SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
1996 FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 1-5471
GLOBAL MARINE INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1849298
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
777 N. Eldridge Road, Houston, Texas 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 596-5100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $0.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
As of January 31, 1997, the aggregate market value of the Company's common
stock, $0.10 par value, held by non-affiliates was $3,798,835,853.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: Common Stock, $0.10 par value,
169,946,670 shares outstanding as of January 31, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement in connection with the 1997 Annual Meeting of
Stockholders are incorporated into Part III of this Report.
<PAGE>
TABLE OF CONTENTS
[CAPTION]
Part I
Items 1. and 2. Business and Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
_______________________
The statements regarding future financial performance and results and the
other statements which are not historical facts contained in this report are
forward-looking statements. The words "expect," "project," "estimate,"
"predict" and similar expressions are also intended to identify forward-looking
statements. Such statements involve risks and uncertainties, including, but not
limited to, oil and gas prices and other market factors, market dayrates,
results of future marketing activity, the dates the Company's rigs undergoing
conversion to drilling operations will commence drilling, rig utilization rates,
and costs and other factors discussed herein and in the Company's other
Securities and Exchange Commission filings. Should one or more such risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.
<PAGE>
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
Global Marine Inc. is a holding company incorporated in Delaware in 1964.
Unless otherwise provided, the term "Company" refers to Global Marine Inc.
and, unless the context otherwise requires, to its consolidated subsidiaries.
The Company's businesses are conducted by subsidiaries of Global Marine Inc.
The Company provides offshore drilling services on a dayrate basis and
offshore drilling management services on a turnkey basis, and participates in
oil and gas exploration, development and production activities. Industry
segment information relative to the Company is set forth in Note 9 of Notes
to Consolidated Financial Statements in Item 8 of this Annual Report on Form
10-K.
Contract Drilling
Substantially all of the Company's offshore contract drilling operations are
conducted by Global Marine Drilling Company ("GMDC"), a wholly-owned subsidiary
of Global Marine Inc. GMDC is headquartered in Houston, Texas, has other
principal offices in Lafayette, Louisiana and Aberdeen, Scotland, and has
additional offices in London, England; Luanda, Angola; New Orleans, Louisiana;
Pointe Noire, Congo; Port Gentil, Gabon; and Port Harcourt, Nigeria.
The Company has a modern, diversified, active fleet of 26 mobile offshore
drilling rigs consisting of 23 cantilevered jackups, two third-generation
semisubmersibles, and one self-propelled drillship. In addition, the Company
has two rigs, the Glomar Celtic Sea semisubmersible and Glomar Explorer
drillship, which are currently undergoing conversion to drilling operations
(see "Recent Developments"), and the inactive Glomar Beaufort Sea I concrete
island drilling system (the "CIDS"), which was designed for arctic operations
and was last under contract in 1990. All of the Company's active rigs were
placed in service in 1979 or later, and, as of February 26, 1997, their
average age was approximately 14.8 years.
The Company's fleet is deployed in the major offshore oil and gas operating
areas worldwide. The principal areas of the Company's operations currently
include the U.S. Gulf of Mexico, offshore West Africa, and the North Sea.
As part of upgrading and expanding its rig fleet and other assets, the
Company considers and pursues the acquisition of suitable additional rigs and
other assets on an ongoing basis. If the Company decides to undertake an
acquisition, the issuance of additional shares of stock or additional debt could
be required.
Recent Developments. In June 1996 the Company entered into an agreement to
purchase a dynamically-positioned semisubmersible, the Polycastle, for $55
million in cash after receiving a three-year, $160 million commitment from a
major oil company to drill in deep waters of the U.S. Gulf of Mexico. The
purchase was completed in October. The Company plans to spend approximately
$130 million to convert the rig, which was renamed the Glomar Celtic Sea,
into a fourth-generation semisubmersible capable of drilling in water depths
of up to 5,000 feet. The Glomar Celtic Sea is scheduled to commence drilling
in the Gulf of Mexico in the fourth quarter of 1997.
In August 1996 the Company announced that it had received a five-year, $262
million commitment from two major oil companies to drill in deep waters of the
U.S. Gulf of Mexico. To fulfill this commitment, the Company entered into a
30-year lease with the U.S. government for use of the Glomar Explorer, a
dynamically-positioned ship that the Company designed and operated for the U.S.
government from 1973 to 1975. The Company plans to spend approximately $175
million to convert the Glomar Explorer into a deep-water drillship capable of
operating in water depths of up to 7,500 feet. The Glomar Explorer is
scheduled to commence drilling in the Gulf of Mexico in the first quarter of
1998.
The Company intends to fund its investments in the Glomar Celtic Sea and
Glomar Explorer with internally generated funds.
Offshore Rig Fleet. The following table lists the rigs in the Company's
drilling fleet as of February 15, 1997, indicating the year each rig was
placed in service, as well as its maximum water and drilling depth
capabilities, current location, customer, and estimated contract expiration
date.
<PAGE>
<TABLE>
<CAPTION>
OFFSHORE RIG FLEET
Status as of February 15, 1997
YEAR
PLACED MAXIMUM DRILLING
IN WATER DEPTH DEPTH CURRENT CONTRACT
SERVICE CAPABILITY CAPABILITY LOCATION CUSTOMER TERM (1)
-------- ----------- ---------- -------- -------- ----------
Cantilevered Jackup
<S> <C> <C> <C> <C> <C> <C>
Glomar High Island I 1979 250 ft. 20,000 ft. Gulf of Mexico Vastar Resources expires 3/97
Glomar High Island II 1979 270 ft. 20,000 ft. Gulf of Mexico Unocal expires 5/97
Glomar High Island III 1980 250 ft. 20,000 ft. West Africa Texaco expires 3/98
Glomar High Island IV 1980 250 ft. 20,000 ft. Gulf of Mexico Chevron expires 3/97
Glomar High Island V 1981 270 ft. 20,000 ft. West Africa Cabinda Gulf expires 4/99
Glomar High Island VII 1982 250 ft. 20,000 ft. West Africa Pecten Cameroon expires 1/98
Glomar High Island VIII 1982 250 ft. 20,000 ft. Gulf of Mexico Vastar Resources expires 6/97
Glomar High Island IX 1983 250 ft. 20,000 ft. West Africa Texaco expires 4/97
Glomar Adriatic I 1981 300 ft. 25,000 ft. West Africa Elf Serepca expires 5/97
Glomar Adriatic II 1981 350 ft. 25,000 ft. Gulf of Mexico Chevron expires 3/97
Glomar Adriatic III 1982 300 ft. 25,000 ft. Gulf of Mexico Forest Oil expires 5/97
Glomar Adriatic IV 1983 350 ft. 25,000 ft. West Africa United Meridian expires 6/98
Glomar Adriatic V 1979 300 ft. 20,000 ft. West Africa Elf Gabon expires 10/97
Glomar Adriatic VI 1981 350 ft. 20,000 ft. Gulf of Mexico Taylor Energy expires 3/97
Glomar Adriatic VII 1983 325 ft. 20,000 ft. Gulf of Mexico Mesa expires 5/97
Glomar Adriatic VIII 1983 300 ft. 25,000 ft. West Africa Mobil expires 2/98
Glomar Adriatic IX 1981 300 ft. 20,000 ft. West Africa Conoco expires 10/97
Glomar Adriatic X 1982 300 ft. 20,000 ft. West Africa UMCEG expires 12/97
Glomar Adriatic XI 1983 225 ft. 25,000 ft. North Sea Talisman expires 5/97
Glomar Main Pass I 1982 300 ft. 25,000 ft. Gulf of Mexico Pennzoil expires 5/97
Glomar Main Pass IV 1982 300 ft. 25,000 ft. Gulf of Mexico Mesa expires 3/97
Glomar Labrador I 1983 300 ft. 25,000 ft. North Sea Amoco expires 4/97
Glomar Baltic I 1983 375 ft. 25,000 ft. Gulf of Mexico Apache expires 3/97
Semisubmersible
Glomar Arctic I 1983 3,000 ft. 25,000 ft. Gulf of Mexico British Petroleum expires 6/98
Glomar Arctic III 1984 1,800 ft. 25,000 ft. North Sea Amerada Hess expires 6/97
Glomar Celtic Sea (2) - 5,000 ft. 25,000 ft. Shipyard Elf Exploration expires 9/00
Drillship
Glomar Robert F. Bauer 1983 2,750 ft. 25,000 ft. West Africa Mobil expires 12/97
Glomar Explorer (3) - 7,500 ft. 25,000 ft. Shipyard Chevron expires 3/03
Concrete Island Drilling
System
Glomar Beaufort Sea I (4) - 55 ft. 25,000 ft. Alaska - inactive
</TABLE>
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(1) Expiration dates are the later of the end of the current contract or new
contract in place but not yet commenced and are estimates only.
(2) The Glomar Celtic Sea is currently undergoing conversion to drilling
operations. The maximum water depth and drilling depth capabilities
indicated in the table are the rig's capabilities after conversion. The
rig is excluded from the Company's rig utilization figures while out of
service and is scheduled to be placed in service in the fourth quarter
of 1997.
(3) The Glomar Explorer is currently undergoing conversion to drilling
operations. The maximum water depth and drilling depth capabilities
indicated in the table are the rig's capabilities after conversion.
The rig is excluded from the Company's rig utilization figures while
out of service and is scheduled to be placed in service in the first
quarter of 1998.
(4) The Glomar Beaufort Sea I concrete island drilling system is inactive and
has been excluded from the Company's rig utilization figures.
<PAGE>
Jackup rigs have elevating legs which extend to the sea bottom, providing a
stable platform for drilling, and are generally preferred in water depths of
300 feet or less. All of the Company's jackup units have rigs which are
mounted on cantilevers, which allow the rigs to extend outward from their hulls
over fixed drilling platforms and enable operators to drill both exploratory and
development wells. The Company's two largest jackup rigs, the Glomar Labrador I
and Glomar Baltic I, are capable of operating in severe weather environments
such as the North Sea and Eastern Canada.
Semisubmersible rigs are floating offshore drilling units that have pontoons
and columns that, when flooded with water, cause the unit to submerge to a
predetermined depth. Most semisubmersibles are anchored to the sea bottom
with mooring chains, but some are held in position solely by computer controlled
propellers, known as thrusters. Semisubmersibles are divided into four
generations, distinguished mainly by their age, environmental rating and water
depth capability. The Company's Glomar Arctic I and Glomar Arctic III
semisubmersibles are third-generation rigs, suitable for drilling in deep-
water, harsh-weather environments. The Company's Glomar Celtic Sea will be
equivalent to a fourth-generation semisubmersible after it is converted.
Drillships are suitable for deep-water drilling in moderate weather
environments and in remote locations because of their mobility and large load
carrying capability.
All 26 of the Company's active rigs are equipped with top-drive drilling
systems. Top-drive drilling systems permit drilling with extended stands of
drill pipe, reducing the number of connections required, and enable operators
to rotate the drill pipe when exiting the well bore, thereby increasing both
the speed and safety of drilling operations and reducing the risk of the
drill pipe becoming stuck in the well bore.
With the exception of the Glomar Explorer, which is leased under a 30-year
agreement, all of the rigs in the fleet are owned by the Company. Twenty-two of
the Company-owned rigs are subject to mortgages granted to collateralize the
Company's 12-3/4% Senior Secured Notes due 1999 (the "Senior Secured Notes").
The unencumbered rigs are the Glomar Baltic I, Glomar Adriatic IX, Glomar
Adriatic X, Glomar Adriatic XI, Glomar Celtic Sea and Glomar Beaufort Sea I.
Rig Utilization. For the year ended December 31, 1996, the Company's average
utilization rate (1) for its active rigs was 98 percent compared to 99 percent
for 1995. As of February 15, 1997, the Company's utilization rate for its
active rigs was 100 percent. The Company anticipates that contracts on 14 of
the Company's 26 rigs operating under contracts as of February 15, 1997, will
expire at varying times on or prior to May 31, 1997. Short-term contracts have
been typical in the industry for the past decade, and the Company considers its
upcoming contract expirations typical of prevailing market conditions and
consistent with the normal course of business. The Company's strategy has been
to employ a number of its rigs on short-term contracts in periods of rising
dayrates, enabling the Company to contract for higher dayrate contracts as
rigs become available.
- -----------------------
(1) The average rig utilization rate for a period is equal to the ratio of days
in the period during which the rigs were under contract to the total days
in the period during which the rigs were available to work, and it excludes
the CIDS and the two rigs undergoing conversion to drilling operations.
<PAGE>
As of December 31, 1996, all twelve of the Company's rigs in the Gulf of
Mexico were employed. As of that date, the industry utilization rate (1) in
the Gulf of Mexico was 83 percent compared with a rate of 80 percent as of
December 31, 1995. Revenues attributable to the Gulf of Mexico accounted for
36 percent, 44 percent and 53 percent of the Company's contract drilling
revenues in 1996, 1995, and 1994, respectively.
As of December 31, 1996, all eleven of the Company's rigs offshore West Africa
were employed. As of that date, the industry utilization rate offshore West
Africa was 98 percent compared with a rate of 81 percent as of December 31,
1995. Revenues from this market accounted for 35 percent, 21 percent and 15
percent of the Company's contract drilling revenues in 1996, 1995, and 1994,
respectively.
As of December 31, 1996, all three of the Company's rigs in the North Sea were
employed. As of that date, the industry utilization rate in the North Sea
was 95 percent compared with a rate of 93 percent as of December 31, 1995.
Revenues from this market accounted for 25 percent, 22 percent and 14 percent
of the Company's contract drilling revenues in 1996, 1995, and 1994,
respectively.
The following table sets forth the size and average utilization rates of the
Company's active rig fleet for each of the past five years.
<TABLE>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rigs in service at year-end 26 26 25 24 24
Average rig utilization 98% 99% 94% 91% 81%
</TABLE>
Backlog. The following tables show, for each of the Company's three principal
groups of drilling rigs and each geographic area in which the Company operates,
the number of contract months available and the number of contract months under
firm commitments for 1997, 1998 and 1999, determined on the basis of executed
contracts as of December 31, 1996, excluding customer option periods. "Rig
Contract Months Available" includes one semisubmersible and one drillship, the
Glomar Celtic Sea and Glomar Explorer, respectively, which have commitments to
drill in the Gulf of Mexico but have not yet entered service, and is based on
the dates each is expected to become available for drilling. The number of rigs
in each category is indicated in parenthesis.
<TABLE>
<CAPTION>
1997 1998 1999
---------------------- --------------------- ----------------------
Rig Rig Rig Rig Rig Rig
Contract Contract Contract Contract Contract Contract
Months Months Months Months Months Months
Available Committed Available Committed Available Committed
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jackups (23) 276 114 276 19 276 2
Semisubmersibles (3) 27 15 36 17 36 12
Drillships (2) 12 12 22 10 24 12
--- --- --- --- --- ---
Total 315 141 334 46 336 26
=== === === === === ===
Percentage committed 45% 14% 8%
</TABLE>
- -------------------------
(1) Industry utilization rates were derived from data published by Offshore Data
Services and other information available to the Company. The Company has
adjusted the numerator (rigs working) and denominator (rigs available) as
reported by Offshore Data Services to include certain rigs which are under
contract for non-drilling uses but which are able to compete with Company
rigs and to exclude other rigs that, because of their location or other
factors, do not compete with Company rigs.
<PAGE>
<TABLE>
<CAPTION>
1997 1998 1999
----------------------- ------------------------- ----------------------
Rig Rig Rig Rig Rig Rig
Contract Contract Contract Contract Contract Contract
Months Months Months Months Months Months
Available Committed Available Committed Available Committed
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gulf of Mexico (14) 147 36 166 27 168 24
West Africa (11) 132 101 132 19 132 2
North Sea (3) 36 4 36 - 36 -
--- --- --- --- --- ---
Total 315 141 334 46 336 26
=== === === === === ===
</TABLE>
As of December 31, 1996, the Company's contract drilling backlog was
approximately $705 million, $242 million of which is expected to be realized in
1997. The contract drilling backlog at December 31, 1995, was $130 million.
Drilling Contracts and Major Customers. Contracts to employ the Company's
drilling rigs extend over a specified period of time or the time required to
drill a specified well or number of wells. While the final contract for
employment of a rig is the result of negotiations between the Company and the
customer, most contracts are awarded based upon competitive bidding. The
rates specified in drilling contracts are generally on a dayrate basis,
payable in U.S. dollars, and vary depending upon the type of rig employed,
equipment and services supplied, geographic location, term of the contract,
competitive conditions, and other variables. Each contract provides for a
basic dayrate during drilling operations, with lower rates or no payment for
periods of equipment breakdown, adverse weather, or other conditions which may
be beyond the control of the Company. When a rig mobilizes to or demobilizes
from an operating area, a contract may provide for different dayrates,
specified fixed amounts, or for no payment during the mobilization period.
A contract may be terminated by the customer if the rig is destroyed or lost,
if drilling operations are suspended for a specified period of time due to a
breakdown of major equipment or, in some cases, if other events occur that
are beyond the control of either party.
The Company's offshore contract drilling business is subject to the usual
risks associated with having a limited number of customers for its services.
In 1996 and 1994 no single customer provided more than 10 percent of
consolidated revenues. In 1995 Shell Oil Company provided $51.2 million, or 11
percent, of consolidated revenues.
Drilling Management Services
The Company provides drilling management services on a turnkey basis through
its wholly-owned subsidiaries, Applied Drilling Technology Inc. ("ADTI") and
Global Marine Integrated Services -International Inc. ("GMIS-I"), and through
Global Marine Integrated Services - Europe ("GMIS-E"), which is a division of
GMDC. ADTI operates primarily in the U.S. Gulf of Mexico, and GMIS-I and GMIS-E
operate in areas other than the U.S. Gulf of Mexico. For a guaranteed price,
each will assume responsibility for the design and execution of specific
offshore drilling programs and deliver a logged or loggable hole to an agreed
depth. Compensation is contingent upon satisfactory completion of the drilling
program.
As of December 31, 1996, ADTI had completed 312 turnkey wells since commencing
operations in 1980, including 79 in 1996, 57 in 1995, and 50 in 1994. GMIS-E
completed no turnkey wells in 1996, six wells in 1995 and two wells in 1994, its
first year of operations. GMIS-I completed three turnkey wells in 1996 and
four wells in 1995, its first year of operations.
<PAGE>
In addition to providing drilling management services on a turnkey basis,
GMIS-E and GMIS-I offer services as general contractors under arrangements
variously described as "partnering," "full service contracting," and
"integrated drilling services" arrangements, among others. When the Company
acts as a general contractor, it provides planning, engineering and
management services beyond the scope of its traditional contract drilling
business, and thereby assumes greater liability. GMIS-E and GMIS-I provide
such planning, engineering and management services, as well as turnkey
drilling services, in areas other than the U.S. Gulf of Mexico.
As of December 31, 1996, the Company's drilling management services backlog
was approximately $26 million, all of which is expected to be realized in 1997.
As of December 31, 1995, the drilling management services backlog was
approximately $25 million.
Oil and Gas Operations
Oil and gas exploration, development and production activities are conducted
through Challenger Minerals Inc. ("CMI"), which is a wholly-owned subsidiary of
the Company. Such activities primarily include participation in the
development and operation of properties for oil and gas production. In
addition, the Company incurs through ADTI and other subsidiaries certain
limited exploration and leasehold acquisition costs in connection with its
turnkey drilling operations. Substantially all of the Company's oil and gas
activities are conducted in the United States offshore Louisiana and Texas and
onshore in Oklahoma and Texas. Oil and gas operations currently account for
less than five percent of the Company's business.
Competition and Business Environment
Offshore drilling is a highly competitive business with numerous industry
participants, none of which has a significant market share. Drilling
contracts are awarded on a competitive bid basis and, while an operator
selecting a rig may consider, among other things, quality of service and
equipment, price competition is the primary factor in determining which
qualified contractor is awarded a job.
Offshore drilling is a highly cyclical business, impacted to a large degree by
oil and gas price levels and volatility. Worldwide military, political and
economic events have contributed to oil and gas price volatility and are
likely to continue to do so in the future. Some other factors which affect
oil and gas prices and, by extension, the level of demand for the Company's
services, include demand for oil and gas worldwide, the ability of the
Organization of Petroleum Exporting Countries ("OPEC") to set and maintain
production levels, the level of production by non-OPEC countries, domestic
and foreign tax policy, and government laws and regulations which restrict
exploration and development of oil and gas in various offshore jurisdictions.
ADTI, GMIS-I and GMIS-E compete with other participants in the drilling
management services industry, some of which have greater resources. In
addition, the Company's drilling management services business is subject to
the usual risks associated with having a limited number of customers for its
services.
Results of operations from the Company's drilling management services may be
limited by certain factors, in particular, the ability of the Company to
obtain and successfully perform turnkey drilling contracts based on
competitive bids. The Company's ability to obtain turnkey drilling contracts is
largely dependent on the number of such contracts available for bid.
Accordingly, results of the Company's drilling management service operations
may vary widely from quarter to quarter and from year to year. Furthermore,
turnkey operations may be constrained by the availability of rigs. In the U.S.
Gulf of
<PAGE>
Mexico, ADTI relied on third-party rigs for all of its rig time in 1996. The
Company currently has 15 third-party rigs under contract for its turnkey
operations, with remaining terms ranging from six months to one year at
market-adjusted dayrates. One of the contracts may be renewed at the option
of the Company for an additional two years at below current-market rates.
The future level of turnkey activity is dependent on the continued
availability of third-party rigs. In the North Sea and West Africa, the market
for turnkey drilling is not well established, and growth in these markets
also may be constrained by future rig availability.
With respect to the Company's oil and gas operations, CMI experiences
competition from other oil and gas companies in all phases of its operations.
Many competing companies have substantially greater financial and other
resources. The Company's oil and gas production operations and economics are
affected by prices of oil and gas, governmental regulation, the use and
allocation of oil and gas, the extent of domestic production, and the levels
of imports and of prices of competitive fuels. They are also affected by
excess supplies of oil and gas in the Company's market areas, as well as
seasonal demand factors, tax and other laws relating to the petroleum
industry and changes in such laws, and by constantly changing administrative
regulations.
Operational Risks and Insurance
The Company's operations are subject to the usual hazards incident to the
drilling of oil and gas wells, such as blowouts, explosions, oil spills and
fires, which can severely damage or destroy equipment or cause environmental
damage. The Company's activities are also subject to perils peculiar to marine
operations, such as collision, grounding, and damage or loss from severe
weather. These hazards can cause personal injury and loss of life, severe
damage to and destruction of property and equipment, pollution or
environmental damage, and suspension of operations.
The Company maintains insurance coverage against certain general and marine
public liability, including liability for personal injury, in the amount of $200
million, subject to a self-insured retention of no more than $250,000 per
occurrence. In addition, the Company's rigs and related equipment are
separately insured under hull and machinery policies against certain marine
and other perils, subject to a self-insured retention generally of no more
than $300,000 per occurrence. The Company's current practice is to insure
each active rig for its market value. Although each rig is insured for at least
its financial book value, the Company's insurance does not cover all costs that
would be required to replace each rig. In addition to hull and machinery
coverage, the Company purchases rig business interruption insurance with
respect to its operating rigs. Business interruption coverage applies only
to business interruptions as a result of losses insured under hull and
machinery policies, and is not available to the Company for interruptions
arising from damages to "spud cans," i.e., the bases of legs of jackup rigs.
The deductible for business interruption claims is 30 days. Although the
Company currently purchases rig business interruption insurance with respect
to all of its operating rigs, the decision to insure a rig against interruption
risks is dependent on a number of factors, including dayrate and utilization
levels, and no assurance can be made that the Company will continue to
insure any or all of its operating rigs against such risks. All of the
Company's rigs which are operated internationally are presently insured
against loss due to war, including terrorism.
The Company is permitted under the terms of the rig mortgages securing the
Senior Secured Notes to change the limits on its general and marine public
liability insurance to $150 million, and to be subject, with respect to such
liability insurance and its marine hull and machinery insurance, to self-insured
retention amounts of up to $1 million per occurrence. The indenture
governing the Senior Secured Notes also
<PAGE>
contains certain restrictions regarding the use of insurance proceeds
received by the Company due to the loss of any Company-owned rig other than
the Glomar Baltic I, Glomar Adriatic IX, Glomar Adriatic X, Glomar Adriatic
XI, Glomar Celtic Sea and Glomar Beaufort Sea I. In addition, subject to the
terms of the indenture, the Company's credit facility with a bank group
contains certain restrictions regarding the use of insurance proceeds
received by the Company due to the loss of any Company-owned or leased rig.
Although the general and marine public liability policies cover liability for
pollution under most circumstances, they do not cover liability for bringing
a well under control following a blowout. In the case of turnkey drilling
operations, the Company maintains insurance covering the cost of controlling
the well, including any environmental damage resulting therefrom, the cost of
cleanup, and the cost of redrilling ("well control liabilities") in an amount
not less than $20 million per occurrence subject to a self-insured retention
of $200,000 per occurrence. Under turnkey drilling contracts, the Company
generally assumes the risk of the cost of well control, but on occasion the
Company receives indemnification from the customer for such risk in excess of
the $20 million insurance coverage. In many instances, however, the Company
is not indemnified by its customers for well-control liabilities. Furthermore,
the Company is not insured against certain drilling risks, such as stuck
drill stem and loss of in-hole equipment not arising from an insured peril,
that could result in delays or nonperformance of a turnkey drilling contract.
In connection with the Company's offshore contract drilling operations, the
Company is generally indemnified for any cost of well control by its
customers. In any event, however, the Company maintains insurance against such
liabilities in the amount of $50 million per occurrence subject to a self-
insured retention of $200,000 per occurrence.
The occurrence of a significant event, including pollution or environmental
damage, not fully insured or indemnified against or the failure of a customer to
meet its indemnification obligations, could materially and adversely affect
the Company's operations and financial condition. Moreover, no assurance can be
made that the Company will be able to maintain adequate insurance in the future
at rates it considers reasonable. See "-- Governmental Regulations and
Environmental Matters."
Foreign Operations
A significant portion of the Company's revenues is attributable to drilling
operations in foreign countries. Such activities accounted for 40 percent, 41
percent and 29 percent of the Company's consolidated revenues in 1996, 1995
and 1994, respectively. Risks associated with the Company's operations in
foreign areas include risks of war and civil disturbances or other risks that
may limit or disrupt markets, expropriation, nationalization, renegotiation or
nullification of existing contracts, foreign exchange restrictions and
currency fluctuations, foreign taxation, changing political conditions and
foreign and domestic monetary policies. To date, the Company has experienced no
material loss as a result of any of these factors. Additionally, the ability of
the Company to compete in the international drilling market may be adversely
affected by foreign governmental regulations favoring or requiring the awarding
of drilling contracts to local contractors, or by regulations requiring foreign
contractors to employ citizens of, or purchase supplies from, a particular
jurisdiction. Furthermore, foreign governmental regulations, which may in
the future become applicable to the oil and gas industry, could reduce demand
for the Company's services, or such regulations could directly affect the
Company's ability to compete for customers.
Governmental Regulations and Environmental Matters
The Company's business is affected by changes in public policy and by federal,
state, foreign and local laws and regulations relating to the energy industry.
The adoption of laws and regulations curtailing
<PAGE>
exploration and development drilling for oil and gas for economic, environmental
and other policy reasons adversely affects the Company's operations by limiting
available drilling and other opportunities in the energy service industry.
The Company's operations are subject to numerous federal, state and local laws
and regulations controlling the discharge of materials into the environment or
otherwise relating to the protection of the environment. For example, the
Company, as an operator of mobile offshore drilling units in navigable U.S.
waters and certain offshore areas, including the Outer Continental Shelf, is
liable for damages and for the cost of removing oil spills for which it may
be held responsible, subject to certain limitations. The Company's
operations may involve the use or handling of materials that may be classified
as environmentally hazardous substances. Laws and regulations protecting the
environment have generally become more stringent, and may in certain
circumstances impose "strict liability," rendering a person liable for
environmental damage without regard to negligence or fault. The Company does
not believe that environmental regulations have had any material adverse
effect on its capital expenditures, results of operations or competitive
position to date, and does not presently anticipate that any material
expenditures will be required to enable it to comply with existing laws and
regulations. It is possible, however, that modification of existing
regulations or the adoption of new regulations in the future, particularly with
respect to environmental and safety standards, could have such a material
adverse effect on the Company's operations.
The U.S. Oil Pollution Act of 1990 ("OPA '90") and similar legislation enacted
in Texas, Louisiana and other coastal states address oil spill prevention and
control and significantly expand liability exposure across all spectrums of
the oil and gas industry. The Company is of the opinion that it maintains
sufficient insurance coverage to respond to the added exposures.
OPA '90 also mandated increases in the amounts of financial responsibility
that must be certified with respect to mobile offshore drilling units and
offshore facilities (e.g. oil and gas production platforms, among others)
located in U.S. waters. Operators of mobile offshore drilling units, together
with operators of vessels, must provide evidence of financial responsibility
based on a tonnage formula, which, in the Company's case, would not exceed
$15 million for its largest rig located in U.S. waters. The Company has
complied with the requirement by providing evidence of adequate U.S.-based net
worth. The Company's inability to comply with the rule in the future,
however, could have a material adverse effect on its operations and financial
condition. During 1996, 36 percent of the Company's contract drilling revenues
were attributable to operations in U.S. waters, and, as of February 26, 1997,
12 of the Company's 26 active rigs were located in U.S. waters.
Until recently OPA '90 would have required lessees, permittees, or holders of
a right of use for offshore facilities (including mobile offshore drilling
rigs while attached to the ocean floor) to certify evidence of financial
responsibility in the amount of $150 million. There was concern that this
requirement could adversely affect oil and gas operations in U.S. waters.
In October 1996, President Clinton signed into law amendments to OPA '90 that
reduce this financial responsibility requirement to $35 million for offshore
facilities located seaward of the state waters and $10 million for offshore
facilities within state waters. These amounts may be increased in the future
based on operational, health and other risks posed by the quantity and
quality of oil being handled. The Department of the Interior's Minerals
Management Service is responsible for promulgating regulations implementing the
new financial responsibility requirements with respect to offshore facilities.
CMI presently operates an offshore production platform, and ADTI's business
and GMDC's operations in the Gulf of Mexico are largely dependent on oil and gas
companies' drilling activities, which, in turn, ultimately depend on their
ability to meet the OPA '90
<PAGE>
financial responsibility requirements. The Company cannot predict the exact
nature or effect of any regulations promulgated to implement the revised
responsibility requirements, but notes that these lower limits in part
correspond to existing requirements for facilities on the Outer Continental
Shelf.
Employees
The Company had approximately 2,100 employees at December 31, 1996. The
Company requires highly skilled personnel to operate its drilling rigs. In
recognition of this, the Company conducts extensive personnel training and
safety programs.
Executive Officers of the Registrant
The name, age as of December 31, 1996, and office or offices currently held by
each of the executive officers of the Company are as follows:
Name Age Office or Offices
---- --- -----------------
David A. Herasimchuk 54 Vice President, Market Development
Thomas R. Johnson 48 Vice President and Corporate Controller
Gary L. Kott 54 President and Chief Operating Officer of
Global Marine Drilling Co.
C. Russell Luigs 63 Chairman of the Board, President and Chief
Executive Officer
Jon A. Marshall 45 Group Vice President of the Company, and
President of Challenger Minerals Inc.
Jerry C. Martin 64 Senior Vice President and Chief Financial
Officer
James L. McCulloch 44 Vice President and General Counsel
John G. Ryan 44 Chairman and Chief Executive Officer of Global
Marine Drilling Co., and Corporate Secretary
of the Company
Officers serve for a one-year term or until their successors are elected and
qualified to serve. Each executive officer's principal occupation has been as
an executive officer of the Company for more than the past five years, with
the exception of Messrs. Marshall and McCulloch. Mr. Marshall has served as the
Company's Group Vice President since February 1995, prior to which he had been
President of Applied Drilling Technology Inc. and Challenger Minerals Inc.
since April 1992. From 1990 to April 1992, he was Applied Drilling
Technology's Vice President of Operations, prior to which he held various
operating positions with Applied Drilling Technology Inc. and with Global Marine
Drilling Company. Mr. McCulloch has served in his present position since May
1993 and has had general supervision of the Company's legal affairs since
February 1993, prior to which he was the Company's Vice President, Litigation
and Risk Management.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock, $0.10 par value per share, is listed on the New
York Stock Exchange under the symbol "GLM." At January 31, 1997, there were
7,506 stockholders of record of the Common Stock. The high and low sales
prices of the Common Stock as reported on the New York Stock Exchange
Composite Transactions Tape for each full quarterly period within the past two
years appear under "Consolidated Selected Quarterly Financial Data," which
follows the notes to the consolidated financial statements.
The Company has not declared any dividends on its common stock since 1985.
Subject to the preferential dividend rights of holders of the Company's
preferred stock, if any, the holders of the Common Stock will be entitled to
receive when, as and if declared by the Board of Directors out of funds legally
available therefor, all other dividends payable in cash, in property, or in
shares of Common Stock. The indenture governing the Company's Senior Secured
Notes, as well as the Company's credit facility with a bank group, contain
certain restrictions with respect to the payment of dividends on the Common
Stock (other than stock dividends). (See Note 3 of Notes to Consolidated
Financial Statements.) It is unlikely that dividends will be declared or
paid on the Common Stock during the next one to two years. The Company
expects, however, that it will reconsider the declaration and payment of
dividends after that time.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
GLOBAL MARINE INC. AND SUBSIDIARIES
FIVE-YEAR REVIEW
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
----------------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------------
Financial Performance
Revenues:
<S> <C> <C> <C> <C> <C>
Contract drilling $ 362.5 $ 248.9 $ 211.4 $ 200.3 $ 214.1
Drilling management services 305.3 209.3 137.8 57.1 26.9
Oil and gas 12.9 9.8 9.8 11.6 19.3
------- ------- ------- ------- -------
Total revenues $ 680.7 $ 468.0 $ 359.0 $ 269.0 $ 260.3
======= ======= ======= ======= =======
Operating income:
Contract drilling $ 125.4 $ 54.6 $ 25.6 $ 4.5 $ 17.3
Drilling management services (1) 27.9 17.3 10.8 7.6 (2.2)
Oil and gas 6.8 3.4 3.7 5.3 3.2
Corporate expenses (19.3) (15.0) (14.0) (14.2) (13.5)
------- ------- ------- ------- -------
Total operating income 140.8 60.3 26.1 3.2 4.8
------- ------- ------- ------- -------
Other income (expense):
Interest expense (30.9) (30.2) (30.2) (32.1) (43.6)
Interest capitalized 2.6 5.6 3.7 - -
Interest income 6.2 4.7 3.8 2.7 2.8
Gain on sale of offshore drilling rigs - 14.7 - - 10.9
Litigation settlement - - - - 55.0
Other 1.0 - 2.0 - 0.7
------- ------- ------- ------- -------
Total other income (expense) (21.1) (5.2) (20.7) (29.4) 25.8
------- ------- ------- ------- -------
Income (loss) before income taxes 119.7 55.1 5.4 (26.2) 30.6
Provision for income taxes:
Current tax provision 9.6 3.2 0.6 0.3 3.1
Deferred tax benefit (70.0) - - - -
------- ------- ------- ------- -------
Total income tax provision (benefit) (60.4) 3.2 0.6 0.3 3.1
------- ------- ------- ------- -------
Income (loss) before extraordinary item and
cumulative effect of accounting changes 180.1 51.9 4.8 (26.5) 27.5
Extraordinary gain on extinguishment of debt - - - - 28.3
Cumulative effect of accounting changes, net - - (3.5) - 1.4
------- ------- ------- ------- -------
Net income (loss) $ 180.1 $ 51.9 $ 1.3 $ (26.5) $ 57.2
======= ======= ======= ======= =======
Primary net income (loss) per common share:
Before extraordinary item and cumulative
effect of accounting changes $ 1.06 $ 0.31 $ 0.03 $ (0.17) $ 0.24
Extraordinary gain on extinguishment of debt - - - - 0.24
Cumulative effect of accounting changes, net - - (0.02) - 0.01
------- ------- ------- ------- -------
Primary net income (loss) per common share $ 1.06 $ 0.31 $ 0.01 $ (0.17) $ 0.49
======= ======= ======= ======= =======
Average common and common equivalent shares 169.5 165.1 163.8 152.0 116.3
Dividends declared per common share (2) $ - $ - $ - $ - $ -
Capital expenditures $ 118.3 $ 73.5 $ 75.9 $ 40.6 $ 20.9
Financial Position (end of year)
Working capital $ 158.9 $ 116.2 $ 93.4 $ 107.2 $ 30.7
Net properties $ 477.4 $ 386.6 $ 353.4 $ 314.6 $ 318.0
Total assets $ 807.8 $ 563.0 $ 512.4 $ 492.9 $ 479.9
Long-term debt, including capital lease obligation $ 241.8 $ 225.0 $ 225.0 $ 225.0 $ 249.0
Shareholders' equity $ 459.1 $ 269.0 $ 212.3 $ 205.4 $ 154.5
Operational Data
Average rig utilization (3) (4) 98% 99% 94% 91% 81%
Fleet average dayrate (5) $38,000 $28,700 $25,600 $25,600 $27,600
Number of active rigs (end of year) (4) 26 26 27 24 24
Turnkey wells completed 82 67 52 18 10
Number of employees (end of year) 2,100 2,100 1,700 1,500 1,500
</TABLE>
- --------------------
(1) Excludes profits earned on turnkey wells drilled on oil and gas properties
in which the Company has working interests.
(2) The indenture governing the Senior Secured Notes and the Company's credit
facility contain certain restrictions with respect to the payment of
dividends on the Common Stock (other than stock dividends). See Note 3 of
Notes to Consolidated Financial Statements.
(3) The average rig utilization rate for a period is equal to the ratio of
days in the period during which the rigs were under contract to the total
days in the period during which the rigs were available to work.
(4) Excludes the Glomar Beaufort Sea I concrete island drilling system, a
currently inactive, special-purpose mobile offshore rig designed for
arctic operations, and the Glomar Explorer and Glomar Celtic Sea, which
are being converted to drilling rigs.
(5) Contract drilling revenues less non-rig related revenues divided by the
aggregate contract days, adjusted to exclude days under contract at
zero dayrate.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operating Results
Summary
Operating income increased by $80.5 million to $140.8 million in 1996 from
$60.3 million in 1995. The improvement in operating results was primarily due
to increased contract drilling dayrates, the full-year effect of three rigs
which the Company placed into service in 1995, and an increase in the number
of turnkey drilling contracts completed.
In 1995 operating income increased by $34.2 million to $60.3 million from
$26.1 million in 1994. The improvement in operating results was primarily
due to generally higher contract drilling dayrates and utilization, lower
depreciation expense due to a change in estimated rig service lives, the three
rigs placed into service in 1995, and an increase in the number of turnkey
wells completed.
Data relating to the Company's operations by business segment follows:
<TABLE>
<CAPTION>
Increase/ Increase/
1996 (Decrease) 1995 (Decrease) 1994
---- ---------- ---- ---------- ----
(Dollars in millions)
Revenues:
<S> <C> <C> <C> <C> <C>
Contract drilling $368.2 42% $258.4 20% $215.4
Drilling management 306.3 44% 212.8 49% 142.8
Oil and gas 12.9 32% 9.8 - 9.8
Less: Intersegment revenues (6.7) (48%) (13.0) 44% (9.0)
------ ------ ------
$680.7 45% $468.0 30% $359.0
====== ====== ======
Operating income:
Contract drilling $125.4 130% $ 54.6 113% $ 25.6
Drilling management 27.9 61% 17.3 60% 10.8
Oil and gas 6.8 100% 3.4 (8%) 3.7
Corporate expenses (19.3) 29% (15.0) 7% (14.0)
------ ------ ------
$140.8 133% $ 60.3 131% $ 26.1
====== ====== ======
</TABLE>
The Company reported net income of $180.1 million for 1996 as compared with
net income of $51.9 million for 1995 and $1.3 million for 1994. Net income for
1996 included a $70.0 million noncash credit to deferred income taxes in order
to recognize a portion of the future tax benefit of net operating loss
carryforwards. Net income for 1995 included a $14.7 million gain on the sale of
the offshore drilling rig, Glomar Main Pass III. Net income for 1994 included a
$3.5 million charge for the cumulative effect of a required change in accounting
for postemployment benefits. Excluding these unusual items, net income for
1996, 1995 and 1994 was $110.1 million, $37.2 million and $4.8 million,
respectively.
During 1996 industry dayrates and utilization continued to increase in all
markets in which the Company operates. In July the Company entered into a
30-year lease of the ship, Glomar Explorer, in connection with the Company's
commitment to two major oil companies to drill in deep water in the U.S.
Gulf of Mexico under a five-year contract scheduled to begin in the first
quarter of 1998. In October the Company completed the purchase of a
dynamically-positioned semisubmersible, the Polycastle, which has
<PAGE>
been renamed the Glomar Celtic Sea and which is scheduled to begin drilling for
a customer in deep water in the U.S. Gulf of Mexico in the fourth quarter of
1997 under a three-year contract.
Contract Drilling Operations
Data with respect to the Company's contract drilling operations follows:
<TABLE>
<CAPTION>
Increase/ Increase/
1996 (Decrease) 1995 (Decrease) 1994
---- ---------- ---- ---------- ----
(Dollars in millions, except for fleet average dayrate)
Contract drilling revenues by area: (1)
<S> <C> <C> <C> <C> <C>
Gulf of Mexico $133.7 18% $112.9 (1%) $113.7
West Africa 130.4 136% 55.3 74% 31.8
North Sea 90.0 62% 55.6 91% 29.1
Other 14.1 (59%) 34.6 (15%) 40.8
------ ------ ------
$368.2 42% $258.4 20% $215.4
====== ====== ======
Average rig utilization (2) 98% 99% 94%
Fleet average dayrate $38,000 $28,700 $25,600
</TABLE>
- -----------------------
(1) Includes revenues earned from affiliates.
(2) Excludes the Glomar Beaufort Sea I concrete island drilling system, a
currently inactive, special-purpose mobile offshore rig designed for
arctic operations, and the Glomar Explorer and Glomar Celtic Sea, which are
being converted to drilling rigs.
Of the $109.8 million increase in contract drilling revenues for 1996
compared to 1995, $79.2 million was attributable to increases in dayrates,
$31.1 million was attributable to the full-year effect of the Glomar Adriatic
IX, Glomar Adriatic X and Glomar Adriatic XI, which were placed into service in
1995, and $1.9 million was attributable to an increase in non-dayrate revenue.
Such increases were partially offset by decreases of $1.2 million attributable
to lower rig utilization and $1.2 million due to the 1995 sale of the Glomar
Main Pass III. The Glomar Adriatic IX and Glomar Adriatic X were purchased
in early 1994 and commenced operations offshore West Africa in May and November
1995, respectively; the Glomar Adriatic XI was purchased in late 1994 and
commenced operations in the North Sea in October 1995. Other factors which have
affected the Company's 1996 revenues from certain geographical areas as
compared with 1995 include the mobilization to West Africa of one jackup from
the U.S. Gulf of Mexico in February, one from Abu Dhabi in May, one from
Trinidad in June, and one drillship from a shipyard in South Africa in July.
The drillship, the Glomar Robert F. Bauer, was in a South African shipyard in
June and July for a scheduled hull inspection and top-drive installation. Prior
to that time, the rig had operated in Australia and the Middle East.
Of the $43.0 million increase in contract drilling revenues for 1995 compared
to 1994, $26.4 million was attributable to increases in dayrates, $14.2 million
was attributable to increases in rig utilization, and $2.4 million was
attributable to an increase in non-dayrate revenue.
Effective January 1, 1995, the Company increased to 25 years the estimated
useful lives of its jackup drilling rigs and increased to 20 years the estimated
useful lives of its semisubmersible drilling rigs and drillship. In addition,
salvage values were reduced to $500,000 per rig for jackups and $1,000,000
per rig for both semisubmersibles and the drillship. The effect of the change
in estimated service lives and salvage values was to decrease 1995
depreciation expense by approximately $11.2 million. Depreciation expense
for contract drilling operations totaled $36.3 million for 1996, $27.4
<PAGE>
million for 1995, and $34.9 million for 1994. The increase in depreciation
expense from 1995 to 1996 was due primarily to the commencement of operations of
the Glomar Adriatic IX, Glomar Adriatic X and Glomar Adriatic XI.
The Company's operating profit margin for contract drilling operations
increased to 34 percent in 1996 from 21 percent in 1995 and 12 percent in
1994. The increases in operating profit margins were due to higher dayrates
in 1996 and 1995 compared to the preceding years and to the decrease in
depreciation expense in 1995 compared to 1994, as noted above. Operating
expenses other than depreciation increased to $206.5 million in 1996 from
$176.4 million in 1995 and $154.9 million in 1994. The increases in
operating expenses were due primarily to the 1995 commencement of operations
of the Glomar Adriatic IX, Glomar Adriatic X and Glomar Adriatic XI.
Additional increases in operating costs were attributable to (i) the
commencement of a drilling contract in West Africa in June 1996 for a rig
which was operated by a third-party in 1995 and 1994 under a management contract
with the Company, (ii) a higher payout in 1996 and 1995 with respect to two of
three rigs under a net revenue-sharing arrangement with Transocean Drilling AS,
(iii) the March 1995 commencement of a drilling contract in Nigeria for a rig
which was mobilized from Alaska where it had been on standby for a customer
in 1994, (iv) the September 1994 commencement of a drilling contract in Angola
for a rig which was previously leased to an operator in Saudi Arabia under a
bareboat charter agreement, and (v) higher utilization in 1995 of three North
Sea rigs which were idle for a significant part of 1994.
Industry demand for contract drilling services in the U.S. Gulf of Mexico has
risen steadily since the second quarter of 1995 primarily due to improved
seismic and drilling technologies, which have lowered the finding costs of
oil and gas, and to higher natural gas prices. For the full year, average
demand in the Gulf increased to 149 rigs under contract (84 percent
utilization) in 1996 from 134 rigs (76 percent utilization) in 1995 and 131
rigs (75 percent utilization) in 1994. The Company averaged 100 percent
utilization for its rigs in the Gulf of Mexico for 1996 and 1995 and 99
percent for 1994. In December 1996 the Company mobilized a semisubmersible
rig, the Glomar Arctic I, from the North Sea to the Gulf of Mexico. The rig
began drilling for a customer under a 16-month contract in February 1997
after undergoing modifications. The cost of the mobilization was
substantially reimbursed by the customer. As of February 15, 1997, all
twelve of the Company's rigs in the Gulf of Mexico were under contract. The
Company intends to mobilize a jackup rig, the Glomar Adriatic VII, from the
Gulf of Mexico to offshore Trinidad in May 1997. The rig is scheduled to
begin drilling for a customer in May under a 15-month contract. The cost of
both the mobilization and demobilization will be reimbursed by the customer.
For the full year, average demand offshore West Africa increased to 41 rigs
under contract (92 percent utilization) in 1996 from 31 rigs (83 percent
utilization) in 1995 and 24 rigs (75 percent utilization) in 1994. The
Company's average utilization rate for its rigs located offshore West Africa was
100 percent for 1996, 95 percent for 1995, and 98 percent for 1994. As of
February 15, 1997, all eleven of the Company's rigs located offshore West Africa
were under contract. The Company intends to mobilize a jackup rig, the
Glomar Adriatic IV, from West Africa to offshore California in May 1997. The
rig is scheduled to begin operating for a customer in June 1997 under a 12-month
contract. The cost of both the mobilization and demobilization will be
reimbursed by the customer.
In the U.K. sector of the North Sea, promising oil discoveries west of the
Shetland Islands, lower tax rates and higher oil prices, among other factors,
have resulted in higher North Sea dayrates and utilization, particularly for
semisubmersible rigs, in 1996 and 1995, compared to the preceding years.
<PAGE>
For the full year, average demand in the North Sea increased to 80 rigs under
contract (93 percent utilization) in 1996 from 71 rigs (90 percent
utilization) in 1995 and 64 rigs (76 percent utilization) in 1994. The
Company averaged 97 percent utilization for its drilling rigs in the North Sea
for 1996, 100 percent for 1995 and 68 percent for 1994. As of February 15,
1997, all three of the Company's rigs in the North Sea were under contract.
The Company intends to mobilize a jackup rig, the Glomar Labrador I, from the
North Sea to offshore Argentina in June 1997. The rig is scheduled to begin
drilling for a customer in July 1997 under a 12-month contract. The cost of
both the mobilization and demobilization will be reimbursed by the customer.
The Company anticipates that contracts on 14 of the Company's 26 rigs
operating under contracts as of February 15, 1997, will expire at varying
times on or prior to May 31, 1997. Short-term contracts have been typical
in the industry for the past decade, and the Company considers its upcoming
contract expirations typical of prevailing market conditions and consistent
with the normal course of business. The Company's strategy has been to
employ a number of its rigs on short-term contracts in periods of rising
dayrates, enabling the Company to contract for higher dayrate contracts as rigs
become available.
As drilling activity has accelerated over the past year, the Company has
found it more difficult to find, hire and retain the skilled workers required
for its contract drilling operations, and it has experienced moderate
increases in certain labor costs. Furthermore, approximately 250 qualified
personnel will be required within the next year to man the Company's two
deep-water rigs undergoing conversion. The Company has hired some of the
required personnel, and management believes it will be able to fill the
remaining positions from both within and outside the Company.
Although a substantial majority of the Company's employees are not
unionized, the Company is required to use union employees when it operates in
some foreign countries. In January 1997 the Company experienced a brief work
stoppage by a few union employees in Nigeria, which has been resolved. There
is no guarantee that the Company will not experience other work stoppages in
Nigeria or elsewhere in the future. Work stoppages to date have not had a
material impact on the Company's results of operations, financial condition
or cash flows. The Company currently has two rigs in Nigeria, which
accounted for approximately five percent of operating income from contract
drilling operations in 1996.
Drilling Management Services
Revenues for drilling management services increased by $93.5 million to
$306.3 million in 1996 from $212.8 million in 1995, and operating income
increased by $10.6 million to $27.9 million from $17.3 million in 1995. The
$93.5 million increase in revenues consisted of $47.1 million attributable to
an increase in the number of turnkey wells completed, from 67 in 1995 to 82
in 1996, $23.4 million attributable to daywork and other revenues, and $23.0
million attributable to higher average turnkey revenues per well.
In 1995 drilling management services reported a $70.0 million increase in
revenues to $212.8 million from $142.8 million in 1994, and a $6.5 million
increase in operating income to $17.3 million from $10.8 million in 1994.
The $70.0 million increase in revenues for the year consisted of (i) a $41.9
million increase attributable to an increase in the number of turnkey wells
completed, from 52 in 1994 to 67 in 1995, (ii) a $12.3 million increase
attributable to higher average turnkey revenues per well, (iii) $13.9 million
from the completion work on a multi-well North Sea turnkey project in 1995, and
(iv) a $1.9 million increase in other drilling management revenues. Average
turnkey revenues per well were
<PAGE>
higher because a higher percentage of the wells completed in 1995 were
directional and/or deep, high-pressured wells as compared with those
completed in 1994.
The increases in the number of turnkey wells completed in 1996 and 1995
compared to the preceding years were attributable in part to more competitive
pricing and oil and gas operators' increased reliance on turnkey contractors
to supplement internal drilling staffs.
Operating income for drilling management services expressed as a
percentage of drilling management revenues increased to 9 percent for 1996 as
compared with 8 percent for each of 1995 and 1994. Eleven turnkey wells in
1996 incurred losses aggregating $12.1 million, compared to losses
aggregating $5.7 million on four wells in 1995, and losses aggregating $5.4
million on seven wells in 1994.
Results of operations from the Company's drilling management services may be
limited by certain factors, in particular, the ability of the Company to obtain
and successfully perform turnkey drilling contracts based on competitive bids.
The Company's ability to obtain turnkey drilling contracts is largely
dependent on the number of such contracts available for bid. Accordingly,
results of the Company's drilling management service operations may vary
widely from quarter to quarter and from year to year. Furthermore, turnkey
operations may be constrained by the availability of rigs. In the U.S. Gulf of
Mexico, ADTI relied on third-party rigs for all of its rig time in 1996. The
Company currently has 15 third-party rigs under contract for its turnkey
operations, with remaining terms ranging from six months to one year at
market-adjusted dayrates. One of the contracts may be renewed at the option of
the Company for an additional two years at below current-market rates. The
future level of turnkey activity in the U.S. Gulf of Mexico is dependent on
the continued availability of third-party rigs. In the North Sea and West
Africa, the market for turnkey drilling is not well established, and growth in
these markets also may be constrained by future rig availability.
Oil and Gas Operations
Oil and gas revenues in the amount of $12.9 million for 1996 were higher than
the $9.8 million of revenues reported for 1995 due to higher oil and gas prices
and higher volumes of oil produced. Operating income of $6.8 million for 1996
was higher than the $3.4 million of operating income reported for 1995 due to
the higher revenues discussed above, offset in part by higher depletion expense
in 1996 as compared to 1995.
Despite higher oil and natural gas production and higher oil prices in
1995 compared to 1994, revenues from oil and gas were unchanged at $9.8
million for each of 1995 and 1994 due to a decline in the average price received
for gas. The increase in oil and gas production in 1995 was due to
production from new properties, partially offset by normal production declines.
Operating income of $3.4 million for 1995 was slightly lower than for 1994 due
principally to higher depletion expense.
Other Income and Expense
General and administrative expenses increased to $18.3 million in 1996 from
$14.4 million in 1995 and $13.4 million in 1994. Most of the increase in 1996
was attributable to costs of a stock-based employee compensation plan, which
costs are based in part on changes in the market price of the Company's
common stock.
<PAGE>
Interest expense was $30.9 million for 1996 compared to $30.2 million for
each of 1995 and 1994. The increase in 1996 was due to interest expensed on the
capital lease for the Glomar Explorer.
The Company capitalized $2.6 million of interest expense in 1996, $5.6
million in 1995, and $3.7 million in 1994. The amount of interest capitalized
is dependent on the number of rigs subject to refurbishments or other
construction work and the level of construction costs. The Glomar Adriatic IX
and Glomar Adriatic X underwent refurbishment during part of 1994 and 1995 after
their purchase in early 1994, and the Glomar Adriatic XI was converted to
drilling operations from an accommodations support unit in 1995 after its
acquisition in late 1994. The Glomar Explorer and the Glomar Celtic Sea
began undergoing conversion to drilling operations from other uses after the
Company acquired them in mid-1996.
Interest income increased to $6.2 million in 1996 from $4.7 million in 1995
and $3.8 million in 1994 primarily due to higher short-term investment
balances.
The Company recognized a gain of $1.1 million on the sale of two oil and gas
properties in 1996 and a gain of $14.7 million on the sale of an offshore
drilling rig, the Glomar Main Pass III, in 1995. Other income for 1994
consisted of $1.4 million in dividend income and a $0.6 million gain on the
sale of marketable equity securities.
Under Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," the Company is required to recognize tax assets
on its balance sheet if it is "more likely than not" that they will be
realized on future tax returns. Although the Company has had net operating
loss ("NOL") carryforwards since 1984, the lack of an earnings history and
the lack of significant revenue backlog, among other factors, led the Company
to conclude in years prior to 1996 that the realization of the tax benefits
of the NOL carryforwards did not pass the "more likely than not" test. The
Company made a determination in the fourth quarter of 1996, however, that it
was more likely than not that a material amount of these benefits would be
realized in the foreseeable future. This determination was based on the
Company's use of NOL carryforwards in 1995 and 1996, the amount of its backlog,
and improved fundamentals in the offshore drilling industry. Accordingly,
the Company recorded a reduction to deferred income tax expense in the amount
of $70.0 million with a corresponding increase in the net future income tax
benefit, which is classified as a noncurrent asset.
At December 31, 1996, the Company had $1.1 billion in NOL carryforwards for
tax purposes expiring in various amounts between 2001 and 2009, and the amount
of the unrecognized future tax benefits related to the NOL carryforwards would,
if fully recognized, approximate $299 million. The Company will reevaluate
its ability to utilize its NOL carryforwards in future periods and, in
compliance with SFAS No. 109, record any resulting adjustments, which may be
material, to deferred income tax expense. In addition, the Company will charge
to deferred income tax expense the benefits of NOL carryforwards actually
used in future quarters. The future impact on net income may therefore be
positive or negative, depending on the net result of such adjustments and
charges.
<PAGE>
Liquidity and Capital Resources
During the three-year period ended December 31, 1996, the Company entered
into a number of strategic transactions. In 1994 the Company received $30.8
million in cash from the sale of marketable securities received in connection
with a 1992 settlement of natural gas take-or-pay litigation. The Company
used the $30.8 million sale proceeds, plus available cash, to pay the $39.8
million cash purchase price of three offshore drilling rigs acquired in 1994.
In 1994 and 1995 the Company spent an additional $56 million to refurbish and
upgrade the three rigs purchased in 1994. In 1995 the Company sold a jackup
rig for $22.4 million in cash and recognized a gain of $14.7 million.
In June 1996 the Company entered into an agreement to purchase a dynamically-
positioned semisubmersible, the Polycastle, for $55 million in cash after
receiving a three-year, $160 million commitment from a major oil company to
drill in deep waters of the U.S. Gulf of Mexico. The purchase was completed
in October. The Company plans to spend approximately $130 million to convert
the rig, which was renamed the Glomar Celtic Sea, into a fourth-generation
semisubmersible capable of drilling in water depths of up to 5,000 feet. The
Glomar Celtic Sea is scheduled to commence drilling in the Gulf of Mexico in
the fourth quarter of 1997.
In August 1996 the Company announced that it had received a five-year, $262
million commitment from two major oil companies to drill in deep waters of
the U.S. Gulf of Mexico. To fulfill its commitment, the Company entered into
a 30-year lease with the U.S. government for use of the Glomar Explorer, a
dynamically-positioned ship that the Company designed and operated for the U.S.
government from 1973 to 1975. The Company plans to spend approximately $175
million to convert the Glomar Explorer into a deep-water drillship capable of
operating in water depths of up to 7,500. The Glomar Explorer is scheduled
to commence drilling in the Gulf of Mexico during the first quarter of 1998.
The Company intends to finance its investments in the Glomar Celtic Sea and
Glomar Explorer with internally generated funds.
In 1996 cash flow provided by operating activities amounted to $139.2
million. An additional $25.9 million was provided from maturities of
marketable securities (net of purchases), $9.2 million was provided from the
exercise of employee stock options, and $3.7 million was provided from sales of
properties and equipment. From the $178.0 million sum of cash inflows, $118.3
million was used for capital expenditures. In 1995 cash flow provided by
operating activities amounted to $75.0 million. An additional $23.9 million
was provided from sales of properties and equipment, primarily the sale of the
Glomar Main Pass III. From the $98.9 million sum of cash flow from operations
and proceeds from sales of properties and equipment, plus available cash, $73.5
million was used for capital expenditures, and $28.8 million was used for
purchases of marketable securities (net of maturities). In 1994 cash flow
provided by operating activities totaled $61.3 million, including $17.9
million in proceeds from the liquidation of a promissory note received in
connection with the 1992 settlement of the Company's take-or-pay litigation.
As of December 31, 1996, the Company had long-term debt of $225.0 million,
a long-term capital lease obligation in the amount of $16.6 million, and
shareholders' equity of $459.1 million. Long-term debt in the amount of
$225.0 million consisted of 12-3/4% Senior Secured Notes due 1999
<PAGE>
(the "Senior Secured Notes"). The annual interest on the Senior Secured Notes
is $28.7 million, payable semiannually each June and December.
The Senior Secured Notes do not require any payments of principal prior to
their stated maturity in December 1999, but the Company is required to make
offers to purchase Senior Secured Notes upon the occurrence of certain events
defined in the indenture, such as asset sales, or a change of control, or
if the annual cash flow ("Excess Cash Flow") of the Company exceeds certain
specified levels. On February 3, 1997, the Company made an offer to
purchase, at a price of 100 percent of principal, $55.3 million aggregate
principal amount of Senior Secured Notes from Excess Cash Flow for 1996. As of
February 3, the quoted market price of the Senior Secured Notes was 107 percent
of principal, which exceeded the price at which the Company was required to make
its purchase offer. Therefore, the amount of Senior Secured Notes the Company
will be required to purchase, if any, is not expected to be material. The
portion of the $55.3 million of cash that is not used to purchase Senior Secured
Notes will become unrestricted and available to the Company for general purposes
upon termination of the Company's purchase offer in March 1997.
The Senior Secured Notes are not redeemable at the option of the Company
prior to December 15, 1997. On or after December 15, 1997, the Senior Secured
Notes are redeemable at the option of the Company, in whole at any time or in
part from time to time, at a price of 102 percent of principal if redeemed
during the twelve months beginning December 15, 1997, or at a price of 100
percent of principal if redeemed on or after December 15, 1998, in each case
together with interest accrued to the redemption date. The Company presently
expects that, absent unforeseen circumstances, it will retire the Senior
Secured Notes as early as December 1997 using the Company's available cash,
cash equivalents and marketable securities, and the proceeds of debt
financings. If the Senior Secured Notes are retired in December 1997, the
Company would record an extraordinary loss of approximately $6.8 million in
the fourth quarter of 1997.
The indenture under which the Senior Secured Notes are issued imposes
significant operating and financial restrictions on the Company and requires
that a first lien in favor of the trustee be maintained, for the benefit of
the holders of Senior Secured Notes, on a significant portion of the Company's
material assets. Such restrictions affect, and in many respects limit or
prohibit, among other things, the ability of the Company to incur additional
indebtedness, make capital expenditures, create liens, sell assets, engage in
mergers or acquisitions, and make dividends or other payments. In addition,
the Company's credit facility, as described below, limits or prohibits, among
other things, the incurrence of additional indebtedness, the incurrence of
additional liens, consolidations, mergers, sales of assets, the payment of
dividends, and the making of certain investments. The restrictive covenants
contained in and liens provided for under the indenture and the limitations
imposed by the credit facility could significantly limit the ability of the
Company to respond to changing business or economic conditions or to respond to
substantial declines in operating results.
Capital expenditures for 1997 are estimated to be $294 million, including
$131 million for improvements to the Glomar Explorer, $113 million for
improvements to the Glomar Celtic Sea, $27 million for improvements to the
remainder of the drilling fleet, $21 million for capitalized interest, and
$2 million for other expenditures.
As of December 31, 1996, the Company had $120.4 million in cash, cash
equivalents and marketable securities, including $58.2 million restricted
from use for general corporate purposes. The restricted amount included (i)
$55.3 million in Excess Cash Flow for 1996, which will become
<PAGE>
unrestricted only after and to the extent not used to purchase Senior Secured
Notes in the Senior Secured Notes purchase offer in the first quarter of
1997, (ii) $2.2 million in proceeds from asset sales, and (iii) $0.7 million
collateralizing outstanding operating letters of credit. As of December 31,
1995, the Company had $86.6 million in cash, cash equivalents and marketable
securities.
In February 1997 the Company terminated a collateralized $25 million
revolving credit and letter of credit facility, which was to have expired in
December 1998 and under which it had no borrowings, and it entered into a new
two-year unsecured facility with a group of major international banks under
which the Company may borrow up to $100 million with a $25 million sublimit
for trade and standby letters of credit. Each borrowing under the new credit
facility would accrue interest at one of several market-based interest rates.
The unused portion of the credit facility is subject to an annual commitment
fee of one-quarter of one percent.
The Company believes that it will be able to meet all of its current
obligations, including capital expenditures and debt service, from its cash
flow from operations and its cash, cash equivalents and marketable securities.
As part of upgrading and expanding its rig fleet and other assets, the
Company considers and pursues the acquisition of suitable additional rigs and
other assets on an ongoing basis. If the Company decides to undertake an
acquisition, the issuance of additional shares of stock or additional debt could
be required.
In April 1995 the Company filed with the Securities and Exchange Commission
a registration statement on Form S-3 for the proposed offering from time to time
of (i) debt securities, which may be subordinated to other indebtedness of
the Company, (ii) shares of preferred stock, $0.01 par value per share,
and/or (iii) shares of common stock, $0.10 par value per share, for an aggregate
initial public offering price not to exceed $75 million. Any net proceeds
from the sale of offered securities would be used for general corporate
purposes which may include, but are not limited to, capital expenditures and
the financing of acquisitions. The registration statement was declared
effective by the Commission in June 1995. The Company has not offered for
sale or sold any securities under the registration statement.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Global Marine Inc.
We have audited the consolidated balance sheet of Global Marine Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Global Marine
Inc. and subsidiaries as of December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
Houston, Texas
February 7, 1997
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share data)
<TABLE>
Year Ended December 31,
-------------------------
1996 1995 1994
------ ------ ------
Revenues:
<S> <C> <C> <C>
Contract drilling $362.5 $248.9 $211.4
Drilling management 305.3 209.3 137.8
Oil and gas 12.9 9.8 9.8
------ ------ ------
Total revenues 680.7 468.0 359.0
Expenses:
Contract drilling 200.8 166.9 150.9
Drilling management 277.3 192.0 127.0
Oil and gas 2.6 3.4 4.2
Depreciation, depletion and amortization 40.9 31.0 37.4
General and administrative 18.3 14.4 13.4
------ ------ ------
539.9 407.7 332.9
------ ------ ------
Operating income 140.8 60.3 26.1
Other income (expense):
Interest expense (30.9) (30.2) (30.2)
Interest capitalized 2.6 5.6 3.7
Interest income 6.2 4.7 3.8
Gain on sale of offshore drilling rig - 14.7 -
Other 1.0 - 2.0
------ ------ ------
Total other income (expense) (21.1) (5.2) (20.7)
------ ------ ------
Income before income taxes 119.7 55.1 5.4
Provision (benefit) for income taxes:
Current tax provision 9.6 3.2 .6
Deferred tax benefit (70.0) - -
------ ------ ------
Total provision (benefit) for
income taxes (Note 8) (60.4) 3.2 .6
------ ------ ------
Income before cumulative effect
of change in accounting principle 180.1 51.9 4.8
Cumulative effect of change in accounting
for postemployment benefits (Note 1) - - (3.5)
------ ------ ------
Net income $180.1 $ 51.9 $ 1.3
====== ====== ======
Primary net income per common share (Note 7):
Before cumulative effect of change in
accounting principle $ 1.06 $ 0.31 $ 0.03
Cumulative effect of change in accounting
for postemployment benefits (Note 1) - - (0.02)
------ ------ ------
Primary net income per common share $ 1.06 $ 0.31 $ 0.01
====== ====== ======
Fully diluted net income per common and common
equivalent share (Note 7):
Before cumulative effect of change in
accounting principle $ 1.03 $ 0.30 $ 0.03
Cumulative effect of change in accounting
for postemployment benefits (Note 1) - - (0.02)
------ ------ ------
Fully diluted net income per common
and common equivalent share $ 1.03 $ 0.30 $ 0.01
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
ASSETS
<TABLE>
December 31,
-------------------
1996 1995
------ ------
Current assets:
<S> <C> <C>
Cash and cash equivalents (Note 2) $ 92.9 $ 33.2
Marketable securities (Note 2) 27.5 53.4
Accounts receivable, less allowance for doubtful
accounts of $1.3 in 1996 and $1.1 in 1995 104.4 70.2
Costs incurred on turnkey drilling contracts in progress 10.8 8.4
Prepaid expenses 8.0 2.2
Other current assets 2.9 .9
------ ------
Total current assets 246.5 168.3
Properties and equipment (Note 3):
Rigs and drilling equipment, less accumulated
depreciation of $224.4 in 1996 and $189.0 in 1995 471.9 377.9
Oil and gas properties, full cost method, less accumulated
depreciation, depletion and amortization of $31.1 in 1996
and $26.4 in 1995 5.5 8.7
------ ------
Net properties and equipment 477.4 386.6
Future income tax benefits, net (Note 8) 70.0 -
Other assets 13.9 8.1
------ ------
Total assets $807.8 $563.0
====== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
December 31,
-----------------
1996 1995
------ ------
Current liabilities:
<S> <C> <C>
Accounts payable $ 53.5 $ 33.9
Accrued compensation and related employee costs 19.0 10.8
Accrued income taxes 4.4 2.4
Other accrued liabilities 10.7 5.0
------ ------
Total current liabilities 87.6 52.1
Long-term debt (Note 3) 225.0 225.0
Capital lease obligation (Note 4) 16.6 -
Other long-term liabilities 19.5 16.9
Commitments and contingencies (Note 4) - -
Shareholders' equity:
Preferred stock, $0.01 par value, 10 million shares
authorized, no shares issued or outstanding - -
Common stock, $0.10 par value, 300 million shares
authorized, 169,440,569 shares and 166,458,083 shares
issued and outstanding at December 31, 1996
and 1995, respectively (Note 3) 16.9 16.6
Additional paid-in capital 274.5 264.8
Retained earnings (accumulated deficit) 167.7 (12.4)
------ ------
Total shareholders' equity 459.1 269.0
------ ------
Total liabilities and shareholders' equity $807.8 $563.0
====== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1996 1995 1994
------ ------ ------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $180.1 $ 51.9 $ 1.3
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred tax benefit (70.0) - -
Depreciation, depletion and amortization 40.9 31.0 37.4
Gains on sales of properties and equipment (1.1) (14.7) -
Cumulative effect of change in accounting
principle - - 3.5
Increase in accounts receivable (37.2) (7.1) (5.2)
Decrease in note receivable - - 17.9
(Increase) decrease in costs incurred on turnkey
drilling contracts in progress (2.4) 10.1 (17.0)
(Increase) decrease in other current assets (7.8) 7.2 (1.9)
Increase (decrease) in accounts payable 19.6 (5.6) 19.6
Increase in accrued liabilities 19.0 3.0 1.2
Other, net (1.9) (.8) 4.5
------ ------ ------
Net cash flow provided by operating activities 139.2 75.0 61.3
Cash flows from investing activities:
Capital expenditures (118.3) (73.5) (75.9)
Purchases of held-to-maturity securities (75.3) (124.3) (64.7)
Proceeds from maturities of held-to-maturity securities 101.2 95.5 60.2
Proceeds from sales of available-for-sale securities - - 15.6
Proceeds from sales of properties and equipment 3.7 23.9 2.6
Other - - 2.1
------ ------ ------
Net cash flow used in investing activities (88.7) (78.4) (60.1)
Cash flows from financing activities:
Proceeds from exercise of employee stock options 9.2 3.3 .9
------ ------ ------
Net cash flow provided by financing activities 9.2 3.3 .9
------ ------ ------
Increase (decrease) in cash and cash equivalents 59.7 (.1) 2.1
Cash and cash equivalents at beginning of year 33.2 33.3 31.2
------ ------ ------
Cash and cash equivalents at end of year $ 92.9 $ 33.2 $ 33.3
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in millions)
<TABLE>
<CAPTION>
Retained
Additional Earnings
Common Stock Paid-in (Accumulated
Shares Par Value Capital Deficit) Total
----------- --------- ------- ------------ -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 162,832,799 $16.3 $254.7 $(65.6) $205.4
Net income - - - 1.3 1.3
Common stock issued in
connection with the acquisition
of two offshore drilling rigs 750,000 .1 2.9 - 3.0
Exercise of employee stock options 484,500 - .9 - .9
Common stock issued under
other employee benefit plans 340,886 - 1.7 - 1.7
----------- ------ ------ ------ ------
Balance, December 31, 1994 164,408,185 16.4 260.2 (64.3) 212.3
Net income - - - 51.9 51.9
Exercise of employee stock options 1,615,299 .2 3.1 - 3.3
Common stock issued under
other employee benefit plans 434,599 - 1.5 - 1.5
----------- ------ ------ ------ ------
Balance, December 31, 1995 166,458,083 16.6 264.8 (12.4) 269.0
Net income - - - 180.1 180.1
Exercise of employee stock options 2,963,567 .3 8.9 - 9.2
Common stock issued under
other employee benefit plans 18,919 - .2 - .2
Income tax benefit from
stock option exercises - - .6 - .6
----------- ----- ------ ------ ------
Balance, December 31, 1996 169,440,569 $16.9 $274.5 $167.7 $459.1
=========== ===== ====== ====== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Global Marine
Inc. and its majority-owned subsidiaries. Unless the context otherwise
requires, the term "Company" refers to Global Marine Inc. and its
consolidated subsidiaries. Intercompany accounts and transactions have been
eliminated.
Cash Equivalents
Cash equivalents consist of all highly liquid debt instruments with remaining
maturities of three months or less at the time of purchase.
Properties and Depreciation
Rigs and Drilling Equipment. The costs of rigs and drilling equipment were
written down in 1988 to their estimated fair market values as of December 31,
1988. Included in the costs of rigs and drilling equipment is an allocation
of interest incurred during periods that rigs are under construction or
refurbishment. Expenditures for maintenance and repairs are charged to expense
as incurred. Costs of property sold or retired and the related accumulated
depreciation are removed from the accounts; resulting gains or losses are
included in income.
Effective January 1, 1995, the Company increased to 25 years the estimated
useful lives of its jackups and increased to 20 years the estimated useful lives
of its semisubmersibles and drillship. In addition, salvage values were
reduced to $500,000 per rig for jackups and $1,000,000 per rig for
semisubmersibles and the drillship. The effect of the change in estimated
service lives and salvage values was to decrease 1995 depreciation expense by
approximately $11.2 million.
Oil and Gas Properties. The Company capitalizes all costs attributable to the
acquisition, exploration and development of oil and gas reserves under the full
cost method of accounting. Depletion expense is computed using the units-of-
production method. The depletable base (the "full cost pool") consists of
capitalized costs, estimated future costs to develop proved reserves, and
estimated future dismantlement costs, and is reduced by profits earned on the
Company's turnkey drilling contracts for wells drilled on properties in which
the Company has working interests. In addition, the full cost pool is
reduced by proceeds from sales of oil and gas properties, unless the sale
involves a significant quantity of reserves in relation to total reserves, in
which case a gain or loss would be recognized. The costs of unproved
properties and major development projects are not subject to depletion until
they are fully evaluated. All unproved properties are reviewed at least
annually to ascertain if impairment has occurred. Capitalized costs in the
full cost pool that exceed the present value of estimated future net revenues
from proved reserves are charged to income in accordance with Securities
and Exchange Commission guidelines.
<PAGE>
Revenue Recognition
Contract drilling services are performed generally on a dayrate basis under
individual contracts to employ the Company's rigs. Such contracts extend over
a specified period of time or the time required to drill a specified well or
number of wells. Revenues from contract drilling services and the related
expenses are recognized on a per-day basis as the work progresses. Revenues
from turnkey drilling contracts, which are classified under drilling management
revenues, are derived from the design and execution of specific offshore
drilling programs, each at a fixed price to the oil and gas operator.
Revenues from each turnkey drilling contract and the related expenses are
recognized upon completion of the contract.
Foreign Currency Translation
The U.S. dollar is the functional currency for all of the Company's
operations. Realized and unrealized foreign currency transaction gains and
losses are recorded in income.
The Company may be exposed to the risk of foreign currency exchange losses in
connection with its foreign operations. Such losses are the result of holding
net monetary assets (cash and receivables in excess of payables) denominated
in foreign currencies during periods of a strengthening U.S. dollar. The
Company's foreign exchange gains and losses, which are primarily attributable
to the British pound, have not been and are not expected to be material.
This is because the Company's revenues are primarily denominated in U.S.
dollars, revenues in each foreign currency are approximately equal to the
Company's local expenses in that currency, and the Company does not speculate
in foreign currencies or maintain significant foreign currency cash balances.
Stock-Based Compensation Plans
In October 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which sets forth accounting and disclosure requirements for
stock option and other stock-based compensation plans. The new statement
encourages, but does not require, companies to record stock-based compensation
expense using a fair-value method, rather than the intrinsic-value method
prescribed by Accounting Principles Board ("APB") Opinion No. 25. The
Company has adopted only the disclosure requirements of SFAS No. 123 and has
elected to continue to record stock-based compensation expense using the
intrinsic-value approach prescribed by APB Opinion No. 25. Accordingly, the
Company computes compensation cost for each employee stock option granted as
the amount by which the quoted market price of the Company's common stock on
the date of grant exceeds the amount the employee must pay to acquire the stock.
The amount of compensation cost, if any, is charged to income over the vesting
period. With respect to performance-based stock awards, under which the number
of shares issued is dependent on the attainment of certain long-term
performance goals, the amount of compensation expense is adjusted based on
changes in the quoted market price of the stock during the period from the date
of grant to the end of the performance period. (See Note 6.)
<PAGE>
Postemployment Benefits
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." SFAS No. 112 requires the recognition of expense for
postemployment benefits on an accrual basis rather than the cash basis used
previously. Postemployment benefits include severance pay, disability-
related benefits and certain health care benefits during the period after
termination of employment but before retirement. The cumulative effect of the
change as of January 1, 1994, was a charge to 1994 earnings in the amount of
$3.5 million ($0.02 per share). Other than the cumulative effect, the effect of
the change on earnings was not material.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 - Investments
At December 31, 1996 and 1995, all of the Company's investments in cash
equivalents and marketable securities consisted of debt securities which were
classified as held-to-maturity and were carried at amortized cost. A summary of
the estimated fair values of investments as of December 31 follows:
<TABLE>
1996 1995
------ ------
(In millions)
Cash equivalents:
<S> <C> <C>
Commercial paper $ 86.3 $ 21.8
Eurodollar time deposits 12.1 9.4
------ ------
$ 98.4 $ 31.2
====== ======
Marketable securities:
Commercial paper $ 20.6 $ 42.5
Eurodollar time deposits 6.6 10.6
Certificates of deposit .2 .1
U.S. Treasury obligations .1 .2
------ ------
$ 27.5 $ 53.4
====== ======
</TABLE>
The estimated fair values of investments approximated their amortized cost;
therefore, there were no unrealized gains or losses as of December 31, 1996
or 1995.
<PAGE>
The estimated fair values of investments as of December 31 grouped by
contractual maturities were as follows:
<TABLE>
1996 1995
------ ------
(In millions)
<S> <C> <C>
Within three months or less $ 98.4 $ 31.2
After three months through one year 27.5 53.3
After one year - .1
------ ------
$125.9 $ 84.6
====== ======
</TABLE>
As of December 31, 1996, $58.2 million of the Company's cash and short-term
investments was restricted from general use. The restricted amount is comprised
of (i) $55.3 million in Excess Cash Flow for 1996, which will become
unrestricted only after and to the extent not used in the offering to purchase
Senior Secured Notes in the first quarter of 1997 (see Note 3), (ii) $2.2
million in proceeds from asset sales, and (iii) $0.7 million collateralizing
outstanding operating letters of credit.
Note 3 - Long-term Debt
Long-term debt as of December 31, 1996 and 1995, consisted of 12-3/4% Senior
Secured Notes due 1999 (the "Senior Secured Notes") in the aggregate principal
amount of $225.0 million, due December 15, 1999. Interest on the Senior Secured
Notes is payable semiannually each June and December. The Senior Secured
Notes do not require any payments of principal prior to their stated maturity
on December 15, 1999, but the Company is required to make offers to purchase
Senior Secured Notes upon the occurrence of certain events defined in the
indenture, such as asset sales, or a change of control, or if the annual cash
flow of the Company exceeds certain specified levels. On February 3, 1997,
the Company made an offer to purchase, at a price of 100 percent of principal,
$55.3 million aggregate principal amount of Senior Secured Notes from Excess
Cash Flow for 1996. As of February 3, the quoted market price of the Senior
Secured Notes was 107 percent of principal, which exceeded the price at which
the Company was required to make its purchase offer. Therefore, the amount of
Senior Secured Notes the Company will be required to purchase, if any, is not
expected to be material. The portion of the $55.3 million of cash that is
not used to purchase Senior Secured Notes will become unrestricted and
available to the Company for general purposes upon termination of the Company's
purchase offer in March 1997.
The Senior Secured Notes are not redeemable at the option of the Company prior
to December 15, 1997. On or after December 15, 1997, the Senior Secured Notes
are redeemable at the option of the Company, in whole at any time or in part
from time to time, at a price of 102 percent of principal if redeemed during
the twelve months beginning December 15, 1997, or at a price of 100 percent
of principal if redeemed on or after December 15, 1998, in each case together
with interest accrued to the redemption date. The Company presently expects
that, absent unforeseen circumstances, it will retire the Senior Secured Notes
as early as December 1997 using the Company's available cash, cash
equivalents and marketable securities, and the proceeds of debt financings.
If the Senior Secured Notes are retired in December 1997, the Company would
record an extraordinary loss of approximately $6.8 million in the fourth
quarter of 1997.
<PAGE>
The Senior Secured Notes are collateralized by 22 rigs and all of the capital
stock of most of the Company's direct and indirect subsidiaries.
In February 1997 the Company terminated a collateralized $25 million revolving
credit and letter of credit facility, which was to have expired in December 1998
and under which it had no borrowings, and it entered into a new two-year
unsecured facility with a group of major international banks under which the
Company may borrow up to $100 million with a $25 million sublimit for trade and
standby letters of credit. Each borrowing under the new credit facility
would accrue interest at one of several market-based interest rates. The
unused portion of the credit facility is subject to an annual commitment
fee of one-quarter of one percent.
The indenture governing the Senior Secured Notes and the credit facility
contain certain restrictions with respect to the payment of dividends on the
common stock (other than stock dividends). Specifically, the indenture
restricts the payment of dividends based on (i) availability of funds under a
formula based on previously unapplied cumulative net income since September 30,
1992 plus certain stock sale proceeds after December 23, 1992 and (ii)
satisfaction of the then-applicable minimum interest coverage ratio for debt
incurrence. Cumulative net income for purposes of the test excludes gains or
losses on asset sales and certain other nonrecurring charges or credits
specified in the indenture. The credit facility restricts the payment of
dividends until the Senior Secured Notes are paid in full and certain
excess cash flow requirements are met. Thereafter, dividends are restricted
to an amount based on a consolidated net income formula. It is unlikely that
dividends will be declared or paid on the Company's common stock during the
next one to two years. The Company expects, however, that it will reconsider
the declaration and payment of dividends after that time.
Note 4 - Commitments and Contingencies
In July 1996 the Company entered into a 30-year lease with the U.S. government
for use of the Glomar Explorer, a dynamically-positioned ship that the Company
designed and operated for the U.S. government from 1973 to 1975. The lease
of the Glomar Explorer was recorded as a capital lease. Accordingly, the
Company recorded an asset, which is included in rigs and drilling equipment,
and a long-term liability in the amount of the present value of the future
rental payments which amounted to $16.0 million at inception of the lease.
At December 31, 1996, the total capitalized cost of the lease including
leasehold improvements amounted to $21.9 million. The Company has recorded no
amortization of the asset to date. Amortization will begin when the drillship
is placed in service and will continue for the remainder of the 30-year lease
term. Payments due under the lease are payable annually in arrears.
The Company has numerous noncancelable operating leases for office facilities
and equipment, with expiration dates ranging from one to five years. Some of
the operating leases may be renewed at the Company's option, and some are
subject to rent revisions based on the Consumer Price Index or increases in
building operating costs. Rent expense for 1996, 1995, and 1994 was $4.1
million, $4.9 million, and $6.9 million, respectively.
<PAGE>
Future minimum rental payments for the Company's lease obligations as of
December 31, 1996, were as follows:
<TABLE>
Capital Operating
Lease Leases
------- ---------
(In millions)
Year ending December 31:
<C> <C> <C>
1997 $ 0.2 $ 2.6
1998 0.2 2.5
1999 1.8 2.4
2000 1.8 2.3
2001 1.8 .7
Later years 44.1 -
----- -----
Total future minimum rental payments 49.9 $10.5
=====
Less amount representing imputed interest 33.1
-----
Present value of future minimum rental
payments under capital lease 16.8
Less current portion included in accrued liabilities .2
-----
Long-term capital lease obligation $16.6
=====
</TABLE>
The Company is involved in various lawsuits resulting from personal injury
and property damage. The Company has accrued for its share of the costs of
settlement of these claims, which costs generally consist of the insurance
deductible amounts. In the opinion of management, resolution of these
matters will not have a material adverse effect on its results of operations,
financial position or cash flows.
Note 5 - Financial Instruments
Concentrations of Credit Risk
The market for the Company's services and products is the offshore oil and
gas industry, and the Company's customers consist primarily of major
integrated international oil companies and independent oil and gas producers.
The Company performs ongoing credit evaluations of its customers and
generally does not require material collateral. The Company maintains reserves
for potential credit losses, and such losses have been within management's
expectations.
The Company had cash deposits concentrated primarily in five major banks at
December 31, 1996, as compared with four banks at December 31, 1995. In
addition, the Company had certificates of deposit, commercial paper and
Eurodollar time deposits with a variety of companies and financial
institutions with strong credit ratings. As a result of the foregoing, the
Company believes that credit risk in such instruments is minimal.
<PAGE>
Fair Values of Financial Instruments
The estimated fair value of the Company's $225.0 million carrying value of
the Senior Secured Notes approximated $241.8 million and $248.0 million as of
December 31, 1996 and 1995, respectively. Fair values of the Senior Secured
Notes were based on quoted market prices. The fair values of the Company's
cash equivalents, marketable securities, trade receivables and trade payables
approximated their carrying values due to the short-term nature of these
instruments (see Note 2).
Note 6 - Stock-Based Compensation Plans
The Company has three stock-based compensation plans, more fully described
below, under which options to purchase a fixed number of shares of the
Company's common stock ("stock options") have been granted to individuals at
then-current market prices and, under one of the plans, at below-market prices.
In addition, under one of the plans the Company has offered for sale to key
employees at below-market prices a variable number of shares of common stock,
the exact number being dependent on the Company's attainment of certain
long-term performance goals ("performance-based stock awards"). As discussed
in Note 1 under "Stock-Based Compensation Plans," the Company accounts for
its stock-based compensation plans under APB Opinion No. 25. Accordingly,
no compensation cost has been recognized for those stock options with
exercise prices equal to the market price of the stock on the date of grant.
The amount of compensation cost charged against income for the Company's
performance-based stock awards was $5.9 million in 1996 and $0.5 million in
1995. There were no charges against income in 1994 for performance-based
awards. Had compensation cost for the Company's stock-based compensation
plans been determined based on fair values at the grant dates consistent with
the method set forth in SFAS No. 123, the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below:
<PAGE>
<TABLE>
1996 1995
------ ------
(In millions, except
per share amounts)
<S> <S> <C> <C>
Net income: As reported $180.1 $51.9
Pro forma $178.4 $50.1
Primary earnings per share: As reported $ 1.06 $0.31
Pro forma $ 1.05 $0.30
Fully diluted earnings per share: As reported $ 1.03 $0.30
Pro forma $ 1.02 $0.29
</TABLE>
The pro forma figures above are not likely to be representative of future pro
forma amounts because compensation costs were allocated over a maximum four-year
vesting period, the above pro forma amounts exclude costs of grants before
1995, and additional awards in future years are anticipated.
The estimated fair values of stock options and performance-based stock awards
on the grant dates were computed using the Black-Scholes option-pricing model
based on the following assumptions:
<TABLE>
1996 1995
------ ------
<S> <C> <C>
Expected price volatility range 41% to 43% 43% to 45%
Risk-free interest rate range 5.5% to 6.8% 5.7% to 7.4%
Expected dividends none none
Expected life of fixed stock options 5 years 5 years
Expected life of performance-based stock awards 3 years 3 years
Description of Plans
</TABLE>
The Company has three stock-based compensation plans, the Global Marine Inc.
1989 Stock Option and Incentive Plan (the "Employee Plan"), the Global Marine
Inc. 1994 Non-Employee Stock Option and Incentive Plan (the "Non-Employee
Plan"), and the Global Marine Inc. 1990 Non-Employee Director Stock Option
Plan (the "Director Plan"). Under the Employee Plan incentive and non-qualified
options to purchase shares of common stock may be granted to key employees;
under the Non-Employee Plan non-qualified options may be granted to certain
non-employees; and under both plans shares of common stock may be sold at
prices below the market price at the time of the sale. Under the Director
Plan, non-qualified options to purchase shares of common stock are
automatically granted each year to outside directors of the Company. One
half of each option grant under the Director Plan becomes exercisable one
year after the grant date with the remainder exercisable after two years.
With respect to stock options under the Employee Plan and Non-Employee Plan,
one half of each grant before December 31, 1995 became exercisable beginning
one year after the date of grant, with the remainder exercisable after two
years. Each grant after December 31, 1995 under the Employee Plan and Non-
Employee Plan becomes exercisable in increments of 25 percent each year
beginning one year after the grant date. Options under all plans expire ten
years after the grant date and become exercisable in full
<PAGE>
if more than 50 percent of the Company's outstanding common stock is acquired by
a person or a single group of persons.
Stock Options
A summary of the status of stock options granted under all plans is presented
below:
<TABLE>
Number
Of Shares Weighted-Average
Under Option Exercise Price
------------ --------------
<S> <C> <C>
Outstanding, December 31, 1993 8,362,700 $2.92
Granted 1,761,900 $4.19
Exercised (484,500) $2.01
Canceled (414,900) $4.93
-----------
Outstanding, December 31, 1994 9,225,200 $3.12
Granted 2,236,500 $4.01
Exercised (1,615,299) $2.03
Canceled (11,000) $3.86
-----------
Outstanding, December 31, 1995 9,835,401 $3.50
Granted 1,317,500 $11.33
Exercised (2,963,567) $3.13
Canceled (96,500) $6.01
-----------
Outstanding, December 31, 1996 8,092,834 $4.88
===========
Exercisable, December 31,
1994 6,586,550 $2.83
1995 6,753,201 $3.24
1996 5,887,559 $3.59
</TABLE>
All stock options granted in 1995 had exercise prices equal to the market
price of the Company's common stock on the day of grant and had a weighted-
average fair value of $1.97 per share on the grant date. In 1996, 42,000
stock options were granted with a weighted-average exercise price of $6.81,
which was less than the market price of the stock on the date of grant, and
a weighted-average fair value of $11.01. All other stock options granted in
1996 had exercise prices equal to the market price of the Company's common
stock on the date of grant and had a weighted-average fair value of $5.21 per
share.
<PAGE>
The following table summarizes information about all stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------- -----------------------------
Weighted-
Range of Number Average Weighted- Number Weighted-
Exercise Outstanding Remaining Average Exercisable Average
Prices at 12/31/96 Contractual Life Exercise Price at 12/31/96 Exercise Price
- -------------- ----------- ---------------- -------------- ----------- --------------
<C> <C> <C> <C> <C> <C>
$0.56 to $2.75 1,202,691 3.9 years $ 1.29 1,202,691 $ 1.29
$3.00 to $5.63 5,515,143 6.3 years $ 4.12 4,647,118 $ 4.16
$6.69 to $10.25 1,098,500 9.1 years $ 9.07 37,750 $ 6.69
$14.56 to $20.31 276,500 9.8 years $19.19 - -
--------- ---------
8,092,834 5,887,559
========= =========
</TABLE>
Performance-Based Stock Awards
Under the Employee Plan, the Company has offered to sell shares of Company
stock to certain key employees at a price of $0.10 per share, the exact
number of shares that each employee will be allowed to purchase being
dependent on Company performance over three-year periods as measured against
performance goals with respect to cash flow, earnings per share, and stock
price. Such offers were made in 1996 for up to 131,250 shares depending on
performance during the period 1996 through 1998, in 1995 for up to 262,500
shares depending on performance during the period 1995 through 1997, and in
1994 for up to 200,000 shares depending on performance during the period 1994
through 1996. At December 31, 1996, all performance goals for the shares
offered in 1994 had been exceeded, and all 200,000 shares offered in 1994
were issued in February 1997, with 58,902 shares being withheld by the
Company in payment of the required withholding taxes. Shares offered in 1995
and 1996 will be issued in 1998 and 1999, respectively, subject, however, to
the attainment of the performance goals. Stock offered in 1996 and 1995 had
weighted-average fair values of $9.23 and $3.54 per share, respectively,
as of the date of the grant. At December 31, 1996, the total number of
performance-based shares subject to conditional sale amounted to 593,750,
including the 200,000 shares issued in February 1997.
Note 7 - Net Income per Common Share
Primary and fully diluted net income per common share were computed by
dividing net income by the weighted average number of common shares
outstanding and, if their effect was material, common share equivalents,
which primarily consisted of employee stock options.
Primary net income per common share was based on 169,495,394 shares for 1996,
165,142,881 shares for 1995, and 163,828,711 shares for 1994. Primary shares
for 1995 and 1994 excluded common share equivalents because their effect was
immaterial.
Fully diluted net income per common and common equivalent share was based on
175,137,942 shares for 1996, 172,540,316 shares for 1995, and 166,996,378 shares
for 1994.
<PAGE>
Note 8 - Income Taxes
The provision (benefit) for income taxes consisted of the following:
<TABLE>
1996 1995 1994
------ ------ ------
(In millions)
<S> <C> <C> <C>
Current - Foreign $ 7.0 $ 2.3 $ .9
- U.S. federal 2.4 .9 (.3)
- State .2 - -
------ ----- ----
9.6 3.2 .6
Deferred - U.S. federal (70.0) - -
------ ----- ----
Provision (benefit) for income taxes $(60.4) $ 3.2 $ .6
====== ===== ====
</TABLE>
A reconciliation of the differences between income taxes computed at the
U.S. federal statutory rate of 35 percent and the Company's reported
provision (benefit) for income taxes follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- ------
(Dollars in millions)
<S> <C> <C> <C>
Income tax expense at statutory rate $ 41.9 $ 19.3 $ 1.9
Decrease in the valuation allowance (70.0) - -
Utilization of net operating loss carryforwards (34.7) (12.9) -
Deductions not recognized for financial net income (7.0) (7.8) (1.9)
Foreign tax provision 7.0 2.3 .9
Alternative minimum tax 2.4 .9 -
State tax provision .2 - -
Other, net (.2) 1.4 (.3)
------ ------ ------
Provision (benefit) for income taxes $(60.4) $ 3.2 $ .6
====== ====== ======
Effective tax rate (50.5)% (1) 5.8% 11.1%
====== ====== ======
- --------------------
(1) Excluding the decrease in the valuation allowance, the effective tax rate
would have been 8.0%.
</TABLE>
Deferred tax assets and liabilities are recorded in recognition of the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. The significant components
of the Company's deferred tax assets and liabilities as of December 31 were
as follows:
<PAGE>
<TABLE>
<CAPTION>
1996 1995
------ ------
(In millions)
Deferred tax assets:
<S> <C> <C>
Net operating and capital loss carryforwards $368.5 $ 402.6
Investment and alternative minimum tax credit carryforwards 25.4 28.7
Accrued expenses not currently deductible 10.5 7.9
Other 2.0 -
------ ------
406.4 439.2
Less: Valuation allowance (279.3) (381.8)
------ ------
Deferred tax assets, net of valuation allowance 127.1 57.4
------ ------
Deferred tax liabilities:
Depreciation and depletion for tax in excess of book expense 32.5 28.0
Tax benefit transfers 19.6 22.1
Income recognized for book in excess of tax 4.0 6.3
Other 1.0 1.0
------ ------
Total deferred tax liabilities 57.1 57.4
------ ------
Net future income tax benefit recognized in consolidated
balance sheet $ 70.0 $ -
====== ======
</TABLE>
Under Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," the Company is required to record a valuation allowance
against the deferred tax assets on its balance sheet unless the Company can
determine that it is "more likely than not" that they will be realized on
future tax returns. Although the Company has had net operating loss ("NOL")
carryforwards since 1984, the lack of an earnings history and the lack of
significant revenue backlog, among other factors, led the Company to conclude
in years prior to 1996 that the realization of the tax benefits of the NOL
carryforwards did not pass the "more likely than not" test. The Company made a
determination in the fourth quarter of 1996, however, that it was more likely
than not that a material amount of these benefits would be realized in the
foreseeable future. This determination was based on the Company's use of NOL
carryforwards in 1995 and 1996, the amount of its backlog, and improved
fundamentals in the offshore drilling industry. Accordingly, the Company
reduced the valuation allowance by $70.0 million in the fourth quarter of
1996 and reduced income tax expense by the same amount.
At December 31, 1996, the Company had $1,052.9 million in NOL carryforwards
for tax purposes expiring in various amounts between 2001 and 2009, and the
amount of the unrecognized future tax benefits related to the NOL
carryforwards would, if fully recognized, approximate $299 million. The
Company will reevaluate its ability to utilize its NOL carryforwards in
future periods and, in compliance with SFAS No. 109, record any resulting
adjustments in the valuation allowance, which adjustments may be material,
to deferred income tax expense. In addition, the Company will charge to
deferred income tax expense the benefits of NOL carryforwards actually used
in future quarters. The future impact on net income may therefore be
positive or negative, depending on the net result of such adjustments and
charges.
<PAGE>
In addition to NOL carryforwards, the Company had $3.0 million in non-expiring
alternative minimum tax credit carryforwards and $22.4 million in investment
tax credit ("ITC") carryforwards at December 31, 1996. The NOL and ITC
carryforwards expire as follows:
<TABLE>
NOL ITC
----- -----
(In millions)
Year ending December 31:
<C> <C> <C>
1997 $ 5.3
1998 8.7
1999 8.1
2000 0.3
2001 $ 12.5 -
2002 31.3 -
2003 24.3 -
2004 424.1 -
2005 418.9 -
2006 66.2 -
2007 21.5 -
2008 35.8 -
2009 18.3 -
-------- -----
$1,052.9 $22.4
======== =====
</TABLE>
The Company's NOL and ITC carryforwards are subject to review and potential
disallowance by the Internal Revenue Service ("IRS") upon audit of the
Company's federal income tax returns. Section 382 of the Internal Revenue
Code of 1986, as amended, may impair the future availability of the NOL
and ITC carryforwards if there is a change in ownership of more than 50
percent of the Company's common stock. This limitation, if it applied, would
limit the utilization of the NOL and ITC carryforwards in each taxable year
to an amount equal to the product of the federal long-term tax-exempt bond
rate prescribed monthly by the IRS and the fair market value of all the
Company's stock at the time of the ownership change. The interpretation of
Section 382 is subject to numerous uncertainties. Accordingly, while the
Company believes its carryforwards are available to it without limitation, such
availability is not certain, nor is it certain that such carryforwards, if
presently available without limitation, will continue to be available without
limitation.
Note 9 - Industry Segment Information
The Company provides offshore drilling services on a contract daily-rate basis
principally in the U.S. Gulf of Mexico, the North Sea, and offshore West
Africa and on a turnkey basis primarily in the U.S. Gulf of Mexico. In
addition, the Company has oil and gas production interests principally in the
U.S. Gulf of Mexico. In the industry segment data which follows, revenues
from turnkey drilling services are included in drilling management services.
Intersegment revenues are recorded at transfer prices which are intended to
approximate the prices charged to unaffiliated customers and have been
eliminated from consolidated revenues. Operating income consists of revenues
less the related operating costs and expenses, excluding interest and
unallocated corporate expenses. Adjustments and eliminations
<PAGE>
in part reduce operating income attributable to drilling management services for
the amount of profit on each turnkey well drilled on properties in which the
Company has economic interests.
<TABLE>
<CAPTION>
Drilling
Contract Management Adjustments and
Drilling Services Oil and Gas Corporate Eliminations Consolidated
-------- --------- ----------- --------- ------------ ------------
(In millions)
Revenues from unaffiliated
customers
<C> <C> <C> <C> <C> <C> <C>
1996 $362.5 $305.3 $ 12.9 $ - $ - $680.7
1995 248.9 209.3 9.8 - - 468.0
1994 211.4 137.8 9.8 - - 359.0
Intersegment revenues
1996 5.7 1.0 - - (6.7) -
1995 9.5 3.5 - - (13.0) -
1994 4.0 5.0 - - (9.0) -
Total revenues
1996 368.2 306.3 12.9 - (6.7) 680.7
1995 258.4 212.8 9.8 - (13.0) 468.0
1994 215.4 142.8 9.8 - (9.0) 359.0
Operating income
1996 125.4 29.4 6.8 (19.3) (1.5) 140.8
1995 54.6 17.3 3.4 (15.0) - 60.3
1994 25.6 16.5 3.7 (14.0) (5.7) 26.1
Depreciation, depletion
and amortization
1996 36.3 0.1 3.5 1.0 - 40.9
1995 27.4 (1) - 3.0 0.6 - 31.0
1994 34.9 - 1.9 0.6 - 37.4
Capital expenditures
1996 115.4 (2) 0.4 1.5 1.0 - 118.3
1995 66.0 0.3 5.1 2.1 - 73.5
1994 70.2 (3) - 4.9 0.8 - 75.9
Identifiable assets
1996 545.9 37.8 8.2 215.9 - 807.8
1995 456.2 22.0 10.6 74.2 - 563.0
1994 390.4 24.3 19.1 78.6 - 512.4
</TABLE>
__________________________________
(1) Effective January 1, 1995, the Company increased the remaining lives of
its offshore drilling rigs, resulting in a reduction of $11.2 million
in depreciation expense for 1995.
(2) Excludes the $16.0 million acquisition of the Glomar Explorer through
assumption of a capital lease.
(3) Excludes $3.0 million of common stock issued in connection with the
acquisition of two offshore drilling rigs.
<PAGE>
No single customer provided more than ten percent of revenues for 1996 or
1994. In 1995 one customer provided both $40.9 million of contract drilling
revenues and $10.3 million of drilling management revenues.
Export sales by geographic areas were as follows:
<TABLE>
1996 1995 1994
------ ------ ------
(In millions)
<S> <C> <C> <C>
West Africa $155.9 $ 68.2 $ 31.2
North Sea 101.2 80.0 39.2
Trinidad 5.8 11.9 11.8
Far East and Australia - 13.3 14.4
Other 8.7 20.3 6.6
------ ------ ------
$271.6 $193.7 $103.2
====== ====== ======
</TABLE>
Note 10 - Retirement Plans
Pensions
The Company has defined benefit pension plans covering substantially all of
its employees. For the most part, benefits are based on the employee's length
of service and average earnings for the five highest consecutive calendar
years of compensation during the last fifteen years of service. Substantially
all benefits are paid from funds previously provided to trustees. The Company
is the sole contributor to the plans, and its funding objective is to fund
participants' benefits under the plans as they accrue, taking into
consideration future salary increases. The components of net pension cost were
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(In millions)
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 2.6 $ 1.9 $ 2.1
Interest cost on projected benefit obligation 5.0 4.1 3.7
Actual return on plan assets (6.2) (9.5) 0.9
Net amortization and deferral 3.0 6.7 (3.5)
----- ----- -----
Net pension cost $ 4.4 $ 3.2 $ 3.2
===== ===== =====
</TABLE>
<PAGE>
The following table sets forth the funded status of the plans by plan type
(for federal income tax reporting purposes) and the amounts recognized in the
Company's consolidated balance sheet as of December 31:
<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
Qualified Nonqualified Qualified Nonqualified
--------- ------------ --------- ------------
(In millions)
Actuarial present value of plan benefits:
<S> <C> <C> <C> <C>
Vested $49.5 $ 8.7 $ 42.7 $ 7.5
Nonvested 3.7 .5 3.5 .3
----- ----- ------ -----
Accumulated benefit obligation 53.2 9.2 46.2 7.8
Effect of projected salary increases 9.0 1.5 8.3 1.2
----- ----- ------ -----
Projected benefit obligation 62.2 10.7 54.5 9.0
Plan assets at fair value 54.9 3.4 46.5 3.0
----- ----- ------ -----
Projected benefit obligation in
excess of plan assets 7.3 7.3 8.0 6.0
Unrecognized net loss (7.2) (2.7) (7.3) (1.9)
----- ----- ----- -----
Accrued pension liability $ .1 $ 4.6 $ .7 $ 4.1
===== ===== ===== =====
</TABLE>
Plan assets consist primarily of listed stocks and bonds.
The Company has established grantor trusts to provide funding for the
benefits payable under certain of the nonqualified plans. The trusts are
irrevocable, and grantor trust assets, which are excluded from plan assets in
the table above, can be used only to pay such benefits, with certain exceptions.
Grantor trust assets totaled $3.5 million at December 31, 1996, and consisted of
interest-bearing cash, a stock portfolio, and a bond portfolio. Grantor
trust assets totaled $1.6 million at December 31, 1995, and consisted of
interest-bearing cash. Assets of the grantor trusts are included in other
assets on the consolidated balance sheet.
The expected long-term rate of return on plan assets used to compute
pension cost was 9.0 percent for 1996, 1995, and 1994. The assumed rate of
increase in future compensation levels ranged from 5.5 percent to 6.5 percent
for each of 1996, 1995, and 1994. The discount rate used to compute the
actuarial present value of the projected benefit obligation was 7.5 percent
for 1996, 7.25 percent for 1995 and 8.25 percent for 1994.
The Company has a defined contribution savings plan in which substantially
all of the Company's domestic employees are eligible to participate. Company
contributions to the savings plan are based on the amount of employee
contributions. Charges to expense with respect to this plan totaled $0.8
million for 1996, $0.6 million for 1995 and $0.5 million for 1994.
<PAGE>
Other Postretirement Benefits
The Company provides term life insurance to retirees and, for a period
generally ending two years following retirement, health care benefits to
retirees and their covered dependents. Generally, employees who have reached
the age of 55 and have rendered a minimum of five years of service are eligible
for such retirement benefits. For the most part, health care benefits are
contributory while life insurance benefits are noncontributory.
Net postretirement life insurance and health care cost consisted of the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In millions)
<S> <C> <C> <C>
Service cost - benefits earned during the period $0.1 $0.1 $0.1
Interest cost on accumulated postretirement benefit obligation 0.2 0.2 0.2
---- ---- ----
Net postretirement life insurance and health care cost $0.3 $0.3 $0.3
==== ==== ====
</TABLE>
Benefits under the Company's postretirement life insurance and health care
plans are not funded. The status of the plans as of December 31 was as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In millions)
Actuarial present value of accumulated postretirement benefit obligation:
<S> <C> <C>
Retirees and dependents $ 1.2 $ 1.2
Active employees eligible for benefits 0.5 0.5
Active employees not yet eligible for benefits 0.8 0.7
Unrecognized net gain 0.1 0.1
----- -----
Accrued postretirement life insurance and health care liability $ 2.6 $ 2.5
===== =====
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 8.0 percent through 1997, gradually
declining to 6.0 percent by the year 2015 and remaining at that level
thereafter. The effect of a one-percentage point increase in the assumed health
care cost trend rate for each future year on (i) the portion of the accumulated
postretirement benefit obligation applicable to health care benefits as of
December 31, 1996 and (ii) the net postretirement health care cost for the
year then ended would be immaterial. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 7.0 percent
for 1996 and 1995.
Note 11 - Supplemental Cash Flow Information
Cash interest payments totaled $28.7 million in each of 1996, 1995 and 1994.
Cash payments for income taxes totaled $7.0 million in 1996, $3.6 million in
1995, and $1.1 million in 1994.
In 1996 the Company financed the acquisition of the Glomar Explorer drillship
by assuming a $16.0 million capital lease obligation.
<PAGE>
In 1994 the Company acquired one offshore drilling rig in an all-cash
transaction and two other drilling rigs for $26.0 million in cash plus
750,000 shares of Global Marine Inc. common stock.
CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(In millions, except per share data)
<TABLE>
<CAPTION>
1996 1995
-------------------------------------- --------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $123.0 $159.9 $177.9 $219.9 $116.1 $102.4 $135.8 $113.7
Operating income 21.0 32.4 38.9 48.5 9.7 14.7 15.5 20.4
Net income 14.9 24.1 30.9 110.2 4.5 24.2 9.6 13.6
Net income per share 0.09 0.14 0.18 0.63 0.03 0.14 0.06 0.08
Price ranges of
common stock:
High 10-3/4 16 16-1/8 21-1/2 4-1/4 5-7/8 7-3/8 8-3/4
Low 7-3/4 10-1/8 13-5/8 15-3/4 3-1/2 4-1/8 5-1/8 6
</TABLE>
The Company recorded a noncash credit to deferred income tax expense in the
fourth quarter of 1996 in the amount of $70.0 million in order to recognize a
portion of the future tax benefit of net operating loss carryforwards as
required by SFAS No. 109. The adjustment resulted in an increase to fourth
quarter net income by the same amount. (See Note 8 of Notes to Consolidated
Financial Statements.)
Net income for the first quarter of 1996 included a $1.1 million gain on the
sale of two offshore oil and gas properties.
Net income for the second quarter of 1995 included a $14.7 million gain on
the sale of an offshore drilling rig.
The Company did not declare any dividends on its common stock in either 1996
or 1995.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Global Marine Inc.
Our report on the consolidated financial statements of Global Marine Inc. and
subsidiaries is included on page 25 of this Form 10-K. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 52 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
Houston, Texas
February 7, 1997
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In millions)
<CAPTION>
Additions
-----------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions of Year
- ----------------------------- ---------- ----------- ---------- ---------- -------
Year ended December 31, 1996:
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts receivable $ 1.1 $ .5 $ - $ .3 $ 1.3
Year ended December 31, 1995:
Allowance for doubtful
accounts receivable $ 1.2 $ .1 $ - $ .2 $ 1.1
Year ended December 31, 1994:
Reserve for loss on
operating lease $ 8.4 $ - $ 0.2 (a) $ 8.6 (b) $ -
Allowance for doubtful
accounts receivable 1.2 .2 - .2 1.2
</TABLE>
(a) Represents unearned interest income which was charged to an escrow account
for the lease of the Glomar Beaufort Sea I and which was classified as a
noncurrent asset.
(b) Represents lease payments for the Glomar Beaufort Sea I which were made
from the escrow account described in (a) above.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As permitted by General Instruction G, the information called for by this item
with respect to the Company's directors is incorporated by reference from the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after the end of the last fiscal year. Information with
respect to the Company's executive officers is set forth in Part I of this
Annual Report on Form 10-K under the caption "Executive Officers of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to
be filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to be
filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to be
filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
Page
(a) Financial Statements, Schedules and Exhibits
(1) Financial Statements
Report of Independent Accountants 25
Consolidated Statement of Operations 26
Consolidated Balance Sheet 27
Consolidated Statement of Cash Flows 29
Consolidated Statement of Shareholders' Equity 30
Notes to Consolidated Financial Statements 31
(2) Financial Statement Schedule
Report of Independent Accountants 49
Schedule II - Valuation and Qualifying Accounts 50
Schedules other than those listed above are omitted for the reason that
they are not applicable.
(3) Exhibits
The following instruments are included as exhibits to this Annual Report
on Form 10-K and are filed herewith unless otherwise indicated.
Exhibits incorporated by reference are so indicated by parenthetical
information.
3(i).1 Restated Certificate of Incorporation of the Company as filed with the
Secretary of State of Delaware on March 15, 1989, effective March 16,
1989. (Incorporated herein by this reference to Exhibit 3(i).1 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
3(i).2 Certificate of Amendment of the Restated Certificate of Incorporation of
the Company as filed with the Secretary of State of Delaware on May 11,
1990. (Incorporated herein by this reference to Exhibit 3(i).2 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
3(i).3 Certificate of Correction of the Restated Certificate of Incorporation
of the Company as filed with the Secretary of State of Delaware on
September 25, 1990. (Incorporated herein by this reference to
Exhibit 3(i).3 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.)
3(i).4 Certificate of Amendment of the Restated Certificate of Incorporation of
the Company as filed with the Secretary of State of Delaware on May 11,
1992. (Incorporated herein by this reference to Exhibit 3(i).4 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.)
<PAGE>
3(i).5 Certificate of Amendment of the Restated Certificate of Incorporation of
the Company as filed with the Secretary of State of Delaware on May 12,
1994. (Incorporated herein by this reference to Exhibit 4.5 of the
Registrant's Registration Statement on Form S-3 (No. 33-53691) filed
with the Commission on May 18, 1994.)
3(ii).1 Amendments to the By-laws of the Company as adopted by the Company's
Board of Directors effective November 14, 1996.
3(ii).2 By-laws of the Company as amended through November 14, 1996.
4.1 Indenture, dated as of December 23, 1992, between the Company and
Wilmington Trust Company, as Trustee, with respect to the Senior Secured
Notes. (Incorporated herein by this reference to Exhibit 4.5 of
Post-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form S-3 (No. 33-34013) filed with the Commission on
January 22, 1993.)
4.2 First Priority Naval Mortgage, dated April 29, 1993, from Global Marine
Drilling Company to Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.6 of the
Registrant's Registration Statement on Form S-3 (No. 33-65272) filed
with the Commission on June 30, 1993.)
4.3 First Preferred Fleet Mortgage, dated December 23, 1992, from Global
Marine Drilling Company to Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.7 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.4 Release of Vessel from Lien of First Preferred Fleet Mortgage, dated
April 30, 1993, by Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.8 of the
Registrant's Registration Statement on Form S-3 (No. 33-65272) filed
with the Commission on June 30, 1993.)
4.5 First Preferred Fleet Mortgage, dated December 23, 1992, from Global
Marine Deepwater Drilling Inc. to Wilmington Trust Company, as
Trustee. (Incorporated herein by this reference to Exhibit 4.8 of
Post-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form S-3 (No. 33-34013) filed with the Commission on
January 22, 1993.)
4.6 Release of Vessel from Lien of Mortgage, dated January 27, 1993, by
Wilmington Trust Company, as Trustee. (Incorporated herein by this
reference to Exhibit 4.6 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993.)
4.7 First Priority Naval Mortgage, dated March 17, 1993, from Global Marine
Nautilus Inc. to Wilmington Trust Company, as Trustee. (Incorporated
herein by this reference to Exhibit 4.10 of the Registrant's
Registration Statement on Form S-3 (No. 33-65272) filed with the
Commission on June 30, 1993.)
4.8 Release of Vessel from Lien of First Priority Naval Fleet Mortgage,
dated September 8, 1993, by Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.8 of the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993.)
<PAGE>
4.9 Supplement No. 1, dated September 8, 1993, to First Priority Naval Fleet
Mortgage from Global Marine Nautilus Inc. to Wilmington Trust Company,
as Trustee. (Incorporated herein by this reference to Exhibit 4.9 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
4.10 Assumption Agreement and Supplement No. 2, dated December 16, 1993,
to First Priority Naval Fleet Mortgage among Global Marine Drilling
Company and Wilmington Trust Company, as Trustee. (Incorporated
herein by this reference to Exhibit 4.10 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.)
4.11 First Preferred Fleet Mortgage, dated December 23, 1992, from Global
Marine West Africa Inc. to Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.10 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.12 First Preferred Ship Mortgage, dated December 23, 1992, from Global
Marine Adriatic Inc. to Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.11 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement on
Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.13 Assumption Agreement and Supplement No.1, dated March 4, 1993, to First
Preferred Ship Mortgage among Global Marine Adriatic Inc., as Original
Mortgagor, Global Marine Drilling Company, as Assuming Mortgagor, and
Wilmington Trust Company, as Trustee. (Incorporated herein by this
reference to Exhibit 4.13 of the Registrant's Registration Statement
on Form S-3 (No. 33-65272) filed with the Commission on June 30, 1993.)
4.14 First Preferred Ship Mortgage, dated December 23, 1992, from Global
Marine Australia Inc. to Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.12 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.15 Release of Vessel from Lien of Mortgage, dated May 19, 1995, by
Wilmington Trust Company, as Trustee. (Incorporated herein by this
reference to Exhibit 4.15 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995.)
4.16 First Preferred Ship Mortgage, dated December 23, 1992, from Global
Marine Bismarck Sea Inc. to Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.13 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.17 First Priority Naval Mortgage, dated March 17, 1993, from Global Marine
North Sea Inc. to Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.16 of the
Registrant's Registration Statement on Form S-3 (No. 33-65272 ) filed
with the Commission on June 30, 1993.)
4.18 Subsidiary Pledge Agreement, dated December 23, 1992, between Global
Marine Adriatic Inc. and Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to
<PAGE>
Exhibit 4.15 of Post-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form S-3 (No. 33-34013) filed with the
Commission on January 22, 1993.)
4.19 Subsidiary Pledge Agreement, dated December 23, 1992, between Global
Marine Australia Inc. and Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.16 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.20 Subsidiary Pledge Agreement, dated December 23, 1992, between Global
Marine Bismarck Sea Inc. and Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.17 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.21 Subsidiary Pledge Agreement, dated December 23, 1992, between Global
Marine Deepwater Drilling Inc. and Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.18 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.22 Subsidiary Pledge Agreement, dated December 23, 1992, between Global
Marine Drilling Company Inc. and Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.19 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.23 Subsidiary Pledge Agreement, dated December 23, 1992, between Global
Marine Nautilus Inc. and Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.20 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.24 Subsidiary Pledge Agreement, dated December 23, 1992, between Global
Marine North Sea Inc. and Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.21 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.25 Subsidiary Pledge Agreement, dated December 23, 1992, between Global
Marine West Africa Inc. and Wilmington Trust Company, as Trustee.
(Incorporated herein by this reference to Exhibit 4.22 of Post-
Effective Amendment No. 2 to the Registrant's Registration Statement
on Form S-3 (No. 33-34013) filed with the Commission on January 22,
1993.)
4.26 Subsidiary Pledge Agreement, dated December 21, 1995, between Global
Marine International Services Corporation and Wilmington Trust Company,
as Trustee. (Incorporated herein by this reference to Exhibit 4.26 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995.)
10.1 Credit Agreement, dated February 12, 1997, among Global Marine Inc.,
Various Lending Institutions, Bankers Trust Company, as Administrative
Agent, and Societe Generale, as Co-Agent, and Guaranty, dated
February 12, 1997, by Global Marine Bismarck Sea Inc., Global Marine
Deepwater Drilling Inc., Global Marine Drilling Company, Global Marine
North Sea Inc., Global Marine West Africa Inc., and Petdrill, Inc.
<PAGE>
10.2 Memorandum of Agreement, dated June 6, 1993, between Global Marine Inc.
and Transocean Drilling AS, and Amendment No. 1 thereto dated June 16,
1993. (Incorporated herein by this reference to Exhibit 99.1 of the
Registrant's Registration Statement on Form S-3 (No. 33-65272) filed
with the Commission on June 30, 1993.)
10.3 Letter of Intent in Order to Form a Joint Venture, dated June 6, 1993,
between Global Marine Inc. and Transocean Drilling AS. (Incorporated
herein by this reference to Exhibit 99.2 of the Registrant's
Registration Statement on Form S-3 (No. 33-65272) filed with the
Commission on June 30, 1993.)
10.4 Purchase and Sale Agreement, dated August 24, 1993, between Global
Marine Inc. and Transocean Drilling AS. (Incorporated herein by this
reference to Exhibit 10.3 of the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.)
10.5 Management Agreement (relating to Glomar Moray Firth I), dated
September 10, 1993, between Global Marine Nautilus Inc. and
Transocean Drilling AS. (Incorporated herein by this reference to
Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.)
10.6 Management Agreement (relating to Transocean No. 5), dated September 10,
1993, between Global Marine Nautilus Inc. and Transocean Drilling AS.
(Incorporated herein by this reference to Exhibit to 10.5 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.)
10.7 Bareboat Charter Agreement, dated July 2, 1996, between the United
States of America and Global Marine Capital Investments Inc.
(Incorporated herein by this reference to Exhibit 10.1 of the
Registrant's Current Report on Form 8-K dated August 1, 1996.)
* 10.8 Letter Employment Agreement dated February 14, 1995, between the Company
and C. Russell Luigs. (Incorporated herein by this reference to Exhibit
10.7 of the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994.)
* 10.9 Consulting Agreement dated February 14, 1986, between Challenger
Minerals Inc. and Donald B. Brown. (Incorporated herein by this
reference to Exhibit 10.2 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1987.)
*10.10 Form of Letter Severance Agreement dated February 7, 1989, between the
Company and six executive officers, respectively. (Incorporated
herein by this reference to Exhibit 10.5 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.)
*10.11 Letter Severance Agreement dated May 7, 1992, between the Company and
one executive officer. (Incorporated herein by this reference to
Exhibit 10.5 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992.)
*10.12 Global Marine Inc. 1989 Stock Option and Incentive Plan.
(Incorporated herein by this reference to Exhibit 10.6 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
<PAGE>
*10.13 First Amendment to Global Marine Inc. 1989 Stock Option and Incentive
Plan. (Incorporated herein by this reference to Exhibit 10.6 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1990.)
*10.14 Second Amendment to Global Marine Inc. 1989 Stock Option and Incentive
Plan. (Incorporated herein by this reference to Exhibit 10.7 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1991.)
*10.15 Third Amendment to Global Marine Inc. 1989 Stock Option and Incentive
Plan. (Incorporated herein by this reference to Exhibit 10.19 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.)
*10.16 Fourth Amendment to Global Marine Inc. 1989 Stock Option and Incentive
Plan. (Incorporated herein by this reference to Exhibit 10.16 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994.)
*10.17 Fifth Amendment to Global Marine Inc. 1989 Stock Option and Incentive
Plan. (Incorporated herein by this reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.)
*10.18 Sixth Amendment to Global Marine Inc. 1989 Stock Option and Incentive
Plan.
*10.19 Form of Incentive Stock Sale Agreement dated February 20, 1996,
between the Company and two executive officers, respectively.
(Incorporated herein by this reference to Exhibit 10.18 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995.)
*10.20 Form of Incentive Stock Sale Agreement dated February 11, 1997, between
the Company and an executive officer.
*10.21 Form of Performance Stock Memorandum dated June 7, 1994, regarding
conditional opportunity to acquire Company stock granted to six
executive officers, respectively. (Incorporated herein by this
reference to Exhibit 10.1 of the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1994.)
*10.22 Form of Performance Stock Memorandum dated February 14, 1995, regarding
conditional opportunity to acquire Company stock granted to six
executive officers, respectively. (Incorporated herein by this
reference to Exhibit 10.20 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994.)
*10.23 Form of Performance Stock Memorandum dated February 20, 1996, regarding
conditional opportunity to acquire Company stock granted to six
executive officers, respectively. (Incorporated herein by this
reference to Exhibit 10.21 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995.)
*10.24 Form of Performance Stock Memorandum dated February 11, 1997, regarding
conditional opportunity to acquire Company stock granted to six
executive officers, respectively.
<PAGE>
*10.25 Performance Criteria for Compensation Intended to Qualify as
"Performance-Based Compensation" Under Section 162(m) of the Internal
Revenue Code. (Incorporated herein by this reference to Exhibit 10.2 of
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.)
*10.26 Executive Life Insurance Plan. (Incorporated herein by this reference
to Exhibit 10.5 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1988.)
*10.27 Global Marine Inc. Executive Supplemental Retirement Plan of 1990.
(Incorporated herein by this reference to Exhibit 10.8 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1990.)
*10.28 Global Marine Executive Deferred Compensation Trust as established
effective January 1, 1995. (Incorporated herein by this reference to
Exhibit 10.24 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995.)
*10.29 Global Marine Benefit Equalization Retirement Plan effective January 1,
1990. (Incorporated herein by this reference to Exhibit 10.8 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1989.)
*10.30 Global Marine Benefit Equalization Retirement Trust as established
effective January 1, 1990. (Incorporated herein by this reference to
Exhibit 10.9 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989.)
*10.31 Form of Indemnification Agreement entered into between the Company and
each of its directors and officers. (Incorporated herein by this
reference to Exhibit 10.12 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1986.)
*10.32 Resolutions dated August 3, 1994 regarding Directors' Compensation.
(Incorporated herein by this reference to Exhibit 10.28 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995.)
*10.33 Amended and Restated Retirement Plan for Outside Directors.
(Incorporated herein by this reference to Exhibit 10.12 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1990.)
*10.34 Global Marine Outside Director Deferred Compensation Trust as
established effective January 1, 1996.
*10.35 Global Marine Inc. 1990 Non-Employee Director Stock Option Plan
(Incorporated herein by this reference to Exhibit 10.18 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1991.)
*10.36 First Amendment to Global Marine Inc. 1990 Non-Employee Director Stock
Option Plan (Incorporated herein by this reference to Exhibit 10.1 of
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995.)
*10.37 Second Amendment to Global Marine Inc. 1990 Non-Employee Director Stock
Option Plan.
<PAGE>
*10.38 Global Marine Inc. 1996 Management Incentive Award Plan. (Incorporated
herein by this reference to Exhibit 10.33 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995.)
*10.39 Global Marine Inc. 1997 Management Incentive Award Plan.
11.1 Computation of Earnings Per Common Share.
21.1 List of Subsidiaries.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as an exhibit
only in the electronic format of this Annual Report on Form 10-K
being submitted to the Securities and Exchange Commission. Exhibit 27.1
shall not be deemed filed for purposes of Section 11 of the Securities
Act of 1933, Section 18 of the Securities Exchange Act of 1934 or
Section 323 of the Trust Indenture Act, or otherwise be subject to the
liabilities of such sections, nor shall it be deemed a part of any
registration statement to which it relates.)
- --------------------------
* Management contract or compensatory plan or arrangement.
The Company hereby undertakes, pursuant to Regulation S-K, Item 601(b),
paragraph (4) (iii), to furnish to the Securities and Exchange Commission on
request agreements defining the rights of holders of long-term debt of the
Company and its consolidated subsidiaries not filed herewith in accordance
with said Item.
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the last
quarter of 1996.
<PAGE>
SIGNATURES REQUIRED FOR FORM 10-K
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.
GLOBAL MARINE INC.
(REGISTRANT)
Date: February 26, 1997 By: J. C. MARTIN
----------------------
(J. C. Martin)
Senior Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
C. R. LUIGS Chairman of the Board, February 26, 1997
(C. R. Luigs) President and Chief
Executive Officer
J. C. MARTIN Senior Vice President and February 26, 1997
(J. C. Martin) Chief Financial Officer
(Principal Financial
Officer) and Director
THOMAS JOHNSON Vice President and February 26, 1997
(Thomas Johnson) Corporate Controller
(Principal Accounting Officer)
DONALD B. BROWN Director February 26, 1997
(Donald B. Brown)
E. J. CAMPBELL Director February 26, 1997
(E. J. Campbell)
THOMAS CASON Director February 26, 1997
(Thomas Cason)
PETER T. FLAWN Director February 26, 1997
(Peter T. Flawn)
JOHN M. GALVIN Director February 26, 1997
(John M. Galvin)
L. L. LEIGH Director February 26, 1997
(L. L. Leigh)
E. R. MULLER Director February 26, 1997
(E. R. Muller)
PAUL J. POWERS Director February 26, 1997
(Paul J. Powers)
W. R. THOMAS Director February 26, 1997
(W. R. Thomas)
EXHIBIT 99
EXHIBIT INDEX
A. Copies of exhibits listed below are submitted with this Annual Report on
Form 10-K, immediately following this index.
3(ii).1 Amendments to the By-laws of the Company as adopted by the
Company's Board of Directors effective November 14, 1996.
3(ii).2 By-laws of the Company as amended through November 14, 1996.
10.1 Credit Agreement, dated February 12, 1997, among Global Marine
Inc., Various Lending Institutions, Bankers Trust Company, as
Administrative Agent, and Societe Generale, as Co-Agent, and
Guaranty, dated February 12, 1997, by Global Marine Bismarck
Sea Inc., Global Marine Deepwater Drilling Inc., Global Marine
Drilling Company, Global Marine North Sea Inc., Global Marine
West Africa Inc., and Petdrill, Inc.
10.18 Sixth Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan.
10.20 Form of Incentive Stock Sale Agreement dated February 11, 1997,
between the Company and an executive officer.
10.24 Form of Performance Stock Memorandum dated February 11, 1997,
regarding conditional opportunity to acquire Company stock
granted to six executive officers, respectively.
10.34 Global Marine Outside Director Deferred Compensation Trust as
established effective January 1, 1996.
10.37 Second Amendment to Global Marine Inc. 1990 Non-Employee Director
Stock Option Plan.
10.39 Global Marine Inc. 1997 Management Incentive Award Plan.
11.1 Computation of Earnings Per Common Share.
21.1 List of Subsidiaries.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as
an exhibit only in the electronic format of this Annual Report
on Form 10-K being submitted to the Securities and Exchange
Commission. Exhibit 27.1 shall not be deemed filed for purposes of
Section 11 of the Securities Act of 1933, Section 18 of the
Securities Exchange Act of 1934 or Section 323 of the Trust
Indenture Act, or otherwise be subject to the liabilities of
such sections, nor shall it be deemed a part of any registration
statement to which it relates.)
B. All other exhibits listed in Item 14(a)(3) are incorporated
by reference in this Annual Report on Form 10-K, as stated in
Item 14(a)(3). Descriptions of these exhibits are
incorporated herein by this reference to Item 14(a)(3) of
this Report.
EXHIBIT 3(ii).1
AMENDMENTS TO BY-LAWS OF GLOBAL MARINE INC.
(Effective November 14, 1996)
Sections II-2, II-4, III-1, III-5, III-8, and IV-1 of the By-laws of
Global Marine Inc. shall be amended in their entirety to change said
sections from the old version to the new version, in each case, as
indicated below:
OLD VERSION:
SECTION II-2 DATE, TIME, AND PURPOSE OF ANNUAL MEETING: The
Annual Meeting of Stockholders shall be held at such date and time
as may be determined by the Board of Directors. In the event that
the Board does not set a date and time, such meeting shall be held
at 11:00 o'clock a.m. on the fourth Wednesday in May of each year
if not a legal holiday, and if a legal holiday, then at the same
time on the next business day following. At such annual meeting
the stockholders shall elect a Board of Directors, and shall
transact such other business as may properly be brought before the
meeting.
NEW VERSION:
SECTION II-2 DATE, TIME, AND PURPOSE OF ANNUAL MEETING: The
Annual Meeting of Stockholders shall be held at such date and time
as may be determined by the Board of Directors. In the event that
the Board does not set a date and time, such meeting shall be held
at 11:00 a.m. on the fourth Wednesday in May of each year if not a
legal holiday, and if a legal holiday, then at the same time on the
next business day following. At such annual meeting the
stockholders shall elect directors and shall transact such other
business as may properly be brought before the meeting.
OLD VERSION:
SECTION II-4 STOCKHOLDER LIST: The officer who has charge of the
stock ledger of the corporation shall prepare and make at least ten
days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in
alphabetical order, showing the address of and the number of shares
registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane
to the meeting, during ordinary business hours, for a period of at
least ten days prior to the election, either at a place within the
city, town or village where the election is to be held, and which
place shall be specified in the notice of the meeting, or, if not
specified, at the place where said meeting is to be held, and the
list shall be produced and kept at the time and place of election
during the whole time thereof, and subject to the inspection of any
stockholder who may be present.
NEW VERSION:
SECTION II-4 STOCKHOLDER LIST: The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in
alphabetical order, and showing the address of and the number of
shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held, and the list shall be
produced and kept at the time and place of the meeting during the
whole time thereof, and subject to the inspection of any
stockholder who is present.
OLD VERSION:
SECTION III-1 NUMBER, QUALIFICATION, ELECTION AND TERM OF OFFICE:
The exact number of directors, within the limits stated in the
Certificate of Incorporation, shall be determined by resolution or
resolutions passed by a majority of the whole Board of Directors.
If it is proposed to reduce the authorized number of directors
below five (5), the vote of stockholders holding more than eighty
percent (80%) of the voting power shall be necessary for such
reduction. No person shall serve as a director of this corporation
who at the time of his or her election has reached his or her 70th
birthday unless such person was elected as a director at the annual
meeting of holders of common stock of this corporation held on May
18, 1979, in which case such person shall be entitled to serve as
a director without regard to any limitation of age. Directors need
not be stockholders.
NEW VERSION:
SECTION III-1 NUMBER, QUALIFICATION, ELECTION, AND TERM OF OFFICE:
The exact number of directors, within the limits stated in the
Certificate of Incorporation, shall be determined by resolution or
resolutions passed by a majority of the whole Board of Directors.
If it is proposed to reduce the authorized number of directors
below five (5), the vote of stockholders holding more than eighty
percent (80%) of the voting power shall be necessary for such
reduction. No person shall serve as a director of this corporation
who at the time of his or her election has reached his or her 70th
birthday unless such person was elected as a director at the annual
meeting of holders of common stock of this corporation held on May
18, 1979, in which case such person shall be entitled to serve as
a director without regard to any limitation of age. Each director
shall serve for a term of office within the limits stated in the
Certificate of Incorporation. Directors need not be stockholders.
OLD VERSION:
SECTION III-5 SPECIAL MEETINGS; TELEPHONIC MEETINGS PERMITTED:
Special meetings of the Board may be called by the President on
reasonable notice to each director, either personally, by
telephone, by mail or by telegram; special meetings shall be called
by the President or Secretary in like manner and on like notice on
the written request of two directors. Unless otherwise restricted
by the Certificate of Incorporation or these By-laws, members of
the Board of Directors, or any committee designated by the Board,
may participate in a meeting of the Board or of such committee, as
the case may be, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting pursuant to this provision shall constitute presence
in person at such meeting.
NEW VERSION:
SECTION III-5 SPECIAL MEETINGS; TELEPHONIC MEETINGS PERMITTED:
Special meetings of the Board may be called by the President on
reasonable notice to each director, which notice may be written,
oral, or by any other mode of notice; special meetings shall be
called by the President or Secretary in like manner and on like
notice on the written request of two directors. Unless otherwise
restricted by the Certificate of Incorporation or these By-laws,
members of the Board of Directors, or any committee designated by
the Board, may participate in a meeting of the Board or of such
committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting pursuant to this provision shall constitute presence
in person at such meeting.
OLD VERSION:
SECTION III-8 COMMITTEES - FORMATION AND POWERS: The Board of
Directors may, by resolution passed by a majority of the whole
Board, designate one or more committees, each committee to consist
of two or more of the directors of the corporation, which, to the
extent provided in the resolution, shall have and may exercise the
powers of the Board of Directors in the management of the business
and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of
Directors.
NEW VERSION:
SECTION III-8 COMMITTEES - FORMATION AND POWERS: The Board of
Directors may designate one or more committees, each committee to
consist of two or more of the directors of the corporation, which,
to the extent provided by the Board, shall have and may exercise
the powers of the Board of Directors in the management of the
business and affairs of the corporation and may authorize the seal
of the corporation to be affixed to all papers which may require
it. Such committee or committees shall have such name or names as
may be determined from time to time by the Board of Directors. The
Board of Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the
absence or disqualification of a member of a committee, and in the
absence of a designation by the Board of Directors of an alternate
member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act
at the meeting in place of any absent or disqualified member.
OLD VERSION:
SECTION IV-1 NOTICES: Whenever under the provisions of these By-laws,
notice is required to be given to any stockholder, director,
or officer, such notice, unless otherwise provided, may be given
personally, or it may be given in writing by depositing the same in
the post office or letterbox in a postpaid sealed envelope, or it
may be telegraphed, addressed to such stockholder, director, or
officer, at such address as appears on the books of the
corporation, or in default of other address, to such stockholder,
director, or officer at the general post office in the City of
Wilmington, County of New Castle, Delaware, and such notice shall
be deemed to be given at the time when the same shall be thus
mailed or telegraphed.
NEW VERSION:
SECTION IV-1 NOTICES: Whenever under the provisions of these By-laws
notice is required to be given to any stockholder, director or
officer, such notice may be written, oral or by any other mode of
notice unless otherwise provided by law, the Certificate of
Incorporation or these By-laws. If given by United States mail,
notice is given when deposited in the United States mail, postage
prepaid, directed to such stockholder, director, or officer at his
address as it appears on the records of the corporation, or in
default of other address, to such stockholder, director, or officer
at the general post office in the City of Wilmington, County of New
Castle, Delaware.
EXHIBIT 3(ii).2
GLOBAL MARINE INC.
BY-LAWS
As Amended Through November 14, 1996
INDEX
ARTICLE I OFFICES PAGE
Section I-1 Principal Office
Section I-2 Other Offices
ARTICLE II MEETINGS OF STOCKHOLDERS
Section II-1 Place
Section II-2 Date, Time, and Purpose of
Annual Meeting
Section II-3 Written Notice
Section II-4 Stockholder List
Section II-5 Special Meeting
Section II-6 Notice of Special Meeting
Section II-7 Business Transacted at Special Meeting
Section II-8 Quorum
Section II-9 Majority Vote
Section II-10 The Stockholder Vote
ARTICLE III DIRECTORS
Section III-1 Number, Qualification, Election
and Term of Office
Section III-2 Location of Board Meeting
Section III-3 First Meeting of the Newly Elected Board
Section III-4 Regular Meetings
Section III-5 Special Meetings; Telephonic Meetings Permitted
Section III-6 Quorum and Majority Vote
Section III-7 Unanimous Written Consent
Section III-8 Committees - Formation and Powers
Section III-9 Committee Minutes
Section III-10 Compensation
Section III-11 Indemnification of Directors,
Officers, Employees and Agents
Section III-12 Directors Emeritus
ARTICLE IV NOTICES AND WAIVERS THEREOF
Section IV-1 Notices
Section IV-2 Waiver of Notice
ARTICLE V OFFICERS
Section V-1 Election of Officers<PAGE>
Section V-2 Time of Election of Principal Officers
Section V-3 Time of Election of Other Officers
Section V-4 Salaries
Section V-5 Term of Office, Removal and
Filling of Vacancies
Section V-5a The Chairman of the Board
Section V-5b Chief Executive Officer
Section V-6 The President - Duties
Section V-7 The President - Execution of
Documents Requiring a Seal
Section V-8 The Vice President
Section V-9 The Secretary
Section V-10 The Assistant Secretary
Section V-11 The Treasurer - Responsibility for Funds
Section V-12 The Treasurer - Other Duties
Section V-13 The Assistant Treasurer
ARTICLE VI CERTIFICATE OF STOCK
Section VI-1 Right of Stockholder to Certificate
Section VI-2 Facsimile Signature
Section VI-3 Lost Certificates
Section VI-4 Transfer of Stock
Section VI-5 Record Date
Section VI-6 Registered Stockholders
ARTICLE VII GENERAL PROVISIONS
Section VII-1 Dividends - Declaration and Payment
Section VII-2 Reserve Out of Funds Available for Dividends
Section VII-3 Annual Report
Section VII-4 Execution of Documents
Section VII-5 Undertakings and Commitments
Section VII-6 Checks
Section VII-7 Representation of Shares of Other Corporations
Section VII-8 Fiscal Year
Section VII-9 Corporate Seal
ARTICLE VIII AMENDMENT OF BY-LAWS
Section VIII-1 Amendment
GLOBAL MARINE INC.
BY-LAWS
ARTICLE I
OFFICES
SECTION I-1 PRINCIPAL OFFICE: The principal office shall be in
the City of Wilmington, County of New Castle, state of Delaware.
SECTION I-2 OTHER OFFICES: The corporation may also have offices
at such other places both within and without the state of
Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION II-1 PLACE: All meetings of the stockholders for the
election of directors shall be held at such place, within or
without the state of Delaware, as may be fixed from time to time
by the Board of Directors. Meetings of stockholders for any
other purpose may be held at such time and place, within or
without the state of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
SECTION II-2 DATE, TIME, AND PURPOSE OF ANNUAL MEETING: The
Annual Meeting of Stockholders shall be held at such date and
time as may be determined by the Board of Directors. In the
event that the Board does not set a date and time, such meeting
shall be held at 11:00 a.m. on the fourth Wednesday in May of
each year if not a legal holiday, and if a legal holiday, then at
the same time on the next business day following. At such annual
meeting the stockholders shall elect directors and shall transact
such other business as may properly be brought before the
meeting.
SECTION II-3 WRITTEN NOTICE: Written notice of the annual
meeting shall be given to each stockholder entitled to vote
thereat at least ten days before the date of the meeting.
SECTION II-4 STOCKHOLDER LIST: The officer who has charge of
the stock ledger of the corporation shall prepare and make, at
least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at said meeting,
arranged in alphabetical order, and showing the address of and
the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting
is to be held, and the list shall be produced and kept at the
time and place of the meeting during the whole time thereof, and
subject to the inspection of any stockholder who is present.
SECTION II-5 SPECIAL MEETING: Special meetings of the
stockholders may only be called at any time by a majority of the
directors then in office or the President, or by the holders of
at least 25% of the issued and outstanding common stock of the
corporation as provided in the Certificate of Incorporation.
SECTION II-6 NOTICE OF SPECIAL MEETING: Written notice of a
special meeting of stockholders, stating the time, place and
object thereof, shall be given to each stockholder entitled to
vote thereat, at least five days before the date fixed for the
meeting.
SECTION II-7 BUSINESS TRANSACTED AT SPECIAL MEETING: Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
SECTION II-8 QUORUM: The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at
the meeting as originally notified.
SECTION II-9 MAJORITY VOTE: When a quorum is present at any
meeting, the vote of the holders of a majority of the stock
having voting power present in person or represented by proxy
shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes
or of the Certificate of Incorporation, a different vote is
required in which case such express provision shall govern and
control the decision of such question. In any election at a
meeting when a quorum is present, the individual or individuals
elected shall be the nominee or nominees, equal in number to the
position or positions to be filled, who receives or receive a
plurality of the votes cast.
SECTION II-10 THE STOCKHOLDER VOTE: Each stockholder shall at
every meeting of the stockholders be entitled to one vote in
person or by proxy for each share of the capital stock having
voting power held by such stockholder, but no proxy shall be
voted on after three years from its date, unless the proxy
provides for a longer period. At all elections of directors of
the corporation each stockholder having voting power shall be
entitled to exercise the right of cumulative voting as provided
in the Certificate of Incorporation.
ARTICLE III
DIRECTORS
SECTION III-1 NUMBER, QUALIFICATION, ELECTION, AND TERM OF
OFFICE: The exact number of directors, within the limits stated
in the Certificate of Incorporation, shall be determined by
resolution or resolutions passed by a majority of the whole Board
of Directors. If it is proposed to reduce the authorized number
of directors below five (5), the vote of stockholders holding
more than eighty percent (80%) of the voting power shall be
necessary for such reduction. No person shall serve as a
director of this corporation who at the time of his or her
election has reached his or her 70th birthday unless such person
was elected as a director at the annual meeting of holders of
common stock of this corporation held on May 18, 1979, in which
case such person shall be entitled to serve as a director without
regard to any limitation of age. Each director shall serve for a
term of office within the limits stated in the Certificate of
Incorporation. Directors need not be stockholders.
SECTION III-2 LOCATION OF BOARD MEETING: The Board of Directors
of the corporation may hold meetings, both regular and special,
either within or without the state of Delaware.
SECTION III-3 FIRST MEETING OF THE NEWLY ELECTED BOARD: The
first meeting of each newly elected Board of Directors shall be
held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting
shall be necessary to the newly elected directors in order to
legally constitute the meeting, provided a quorum shall be
present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at
the time and place so fixed by the stockholders, the meeting may
be held at such time and place as shall have been determined for
the next regular meeting by the previous Board of Directors or as
shall be determined by the President, which time and place shall
be specified in a notice given as hereinafter provided for
meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
SECTION III-4 REGULAR MEETINGS: Regular meetings of the Board of
Directors may be held without notice at such time and at such
place as shall from time to time be determined by the Board.
SECTION III-5 SPECIAL MEETINGS; TELEPHONIC MEETINGS PERMITTED:
Special meetings of the Board of Directors may be called by the
President on reasonable notice to each director, which notice may
be written, oral, or by any other mode of notice; special
meetings shall be called by the President or Secretary in like
manner and on like notice on the written request of two
directors. Unless otherwise restricted by the Certificate of
Incorporation or these By-laws, members of the Board of
Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as
the case may be, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting.
SECTION III-6 QUORUM AND MAJORITY VOTE: At any meeting of the
Board or of any committee of the Board, one-third of the
directors holding office or one-third of the members constituting
such committee, as the case may be, shall constitute a quorum for
the transaction of business, provided however that a quorum for
the transaction of business at any meeting of a committee of the
Board shall not be less than two members. The act of a majority
of the directors or members present at any meeting at which there
is a quorum shall be the act of the Board of Directors or such
committee, as the case may be, except as may be otherwise
specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting
of the Board of Directors or of any committee of the Board, the
directors or members present thereat may adjourn the meeting from
time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION III-7 UNANIMOUS WRITTEN CONSENT: Unless otherwise
restricted by the Certificate of Incorporation or these By-laws,
any action required or permitted to be taken at a meeting of the
Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all
members of the Board or of such committee as the case may be, and
such written consent or consents are filed with the minutes of
proceedings of the Board or committee.
SECTION III-8 COMMITTEES - FORMATION AND POWERS: The Board of
Directors may designate one or more committees, each committee to
consist of two or more of the directors of the corporation,
which, to the extent provided by the Board, shall have and may
exercise the powers of the Board of Directors in the management
of the business and affairs of the corporation and may authorize
the seal of the corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or
names as may be determined from time to time by the Board of
Directors. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a
committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in place of any
absent or disqualified member.
SECTION III-9 COMMITTEE MINUTES: Each committee shall keep
regular minutes of its meeting and report the same to the Board
of Directors when required.
SECTION III-10 COMPENSATION: The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director.
No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
SECTION III-11 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS: (a)(i) The corporation, to the full extent
permitted, and in the manner required by the laws of the state of
Delaware, as in effect at the time of the adoption of this
revised Section III-11 or as such laws may be amended from time
to time, shall indemnify any person who was or is made a party to
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (including any appeal
thereof), whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation), by reason of the fact that such person is or was a
director or officer of the corporation, or, if at a time when he
was a director or officer of the corporation, is or was serving
at the request of the corporation as a director, officer,
partner, trustee, fiduciary, employee or agent (a "Subsidiary
Officer") of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Affiliated
Entity"), against expenses (including attorneys' fees), costs,
judgments, fines, penalties and amounts paid in settlement
actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or
not opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful; provided,
however, that the corporation shall not be obligated to indemnify
against any amount paid in settlement unless the corporation has
consented to such settlement, which consent shall not be
unreasonably withheld. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a
plea of NOLO CONTENDERE or its equivalent shall not, of itself,
create a presumption that the person did not act in good faith
and in a manner which such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, that such person
had reasonable cause to believe that his conduct was unlawful.
Notwithstanding anything to the contrary in the foregoing
provisions of this subparagraph (i) and except for any action,
suit or proceeding brought on behalf of a person to enforce the
right to indemnification hereunder or otherwise, a person shall
not be entitled, as a matter of right, to indemnification
pursuant to this subparagraph (i) against costs or expenses
incurred in connection with any action, suit or proceeding
commenced by such person against any person who is or was a
director, officer, fiduciary, employee or agent of the
corporation or a Subsidiary Officer of an Affiliated Entity, but
such indemnification may be provided by the corporation in any
specific case as permitted by paragraph (f) of this Section III-11.
(ii) The corporation may indemnify any employee or agent of
the corporation in the manner and to the extent that it shall
indemnify any director or officer under this paragraph (a),
including indemnity in respect of service at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity.
(b)(i) The corporation, to the full extent permitted, and
in the manner required by the laws of the state of Delaware, as
in effect at the time of the adoption of this Section III-11 or
as such laws may be amended from time to time, shall indemnify
any person who was or is made a party to or is threatened to be
made a party to any threatened, pending or completed action or
suit (including any appeal thereof) brought in the right of the
corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the
corporation, or, if at a time when he was a director or officer
of the corporation, is or was serving at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity,
against expenses (including attorneys' fees) and costs actually
and reasonably incurred by such person in connection with such
action or suit if such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification
shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the
corporation unless, and except to the extent that, the Court of
Chancery of the state of Delaware or the court in which such
judgment was rendered shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses and costs as the Court of
Chancery of the state of Delaware or such other court shall deem
proper. Notwithstanding anything to the contrary in the
foregoing provisions of this subparagraph (b)(i), a person shall
not be entitled, as a matter of right, to indemnification
pursuant to this subparagraph (b)(i) against costs and expenses
incurred in connection with any action or suit in the right of
the corporation commenced by such person, but such
indemnification may be provided by the corporation in any
specific case as permitted by paragraph (f) of this Section III-11.
(ii) The corporation may indemnify any employee or agent of
the corporation in the manner and to the extent that it shall
indemnify any director or officer under this paragraph (b),
including indemnity in respect of service at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity.
(c) Any indemnification under paragraph (a) or (b) of this
Section III-11 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper under the circumstances because such
person has met the applicable standard of conduct set forth in
paragraph (a) or (b) of this Section III-11. Such determination
shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to the
action, suit or proceeding in respect of which indemnification is
sought or by majority vote of the members of a committee of the
Board of Directors composed of at least three members each of
whom is not a party to such action, suit or proceeding, or (ii)
if such a quorum is not obtainable and/or such a committee is not
established or obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders. In the event
a request for indemnification is made by any person referred to
in subparagraph (i) of paragraph (a) or subparagraph (i) of
paragraph (b), the corporation shall cause such determination to
be made not later than 60 days after such request is made.
(d)(i) Notwithstanding the other provisions of this Section
III-11, to the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
paragraph (a) or (b) of this Section III-11, or in defense of any
claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) and costs actually
and reasonably incurred by such person in connection therewith.
(ii) To the extent any person who is or was a director or
officer of the corporation has served or prepared to serve as a
witness in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, or in any
investigation by the corporation or the Board of Directors
thereof or a committee thereof or by any securities exchange on
which securities of the corporation are or were listed or any
national securities association, by reason of his services as a
director or officer of the corporation or, if at a time when he
was a director or officer of the corporation, is or was serving
at the request of the corporation as a Subsidiary Officer of an
Affiliated Entity, the corporation shall indemnify such person
against expenses (including attorneys' fees) and costs actually
and reasonably incurred by such person in connection therewith
within 30 days after the receipt by the corporation from such
person of a statement requesting such indemnification, averring
such service and reasonably evidencing such expenses and costs.
The corporation may indemnify any employee or agent of the
corporation to the same extent it is required to indemnify any
director or officer of the corporation pursuant to the foregoing
sentence of this paragraph.
(e)(i) Expenses and costs incurred by any person referred
to in subparagraph (i) of paragraph (a) or subparagraph (i) of
paragraph (b) of this Section III-11 in defending a civil,
criminal, administrative or investigative action, suit or
proceeding shall be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the corporation as authorized
by this Section III-11.
(ii) Expenses and costs incurred by any person referred to
in subparagraph (ii) of paragraph (a) or subparagraph (ii) of
paragraph (b) of this Section III-11 in defending a civil,
criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by
the Board of Directors, a committee thereof or an officer of the
corporation or a committee thereof authorized to so act by the
Board of Directors upon receipt of an undertaking by or on behalf
of such person to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by
the corporation as authorized by this Section III-11.
(f) The provision of indemnification to or the advancement
of expenses and costs to any person under this Section III-11, or
the entitlement of any person to indemnification or advancement
of expenses and costs under this Section III-11, shall not limit
or restrict in any way the power of the corporation to indemnify
or advance expenses and costs to such person in any other way
permitted by law or be deemed exclusive of any right to which any
person seeking indemnification or advancement of expenses and
costs may be entitled under any law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to
action in such person's capacity as an officer, director,
employee or agent of the corporation and as to action in any
other capacity while holding any such position.
(g) The indemnification provided or permitted under this
Section III-11 shall apply in respect of any expense, costs,
judgment, fine, penalty or amount paid in settlement, whether or
not the claim or cause of action in respect thereof accrued or
arose before or after the effective date of this revised Section
III-11. The right of any person who is or was a director,
officer, employee or agent of the corporation to indemnification
and advance payment of expenses and costs under this Section III-11
shall continue after he shall have ceased to be a director,
officer, employee or agent and shall inure to the benefit of the
heirs, distributees, executors, administrators and other legal
representatives of such person.
(h) This Section III-11 shall be deemed to create a binding
obligation on the part of the corporation to its current and
former officers and directors and their heirs, distributees,
executors, administrators and other legal representatives, and
each director or officer in acting in such capacity shall be
entitled to rely on the provisions of this Section III-11,
without giving notice thereof to the corporation.
(i) The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request
of the corporation as a Subsidiary Officer of any Affiliated
Entity, against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation
would have the power to indemnify such person against such
liability under the provisions of this Section III-11 or
applicable law.
(j)(i) For purposes of this Section III-11, references to
"the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its corporate existence had continued, would
have been permitted under applicable law to indemnify its
directors, officers, employees or agents, so that any person who
is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of
such constituent corporation as a Subsidiary Officer of any
Affiliated Entity, shall stand in the same position under the
provisions of this Section III-11 with respect to the resulting
or surviving corporation as such person would have with respect
to such constituent corporation if its separate existence had
continued.
(ii) For purposes of this Section III-11, references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; references to "serving at
the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted
in good faith and in a manner such person reasonably believed to
be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interest of the corporation" as referred
to in this Section III-11.
SECTION III-12 DIRECTORS EMERITUS: The Board of Directors may,
from time to time, elect one or more Directors Emeritus, each of
whom shall serve until the first meeting of the Board next
following the annual meeting of stockholders or until his earlier
resignation or removal by the Board. Directors Emeritus shall
serve as advisors and consultants to the Board of Directors,
shall be invited to attend all meetings of the Board and may
participate in all discussions occurring during such meetings.
Directors Emeritus shall not be privileged to vote on matters
brought before the Board and shall not be counted for the purpose
of determining whether a quorum of the Board is present.
ARTICLE IV
NOTICES AND WAIVERS THEREOF
SECTION IV-1 NOTICES: Whenever under the provisions of these
By-laws notice is required to be given to any stockholder,
director or officer, such notice may be written, oral or by any
other mode of notice unless otherwise provided by law, the
Certificate of Incorporation or these By-laws. If given by
United States mail, notice is given when deposited in the United
States mail, postage prepaid, directed to such stockholder,
director, or officer at his address as it appears on the records
of the corporation, or in default of other address, to such
stockholder, director, or officer at the general post office in
the City of Wilmington, County of New Castle, Delaware.
SECTION IV-2 WAIVER OF NOTICE: Whenever any notice whatever is
required to be given by law, or under the provisions of the
Certificate of Incorporation, or of these By-laws, a waiver
thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein,
shall be deemed equivalent to receipt of such required notice.
ARTICLE V
OFFICERS
SECTION V-1 ELECTION OF OFFICERS: The officers of the
corporation shall be chosen by the Board of Directors, and shall
be a Chairman of the Board, a President, a Vice President, a
Secretary and a Treasurer. The Board of Directors may also
choose additional vice presidents, and one or more assistant
secretaries and/or assistant treasurers, and one or more such
other officers, with such other titles, as the Board may deem
necessary or desirable. Two or more offices may be held by the
same person, except that where the offices of president and
secretary are held by the same person, such person shall not hold
any other office. The Board of Directors shall designate either
the Chairman of the Board or the President to be the Chief
Executive Officer of the corporation.
SECTION V-2 TIME OF ELECTION OF PRINCIPAL OFFICERS: The Board of
Directors at its first meeting after each annual meeting of
stockholders shall choose a Chairman of the Board, a President,
one or more Vice Presidents, a Secretary and a Treasurer; the
Chairman of the Board shall be a member of the Board; none of the
other officers need be a member of the Board.
SECTION V-3 TIME OF ELECTION OF OTHER OFFICERS: The Board of
Directors may appoint such other officers and agents as it shall
deem necessary who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
SECTION V-4 SALARIES: The salaries of the Chairman of the Board
and the President shall be fixed by the Board of Directors. The
salaries of other officers shall be fixed by the Chief Executive
Officer subject to review by the Board of Directors.
SECTION V-5 TERM OF OFFICE, REMOVAL AND FILLING OF VACANCIES:
The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or
appointed by the Board of Directors may be removed at any time by
the affirmative vote of a majority of the Board of Directors.
Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
SECTION V-5a THE CHAIRMAN OF THE BOARD: The Chairman of the
Board shall preside at all meetings of the Board of Directors,
and shall exercise and perform such other powers and duties as
may be from time to time assigned to him by the Board of
Directors or prescribed by the By-laws.
SECTION V-5b CHIEF EXECUTIVE OFFICER: The Board shall designate
either the Chairman of the Board or the President to be the Chief
Executive Officer of this corporation; the Chief Executive
Officer shall see that all orders and resolutions of the Board of
Directors are carried into effect, and shall exercise or perform
such other powers and duties as may be from time to time assigned
to him by the Board of Directors or prescribed by the By-laws.
SECTION V-6 THE PRESIDENT - DUTIES: The President shall have
general and active management of the business of the corporation
subject to the direction and control of the Board of Directors,
and if the President is not the Chief Executive Officer, subject
also to the direction and control of the Chief Executive Officer.
The President shall assume the duties and responsibilities of the
Chairman of the Board in the absence of the Chairman of the
Board, or if there shall be no person occupying that office.
SECTION V-7 THE PRESIDENT - EXECUTION OF DOCUMENTS REQUIRING A
SEAL: He shall execute bonds, mortgages, and the contracts
requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other
officer or agent of the corporation.
SECTION V-8 THE VICE PRESIDENT: The Vice President, or if there
shall be more than one, the Vice Presidents in the order
determined by the Board of Directors, shall in the absence or
disability of the President, perform the duties and exercise the
powers of the President and shall perform such other duties and
have such other powers as the Board of Directors may from time to
time prescribe.
SECTION V-9 THE SECRETARY: The Secretary shall attend all
meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of
the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be
given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform other such
duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall keep in
safe custody the seal of the corporation, and when authorized by
the Board of Directors, affix the same to any instrument
requiring it.
SECTION V-10 THE ASSISTANT SECRETARY: The Assistant Secretary,
or if there be more than one, the Assistant Secretaries in the
order determined by the Board of Directors, shall, in the absence
or disability of the Secretary, perform the duties and exercise
the powers of the Secretary and shall perform such other duties
and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION V-11 THE TREASURER - RESPONSIBILITY FOR FUNDS: The
Treasurer shall have custody of and be responsible for all the
monies and funds of the company. He shall deposit or cause to be
deposited all company monies, funds and other valuables in the
name and to the credit of the company in such banks or other
financial institutions as in his judgment is proper or as shall
be directed by the Board, Chairman of the Board or the President,
and shall disburse the funds of the company which have been duly
approved for disbursement. He shall enter regularly in the books
of the company to be kept by him for the purpose of full and
accurate accounts of all monies received and paid out by him on
account of the company.
SECTION V-12 THE TREASURER - OTHER DUTIES: The Treasurer shall
have such other powers and perform such other duties as may from
time to time be prescribed by the Board, the Chairman of the
Board, the President or the By-laws, and he shall in general,
subject to control of the Board, the Chairman of the Board and
the President, perform all the duties usually incident to the
office of treasurer of a corporation.
SECTION V-13 THE ASSISTANT TREASURER: Each Assistant Treasurer
shall assist the Treasurer and, in the absence or disability of
the Treasurer, any Assistant Treasurer may perform the duties of
the Treasurer unless and until the contrary is expressed by the
Board, and shall perform such other duties as may be prescribed
by the Board or the Treasurer.
ARTICLE VI
CERTIFICATE OF STOCK
SECTION VI-1 RIGHT OF STOCKHOLDER TO CERTIFICATE: Every holder
of stock in the corporation shall be entitled to have a
certificate, signed by, or in the name of the corporation by, the
President or a Vice President and the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the
corporation.
SECTION VI-2 FACSIMILE SIGNATURE: Where a certificate is signed
(1) by a transfer agent other than the corporation or its
employee or (2) by a registrar other than the corporation or its
employee, the signature of any such President, Vice President,
Treasurer, Assistant Treasurer, Secretary or Assistant Secretary
may be by facsimile. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used
on any such certificate or certificates shall cease to be such
officer or officers of the corporation, whether because of death,
resignation or otherwise, before such certificate or certificates
have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and
be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to
be such officer or officers of the corporation.
SECTION VI-3 LOST CERTIFICATES: The Board of Directors may
direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the
corporation alleged to have been lost or destroyed, upon the
making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to
give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been
lost or destroyed.
SECTION VI-4 TRANSFER OF STOCK: Upon surrender to the
corporation or the transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it
shall be the duty of the corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
SECTION VI-5 RECORD DATE: (a) In order that the corporation may
determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the Board
of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of
such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting
is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the
resolution relating thereto.
(c) In each case when a record date has been duly fixed,
such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to
notice of and to vote at the meeting of stockholders and any
adjournment thereof, or to receive payment of the dividend or
other distribution, or to receive the allotment of rights, or to
exercise the rights or participate in the other action, as the
case may be, notwithstanding any transfer of any stock on the
books of the corporation after such record date is fixed.
SECTION VI-6 REGISTERED STOCKHOLDERS: The corporation shall be
entitled to recognize the exclusive right of a person registered
on its books as the owner of shares to receive dividends, and to
vote as such owner, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
SECTION VII-1 DIVIDENDS - DECLARATION AND PAYMENT: Dividends
upon the capital stock of the corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special
meeting pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation.
SECTION VII-2 RESERVE OUT OF FUNDS AVAILABLE FOR DIVIDENDS:
Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums
as the directors from time to time in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or
for equalizing dividends, or for repairing and maintaining any
property of the corporation, or for such other purpose as the
directors think conducive to the interest of the corporation, and
the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION VII-3 ANNUAL REPORT: The Board of Directors shall cause
an annual report to be sent to the stockholders, not later than
three months after the close of the fiscal year, but at least
fifteen days in advance of the annual meeting of stockholders,
such report to include a balance sheet as of such closing date
and a statement of income and profit and loss for the year ended
on such closing date.
SECTION VII-4 EXECUTION OF DOCUMENTS: Unless otherwise
authorized or prescribed by the Board of Directors, all
contracts, leases, deeds, deeds of trust, mortgages, bonds,
indentures, endorsements, assignments, powers of attorney to
transfer stock or for other purposes, and other documents and
instruments of whatever kind shall be executed for and on behalf
of the corporation by the President, a Vice President, or the
Treasurer, or by any such officer and the Secretary or an
Assistant Secretary, who shall have authority to affix the
corporate seal to the same.
The Board of Directors also may authorize any other officer or
officers, or agent or agents, to execute any contract, document
or instrument of whatever kind for and on behalf of the
corporation and such authority may be general or be confined to
specific instances.
SECTION VII-5 UNDERTAKINGS AND COMMITMENTS: No undertaking,
commitment, contract, instrument or document shall be binding
upon the corporation unless previously authorized or subsequently
ratified by the Board of Directors or executed by an officer or
officers or an agent or agents of the corporation acting under
powers conferred by the Board of Directors or by these By-laws.
SECTION VII-6 CHECKS: All checks, notes and other obligations
for collection, deposit or transfer, and all checks and drafts
for disbursement from company funds, and all bills of exchange
and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be endorsed or signed
by such officer or officers, agent or agents, as shall be
thereunto authorized from time to time by the Board of Directors.
SECTION VII-7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS:
Shares standing in the name of the corporation may be voted or
represented and all rights incident thereto may be exercised on
behalf of the corporation by the President, a Vice President, the
Secretary or the Treasurer, or by such other officers as to whom
the Board of Directors may from time to time confer like powers.
SECTION VII-8 FISCAL YEAR: The fiscal year of the corporation
shall end the thirty-first day of December in each year.
SECTION VII-9 CORPORATE SEAL: The corporate seal shall have
inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENT OF BY-LAWS
SECTION VIII-1 AMENDMENT: These By-laws may be altered or
repealed at any meeting of the stockholders or of the Board of
Directors.
EXHIBIT 10.1
CREDIT AGREEMENT
among
GLOBAL MARINE INC.,
VARIOUS LENDING INSTITUTIONS,
BANKERS TRUST COMPANY,
as
ADMINISTRATIVE AGENT
and
SOCIETE GENERALE,
as
Co-Agent
Dated as of February 12, 1997
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit
1.01 Commitment
1.02 Minimum Borrowing Amounts, etc.
1.03 Notice of Borrowing
1.04 Disbursement of Funds
1.05 Notes
1.06 Conversions
1.07 PRO RATA Borrowings
1.08 Interest
1.09 Interest Periods
1.10 Increased Costs, Illegality, etc.
1.11 Compensation
1.12 Change of Lending Office
1.13 Replacement of Banks
SECTION 2. Letters of Credit
2.01 Letters of Credit
2.02 Minimum Stated Amount
2.03 Letter of Credit Requests; Request for
Issuance of Letter of Credit
2.04 Agreement to Repay Letter of Credit
Payments
2.05 Letter of Credit Participations
2.06 Increased Costs
2.07 Indemnities
SECTION 3. Fees; Commitments
3.01 Fees
3.02 Voluntary Reduction of Commitments
3.03 Mandatory Adjustments of Commitments,
etc.
SECTION 4. Payments
4.01 Voluntary Prepayments
4.02 Mandatory Prepayments
4.03 Method and Place of Payment
4.04 Net Payments
SECTION 5. Conditions Precedent
5.01 Execution of Agreement and Notes
5.02 No Default; Representations and
Warranties
5.03 Officer's Certificate
5.04 Opinions of Counsel
5.05 Corporate Proceedings
5.06 Indebtedness
5.07 Adverse Change, etc.
5.08 Litigation
5.09 Approvals
5.10 Fees
5.11 Guaranty
5.12 Rig Matters
5.13 Insurance Report
5.14 Projections
5.15 Offshore Drilling Contracts
5.16 Margin Rules
SECTION 6. Representations, Warranties and
Agreements
6.01 Status
6.02 Power and Authority
6.03 No Violation
6.04 Litigation
6.05 Use of Proceeds; Margin Regulations
6.06 Governmental Approvals
6.07 Investment Company Act
6.08 Public Utility Holding Company Act
6.09 True and Complete Disclosure
6.10 Financial Condition; Financial Statements
6.11 Tax Returns and Payments
6.12 Employee Benefit Plans
6.13 Subsidiaries
6.14 Patents, etc.
6.15 Environmental Matters
6.16 Properties
6.17 Labor Relations
6.18 Existing Indebtedness
6.19 Rig Classification
6.20 Insurance
SECTION 7. Affirmative Covenants
7.01 Information Covenants
7.02 Books, Records and Inspections
7.03 Maintenance of Insurance
7.04 Payment of Taxes
7.05 Consolidated Corporate Franchises
7.06 Compliance with Statutes, etc.
7.07 Good Repair
7.08 End of Fiscal Years; Fiscal Quarters
7.09 Use of Proceeds
7.10 Rig Valuations
7.11 Additional Guarantors
7.12 ERISA
7.13 Performance of Obligations
SECTION 8. Negative Covenants
8.01 Changes in Business
8.02 Consolidation, Merger, Sale of Assets,
etc.
8.03 Indebtedness
8.04 Liens
8.05 Restricted Payments; Designation of
Unrestricted Subsidiaries
8.06 Restrictions on Subsidiaries
8.07 Transactions with Affiliates
8.08 Vessel Ownership and Management
8.09 Cash Interest Coverage Ratio
8.10 Leverage Ratio
8.11 Fleet Market Value
8.12 Net Worth
8.13 Modifications of Certain Documents, Etc.
SECTION 9. Events of Default
9.01 Payments
9.02 Representations, etc.
9.03 Covenants
9.04 Default Under Other Agreements
9.05 Bankruptcy, etc.
9.06 Guaranty
9.07 Judgments
9.08 Change of Control
9.09 Employee Benefit Plans
SECTION 10. Definitions
SECTION 11. The Agents
11.01 Appointment
11.02 Nature of Duties
11.03 Lack of Reliance on the
Agents
11.04 Certain Rights of the Administrative
Agent
11.05 Reliance
11.06 Indemnification
11.07 The Agents in Their Individual Capacity
11.08 Holders
11.09 Resignation by the Administrative Agent
SECTION 12. Miscellaneous
12.01 Payment of Expenses, etc.
12.02 Right of Setoff
12.03 Notices
12.04 Benefit of Agreement
12.05 No Waiver; Remedies Cumulative
12.06 Payments PRO RATA
12.07 Calculations; Computations
12.08 Governing Law; Submission to Jurisdiction;
Venue; Waiver of Jury Trial
12.09 Counterparts
12.10 Effectiveness
12.11 Headings Descriptive
12.12 Amendment or Waiver
12.13 Survival
12.14 Domicile of Loans
12.15 Confidentiality
12.16 Registry
ANNEX I -Commitments
ANNEX II -Bank Addresses
ANNEX III -Offshore Drilling Contracts
ANNEX IV -Subsidiaries
ANNEX V -[Intentionally Omitted]
ANNEX VI -Rigs and Vessels
ANNEX VII -Existing Indebtedness
ANNEX VIII -Existing Liens
ANNEX IX -Approved Shipbrokers
ANNEX X -Unrestricted Subsidiaries as of the Effective Date
EXHIBIT A -Form of Notice of Borrowing
EXHIBIT B -Form of Note
EXHIBIT C -Form of Letter of Credit Request
EXHIBIT D -Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1 -Form of Opinion of Baker & Botts, L.L.P.
EXHIBIT E-2 -Form of Opinion of James L. McCulloch
EXHIBIT E-3 -Form of Opinion of Cahill Gordon &
Reindel
EXHIBIT F -Form of Officers' Certificate
EXHIBIT G -Form of Guaranty
EXHIBIT H -Form of Compliance Certificate
EXHIBIT I -Form of Assignment and Assumption Agreement
CREDIT AGREEMENT, dated as of February 12, 1997,
among GLOBAL MARINE INC. ("BORROWER"), a Delaware
corporation, the lending institutions listed on ANNEX I
hereto (each a "BANK" and, collectively, the "BANKS"),
BANKERS TRUST COMPANY, as Administrative Agent (the
"ADMINISTRATIVE AGENT"), and SOCIETE GENERALE, as Co-Agent
(the "CO-AGENT", and, together with the Administrative
Agent, the "AGENTS"). Unless otherwise defined herein, all
capitalized terms used herein and defined in Section 10 are
used herein as so defined.
The parties hereto agree as follows:
SECTION I. AMOUNT AND TERMS OF CREDIT.
1.01 COMMITMENT. Subject to and upon the terms
and conditions herein set forth, each Bank severally agrees
to make a loan or loans (each a "LOAN" and, collectively,
the "LOANS") under the Facility to Borrower, which Loans
(i) shall be made at any time and from time to time on and
after the Initial Borrowing Date and prior to the Maturity
Date, (ii) except as hereinafter provided, may, at the
option of Borrower, be incurred and maintained as, and/or
converted into, Base Rate Loans or Eurodollar Loans;
PROVIDED, HOWEVER, that all Loans made as part of the same
Borrowing shall, unless otherwise specifically provided
herein, consist of Loans of the same Type, (iii) may be
repaid and reborrowed in accordance with the provisions
hereof, (iv) shall not exceed in the aggregate for all
Banks at any time outstanding, the Total Commitment and (v)
shall not exceed for any Bank at any time outstanding the
aggregate principal amount which, when combined with the
aggregate outstanding principal amount of all other Loans
of such Bank and with such Bank's Adjusted Percentage of
the Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective
incurrence of Loans) at such time, equals (1) if such Bank
is a Non-Defaulting Bank, the Adjusted Commitment of such
Bank at such time and (2) if such Bank is a Defaulting
Bank, the Commitment of such Bank at such time.
1.02 MINIMUM BORROWING AMOUNTS, ETC. The
aggregate principal amount of each Borrowing shall not be
less than the Minimum Borrowing Amount for the Loans
constituting such Borrowing. More than one Borrowing may
be incurred on any day; PROVIDED, HOWEVER, that at no time
shall there be outstanding more than ten Borrowings of
Eurodollar Loans.
1.03 NOTICE OF BORROWING. Whenever Borrower
desires to incur Loans under the Facility, it shall give
the Administrative Agent at its Notice Office, prior to
11:00 a.m. (New York time), at least three Business Days'
prior written notice (or telephonic notice promptly
confirmed in writing) of each Borrowing of Eurodollar Loans
and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each
Borrowing of Base Rate Loans to be made hereunder. Each
such written notice (each a "NOTICE OF BORROWING") shall be
in the form of EXHIBIT A hereto and shall be irrevocable
and shall specify (i) the aggregate principal amount of the
Loans to be made pursuant to such Borrowing, (ii) the date
of Borrowing (which shall be a Business Day) and (iii)
whether the respective Borrowing shall consist of Base Rate
Loans or (to the extent permitted) Eurodollar Loans and, if
Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Administrative Agent shall
promptly give each Bank written notice (or telephonic
notice promptly confirmed in writing) of each proposed
Borrowing, of such Bank's proportionate share thereof and
of the other matters covered by the Notice of Borrowing.
1.04 DISBURSEMENT OF FUNDS. (a) No later than
1:00 P.M. (New York time) on the date specified in each
Notice of Borrowing, each Bank will make available its PRO
RATA share of each Borrowing requested to be made on such
date in the manner provided below. All such amounts shall
be made available to the Administrative Agent in Dollars
and immediately available funds at the Payment Office and
the Administrative Agent promptly will make available to
Borrower by depositing to its account at the Payment Office
the aggregate of the amounts so made available in Dollars
and immediately available funds. Unless the Administrative
Agent shall have been notified by any Bank prior to the
date of Borrowing that such Bank does not intend to make
available to the Administrative Agent its portion of the
Borrowing or Borrowings to be made on such date, the
Administrative Agent may assume that such Bank has made
such amount available to the Administrative Agent on such
date of Borrowing, and the Administrative Agent, in
reliance upon such assumption, may (in its sole discretion
and without any obligation to do so) make available to
Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Administrative
Agent by such Bank and the Administrative Agent has made
available same to Borrower, the Administrative Agent shall
be entitled to recover such corresponding amount from such
Bank. If such Bank does not pay such corresponding amount
forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly (and in any event
within three Business Days from the date the Administrative
Agent made such funds available to Borrower) notify
Borrower, and Borrower shall (within two Business Days of
receiving such demand) pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also
be entitled to recover on demand from such Bank or
Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date
such corresponding amount was made available by the
Administrative Agent to Borrower to the date such
corresponding amount is recovered by the Administrative
Agent, at a rate PER ANNUM equal to (x) if paid by such
Bank, the Federal Funds Effective Rate or (y) if paid by
Borrower, the then applicable rate of interest, calculated
in accordance with Section 1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any
Bank from its obligation to fulfill its commitments
hereunder or to prejudice any rights which Borrower may
have against any Bank as a result of any default by such
Bank hereunder.
1.05 NOTES. Borrower's obligation to pay the
principal of, and interest on, the Loans made to it by each
Bank shall be evidenced by a promissory note substantially
in the form of EXHIBIT B hereto with blanks appropriately
completed in conformity herewith (each a "NOTE" and,
collectively, the "NOTES").
(b) The Note issued to each Bank shall (i) be
executed by Borrower, (ii) be payable to the order of such
Bank and be dated the Initial Borrowing Date, (iii) be in a
stated principal amount equal to the Commitment of such
Bank on such date and be payable in the aggregate unpaid
principal amount of the Loans evidenced thereby, (iv)
mature on the Maturity Date, (v) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the
Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to mandatory prepayment
as provided in Section 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(c) Each Bank will note on its internal records
the amount of each Loan made by it and each payment in
respect thereof and will, prior to any transfer of any of
its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby.
Failure to make any such notation shall not affect
Borrower's obligations in respect of such Loans.
1.06 CONVERSIONS. Borrower shall have the option
to convert on any Business Day all or a portion (which
portion shall be at least equal to the applicable Minimum
Borrowing Amount) of the outstanding principal amount of
the Loans owing pursuant to the Facility into a Borrowing
or Borrowings pursuant to the Facility of another Type of
Loan; PROVIDED, HOWEVER, that (i) if any Eurodollar Loan is
converted into Base Rate Loans other than on the last day
of an Interest Period applicable thereto Borrower shall pay
to the Banks all amounts related to such conversion that
are due pursuant to Section 1.11, (ii) no partial
conversion of a Borrowing of Eurodollar Loans shall reduce
the outstanding principal amount of the Eurodollar Loans
made pursuant to such Borrowing to less than the Minimum
Borrowing Amount applicable thereto, (iii) no Base Rate
Loans may be converted into Eurodollar Loans at any time
when a Default or Event of Default is in existence on the
date of the conversion if the Administrative Agent or the
Required Banks have reasonably determined that such a
conversion would be disadvantageous to the Banks and (iv)
Borrowings of Eurodollar Loans resulting from this Section
1.06 shall be limited in number as provided in Section
1.02. Each such conversion shall be effected by Borrower
by giving the Administrative Agent at its Notice Office,
prior to 12:00 Noon (New York time), at least three
Business Days' (or one Business Day's, in the case of a
conversion into Base Rate Loans) prior written notice (or
telephonic notice promptly confirmed in writing) (each a
"NOTICE OF CONVERSION") specifying the Loans to be so
converted, the Type of Loans to be converted into and, if
to be converted into a Borrowing of Eurodollar Loans, the
Interest Period to be initially applicable thereto. The
Administrative Agent shall give each Bank prompt notice of
any such proposed conversion affecting any of its Loans.
1.07 PRO RATA BORROWINGS. All Loans under this
Agreement shall be made by the Banks PRO RATA on the basis
of their Commitments. It is understood that no Bank shall
be responsible for any default by any other Bank in its
obligation to make Loans hereunder and that each Bank shall
be obligated to make the Loans provided to be made by it
hereunder, regardless of the failure of any other Bank to
fulfill its commitments hereunder.
1.08 INTEREST. (a) The unpaid principal amount
of each Base Rate Loan shall bear interest at a rate PER
ANNUM, which shall at all times be equal to the sum of the
Base Rate in effect from time to time, PLUS the Applicable
Base Rate Margin.
(b) The unpaid principal amount of each
Eurodollar Loan shall bear interest at a rate PER ANNUM
which shall at all times be equal to the sum of the
relevant Eurodollar Rate, PLUS the Applicable Eurodollar
Margin.
(c) All overdue principal and, to the extent
permitted by law, overdue interest in respect of each Loan
and any other overdue amount payable hereunder shall bear
interest at a rate PER ANNUM equal to the greater of (x) 2%
PER ANNUM in excess of the rate otherwise applicable to
Base Rate Loans from time to time and (y) the rate which is
2% in excess of the rate (including any applicable margin)
then borne by such Loans, in each case with such interest
payable on demand; PROVIDED, HOWEVER, that no Loan shall
bear interest after maturity (whether by acceleration or
otherwise) at a rate PER ANNUM less than 2% plus the rate
of interest applicable thereto at maturity; PROVIDED,
FURTHER, HOWEVER, that in no event shall any amount payable
hereunder bear interest in excess of the maximum amount
permitted by applicable law.
(d) Interest shall accrue from and including the
date of any Borrowing to but excluding the date of any
repayment thereof (whether by acceleration or otherwise)
and shall be payable (i) in respect of each Base Rate Loan,
quarterly in arrears on the first Business Day of each
March, June, September and December, (ii) in respect of
each Eurodollar Loan, in arrears on the last day of each
Interest Period applicable thereto and, in the case of an
Interest Period of six months, on the date occurring three
months after the first day of such Interest Period and
(iii) in respect of each Loan, on any prepayment or
conversion (other than the prepayment and conversion of
Base Rate Loans) (on the amount prepaid or converted), at
maturity (whether by acceleration or otherwise) and, after
such maturity, on demand.
(e) All computations of interest hereunder shall
be made in accordance with Section 12.07(b).
(f) The Administrative Agent, upon determining
the interest rate for any Borrowing of Eurodollar Loans for
any Interest Period, shall promptly notify Borrower and the
Banks thereof.
1.09 INTEREST PERIODS. (a) At the time Borrower
gives a Notice of Borrowing or Notice of Conversion in
respect of the making of, or conversion into, a Borrowing
of Eurodollar Loans, in the case of the initial Interest
Period applicable thereto, or prior to 12:00 Noon (New York
time) on the third Business Day prior to the expiration of
an Interest Period applicable to a Borrowing of Eurodollar
Loans, Borrower shall have the right to elect by giving the
Administrative Agent written notice (or telephonic notice
promptly confirmed in writing) of the Interest Period
applicable to such Borrowing, which Interest Period shall,
at the option of Borrower, be a one, two, three or six
month period. Notwithstanding anything to the contrary
contained above:
(i) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such
Borrowing (including the date of any conversion from a
Borrowing of Base Rate Loans) and each Interest Period
occurring thereafter in respect of such Borrowing
shall commence on the day on which the next preceding
Interest Period expires;
(ii)if any Interest Period begins on a day for which
there is no numerically corresponding day in the
calendar month in which such Interest Period ends,
such Interest Period shall end on the last Business
Day of such calendar month;
(iii) if any Interest Period would otherwise expire on
a day which is not a Business Day, such Interest
Period shall expire on the next succeeding Business
Day; PROVIDED, HOWEVER, that if any Interest Period
would otherwise expire on a day which is not a
Business Day but is a day of the month after which no
further Business Day occurs in such month, such
Interest Period shall expire on the next preceding
Business Day;
(iv) no Interest Period shall extend beyond the
Maturity Date; and
(v) no Interest Period may be elected at any time when
a Default or Event of Default is then in existence if
the Administrative Agent or the Required Banks have
reasonably determined that such an election at such
time would be disadvantageous to the Banks.
(b) If upon the third Business Day prior to the
expiration of any Interest Period, Borrower has failed to
(or may not) elect a new Interest Period to be applicable
to the respective Borrowing of Eurodollar Loans as provided
above, Borrower shall be deemed to have elected to convert
such Borrowing into a Borrowing of Base Rate Loans
effective as of the expiration date of such current
Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In
the event that (x) in the case of clause (i) below, the
Administrative Agent or (y) in the case of clauses (ii) and
(iii) below, any Bank shall have reasonably determined
(which determination shall, absent manifest error, be final
and conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar
Rate for any Interest Period that, by reason of any changes
arising after the date of this Agreement affecting the
interbank Eurodollar market, adequate and fair means do not
exist for ascertaining the applicable interest rate on the
basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur
increased costs or reductions in the amounts received or
receivable hereunder with respect to any Eurodollar Loans
(other than any increased cost or reduction in the amount
received or receivable resulting from the imposition of or
a change in the rate or basis of net income taxes,
franchise taxes, or similar charges) because of (x) any
change since the date of this Agreement in any applicable
law, governmental rule, regulation, guideline or order (or
in the interpretation or administration thereof and
including the adoption of any new law or governmental rule,
regulation, guideline or order) (such as, for example, but
not limited to, a change in official reserve requirements,
but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of
the Eurodollar Rate) and/or (y) other circumstances
occurring after the date of this Agreement and affecting
the interbank Eurodollar market; or
(iii) at any time, that the making or continuance
of any Eurodollar Loan has become unlawful by compliance by
such Bank in good faith with any law, governmental rule,
regulation, guideline (or would conflict with any such
governmental rule, regulation, guideline or order not
having the force of law but with which such Bank
customarily complies even though the failure to comply
therewith would not be unlawful);
then, and in any such event, such Bank (or the
Administrative Agent in the case of clause (i) above) shall
(x) on such date and (y) within ten Business Days of the
date on which such event no longer exists, give notice (by
telephone confirmed in writing) to Borrower and, in the
case of clauses (ii) and (iii) above, to the Administrative
Agent of such determination (which notice the
Administrative Agent shall promptly transmit to each of the
other Banks). Thereafter (x) in the case of clause (i)
above, Eurodollar Loans shall no longer be available until
such time as the Administrative Agent notifies Borrower and
the Banks that the circumstances giving rise to such notice
by the Administrative Agent no longer exist, which notice
the Administrative Agent agrees to promptly deliver to
Borrower as soon as practicable after becoming aware of the
absence of such circumstances, and any Notice of Borrowing
or Notice of Conversion given by Borrower with respect to
Eurodollar Loans which have not yet been incurred shall be
deemed rescinded by Borrower, (y) in the case of clause
(ii) above, Borrower shall, subject to Section 1.12(b) (to
the extent applicable), pay to such Bank, upon written
demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating,
interest or otherwise as such Bank in its reasonable
discretion shall determine) as shall be required to
compensate such Bank for such increased costs or reductions
in amounts receivable hereunder (a written notice as to the
additional amounts owed to such Bank, showing the basis for
the calculation thereof, submitted to Borrower by such Bank
shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of
clause (iii) above, Borrower shall take one of the actions
specified in Section 1.10(b) as promptly as possible and,
in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is
affected by the circumstances described in Section
1.10(a)(ii) or (iii), Borrower may (and in the case of a
Eurodollar Loan affected pursuant to Section 1.10(a)(iii),
Borrower shall) either (i) if the affected Eurodollar Loan
is then being made pursuant to a Borrowing, cancel said
Borrowing by giving the Administrative Agent telephonic
notice (confirmed promptly in writing) thereof on the same
date that Borrower was notified by a Bank pursuant to
Section 1.10(a)(ii) or (iii), or (ii) if the affected
Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Administrative Agent, require
the affected Bank to convert each such Eurodollar Loan into
a Base Rate Loan; PROVIDED, HOWEVER, that if more than one
Bank is affected at any time, then all affected Banks must
be treated the same pursuant to this Section 1.10(b).
(c) If any Bank shall have reasonably determined
that after the date of this Agreement, the adoption or
effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by
any governmental authority, central bank or comparable
agency charged with the interpretation or administration
thereof, or compliance by such Bank with any request or
directive regarding capital adequacy (whether or not having
the force of law but with which such Bank customarily
complies even though the failure to comply therewith would
not be unlawful) of any such authority, central bank or
comparable agency, has or would have the effect of reducing
the rate of return on such Bank's capital or assets as a
consequence of its commitments or obligations hereunder to
a level below that which such Bank could have achieved but
for such adoption, effectiveness, change or compliance
(taking into consideration such Bank's policies with
respect to capital adequacy), then from time to time,
within 15 days after demand by such Bank (with a copy to
the Administrative Agent), Borrower shall, subject to
Section 1.12(b) (to the extent applicable), pay to such
Bank such additional amount or amounts as will compensate
such Bank for such reduction. Each Bank, upon determining
in good faith that any additional amounts will be payable
pursuant to this Section 1.10(c), will give prompt written
notice thereof to Borrower, which notice shall set forth
the basis of the calculation of such additional amounts,
although, subject to Section 1.12(b), the failure to give
any such notice shall not release or diminish any of
Borrower's obligations to pay additional amounts pursuant
to this Section 1.10(c) upon the subsequent receipt of such
notice.
1.11 COMPENSATION. Borrower shall compensate
each Bank, upon its written request (which request shall
set forth the basis for requesting such compensation), for
all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred
by reason of the liquidation or reemployment of deposits or
other funds required by such Bank to fund its Eurodollar
Loans but excluding in any event the loss of anticipated
profits or other consequential damages) which such Bank may
sustain: (i) if for any reason (other than a default by
such Bank or the Administrative Agent) a Borrowing of
Eurodollar Loans does not occur on a date specified
therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by Borrower or deemed withdrawn
pursuant to Section 1.10(a)); (ii) if any prepayment,
repayment or conversion of any of its Eurodollar Loans
occurs on a date which is not the last day of an Interest
Period applicable thereto; (iii) if any prepayment of any
of its Eurodollar Loans is not made on any date specified
in a notice of prepayment given by Borrower; or (iv) as a
consequence of (x) any other default by Borrower to repay
its Eurodollar Loans when required by the terms of this
Agreement or (y) an election made pursuant to Section
1.10(b).
1.12 CHANGE OF LENDING OFFICE. (a) Each Bank
agrees that, upon the occurrence of any event giving rise
to the operation of Section 1.10(a)(ii) or (iii), 1.10(c),
2.06 or 4.04 with respect to such Bank, it will, if
requested by Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate
another lending office for any Loan, Letters of Credit or
Commitments affected by such event; PROVIDED, HOWEVER, that
such designation is made on such terms that such Bank and
its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence
of the event giving rise to the operation of any such
Section. Nothing in this Section 1.12 shall affect or
postpone any of the obligations of Borrower or the right of
any Bank provided in Section 1.10, 2.06 or 4.04.
(b) Notwithstanding anything in this Agreement to
the contrary, to the extent any notice required by Section
1.10, 1.11, 2.06 or 4.04 is given by any Bank more than 180
days after the occurrence of the event giving rise to the
additional costs of the type described in such Section,
such Bank shall not be entitled to compensation under
Section 1.10, 1.11, 2.06 or 4.04 for any amounts incurred
or accruing prior to 180 days prior to the giving of such
notice to Borrower.
1.13 REPLACEMENT OF BANKS. (x) Upon the
occurrence of any event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.06
or Section 4.04 with respect to any Bank which results in
such Bank charging to Borrower increased costs in excess of
those being generally charged by the other Banks or
becoming incapable of making Eurodollar Loans, (y) if a
Bank becomes a Defaulting Bank and/or (z) as provided in
Section 12.12(b), in the case of a refusal by a Bank to
consent to a proposed change, waiver, discharge or
termination with respect to this Agreement which has been
approved by the Required Banks, Borrower shall have the
right, if no Default or Event of Default then exists, to
replace such Bank (the "REPLACED BANK") with one or more
other Eligible Transferee or Eligible Transferees
reasonably acceptable to the Administrative Agent, none of
which Eligible Transferees shall constitute a Defaulting
Bank at the time of such replacement (collectively, the
"REPLACEMENT BANK"); PROVIDED, HOWEVER, that (i) at the
time of any replacement pursuant to this Section 1.13, the
Replacement Bank shall enter into one or more Assignment
and Assumption Agreements pursuant to Section 12.04(b) (and
with all fees payable pursuant to said Section 12.04(b) to
be paid by the Replacement Bank) pursuant to which the
Replacement Bank shall acquire all of the Commitments and
outstanding Loans of, and in each case participations in
Letters of Credit by, the Replaced Bank and, in connection
therewith, shall pay to (x) the Replaced Bank in respect
thereof an amount equal to the sum of (A) an amount equal
to the principal of, and all accrued interest on, all
outstanding Loans of the Replaced Bank, (B) an amount equal
to all Unpaid Drawings that have been funded by (and not
reimbursed to) such Replaced Bank, together with all then
unpaid interest with respect thereto at such time and (C)
an amount equal to all accrued, but theretofore unpaid,
Fees owing to the Replaced Bank pursuant to Section 3.01,
and (y) the Letter of Credit Issuer an amount equal to such
Replaced Bank's Percentage of any Unpaid Drawing (which at
such time remains an Unpaid Drawing) to the extent such
amount was not theretofore funded by such Replaced Bank,
and (ii) all obligations of Borrower owing to the Replaced
Bank (other than those specifically described in clause (i)
above in respect of which the assignment purchase price has
been, or is concurrently being, paid) shall be paid in full
to such Replaced Bank concurrently with such replacement.
Upon the execution of the respective Assignment and
Assumption Agreements, the payment of amounts referred to
in clauses (i) and (ii) above and, if so requested by the
Replacement Bank, delivery to the Replacement Bank of a
Note executed by Borrower, the Replacement Bank shall
become a Bank hereunder and the Replaced Bank shall cease
to constitute a Bank hereunder, except with respect to
indemnification provisions applicable to the Replaced Bank
under this Agreement, which shall survive as to such
Replaced Bank.
SECTION 2. LETTERS OF CREDIT.
2.01 LETTERS OF CREDIT. (a) Subject to and upon
the terms and conditions herein set forth, Borrower may
request a Letter of Credit Issuer to issue, at any time and
from time to time on and after the Initial Borrowing Date
and prior to the Maturity Date, and subject to and upon the
terms and conditions herein set forth, such Letter of
Credit Issuer agrees to issue from time to time, (x) for
the account of Borrower and for the benefit of any holder
(or any trustee, agent or other similar representative for
any such holders) of L/C Supportable Obligations of
Borrower or any Subsidiary, an irrevocable sight standby
letter of credit, in a form customarily used by such Letter
of Credit Issuer or in such other form as has been approved
by such Letter of Credit Issuer (each such standby letter
of credit, a "STANDBY LETTER OF CREDIT") in support of such
L/C Supportable Obligations and/or (y) for the account of
Borrower and for the benefit of sellers of goods or
materials to Borrower or any Subsidiary, an irrevocable
sight letter of credit in a form customarily used by such
Letter of Credit Issuer or in such other form as has been
approved by such Letter of Credit Issuer (each such letter
of credit, a "TRADE LETTER OF CREDIT", and each such Trade
Letter of Credit and each Standby Letter of Credit, a
"LETTER OF CREDIT") in support of commercial transactions
of Borrower or any Subsidiary.
(b) Notwithstanding the foregoing, (i) no Letter
of Credit shall be issued, the Stated Amount of which, when
added to the Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid on the date of, and prior
to the issuance of, the respective Letter of Credit) at
such time, would exceed either (x) $25,000,000 or (y) when
added to the aggregate principal amount of all Loans made
by Non-Defaulting Banks then outstanding, the Adjusted
Total Commitment at such time; (ii) each Standby Letter of
Credit shall have an expiry date occurring not later than
one year after such Standby Letter of Credit's date of
issuance although any Standby Letter of Credit may be
extendable for successive periods of up to 12 months, but
not beyond the Business Day next preceding the Maturity
Date, on terms reasonably acceptable to the respective
Letter of Credit Issuer and in no event shall any Standby
Letter of Credit have an expiry date occurring later than
the Business Day immediately preceding the Maturity Date;
and (iii) each Letter of Credit shall be denominated in
Dollars; and (iv) each Trade Letter of Credit shall have an
expiry date occurring not later than the earlier of (x) the
30th day prior to the Maturity Date and (y) the date which
is 180 days from the date of issuance of such Trade Letter
of Credit, on terms acceptable to the respective Letter of
Credit Issuer.
(c) To the extent that any provision of any
application for any Letter of Credit is inconsistent with
or in addition to the terms of this Agreement, the terms of
this Agreement shall control.
2.02 MINIMUM STATED AMOUNT. The initial Stated
Amount of each Letter of Credit shall be not less than
$10,000 or such lesser amount reasonably acceptable to the
respective Letter of Credit Issuer.
2.03 LETTER OF CREDIT REQUESTS; REQUEST FOR
ISSUANCE OF LETTER OF CREDIT. (a) Whenever it desires
that a Letter of Credit be issued, Borrower shall give the
Administrative Agent and the respective Letter of Credit
Issuer written notice (including by way of telecopier) in
the form of EXHIBIT C hereto prior to 1:00 P.M. (New York
time) at least one Business Day (or such shorter period as
may be acceptable to such Letter of Credit Issuer) prior to
the proposed date of issuance (which shall be a Business
Day) (each a "LETTER OF CREDIT REQUEST"), which Letter of
Credit Request shall include any documents that such Letter
of Credit Issuer customarily requires in connection
therewith.
(b) In the case of Standby Letters of Credit, the
Letter of Credit Issuer shall, without cost to Borrower,
promptly after the issuance of or amendment to any such
Standby Letter of Credit, give the Administrative Agent,
each Bank and Borrower written notice of such issuance or
amendment accompanied by a copy of such issuance or
amendment. In the case of Trade Letters of Credit, the
Letter of Credit Issuer will furnish the Administrative
Agent, by facsimile transmission, promptly on the first
Business Day of each week a report of its daily aggregate
Letter of Credit Outstandings with respect to Trade Letters
of Credit for the previous week. The Administrative Agent
shall furnish each Bank, on the first day of each calendar
month and on each Letter of Credit Fee payment date, with a
report detailing the daily aggregate Letter of Credit
Outstandings with respect to Trade Letters of Credit during
such period.
2.04 AGREEMENT TO REPAY LETTER OF CREDIT
PAYMENTS. (a) Borrower hereby agrees to reimburse each
Letter of Credit Issuer, by making payment to the
Administrative Agent at the Payment Office, for any payment
or disbursement made by such Letter of Credit Issuer under
any Letter of Credit (each such amount so paid or disbursed
until reimbursed, an "UNPAID DRAWING") within one Business
Day of the date on which Borrower is notified by such
Letter of Credit Issuer of such payment or disbursement
with interest on the amount so paid or disbursed by such
Letter of Credit Issuer, to the extent not reimbursed prior
to 1:00 P.M. (New York time) on the date of such payment or
disbursement, from and including the date paid or disbursed
to but not including the date such Letter of Credit Issuer
is reimbursed therefor at a rate PER ANNUM which shall be
equal to the sum of the Base Rate as in effect from time to
time plus the Applicable Base Rate Margin (plus an
additional 2% PER ANNUM if not reimbursed by the fourth
Business Day after the date of such notice of payment or
disbursement), such interest also to be payable on demand.
(b) Borrower's obligation under this Section 2.04
to reimburse the respective Letter of Credit Issuer with
respect to Unpaid Drawings (including, in each case,
interest thereon) shall be absolute and unconditional under
any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which Borrower may have
or have had against such Letter of Credit Issuer, the
Administrative Agent or any Bank, including, without
limitation, any defense based upon the failure of any
drawing under a Letter of Credit to conform to the terms of
the Letter of Credit (other than the failure of the
respective Letter of Credit Issuer to determine that any
documents required to be delivered under such Letter of
Credit have been delivered and that they substantially
comply on their face with the requirements of such Letter
of Credit) or any non-application or misapplication by the
beneficiary of the proceeds of such drawing; PROVIDED,
HOWEVER, that Borrower shall not be obligated to reimburse
any Letter of Credit Issuer for any wrongful payment made
by such Letter of Credit Issuer under a Letter of Credit as
a result of acts or omissions constituting willful
misconduct or gross negligence on the part of such Letter
of Credit Issuer as determined by a court of competent
jurisdiction.
2.05 LETTER OF CREDIT PARTICIPATIONS.
(a) Immediately upon the issuance by any Letter of Credit
Issuer of any Letter of Credit, such Letter of Credit
Issuer shall be deemed to have sold and transferred to each
other Bank, and each such Bank (each a "PARTICIPANT") shall
be deemed irrevocably and unconditionally to have purchased
and received from such Letter of Credit Issuer, without
recourse or warranty, an undivided interest and
participation, to the extent of such Bank's Adjusted
Percentage, in such Letter of Credit, each substitute
letter of credit, each drawing made thereunder and the
obligations of Borrower under this Agreement with respect
thereto (although the Letter of Credit Fee shall be payable
directly to the Administrative Agent for the account of the
Banks as provided in Section 3.01(b) and the Participants
shall have no right to receive any portion of any Facing
Fees) and any security therefor or guaranty pertaining
thereto. Upon any change in the Commitments or Adjusted
Percentages of the Banks pursuant to Section 12.04(b) or
upon a Bank Default, it is hereby agreed that, with respect
to all outstanding Letters of Credit and Unpaid Drawings,
there shall be an automatic adjustment to the
participations pursuant to this Section 2.05 to reflect the
new Adjusted Percentages of the assigning and assignee Bank
or of all Banks, as the case may be.
(b) In determining whether to pay under any
Letter of Credit, the respective Letter of Credit Issuer
shall not have any obligation relative to the Participants
other than to determine that any documents required to be
delivered under such Letter of Credit have been delivered
and that they substantially comply on their face with the
requirements of such Letter of Credit. Any action taken or
omitted to be taken by any Letter of Credit Issuer under or
in connection with any Letter of Credit, if taken or
omitted in the absence of gross negligence or willful
misconduct as determined by a court of competent
jurisdiction, shall not create for such Letter of Credit
Issuer any resulting liability to the Participants.
(c) In the event that the respective Letter of
Credit Issuer makes any payment under any Letter of Credit
and Borrower shall not have reimbursed such amount in full
to such Letter of Credit Issuer pursuant to Section
2.04(a), such Letter of Credit Issuer shall promptly notify
the Administrative Agent, and the Administrative Agent
shall promptly notify each Participant of such failure, and
each Participant shall promptly and unconditionally pay to
the Administrative Agent for the account of such Letter of
Credit Issuer, the amount of such Participant's Adjusted
Percentage of such payment in Dollars and in same day
funds; PROVIDED, HOWEVER, that no Participant shall be
obligated to pay to the Administrative Agent its Adjusted
Percentage of such unreimbursed amount for any wrongful
payment made by such Letter of Credit Issuer under a Letter
of Credit as a result of acts or omissions constituting
willful misconduct or gross negligence on the part of such
Letter of Credit Issuer. If the Administrative Agent so
notifies any Participant required to fund an Unpaid Drawing
under a Letter of Credit prior to 12:00 Noon (New York
time) on any Business Day, such Participant shall make
available to the Administrative Agent for the account of
the respective Letter of Credit Issuer such Participant's
Adjusted Percentage of the amount of such payment on such
Business Day in same day funds. If and to the extent such
Participant shall not have so made its Adjusted Percentage
of the amount of such Unpaid Drawing available to the
Administrative Agent for the account of such Letter of
Credit Issuer, such Participant agrees to pay to the
Administrative Agent for the account of such Letter of
Credit Issuer, forthwith on demand such amount, together
with interest thereon, for each day from such date until
the date such amount is paid to the Administrative Agent
for the account of such Letter of Credit Issuer at the
overnight Federal Funds Effective Rate. The failure of any
Participant to make available to the Administrative Agent
for the account of the respective Letter of Credit Issuer
its Adjusted Percentage of any Unpaid Drawing under any
Letter of Credit shall not relieve any other Participant of
its obligation hereunder to make available to the
Administrative Agent for the account of such respective
Letter of Credit Issuer its Adjusted Percentage of any
payment under any Letter of Credit on the date required, as
specified above, but no Participant shall be responsible
for the failure of any other Participant to make available
to the Administrative Agent for the account of such Letter
of Credit Issuer such other Participant's Adjusted
Percentage of any such payment.
(d) Whenever the respective Letter of Credit
Issuer receives a payment of a reimbursement obligation as
to which the Administrative Agent has received for the
account of such Letter of Credit Issuer any payments from
the Participants pursuant to clause (c) above, such Letter
of Credit Issuer shall pay to the Administrative Agent and
the Administrative Agent shall promptly pay to each
Participant which has paid its Adjusted Percentage thereof,
in Dollars and in same day funds, an amount equal to such
Participant's Adjusted Percentage of the principal amount
thereof and interest thereon accruing at the overnight
Federal Funds Effective Rate after the purchase of the
respective participations.
(e) The obligations of the Participants to make
payments to the Administrative Agent for the account of the
respective Letter of Credit Issuer with respect to Letters
of Credit shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other
qualification or exception whatsoever (PROVIDED, HOWEVER,
that no Participant shall be required to make payments
resulting from such Letter of Credit Issuer's gross
negligence or willful misconduct) and shall be made in
accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any
of the following circumstances:
(i) any lack of validity or enforceability of
this Agreement or any of the other Credit Documents;
(ii) the existence of any claim, set-off,
defense or other right which Borrower may have at any time
against a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit (or any Person for whom
any such transferee may be acting), the Administrative
Agent, the respective Letter of Credit Issuer, any Bank or
other Person, whether in connection with this Agreement,
any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying
transaction between Borrower and the beneficiary named in
any such Letter of Credit);
(iii) any draft, certificate or other document
presented under the Letter of Credit proving to be forged,
fraudulent, or invalid in any respect or any statement
therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any
security for the performance or observance of any of the
terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of
Default.
2.06 INCREASED COSTS. If at any time after the
date of the Agreement, the adoption or effectiveness of any
new applicable law, rule or regulation, or any change
therein, or any change in the interpretation or
administration thereof or any existing law, rule or
regulation by any governmental authority, central bank or
comparable agency charged with the interpretation or
administration thereof, or compliance by the respective
Letter of Credit Issuer or any Bank with any request or
directive (whether or not having the force of law but with
which such Bank customarily complies even though the
failure to comply therewith would not be unlawful) by any
such authority, central bank or comparable agency shall
either (i) impose, modify or make applicable any reserve,
deposit, capital adequacy or similar requirement against
Letters of Credit issued by such Letter of Credit Issuer or
such Bank's participation therein, or (ii) shall impose on
such Letter of Credit Issuer or any Bank any other
conditions affecting this Agreement, any Letter of Credit
or such Bank's participation therein; and the result of any
of the foregoing is to increase the cost to such Letter of
Credit Issuer or such Bank of issuing, maintaining or
participating in any Letter of Credit, or to reduce the
amount of any sum received or receivable by such Letter of
Credit Issuer or such Bank hereunder (other than any
increased cost or reduction in the amount received or
receivable resulting from the imposition of or a change in
the rate or basis of net income taxes, franchise taxes or
similar charges), then, upon demand to Borrower by such
Letter of Credit Issuer or such Bank (a copy of which
notice shall be sent by such Letter of Credit Issuer or
such Bank to the Administrative Agent), Borrower shall,
subject to Section 1.12(b) (to the extent applicable), pay
to such Letter of Credit Issuer or such Bank such
additional amount or amounts as will compensate such Letter
of Credit Issuer or such Bank for such increased cost or
reduction. A certificate submitted to Borrower by the
respective Letter of Credit Issuer or such Bank, as the
case may be (a copy of which certificate shall be sent by
such Letter of Credit Issuer or such Bank to the
Administrative Agent), setting forth the basis for the
determination of such additional amount or amounts
necessary to compensate such Letter of Credit Issuer or
such Bank as aforesaid shall be conclusive and binding on
Borrower absent manifest error, although the failure to
deliver any such certificate shall not, subject to Section
1.12(b), release or diminish any of Borrower's obligations
to pay additional amounts pursuant to this Section 2.06
upon the subsequent receipt thereof.
2.07 INDEMNITIES. Borrower hereby agrees to
reimburse and indemnify the respective Letter of Credit
Issuer for and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted
against or incurred by such Letter of Credit Issuer in
performing its respective duties in any way relating to or
arising out of its issuance of Letters of Credit; PROVIDED,
HOWEVER, that Borrower shall not be liable for any portion
of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Letter of Credit Issuer's
gross negligence or willful misconduct or the failure of
the respective Letter of Credit Issuer to determine that
any documents required to be delivered under such Letter of
Credit have been delivered and that they substantially
comply on their face with the requirements of such Letter
of Credit. To the extent the respective Letter of Credit
Issuer is not indemnified by Borrower, the Participants
will reimburse and indemnify such Letter of Credit Issuer,
in proportion to their respective Percentages, for and
against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, suits,
costs, expenses or disbursements of whatsoever kind or
nature which may be imposed on, asserted against or
incurred by such Letter of Credit Issuer in performing its
respective duties in any way relating to or arising out of
its issuance of Letters of Credit; PROVIDED, HOWEVER, that
no Participants shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
resulting from such Letter of Credit Issuer's gross
negligence or willful misconduct.
SECTION 3. FEES; COMMITMENTS.
3.01 FEES. (a) Borrower agrees to pay to the
Administrative Agent a commitment commission ("COMMITMENT
COMMISSION") PRO RATA for the account of each Non-Defaulting Bank
for the period from and including the date hereof to, but not including,
the date the Total Commitment has been terminated, which Commitment
Commission shall be equal to the Applicable Commitment Commission
Percentage, computed at such rate for each day, on the daily amount of
such Bank's Available Unutilized Commitment. Such Commitment Commission
shall be due and payable in arrears on the first Business Day of each
March, June, September and December and on the date upon which the Total
Commitment is terminated.
(b) Borrower agrees to pay to the Administrative Agent for
the account of each Non-Defaulting Bank PRO RATA on the basis of
their respective Adjusted Percentages, a fee in respect of each
Letter of Credit (the "LETTER OF CREDIT FEE") computed at a rate PER
ANNUM equal to the Applicable Eurodollar Margin then in effect on the
daily Stated Amount of such Letter of Credit. Accrued Letter of Credit
Fees shall be due and payable quarterly in arrears on the first Business
Day of each March, June, September and December of each year and on the
date after the Total Commitment is terminated and no Letters of Credit
remain outstanding.
(c) Borrower agrees to pay to the
Administrative Agent for the account of each Letter of
Credit Issuer a fee in respect of each Letter of Credit
issued by it (the "FACING FEE") computed at the rate of 1/8
of 1.00% PER ANNUM on the daily Stated Amount of such
Letter of Credit; PROVIDED, HOWEVER, that in no event shall
the annual Facing Fee to any Letter of Credit Issuer be
less than $500 per Letter of Credit. Accrued Facing Fees
shall be due and payable quarterly in arrears on the first
Business Day of each March, June, September and December of
each year and on the date after the Total Commitment is
terminated and no Letters of Credit remain outstanding.
(d) Borrower agrees to pay directly to the
respective Letter of Credit Issuer upon each issuance of,
payment under, and/or amendment of, a Letter of Credit
issued by it such amount as shall at the time of such
issuance, payment or amendment be the administrative charge
and expenses which such Letter of Credit Issuer is
customarily charging for issuances of, payments under, or
amendments of, letters of credit issued by it.
(e) Borrower shall pay to the Administrative
Agent (x) on the Initial Borrowing Date for its own account
and/or for distribution to the Banks such Fees as
heretofore agreed in writing by Borrower and the
Administrative Agent and (y) for its own account such other
Fees as agreed to in writing between Borrower and the
Administrative Agent, when and as due.
(f) All computations of Fees shall be made in
accordance with Section 12.07(b).
3.02 VOLUNTARY REDUCTION OF COMMITMENTS. Upon
at least three Business Days' prior written notice (or
telephonic notice confirmed in writing) to the
Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the
Banks), Borrower shall have the right, without premium or
penalty, to terminate or partially reduce the Total
Unutilized Commitment; PROVIDED, HOWEVER, that (w) any such
termination shall apply to proportionately and permanently
reduce the Commitment of each Bank, (x) no such reduction
shall reduce any Non-Defaulting Bank's Commitment to an
amount that is less than the sum of (A) the outstanding
Loans of such Bank plus (B) such Bank's Adjusted Percentage
of Letter of Credit Outstandings and (y) any partial
reduction pursuant to this Section 3.02 shall be in the
amount of at least $500,000 and in integral multiples of
$100,000 in excess thereof.
3.03 MANDATORY ADJUSTMENTS OF COMMITMENTS,
ETC. (a) The Total Commitment shall terminate on the
Maturity Date.
(b) In addition to any other mandatory
commitment reductions pursuant to this Section 3.03, on the
Business Day immediately after (1) with respect to clauses
(i) and (iii) of this Section 3.03(b), the date on which
the Section 3.03(b)(i) Remainder or the Section
3.03(b)(iii) Remainder, as the case may be, is finally
determined or (2) with respect to clause (ii) of this
Section 3.03(b), the date of receipt thereof by Borrower
and/or any Subsidiary, the Total Commitment shall be
permanently reduced by an amount equal to 100% of:
(i) the remainder of (x) the Net Cash Proceeds
arising from any Asset Disposition, LESS (y) the
aggregate dollar amount of such Net Cash Proceeds
utilized to (1) so long as the Indenture is in
effect, acquire one or more Replacement Assets (as
defined in the Indenture as in effect on the date
hereof) within 270 days of the related Asset
Disposition or date of the receipt of such Net Cash
Proceeds, (2) acquire capital assets related to the
core business of Borrower within 270 days of the
related Asset Disposition or date of the receipt of
such Net Cash Proceeds or (3) so long as the
Indenture is in effect, purchase outstanding Senior
Secured Notes pursuant to an offer to purchase
(effected in accordance with the Indenture as in
effect on the date hereof) such outstanding Senior
Secured Notes permitted or required by the Indenture
as in effect on the date hereof to be made as a
result of such Asset Disposition (the remainder of
(x) less (y), the "SECTION 3.03(b)(i) REMAINDER");
(ii) the Net Financing Proceeds arising from
any Debt Issuance; and
(iii) the remainder of (x) the aggregate amount
of cash payments received by Borrower or any
Subsidiary from any Recovery Event arising as a
result of a Total Loss (net of any applicable taxes
and expenses incurred as a result thereof), LESS (y)
the aggregate dollar amount of such cash payments
utilized to (1) so long as the Indenture is in
effect, acquire one or more Replacement Assets (as
defined in the Indenture as in effect on the date
hereof) within 270 days of the related Total Loss or
date of the receipt of such cash payments, (2)
repair or replace the damaged property which is the
subject of such Total Loss or acquire capital assets
related to the core business of Borrower within 270
days of the date of the related Total Loss or
receipt of such cash payments or (3) so long as the
Indenture is in effect, purchase outstanding Senior
Secured Notes pursuant to an offer to purchase
(effected in accordance with the Indenture as in
effect on the date hereof) such outstanding Senior
Secured Notes permitted or required by the Indenture
as in effect on the date hereof to be made as a
result of such Total Loss (the remainder of (x) less
(y), the "SECTION 3.03(b)(iii) REMAINDER").
Notwithstanding anything in this Section
3.03(b) to the contrary, so long as the Indenture and the
Security Documents are in effect, to the extent that the
provisions of this Section 3.03(b) conflict with any action
required to be taken (or prohibited to be taken) by
Borrower or any Subsidiary pursuant to the Indenture or the
Security Documents (in each case as in effect on the date
hereof), Borrower and the Subsidiaries may comply with the
Indenture and the Security Documents to such extent as is
necessary to avoid any breach or default thereunder and
such compliance, if resulting in non-compliance with the
terms hereof, shall not be a breach or default by Borrower
or any Subsidiary of the provisions of this Section
3.03(b).
(c) Each reduction of the Total Commitment
pursuant to this Section 3.03 shall apply proportionately
to the Commitment of each Bank.
SECTION 4. PAYMENTS.
4.01 VOLUNTARY PREPAYMENTS. Borrower shall
have the right to prepay Loans in whole or in part, without
premium or penalty, from time to time on the following
terms and conditions: (i) Borrower shall give the
Administrative Agent at the Payment Office written notice
(or telephonic notice promptly confirmed in writing) of its
intent to prepay the Loans, the amount of such prepayment
and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings pursuant to which made, which
notice shall be given by Borrower at least one Business Day
prior to the date of such prepayment with respect to Base
Rate Loans and two Business Days prior to the date of such
prepayment with respect to Eurodollar Loans, which notice
shall promptly be transmitted by the Administrative Agent
to each of the Banks; (ii) each partial prepayment of any
Borrowing shall be in an aggregate principal amount of at
least $500,000 and, if greater, in an integral multiple of
$100,000; PROVIDED, HOWEVER, that no partial prepayment of
Eurodollar Loans made pursuant to a Borrowing shall reduce
the aggregate principal amount of the Loans outstanding
pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount applicable thereto; (iii) if any
Eurodollar Loan is prepaid pursuant to this Section 4.01
other than on the last day of the Interest Period
applicable thereto Borrower shall pay to the Banks all
amounts due under Section 1.11 with respect to such
prepayment; and (iv) each prepayment in respect of any
Loans made pursuant to a Borrowing shall be applied PRO
RATA among the Banks which made such Loans; PROVIDED,
HOWEVER, that at Borrower's election in connection with any
prepayment of Loans pursuant to this Section 4.01, such
prepayment shall not be applied to any Loans of a
Defaulting Bank.
4.02 MANDATORY PREPAYMENTS.
(A) REQUIREMENTS:
(a) (i) If on any date the sum of the aggregate
outstanding principal amount of Loans made by Non-Defaulting
Banks and the Letter of Credit Outstandings exceeds the Adjusted
Total Commitment as then in effect, Borrower shall repay on
such date the principal of Loans of Non-Defaulting Banks,
in an aggregate amount equal to such excess. If, after
giving effect to the repayment of all outstanding Loans of
Non-Defaulting Banks, the aggregate amount of Letter of
Credit Outstandings exceeds the Adjusted Total Commitment
then in effect, Borrower shall pay to the Administrative Agent
an amount in cash and/or Cash Equivalents equal to such excess
(up to the aggregate amount of the Letter of Credit Outstandings
at such time) and the Administrative Agent shall hold such payment as
security for the obligations of Borrower hereunder pursuant
to a cash collateral agreement to be entered into in form
and substance reasonably satisfactory to the Administrative
Agent (which shall permit certain investments in Cash
Equivalents satisfactory to the Administrative Agent, until
the proceeds are applied to the secured obligations).
(ii) If on any date the aggregate outstanding
principal amount of the Loans made by a Defaulting Bank
exceeds the Commitment of such Defaulting Bank, Borrower
shall repay the principal of Loans of such Defaulting Bank
in an amount equal to such excess.
(b) Notwithstanding anything to the contrary
contained elsewhere in this Agreement, all then outstanding
Loans shall be repaid in full on the Maturity Date.
(B) APPLICATION:
With respect to each prepayment of Loans
required by Section 4.02, Borrower may designate the Types
of Loans which are to be prepaid and the specific Borrowing
or Borrowings under the Facility pursuant to which made;
PROVIDED, HOWEVER, that (i) Eurodollar Loans may only be
repaid if no Base Rate Loans of Non-Defaulting Banks remain
outstanding; (ii) if any prepayment of Eurodollar Loans
made pursuant to a single Borrowing shall reduce the
outstanding Loans made pursuant to such Borrowing to an
amount less than the Minimum Borrowing Amount for such
Borrowing, such Borrowing shall be immediately converted
into Base Rate Loans; and (iii) each prepayment of any
Loans made by Non-Defaulting Banks pursuant to a Borrowing
shall be applied PRO RATA among the Non-Defaulting Banks
which made such Loans. In the absence of a designation by
Borrower as described in the preceding sentence, the
Administrative Agent shall, subject to the above, make such
designation in its sole discretion with a view, but no
obligation, to minimize breakage costs owing under Section
1.11. Notwithstanding the foregoing provisions of this
Section 4.02(B), if at any time the mandatory prepayment of
Loans pursuant to Section 4.02(A) above would result, after
giving effect to the procedures set forth above, in
Borrower incurring breakage costs under Section 1.11 as a
result of Eurodollar Loans being prepaid other than on the
last day of an Interest Period applicable thereto (the
"AFFECTED EURODOLLAR LOANS"), then Borrower may in its sole
discretion initially deposit a portion (up to 100%) of the
amounts that otherwise would have been paid in respect of
the Affected Eurodollar Loans with the Administrative Agent
(which deposit must be equal in amount to the amount of the
Affected Eurodollar Loans not immediately prepaid) to be
held as security for the obligations of Borrower hereunder
pursuant to a cash collateral agreement to be entered into
in form and substance reasonably satisfactory to the
Administrative Agent and shall provide for investments
satisfactory to the Administrative Agent and Borrower, with
such cash collateral to be directly applied upon the first
occurrence (or occurrences) thereafter of the last day of
an Interest Period applicable to the relevant Loans that
are Eurodollar Loans (or such earlier date or dates as
shall be requested by Borrower) to repay an aggregate
principal amount of such Loans equal to the Affected
Eurodollar Loans not initially prepaid pursuant to this
sentence. Notwithstanding anything to the contrary
contained in the immediately preceding sentence, all
amounts deposited as cash collateral pursuant to the
immediately preceding sentence shall be held for the sole
benefit of the Banks whose Loans would otherwise have been
immediately prepaid with the amounts deposited and upon the
taking of any action by the Administrative Agent or the
Banks pursuant to the remedial provisions of Section 9, any
amounts held as cash collateral pursuant to this Section
4.02(B) shall, subject to the requirements of applicable
law, be immediately applied to the Loans.
4.03 METHOD AND PLACE OF PAYMENT. Except as
otherwise specifically provided herein, all payments under
this Agreement shall be made to the Administrative Agent
for the ratable (based on its PRO RATA share) account of
the Banks entitled thereto, not later than 1:00 P.M. (New
York time) on the date when due and shall be made in
immediately available funds and in lawful money of the
United States of America at the Payment Office, it being
understood that written notice by Borrower to the
Administrative Agent to make a payment from the funds in
Borrower's account at the Payment Office shall constitute
the making of such payment to the extent of such funds held
in such account. Solely for purposes of calculating
interest due on any amount owing hereunder, any payments
under this Agreement which are made later than 1:00 P.M.
(New York time) shall be deemed to have been made on the
next succeeding Business Day. Whenever any payment to be
made hereunder shall be stated to be due on a day which is
not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during
such extension at the applicable rate in effect immediately
prior to such extension.
4.04 NET PAYMENTS. (a) All payments made by
Borrower hereunder or under any Note will be made without
setoff, counterclaim or other defense. Except as provided
in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with
respect to such payments (but excluding, except as provided
in the second succeeding sentence, any franchise or similar
tax imposed on or measured by the net income or net profits
of a Bank pursuant to the laws of the jurisdiction in which
it is organized or managed and controlled or the
jurisdiction in which the principal office or applicable
lending office of such Bank is located or any subdivision
thereof or therein) and all interest, penalties or similar
liabilities with respect thereto (other than interest,
penalties, levies, imposts, duties, fees, assessments or
other charges imposed or payable as a result of any action
or inaction of such Bank not timely or properly taken by
such Bank or non-compliance by such Bank with applicable
law) (all such non-excluded taxes, levies, imposts, duties,
fees, assessments or other charges being referred to
collectively as "TAXES"). If any Taxes are so levied or
imposed, Borrower agrees to pay the full amount of such
Taxes, and such additional amounts, if any, as may be
necessary so that every payment of all amounts due under
this Agreement or under any Note, after withholding or
deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. If
any amounts are payable in respect of Taxes pursuant to the
preceding sentence, Borrower agrees to reimburse each Bank,
upon the written request of such Bank, for taxes imposed on
or measured by the net income or net profits of such Bank
pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of such Bank
is located or under the laws of any political subdivision
or taxing authority of any such jurisdiction in which the
principal office or applicable lending office of such Bank
is located and for any withholding of taxes as such Bank
shall determine are payable by, or withheld from, such Bank
in respect of such amounts so paid to or on behalf of such
Bank pursuant to the preceding sentence and in respect of
any amounts paid to or on behalf of such Bank pursuant to
this sentence. Borrower will furnish to the Administrative
Agent within 45 days after the date the payment of any
Taxes is due pursuant to applicable law certified copies of
tax receipts evidencing such payment by Borrower. Borrower
agrees to indemnify and hold harmless each Bank, and
reimburse such Bank upon its written request, for the
amount of any Taxes so levied or imposed and paid by such
Bank.
(b) Each Bank that is not a United States
person (as such term is defined in Section 7701(a)(30) of
the Code) agrees to deliver to Borrower and the
Administrative Agent on or prior to the date of this
Agreement, or in the case of a Bank that is an assignee or
transferee of an interest under this Agreement pursuant to
Section 1.13 or 12.04 (unless the respective Bank was
already a Bank hereunder immediately prior to such
assignment or transfer), on the date of such assignment or
transfer to such Bank, (i) two accurate and complete
original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor forms) certifying to such Bank's
entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under
this Agreement and under any Note, or (ii) if the Bank is
not a "bank" within the meaning of Section 881(c)(3)(A) of
the Code and cannot deliver either Internal Revenue Service
Form 1001 or 4224 pursuant to clause (i) above, (x) a
certificate substantially in the form of EXHIBIT D hereto
(any such certificate, a "SECTION 4.04(b)(ii) CERTIFICATE")
and (y) two accurate and complete original signed copies of
Internal Revenue Service Form W-8 (or successor form)
certifying to such Bank's entitlement to a complete
exemption from United States withholding tax with respect
to payments of interest to be made under this Agreement and
under any Note. In addition, each Bank agrees that from
time to time after the date of this Agreement, when a lapse
in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material
respect, it will deliver to Borrower and the Administrative
Agent two new accurate and complete original signed copies
of Internal Revenue Service Form 4224 or 1001, or Form W-8
and a Section 4.04(b)(ii) Certificate, as the case may be,
and such other forms as may be required in order to confirm
or establish the entitlement of such Bank to a continued
exemption from or reduction in United States withholding
tax with respect to payments under this Agreement and any
Note, or it shall immediately notify Borrower and the
Administrative Agent of its inability to deliver any such
Form or Certificate. Notwithstanding anything to the
contrary contained in Section 1.10, 2.06 or 4.04(a), but
subject to Section 12.04(b) and the immediately succeeding
sentence, (x) Borrower shall be entitled, to the extent it
is required to do so by law, to deduct or withhold income
or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or
therein) from interest, fees or other amounts payable
hereunder for the account of any Bank which is not a United
States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax
purposes to the extent that such Bank has not provided to
Borrower U.S. Internal Revenue Service Forms that establish
a complete exemption from such deduction or withholding and
(y) Borrower shall not be obligated pursuant to Section
1.10, 2.06 or 4.04(a) hereof to gross-up payments to be
made to a Bank in respect of income or similar taxes
imposed by the United States (I) if such Bank has not
provided to Borrower the Internal Revenue Service Forms
required to be provided to Borrower pursuant to this
Section 4.04(b) or (II) in the case of a payment, other
than interest, to a Bank described in clause (ii) above, to
the extent that such Forms do not establish a complete
exemption from withholding of such taxes. Notwithstanding
anything to the contrary contained in the preceding
sentence or elsewhere in this Section 4.04 and except as
set forth in Section 12.04(b), Borrower agrees to pay
additional amounts and to indemnify each Bank in the manner
set forth in Section 1.10, 2.06 or 4.04(a) (without regard
to the identity of the jurisdiction requiring the deduction
or withholding) in respect of any amounts deducted or
withheld by it as described in the immediately preceding
sentence as a result of any changes after the date of this
Agreement in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of income
or similar Taxes; PROVIDED, HOWEVER, such Bank shall
provide to Borrower and the Administrative Agent any
reasonably available applicable Internal Revenue Service
tax form (reasonably similar in its simplicity and lack of
detail to Internal Revenue Service Form 1001) necessary or
appropriate for the exemption or reduction in the rate of
such U.S. federal withholding tax.
(c) The provisions of this Section 4.04 shall
be subject to Section 1.12(b) (to the extent applicable).
SECTION 5. CONDITIONS PRECEDENT. The
obligation of the Banks to make each Loan hereunder, and
the obligation of the Letter of Credit Issuers to issue
Letters of Credit hereunder, is subject, at the time of
each such Credit Event (except as otherwise hereinafter
indicated), to the satisfaction of each of the following
conditions:
5.01 EXECUTION OF AGREEMENT AND NOTES. On or
prior to the Effectiveness Date, (i) this Agreement shall
have been duly authorized, executed and delivered by each
of the parties thereto and (ii) there shall have been
delivered to the Administrative Agent for the account of
each Bank the appropriate Note executed by Borrower, and in
the amount, maturity and as otherwise provided herein.
5.02 NO DEFAULT; REPRESENTATIONS AND
WARRANTIES. As of the Effectiveness Date and at the time
of each Credit Event and also after giving effect thereto,
(i) there shall exist no Default or Event of Default and
(ii) all representations and warranties contained herein or
in each of the other Credit Documents in effect at such
time shall be true and correct in all material respects
with the same effect as though such representations and
warranties had been made on and as of the date of such
Credit Event (except to the extent that such
representations and warranties expressly relate to an
earlier date, in which case they shall be true and correct
in all material respects as of such earlier date, and
except to the extent that such representations and
warranties are no longer true and correct due to any action
or inaction permitted or required to be taken under the
Credit Documents by Borrower or any Subsidiary).
5.03 OFFICER'S CERTIFICATE. On the
Effectiveness Date, the Administrative Agent shall have
received a certificate dated such date signed by the
President, any Vice President or the Treasurer of Borrower
stating that all of the applicable conditions set forth in
Sections 5.02, 5.08(a) and 5.15 have been satisfied as of
such date.
5.04 OPINIONS OF COUNSEL. On the Effectiveness
Date, the Administrative Agent shall have received
opinions, addressed to the Administrative Agent and each of
the Banks and dated the Initial Borrowing Date, from (i)
Baker & Botts, L.L.P., counsel to Borrower, which opinion
shall cover the matters contained in EXHIBIT E-1 hereto,
(ii) James L. McCulloch, Vice President and General Counsel
of Borrower, which opinion shall cover the matters
contained in EXHIBIT E-2 hereto, and (iii) Cahill Gordon &
Reindel, special counsel to the Administrative Agent, which
opinion shall cover the matters contained in EXHIBIT E-3
hereto.
5.05 CORPORATE PROCEEDINGS. (a) On the
Effectiveness Date, the Administrative Agent shall have
received from each Credit Party a certificate, dated the
Initial Borrowing Date, signed by the President, any Vice
President or the Treasurer or other appropriate
representative of such Credit Party in the form of
EXHIBIT F hereto with appropriate insertions and deletions,
together with copies of the certificate of formation or
organization, the by-laws, or other organizational
documents of such Credit Party, and the resolutions, or
such other administrative approval, of such Credit Party
referred to in such certificate.
(b) On the Effectiveness Date, all corporate
and legal proceedings and all instruments and agreements in
connection with the execution and delivery of the Credit
Documents shall be reasonably satisfactory in form and
substance to the Administrative Agent, and the
Administrative Agent shall have received all information
and copies of all certificates, documents and papers,
including good standing certificates and any other records
of corporate proceedings and governmental approvals, if
any, which the Administrative Agent may have reasonably
requested in connection therewith.
5.06 INDEBTEDNESS. On the Effectiveness Date,
(a) Borrower and the Subsidiaries shall not have any
Indebtedness outstanding with a principal amount in excess
of $10,000 except for (i) Loans and Letters of Credit,
(ii) Indebtedness in an aggregate principal amount not
exceeding $225.0 million represented by the Senior Secured
Notes, (iii) Existing Indebtedness and (iv) Existing L\C
Facility Indebtedness and (b) the credit agreement dated
June 24, 1993 among Borrower and certain Subsidiaries and
Societe Generale, New York Branch shall have been
terminated and all amounts owing thereunder shall have been
repaid and the Administrative Agent shall have received
written evidence reasonably satisfactory to it of the same.
On or prior to the Initial Borrowing Date, there shall have
been delivered to the Banks copies, certified as true and
correct by an appropriate officer of Borrower, of all
agreements evidencing or relating to Existing Indebtedness
(the "EXISTING INDEBTEDNESS AGREEMENTS"), all of which
Existing Indebtedness Agreements shall be in form and
substance reasonably satisfactory to the Administrative
Agent.
5.07 ADVERSE CHANGE, ETC. As of the date of
each Credit Event, nothing shall have occurred (and neither
the Banks nor the Administrative Agent shall have become
aware of any facts or conditions not previously known)
which the Administrative Agent shall reasonably determine
(a) is reasonably likely to have a material adverse effect
on the rights and remedies of the Banks or the
Administrative Agent under the Credit Documents, taken as a
whole, or on the ability of the Credit Parties, taken as a
whole, to perform their obligations to the Banks and the
Administrative Agent under the Credit Documents, or (b) is
reasonably likely to have a Material Adverse Effect.
5.08 LITIGATION. On the Effectiveness Date,
there shall be no actions, suits or proceedings by any
administrative, governmental or other public authority or
other Person pending or threatened (a) with respect to this
Agreement or any other Credit Document or the transactions
contemplated hereby or thereby or (b) which the
Administrative Agent or the Required Banks shall reasonably
determine is reasonably likely to, individually or in the
aggregate, (i) have a Material Adverse Effect or (ii) have
a material adverse effect on the rights or remedies of the
Banks or the Administrative Agent under the Credit
Documents, taken as a whole, or on the ability of the
Credit Parties, taken as a whole, to perform their
obligations to the Banks and the Administrative Agent under
the Credit Documents.
5.09 APPROVALS. On the Effectiveness Date, all
material necessary governmental and third party approvals
and consents in connection with the transactions
contemplated by the Credit Documents and otherwise referred
to therein shall have been obtained and remain in effect,
and all applicable waiting periods shall have expired
without any action being taken by any competent authority
which restrains or prevents such transactions or imposes,
in the reasonable judgment of the Required Banks or the
Administrative Agent, materially adverse conditions upon
the consummation of such transactions.
5.10 FEES. On the Effectiveness Date,
Borrower shall have paid to the Administrative Agent and
the Banks all Fees and expenses agreed upon by such parties
to be paid on or prior to such date.
5.11 GUARANTY. On or prior to the
Effectiveness Date, each Wholly-Owned Domestic Subsidiary
which owns or has chartered from a Person (other than
Borrower or any Subsidiary) any Fleet Rig as of the
Effectiveness Date and each Wholly-Owned Domestic
Subsidiary whose assets as of the Effectiveness Date
constitute more than 5% of the combined book value of the
assets of Borrower and the Subsidiaries (other than
Unrestricted Subsidiaries) as of the Effectiveness Date
shall have duly authorized, executed and delivered a
Guaranty in the form of EXHIBIT G hereto (as modified,
amended or supplemented from time to time in accordance
with the terms hereof and thereof, the "GUARANTY"), and the
Guaranty shall be in full force and effect; PROVIDED,
HOWEVER, that no Unrestricted Subsidiary need be a
Guarantor unless it is a guarantor of any Indebtedness of
Borrower or of any Subsidiary (other than of an
Unrestricted Subsidiary).
5.12 RIG MATTERS. (a)On or prior to the
Effectiveness Date, the Administrative Agent shall have
received:
(i) evidence reasonably satisfactory to the
Administrative Agent that as of the Effectiveness Date
(A) Borrower and the Subsidiaries (other than
Unrestricted Subsidiaries) own and operate not less
than 25 Fleet Rigs which have a Market Value,
determined in a manner reasonably satisfactory to the
Administrative Agent by one of the Approved
Shipbrokers, of at least $1.0 billion and (B) each
Fleet Rig is classified in the highest class available
for rigs of its age and type with the American Bureau
of Shipping, Inc. or another internationally
recognized classification society acceptable to the
Administrative Agent, free of any requirements or
recommendations, other than such requirements or
recommendations which if not cured by the owner
thereof would not materially diminish such Fleet Rig's
value; and
(ii) reports from one of the Approved Shipbrokers
setting forth the Market Value as of the Effectiveness
Date of each Fleet Rig.
(b) On the date of each Credit Event, none of
the Glomar Adriatic IX (Official No. 11490-81-D), Glomar
Adriatic X (Official No. 10767-PEXT5), Glomar Adriatic XI
(Official No. 21899-95), Glomar Baltic I (Official No.
663783), Glomar Celtic Sea (Official No. 25598-PEXT) Fleet
Rigs and Borrower's leasehold interest in and other rights
with respect to the Glomar Explorer (Official No. 547527)
Fleet Rig shall be subject to any Lien, other than Liens
permitted by Section 8.04 (except Liens securing
Indebtedness for borrowed money) and such Fleet Rigs and
leasehold interest and other rights shall have a Market
Value at the Effectiveness Date, determined in a manner
reasonably satisfactory to the Administrative Agent by one
of the Approved Shipbrokers, of at least $150.0 million.
5.13 INSURANCE REPORT. On or prior to the
Effectiveness Date, the Administrative Agent shall have
received a detailed report from a firm of independent
marine insurance brokers acceptable to the Administrative
Agent and the Required Banks, with respect to the insurance
maintained by Borrower and the Subsidiaries in connection
with the Fleet Rigs, together with a certificate from such
broker certifying that such insurances are placed with such
insurance companies and/or underwriters and/or clubs, in
such amounts, against such risks, and in such form, as are
normally insured against by similarly situated insureds.
5.14 PROJECTIONS. On or prior to the
Effectiveness Date, the Banks shall have received detailed
consolidated financial projections (including, but not
limited to, forecasted statements of net income, cash flow
and balance sheets and compliance with all financial
covenants) (the "PROJECTIONS"), for Borrower and the
Subsidiaries for the fiscal year ending December 31, 1997,
accompanied by a certificate of the Chief Financial Officer
of Borrower to the effect that such Projections are based
on supporting assumptions and explanations believed by
Borrower in good faith to be reasonable as to the future
financial performance of Borrower and the Subsidiaries for
the period covered, which Projections, the supporting
assumptions and explanations thereto, and certificate shall
be reasonably satisfactory in form and substance to the
Administrative Agent and the Required Banks.
5.15 OFFSHORE DRILLING CONTRACTS. On the
Effectiveness Date, all of the offshore drilling contracts
described on ANNEX III hereto shall be in full force and
effect.
5.16 MARGIN RULES. On the date of each Credit
Event, neither the making of a Loan hereunder nor the use
of the proceeds thereof will violate or be inconsistent
with the provisions of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System.
The acceptance of the benefits of each Credit
Event shall constitute a representation and warranty by
Borrower to the Administrative Agent and each of the Banks
that all of the applicable conditions specified above exist
as of that time. All of the certificates, legal opinions
and other documents and papers referred to in this Section
5, unless otherwise specified, shall be delivered to the
Administrative Agent at its Notice Office for the account
of each of the Banks and, except for the Notes, in
sufficient counterparts or copies for each of the Banks and
shall be satisfactory in form and substance to the
Administrative Agent.
SECTION 6. REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. In order to induce the Banks to enter into
this Agreement and to make the Loans and issue and/or
participate in Letters of Credit provided for herein,
Borrower makes the following representations and warranties
to, and agreements with, the Banks, all of which shall
survive the execution and delivery of this Agreement and
the making of the Loans (with the making of each Credit
Event thereafter being deemed to constitute a
representation and warranty that the matters specified in
this Section 6 are true and correct in all material
respects on and as of the date of each such Credit Event,
unless such representation and warranty expressly indicates
that it is being made as of any specific date, in which
case such representations and warranties shall be true and
correct in all material respects as of such date, and
except to the extent that such representations and
warranties are no longer true and correct due to any action
or inaction permitted or required to be taken under the
Credit Documents by Borrower or any Subsidiary):
6.01 STATUS. Borrower and each Subsidiary (i) is
a duly organized and validly existing corporation,
partnership, association, limited liability company or
other business entity in good standing under the laws of
the jurisdiction of its organization, (ii) has the power
and authority and has obtained all requisite governmental
licenses, authorizations, consents and approvals (a) to own
its property and assets and (b) to transact the business in
which it is engaged, except in such case where the failure
to have such power and authority or to obtain such
governmental licenses, authorizations, consents and
approvals, individually and in the aggregate, (x) is not
reasonably likely to have a Material Adverse Effect and (y)
is not reasonably likely to have a material adverse effect
on the rights and remedies of the Banks or the
Administrative Agent under the Credit Documents, taken as a
whole, or on the ability of the Credit Parties, taken as a
whole, to perform their obligations to the Banks and the
Administrative Agent under the Credit Documents, and (iii)
is duly qualified and is authorized to do business and is
in good standing in all jurisdictions where it is required
to be so qualified and where the failure to be so
qualified, individually and in the aggregate, is not
reasonably likely to have a Material Adverse Effect.
6.02 POWER AND AUTHORITY. Each Credit Party has
the power and authority to execute, deliver and carry out
the terms and provisions of each Credit Document to which
it is a party and has taken all necessary action to
authorize the execution, delivery and performance of each
Credit Document to which it is a party. Each Credit Party
has duly executed and delivered each Credit Document to
which it is a party and each such Credit Document
constitutes the legal, valid and binding obligation of each
such Credit Party, enforceable against such Person in
accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is
sought in equity or at law).
6.03 NO VIOLATION. (a) Neither the execution,
delivery or performance by any Credit Party of the Credit
Documents to which it is a party nor compliance with the
terms and provisions thereof (i) will contravene any
applicable provision of any law, statute, rule, regulation,
order, writ, injunction or decree of any court or
governmental instrumentality of the United States or any
State thereof, (ii) will result in any breach of any of the
terms, covenants, conditions or provisions of, or
constitute a default under (or with notice or lapse of time
or both would constitute a default under), or result in the
creation or imposition of (or the obligation to create or
impose) any Lien upon any of the property or assets of
Borrower or any Subsidiary pursuant to the terms of, any
indenture, mortgage, deed of trust, agreement or other
instrument to which Borrower or any Subsidiary is a party
or by which it or any of its properties or assets are bound
or to which it is subject or (iii) will violate any
provision of the Certificate of Incorporation or By-Laws of
Borrower or any Subsidiary (except for, in the case of
clauses (i) and (ii) above only, contraventions, breaches,
defaults, creations or impositions which, individually and
in the aggregate, (x) are not reasonably likely to have a
Material Adverse Effect and (y) are not reasonably likely
to have a material adverse effect on the rights or remedies
of the Banks or the Administrative Agent under the Credit
Documents, taken as a whole, or on the ability of the
Credit Parties, taken as a whole, to perform their
obligations to the Banks and the Administrative Agent under
the Credit Documents).
(b) Neither Borrower nor any Subsidiary is
(i) in contravention of any applicable provision of any
law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality of the
United States or any State thereof, (ii) in breach of any
of the terms, covenants, conditions or provisions of, or in
default under (or with notice or lapse of time or both
would be in default under), any indenture, mortgage, deed
of trust, agreement or other instrument to which Borrower
or any Subsidiary is a party or by which it or any of its
properties or assets are bound or to which it is subject or
(iii) in violation of any provision of the Certificate of
Incorporation or By-Laws of Borrower or any Subsidiary
(except for, in the case of clauses (i) and (ii) above
only, contraventions, breaches or defaults which,
individually and in the aggregate, (x) are not reasonably
likely to have a Material Adverse Effect and (y) are not
reasonably likely to have a material adverse effect on the
rights or remedies of the Banks or the Administrative Agent
under the Credit Documents, taken as a whole, or on the
ability of the Credit Parties, taken as a whole, to perform
their obligations to the Banks and the Administrative Agent
under the Credit Documents).
6.04 LITIGATION. There are no actions, suits or
proceedings by an administrative, governmental or other
public authority or other Person pending or, to the best of
Borrower's knowledge, threatened against or with respect to
Borrower or any Subsidiary or any of their respective
properties or assets which, individually or in the
aggregate, (i) are reasonably likely to have a Material
Adverse Effect or (ii) are reasonably likely to have a
material adverse effect on the rights or remedies of the
Banks or the Administrative Agent under the Credit
Documents, taken as a whole, or on the ability of the
Credit Parties, taken as a whole, to perform their
obligations to the Banks and the Administrative Agent under
the Credit Documents.
6.05 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The
proceeds of all Loans shall be utilized to support
Borrower's ongoing working capital needs or to provide for
the general corporate purposes of Borrower.
(b) Neither the making of any Loan hereunder, nor
the use of the proceeds thereof, will violate or be
inconsistent with the provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System and
no part of the proceeds of any Loan will be used to
purchase or carry any Margin Stock in violation of
Regulation U or to extend credit for the purpose of
purchasing or carrying any Margin Stock.
6.06 GOVERNMENTAL APPROVALS. Except for the
orders, consents, approvals, licenses, authorizations,
validations, recordings, registrations and exemptions that
have already been duly made or obtained and remain in full
force and effect, no order, consent, approval, license,
authorization, or validation of, or filing, recording or
registration with, or exemption by, any foreign or domestic
governmental or public body or authority, or any
subdivision thereof, is necessary or is required to
authorize or is required in connection with (i) the
execution, delivery and performance of any Credit Document
or (ii) the legality, validity, binding effect or
enforceability of any Credit Document.
6.07 INVESTMENT COMPANY ACT. Neither Borrower
nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company," within the meaning
of the Investment Company Act of 1940, as amended.
6.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither
Borrower nor any Subsidiary is a "holding company," or a
"subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
6.09 TRUE AND COMPLETE DISCLOSURE. All factual
information (taken as a whole) heretofore or
contemporaneously furnished for purposes of or in
connection with this Agreement or any transaction
contemplated herein by or, to Borrower's knowledge, on
behalf of Borrower or any Subsidiary in writing to (i) the
Administrative Agent or any Bank or (ii) any Person
providing information to the Administrative Agent or any
Bank on behalf of Borrower or any Subsidiary is, and all
other such factual information (taken as a whole) hereafter
furnished by or, to Borrower's knowledge, on behalf of
Borrower or any Subsidiary in writing to (i) the
Administrative Agent or any Bank or (ii) any Person
providing information to the Administrative Agent or any
Bank on behalf of Borrower or any Subsidiary will be, true
and accurate in all material respects on the date as of
which such information is dated or certified and not
incomplete by omitting to state any material fact necessary
to make such information (taken as a whole) not misleading
at such time in light of the circumstances under which such
information was provided. The Projections contained in
such materials are based on supporting estimates and
assumptions believed by such Persons in good faith to be
reasonable at the time made as to the future financial
performance of Borrower and the Subsidiaries for the period
covered, it being recognized by the Administrative Agent
and the Banks that such Projections as to future events are
not to be viewed as facts and that actual results during
the period or periods covered by any such Projections may
differ from the projected results. There is no fact known
to Borrower or any Subsidiary which is reasonably likely to
have a Material Adverse Effect or which has not been
disclosed herein or in such other documents, certificates
and statements furnished to the Banks for use in connection
with the transactions contemplated hereby.
6.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS.
(a) On and as of the date of each Credit Event, on a PRO
FORMA basis after giving effect to all Indebtedness
incurred, and to be incurred, by Borrower and the
Subsidiaries in connection therewith, (x) the sum of the
assets, at a fair valuation, of Borrower and the
Subsidiaries taken as a whole will exceed their debts, (y)
Borrower and the Subsidiaries taken as a whole will not
have incurred or intended to, or believe that they will,
incur debts beyond their ability to pay such debts as such
debts mature and (z) Borrower and the Subsidiaries taken as
a whole will not have unreasonably small capital with which
to conduct their business.
(b) (i) The consolidated balance sheet of
Borrower and the Subsidiaries at December 31, 1995 and the
related consolidated statements of operations and cash
flows of Borrower and the Subsidiaries for the fiscal year
ended as of such date, which have been examined by Coopers
& Lybrand L.L.P., independent certified public accountants,
who delivered an unqualified opinion in respect thereof,
and (ii) the consolidated balance sheet of Borrower and the
Subsidiaries as of September 30, 1996 and the related
consolidated statements of operations and cash flows for
Borrower and the Subsidiaries for the nine-month period
then ended, copies of which have heretofore been furnished
to each Bank, present fairly in all material respects the
financial position of such entities at the dates of said
statements and the results for the period covered thereby
in accordance with GAAP, except to the extent provided in
the notes to said financial statements and, in the case of
the September 30, 1996 statements, subject to normal and
recurring year-end audit adjustments and the exclusion of
detailed footnotes. All such financial statements have
been prepared in accordance with generally accepted
accounting principles consistently applied except to the
extent provided in the notes to said financial statements.
Nothing has occurred since December 31, 1995 that has had
or is reasonably likely to have a Material Adverse Effect.
(c) Except as reflected in the financial
statements and the notes thereto described in Section
6.10(b) or in ANNEX VII hereto, there were as of the
Effectiveness Date no liabilities or obligations with
respect to Borrower or any Subsidiary of a nature (whether
absolute, accrued, contingent or otherwise and whether or
not due) which, either individually or in aggregate, is
reasonably likely to have a Material Adverse Effect.
6.11 TAX RETURNS AND PAYMENTS. Borrower and each
Subsidiary has filed all federal income tax returns and all
other material tax returns, domestic and foreign, required
to be filed by it and has paid all material taxes and
assessments payable by it which have become due, other than
those not yet delinquent and except for those contested in
good faith and for which adequate reserves have been
established as is required by GAAP or which if unfiled or
unpaid would not reasonably be likely to have a Material
Adverse Effect. Borrower and each Subsidiary has paid, or
has provided adequate reserves (in accordance with GAAP)
for the payment of, all federal, state and foreign income
taxes applicable for all prior fiscal years and for the
current fiscal year to the date hereof. Neither Borrower
nor any Subsidiary knows of any proposed tax assessment
against any such Person that is reasonably likely to have a
Material Adverse Effect and which is not being actively
contested in good faith by such Person to the extent
affected thereby by appropriate proceedings; PROVIDED,
HOWEVER, that such reserves or other appropriate
provisions, if any, as shall be required in conformity with
GAAP shall have been made or provided therefor.
6.12 EMPLOYEE BENEFIT PLANS. (a) Each member of
the ERISA Group (x) has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with
respect to each Plan and (y) is in compliance in all
material respects with the presently applicable provisions
of ERISA and the Code with respect to each Plan other than
any failure to so comply that is not reasonably likely to
have a Material Adverse Effect. No member of the ERISA
Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any
Plan within the preceding six years, (ii) failed to make
any contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has
resulted or is reasonably likely to result in the
imposition of a Lien or the posting of a bond or other
security under ERISA or the Code or (iii) incurred any
liability under Title IV of ERISA within the preceeding six
years other than a liability to the PBGC for premiums under
Section 4007 of ERISA. The amount of Unfunded Liabilities
in the aggregate for all Plans (excluding for purposes of
such computation any Plans which have a negative amount of
Unfunded Liabilities) does not exceed $10.0 million.
(b) Each Foreign Pension Plan has been
maintained in compliance with its terms and with the
requirements of any and all applicable laws, statutes,
rules, regulations and orders and has been maintained,
where required, in good standing with applicable regulatory
authorities other than any failure to so comply that could
not reasonably be expected to have a Material Adverse
Effect. Neither Borrower nor any Subsidiary has incurred
any material obligation in connection with the termination
of or withdrawal from any Foreign Pension Plan. The
present value of the accrued benefit liabilities (whether
or not vested) under each Foreign Pension Plan, determined
as of the end of Borrower's most recently ended fiscal year
on the basis of actuarial assumptions, each of which is
reasonable, did not exceed the current value of the assets
of such Foreign Pension Plan allocable to such benefit
liabilities by an amount that could reasonably be expected
to have a Material Adverse Effect.
6.13 SUBSIDIARIES. ANNEX IV hereto lists each
Subsidiary (and the direct and indirect ownership interest
of Borrower therein), in each case existing on the date
hereof. All the outstanding shares of Capital Stock of
each Subsidiary have been duly authorized and validly
issued, are fully paid and non-assessable and (except for
any directors' qualifying shares) are owned by Borrower
free and clear of all Liens, other than, so long as the
Indenture is in effect, Liens created by the Security
Documents.
6.14 PATENTS, ETC. Borrower and each Subsidiary
has obtained all patents, trademarks, service marks, trade
names, copyrights, licenses and other rights (collectively,
the "INTELLECTUAL PROPERTY"), free from burdensome
restrictions, that are necessary for the operation of their
respective businesses as presently conducted and the
failure to obtain which is reasonably likely to have,
individually or in the aggregate, a Material Adverse
Effect. No claim is pending or, to the best of Borrower's
knowledge, threatened to the effect that the actions of
Borrower or any Subsidiary infringe upon or conflict with
the asserted rights of any other Person under any
Intellectual Property, except for such claims which are
not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect, and, to the best of
Borrower's knowledge, there is no basis for any such claim
(whether or not pending or threatened). No claim is
pending or, to the best of Borrower's knowledge, threatened
to the effect that any such Intellectual Property owned or
licensed by Borrower or any Subsidiary or which Borrower or
any Subsidiary otherwise has the right to use is invalid or
unenforceable by Borrower or such Subsidiary, except for
such claims which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse
Effect, and, to the best of Borrower's knowledge, there is
no basis for any such claim (whether or not pending or
threatened).
6.15 ENVIRONMENTAL MATTERS. (a) Borrower and
each Subsidiary is in compliance with all Environmental
Laws and is not subject to any liability under any
Environmental Law except as would not, individually or in
the aggregate, reasonably be likely to have a Material
Adverse Effect. All licenses, permits, registrations, or
approvals required for the business conducted and for the
operations and facilities owned, leased or operated by
Borrower and each Subsidiary under any Environmental Law
have been obtained and Borrower and each Subsidiary is in
compliance therewith, except such licenses, permits,
registrations or approvals the failure to obtain or to
comply therewith is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect.
Neither Borrower nor any Subsidiary is in any respect in
noncompliance with, breach of or default under any
applicable writ, order, judgment, injunction, or decree to
which Borrower or such Subsidiary is a party or which would
affect the ability of Borrower or such Subsidiary to
operate any Real Property, offshore drilling rig or other
facility and no event has occurred and is continuing which,
with the passage of time or the giving of notice or both,
would constitute noncompliance, breach of or default
thereunder, except in each such case, such noncompliance,
breaches or defaults which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse
Effect. There are no Environmental Claims pending or, to
the best knowledge of Borrower, threatened, against
Borrower or any Subsidiary wherein an unfavorable decision,
ruling or finding is, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect.
Neither Borrower nor any Subsidiary has received notice
that it has been identified as a potentially responsible
party under CERCLA or any comparable foreign or state law,
nor has Borrower or any Subsidiary received any written
notification that any Hazardous Materials that it or any of
their respective predecessors in interest has used,
generated, stored, treated, handled, transported or
disposed of, or arranged for disposal or treatment of, have
been found at any location at which any Person is
conducting or plans to conduct any action pursuant to any
Environmental Law except as would not, individually or in
the aggregate, reasonably be likely to have a Material
Adverse Effect. No properties now or formerly owned,
leased or operated by Borrower or any Subsidiary or, to the
knowledge of Borrower or any Subsidiary, any of their
respective predecessors in interest, are (x) listed or
proposed for listing on the National Priorities List under
CERCLA or (y) listed on the Comprehensive Environmental
Response, Compensation and Liability Information System
List promulgated pursuant to CERCLA or (z) included on any
comparable lists maintained by any Governmental Authority
except as would not, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect.
There are no past or present events, conditions,
activities, practices or actions, or any agreements,
judgments, decrees or orders by which Borrower or any
Subsidiary is bound, which would reasonably be expected to
prevent Borrower's or any Subsidiary's compliance with any
Environmental Law, or which would reasonably be expected to
give rise to any liability of Borrower or any Subsidiary
under any Environmental Law, or to cause any Real Property,
offshore drilling rig or other facility owned, leased or
operated by Borrower or any Subsidiary to be subject to any
restriction on its ownership, occupancy, use or
transferability under any Environmental Law, except in each
such case, such noncompliance, liability or restriction
which is, individually or in the aggregate, not reasonably
likely to have a Material Adverse Effect.
(b) Hazardous Materials have not at any time been
(i) generated, used, processed, treated, stored or disposed
of on, at or under or transported to or from, any Real
Property, offshore drilling rig or other facility at any
time owned, leased or operated by Borrower or any
Subsidiary or (ii) Released on, at, under or from any such
Real Property, offshore drilling rig or other such
facility, in each case where such occurrence, or event is,
individually or in the aggregate, reasonably likely to have
a Material Adverse Effect.
6.16 PROPERTIES. (a) Borrower and each
Subsidiary has title to all material properties owned by
them including all property reflected in the consolidated
balance sheets of Borrower and the Subsidiaries as referred
to in Section 6.10(b), free and clear of all Liens, other
than (i) as referred to in the consolidated balance sheet
or in the notes thereto or (ii) Permitted Liens.
(b) ANNEX VI hereto sets forth all the offshore
drilling rigs owned or leased for more than two years by
Borrower or any Subsidiary on the date hereof, and
identifies the registered owner, flag, official or patent
number, as the case may be, and the home port, class,
location and operating status thereof on the date hereof.
6.17 LABOR RELATIONS. Neither Borrower nor any
Subsidiary is engaged in any unfair labor practice that is,
individually or in the aggregate, reasonably likely to have
a Material Adverse Effect. There is (i) no unfair labor
practice complaint pending against Borrower or any
Subsidiary or threatened against any of them, before the
National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against any
of them or, to the best of Borrower's knowledge, threatened
against any of them, (ii) no strike, labor dispute,
slowdown or stoppage pending against Borrower or any
Subsidiary or, to the best of Borrower's knowledge,
threatened against Borrower or any Subsidiary and (iii) no
union representation petition existing with respect to the
employees of and of them and no union organizing activities
are taking place, except with respect to any matter
specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate, such as is not reasonably
likely to have a Material Adverse Effect.
6.18 EXISITNG INDEBTEDNESS. ANNEX VII hereto
sets forth a true and complete list of all Indebtedness of
Borrower and each Subsidiary with a principal amount in
excess of $10,000 on the date hereof and which is to remain
outstanding thereafter, excluding (i) the Loans and the
Letters of Credit, (ii) Indebtedness represented by the
Senior Secured Notes, (iii) Existing L/C Facility
Indebtedness and (iv) Indebtedness permitted under
Sections 8.3(d) and (e) (the "EXISTING INDEBTEDNESS"), in
each case showing the aggregate principal amount thereof
and the name of the respective borrower (or issuer) and any
other entity which directly or indirectly guaranteed such
debt.
6.19 RIG CLASSIFICATION. Each offshore drilling
rig owned or leased by Borrower or any Subsidiary (other
than any offshore drilling rig which is under construction
or is in the process of being upgraded) is classified in
the highest class available for rigs of its age and type
with the American Bureau of Shipping, Inc. or another
internationally recognized classification society
acceptable to the Administrative Agent ("IN CLASS"), free
of any requirements or recommendations, other than such
requirements or recommendations which if not cured by the
owner thereof would not reasonably be likely to have,
individually or in the aggregate, a Material Adverse
Effect.
6.20 INSURANCE. Borrower and each Subsidiary has
insured its properties and assets against such risks and in
such amounts as are customary for companies engaged in
similar businesses.
SECTION 7. AFFIRMATIVE COVENANTS. Borrower
covenants and agrees that on the date hereof and thereafter
for so long as this Agreement is in effect and until the
Commitments have terminated, no Letters of Credit or Notes
are outstanding and the Loans and Unpaid Drawings, together
with interest, Fees and all other Obligations incurred
hereunder or under any other Credit Document, are paid in
full:
7.01 INFORMATION COVENANTS. Borrower will
furnish to each Bank:
(a) ANNUAL FINANCIAL STATEMENTS. Within 95 days
after the close of fiscal year 1996 and each other
fiscal year of Borrower occurring after the date
hereof, the consolidated balance sheet of Borrower and
the Subsidiaries as at the end of such fiscal year,
and the related consolidated statements of operations
and stockholders' equity and cash flows for such
fiscal year, in each case setting forth comparative
consolidated figures for the preceding fiscal year,
and examined by independent certified public
accountants of recognized national standing whose
opinion shall not be qualified as to the scope of
audit and as to the status of Borrower and the
Subsidiaries as a going concern.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as
available and in any event within 60 days after the
close of each of the first three quarterly accounting
periods in fiscal 1997 and each fiscal year occurring
after the date hereof, the consolidated balance sheet
of Borrower and the Subsidiaries as at the end of such
quarterly period, and the related consolidated
statements of operations and, if included in
Borrower's reports filed with the SEC pursuant to the
Exchange Act, stockholders' equity for such quarterly
period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, and
the consolidated statement of cash flows for the
elapsed portion of the fiscal year ended with the last
day of such quarterly period, and in each case setting
forth comparative consolidated figures for the related
period in the prior fiscal year, except with respect
to the consolidated balance sheet, which shall be as
of the end of the prior fiscal year, all of which
shall be certified by the chief financial officer or
controller of Borrower as fairly presenting in all
material respects the financial conditions and results
of operations of Borrower and the Subsidiaries in
accordance with GAAP, subject to changes resulting
from audit and normal year-end audit adjustments and
the exclusion of detailed footnotes.
(c) RIG STATUS REPORT. As soon as available and
in any event within 60 days after the close of each
quarterly accounting period occurring after the date
hereof, a report detailing (i) as of such quarter end
(A) location of each Fleet Rig owned or leased by
Borrower or any Subsidiary, and (B) term of, and
parties to, any contract pertaining to any such Fleet
Rig and (ii) the average day rates and utilization (on
a class and geographic region basis) for each Fleet
Rig for such quarter on the date of such report.
(d) INSURANCE SUMMARY. At the Effectiveness
Date and within 105 days after the close of each
fiscal year of Borrower occurring after the date
hereof, a summary of insurance carried by Borrower and
each Subsidiary together with certificates of
insurance and other evidence of such insurance.
(e) COMPLIANCE CERTIFICATE. At the time of the
delivery of the financial statements provided for in
Sections 7.01(a) and (b), a certificate of Borrower
signed by its chief financial officer, controller or
other Authorized Officer in the form of EXHIBIT H
hereto to the effect that no Default or Event of
Default exists or, if any Default or Event of Default
does exist, specifying the nature and extent thereof,
which certificate shall set forth the calculations
required to establish whether Borrower and the
Subsidiaries were in compliance with the provisions of
Section 8 as at the end of such fiscal period or year,
as the case may be.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly,
and in any event within (x) five Business Days after
an executive officer of Borrower obtains knowledge
thereof, notice of the occurrence of any event which
constitutes a Default or Event of Default which notice
shall specify the nature thereof, the period of
existence thereof and what action Borrower proposes to
take with respect thereto and (y) ten Business Days
after an executive officer of Borrower obtains
knowledge thereof, notice of the commencement of or
any significant development in any litigation or
governmental proceeding pending against Borrower or
any Subsidiary (other than to the extent that
disclosure of the details thereof would, in the
opinion of counsel to Borrower, compromise attorney-client
privilege) (i) which is reasonably likely to
have a Material Adverse Effect or (ii) which is
reasonably likely to have a material adverse effect on
the ability of the Credit Parties, taken as a whole,
to perform their obligations under the Credit
Documents.
(G) AUDITORS' REPORTS. Promptly upon receipt
thereof, a copy of each formal report or "management
letter" submitted to Borrower by its independent
accountants in connection with any annual, interim or
special audit made by it of the books of Borrower.
(h) SEC REPORTS. Promptly upon transmission
thereof, copies of any material filings and
registrations with, and reports to, the SEC by
Borrower or any Subsidiary (other than registrations
on Form S-8 under the Securities Act, registrations of
equity securities pursuant to Rule 415 under the
Securities Act which do not involve an underwritten
public offering and reports on Form 11-K or pursuant
to Section 16(a) under the Exchange Act) and copies of
all financial statements, proxy statements, notices
and reports as Borrower or any Subsidiary shall
generally send to analysts or all holders of their
Capital Stock in their capacity as such holders (in
each case to the extent not theretofore delivered to
the Banks pursuant to this Agreement).
(i) OTHER INFORMATION. From time to time, such
other information or documents (financial or
otherwise) as the Administrative Agent or any Bank may
reasonably request.
7.02 BOOKS, RECORDS AND INSPECTIONS. Borrower
will, and will cause each Subsidiary to, keep books of
records and accounts in which entries will be made of all
its business transactions to enable Borrower to prepare
financial statements in accordance with GAAP, and will
reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP.
Borrower will, and will cause each Subsidiary to, permit,
upon reasonable notice to the chief financial officer,
controller or any other Authorized Officer of Borrower,
officers and designated representatives of the
Administrative Agent or any Bank (at the expense of
Borrower if after an Event of Default) to visit and inspect
any of the properties or assets of Borrower or any
Subsidiary, and to examine the books of account of Borrower
or any Subsidiary and discuss the affairs, finances and
accounts of Borrower or of any Subsidiary with, and be
advised as to the same by, its and their officers and
independent accountants, all at such reasonable times and
intervals as the Administrative Agent or any Bank may
desire.
7.03 MAINTENANCE OF INSURANCE. Borrower will,
and will cause each Subsidiary to, at all times maintain in
full force and effect insurance in such amounts and of such
types with such financially sound and reputable insurers
covering such risks and liabilities and with such
deductibles or self-insured retentions as are in accordance
with normal industry practice for similarly situated
insureds and which are reasonably satisfactory to the
Administrative Agent.
7.04 PAYMENT OF TAXES. Borrower will pay and
discharge, and will cause each Subsidiary to pay and
discharge, all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims
which, if unpaid, might become a Lien or charge upon any
properties of Borrower or any Subsidiary; PROVIDED,
HOWEVER, that neither Borrower nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by proper
proceedings if it has maintained adequate reserves with
respect thereto in accordance with GAAP or which if unpaid
would not reasonably be likely to have a Material Adverse
Effect.
7.05 CONSOLIDATED CORPORATE FRANCHISES. Borrower
will do, and will cause each Subsidiary to do, or cause to
be done, all things necessary to preserve and keep in full
force and effect its existence, material rights and
authority, unless the failure to do so would not have a
Material Adverse Effect; PROVIDED, HOWEVER, that any
transaction permitted by Section 8.02 will not constitute a
breach of this Section 7.05.
7.06 COMPLIANCE WITH STATUTES, ETC. Borrower
will, and will cause each Subsidiary to, comply with all
applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental
bodies, domestic or foreign, including without limitation
all Environmental Laws and ERISA and the rules and
regulations thereunder, other than those the non-compliance
with which is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect or is
not, individually or in the aggregate, reasonably likely to
have a material adverse effect on the ability of the Credit
Parties, taken as a whole, to perform their obligations
under the Credit Documents.
7.07 GOOD REPAIR. Borrower will, and will cause
each Subsidiary to, keep its properties and equipment used
or useful in its business, in whomsoever's possession they
may be, in good repair, working order and condition, normal
wear and tear excepted, and, subject to Section 8.02 and
the occurrence of a force majeure, see that from time to
time there are made in such properties and equipment all
needful and proper repairs, renewals, replacements,
extensions, additions, betterments and improvements
thereto, (i) to the extent and in the manner useful or
customary for companies in similar businesses and (ii) to
the extent where the failure to do so is, individually or
in the aggregate, reasonably likely to have a Material
Adverse Effect. For purposes of this Section 7.07, any
Fleet Rig shall be deemed to be in good repair, working
order and condition if such Fleet Rig is In Class.
7.08 END OF FISCAL YEARS; FISCAL
QUARTERS. Borrower will, and will cause each Subsidiary
to, for financial reporting purposes, have (i) each of its
fiscal years to end on December 31 of each year and (ii)
each of its fiscal quarters to end on March 31, June 30,
September 30 and December 31 of each year.
7.09 USE OF PROCEEDS. All proceeds of the Loans
shall be used as provided in Section 6.05.
7.10 RIG VALUATIONS. From and after January 1,
1998, at any time, but no more frequently than twice during
any twelve month period, Borrower, at the request of the
Administrative Agent or the Required Banks, will obtain an
updated appraisal of the Fleet Rigs from an Approved
Shipbroker, substantially in the form of the reports
delivered pursuant to Section 5.12, confirming compliance
with Section 8.11.
7.11 ADDITIONAL GUARANTORS. In the event that
(a) at any date (the "APPLICABLE DATE") the book value of
the assets of any Wholly-Owned Domestic Subsidiary (other
than an Unrestricted Subsidiary), whether formed or
acquired before or after the date hereof and whether or not
existing on the date hereof, constitutes more than 5% of
the combined book value at such date of the assets of
Borrower and the Subsidiaries (other than Unrestricted
Subsidiaries), (b) on any date any Subsidiary (other than
an Unrestricted Subsidiary) shall guarantee any
Indebtedness of Borrower or any Subsidiary or (c) any
Wholly-Owned Domestic Subsidiary acquires any Fleet Rig
owned or leased by Borrower or any Subsidiary on the
Effectiveness Date, Borrower shall cause each such
Subsidiary (unless already a Guarantor) (i) in the case of
(a) above, within 50 days after the end of the fiscal
quarter in which such Applicable Date occurs; PROVIDED,
HOWEVER, that if on any Applicable Date the book value of
the assets of any Wholly-Owned Domestic Subsidiary
(excluding Investments in Borrower or any Subsidiary other
than an Unrestricted Subsidiary) constitutes more than 20%
of the combined book value at such date of the assets of
Borrower and the Subsidiaries (other than any Unrestricted
Subsidiary) then within 10 days of the first date on which
such 20% threshold is met, (ii) in the case of (b) above,
within five Business Days and (iii) in the case of (c)
above, within five Business Days of the first date on which
any such Wholly-Owned Subsidiary acquires any such Fleet
Rig, to execute and deliver to the Administrative Agent a
counterpart of the Guaranty; PROVIDED, HOWEVER, that no
Unrestricted Subsidiary shall be required to be a Guarantor
unless it is a guarantor of any Indebtedness of Borrower or
of any Subsidiary (other than of an Unrestricted
Subsidiary); PROVIDED, FURTHER, HOWEVER, that (i) in the
event that all of the Capital Stock of any Guarantor owned
by Borrower or any Subsidiary is sold or otherwise disposed
of or liquidated in compliance with the requirements of
Section 8.02 hereof (whether in a single transaction or in
a series of related transactions and whether by merger,
consolidation or otherwise) (or such sale or other
disposition has been approved in writing by the Required
Banks (or all Banks if required by Section 12.12)), other
than any such sale, disposition or liquidation to Borrower
or any Subsidiary, such Guarantor shall be released from
the Guaranty and the Guaranty shall, as to such Guarantor,
terminate, and have no further force or effect (it being
understood and agreed that the sale of any Person that
owns, directly or indirectly, the Capital Stock of any
Guarantor shall be deemed to be a sale of such Guarantor)
and (ii) in the event that any Guarantor shall be
designated an Unrestricted Subsidiary pursuant to and in
accordance with Section 8.05(b) hereof, then such Guarantor
(unless it is a guarantor of any Indebtedness of Borrower
or of any Subsidiary (other than of an Unrestricted
Subsidiary)) shall be released from the Guaranty and the
Guaranty shall, as to such Guarantor, terminate, and have
no further force or effect. The Administrative Agent and
each Bank agree that Borrower may, on behalf of any
Subsidiary released from the Guaranty, require the
Administrative Agent, at the expense of Borrower, to
execute and deliver to Borrower, for the benefit of any
Person, a written release, disclaimer, termination or
quitclaim, and such other release documents as Borrower may
reasonably request to evidence such termination, and each
Bank authorizes the Administrative Agent to execute and
deliver such release, disclaimer, termination and other
documents on behalf of such Bank without any further action
by any Bank. For avoidance of doubt, the Subsidiaries'
undertakings under the Indenture or the Security Documents,
each as in effect on the date hereof, shall not for
purposes of this Section 7.11 constitute a guarantee of
Indebtedness of Borrower or any Subsidiary.
7.12 ERISA. As soon as possible and, in any
event, within 10 days after Borrower, any Subsidiary or any
member of the ERISA Group knows or has reason to know that
any member of the ERISA Group (i) gives or is required to
give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice
of such reportable event given or required to be given to
the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent
or has been terminated, a copy of such notice; (iii)
receives notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such
notice; (iv) applies for a waiver of the minimum funding
standard under Section 412 of the Code, a copy of such
application; (v) gives notice of intent to terminate any
Plan under Section 4041(c) of ERISA, a copy of such notice
and other information filed with the PBGC; (vi) gives
notice of withdrawal from any Plan pursuant to Section 4063
of ERISA, a copy of such notice; or (vii) fails to make any
payment or contribution to any Plan or Multiemployer Plan
or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has
resulted or could reasonably be expected to result in the
imposition of a Lien or the posting of a bond or other
security under ERISA or the Code, Borrower will deliver to
each of the Banks a certificate of the chief financial
officer of Borrower setting forth details as to such
occurrence and the action, if any, that Borrower, such
Subsidiary or such member of the ERISA Group is required or
proposes to take, together with any notices required or
proposed to be given to or filed with or by Borrower, such
Subsidiary, the member of the ERISA Group, a plan
participant or the plan administrator. Upon written
request Borrower will deliver to each of the Banks a
complete copy of the annual report (Form 5500) of each Plan
(as defined in Section 3(2) of ERISA) (including, to the
extent required, the related financial statements and
opinions and other supporting statements, certifications,
schedules and information) required to be filed with the
Internal Revenue Service, if any.
7.13 PERFORMANCE OF OBLIGATIONS. Borrower will,
and will cause each Subsidiary (other than an Unrestricted
Subsidiary) to, perform in all material respects all of its
obligations under the terms of each mortgage, indenture,
security agreement, other debt instrument and material
contract by which it is bound or to which it is a party
(including, without limitation, the Indenture and the
Security Documents), except where such nonperformance is
not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect.
SECTION 8. NEGATIVE COVENANTS. Borrower
covenants and agrees that as of the date hereof and
thereafter for so long as this Agreement is in effect and
until the Commitments have terminated, no Letters of Credit
or Notes are outstanding and the Loans and Unpaid Drawings,
together with interest, Fees and all other Obligations
incurred hereunder or under any other Credit Document, are
paid in full:
8.01 CHANGES IN BUSINESS. Borrower shall not,
and shall not permit any Subsidiary (other than an
Unrestricted Subsidiary) to, materially alter the character
of the business of Borrower and the Subsidiaries taken as a
whole from that conducted at the Effectiveness Date
(including any material expansion outside of the offshore
contract drilling and production services, drilling
management services and oil and gas exploration and
production businesses); PROVIDED, HOWEVER, that this
Section 8.01 shall not restrict the making of any
Investment expressly permitted by Section 8.05.
8.02 CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
Borrower shall not, and shall not permit any Subsidiary
(other than an Unrestricted Subsidiary) to, directly or
indirectly, wind up, liquidate or dissolve its affairs, or
enter into any transaction of merger or consolidation, sell
or otherwise dispose of all or any part of its property or
assets (other than inventory or worn-out or obsolete
equipment in the ordinary course of business) or agree
(unless such agreement is conditioned upon a waiver of this
provision by the Banks hereunder) to do any of the
foregoing at any future time, except that each of the
following shall be permitted:
(a) (i) any Subsidiary may be merged or
consolidated with or into, or be liquidated or
dissolved into, Borrower (so long as Borrower is the
surviving corporation) or any other Person (other than
an Unrestricted Subsidiary) so long as a Subsidiary
(other than an Unrestricted Subsidiary) is the
surviving Person and (ii) all or any part of the
business, properties and assets of any Subsidiary may
be conveyed, leased, sold or transferred to Borrower
or any Subsidiary (other than an Unrestricted
Subsidiary); PROVIDED, HOWEVER, that if any such
transaction involves a Guarantor and any other
Subsidiary and the surviving or transferee Person is
not a Guarantor (unless such surviving or transferee
Person is Borrower) then immediately after such
transaction Borrower shall cause such surviving or
transferee Person to execute and deliver a counterpart
to the Guaranty;
(b) Restricted Payments permitted pursuant to
Section 8.05 and any bare boat charter permitted by
Section 8.08; and
(c) any sale or disposition of assets; PROVIDED,
HOWEVER, that (x) (A) the Total Commitment shall be
reduced to the extent and when required by Section
3.03(b) and (B) all proceeds thereof shall be used
without violating the provisions of Section 8.01 and
(y) each such sale or disposition shall be in an
amount at least equal to the fair market value thereof
(as determined by the Board of Directors of Borrower
in the case of sales or dispositions in excess of
$10.0 million).
8.03 INDEBTEDNESS. Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly,
contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to the Credit
Documents;
(b) Indebtedness in an aggregate principal
amount not exceeding $225.0 million represented by the
Senior Secured Notes, and any refinancing, extension,
renewal, rearrangement or replacement of all, but not
less than all, of such Indebtedness pursuant to an
offering of debt securities of Borrower (which may be
guaranteed by the Guarantors on terms no more
favorable to the holders of such debt securities than
the Guaranty) which (i) are not in an aggregate
principal amount in excess of the sum of the aggregate
principal amount of the Senior Secured Notes then
outstanding, PLUS any premium required by the terms of
the Senior Secured Notes or reasonably incurred to
refinance the Senior Secured Notes, PLUS expenses,
discounts and commissions related to such offering;
(ii) are unsecured; (iii) do not have a maturity or
any mandatory sinking fund or retirement requirements
prior to the Maturity Date; and (iv) do not have
covenants or events of default less favorable to
Borrower or any Subsidiary than the Senior Secured
Notes as in effect on the date hereof;
(c) Existing Indebtedness and other Indebtedness
existing on the Effectiveness Date with a principal
amount not exceeding $10,000;
(d) intercompany Indebtedness between Borrower
and any Subsidiary (other than any Unrestricted
Subsidiary) or between Subsidiaries (other than
Indebtedness owing from any Subsidiary which is not an
Unrestricted Subsidiary to any Unrestricted
Subsidiary) so long as such Indebtedness is held by
Borrower or any Subsidiary (other than an Unrestricted
Subsidiary);
(e) Non-Recourse Indebtedness of any
Unrestricted Subsidiary; and
(f) Existing L/C Facility Indebtedness and other
Indebtedness in an aggregate principal amount not to
exceed, when aggregated with the Existing L/C Facility
Indebtedness, $10.0 million at any time outstanding.
8.04 LIENS. Borrower shall not, and shall not
permit any Subsidiary to, directly or indirectly, create,
incur, assume or suffer to exist any Lien upon or with
respect to any property or assets (real or personal,
tangible or intangible) of Borrower or any Subsidiary,
whether now owned or hereafter acquired, or sell any such
property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such
property or assets (including sales of accounts receivable
or notes with recourse to Borrower or any Subsidiary) or
assign any right to receive income, or file or permit the
filing of any financing statement under the UCC or any
other similar notice of Lien under any similar recording or
notice statute, except:
(a) Liens for taxes not yet due or Liens for
taxes being contested in good faith and by appropriate
proceedings for which adequate reserves (as may be
required by GAAP) have been established;
(b) Liens imposed by law which were incurred in
the ordinary course of business, such as carriers',
warehousemen's and mechanics' Liens, statutory
landlord's Liens, maritime Liens, drilling contracts
and other similar Liens arising in the ordinary course
of business, and (x) which do not in the aggregate
materially detract from the value of Borrower's or any
Subsidiary's property or assets or materially impair
the use thereof in the operation of the business of
Borrower or any Subsidiary or (y) which are being
contested in good faith by appropriate proceedings
(including the providing of bail), which proceedings
have the effect of preventing the forfeiture or sale
of the property or assets subject to such Lien or
procuring the release of the property or assets
subject to such Lien from arrest or detention;
(c) Liens created in favor of the Banks or the
Administrative Agent on behalf of the Banks;
(d) Liens existing on the date hereof and listed
on ANNEX VIII hereto;
(e) Liens arising from judgments, decrees or
attachments (or securing of appeal bonds with respect
thereto) to the extent not covered by insurance, the
obligations in connection therewith do not exceed
$10.0 million and otherwise in circumstances not
constituting an Event of Default under Section 9.07;
(f) Liens existing on property or assets
acquired by Borrower or any Subsidiary or on property
or assets of any Person which becomes a Subsidiary
upon such acquisition or such Person becoming a
Subsidiary, as the case may be; PROVIDED, HOWEVER,
that such Lien shall not extend to or cover any other
property or assets of Borrower or any Subsidiary and
such Liens were not incurred in connection with or in
anticipation of such acquisition;
(g) any interest or title of a lessor or
charterer under any lease permitted by this Agreement;
(h) Liens only on assets of Unrestricted
Subsidiaries securing Non-Recourse Indebtedness
permitted to be incurred under Section 8.03(e);
PROVIDED, HOWEVER, that such Liens do not extend to or
cover any other property or assets of Borrower or any
Subsidiary which is not an Unrestricted Subsidiary;
(i) zoning restrictions, easements, licenses,
covenants, reservations or restrictions on the use of
real property or minor irregularities of title
incident thereto;
(j) Liens for crews' wages (including wages of
the muster and the seamen to the extent provided by 46
U.S.C. Section 10317, as amended) or salvage
(including contract salvage) and general average, or
wages of stevedores when employed directly by a person
listed in 46 U.S.C. Section 31341, as amended, or
similar claims arising under laws of other
jurisdictions;
(k) Liens to secure any extensions, renewals or
refinancings (or successive extensions, renewals or
refinancings), in whole or in part, of any
Indebtedness secured by Liens referred to in the
foregoing clauses (a) through (j) so long as such Lien
does not extend to or cover any other property or
assets of Borrower or any Subsidiary;
(l) Liens securing the Senior Secured Notes
pursuant to the Indenture and the Security Documents,
each as in effect on the date hereof;
(m) Liens permitted to be in existence pursuant
to Article I, Section 5 of the Rig Mortgages (as
defined in the Indenture as in effect on the date
hereof) and any Lien arising as a result of any bare
boat charter permitted under Section 8.08;
(n) negative pledges; and
(o) Liens securing Indebtedness in an aggregate
amount not to exceed $10.0 million at any time
outstanding.
8.05 RESTRICTED PAYMENTS; DESIGNATION OF
UNRESTRICTED SUBSIDIARIES. (a) Borrower shall not, and
shall not permit any Subsidiary (other than an Unrestricted
Subsidiary) to, make any Restricted Payment, except:
(i) so long as no Default or Event of Default
exists or would result therefrom, Borrower and the
Subsidiaries may make Restricted Payments after the date
hereof in an amount not to exceed in the aggregate the sum
of (v) $100.0 million, PLUS (w) 50% of the excess, if any
of (1) the aggregate Consolidated Net Income for the period
beginning January 1, 1997 and ending on the last day of the
fiscal quarter immediately preceding the date of such
proposed Restricted Payment over (2) $200.0 million (or, if
such Consolidated Net Income shall be a deficit, MINUS 100%
of such deficit), PLUS (x) the aggregate net cash proceeds
received by Borrower (i) either as capital contributions to
Borrower after the date hereof or (ii) from the issue and
sale (other than to any Subsidiary) of its Qualified
Capital Stock after the date hereof (excluding the net
proceeds from any issuance and sale of Qualified Capital
Stock financed, directly or indirectly, using funds
borrowed from Borrower or any Subsidiary until and to the
extent such borrowing is repaid), PLUS (y) (to the extent
not included in the computation of Consolidated Net Income)
the amount of cash dividends or cash contributions (other
than to pay taxes) received by Borrower from any
Unrestricted Subsidiary after the date hereof, MINUS (z)
the greater of (i) $0 and (ii) the Designation Amount
(measured as of the date of Designation) with respect to
any Subsidiary which has been designated as an Unrestricted
Subsidiary pursuant to and in accordance with subparagraph
(b) of this Section 8.05; PROVIDED, HOWEVER that (a)
Borrower shall not be permitted to make any Restricted
Payments which are Dividends on Borrower's Capital Stock
pursuant to this clause (i) unless the Senior Secured Notes
shall have been repaid in full and (b) Borrower shall not
be permitted to make any Restricted Payment which is a
Dividend on Borrower's Capital Stock pursuant to this
clause (i) unless Excess Cash Flow for the four consecutive
complete fiscal quarters then last ended after the date
hereof immediately prior to the payment of such Dividend
exceeds the sum of (I) all Dividends paid during the four
consecutive complete fiscal quarters then last ended after
the date hereof immediately prior to the payment of such
Dividend, PLUS (II) the amount of such Dividend proposed to
be paid;
(ii) any Subsidiary may pay Dividends on its
Capital Stock;
(iii) Borrower may redeem or repurchase Capital
Stock of Borrower (or options to purchase such Capital
Stock) from present or former officers, employees or
directors of Borrower or any Subsidiary (or their
estates) upon the death, permanent disability,
retirement or termination of employment of any such
Person or otherwise in accordance with any stock
option plan or any employee stock ownership plan of
Borrower or any Subsidiary; PROVIDED, HOWEVER, that in
all such cases (x) no Default or Event of Default is
then in existence or would arise therefrom and (y) the
aggregate amount of all cash paid in respect of all
such shares so redeemed or repurchased in any calendar
year shall not exceed $5.0 million; and
(iv) Borrower may pay any Dividend within 60 days
after the declaration thereof so long as Borrower
would have been permitted to pay such Dividend on the
date of the declaration thereof; PROVIDED, HOWEVER,
that amounts paid pursuant to this subparagraph (iv)
shall be included as Restricted Payments for purposes
of subparagraph (i) of this Section 8.05(a).
(b) Borrower may designate, pursuant to written
notification to the Administrative Agent, any Subsidiary as
an Unrestricted Subsidiary (a "DESIGNATION") only if:
(i) no Default or Event of Default shall have
occurred and be continuing at the time of and after giving
effect to such Designation;
(ii) such Subsidiary does not own or have any
right or interest in, or the right to receive income or
profits from, any of the Fleet Rigs owned by Borrower or
any Subsidiary as of the date hereof;
(iii) so long as the Indenture shall be in
effect, such Subsidiary is an unrestricted subsidiary under
and pursuant to the terms of the Indenture (as in effect on
the date hereof); and
(iv) Borrower would be permitted to make an
Investment (other than a Permitted Investment) at the time
of Designation (assuming the effectiveness of such
Designation) pursuant to subparagraph (a)(i) of this
Section 8.05 in an amount (the "DESIGNATION AMOUNT") equal
to Borrower's proportionate interest in the net worth of
such Subsidiary calculated in accordance with GAAP on such
date.
Neither Borrower nor any Subsidiary (other than
an Unrestricted Subsidiary) shall at any time subject any
of its properties or assets to any Lien to secure, or
otherwise guarantee or incur any Contingent Obligation in
respect of, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument
evidencing such Indebtedness).
Borrower shall, and shall cause each Subsidiary
to, take all action necessary so that so long as the
Indenture is in effect any Subsidiary which has incurred
Indebtedness under Section 8.03(e) hereof shall meet the
qualifications of, and be designated as, an unrestricted
subsidiary pursuant to the terms of the Indenture.
Borrower shall not, and shall not permit any Subsidiary to,
amend, modify, change or waive any provisions of the
Indenture which would result in the restrictions and
limitations in this Agreement with respect to the
Unrestricted Subsidiaries being in conflict with, or
resulting in a breach of default under the Indenture.
8.06 RESTRICTIONS ON SUBSIDIARIES. Borrower
shall not, and shall not permit any Subsidiary (other than
an Unrestricted Subsidiary) to, create or otherwise cause
or suffer to exist any encumbrance or restriction which,
directly or indirectly, prohibits or otherwise restricts
the ability of any Subsidiary (other than an Unrestricted
Subsidiary) to (a) pay dividends or make other
distributions or pay any Indebtedness owed to Borrower or
any Subsidiary, (b) make loans or advances to Borrower or
any Subsidiary or (c) transfer any of its properties or
assets to Borrower or any Subsidiary, other than
encumbrances or restrictions existing under or by reason
of:
(a) the Credit Documents;
(b) applicable law;
(c) customary non-assignment provisions entered
into in the ordinary course of business and consistent
with past practices;
(d) any restriction or encumbrance with respect
to a Subsidiary imposed pursuant to (i) an agreement
which has been entered into for the sale or
disposition of all or substantially all of the Capital
Stock or assets of such Subsidiary, so long as such
sale or disposition is permitted under this Agreement
or (ii) any bare boat charter permitted by Section
8.08;
(e) the Indenture and the Security Documents or
any other encumbrance or restriction in effect on the
Effectiveness Date, each as in effect on the
Effectiveness Date, and any refinancing, extension or
renewal thereof so long as such refinancing, extension
or renewal is no more restrictive than (x) with
respect to the Indenture and the Security Documents,
this Agreement or (y) with respect to any other
encumbrance or restriction, that existing on the date
hereof;
(f) Permitted Liens and any documents or
instruments governing the terms of any Indebtedness or
other obligations secured by any such Liens; PROVIDED,
HOWEVER, that such prohibitions or restrictions apply
only to the assets subject to such Liens;
(g) encumbrances or restrictions on property of
any Subsidiary which do not restrict the ability of
such Subsidiary to transfer the property subject to
such encumbrances or restrictions; and
(h) any encumbrances or restrictions pursuant to
an agreement in effect on the date on which such
Subsidiary was acquired by Borrower or any Subsidiary
(provided that such encumbrance or restriction was not
incurred in connection with or in contemplation of
such acquisition).
8.07 TRANSACTIONS WITH AFFILIATES. Borrower
shall not, and shall not permit any Subsidiary (other than
an Unrestricted Subsidiary) to, directly or indirectly,
enter into any transaction or series of transactions after
the date hereof whether or not in the ordinary course of
business, with any Affiliate other than on terms and
conditions substantially as favorable to Borrower or such
Subsidiary as would be obtainable by Borrower or such
Subsidiary at the time in a comparable arm's-length
transaction with a Person other than an Affiliate;
PROVIDED, HOWEVER, that the foregoing restrictions shall
not apply to (i) employment arrangements entered into in
the ordinary course of business with officers of Borrower
or any Subsidiary, (ii) customary fees paid to members of
the Board of Directors of Borrower and of any Subsidiary
and (iii) all transactions between or among the Credit
Parties.
8.08 VESSEL OWNERSHIP AND MANAGEMENT.
(a) Borrower shall not permit there to be less
than 22 Fleet Rigs which are owned by Borrower or any
Guarantor.
(b) Borrower shall not, and shall not permit any
Subsidiary (other than an Unrestricted Subsidiary) to,
contract out the management of any Fleet Rig owned or
leased by Borrower or any Subsidiary (other than an
Unrestricted Subsidiary) on the Effectiveness Date
other than to Borrower or any Subsidiary which is not
an Unrestricted Subsidiary, other than the bare boat
charter of up to three of such Fleet Rigs at any time
in effect.
8.09 CASH INTEREST COVERAGE RATIO. Borrower
shall not permit the ratio of (i) Consolidated EBITDA for
any four consecutive complete fiscal quarters then last
ended after the date hereof to (ii) Consolidated Cash
Interest Expense of Borrower for such period to be less
than 3.00:1.00. In connection with any Credit Event, such
ratio shall be calculated to give PRO FORMA effect to the
Loans or Letters of Credit to be made and the application
of the proceeds therefrom as if made and applied on the
first day of the period for which such ratio is being
calculated.
8.10 LEVERAGE RATIO. Borrower shall not permit
the Leverage Ratio at any time to be more than 2.00:1.00.
In connection with any Credit Event, such ratio shall be
calculated to give PRO FORMA effect to the Loans or Letters
of Credit to be made and the application of the proceeds
therefrom as if made and applied on the first day of the
period for which such ratio is being calculated.
8.11 FLEET MARKET VALUE. Borrower shall not
permit the aggregate Market Value of the Fleet at any time
to be less than (i) 2.5 times the sum of (x) Consolidated
Indebtedness, PLUS (y) the Available Unutilized Total
Commitment.
8.12 NET WORTH. Borrower shall not permit
Consolidated Net Worth at any time to be less than the sum
of (i) $300.0 million, PLUS (ii) an amount (added at the
end of each fiscal quarter after the date hereof) equal to
the greater of (x) $0 and (y) 50% of Consolidated Net
Income (without giving effect to the proviso thereto) for
each fiscal quarter after September 30, 1996 (adjusted to
exclude the effect of deferred taxes related to the
existing net operating loss of Borrower and its
Subsidiaries).
8.13 MODIFICATIONS OF CERTAIN DOCUMENTS, ETC.
Borrower shall not, and shall not permit any Subsidiary to,
directly or indirectly, consent to any modification,
supplement or waiver of any of the provisions of the Senior
Secured Notes, the Indenture or the Security Documents
where the effect of such modification, supplement or waiver
would be material and adverse to the interests of the Banks
without the prior written approval of the Required Banks.
SECTION 9. EVENTS OF DEFAULT. Upon the
occurrence of any of the following specified events (each
an "EVENT OF DEFAULT"):
9.01 PAYMENTS. Borrower shall (i) default in the
payment when due of any principal of the Loans or (ii)
default, and such default shall continue for three or more
Business Days, in the payment when due of any Unpaid
Drawing, any interest on the Loans or any Fees or any other
amounts owing under any Credit Document; or
9.02 REPRESENTATIONS, ETC. Any material
representation, warranty or statement made by any Credit
Party in any Credit Document or in any statement or
certificate delivered or required to be delivered pursuant
thereto shall prove to be untrue in any material respect on
the date as of which made or deemed made; or
9.03 COVENANTS. (a) Borrower or any Subsidiary
shall default in the due performance or observance by it of
any term, covenant or agreement contained in Section 7.09,
Section 7.11 or Section 8 or (b) any Credit Party shall
default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to
in Section 9.01, 9.02 or clause (a) of this Section 9.03)
contained in any Credit Document and such default shall
continue unremedied for a period of at least 30 days after
notice to Borrower by the Administrative Agent or the
Required Banks; or
9.04 DEFAULT UNDER OTHER AGREEMENTS. (a)
Borrower or any Subsidiary shall (i) default in any payment
with respect to any Indebtedness (other than the
Obligations and any Non-Recourse Indebtedness permitted to
be incurred hereunder) beyond the period of grace, if any,
applicable thereto or (ii) default in the observance or
performance of any agreement or condition relating to any
such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders) to
cause, any such Indebtedness to become due prior to its
stated maturity; or (b) any Indebtedness of Borrower or any
Subsidiary (other than the Obligations and any Non-Recourse
Indebtedness permitted to be incurred hereunder) shall be
declared to be due and payable, or required to be prepaid
other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof; PROVIDED, HOWEVER,
that it shall not constitute an Event of Default pursuant
to this Section 9.04 unless any such event referred to in
clause (a) or (b) occurs with respect to one or more issues
of Indebtedness aggregating at least $10.0 million or more;
or
9.05 BANKRUPTCY, ETC. Borrower or any Subsidiary
(other than an Unrestricted Subsidiary) shall commence a
voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy", as now or
hereafter in effect, or any successor thereto (the
"BANKRUPTCY CODE"); or an involuntary case is commenced
against Borrower or any Subsidiary (other than an
Unrestricted Subsidiary) and the petition is not dismissed
within 60 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or substantially all of the
property of Borrower or any Subsidiary (other than an
Unrestricted Subsidiary); or Borrower or any Subsidiary
(other than an Unrestricted Subsidiary) commences any other
proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to
Borrower or any Subsidiary (other than an Unrestricted
Subsidiary); or there is commenced against Borrower or any
Subsidiary (other than an Unrestricted Subsidiary) any such
case or proceeding which remains undismissed for a period
of 60 days; or Borrower or any Subsidiary (other than an
Unrestricted Subsidiary) is adjudicated insolvent or
bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or Borrower or any
Subsidiary (other than an Unrestricted Subsidiary) suffers
any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged
or unstayed for a period of 60 days; or Borrower or any
Subsidiary (other than an Unrestricted Subsidiary) makes a
general assignment for the benefit of creditors; or any
corporate action is taken by Borrower or any Subsidiary
(other than an Unrestricted Subsidiary) for the purpose of
effecting any of the foregoing; or
9.06 GUARANTY. The Guaranty or any provision
thereof shall cease to be in full force and effect
(otherwise than in accordance with the Credit Documents),
or any Guarantor or any Person acting by or on behalf of
such Guarantor shall deny or disaffirm all or any portion
of such Guarantor's obligation thereunder (other than by
reason of a release of such Guarantor from the Guaranty in
accordance with the terms of the Credit Documents), or any
Guarantor shall default in the observance of any term,
covenant or agreement on its part to be performed or
observed pursuant thereto and such default (other than any
default arising from a failure to make any payment
thereunder) shall continue unremedied for a period of at
least 30 days after notice to Borrower by the
Administrative Agent or the Required Banks; or
9.07 JUDGMENTS. One or more judgments or decrees
shall be entered against Borrower or any Subsidiary
involving a liability of $10.0 million or more in the
aggregate (not paid or to the extent not covered by
insurance) and any such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal
within 60 days from the entry thereof; or
9.08 CHANGE OF CONTROL. There shall have
occurred a Change of Control; or
9.09 EMPLOYEE BENEFIT PLANS. Any member of the
ERISA Group shall fail to pay when due an amount or amounts
aggregating in excess of $10.0 million which it shall have
become liable to pay under Title IV of ERISA; or notice of
intent to terminate a Plan shall be filed under
Section 4041(c) of ERISA by an member of the ERISA Group,
any plan administrator or any combination of the foregoing;
or the PBGC shall institute proceedings under Title IV of
ERISA to terminate, to impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or to
cause a trustee to be appointed to administer any Plan; or
a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any Plan
must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning
of Section 4219(c)(5) of ERISA, with respect to, one or
more Multiemployer Plans which could reasonably be expected
to cause one or more members of the ERISA Group to incur a
payment obligation in excess of $10.0 million;
then, and in any such event, and at any time thereafter, if
any Event of Default shall then be continuing, the
Administrative Agent shall, upon the written request of the
Required Banks, by written notice to Borrower, take any or
all of the following actions, without prejudice to the
rights of the Administrative Agent or any Bank to enforce
its claims against Borrower, except as otherwise
specifically provided for in this Agreement (PROVIDED,
HOWEVER, that, if an Event of Default specified in Section
9.05 shall occur with respect to Borrower, the result which
would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (i) and (ii)
below shall occur automatically without the giving of any
such notice): (i) declare the Total Commitment terminated,
whereupon the Commitment of each Bank shall forthwith
terminate immediately and any Commitment Commission shall
forthwith become due and payable without any other notice
of any kind; (ii) declare the principal of and any accrued
interest in respect of all Loans and all obligations owing
hereunder (including Unpaid Drawings) and thereunder to be,
whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Borrower; (iii)
terminate any Letter of Credit which may be terminated in
accordance with its terms; (iv) direct Borrower to pay (and
Borrower hereby agrees upon receipt of such notice, or upon
the occurrence of any Event of Default specified in Section
9.05 in respect of Borrower, it will pay) to the
Administrative Agent at the Payment Office such additional
amounts of cash, to be held as security for Borrower's
reimbursement obligations in respect of Letters of Credit
then outstanding equal to the aggregate Stated Amount of
all Letters of Credit then outstanding; and (v) apply any
amounts held as cash collateral pursuant to Section 4.02 or
this Section 9 to repay Obligations.
SECTION 10. DEFINITIONS. As used herein, the
following terms shall have the meanings herein specified
unless the context otherwise requires. Defined terms in
this Agreement shall include in the singular number the
plural and in the plural the singular:
"ADJUSTED COMMITMENT" for each Non-Defaulting
Bank shall mean at any time the product of such Bank's
Adjusted Percentage and the Adjusted Total Commitment.
"ADJUSTED PERCENTAGE" shall mean (x) at a time
when no Bank Default exists, for each Bank such Bank's
Percentage and (y) at a time when a Bank Default exists (i)
for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non-Defaulting Bank, the percentage
determined by dividing such Bank's Commitment at such time
by the Adjusted Total Commitment at such time, it being
understood that all references herein to Commitments and
the Adjusted Total Commitment at a time when the Total
Commitment or Adjusted Total Commitment, as the case may
be, has been terminated shall be references to the
Commitments or Adjusted Total Commitment, as the case may
be, in effect immediately prior to such termination;
PROVIDED, HOWEVER, that (A) no Bank's Adjusted Percentage
shall change upon the occurrence of a Bank Default from
that in effect immediately prior to such Bank Default if,
after giving effect to such Bank Default and any repayment
of Loans at such time pursuant to Section 4.02(A)(a) or
otherwise, the sum of (i) the aggregate outstanding
principal amount of Loans of all Non-Defaulting Banks plus
(ii) the Letter of Credit Outstandings, exceeds the
Adjusted Total Commitment; (B) the changes to the Adjusted
Percentage that would have become effective upon the
occurrence of a Bank Default but that did not become
effective as a result of the preceding clause (A) shall
become effective on the first date after the occurrence of
the relevant Bank Default on which the sum of (i) the
aggregate outstanding principal amount of the Loans of all
Non-Defaulting Banks plus (ii) the Letter of Credit
Outstandings is equal to or less than the Adjusted Total
Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted
Percentage is changed pursuant to the preceding clause (B)
and (ii) any repayment of such Bank's Loans, or of Unpaid
Drawings with respect to Letters of Credit, that were made
during the period commencing after the date of the relevant
Bank Default and ending on the date of such change to its
Adjusted Percentage must be returned to Borrower as a
preferential or similar payment in any bankruptcy or
similar proceeding of Borrower, then the change to such
Non-Defaulting Bank's Adjusted Percentage effected pursuant
to said clause (B) shall be reduced to that positive
change, if any, as would have been made to its Adjusted
Percentage if (x) such repayments had not been made and (y)
the maximum change to its Adjusted Percentage would have
resulted in the sum of the outstanding principal of Loans
made by such Bank plus such Bank's new Adjusted Percentage
of the outstanding principal amount of Letter of Credit
Outstandings equalling such Bank's Commitment at such time.
"ADJUSTED TOTAL COMMITMENT" shall mean at any
time the Total Commitment less the aggregate Commitments of
all Defaulting Banks.
"ADMINISTRATIVE AGENT" see the first paragraph of
this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 11.09.
"AFFECTED EURODOLLAR LOAN" see Section 4.02(B).
"AFFILIATE" shall mean, with respect to any
Person, any other Person directly or indirectly
controlling, controlled by, or under direct or indirect
common control with such Person. A Person shall be deemed
to control a corporation if such Person possesses, directly
or indirectly, the power (i) to vote 10% or more of the
securities having ordinary voting power for the election of
directors of such corporation or (ii) to direct or cause
the direction of the management and policies of such
corporation, whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" shall mean this Credit Agreement, as
the same may be from time to time further modified, amended
and/or supplemented.
"AGENTS" see the first paragraph of this
Agreement.
"APPLICABLE BASE RATE MARGIN" shall be equal to
the percentage PER ANNUM set forth below opposite
Borrower's applicable Leverage Ratio, as calculated for the
last day of the fiscal quarter last ended; PROVIDED,
HOWEVER, that, in the event a change in the Applicable Base
Rate Margin is to be made, such change shall not become
effective until the date on which the Administrative Agent
receives written notice from Borrower indicating that such
change is warranted:
APPLICABLE BASE
LEVERAGE RATIO RATE MARGIN
Less than or equal to
1.40:1.00 0.00%
Greater than 1.40:1.00 0.25%
"APPLICABLE COMMITMENT COMMISSION PERCENTAGE"
shall be 1/4 of 1.00% PER ANNUM.
"APPLICABLE DATE" see Section 7.11.
"APPLICABLE EURODOLLAR MARGIN" shall be equal to
the percentage PER ANNUM set forth below opposite
Borrower's applicable Leverage Ratio, as calculated for the
last day of the fiscal quarter last ended; PROVIDED,
HOWEVER, that, in the event a change in the Applicable
Eurodollar Margin is to be made, such change shall not
become effective until the date on which the Administrative
Agent receives written notice from Borrower indicating that
such change is warranted:
<PAGE>
APPLICABLE
LEVERAGE RATIO EURODOLLAR MARGIN
Less than 0.90:1.00 0.75%
Greater than or equal to
0.90:1.00 and less than or
equal to 1.40:1.00 1.00%
Greater than 1.40:1.00 1.25%
"APPROVED BANK" see the definition of "Cash
Equivalents."
"APPROVED COMPANY" see the definition of "Cash
Equivalents."
"APPROVED SHIPBROKER" shall mean each of the
international, independent, sale-and-purchase Shipbrokers
listed on ANNEX IX hereto, as such Annex may be revised
from time to time at the request of the Required Banks with
the consent of Borrower, which consent shall not be
unreasonably withheld or delayed.
"ASSET DISPOSITION" shall mean the sale, transfer
or other disposition (including by merger or consolidation
or sale-leaseback) occurring after the date hereof by
Borrower or any Subsidiary to any Person other than
Borrower or any Wholly-Owned Subsidiary of any asset
(including the Capital Stock of any Subsidiary) of Borrower
or such Subsidiary, except sales, transfers or other
dispositions in the ordinary course of business of
inventory and/or obsolete or worn-out equipment or Cash
Equivalents; PROVIDED, HOWEVER, that for purposes of
Section 3.03(b)(i), (i) no sale, transfer or other
disposition of assets of Borrower or any Subsidiary shall
be deemed an Asset Disposition to the extent (but only to
the extent) that the Cash Proceeds therefrom when added to
the Cash Proceeds from all other sales, transfer or other
dispositions of assets since the date hereof that would
otherwise constitute an Asset Disposition are not in excess
of $50.0 million and (ii) any bare boat charter permitted
by Section 8.08 shall not be considered an Asset
Disposition.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean
the Assignment and Assumption Agreement substantially in
the form of EXHIBIT I hereto (appropriately completed).
"AUTHORIZED OFFICER" shall mean any senior
officer of Borrower designated as such in writing to the
Administrative Agent by Borrower.
"AVAILABLE UNUTILIZED COMMITMENT" for each Bank,
shall mean the excess of (i) the Commitment of such Bank
over (ii) the sum of (x) the aggregate outstanding
principal amount of Loans made by such Bank plus (y) an
amount equal to such Bank's Adjusted Percentage of the
Letter of Credit Outstandings at such time.
"AVAILABLE UNUTILIZED TOTAL COMMITMENT" shall
mean the excess of (i) the Total Commitment over (ii) the
sum of (x) the aggregate outstanding principal amount of
Loans plus (y) the Letter of Credit Outstandings at such
time.
"BANK" see the first paragraph of this Agreement.
"BANK DEFAULT" shall mean (i) the refusal (which
has not been retracted) of a Bank to make available its
portion of any incurrence of Loans or to fund its portion
of any unreimbursed payment under Section 2.05(c) or (ii) a
Bank having notified the Administrative Agent and/or
Borrower that it does not intend to comply with the
obligations under Section 1.01 or under Section 2.05(c), in
the case of either (i) or (ii) as a result of the
appointment of a receiver or conservator with respect to
such Bank at the direction or request of any regulatory
agency or authority.
"BANKRUPTCY CODE" see Section 9.05.
"BASE RATE" at any time shall mean the higher of
(i) the rate which is 1/2 of 1% in excess of the Federal
Funds Effective Rate and (ii) the Prime Lending Rate.
"BASE RATE LOAN" shall mean each Loan bearing
interest at the rates provided in Section 1.08(a).
"BENEFIT ARRANGEMENT" shall mean at any time an
employee benefit plan with the meaning of Section 3(3) of
ERISA which is not a Plan or a Multiemployer Plan and which
is maintained or otherwise contributed to by any member of
the ERISA Group.
"BORROWER" see the first paragraph of this
Agreement.
"BORROWING" shall mean the incurrence of one Type
of Loan pursuant to the Facility by Borrower from all of
the Banks with respect to such Facility on a PRO RATA basis
on a given date (or resulting from conversions on a given
date), having in the case of Eurodollar Loans the same
Interest Period; PROVIDED, HOWEVER, that Base Rate Loans
incurred pursuant to Section 1.10(b) shall be considered
part of any related Borrowing of Eurodollar Loans.
"BTCO" shall mean Bankers Trust Company.
"BUSINESS DAY" shall mean (i) for all purposes
other than as covered by clause (ii) below, any day
excluding Saturday, Sunday and any day which shall be in
the City of New York a legal holiday or a day on which
banking institutions are authorized by law or other
governmental actions to close and (ii) with respect to all
notices and determinations in connection with, and payments
of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) and which
is also a day for trading by and between banks in U.S.
dollar deposits in the interbank Eurodollar market in
London.
"CAPITAL EXPENDITURES" shall mean, with respect
to any Person, without duplication, all expenditures by
such Person which should be capitalized in accordance with
GAAP, including, without duplication, all such expenditures
with respect to fixed or capital assets (including, without
limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with GAAP) and the
amount of all Capitalized Lease Obligations incurred by
such Person.
"CAPITAL LEASE" as applied to any Person shall
mean any lease of any property (whether real, personal or
mixed) by that Person as lessee which, in conformity with
GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
"CAPITAL STOCK" shall mean any and all shares,
interests, rights to purchase, warrants, options,
participants or other equivalents of or interests in
(however designated) corporate stock or other equity
participations, including partnership interests, whether
general or limited, including any Preferred Stock.
"CAPITALIZED LEASE OBLIGATIONS" shall mean all
obligations under Capital Leases of Borrower or any
Subsidiary (other than an Unrestricted Subsidiary) in each
case taken at the amount thereof accounted for as
liabilities in accordance with GAAP.
"CASH EQUIVALENTS" shall mean (i) securities
issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality
thereof (PROVIDED that the full faith and credit of the
United States of America is pledged in support thereof)
having maturities of not more than one year from the date
of acquisition, (ii) U.S. dollar denominated time deposits,
certificates of deposit and bankers' acceptances of (x) any
Bank, (y) any domestic commercial bank of recognized
standing having capital and surplus in excess of $500.0
million or (z) any Bank or bank (or the parent company of
such bank) whose short-term commercial paper rating from
S&P is at least A-1 or the equivalent thereof or from
Moody's is at least P-1 or the equivalent thereof (any such
bank, an "APPROVED BANK"), in each case with maturities of
not more than one year from the date of acquisition, (iii)
repurchase obligations with a term of not more than seven
days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv)
commercial paper issued by any Bank or Approved Bank or by
the parent company of any Bank or Approved Bank and
commercial paper issued by, or guaranteed by, any
industrial or financial company with a short-term
commercial paper rating of at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (any such company, an "APPROVED COMPANY"), or
guaranteed by any industrial company with a long term
unsecured debt rating of at least A or A2, or the
equivalent of each thereof, from S&P or Moody's, as the
case may be, and in each case maturing within one year
after the date of acquisition and (v) investments in money
market funds substantially all of whose assets are
comprised of securities of the type described in clauses
(i) through (iv) above.
"CASH PROCEEDS" shall mean, with respect to any
Asset Disposition, the aggregate cash payments (including
any cash received by way of deferred payment pursuant to a
note receivable issued in connection with such Asset
Disposition, other than the portion of such deferred
payment constituting interest, but only as and when so
received) received by Borrower and/or any Subsidiary from
such Asset Disposition.
"CERCLA" shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601 ET SEQ.
"CHANGE OF CONTROL" shall mean an event or series
of events by which (i) any person (as defined in Section
13(d)(3) of the Exchange Act) is or becomes the beneficial
owner (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of more than 35% of the voting
power of the then outstanding Voting Stock of Borrower; or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted
the Board of Directors of Borrower (together with any new
or replacement directors whose election by the Board of
Directors of Borrower or whose nomination for election by
Borrower's stockholders, was approved by a vote of at least
66-2/3% of the directors then still in office who were
either directors at the beginning of such period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority of
the Board of Directors of Borrower then in office; or (iii)
any "Change of Control" as defined in the Indenture (so
long as the Indenture shall be in effect) shall occur.
"CLAIMS" see the definition of "Environmental
Claims."
"CO-AGENT" see the first paragraph of this
Agreement.
"CODE" shall mean the Internal Revenue Code of
1986, as amended from time to time and the regulations
promulgated and the rulings issued thereunder. Section
references to the Code are to the Code, as in effect at the
Effectiveness Date and any subsequent provisions of the
Code, amendatory thereof, supplemental thereto or
substituted therefor.
"COMMITMENT" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in
ANNEX I hereto directly below the column entitled
"Commitment," as the same may be (x) reduced from time to
time pursuant to Sections 3.02, 3.03 and/or 9 or (y)
adjusted from time to time as a result of assignments to or
from such Bank pursuant to Section 12.04.
"COMMITMENT COMMISSION" see Section 3.01(a).
"CONSOLIDATED CASH INTEREST EXPENSE" shall mean,
for any period, total cash interest expense (including that
attributable to Capital Leases, whether or not the
Capitalized Lease Obligations under such Capitalized Leases
is included in Indebtedness) of Borrower and the
Subsidiaries (other than Unrestricted Subsidiaries) on a
consolidated basis during such period, including, without
limitation, (i) all commissions, discounts and other fees
and charges owed with respect to letters of credit and
bankers' acceptance financing during such period and (ii)
all capitalized cash interest during such period.
"CONSOLIDATED EBIT" shall mean, for any period,
(A) the sum of the amounts for such period of (i)
Consolidated Net Income, (ii) provisions for taxes based on
income, (iii) Consolidated Interest Expense, (iv)
amortization or write-off of deferred financing costs to
the extent deducted in determining Consolidated Net Income
and (v) losses on sales of assets (excluding sales in the
ordinary course of business) and other extraordinary
losses, LESS (B) the amount for such period of gains on
sales of assets (excluding sales in the ordinary course of
business) and other extraordinary gains, all as determined
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED EBITDA" shall mean, for any period,
the sum of the amounts for such period of (i) Consolidated
EBIT, (ii) depreciation expense of Borrower and the
Subsidiaries (other than Unrestricted Subsidiaries) and
(iii) amortization expense of Borrower and the Subsidiaries
(other than Unrestricted Subsidiaries), all as determined
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INDEBTEDNESS" shall mean, as at any
date of determination, the aggregate stated balance sheet
amount of all Indebtedness (including the Loans) of
Borrower and the Subsidiaries (other than Unrestricted
Subsidiaries) on a consolidated basis as determined in
accordance with GAAP, excluding (i) all Contingent
Obligations relating to the Indebtedness of any Person
which such Indebtedness is included in the calculation of
Consolidated Indebtedness of Borrower and the Subsidiaries
(other than Unrestricted Subsidiaries) and (ii) all
Capitalized Lease Obligations under the Capitalized Lease
(as in effect on the date hereof) of the Glomar Explorer
Fleet Rig (Official No. 547257).
"CONSOLIDATED INTEREST EXPENSE" shall mean, for
any period, total interest expense (including that
attributable to Capital Leases, whether or not the
Capitalized Lease Obligations under such Capitalized Lease
is included in Indebtedness) of Borrower and the
Subsidiaries (other than Unrestricted Subsidiaries) in
accordance with GAAP on a consolidated basis with respect
to all outstanding Indebtedness of Borrower and the
Subsidiaries (other than Unrestricted Subsidiaries),
including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of
credit and bankers' acceptance financing.
"CONSOLIDATED NET INCOME" shall mean for any
period, the net income (or loss) of Borrower and the
Subsidiaries (other than Unrestricted Subsidiaries) on a
consolidated basis for such period taken as a single
accounting period determined in conformity with GAAP;
PROVIDED, HOWEVER, that there shall be excluded therefrom
(i) the effect of deferred taxes, (ii) except to the extent
of the amount of cash dividends or other cash distributions
in respect of Capital Stock paid to Borrower or a
Subsidiary (other than an Unrestricted Subsidiary) by any
other Person during such period out of funds legally
available therefor, the net income (or loss) of such other
Person other than a Subsidiary, (iii) except to the extent
includible pursuant to clause (ii) hereof, the net income
(or loss) of any other Person accrued or attributable to
any period prior to the date it becomes a Subsidiary or is
merged into or consolidated with Borrower or any Subsidiary
or such other Person's property or Capital Stock (or a
portion thereof) is acquired by Borrower or any Subsidiary,
and (iv) the net income of any Subsidiary which is not a
Guarantor to the extent that the transfer to Borrower or a
Guarantor of that income is not at the time permitted,
directly or indirectly, by any means (including by
dividend, distribution, advance or loan or otherwise), by
operation of the terms of its charter or any agreement with
a Person other than with Borrower or any Affiliate thereof,
instrument held by a Person other than by Borrower or any
Affiliate thereof, judgment, decree, order, statute, law,
rule or governmental regulations applicable to such
Subsidiary or its stockholders; PROVIDED, HOWEVER, that if
at any time during the period for which Consolidated Net
Income is measured such restriction or transfer to Borrower
of such income of a Subsidiary is lifted, Consolidated Net
Income shall include the net income of such Subsidiary
previously excluded.
"CONSOLIDATED NET WORTH" shall mean, at any time,
the net worth of Borrower and the Subsidiaries (other than
Unrestricted Subsidiaries) on a consolidated basis
determined in accordance with GAAP.
"CONTINGENT OBLIGATIONS" shall mean as to any
Person any obligation of such Person guaranteeing or
intending to guarantee any Indebtedness, leases, dividends
or other obligations ("PRIMARY OBLIGATIONS") of any other
Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (a)
to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of
any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof;
PROVIDED, HOWEVER, that the term Contingent Obligation
shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be
an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"CREDIT DOCUMENTS" shall mean this Agreement, the
Notes and each Guaranty and any documents executed in
connection therewith.
"CREDIT EVENT" shall mean and include the making
of a Loan or the issuance of a Letter of Credit.
"CREDIT PARTY" shall mean Borrower and each
Guarantor.
"DEBT INSUANCE" shall mean the issuance or sale
by Borrower or any Subsidiary of any securities evidencing
Indebtedness of Borrower or any Subsidiary, other than any
refinancing of the Senior Secured Notes as permitted by
Section 8.03(b).
"DEFAULT" shall mean any event, act or condition
which with notice or lapse of time, or both, would
constitute an Event of Default.
"DEFAULTING BANK" shall mean any Bank with
respect to which a Bank Default is in effect.
"DESIGNATION" see Section 8.05(b).
"DESIGNATION AMOUNT" see Section 8.05(b).
"DISQUALIFIED CAPITAL STOCK" means any Capital
Stock which, by its terms (or by the terms of any security
into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon
the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable, at the option of the holder
thereof, in whole or in part, or exchangeable into
Indebtedness on or prior to the Maturity Date.
"DIVIDENDS" shall mean to declare or pay on the
part of Borrower or any Subsidiary any dividends (other
than dividends payable solely in Qualified Capital Stock of
such Person (including pursuant to a shareholders' rights
plan)) or return any capital to, its stockholders or
authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such,
or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for a consideration, any shares of any class
of its Capital Stock now or hereafter outstanding (or any
warrants for or options or stock appreciation rights in
respect of any of such shares), or set aside any funds for
any of the foregoing purposes, or permit any Subsidiary to
purchase or otherwise acquire for consideration any shares
of any class of the Capital Stock of Borrower or any other
Subsidiary, as the case may be, now or hereafter
outstanding; PROVIDED, HOWEVER, that Dividends shall not
include the redemption of rights issued pursuant to a
shareholders' rights agreement in an amount per right not
to exceed a DE MINIMIS amount.
"DOLLARS" shall mean freely transferable lawful
money of the United States.
"DOMESTIC SUBSIDIARY" shall mean, as to any
Person, any Subsidiary that is incorporated under the laws
of the United States of America, any State thereof or any
territory thereof.
"EFFECTIVENESS DATE" see Section 12.10.
"ELIGIBLE TRANSFEREE" shall mean a commercial
bank, financial institution or other "accredited investor"
(as defined by Regulation D of the Securities Act).
"ENVIRONMENTAL CLAIMS" shall mean any and all
administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations of Governmental
Authorities or third parties or proceedings relating in any
way to any Environmental Law or any permit issued, or any
approval given, under any such Environmental Law
(hereafter, "CLAIMS"), including, without limitation,
(a) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) any and all Claims by
any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials arising from
alleged damage or injury or threat of injury or damage to
health, safety or the environment.
"ENVIRONMENTAL LAW" shall mean any applicable
Federal, state, foreign or local statute, law, rule,
regulation, ordinance, code, guide, policy, treaty or
convention and rule of common law now or hereafter in
effect and in each case as amended and having legally
binding effect on, and enforceable against, private
parties, and any judicial or administrative interpretation
thereof, including, without limitation, any judicial or
administrative order, consent decree or judgment, relating
to pollution or protection of the environment or health or
safety or Release or threat of Release or treatment,
storage, transport, generation, handling or disposal of any
Hazardous Materials, including, without limitation, CERCLA;
RCRA; the Deepwater Port Act, as amended, 33 U.S.C.
SectionSection 1501 ET SEQ.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.;
the Toxic Substances Control Act, 15 U.S.C. Section 7401 ET
SEQ.; the Clean Air Act, as amended, 42 U.S.C. Section 7401
ET SEQ.; the Safe Drinking Water Act, 42 U.S.C.
Section 3808 ET SEQ.; the Oil Pollution Act of 1990, 33
U.S.C. Section 2701 ET SEQ. and any state and local or
foreign counterparts or equivalents.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA GROUP" shall mean Borrower, any Subsidiary
and all members of a controlled group of corporations and
all trades or businesses (whether or not incorporated)
under common control which, together with Borrower or any
Subsidiary, are treated as a single employer under
Section 414 of the Code.
"EURODOLLAR LOANS" shall mean each Loan bearing
interest at the rates provided in Section 1.08(b).
"EURODOLLAR RATE" shall mean with respect to each
Interest Period for a Eurodollar Loan, (i) the offered
quotation to first-class banks in the interbank Eurodollar
market by the Administrative Agent for dollar deposits of
amounts in same day funds comparable to the outstanding
principal amount of the Eurodollar Loan of the
Administrative Agent for which an interest rate is then
being determined with maturities comparable to the Interest
Period to be applicable to such Eurodollar Loan, determined
as of 10:00 A.M. (New York time) on the date which is two
Business Days prior to the commencement of such Interest
Period divided (and rounded upward to the next whole
multiple of 1/16 of 1%) by (ii) a percentage equal to 100%
minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves)
applicable to any member bank of the Federal Reserve System
in respect of Eurocurrency liabilities as defined in
Regulation D (or any successor category of liabilities
under Regulation D).
"EVENT OF DEFAULT" see Section 9.
"EXCESS CASH FLOW" shall mean, for any period,
the difference, if any, of (a) the sum of the following
items for Borrower and the Subsidiaries (other than
Unrestricted Subsidiaries) on a consolidated basis for such
period determined in accordance with GAAP: (i)
consolidated net income, adjusted by (1) adding back the
non-cash portion of all extraordinary or non-recurring
items of expense and (2) deducting the non-cash portion of
all extraordinary or non-recurring items of income, in each
case to the extent taken into account in the calculation of
such net income, (ii) the non-cash portion of any other
item of expense to the extent deducted in determining such
net income, other than to the extent requiring an accrual
or reserve for future cash expenses, (iii) depreciation and
amortization allowances to the extent deducted in
determining such net income and (iv) net decreases in
Working Capital, MINUS (b) the sum of the following items
for Borrower and the Subsidiaries (other than Unrestricted
Subsidiaries) on a consolidated basis for such period: (i)
Capital Expenditures for such period, (ii) scheduled
principal payments in respect of Indebtedness (excluding
(I) any principal payment effected in connection with the
refinancing of any Indebtedness and (II) any prepayment in
respect of any revolving credit facility (including the
Loans) to the extent not accompanied by a permanent
reduction in commitments thereunder), (iii) non-cash
credits to the extent added in determining such net income
and (iv) net increases in Working Capital.
"EXCHANGE ACT" shall mean the Securities Exchange
Act of 1934, as amended from time to time, and the
regulations promulgated and the rulings issued thereunder.
"EXISTING INDEBTEDNESS" see Section 6.18.
"EXISTING INDEBTEDNESS AGREEMENTS" see Section
5.06(i).
"EXISTING L/C FACILITY INDEBTEDNESS" shall mean
Indebtedness under (i) the Reimbursement and Security
Agreement between the Company and the Bank of Nova Scotia
dated as of May 1, 1993 and (ii) the Reimbursement and
Security Agreement between the Company and First Union Bank
of North Carolina dated as of August 1, 1993, not exceeding
$2.0 million in the aggregate at any time outstanding.
"FACILITY" shall mean the credit facility
established under this Agreement, evidenced by the Total
Commitment.
"FACING FEE" see Section 3.01(c).
"FEDERAL FUNDS EFFECTIVE RATE" shall mean for any
period, a fluctuating interest rate equal for each day
during such period to the weighted average of the rates on
overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers,
as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the
average of the quotations for such day on such transactions
received by the Administrative Agent from three Federal
Funds brokers of recognized standing selected by the
Administrative Agent.
"FEES" shall mean all amounts payable pursuant
to, or referred to in, Section 3.01.
"FINANCING PROCEEDS" shall mean the cash received
by Borrower or any Subsidiary from a Debt Issuance.
"FLEET" shall mean all Fleet Rigs taken as a
whole.
"FLEET RIGS" shall mean the Glomar Explorer
(Official No. 547527) and any offshore drilling rig or
drilling vessel owned from time to time by Borrower or any
Subsidiary (other than an Unrestricted Subsidiary).
"FOREIGN PENSION PLAN" shall mean any plan, fund
(including, without limitation, any superannuation fund) or
other similar program established or maintained outside the
United States of America by Borrower or any one or more of
its Subsidiaries primarily for the benefit of employees of
Borrower or such Subsidiaries residing outside the United
States of America, which plan, fund or other similar
program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or
payments to be made upon termination of employment, and
which plan is not subject to ERISA.
"GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect on
the date of this Agreement; it being understood and agreed
that determinations in accordance with GAAP for purposes of
Section 8, including defined terms as used therein, are
subject (to the extent provided therein) to Section
12.07(a).
"GOVERNMENTAL AUTHORITY" shall mean any
government or political subdivision or any agency,
authority, board, bureau, central bank, commission,
department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether
foreign or domestic, or any exercising executive,
legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GUARANTOR" shall mean each Subsidiary which is a
party to the Guaranty and which has not been released
therefrom in accordance with the Credit Documents.
"GUARANTY" see Section 5.11.
"HAZARDOUS MATERIALS" shall mean any pollutant,
contaminant, toxic, hazardous, extremely hazardous or
radioactive substance, constituent or waste, or any other
constituent, waste, chemical material, compound or
substance including, without limitation, petroleum
including without limitation crude oil or any fraction
thereof, or any petroleum product, subject to regulation
under any Environmental Law.
"IN CLASS" see Section 6.19.
"INDEBTEDNESS" of any Person shall mean without
duplication (i) all indebtedness of such Person for
borrowed money, (ii) the deferred purchase price of assets
or services which in accordance with GAAP would be shown on
the liability side of the balance sheet of such Person,
(iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all
drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such
first Person, whether or not such indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such
Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or
not delivered or accepted, I.E., take-or-pay and similar
obligations, (vii) all net obligations of such Person under
Interest Rate Agreements and (viii) all Contingent
Obligations of such Person (other than Contingent
Obligations arising from the guaranty by Borrower or any
Subsidiary of the obligations of Borrower and/or any
Subsidiary (other than any Unrestricted Subsidiary) of a
character described in the foregoing clauses (i) through
(vii) to the extent such guaranteed obligations are
permitted under this Agreement); PROVIDED, HOWEVER, that
Indebtedness (a) shall not include obligations of any
Person (x) arising from the honoring by a bank or other
financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds
in the ordinary course of business, provided that such
obligations are extinguished within two Business Days of
their incurrence and (y) resulting from the endorsement of
negotiable instruments for collection in the ordinary
course of business and consistent with past business
practices; (b) shall include the liquidation preference and
any mandatory redemption payment obligation obligations in
respect of any Disqualified Capital Stock of Borrower or
any Subsidiary; (c) shall not include obligations under
performance bonds, performance guarantees, surety bonds,
appeal bonds or similar obligations, incurred in the
ordinary course of business and on ordinary business terms;
(d) shall not include Capitalized Lease Obligations
incurred in the ordinary course of business and on ordinary
business terms (other than under Capitalized Leases of
offshore drilling rigs and vessels) not exceeding $10.0
million in the aggregate at any time outstanding; (e) shall
not include trade payables and accrued expenses, in each
case arising in the ordinary course of business.
"INDENTURE" shall mean the Indenture dated as of
December 23, 1992 among Borrower and Wilmington Trust
Company, as trustee, as the same may be amended, modified
or supplemented from time to time.
"INITIAL BORROWING DATE" shall mean the date upon
which the initial Borrowing of Loans occurs.
"INTELLECTUAL PROPERTY" see Section 6.14.
"INTEREST PERIOD" with respect to any Loan shall
mean the interest period applicable thereto, as determined
pursuant to Section 1.09.
"INTEREST RATE AGREEMENT" shall mean any interest
rate swap agreement, any interest rate cap agreement, any
interest rate collar agreement or other similar agreement
or arrangement designed to protect Borrower or any
Subsidiary against interest rate risk.
"INVESTMENT" shall mean any direct or indirect
loan, advance, guarantee or other extension of credit or
capital contribution to (by means of transfers of cash or
other property or assets to others or payments for property
or services for the account or use of others, or
otherwise), or purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidences
of Indebtedness issued by, any other Person. The amount of
any Investment shall be the original cost of such
Investment, PLUS the cost of all additions thereto, and
MINUS the amount of any portion of such Investment repaid
to such Person in cash as a repayment of principal or a
return of capital, as the case may be, but without any
other adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such
Investment. In determining the amount of any investment
involving a transfer of any property or asset other than
cash, such property shall be valued at its fair market
value at the time of such transfer, as determined in good
faith by the board of directors (or comparable body) of the
Person making such transfer.
"LEASEHOLD" of any Person shall mean all of the
right, title and interest of such Person as lessee or
licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"L/C SUPPORTABLE OBLIGATIONS" shall mean such
obligations of Borrower or any Subsidiary as are not
inconsistent with the policies of the Letter of Credit
Issuer determined reasonably and in good faith.
"LETTER OF CREDIT" see Section 2.01(a).
"LETTER OF CREDIT FEE" see Section 3.01(b).
"LETTER OF CREDIT ISSUER" shall mean BTCo.
"LETTER OF Credit Outstandings" shall mean, at
any time, the sum of, without duplication, (i) the
aggregate Stated Amount of all outstanding Letters of
Credit and (ii) the aggregate amount of all Unpaid Drawings
in respect of all Letters of Credit.
"LETTER OF CREDIT REQUEST" see Section 2.03(a).
"LEVERAGE RATIO" shall mean, at any date of
determination, the ratio of Consolidated Indebtedness of
Borrower at such date to Consolidated EBITDA of Borrower
for the four consecutive complete fiscal quarters then last
ended.
"LIEN" shall mean any mortgage, pledge, security
interest, security title, encumbrance, lien or charge of
any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention
agreement or any lease in the nature thereof), in each case
for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or
performance of an obligation to a creditor.
"LOAN" see Section 1.01.
"MARGIN STOCK" shall have the meaning provided in
Regulation U.
"MARKET VALUE" shall mean as of any date of
calculation the value as of such date of any Fleet Rig or
other vessel provided in the most recent valuation report
delivered in connection with Section 5.12(a)(ii) and
Section 7.10.
"MATERIAL ADVERSE EFFECT" shall mean a material
adverse effect on the performance, business, properties,
assets, operations, nature of assets, liabilities,
condition (financial or otherwise) or prospects of Borrower
and the Subsidiaries taken as a whole.
"MATURITY DATE" shall mean February 15, 1999.
"MINIMUM BORROWING AMOUNT" shall mean (i) for
Loans maintained as Base Rate Loans, $1.0 million and
increments of $500,000 over such amount, and (ii) for Loans
maintained as Eurodollar Loans, $5.0 million and increments
of $1.0 million over such amount.
"MOODY'S" shall mean Moody's Investors Service,
Inc. and its successors.
"MULTIEMPLOYER PLAN" shall mean at any time an
employee pension benefit plan within the meaning of
Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to
make contributions or has within the preceding five plan
years made contributions, including for these purposes any
Person which ceased to be a member of the ERISA Group
during such five year period.
"NET CASH PROCEEDS" shall mean, with respect to
any Asset Disposition, the Cash Proceeds therefrom, MINUS,
without duplication, the sum of (i) reasonable legal, title
and recording tax expenses, commissions and other
reasonable fees and expenses incurred, and all federal,
state, provincial, foreign and local taxes payable as a
consequence of such Asset Disposition, and (ii) all payment
made to any Person other than Borrower or any Subsidiary on
any Indebtedness of Borrower or its Subsidiary which is
secured by such assets, in accordance with the terms of any
Lien upon or with respect to such assets, or which must by
its terms, or in order to obtain a necessary consent to
such Asset Disposition, or by applicable law, be repaid out
of the proceeds from such Asset Disposition.
"NET FINANCING PROCEEDS" shall mean the Financing
Proceeds net of underwriting discounts and commissions and
direct expenses.
"NON-DEFAULTING BANK" shall mean each Bank other
than a Defaulting Bank.
"NON-RECOURSE INDEBTEDNESS" means any
Indebtedness of any Subsidiary (the "RELEVANT SUBSIDIARY")
(a) in respect of which neither Borrower nor any Subsidiary
(other than an Unrestricted Subsidiary or the Relevant
Subsidiary) is liable or obligated in any manner including,
without limitation, liabilities or obligations constituting
Indebtedness of Borrower or any Subsidiary (other than an
Unrestricted Subsidiary or the Relevant Subsidiary), and
(b) the occurrence of any event or the existence of any
condition under any agreement or instrument relating to
which shall not at any time have the effect of
accelerating, or permitting the acceleration of, the
maturity of any Indebtedness of Borrower or of any
Subsidiary (other than an Unrestricted Subsidiary or the
Relevant Subsidiary) or otherwise permitting any such
Indebtedness to be declared to be due and payable, or to be
required to be prepaid, purchased or redeemed, prior to the
stated maturity thereof.
"NOTE" see Section 1.05(a).
"NOTICE OF BORROWING" see Section 1.03.
"NOTICE OF CONVERSION" see Section 1.06.
"NOTICE OFFICE" shall mean the office of the
Administrative Agent at 130 Liberty Street, New York, New
York or such other office as the Administrative Agent may
designate to Borrower from time to time.
"OBLIGATIONS" shall mean all amounts, direct or
indirect, contingent or absolute, of every type or
description, and at any time existing, owing to the
Administrative Agent or any Bank pursuant to the terms of
any Credit Document.
"PARTICIPANT" see Section 2.05(a).
"PAYMENT OFFICE" shall mean the office of the
Administrative Agent at 130 Liberty Street, New York, New
York or such other office as the Administrative Agent may
designate to Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor thereto.
"PERCENTAGE" shall mean for each Bank the
percentage obtained by dividing such Bank's Commitment by
the Total Commitment; PROVIDED, HOWEVER, that if the Total
Commitment has been terminated, the Percentage of each Bank
shall be determined by dividing such Bank's Commitment
immediately prior to such termination by the Total
Commitment immediately prior to such termination.
"PERMITTED INVESTMENTS" shall mean and include
the following:
(a) Borrower or any Subsidiary may make
Investments in cash and Cash Equivalents;
(b) Borrower and any Subsidiary may acquire and
hold receivables owing to them, if created or acquired
in the ordinary course of business and payable or
dischargeable in accordance with customary trade
terms;
(c) Borrower or any Subsidiary may make loans
and advances (i) to employees in the ordinary course
of business or in connection with employee relocation
in an aggregate principal amount not to exceed $1.0
million at any time outstanding (without giving effect
to any write-down or write-off thereof) and (ii) to
management employees to finance their purchases of
Qualified Capital Stock of Borrower in an aggregate
amount not to exceed $1.0 million at any time
outstanding (without giving effect to any write-down
or write-off thereof);
(d) Borrower or any Subsidiary may acquire and
own investments (including debt obligations) received
in connection with the bankruptcy or reorganization of
suppliers and customers or in settlement of delinquent
obligations of, or other disputes with, customers and
suppliers arising in the ordinary course of business;
(e) Borrower may hold treasury stock received by
it in connection with the repurchase of stock from
employees pursuant to Section 8.05(c);
(f) Borrower may make contributions to an
employee stock ownership plan provided such
contributions are in Borrower's common stock;
(g) Borrower or any Subsidiary may make
Investments in any Subsidiary (other than any
Unrestricted Subsidiary) and any Person which, after
giving effect to such investments, becomes a
Subsidiary (other than an Unrestricted Subsidiary);
PROVIDED, HOWEVER, that any such Investments which are
loans and advances are unsecured and subordinated to
the Obligations of such Credit Party owing to the
Banks;
(h) Borrower or any Subsidiary may acquire
Senior Secured Notes pursuant to any offer required to
be made therefor pursuant to the Indenture as in
effect on the date hereof;
(i) Borrower or any Subsidiary may make
investments in Persons to the extent that the
consideration provided by Borrower or any Subsidiary
for such investments shall be solely the Qualified
Capital Stock of Borrower; and
(j) Investments required to be made pursuant to
the Purchase and Sale Agreement dated August 24, 1993
between Borrower and Transocean Drilling AS, as in
effect on the Effectiveness Date.
"PERMITTED LIENS" shall mean Liens described in
Section 8.04(a) through (o).
"PERSON" shall mean any individual, partnership,
joint venture, limited liability company, firm,
corporation, association, trust or other enterprise or any
government or political subdivision or any agency,
department or instrumentality thereof.
"PLAN" shall mean at any time an employee pension
benefit plan (other than a Multiemployer Plan) which is
covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code and either
(i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group
or (ii) has at any time within the preceding five years
been maintained, or contributed to, by any Person which was
at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA
Group.
"PREFERRED STOCK" in any Person, means Capital
Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions,
or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over
Capital Stock of any other class in such Person.
"PRIME LENDING RATE" shall mean the rate which
Bankers Trust Company announces from time to time as its
prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending
Rate is a reference rate and does not necessarily represent
the lowest or best rate actually charged to any customer.
Bankers Trust Company may make commercial loans or other
loans at rates of interest at, above or below the Prime
Lending Rate.
"PROJECTIONS" see Section 5.14.
"QUALIFIED CAPITAL STOCK" in any Person means any
Capital Stock in such Person other than any Disqualified
Capital Stock.
"RATING AGENCIES" shall mean each of Moody's and
S&P.
"RCRA" shall mean the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 ET SEQ.
"REAL PROPERTY" of any Person shall mean all of
the right, title and interest of such Person in and to
land, improvements and fixtures, including Leaseholds.
"RECOVERY EVENT" shall mean the receipt by
Borrower or any Subsidiary of any cash insurance proceeds
or cash condemnation award (excluding the proceeds of any
business interruption insurance) payable (i) by reason of
theft, loss, physical destruction or damage or any other
similar event with respect to any property or asset of
Borrower or any Subsidiary or (ii) by reason of any
condemnation, taking, seizing or similar event with respect
to any property or asset of Borrower or any Subsidiary.
"REGISTER" see Section 12.16.
"REGULATION D" shall mean Regulation D of the
Board of Governors of the Federal Reserve System as from
time to time in effect and any successor to all or a
portion thereof establishing reserve requirements.
"REGULATION U" shall mean Regulation U of the
Board of Governors of the Federal Reserve System as from
time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"RELEASE" shall mean any release, spill,
emission, leaking, pumping, injection, deposit, disposal,
discharge, leaching or migration into the environment or
into, out of or through any structure, property, pipeline,
air, soil, subsurface strata, surface water, or groundwater
or wetlands.
"REPLACED BANK" see Section 1.13.
"REPLACEMENT BANK" see Section 1.13.
"REQUIRED BANKS" shall mean Non-Defaulting Banks
whose outstanding Commitments (or, if after the Total
Commitment has been terminated, outstanding Loans and
Adjusted Percentage of Letter of Credit Outstandings)
constitute greater than 50% of the sum of the Adjusted
Total Commitment (or, if after the Total Commitment has
been terminated, the total outstanding Loans of Non-Defaulting
Banks and the aggregate Adjusted Percentages of
all Non-Defaulting Banks of the total Letter of Credit
Outstandings at such time).
"RESTRICTED PAYMENTS" shall mean any Dividend or
Investment, other than any Permitted Investment.
"S&P" shall mean Standard & Poor's Ratings Group
and its successors.
"S&P CREDIT RATING" shall mean the rating level
(it being understood that a rating level shall include
numerical modifiers and (+) and (-) modifiers) assigned by
S&P to the senior unsecured long-term debt of Borrower.
"SEC" shall mean the Securities and Exchange
Commission or any successor thereto.
"SECTION 3.03(b)(i) REMAINDER" see Section
3.03(b)(i).
"SECTION 3.03(b)(iii) REMAINDER" see Section
3.03(b)(iii).
"SECTION 4.04(b)(ii) CERTIFICATE" see Section
4.04(b)(ii).
"SECURITIES ACT" shall mean the Securities Act of
1933, as amended from time to time, and the regulations
promulgated and the rulings issued thereunder.
"SECURITY DOCUMENTS" shall have the meaning
assigned to that term in the Indenture as in effect on the
date hereof.
"SENIOR SECURED NOTES" shall mean the 12-3/4%
Senior Secured Notes Due 1999 issued pursuant to the
Indenture.
"STANDBY LETTER OF CREDIT" see Section 2.01(a).
"STATED AMOUNT" of each Letter of Credit shall
mean the maximum available to be drawn thereunder
(regardless of whether any conditions for drawing could
then be met).
"SUBSIDIARY" of any Person shall mean and include
(i) any corporation more than 50% of whose stock of any
class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time
stock of any class or classes of such corporation shall
have or might have voting power by reason of the happening
of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries and (ii) any
partnership, association, joint venture or other entity in
which such Person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the
time. Unless otherwise expressly provided, all references
herein to "Subsidiary" shall mean a Subsidiary of Borrower.
"TAXES" see Section 4.04(a).
"TOTAL COMMITMENT" shall mean, at any time, the
sum of the Commitments of each of the Banks.
"TOTAL LOSS" shall mean (i) the actual,
constructive, arranged, agreed, or compromised total loss
of any Fleet Rig; (ii) the requisition for title or other
compulsory acquisition or forfeiture of any Fleet Rig
otherwise than by requisition for hire; or (iii) the
capture, seizure, arrest, detention or confiscation of any
Fleet Rig by any government or by persons acting or
purporting to act on behalf of any government unless such
Fleet Rig is released from such capture, seizure, arrest or
detention within 180 days after the occurrence thereof.
"TOTAL UNUTILIZED COMMITMENT" shall mean, at any
time, (i) the Total Commitment at such time less (ii) the
sum of the aggregate principal amount of all Loans at such
time, PLUS the Letter of Credit Outstandings at such time.
"TRADE LETTER OF CREDIT" see Section 2.01(a).
"TYPE" shall mean any type of Loan determined
with respect to the interest option applicable thereto,
I.E., a Base Rate Loan or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as
in effect in the State of New York.
"UNFUNDED LIABILITIES" shall mean, with respect
to any Plan at any time, the amount (if any) by which
(i) the value of all benefit liabilities under such Plan,
determined on a current liability basis under Section
412(l)(7) of the Code, exceeds (ii) the fair market value
of all Plan assets allocable to such liabilities under
Title I of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent
valuation date for such Plan.
"UNPAID DRAWING" see Section 2.04(a).
"UNRESTRICTED SUBSIDIARY" shall mean (i) the
Subsidiaries treated as unrestricted under Indenture as of
the date hereof, each of which is set forth in ANNEX X
hereto and (ii) any Subsidiaries treated as Unrestricted
Subsidiaries pursuant to and in accordance with Section
8.05(b) hereof.
"VOTING STOCK" shall mean, with respect to any
corporation, the outstanding stock of all classes (or
equivalent interests) which ordinarily, in the absence of
contingencies, entitles holders thereof to vote for the
election of directors (or Persons performing similar
functions) of such corporation, even though the right so to
vote has been suspended by the happening of such a
contingency.
"WHOLLY-OWNED DOMESTIC SUBSIDIARY" shall mean, as
to any Person, any wholly-owned Subsidiary of such Person
which is a Domestic Subsidiary.
"WHOLLY-OWNED SUBSIDIARY" of any Person shall
mean any Subsidiary of such Person to the extent all of the
Capital Stock or other ownership interests in such
Subsidiary, other than directors' qualifying shares, is
owned directly or indirectly by such Person. Unless
otherwise expressly provided, all references herein to
"Wholly-Owned Subsidiary" shall mean a Wholly-Owned
Subsidiary of Borrower.
"WORKING CAPITAL" shall mean an amount determined
on a consolidated basis in accordance with GAAP) determined
for Borrower and the Subsidiaries (other than Unrestricted
Subsidiaries) equal to the sum of all current assets (other
than cash) less the sum of all current liabilities (other
than the current portion of any Indebtedness that was
long-term Indebtedness when incurred).
"WRITTEN or "IN WRITING" shall mean any form of
written communication or a communication by means of telex
or facsimile transmission.
SECTION 11. THE AGENTS.
11.01 APPOINTMENT. The Banks hereby designate
Bankers Trust Company as Administrative Agent to act as
specified herein and in the other Credit Documents. Each
Bank hereby irrevocably authorizes, and each holder of any
Note by the acceptance of such Note shall be deemed
irrevocably to authorize, the Administrative Agent to take
such action on its behalf under the provisions of this
Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein
and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to
or required of the Administrative Agent by the terms hereof
and thereof and such other powers as are reasonably
incidental thereto. The Administrative Agent may perform
any of its duties hereunder by or through its respective
officers, directors, agents, employees or Affiliates.
11.02 NATURE OF DUTIES. The Administrative
Agent shall not have any duties or responsibilities except
those expressly set forth in this Agreement and the other
Credit Documents. Neither the Administrative Agent nor any
of its respective officers, directors, agents, employees or
Affiliates shall be liable for any action taken or omitted
by it or them hereunder or under any other Credit Document
or in connection herewith or therewith, unless caused by
its or their gross negligence or willful misconduct. The
duties of the Administrative Agent shall be mechanical and
administrative in nature; the Administrative Agent shall
not have by reason of this Agreement or any other Credit
Document a fiduciary relationship in respect of any Bank or
the holder of any Note; and nothing in this Agreement or
any other Credit Document, expressed or implied, is
intended to or shall be so construed as to impose upon the
Administrative Agent any obligations in respect of this
Agreement or any other Credit Document except as expressly
set forth herein or therein.
11.03 LACK OF RELIANCE ON THE AGENTS.
Independently and without reliance upon the Agents, each
Bank and the holder of each Note, to the extent it deems
appropriate, has made and shall continue to make (i) its
own independent investigation of the financial condition
and affairs of Borrower and the Subsidiaries in connection
with the making and the continuance of the Loans and
issuance and/or participation in Letters of Credit and the
taking or not taking of any action in connection herewith
and (ii) its own appraisal of the creditworthiness of
Borrower and the Subsidiaries and, except as expressly
provided in this Agreement, the Agents shall not have any
duty or responsibility, either initially or on a continuing
basis, to provide any Bank or the holder of any Note with
any credit or other information with respect thereto,
whether coming into its possession before the making of the
Loans or at any time or times thereafter. The Agents shall
not be responsible to any Bank or the holder of any Note
for any recitals, statements, information, representations
or warranties herein or in any document, certificate or
other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or
sufficiency of this Agreement or any other Credit Document
or the financial condition of Borrower and the Subsidiaries
or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions
or conditions of this Agreement or any other Credit
Document, or the financial condition of Borrower and the
Subsidiaries or the existence or possible existence of any
Default or Event of Default.
11.04 CERTAIN RIGHTS OF THE ADMINISTRATIVE
AGENT. If the Administrative Agent shall request
instructions from the Required Banks with respect to any
act or action (including failure to act) in connection with
this Agreement or any other Credit Document, the
Administrative Agent shall be entitled to refrain from such
act or taking such action unless and until the
Administrative Agent shall have received instructions from
the Required Banks; and the Administrative Agent shall not
incur liability to any Person by reason of so refraining.
Without limiting the foregoing, neither any Bank nor the
holder of any Note shall have any right of action
whatsoever against the Administrative Agent as a result of
the Administrative Agent acting or refraining from acting
hereunder or under any other Credit Document in accordance
with the instructions of the Required Banks.
11.05 RELIANCE. The Administrative Agent shall
be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or
telephone message signed, sent or made by any Person that
the Administrative Agent believed to be the proper Person,
and, with respect to all legal matters pertaining to this
Agreement and any other Credit Document and its duties
hereunder and thereunder, upon advice of counsel selected
by the Administrative Agent (which may be counsel for
Borrower).
11.06 INDEMNIFICATION. To the extent the Agents
are not reimbursed and indemnified by Borrower, the Banks
will reimburse and indemnify the Agents, in proportion to
their respective "percentages" as used in determining the
Required Banks, for and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions,
judgments, costs, expenses or disbursements of whatsoever
kind or nature which may be imposed on, asserted against or
incurred by the Agents in performing their respective
duties hereunder or under any other Credit Document, in any
way relating to or arising out of this Agreement or any
other Credit Document; PROVIDED, HOWEVER, that no Bank
shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements
resulting from either of the Agents' gross negligence or
willful misconduct.
11.07 THE AGENTS IN THEIR INDIVIDUAL CAPACITY.
With respect to its obligation to make Loans under this
Agreement, the Agents shall have the rights and powers
specified herein for a "Bank" and may exercise the same
rights and powers as though it were not performing the
duties specified herein; and the term "Banks," "Required
Banks," "holders of Notes" or any similar terms shall,
unless the context clearly otherwise indicates, include the
Agents in their individual capacity. The Agents may accept
deposits from, lend money to, and generally engage in any
kind of banking, trust or other business with Borrower or
its Subsidiaries or any Affiliate thereof as if it were not
performing the duties specified herein, and may accept fees
and other consideration from Borrower or any Subsidiary for
services in connection with this Agreement and otherwise
without having to account for the same to the Banks.
11.08 HOLDERS. The Administrative Agent may deem
and treat the payee of any Note as the owner thereof for
all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the
case may be, shall have been filed with the Administrative
Agent. Any request, authority or consent of any Person
who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder,
transferee, assignee or indorsee, as the case may be, of
such Note or of any Note or Notes issued in exchange
therefor.
11.09 RESIGNATION BY THE ADMINISTRATIVE AGENT.
(a) The Administrative Agent may resign from the
performance of all its functions and duties hereunder
and/or under the other Credit Documents at any time by
giving 15 Business Days' prior written notice to Borrower
and the Banks. Such resignation shall take effect upon the
appointment of a successor Administrative Agent pursuant to
clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the
Required Banks shall appoint a successor Administrative
Agent hereunder or thereunder who shall be a commercial
bank or trust company reasonably acceptable to Borrower.
(c) If a successor Administrative Agent shall not
have been so appointed within such 15 Business Day period,
the Administrative Agent, with the consent of Borrower,
shall then appoint a successor Administrative Agent who
shall serve as Administrative Agent hereunder or thereunder
until such time, if any, as the Required Banks appoint a
successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been
appointed pursuant to clause (b) or (c) above by the 20th
Business Day after the date such notice of resignation was
given by the Administrative Agent, the Administrative
Agent's resignation shall become effective and the Required
Banks shall thereafter perform all the duties of the
Administrative Agent hereunder and/or under any other
Credit Document until such time, if any, as the Required
Banks appoint a successor Administrative Agent as provided
above.
SECTION 12. MISCELLANEOUS.
12.01 PAYMENT OF EXPENSES, ETC. Borrower agrees
to (and to cause each other Credit Party, in respect of the
Credit Document to which it is a party, to): (i) whether
or not the transactions herein contemplated are
consummated, pay all reasonable out-of-pocket costs and
expenses of the Administrative Agent in connection with the
negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred
to therein and any amendment, waiver or consent relating
thereto (including, without limitation, the reasonable fees
and disbursements of Cahill Gordon & Reindel and any local
counsel) and of the Administrative Agent and, after the
occurrence and during the continuance of an Event of
Default, each of the Banks in connection with the
enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without
limitation, the actual reasonable fees and disbursements of
counsel for the Administrative Agent and, after the
occurrence and during the continuance of an Event of
Default for each of the Banks); (ii) pay and hold each of
the Banks harmless from and against any and all present and
future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from
and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the
extent attributable to the Administrative Agent or such
Bank) to pay such taxes; and (iii) indemnify each Bank
(including in its capacity as the Administrative Agent or a
Letter of Credit Issuer), its officers, directors,
employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities,
claims, damages, expenses, fines or penalties incurred by
any of them as a result of, or arising out of, or in any
way related to, or by reason of, (a) any investigation,
litigation or other proceeding (whether or not any Bank is
a party thereto) related to the entering into and/or
performance of any Credit Document or the use of the
proceeds of any Loans hereunder or the consummation of any
transactions contemplated in any Credit Document, whether
initiated by Borrower or any other Person (other than the
Office of the Comptroller of Currency, the FDIC or other
regulatory authority having jurisdiction over any Bank if
not related to any action or inaction by Borrower or any
Subsidiary or any other event or occurrence relating to
Borrower or any Subsidiary), including, without limitation,
the actual reasonable fees and disbursements of counsel
incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such
losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified) or (b)
the actual or alleged presence of Hazardous Materials in
the air, surface water, groundwater, surface or subsurface
of any Real Property, offshore drilling rig, facility or
location at any time owned or operated by Borrower or any
Subsidiary, the generation, storage, transportation,
treatment, release or disposal of Hazardous Materials at
on, under or from any Real Property, offshore drilling rig,
facility or location at any time owned or operated by
Borrower or any Subsidiary, the non-compliance of Borrower
or any Subsidiary, or of any Real Property, offshore
drilling rig, facility or location at any time owned or
operated by Borrower or any Subsidiary with any
Environmental Law or any Environmental Claim asserted
against Borrower or any Subsidiary with any Environmental
Law or any Real Property, offshore drilling rig, facility
or location at any time owned or operated by Borrower or
any Subsidiary, including, in each case, without
limitation, the actual reasonable fees and disbursements of
counsel and other consultants incurred in connection with
any such investigation, litigation or other proceeding (but
excluding any losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross
negligence or willful misconduct of the Person to be
indemnified). To the extent that the undertaking to
indemnify, pay or hold harmless the Administrative Agent or
any Bank set forth in the preceding sentence may be
unenforceable because it is violative of any law or public
policy, Borrower shall make the maximum contribution to the
payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
12.02 RIGHT OF SETOFF. In addition to any rights
now or hereafter granted under applicable law or otherwise,
and not by way of limitation of any such rights, if an
Event of Default then exists, each Bank is hereby
authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to
Borrower or to any other Person, any such notice being
hereby expressly waived, to the extent permitted by
applicable law, to set off and to appropriate and apply any
and all deposits (general or special) and any other
Indebtedness at any time held or owing by such Bank
(including without limitation by branches and agencies of
such Bank wherever located) to or for the credit or the
account of Borrower against and on account of the
Obligations and liabilities of Borrower to such Bank under
any Credit Document, including, without limitation, all
interests in Obligations of Borrower purchased by such Bank
pursuant to Section 12.06(b), and all other claims of any
nature or description arising out of or connected with any
Credit Document, irrespective of whether or not such Bank
shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall
be contingent or unmatured.
12.03 NOTICES. (a) Except as otherwise
expressly provided herein, all notices and other
communications provided for hereunder shall be in writing
(including telex or telecopier communication) and mailed,
telexed, telecopied or delivered, if to Borrower or any
Subsidiary, at the address specified opposite its signature
below or in the other relevant Credit Documents, as the
case may be; if to any Bank, at its address specified for
such Bank on ANNEX II hereto; or, at such other address as
shall be designated by any party in a written notice to the
other parties hereto. All such notices and communications
shall be effective when received and, in the case of notice
by telecopier, after confirmation of such receipt has been
given by the recipient, excluding by way of automatic
receipt produced by telecopier.
(b) Without in any way limiting the obligation of
Borrower to confirm in writing any telephonic notice
permitted to be given hereunder, the Administrative Agent
or any Letter of Credit Issuer, as the case may be, may
prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice,
believed by the Administrative Agent or such Letter of
Credit Issuer in good faith to be from an Authorized
Officer of Borrower. In each such case, Borrower hereby
waives the right to dispute the Administrative Agent's or
such Letter of Credit Issuer's record of the terms of such
telephonic notice.
12.04 BENEFIT OF AGREEMENT. (k) This Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the
parties hereto; PROVIDED, HOWEVER, that Borrower may not
assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Banks.
Each Bank may at any time grant participations in any of
its rights hereunder or under any of the Notes to another
financial institution; PROVIDED, HOWEVER, that in the case
of any such participation, the participant shall not have
any rights under this Agreement or any of the other Credit
Documents (the participant's rights against such Bank in
respect of such participation to be those set forth in the
agreement executed by such Bank in favor of the participant
relating thereto) and all amounts payable by Borrower
hereunder shall be determined as if such Bank had not sold
such participation, except that the participant shall be
entitled to the benefits of Sections 1.10 and 4.04 of this
Agreement to the extent that such Bank would be entitled to
such benefits if the participation had not been entered
into or sold; PROVIDED, FURTHER, HOWEVER, that no Bank
shall transfer, grant or assign any participation under
which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or
waiver would (i) extend the final scheduled maturity of any
Loan or Note in which such participant is participating or
reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of the
applicability of any post-default increase in interest
rates), or reduce the principal amount thereof, or increase
such participant's participating interest in any Commitment
over the amount thereof then in effect (it being understood
that a waiver of any Default or Event of Default or of a
mandatory reduction in the Total Commitment, or a mandatory
prepayment, shall not constitute a change in the terms of
any Commitment) or (ii) consent to the assignment or
transfer by Borrower of any of its rights and obligations
under this Agreement.
(b) Notwithstanding the foregoing, (x) any Bank
may assign all or a portion of its outstanding Commitment
and its rights and obligations hereunder to its Affiliate
or to another Bank, and (y) with the consent of the
Administrative Agent, each Letter of Credit Issuer and
Borrower (which consent shall not be unreasonably withheld
or delayed and which consent of Borrower need not be
obtained at any time that a Default or Event of Default
shall have occurred and be continuing), any Bank may assign
all or a portion of its outstanding Commitment and its
rights and obligations hereunder to one or more Eligible
Transferees. Unless otherwise agreed to by Borrower, no
assignment pursuant to the immediately preceding sentence
shall to the extent such assignment represents an
assignment to an institution other than one or more Banks
hereunder, be in an aggregate amount less than $5.0 million
unless the entire Commitment of the assigning Bank is so
assigned. If any Bank so sells or assigns all or a part of
its rights hereunder or under the Notes, any reference in
this Agreement or the Notes to such assigning Bank shall
thereafter refer to such Bank and to the respective
assignee to the extent of their respective interests and
the respective assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same
rights and benefits as it would if it were such assigning
Bank. Each assignment pursuant to this Section 12.04(b)
shall be effected by the assigning Bank and the assignee
Bank executing an Assignment and Assumption Agreement. In
the event of any such assignment (x) to a commercial bank
or other financial institution not previously a Bank
hereunder, either the assigning or the assignee Bank shall
pay to the Administrative Agent a nonrefundable assignment
fee of $3,500 and (y) to a Bank, either the assigning or
assignee Bank shall pay to Administrative Agent a
nonrefundable assignment fee of $1,500, and at the time of
any assignment pursuant to this Section 12.04(b), (i) ANNEX
I hereto shall be deemed to be amended to reflect the
Commitment of the respective assignee (which shall result
in a direct reduction to the Commitment of the assigning
Bank) and of the other Banks, and (ii) if any such
assignment occurs after the Initial Borrowing Date, if
requested by the assigning Bank and the assignee Bank,
Borrower will issue new Notes to the respective assignee
and to the assigning Bank in conformity with the
requirements of Section 1.05. Each Bank and Borrower agree
to execute such documents (including, without limitation,
amendments to this Agreement and the other Credit
Documents) as shall be necessary to effect the foregoing.
Nothing in this clause (b) shall prevent or prohibit any
Bank from pledging its Notes or Loans to a Federal Reserve
Bank in support of borrowings made by such Bank from such
Federal Reserve Bank.
(c) Notwithstanding any other provisions of this
Section 12.04, no transfer or assignment of the interests
or obligations of any Bank hereunder or any grant of
participation therein shall be permitted if such transfer,
assignment or grant would require Borrower to file a
registration statement with the SEC or to qualify the Loans
under the "Blue Sky" laws of any State.
(d) Each Bank initially party to this Agreement
hereby represents, and each Person that became a Bank
pursuant to an assignment permitted by this Section 12
will, upon its becoming party to this Agreement, represent
that it is a commercial lender, other financial institution
or other "accredited" investor (as defined in SEC
Regulation D) which makes loans in the ordinary course of
its business and that it will make or acquire Loans for its
own account in the ordinary course of such business;
PROVIDED, HOWEVER, that subject to the preceding clauses
(a) and (b), the disposition of any promissory notes or
other evidences of or interests in Indebtedness held by
such Bank shall at all times be within its exclusive
control.
12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of the Administrative Agent or any
Bank in exercising any right, power or privilege under any
Credit Document and no course of dealing between Borrower
or any Subsidiary and the Administrative Agent or any Bank
shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege under any
Credit Document preclude any other or further exercise
thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive
of any rights or remedies which the Administrative Agent or
any Bank would otherwise have. No notice to or demand on
Borrower or any Subsidiary in any case shall entitle
Borrower or any Subsidiary to any other or further notice
or demand in similar or other circumstances or constitute a
waiver of the rights of the Administrative Agent or the
Banks to any other or further action in any circumstances
without notice or demand.
12.06 PAYMENTS PRO RATA. (a) The Administrative
Agent agrees that promptly after its receipt of each
payment from or on behalf of Borrower or any Subsidiary in
respect of any Obligations of Borrower or any Subsidiary
hereunder, it shall distribute such payment to the Banks
(other than any Bank that has expressly waived its right to
receive its PRO RATA share thereof) PRO RATA based upon
their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should
receive any amount hereunder (whether by voluntary payment,
by realization upon security, by the exercise of the right
of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit
Documents, or otherwise) which is applicable to the payment
of the principal of, or interest on, the Loans, Unpaid
Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater
proportion than the total of such Obligation then owed and
due to such Bank bears to the total of such Obligation then
owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall
purchase for cash without recourse or warranty from the
other Banks an interest in the Obligations of Borrower or
any Subsidiary, respectively, to such Banks in such amount
as shall result in a proportional participation by all of
the Banks in such amount; PROVIDED, HOWEVER, that if all or
any portion of such excess amount is thereafter recovered
from such Bank, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but
without interest.
(c) Notwithstanding anything to the contrary
contained herein, the provisions of the preceding Sections
12.06(a) and (b) shall be subject to the express provisions
of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to
Defaulting Banks.
12.07 CALCULATIONS; COMPUTATIONS. (a) The
financial statements to be furnished to the Banks pursuant
hereto shall be made and prepared in accordance with GAAP
consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise
disclosed in writing by Borrower to the Banks); PROVIDED,
HOWEVER, that (x) except as otherwise specifically provided
herein, all computations determining compliance with
Section 8, including definitions used therein, shall
utilize accounting principles and policies in effect at the
time of the preparation of, and in conformity with those
used to prepare, the September 30, 1996 historical
financial statements of Borrower delivered to the Banks
pursuant to Section 6.10(b) and (y) that if at any time the
computations determining compliance with Section 8 utilize
accounting principles different from those utilized in the
financial statements furnished to the Banks, such financial
statements shall be accompanied by reconciliation work-sheets.
(b) All computations of interest and Fees
hereunder shall be made on the actual number of days
elapsed over a year of 360 days.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL. (a) This Agreement and the
other Credit Documents and the rights and obligations of
the parties hereunder and thereunder shall be construed in
accordance with and be governed by the law of the state of
New York. Any legal action or proceeding with respect to
this Agreement or any other Credit Document may be brought
in the courts of the state of New York or of the United
States for the Southern District of New York, and, by
execution and delivery of this Agreement, Borrower hereby
irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction
of the aforesaid courts. To the extent permitted by
applicable law, Borrower further irrevocably consents to
the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage
prepaid, to Borrower located outside New York City and by
hand delivery to Borrower located within New York City, at
its address for notices pursuant to Section 12.03, such
service to become effective 30 days after such mailing.
Nothing herein shall affect the right of the Administrative
Agent, any Bank to serve process in any other manner
permitted by law or to commence legal proceedings or
otherwise proceed against Borrower in any other
jurisdiction.
(b) To the extent permitted by applicable law,
Borrower hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in
connection with this Agreement or any other Credit Document
brought in the courts referred to in clause (a) above and
hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or
proceeding brought in any such court has been brought in an
inconvenient forum.
(c) Each of the parties to this agreement hereby
irrevocably waives all right to a trial by jury in any
action, proceeding or counterclaim arising out of or
relating to this agreement, the other credit documents or
the transactions contemplated hereby or thereby.
12.09 COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when
so executed and delivered shall be an original, but all of
which shall together constitute one and the same
instrument. A set of counterparts executed by all the
parties hereto shall be lodged with Borrower and the
Administrative Agent.
12.10 EFFECTIVENESS. This Agreement shall become
effective on the date (the "EFFECTIVENESS DATE") on which
Borrower and each of the Banks shall have signed a copy
hereof (whether the same or different copies) and shall
have delivered the same to the Administrative Agent at the
Payment Office of the Administrative Agent or, in the case
of the Banks, shall have given to the Administrative Agent
telephonic (confirmed in writing), written telex or
facsimile transmission notice (actually received) at such
office that the same has been signed and mailed to it.
12.11 HEADINGS DESCRIPTIVE. The headings of the
several sections and subsections of this Agreement are
inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this
Agreement.
12.12 AMENDMENT OR WAIVER. (a) Neither this
Agreement nor any other Credit Document nor any terms
hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or
termination is in writing signed by Borrower and the
Required Banks; PROVIDED, HOWEVER, that no such change,
waiver, discharge or termination shall, without the consent
of each Bank (other than a Defaulting Bank) affected
thereby, (i) extend the Maturity Date, or reduce the rate
or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default
increase in interest rates) or Fees thereon, or reduce the
principal amount thereof, (ii) increase the Commitment of
any Bank over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default
or of a mandatory reduction in the Total Commitment shall
not constitute a change in the terms of any Commitment of
any Bank), (iii) amend, modify or waive any provision of
this Section, (iv) reduce the percentage specified in the
definition of Required Banks or (v) consent to the
assignment or transfer by Borrower of any of its rights and
obligations under this Agreement. No provision of Sections
2 or 11, or any other provisions relating to any Letter of
Credit Issuer or the Administrative Agent may be modified
without the consent of such Letter of Credit Issuer or the
Administrative Agent, respectively.
(b) If, in connection with any proposed change,
waiver, discharge or termination to any of the provisions
of this Agreement as contemplated by clauses (i), (iii),
(iv) or (v) of the proviso to Section 12.12(a), the consent
of the Required Banks is obtained but the consent of one or
more of such other Banks whose consent is required is not
obtained, then Borrower shall have the right to replace
each such non-consenting Bank or Banks (so long as all
non-consenting Banks are so replaced) with one or more
Replacement Banks pursuant to Section 1.13 so long as at
the time of such replacement, each such Replacement Bank
consents to the proposed change, waiver, discharge or
termination; PROVIDED, HOWEVER, that Borrower shall not
have the right to replace a Bank solely as a result of the
exercise of such Bank's rights (and the withholding of any
required consent by such Bank) pursuant to clause (ii) of
the proviso to Section 12.12(a).
12.13 SURVIVAL. All indemnities set forth herein
including, without limitation, in Section 1.10, 1.11, 4.04,
11.07 or 12.01 shall survive the execution and delivery of
this Agreement and the making and repayment of the Loans.
12.14 DOMICILE OF LOANS. Each Bank may transfer
and carry its Loans at, to or for the account of any branch
office, subsidiary or Affiliate of such Bank; PROVIDED,
HOWEVER, that Borrower shall not be responsible for costs
arising under Section 1.10 or 4.04 resulting from any such
transfer (other than a transfer pursuant to Section
1.12(a)) to the extent not otherwise applicable to such
Bank prior to such transfer.
12.15 CONFIDENTIALITY. The Banks shall hold all
non-public information obtained pursuant to the
requirements of this Agreement confidential and in any
event may make disclosure reasonably required by any BONA
FIDE transferee or participant in connection with the
contemplated transfer of any Loans or participation therein
(so long as such transferee or participant agrees to be
bound by the provisions of this Section 12.15) or as
required or requested by any governmental agency or
representative thereof or pursuant to legal process;
PROVIDED, HOWEVER, that, unless specifically prohibited by
applicable law or court order, each Bank shall notify
Borrower of any request by any governmental agency or
representative thereof (other than any such request in
connection with an examination of the financial condition
of such Bank by such governmental agency) for disclosure of
any such non-public information prior to disclosure of such
information; PROVIDED, FURTHER, HOWEVER, that in no event
shall any Bank be obligated or required to return any
materials furnished by Borrower or any Subsidiary.
12.16 REGISTRY. Borrower hereby designates the
Administrative Agent to serve as Borrower's agent, solely
for purposes of this Section 12.16, to maintain a register
(the "REGISTER") on which it will record the Commitments
from time to time of each of the Banks, the Loans made by
each of the Banks and each repayment in respect of the
principal amount of the Loans of each Bank. Failure to
make any such recordation, or any error in such recordation
shall not affect Borrower's obligations in respect of such
Loans. With respect to any Bank, the transfer of the
Commitments of such Bank and the rights to the principal
of, and interest on, any Loan made pursuant to such
Commitments shall not be effective until such transfer is
recorded on the Register maintained by the Administrative
Agent with respect to ownership of such Commitments and
Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans
shall remain owing to the transferor. The registration of
assignment or transfer of all or part of any Commitments
and Loans shall be recorded by the Administrative Agent on
the Register only upon the acceptance by the Administrative
Agent of a properly executed and delivered Assignment and
Assumption Agreement pursuant to Section 12.04(b).
Coincident with the delivery of such an Assignment and
Assumption Agreement to the Administrative Agent for
acceptance and registration of assignment or transfer of
all or part of a Loan, or as soon thereafter as
practicable, the assigning or transferor Bank shall
surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate principal amount
shall be issued to the assigning or transferor Bank and/or
the new Bank.
[Signature Pages Follow]
IN WITNESS WHEREOF, each of the parties hereto
has caused a counterpart of this Agreement to be duly
executed and delivered as of the date first above written.
ADDRESS: GLOBAL MARINE INC.
777 N. Eldridge Road
Houston, Texas 77079-4416 By: /s/ James L. McCulloch
Name: James L. McCulloch
Title: Vice President
BANKERS TRUST COMPANY,
Individually and as
Administrative Agent
By: /s/Patricia Hogan
Name: Patricia Hogan
Title: Vice President
SOCIETE GENERALE,
Individually and as Co-Agent
By: /s/John J. Wagner
Name: John J. Wagner
Title: Vice President
CHRISTIANIA BANK og
KREDITKASSE, NEW YORK BRANCH
By: /s/ Martin Lunder
Name: Martin Lunder
Title: First Vice President
By: /s/ Hans Chr. Kjelsrud
Name: Hans Chr. Kjelsrud
Title: Vice President
CREDIT LYONNAIS NEW YORK
BRANCH
By: /S/ Pascal Poupelle
Name: Pascal Poupelle
Title: Sr. Vice President
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:/s/ Michael J. Kolosowsky
Name: Michael J. Kolosowsky
Title: Vice President
THE FUJI BANK, LIMITED
By: /s/ David Kelley
Name: David Kelley
Title: Sr. Vice President
THE SANWA BANK, LIMITED,
DALLAS AGENCY
By: /s/ Blake Wright
Name: Blake Wright
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ A. S. Norsworthy
Name: A. S. Norsworthy
Title: Sr. Team Leader -
Loan Operations
SKANDINAVISKA ENSKILDA
BANKEN AB (publ.)
By: /s/ Per K. Frolick/Lars Bjerrek
Name: Per K. Frolick/Lars Bjerrek
Title:
THE SUMITOMO BANK, LIMITED
By: /s/ Harumitsu Seki
Name: Harumitsu Seki
Title: General Manager
GUARANTY
GUARANTY, dated as of February 12, 1997, made by
the undersigned (each a "GUARANTOR" and collectively, the
"GUARANTORS"). Except as otherwise defined herein, terms
used herein and defined in the Credit Agreement (as herein-
after defined) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Global Marine Inc. ("BORROWER"), various
financial institutions from time to time party thereto (the
"BANKS"), Bankers Trust Company, as Administrative Agent
(the "ADMINISTRATIVE AGENT"), and Societe Generale, as Co-Agent
(the "CO-AGENT", have entered into a CREDIT AGREEMENT, dated
as of February 12, 1997, (as amended, modified or supplemented
from time to time, the "CREDIT AGREEMENT"), providing for the
making of Loans and the issuance of, and participation in,
Letters of Credit as contemplated therein (the Banks, the
Administrative Agent, the Co-Agent and each Letter of Credit
Issuer, are herein collectively called the "CREDITORS");
WHEREAS, it is a condition to the making of Loans
and the issuance of, and participation in, Letters of
Credit under the Credit Agreement that each Guarantor shall
have executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from
the incurrence of Loans by Borrower and the issuance of
Letters of Credit under the Credit Agreement and,
accordingly, desires to execute this Guaranty in order to
satisfy the conditions described in the preceding paragraph
and to induce the Banks to make Loans to Borrower and the
Letter of Credit Issuers to issue Letters of Credit;
NOW, THEREFORE, in consideration of the foregoing
and other benefits accruing to each Guarantor, the receipt
and sufficiency of which are hereby acknowledged, each
Guarantor hereby makes the following representations and
warranties to the Creditors and hereby covenants and agrees
with each Creditor as follows:
1. (a) Each Guarantor (i) is a duly organized and
validly existing corporation, partnership, association,
limited liability company or other business entity in good
standing under the laws of the jurisdiction of its
organization, (ii) has the power and authority and has
obtained all requisite governmental licenses,
authorizations, consents and approvals (a) to own its
property and assets and (b) to transact the business in
which it is engaged, except in such case where the failure
to have such power and authority or to obtain such
governmental licenses, authorizations, consents and
approvals, individually and in the aggregate, (x) is not
reasonably likely to have a Material Adverse Effect and (y)
is not reasonably likely to have a material adverse effect
on the rights and remedies of the Banks or the
Administrative Agent under the Credit Documents, taken as a
whole, or on the ability of the Credit Parties, taken as a
whole, to perform their obligations to the Banks and the
Administrative Agent under the Credit Documents, and (iii)
is duly qualified and is authorized to do business and is
in good standing in all jurisdictions where it is required
to be so qualified and where the failure to be so qualified
could have a Material Adverse Effect.
(b) Each Guarantor has the power and authority
to execute, deliver and carry out the terms and provisions
of this Guaranty and each other Credit Document to which it
is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance of this
Guaranty and each such other Credit Document. Each
Guarantor has duly executed and delivered this Guaranty and
each other Credit Document to which it is a party and this
Guaranty and each such other Credit Document constitutes
the legal, valid and binding obligation of each such
Guarantor, enforceable against such Person in accordance
with its terms, except to the extent that the
enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is
sought in equity or at law).
(c) Neither the execution, delivery or
performance by each Guarantor of this Guaranty or any other
Credit Document to which it is a party nor compliance with
the terms and provisions thereof (i) will contravene any
applicable provision of any law, statute, rule, regulation,
order, writ, injunction or decree of any court or
governmental instrumentality of the United States or any
State thereof, (ii) will result in any breach of any of the
terms, covenants, conditions or provisions of, or
constitute a default under (or with notice or lapse of time
or both would constitute a default under), or result in the
creation or imposition of (or the obligation to create or
impose) any Lien upon any of the property or assets of such
Guarantor or any of its Subsidiaries pursuant to the terms
of, any indenture, mortgage, deed of trust, agreement or
other instrument to which such Guarantor or any of its
Subsidiaries is a party or by which it or any of its
properties or assets are bound or to which it is subject or
(iii) will violate any provision of the Certificate or
Articles of Incorporation, By-Laws or other organizational
documents of such Guarantor or any of its Subsidiaries
(except for, in the case of clauses (i) and (ii) above
only, contraventions, breaches, defaults, creations or
impositions which, individually and in the aggregate, (x)
are not reasonably likely to have a Material Adverse Effect
and (y) are not reasonably likely to have a material
adverse effect on the rights or remedies of the Banks or
the Administrative Agent under the Credit Documents, taken
as a whole, or on the ability of the Credit Parties, taken
as a whole, to perform their obligations to the Banks and
the Administrative Agent under the Credit Documents).
(d) No Guarantor nor any of its Subsidiaries is
(i) in contravention of any applicable provision of any
law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality of the
United States or any State thereof, (ii) in breach of any
of the terms, covenants, conditions or provisions of, or in
default under (or with notice or lapse of time or both
would be in default under), any indenture, mortgage, deed
of trust, agreement or other instrument to which such
Guarantor or any of its Subsidiaries is a party or by which
it or any of its properties or assets are bound or to which
it is subject or (iii) in violation of any provision of the
Certificate or Articles of Incorporation, By-Laws or other
organizational documents of such Guarantor or any of its
Subsidiaries (except for, in the case of clauses (i) and
(ii) above only, contraventions, breaches or defaults
which, individually and in the aggregate, (x) are not
reasonably likely to have a Material Adverse Effect and (y)
are not reasonably likely to have a material adverse effect
on the rights or remedies of the Banks or the
Administrative Agent under the Credit Documents, taken as a
whole, or on the ability of the Credit Parties, taken as a
whole, to perform their obligations to the Banks and the
Administrative Agent under the Credit Documents).
(e) Except for the orders, consents, approvals,
licenses, authorizations, validations, recordings,
registrations and exemptions that have already been duly
made or obtained and remain in full force and effect, no
order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with,
or exemption by, any foreign or domestic governmental or
public body or authority, or any subdivision thereof, is
necessary or is required to authorize or is required in
connection with (i) the execution, delivery and performance
of this Guaranty or any other Credit Document to which such
Guarantor is a party or (ii) the legality, validity,
binding effect or enforceability of this Guaranty or any
such other Credit Document.
(f) There are no actions, suits or proceedings
by an administrative, governmental or other public
authority or other Person pending or, to the best of each
Guarantor's knowledge, threatened against or with respect
to such Guarantor or any of its Subsidiaries or any of
their respective properties or assets (i) that are likely
to have a Material Adverse Effect or (ii) that are
reasonably likely to have a material adverse effect on the
rights or remedies of the Banks or the Administrative Agent
under the Credit Documents, taken as a whole, or on the
ability of the Credit Parties, taken as a whole, to perform
their obligations to the Banks and the Administrative Agent
under the Credit Documents.
2. (a) Each Guarantor, jointly and severally,
irrevocably and unconditionally, guarantees to the
Creditors the full and prompt payment when due (whether at
the stated maturity, by acceleration or otherwise) of (x)
the principal of and interest on the Notes issued by, and
the Loans made to, Borrower under the Credit Agreement, and
all reimbursement obligations and Unpaid Drawings under the
Letters of Credit issued under the Credit Agreement and (y)
all other obligations (including obligations which, but for
the automatic stay under Section 362(a) of the Bankruptcy
Code, would become due) and liabilities owing by Borrower
to the Creditors under the Credit Agreement (including,
without limitation, indemnities, Fees and interest thereon)
now existing or hereafter incurred under, or in connection
with, the Credit Agreement or any other Credit Document and
the due performance and compliance with the terms of the
Credit Documents by Borrower (all such principal, interest,
liabilities and obligations being herein collectively
called the "GUARANTEED OBLIGATIONS"). Each Guarantor
understands, agrees and confirms that the Creditors may
enforce this Guaranty up to the full amount of the
Guaranteed Obligations against each Guarantor without pro-
ceeding against any other Guarantor or Borrower, against
any security for the Guaranteed Obligations, or under any
other guaranty covering all or a portion of the Guaranteed
Obligations. All payments by each Guarantor under this
Guaranty shall be made on the same basis as payments by
Borrower under Sections 4.03 and 4.04 of the Credit Agree-
ment.
(b) Notwithstanding any other provision of this
Guaranty to the contrary, the maximum aggregate amount of
Guaranteed Obligations which each Guarantor agrees to
guarantee pursuant to this Guaranty shall in no event
exceed the maximum amount of Guaranteed Obligations which
can be guaranteed by such Guarantor under applicable
federal and state laws relating to the insolvency of the
debtors.
(c) Notwithstanding any other provision of this
Guaranty to the contrary,
(i) as of the date hereof, the maximum
aggregate amount of Guaranteed Obligations each Guarantor
executing and delivering this Guaranty on the date hereof
agrees to guaranty pursuant to this Guaranty shall in no
event exceed the maximum amount of Guaranteed Obligations
which can be guaranteed by each Guarantor pursuant to the
Indenture, as determined on the date hereof; PROVIDED,
HOWEVER, that on each date that pursuant to the Indenture
any such Guarantor may guarantee an aggregate amount of
Guaranteed Obligations greater than that on the date
hereof, the maximum aggregate amount of Guaranteed
Obligations guaranteed by such Guarantor pursuant to this
Guaranty shall increase by such amount.
(ii) as of the date any Subsidiary of the
Borrower becomes a Guarantor hereunder pursuant to Section
7.11 of the Credit Agreement, the maximum aggregate amount
of Guaranteed Obligations such Guarantor agrees to guaranty
pursuant to this Guaranty shall in no event exceed the
maximum amount of Guaranteed Obligations which can be
guaranteed by such Guarantor pursuant to the Indenture (as
in effect on the date hereof), as determined on such date;
PROVIDED, HOWEVER, that on each date that pursuant to the
Indenture such Guarantor may guarantee an aggregate amount
of Guaranteed Obligations greater than that on the date
such Guarantor became a Guarantor hereunder, the maximum
aggregate amount of Guaranteed Obligations guaranteed by
such Guarantor pursuant to this Guaranty shall increase by
such amount;
PROVIDED, FURTHER, HOWEVER, that the limitations set forth
in this subparagraph (c) of Section 2 shall no longer apply
if there are no Senior Secured Notes outstanding or the
restrictions in the Indenture limiting the amount of
Guaranteed Obligations that can be incurred by Subsidiaries
are no longer in effect.
3. Additionally, each Guarantor, jointly and
severally, unconditionally and irrevocably, guarantees,
subject to Section 2 hereof, the payment of any and all
Guaranteed Obligations of Borrower to the Creditors,
whether or not due or payable by Borrower, upon the
occurrence in respect of Borrower of any of the events
specified in Section 9.05 of the Credit Agreement, and
unconditionally and irrevocably, jointly and severally,
promises to pay such Guaranteed Obligations to the Credi-
tors, or order, on demand, in lawful money of the United
States. This Guaranty shall constitute a guaranty of
payment, and not of collection.
4. The liability of each Guarantor hereunder is
exclusive and independent of any security for or other
guaranty of the indebtedness of Borrower whether executed
by such Guarantor, any other Guarantor, any other guarantor
or by any other party, and the liability of each Guarantor
hereunder shall not be affected or impaired by (a) any
direction as to application of payment by Borrower or by
any other party, (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor
or of any other party as to the indebtedness of Borrower,
(c) any payment on or in reduction of any such other
guaranty or undertaking, (d) any dissolution, termination
or increase, decrease or change in personnel by Borrower,
(e) any payment made to any Creditor which any Creditor
repays to Borrower pursuant to court order in any bank-
ruptcy, reorganization, arrangement, moratorium or other
debtor relief proceeding, and each Guarantor waives any
right to the deferral or modification of its obligations
hereunder by reason of any such proceeding, (f) any action
or inaction by the Creditors as contemplated in Section 6
hereof, or (g) any invalidity, irregularity or
unenforceability of all or part of the Guaranteed
Obligations or of any security therefor.
5. The obligations of each Guarantor hereunder
are independent of the obligations of any other Guarantor,
any other guarantor or Borrower, and a separate action or
actions may be brought and prosecuted against each Guar-
antor whether or not action is brought against any other
Guarantor, any other guarantor or Borrower and whether or
not any other Guarantor, any other guarantor or Borrower is
joined in any such action or actions. Any payment by
Borrower or other circumstance which operates to toll any
statute of limitations as to Borrower shall operate to toll
the statute of limitations as to each Guarantor with
respect to the Obligations of Borrower.
6. Each Guarantor hereby waives notice of accep-
tance of this Guaranty and notice of any liability to which
it may apply, and waives promptness, diligence,
presentment, demand of payment, protest, notice of intent
to accelerate, notice of acceleration, notice of dishonor
or nonpayment of any such liabilities, suit or taking of
other action by the Administrative Agent or any other
Creditor against, and any other notice to, any party liable
thereon (including such Guarantor, any other guarantor or
Borrower).
7. Any Creditor may, to the extent permitted by
applicable law, at any time and from time to time without
the consent of, or notice to, any Guarantor, without
incurring responsibility to such Guarantor, without
impairing or releasing the obligations of such Guarantor
hereunder, upon or without any terms or conditions and in
whole or in part:
(a) change the manner, place or terms of payment
of, and/or change or extend the time of payment of,
renew or alter, any of the Guaranteed Obligations, any
security therefor, or any liability incurred directly
or indirectly in respect thereof, and the guaranty
herein made shall apply to the Guaranteed Obligations
as so changed, extended, renewed or altered;
(b) sell, exchange, release, surrender, realize
upon or otherwise deal with in any manner and in any
order any property by whomsoever at any time pledged
or mortgaged to secure, or howsoever securing, the
Guaranteed Obligations or any liabilities (including
any of those hereunder) incurred directly or
indirectly in respect thereof or hereof, and/or any
offset thereagainst;
(c) exercise or refrain from exercising any
rights against Borrower or others or otherwise act or
refrain from acting;
(d) settle or compromise any of the Guaranteed
Obligations, any security therefor or any liability
(including any of those hereunder) incurred directly
or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to
the payment of any liability (whether due or not) of
Borrower to creditors of Borrower;
(e) apply any sums by whomsoever paid or howso-
ever realized to any liability or liabilities of
Borrower to the Creditors regardless of what
liabilities of Borrower remain unpaid;
(f) release or substitute any one or more
endorsers, guarantors, any Credit Party or other
obligors;
(g) consent to or waive any breach of, or any
act, omission or default under, any of the Credit
Documents or any of the instruments or agreements
referred to therein, or otherwise amend, modify or
supplement any of the Credit Documents or any of such
other instruments or agreements; and/or
(h) act or fail to act in any manner referred to
in this Guaranty which may deprive such Guarantor of
its right to subrogation against Borrower to recover
full indemnity for any payments made pursuant to this
Guaranty.
8. To the extent permitted by applicable law, no
invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security
therefor shall affect, impair or be a defense to this
Guaranty, and this Guaranty shall be primary, absolute and
unconditional notwithstanding the occurrence of any event
or the existence of any other circumstances which might
constitute a legal or equitable discharge of a surety or
guarantor except, with respect to any Guarantor, payment in
full of the Guaranteed Obligations guaranteed by it, or,
with respect to any Guarantor, the release of such
Guarantor from this Guaranty pursuant to Section 22 hereof
and the Credit Agreement.
9. This Guaranty is a continuing one and all
liabilities to which it applies or may apply under the
terms hereof shall be conclusively presumed to have been
created in reliance hereon. To the extent permitted by
applicable law, no failure or delay on the part of any
Creditor in exercising any right, power or privilege here-
under shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The
rights and remedies herein expressly specified are cumula-
tive and not exclusive of any rights or remedies which any
Creditor would otherwise have. No notice to or demand on
any Guarantor in any case shall entitle such Guarantor to
any other further notice or demand in similar or other
circumstances or constitute a waiver of the rights of any
Creditor to any other or further action in any circum-
stances without notice or demand. It is not necessary for
any Creditor to inquire into the capacity or powers of
Borrower or any of its Subsidiaries or the officers,
directors, partners or agents acting or purporting to act
on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall
be guaranteed hereunder.
10. Any indebtedness of Borrower now or here-
after held by any Guarantor is hereby subordinated to the
indebtedness of Borrower to the Creditors; and such
indebtedness of Borrower to any Guarantor, if the
Administrative Agent, after an Event of Default has
occurred, so requests, shall be collected, enforced and
received by such Guarantor as trustee for the Creditors and
be paid over to the Creditors on account of the
indebtedness of Borrower to the Creditors, but without
affecting or impairing in any manner the liability of such
Guarantor under the other provisions of this Guaranty.
Prior to the transfer by any Guarantor of any note or
negotiable instrument evidencing any indebtedness of
Borrower to such Guarantor, such Guarantor shall mark such
note or negotiable instrument with a legend that the same
is subject to this subordination. Without limiting the
generality of the foregoing, each Guarantor hereby agrees
with the Creditors that it will not exercise any right of
subrogation which it may at any time otherwise have as a
result of this Guaranty (whether contractual, under Section
509 of the Bankruptcy Code or otherwise) until all
Guaranteed Obligations have been irrevocably paid in full
in cash.
11. (a) Each Guarantor waives any right (except
as shall be required by applicable law and cannot be
waived) to require the Creditors to (A) proceed against
Borrower, any other Guarantor, any other guarantor or any
other party, (B) proceed against or exhaust any security
held from Borrower, any other Guarantor, any other
guarantor or any other party or (C) pursue any other remedy
in the Creditors' power whatsoever. Each Guarantor waives,
to the extent permitted by applicable law, any defense
based on or arising out of any defense of Borrower, any
other Guarantor, any other guarantor or any other party
other than payment in full of its respective Guaranteed
Obligations, including without limitation any defense based
on or arising out of the disability of Borrower, any other
Guarantor, any other guarantor or any other party, or the
unenforceability of its respective Guaranteed Obligations
or any part thereof from any cause, or the cessation from
any cause of the liability of Borrower other than payment
in full of its respective Guaranteed Obligations. The
Creditors may, at their election, foreclose on any security
held by the Administrative Agent or the other Creditors by
one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable
(to the extent such sale is permitted by applicable law),
or exercise any other right or remedy the Creditors may
have against Borrower or any other party, or any security,
without affecting or impairing in any way the liability of
any Guarantor hereunder except to the extent the respective
Guaranteed Obligations have been paid in full. Each
Guarantor waives any defense arising out of any such
election by the Creditors, even though such election
operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of such Guarantor
against Borrower or any other party or any security.
(b) Each Guarantor waives all presentments,
demands for performance, protests and notices, including
without limitation notices of nonperformance, notices of
protest, notice of intent to accelerate, notice of
acceleration, notices of dishonor, notices of acceptance of
this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. Each
Guarantor assumes all responsibility for being and keeping
itself informed of Borrower's financial condition and
assets, and of all other circumstances bearing upon the
risk of nonpayment of any of the Guaranteed Obligations and
the nature, scope and extent of the risks which such
Guarantor assumes and incurs hereunder, and agrees that the
Creditors shall have no duty to advise any Guarantor of
information known to them regarding such circumstances or
risks.
12. The Creditors agree that this Guaranty may
be enforced only by the action of the Administrative Agent
acting upon the instructions of the Required Banks and that
no Creditor shall have any right individually to seek to
enforce or to enforce this Guaranty, it being understood
and agreed that such rights and remedies may be exercised
by the Administrative Agent for the benefit of the
Creditors upon the terms of this Guaranty. The Creditors
further agree that this Guaranty may not be enforced
against any director, officer, employee or stockholder of
any Guarantor (except to the extent such stockholder is
also a Guarantor hereunder).
13. Each Guarantor covenants and agrees that on
and after the date hereof and until the termination of the
Total Commitment and when no Letter of Credit or Note
remains outstanding and all Guaranteed Obligations have
been paid in full, such Guarantor shall take, or will
refrain from taking, as the case may be, all actions that
are necessary to be taken or not taken so that no violation
of any provision, covenant or agreement contained in
Section 7 or 8 of the Credit Agreement, and so that no
Event of Default, is caused by the actions of such Guar-
antor or any of its Subsidiaries.
14. The Guarantors hereby jointly and severally
agree to pay all reasonable out-of-pocket costs and
expenses of each Creditor in connection with the
enforcement of this Guaranty and any amendment, waiver or
consent relating hereto (including, without limitation, the
reasonable fees and disbursements of counsel employed by
any of the Creditors).
15. This Guaranty shall be binding upon each
Guarantor and its successors and assigns and shall inure to
the benefit of the Creditors and their successors and
assigns.
16. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated
(other than pursuant to Section 22 hereof) except with the
written consent of the Required Banks (or to the extent
required by Section 12.12 of the Credit Agreement, with the
written consent of each Bank) and each Guarantor affected
thereby (it being understood that the addition or release
of any Guarantor hereunder shall not constitute a change,
waiver, discharge or termination affecting any Guarantor
other than the Guarantor so added or released).
17. Each Guarantor acknowledges that an executed
(or conformed) copy of each of the Credit Documents has
been made available to its principal executive officers and
such officers are familiar with the contents thereof.
18. In addition to any rights now or hereafter
granted under applicable law (including, without
limitation, Section 151 of the New York Debtor and Creditor
Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of
Default (such term to mean and include any "Event of
Default" as defined in the Credit Agreement continuing
after any applicable grace period), each Creditor is hereby
authorized at any time or from time to time, without notice
to any Guarantor or to any other Person, any such notice
being expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any
other indebtedness at any time held or owing by such
Creditor to or for the credit or the account of such
Guarantor, against and on account of the obligations and
liabilities of such Guarantor to such Creditor under this
Guaranty, irrespective of whether or not such Creditor
shall have made any demand hereunder and although said
obligations, liabilities, deposits or claims, or any of
them, shall be contingent or unmatured.
19. All notices, requests, demands or other com-
munications pursuant hereto shall be deemed to have been
duly given or made when delivered to the Person to which
such notice, request, demand or other communication is
required or permitted to be given or made under this Guar-
anty, addressed to such party at (i) in the case of any
Creditor, as provided in the Credit Agreement and (ii) in
the case of any Guarantor, at its address set forth
opposite its signature below; or in any case at such other
address as any of the Persons listed above may hereafter
notify the others in writing.
20. If any claim is ever made upon any Creditor
for repayment or recovery of any amount or amounts received
in payment or on account of any of the Guaranteed
Obligations and any of the aforesaid payees repays all or
part of said amount by reason of (a) any judgment, decree
or order of any court or administrative body having
jurisdiction over such payee or any of its property or (b)
any settlement or compromise of any such claim effected by
such payee with any such claimant (including Borrower),
then and in such event each Guarantor agrees that any such
judgment, decree, order, settlement or compromise shall be
binding upon such Guarantor, notwithstanding any revocation
hereof or of any other instrument evidencing any liability
of Borrower, and such Guarantor shall be and remain liable
to the aforesaid payees hereunder for the amount so repaid
or recovered to the same extent as if such amount had never
originally been received by any such payee.
21. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS
OF THE CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK. Any legal action or proceeding with
respect to this Guaranty or any other Credit Document may
be brought in the courts of the State of New York or of the
United States of America for the Southern District of New
York, and, by execution and delivery of this Guaranty, each
Guarantor hereby accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction
of the aforesaid courts and hereby irrevocably waives, to
the extent permitted by applicable law, any right it may
have to object to the laying of venue of any such action or
proceeding in the aforesaid courts and hereby further
irrevocably waives and agrees not to plead or claim that
any such action or proceeding has been brought in an
inconvenient forum. Each Guarantor hereby irrevocably
designates, appoints and empowers Borrower, with offices on
the date hereof at 777 N. Eldridge Road, Houston, Texas
77079 as its designee, appointee and agent to receive,
accept and acknowledge for any on its behalf, and in
respect of its property, service or any and all legal
process, summons, notices and documents which may be served
in any such action or proceeding. If for any reason such
designee, appointee and agent shall cease to be available
to act as such, each Guarantor agrees to designate a new
designee, appointee and agent in New York City on the terms
and for the purposes of this provision satisfactory to the
Administrative Agent for the Banks under this Guaranty.
Each Guarantor further irrevocably consents to the service
of process out of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to each
Guarantor at its address set forth opposite its signature
below. Nothing herein shall affect the right of any of the
Creditors to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed
against each Guarantor in any other jurisdiction.
(b) Each Guarantor hereby irrevocably waives, to
the extent permitted by applicable law, any objection which
it may now or hereafter have to the laying of venue of any
of the aforesaid actions or proceedings arising out of or
in connection with this Guaranty or any other credit
document brought in the courts referred to in clause (a)
above and hereby further irrevocably waives and agrees not
to plead or claim in any such court that such action or
proceeding brought in any such court has been brought in an
inconvenient forum.
22. (a) In the event that all of the Capital
Stock of any Guarantor is sold or otherwise disposed of or
liquidated in compliance with the requirements of Section
8.02 of the Credit Agreement (or such sale or other
disposition has been approved in writing by the Required
Banks (or all Banks if required by Section 12.12 of the
Credit Agreement)), other than any such sale, disposition
or liquidation to Borrower or any Subsidiary, such
Guarantor shall be released from the Guaranty and the
Guaranty shall, as to such Guarantor, terminate, and have
no further force or effect (it being understood and agreed
that the sale of any Person that owns, directly or
indirectly, the Capital Stock of any Guarantor shall be
deemed to be a sale of such Guarantor).
(b) In the event that any Guarantor shall be
designated an Unrestricted Subsidiary pursuant to and in
accordance with Section 8.05(b) of the Credit Agreement,
then such Guarantor (unless it is a guarantor of any
Indebtedness of Borrower or of any Subsidiary (other than
of an Unrestricted Subsidiary)) shall be released from the
Guaranty and the Guaranty shall, as to such Guarantor,
terminate, and have no further force or effect.
23. At any time a payment in respect of (i) the
Guaranteed Obligations is made under this Guaranty, the
right of contribution, if any, of each Guarantor against
any other Guarantor required to make any payment to such
Guarantor pursuant to this Section 23 (a "CONTRIBUTOR")
shall be determined as provided in the immediately
following sentence, with the right of contribution of each
Guarantor to be revised and restated as of each date on
which a payment (a "RELEVANT PAYMENT") is made on the
Guaranteed Obligations under this Guaranty. At any time
that a Relevant Payment is made by a Guarantor that results
in the aggregate payments made by such Guarantor in respect
of the Guaranteed Obligations to and including the date of
the Relevant Payment exceeding such Guarantor's Contribu-
tion Percentage (as hereinafter defined) of the aggregate
payments made by all Guarantors in respect of the
Guaranteed Obligations to and including the date of the
Relevant Payment (such excess, the "AGGREGATE EXCESS
AMOUNT"), each such Guarantor shall have a right of con-
tribution against each Contributor who has made payments in
respect of the Guaranteed Obligations to and including the
date of the Relevant Payment in an aggregate amount less
than such Contributor's Contribution Percentage of the
aggregate payments made to and including the date of the
Relevant Payment by all Guarantors in respect of the
Guaranteed Obligations (the aggregate amount of such
deficit, the "AGGREGATE DEFICIT AMOUNT") in an amount equal
to (x) a fraction the numerator of which is the Aggregate
Excess Amount of such Guarantor and the denominator of
which is the Aggregate Excess Amount of all Guarantors
multiplied by (y) the Aggregate Deficit Amount of such
Contributor. A Guarantor's right of contribution, if any,
pursuant to the preceding sentences shall arise at the time
of each computation, subject to adjustment at the time of
any subsequent computation; PROVIDED, HOWEVER, that no
Guarantor may take any action to enforce such right until
the Guaranteed Obligations have been paid in full, all
Letters of Credit have terminated and the Total Commitment
has been terminated, it being expressly recognized and
agreed by all parties hereto that any Guarantor's right of
contribution arising pursuant to this Section 23 against
any Contributor shall be expressly junior and subordinate
to such Contributor's obligations and liabilities in
respect of the Guaranteed Obligations and any other
obligations owing under this Guaranty. As used in this
Agreement, (i) each Contributor's "CONTRIBUTION PERCENTAGE"
shall mean the percentage obtained by dividing (x) the
Adjusted Net Worth of such Contributor by (y) the aggregate
Adjusted Net Worth of all Guarantors of the respective
Guaranteed Obligations; (ii) the "ADJUSTED NET WORTH" of
each Guarantor shall mean the greater of (x) the Net Worth
of such Guarantor or (y) zero; and (iii) the "NET WORTH" of
each Guarantor shall mean the amount by which the fair
salable value of such Guarantor's assets (other than its
equity interests in another Guarantor and its rights under
this Section 23) on the later of the date it first became a
Guarantor hereunder and the last date on which the maximum
aggregate amount of Guaranteed Obligations which it
guarantees pursuant to this Guaranty is increased over that
amount which it guaranteed pursuant to this Guaranty on the
date it first became a Guarantor hereunder exceeds its
existing debts and other liabilities (including contingent
liabilities, but without giving effect to any Guaranteed
Obligations arising under this Guaranty), in each case
after giving effect to all transactions occurring on such
date.
24. Each Guarantor recognizes and agrees that,
except for any right of contribution arising pursuant to
Section 23, until the Guaranteed Obligations have been paid
in full, each Guarantor who makes any payment in respect of
the Guaranteed Obligations shall have no right to exercise
any right of contribution or subrogation against any other
Guarantor in respect of such payment, any such right to
exercise any right of contribution or subrogation arising
under law or otherwise being expressly waived by all
Guarantors until the Guaranteed Obligations have been paid
in full.
25. Each Guarantor recognizes and acknowledges
that the rights to contribution arising hereunder shall
constitute an asset in favor of the party entitled to such
contribution. In this connection, each Guarantor has the
right to waive its contribution right against any other
Guarantor to the extent that after giving effect to such
waiver such Guarantor would remain solvent, in the
determination of the Required Banks.
26. This Guaranty may be executed in any number
of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall
together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be
lodged with the Guarantors and the Administrative Agent.
27. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY,
THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
28. It is understood and agreed that any
Subsidiary of Borrower that is required to execute a
counterpart of this Guaranty pursuant to the Credit
Agreement shall automatically become a Guarantor hereunder
by executing a counterpart hereof and delivering the same
to the Administrative Agent.
[Signature Pages Follow]
IN WITNESS WHEREOF, each Guarantor has caused this
Guaranty to be executed and delivered as of the date first above
written.
ADDRESS FOR EACH GUARANTOR
Global Marine Inc. GLOBAL MARINE BISMARCK SEA INC.
777 N. Eldridge Road
Houston, Texas 77079-4416 GLOBAL MARINE DEEPWATER DRILLING INC.
Attention: James L. McCulloch
Telephone No.: (281) 596-5837 GLOBAL MARINE DRILLING COMPANY
Facsimile No.: (281) 596-5196
GLOBAL MARINE NORTH SEA INC.
GLOBAL MARINE WEST AFRICA INC.
PETDRILL, INC.
By: /s/ James L. McCulloch
Name: James L. McCulloch
Title: Vice President
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Administrative Agent
By: /s/ Patricia Hogan
Name: Patricia Hogan
Title: Vice President
EXHIBIT 10.18
GLOBAL MARINE INC.
1989 STOCK OPTION AND INCENTIVE PLAN
SIXTH AMENDMENT
The Global Marine Inc. 1989 Stock Option and Incentive Plan,
as heretofore amended (the "Plan"), is hereby further amended as
follows, effective November 14, 1996:
1. Subsection (b) of Section 5 of the Plan is hereby amended
in its entirety to be and read as follows:
"(b) Such terms and conditions of exercise as may
be determined by the Board of Directors or the Committee;
provided, however, that whenever an option is exercised
by delivery of a notice of stock option exercise together
with instructions to sell the shares issuable upon such
exercise and apply proceeds from such sale to payment of
the exercise price, the date of such exercise shall be
the date of such sale."
2. Subsection (c) of Section 5 of the Plan is hereby amended
in its entirety to be and read as follows:
"(c) That the option is not transferable other than
by will or the laws of descent and distribution or, if
applicable, as authorized pursuant to the following
sentence, and that the option is exercisable during the
grantee's lifetime only by him, his guardian or legal
representative or, if applicable, by a transferee
authorized pursuant to the following sentence. The Board
of Directors or the Committee may, in its discretion,
authorize all or a portion of the options granted or to
be granted to a grantee to be on terms that permit
transfer by the grantee to (i) the spouse, children or
grandchildren of the grantee ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive
benefit of the grantee and/or Immediate Family Members,
(iii) a partnership in which the grantee and/or Immediate
Family Members are the only partners, (iv) a transferee
pursuant to a judgment, decree or order relating to child
support, alimony or marital property rights that is made
pursuant to a domestic relations law of a state or
country with competent jurisdiction (a "Domestic
Relations Order"), or (v) such other transferee as may be
approved by the Committee in its sole and absolute
discretion; provided, however, that (x) the Stock Option
Agreement relating to such options must be approved by
the Board of Directors or the Committee and must
expressly provide for transferability in a manner
consistent with this subsection, and (y) subsequent
transfers of transferred options shall be prohibited
except those to the original grantee or by the original
grantee in accordance with this subsection, by will or
the laws of descent and distribution, or pursuant to a
Domestic Relations Order. Following any transfer, an
option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to
transfer, and any and all references to the grantee in
the relevant Stock Option Agreement shall be deemed to
refer to the transferee; provided, however, that events
of termination of employment, if any, referred to in the
Stock Option Agreement shall continue to mean events of
termination of the original grantee's employment, and
following any such event the options shall be exercisable
by the transferee only to the extent and for the periods
specified in the Stock Option Agreement."
3. A new section is hereby added at the end of the Plan,
said section to be and read as follows:
"11. TERMS OF EMPLOYMENT. The adoption and
maintenance of the provisions of this Plan shall not be
deemed to constitute a contract between the Company or
any of its subsidiaries or affiliates and any employee,
or to be consideration for, or an inducement or condition
of, the employment of any person. Nothing contained in
this Plan shall be deemed to give to any employee the
right to be retained in the employ of the company or any
of its subsidiaries or affiliates or to interfere with
the right of any employer to discharge any employee at
any time, nor shall it be deemed to give to any employer
the right to require any employee to remain in its
employ, nor shall it interfere with any employee's right
to terminate his employment at any time."
4. Terms used in this Amendment and not defined herein are
used herein as they are defined in the Plan. References in the
Plan to "this Plan" (and indirect references such as "hereof" and
"herein") are amended to refer to the Plan as amended by this
Amendment.
5. Except as expressly amended hereby, the Plan shall remain
in full force and effect.
EXHIBIT 10.20
GLOBAL MARINE INC.
INCENTIVE STOCK SALE AGREEMENT
(1989 Stock Option and Incentive Plan)
GLOBAL MARINE INC. (the "Company"), desiring to afford an
opportunity to the offeree identified as such below (the "Offeree")
to purchase shares of the Company's common stock, $.10 par value
per share (the "Common Stock") at an incentive purchase price below
the market price at the time of sale as compensation for the
Offeree's services as an employee of the Company or of one or more
of its subsidiaries, hereby makes an offer to sell to the Offeree,
under the Company's 1989 Stock Option and Incentive Plan, the
number of shares of such Common Stock specified below, at the price
specified below, subject to and upon the terms and conditions set
forth below (the "Offer").
1. SPECIFICATION OF DATE, OFFEREE, NUMBER OF SHARES, PURCHASE
PRICE AND TERM.
(a) The date of the Offer is February 11, 1997.
(b) The Offeree is _______________________.
(c) The number of shares of the Company's Common Stock
offered hereby is ____________________.
(d) The purchase price of the Common Stock offered hereby is
$0.10 per share.
(e) The term of the Offer shall expire at the close of
business at the Company's principal executive office in
Houston, Texas, on February 13, 1997; from and after that
time, if the Offer has not been accepted before that time
as provided in this Agreement, neither the Offeree nor
the Company shall have any rights or obligations under
this Agreement.
2. METHOD OF ACCEPTANCE AND PURCHASE. The Offeree may accept the
Offer by executing a copy of this Agreement in the acceptance
space provided below and delivering said executed copy or a
facsimile thereof during the term of the Offer to the
Secretary of the Company at the Company's principal executive
office in Houston, Texas. Such acceptance shall be completed
to indicate the number of shares being purchased. Payment of
the purchase price for such number of shares will be effected
by means of immediate payroll deduction. Promptly after
receipt of such acceptance, the Company shall, subject to the
other terms and conditions of this Agreement, issue a
certificate for such number of shares to the Offeree.
3. WAGE WITHHOLDING AND EMPLOYMENT TAXES. The Company and the
Offeree understand and agree that, (i) with respect to shares
of the Common Stock purchased under this Agreement that are
not subject to a substantial risk of forfeiture (or, if
subject to a substantial risk of forfeiture, with respect to
which a timely election under Section 83 of the Internal
Revenue Code has been filed), the Offeree will recognize
ordinary income for tax purposes to the extent of any excess
of the fair market value of such shares at the time they are
transferred to the Offeree over the price paid for the shares,
(ii) with respect to shares of the Common Stock purchased
under this Agreement that are subject to a substantial risk of
forfeiture and with respect to which a timely Section 83
election is not filed, then, upon lapse of the restrictions
which impose a substantial risk of forfeiture, the Offeree
will recognize ordinary income for tax purposes to the extent
of any excess of the fair market value of such shares at such
time over the price paid for the shares, and (iii) any such
ordinary income recognized by the Offeree will be subject to
both wage withholding and employment taxes. The Offeree
agrees that his employer may effect any such withholding
and/or deduct any such taxes from any cash compensation that
the Company or any one or more of its subsidiaries may pay the
Offeree.
4. Restrictions on Share Transfer by Certain Offerees. Until six
months have elapsed after the date of the Offer, the Offeree
may not transfer the shares in a transaction that would
constitute a "sale" under Section 16 of the Securities
Exchange Act of 1934 (the "Exchange Act") if the Offeree is
(a) a director of Global Marine Inc., (b) an "officer" of
Global Marine Inc. as such term is defined for purposes of the
rules of the Securities and Exchange Commission under
Section 16 of the Exchange Act, or (c) a beneficial owner of
more than ten percent of the issued and outstanding Common
Stock. Furthermore, the Offeree understands and acknowledges
that, if he is an Offeree described in (a), (b) or (c) in the
preceding sentence, his transfer of any other shares of the
Common Stock in a "sale" transaction during the six-month
period mentioned above could be matched with his purchase of
shares of the Common Stock under this Agreement and subject
him to liability under Section 16 of the Exchange Act.
5. NON-TRANSFERABLE. The Offer may not be transferred and may be
accepted only by the Offeree.
6. LIMITATION. The Offeree shall be entitled to the privileges
of stock ownership in respect of shares subject to the Offer
only when such shares have been issued and delivered to him as
fully paid shares upon purchase of Common Stock in accordance
with this Agreement.
7. REQUIREMENTS OF LAW AND OF STOCK EXCHANGES. The issuance of
shares upon acceptance of the Offer shall be subject to
compliance with all of the applicable requirements of law with
respect to the issuance and sale of such shares. In addition,
the Company shall not be required to issue or deliver any
certificate or certificates upon acceptance of the Offer prior
to the admission of such shares to listing on notice of
issuance on any stock exchange on which shares of the same
class are then listed. In the event the Company's legal
counsel shall advise it that registration under the Securities
Act of 1933 of the shares as to which the Offer is accepted is
required prior to issuance thereof, the Company shall not be
required to issue or deliver such shares unless and until such
legal counsel shall advise that such registration has been
completed or is not required.
8. GLOBAL MARINE INC. 1989 STOCK OPTION AND INCENTIVE PLAN. The
Offer and any acceptance and purchase under this Agreement are
made under and are subject to, and the Company and the Offeree
agree to be bound by, all of the terms and conditions of the
Company's 1989 Stock Option and Incentive Plan as the same
shall have been amended from time to time in accordance with
the terms thereof, provided that no such amendment shall
deprive the Offeree, without his consent, of the Offer or any
rights hereunder. Pursuant to said Plan, the Board of
Directors of the Company or its Committee established for such
purposes is authorized to adopt rules and regulations not
inconsistent with the Plan and to take such action in the
administration of the Plan as it shall deem proper. A copy of
the Plan in its present form is available for inspection
during business hours by the Offeree at the Company's
principal office.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed on its behalf as of the date of the Offer stated above.
GLOBAL MARINE INC.
By:_________________________
ACCEPTED for _____ shares:
_____________________________
(Offeree)
EXHIBIT 10.24
February 11, 1997
TO: ________________
PERFORMANCE STOCK
In order to provide incentive compensation specifically directed
toward achievement of long term performance goals, you have been
granted an opportunity to acquire as many as ______ shares of
Global Marine common stock. The company will offer you none, some
or all of these shares at the time of the first regular meeting of
the company's board of directors in 2000, depending on the extent
to which the performance objectives set forth in Exhibit A have
been achieved.
This grant amounts to an incremental opportunity to earn
significant compensation, provided that we are able to achieve the
ambitious targets established for cumulative EBITDA, 1999 EPS, and
stock price. This incentive arrangement is designed so that the
management team wins if the shareholders win.
The terms and conditions of your grant under this incentive
arrangement are outlined in the attached Exhibit A. The conditions
are based on the company's performance during the period 1997-1999,
as measured against long term performance goals established by the
Compensation Committee of the Board of Directors
I look forward to working with you in an effective mutual effort to
assure that the target goals are more than accomplished.
EXHIBIT A
GLOBAL MARINE INC.
TERMS AND CONDITIONS
OF
OPPORTUNITY TO ACQUIRE PERFORMANCE STOCK
(Performance Period 1997-1999)
GLOBAL MARINE INC. (the "Company"), desiring to afford you a
conditional opportunity to acquire shares of the Company's common
stock, $.10 par value per share (the "Common Stock"), as added
incentive to achieve the long-term objectives of the Company and
its subsidiaries, has established the following terms and
conditions under which it will offer shares of Common Stock to you
under the Company's 1989 Stock Option and Incentive Plan (the
"Plan").
1. CONDITIONAL OPPORTUNITY TO ACQUIRE SHARES. At the time of the
first regular meeting of the Company's board of directors held
in 2000, the Company will offer shares of the Common Stock to
you, up to the full number of shares stated in the first
paragraph of the cover page of this memorandum (the "Shares"),
subject to the terms and conditions outlined in this
memorandum and the terms and conditions of the Plan as amended
from time to time in accordance with its terms. The Shares
will be offered to you and you will have the opportunity to
acquire the Shares in the form of an incentive stock purchase
under the Plan, at the same price and by substantially the
same method used to pay you a 1994 incentive bonus award in
February 1995.
2. NUMBER OF SHARES TO BE OFFERED. The Company will offer you
none, some or all of the Shares. The exact number of Shares
to be offered will depend on the performance of the Company
and its subsidiaries during the period 1997-1999 as measured
against the following long-term performance goals (the
"Performance Goals") established by the Compensation Committee
of the Company's board of directors (the "Compensation
Committee"):
Cumulative EBITDA: Cumulative earnings of the Company and
its subsidiaries on a consolidated basis
before interest, taxes, depreciation and
amortization for fiscal years 1997, 1998
and 1999.
Threshold = $1.2 billion; Target = $1.5
billion.
1999 E.P.S.: Earnings per share of the Company's
Common Stock for fiscal year 1999.
Threshold = $2.00/share; Target =
$3.00/share.
Stock Price: Average of the daily closing prices for
one share of the Company's Common Stock
during the fourth quarter of 1999
compared to the average of the daily
closing prices for one share of the
Company's Common Stock during the fourth
quarter of 1996.
Threshold = +30%; Target = +50%.
The total number of Shares stated in the first paragraph of
the cover page of this memorandum has been allocated among the
three Performance Goals as follows: 40% are Cumulative EBITDA
Shares; 40% are 1999 E.P.S. Shares; and 20% are Stock Price
Shares. You will be offered a percentage of the Shares
allocated to each Performance Goal, depending on actual
performance as measured against that respective Performance
Goal, as follows:
PERFORMANCE: PERCENTAGE
Below Threshold 0%
At Threshold 25%
Between Threshold A proportionate percentage
and Target between 25% and 100%, based on
straight-linie interpolation
between the threshold and
target objectives.
At or Above Target 100%
3. NON-TRANSFERABLE. You may not transfer your right to acquire
Shares under this memorandum other than by will or by the laws
of descent and distribution.
4. TERMINATION OF EMPLOYMENT. You will not be entitled to
acquire any of the Shares after termination of your employment
with the Company and its subsidiaries unless such termination
is by reason of early retirement not objected to by the
Compensation Committee, normal retirement, disability or
death, or unless your employment with the Company and its
subsidiaries is terminated by the Company or any such
subsidiary other than for cause (to mean acts of misconduct
harmful to the Company, inadequate performance or
incompetence). If your employment is terminated by reason of
early retirement not objected to by the Compensation
Committee, normal retirement or disability, or by the Company
or any of its subsidiaries other than for cause, the number of
Shares that the Company would otherwise offer to you at the
time of the Company's first regular board meeting held in 2000
will be prorated based on your months of employment completed
during the period 1997-1999 compared to 36 months, and the
Company will offer to you or your legal representative or
representatives, at the time of said board meeting, a reduced
number of Shares based on such proration. If your employment
is terminated by reason of your death, the total number of
Shares stated in the first paragraph of the cover page of this
memorandum will be multiplied by 50% and the resulting number
will be prorated based on your months of employment completed
during the period 1997-1999 compared to 36 months, and the
Company will offer to the appropriate person or persons named
under your last will and testament or determined under
applicable intestate laws, at the time of the Company's first
regular board meeting held in 2000, a reduced number of Shares
based on such multiplication and proration. Termination of
your "employment" with the Company and its subsidiaries will
be deemed to occur at the close of business on the earliest of
(i) the last day on which you are assigned to a position with
the Company or any of its subsidiaries for the purpose of
performing your occupation, in the case of termination by
reason of your early or normal retirement, disability or
death, (ii) the last day of the period during which you are
entitled to receive salary continuation under any agreement,
policy, plan or other arrangement with the Company or any of
its affiliates, in the case of any termination entitling you
to such salary continuation, (iii) the last day of an approved
leave of absence if you do not resume the performance of your
occupation for the Company or any of its subsidiaries on or
before the next business day, and (iv) the last day on which
you are assigned to a position with the Company or any of its
subsidiaries for the purpose of performing your occupation in
any other case. For purposes of this paragraph, the term
"disability" shall mean any physical or mental condition which
totally and permanently prevents you from engaging in any
substantial gainful activity, as reasonably determined in good
faith by the Compensation Committee.
5. ADJUSTMENTS. Except as provided in the following paragraph,
if outstanding shares of the class then subject to the
conditional opportunity to acquire Shares outlined herein are
increased, decreased, changed into or exchanged for a
different number or kind of shares or securities of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock
split, then there will be substituted for each Share then
subject to such opportunity and for each share upon which any
of the Performance Goals are then based the number and class
of shares or securities into or for which each share of the
class subject to such opportunity shall be so changed or
exchanged, all without any change in the aggregate purchase
price for the Shares then subject to such opportunity, but
with a corresponding adjustment in the purchase price per
Share. Such adjustments will become effective on the
effective date of any such transaction; except that in the
event of a stock dividend or of a stock split effected by
means of a stock dividend or distribution, such adjustments
will become effective immediately after the record date
therefor.
Upon a dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company is
not the surviving company, your opportunity to acquire Shares
and the obligations of the Company hereunder will terminate,
unless provision is made in writing in connection with such
transaction for the assumption of such obligations, or the
substitution for such obligations of similar obligations
involving the stock of a successor employer corporation, or a
parent or subsidiary thereof, with appropriate adjustments as
to the conditions thereof and the number and kind of Shares
and prices, in which event your opportunity to acquire Shares
and the obligations of the Company hereunder will continue in
the manner and under the terms so provided.
Adjustments under this Section 5 will be made by the
Compensation Committee, whose determination as to what
adjustments will be made, and the extent thereof, will be
final, binding and conclusive. No fractional shares of stock
will be issued pursuant to any acquisition of Shares or in
connection with any adjustment contemplated herein.
6. LIMITATION. You will not be entitled to the privileges of
stock ownership in respect of any of the Shares until they
have been issued and delivered pursuant to the terms and
conditions of this memorandum and the Plan.
7. REQUIREMENTS OF LAW AND STOCK EXCHANGES. Your right to
acquire the Shares and issuance of the Shares will be subject
to compliance with all applicable requirements of law. In
addition, the Company will not be required to issue or deliver
any certificate or certificates for any of the Shares prior to
the admission of such Shares to listing on notice of issuance
on any stock exchange on which shares of the same class are
then listed.
By acquiring any of the Shares as contemplated herein, you
will be representing and agreeing for yourself and your
transferees by will or by the laws of descent and distribution
that, unless a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), is in effect as to
the Shares acquired, any and all Shares so acquired will be
acquired for investment and not for sale or distribution, and
each such acquisition will be accompanied by a representation
and warranty in writing, signed by the person entitled to make
such acquisition, that the Shares are being so acquired in
good faith for investment and not for sale or distribution.
In the event the Company's legal counsel, at the Company's
request, advises it that registration under the Securities Act
of the acquired Shares is required prior to issuance thereof,
the Company will not be required to issue or deliver the
Shares unless and until such legal counsel advises it that
such registration has been completed or is not required.
By acquiring any of the Shares, you also will be representing
and agreeing for yourself and your transferees by will or the
laws of descent and distribution that if you are an officer of
the Company or any other person who might be deemed an
"affiliate" of the Company under the Securities Act at the
time any Shares that have been acquired are proposed to be
sold, you or they will not sell such Shares (a) without giving
thirty days advance notice in writing to the Company, and (b)
until the Company has advised you or them that such sale may
be made without registration under the Securities Act or, if
such registration is required, that such registration has been
effected.
8. RESTRICTIONS ON SHARE TRANSFER BY CERTAIN PERSONS. In the
case of Cumulative EBITDA Shares and 1999 E.P.S. Shares, until
six months have elapsed after the date of the Company's
unconditional offer of such Shares to you, or, in the case of
Stock Price Shares, until six months have elapsed after the
date the Compensation Committee approved the recommendation
that you be granted a conditional opportunity to acquire such
Shares, you may not transfer such Shares in a transaction that
would constitute a "sale" under Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), if you
are at the time of the sale a person subject to the provisions
of Section 16 of the Exchange Act.
9. WAGE WITHHOLDING AND EMPLOYMENT TAXES. Your acquisition of
any of the Shares as outlined herein may result in ordinary
income at the time of acquisition. Such ordinary income will
be subject to both wage withholding and employment taxes, and
the Company or your employer may be required to effect such
withholding and/or deduct such taxes. Except as set forth
below, you may make an irrevocable election to satisfy, in
whole or in part, your obligation to reimburse the Company or
your employer for such taxes (an "Election") by (i) making a
cash payment to the Company, (ii) having the Company deduct
the required amount from any cash compensation that the
Company or any of its subsidiaries may owe you, (iii)
surrendering your right to acquire either a specified number
of the Shares or Shares having a specified value, in each case
with a value not in excess of your related tax liability, (iv)
tendering shares previously issued pursuant to the Plan or
other shares of the Company's common stock owned by you, or
(v) combining any or all of the foregoing in any fashion;
provided, however, that, if you are at the time the
withholding obligation arises a person subject to the
provisions of Section 16 of the Exchange Act, you must satisfy
such obligation by surrendering your right to acquire such
number of Shares as will have a value sufficient to satisfy
such obligation, but not in excess of such liability. The
Compensation Committee may disapprove of any Election or
suspend or terminate the right to make Elections at any time
or from time to time. All withheld or surrendered Shares and
other shares tendered in payment will be valued at their Fair
Market Value on the date the withholding obligation arises.
"Fair Market Value" with regard to stock of the Company on a
particular date shall mean the average of the high and low
quotations at which the stock is traded on that particular
date as reported in the "NYSE-Composite Transactions" section
of the Southwest Edition of The Wall Street Journal for that
date (corrected for obvious typographical errors), or, if no
prices are quoted for that date, on the last preceding date
for which such prices of shares of stock are so quoted. In
the event "NYSE-Composite Transactions" cease to be reported
as such, or in the event that the Company's stock is no longer
quoted on the New York Stock Exchange, an appropriate
substitute published stock quotation system will be selected
by the Compensation Committee, consistent with appropriate
regulatory provisions.
10. CONTINUED EMPLOYMENT AND FUTURE GRANTS. Neither the granting
to you of an opportunity to acquire stock nor the other
arrangements outlined herein give you the right to remain in
the employ of the Company or any of its subsidiaries or to be
selected to receive similar or identical grants in the future.
11. GLOBAL MARINE INC. 1989 STOCK OPTION AND INCENTIVE PLAN, THE
BOARD AND THE COMMITTEE. The opportunity to acquire Shares
outlined in this memorandum has been granted to you, and any
offer or sale of Shares will be made, under and pursuant to
the Plan as the same shall have been amended from time to time
in accordance with its terms. The decision of the Company's
board of directors or the Committee on any questions
concerning the interpretation or administration of the Plan or
any matters covered in this memorandum will be final and
conclusive. No amendment to the Plan or decision of the board
or the Committee will deprive you, without your consent, of
any rights hereunder.
A copy of the Plan in its present form is available at the
Company's principal office for inspection during business
hours by you or other persons who may be entitled to acquire
any of the Shares as contemplated herein.
References in this Exhibit A to "this memorandum" (and indirect
references such as "hereof," "hereunder" and "herein") refer to the
attached cover page of this memorandum and this Exhibit A, each of
which constitutes an integral part of this memorandum.
EXHIBIT 10.34
GLOBAL MARINE
OUTSIDE DIRECTOR DEFERRED
COMPENSATION TRUST
THIS TRUST AGREEMENT made this 26th day of
February, 1997, but effective January 1, 1996 by and between
GLOBAL MARINE INC., a Delaware corporation having its principal
offices in Houston, Texas ("Company"), and TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, a national banking association ("Trustee");
WHEREAS, Company has established the Global Marine
Retirement Plan for Outside Directors (the "Plan");
WHEREAS, Company has incurred or expects to incur
liability under the terms of such Plan with respect to the
individuals participating in such Plan;
WHEREAS, Company wishes to establish a trust (hereinafter
called "Trust") and to contribute to the Trust assets that shall be
held therein, subject to the claims of the Company's creditors in
the event of Company's Insolvency, as herein defined, until paid to
Plan participants and their beneficiaries in such manner and at
such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not affect
the status of the Plan as an unfunded plan maintained for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title I
of the Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of funds
to assist it in the meeting of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed of
as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) Company hereby deposits with Trustee in trust
$900,000, which shall become the principal of the Trust to be held,
administered and disposed by Trustee as provided in this Trust
Agreement.
(b) The Trust shall be irrevocable from and after
January 1, 1996.
(c) The Trust is intended to be a grantor trust, of
which Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal Revenue
Code of 1986, as amended, and shall be construed accordingly.
<PAGE>
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of Company and
shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Trust Agreement
shall be mere unsecured contractual rights of Plan participants and
their beneficiaries against Company. Any assets held by the Trust
will be subject to the claims of Company's general creditors under
federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or
from time to time, make additional deposits of cash or other
property in trust with Trustee to augment the principal to be held,
administered and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Plan participant or beneficiary
shall have any right to compel such additional deposits.
(f) Upon a Change of Control, Company shall, as soon as
possible, but in no event longer than thirty (30) days following
the Change of Control, as defined in Section 13(d) herein, make an
irrevocable contribution to the Trust in an amount, determined in
accordance with Section 1(g), that is sufficient to pay each Plan
participant or beneficiary the benefits to which Plan participants
or their beneficiaries would be entitled pursuant to the terms of
the Plan as of the date on which the Change of Control occurred.
(g) The amount required to be contributed, if any,
pursuant to Section 1(f) herein shall be determined by an
independent actuarial firm selected by Company, in its sole
discretion. Such amount shall be equal to the present value of the
accrued benefits of each participant or beneficiary as of the date
of the contribution, whether or not then vested and nonforfeitable,
determined using the interest rate assumption that would be used by
the Pension Benefit Guaranty Corporation during the month in which
the contribution occurs to value annuities for a pension plan
termination, the GAM 83 mortality table, and the other relevant
assumptions used by Company in computing the accumulated benefit
obligation for the Global Marine Retirement Plan for Employees or
any successor plan (the "Retirement Plan") in accordance with
Financial Accounting Standards Bulletin 87 for its financial
statements as of the date of the most recent financial statements
completed before such contribution or if the Company does not
maintain the Retirement Plan, such assumptions as are deemed
reasonable by the actuary.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR
BENEFICIARIES
(a) Company shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in respect
of each Plan participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to Trustee for
determining the amount so payable, the form in which such amount is
to be paid (as provided for or available under the Plan), and the
time of commencement for payment of such amounts. Except as
otherwise provided herein, Trustee shall make payments to the Plan
participants and their beneficiaries in accordance with such
Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes that
may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plan and shall pay amounts
withheld to the appropriate taxing authorities or determine that
such amounts have been reported, withheld and paid by Company.
<PAGE>
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by
Company or such party as it shall designate under the Plan, and any
claim for such benefits shall be considered and reviewed under the
procedures set out in the Plan.
(c) Company may make payment of benefits directly to
Plan participants or their beneficiaries as they become due under
the terms of the Plan. Company shall notify Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon,
are not sufficient to make payments of benefits in accordance with
the terms of the Plan, Company shall make the balance of each such
payment as it falls due. Trustee shall notify Company where
principal and earnings are not sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is insolvent.
Company shall be considered "Insolvent" for purposes of this Trust
Agreement if (i) Company is unable to pay its debts as they become
due, or (ii) Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust,
as provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of Company
under federal and state law as set forth below.
(1) The Board of Directors and the President of
Company shall have the duty to inform Trustee in writing
of Company's Insolvency. If a person claiming to be a
creditor of the Company alleges in writing to the Trustee
that Company has become Insolvent, Trustee shall
determine whether Company is Insolvent and, pending such
determination, Trustee shall discontinue payment of
benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of
Company's Insolvency or has received notice from Company
or a person claiming to be a creditor alleging that
Company is Insolvent, Trustee shall have no duty to
inquire whether Company is Insolvent. Trustee may in all
events rely on such evidence concerning Company's
solvency as may be furnished to Trustee and that provides
Trustee with a reasonable basis for making a
determination concerning Company's solvency.
(3) If at any time Trustee has determined that
Company is Insolvent, Trustee shall discontinue payments
to Plan participants or their beneficiaries and shall
hold the assets of the Trust for the benefit of Company's
general creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of Plan participants or
their beneficiaries to pursue their right as general
creditors of Company with respect to benefits due under
the Plan or otherwise.
<PAGE>
(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance
with Section 2 of this Trust Agreement only after Trustee
has determined that Company is not Insolvent (or is no
longer Insolvent).
(c) Provided that there are sufficient assets, if
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for
the period of such discontinuance, less the aggregate amount of any
payments made to Plan participants or their beneficiaries by
Company in lieu of the payments provided for hereunder during any
such period of discontinuance.
SECTION 4. PAYMENTS TO COMPANY
Except as provided in Section 3 hereof, after the Trust
has become irrevocable, Company shall have no right or power to
direct Trustee to return to Company or to divert to others any of
the Trust assets before all payment of benefits have been made to
Plan participants and their beneficiaries pursuant to the terms of
the Plan.
SECTION 5. INVESTMENT AUTHORITY
(a) Subject to the investment direction of the
Retirement Plan Committee of Company (the "Retirement Plan
Committee"), funds held for the account of the Trust may be
invested by Trustee in obligations issued or fully guaranteed by
the United States of America or any agency thereof, corporate debt
securities currently rated A or better in Moody's, notes secured by
first mortgages on real estate, certificates of deposit, demand or
time deposits, life insurance and annuity contracts, commercial
paper rates P-1 or A-1 or master note agreements of companies the
commercial paper of which is rated P-1 or A-1 and pooled, common or
group investment funds offered by or through Trustee.
(b) The Retirement Plan Committee, in its sole
discretion, may at any time, or from time to time direct, require
or permit different or additional investments of Trust assets,
except that in no event may Trustee invest in securities (including
stock or rights to acquire stock) or obligations issued by Company,
other than a de minimis amount held in common investment vehicles
in which Trustee invests. All rights associated with assets of the
Trust shall be exercised by Trustee or the person designated by
Trustee, and shall in no event be exercisable by or rest with Plan
participants.
(c) Company shall have the right, at any time, and from
time to time in its sole discretion, to substitute assets of equal
fair market value for any asset held by the Trust. This right is
exercisable by Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
SECTION 6. DISPOSITION OF INCOME
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
<PAGE>
SECTION 7. ACCOUNTING BY TRUSTEE
(a) The Trust's fiscal year shall be the calendar year.
Trustee shall maintain the books of the Trust on the cash receipts
and disbursements method of accounting.
(b) For federal and state income tax purposes, Trustee
shall file such returns and statements as it is directed by the
Retirement Plan Committee to so file in order to comply with
applicable provisions of the Code, regulations thereunder and any
state laws and regulations thereunder.
(c) Trustee shall provide the Retirement Plan Committee
annual reports respecting cash receipts and disbursements of the
Trust Fund.
(d) The Retirement Plan Committee shall have the right
to examine during regular business hours Trustee's books and
records respecting the Trust Fund by giving Trustee two (2) weeks'
prior written notice of its desire to inspect such books and
records.
SECTION 8. RESPONSIBILITY OF TRUSTEE
(a) Trustee is empowered to act in its discretion and
shall not be personally or individually liable to Company for any
act or omission except in the case of gross negligence, bad faith
or fraud.
(b) Trustee shall be indemnified by, and receive
reimbursement from, Company against and from any and all liability,
expense, claim, damage or loss incurred by it individually or as
Trustee in the administration of the Trust or any part or parts
thereof, or in the doing of any act done or performed or omission
occurring on account of its being Trustee, except such liability,
expense, claim, damage or loss arising from its gross negligence,
bad faith or fraud.
(c) Trustee shall receive from Company compensation for
its services in implementing the Trust as set forth in Exhibit A
hereto.
(d) No bond or other security shall be required of
Trustee.
(e) To the extent allowed by applicable law, Trustee
shall not be prohibited in any way in exercising its powers or from
dealing with itself in any other capacity, fiduciary or otherwise.
(f) Pursuant to Section 113.059 of the Texas Trust Code,
Company as Trustor hereby relieves Trustee from any or all duties,
restrictions, and liabilities otherwise imposed upon Trustee by the
Texas Trust Code except for such duties, restrictions, and
liabilities as are imposed (a) by Sections 113.052, 113.053 and
113.057 of the Texas Trust Code, (b) by the terms and conditions of
this Trust Agreement, or (c) by any other applicable law, rule or
regulation.
(g) Whenever Trustee, in the administration of the
provisions of this Trust Agreement, shall deem it necessary or
desirable that a matter be proved or established prior to taking or
suffering any action hereunder, such matter may, in the absence of
bad faith on the part of Trustee, be deemed to be conclusively
<PAGE>
proved by a certificate delivered to Trustee by Company or the
Retirement Plan Committee, as the case may be, and such certificate
shall be complete authority to Trustee for any action taken or
suffered by it under the provisions of this Trust Agreement upon
the faith thereof. In the case of Company, such certificate shall
be signed by the President or any Vice President of Company.
(h) Trustee shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly provided
otherwise herein, provided, however, that if an insurance policy is
held as an asset of the Trust, Trustee shall have no power to name
a beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to any person
the proceeds of any borrowing against such policy.
(i) However, notwithstanding the provisions of Section
8(h) above, Trustee may loan to Company the proceeds of any
borrowing against an insurance policy held as an asset of the
Trust.
(j) Notwithstanding any powers granted to Trustee
pursuant to this Trust Agreement or to applicable law, Trustee
shall not have any power that could give this Trust the objective
of carrying on a business and dividing the gains therefrom, within
the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
(k) Trustee shall have the power to employ such
accountants, lawyers, brokers or other agents as Trustee deems
advisable in administering this Trust, and to reasonably rely upon
information and advice furnished by such accountants, lawyers,
brokers and other agents.
(l) Trustee shall have the power from time to time to
register any property in the name of its nominee or in its own
name, or to hold it unregistered or in such form that title shall
pass by delivery or to cause the same to be deposited in a
depository clearing corporation or system established to settle
transfers of securities and to cause such securities to be merged
and held in bulk by the nominee of such depository or clearing
corporation or system.
<PAGE>
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE
Trustee shall receive for its services as trustee
hereunder the compensation which may be agreed upon from time to
time by Company and Trustee. All amounts due Trustee as
compensation for its services shall be paid by Company, or
disbursed by Trustee out of the Trust, and, until paid, shall
constitute a charge upon the Trust. Brokerage fees, commissions,
stock transfer taxes and other charges and expenses incurred in
connection with the purchase and sale of securities for the Trust
or distribution thereof shall be paid by Trustee from the Trust.
All taxes imposed or levied with respect to the Trust or any part
thereof, under existing or future laws, shall be paid from the
Trust. Expenses incurred by Trustee in the administration of the
Trust (including fees for legal, actuarial, investment, or other
services and all other proper charges and expenses of Trustee and
of Trustee's agents and counsel) shall be paid by Company or
disbursed from the Trust by Trustee and, until paid, shall
constitute a charge upon the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE
(a) Trustee may resign at any time by written notice to
Company, which shall be effective 30 days after receipt of such
notice (the "Resignation Notice Date") unless Company and Trustee
agree otherwise and by accounting to its successor for the
administration of the Trust as may be required by the successor
Trustee.
(b) Trustee may be removed, by Company at any time;
provided, however, that no such removal shall be effective unless
contemporaneously with such removal a successor Trustee is
appointed by Company.
(c) Upon a Change of Control, as defined herein, Trustee
may not be removed by Company for two (2) years.
(d) Upon resignation or removal of Trustee and
appointment of a successor Trustee, all assets shall subsequently
be transferred to the successor Trustee. The transfer shall be
completed within thirty (30) days after receipt of notice of
resignation, removal or transfer, unless Company extends the time
limit.
(e) If Trustee resigns or is removed, a successor shall
be appointed, in accordance with Section 11 hereof, by the
effective date of resignation or removal under paragraphs (a) or
(b) of this Section 10. If no such appointment has been made,
Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of
Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR
(a) In the event Trustee has given notice of its
intention to resign, a successor Trustee shall be appointed by
Company within ten (10) days of the Resignation Notice Date.
Notice of the appointment of a successor Trustee shall be given by
the resigning Trustee to Company on the Resignation Notice Date at
the address of Company as last reflected on the records of Trustee.
<PAGE>
(b) In the event that a successor Trustee has not been
appointed by Company within twenty (20) days after the Resignation
Notice Date or the occurrence of a vacancy in the position of
Trustee, a successor Trustee may be appointed by any Texas or
United States District Court holding terms in Houston, Harris
County, Texas, upon the application of Trustee. In the event such
Court shall deem it necessary, the Court may appoint a temporary
successor Trustee or successor Trustee on such terms as to
compensation as the Court shall deem necessary and reasonable
notwithstanding any provision herein to the contrary. A Trustee
appointed under the provisions of this Section 11 shall be a state
or national banking association which has a capital, surplus and
undivided profits of at least $10,000,000.
(c) Immediately upon the appointment of any successor
Trustee, all rights, titles duties, powers and authority of the
succeeded Trustee hereunder shall be vested in and undertaken by
the successor Trustee which shall be entitled to receive from the
trustee which it succeeds, in addition to the accounting referred
to in Section 10, all of the assets of the Trust held by it
hereunder and all records and files in connection therewith.
(d) Any and all successors to a resigning Trustee shall
be fully protected in relying upon the accounting referred to in
Section 10 and this Section 11. No successor Trustee shall be
obligated to examine or seek alteration of any accounting of any
preceding Trustee, nor shall any Trustee be liable personally for
failing to do so or for any act or omission of any preceding
Trustee. The preceding sentence shall not prevent any successor
Trustee or anyone else from taking any action otherwise permissible
in connection with any such accounting.
SECTION 12. AMENDMENT OR TERMINATION
(a) This Trust Agreement may be amended by a written
instrument executed by Trustee and Company. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the
Plan or shall make the Trust revocable after it has become
irrevocable in accordance with Section 1(b) hereof.
(b) Subject to the provisions of Section 12(c) herein,
the Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan. Upon termination of
the Trust, any assets remaining in the Trust shall be returned to
Company.
(c) Upon written approval of participants or
beneficiaries entitled to payment of benefits pursuant to the terms
of the Plan, Company may terminate this Trust prior to the time all
benefit payments under the Plan have been made. All assets in the
Trust at termination shall be returned to Company.
(d) Sections 1, 2 and 10(c) of this Trust Agreement may
not be amended by Company for fifteen (15) years following a Change
of Control, as defined herein.
<PAGE>
SECTION 13. MISCELLANEOUS
(a) Any provision of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution
or other legal or equitable process.
(c) This Trust Agreement shall be governed by and
construed in accordance with the laws of Texas.
(d) For purposes of this Trust, "Change of Control"
shall mean: (i) any acquisition of more than fifty percent of the
voting power of Company's stock by any person or persons acting as
a group for purposes of acquiring such stock, (ii) the occurrence
of a change in the membership of the Board of Directors of Company
during any consecutive two-year period, excluding changes due to
death or disability, as a result of which individuals who were
members of said Board at the beginning of such period no longer
constitute a majority of said Board, (iii) shares becoming subject
to delisting by the New York Stock Exchange or a successor exchange
in respect of the number of publicly held shares or the number of
stockholders holding one hundred shares or more, (iv) approval by
the Board of Directors of Company of the sale of all or
substantially all of Company's assets, or (v) approval by the Board
of Directors of Company of any merger, consolidation, issuance of
securities or purchase of assets which would result in an event
described in (i), (ii), or (iii) above.
(e) Except as otherwise required by law, neither this
Trust Agreement nor any executed copy hereof need be filed in any
county, or other jurisdiction in which any of the properties
comprising the Trust are located, but the same may be filed for
record in any county or other jurisdiction by Trustee.
(f) Any notice or demand which by any provision of this
Trust Agreement is required or permitted to be given or served upon
Trustee may be given or served by in-hand delivery or by deposit,
postage prepaid and by registered or certified mail, in a post
office or letter box addressed to Trustee at 600 Travis, Houston,
Texas 77002 or at such other address as Trustee may from time to
time advise Company in writing.
(g) Whenever any notice, communication or report is
given by Trustee to Company pursuant to the provisions of this
Trust Agreement or is otherwise required to be provided to Company
pursuant to the provisions of this Trust Agreement, Trustee shall
provide, by in-hand delivery or by deposit, postage prepaid, in a
post office or letter box addressed to Company at 777 N. Eldridge,
Houston, Texas 77079, or at such other address as Company may from
time to time advise Trustee in writing.
(h) Whenever any notice, communication, or report is
given by Trustee to the Retirement Plan Committee pursuant to the
provisions of this Trust Agreement or is otherwise required to be
provided to the Retirement Plan Committee pursuant to the
<PAGE>
provisions of this Trust Agreement, Trustee shall provide, by in-hand
delivery or by deposit, postage prepaid, in a post office or
letter box addressed to the Retirement Plan Committee at 777
N. Eldridge, Houston, Texas 77079, or at such other address as
Company may from time to time advise Trustee in writing.
(i) Trustee, by joining in the execution of this Trust
Agreement, accepts the Trust herein created and provided for and
accepts all of the rights, powers, privileges, duties and
responsibilities of Trustee hereunder and agrees to exercise and
perform the same in accordance with the terms and provisions
contained herein.
(j) This Trust Agreement may be executed in a number of
counterparts, each of which shall constitute an original, but such
counterparts shall together constitute but one and the same
instrument.
(k) The headings of the Sections of this Trust Agreement
are inserted for convenience only and shall not constitute a part
hereof.
SECTION 14. EFFECTIVE DATE
The effective date of this Trust Agreement shall be
January 1, 1996.
GLOBAL MARINE INC.
By: /s/ James L. McCulloch
Vice President
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, Trustee
By: /s/ Lynne Arnold
Vice President
EXHIBIT 10.37
GLOBAL MARINE INC.
1990 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
SECOND AMENDMENT
The Global Marine Inc. 1990 Non-Employee Director Stock Option
Plan, as heretofore amended (the "Plan"), is hereby further amended
as follows:
1. Article X of the Plan is hereby amended in its entirety
to be and read as follows:
"X. TRANSFERABILITY OF OPTIONS
An Option granted hereunder shall not be
transferable, whether by operation of law or otherwise,
other than by will or the laws of descent and
distribution or as authorized by the following sentence,
and any Option granted hereunder shall be exercisable,
during the lifetime of the optionee, only by such
optionee, his guardian or legal representative, or by a
transferee authorized by the following sentence. An
Option granted hereunder, or any portion thereof, may be
transferred by the optionee to (i) the spouse, children
or grandchildren of the optionee ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive
benefit of the optionee and/or Immediate Family Members,
(iii) a partnership in which the optionee and/or
Immediate Family Members are the only partners, (iv) a
transferee pursuant to a judgment, decree or order
relating to child support, alimony or marital property
rights that is made pursuant to a domestic relations law
of a state or country with competent jurisdiction (a
"Domestic Relations Order"), or (v) such other transferee
as may be approved by the Committee in its sole and
absolute discretion; provided, however, that (x) the
Board of Directors or the Committee may prohibit any
transfer with or without cause in its sole and absolute
discretion, and (y) subsequent transfers of transferred
Options or any portion thereof are prohibited except
those to or by the original optionee in accordance with
this Article, by will or the laws of descent and
distribution, or pursuant to a Domestic Relations Order.
Following any transfer, an Option shall continue to be
subject to the same terms and conditions as were
applicable immediately prior to transfer, and any and all
references to the optionee or Grantee in the Plan or the
relevant Non-Employee Director Stock Option Agreement
shall be deemed to refer to the transferee; provided,
however, that any and all references to service or events
of termination of service in the Plan or the relevant
Non-Employee Director Stock Option Agreement shall
continue to mean the original optionee's service or
events of termination of the original optionee's service,
and following any such event the Options shall be
exercisable by the transferee only to the extent and for
the periods specified in the Plan or the relevant Non-Employee
Director Stock Option Agreement. Each transfer
shall be effected by written notice thereof duly signed
and delivered by the transferor to the Corporate
Secretary of the Company at the principal business office
of the Company. Such notice shall state the name and
address of the transferee, the Option and amount thereof
being transferred, and such other information as may be
requested by the Corporate Secretary. The person or
persons entitled to exercise any Option shall be that
person or those persons appearing on the registry books
of the Company as the owner or owners of the Option, and
the Company may treat the person or persons in whose name
or names an Option is registered as the owner or owner of
the Option for all purposes. The Company shall have no
obligation to, or liability for any failure to, notify
the optionee or any transferee of any termination of any
Option at or prior to its normal expiration date or of
any event that will or might result in such termination."
2. This Amendment shall become effective November 14, 1996
with respect to Options granted on and after that date. With
respect to Options outstanding as of the close of business on
November 13, 1996, this Amendment is subject to and shall only
become effective upon a determination by the Vice President and
Corporate Controller of Global Marine Inc. that this Amendment will
not effect a material modification of any outstanding Option that
will result in a charge to the Company's earnings.
3. Terms used in this Amendment and not defined herein are
used herein as they are defined in the Plan. References in the
Plan to "this Plan" (and indirect references such as "hereof" and
"herein") are amended to refer to the Plan as amended by this
Amendment.
4. Except as expressly amended hereby, the Plan shall remain
in full force and effect.
EXHIBIT 10.39
GLOBAL MARINE INC.
1997 MANAGEMENT INCENTIVE AWARD PLAN
PURPOSE AND ELIGIBLE PARTICIPANTS
The purpose of the 1997 Management Incentive Award Plan is to
provide incentive awards in respect of service during 1997 for
employees of Global Marine Inc. and its subsidiaries in grade
levels 34 and above, excluding the Chief Executive Officer of
Global Marine Inc. and senior executives who report directly to
the Chief Executive Officer of Global Marine Inc., and also excluding
employees who are eligible to participate in any other plan or
arrangement under which incentive awards may be paid in cash, or
shares of stock in lieu of cash, by Global Marine Inc. or any of
its subsidiaries in respect of service during 1997.
PLAN
An incentive pool will be established for this plan in 1997. The
pool will be equal to 5% of the amount by which the company's
1997 consolidated pretax profit exceeds $180 million.
Consideration for individual awards under this plan will be given
to employees who are eligible to participate in this plan under
the provisions of this plan's first paragraph; provided, however,
that in cases of unusual merit consideration will be given to
employees below grade level 34 when recommended by the relevant
Subsidiary President or Corporate Vice President and approved by
the Chief Executive Officer of Global Marine Inc. No individual will be
eligible for an award of more than 50% of annual base salary.
Subject to approval by the Board of Directors of Global Marine
Inc., at its discretion, incentive awards under this plan will be
paid as soon as practicable after the company's 1997 results are
final and may be paid in cash or, at the discretion of the
Compensation Committee or the Board of Directors of Global Marine
Inc., in shares of common stock of Global Marine Inc. or in any
combination of cash and such shares; provided, however, that
common stock will not be used to pay an incentive award under this plan
to any director of Global Marine Inc., any beneficial owner of more
than ten percent of the issued and outstanding common stock of
Global Marine Inc., or any "officer" of Global Marine Inc. as
such term is defined for purposes of the rules of the Securities and
Exchange Commission under Section 16 of the Securities Exchange
Act of 1934. The aggregate market value of the shares, if any, used
to pay incentive awards under this plan shall be no greater than the
aggregate amount of cash that otherwise would have been paid in
lieu of said shares pursuant to the terms of this plan, the market
<PAGE>
value per share being the average of the high and low prices for
Global Marine Inc. common stock as quoted on the New York Stock
Exchange Composite Transactions for the day the incentive awards
are determined.
Incentive awards will consider individual performance of the
employee. Establishment of the annual incentive award pool shall
not create or imply a promise or any other obligation of Global
Marine Inc. or any of its subsidiaries, or a right of any
individual employee or of the collective employees of Global
Marine Inc. or its subsidiaries. The plan shall terminate upon the
grant of awards under the plan or a resolution of the Board of
Directors of Global Marine Inc. terminating the plan. The establishment of
this plan or the grant of awards hereunder does not create or
imply a promise or any other obligation to establish the same or a
similar plan for any other year or to continue to grant such
awards in the future.
RESPONSIBILITY AND AUTHORITY
The Chief Executive Officer and the Chief Financial Officer of
Global Marine Inc. shall take all such actions, do all such
things, make all such payments and sign and deliver all such documents
and instruments as either or both of them may at any time or from
time to time deem necessary or desirable in order to implement this
plan.
EXHIBIT 11.1
GLOBAL MARINE INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
Shares for primary and fully diluted computations:
<S> <C> <C> <C>
Weighted average shares of common stock outstanding 167,915,661 165,142,881 163,828,711
Weighted average shares issuable on
assumed exercise of stock options 1,579,733 - -
Weighted average shares for primary earnings per share 169,495,394 165,142,881 163,828,711
Incremental shares issuable on assumed exercise of stock
options and sale of incentive stock to reflect maximum
dilutive effect 5,642,548 7,397,435 3,167,667
Weighted average shares and share equivalents for
fully diluted earnings per share 175,137,942 172,540,316 166,996,378
Earnings for primary and
fully diluted computations:
Income before cumulative effect of
change in accounting principle $ 180.1 $ 51.9 $ 4.8
Cumulative effect of change in accounting for
postemployment benefits - - (3.5)
Net income $ 180.1 $ 51.9 $ 1.3
Primary earnings per share:
Income before cumulative effect of change
in accounting principle $ 1.06 $ 0.31 $ 0.03
Cumulative effect of change in accounting for
postemployment benefits - - (0.02)
Primary net income per common share $ 1.06 $ 0.31 $ 0.01
Fully diluted net income per share:
Income before cumulative effect of
change in accounting principle $ 1.03 $ 0.30 $ 0.03
Cumulative effect of change in accounting for
postemployment benefits - - (0.02)
Fully diluted net income per common share $ 1.03 $ 0.30 $ 0.01
</TABLE>
EXHIBIT 21.1
GLOBAL MARINE INC. AND SUBSIDIARIES
as of February 28, 1997
STATE OR OTHER PERCENT OF VOTING
JURISDICTION OF STOCK OWNED BY
NAME OF COMPANY INCORPORATION IMMEDIATE PARENT
Global Marine Inc. Delaware -
Applied Drilling Technology Inc. Texas 100%
Arctic Systems Ltd. Canada 100%
Challenger Minerals Inc. California 100%
WO Offshore, Inc. Texas 50%
Global Marine Arctic Ltd. Canada 100%
Global Marine B.V. The Netherlands 100%
Global Marine Baltic Inc. Delaware 100%
Global Marine Bismarck Sea Inc. Delaware 100%
Global Marine International
Services Corporation Bahamas 100%
Global Marine Capital
Investments Inc. Delaware 100%
Global Marine Beaufort Sea Inc. Delaware 100%
Global Marine Corporate Services Inc. California 100%
Global Marine Deepwater Drilling Inc. Delaware 100%
Global Marine Australia Inc. Delaware 100%
Global Marine West Africa Inc. Delaware 100%
Petdrill, Inc. Delaware 100%
Global Marine Drilling Company California 100%
Global Marine Caribbean, Inc. California 100%
Global Marine Development Inc. California 100%
Global Marine do Brasil
Perfuracoes Ltda. Brazil 50% (1)
Global Marine Drilling Services California 100%
Global Dolphin Drilling Company
Private Limited India 40%
Glomar International S.A.R.L. France 100%
Global Marine Drilling (Malaysia)
Sdn. Bhd. Malaysia 100%
Global Marine Integrated Services
- International Inc. Delaware 100%
Global Marine North Sea Inc. Delaware 100%
Global Marine Oil & Gas Company Delaware 100%
Global Marine U.K. Limited Scotland 100%
Global Marine de Venezuela Inc. Delaware 100%
Global Offshore Drilling Ltd. Nigeria 60%
Intermarine Services Inc. Texas 100%
Marican Offshore Drilling Services, Inc. Canada 100%
(1) The remaining 50% of the voting stock is owned directly
by Global Marine Inc.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report dated February 7,
1997 on our audits of the consolidated financial statements and our report
dated February 7, 1997 on our audits of the financial statement schedule of
Global Marine Inc. and subsidiaries, as of December 31, 1996 and 1995, and
for the years ended December 31, 1996, 1995 and 1994, which reports are
included in this Annual Report on Form 10-K, into (i) the prospectus
constituting part of the Company's Registration Statements on Form S-8
(Registration Nos. 33-32088, 33-40961 and 33-63326), respectively, for the
Global Marine Inc. 1989 Stock Option and Incentive Plan, (ii) the prospectus
constituting part of the Company's Registration Statement on Form S-8
(Registration No. 33-40266) for the Global Marine Savings Incentive Plan,
(iii) the prospectus constituting part of the Company's Registration
Statement on Form S-8 (Registration No. 33-40961) for the Global Marine Inc.
1990 Non-Employee Director Stock Option Plan, (iv) the prospectus
constituting part of the Company's Registration Statement on Form S-8
(Registration No. 33-57691) for the Global Marine Inc. 1994 Non-Employee
Stock Option and Incentive Plan, and (v) the prospectus constituting part of
the Company's Registration Statement on Form S-3 (Registration No. 33-58577)
for the proposed offering of up to $75,000,000 of debt securities, preferred
stock and/or common stock.
/s/ Coopers & Lybrand L.L.P.
Houston, Texas
February 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Global Marine Inc. and subsidiaries as of
12-31-96 and the related consolidated statement of operations for the year
ended 12-31-96, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 92,900
<SECURITIES> 27,500
<RECEIVABLES> 105,700
<ALLOWANCES> 1,300
<INVENTORY> 0
<CURRENT-ASSETS> 246,500
<PP&E> 732,900
<DEPRECIATION> 255,500
<TOTAL-ASSETS> 807,800
<CURRENT-LIABILITIES> 87,600
<BONDS> 225,000
0
0
<COMMON> 16,900
<OTHER-SE> 442,200
<TOTAL-LIABILITY-AND-EQUITY> 807,800
<SALES> 12,900
<TOTAL-REVENUES> 680,700
<CGS> 6,100
<TOTAL-COSTS> 521,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,900
<INCOME-PRETAX> 119,700
<INCOME-TAX> (60,400)
<INCOME-CONTINUING> 180,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 180,100
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.03
</TABLE>
