UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 (I.R.S. Employer
incorporation or organization) Identification No.)
777 N. Eldridge Parkway, Houston, Texas 77079-4493
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 596-5100
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 [ ]
The number of shares of the registrant's Common Stock, par value $.10 per
share, outstanding as of October 31, 1999 was 174,418,889.
<PAGE>
GLOBAL MARINE INC.
TABLE OF CONTENTS TO FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Report of Independent Accountants 2
Condensed Consolidated Statement of Income for the Three
and Nine Months Ended September 30, 1999 and 1998 3
Condensed Consolidated Balance Sheet as of September 30, 1999
and December 31, 1998 4
Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 22
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURE 23
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Global Marine Inc.
We have made a review of the condensed consolidated balance sheet of
Global Marine Inc. and subsidiaries as of September 30, 1999, the related
condensed consolidated statement of income for the three and nine-month
periods ended September 30, 1999 and 1998, and the consolidated statement
of cash flows for the nine months ended September 30, 1999 and 1998. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1998, and the
related consolidated statements of income, stockholders' equity, and cash
flows for the year then ended (not presented herein); and in our report
dated February 22, 1999, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of
December 31, 1998, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
November 8, 1999
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Contract drilling $106.9 $191.4 $404.6 $564.6
Drilling management 59.0 79.9 182.6 335.5
Oil and gas 2.7 .9 5.1 3.2
------ ------- ------ ------
Total revenues 168.6 272.2 592.3 903.3
Expenses:
Contract drilling 65.1 73.7 207.2 200.6
Drilling management 49.9 99.9 175.3 354.2
Oil and gas .8 .4 2.1 1.4
Depreciation, depletion, and
amortization 22.4 27.9 65.7 74.4
General and administrative 5.3 3.7 17.2 14.1
------ ------ ------ ------
Total operating expenses 143.5 205.6 467.5 644.7
------ ------ ------ ------
Operating income 25.1 66.6 124.8 258.6
Other income (expense):
Interest expense (13.8) (12.7) (40.8) (33.1)
Interest capitalized 7.0 3.7 17.0 13.9
Interest income .5 .7 2.0 2.6
------ ------ ------ ------
Total other income (expense) (6.3) (8.3) (21.8) (16.6)
------ ------ ------ ------
Income before income taxes 18.8 58.3 103.0 242.0
Provision for income taxes:
Current tax provision 1.3 5.5 .9 17.1
Deferred tax provision 3.7 5.6 23.3 36.1
------ ------ ------ ------
Total provision for income taxes 5.0 11.1 24.2 53.2
------ ------ ------ ------
Net income $ 13.8 $ 47.2 $ 78.8 $188.8
====== ====== ====== ======
Earnings per share:
Basic $ 0.08 $ 0.27 $ 0.45 $ 1.09
Diluted $ 0.08 $ 0.27 $ 0.45 $ 1.07
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ in millions)
ASSETS
<CAPTION>
September 30, December 31,
1999 1998
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 35.1 $ 56.9
Accounts receivable, net of allowances 106.3 163.0
Costs incurred on turnkey drilling
contracts in progress 10.0 6.6
Future income tax benefits - 20.0
Prepaid expenses 15.0 15.6
Other current assets 7.5 7.3
-------- --------
Total current assets 173.9 269.4
Properties and equipment:
Rigs and drilling equipment, less accumulated
depreciation of $431.1 at September 30, 1999
and $371.9 at December 31, 1998 1,234.6 1,262.6
Construction in progress 485.8 236.8
Oil and gas properties, full cost method, less
accumulated depreciation, depletion, and
amortization of $26.6 at September 30, 1999
and $24.3 at December 31, 1998 13.9 12.7
-------- --------
Net properties and equipment 1,734.3 1,512.1
Future income tax benefits 89.8 89.8
Other assets 92.0 100.3
-------- --------
Total assets $2,090.0 $1,971.6
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
($ in millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
1999 1998
------------ -----------
<S> <C> <C>
Current liabilities:
Accounts payable $ 70.6 $ 99.0
Accrued compensation and related employee costs 21.6 22.5
Accrued income taxes 3.3 12.2
Accrued interest 9.4 9.3
Other accrued liabilities 8.5 9.4
-------- --------
Total current liabilities 113.4 152.4
Long-term debt 810.7 750.7
Capital lease obligation 17.1 17.7
Other long-term liabilities 22.6 10.4
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, 174,400,272 shares and 173,368,384
shares issued and outstanding at September 30,
1999 and December 31, 1998, respectively 17.4 17.3
Additional paid-in capital 328.4 321.5
Retained earnings 780.4 701.6
-------- --------
Total shareholders' equity 1,126.2 1,040.4
-------- --------
Total liabilities and shareholders' equity $2,090.0 $1,971.6
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Nine Months Ended
September 30,
-----------------
1999 1998
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 78.8 $ 188.8
Adjustments to reconcile net income to net
cash flow provided by operating activities:
Depreciation, depletion, and amortization 65.7 74.4
Deferred income taxes 23.3 36.1
Decrease (increase) in accounts receivable 56.9 (23.7)
(Increase) decrease in costs incurred on
turnkey drilling contracts in progress (3.4) 1.8
Decrease (increase) in other current assets .4 (13.8)
Decrease (increase) in noncurrent receivables 8.0 (46.4)
Decrease in accounts payable (28.4) (23.3)
Increase in accrued interest - 2.8
Decrease in other accrued liabilities (10.2) (13.0)
Other, net 11.2 (4.6)
------- -------
Net cash flow provided by operating activities 202.3 179.1
Cash flows from investing activities:
Capital expenditures (287.7) (531.7)
Proceeds from sales of properties and equipment 2.6 3.2
Other (.4) .2
------- -------
Net cash flow used in investing activities (285.5) (528.3)
Cash flows from financing activities:
Increases in long-term debt 305.2 571.0
Reductions of long-term debt (245.3) (250.0)
Proceeds from exercises of employee stock options 3.3 4.4
Other (1.8) (3.1)
------- -------
Net cash flow provided by financing activities 61.4 322.3
------- -------
Decrease in cash and cash equivalents (21.8) (26.9)
Cash and cash equivalents at beginning of period 56.9 78.9
------- -------
Cash and cash equivalents at end of period $ 35.1 $ 52.0
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
Note 1 - General
The financial statements reflect all adjustments which are, in the opinion
of management, necessary for a fair statement of the results for the interim
periods. Such adjustments are considered to be of a normal recurring nature
unless otherwise identified.
The year-end condensed consolidated balance sheet was derived from audited
financial statements but does not include all disclosures required by generally
accepted accounting principles. Certain reclassifications were made to the
prior-year period to conform to the current-period presentation, with no
effect on the consolidated financial position, results of operations, or
cash flows.
The term "Company" refers to Global Marine Inc. and, unless the context
otherwise requires, to the Company's consolidated subsidiaries.
These interim financial statements should be read in conjunction with the
Company's audited financial statements for the year ended December 31, 1998.
Note 2 - Change in Rig Service Lives
In December 1998, the Company conducted an evaluation of the service lives
of the rigs in its drilling fleet. Based on the results of the evaluation,
effective January 1, 1999, the Company increased the estimated useful lives
of its jackups and semisubmersibles to 30 years to better reflect their
estimated economic lives. Prior to the change, jackups were depreciated
over 25-year lives, and semisubmersibles generally were depreciated over
20-year lives. For the quarter ended September 30, 1999, the effect of the
change was to increase net income by $5.0 million and diluted earnings per
share by $0.03. For the nine months ended September 30, 1999, the effect of
the change was to increase net income by $15.1 million and diluted earnings
per share by $0.09.
<PAGE>
Note 3 - Earnings per Share
A reconciliation of the numerators and denominators of the basic and diluted
per-share computations for net income follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
($ in millions, except per share data)
<S> <C> <C> <C> <C>
Net income (numerator): $13.8 $47.2 $78.8 $188.8
===== ===== ===== ======
Shares (denominator):
Shares - Basic 174,242,291 173,264,071 173,849,801 172,935,155
Effect of employee
stock options 3,291,791 2,395,816 2,713,247 2,995,137
----------- ----------- ----------- -----------
Shares - Diluted 177,534,082 175,659,887 176,563,048 175,930,292
=========== =========== =========== ===========
Earnings per share:
Basic $0.08 $0.27 $0.45 $1.09
Diluted $0.08 $0.27 $0.45 $1.07
</TABLE>
<PAGE>
Note 4 - Segment and Geographic Information
Information by operating segment, together with reconciliations to the
consolidated totals, is presented in the following table:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
(In millions)
<S> <C> <C> <C> <C>
Revenues from external customers:
Contract drilling $106.9 $191.4 $404.6 $564.6
Drilling management services 59.0 79.9 182.6 335.5
Oil and gas 2.7 .9 5.1 3.2
------ ------ ------ ------
Consolidated $168.6 $272.2 $592.3 $903.3
====== ====== ====== ======
Intersegment revenues:
Contract drilling $ 2.3 $ - $ 6.2 $ 11.0
Drilling management services 1.1 .8 6.0 4.5
Intersegment eliminations (3.4) (.8) (12.2) (15.5)
------ ------ ------ ------
Consolidated $ - $ - $ - $ -
====== ====== ====== ======
Total revenues:
Contract drilling $109.2 $191.4 $410.8 $575.6
Drilling management services 60.1 80.7 188.6 340.0
Oil and gas 2.7 .9 5.1 3.2
Intersegment eliminations (3.4) (.8) (12.2) (15.5)
------ ------ ------ ------
Consolidated $168.6 $272.2 $592.3 $903.3
====== ====== ====== ======
Operating income:
Contract drilling $ 20.9 $ 90.8 $135.3 $292.4
Drilling management services 9.0 (20.0) 7.1 (18.9)
Oil and gas .8 - .7 .5
Corporate (5.6) (4.2) (18.3) (15.4)
------ ------ ------ ------
Consolidated $ 25.1 $ 66.6 $124.8 $258.6
====== ====== ====== ======
</TABLE>
<PAGE>
A reconciliation of segment operating income to consolidated income before
income taxes follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
(In millions)
<S> <C> <C> <C> <C>
Total segment operating income $ 30.7 $ 70.8 $143.1 $274.0
Corporate general and administrative
expenses (5.3) (3.7) (17.2) (14.1)
Corporate depreciation, depletion,
and amortization (.3) (.5) (1.1) (1.3)
------ ------ ------ ------
Consolidated operating income 25.1 66.6 124.8 258.6
Interest expense (13.8) (12.7) (40.8) (33.1)
Interest capitalized 7.0 3.7 17.0 13.9
Interest income .5 .7 2.0 2.6
------ ------ ------ ------
Income before income taxes $ 18.8 $ 58.3 $103.0 $242.0
====== ====== ====== ======
</TABLE>
Note 5 - Contingencies
In February and March 1998, the Company entered into fixed-price contracts
with Harland and Wolff Shipbuilding and Heavy Industries Limited (the
"Shipbuilder") totaling $315 million for the construction of two dynamically
positioned, ultra-deepwater drillships, the Glomar C.R. Luigs and the Glomar
Jack Ryan, for delivery in the fourth quarter of 1999 and first quarter of
2000, respectively. Pursuant to two fully-defeased long-term lease agreements,
the Company has novated the construction contracts for the drillships to two
financial institutions, which now own the drillships and will lease them to
the Company. The Company acts as the lessors' construction supervisor and,
to date, has paid on behalf of the lessors, or provided for the lessors'
payment of, all amounts it believes are required under the terms of the
contracts, including payments for all approved change orders.
On October 29, 1999, the Company received a claim from the Shipbuilder
alleging breach of contract in connection with the Company's obligations
regarding design of the drillships, the timely delivery to the Shipbuilder
of owner-furnished equipment, and design change orders. The amount of the
Shipbuilder's claim in excess of the contract price totals GBP133 million
($216 million). In addition, the Shipbuilder has previously requested
additional compensation in the amount of $46 million related to the
drillships' steel-weight content. With the exception of a small amount of
the steel-weight claim, the Company believes that the Shipbuilder's claims
are totally without merit and that the cost overruns claimed by the
Shipbuilder are primarily the result of the Shipbuilder's independent
engineering processes and planning and are for its own account. The Company
also believes that the claims ultimately will be resolved through arbitration.
Because the Company is concerned about the Shipbuilder's financial viability,
and because the Company's immediate goal is satisfactory completion of the
drillships, the Company is working with the Shipbuilder to determine the costs
to complete the ships and the amount of additional funding needed. Following
that determination, the Company may provide for the advancement of additional
amounts to
<PAGE>
complete the drillships. In that regard, the Company is negotiating the
terms and conditions under which such amounts might be advanced. The Company
does not know, however, if it will be able to negotiate satisfactory terms
and conditions. The Company is therefore evaluating its rights and remedies
in the event of a default by the Shipbuilder, including its right to take
possession of the unfinished drillships and complete them at the Shipbuilder's
yard.
Although the Company believes that its position regarding the Shipbuilder's
claims is meritorious, it cannot predict the ultimate resolution of this
matter or the amount of additional payments, if any, that would be required
to complete the drillships.
The Company is seeking to resolve a dispute with Sedco Forex Offshore
("Sedco") with respect to a bareboat charter agreement for the drilling
rig, Glomar Grand Banks. The Company assumed rights to the bareboat
charter at the time it acquired ownership of the rig in July 1997. At
issue are (i) the date of termination of the charter, (ii) the condition
of the rig upon its return to the Company, and (iii) Sedco's liability
to pay additional dayrate. With regard to the first issue, the Company
has contended that the charter expired on January 20, 1998. The parties
commenced arbitration proceedings in London in December 1997, and the
arbitration panel ruled in favor of the Company on that issue. With
respect to the other issues, the Company contends Sedco is responsible
under the charter for paying the cost of certain repairs to the rig and for
paying a market dayrate for the period following termination of the charter
and while the rig was in the shipyard for repairs prior to its return to
work for another customer. Sedco finished using the rig for drilling in
May 1998, at which time the rig entered a shipyard to undergo the repairs
at issue. The Company completed the repairs in October 1998 and mobilized
the rig to the east coast of Canada, where it has been operating for another
customer since December 1998. The arbitration hearing in London with regard
to the outstanding issues has been delayed until no earlier than the first
quarter of 2000. The Company has recorded a noncurrent receivable from
Sedco in the amount of $55.4 million at September 30, 1999, consisting of
$32.2 million of costs incurred in connection with rig repairs for which
the Company contends Sedco is responsible and $23.2 million of dayrate
revenue recognized in 1998; however, the Company expects the total claim
against Sedco to exceed these amounts.
The Company is involved in various lawsuits resulting from personal injury
and property damage. In the opinion of management, resolution of these
matters will not have a material adverse effect on the Company's results
of operations, financial position, or cash flows.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating Results
SUMMARY
Operating income decreased by $41.5 million to $25.1 million for the third
quarter of 1999 from $66.6 million for the third quarter of 1998. Operating
income decreased by $133.8 million to $124.8 million for the nine months
ended September 30, 1999 from $258.6 million for the nine months ended
September 30, 1998. The declines were attributable to decreases in average
dayrates and rig utilization for contract drilling and were partly offset by
the addition of three deep-water rigs to the contract drilling fleet since
February 1998, lower depreciation resulting from the increase in estimated
rig service lives, and lower fixed costs for drilling management services.
Data relating to the Company's operations by business segment follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- ------------------------------
% Increase % Increase
1999 1998 (Decrease) 1999 1998 (Decrease)
------ ------ ---------- ------ ------ ----------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Contract drilling $109.2 $191.4 (43%) $410.8 $575.6 (29%)
Drilling management 60.1 80.7 (26%) 188.6 340.0 (45%)
Oil and gas 2.7 .9 200% 5.1 3.2 59%
Less: Intersegment revenues (3.4) (.8) 325% (12.2) (15.5) (21%)
------ ------ ------ ------
$168.6 $272.2 (38%) $592.3 $903.3 (34%)
====== ====== ====== ======
Operating income:
Contract drilling $ 20.9 $ 90.8 (77%) $135.3 $292.4 (54%)
Drilling management 9.0 (20.0) na 7.1 (18.9) na
Oil and gas .8 - na .7 .5 40%
Corporate expenses (5.6) (4.2) 33% (18.3) (15.4) 19%
------ ------ ------ ------
$ 25.1 $ 66.6 (62%) $124.8 $258.6 (52%)
====== ====== ====== ======
</TABLE>
Weak oil prices throughout 1998 caused most oil and gas producers to
substantially reduce their 1999 drilling budgets as compared to 1998
levels. Since year-end 1998, industry utilization rates for offshore
drilling rigs in most major worldwide markets have fallen from prior-year
levels, and spot market dayrates for most rig types in most geographic
markets have fallen to near cash break-even levels. As of November 8,
1999, six of the Company's eight deep-water rigs were operating under
older contracts at dayrates higher than current market rates. One of
these rigs completes its current contract in December 1999, one becomes
available in July 2000, one becomes available in December 2000, and one
becomes available in each of 2001, 2002, and 2003. At November 8, 1999,
eight of the Company's thirty-one active rigs were idle with no immediate
plans for work ("cold-stacked").
Since January 1999, oil prices have risen significantly as a result of
OPEC production cuts and an improving outlook for foreign economic recovery,
particularly in Asia. In addition, natural gas prices have increased in
anticipation of tighter supplies. In the third quarter of 1999, several
independent oil and gas companies increased their drilling activities in the
U.S. Gulf of Mexico apparently in response to higher gas prices and improved
access to capital markets. The Company experienced a 96 percent rig
<PAGE>
utilization rate in the U.S. Gulf of Mexico during the third quarter of
1999 compared to an industry average of 67 percent for the region. The
Company has also seen an improvement in dayrates in the U.S. Gulf of Mexico
during the third quarter of 1999, which typically occurs when utilization
rates for individual classes of rigs increase above a threshold level. The
Company has not yet seen a resurgence in offshore drilling markets in either
the North Sea or West Africa, where it has a significant presence; however,
the number of inquiries in West Africa has recently increased, and the
Company expects that market to improve in 2000 following the completion of
oil company budget cycles. The North Sea market will likely be the last of
the Company's three major markets to recover due to the high cost nature of
that region. Despite the improvements in rig utilization and dayrates in
the U.S. Gulf of Mexico during the third quarter of 1999, the Company
expects earnings in the fourth quarter of 1999 to be slightly lower than in
the third quarter due primarily to lower projected utilization rates for
Company rigs in the North Sea and Argentina.
The anticipated delivery dates for the two ultra deep-water drillships
currently under construction, the Glomar C.R. Luigs and the Glomar Jack
Ryan, have been delayed. The Company now expects to take delivery of the
Glomar C.R. Luigs during the first quarter of 2000 and that the Glomar Jack
Ryan could be delivered as late as the third quarter of 2000. Both rigs are
committed to multi-year contracts on delivery. The delayed delivery dates
are not expected to have a material effect on the drillships' operating
contracts with customers, other than to delay their commencement. The
Company estimates that the resulting delay in the commencement of operations
under the contracts will reduce cash flow in the year 2000 by approximately
$40 million, but will only modestly impact earnings. The shipbuilder has
recently advised the Company of claims for additional costs (see "Liquidity
and Capital Resources").
At September 30, 1999, the Company had $1.0 billion of contract drilling
backlog, which is expected to be realized as follows: $99 million during
the remainder of 1999, $403 million in 2000, and $547 million in 2001
through 2003. Contract drilling backlog at December 31, 1998 was $1.3
billion.
CONTRACT DRILLING OPERATIONS
Data with respect to the Company's contract drilling operations follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- ------------------------------
% Increase % Increase
1999 1998 (Decrease) 1999 1998 (Decrease)
------ ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Contract drilling revenues by area
(in millions): (1)
Gulf of Mexico $ 40.9 $ 59.7 (31%) $ 140.7 $ 206.4 (32%)
North Sea 28.3 51.2 (45%) 108.6 128.2 (15%)
West Africa 24.7 56.6 (56%) 75.9 169.5 (55%)
Other 15.3 23.9 (36%) 85.6 71.5 20%
------- ------- ------- -------
$ 109.2 $ 191.4 (43%) $ 410.8 $ 575.6 (29%)
======= ======= ======= =======
Average rig utilization (2) 71% 93% 78% 97%
Average dayrate $53,600 $72,100 $61,600 $72,900
- -------------------
(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 rigs during the periods they were being converted
to drilling operations from other uses.
</TABLE>
<PAGE>
Of the $82.2 million decrease in contract drilling revenues for the third
quarter of 1999 as compared with the comparable quarter of 1998, $60.6
million was attributable to a decrease in average dayrates, and $30.9 million
was attributable to a decrease in average rig utilization, partially offset
by a $9.3 million increase attributable to the addition to the fleet of the
Glomar Explorer drillship in August 1998.
Of the $164.8 million decrease in contract drilling revenues for the nine
months ended September 30, 1999 as compared with the nine months ended
September 30, 1998, $135.6 million was attributable to a decrease in average
dayrates, and $82.8 million was attributable to a decrease in average rig
utilization, partially offset by a $56.0 million increase attributable to
additions to the fleet. The additions were the Glomar Celtic Sea
semisubmersible in February 1998, the Glomar Arctic IV semisubmersible in
March 1998, and the Glomar Explorer drillship in August 1998.
The Company experienced lower rig utilization in the third quarter of 1999
as compared with the comparable quarter of 1998 in most of its geographic
markets, except the U.S. Gulf of Mexico. In the third quarter of 1999, the
Company averaged 96 percent utilization for its rigs in the U.S. Gulf of
Mexico, 76 percent in the North Sea, and 43 percent in West Africa. This
compares with the Company's third quarter 1998 average rig utilization of
87 percent in the U.S. Gulf of Mexico, 99 percent in the North Sea, and
96 percent in West Africa.
For the nine months ended September 30, 1999, the Company averaged 96 percent
utilization for its rigs in the U.S. Gulf of Mexico, 87 percent in the North
Sea, and 48 percent in West Africa. This compares with the Company's average
rig utilization for the nine months ended September 30, 1998 of 94 percent
in the U.S. Gulf of Mexico, 98 percent in the North Sea, and 98 percent in
West Africa.
The mobilization of rigs between the geographic areas shown in the preceding
table also affected each area's revenues over the periods indicated.
Specifically, the Company mobilized one jackup from the U.S. Gulf of Mexico
to the North Sea in May 1998, one jackup from California to the North Sea in
July 1998, one semisubmersible from the North Sea to the east coast of Canada
in November 1998, one drillship from West Africa to offshore Peru in April
1999, and one drillship from the U.S. Gulf of Mexico to West Africa in May
1999.
In December 1998, the Company conducted an evaluation of the service lives
of the rigs in its drilling fleet. Based on the results of the evaluation,
effective January 1, 1999, the Company increased the estimated useful lives
of its jackups and semisubmersibles to 30 years to better reflect their
estimated economic lives. Prior to the change, jackups were depreciated
over 25-year lives, and semisubmersibles generally were depreciated over
20-year lives. For the quarter ended September 30, 1999, the effect of the
change was to decrease depreciation expense by $6.8 million. For the nine
months ended September 30, 1999, the effect of the change was to decrease
depreciation expense by $19.7 million.
The Company's operating profit margin for contract drilling operations
decreased to 19 percent for the third quarter of 1999 from 47 percent
in the third quarter of 1998 and decreased to 33 percent for the nine
months ended September 30, 1999 from 51 percent for the nine months
ended September 30, 1998. The declines were primarily the result of lower
average rig utilization and dayrates. Contract drilling operating expenses
decreased by $12.3 million and $7.7 million for the three and nine months
ended September 30, 1999, respectively, primarily due to lower expenses in
connection with the Company's cold-stacked rigs and lower depreciation
resulting from the increase in rig lives. These declines were partly offset
by the operating costs of the three rigs added to the fleet in 1998 and
higher operating costs incurred on the Glomar Grand Banks, which, prior to
December 1998, was being leased from the
<PAGE>
Company under a bareboat charter. Under a bareboat charter the Company
provides the customer with a rig, and the customer uses its own crews to
operate the rig.
In October 1999, the Company moved two jackups, the Glomar Adriatic IX and
the Glomar Adriatic X, to the U.S. Gulf of Mexico from West Africa. The
Company will incur the cost of mobilizing these rigs, which is expected to
be approximately $4.0 million. After upgrades to both rigs to increase
their water-depth capability, the Glomar Adriatic X will commence operations
in November 1999 on a one-year, $10.2 million contract, and the Glomar
Adriatic IX will commence operations in November 1999 under two consecutive
contracts totaling $4.1 million over five months. The Company will amortize
the cost of mobilizing the two rigs over the terms of the contracts. As of
November 8, 1999, thirteen of the Company's rigs were located in the U.S.
Gulf of Mexico, eight were offshore West Africa, six were in the North
Sea, and one was offshore each of Argentina, Trinidad, Canada, and Peru. At
November 8, 1999, eight of the Company's thirty-one active rigs were without
contracts or other commitments.
DRILLING MANAGEMENT SERVICES
Drilling management services revenues decreased by $20.6 million to $60.1
million in the third quarter of 1999 from $80.7 million in the third quarter
of 1998. The decrease in revenues consisted of a $17.4 million decrease
attributable to lower average revenues per turnkey project and a $17.2
million decrease attributable to daywork and other revenues, partly offset
by a $14.0 million increase attributable to an increase in the number
of turnkey projects to 17 (15 wells drilled and two well completions) in the
third quarter of 1999 from 12 wells drilled in the third quarter of 1998.
Drilling management services revenues decreased by $151.4 million to $188.6
million for the nine months ended September 30, 1999 from $340.0 million for
the nine months ended September 30, 1998. The decrease in revenues consisted
of a $107.1 million decrease attributable to lower average revenues per
turnkey project and a $49.0 million decrease attributable to daywork and
other revenues, partly offset by a $4.7 million increase attributable to an
increase in the number of turnkey projects to 61 (52 wells drilled and 9 well
completions) for the nine months ended September 30, 1999 from 59 (58 wells
drilled and one well completion) for the comparable prior-year period.
Operating income increased $29.0 million to $9.0 million in the third
quarter of 1999 from a loss of $20.0 million for the third quarter of 1998,
and operating income increased $26.0 million to $7.1 million for the nine
months ended September 30, 1999 from a loss of $18.9 million for the nine
months ended September 30, 1998. The increases in drilling management
services operating results for the quarter and nine months were primarily
due to a decrease in the number of rigs under term contract to the Company.
During 1998 and early 1999, the Company was paying above-market rates for
the use of as many as sixteen rigs under term contracts signed in late 1997
and early 1998, when market rates were higher. The incremental cost of
these rigs above what they would have cost if contracted as needed on the
spot market was estimated to be $11.5 million for the nine months ended
September 30, 1999, compared with $25.3 million and $39.6 million for the
quarter and nine months ended September 30, 1998, respectively. By June 30,
1999, the Company had substantially fulfilled all obligations related to rigs
contracted at above-market rates. Currently, the Company is contracting
rigs as needed on a well-by-well basis. In addition to the incremental costs
of rigs under term contracts, the Company recorded $4.2 million of estimated
losses on turnkey wells during the third quarter of 1998 that were expected
to be completed during the fourth quarter of 1998 at a loss compared to none
for the third quarter of 1999.
<PAGE>
Drilling management operating results for the three and nine months ended
September 30, 1999 and 1998 were favorably affected by downward revisions
to estimates of the costs of wells completed in prior periods. The effects
of these downward revisions were to increase income by $1.7 million and $3.4
million for the three and nine months ended September 30, 1999, and by $1.1
million and $8.3 million for the three and nine months ended September 30,
1998.
OTHER INCOME AND EXPENSE
General and administrative expenses increased to $5.3 million in the third
quarter of 1999 from $3.7 million in the third quarter of 1998. General
and administrative expenses increased to $17.2 million for the nine months
ended September 30, 1999 from $14.1 million for the nine months ended
September 30, 1998. The increases were due to increases in professional
fees and compensation expense primarily related to a stock-based compensation
plan, which costs were based on Company performance and the market price of
the Company's common stock.
Interest expense increased to $13.8 million in the third quarter of 1999
from $12.7 million in the third quarter of 1998. Interest expense increased
to $40.8 million for the nine months ended September 30, 1999 from $33.1
million for the comparable prior-year period. The increases were primarily
due to higher debt incurred to finance rig construction.
The Company capitalized $7.0 million of interest expense for the third
quarter of 1999 as compared to $3.7 million for the third quarter of 1998,
an increase of $3.3 million. The Company capitalized $17.0 million of
interest expense for the nine months ended September 30, 1999 as compared
to $13.9 million for the comparable prior-year period, an increase of $3.1
million. The increases were due to interest capitalized on the two
new-builds, the Glomar C.R. Luigs and the Glomar Jack Ryan, partially
offset by the completion of conversion of the Glomar Celtic Sea, which
entered service in the first quarter of 1998, and the Glomar Explorer,
which entered service in the third quarter of 1998.
Interest income decreased to $0.5 million in the third quarter of 1999 from
$0.7 million in the third quarter of 1998. Interest income decreased to
$2.0 million for the nine months ended September 30, 1999 from $2.6 million
for the nine months ended September 30, 1998. The decreases were primarily
due to lower cash balances.
LIQUIDITY AND CAPITAL RESOURCES
In February and March 1998, the Company entered into fixed-price contracts
with Harland and Wolff Shipbuilding and Heavy Industries Limited (the
"Shipbuilder") totaling $315 million for the construction of two dynamically
positioned, ultra-deepwater drillships, the Glomar C.R. Luigs and the Glomar
Jack Ryan, for delivery in the fourth quarter of 1999 and first quarter of
2000, respectively. Pursuant to two fully-defeased long-term lease agreements,
the Company has novated the construction contracts for the drillships to two
financial institutions, which now own the drillships and will lease them to
the Company. The Company acts as the lessors' construction supervisor and,
to date, has paid on behalf of the lessors, or provided for the lessors'
payment of, all amounts it believes are required under the terms of the
contracts, including payments for all approved change orders.
On October 29, 1999, the Company received a claim from the Shipbuilder
alleging breach of contract in connection with the Company's obligations
regarding design of the drillships, the timely delivery to the
Shipbuilder of owner-furnished equipment, and design change orders. The
amount of the Shipbuilder's
<PAGE>
claim in excess of the contract price totals GBP133 million ($216 million).
In addition, the Shipbuilder has previously requested additional compensation
in the amount of $46 million related to the drillships' steel-weight content.
With the exception of a small amount of the steel-weight claim, the Company
believes that the Shipbuilder's claims are totally without merit and that the
cost overruns claimed by the Shipbuilder are primarily the result of the
Shipbuilder's independent engineering processes and planning and are for its
own account. The Company also believes that the claims ultimately will be
resolved through arbitration.
Because the Company is concerned about the Shipbuilder's financial viability,
and because the Company's immediate goal is satisfactory completion of the
drillships, the Company is working with the Shipbuilder to determine the
costs to complete the ships and the amount of additional funding needed.
Following that determination, the Company may provide for the advancement
of additional amounts to complete the drillships. In that regard, the
Company is negotiating the terms and conditions under which such amounts
might be advanced. The Company does not know, however, if it will be able
to negotiate satisfactory terms and conditions. The Company is therefore
evaluating its rights and remedies in the event of a default by the
Shipbuilder, including its right to take possession of the unfinished
drillships and complete them at the Shipbuilder's yard.
Although the Company believes that its position regarding the Shipbuilder's
claims is meritorious, it cannot predict the ultimate resolution of this
matter or the amount of additional payments, if any, that would be required
to complete the drillships. The Company, however, does not presently
expect that resolution of the Shipbuilder's claims will materially impact
the Company's future earnings and believes that its existing credit facilities
are adequate to fund completion of the drillships. Additionally, the Company
now expects to take delivery of the Glomar C.R. Luigs during the first quarter
of 2000 and that the Glomar Jack Ryan could be delivered as late as the third
quarter of 2000. The delayed delivery dates are not expected to have a material
effect on the drillships' operating contracts with customers, other than to
delay their commencement. The Company estimates that the resulting delay in
the commencement of operations under the contracts will reduce cash flow in
the year 2000 by approximately $40 million, but will only modestly impact
earnings.
Projected net cash outlays in connection with construction of the Glomar
C.R. Luigs and the Glomar Jack Ryan are expected to total $632 million,
which is $25 million higher than previously estimated. The increase is
primarily due to higher engineering costs and capitalized interest related
to the delayed delivery dates. The Company expects to spend $150 million,
including $24 million of capitalized interest, to complete construction of
the drillships. Projected net cash outlays do not include any additional
costs which could be incurred in connection with the Shipbuilder's claims
for additional amounts.
For the nine months ended September 30, 1999, $202.3 million of cash flow
was provided by operating activities, $59.9 million was provided from the
Company's bank revolving credit facilities and commercial paper program
(net of payments), $3.3 million was provided from exercises of employee
stock options, and $2.6 million was provided from sales of properties and
equipment. From these amounts, plus available cash, $287.7 million was
used for capital expenditures, and $2.2 million was used for other purposes.
For the nine months ended September 30, 1998, $296.0 million (after
deduction for discount and underwriting fees) was provided from the
issuance of $300 million of 7% Notes due 2028, $179.1 million was
provided by operating activities, $25.0 million was provided from the
Company's bank revolving credit facilities (net of payments), $4.4
million was provided from exercises of employee stock options,
<PAGE>
and $3.2 million was provided from sales of properties and equipment.
From these amounts, together with cash on hand, $531.7 million was used
for capital expenditures, and $2.9 million was used for other purposes.
Capital expenditures for the full year 1999 are anticipated to be $393
million, including $137 million for construction of the Glomar C.R. Luigs,
$162 million for construction of the Glomar Jack Ryan, $63 million for
improvements to the remainder of the drilling fleet, $26 million for
capitalized interest, and $5 million for other expenditures. Estimated
capital expenditures do not include additional amounts, if any, that could
be incurred in connection with the Shipbuilder's claims with respect to
construction of the Glomar C.R. Luigs and the Glomar Jack Ryan discussed
above.
In August 1999 the Company initiated a commercial paper program under which
debt may be issued at rates more favorable than the rates available under
the Company's bank credit facilities. The sum of debt issued under the
commercial paper program and borrowings under the Company's bank credit
facilities is limited to the maximum amount available for borrowings under
the bank credit facilities, which is $390 million.
As of September 30, 1999, the Company had $35.1 million in cash and cash
equivalents and $175.1 million available for borrowings under the Company's
bank revolving credit/commercial paper facilities. As of December 31, 1998,
the Company had $56.9 million in cash and cash equivalents.
The Company believes it will be able to meet all of its current obligations,
including capital expenditures and debt service, from its cash flow from
operations, its existing bank credit/commercial paper facilities, and its
cash and cash equivalents. The Company presently expects that capital
expenditures for the remainder of 1999 will exceed the Company's cash flow
from operating activities for the period and that amounts outstanding under
the Company's bank revolving credit/commercial paper facilities will increase.
YEAR 2000 READINESS DISCLOSURE
The "Year 2000" problem refers to the inability of certain computer systems
and other equipment with embedded chips or processors (collectively "Business
Systems") to correctly interpret the century from a date in which the year
is represented by only two digits. Business Systems which are not Year 2000
ready may not be able to correctly process certain data, or in extreme
situations, may cause a system to be disabled or fail to function reliably.
The Company's goal was to have substantially all of its critical Business
Systems functioning properly with respect to the Year 2000 problem by
June 30, 1999, and to develop by June 30, 1999, contingency plans for use
in the event of disruptions caused by the Year 2000 problem. In order to
meet these goals, the Company established a task force of key employees
and outside professional consultants to identify, repair, and replace, if
necessary, significant Business Systems that have Year 2000 problems. These
overall goals and objectives are referred to as the "Year 2000 Project Plan."
The Year 2000 Project Plan has been divided into various subprojects and
phases. The six subprojects include: Information Technology, Rigs,
Supplier/Customer/Shareholder Relations, Telecommunications, Facilities, and
Employee Benefit Plans. The Company has identified the Information Technology
and Rigs subprojects as the most critical, based on the possibility of business
disruptions as a result of any Year 2000 failures in these areas. As of
September 30, 1999, the Company's Year 2000 Project Plan was substantially
complete.
<PAGE>
Information Technology. In 1995 the Company purchased and developed new
accounting, payroll, personnel, and purchasing software as part of the
migration of its computer systems from a mainframe platform to a PC-based
client/server platform. The Company has tested the software to confirm
that it is Year 2000 ready. The Company, as part of its normal business
operations, has upgraded certain software under software maintenance
agreements and has replaced its computer hardware on an as-needed basis
as new technology has been developed. The Company believes its computer
hardware to be substantially Year 2000 ready. Although the Company has
successfully completed testing its critical business applications, a few
software vendors have recently notified the Company of some additional
minor updates to their applications. The Company intends to install and
test these applications by November 30, 1999.
Rigs. The Company has inventoried each drilling rig's critical Business
Systems. This inventory was evaluated, and written documentation regarding
the critical Business Systems' Year 2000 readiness was compiled. In addition,
the Company engaged an independent consultant to conduct on-site surveys on
each rig type. Due to the identical nature of the equipment on board rigs
within a particular rig type, the Company selected 14 of its 31 rigs to be
surveyed. The Company believes these 14 rigs represent all of the rigs in
the fleet. The surveys were completed by June 30, 1999, and minimal
remediation was required. Both the contingency planning and assessment
phases of this subproject were completed as of June 30, 1999. The Glomar
C.R. Luigs and Glomar Jack Ryan, the Company's new-build, ultra deep-water
drillships, will be assessed and tested during the commissioning of the
vessels. Contingency planning for the new-builds will be conducted in
conjunction with assessment.
As a company that provides offshore drilling rigs, the Company routinely
faces the possibility of a catastrophic event affecting its rigs. A Year
2000 failure could produce such an event, which is the reason the Company
has developed a specific subproject that focuses exclusively on analyzing,
remediating, testing, and contingency planning for possible Year 2000
disruptions aboard its rigs. The Company's present analysis of its most
reasonably likely worst-case scenario for Year 2000 disruptions involves
potential downtime on its semisubmersibles and deep-water drillships
consisting of its recent conversions, the Glomar Explorer and Glomar Celtic
Sea, the two new-build, deep-water drillships, the Glomar C.R. Luigs and
Glomar Jack Ryan, and the Glomar Grand Banks and Glomar Arctic I, all of
which are under long-term contract. A Year 2000 failure of critical
hardware or software needed for proper functioning of these vessels could
lead to downtime, which, if lengthy, could materially impact the Company's
financial condition. The Glomar Arctic I has been assessed, and no
remediation has been required. The Glomar Grand Banks, Glomar Explorer,
and Glomar Celtic Sea have been assessed, and remediation on these rigs has
been completed. Certain critical hardware and software aboard the Glomar
Explorer and Glomar Celtic Sea were tested for Year 2000 readiness during
the commissioning of the vessels. The Glomar C.R. Luigs and Glomar Jack Ryan
will be assessed and tested for Year 2000 readiness during the commissioning
of the vessels. The Company's contingency plan considers any significant
failure related to the most reasonably likely worst-case scenario as well
as the severity and duration of the impact of such a scenario. From this
analysis, a Year 2000 contingency plan has been developed to mitigate those
risks.
Supplier/Customer/Shareholder Relations. The Company has initiated
communications with its significant customers, suppliers, and business
partners (collectively "Key Business Partners") to seek Year 2000 readiness
assurances and determine the extent to which their failure to correct their
own Year 2000 problems could affect the Company. The Company's Key Business
Partners include suppliers whose critical function is to provide drilling
rig capital equipment essential to the operation of a rig. As part of normal
business operations, the Company generally does not maintain an inventory of
drilling rig
<PAGE>
capital equipment replacement parts. Although the Company has a contingency
plan in place, in the event replacement parts are required for a rig and the
Company is unsuccessful in purchasing the equipment from its suppliers, the
rig could experience idle time resulting in loss of revenue. Other Key
Business Partners include customers who provide the Company's source of
revenue and cash flow. Any disruption in this revenue stream could impact
the Company's cash flow, results of operations, and financial position. In
large measure, the Company must rely on such Key Business Partners to make
accurate and complete disclosures about their Year 2000 efforts in order for
its assessment of their readiness to be effective. Accordingly, the Company
cannot guarantee that Year 2000 problems, if any, in Key Business Partners'
systems on which it relies will be timely resolved, nor, in most cases, can
it reasonably inspect their Year 2000 efforts or independently verify their
representations to the Company. In addition, the Company cannot foretell
the effect on its business operations from the failure of systems owned by
others, from the delivery of inaccurate information from other companies, or
from the inability of Key Business Partners' systems to interface with the
Company's systems. Where appropriate, the Company plans to explore the
possibility of conducting tests of critical system interfaces with relevant
Key Business Partners. The Company cannot guarantee that other companies'
failure to resolve their Year 2000 problems would not have a material adverse
effect on the Company; however, the Company will continue to assess these
risks and prepare accordingly.
Telecommunications. The Company has compiled a list of its inventory of
telecommunications hardware and software and has contacted vendors and
service providers to determine the Year 2000 readiness of their products.
The subproject was completed in April 1999, and no significant remediation
was required. The Company believes the Telecommunications subproject to be
Year 2000 ready.
Facilities. The Company has conducted evaluations of computer-controlled
components within the Company's main offices worldwide. In addition, the
Company has evaluated the Year 2000 readiness information of its landlords
for its main offices. The subproject was completed in June 1999, and no
significant remediation was required. The Company believes the Facilities
subproject to be Year 2000 ready.
Employee Benefit Plans. The Company has confirmed the Year 2000 readiness
of its internal systems that interface with its Employee Benefit Plans, as
well as the readiness of its third-party service providers. Testing of the
Company's system interfaces with its service providers is complete.
Total costs for Year 2000 remediation, including outside consultants, are
estimated to be approximately $0.9 million, of which $0.8 million has been
incurred as of November 8, 1999. Such costs are exclusive of certain
software corrections or upgrades that are generally made in the normal course
of business and are exclusive of the information system upgrade in 1995,
which was unrelated to the Year 2000 issue. The Company does not separately
track the internal costs of its Year 2000 Project Plan. Such costs are
primarily related to payroll costs of the Company's information technology
group. Costs related to the Year 2000 issue are funded from the Company's
operating cash flows.
Contingency planning for each subproject has been incorporated into the
Company's Year 2000 Project Plan. The Company has engaged external
consultants to develop contingency plans for Business Systems and certain
processes that are highly critical to its business operations. The
contingency plans encompass alternative courses of action, with limited
reliance on computer software and hardware, in the event that Business
Systems or processes are not Year 2000 ready. The contingency plans were
substantially completed by June 30, 1999 but will be continually updated
through December 31, 1999.
<PAGE>
The Company's expectations regarding the Year 2000 problem are subject to
uncertainties which could affect the Company's results of operations or
financial condition. For example, the Company could be adversely affected
by the inability of its Key Business Partners to remedy their own Year 2000
problems, or the Company could be unsuccessful in identifying or repairing
all of its Year 2000 problems related to its critical business operations,
and, as such, the Company's results of operations or financial condition
could be materially impacted. Accordingly, success depends on many factors,
some of which are outside the Company's control. Despite reasonable efforts,
the Company cannot assure that it will not experience any disruptions or
otherwise be adversely affected by Year 2000 problems. While the Company
does not expect any catastrophic failures of any of its Business Systems,
such belief is based upon future events which cannot be reasonably predicted.
As part of assessing its Year 2000 risks, the Company has been communicating
with its insurance carrier to determine the extent to which Year 2000 problems
are covered.
To the extent that any reader of the above Year 2000 Readiness Disclosure is
other than an investor or potential investor in the Company's equity or debt
securities, this disclosure is made for the sole purpose of communicating or
disclosing information aimed at correcting, helping to correct, and/or avoid
Year 2000 failures. This statement is made with the intention to comply
fully with the Year 2000 Information and Readiness Disclosure Act as signed
into law October 19, 1998. All statements made herein shall be construed
within the confines of that Act.
Forward-Looking Statements
Under the Private Securities Litigation Reform Act of 1995, companies
are provided a "safe harbor" for discussing their expectations regarding
future performance. We believe it is in the best interests of our
stockholders and the investment community to use these provisions and
provide such forward-looking information. We do so in this report and
other communications. Our forward-looking statements include things such
as our expectation that our total claim against Sedco will exceed the
amounts recorded as a noncurrent receivable; our opinion that the resolution
of various lawsuits resulting from personal injury and property damage will
not have a material adverse effect on our results of operations, financial
position, or cash flows; our expectations that the West Africa offshore
drilling market will improve in 2000 following the completion of oil company
budget cycles and that the North Sea market will likely be the last of our
three major markets to recover; our expection that earnings in the fourth
quarter of 1999 will be slightly lower than in the third quarter; our
expectations regarding the periods during which our contract drilling backlog
will be realized; our statements regarding the expected cost of mobilizing
certain rigs and the dates rigs that are being upgraded will commence
operations; our beliefs that the claims of Harland and Wolff against the
Company ultimately will be resolved through arbitration, that we may provide
for the advancement of additional amounts to complete the drillships, that
resolution of the Shipbuilder's claims will not materially impact our future
earnings, that our existing credit facilities are adequate to fund completion
of the drillships, that we will take delivery of the Glomar C.R. Luigs during
the first quarter of 2000 and that the Glomar Jack Ryan could be delivered
as late as the third quarter 2000, that the delayed delivery dates will have
no material effect on the drillships' operating contracts with customers other
than to delay their commencement, and that the resulting delay in the
commencement of operations under the contracts will reduce cash flow in the
year 2000 by approximately $40 million but will only modestly impact earnings;
our projection of the total net cash outlays in connection with construction
of the Glomar C.R. Luigs and the Glomar Jack Ryan and our expection regarding
the amount we will spend to complete construction of the drillships; our
statement regarding the amount of anticipated capital expenditures for the
full year 1999; our belief that we will be able to meet all of our current
obligations from our cash flow from operations, our existing bank
credit/commercial
<PAGE>
paper facilities, and our cash and cash equivalents; our expectation that
capital expenditures for the remainder of 1999 will exceed our cash flow
from operating activities for the period and that amounts outstanding under
our bank revolving credit/commercial paper facilities will increase; our
belief that our computer hardware is substantially Year 2000 ready; our
expectations regarding the dates by which various parts of and work in
connection with our Year 2000 Project Plan will be performed or completed;
our expectations regarding the estimated costs and projected effectiveness
of our Year 2000 Project Plan and of our equipment and software in the
context of the Year 2000 problem; our expectation that there will not be any
catastrophic failures of any of our Business Systems; and other statements
that are not historical facts.
Our forward-looking statements speak only as of the date of this report and
are based on currently available industry, financial, and economic data and
our operating plans. They are also inherently uncertain, and investors must
recognize that events could turn out to be materially different from our
expectations.
Factors that could cause or contribute to such differences include, but
are not limited to, incomplete knowledge or planning on our part because
information has not yet been provided to us or will take more time to
uncover or evaluate; changes in the markets for oil and gas and for offshore
drilling services, including changes in demand for our services which may
result from changes in oil and gas operators' drilling programs due to
factors such as changing oil and gas prices; the uncertainties inherent in
disputed matters and in resolving such matters through negotiation,
arbitration, litigation, or other means, including the possibility that we
may be unable to negotiate satisfactory terms and conditions under which
we might advance additional amounts to complete the drillships; uncertainties
regarding the plans of our competitors, particularly with regard to changes
in the composition or location of their rig fleets and the marketing of their
rigs; other competitive and technological changes that affect our ability to
market our services competitively and cost effectively; the risks of
operating in international markets, including changes in political, economic,
trade, and regulatory climates; the operational risks and uncertainties
inherent in offshore oil and gas drilling, particularly on a turnkey basis;
unanticipated additional costs or delays in our rig upgrade or drillship
construction projects due to things such as shipyard problems, price inflation,
design and engineering problems, regulatory requirements, and labor
difficulties; the risks and uncertainties discussed above under "Year 2000
Readiness Disclosure"; and such other risk factors as may be discussed in the
Company's reports filed with the U.S. Securities and Exchange Commission.
The Company disclaims any obligation or undertaking to disseminate any
updates or revisions to its statements, forward-looking or otherwise, to
reflect changes in the Company's expectations or any change in events,
conditions, or circumstances on which any such statements are based.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not significant.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Commercial Paper Dealer Agreement 4(2) Program between Global
Marine Inc., as Issuer, and Merrill Lynch Money Markets Inc.,
as Dealer, dated as of July 27, 1999.
10.2 Commercial Paper Dealer Agreement 4(2) Program between Global
Marine Inc., as Issuer, and Goldman, Sachs & Co., as Dealer,
dated as of July 27, 1999.
10.3 Resolution dated August 11, 1999, regarding Directors' Fees
and Expense Reimbursement.
10.4 Resolution dated August 11, 1999, regarding Termination of
Retirement Plan for Outside Directors.
15.1 Letter of Independent Accountants regarding Awareness of
Incorporation by Reference.
27.1 Financial Data Schedule. (Exhbit 27.1 is being submitted as
an exhibit only in the electronic format of this Quarterly
Report on Form 10-Q 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) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1999.
SIGNATURE
Pursuant to the requirements 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)
Dated: November 8, 1999 /s/ Thomas R. Johnson
---------------------------------------
Thomas R. Johnson
Vice President and Corporate Controller
(Duly Authorized Officer and Principal
Accounting Officer of the Registrant)
INDEX TO EXHIBITS
10.1 Commercial Paper Dealer Agreement 4(2) Program between Global Marine
Inc., as Issuer, and Merrill Lynch Money Markets Inc., as Dealer,
dated as of July 27, 1999.
10.2 Commercial Paper Dealer Agreement 4(2) Program between Global Marine
Inc., as Issuer, and Goldman, Sachs & Co., as Dealer, dated as of
July 27, 1999.
10.3 Resolution dated August 11, 1999, regarding Directors' Fees and
Expense Reimbursement.
10.4 Resolution dated August 11, 1999, regarding Termination of Retirement
Plan for Outside Directors.
15.1 Letter of Independent Accountants regarding Awareness of Incorporation
by Reference.
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as an
exhibit only in the electronic format of this Quarterly Report on
Form 10-Q 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.)
EXHIBIT 10.1
COMMERCIAL PAPER DEALER AGREEMENT
4(2) PROGRAM
between
Global Marine Inc., as Issuer
and
Merrill Lynch Money Markets Inc., as Dealer
Concerning Notes to be issued pursuant to
an Issuing and Paying Agency Agreement
dated as of July 27, 1999 between the
Issuer and Citibank, N.A., as Issuing and
Paying Agent
DATED AS OF
July 27, 1999
<PAGE>
COMMERCIAL PAPER DEALER AGREEMENT
4(2) Program
This agreement ("Agreement") sets forth the
understandings between the Issuer and the Dealer in
connection with the issuance and sale by the Issuer of its
short-term promissory notes through the Dealer (the
"Notes").
Certain terms used in this Agreement are defined in
Section 6 hereof.
The Addendum to this Agreement, and any Annexes or
Exhibits described in this Agreement or such Addendum, are
hereby incorporated into this Agreement and made fully a
part hereof.
Section 1. OFFERS, SALES AND RESALES OF NOTES
1.1 While (i) the Issuer has and shall have no
obligation to sell the Notes to the Dealer or to permit the
Dealer to arrange any sale of the Notes for the account of
the Issuer, and (ii) the Dealer has and shall have no
obligation to purchase the Notes from the Issuer or to
arrange any sale of the Notes for the account of the Issuer,
the parties hereto agree that in any case where the Dealer
purchases Notes from the Issuer, or arranges for the sale of
Notes by the Issuer, such Notes will be purchased or sold by
the Dealer in accordance with Section 1.6, and in reliance
on the representations, warranties, covenants and agreements
of the Issuer contained herein or made pursuant hereto and
on the terms and conditions and in the manner provided
herein.
1.2 So long as this Agreement shall remain in effect,
and in addition to the limitations contained in Section 1.7
hereof, the Issuer shall not, without the consent of the
Dealer, offer, solicit or accept offers to purchase, or
sell, any Notes except (a) in transactions with one or more
dealers which may from time to time after the date hereof
become dealers with respect to the Notes by executing with
the Issuer one or more agreements which contain provisions
substantially identical to Section 1 of this Agreement, of
which the Issuer hereby undertakes to provide the Dealer
prompt notice or (b) in transactions with the other dealers
listed on the Addendum hereto, which are executing
agreements with the Issuer which contain provisions
substantially identical to Section 1 of this Agreement
contemporaneously herewith. In no event shall the Issuer
offer, solicit or accept offers to purchase, or sell, any
Notes directly on its own behalf in transactions with
persons other than broker-dealers as specifically permitted
in this Section 1.2.
1.3 The Notes shall be in a minimum denomination or
minimum amount, whichever is applicable, of $250,000 or
integral multiples of $1,000 in excess thereof, will bear
such interest rates, if interest bearing, or will be sold at
such discount from their face amounts, as shall be agreed
upon by the Dealer and the Issuer, shall have a maturity not
exceeding 270 days from the date of issuance (exclusive of
days of grace) and shall not contain any provision for
extension, renewal or automatic "rollover."
1.4 The authentication, delivery and payment of the
Notes shall be effected in accordance with the Issuing and
Paying Agency Agreement and the Notes shall be either
individual bearer physical certificates or represented by
book-entry Notes registered in the name of DTC or its
nominee in the form or forms annexed to the Issuing and
Paying Agency Agreement.
1.5 If the Issuer and the Dealer shall agree on the
terms of the purchase of any Note by the Dealer or the sale
of any Note arranged by the Dealer (including, but not
limited to, agreement with respect to the date of issue,
purchase price, principal amount, maturity and interest rate
(in the case of interest-bearing Notes) or discount thereof
(in the case of Notes issued on a discount basis), and
appropriate compensation for the Dealer's services
<PAGE>
hereunder) pursuant to this Agreement, the Issuer shall
cause such Note to be issued and delivered in accordance
with the terms of the Issuing and Paying Agency Agreement
and payment for such Note shall be made by the purchaser
thereof, either directly or through the Dealer, to the
Issuer. Except as otherwise agreed, in the event that the
Dealer is acting as an agent and a purchaser shall either
fail to accept delivery of or make payment for a Note on the
date fixed for settlement, the Dealer shall promptly notify
the Issuer, and if the Dealer has theretofore paid the
Issuer for the Note, the Issuer will promptly return such
funds to the Dealer against its return of the Note to the
Issuer, in the case of a certificated Note, and upon notice
of such failure in the case of a book-entry Note. If such
failure occurred for any reason other than default by the
Dealer, the Issuer shall reimburse the Dealer on an
equitable basis for the Dealer's loss of the use of such
funds for the period such funds were credited to the
Issuer's account.
1.6 All offers and sales of the Notes by the Issuer
shall be effected pursuant to the exemption from the
registration requirements of the Securities Act provided by
Section 4(2) thereof. The Dealer and the Issuer hereby
establish and agree to observe the following procedures in
connection with offers, sales and subsequent resales or
other transfers of the Notes:
(a) Offers and sales of the Notes by or through
the Dealer shall be made only to the following types of
investors: (i) investors reasonably believed by the
Dealer to be Institutional Accredited Investors , (ii)
non-bank fiduciaries or agents that will be purchasing
Notes for one or more accounts, each of which is an
Institutional Accredited Investor , and (iii) Qualified
Institutional Buyers.
(b) Resales and other transfers of the Notes by
the holders thereof shall be made only in accordance
with the restrictions in the legends described in
clause (e) below, and to the extent such resale is made
to or through the Dealer, the Dealer will comply with
the provisions of such legend and this Section 1.6.
(c) No general solicitation or general
advertising shall be used in connection with the
offering of the Notes. Without limiting the generality
of the foregoing, without the prior written approval of
the Dealer, the Issuer shall not issue any press
release or place or publish any "tombstone" or other
advertisement relating to the Notes; and without the
prior written approval of the Issuer, the Dealer shall
not issue any press release or place or publish any
"tombstone" or other advertisement relating to the
Notes.
(d) No sale of Notes to any one purchaser shall
be for less than $250,000 principal or face amount, and
no Note shall be issued in a smaller principal or face
amount. If the purchaser is a non-bank fiduciary
acting on behalf of others, each person for whom such
purchaser is acting must purchase at least $250,000
principal or face amount of Notes.
(e) Offers and sales of the Notes by the Issuer
hereunder shall be made in accordance with Rule 506
under the Securities Act, and shall be subject to the
restrictions described in the legend appearing on
Exhibit A hereto. A legend substantially to the effect
of such Exhibit A shall appear as part of the Private
Placement Memorandum used in connection with offers and
sales of Notes hereunder, as well as on each individual
certificate representing a Note and each Master Note
representing book-entry Notes offered and sold pursuant
to this Agreement.
(f) The Dealer shall furnish or shall have
furnished to each purchaser of Notes a copy of the
then-current Private Placement Memorandum unless such
purchaser has previously received a copy of the Private
Placement Memorandum as then in effect. The Private
Placement Memorandum shall expressly state that any
person to whom Notes are offered shall have an
opportunity to ask questions of, and receive
information from, the Issuer and the Dealer and shall
<PAGE>
provide the names, addresses and telephone numbers of
the persons from whom information regarding the Issuer
may be obtained.
(g) The Issuer agrees, for the benefit of the
Dealer and each of the holders and prospective
purchasers from time to time of the Notes that, if at
any time the Issuer shall not be subject to Section 13
or 15(d) of the Exchange Act, the Issuer will furnish,
upon request and at its expense, to the Dealer and to
holders and prospective purchasers of Notes information
required by Rule 144A(d)(4)(i) in compliance with Rule
144A(d).
(h) In the event that any Note offered or to be
offered by Dealer would be ineligible for resale under
Rule 144A, the Issuer shall immediately notify Dealer
(by telephone, confirmed in writing) of such fact and
shall promptly prepare and deliver to Dealer an
amendment or supplement to the Private Placement
Memorandum describing the Notes that are ineligible,
the reason for such ineligibility and any other
relevant information relating thereto.
(i) The Issuer represents that it is not
currently issuing commercial paper in the United States
market in reliance upon the exemption provided by
Section 3(a)(3) of the Securities Act. In the event
the Issuer determines to issue commercial paper in the
United States market in reliance on such exemption, the
Issuer agrees that (a) the proceeds from the sale of
the Notes will be segregated from the proceeds of the
sale of any such commercial paper by being placed in a
separate account; (b) the Issuer will institute
appropriate corporate procedures to ensure that the
offers and sales of notes issued by the Issuer pursuant
to the Section 3(a)(3) exemption are not integrated
with offerings and sales of Notes hereunder; and (c)
the Issuer will comply with each of the requirements of
Section 3(a)(3) of the Act in selling commercial paper
or other short-term debt securities other than the
Notes in the United States.
1.7 The Issuer hereby represents and warrants to the
Dealer, in connection with offers, sales and resales of
Notes, as follows:
(a) The Issuer hereby confirms to the Dealer that
(except as permitted by Section 1.6(i)) within the
preceding six months neither the Issuer nor any person
other than the Dealer or the other dealers referred to
in Section 1.2 hereof acting on behalf of the Issuer
has offered or sold any Notes, or any substantially
similar security of the Issuer (including, without
limitation, any such substantially similar security
issued by the Issuer pursuant to a medium-term note
program), to, or solicited offers to buy any such
security from, any person other than the Dealer or the
other dealers referred to in Section 1.2 hereof. The
Issuer also agrees that, as long as the Notes are being
offered for sale by the Dealer and the other dealers
referred to in Section 1.2 hereof as contemplated
hereby and until at least six months after the offer of
Notes hereunder has been terminated, neither the Issuer
nor any person other than the Dealer or the other
dealers referred to in Section 1.2 hereof (except as
contemplated by Section 1.2 hereof) will offer the
Notes or any substantially similar security of the
Issuer for sale to, or solicit offers to buy any such
security from, any person other than the Dealer and the
other dealers referred to in Section 1.2 hereof (except
to the extent any of the foregoing would not cause the
offer and sale of the Notes by the Issuer to be
integrated with other offers and sales so as no longer
to come within the exemption provided by Section 4(2)
of the Securities Act and Rule 506 thereunder), it
being understood that such agreement is made with a
view to bringing the offer and sale of the Notes within
the exemption provided by Section 4(2) of the
Securities Act and Rule 506 thereunder and shall
survive any termination of this Agreement. The Issuer
hereby represents and warrants that it has not taken or
omitted to take, and will not take or omit to take, any
action that would cause the offering and sale of Notes
hereunder to be integrated with any other offering of
securities, whether such offering is made by the Issuer
or some other party or parties under circumstances that
would cause the offering and sale of the Notes by the
Issuer to fail to be exempt under Section 4(2) of the
Securities Act and Rule 506 thereunder.
<PAGE>
(b) The Issuer represents and agrees that the
proceeds of the sale of the Notes are not currently
contemplated to be used for the purpose of buying,
carrying or trading securities within the meaning of
Regulation T and the interpretations thereunder by the
Board of Governors of the Federal Reserve System. In
the event that the Issuer determines to use such
proceeds for the purpose of buying, carrying or trading
securities, whether in connection with an acquisition
of another company or otherwise, the Issuer shall give
the Dealer at least two business days' prior written
notice to that effect. The Issuer shall also give the
Dealer prompt notice of the actual date that it
commences to purchase securities with the proceeds of
the Notes. Thereafter, to the extent necessary to
comply with Regulation T and the interpretations
thereunder, the Dealer will sell such Notes only to
offerees it reasonably believes to be QIBs or to QIBs
it reasonably believes are acting for other QIBs, in
each case in accordance with Rule 144A.
1.8 The Dealer agrees from time to time upon request
of the Issuer to inform the Issuer whether it is holding
Notes purchased from the Issuer that it has not yet sold or
Notes that have been sold and subsequently repurchased by
the Dealer (specifying in which category each Note so held
belongs) and the amount, issue date, maturity and interest
rate, if applicable, of each such Note. Upon request of the
Issuer, the Dealer shall resell to the Issuer any such Notes
specified by the Issuer at a price equal to (a) the
principal amount thereof plus accrued and unpaid interest
thereon, in the case of an interest-bearing Note, or (b) the
face amount thereof discounted on a ratable basis based on
the Issuer's market rate reflecting the remaining period
until maturity in relation to the original term, in the case
of such Note issued on a discount basis.
Section 2. REPRESENTATIONS AND WARRANTIES OF ISSUER
The Issuer represents and warrants that:
2.1 The Issuer is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all the requisite
power and authority to execute, deliver and perform its
obligations under the Notes, this Agreement and the Issuing
and Paying Agency Agreement.
2.2 This Agreement and the Issuing and Paying Agency
Agreement have been duly authorized, executed and delivered
by the Issuer and constitute legal, valid and binding
obligations of the Issuer enforceable against the Issuer in
accordance with their terms subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law),
and except insofar as rights to indemnification and
contribution may be limited by applicable law.
2.3 The Notes have been duly authorized, and when
issued and delivered against pa;yment therefor, as provided
in the Issuing and Paying Agency Agreement, will be duly and
validly issued and delivered and will constitute legal,
valid and binding obligations of the Issuer enforceable
against the Issuer in accordance with their terms subject to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity
or at law).
2.4 Assuming compliance by the Dealer with the
procedures applicable to it set forth in Section 1, the
offer and sale of Notes in the manner contemplated hereby do
not require registration of the Notes under the Securities
Act, pursuant to the exemption from registration contained
in Section 4(2) thereof, and no indenture in respect of the
Notes is required to be qualified under the Trust Indenture
Act of 1939, as amended.
2.5 The Notes will rank at least PARI PASSU with all
other unsecured and unsubordinated indebtedness of the
Issuer.
<PAGE>
2.6 Assuming compliance by the Dealer with the
procedures set forth in Section 1, no consent or action of,
or filing or registration with, any governmental or public
regulatory body or authority, including the SEC, is required
to authorize, or is otherwise required in connection with
the execution, delivery or performance of, this Agreement,
the Notes or the Issuing and Paying Agency Agreement, except
as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the
Notes, and except for the requirement that the Issuer file
with the SEC a notice on Form D in accordance with Rule 503
under the Securities Act and such amendments thereto as Rule
503 may require.
2.7 Neither the execution and delivery of this
Agreement and the Issuing and Paying Agency Agreement, nor
the issuance and delivery of the Notes in accordance with
the Issuing and Paying Agency Agreement, nor the fulfillment
of or compliance with the terms and provisions hereof or
thereof by the Issuer, will (i) result in the creation or
imposition of any mortgage, lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets
of the Issuer, or (ii) violate or result in a breach or an
event of default under any of the terms of the Issuer's
charter documents or by-laws, any contract or instrument to
which the Issuer is a party or by which it or its property
is bound, or any law or regulation, or any order, writ,
injunction or decree of any court or government
instrumentality, to which the Issuer is subject or by which
it or its property is bound, which breach or event of
default would reasonably be expected to have a material
adverse effect on the financial condition or results of
operations of the Issuer and its subsidiaries taken as a
whole, or the ability of the Issuer to perform its
obligations under this Agreement, the Notes or the Issuing
and Paying Agency Agreement.
2.8 Except as may be set forth in the Company
Information of which the Dealer has been specifically
advised, there is no litigation or governmental proceeding
pending, or to the knowledge of the Issuer threatened,
against or affecting the Issuer or any of its subsidiaries
which would reasonably be expected to result in a material
adverse change in the financial condition or results of
operations of the Issuer and its subsidiaries taken as a
whole, or the ability of the Issuer to perform its
obligations under this Agreement, the Notes or the Issuing
and Paying Agency Agreement.
2.9 The Issuer is not an "investment company" or an
entity "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
2.10 Neither the Private Placement Memorandum nor the
Company Information contains any untrue statement of a
material fact or omits to state a material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, provided that the Issuer makes no
representation or warranty as to the Dealer Information.
2.11 Each (a) issuance of Notes by the Issuer hereunder
and (b) amendment or supplement of the Private Placement
Memorandum shall be deemed a representation and warranty by
the Issuer to the Dealer, as of the date thereof, that, both
before and after giving effect to such issuance and after
giving effect to such amendment or supplement, (i) the
representations and warranties given by the Issuer set forth
above in this Section 2 remain true and correct on and as of
such date as if made on and as of such date, (ii) in the
case of an issuance of Notes, the Notes being issued on such
date have been duly and validly issued and constitute legal,
valid and binding obligations of the Issuer, enforceable
against the Issuer in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity
or at law), (iii) in the case of an issuance of Notes, since
the date of the most recent Private Placement Memorandum (as
most recently amended or supplemented, including by
incorporation of or reference to Company Information
therein), there has been no material adverse change in the
financial condition or results of operations of the Issuer
and its subsidiaries taken as a whole which has not been
disclosed to the Dealer in writing, and (iv) the Issuer is
not in default of any of its obligations under the Notes.
Section 3. Covenants and Agreements of Issuer
<PAGE>
The Issuer covenants and agrees that:
3.1 The Issuer will give the Dealer prompt notice (but
in any event prior to any subsequent issuance of Notes
hereunder) of any amendment to, modification of, or waiver
with respect to, the Notes or the Issuing and Paying Agency
Agreement, including a complete copy of any such amendment,
modification or waiver.
3.2 The Issuer shall, whenever it shall have received
notice of any downgrading or any announced review for
potential change in the rating accorded any of the Issuer's
securities by any nationally recognized statistical rating
organization which has published a rating of the Notes,
promptly, and in any event prior to any subsequent issuance
of Notes hereunder, notify the Dealer (by telephone,
confirmed in writing) of such change, development, or
occurrence.
3.3 The Issuer shall from time to time furnish to the
Dealer copies of all material provided by the Issuer to any
national securities exchange (excluding routine press
releases), regarding (i) the Issuer's operations and
financial condition, (ii) the due authorization and
execution of the Notes, and (iii) the Issuer's ability to
pay the Notes as they mature.
3.4 The Issuer will take all such action as the Dealer
may reasonably request to ensure that each offer and each
sale of the Notes will comply with any applicable state Blue
Sky laws; PROVIDED, that the Issuer shall not be obligated
to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in
which it is not so qualified or subject itself to taxation
in respect of doing business in any jurisdiction in which it
is not otherwise so subject.
3.5 The Issuer shall not issue Notes hereunder until
the Dealer shall have received (a) an opinion of counsel to
the Issuer, addressed to the Dealer, satisfactory in form
and substance to the Dealer, (b) a copy of the executed
Issuing and Paying Agency Agreement as then in effect, (c) a
copy of resolutions adopted by the Board of Directors of the
Issuer, satisfactory in form and substance to the Dealer and
certified by the Secretary or similar officer of the Issuer,
authorizing execution and delivery by the Issuer of this
Agreement the Issuing and Paying Agency Agreement and the
Notes and consummation by the Issuer of the transactions
contemplated hereby and thereby, (d) prior to the issuance
of any Notes represented by a book-entry note registered in
the name of DTC or its nominee, a copy of the executed
Letter of Representations among the Issuer, the Issuing and
Paying Agent and DTC and (e) such other certificates,
opinions, letters and documents as the Dealer shall have
reasonably requested.
3.6 The Issuer shall reimburse the Dealer for all of
the Dealer's reasonable and documented out-of-pocket
expenses related to this Agreement, including expenses
incurred in connection with its preparation and negotiation,
and the transactions contemplated hereby (including, but not
limited to, the printing and distribution of the Private
Placement Memorandum), and, if applicable, for the
reasonable and documented fees and out-of-pocket expenses of
the Dealer's counsel.
Section 4. DISCLOSURE
4.1 The Private Placement Memorandum and its contents
(other than the Dealer Information) shall be the sole
responsibility of the Issuer. The Private Placement
Memorandum shall contain a statement expressly offering an
opportunity for each prospective purchaser to ask questions
of, and receive answers from, the Issuer concerning the
offering of Notes and to obtain relevant additional
information which the Issuer possesses or can acquire
without unreasonable effort or expense.
4.2 The Issuer agrees promptly to furnish the Dealer
the Company Information upon or promptly following the time
it is filed with the SEC or otherwise becomes publicly
available.
<PAGE>
4.3 Unless the Issuer has determined, based on most
recent inquiry to the Dealer under Section 1.8 that the
Dealer is not holding any Notes purchased from the Issuer
that it has not yet sold and that the Issuer has not
subsequent to such inquiry issued any additional Notes, the
Issuer agrees, upon the occurrence of any event relating to
or affecting the Issuer that would cause the Private
Placement Memorandum to include an untrue statement of a
material fact or to omit to state a material fact necessary
to make the statements contained therein, in light of the
circumstances under which they are made, not misleading,
promptly to (unless the Issuer promptly purchases from the
Dealer all such Notes so held pursuant to Section 1.8)
supplement or amend the Private Placement Memorandum
(including through documents incorporated by reference or
referred to therein) so that the Private Placement
Memorandum, as amended or supplemented, shall not contain an
untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained
therein, in light of the circumstances under which they are
made, not misleading, and the Issuer shall make such
supplement or amendment available to the Dealer.
Section 5. INDEMNIFICATION AND CONTRIBUTION
5.1 The Issuer will indemnify and hold harmless the
Dealer, and each individual, corporation, partnership,
trust, association or other entity controlling the Dealer,
within the meaning of Section 15 of the Securities Act
(hereinafter the "Indemnitees"), against any and all
liabilities, penalties, suits, causes of action, losses,
damages, claims, costs and expenses (including, without
limitation, reasonable fees and disbursements of counsel) or
judgments of whatever kind or nature (each a "Claim"),
imposed upon, incurred by or asserted against the
Indemnitees arising out of or based upon (i) any allegation
that the Private Placement Memorandum, the Company
Information or any information provided by the Issuer to the
Dealer included (as of any relevant time of offer or sale of
Notes by the Issuer) or includes an untrue statement of a
material fact or omitted (as of any relevant time of offer
or sale of Notes by the Issuer) or omits to state any
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading or (ii) arising out of or based upon the breach
by the Issuer of any agreement, covenant or representation
made in or pursuant to this Agreement. This indemnification
shall not apply to the extent that the Claim arises out of
or is based upon Dealer Information.
5.2 Provisions relating to claims made for
indemnification under this Section 5 are set forth on
Exhibit B to this Agreement.
5.3 In order to provide for just and equitable
contribution in circumstances in which the indemnification
provided for in this Section 5 is held to be unavailable or
insufficient to hold harmless the Indemnitees, although
applicable in accordance with the terms of this Section 5,
the Issuer shall contribute to the aggregate costs incurred
by the Dealer in connection with any Claim in the proportion
of the respective economic interests of the Issuer and the
Dealer; provided, however, that such contribution by the
Issuer shall be in an amount such that the aggregate costs
incurred by the Dealer do not exceed the aggregate of the
commissions and fees earned by the Dealer hereunder with
respect to the issue or issues of Notes to which such Claim
relates. The respective economic interests shall be
calculated by reference to the aggregate proceeds to the
Issuer of the Notes issued hereunder and the aggregate
commissions and fees earned by the Dealer hereunder.
Section 6. DEFINITIONS
6.1 "Claim" shall have the meaning set forth in
Section 5.1.
6.2 "Company Information" at any given time shall mean
the Private Placement Memorandum together with, to the
extent applicable, (i) the Issuer's most recent report on
Form 10-K filed with the SEC and each report on Form 10-Q or
8-K filed by the Issuer with the SEC since the most recent
Form 10-K, (ii) the Issuer's most recent annual audited
financial statements and each interim financial statement or
report prepared subsequent thereto, if not included in item
(i) above, (iii) the Issuer's and its affiliates' other
<PAGE>
publicly available recent reports, including, but not
limited to, any publicly available filings or reports
provided to their respective shareholders, and (iv) any
information prepared or approved by the Issuer for
dissemination to investors or potential investors in the
Notes.
6.3 "Dealer Information" shall mean material
concerning the Dealer and provided by the Dealer in writing
expressly for inclusion in the Private Placement Memorandum.
6.4 "DTC" shall mean The Depository Trust Company.
6.5 "Exchange Act" shall mean the U.S. Securities
Exchange Act of 1934, as amended.
6.6 "Indemnitee" shall have the meaning set forth in
Section 5.1.
6.7 "Institutional Accredited Investor" shall mean an
institutional investor that is an accredited investor within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act and that has such knowledge and experience in
financial and business matters that it is capable of
evaluating and bearing the economic risk of an investment in
the Notes, including, but not limited to, a bank, as defined
in Section 3(a)(2) of the Securities Act, or a savings and
loan association or other institution, as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its
individual or fiduciary capacity.
6.8 "Issuing and Paying Agency Agreement" shall mean
the issuing and paying agency agreement described on the
cover page of this Agreement, as such agreement may be
amended or supplemented from time to time.
6.9 "Issuing and Paying Agent" shall mean the party
designated as such on the cover page of this Agreement, as
issuing and paying agent under the Issuing and Paying Agency
Agreement.
6.10 "Non-bank fiduciary or agent" shall mean a
fiduciary or agent other than (a) a bank, as defined in
Section 3(a)(2) of the Securities Act, or (b) a savings and
loan association, as defined in Section 3(a)(5)(A) of the
Securities Act.
6.11 "Private Placement Memorandum" shall mean offering
materialsprepared in accordance with Section 4 (including
materials referred to therein or incorporated by reference
therein) provided to purchasers and prospective purchasers
of the Notes, and shall include amendments and supplements
thereto which may be prepared from time to time in
accordance with this Agreement (other than any amendment or
supplement that has been completely superseded by a later
amendment or supplement).
6.12 "Qualified Institutional Buyer" (or "QIB") shall
have the meaning assigned to that term in Rule 144A under
the Securities Act.
6.13 "Rule 144A" shall mean Rule 144A under the
Securities Act.
6.14 "SEC" shall mean the U.S. Securities and Exchange
Commission.
6.15 "Securities Act" shall mean the U.S. Securities
Act of 1933, as amended.
Section 7. GENERAL
7.1 Unless otherwise expressly provided herein, all
notices under this Agreement to parties hereto shall be in
writing and shall be effective when received at the address
of the respective party set forth in the Addendum to this
Agreement.
7.2 This Agreement shall be governed by and construed
in accordance with the laws of the State of New York,
without regard to its conflict of laws provisions.
<PAGE>
7.3 The Issuer agrees that any suit, action or
proceeding brought by the Issuer against the Dealer in
connection with or arising out of this Agreement or the
Notes or the offer and sale of the Notes shall be brought
solely in the United States federal courts located in the
borough of Manhattan or the courts of the State of New York
located in the Borough of Manhattan. EACH OF THE DEALER AND
The Issuer waives its right to trial by jury in any suit,
action or proceeding with respect to this Agreement or the
transactions contemplated hereby.
7.4 This Agreement may be terminated, at any time, by
the Issuer, upon one business day's prior notice to such
effect to the Dealer, or by the Dealer upon one business
day's prior notice to such effect to the Issuer. Any such
termination, however, shall not affect the obligations of
the Issuer under Sections 3.7, 5 and 7.3 hereof or the
respective representations, warranties, agreements,
covenants, rights or responsibilities of the parties made or
arising prior to the termination of this Agreement.
7.5 This Agreement is not assignable by either party
hereto without the written consent of the other party;
provided, however, that the Dealer may assign its rights
and obligations under this Agreement to any wholly owned
direct or indirect subsidiary of the Dealer or of its
ultimate parent.
7.6 This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date and year first above
written.
GLOBAL MARINE INC.,
AS ISSUER
By: /s/ W. Matt Ralls
Name: W. Matt Ralls
Title: Sr. Vice Pres.,
Chief Financial Officer &
Treasurer
MERRILL LYNCH MONEY
MARKETS INC.,
AS DEALER
By: /s/ K. Carter Harris
Name: K. Carter Harris
Title:
<PAGE>
ADDENDUM
1. The other dealers referred to in clause (b) of Section
1.2 of the Agreement is Goldman, Sachs & Co.
2. The addresses of the respective parties for purposes of
notices under Section 7.1 are as follows:
For the Issuer:
Address: 777 North Eldridge Parkway
Houston, Texas 77079
Attention: W. Matt Ralls, Senior Vice President
Chief Financial Officer and Treasurer
Telephone number: (281) 596-5810
Fax number: (281) 596-5826
For the Dealer:
Address: World Financial Center -
North Tower
250 Vesey Street - 10th Floor
New York, New York 10281-1310
Attention: Product Management - CP
Telephone number: (212) 449-7476
Fax number: (212) 449-2234
<PAGE>
EXHIBIT A
FORM OF LEGEND FOR
PRIVATE PLACEMENT MEMORANDUM AND NOTES
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY OTHER APPLICABLE SECURITIES
LAW, AND OFFERS AND SALES THEREOF MAY BE MADE
ONLY IN COMPLIANCE WITH AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS. BY ITS ACCEPTANCE OF A NOTE, THE
PURCHASER WILL BE DEEMED TO REPRESENT THAT IT
HAS BEEN AFFORDED AN OPPORTUNITY TO
INVESTIGATE MATTERS RELATING TO THE ISSUER AND
THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE
WITH A VIEW TO ANY DISTRIBUTION THEREOF AND
THAT IT IS EITHER (A) AN INSTITUTIONAL
INVESTOR THAT IS AN ACCREDITED INVESTOR
WITHIN THE MEANING OF RULE 501(a) UNDER THE
ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR" )
AND THAT EITHER IS PURCHASING NOTES FOR ITS
OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN
SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND
LOAN ASSOCIATION OR OTHER INSTITUTION (AS
DEFINED IN SECTION 3(a)(5)(A) OF THE ACT)
ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY
OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S.
BANK OR SAVINGS AND LOAN) PURCHASING NOTES FOR
ONE OR MORE ACCOUNTS EACH OF WHICH IS SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR; OR (B) A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN
THE MEANING OF RULE 144A UNDER THE ACT WHICH
IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR
ONE OR MORE ACCOUNTS, EACH OF WHICH IS A QIB
AND WITH RESPECT TO EACH OF WHICH THE
PURCHASER HAS SOLE INVESTMENT DISCRETION; AND
THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE
THAT THE SELLER MAY RELY UPON THE EXEMPTION
FROM THE REGISTRATION PROVISIONS OF SECTION 5
OF THE ACT PROVIDED BY RULE 144A. BY ITS
ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF
SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE
OR OTHER TRANSFER THEREOF WILL BE MADE ONLY
(A) IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO
MERRILL LYNCH MONEY MARKETS INC. OR ANOTHER
PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT
AGENT FOR THE NOTES (COLLECTIVELY, THE
"PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE
ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2)
THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL
ACCREDITED INVESTOR OR A QIB , OR (3) TO A QIB
IN A TRANSACTION THAT MEETS THE REQUIREMENTS
OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF
$250,000.
<PAGE>
EXHIBIT B
FURTHER PROVISIONS RELATING
TO INDEMNIFICATION
(a) Except as provided in paragraph (b), the Issuer
agrees to reimburse each Indemnitee for all expenses
(including reasonable fees and disbursements of internal and
external counsel) as they are incurred by it in connection
with investigating or defending any loss, claim, damage,
liability or action in respect of which it is entitled to
indemnification under Section 5 of the Agreement (whether or
not it is a party to any such proceedings).
(b) Promptly after receipt by an Indemnitee of notice of
the existence of a Claim, such Indemnitee will, if a claim
in respect thereof is to be made against the Issuer, notify
the Issuer in writing of the existence thereof; provided
that the omission so to notify the Issuer will not relieve
it from any liability which it may have hereunder unless and
except to the extent it did not otherwise learn of such
Claim and the Issuer is prejudiced thereby (it being
understood that any resulting relief from liability shall be
limited to the amount of any documented losses due to such
failure to give notice). In case any such Claim is made
against any Indemnitee and it notifies the Issuer of the
existence thereof, the Issuer will be entitled to
participate therein, and to the extent that it may elect by
written notice delivered to the Indemnitee, to assume the
defense thereof, with counsel reasonably satisfactory to
such Indemnitee; provided that if the defendants in any such
Claim include both the Indemnitee and the Issuer and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them, the Issuer shall not have the right to direct
the defense of such Claim on behalf of such Indemnitee, and
the Indemnitee shall have the right to select separate
counsel to assert such legal defenses on behalf of such
Indemnitee. Upon receipt of notice from the Issuer to such
Indemnitee of the Issuer's election so to assume the defense
of such Claim and approval by the Indemnitee of counsel, the
Issuer will not be liable to such Indemnitee for expenses
incurred thereafter by the Indemnitee in connection with the
defense thereof (other than reasonable costs of
investigation) unless (i) the Indemnitee shall have employed
separate counsel in connection with the assertion of legal
defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the
Issuer shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel in the
jurisdiction in which any Claim is brought), approved by the
Dealer, representing all Indemnitees ), (ii) the Issuer
shall not have employed counsel reasonably satisfactory to
the Indemnitee to represent the Indemnitee within a
reasonable time after notice of existence of the Claim or
(iii) the Issuer has authorized in writing the employment of
counsel for the Indemnitee. The indemnity, reimbursement
and contribution obligations of the Issuer hereunder shall
be in addition to any other liability the Issuer may
otherwise have to an Indemnitee and shall be binding upon
and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Issuer and any
Indemnitee. The Issuer agrees that without the Dealer's
prior written consent, it will not settle, compromise or
consent to the entry of any judgment in any Claim in respect
of which indemnification has been or could have been sought
by an Indemnitee under the indemnification provision of the
Agreement, unless such settlement, compromise or consent
includes an unconditional release of such Indemnitee from
all liability arising out of such Claim.
EXHIBIT 10.2
COMMERCIAL PAPER DEALER AGREEMENT
4(2) PROGRAM
between
Global Marine Inc., as Issuer
and
Goldman, Sachs & Co., as Dealer
Concerning Notes to be issued pursuant
to an
Issuing and Paying Agency Agreement
dated as of July 27, 1999
between the Issuer and
Citibank N.A., as Issuing and Paying Agent
DATED AS OF
JULY 27, 1999
<PAGE>
COMMERCIAL PAPER DEALER AGREEMENT
4(2) Program
This agreement ("Agreement") sets forth the
understandings between the Issuer and the Dealer in
connection with the issuance and sale by the Issuer of its
short-term promissory notes through the Dealer (the
"Notes").
Certain terms used in this Agreement are defined in
Section 6 hereof.
The Addendum to this Agreement, and any Annexes or
Exhibits described in this Agreement or such Addendum, are
hereby incorporated into this Agreement and made fully a
part hereof.
Section 1. OFFERS, SALES AND RESALES OF NOTES
1.1 While (i) the Issuer has and shall have no
obligation to sell the Notes to the Dealer or to permit the
Dealer to arrange any sale of the Notes for the account of
the Issuer, and (ii) the Dealer has and shall have no
obligation to purchase the Notes from the Issuer or to
arrange any sale of the Notes for the account of the Issuer,
the parties hereto agree that in any case where the Dealer
purchases Notes from the Issuer, or arranges for the sale of
Notes by the Issuer, such Notes will be purchased or sold by
the Dealer in accordance with Section 1.6, and in reliance
on the representations, warranties, covenants and agreements
of the Issuer contained herein or made pursuant hereto and
on the terms and conditions and in the manner provided
herein.
1.2 So long as this Agreement shall remain in effect,
and in addition to the limitations contained in Section 1.7
hereof, the Issuer shall not, without the consent of the
Dealer, offer, solicit or accept offers to purchase, or
sell, any Notes except (a) in transactions with one or more
dealers which may from time to time after the date hereof
become dealers with respect to the Notes by executing with
the Issuer one or more agreements which contain provisions
substantially identical to Section 1 of this Agreement, of
which the Issuer hereby undertakes to provide the Dealer
prompt notice or (b) in transactions with the other dealers
listed on the Addendum hereto, which are executing
agreements with the Issuer which contain provisions
substantially identical to Section 1 of this Agreement
contemporaneously herewith. In no event shall the Issuer
offer, solicit or accept offers to purchase, or sell, any
Notes directly on its own behalf in transactions with
persons other than broker-dealers as specifically permitted
in this Section 1.2.
1.3 The Notes shall be in a minimum denomination or
minimum amount, whichever is applicable, of $250,000 or
integral multiples of $1,000 in excess thereof, will bear
such interest rates, if interest bearing, or will be sold at
such discount from their face amounts, as shall be agreed
upon by the Dealer and the Issuer, shall have a maturity not
exceeding 270 days from the date of issuance (exclusive of
days of grace) and shall not contain any provision for
extension, renewal or automatic "rollover."
1.4 The authentication, delivery and payment of the
Notes shall be effected in accordance with the Issuing and
Paying Agency Agreement and the Notes shall be either
individual bearer physical certificates or represented by
book-entry Notes registered in the name of DTC or its
nominee in the form or forms annexed to the Issuing and
Paying Agency Agreement.
1.5 If the Issuer and the Dealer shall agree on the
terms of the purchase of any Note by the Dealer or the sale
of any Note arranged by the Dealer (including, but not
limited to, agreement with respect to the date of issue,
purchase price, principal amount, maturity and interest rate
(in the case of interest-bearing Notes) or discount thereof
(in the case of Notes issued on a discount basis), and
<PAGE>
appropriate compensation for the Dealer's services
hereunder) pursuant to this Agreement, the Issuer shall
cause such Note to be issued and delivered in accordance
with the terms of the Issuing and Paying Agency Agreement
and payment for such Note shall be made by the purchaser
thereof, either directly or through the Dealer, to the
Issuer. Except as otherwise agreed, in the event that the
Dealer is acting as an agent and a purchaser shall either
fail to accept delivery of or make payment for a Note on the
date fixed for settlement, the Dealer shall promptly notify
the Issuer, and if the Dealer has theretofore paid the
Issuer for the Note, the Issuer will promptly return such
funds to the Dealer against its return of the Note to the
Issuer, in the case of a certificated Note, and upon notice
of such failure in the case of a book-entry Note. If such
failure occurred for any reason other than default by the
Dealer, the Issuer shall reimburse the Dealer on an
equitable basis for the Dealer's loss of the use of such
funds for the period such funds were credited to the
Issuer's account.
1.6 All offers and sales of the Notes by the Issuer
shall be effected pursuant to the exemption from the
registration requirements of the Securities Act provided by
Section 4(2) thereof. The Dealer and the Issuer hereby
establish and agree to observe the following procedures in
connection with offers, sales and subsequent resales or
other transfers of the Notes:
(a) Offers and sales of the Notes by or through
the Dealer shall be made only to the following types of
investors: (i) investors reasonably believed by the
Dealer to be Institutional Accredited Investors , (ii)
non-bank fiduciaries or agents that will be purchasing
Notes for one or more accounts, each of which is an
Institutional Accredited Investor , and (iii) Qualified
Institutional Buyers.
(b) Resales and other transfers of the Notes by
the holders thereof shall be made only in accordance
with the restrictions in the legends described in
clause (e) below, and to the extent such resale is made
to or through the Dealer, the Dealer will comply with
the provisions of such legend and this Section 1.6.
(c) No general solicitation or general
advertising shall be used in connection with the
offering of the Notes. Without limiting the generality
of the foregoing, without the prior written approval of
the Dealer, the Issuer shall not issue any press
release or place or publish any "tombstone" or other
advertisement relating to the Notes; and without the
prior written approval of the Issuer, the Dealer shall
not issue any press release or place or publish any
"tombstone" or other advertisement relating to the
Notes.
(d) No sale of Notes to any one purchaser shall
be for less than $250,000 principal or face amount, and
no Note shall be issued in a smaller principal or face
amount. If the purchaser is a non-bank fiduciary
acting on behalf of others, each person for whom such
purchaser is acting must purchase at least $250,000
principal or face amount of Notes.
(e) Offers and sales of the Notes by the Issuer
hereunder shall be made in accordance with Rule 506
under the Securities Act, and shall be subject to the
restrictions described in the legend appearing on
Exhibit A hereto. A legend substantially to the effect
of such Exhibit A shall appear as part of the Private
Placement Memorandum used in connection with offers and
sales of Notes hereunder, as well as on each individual
certificate representing a Note and each Master Note
representing book-entry Notes offered and sold pursuant
to this Agreement.
(f) The Dealer shall furnish or shall have
furnished to each purchaser of Notes a copy of the
then-current Private Placement Memorandum unless such
purchaser has previously received a copy of the Private
Placement Memorandum as then in effect. The Private
Placement Memorandum shall expressly state that any
person to whom Notes are offered shall have an
opportunity to ask questions of, and receive
<PAGE>
information from, the Issuer and the Dealer and shall
provide the names, addresses and telephone numbers of
the persons from whom information regarding the Issuer
may be obtained.
(g) The Issuer agrees, for the benefit of the
Dealer and each of the holders and prospective
purchasers from time to time of the Notes that, if at
any time the Issuer shall not be subject to Section 13
or 15(d) of the Exchange Act, the Issuer will furnish,
upon request and at its expense, to the Dealer and to
holders and prospective purchasers of Notes information
required by Rule 144A(d)(4)(i) in compliance with Rule
144A(d).
(h) In the event that any Note offered or to be
offered by Dealer would be ineligible for resale under
Rule 144A, the Issuer shall immediately notify Dealer
(by telephone, confirmed in writing) of such fact and
shall promptly prepare and deliver to Dealer an
amendment or supplement to the Private Placement
Memorandum describing the Notes that are ineligible,
the reason for such ineligibility and any other
relevant information relating thereto.
(i) The Issuer represents that it is not
currently issuing commercial paper in the United States
market in reliance upon the exemption provided by
Section 3(a)(3) of the Securities Act. In the event
the Issuer determines to issue commercial paper in the
United States market in reliance on such exemption, the
Issuer agrees that (a) the proceeds from the sale of
the Notes will be segregated from the proceeds of the
sale of any such commercial paper by being placed in a
separate account; (b) the Issuer will institute
appropriate corporate procedures to ensure that the
offers and sales of notes issued by the Issuer pursuant
to the Section 3(a)(3) exemption are not integrated
with offerings and sales of Notes hereunder; and (c)
the Issuer will comply with each of the requirements of
Section 3(a)(3) of the Act in selling commercial paper
or other short-term debt securities other than the
Notes in the United States.
1.7 The Issuer hereby represents and warrants to the
Dealer, in connection with offers, sales and resales of
Notes, as follows:
(a) The Issuer hereby confirms to the Dealer that
(except as permitted by Section 1.6(i)) within the
preceding six months neither the Issuer nor any person
other than the Dealer or the other dealers referred to
in Section 1.2 hereof acting on behalf of the Issuer
has offered or sold any Notes, or any substantially
similar security of the Issuer (including, without
limitation, any such substantially similar security
issued by the Issuer pursuant to a medium-term note
program), to, or solicited offers to buy any such
security from, any person other than the Dealer or the
other dealers referred to in Section 1.2 hereof. The
Issuer also agrees that, as long as the Notes are being
offered for sale by the Dealer and the other dealers
referred to in Section 1.2 hereof as contemplated
hereby and until at least six months after the offer of
Notes hereunder has been terminated, neither the Issuer
nor any person other than the Dealer or the other
dealers referred to in Section 1.2 hereof (except as
contemplated by Section 1.2 hereof) will offer the
Notes or any substantially similar security of the
Issuer for sale to, or solicit offers to buy any such
security from, any person other than the Dealer and the
other dealers referred to in Section 1.2 hereof (except
to the extent any of the foregoing would not cause the
offer and sale of the Notes by the Issuer to be
integrated with other offers and sales so as no longer
to come within the exemption provided by Section 4(2)
of the Securities Act and Rule 506 thereunder), it
being understood that such agreement is made with a
view to bringing the offer and sale of the Notes within
the exemption provided by Section 4(2) of the
Securities Act and Rule 506 thereunder and shall
survive any termination of this Agreement. The Issuer
hereby represents and warrants that it has not taken or
omitted to take, and will not take or omit to take, any
action that would cause the offering and sale of Notes
hereunder to be integrated with any other offering of
securities, whether such offering is made by the Issuer
or some other party or parties under circumstances that
would cause the offering and sale of the Notes by the
Issuer to fail to be exempt under Section 4(2) of the
Securities Act and Rule 506 thereunder.
<PAGE>
(b) The Issuer represents and agrees that the
proceeds of the sale of the Notes are not currently
contemplated to be used for the purpose of buying,
carrying or trading securities within the meaning of
Regulation T and the interpretations thereunder by the
Board of Governors of the Federal Reserve System. In
the event that the Issuer determines to use such
proceeds for the purpose of buying, carrying or trading
securities, whether in connection with an acquisition
of another company or otherwise, the Issuer shall give
the Dealer at least two business days' prior written
notice to that effect. The Issuer shall also give the
Dealer prompt notice of the actual date that it
commences to purchase securities with the proceeds of
the Notes. Thereafter, to the extent necessary to
comply with Regulation T and the interpretations
thereunder, the Dealer will sell such Notes only to
offerees it reasonably believes to be QIBs or to QIBs
it reasonably believes are acting for other QIBs, in
each case in accordance with Rule 144A.
1.8 The Dealer agrees from time to time upon request
of the Issuer to inform the Issuer whether it is holding
Notes purchased from the Issuer that it has not yet sold or
Notes that have been sold and subsequently repurchased by
the Dealer (specifying in which category each Note so held
belongs) and the amount, issue date, maturity and interest
rate, if applicable, of each such Note. Upon request of the
Issuer, the Dealer shall resell to the Issuer any such Notes
specified by the Issuer at a price equal to (a) the
principal amount thereof plus accrued and unpaid interest
thereon, in the case of an interest-bearing Note, or (b) the
face amount thereof discounted on a ratable basis based on
the Issuer's market rate reflecting the remaining period
until maturity in relation to the original term, in the case
of such Note issued on a discount basis.
Section 2. REPRESENTATIONS AND WARRANTIES OF ISSUER
The Issuer represents and warrants that:
2.1 The Issuer is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all the requisite
power and authority to execute, deliver and perform its
obligations under the Notes, this Agreement and the Issuing
and Paying Agency Agreement.
2.2 This Agreement and the Issuing and Paying Agency
Agreement have been duly authorized, executed and delivered
by the Issuer and constitute legal, valid and binding
obligations of the Issuer enforceable against the Issuer in
accordance with their terms subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law),
and except insofar as rights to indemnification and
contribution may be limited by applicable law.
2.3 The Notes have been duly authorized, and when
issued and delivered against pa;yment therefor, as provided
in the Issuing and Paying Agency Agreement, will be duly and
validly issued and delivered and will constitute legal,
valid and binding obligations of the Issuer enforceable
against the Issuer in accordance with their terms subject to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity
or at law).
2.4 Assuming compliance by the Dealer with the
procedures applicable to it set forth in Section 1, the
offer and sale of Notes in the manner contemplated hereby do
not require registration of the Notes under the Securities
Act, pursuant to the exemption from registration contained
in Section 4(2) thereof, and no indenture in respect of the
Notes is required to be qualified under the Trust Indenture
Act of 1939, as amended.
2.5 The Notes will rank at least PARI PASSU with all
other unsecured and unsubordinated indebtedness of the
Issuer.
<PAGE>
2.6 Assuming compliance by the Dealer with the
procedures set forth in Section 1, no consent or action of,
or filing or registration with, any governmental or public
regulatory body or authority, including the SEC, is required
to authorize, or is otherwise required in connection with
the execution, delivery or performance of, this Agreement,
the Notes or the Issuing and Paying Agency Agreement, except
as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the
Notes, and except for the requirement that the Issuer file
with the SEC a notice on Form D in accordance with Rule 503
under the Securities Act and such amendments thereto as Rule
503 may require.
2.7 Neither the execution and delivery of this
Agreement and the Issuing and Paying Agency Agreement, nor
the issuance and delivery of the Notes in accordance with
the Issuing and Paying Agency Agreement, nor the fulfillment
of or compliance with the terms and provisions hereof or
thereof by the Issuer, will (i) result in the creation or
imposition of any mortgage, lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets
of the Issuer, or (ii) violate or result in a breach or an
event of default under any of the terms of the Issuer's
charter documents or by-laws, any contract or instrument to
which the Issuer is a party or by which it or its property
is bound, or any law or regulation, or any order, writ,
injunction or decree of any court or government
instrumentality, to which the Issuer is subject or by which
it or its property is bound, which breach or event of
default would reasonably be expected to have a material
adverse effect on the financial condition or results of
operations of the Issuer and its subsidiaries taken as a
whole, or the ability of the Issuer to perform its
obligations under this Agreement, the Notes or the Issuing
and Paying Agency Agreement.
2.8 Except as may be set forth in the Company
Information of which the Dealer has been specifically
advised, there is no litigation or governmental proceeding
pending, or to the knowledge of the Issuer threatened,
against or affecting the Issuer or any of its subsidiaries
which would reasonably be expected to result in a material
adverse change in the financial condition or results of
operations of the Issuer and its subsidiaries taken as a
whole, or the ability of the Issuer to perform its
obligations under this Agreement, the Notes or the Issuing
and Paying Agency Agreement.
2.9 The Issuer is not an "investment company" or an
entity "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
2.10 Neither the Private Placement Memorandum nor the
Company Information contains any untrue statement of a
material fact or omits to state a material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, provided that the Issuer makes no
representation or warranty as to the Dealer Information.
2.11 Each (a) issuance of Notes by the Issuer hereunder
and (b) amendment or supplement of the Private Placement
Memorandum shall be deemed a representation and warranty by
the Issuer to the Dealer, as of the date thereof, that, both
before and after giving effect to such issuance and after
giving effect to such amendment or supplement, (i) the
representations and warranties given by the Issuer set forth
above in this Section 2 remain true and correct on and as of
such date as if made on and as of such date, (ii) in the
case of an issuance of Notes, the Notes being issued on such
date have been duly and validly issued and constitute legal,
valid and binding obligations of the Issuer, enforceable
against the Issuer in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity
or at law), (iii) in the case of an issuance of Notes, since
the date of the most recent Private Placement Memorandum (as
most recently amended or supplemented, including by
incorporation of or reference to Company Information
therein), there has been no material adverse change in the
financial condition or results of operations of the Issuer
and its subsidiaries taken as a whole which has not been
disclosed to the Dealer in writing, and (iv) the Issuer is
not in default of any of its obligations under the Notes.
Section 3. COVENANTS AND AGREEMENTS OF ISSUER
<PAGE>
The Issuer covenants and agrees that:
3.1 The Issuer will give the Dealer prompt notice (but
in any event prior to any subsequent issuance of Notes
hereunder) of any amendment to, modification of, or waiver
with respect to, the Notes or the Issuing and Paying Agency
Agreement, including a complete copy of any such amendment,
modification or waiver.
3.2 The Issuer shall, whenever it shall have received
notice of any downgrading or any announced review for
potential change in the rating accorded any of the Issuer's
securities by any nationally recognized statistical rating
organization which has published a rating of the Notes,
promptly, and in any event prior to any subsequent issuance
of Notes hereunder, notify the Dealer (by telephone,
confirmed in writing) of such change, development, or
occurrence.
3.3 The Issuer shall from time to time furnish to the
Dealer copies of all material provided by the Issuer to any
national securities exchange (excluding routine press
releases), regarding (i) the Issuer's operations and
financial condition, (ii) the due authorization and
execution of the Notes, and (iii) the Issuer's ability to
pay the Notes as they mature.
3.4 The Issuer will take all such action as the Dealer
may reasonably request to ensure that each offer and each
sale of the Notes will comply with any applicable state Blue
Sky laws; PROVIDED, that the Issuer shall not be obligated
to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in
which it is not so qualified or subject itself to taxation
in respect of doing business in any jurisdiction in which it
is not otherwise so subject.
3.5 The Issuer shall not issue Notes hereunder until
the Dealer shall have received (a) an opinion of counsel to
the Issuer, addressed to the Dealer, satisfactory in form
and substance to the Dealer, (b) a copy of the executed
Issuing and Paying Agency Agreement as then in effect, (c) a
copy of resolutions adopted by the Board of Directors of the
Issuer, satisfactory in form and substance to the Dealer and
certified by the Secretary or similar officer of the Issuer,
authorizing execution and delivery by the Issuer of this
Agreement the Issuing and Paying Agency Agreement and the
Notes and consummation by the Issuer of the transactions
contemplated hereby and thereby, (d) prior to the issuance
of any Notes represented by a book-entry note registered in
the name of DTC or its nominee, a copy of the executed
Letter of Representations among the Issuer, the Issuing and
Paying Agent and DTC and (e) such other certificates,
opinions, letters and documents as the Dealer shall have
reasonably requested.
3.6 The Issuer shall reimburse the Dealer for all of
the Dealer's reasonable and documented out-of-pocket
expenses related to this Agreement, including expenses
incurred in connection with its preparation and negotiation,
and the transactions contemplated hereby (including, but not
limited to, the printing and distribution of the Private
Placement Memorandum), and, if applicable, for the
reasonable and documented fees and out-of-pocket expenses of
the Dealer's counsel.
Section 4. DISCLOSURE
4.1 The Private Placement Memorandum and its contents
(other than the Dealer Information) shall be the sole
responsibility of the Issuer. The Private Placement
Memorandum shall contain a statement expressly offering an
opportunity for each prospective purchaser to ask questions
of, and receive answers from, the Issuer concerning the
offering of Notes and to obtain relevant additional
information which the Issuer possesses or can acquire
without unreasonable effort or expense.
4.2 The Issuer agrees promptly to furnish the Dealer
the Company Information upon or promptly following the time
it is filed with the SEC or otherwise becomes publicly
available.
<PAGE>
4.3 Unless the Issuer has determined, based on most
recent inquiry to the Dealer under Section 1.8 that the
Dealer is not holding any Notes purchased from the Issuer
that it has not yet sold and that the Issuer has not
subsequent to such inquiry issued any additional Notes, the
Issuer agrees, upon the occurrence of any event relating to
or affecting the Issuer that would cause the Private
Placement Memorandum to include an untrue statement of a
material fact or to omit to state a material fact necessary
to make the statements contained therein, in light of the
circumstances under which they are made, not misleading,
promptly to (unless the Issuer promptly purchases from the
Dealer all such Notes so held pursuant to Section 1.8)
supplement or amend the Private Placement Memorandum
(including through documents incorporated by reference or
referred to therein) so that the Private Placement
Memorandum, as amended or supplemented, shall not contain an
untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained
therein, in light of the circumstances under which they are
made, not misleading, and the Issuer shall make such
supplement or amendment available to the Dealer.
Section 5. INDEMNIFICATION AND CONTRIBUTION
5.1 The Issuer will indemnify and hold harmless the
Dealer, and each individual, corporation, partnership,
trust, association or other entity controlling the Dealer,
within the meaning of Section 15 of the Securities Act
(hereinafter the "Indemnitees"), against any and all
liabilities, penalties, suits, causes of action, losses,
damages, claims, costs and expenses (including, without
limitation, reasonable fees and disbursements of counsel) or
judgments of whatever kind or nature (each a "Claim"),
imposed upon, incurred by or asserted against the
Indemnitees arising out of or based upon (i) any allegation
that the Private Placement Memorandum, the Company
Information or any information provided by the Issuer to the
Dealer included (as of any relevant time of offer or sale of
Notes by the Issuer) or includes an untrue statement of a
material fact or omitted (as of any relevant time of offer
or sale of Notes by the Issuer) or omits to state any
material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading or (ii) arising out of or based upon the breach
by the Issuer of any agreement, covenant or representation
made in or pursuant to this Agreement. This indemnification
shall not apply to the extent that the Claim arises out of
or is based upon Dealer Information.
5.2 Provisions relating to claims made for
indemnification under this Section 5 are set forth on
Exhibit B to this Agreement.
5.3 In order to provide for just and equitable
contribution in circumstances in which the indemnification
provided for in this Section 5 is held to be unavailable or
insufficient to hold harmless the Indemnitees, although
applicable in accordance with the terms of this Section 5,
the Issuer shall contribute to the aggregate costs incurred
by the Dealer in connection with any Claim in the proportion
of the respective economic interests of the Issuer and the
Dealer; PROVIDED, however, that such contribution by the
Issuer shall be in an amount such that the aggregate costs
incurred by the Dealer do not exceed the aggregate of the
commissions and fees earned by the Dealer hereunder with
respect to the issue or issues of Notes to which such Claim
relates. The respective economic interests shall be
calculated by reference to the aggregate proceeds to the
Issuer of the Notes issued hereunder and the aggregate
commissions and fees earned by the Dealer hereunder.
Section 6. DEFINITIONS
6.1 "Claim" shall have the meaning set forth in
Section 5.1.
6.2 "Company Information" at any given time shall mean
the Private Placement Memorandum together with, to the
extent applicable, (i) the Issuer's most recent report on
Form 10-K filed with the SEC and each report on Form 10-Q or
8-K filed by the Issuer with the SEC since the most recent
Form 10-K, (ii) the Issuer's most recent annual audited
financial statements and each interim financial statement or
report prepared subsequent thereto, if not included in item
(i) above, (iii) the Issuer's and its affiliates' other
<PAGE>
publicly available recent reports, including, but not
limited to, any publicly available filings or reports
provided to their respective shareholders, and (iv) any
information prepared or approved by the Issuer for
dissemination to investors or potential investors in the
Notes.
6.3 "Dealer Information" shall mean material
concerning the Dealer and provided by the Dealer in writing
expressly for inclusion in the Private Placement Memorandum.
6.4 "DTC" shall mean The Depository Trust Company.
6.5 "Exchange Act" shall mean the U.S. Securities
Exchange Act of 1934, as amended.
6.6 "Indemnitee" shall have the meaning set forth in
Section 5.1.
6.7 "Institutional Accredited Investor" shall mean an
institutional investor that is an accredited investor within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act and that has such knowledge and experience in
financial and business matters that it is capable of
evaluating and bearing the economic risk of an investment in
the Notes, including, but not limited to, a bank, as defined
in Section 3(a)(2) of the Securities Act, or a savings and
loan association or other institution, as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its
individual or fiduciary capacity.
6.8 "Issuing and Paying Agency Agreement" shall mean
the issuing and paying agency agreement described on the
cover page of this Agreement, as such agreement may be
amended or supplemented from time to time.
6.9 "Issuing and Paying Agent" shall mean the party
designated as such on the cover page of this Agreement, as
issuing and paying agent under the Issuing and Paying Agency
Agreement.
6.10 "Non-bank fiduciary or agent" shall mean a
fiduciary or agent other than (a) a bank, as defined in
Section 3(a)(2) of the Securities Act, or (b) a savings and
loan association, as defined in Section 3(a)(5)(A) of the
Securities Act.
6.11 "Private Placement Memorandum" shall mean offering
materialsprepared in accordance with Section 4 (including
materials referred to therein or incorporated by reference
therein) provided to purchasers and prospective purchasers
of the Notes, and shall include amendments and supplements
thereto which may be prepared from time to time in
accordance with this Agreement (other than any amendment or
supplement that has been completely superseded by a later
amendment or supplement).
6.12 "Qualified Institutional Buyer" (or "QIB") shall
have the meaning assigned to that term in Rule 144A under
the Securities Act.
6.13 "Rule 144A" shall mean Rule 144A under the
Securities Act.
6.14 "SEC" shall mean the U.S. Securities and Exchange
Commission.
6.15 "Securities Act" shall mean the U.S. Securities
Act of 1933, as amended.
Section 7. GENERAL
7.1 Unless otherwise expressly provided herein, all
notices under this Agreement to parties hereto shall be in
writing and shall be effective when received at the address
of the respective party set forth in the Addendum to this
Agreement.
7.2 This Agreement shall be governed by and construed
in accordance with the laws of the State of New York,
without regard to its conflict of laws provisions.
<PAGE>
7.3 The Issuer agrees that any suit, action or
proceeding brought by the Issuer against the Dealer in
connection with or arising out of this Agreement or the
Notes or the offer and sale of the Notes shall be brought
solely in the United States federal courts located in the
borough of Manhattan or the courts of the State of New York
located in the Borough of Manhattan. EACH OF THE DEALER AND
THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
7.4 This Agreement may be terminated, at any time, by
the Issuer, upon one business day's prior notice to such
effect to the Dealer, or by the Dealer upon one business
day's prior notice to such effect to the Issuer. Any such
termination, however, shall not affect the obligations of
the Issuer under Sections 3.7, 5 and 7.3 hereof or the
respective representations, warranties, agreements,
covenants, rights or responsibilities of the parties made or
arising prior to the termination of this Agreement.
7.5 This Agreement is not assignable by either party
hereto without the written consent of the other party;
provided, however, that the Dealer may assign its rights
and obligations under this Agreement to any wholly owned
direct or indirect subsidiary of the Dealer or of its
ultimate parent.
7.6 This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date and year first above
written.
GLOBAL MARINE INC., AS
ISSUER
BY: /s/ W. Matt Ralls
NAME: W. Matt Ralls
TITLE: Sr. Vice President,
Chief Financial Officer
and Treasurer
GOLDMAN, SACHS & CO., AS
DEALER
BY: /s/ J. Christopher Kersey
NAME: J. Christopher Kersey
Title: Vice President
<PAGE>
ADDENDUM
1. The other dealers referred to in clause (b) of Section
1.2 of the Agreement is Merrill Lynch Money Markets Inc..
2. The addresses of the respective parties for purposes of
notices under Section 7.1 are as follows:
For the Issuer: Global Marine Inc.
Address: 777 North Eldridge Parkway
Houston, Texas 77079
Attention: W. Matt Ralls, Senior Vice President
Chief Financial Officer and
Treasurer
Telephone number: (281) 596-5810
Fax number: (281) 596-5826
For the Dealer: Goldm,an, Sachs & Co.
Address: 85 Broad Street
New York, New York 10004
Attention: Money Market Origination
Telephone number: (212) 357-3208
Fax number: (212) 902-0683
<PAGE>
EXHIBIT A
FORM OF LEGEND FOR
PRIVATE PLACEMENT MEMORANDUM AND NOTES
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES
LAW, AND OFFERS AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE
WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. BY ITS
ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT
THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS
RELATING TO THE ISSUER AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH
NOTE WITH A VIEW TO ANY DISTRIBUTION THEREOF AND THAT IT IS EITHER
(A) AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR
WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR" ) AND THAT EITHER IS PURCHASING NOTES FOR ITS
OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF THE
ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS
DEFINED IN SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL
OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S.
BANK OR SAVINGS AND LOAN) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS
EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR; OR (B)
A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE
144A UNDER THE ACT WHICH IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR
FOR ONE OR MORE ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT
TO EACH OF WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND
THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY
RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION
5 OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE,
THE PURCHASER THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE
OR OTHER TRANSFER THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE ACT, EITHER (1) TO THE ISSUER OR
TO GOLDMAN, SACHS & CO. OR ANOTHER PERSON DESIGNATED BY THE ISSUER
AS A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT
AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH
NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED
INVESTOR OR A QIB , OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE
REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000.
<PAGE>
EXHIBIT B
FURTHER PROVISIONS RELATING
TO INDEMNIFICATION
(a) Except as provided in paragraph (b), the Issuer agrees to
reimburse each Indemnitee for all expenses (including reasonable
fees and disbursements of internal and external counsel) as they
are incurred by it in connection with investigating or defending
any loss, claim, damage, liability or action in respect of which it
is entitled to indemnification under Section 5 of the Agreement
(whether or not it is a party to any such proceedings).
(b) Promptly after receipt by an Indemnitee of notice of the
existence of a Claim, such Indemnitee will, if a claim in respect
thereof is to be made against the Issuer, notify the Issuer in
writing of the existence thereof; provided that the omission so to
notify the Issuer will not relieve it from any liability which it
may have hereunder unless and except to the extent it did not
otherwise learn of such Claim and the Issuer is prejudiced thereby
(it being understood that any resulting relief from liability shall
be limited to the amount of any documented losses due to such
failure to give notice). In case any such Claim is made against
any Indemnitee and it notifies the Issuer of the existence thereof,
the Issuer will be entitled to participate therein, and to the
extent that it may elect by written notice delivered to the
Indemnitee, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnitee; provided that if the defendants in
any such Claim include both the Indemnitee and the Issuer and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them, the Issuer shall not have the right to direct the
defense of such Claim on behalf of such Indemnitee, and the
Indemnitee shall have the right to select separate counsel to
assert such legal defenses on behalf of such Indemnitee. Upon
receipt of notice from the Issuer to such Indemnitee of the
Issuer's election so to assume the defense of such Claim and
approval by the Indemnitee of counsel, the Issuer will not be
liable to such Indemnitee for expenses incurred thereafter by the
Indemnitee in connection with the defense thereof (other than
reasonable costs of investigation) unless (i) the Indemnitee shall
have employed separate counsel in connection with the assertion of
legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the Issuer shall not
be liable for the expenses of more than one separate counsel (in
addition to any local counsel in the jurisdiction in which any
Claim is brought), approved by the Dealer, representing all
Indemnitees ), (ii) the Issuer shall not have employed counsel
reasonably satisfactory to the Indemnitee to represent the
Indemnitee within a reasonable time after notice of existence of
the Claim or (iii) the Issuer has authorized in writing the
employment of counsel for the Indemnitee. The indemnity,
reimbursement and contribution obligations of the Issuer hereunder
shall be in addition to any other liability the Issuer may
otherwise have to an Indemnitee and shall be binding upon and inure
to the benefit of any successors, assigns, heirs and personal
representatives of the Issuer and any Indemnitee. The Issuer
agrees that without the Dealer's prior written consent, it will not
settle, compromise or consent to the entry of any judgment in any
Claim in respect of which indemnification has been or could have
been sought by an Indemnitee under the indemnification provision of
the Agreement, unless such settlement, compromise or consent
includes an unconditional release of such Indemnitee from all
liability arising out of such Claim.
5-3.C
COMPANY: Global Marine Inc. (the "Company")
ITEM: Resolutions of the Board of Directors
SUBJECT: Directors' Fees and Expense Reimbursement
DATE: August 11, 1999
RESOLVED that the resolutions of this Board of
Directors adopted on August 5, 1997, relating to directors' fees
and expense reimbursement be, and they hereby are, superseded in
their entirety, and that the following resolutions be, and they
hereby are, effective in their stead; and it was further
RESOLVED that the fees payable to each director of the
Company who is not an officer or employee of the Company be, and
they hereby are, $8,000 per calendar quarter (payable with
respect to each calendar quarter on the date of the first regular
meeting of the Board of Directors during such calendar quarter),
plus $1,000 for participation in each regular meeting of the
Board of Directors, whether in person or by telephone, $1,000 for
attendance at each of the Company's annual management
conferences, $1,500 for attendance at each special meeting of the
Board of Directors, $1,000 for participation by telephone in each
special meeting of the Board of Directors, $1,000 for
participation in each meeting of any Committee of the Board of
Directors, whether in person or by telephone, and $1,000 per day
for services performed in the capacity of a director on special
assignment at the request of the Board of Directors or the
Company's management; and it was further
RESOLVED that, in addition to the fees authorized by
the preceding resolution, each director of the Company who is a
chairman of a Committee of the Board of Directors and is not an
officer or employee of the Company be paid $1,000 per calendar
quarter (payable with respect to each calendar quarter on the
date of the first regular meeting of the Board of Directors
during such calendar quarter); and it was further
RESOLVED that each director of the Company who is not
an officer or employee of the Company shall be reimbursed for all
expenses incurred by such director in attending each annual
management conference and each meeting of the Board of Directors
of the Company including regular meetings, special meetings and
meetings of any Committee of the Board of Directors, and in
performing services in the capacity of a director on special
assignment at the request of the Board of Directors or the
Company's management, the reimbursement for such expenses to be
paid upon receipt by the Company of an invoice or expense account
covering such expenses; and it was further
RESOLVED that the directors' fees and expense
reimbursement authorized by the foregoing resolutions shall
become effective on August 12, 1999, with the exception of the
fee of $1,000 per day for services performed in the capacity of a
director on special assignment at the request of the Board of
Directors or the Company's management, which is effective as of
May 7, 1999.
5-3.D
COMPANY: Global Marine Inc. (the "Company")
ITEM: Resolutions of the Board of Directors
SUBJECT: Termination of Retirement Plan for Outside Directors
DATE: August 11, 1999
RESOLVED that the Company's Retirement Plan for Outside
Directors be and hereby is terminated effective the day immediately
preceding the day on which directors are elected at the Company's
annual meeting of stockholders in 2000 and that the present value
of the then-accrued benefit of each participant who is not then
receiving a benefit under the plan be paid to such participant in
the form of a lump sum cash payment, but that each benefit then
being paid under the plan continue to be paid to such recipient, in
such form, and at such time or times as such benefit would have
been paid but for said termination; and it was further
RESOLVED that, in calculating the present value of
accrued benefits of participants in the Retirement Plan for Outside
Directors for the purpose of determining the amounts of the lump
sum cash payments authorized by the immediately preceding
resolution, (a) a discount rate of six percent be applied, (b) each
participant entitled to receive such payment be deemed to be fully
vested in an accrued benefit under the plan, (c) each such
participant be credited with his service through May 2000, and (d)
each such participant be deemed to have attained age 65; and it was
further
RESOLVED that the proper officers of the Company be and
hereby are authorized and directed to do or cause to be done any
and all such further acts and things, make any and all such
payments, and negotiate, execute and deliver, for and on behalf of
the Company and in its name, any and all such documents, papers,
instruments and agreements as they may deem necessary or desirable
to effect the intent and purposes of these resolutions.
EXHIBIT 15.1
ACCOUNTANTS' AWARENESS LETTER
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Global Marine Inc. Registration Statements
We are aware that our report dated November 8, 1999, on our review of
the condensed consolidated interim financial information of Global Marine
Inc. and subsidiaries for the three and nine months ended September 30,
1999, and included in this Quarterly Report on Form 10-Q is incorporated
by reference in (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 and the Global Marine 1998 Stock Option and Incentive
Plan, (ii) the prospectus constituting part of the Company's Registration
Statement on Form S-8 (Registration No. 333-80383) for the Global Marine
1998 Stock Option and Incentive Plan, (iii) 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, (iv) 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, (v) 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 (vi) the combined prospectus constituting part
of the Company's Registration Statements on Form S-3 (Registration
Nos. 33-58577 and 333-49807) for the proposed offering of up to $500,000,000
of debt securities, preferred stock, and/or common stock. Pursuant to Rule
436(c) under the Securities Act of 1933, this report should not be considered
a part of any of said registration statements prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
November 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of Global Marine Inc. and subsidiaries
as of 9-30-99 and the related condensed consolidated statement of operations
for the nine months ended 9-30-99, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 35,100
<SECURITIES> 0
<RECEIVABLES> 111,100
<ALLOWANCES> 4,800
<INVENTORY> 0
<CURRENT-ASSETS> 173,900
<PP&E> 2,192,000
<DEPRECIATION> 457,700
<TOTAL-ASSETS> 2,090,000
<CURRENT-LIABILITIES> 113,400
<BONDS> 595,800
0
0
<COMMON> 17,400
<OTHER-SE> 1,108,800
<TOTAL-LIABILITY-AND-EQUITY> 2,090,000
<SALES> 5,100
<TOTAL-REVENUES> 592,300
<CGS> 4,400
<TOTAL-COSTS> 450,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,800
<INCOME-PRETAX> 103,000
<INCOME-TAX> 24,200
<INCOME-CONTINUING> 78,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,800
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.45
</TABLE>
