UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
1999 FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 1-5471
GLOBAL MARINE INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1849298
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
777 N. Eldridge Parkway, Houston, Texas 77079-4493
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281)596-5100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [x]
As of January 31, 2000, the aggregate market value of the Company's common
stock, $.10 par value, held by non-affiliates was $3,098,183,428.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date: Common Stock, $.10 par
value, 174,514,721 shares outstanding as of January 31, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement in connection with the 2000 Annual Meeting of
Stockholders are incorporated into Part III of this Report.
<PAGE>
TABLE OF CONTENTS
Page
Part I
Items 1. and 2. Business and Properties 3
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 25
Item 8. Financial Statements and Supplementary Data 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 54
Part III
Item 10. Directors and Executive Officers of the Registrant 54
Item 11. Executive Compensation 54
Item 12. Security Ownership of Certain Beneficial Owners
and Management 54
Item 13. Certain Relationships and Related Transactions 54
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 55
<PAGE>
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
Global Marine Inc. is a holding company incorporated in Delaware in 1964.
Unless otherwise provided, the term "Company" refers to Global Marine Inc.
and, unless the context otherwise requires, to its consolidated subsidiaries.
The Company's businesses are conducted by subsidiaries of Global Marine Inc.
The Company, which is headquartered in Houston, Texas, provides offshore
contract drilling services on a dayrate basis and offshore drilling management
services on a dayrate or fixed-price ("turnkey") basis. Business Segment and
geographic information is set forth in Note 11 of Notes to Consolidated
Financial Statements in Item 8 of this Annual Report on Form 10-K.
Contract Drilling
Substantially all of the Company's domestic offshore contract drilling
operations are conducted by Global Marine Drilling Company ("GMDC"), a
wholly-owned subsidiary, and substantially all international offshore
contract drilling operations are conducted by Global Marine International
Drilling Corporation ("GMIDC"), also a wholly-owned subsidiary. Contract
drilling has operations offices located in Houston, Texas; Lafayette,
Louisiana; Aberdeen, Scotland; Luanda, Angola; Port Gentil, Gabon; The
Hague, Netherlands; St. John's, Newfoundland; Lagos, Nigeria; Port Harcourt,
Nigeria; and Trinidad, West Indies.
The Company has a modern, diversified, active fleet of 31 mobile offshore
drilling rigs, plus two ultra-deepwater drillships under construction.
The active fleet consists of 23 cantilevered jackups, five third-generation
semisubmersibles, one fourth-generation semisubmersible, one moored drillship,
and one ultra-deepwater, dynamically-positioned drillship. In addition, the
Company has one currently inactive concrete island drilling system ("CIDS")
designed for arctic operations. All of the Company's rigs were placed in
service in 1979 or later, and, as of February 23, 2000, their average age was
approximately 16.7 years.
The Company's fleet is deployed in major offshore oil and gas operating areas
worldwide. The principal areas in which the fleet is currently deployed are
the U.S. Gulf of Mexico, offshore West Africa, and the North Sea.
As part of the Company's goal of enhancing long-term stockholder value, the
Company has from time to time considered and actively pursued business
combinations and the acquisition or construction of suitable additional rigs
and other assets. If the Company decides to undertake a business combination
or an acquisition or construction project, the issuance of additional debt or
additional shares of stock could be required.
Offshore Rig Fleet. The following table lists the rigs in the Company's
drilling fleet as of February 23, 2000, indicating the year each rig was
placed in drilling service, each rig's maximum water and drilling depth
capabilities, current location, customer, and the date each rig is expected
to complete its current drilling commitments.
<PAGE>
<TABLE>
OFFSHORE RIG FLEET
Status as of February 23, 2000
<CAPTION>
YEAR
PLACED MAXIMUM DRILLING
IN WATER DEPTH DEPTH CURRENT CONTRACT
SERVICE CAPABILITY CAPABILITY LOCATION CUSTOMER TERM (1)
------- ----------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cantilevered Jackup
Glomar High Island I 1979 250 ft. 20,000 ft. Gulf of Mexico Coastal expires 9/00
Glomar High Island II 1979 270 ft. 20,000 ft. Gulf of Mexico Unocal expires 4/00
Glomar High Island III 1980 250 ft. 20,000 ft. West Africa - -
Glomar High Island IV 1980 250 ft. 20,000 ft. Gulf of Mexico Chevron expires 3/00
Glomar High Island V 1981 270 ft. 20,000 ft. West Africa Cabinda Gulf expires 9/00
Glomar High Island VII 1982 250 ft. 20,000 ft. West Africa Elf Serepca expires 8/00
Glomar High Island VIII 1982 250 ft. 20,000 ft. Gulf of Mexico Ocean Energy expires 3/00
Glomar High Island IX 1983 250 ft. 20,000 ft. West Africa - -
Glomar Adriatic I 1981 300 ft. 25,000 ft. West Africa Perenco expires 7/00
Glomar Adriatic II 1981 328 ft. 25,000 ft. Gulf of Mexico Vastar Resources expires 5/00
Glomar Adriatic III 1982 328 ft. 25,000 ft. Gulf of Mexico Unocal expires 2/00
Glomar Adriatic IV 1983 328 ft. 25,000 ft. Gulf of Mexico Devon expires 8/00
Glomar Adriatic V 1979 300 ft. 20,000 ft. West Africa Ocean Energy expires 4/00
Glomar Adriatic VI 1981 225 ft. 20,000 ft. North Sea BP Amoco expires 7/00
Glomar Adriatic VII 1983 328 ft. 20,000 ft. Trinidad Enron expires 3/00
Glomar Adriatic VIII 1983 328 ft. 25,000 ft. West Africa ExxonMobil expires 11/00
Glomar Adriatic IX 1981 328 ft. 20,000 ft. Gulf of Mexico Ocean Energy expires 4/00
Glomar Adriatic X 1982 328 ft. 20,000 ft. Gulf of Mexico Coastal expires 11/00
Glomar Adriatic XI 1983 225 ft. 25,000 ft. North Sea British Gas expires 5/00
Glomar Main Pass I 1982 300 ft. 25,000 ft. Gulf of Mexico El Paso expires 3/00
Glomar Main Pass IV 1982 300 ft. 25,000 ft. Gulf of Mexico Coastal expires 8/00
Glomar Labrador I 1983 300 ft. 25,000 ft. Argentina - -
Glomar Baltic I 1983 375 ft. 25,000 ft. Gulf of Mexico Devon expires 4/00
Semisubmersible
Glomar Arctic I 1983 3,400 ft. 25,000 ft. Gulf of Mexico EEX expires 7/02
Glomar Arctic III 1984 1,800 ft. 25,000 ft. North Sea - -
Glomar Arctic IV 1983 1,800 ft. 25,000 ft. North Sea - -
Maersk Jutlander 1982 1,200 ft. 25,000 ft. North Sea Maersk expires 12/00
Glomar Grand Banks 1984 1,500 ft. 25,000 ft. Canada ExxonMobil expires 7/00
Glomar Celtic Sea 1998 5,750 ft. 25,000 ft. Gulf of Mexico Elf Exploration expires 2/01
Drillship
Glomar Robert F. Bauer 1983 2,750 ft. 25,000 ft. Peru Triton expires 9/00
Glomar Explorer 1998 7,800 ft. 25,000 ft. West Africa Texaco/Chevron expires 10/03
Concrete Island
Drilling System
Glomar Beaufort Sea I (2) 1984 55 ft. 25,000 ft. Alaska - -
- ---------------------
(1) Expiration dates relate to executed contracts and letters of intent or
other customer commitments for which contracts have not yet been executed
and are estimates only.
(2) The Glomar Beaufort Sea I concrete island drilling system is inactive and
has been excluded from the Company's rig utilization figures.
</TABLE>
The two ultra-deepwater drillships under construction are the Glomar C.R.
Luigs, which is expected to enter service in the U.S. Gulf of Mexico in
the second quarter of 2000 under a three-year, $227 million contract, and
the Glomar Jack Ryan, which is expected to enter service offshore West Africa
in the third quarter of 2000 under a three-year, $225 million contract. The
Glomar C.R. Luigs and the Glomar Jack Ryan will be outfitted to drill in water
depths of 9,000 feet and 8,000 feet, respectively.
Rig Types. Jackup rigs have elevating legs which extend to the sea bottom,
providing a stable platform for drilling, and are generally preferred in water
depths of 350 feet or less. All of the Company's jackup rigs have drilling
equipment mounted on cantilevers, which allow the equipment to extend outward
from the rigs' hulls over fixed drilling platforms and enable operators to
drill both exploratory and development
<PAGE>
wells. The Company has extended the reach of the cantilevers on ten of its
jackups beyond the originally designed reach. This enables the drilling
equipment to operate over larger production platforms. In addition, two of
the Company's jackups have been equipped with "skid-off packages," which
allow the drilling equipment to be transferred to fixed production platforms.
Semisubmersible rigs are floating offshore drilling units that have pontoons
and columns that, when flooded with water, cause the unit to partially
submerge to a predetermined depth. Most semisubmersibles are anchored to
the sea bottom with mooring chains, but some use dynamic positioning ("DP"),
which means they are held in position by computer-controlled propellers,
known as thrusters. Semisubmersibles are classified into four generations,
distinguished mainly by their age, environmental rating, variable deck load,
and water-depth capability. The Company's Glomar Arctic I, Glomar Arctic III,
Glomar Arctic IV, Glomar Grand Banks, and Maersk Jutlander semisubmersibles
are third-generation, conventionally-moored rigs suitable for drilling in
deepwater, harsh-weather environments. The Company's Glomar Celtic Sea is
a fourth-generation semisubmersible capable of drilling in water depths of up
to 5,750 feet, and utilizes a mooring system that is DP-assisted. The Company
is analyzing the possibility of upgrading the Glomar Arctic III and Glomar
Arctic IV to drill in 3,000 feet of water. Both rigs are currently rated for
1,800 feet of water.
Drillships are generally preferred for deepwater drilling in remote locations
with moderate weather environments because of their mobility and large load
carrying capability. The Company's Glomar Explorer is a dynamically-positioned
drillship capable of drilling in water depths up to 7,800 feet. The Glomar
Robert F. Bauer is a conventionally-moored drillship capable of drilling in
maximum water depths of 2,750 feet.
The Company's "deepwater" rigs consist of its semisubmersibles and drillships.
The Company considers rigs with a maximum water-depth capability of 5,000 feet
or more, such as the Glomar Explorer, the Glomar Celtic Sea, and the two
drillships currently under construction, to be "ultra-deepwater" rigs.
All of the Company's active rigs are equipped with top-drive drilling systems.
Top-drives permit drilling with extended stands of drill pipe, reducing the
number of connections required, and enable operators to rotate the drill pipe
when exiting the well bore, thereby increasing both the speed and safety of
drilling operations and reducing the risk of the drill pipe becoming stuck in
the well bore.
The Company owns all of the rigs in the fleet with the exception of the Glomar
Explorer, which is subject to a 30-year capital lease, and the two drillships
under construction, which are subject to 20-year capital leases.
Rig Utilization. For the year ended December 31, 1999, the Company's average
utilization rate(1) for its active rigs was 76 percent compared to 96 percent
for 1998. As of February 23, 2000, 24 of the Company's 31 active rigs were
operating under contract, two were committed to begin operations within 60
days, and five were idle. Eleven of the Company's currently operating rigs
are expected to complete their commitments by June 30, 2000, an additional
ten are expected to complete their commitments by December 31, 2000, and the
remaining three rigs are expected to complete their commitments in 2001 or
later.
- --------------------
(1) The Company's average rig utilization rate for a period is the ratio
of days in the period during which the rigs were under contract to the
total days in the period during which the rigs were available to work
and excludes the CIDS.
<PAGE>
As of December 31, 1999, all of the Company's fourteen rigs in the U.S.
Gulf of Mexico were employed or committed, including one rig that was being
mobilized to the Gulf of Mexico from the North Sea. As of that date, the
industry utilization rate(1) in the Gulf of Mexico was 76 percent compared with
a rate of 65 percent as of December 31, 1998. Revenues attributable to the
Gulf of Mexico accounted for 36 percent of the Company's contract drilling
revenues in both 1999 and 1998 and 40 percent in 1997.
As of December 31, 1999, four of the Company's eight rigs offshore West Africa
were employed. As of that date, the industry utilization rate offshore West
Africa was 61 percent compared with a rate of 82 percent as of December 31,
1998. Revenues from this market accounted for 19 percent of the Company's
contract drilling revenues in 1999, 29 percent in 1998, and 36 percent in 1997.
As of December 31, 1999, three of the Company's five rigs in the North Sea
were employed. As of that date, the industry utilization rate in the North
Sea was 62 percent compared with a rate of 91 percent as of December 31, 1998.
Revenues from this market accounted for 26 percent of the Company's contract
drilling revenues in 1999, 23 percent in 1998, and 13 percent in 1997.
In addition to the major drilling markets of the U.S. Gulf of Mexico, offshore
West Africa, and the North Sea, the Company had one rig operating offshore
Canada and another operating offshore Trinidad at December 31, 1999.
The following table sets forth the size and average utilization rate of the
Company's active rig fleet for each of the past five years.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rigs in service at year-end 31 31 28 26 26
Average rig utilization 76% 96% 99% 98% 99%
</TABLE>
Backlog. The following tables show, for each of the Company's three principal
types of drilling rigs and each major geographic area, the Company's revenue
backlog and percentage of rig months committed for 2000 and 2001 and revenue
backlog for later years, determined on the basis of executed contracts and
other commitments as of December 31, 1999. The number of rigs of each type is
indicated in parenthesis. Figures in the tables below include two drillships
under construction, one of which is expected to enter service in the Gulf of
Mexico in the second quarter of 2000 and one of which is expected to enter
service offshore West Africa in the third quarter of 2000.
<TABLE>
<CAPTION>
2000 2001
------------------- -------------------
% Rig % Rig
Months Months Later Total
Revenues Committed Revenues Committed Years Revenues
-------- --------- -------- --------- ----- --------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Drillships (4) $145 70% $206 75% $317 $ 668
Semisubmersibles (6) 161 58% 57 19% 25 243
Jackups (23) 97 34% - - - 97
---- ---- ---- ------
Total $403 42% $263 13% $342 $1,008
==== ==== ==== ======
</TABLE>
- -------------------
1 Industry utilization rates are derived from data published by Offshore
Data Services and other information available to the Company. The Company
has adjusted the numerator (rigs working) and denominator (rigs available)
as reported by Offshore Data Services to include certain rigs which are
under contract for non-drilling uses but which are able to compete with
Company rigs and to exclude other rigs that, because of their location or
other factors, do not compete with Company rigs.
<PAGE>
<TABLE>
<CAPTION>
2000 2001
------------------- --------------------
% Rig % Rig
Months Months Later Total
Revenues Committed Revenues Committed Years Revenues
-------- --------- -------- --------- ----- --------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Gulf of Mexico (16) $232 50% $188 20% $223 $ 643
West Africa (8) 73 38% 75 13% 119 267
North Sea (5) 52 38% - - - 52
Other (4) 46 25% - - - 46
---- ---- ---- ------
Total $403 42% $263 13% $342 $1,008
==== ==== ==== ======
</TABLE>
The contract drilling backlog at December 31, 1998 was $1.3 billion and
included $68 million attributable to letters of intent or other customer
commitments for which contracts had not yet been executed as of December 31.
Drilling Contracts and Major Customers. Contracts to employ the Company's
drilling rigs extend over a specified period of time or the time required
to drill a specified well or number of wells. While the final contract for
employment of a rig is the result of negotiations between the Company and
the customer, most contracts are awarded based upon competitive bidding.
The rates specified in drilling contracts are generally on a daily-rate
("dayrate") basis, payable in U.S. dollars, and vary depending upon the type
of rig employed, equipment and services supplied, geographic location, term
of the contract, competitive conditions, and other variables. Each contract
provides for a basic dayrate during drilling operations, with lower rates or
no payment for periods of equipment breakdown, adverse weather, or other
conditions which may be beyond the Company's control. When a rig mobilizes
to or demobilizes from an operating area, a contract may provide for
different dayrates, specified fixed amounts, or no payment during the
mobilization or demobilization. A contract may be terminated by the customer
if the rig is destroyed or, in some cases, if drilling operations are suspended
for a specified period of time due to a breakdown of major equipment, in the
event of poor operational, safety, or environmental performance not remedied
by the Company within a specified period, or if other events occur that are
beyond either party's control.
The Company's offshore contract drilling business is subject to the usual
risks associated with having a limited number of customers for its services.
No single customer provided more than 10 percent of consolidated revenues in
1999, 1998, or 1997.
Drilling Management Services
The Company provides drilling management services priced primarily on a
completed-project ("turnkey") basis through a wholly-owned subsidiary,
Applied Drilling Technology Inc. ("ADTI"), and through Global Marine
Integrated Services - Europe ("GMIS-E"), a division of one of the Company's
foreign subsidiaries. ADTI operates primarily in the U.S. Gulf of Mexico,
and GMIS-E operates in areas other than the U.S. Gulf of Mexico. Under a
turnkey arrangement, each will assume responsibility for the design and
execution of specific offshore drilling programs and deliver a logged or
loggable hole to an agreed depth for a guaranteed price. Compensation is
contingent upon satisfactory completion of the drilling program. Under
the Company's turnkey drilling operations, the Company provides planning,
engineering, and management services beyond the scope of its traditional
contract drilling business and thereby assumes greater liability.
As of December 31, 1999, the Company had drilled 587 turnkey wells since
commencing turnkey operations in 1980, including 76 in 1999, 77 in 1998,
and 107 in 1997.
<PAGE>
In addition to providing drilling management services on a turnkey basis,
the Company offers services as a general contractor under arrangements
variously described as "partnering," "full service contracting," and
"integrated drilling services," among others.
As of December 31, 1999, the Company's drilling management services revenue
backlog was approximately $53 million, all of which is expected to be
realized in 2000. As of December 31, 1998, the drilling management services
backlog was approximately $36 million.
Oil and Gas Operations
The Company conducts oil and gas exploration, development, and production
activities through its wholly-owned subsidiary, Challenger Minerals Inc.
("CMI"). Such activities primarily include participation in the development
and operation of properties for oil and gas production. In addition, the
Company incurs through ADTI and other subsidiaries certain limited exploration
and leasehold acquisition costs in connection with its turnkey drilling
operations. Typically, the Company acquires a participation interest only
in order to secure a turnkey drilling contract. Substantially all of the
Company's oil and gas activities are conducted in the United States offshore
Louisiana and Texas. Oil and gas operations accounted for approximately one
percent of the Company's revenues in 1999.
Competition and Business Environment
Drilling contracts are, for the most part, awarded on a competitive-bid
basis. An operator selecting a rig may consider, among other things, rig
availability, quality of service and equipment, and price. Offshore drilling
is a highly competitive business with numerous industry participants, none
of which has a significant market share, which makes it difficult to raise
prices. Recent mergers in the oil and gas industry have reduced the number
of customers served by the Company and its competitors.
Offshore drilling is a highly cyclical business and may be impacted by oil
and gas price levels and volatility. Worldwide military, political, and
economic events have contributed to oil and gas price volatility and are
likely to continue to do so in the future. Some other factors which have
affected and are likely to continue affecting oil and gas prices and, in
turn, the level of demand for the Company's services, include demand for
oil and gas worldwide, the ability of the Organization of Petroleum Exporting
Countries ("OPEC") to set and maintain production levels, the level of
production by non-OPEC countries, domestic and foreign tax policies, and
laws and governmental regulations which restrict exploration and development
of oil and gas in various offshore jurisdictions.
Competition for the skilled labor required for deepwater operations has
intensified as the number of deepwater rigs added to worldwide fleets or
under construction has increased in the last few years. Although such
competition has not materially affected the Company to date, the Company has
found it more difficult to find qualified individuals, and the possibility
exists that competition for skilled labor with deepwater expertise could
limit the Company's results of operations.
Results of operations from the Company's drilling management services may
be limited by certain factors, in particular the ability of the Company to
find and retain qualified personnel and to obtain and successfully perform
turnkey drilling contracts based on competitive bids. The Company's ability
to obtain turnkey drilling contracts is largely dependent on the number of
such contracts available for bid. Accordingly, results of the Company's
drilling management service operations may vary widely from quarter to
quarter and from year to year.
<PAGE>
Operational Risks and Insurance
The Company's operations are subject to the usual hazards incident to the
drilling of oil and gas wells, such as blowouts, explosions, oil spills,
and fires. They are also subject to hazards peculiar to marine operations,
such as collision, grounding, and severe weather. All of these hazards can
cause personal injury and loss of life, severe damage to and destruction of
property and equipment, pollution or environmental damage, and suspension of
operations.
The Company maintains insurance coverage against certain general and marine
public liabilities, including liability for personal injury, in the amount
of $200 million, subject to a self-insured retention of no more than $250,000
per occurrence. In addition, the Company's rigs and related equipment are
separately insured under hull and machinery policies against certain marine
and other perils resulting in property damage, subject to a self-insured
retention generally of no more than $300,000 per occurrence. The Company's
current practice is to insure each active rig for its market value; however,
the Company's insurance does not cover all costs required to replace each rig
with a newly constructed one.
In addition to hull and machinery coverage, the Company purchases business
interruption insurance with respect to certain of its rigs. Business
interruption coverage applies only to business interruptions as a result of
losses insured under hull and machinery policies and is not available to the
Company for interruptions arising from damages to "spud cans," which are the
bases of legs of jackup rigs. The deductible for business interruption claims
is 30 days. The decision to insure a rig against interruption risks is
dependent on a number of factors, including dayrate and utilization levels, and
no assurance can be made that the Company will continue to insure any of its
rigs against such risks. All of the Company's rigs operating internationally
are presently insured against loss due to war, including terrorism.
Although the Company's general and marine public liability policies cover
liability for pollution under most circumstances, they do not cover liability
for bringing a well under control following a blowout. In the case of turnkey
drilling operations, the Company maintains insurance covering the cost of
controlling wells, including any environmental damage resulting therefrom,
the cost of cleanup, and the cost of redrilling ("well-control liabilities")
in an amount not less than $30 million per occurrence, subject to a
self-insured retention of $200,000 per occurrence. Under turnkey drilling
contracts, the Company generally assumes the risk of the cost of well control,
but on occasion the Company receives indemnification from the customer for
such risk in excess of the $30 million insurance coverage. In many instances,
however, the Company is not indemnified by its customers for well-control
liabilities. Furthermore, the Company is not insured against certain drilling
risks, such as stuck drill stem and loss of in-hole equipment not arising from
an insured peril, that could result in delays or nonperformance of a turnkey
drilling contract. With respect to the Company's offshore contract drilling
operations, the Company is generally indemnified by its customers for any
cost of well control. In any event, however, the Company maintains insurance
against such liabilities in the amount of $50 million per occurrence, subject
to a self-insured retention of $200,000 per occurrence.
The occurrence of a significant event, including pollution or environmental
damage not fully insured or indemnified against or the failure of a customer
to meet its indemnification obligations, could materially and adversely affect
the Company's operations and financial condition. Moreover, no assurance can
be made that the Company will be able to maintain adequate insurance in the
future at rates it considers reasonable. See "-- Governmental Regulations
and Environmental Matters."
<PAGE>
Foreign Operations
A significant portion of the Company's revenues is attributable to operations
in foreign countries. Such activities accounted for 47 percent of the
Company's consolidated revenues in both 1999 and 1998 and 35 percent in 1997.
Risks associated with the Company's operations in foreign areas include risks
of war and civil disturbance or other risks that may limit or disrupt markets,
expropriation, nationalization, renegotiation or nullification of existing
contracts, foreign exchange restrictions, foreign currency fluctuations,
foreign taxation, changing political conditions, and foreign and domestic
monetary policies. To date, the Company has experienced no material loss as
a result of any of these factors. Additionally, the ability of the Company
to compete in the international drilling market may be adversely affected by
foreign governmental regulations favoring or requiring the awarding of drilling
contracts to local contractors, or by regulations requiring foreign contractors
to employ citizens of, or purchase supplies from, a particular jurisdiction.
Furthermore, foreign governmental regulations, which may in the future become
applicable to the oil and gas industry, could reduce demand for the Company's
services, or such regulations could directly affect the Company's ability to
compete for customers.
Governmental Regulations and Environmental Matters
The Company's business is affected by changes in public policy and by federal,
state, foreign, and local laws and regulations relating to the energy industry.
The adoption of laws and regulations curtailing exploration and development
drilling for oil and gas for economic, environmental, and other policy reasons
adversely affects the Company's operations by limiting available drilling and
other opportunities in the energy service industry.
The Company's operations are subject to numerous federal, state, and local laws
and regulations controlling the discharge of materials into the environment
or otherwise relating to the protection of the environment. For example, the
Company, as an operator of mobile offshore drilling units in navigable U.S.
waters and certain offshore areas, including the Outer Continental Shelf, is
liable for damages and for the cost of removing oil spills for which it may
be held responsible, subject to certain limitations. The Company's operations
may involve the use or handling of materials that may be classified as
environmentally hazardous substances. Laws and regulations protecting the
environment have generally become more stringent, and may in certain
circumstances impose "strict liability," rendering a person liable for
environmental damage without regard to negligence or fault. The Company does
not believe that environmental regulations have had any material adverse effect
on its capital expenditures, results of operations, or competitive position to
date and does not presently anticipate that any material expenditures will be
required to enable it to comply with existing laws and regulations. It is
possible, however, that modification of existing regulations or the adoption
of new regulations in the future, particularly with respect to environmental
and safety standards, could have such a material adverse effect on the
Company's operations.
The U.S. Oil Pollution Act of 1990 ("OPA '90") and similar legislation enacted
in Texas, Louisiana, and other coastal states address oil spill prevention and
control and significantly expanded liability exposure across all spectrums of
the oil and gas industry. The Company is of the opinion that it maintains
sufficient insurance coverage to respond to the added exposures.
OPA '90 mandated increases in the amounts of financial responsibility that
must be certified with respect to mobile offshore drilling units and offshore
facilities (e.g., oil and gas production platforms, among others) located in
U.S. waters. Operators of mobile offshore drilling units, together with
operators of vessels, must provide evidence of financial responsibility based
on a tonnage formula. The Company has
<PAGE>
complied with the requirement by providing evidence of adequate U.S.-based
net worth. The Company's inability to comply with the rule in the future,
however, could have a material adverse effect on its operations and financial
condition. For 1999, 36 percent of the Company's contract drilling revenues
was attributable to operations in U.S. waters, and, as of February 23, 2000,
14 of the Company's 31 active rigs were located in U.S. waters.
OPA '90 also requires lessees, permittees, or holders of a right of use of
offshore facilities (including mobile offshore drilling rigs while attached
to the ocean floor) to certify evidence of financial responsibility. This
financial responsibility requirement varies from $10 million to $150 million
per facility, with the actual requirement determined based on an estimate of
the number of barrels of oil which could be spilled under a worst-case
scenario. The Department of the Interior's Minerals Management Service is
responsible for promulgating regulations implementing the financial
responsibility requirements with respect to offshore facilities. The Company
does not presently operate any offshore production platforms. The Company's
offshore drilling operations in the Gulf of Mexico are largely dependent on
oil and gas companies' drilling activities, which, in turn, ultimately depend
on their ability to meet the OPA '90 financial responsibility requirements.
Employees
The Company had approximately 2,400 employees at December 31, 1999. The
Company requires highly skilled personnel to operate its drilling rigs. In
recognition of this, the Company conducts extensive personnel training and
safety programs.
Executive Officers of the Registrant
The name, age as of December 31, 1999, and office or offices currently held
by each of the executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Office or Offices
---- --- -----------------
<S> <C> <S>
Robert E. Rose 61 Chairman, President and Chief Executive Officer
C. Russell Luigs 66 Chairman of the Executive Committee
Jon A. Marshall 48 Executive Vice President and Chief Operating Officer
Thomas R. Johnson 51 Senior Vice President and Chief Administrative Officer
James L. McCulloch 47 Senior Vice President, General Counsel and Assistant Secretary
W. Matt Ralls 50 Senior Vice President, Chief Financial Officer and Treasurer
Douglas C. Stegall 55 Vice President and Controller
Douglas K. Vrooman 49 President of Applied Drilling Technology Inc.
Marion M. Woolie 45 President of Global Marine Drilling Company
</TABLE>
Officers serve for a one-year term or until their successors are elected and
qualified to serve. Each executive officer's principal occupation has been
as an executive officer of the Company for more than the past five years, with
the exception of Messrs. Ralls, Rose, Stegall, and Woolie. Mr. Ralls has been
the Company's Senior Vice President, Chief Financial Officer and Treasurer
since January 1999, prior to which he was the Company's Vice President and
Treasurer since 1997. Mr. Ralls served as Executive Vice President, Chief
Financial Officer, and a director of Kelley Oil Corporation from 1990 to 1996,
after which he was Vice President of Capital Markets and Corporate Development
for The Meridian Resource Corporation. Mr. Rose has been the Company's
Chairman since May 1999 and its President and Chief
<PAGE>
Executive Officer since May 1998, prior to which he was President and Chief
Executive Officer of Cardinal Services, Inc., an oil services company, since
April 1998, and President and Chief Executive Officer of Diamond Offshore
Drilling, Inc. and its predecessor, Diamond M Company, for more than a decade.
Mr. Stegall has been the Company's Vice President and Controller since February
2000, prior to which he was Vice President and Controller of GMDC for more than
five years. Mr. Woolie has been President of GMDC since 1998. He was GMDC's
Vice President, Sales and Contracts, from 1997 to 1998, prior to which he was
responsible for GMDC's North and South American sales.
ITEM 3. LEGAL PROCEEDINGS
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 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, 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. An arbitration hearing in respect of certain preliminary
legal issues has been scheduled for May 2000. Full evidentiary hearings have
been scheduled to begin in September 2000, and the Company expects that
additional hearings will be required in 2001. Schlumberger Limited has
issued a guaranty in favor of the Company in the amount of $140 million as
security for any award ultimately handed down by the arbitration tribunal.
The Company has recorded a noncurrent receivable from Sedco in the amount of
$56.7 million at December 31, 1999, consisting of $33.5 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 in
connection with the arbitration ruling; however, the Company expects the
total claim against Sedco to exceed these amounts.
There are no other material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Company, to which the
Company is a party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of 1999.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.10 par value per share, is listed on the New York
Stock Exchange under the symbol "GLM." At January 31, 2000, there were 7,569
stockholders of record of the Common Stock. The high and low sales prices of
the Common Stock as reported on the New York Stock Exchange Composite
Transactions Tape for each full quarterly period within the past two years
appear under "Consolidated Selected Quarterly Financial Data," which follows
the notes to the consolidated financial statements.
The Company did not declare any dividends on its common stock in either 1999
or 1998. Subject to the preferential dividend rights of holders of the
Company's preferred stock, if any, the holders of the Common Stock will be
entitled to receive when, as, and if declared by the Board of Directors out
of funds legally available therefor, all other dividends payable in cash, in
property, or in shares of Common Stock. The Company does not intend to
declare or pay dividends on the Common Stock in the foreseeable future, but
reconsiders the declaration and payment of dividends from time to time.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
FIVE-YEAR REVIEW
(In millions, except per share and operational data)
<CAPTION>
-------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Financial Performance
Revenues:
Contract drilling $ 507.7 $ 742.4 $ 579.4 $ 362.5 $ 248.9
Drilling management services 275.0 416.0 480.5 305.3 209.3
Oil and gas 8.3 3.8 7.2 12.9 9.8
-------- -------- -------- -------- --------
Total revenues $ 791.0 $1,162.2 $1,067.1 $ 680.7 $ 468.0
======== ======== ======== ======== ========
Operating income:
Contract drilling $ 153.5 $ 361.7 $ 274.8 $ 125.4 $ 54.6
Drilling management services 13.3 (30.7) 50.0 27.9 17.3
Oil and gas 2.0 0.3 2.1 6.8 3.4
Corporate expenses (25.5) (20.8) (21.8) (19.3) (15.0)
-------- -------- -------- -------- --------
Total operating income 143.3 310.5 305.1 140.8 60.3
-------- -------- -------- -------- --------
Other income (expense):
Interest expense (56.6) (46.9) (39.7) (30.9) (30.2)
Interest capitalized 25.9 17.2 20.9 2.6 5.6
Interest income 2.7 3.3 7.7 6.2 4.7
Other - - - 1.0 14.7
-------- -------- -------- -------- --------
Total other income (expense) (28.0) (26.4) (11.1) (21.1) (5.2)
-------- -------- -------- -------- --------
Income before income taxes and
extraordinary item 115.3 284.1 294.0 119.7 55.1
Provision for income taxes:
Current tax provision 3.4 18.5 33.5 9.6 3.2
Deferred tax provision (benefit) 22.4 42.3 (54.6) (70.0) -
-------- -------- -------- -------- --------
Total income tax provision (benefit) 25.8 60.8 (21.1) (60.4) 3.2
-------- -------- -------- -------- --------
Income before extraordinary item 89.5 223.3 315.1 180.1 51.9
Extraordinary loss on extinguishment
of debt, net - - (4.5) - -
-------- -------- -------- -------- --------
Net income $ 89.5 $ 223.3 $ 310.6 $ 180.1 $ 51.9
======== ======== ======== ======== ========
Income per share before extraordinary item:
Basic $ 0.51 $ 1.29 $ 1.84 $ 1.07 $ 0.31
Diluted $ 0.51 $ 1.27 $ 1.79 $ 1.03 $ 0.31
Net income per share:
Basic $ 0.51 $ 1.29 $ 1.81 $ 1.07 $ 0.31
Diluted $ 0.51 $ 1.27 $ 1.76 $ 1.03 $ 0.31
Average common shares - Basic 174.0 173.0 171.2 167.9 165.1
Average common shares - Diluted 176.8 175.8 176.2 174.3 169.4
Dividends declared per common share $ - $ - $ - $ - $ -
Capital expenditures $ 448.1 $ 637.7 $ 580.3 $ 118.3 $ 73.5
Depreciation, depletion, and amortization (1) $ 88.8 $ 103.9 $ 55.1 $ 40.9 $ 31.0
Financial Position (end of year)
Working capital $ 63.4 $ 117.0 $ 144.2 $ 158.9 $ 116.2
Properties and equipment, net $1,868.6 $1,512.1 $ 999.0 $ 477.4 $ 386.6
Total assets $2,264.5 $1,971.6 $1,421.9 $ 807.8 $ 563.0
Long-term debt, including capital lease
obligation $ 955.3 $ 768.4 $ 417.3 $ 241.6 $ 225.0
Shareholders' equity $1,135.0 $1,040.4 $ 805.6 $ 459.1 $ 269.0
Operational Data
Average rig utilization (2) (3) 76% 96% 99% 98% 99%
Fleet average dayrate (4) $ 59,600 $ 71,100 $ 55,700 $ 38,000 $ 28,700
Number of active rigs (end of year) (3) 31 31 28 26 26
Turnkey wells drilled 76 77 107 82 67
Turnkey well completions 16 4 3 - -
Number of employees (end of year) 2,400 2,700 2,500 2,100 2,100
- --------------------
(1) In 1999 the Company increased the estimated useful lives of certain
of its drilling rigs. The effect of the change was to reduce 1999
depreciation expense by approximately $27.2 million.
(2) The average rig utilization rate for a period is the ratio of days in
the period during which the rigs were under contract to the total days
in the period during which the rigs were available to work.
(3) Excludes the Glomar Beaufort Sea I concrete island drilling system, a
currently inactive, special-purpose mobile offshore rig designed for
arctic operations.
(4) Contract drilling revenues less non-rig related revenues divided by the
aggregate contract days, adjusted to exclude days under contract at zero
dayrate.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Operating Results
Summary
Operating income decreased by $167.2 million to $143.3 million in 1999 from
$310.5 million in 1998. The decrease was primarily attributable to lower
average rig utilization and dayrates for contract drilling, partly offset by
the addition of three deepwater rigs to the contract drilling fleet since
February 1998, lower depreciation resulting from an increase in estimated rig
service lives, and lower fixed costs for drilling management services.
In 1998 operating income increased by $5.4 million to $310.5 million from
$305.1 million in 1997. The increase was attributable to higher average
contract drilling dayrates and the addition of five deepwater rigs to the
contract drilling fleet since July 1997, partially offset by a loss for
drilling management services. The drilling management services loss was
primarily attributable to the fixed costs of rigs retained by the Company
under term contracts and the downturn in shallow-water drilling activity.
Data relating to the Company's operations by business segment follows:
<TABLE>
<CAPTION>
Increase Increase
1999 (Decrease) 1998 (Decrease) 1997
---- -------- ---- -------- ----
($ in millions)
<S> <C> <C> <C> <C> <C>
Revenues:
Contract drilling $ 517.7 (31%) $ 753.7 29% $ 584.7
Drilling management 282.2 (33%) 421.5 (13%) 482.6
Oil and gas 8.3 118% 3.8 (47%) 7.2
Less: Intersegment revenues (17.2) 2% (16.8) 127% (7.4)
-------- -------- --------
$ 791.0 (32%) $1,162.2 9% $1,067.1
======== ======== ========
Operating income:
Contract drilling $ 153.5 (58%) $ 361.7 32% $ 274.8
Drilling management 13.3 na (30.7) na 50.0
Oil and gas 2.0 567% 0.3 (86%) 2.1
Corporate expenses (25.5) 23% (20.8) (5%) (21.8)
-------- -------- --------
$ 143.3 (54%) $ 310.5 2% $ 305.1
======== ======== ========
</TABLE>
The Company reported net income of $89.5 million for 1999 as compared with
net income of $223.3 million for 1998 and $310.6 million for 1997. Net
income for 1997 included a $4.5 million after-tax extraordinary charge in
connection with the redemption of all $224 million of the Company's 12-3/4%
Senior Secured Notes due 1999 (the "12-3/4% Notes") and a $45.0 million net
credit to income taxes. The income tax adjustment consisted of a net credit
to deferred taxes in connection with the recognition of the future tax
benefits of net operating loss carryforwards, partially offset by charges to
current and deferred taxes for the effects of a realignment of the Company's
foreign operations. Excluding these unusual items, net income was $270.1
million for 1997.
Weak oil prices throughout 1998 and early 1999 caused most oil and gas
producers to substantially reduce their 1999 drilling budgets as compared
to 1998 levels. Industry utilization rates for offshore drilling rigs in
most major worldwide markets have fallen from year-end 1998 levels, and
spot market dayrates for most
<PAGE>
rig types in most geographic markets fell during the year to near cash
break-even levels. By year-end 1999, dayrates in all but the North Sea had
rebounded off their 1999 lows. At February 23, 2000, seven of the Company's
thirty-one active rigs were idle, five of which had no immediate plans for
work ("cold-stacked").
Since January 1999 oil prices have risen significantly as a result of
production restraints by OPEC and certain non-OPEC countries and an
improving outlook for foreign economic recovery, particularly in Asia.
In addition, natural gas prices have increased in anticipation of tighter
supplies. Independent oil and gas companies increased their drilling
activities in the U.S. Gulf of Mexico in the latter half of 1999, apparently
in response to higher gas prices and improved access to capital markets.
Recently, the Company has seen an improvement in dayrates in the U.S. Gulf of
Mexico, which typically occurs when utilization rates for individual classes
of rigs increase above a threshold level. Additionally, the Company has
received an increased level of inquiries offshore West Africa, which in the
past has marked the early signs of recovery. In the first quarter of 2000,
the Company received a two-month contract offshore West Africa for a jackup
rig that had been cold-stacked for about one year and letters of intent to
contract one jackup offshore West Africa and the drillship in Peru. Drilling
markets in the North Sea remain weak. While the North Sea market may or
may not remain soft during 2000, activity in that region has historically
increased as summer approaches. The North Sea market will likely be the
last of the Company's three major markets to recover due to the seasonal and
high-cost nature of operating in that region. Overall, the Company's outlook
for the future is positive as oil company budget announcements and surveys of
capital spending plans for 2000 suggest average increases of more than 10
percent over 1999 levels. The Company believes that if commodity prices
remain in the current range, actual spending will exceed budgeted estimates.
The Company has under construction two dynamically-positioned, ultra-deepwater
drillships, which are subject to two fully-defeased, 20-year capital leases.
The Company expects to take delivery of the Glomar C.R. Luigs during the first
quarter of 2000 and the Glomar Jack Ryan in the third quarter of 2000. The
Glomar C.R. Luigs began sea trials on February 21, 2000, and the trials are
currently scheduled to be completed on or about March 7, 2000, with delivery
shortly thereafter. Both rigs are committed to multi-year contracts on
delivery. The Company's deepwater fleet will total ten rigs with the
addition of these two rigs.
During 1998 the Company added three deepwater rigs to the fleet -- the Glomar
Celtic Sea semisubmersible in February, the Glomar Arctic IV semisubmersible
in March, and the Glomar Explorer drillship in August. In July 1997 the
Company added two deepwater rigs to the fleet, the Glomar Grand Banks and the
Maersk Jutlander semisubmersibles. As of February 23, 2000, five of the
Company's eight deepwater rigs were operating under contracts at dayrates
higher than current market rates. One of these rigs completes its current
contract in July 2000, one becomes available in December 2000, and one becomes
available in each of 2001, 2002, and 2003.
The Company intends to take a pretax charge of approximately $5 million in
the first quarter of 2000 in connection with a restructuring of operations
comprised of a workforce reduction and consolidation of facilities. The pretax
cost savings of the restructuring is estimated to be approximately $6 million
on an annualized basis.
<PAGE>
Contract Drilling Operations
Data with respect to the Company's contract drilling operations follows:
<TABLE>
<CAPTION>
Increase Increase
1999 (Decrease) 1998 (Decrease) 1997
------ -------- ------ -------- ------
($ in millions, except for fleet average dayrate)
<S> <C> <C> <C> <C> <C>
Contract drilling revenues by area: (1)
U.S. Gulf of Mexico $ 187.8 (30%) $ 267.5 13% $ 235.8
North Sea 134.5 (23%) 174.1 126% 77.0
West Africa 98.5 (55%) 218.8 4% 211.1
Other 96.9 4% 93.3 53% 60.8
------- ------- -------
$ 517.7 (31%) $ 753.7 29% $ 584.7
======= ======= =======
Average rig utilization (2) 76% 96% 99%
Fleet average dayrate $59,600 $71,100 $55,700
- --------------------
(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.
</TABLE>
Of the $236.0 million decrease in contract drilling revenues for 1999 compared
to 1998, $180.8 million was attributable to a decrease in average dayrates, and
$110.0 million was attributable to lower average rig utilization, partially
offset by a $57.2 million increase attributable to the addition to the fleet
of the Glomar Celtic Sea semisubmersible in February 1998, the Glomar Arctic
IV semisubmersible in March 1998, and the Glomar Explorer drillship in August
1998.
Of the $169.0 million increase in contract drilling revenues for 1998 compared
to 1997, $120.2 million was attributable to fleet additions during 1997 and
1998, and $97.7 million was attributable to an increase in average dayrates,
partially offset by a $23.0 million decrease attributable to lower average
rig utilization and a $25.9 million decrease in non-dayrate revenues.
The mobilization of rigs between the geographic areas shown in the preceding
table also affected each area's revenues over the periods indicated. During
1997 the Company mobilized one jackup from the U.S. Gulf of Mexico to Trinidad,
one jackup from West Africa to California, and one jackup from the North Sea
to offshore Argentina. During 1998 the Company mobilized one jackup from the
U.S. Gulf of Mexico to the North Sea, one jackup from California to the North
Sea, and one semisubmersible from the North Sea to the east coast of Canada.
During 1999 the Company mobilized two jackups from West Africa to the U.S.
Gulf of Mexico, one jackup from the North Sea to the U.S. Gulf of Mexico, one
drillship from West Africa to Peru, and one drillship from the U.S. Gulf of
Mexico to West Africa.
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. The effect of the change was to decrease 1999 depreciation expense by
$27.2 million.
The Company's operating profit margin for contract drilling operations
decreased to 30 percent in 1999 from 48 percent in 1998 and 47 percent in
1997. The decrease in operating profit margin in 1999 compared to 1998 was
primarily the result of lower average rig utilization and dayrates. The
increase in operating profit margin in 1998 compared to 1997 was attributable
to higher average dayrates, partly offset
<PAGE>
by lower average rig utilization. Operating expenses decreased to $364.2
million in 1999 from $392.0 million in 1998 and $309.9 million in 1997. The
decrease in operating expenses in 1999 compared to 1998 was 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 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. The increase
in operating expenses in 1998 compared to 1997 was attributable to higher
depreciation and other operating costs in connection with the additions to
the fleet, and higher labor and repairs and maintenance, among other factors.
As of February 23, 2000, fourteen of the Company's rigs were located in the
U.S. Gulf of Mexico, eight were offshore West Africa, five were in the North
Sea, and one was offshore each of Canada, Trinidad, Argentina, and Peru.
The Company averaged 95 percent utilization for its drilling rigs in the
U.S. Gulf of Mexico for 1999, 96 percent for 1998, and 99 percent for 1997.
As of February 23, 2000, all fourteen of the Company's rigs in the U.S. Gulf
of Mexico were under contract or otherwise committed to a customer.
The Company's average utilization rate for its rigs located offshore West
Africa was 48 percent for 1999, 94 percent for 1998, and 100 percent for
1997. As of February 23, 2000, five of the Company's eight rigs located
offshore West Africa were operating under contracts, one was committed to
a customer beginning in March, and two were idle.
The Company averaged 81 percent utilization for its rigs in the North Sea
for 1999, 98 percent for 1998, and 100 percent for 1997. As of February 23,
2000, three of the Company's five rigs in the North Sea were under contract
or otherwise committed to a customer, and two were idle.
The Company experienced some unanticipated rig downtime in January and
February 2000 that will reduce pretax earnings in the first quarter of 2000
by approximately $5.2 million ($3.6 million after tax). The downtime was
primarily related to repairs to the blowout preventer stack on the drillship
Glomar Explorer, which is currently operating offshore West Africa.
Drilling Management Services
Drilling management services revenues decreased by $139.3 million to $282.2
million in 1999 from $421.5 million in 1998. The decrease in revenues
consisted of a $109.8 million decrease attributable to lower average revenues
per turnkey project and a $55.5 million decrease attributable to daywork and
other revenues, partly offset by a $26.0 million increase attributable to an
increase in the number of turnkey projects. The Company completed 92 turnkey
projects in 1999 (76 wells drilled and 16 well completions) as compared to 81
turnkey projects in 1998 (77 wells drilled and 4 well completions).
Drilling management services revenues decreased by $61.1 million to $421.5
million in 1998 from $482.6 million in 1997. The decrease in revenues
consisted of a $107.7 million decrease attributable to a reduction in the
number of turnkey projects, partly offset by a $28.3 million increase
attributable to higher average turnkey revenues per project and an $18.3
million increase attributable to daywork and other revenues. The Company
completed 110 turnkey projects in 1997 (107 wells drilled and 3 well
completions) as compared to the 81 projects in 1998.
<PAGE>
Operating income increased by $44.0 million to $13.3 million in 1999 from
a loss of $30.7 million in 1998, and operating income decreased by $80.7
million to a loss of $30.7 million in 1998 from income of $50.0 million in
1997. The poor performance in 1999 and 1998 as compared to 1997 was
primarily attributable to the number of fixed-cost rigs under term contract
to the Company. During 1999 and 1998, 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 $11.8 million in 1999 and $57.2
million in 1998. 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, at
December 31, 1999, the Company recorded $3.0 million of estimated losses
on turnkey projects that were expected to be completed during the first
quarter of 2000 at a loss compared to $0.4 million at December 31, 1998.
In addition, bad debt expense for drilling management services totaled
$1.3 million in 1999, $11.3 million in 1998, and $0.8 million in 1997.
In June 1998 the Company suspended drilling a turnkey well after experiencing
an underground blowout, which made it impossible to continue drilling. The
Company was unable to successfully complete the well and in 1998 charged
$5.3 million of costs to income. In 1999 the Company received insurance
recoveries in excess of the amount previously estimated, resulting in a $1.1
million favorable adjustment to income. Drilling management operating results
for 1998 were favorably affected by downward revisions to estimates of the
costs of wells completed in prior periods totaling $8.3 million.
Results of operations from the Company's drilling management services may be
limited by certain factors, in particular the ability of the Company to find
and retain qualified personnel and to obtain and successfully perform turnkey
drilling contracts based on competitive bids. The Company's ability to obtain
turnkey drilling contracts is largely dependent on the number of such contracts
available for bid, which in turn is influenced by market prices for oil and
gas, among other factors. Accordingly, results of the Company's drilling
management service operations may vary widely from quarter to quarter and
from year to year.
Other Income and Expense
General and administrative expenses were $23.6 million in 1999, $19.1
million in 1998, and $20.5 million in 1997. The increase in general and
administrative expenses from 1998 to 1999 was primarily due to increases in
professional fees and compensation expense. The increase in compensation
expense was primarily related to a stock-based compensation plan, which is
based on Company performance over rolling three-year periods and the market
price of the Company's common stock at each year end. The decrease in
general and administrative expenses from 1997 to 1998 was due to lower costs
in connection with the stock-based compensation plan, partially offset by
higher compensation and severance, among other costs.
Interest expense was $56.6 million for 1999, $46.9 million for 1998, and
$39.7 million for 1997. The increases in interest expense were primarily
attributable to higher debt incurred to finance the upgrade, acquisition,
conversion, and construction of rigs, partially offset in 1998 by lower
effective interest rates due to the redemption of the 12-3/4% Notes in
December 1997.
The Company capitalized interest expense of $25.9 million in 1999, $17.2
million in 1998, and $20.9 million in 1997 in connection with the construction
and conversion of rigs.
<PAGE>
Interest income decreased to $2.7 million in 1999 from $3.3 million in 1998
and $7.7 million in 1997. The decreases were primarily due to lower levels of
cash and short-term investments.
The Company's effective income tax rate for financial reporting purposes was
approximately 22 percent in 1999 and 21 percent in 1998, which was lower than
the U.S. federal statutory rate of 35 percent. These lower effective rates
were primarily the result of the Company's foreign subsidiaries' earnings
being permanently reinvested abroad and taxed at foreign rates, which were
generally lower than the U.S. federal income tax rate. Because of the
differences between U.S. and foreign tax rates, the Company's future effective
income tax rate can be expected to fluctuate as the relative amounts of the
Company's foreign and U.S. earnings fluctuate. The Company intends to
permanently reinvest outside the United States its foreign subsidiaries'
earnings that are not otherwise subject to U.S. taxation, and, as a result,
the Company does not expect to incur nor does it intend to provide for any
deferred federal income taxes on such foreign earnings. Although the Company
is confident of its positions taken on its tax returns, the Company cannot
guarantee that its positions will never be challenged or that, if challenged,
the Company will prevail.
In 1997 the Company reduced a valuation allowance pertaining to the value
of future tax benefits of net operating loss ("NOL") carryforwards and other
deferred tax assets recorded on its balance sheet. The Company reduced the
valuation allowance based on its expectation that it will be able to realize
the tax benefits of certain NOL carryforwards prior to their expiration. The
effect of reducing the valuation allowance was to significantly reduce income
tax expense in 1997.
At December 31, 1999, the balance of the Company's net deferred tax asset
recorded on its balance sheet was $90.7 million. The Company's ability to
realize the entire benefit of this deferred tax asset requires that the
Company achieve certain future earnings levels prior to the expiration of
its NOL carryforwards. The Company could be required to record a valuation
allowance for a portion or all of its deferred tax asset if market conditions
deteriorate and future earnings are below, or projected to be below, its
current estimates.
Liquidity and Capital Resources
Financing and Investing Activities
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 retained its role as construction
supervisor and its responsibility to pay on behalf of the lessors, or provide
for the lessors' payment of, all amounts required under the terms of the
contracts, including payments for all approved change orders.
In October 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. In its claim, the
Shipbuilder also requested additional compensation for increases in the
drillships' steel weight. The amount of the Shipbuilder's claim in excess of
the contract price totals GBP133 million ($216 million). With the exception
of a small portion of the steel-weight claim, the Company believes that the
claim is totally without merit.
<PAGE>
In accordance with the contracts, the claim will be resolved through
arbitration in London.
Because the Company was concerned about the Shipbuilder's financial
viability and the satisfactory completion of the drillships, in November
1999 the Company agreed to provide additional funding to the Shipbuilder
to ensure completion of the two drillships in exchange for certain
assurances by the Shipbuilder and its parent, Fred. Olsen Energy ASA (the
"Funding Agreement").
Under the terms of the Funding Agreement, the Company released two cash
collateralized letters of credit, giving the Shipbuilder access to $40
million of its own funds. In addition, the Company agreed to advance to
the Shipbuilder, without prejudice to any issues of liability under the
shipbuilding contracts, GBP57 million ($93 million) above the drillships'
$315 million contract price. The Company also agreed to advance amounts
equal to half of subsequent cost overruns until the Company's total advances
under the Funding Agreement reach GBP65 million ($106 million). As of
February 29, 2000, the Company had advanced GBP57 million ($93 million)
under the Funding Agreement. If the maximum advances of GBP65 million are
made by the Company, the Shipbuilder's parent, Fred. Olsen Energy ASA, has
agreed to provide all additional funds necessary to keep the Shipbuilder
solvent and working in an expeditious and diligent manner and to enable it
to deliver the two completed drillships. In addition, the parent will
guarantee up to GBP3 million ($4.9 million) of the Shipbuilder's warranty
with respect to the two drillships.
The Funding Agreement did not settle any portion of the Shipbuilder's claim
of GBP133 million ($216 million). The agreement provides that the Shipbuilder
will repay to the Company amounts advanced under the Funding Agreement to the
extent the amount of the advanced funds exceeds any arbitration award in favor
of the Shipbuilder; the Funding Agreement also provides the Company shall pay
the Shipbuilder to the extent an arbitration award in favor of the Shipbuilder
exceeds the funds so advanced. In view of the current financial condition of
the Shipbuilder, collection from the Shipbuilder of any amounts to which the
Company may be entitled under the Funding Agreement is doubtful.
The Company's original cash outlay projection for the two new drillships
totaled $660 million, inclusive of the $315 million Shipbuilder contract
price. The Company estimates that if it were to fund the maximum GBP65
million ($106 million) under the Funding Agreement, and if none of that
amount were to be refunded, its projected cash outlays in connection with
construction of the drillships, including payments to the Shipbuilder, the
costs of owner-furnished equipment, financing and engineering, and all
other costs, net of the lease benefits, would total approximately $728
million. This represents a ten percent increase over the Company's original
cash outlay projection. Of the $728 million, the Company has spent $653
million, including $36 million of capitalized interest, through January 31,
2000. The Company expects to spend an additional $75 million, including $19
million of capitalized interest, over the remainder of 2000 in connection
with the construction of the two drillships.
The Company does not expect the Funding Agreement to materially impact
its future earnings and believes that its existing credit facilities are
adequate to fund completion of the drillships in accordance with the
agreement. In addition, the Funding Agreement is not expected to further
delay the drillships' delivery dates beyond the first quarter of 2000 for
the Glomar C.R. Luigs and the third quarter of 2000 for the Glomar Jack Ryan.
These delayed delivery dates are not anticipated 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 projected cash flow
in 2000 by approximately $40 million.
<PAGE>
The first of the new drillships, the Glomar C.R. Luigs, is under contract
to two customers for a total period of three years following delivery. The
first customer also has two one-year options following the three-year period.
Total revenues to be generated over the three-year period after delivery are
approximately $227 million. The second of the two drillships, the Glomar
Jack Ryan, has a three-year contract that is expected to generate revenues
of approximately $225 million.
Significant financing and investing activities, other than construction of
the drillships, during the three-year period ended December 31, 1999, were as
follows:
. July 1997 - Increased the Company's revolving bank credit facility
to $250 million from $100 million.
. July 1997 - Purchased two deepwater semisubmersibles, the Maersk
Vinlander and Maersk Jutlander, for a combined purchase price of
$250 million in cash. The Maersk Vinlander was subsequently
renamed the Glomar Grand Banks.
. September 1997 - Issued $300 million of 7-1/8% Notes due 2007 and
used part of the proceeds to pay all amounts outstanding under the
$250 million credit facility.
. December 1997 - Redeemed the entire outstanding balance of the 12-3/4%
Senior Secured Notes due 1999 in the amount of $223.9 million using the
remainder of the proceeds from the 7-1/8% Note offering, together with
$100 million drawn under the bank credit facility.
. January 1998 - Entered into a one-year unsecured $150 million
revolving bank credit facility, bringing the total amount available
for borrowings under all committed credit facilities to $390 million.
The $150 million credit facility was subsequently extended to October
2000.
. February 1998 - Completed the conversion of the Glomar Celtic Sea
semisubmersible and placed it into service in the U.S. Gulf of Mexico
under a three-year, $164 million contract.
. March 1998 - Purchased the deepwater semisubmersible, Stena Forth, for
$150 million with borrowings under revolving bank credit facilities.
The Stena Forth was subsequently renamed the Glomar Arctic IV.
. March 1998 - Entered into an agreement to purchase from Transocean ASA
the remaining 43.4 percent interest in the partnership operating the
Glomar Adriatic V, Glomar Adriatic VI, and Glomar Adriatic VII for
$20.3 million in cash.
. May 1998 - Issued $300 million of 7% Notes due 2028 and used the
proceeds to pay down amounts outstanding under the Company's bank
credit facilities.
. August 1998 - Completed the conversion of the Glomar Explorer
drillship and placed it into service in the U.S. Gulf of Mexico under
a five-year, $268 million contract.
. August 1999 - Initiated a commercial paper program under which the
Company may issue up to $350 million of debt at rates generally more
favorable than the rates available under the Company's revolving bank
credit facilities.
Cash Flows
In 1999 cash flow provided by operating activities amounted to $271.9 million.
An additional $194.9 million was provided from borrowings under the Company's
bank credit facilities and commercial paper program (net of payments), $6.4
million was provided from sales of properties and equipment, and $3.4
million was provided from exercises of employee stock options. From the
$476.6 million sum of cash inflows, $448.1 million was used for capital
expenditures, and $2.1 million was used for other purposes.
In 1998 cash flow provided by operating activities amounted to $258.0 million.
An additional $292.9 million was provided from issuance of the 7% Notes (after
deduction for discount, underwriting fees, and
<PAGE>
issue costs), $55.0 million was provided from borrowings under the Company's
revolving bank credit facilities (net of payments), $4.4 million was provided
from exercises of employee stock options, $3.7 million was provided from sales
of properties and equipment, and $1.7 million was provided from maturities of
marketable securities (net of purchases). From the $615.7 million sum of cash
inflows, plus available cash, $637.7 million was used for capital expenditures.
In 1997 cash flow provided by operating activities amounted to $359.3 million.
An additional $297.1 million was provided from issuance of the 7-1/8% Notes
(after deduction for discount, underwriting fees, and issue costs), $100.0
million was provided from borrowings under the revolving credit facilities
(net of payments), $25.8 million was provided from maturities of marketable
securities (net of purchases), $10.0 million was provided from exercises of
employee stock options, and $3.6 million was provided from sales of properties
and equipment. From the $795.8 million sum of cash inflows, plus available
cash, $580.3 million was used for capital expenditures and $229.5 million was
used to redeem the 12-3/4% Notes.
Future Cash Requirements
As of December 31, 1999, the Company had long-term debt of $963.2 million,
including current maturities of $7.9 million, and shareholders' equity of
$1,135.0 million. Long-term debt at December 31 consisted of $299.5 million
(net of discount) of 7-1/8% Notes due 2007, $296.3 million (net of discount)
of 7% Notes due 2028, $235.9 million of commercial paper, $114.0 million of
borrowings under bank credit facilities, and a $17.5 million capital lease
obligation.
The annual interest on the 7-1/8% Notes is $21.4 million, payable semiannually
each March and September. The annual interest on the 7% Notes is $21.0
million, payable semiannually each June and December. No principal payments
are due under either issue until the maturity date.
The Company may redeem the 7-1/8% Notes and the 7% Notes in whole at any
time, or in part from time to time, at a price equal to 100 percent of the
principal amount thereof plus accrued interest, if any, to the date of
redemption, plus a premium, if any, relating to the then prevailing Treasury
Yield and the remaining life of the notes. The indentures relating to the
7-1/8% Notes and the 7% Notes contain limitations on the Company's ability to
incur indebtedness for borrowed money secured by certain liens and to engage
in certain sale/leaseback transactions. The revolving credit facilities
contain similar limitations, require the Company to maintain minimum levels
of net worth and interest coverage, and limit the Company's maximum debt as
a percentage of capitalization.
Capital expenditures for 2000 are estimated to be $149 million, including
$77 million in connection with construction of the two new drillships, $45
million for improvements to the remainder of the drilling fleet, $23 million
for capitalized interest, and $4 million for other capital expenditures.
Sources of Liquidity
As of December 31, 1999, the Company had $83.3 million of cash and cash
equivalents and $40.1 million available for borrowings under committed
revolving bank credit facilities and the commercial paper program. As of
December 31, 1998, the Company had $56.9 million in cash, cash equivalents,
and marketable securities.
<PAGE>
In 1998 the Company filed with the U.S. Securities and Exchange Commission
a registration statement on Form S-3 under which, together with a previous
registration statement on Form S-3, the Company may offer to sell from time
to time (i) unsecured debt securities consisting of notes, debentures, or
other evidences of indebtedness, (ii) shares of preferred stock, $.01 par
value per share, and/or (iii) shares of common stock, $.10 par value per
share, for an aggregate initial public offering price not to exceed $500
million. The amount of securities available for issuance was reduced from
$500 million to $200 million as a result of the issuance of the $300 million
of 7% Notes in 1998. There is no assurance that the Company could raise
capital on acceptable terms using its shelf registration.
The Company believes it will be able to meet all of its current obligations,
including capital expenditures and debt service, from its existing bank credit
facilities, its cash flow from operations, and its cash and cash equivalents.
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.
As of February 29, 2000 the Company has not experienced any Year 2000
disruptions or failures in its Business Systems, and is not aware of any
disruptions or failures with its significant customers, suppliers, and
business partners. Total costs incurred by the Company in connection with
the Year 2000 issue were approximately $0.8 million.
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 expectations for future Company performance and earnings; our
projections regarding the costs of rigs that are under construction, the
financing of those costs, the dates the rigs will be delivered and enter
service and the impact thereof, the rigs' capabilities once they enter
service, and the revenues expected to be generated by the rigs; our
expectations regarding the impact of the Funding Agreement and amounts to
be received thereunder; our expectations regarding the dates by which rigs
will complete their commitments and by which revenue backlog will be realized;
our expectations regarding the sufficiency of and reimbursements under the
Company's insurance coverages; our expectations regarding disputed amounts
of rig repair costs and dayrate revenue that can be claimed and collected by
the Company; our views regarding the timing of a market recovery in various
drilling markets and the amounts and timing of capital spending increases by
our customers; our expectations regarding future income tax rates, liabilities
and benefits and future capital expenditures; our views on the merits of
claims against the Company; our belief in the Company's ability to meet its
current obligations; 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.
<PAGE>
Factors that could cause or contribute to such differences include, but are
not limited to, changes in capital markets that affect our ability to obtain
financing to fund our growth; changes in the markets for oil and gas and for
offshore drilling services, including decreases in demand for the Company's
services which may result from curtailments of oil and gas operators' drilling
programs due to changes in oil or gas prices; the uncertainties inherent in
dealing with other parties and resolving disputed matters through negotiation,
arbitration, litigation, or by other means; changing tax laws and regulations,
as well as changing interpretations of such laws and regulations; the risks of
operating in international markets, including changes in political, economic,
trade, and regulatory climates; unanticipated costs or delays in the Company's
construction projects due to things such as price inflation, contract disputes,
design and engineering problems, regulatory requirements, and labor
difficulties; competitive and technological changes that affect our ability to
market our services competitively and cost effectively; the operational risks
and uncertainties inherent in offshore oil and gas drilling, particularly on
a turnkey basis; 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's debt consists of both fixed-interest and variable-interest rate
debt; consequently, the Company's earnings and cash flows, as well as the fair
values of its fixed-rate debt instruments, are subject to interest-rate risk.
The Company has performed sensitivity analyses to assess the impact of this
risk based on a hypothetical ten-percent increase in market interest rates.
Market rate volatility is dependent on many factors that are impossible to
forecast, and actual interest rate increases could be more severe than the
hypothetical ten-percent increase.
The Company estimates that if prevailing market interest rates had been ten
percent higher throughout 1999 and 1998, and all other factors affecting the
Company's debt remained the same, pretax earnings would have been lower by
$1.1 million in 1999 and $1.0 million in 1998. With respect to the fair
value of the Company's fixed-interest rate debt, if prevailing market interest
rates had been ten percent higher at year-end 1999 and 1998, and all other
factors affecting the Company's debt remained the same, the fair value of the
Company's fixed-rate debt, as determined on a present-value basis, would have
been lower by $33.3 million (6.1 percent) at December 31, 1999 and $35.9
million (6.2 percent) at December 31, 1998. The Company does not, for the most
part, actively manage its interest rate risk.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Global Marine Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of Global
Marine Inc. and subsidiaries (the "Company") at December 31, 1999 and 1998,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
February 29, 2000
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data)
<CAPTION>
Year Ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Contract drilling $ 507.7 $ 742.4 $ 579.4
Drilling management 275.0 416.0 480.5
Oil and gas 8.3 3.8 7.2
-------- -------- --------
Total revenues 791.0 1,162.2 1,067.1
Expenses:
Contract drilling 271.1 280.4 252.9
Drilling management 261.5 446.4 430.2
Oil and gas 2.7 1.9 3.3
Depreciation, depletion, and amortization 88.8 103.9 55.1
General and administrative 23.6 19.1 20.5
-------- -------- --------
647.7 851.7 762.0
-------- -------- --------
Operating income 143.3 310.5 305.1
Other income (expense):
Interest expense (56.6) (46.9) (39.7)
Interest capitalized 25.9 17.2 20.9
Interest income 2.7 3.3 7.7
-------- -------- --------
Total other income (expense) (28.0) (26.4) (11.1)
-------- -------- --------
Income before income taxes and
extraordinary item 115.3 284.1 294.0
Provision (benefit) for income taxes:
Current income tax provision 3.4 18.5 33.5
Deferred income tax provision (benefit) 22.4 42.3 (54.6)
-------- -------- --------
Total provision (benefit) for income taxes 25.8 60.8 (21.1)
-------- -------- --------
Income before extraordinary item 89.5 223.3 315.1
Extraordinary loss on extinguishment of
debt, net of income tax benefit of $2.4 - - (4.5)
-------- -------- --------
Net income $ 89.5 $ 223.3 $ 310.6
======== ======== ========
Basic earnings per common share:
Before extraordinary item $ 0.51 $ 1.29 $ 1.84
Extraordinary loss on extinguishment
of debt, net - - (0.03)
-------- -------- --------
Basic earnings per common share $ 0.51 $ 1.29 $ 1.81
======== ======== ========
Diluted earnings per common share:
Before extraordinary item $ 0.51 $ 1.27 $ 1.79
Extraordinary loss on extinguishment
of debt, net - - (0.03)
-------- -------- --------
Diluted earnings per common share $ 0.51 $ 1.27 $ 1.76
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions)
ASSETS
<CAPTION>
December 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 83.3 $ 56.9
Accounts receivable, less allowance for doubtful
accounts of $4.1 in 1999 and $4.2 in 1998 101.1 163.0
Costs incurred on turnkey drilling contracts
in progress 12.9 6.6
Future income tax benefits - 20.0
Prepaid expenses 11.2 15.6
Other current assets 4.5 7.3
-------- --------
Total current assets 213.0 269.4
Properties and equipment:
Rigs and drilling equipment, less accumulated
depreciation of $450.2 in 1999 and $371.9 in 1998 1,225.8 1,262.6
Construction in progress 632.2 236.8
Oil and gas properties, full-cost method, less
accumulated depreciation, depletion, and
amortization of $16.3 in 1999 and $24.3 in 1998 10.6 12.7
-------- --------
Net properties and equipment 1,868.6 1,512.1
Future income tax benefits 90.7 89.8
Other assets 92.2 100.3
-------- --------
Total assets $2,264.5 $1,971.6
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
December 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 7.9 $ -
Accounts payable 94.0 99.0
Accrued compensation and related employee costs 21.6 22.5
Accrued income taxes 6.1 12.2
Accrued interest 10.7 9.3
Other accrued liabilities 9.3 9.4
-------- --------
Total current liabilities 149.6 152.4
Long-term debt 937.8 750.7
Capital lease obligation 17.5 17.7
Other long-term liabilities 24.6 10.4
Commitments and contingencies (Note 4) - -
Shareholders' equity:
Preferred stock, $0.01 par value, 10 million shares
authorized, no shares issued or outstanding - -
Common stock, $0.10 par value, 300 million shares
authorized,174,421,339 shares and 173,368,384
shares issued and outstanding at December 31, 1999
and 1998, respectively 17.4 17.3
Additional paid-in capital 328.6 321.5
Retained earnings 791.1 701.6
Accumulated other comprehensive loss (2.1) -
-------- --------
Total shareholders' equity 1,135.0 1,040.4
-------- --------
Total liabilities and shareholders' equity $2,264.5 $1,971.6
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Year Ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 89.5 $ 223.3 $ 310.6
Adjustments to reconcile net income to net
cash flow provided by operating activities:
Depreciation, depletion, and amortization 88.8 103.9 55.1
Deferred income taxes 22.4 42.3 (54.6)
Extraordinary loss on debt extinguishment, net - - 4.5
Decrease (increase) in accounts receivable 61.1 (13.3) (49.6)
Decrease (increase) in noncurrent receivables 8.0 (67.7) -
Decrease (increase) in other current assets 7.5 (9.7) (2.3)
Increase in accrued interest 1.4 2.7 5.4
(Decrease) increase in accounts payable (5.0) (16.5) 62.0
(Increase) decrease in costs incurred on
turnkey drilling contracts in progress (6.3) 5.1 (0.9)
(Decrease) increase in other accrued liabilities (6.6) (14.2) 31.2
Other, net 11.1 2.1 (2.1)
------- ------- -------
Net cash flow provided by operating activities 271.9 258.0 359.3
Cash flows from investing activities:
Capital expenditures (448.1) (637.7) (580.3)
Proceeds from sales of properties and equipment 6.4 3.7 3.6
Proceeds from maturities of held-to-maturity securities - 2.8 46.6
Purchases of held-to-maturity securities (0.3) (1.1) (20.8)
------- ------- -------
Net cash flow used in investing activities (442.0) (632.3) (550.9)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 604.0 621.0 599.3
Reductions of long-term debt (409.1) (270.0) (429.5)
Proceeds from exercises of employee stock options 3.4 4.4 10.0
Other (1.8) (3.1) (2.2)
------- ------- -------
Net cash flow provided by financing activities 196.5 352.3 177.6
------- ------- -------
Increase (decrease) in cash and cash equivalents 26.4 (22.0) (14.0)
Cash and cash equivalents at beginning of year 56.9 78.9 92.9
------- ------- -------
Cash and cash equivalents at end of year $ 83.3 $ 56.9 $ 78.9
======= ======= =======
Supplemental cash flow information:
Interest paid, net of amounts capitalized $ 26.2 $ 23.9 $ 8.8
Income taxes paid, net of refunds $ 9.4 $ 25.9 $ 18.1
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
($ in millions)
<CAPTION>
Accumulated
Common Stock Additional Other
--------------------------- Paid-in Retained Comprehensive
Shares Par Value Capital Earnings Income (Loss) Total
----------- ----------- ---------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 169,440,569 $ 16.9 $274.5 $167.7 $ 459.1
Net income - - - 310.6 310.6
Exercise of employee stock options 2,636,527 0.3 10.3 - 10.6
Stock issued under other employee
benefit plans 149,588 - 3.1 - 3.1
Stock canceled (23,899) - (0.5) - (0.5)
Income tax benefit from stock option
exercises - - 22.7 - 22.7
----------- ------ ------ ------ --------
Balance at December 31, 1997 172,202,785 17.2 310.1 478.3 805.6
Net income - - - 223.3 223.3
Exercise of employee stock options 991,018 0.1 4.4 - 4.5
Stock issued under other employee
benefit plans 178,162 - 4.4 - 4.4
Stock canceled (3,581) - (0.1) - (0.1)
Income tax benefit from
stock option exercises - - 2.7 - 2.7
----------- ------ ------ ------ --------
Balance at December 31, 1998 173,368,384 17.3 321.5 701.6 1,040.4
Net income - - - 89.5 89.5
Minimum pension liability - - - - $(2.3) (2.3)
Unrealized gains on securities - - - - 0.2 0.2
--------
Comprehensive income - - - - - 87.4
Exercise of employee stock options 996,952 0.1 3.4 - - 3.5
Stock issued under other employee
benefit plans 82,187 - 0.7 - - 0.7
Stock canceled (26,184) - (0.3) - - (0.3)
Income tax benefit from stock option
exercises - - 3.3 - - 3.3
----------- ------ ------ ------ ----- --------
Balance at December 31, 1999 174,421,339 $ 17.4 $328.6 $791.1 $(2.1) $1,135.0
=========== ====== ====== ====== ===== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Global
Marine Inc. and its majority-owned subsidiaries. Unless the context
otherwise requires, the term "Company" refers to Global Marine Inc. and
its consolidated subsidiaries. Intercompany accounts and transactions
have been eliminated.
Cash Equivalents
Cash equivalents consist of all highly liquid debt instruments with
remaining maturities of three months or less at the time of purchase.
Properties and Depreciation
Rigs and Drilling Equipment. Capitalized costs of rigs and drilling
equipment include all costs incurred in the acquisition of capital assets
including allocations of interest costs incurred during periods that rigs
are under construction or refurbishment. Expenditures for maintenance and
repairs are charged to expense as incurred. Costs of property sold or
retired and the related accumulated depreciation are removed from the
accounts; resulting gains or losses are included in income.
Prior to January 1, 1999, jackup drilling rigs were depreciated over lives
of 25 years, with salvage values of $0.5 million per rig. Semisubmersible
drilling rigs and drillships, other than the Glomar Explorer, were depreciated
over lives ranging from 10 to 20 years, with salvage values of $1.0 million
per rig. Effective January 1, 1999, the Company increased the estimated
useful lives of its jackups and semisubmersibles to 30 years. The effect of
the change was to decrease 1999 depreciation expense by approximately $27.2
million.
The Glomar Explorer is being depreciated over the remainder of its 30-year
lease (from the date it entered service following its conversion to a
drillship), or approximately 28 years, with no salvage value.
Rigs and drilling equipment included $246.8 million of assets recorded under
capital lease at December 31, 1999 (inclusive of $230.8 million of leasehold
improvements and capitalized interest), and $241.1 million at December 31,
1998 (inclusive of $225.1 million of leasehold improvements and capitalized
interest). Construction in progress at December 31, 1999 and 1998 included
$628.5 million and $234.3 million, respectively, of assets subject to capital
leases. Accumulated amortization of asset under capital lease totaled $12.1
million at December 31, 1999 and $3.3 million at December 31, 1998.
Oil and Gas Properties. The Company uses the full-cost method of accounting
for oil and gas exploration and development costs. Under this method of
accounting, the Company capitalizes all costs incurred in the acquisition,
exploration, and development of oil and gas properties and amortizes such
costs, together with estimated future development and dismantlement costs,
using the units-of-production method.
<PAGE>
Revenue Recognition
Contract drilling services are performed generally on a dayrate basis under
individual contracts to employ the Company's rigs. Such contracts extend
over a specified period of time or the time required to drill a specified
well or number of wells. Revenues from contract drilling services and the
related expenses are recognized on a per-day basis as the work progresses.
Revenues from turnkey drilling contracts, which are classified under drilling
management revenues, are derived from the design and execution of specific
offshore drilling programs, each at a fixed price to the oil and gas operator.
Revenues from each turnkey drilling contract and the related expenses are
recognized upon completion of the contract.
Foreign Currency Translation
The United States dollar is the functional currency for all of the Company's
operations. Realized and unrealized foreign currency transaction gains and
losses are recorded in income.
The Company may be exposed to the risk of foreign currency exchange losses in
connection with its foreign operations. Such losses are the result of holding
net monetary assets (cash and receivables in excess of payables) denominated in
foreign currencies during periods of a strengthening U.S. dollar. The Company
attempts to lessen the impact of exchange rate changes by requiring customer
payments to be primarily in U.S. dollars, by keeping foreign cash balances at
minimal levels, and by not speculating in foreign currencies. The Company
incurred a net foreign currency transaction gain of $0.1 million in 1999 and a
net foreign currency transaction loss of $0.6 million in each of 1998 and 1997.
Income Taxes
The Company intends to permanently reinvest in its business outside the United
States the unremitted earnings of foreign subsidiaries not otherwise subject
to U.S. taxation. As a result, the Company has not provided for deferred
federal income taxes on such unremitted foreign earnings.
Stock-Based Compensation Plans
The Company accounts for its stock option and stock-based compensation plans
using the intrinsic-value method prescribed by Accounting Principles Board
("APB") Opinion No. 25. Accordingly, the Company computes compensation cost
for each employee stock option granted as the amount by which the quoted
market price of the Company's common stock on the date of grant exceeds the
amount the employee must pay to acquire the stock. The amount of compensation
cost, if any, is charged to income over the vesting period. With respect to
performance-based stock awards, under which the number of shares issued is
dependent on the attainment of certain long-term performance goals,
compensation expense is charged to income over the performance (vesting)
period but is adjusted for changes in the market price of the stock during
the period. (See Note 6.)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and
<PAGE>
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Note 2 - Investments
At December 31, 1999 and 1998, the Company had investments in debt securities
that were classified as held-to-maturity and carried at amortized cost. Fair
value of such investments at December 31 by major type and by balance sheet
classification are presented in the following table:
<TABLE>
<CAPTION>
1999 1998
------ ------
(In millions)
<S> <C> <C>
Money market funds $57.5 $38.0
Commercial paper 11.7 2.0
Repurchase agreements 4.4 0.2
Eurodollar time deposits 0.3 -
----- -----
$73.9 $40.2
===== =====
Cash and cash equivalents $73.6 $40.2
Other current assets 0.3 -
----- -----
$73.9 $40.2
===== =====
</TABLE>
The fair value of investments in debt securities approximated their carrying
value; therefore, there were no unrealized holding gains or losses as of
December 31, 1999 or 1998. All investments in debt securities at December 31,
1999 and 1998 had remaining maturities of three months or less.
In addition, the Company had other investments in debt and equity securities
classified as available-for-sale held in connection with certain nonqualified
pension plans. These investments, which were included in other assets at
December 31, are disclosed in the table which follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Unrealized Fair Unrealized Fair
Cost Gain (Loss) Value Cost Gain (Loss) Value
---- ---------- ----- ---- ---------- -----
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Fixed income mutual funds $ 4.3 $(0.1) $ 4.2 $ 1.0 $ - $ 1.0
Equity mutual funds 3.5 0.3 3.8 - - -
Money market mutual funds - - - 4.8 - 4.8
Stock and bond mutual fund - - - 0.9 - 0.9
----- ----- ----- ----- ----- -----
$ 7.8 $ 0.2 $ 8.0 $ 6.7 $ - $ 6.7
===== ===== ===== ===== ===== =====
</TABLE>
<PAGE>
Note 3 - Long-term Debt
Long-term debt as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
------ ------
(In millions)
<S> <C> <C>
7-1/8% Notes due 2007, net of unamortized discount of
$0.5 million at December 31, 1999 and 1998 $299.5 $299.5
7% Notes due 2028, net of unamortized discount of $3.7
million at December 31, 1999 and $3.8 million at
December 31, 1998 296.3 296.2
Commercial paper 235.9 -
Borrowings under bank credit facilities 114.0 155.0
------ ------
Total long-term debt, including current maturities 945.7 750.7
Less current maturities 7.9 -
------ ------
Long-term debt $937.8 $750.7
====== ======
</TABLE>
In August 1999 the Company initiated a commercial paper program under which
unsecured debt may be issued at rates generally more favorable than the rates
available under the Company's revolving bank credit facilities. As of
December 31, 1999, the weighted average annual interest rate applicable to
borrowings under the commercial paper program was 6.668 percent. Borrowings
under the commercial paper program have been classified as noncurrent because
the Company has the ability and the intent to refinance the obligations beyond
2000.
The Company has two committed, unsecured revolving bank credit facilities
consisting of a $240 million facility expiring December 2002 and a $150
million facility expiring October 2000. Any amounts outstanding under the
$150 million facility upon expiration can be converted into a two-year term
loan. The weighted average annual interest rate on borrowings under all bank
credit facilities was 6.983 percent at December 31, 1999, as compared to
5.876 percent at December 31, 1998. Aggregate borrowings under the two
committed revolving bank credit facilities and the commercial paper program
are limited to $390 million.
No principal payments are required with respect to either the 7-1/8% Notes or
the 7% Notes prior to their final maturity date. The Company may redeem the
7-1/8% Notes and the 7% Notes in whole at any time, or in part from time to
time, at a price equal to 100 percent of the principal amount thereof plus
accrued interest, if any, to the date of redemption, plus a premium, if any,
relating to the then prevailing Treasury Yield and the remaining life of the
notes.
The indentures relating to the 7-1/8% Notes and the 7% Notes contain
limitations on the Company's ability to incur indebtedness for borrowed
money secured by certain liens and to engage in certain sale/leaseback
transactions, among other things. The revolving credit facilities contain
similar limitations, require the Company to maintain minimum levels of net
worth and interest coverage, and limit the Company's maximum debt as a
percentage of capitalization.
All of the Company's debt is unsecured and unsubordinated and ranked equally
in right of payment with all other unsubordinated and unsecured indebtedness
of the Company.
<PAGE>
Note 4 - Commitments and Contingencies
At December 31, 1999, the Company had under operating leases office space and
equipment with remaining terms ranging from approximately one to eight years.
Some of the leases may be renewed at the Company's option, and some are
subject to rent revisions based on the Consumer Price Index or increases in
building operating costs. In addition, at December 31, 1999, the Company had
under capital lease the Glomar Explorer drillship through 2026. Rent expense
was $69.3 million for 1999, $213.6 million for 1998, and $149.2 million for
1997. Included in rent expense was the rental of offshore drilling rigs used
in the Company's turnkey operations totaling $63.0 million for 1999, $207.1
million for 1998, and $144.6 million for 1997.
Future minimum rental payments with respect to the Company's lease obligations
as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Capital Operating
Lease Leases
------- ---------
(In millions)
<S> <C> <C>
Year ended December 31:
2000 $ 1.8 $ 4.0
2001 1.8 3.8
2002 1.8 2.9
2003 1.8 2.7
2004 1.8 2.6
Later years 38.7 2.4
----- -----
Total future minimum rental payments 47.7 $18.4
=====
Less amount representing imputed interest 28.4
-----
Present value of future minimum rental payments
under capital lease 19.3
Less current portion included in accrued liabilities 1.8
-----
Long-term capital lease obligation $17.5
=====
</TABLE>
In 1998 the Company entered into agreements with Harland and Wolff
Shipbuilding and Heavy Industries, Ltd. (the "Shipbuilder") for the
construction of two dynamically-positioned ultra-deepwater drillships,
the Glomar C.R. Luigs and the Glomar Jack Ryan. In December 1998 the
Company novated the contracts for the construction of the Glomar C.R.
Luigs and the Glomar Jack Ryan to leasing subsidiaries of Lloyds Bank
Plc and Barclays Bank Plc, respectively (the "Lessors"), placing ownership
of the drillships with the Lessors, and entered into 20-year capital
leases with respect to the rigs. By the time construction of the ships is
completed, the Company will have deposited with three large foreign banks
(the "Payment Banks") amounts equal to the progress payments that the
Lessors are required to make under the construction contracts, less
approximately $69 million. In exchange for the deposits, the Payment Banks
will assume liability for making rental payments required under the leases,
and the Company will be legally released from making such rental payments.
Accordingly, the Company has recorded no capital lease obligation on its
balance sheet. As of December 31, 1999, the Company expects to deposit
with the Payment Banks an additional $77 million in connection with the
construction contracts. Under the terms of the leases, the Company retains
full control over both the operations and ultimate disposition of the
vessels in all but remote circumstances. The ultimate amount of the
benefit to be received by the Company is dependent
<PAGE>
on interest and tax rates in the United Kingdom over the 20-year terms of the
leases and may be more or less than the $69 million initial benefit. Changes
in interest or tax rates from levels assumed in the leases will result in
the Company paying or receiving additional amounts over the 20-year term.
In October 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. In its claim, the
Shipbuilder also requested additional compensation for increases in the
drillships' steel weight. The amount of the Shipbuilder's claim in excess
of the contract price totals GBP133 million ($216 million). With the
exception of a small portion of the steel-weight claim, the Company believes
that the claim is totally without merit. In accordance with the contracts,
the claim will be resolved through arbitration in London.
Because the Company was concerned about the Shipbuilder's financial viability
and the satisfactory completion of the drillships, in November 1999 the
Company agreed to provide additional funding to the Shipbuilder to ensure
completion of the two drillships in exchange for certain assurances by the
Shipbuilder and its parent, Fred. Olsen Energy ASA (the "Funding Agreement").
Under the terms of the Funding Agreement, the Company released two cash
collateralized letters of credit, giving the Shipbuilder access to $40
million of its own funds. In addition, the Company agreed to advance to
the Shipbuilder, without prejudice to any issues of liability under the
shipbuilding contracts, GBP57 million ($93 million) above the drillships'
$315 million contract price. The Company also agreed to advance amounts
equal to half of subsequent cost overruns until the Company's total
advances under the Funding Agreement reach GBP65 million ($106 million).
As of February 29, 2000, the Company had advanced GBP57 million ($93
million) under the Funding Agreement. If the maximum advances of GBP65
million are made by the Company, the Shipbuilder's parent, Fred. Olsen
Energy ASA, has agreed to provide all additional funds necessary to keep
the Shipbuilder solvent and working in an expeditious and diligent manner
and to enable it to deliver the two completed drillships. In addition, the
parent will guarantee up to GBP3 million ($4.9 million) of the Shipbuilder's
warranty with respect to the two drillships.
The Funding Agreement did not settle any portion of the Shipbuilder's
claim of GBP133 million ($216 million). The agreement provides that the
Shipbuilder will repay to the Company amounts advanced under the Funding
Agreement to the extent the amount of the advanced funds exceeds any
arbitration award in favor of the Shipbuilder; the Funding Agreement also
provides the Company shall pay the Shipbuilder to the extent an arbitration
award in favor of the Shipbuilder exceeds the funds so advanced. In view
of the current financial condition of the Shipbuilder, collection from the
Shipbuilder of any amounts to which the Company may be entitled under the
Funding Agreement is doubtful.
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 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,
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
<PAGE>
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. An arbitration hearing in respect of certain preliminary
legal issues has been scheduled for May 2000. Full evidentiary hearings have
been scheduled to begin in September 2000, and the Company expects that
additional hearings will be required in 2001. Schlumberger Limited has issued
a guaranty in favor of the Company in the amount of $140 million as security
for any award ultimately handed down by the arbitration tribunal.
The Company has recorded a noncurrent receivable from Sedco in the amount
of $56.7 million at December 31, 1999, consisting of $33.5 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 in
connection with the arbitration ruling; however, the Company expects the
total claim against Sedco to exceed these amounts. The total amount of the
receivable from Sedco recorded at December 31, 1998 was $52.4 million.
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.
Note 5 - Financial Instruments
Concentrations of Credit Risk
The market for the Company's services and products is the offshore oil
and gas industry, and the Company's customers consist primarily of major
integrated international oil companies and independent oil and gas
producers. The Company performs ongoing credit evaluations of its
customers and generally does not require material collateral. The Company
maintains reserves for potential credit losses, and such losses have been
within management's expectations.
The Company had cash deposits concentrated primarily in five major banks at
December 31, 1999 and 1998. In addition, the Company had money-market funds,
commercial paper, repurchase agreements, and Eurodollar time deposits with a
variety of financial institutions with strong credit ratings. As a result
of the foregoing, the Company believes that credit risk in such instruments
is minimal.
Fair Values of Financial Instruments
The estimated fair value of the Company's $945.7 million carrying value
of long-term debt approximated $896.3 million at December 31, 1999. At
December 31, 1998, the estimated fair value of the Company's $750.7 million
carrying value of long-term debt was $738.0 million. Fair values were based
on quoted market prices. The fair values of the Company's cash equivalents,
marketable securities, trade receivables, and trade payables approximated
their carrying values due to the short-term nature of these instruments
(see Note 2).
<PAGE>
Note 6 - Stock-Based Compensation Plans
The Company has stock-based compensation plans under which it may grant
options to purchase a fixed number of shares of the Company's common stock.
Under one such plan for outside directors, one half of each stock option
grant becomes exercisable one year after the grant date with the remainder
exercisable after two years. Under all other plans, stock options become
exercisable in increments of 25 percent each year beginning one year after
the grant date. Stock options expire ten years after the grant date and
become exercisable in full if more than 50 percent of the Company's
outstanding common stock is acquired by a person or a single group of
persons. At December 31, 1999, there were 3,091,795 shares available for
future grants.
Under certain plans, the Company may also grant shares of common stock at
nominal or no cost. Under such plans, the Company has granted to certain
employees, at nominal or no cost, a variable number of shares of common
stock, the exact number being dependent on the Company's attainment of
certain long-term performance goals ("performance-based stock awards").
Estimates of fair values of stock options and performance-based stock awards
on the grant dates in the disclosures which follow were computed using the
Black-Scholes option-pricing model based on the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Expected price volatility range 54% to 67% 49% to 53% 48%
Risk-free interest rate range 5.0% to 5.9% 4.4% to 5.7% 5.8% to 6.6%
Expected dividends none none none
Expected life of stock options 5 years 5 years 5 years
Expected life of performance-based
stock awards 3 years 3 years 3 years
</TABLE>
<PAGE>
Stock Options
A summary of the status of stock options granted is presented below:
<TABLE>
<CAPTION>
Number
Of Shares Weighted Average
Under Option Exercise Price
------------ --------------
<S> <C> <C>
Shares under option at December 31, 1996 8,092,834 $4.88
Granted 1,011,400 $22.91
Exercised (2,636,527) $4.02
Canceled (37,900) $15.51
---------
Shares under option at December 31, 1997 6,429,807 $8.01
Granted 2,083,400 $23.27
Exercised (991,018) $4.56
Canceled (139,100) $19.96
---------
Shares under option at December 31, 1998 7,383,089 $12.55
Granted 3,242,250 $9.65
Exercised (996,952) $3.60
Canceled (164,926) $18.15
---------
Shares under option at December 31, 1999 9,463,461 $12.40
=========
Options exercisable at December 31,
1997 4,457,868 $3.92
1998 3,972,889 $5.28
1999 3,977,054 $9.05
</TABLE>
All stock options granted in 1997 through 1999 had exercise prices equal
to the market price of the Company's common stock on the date of grant.
The weighted average per-share fair value of options as of the grant date
was $5.52 in 1999, $11.54 in 1998, and $11.37 in 1997.
<PAGE>
The following table summarizes information with respect to stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- -----------------------------
Weighted
Range of Number Average Weighted Number Weighted
Exercise Outstanding Remaining Average Exercisable Average
Prices at 12/31/99 Contractual Life Exercise Price at 12/31/99 Exercise Price
-------- ----------- ---------------- -------------- ----------- --------------
<C> <C> <C> <S> <C> <C> <C>
$1.6875 to $3.8125 1,232,472 3.8 years $3.03 1,232,472 $3.03
$4.125 to $7.6875 3,857,980 7.0 years $6.60 1,372,948 $4.62
$9.3125 to $13.00 909,520 7.0 years $10.41 443,345 $9.86
$14.5625 to $20.75 1,557,864 8.1 years $19.06 465,989 $20.04
$24.9375 to $34.1875 1,905,625 8.2 years $25.73 462,300 $26.40
--------- ---------
9,463,461 7.0 years $12.40 3,977,054 $9.05
========= =========
</TABLE>
Performance-Based Stock Awards
Under certain plans, the Company has offered shares of Company stock to
certain key employees at nominal or no cost to the employee. The exact
number of shares that each employee will receive is dependent on Company
performance over three-year periods as measured against performance goals
with respect to net income and cash flow, among other measures. The
performance period applicable to each offer ends on December 31 of the
second full year following the year of the grant. A summary of the status
of performance-based stock awards is presented in the table which follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Number of contingent shares at beginning of year 446,356 428,668 593,750
Granted 225,000 315,000 68,600
Issued (82,187) (178,162) (141,098)
Forfeited/canceled (92,285) (119,150) (92,584)
------- ------- -------
Number of contingent shares at end of year 496,884 446,356 428,668
======= ======= =======
Shares vested at December 31 - 97,479 252,777
Fair value at grant date $10.54 $24.94 $20.67
</TABLE>
<PAGE>
Pro Forma Disclosures
As discussed in Note 1 under "Stock-Based Compensation Plans," the Company
accounts for its stock-based compensation plans under APB Opinion No. 25.
Accordingly, no compensation cost has been recognized for those stock options
with exercise prices equal to the market price of the stock on the date of
grant. The amount of compensation cost included in income for the Company's
performance-based stock awards was a charge of $1.0 million in 1999, a credit
of $1.2 million in 1998, and a charge of $6.3 million in 1997. Had
compensation cost for the Company's stock-based compensation plans been
determined based on fair values as of the dates of grant, the Company's net
income and earnings per share would have been reported as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(In millions,except per share amounts)
<S> <S> <C> <C> <C>
Net income: As reported $ 89.5 $223.3 $310.6
Pro forma $ 79.6 $215.0 $311.5
Basic earnings per share: As reported $ 0.51 $ 1.29 $ 1.81
Pro forma $ 0.46 $ 1.24 $ 1.82
Diluted earnings per share: As reported $ 0.51 $ 1.27 $ 1.76
Pro forma $ 0.45 $ 1.22 $ 1.77
</TABLE>
The pro forma figures in the preceding table may not be representative of pro
forma amounts in future years.
Note 7 - Retirement Plans
Pensions
The Company has defined benefit pension plans covering substantially all
of its employees. For the most part, benefits are based on the employee's
length of service and average earnings for the five highest consecutive
calendar years of compensation during the last fifteen years of service.
Substantially all benefits are paid from funds previously provided to
trustees. The Company is the sole contributor to the plans, and its funding
objective is to fund participants' benefits under the plans as they accrue,
taking into consideration future salary increases. The components of net
periodic pension benefit cost were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(In millions)
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 4.7 $ 4.4 $ 2.7
Interest cost on projected benefit obligation 6.9 6.5 5.6
Expected return on plan assets (7.4) (6.7) (5.5)
Recognized actuarial loss 1.8 1.5 0.8
----- ----- -----
Net periodic pension benefit cost $ 6.0 $ 5.7 $ 3.6
===== ===== =====
</TABLE>
<PAGE>
The following table sets forth the funded status of the plans and the amounts
recognized in the Company's consolidated balance sheet as of December 31:
<TABLE>
<CAPTION>
1999 1998
------ ------
(In millions)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $107.0 $ 87.4
Service cost 4.7 4.4
Interest cost 6.9 6.5
Actuarial (gain) loss (13.1) 11.3
Benefits paid (3.2) (2.6)
------ ------
Benefit obligation at end of year 102.3 107.0
------ ------
Change in plan assets:
Fair value of plan assets at beginning of year 81.0 72.2
Actual return on plan assets 14.4 5.1
Employer contributions 4.9 6.3
Benefits paid (3.2) (2.6)
------ ------
Fair value of plan assets at end of year 97.1 81.0
------ ------
Reconciliation of funded status:
Funded status (5.2) (26.0)
Unrecognized net loss 2.7 24.7
------ ------
Net amount recognized $ (2.5) $ (1.3)
====== ======
Amounts recognized in the balance sheet consist of:
Prepaid benefit cost $ 5.9 $ 4.2
Accrued benefit liability (10.7) (5.5)
Accumulated other comprehensive loss 2.3 -
------ ------
Net amount recognized $ (2.5) $ (1.3)
====== ======
Additional information for plans with benefit obligations
in excess of plan assets:
Benefit obligation $ 12.9 $101.6
Fair value of plan assets $ - $ 74.4
Additional information for plans with accumulated
benefit obligations in excess of plan assets:
Accumulated benefit obligation $ 10.6 $ 82.9
Fair value of plan assets $ - $ 74.4
</TABLE>
The Company has established grantor trusts to provide funding for benefits
payable under certain nonqualified plans. Assets in the trusts, which are
irrevocable and can only be used to pay such benefits, with certain exceptions,
are excluded from plan assets in the preceding table in accordance with
Statement of Financial Accounting Standards No. 87, "Employers' Accounting
for Pensions." The fair market value
<PAGE>
of such assets was $8.0 million at December 31, 1999 and $6.7 million at
December 31, 1998. (See Note 2.)
The expected long-term rate of return on plan assets used to compute pension
cost was 9.0 percent for 1999, 1998, and 1997. The assumed rate of increase
in future compensation levels was 6.0 percent for 1999 and 5.6 percent for
1998 and 1997. The discount rate used to compute the benefit obligation was
7.5 percent for 1999, 6.75 percent for 1998, and 7.0 percent for 1997.
The Company has a defined contribution savings plan in which substantially
all of the Company's U.S. employees are eligible to participate. Company
contributions to the savings plan are based on the amount of employee
contributions. Effective July 1, 1998, the Company increased its matching
contribution to 100 percent of each participant's first six percent of
compensation contributed to the plan. Charges to expense with respect to
this plan totaled $3.6 million for 1999, $2.2 million for 1998, and $0.9
million for 1997.
Other Postretirement Benefits
The Company provides term life insurance to retirees and, for a period
generally ending two years following retirement, health care benefits to
retirees and their covered dependents. Generally, employees who have
reached the age of 55 and have rendered a minimum of five years of service
are eligible for such retirement benefits. For the most part, health care
benefits are contributory while life insurance benefits are non-contributory.
Liabilities for postretirement health care and life insurance benefits are
not material to the Company's results of operations or financial position.
Note 8 - Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive income (loss) were as
follows:
<TABLE>
<CAPTION>
Accumulated Other
Unrealized Gains Minimum Pension Comprehensive
on Securities Liability Adjustment Loss
---------------- -------------------- -----------------
(In millions)
<S> <C> <C> <C>
Balance at December 31, 1998 $ - $ - $ -
Current-year change 0.2 (2.3) (2.1)
----- ----- -----
Balance at December 31, 1999 $ 0.2 $(2.3) $(2.1)
===== ===== =====
</TABLE>
<PAGE>
Note 9 - Income Taxes
Income before income taxes was comprised of the following:
1999 1998 1997
------ ------ ------
(In millions)
Foreign $ 77.2 $222.2 $162.3
U.S. 38.1 61.9 131.7
------ ------ ------
$115.3 $284.1 $294.0
====== ====== ======
The provision (benefit) for income taxes consisted
of the following:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(In millions)
<S> <C> <C> <C>
Current - Foreign $ 8.0 $ 15.8 $ 19.0
- U.S. federal (4.6) 2.2 14.3
- State - 0.5 0.2
------ ------ ------
3.4 18.5 33.5
Deferred - U.S. federal 22.4 42.3 (54.6)
------ ------ ------
Provision (benefit) for income taxes $ 25.8 $ 60.8 $(21.1)
====== ====== ======
</TABLE>
A reconciliation of the differences between taxes on income before
extraordinary item computed at the U.S. federal statutory rate of 35 percent
and the Company's reported provision (benefit) for income taxes follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
($ in millions)
<S> <C> <C> <C>
Income tax provision at statutory rate $ 40.4 $ 99.4 $ 102.9
Taxes on foreign earnings at less than the
U.S. rate (18.6) (38.2) -
Permanent differences (1.3) 0.6 1.0
Other, net 5.3 (1.0) (0.8)
Decrease in the valuation allowance - - (246.4)
Effect of foreign operations realignment - - 99.6
Decrease in valuation allowance recorded to
paid-in capital - - 22.6
------ ------ -------
Provision (benefit) for income taxes $ 25.8 $ 60.8 $ (21.1)
====== ====== =======
Effective tax rate 22% 21% (7%)
====== ====== =======
</TABLE>
The Company intends to permanently reinvest in its business outside the
United States the unremitted earnings of foreign subsidiaries not otherwise
subject to U.S. taxation. As a result, the Company has not provided for
deferred federal income taxes on $244.5 million of cumulative unremitted
foreign earnings at December 31, 1999. It is not practicable to estimate
the amount of deferred income taxes associated with these unremitted earnings.
<PAGE>
Deferred tax assets and liabilities are recorded in recognition of the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. The significant components
of the Company's deferred tax assets and liabilities as of December 31 were
as follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
(In millions)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $208.4 $208.8
Tax credit carryforwards 14.6 30.3
Accrued expenses not currently deductible 8.7 7.9
Other 10.9 12.4
------ ------
242.6 259.4
Less: Valuation allowance (36.6) (48.7)
------ ------
Deferred tax assets, net of valuation allowance 206.0 210.7
Deferred tax liabilities:
Depreciation and depletion for tax in excess of
book expense 106.8 78.7
Tax benefit transfers 8.5 9.7
Income recognized for book in excess of tax - 12.3
Other - 0.2
------ ------
Total deferred tax liabilities 115.3 100.9
------ ------
Net future income tax benefit recognized in
consolidated balance sheet $ 90.7 $109.8
====== ======
</TABLE>
The Company has established a valuation allowance primarily due to the
uncertainty of realizing certain net operating loss ("NOL") and other
carryforwards. The decrease in the valuation allowance from 1998 to 1999
was primarily due to the use of NOL carryforwards in the United Kingdom
and the expiration of tax credit carryforwards, all of which were fully
reserved at December 31, 1998.
At December 31, 1999, the Company had $513.1 million of U.S. NOL carryforwards
and $14.2 million of non-expiring alternative minimum tax credit carryforwards,
which can be used to reduce the Company's U.S. federal income taxes payable in
future years. The NOL carryforwards expire as follows:
<TABLE>
<CAPTION>
(In millions)
-----------
<S><C> <C>
Year ended December 31:
2005 $343.4
2006 82.8
2007 19.6
2008 34.1
2009 18.8
2014 14.4
------
$513.1
======
</TABLE>
In addition, at December 31, 1999, the Company had $94.3 million of
non-expiring NOL carryforwards in the United Kingdom.
<PAGE>
The Company's ability to realize the entire benefit of its deferred tax
asset requires that the Company achieve certain future earnings levels
prior to the expiration of its NOL carryforwards. The Company could be
required to record a valuation allowance for a portion or all of its
deferred tax asset if market conditions deteriorate and future earnings are
below, or projected to be below, its current estimates.
The Company's U.S. NOL carryforwards are subject to review and potential
disallowance by the Internal Revenue Service ("IRS") upon audit of the
Company's federal income tax returns. Section 382 and 383 of the Internal
Revenue Code of 1986, as amended, may impair the future availability of the
NOL carryforwards if there is a change in ownership of more than 50 percent
of the Company's common stock. This limitation, if it applied, would limit
the utilization of the NOL in each taxable year to an amount equal to the
product of the federal long-term tax-exempt bond rate prescribed monthly by
the IRS and the fair market value of all the Company's stock at the time of
the ownership change. The Company believes that it has not undergone a
greater-than-50-percent ownership change and that its carryforwards are
currently available for utilization without limitation.
Note 10 - Earnings Per Share
A reconciliation of the numerators and denominators of the basic and diluted
per-share computations for income before extraordinary item follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
($ in millions, except per share amounts)
<S> <C> <C> <C>
Income (numerator):
Income before extraordinary item $ 89.5 $223.3 $315.1
Shares (denominator):
Shares - Basic 173,991,869 173,040,584 171,159,212
Effect of outstanding employee
stock options 2,782,710 2,744,611 5,002,765
----------- ----------- -----------
Shares - Diluted 176,774,579 175,785,195 176,161,977
=========== =========== ===========
Earnings per share before
extraordinary item:
Basic $0.51 $1.29 $1.84
Diluted $0.51 $1.27 $1.79
</TABLE>
The computation of diluted earnings per share excludes outstanding stock
options with exercise prices greater than the average market price of the
stock for the period, because their inclusion would be antidilutive. The
number of antidilutive options that were excluded from diluted earnings
per share and could potentially dilute basic earnings per share in the
future were 3,413,487 shares in 1999, 2,766,227 shares in 1998, and 76,702
shares in 1997.
<PAGE>
Note 11 - Segment and Geographic Information
The Company has three lines of business, each organized along the basis
of services and products and each with a separate management team. The
Company's three lines of business are reported as separate operating
segments and consist of contract drilling, drilling management services,
and oil and gas. The Company's contract drilling business leases fully-manned,
mobile offshore drilling rigs to oil and gas operators on a daily-rate basis
and is also referred to as dayrate drilling. The drilling management services
business, also referred to as turnkey drilling, designs, develops, and
executes specific offshore drilling programs and delivers a logged or loggable
hole to an agreed depth for a guaranteed price. The Company's oil and gas
business participates in development and production activities for its own
account.
The Company evaluates and measures segment performance on the basis of
operating income. Segment operating income is inclusive of intersegment
revenues. Such revenues, which have been eliminated from the consolidated
totals, are recorded at transfer prices which are intended to approximate
the prices charged to external customers. Segment operating income consists
of revenues less the related operating costs and expenses and is exclusive
of interest expense, interest income, and unallocated corporate expenses.
Segment assets consist of all current and long-lived assets, exclusive of
affiliate receivables and investments.
<PAGE>
Information by operating segment, together with reconciliations to the
consolidated totals, is presented in the following table:
<TABLE>
<CAPTION>
Drilling
Contract Management Adjustments and
Drilling Services Oil and Gas Corporate Eliminations Consolidated
-------- ---------- ----------- --------- --------------- ------------
(In millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from
external customers
1999 $507.7 $275.0 $ 8.3 $ 791.0
1998 742.4 416.0 3.8 1,162.2
1997 579.4 480.5 7.2 1,067.1
Intersegment revenues
1999 10.0 7.2 - $(17.2) -
1998 11.3 5.5 - (16.8) -
1997 5.3 2.1 - (7.4) -
Total revenues
1999 517.7 282.2 8.3 (17.2) 791.0
1998 753.7 421.5 3.8 (16.8) 1,162.2
1997 584.7 482.6 7.2 (7.4) 1,067.1
Operating income
1999 153.5 13.3 2.0 $(25.5) - 143.3
1998 361.7 (30.7) 0.3 (20.8) - 310.5
1997 274.8 50.0 2.1 (21.8) - 305.1
Depreciation, depletion,
and amortization
1999 83.1 0.2 3.6 1.9 - 88.8
1998 100.3 0.3 1.6 1.7 - 103.9
1997 51.7 0.3 1.8 1.3 - 55.1
Capital expenditures
1999 442.5 0.1 4.1 1.4 - 448.1
1998 627.9 0.1 7.8 1.9 - 637.7
1997 575.0 0.4 2.7 2.2 - 580.3
Segment assets
1999 2,014.0 41.7 15.1 193.7 - 2,264.5
1998 1,713.5 60.8 15.7 181.6 - 1,971.6
</TABLE>
No single customer provided more than ten percent of consolidated revenues
for 1999, 1998, or 1997.
<PAGE>
A reconciliation of segment operating income to consolidated income before
income taxes and extraordinary item follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In millions)
<S> <C> <C> <C>
Total segment operating income $ 168.8 $ 331.3 $ 326.9
Corporate general and administrative
expenses (23.6) (19.1) (20.5)
Corporate depreciation, depletion, and
amortization (1.9) (1.7) (1.3)
-------- -------- -------
Consolidated operating income 143.3 310.5 305.1
Interest expense (56.6) (46.9) (39.7)
Interest capitalized 25.9 17.2 20.9
Interest income 2.7 3.3 7.7
-------- -------- --------
Income before income taxes and
extraordinary item $ 115.3 $ 284.1 $ 294.0
======== ======== ========
</TABLE>
Revenues and assets by geographic area in the tables which follow were
attributed to countries based on the physical location of the assets. The
mobilization of rigs between geographic areas has affected area revenues
and long-lived assets over the periods presented.
Revenues from external customers by geographic areas were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In millions)
<S> <C> <C> <C>
United Kingdom $ 148.6 $ 182.7 $ 84.2
Nigeria 57.0 38.1 60.5
Canada 48.0 5.0 -
Other foreign countries 120.9 317.6 225.6
-------- -------- --------
Total foreign revenues 374.5 543.4 370.3
United States 416.5 618.8 696.8
-------- -------- --------
Total revenues $ 791.0 $1,162.2 $1,067.1
======== ======== ========
</TABLE>
Long-lived assets by geographic areas, based on their location at December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(In millions)
<S> <C> <C>
Nigeria $ 244.4 $ 25.6
United Kingdom 195.4 222.7
Canada 168.5 171.4
Other foreign countries 165.9 210.4
-------- --------
Total foreign long-lived assets 774.2 630.1
United States 462.2 645.2
-------- --------
Total productive assets 1,236.4 1,275.3
Construction in progress - United Kingdom 632.2 236.8
-------- --------
Total long-lived assets $1,868.6 $1,512.1
======== ========
</TABLE>
<PAGE>
CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(In millions, except per share data)
<TABLE>
<CAPTION>
1999 1998
------------------------------------- -------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $198.7 $168.6 $195.7 $228.0 $258.9 $272.2 $356.0 $275.1
Operating income 18.5 25.1 44.9 54.8 51.9 66.6 101.3 90.7
Net income 10.7 13.8 28.2 36.8 34.5 47.2 73.4 68.2
Earnings per common share:
Basic 0.06 0.08 0.16 0.21 0.20 0.27 0.42 0.40
Diluted 0.06 0.08 0.16 0.21 0.20 0.27 0.42 0.39
Price ranges of
common stock:
High 17-7/16 19-1/2 16-1/8 12-1/2 13-5/16 18-3/4 25-5/8 26-1/8
Low 14-3/8 15 10-1/2 7-9/16 8-5/8 9-5/16 18-1/8 19-5/16
</TABLE>
The Company did not declare any dividends on its common stock in either 1999
or 1998.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Global Marine Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 29, 2000 appearing in the 1999 Annual Report on Form 10-K of
Global Marine Inc. and subsidiaries also included an audit of the financial
statement schedule listed on page 55 of this Form 10-K. In our opinion,
this financial statement schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
February 29, 2000
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In millions)
<CAPTION>
Additions
------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions of Year
- ----------------------- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful
accounts receivable (1) $ 13.7 $ 1.8 $ - $ 8.9 $ 6.6
Deferred tax asset valuation
allowance 48.7 - - 12.1 36.6
Year ended December 31, 1998:
Allowance for doubtful
accounts receivable (1) $ 2.8 $12.2 $ - $ 1.3 $ 13.7
Deferred tax asset valuation
allowance 32.9 15.8 - - 48.7
Year ended December 31, 1997:
Allowance for doubtful
accounts receivable $ 1.3 $ 1.7 $ - $ 0.2 $ 2.8
Deferred tax asset valuation
allowance 279.3 - - 246.4 32.9
- --------------
(1) At December 31, 1999, $4.1 million of the allowance for doubtful
accounts was classified as current, and $2.5 million was classified
as long-term. At December 31, 1998, $4.2 million was classified as
current, and $9.5 million was classified as long-term.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As permitted by General Instruction G, the information called for by this
item with respect to the Company's directors, and the information required
by this item and Item 405 of Regulation S-K with respect to filings under
Section 16 of the 1934 Securities Exchange Act, is incorporated by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after the end of the last fiscal year.
Information with respect to the Company's executive officers required by
Item 401 of Regulation S-K is set forth in Part I of this Annual Report on
Form 10-K under the caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to
be filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As permitted by General Instruction G, the information called for by this
item is incorporated by reference from the Company's definitive proxy
statement to be filed pursuant to Regulation 14A within 120 days after the
end of the last fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to
be filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page
(a) Financial Statements, Schedules and Exhibits
(1) Financial Statements
Report of Independent Accountants 26
Consolidated Statement of Income 27
Consolidated Balance Sheet 28
Consolidated Statement of Cash Flows 30
Consolidated Statement of Shareholders' Equity 31
Notes to Consolidated Financial Statements 32
(2) Financial Statement Schedule
Report of Independent Accountants 52
Schedule II - Valuation and Qualifying Accounts 53
Schedules other than Schedule II are omitted for the reason that
they are not applicable.
(3) Exhibits
The following are included as exhibits to this Annual Report
on Form 10-K and are filed herewith unless otherwise indicated.
Exhibits incorporated by reference are so indicated by
parenthetical information.
3(i).1 Restated Certificate of Incorporation of the Company as filed
with the Secretary of State of Delaware on March 15, 1989,
effective March 16, 1989. (Incorporated herein by this reference
to Exhibit 3(i).1 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.)
3(i).2 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company as filed with the Secretary of
State of Delaware on May 11, 1990. (Incorporated herein by this
reference to Exhibit 3(i).2 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.)
3(i).3 Certificate of Correction of the Restated Certificate of
Incorporation of the Company as filed with the Secretary of
State of Delaware on September 25, 1990. (Incorporated herein
by this reference to Exhibit 3(i).3 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.)
3(i).4 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company as filed with the Secretary of
State of Delaware on May 11, 1992. (Incorporated herein by
this reference to Exhibit 3(i).4 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.)
3(i).5 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company as filed with the Secretary of
State of Delaware on May 12, 1994. (Incorporated herein by
this
<PAGE>
reference to Exhibit 4.5 of the Registrant's Registration
Statement on Form S-3 (No. 33-53691) filed with the Commission
on May 18, 1994.)
3(ii).1 Amendment to the By-laws of the Company, effective February 23,
1999. (Incorporated herein by this reference to Exhibit 3(ii).1
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.)
3(ii).2 By-laws of the Company as amended through February 23, 1999.
(Incorporated herein by this reference to Exhibit 3(ii).2 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.)
4.1 Section II-7 of the By-laws of the Company as amended February 23,
1999. (Incorporated herein by this reference to Exhibit 4.1 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.)
4.2 Indenture dated as of September 1, 1997, between Global Marine
Inc. and Wilmington Trust Company, as Trustee, relating to Debt
Securities of the Registrant. (Incorporated herein by this
reference to Exhibit 4.1 of the Registrant's Registration Statement
on Form S-4 (No. 333-39033) filed with the Commission on October 30,
1997.)
4.3 Form of 7-1/8% Exchange Note Due 2007. (Incorporated herein by
this reference to Exhibit 4.4 of Amendment No. 1 to the Registrant's
Registration Statement on Form S-4 (No. 333-39033) filed with the
Commission on February 3, 1998.)
4.4 Terms of 7-1/8% Notes Due 2007. (Incorporated herein by this
reference to Exhibit 4.5 of the Registrant's Registration Statement
on Form S-4 (No. 333-39033) filed with the Commission on October 30,
1997.)
4.5 Form of 7% Note Due 2028. (Incorporated herein by this reference
to Exhibit 4.2 of the Registrant's Current Report on Form 8-K dated
May 20, 1998.)
4.6 Terms of 7% Note Due 2028. (Incorporated herein by this reference
to Exhibit 4.1 of the Registrant's Current Report on Form 8-K dated
May 20, 1998.)
10.1 Second Amended and Restated Credit Agreement among Global Marine
Inc., Various Lending Institutions, and Bankers Trust Company,
as Administrative Agent, Societe Generale, Southwest Agency, as
Documentation Agent, and Skandinaviska Enskilda Banken AB (publ)
and Den Norske Bank ASA, New York Branch, as Co-Agents, dated as of
December 9, 1997. (Incorporated herein by reference to Exhibit 99.3
of Amendment No.1 to the Registrant's Registration Statement on
Form S-4 (No. 333-39033) filed with the Commission on February 3,
1998.)
10.2 First Amendment to Credit Agreement and Loan Documents, dated as
of November 23, 1998, among Global Marine Inc., Various Lending
Institutions, Bankers Trust Company, as administrative agent,
Skandinaviska Enskilda Banken AB (publ) and Den Norske Bank ASA,
New York Branch, as co-agents, and Societe Generale, Southwest
Agency, as documentation agent. (Incorporated herein by this
reference to Exhibit 10.2 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998.)
<PAGE>
10.3 Second Amendment to Credit Agreement and Loan Documents, dated
as of April 23, 1999, among Global Marine Inc., Various Lending
Institutions, Bankers Trust Company, as administrative agent,
Skandinaviska Enskilda Banken AB (publ) and Den Norske Bank ASA,
New York Branch, as co-agents, and Societe Generale, Southwest
Agency, as documentation agent. (Incorporated herein by this
reference to Exhibit 10.5 of the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999.)
10.4 Credit Agreement among Global Marine Inc., Various Lending
Institutions, and Bankers Trust Company, as Administrative Agent,
ABN AMRO Bank, Houston Agency, as Syndication Agent, and Societe
Generale, Southwest Agency, as Documentation Agent, dated as of
January 29, 1998. (Incorporated herein by reference to Exhibit 99.4
of Amendment No. 1 to the Registrant's Registration Statement on
Form S-4 (No. 333-39033) filed with the Commission on February 3,
1998.)
10.5 First Amendment to Credit Agreement and Loan Documents, dated as
of November 23, 1998, among Global Marine Inc., Various Lending
Institutions, Bankers Trust Company, as administrative agent, ABN
Amro Bank, N.V., Houston Agency, as syndication agent, and Societe
Generale, Southwest Agency, as documentation agent. (Incorporated
herein by this reference to Exhibit 10.4 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998.)
10.6 Second Amendment to Credit Agreement and Loan Documents, dated as
of April 23, 1999, among Global Marine Inc., Various Lending
Institutions, Bankers Trust Company, as administrative agent, ABN
Amro Bank, N.V., Houston Agency, as syndication agent, and Societe
Generale, Southwest Agency, as documentation agent. (Incorporated
herein by this reference to Exhibit 10.6 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.)
10.7 Third Amendment to Credit Agreement and Loan Documents, dated as
of October 15, 1999, among Global Marine Inc., Various Lending
Institutions, Bankers Trust Company, as administrative agent, ABN
Amro Bank, N.V., Houston Agency, as syndication agent, and Societe
Generale, Southwest Agency, as documentation agent.
10.8 Letter Agreement dated as of June 4, 1999, between Global Marine
Inc. and Societe Generale. (Incorporated herein by this reference
to Exhibit 10.7 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999.)
10.9 Loan Agreement dated as of June 4, 1999, between Global Marine
Inc. and Altair Funding Corporation. (Incorporated herein by
this reference to Exhibit 10.8 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999.)
10.10 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. (Incorporated herein by
this reference to Exhibit 10.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999.)
10.11 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. (Incorporated herein by
<PAGE>
this reference to Exhibit 10.2 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999.)
10.12 Bareboat Charter Agreement, dated July 2, 1996, between the
United States of America and Global Marine Capital Investments
Inc. (Incorporated herein by this reference to Exhibit 10.1 of
the Registrant's Current Report on Form 8-K dated August 1, 1996.)
10.13 Shipbuilding Contract dated 27 February 1998 relating to Hull
No. 1739 between Harland and Wolff Shipbuilding and Heavy
Industries Limited and Global Marine International Services
Corporation. (Incorporatedherein by this reference to Exhibit
10.4 of the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998.)
10.14 Novation Agreement dated 9th December 1998 by and among Harland
and Wolff Shipbuilding and Heavy Industries Limited, Global
Marine International Drilling Corporation, Global Marine Leasing
Corporation and Global Marine Inc. relating to Shipbuilding Contract
dated 27 February 1998 for construction of deepwater drillship Hull
No. 1739. (Incorporated herein by this reference to Exhibit 10.8
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.)
10.15 Novation Agreement dated 9th December 1998 by and among Harland
and Wolff Shipbuilding and Heavy Industries Limited, Nelstar
Leasing Company Limited, Global Marine International Drilling
Corporation and Global Marine Leasing Corporation relating to
Shipbuilding Contract dated 27 February 1998 for the construction
of deepwater drillship Hull No. 1739. (Incorporated herein by
this reference to Exhibit 10.9 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998.)
10.16 Head Lease Agreement dated 8th December 1998 by and between
Nelstar Leasing Company Limited, as lessor, and Global Marine
Leasing Corporation, as lessee, relating to a Glomar Hull 456
class deepwater drillship to be constructed by Harland and Wolff
Shipbuilding and Heavy Industries Ltd. with hull number 1739
(t.b.n. "Glomar C.R. Luigs"). (Incorporated herein by this
reference to Exhibit 10.10 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998.)
10.17 Guarantee and Indemnity dated 8th December 1998 by and between
Global Marine Inc., as guarantor, and Nelstar Leasing Company
Limited, as lessor. (Incorporated herein by this reference to
Exhibit 10.11 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998.)
10.18 Shipbuilding Contract dated 28 March 1998 relating to Hull No. 1740
between Harland and Wolff Shipbuilding and Heavy Industries Limited
and Global Marine International Services Corporation. (Incorporated
herein by this reference to Exhibit 10.5 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.)
10.19 Novation Agreement dated 9th December 1998 by and among Harland
and Wolff Shipbuilding and Heavy Industries Limited, BMBF (No. 12)
Limited and Global Marine International Drilling Corporation
relating to Shipbuilding Contract dated 28 March 1998 for the
construction of deepwater drillship Hull No. 1740. (Incorporated
herein by this reference to Exhibit 10.13 of the Registrant's Annual
Report on Form 10-K for the year
<PAGE>
ended December 31, 1998.)
10.20 Head Lease Agreement dated 8th December 1998 by and between BMBF
(No. 12) Limited, as lessor, and Global Marine International
Drilling Corporation, as lessee, relating to one double hulled,
dynamically positioned ultra-deepwater Glomar class 456 drillship
to be constructed by Harland and Wolff Shipbuilding and Heavy
Industries Ltd. with hull number 1740. (Incorporated herein by
this reference to Exhibit 10.14 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998.)
10.21 Deed of Guarantee and Indemnity dated 8th December 1998 by and
between Global Marine Inc., as Guarantor, and BMBF (No. 12) Limited,
as Lessor. (Incorporated herein by this reference to Exhibit 10.15
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.)
10.22 Amendment to Shipbuilding Contract, dated 19 November 1999, between
Global Marine International Drilling Corporation for and on behalf
of Nelstar Leasing Company Limited, and Harland and Wolff
Shipbuilding and Heavy Industries Limited. (Incorporated herein by
this reference to Exhibit 99.1 of the Registrant's Current Report on
Form 8-K dated November 23, 1999.)
10.23 Amendment to Shipbuilding Contract, dated 19 November 1999, between
Global Marine International Drilling Corporation for and on behalf
of BMBF (NO.12) Limited, and Harland and Wolff Shipbuilding and
Heavy Industries Limited. (Incorporated herein by this reference
to Exhibit 99.2 of the Registrant's Current Report on Form 8-K dated
November 23, 1999.)
10.24 Agreement, dated 19 November 1999, between Fred. Olsen Energy ASA,
Global Marine International Drilling Corporation for and on behalf
of Nelstar Leasing Company Limited, and Global Marine International
Drilling Corporation acting on its own behalf. (Incorporated
herein by this reference to Exhibit 99.3 of the Registrant's Current
Report on Form 8-K dated November 23, 1999.)
10.25 Agreement, dated 19 November 1999, between Fred. Olsen Energy ASA,
Global Marine International Drilling Corporation for and on behalf
of BMBF (NO.12) Limited, and Global Marine International Drilling
Corporation acting on its own behalf. (Incorporated herein by this
reference to Exhibit 99.4 of the Registrant's Current Report on
Form 8-K dated November 23, 1999.)
10.26 Guarantee, dated 19 November 1999, by Global Marine Inc. in favor
of Harland and Wolff Shipbuilding and Heavy Industries Limited,
with respect to obligations of the owner of the Glomar C.R. Luigs.
(Incorporated herein by this reference to Exhibit 99.5 of the
Registrant's Current Report on Form 8-K dated November 23, 1999.)
10.27 Guarantee, dated 19 November 1999, by Global Marine Inc. in favor
of Harland and Wolff Shipbuilding and Heavy Industries Limited,
with respect to obligations of the owner of the Glomar Jack Ryan.
(Incorporated herein by this reference to Exhibit 99.6 of the
Registrant's Current Report on Form 8-K dated November 23, 1999.)
<PAGE>
* 10.28 Amended and Restated Employment Agreement dated as of December 16,
1999, among the Company, Global Marine Corporate Services Inc., and
Robert E. Rose.
* 10.29 Letter Employment Agreement dated May 6, 1999, among the Company,
Global Marine Corporate Services Inc., and C. Russell Luigs.
(Incorporated herein by this reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999.)
* 10.30 Form of Severance Agreement dated December 15, 1999, between the
Company and six executive officers, respectively.
* 10.31 Global Marine Inc. 1989 Stock Option and Incentive Plan.
(Incorporated herein by this reference to Exhibit 10.6 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
* 10.32 First Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.6 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990.)
* 10.33 Second Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.7 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991.)
* 10.34 Third Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.19 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.)
* 10.35 Fourth Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.16 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994.)
* 10.36 Fifth Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.)
* 10.37 Sixth Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.18 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996.)
* 10.38 Global Marine 1998 Stock Option and Incentive Plan. (Incorporated
herein by this reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
* 10.39 Form of Performance Stock Memorandum dated February 10, 1998
regarding conditional opportunity to acquire Company stock granted
to eight executive officers, respectively, and dated May 5, 1998
regarding conditional opportunity to acquire Company stock granted
to one executive officer. (Incorporated herein by this reference
to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998.)
<PAGE>
* 10.40 Form of Performance Stock Memorandum dated March 12, 1999,
regarding conditional opportunity to acquire Company stock granted
to eight executive officers, respectively. (Incorporated herein by
this reference to Exhibit 10.1 of the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1999.)
* 10.41 Form of Performance Stock Memorandum dated February 22, 2000,
regarding conditional opportunity to acquire Company stock granted
to seven executive officers, respectively.
* 10.42 Form of Notice of Grant of Stock Options (Non-Qualified Stock
Options). (Incorporated herein by this reference to Exhibit 10.33
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.)
* 10.43 Form of Notice of Grant of Stock Options (Incentive Stock Options).
(Incorporated herein by this reference to Exhibit 10.34 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.)
* 10.44 Executive Life Insurance Plan. (Incorporated herein by this
reference to Exhibit 10.5 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1988.)
* 10.45 Global Marine Inc. Executive Supplemental Retirement Plan of
1990 (Incorporated herein by this reference to Exhibit 10.8 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990), as amended by First Amendment thereto
(Incorporated herein by this reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997).
* 10.46 Second Amendment to Global Marine Executive Supplemental
Retirement Plan of 1990. (Incorporated herein by this reference
to Exhibit 10.37 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998.)
* 10.47 Global Marine Executive Deferred Compensation Trust as established
effective January 1, 1995 (Incorporated herein by this reference
to Exhibit 10.24 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995), as amended by First
Amendment thereto (Incorporated herein by this reference to
Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997).
* 10.48 Second Amendment and Appointment of Successor Trustee Under the
Global Marine Executive Deferred Compensation Trust dated as of
June 1, 1999, by and between Global Marine Corporate Services Inc.
and SEI Trust Company. (Incorporated herein by this reference to
Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999.)
* 10.49 Global Marine Benefit Equalization Retirement Plan effective
January 1, 1990. (Incorporated herein by this reference to
Exhibit 10.8 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989.)
* 10.50 Global Marine Benefit Equalization Retirement Trust as established
effective January 1, 1990. (Incorporated herein by this reference
to Exhibit 10.9 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989.)
<PAGE>
* 10.51 First Amendment and Appointment of Successor Trustee Under the
Global Marine Benefit Equalization Retirement Trust dated as of
June 1, 1999, by and between Global Marine Corporate Services Inc.
and SEI Trust Company. (Incorporated herein by this reference to
Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999.)
* 10.52 Form of Indemnification Agreement entered into between the Company
and each of its directors and officers.
* 10.53 Resolution dated August 11, 1999, regarding Directors' Fees and
Expense Reimbursement. (Incorporated herein by this reference
to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.)
* 10.54 Amended and Restated Retirement Plan for Outside Directors.
(Incorporated herein by this reference to Exhibit 10.12 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990.)
* 10.55 Resolution dated August 11, 1999, regarding Termination of
Retirement Plan for Outside Directors. (Incorporated herein by
this reference to Exhibit 10.4 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999.)
* 10.56 Global Marine Outside Director Deferred Compensation Trust as
established effective January 1, 1996. (Incorporated herein by
this reference to Exhibit 10.34 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1996.)
* 10.57 First Amendment and Appointment of Successor Trustee Under the
Global Marine Outside Director Deferred Compensation Trust
dated as of June 1, 1999, by and between Global Marine Corporate
Services Inc. and SEI Trust Company. (Incorporated herein by this
reference to Exhibit 10.4 of the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999.)
* 10.58 Global Marine Inc. 1990 Non-Employee Director Stock Option Plan.
(Incorporated herein by this reference to Exhibit 10.18 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
* 10.59 First Amendment to Global Marine Inc. 1990 Non-Employee Director
Stock Option Plan. (Incorporated herein by this reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995.)
* 10.60 Second Amendment to Global Marine Inc. 1990 Non-Employee Director
Stock Option Plan. (Incorporated herein by this reference to
Exhibit 10.37 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996.)
* 10.61 Global Marine Inc. 2000 Management Incentive Award Plan.
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
<PAGE>
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as
an exhibit only in the electronic format of this Annual Report on
Form 10-K being submitted to the Securities and Exchange Commission.
Exhibit 27.1 shall not be deemed filed for purposes of Section 11
of the Securities Act of 1933, Section 18 of the Securities Exchange
Act of 1934 or Section 323 of the Trust Indenture Act, or otherwise
be subject to the liabilities of such sections, nor shall it be
deemed a part of any registration statement to which it relates.)
- -----------------
* Management contract or compensatory plan or arrangement.
The Company hereby undertakes, pursuant to Regulation S-K, Item 601(b),
paragraph (4) (iii), to furnish to the Securities and Exchange Commission
on request agreements defining the rights of holders of long-term debt of
the Company and its consolidated subsidiaries not filed herewith in
accordance with said Item.
(b) Reports on Form 8-K
During the last quarter of 1999, the Company filed a Current Report on
Form 8-K dated November 23, 1999, in which the Company reported, under
"Item 5, Other Events," that its wholly-owned subsidiary, Global Marine
International Drilling Corporation, had entered into agreements with
the Shipbuilder regarding the terms under which the Shipbuilder would
complete two new drillships.
<PAGE>
SIGNATURES REQUIRED FOR FORM 10-K
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GLOBAL MARINE INC.
(REGISTRANT)
Date: March 6, 2000 By: W. MATT RALLS
---------------------------
(W. Matt Ralls)
Senior Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
ROBERT E. ROSE Chairman, President, Chief Executive March 6, 2000
- ---------------------- Officer and Director
(Robert E. Rose)
W. MATT RALLS Senior Vice President and March 6, 2000
- ---------------------- Chief Financial Officer
(W. Matt Ralls) (Principal Financial and
Accounting Officer)
EDWARD A. BLAIR Director March 6, 2000
- ----------------------
(Edward A. Blair)
E. J. CAMPBELL Director March 6, 2000
- ----------------------
(E.J. Campbell)
THOMAS CASON Director March 6, 2000
- ----------------------
(Thomas Cason)
JOHN M. GALVIN Director March 6, 2000
- ----------------------
(John M. Galvin)
C.R. LUIGS Director March 6, 2000
- ----------------------
(C.R. Luigs)
J.C. MARTIN Director March 6, 2000
- ----------------------
(J.C. Martin)
E.R. MULLER Director March 6, 2000
- ----------------------
(E.R. Muller)
PAUL J. POWERS Director March 6, 2000
- ----------------------
(Paul J. Powers)
B.G. STREETMAN Director March 6, 2000
- ----------------------
(B.G. Streetman)
- ---------------------- Director
(Carroll W. Suggs)
JOHN WHITMIRE Director March 6, 2000
- ----------------------
(John Whitmire)
EXHIBIT INDEX
A. Copies of exhibits listed below are submitted with this Annual Report
on Form 10-K, immediately following this index.
10.7 Third Amendment to Credit Agreement and Loan Documents, dated as
of October 15, 1999, among Global Marine Inc., Various Lending
Institutions, Bankers Trust Company, as administrative agent, ABN
Amro Bank, N.V., Houston Agency, as syndication agent, and Societe
Generale, Southwest Agency, as documentation agent.
10.28 Amended and Restated Employment Agreement dated as of December 16,
1999, among the Company, Global Marine Corporate Services Inc.,
and Robert E. Rose.
10.30 Form of Severance Agreement dated December 15, 1999, between the
Company and six executive officers, respectively.
10.41 Form of Performance Stock Memorandum dated February 22, 2000,
regarding conditional opportunity to acquire Company stock granted
to seven executive officers, respectively.
10.52 Form of Indemnification Agreement entered into between the Company
and each of its directors and officers.
10.61 Global Marine Inc. 2000 Management Incentive Award Plan.
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as an
exhibit only in the electronic format of this Annual Report on
Form 10-K being submitted to the Securities and Exchange Commission.
Exhibit 27.1 shall not be deemed filed for purposes of Section 11 of
the Securities Act of 1933, Section 18 of the Securities Exchange
Act of 1934 or Section 323 of the Trust Indenture Act, or otherwise
be subject to the liabilities of such sections, nor shall it be
deemed a part of any registration statement to which it relates.)
B. All other exhibits listed in Item 14(a)(3) are incorporated by reference
in this Annual Report on Form 10-K, as stated in Item 14(a)(3).
Descriptions of these exhibits are incorporated herein by this reference
to Item 14(a)(3) of this Report.
EXHIBIT 10.7
THIRD AMENDMENT TO
CREDIT AGREEMENT AND LOAN DOCUMENTS
This Third Amendment to Credit Agreement and Loan
Documents (this "AMENDMENT") dated as of October 15, 1999 is among
GLOBAL MARINE INC., a Delaware corporation (the "BORROWER"), the
banks named on the signature pages hereto (together with their
respective successors and assigns in such capacity, the "BANKS"),
BANKERS TRUST COMPANY, as administrative agent for the Banks
(together with its successors and assigns in such capacity, the
"ADMINISTRATIVE AGENT"), ABN AMRO BANK, N.V., HOUSTON AGENCY, as
syndication agent for the Banks, SOCIETE GENERALE, SOUTHWEST
AGENCY, as documentation agent for the Banks (all of the agents,
collectively, together with their successors and assigns in such
capacity, the "AGENTS").
PRELIMINARY STATEMENT
The Borrower, the Banks and the Agents have entered into
that certain Credit Agreement dated as of January 29, 1998 (as
amended or restated from time to time, the "CREDIT AGREEMENT").
The Borrower, the Banks and the Agents wish to amend
further the Credit Agreement and execute this Amendment to reflect
same.
NOW THEREFORE, in consideration of the foregoing and the
mutual agreements set forth herein, the parties agree as follows:
Section 1. DEFINITIONS. Unless otherwise defined in this
Amendment, each capitalized term used in this Amendment has the
meaning assigned to such term in the Credit Agreement.
Section 2. AMENDMENTS. The Credit Agreement is hereby
amended as follows:
a. Section 3.01(a) of the Credit Agreement is hereby
amended by deleting the grid contained therein and replacing it
with the following:
"RATING FACILITY FEE
A-/A3 .1%
BBB+/Baa1 .15%
BBB/Baa2 .175%
BBB-/Baa3 .225%
BB+/Ba1 .3%"
b. A new Section 7.10 is hereby added to the Credit
Agreement to read as follows:
<PAGE>
"Section 7.10 YEAR 2000. Borrower will ensure that
its Information Systems and Equipment and that of its
Subsidiaries are, at all times after the Amendment
Closing Date, Year 2000 Compliant, except insofar as the
failure to be would not reasonably be expected to result
in a Material Adverse Effect, and shall notify the
Administrative Agent and all Banks promptly upon
detecting any failure of said Information Systems and
Equipment to be Year 2000 Compliant, if same would
reasonably be expected to result in a Material Adverse
Effect. In addition, Borrower shall provide the
Administrative Agent and any Bank with such information
about its year 2000 computer readiness as the
Administrative Agent or such Bank shall reasonably
request."
c. The following defined terms are hereby added to or
amended in Section 10 of the Credit Agreement in their appropriate
alphabetical order to read as follows:
(i) "'AMENDMENT CLOSING DATE' shall mean the date that
the Third Amendment to Credit Agreement and Loan Documents
dated as of October 15, 1999, among Borrower, the
Administrative Agent and the Banks shall have become effective
pursuant to Section 4 thereof."
(ii) "'APPLICABLE EURODOLLAR MARGIN' shall mean the
following: prior to the Revolving Loan Maturity Date the
Applicable Eurodollar Margin shall be equal to the percentage
per annum set forth below opposite Borrower's applicable
Rating, effective as of the date such Rating is published or
announced:
APPLICABLE
EURODOLLAR
RATING MARGIN
A- / A3 .40%
BBB+ / Baa1 .475%
BBB / Baa2 .575%
BBB- / Baa3 .775%
BB+ / Ba1 1.075%;
PROVIDED, prior to the Revolving Loan Maturity Date the above
listed figures shall each be increased at any time, and for so
long as, the Revolving Credit Loans, in the aggregate, equal:
(i) twenty-five percent (25%) or more of the Total Commitment
but less than fifty percent (50%), by adding 12.5 basis points
(.125%) thereto, and (ii) fifty percent (50%) or more of the
Total Commitment, by adding 25 basis points (.25%) thereto.
Subsequent to the Revolving Loan Maturity Date and until
payment in full of the Obligations, the Applicable Eurodollar
Margin shall be equal to the percentage per annum set forth
below opposite Borrower's applicable Rating, effective as of
the date such Rating is published or announced:
<PAGE>
APPLICABLE
EURODOLLAR
RATING MARGIN
A- / A3 .65%
BBB+ / Baa1 .725%
BBB / Baa2 .825%
BBB- / Baa3 1.025%
BB+ / Ba1 1.325%"
(iii) "'INFORMATION SYSTEMS AND EQUIPMENT' means all
material computer hardware and software, as well as other
material information processing systems, or any material
equipment containing embedded microchips, whether directly
owned, licensed, leased, operated or otherwise controlled by
the Borrower or any of its Subsidiaries, including through
third-party service providers, and which are essential to the
Borrower's or any of its Subsidiaries' conduct of their
business."
(iv) "'YEAR 2000 COMPLIANT' means that, to Borrower's
knowledge, all Information Systems and Equipment accurately
process in all material respects date data (including, but not
limited to, calculating, comparing and sequencing), before,
during and after the year 2000, as well as same and multi-
century dates, or between the years 1999 and 2000, taking into
account all leap years, including the fact that the year 2000
is a leap year, and further, that when used in combination
with, or interfacing with, other Information Systems and
Equipment, shall in all material respects accurately accept,
release and exchange date data, and shall, normal wear and
tear and force majeure excepted, in all material respects,
continue to function in good working order, and not otherwise
impair the accuracy or functionality of the Information
Systems and Equipment."
Section 3. RATIFICATION. The Borrower hereby ratifies and
confirms all of the Obligations under the Credit Agreement (as
amended hereby) and the Notes. All references to the "Credit
Agreement" shall mean the Credit Agreement as amended hereby and as
the same may be amended, supplemented, restated or otherwise
modified and in effect from time to time in the future.
Section 4. EFFECTIVENESS. The effectiveness of this
Amendment is subject to the condition precedent that (i) the
Administrative Agent shall have received in form and substance
reasonably satisfactory to the Banks and in such number of
counterparts as may be reasonably requested by the Administrative
Agent, this Amendment executed by the Borrower and each of the
Banks and (ii) the Borrower shall have paid (Y) to the
Administrative Agent, for the pro-rata benefit of the Banks, an
Amendment fee equal to .1% of the Total Commitment, and (Z) all of
the Administrative Agent's reasonable costs and expenses (other
than legal fees and expenses, which shall be payable promptly after
Borrower receives an invoice from counsel to the Administrative
Agent) incurred in connection herewith.
<PAGE>
Section 5. REPRESENTATIONS AND WARRANTIES. The Borrower
hereby represents and warrants to the Banks that (a) the execution,
delivery and performance of this Amendment has been duly
authorized by all requisite corporate action on the part of the
Borrower, (b) the Credit Agreement (as amended hereby) constitutes
a valid and legally binding agreement enforceable against the
Borrower in accordance with its terms except, as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar
laws relating to or affecting the enforcement of creditors' rights
generally and by general principles of equity, (c) the
representations and warranties by the Borrower contained in the
Credit Agreement as amended hereby are true and correct on and as
of the date hereof in all material respects as though made as of
the date hereof unless such representation and warranty expressly
indicates that it is being made as of any specific date, in which
case such representations and warranties shall be true and correct
in all material respects as of such date, and except to the extent
that such representations and warranties are no longer true and
correct due to any action or inaction permitted or required to be
taken under the Credit Documents by Borrower or any Subsidiary, and
(d) no Default or Event of Default exists under the Credit
Agreement (as amended hereby).
Section 6. CHOICE OF LAW. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
Section 7. FINAL AGREEMENT. THE CREDIT AGREEMENT (AS
AMENDED HEREBY) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL
AGREEMENTS BETWEEN THE PARTIES.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by its officers thereunto duly authorized
as of the date first above written.
ADDRESS: GLOBAL MARINE INC.
777 N. Eldridge Road
Houston, Texas 77079-4416
Telecopy: (281) 596-5826
Telephone: (281) 596-5810 By: /S/ W. Matt Ralls
Attention: W. Matt Ralls W. Matt Ralls
Senior Vice President
- Chief Financial Officer and
Treasurer
<PAGE>
BANKERS TRUST COMPANY,
as Administrative Agent
By: /s/ Markus M. Tarkington
Name: Markus M. Tarkington
Title: Principal
<PAGE>
ABN AMRO BANK, N.V., HOUSTON
AGENCY, Individually and as
Syndication Agent
By: /s/ Stuart Murray
Name: Stuart Murray
Title: Vice President
By: /s/ Deanna Breland
Name: Deanna Breland
Title: Vice President
<PAGE>
ARGENTARIA, CAJA POSTAL Y BANCO
HIPOTECARIO, NEW YORK BRANCH
By: /s/Augusto Godoy
Name: Augusto Godoy
Title: General Manager
<PAGE>
BANCO ESPIRITO SANTO E COMMERCIAL
DE LISBOA, NASSAU BRANCH
By: /s/ Andrew M. Orsen
Name: Andrew M. Orsen
Title: Vice President
By: /s/ Terry R. Hull
Name: Terry R. Hull
Title: Senior Vice President
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ A. S. Norsworthy
Name: A. A. Norsworthy
Title: Sr. Team Leader-
Loan Operations
<PAGE>
THE BANK OF TOKYO - MITSUBISHI,
LTD.
By: /s/ Michael G. Meiss
Name: Michael G. Meiss
Title: Vice President & Manager
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Philippe Soustna
Name: Philippe Soustna
Title: Senior Vice President
<PAGE>
DEN NORSKE BANK ASA, NEW YORK
BRANCH
By: /s/ Ole B. Hjertaker
Name: Ole B. Hjertaker
Title: First Vice President
By: /s/ Chr. Tobias Backer
Name: Chr. Tobias Backer
Title: Assistant Vice President
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY,
Individually and as Documentation
Agent
By: /s/ Richard A. Gould
Name: Richard A. Gould
Title: Director
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: /s/ Carol Brandt
Name: Carol Brandt
Title: Vice President
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By: /s/Felicia LaForgia
Name: Felicia LaForgia
Title: Vice President
By: /s/ Thomas Lee
Name: Thomas Lee
Title: Associate
EXHIBIT 10.28
Amended and Restated
Employment Agreement
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of
December 16th, 1999, is by and among GLOBAL MARINE INC., a
Delaware corporation ("GMI"), GLOBAL MARINE CORPORATE SERVICES
INC., a California corporation (the "Company") and ROBERT E. ROSE
(the "Executive").
WHEREAS, GMI, the Company and the Executive entered into an
employment agreement dated as of May 5, 1998; and
WHEREAS, GMI, the Company and the Executive desire to enter
into an amended and restated employment agreement (the
"Agreement"), which Agreement will replace and thereby supersede
any and all prior employment agreements and amendments thereto
previously executed among GMI, the Company and the Executive;
NOW THEREFORE, in consideration of the mutual promises,
agreements and covenants and subject to the terms and conditions
contained in this Agreement, GMI, the Company and the Executive
hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
terms will have the following meanings unless otherwise expressly
provided in this Agreement:
1.1 BOARD. "Board" means the Board of Directors of GMI.
1.2 CAUSE. "Cause" means an act or acts of misconduct
harmful to GMI or any of its affiliates, including
without limitation any violation of any policy
regarding the use and possession of alcohol, illegal
drugs, firearms or dangerous weapons that is applicable
to employees of GMI and its affiliates generally, and
will not mean inadequate performance or incompetence.
1.3 CHANGE IN CONTROL. A "Change in Control" means the
occurrence of any of the following events:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d) or
14(d) of the U.S. Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act)
of 35% or more of either (A) the then
outstanding shares of common stock of GMI or
of any affiliate of GMI by which the
Executive is employed or which directly or
indirectly owns or controls any affiliate by
which the Executive is employed (the
"Outstanding Company Common Stock") or (B)
the combined voting power of the then
outstanding voting securities of GMI or of
any affiliate of GMI by which the Executive
is employed or which directly or indirectly
owns or controls any affiliate by which the
Executive is employed entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities");
provided, however, that the following
acquisitions will not constitute a Change in
Control: (I) any acquisition by GMI or any
affiliate of GMI that remains under GMI's
control, (II) any acquisition by any employee
benefit plan (or related trust) sponsored or
maintained by GMI or any affiliate controlled
by GMI, (III) the sale, exchange, transfer or
other disposition of substantially all of the
assets of GMI or of any affiliate of GMI by
which the Executive is employed or which
directly or indirectly owns or controls any
affiliate by which the Executive is employed
to the Chief Executive Officer of GMI (the
"CEO"), alone or with other officers, or a
merger, consolidation or other reorganization
involving GMI or any affiliate of GMI by
which the Executive is employed or which
directly or indirectly owns or controls any
affiliate by which the Executive is employed
and the CEO, alone or with other officers, or
any entity in which the CEO (alone or with
other officers) has, directly or indirectly,
a substantial equity or ownership interest,
(IV) a transaction otherwise commonly
referred to as a "management leveraged
buyout," or (V) any acquisition by any
corporation pursuant to a reorganization,
merger or consolidation, if, following such
reorganization, merger or consolidation, the
conditions described in clauses (I), (II),
(III), or (IV) are satisfied; or
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however,
that any individual becoming a director
subsequent to the date hereof whose election,
or nomination for election by GMI's
stockholders, was approved by a vote of at
least a majority of the directors then
comprising the Incumbent Board will be
considered as though such individual were a
member of the Incumbent Board, but excluding
for this purpose any such individual whose
initial assumption of office occurs as a
result of either an actual or threatened
election contest (meaning a solicitation of
the type that would be subject to Rule 14a-11
of Regulation 14A under the Exchange Act) or
other actual or threatened solicitation of
proxies or consents by or on behalf of a
Person other than the Board; or
(iii) Approval by the stockholders of GMI of a
reorganization, merger or consolidation, in
each case unless, following such
reorganization, merger or consolidation, (A)
more than 50% of, respectively, the then
outstanding shares of common stock of the
corporation resulting from such
reorganization, merger or consolidation and
the combined voting power of the then
outstanding voting securities of such
corporation entitled to vote generally in the
election of directors is then beneficially
owned, directly or indirectly, by all or
substantially all of the individuals and
entities who were the beneficial owners,
respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities immediately prior to such
reorganization, merger or consolidation in
substantially the same proportions as their
ownership, immediately prior to such
reorganization, merger or consolidation, of
the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the
case may be, (B) no Person (excluding GMI,
any affiliate of GMI that remains under GMI's
control, any employee benefit plan (or
related trust) sponsored or maintained by GMI
or by any affiliate controlled by GMI or such
corporation resulting from such
reorganization, merger or consolidation, and
any Person beneficially owning, immediately
prior to such reorganization, merger or
consolidation, directly or indirectly, 35% or
more of the Outstanding Company Common Stock
or Outstanding Company Voting Securities, as
the case may be) beneficially owns, directly
or indirectly, 35% or more of, respectively,
the then outstanding shares of common stock
of the corporation resulting from such
reorganization, merger or consolidation or
the combined voting power of the then
outstanding voting securities of such
corporation entitled to vote generally in the
election of directors, and (C) at least a
majority of the members of the board of
directors of the corporation resulting from
such reorganization, merger or consolidation
were members of the Incumbent Board at the
time of the execution of the initial
agreement providing for such reorganization,
merger or consolidation; or
(iv) Approval by the stockholders of GMI of any plan or
proposal which would result directly or indirectly
in (A) a complete liquidation or dissolution of
GMI or of any affiliate of GMI by which the
Executive is employed, or (B) the liquidation,
transfer, sale or other disposition of all or
substantially all of the assets of GMI or of any
affiliate of GMI by which the Executive is
employed or which directly or indirectly owns or
controls any affiliate by which the Executive is
employed, other than to a corporation with respect
to which following such sale or other disposition
(I) more than 50% of, respectively, the then
outstanding shares of common stock of such
corporation and the combined voting power of the
then outstanding voting securities of such
corporation entitled to vote generally in the
election of directors is then beneficially owned,
directly or indirectly, by all or substantially
all of the individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to
such sale or other disposition in substantially
the same proportions as their ownership,
immediately prior to such sale or other
disposition, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities,
as the case may be, (II) no Person (excluding GMI,
any affiliate of GMI that remains under GMI's
control, any employee benefit plan (or related
trust) sponsored or maintained by GMI or any
affiliate controlled by GMI or such corporation,
and any Person beneficially owning, immediately
prior to such sale or other disposition, directly
or indirectly, 35% or more of the Outstanding
Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns,
directly or indirectly, 35% or more of,
respectively, the then outstanding shares of
common stock of such corporation or the combined
voting power of the then outstanding voting
securities of such corporation entitled to vote
generally in the election of directors, and (III)
at least a majority of the members of the board of
directors of such corporation were members of the
Incumbent Board at the time of the execution of
the initial agreement or action of the Board
providing for such sale or other disposition of
assets.
1.4 EFFECTIVE PERIOD. The "Effective Period" means the 36-
month period following any Change in Control (even if
such 36-month period will extend beyond the Term (as
defined in Section 3 hereof) of this Agreement or any
extension thereof).
1.5 GOOD REASON. "Good Reason" means, unless the
Executive has consented in writing thereto, the
occurrence of any of the following:
(i) A reduction of the Executive's title, duties,
authority, responsibilities or status, or any
other action which results in a diminution in such
title, duties, authority, responsibilities or
status, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in
bad faith and which is remedied by GMI or the
Executive's employer promptly after receipt of
notice thereof given by the Executive, or the
Board's failure to elect or reelect or to appoint
or reappoint the Executive to the offices of
Chairman of the Board, President and Chief
Executive Officer of GMI;
(ii) A reduction by GMI or the Executive's employer in
the Executive's Annual Salary (as defined in
Section 4.1 hereof);
(iii)The relocation of the Executive's office to a
location more than 40 miles outside Houston, Texas;
(iv) Following a Change in Control, unless a plan
providing a substantially similar compensation or
benefit is substituted, (A) the failure by GMI or
any of its affiliates to continue in effect any
material fringe benefit or compensation plan,
retirement plan, life insurance plan, health and
accident plan or disability plan in which the
Executive is participating prior to the Change in
Control, or (B) the taking of any action by GMI or
any of its affiliates which would adversely affect
the Executive's participation in or materially
reduce his benefits under any of such plans or
deprive him of any material fringe benefit;
(v) Following a Change in Control, the failure of GMI
or the affiliate of GMI by which the Executive is
employed, or any affiliate which directly or
indirectly owns or controls any affiliate by which
the Executive is employed, to obtain the
assumption in writing of the obligations of GMI
and the Company to perform this Agreement by any
successor to all or substantially all of the
assets of GMI or such affiliate within 15 days
after a reorganization, merger, consolidation,
sale or other disposition of assets of GMI or such
affiliate; or
(vi) The failure to perform or breach of this Agreement
by GMI or the Company.
2. EMPLOYMENT BY THE COMPANY; DUTIES. The Company hereby
employs the Executive and the Executive hereby accepts employment
by the Company, in accordance with and subject to the terms and
conditions of this Agreement. Executive will serve in the
capacity of Chairman of the Board, President and Chief Executive
Officer of GMI and will also serve in those offices and
directorships of GMI and its affiliates to which he may from time
to time be appointed or elected. The Executive will devote all
reasonable efforts and all of his business time and services to
GMI and its affiliates, subject to the direction of the Board and
the Boards of Directors of such affiliates. The Executive will
not engage in any other business activities except for passive
investments and his farm and ranching interests and service on
the Board of Directors of Superior Energy Services, Inc. or any
successor, which activities will not materially interfere with
the Executive's obligations hereunder.
3. TERM. The term of this Agreement (the "Term") will
commence on the date first above written (the "Commencement
Date") and will continue until the close of the business day on
October 23, 2003 (the "Expiration Date"), unless sooner
terminated as herein provided.
4. COMPENSATION AND OTHER BENEFITS.
4.1 ANNUAL SALARY. The Company will pay to the Executive
an annual salary at a rate of five hundred twenty-five
thousand dollars ($525,000) per year (the "Annual
Salary"), subject to increase at the sole discretion of
the Board. The Annual Salary will be payable in
accordance with the payroll policies of the Company as
from time to time in effect, but in no event less
frequently than once each month, less deductions
required to be withheld by applicable law and
regulations.
4.2 BONUS. If determined by the Board, the Company may
declare and pay an incentive bonus to the Executive
with respect to the fiscal years ending during the Term
(the "Incentive Bonus"). The amount of the Incentive
Bonus payable during the Term will be determined by the
Board, in its sole discretion.
4.3 EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN. The Executive
is a participant in the Global Marine Executive
Supplemental Retirement Plan (the "SERP") effective as
of May 5, 1998. For purposes of determining the amount
of the Normal Retirement Benefit and the Executive's
eligibility for an Early Retirement Benefit under the
SERP (as such terms are defined therein), the Executive
has been and will continue to be credited with three
years of employment with the Company for each actual
year of employment with GMI or any of its affiliates
from and after May 5, 1998. In addition, in the event
the Executive's employment with GMI and it affiliates
terminates due to death, to disability pursuant to
Section 9.2 hereof, to involuntary termination without
cause under Section 9.5 or 9.6 hereof, or to
termination by the Executive for Good Reason under
Section 9.5 or 9.6 hereof, he will be deemed eligible
to receive an Early Retirement Benefit under the SERP
calculated as though the Executive had attained 15
years of employment with GMI and its affiliates. In
all circumstances the Executive's SERP benefit will be
based on an amount ("Base Earnings") equal to the sum
of his Annual Salary and the greater of his actual
Incentive Bonus or two-thirds of his Annual Salary for
each 12-month period in the 36 consecutive months of
highest Base Earnings.
4.4 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The Company
and GMI agree to permit the Executive during the Term,
if and to the extent eligible, to participate in any
401(k) plan, retirement plan, group life,
hospitalization or disability insurance plan, health
program, pension plan, similar benefit plan or other
so-called "fringe benefits" of the Company or GMI
(collectively, "Benefits") which may be available to
other senior executives of the Company or GMI on terms
no less favorable to the Executive than the terms
offered to such other executives.
4.5 OTHER PERQUISITES. The Executive will be entitled to
expense reimbursement, office appointments, secretarial
support and other perquisites as are provided in
accordance with company policy or practice for senior
executives of GMI. In addition, the Company will
provide the Executive with the use of the automobile
which was made available to the Executive by Cardinal
Services, Inc. or with the use of a similar automobile.
5. CONFIDNETIALITY AND NON-SOLICITATION. The Executive
acknowledges that (a) his work for GMI and its affiliates will
give him access to trade secrets of and confidential information
concerning the business of GMI and its affiliates (the "Company
Business"); and (b) the agreements and covenants contained in
this Agreement are essential to protect the business and goodwill
of GMI and its affiliates. Accordingly, during the Term of this
Agreement and during any Salary Continuation Period or CIC Salary
Continuation Period, the Executive covenants and agrees as
follows:
5.1 To hold in a fiduciary capacity for the benefit of GMI
and its affiliates all secret, proprietary or
confidential material, knowledge, data or any other
information relating to GMI or any of its affiliated
companies, and the Company Business ("Confidential
Information"), which has been obtained by the Executive
during the Executive's employment by GMI or any of its
affiliated companies and that has not been, is not now
and hereafter does not become public knowledge (other
than by acts by the Executive or representatives of the
Executive in violation of this Agreement), and will
not, without the prior written consent of the Company
or as may otherwise be required by law or legal
process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and
those designated by it. The Executive further agrees
to return to the Company any and all records and
documents (and all copies thereof) and all other
property belonging to the Company or relating to GMI,
its affiliates or their businesses, upon termination of
Executive's employment with GMI and its affiliates.
5.2 Not to solicit or entice any other employee of GMI or
its affiliates to leave GMI or its affiliates to go to
work for any other business or organization which is in
direct or indirect competition with GMI or any of its
affiliates, nor request or advise a customer or client
of GMI or its affiliates to curtail or cancel such
customer's business relationship with GMI or its
affiliates.
6. RIGHTS AND REMEDIES UPON BREACH. If the Executive breaches,
or threatens to commit a breach of, any of the provisions
contained in Section 5 of this Agreement (the "Restrictive
Covenants"), GMI and the Company will have the following rights
and remedies, each of which rights and remedies will be
independent of the others and severally enforceable, and each of
which is in addition to, and not in lieu of, any other rights and
remedies available to GMI or the Company under law or in equity:
6.1 SPECIFIC PERFORMANCE. The right and remedy to have
the Restrictive Covenants specifically enforced by any
court of competent jurisdiction, it being agreed that
any breach or threatened breach of the Restrictive
Covenants would cause irreparable injury to GMI and the
Company and that money damages would not provide an
adequate remedy.
6.2 ACCOUNTING. The right and remedy to require the
Executive to account for and pay over to GMI or the
Company all compensation, profits, monies, accruals,
increments or other benefits derived or received by the
Executive as the result of any action constituting a
breach of the Restrictive Covenants.
6.3 CESSATION OF SEVERANCE, BENEFITS AND OTHER PAYMENTS.
The right and remedy to cease any further severance,
benefit or other compensation payments under this
Agreement from and after the commencement of such
breach by the Executive.
The Executive hereby acknowledges and agrees that the Restrictive
Covenants are reasonable and valid in duration and in all other
respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants will not thereby be
affected and will be given full effect without regard to the
invalid portions.
7. NOTICE OF TERMINATION. Any termination of the Executive's
employment by reason of disability pursuant to Section 9.2
hereof, by the Company for Cause, or by the Executive for Good
Reason will be communicated by Notice of Termination to the other
party hereto given in accordance with Section 15 of this
Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (a) indicates the
specific termination provision in this Agreement relied upon, (b)
to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated, and (c) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the
employment termination date. The failure to set forth in the
Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause will not waive any right of
the party giving the Notice of Termination hereunder or preclude
such party from asserting such fact or circumstance in enforcing
its rights hereunder.
8. DATE OF TERMINATION. Subject to Section 9.4 regarding
Termination for Cause, "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified
therein, or the Executive's last day as an active employee of the
Company and its affiliates before a termination of employment due
to death or disability or a termination without Cause, as the
case may be.
9. TERMINATION.
9.1 TERMINATION UPON DEATH. If the Executive dies during
the Term, this Employment Agreement will terminate;
provided, however, that in any such event, the Company
will pay to the Executive, or to his estate, a lump sum
amount in cash equal to the product of three (3) times
the Executive's Annual Salary then in effect (or, if
the Executive's Annual Salary has been reduced in
breach of this Agreement, the Executive's Annual Salary
before such reduction), and any Benefits that have
vested in the Executive at the time of such termination
as a result of his participation in any benefits plans
of the Company or any of its affiliates will be paid to
the Executive, or to his estate or designated
beneficiary, in accordance with the provisions of such
plan.
9.2 TERMINATION UPON DISABILITY. If during the Term
the Executive becomes physically or mentally
disabled, whether totally or partially, as
evidenced by the written statement of a competent
physician licensed to practice medicine in the
United States who is mutually acceptable to the
Company and the Executive, or his closest relative
if he is not then able to make such a choice, so
that the Executive is unable, with reasonable
accommodation, substantially to perform his
services hereunder (i) for a period of four
consecutive months, or (ii) for shorter periods
aggregating six months during any twelve-month
period, the Company may at any time after the last
day of the four consecutive months of disability
or the day on which the shorter periods of
disability equal an aggregate of six months, by
Notice of Termination, terminate the Executive's
employment hereunder. In the event of such
termination, the Term will terminate on the date
of such termination and the Company will (a) pay
to the Executive, or to his estate, a lump sum
amount in cash equal to the product of three times
Executive's Annual Salary then in effect (or, if
the Executive's Annual Salary has been reduced in
breach of this Agreement, the Executive's Annual
Salary before such reduction), and (b) any
Benefits that have vested in the Executive at the
time of such termination as a result of his
participation in any benefit plans of the Company
or any of its affiliates will be paid to the
Executive, or to his estate or designated
beneficiary, subject to the provisions of such
plans.
9.3 TERMINATION BY THE EXECUTIVE. Any termination of this
Agreement by the Executive during the Term, except such
termination for Good Reason, will be deemed to be a
breach of the terms of this Agreement and will entitle
GMI and its affiliates to discontinue payment of all
Annual Salary, Incentive Bonuses and Benefits accruing
from and after the Date of Termination. Any Benefits
that have vested in the Executive at the time of such
termination as a result of his participation in any of
the Company's benefit plans will be paid to the
Executive, or to his estate or designated beneficiary,
subject to the provisions of such plans.
9.4 TERMINATION FOR CAUSE. The Company has the right,
at any time during the Term, subject to all of the
provisions hereof, exercisable by serving a Notice
of Termination, to terminate the Executive's
employment under this Agreement and discharge the
Executive for Cause. If such right is exercised,
the obligations of GMI and the Company to the
Executive will be limited solely to payment by the
Company of unpaid Annual Salary accrued, and
subject to the provisions of the applicable
benefit plans, any Benefits vested up to the
effective date specified in the Company's Notice
of Termination. Prior to the effectiveness of any
termination or discharge of the Executive for
Cause under this Agreement, the Executive will be
given thirty days from the date he receives the
Notice of Termination and an opportunity to be
heard by the Board in the event the Executive
disputes the allegations, facts, or circumstances
claimed to provide the basis for such termination
or discharge.
9.5 TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE
EXECUTIVE FOR GOOD REASON. The Company has the right,
at any time during the Term, subject to all of the
provisions hereof, to terminate the Executive's
employment under this Agreement and discharge the
Executive without Cause. Furthermore, notwithstanding
any other provision of this Agreement, the Executive's
employment under this Agreement may be terminated at
any time during the Term by the Executive for Good
Reason. For purposes of this Agreement, any good faith
determination of "Good Reason" made by the Executive
will be conclusive. In the event of termination of
employment either by the Company without Cause or by
the Executive for Good Reason, the Company will pay the
following severance payments and benefits to the
Executive:
(i) Cash in the amount of the Executive's Annual
Salary through the Date of Termination to the
extent not theretofore paid;
(ii) Any and all compensation deferred under a deferred
compensation plan or program of GMI or any of its
affiliates in a lump sum cash payment;
(iii)The greater of (a) the Executive's Annual Salary
for the number of full months remaining in the
Term of this Agreement had the Executive's
employment not been so terminated or (b) the
product of two (2) times the Executive's Annual
Salary, in each case based on the Annual Salary of
the Executive in effect on the Date of Termination
(or, if the Executive's Annual Salary has been
reduced in breach of this Agreement, the
Executive's Annual Salary before such reduction)
and payable in equal monthly installments over the
greater of the remaining Term of this Agreement or
two (2 ) years following the Date of Termination
(the "Salary Continuation Period");
(iv) A lump sum cash amount equal to the greater of
(a) the sum of actual Incentive Bonuses paid or
payable to the Executive, including any amount
deferred (whether mandatory or elective) or (b)
the sum of target Incentive Bonuses established
for the Executive, in either case for the two
years immediately prior to the Date of
Termination, payable within 30 days after the Date
of Termination.
v) The continuation of the provision of health
insurance, dental insurance and life insurance
benefits for the Salary Continuation Period to the
Executive and the Executive's family at least
equal to those which would have been provided to
them in accordance with the plans, programs,
practices and policies of the Company as in effect
and applicable generally to other peer executives
and their families during the 90-day period
immediately preceding the Date of Termination;
provided, however, that if the Executive becomes
re-employed with another employer and is eligible
to receive medical or other welfare benefits under
another employer provided plan, the medical and
other welfare benefits described herein will be
secondary to those provided under such other plan
during such applicable period of eligibility; and
(vi) The continued accrual of years of service under
any and all defined benefit retirement plans
sponsored or maintained by GMI or any affiliate
controlled by GMI in effect on and in which the
Executive was a participant on the Date of
Termination, in each case for the Salary
Continuation Period, but in no event beyond the
date the Executive or the Executive's spouse
begins to receive a benefit under any such plan.
9.6 TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN
CONTROL. If, during the Effective Period, the Company
terminates the Executive's employment other than for
Cause or the Executive terminates his employment with
the Company for Good Reason, the Company will pay the
following to the Executive:
(i) Cash in the amount of The Executive's Annual
Salary through the Date of Termination to the
extent not theretofore paid;
(ii) Any and all compensation deferred under a deferred
compensation plan or program of GMI or any of its
affiliates in a lump sum cash payment;
(iii)The greater of (a) the Executive's Annual
Salary for the number of full months remaining in
the Term of this Agreement had the Executive's
employment not been so terminated or (b) the
product of three (3) times the Executive's Annual
Salary, in each case based on the Annual Salary of
the Executive in effect on the Date of Termination
(or, if the Executive's Annual Salary has been
reduced in breach of this Agreement, the
Executive's Annual Salary before such reduction)
and payable in equal monthly installments over the
greater of the remaining Term of this Agreement or
three (3) years following the Date of Termination
(the "CIC Salary Continuation Period");
(iv) A lump sum cash amount equal to three times the
greater of (a) the highest Incentive Bonus paid
or payable to the Executive, including any amount
deferred (whether mandatory or elective) in any
one year in the three years prior to the Date of
Termination, or (b) the highest target Incentive
Bonus established for the Executive in the three
years immediately prior to the Date of
Termination, in either case, payable within 30
days after the Date of Termination.
(v) The continuation of the provision of health
insurance, dental insurance and life insurance
benefits for the CIC Salary Continuation Period to
the Executive and the Executive's family at least
equal to those which would have been provided to
them in accordance with the plans, programs,
practices and policies of the Company as in effect
and applicable generally to other peer executives
and their families during the 90-day period
immediately preceding the Effective Period or on
the Date of Termination, at the election of the
Executive; provided, however, that if the
Executive becomes re-employed with another
employer and is eligible to receive medical or
other welfare benefits under another employer
provided plan, the medical and other welfare
benefits described herein will be secondary to
those provided under such other plan during such
applicable period of eligibility; and
(vi) The continued accrual of years of service under
any and all defined benefit retirement plans
sponsored or maintained by GMI or any affiliate
controlled by GMI in effect on and in which the
Executive was a participant on the Date of
Termination, in each case for the CIC Salary
Continuation Period; but in no event beyond the
date the Executive or the Executive's spouse
begins to receive a benefit under any such plan.
9.7 "BASIC EARNINGS" UNDER RETIREMENT PLANS. Any and all
amounts paid under this Agreement in the amount of or
otherwise in respect of the Executive's Annual Salary
and Incentive Bonuses, whether or not deferred under a
deferred compensation plan or program, are intended to
be and will be "Basic Earnings" for purposes of
determining Basic Earnings under any and all retirement
plans sponsored or maintained by GMI or any affiliate
controlled by GMI.
10. EFFECT OF RETIREMENT OR DISABILITY PAYMENTS. In the event
the Executive or the Executive's spouse begins to receive a
benefit under one or more retirement plans sponsored or
maintained by GMI or by any affiliate of GMI or begins to receive
any disability payment that has been funded or insured wholly or
in part at the expense of GMI or any affiliate of GMI, the
amounts that the Executive or the Executive's spouse would
otherwise be entitled to receive under this Agreement in the
amount of or otherwise in respect of the Executive's Annual
Salary will be reduced by the amount of any such retirement
benefit or disability payments, as the case may be.
11. MITIGATION OF DAMAGES. The Executive will not be required
to mitigate damages or the amount of any payment provided for
under this Agreement by seeking other employment or otherwise.
Except as otherwise specifically provided in this Agreement, the
amount of any payment provided for under this Agreement will not
be reduced by any compensation earned by the Executive as the
result of self-employment or employment by another employer or
otherwise.
12. TAX EFFECT.
12.1 If GMI's independent accounting firm determines that
any non-stock payment or distribution, as defined
below, by GMI or any of its affiliates to or for the
benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of
this Agreement or otherwise) (a "Payment") constitutes
a "parachute payment" as defined in Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code")
(or any successor provision thereto) ("Parachute
Payment") which would be subject to the excise tax
imposed by Section 4999 of the Code, or any interest or
penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive will be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount equal to
the sum of the Excise Tax, any and all federal, state
and local income taxes and Medicare tax on the Excise
Tax, and the excise tax imposed by Section 4999 of the
Code on the Excise Tax, together with any interest or
penalties incurred by the Executive with respect to
such income, Medicare and excise taxes. For purposes
of this Section 12, a "non-stock payment or
distribution" is a payment, distribution, deemed
payment, or deemed distribution that is not in the form
of or in respect of a security that represents an
equity interest in GMI or a derivative thereof,
including without limitation GMI stock, restricted GMI
stock, GMI performance stock, stock options and stock
appreciation rights in respect of GMI stock, the lapse
or termination of any restriction in respect of any of
the foregoing, and any other similar interest, right or
benefit.
2.2 Subject to the provisions of Section 12.4 below, all
determinations required to be made under this Section
12, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determinations, will be made by GMI's independent
accounting firm, which will provide detailed supporting
calculations both to the Company and the Executive
within 15 business days of the receipt of notice from
the Executive that there has been a Payment, or such
earlier time as is requested by the Company. All fees
and disbursements of GMI's independent accounting firm
will be paid by the Company.
12.3 Any Gross-Up Payment will be paid by the Company to the
Executive within five days of the Company's receipt of
the determination of GMI's independent accounting firm.
If such firm determines that no Excise Tax is payable
by the Executive, it will furnish the Executive with a
written opinion that the Executive has substantial
authority not to report any Excise Tax on the
Executive's Federal income tax return. If the
Executive is subsequently required to make a payment of
any Excise Tax, then GMI's independent accounting firm
will determine the amount of such additional payment
("Gross-Up Underpayment"), and any such Gross-Up
Underpayment will be promptly paid by the Company to or
for the benefit of the Executive. The fees and
disbursements of GMI's independent accounting firm will
be paid by the Company.
12.4 The Executive will notify the Company in writing within
15 days of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of a Gross-Up Payment. If the Company notifies
the Executive in writing that it desires to contest
such claim and that it will bear the costs and provide
the indemnification as required by this paragraph, the
Executive will:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company reasonably requests in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(iii)cooperate with the Company in good faith in order
to effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim; provided,
however, that the Company will bear and pay
directly all costs and expenses (including
additional interest and penalties) incurred in
connection with such contest and will indemnify
and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto,
imposed as a result of such representation and
payment of costs and expenses. The Company will
control all proceedings taken in connection with
such contest; provided, however, that if the
Company directs the Executive to pay such claim
and sue for a refund, the Company will advance the
amount of such payment to the Executive, on an
interest-free basis, and will indemnify and hold
the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including
interest or penalties with respect thereto,
imposed with respect to such advance or with
respect to any imputed income with respect to such
advance.
12.5 If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 12.4(iv),
the Executive becomes entitled to receive any refund
with respect to such claim, the Executive will, within
10 days of receipt thereof, pay to the Company the
amount of such refund, together with any interest paid
or credited thereon after taxes applicable thereto.
If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 12.4(iv), a
determination is made that the Executive will not be
entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to
the expiration of 30 days after such determination,
then such advance will be forgiven and will not be
required to be repaid and the amount of such advance
will offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
13. LEGAL FEES. In the event of a dispute or disagreement
regarding the right of the Executive to receive any compensation
or other benefit under this Agreement or the amount of such
compensation or other benefit, the Executive will be reimbursed
by the Company for any and all attorney's fees and other costs
and expenses as and when expended by the Executive in connection
with such dispute or disagreement, regardless of the outcome
thereof. Further, in the event the Executive becomes entitled to
any monies or benefits hereunder, the Company agrees to pay such
monies and provide such benefits without regard to any and all
claims, offsets or causes of action which the Company or any of
its affiliates may have against the Executive until such time, if
ever, as the Company will have obtained a final judgment in its
favor in a court of competent jurisdiction regarding such claim,
offset or cause of action.
14. INDEMNIFICATION. The Executive will be entitled to
indemnification of claims arising by reason of the fact that the
Executive is or was a director or officer of GMI or its
affiliates in accordance with the standard terms of
indemnification attached hereto as Attachment A.
15. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES.
15.1 The Executive warrants and represents that he was not
terminated from employment with Diamond Offshore
Drilling Inc. for any reason that would be deemed to
constitute "cause" within the meaning of his employment
agreement with Diamond Offshore Drilling Inc.
15.2 The Executive warrants that he will not, during the
course of his employment under this Agreement, disclose
any confidential or proprietary information obtained
during his prior employment relationships, and will not
use such confidential information in a manner that
would violate his contractual obligations to prior
employers. In addition, the Executive warrants that he
will comply with the nonsolicitation of employees
requirement of his prior employment agreement with
Diamond Offshore Drilling Inc.
15.3 The Executive warrants that the execution and
performance of this Agreement is not in violation of
any existing agreement to which he is a party.
16. NOTICES. Any notice provided for in this Agreement will be
given in writing and be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice
will be deemed given when so delivered personally, telegraphed,
telexed or sent by facsimile transmission, or, if mailed, on the
date of actual receipt thereof. Notices will be properly
addressed to the parties at their respective addresses set forth
below or to such other address as either party may later specify
by notice to the other in accordance with the provisions of this
paragraph:
If to the Company and GMI:
Global Marine Inc.
777 North Eldridge Parkway
Houston, Texas 77079-4493
Attention: Corporate Secretary
If to the Executive:
Robert E. Rose
703 St. Ives
Houston, Texas 77079
17. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements, written or oral, with
respect thereto, including, without limitation, any and all prior
employment or severance agreements and related amendments entered
into between GMI, the Company and the Executive. Furthermore,
the payments and benefits provided for under this Agreement are
separate and apart from and, to the extent paid, will be in lieu
of any payment under any plan or policy of GMI or its affiliates
regarding the payment of severance benefits generally.
18. WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder will operate
as a waiver thereof, nor will any waiver on the part of any party
of any such right, power or privilege hereunder, nor any single
or partial exercise of any right, power or privilege hereunder,
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege hereunder.
19. GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the state of Texas
(without giving effect to the choice of law provisions thereof),
where the employment of the Executive will be deemed, in part, to
be performed, and enforcement of this Agreement or any action
taken or held with respect to this Agreement will be taken in the
courts of appropriate jurisdiction in Houston, Texas.
20. ASSIGNMENT. This Agreement, and any rights and obligations
hereunder, may not be assigned by the Executive and may be
assigned by GMI or the Company only to any successor in interest,
whether by merger, consolidation, acquisition or the like, or to
purchasers of substantially all of the assets of GMI or the
Company, as the case may be.
21. BINDING AGREEMENT. This Agreement will inure to the benefit
of and be binding upon GMI, the Company and their respective
successors and assigns and the Executive and his legal
representatives.
22. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered will
be deemed an original, but all of which together will constitute
one and the same instrument.
23. HEADINGS. The headings in this Agreement are for reference
purposes only and will not in any way affect the meaning or
interpretation of this Agreement.
24. AUTHORIZATION. The Company represents and warrants that the
Board and the Board of Directors of the Company have authorized
the execution of this Agreement.
25. VALIDITY. The invalidity or unenforceability of any
provisions of this Agreement will not affect the validity or
enforceability of any other provisions of this Agreement, which
will remain in full force and effect.
26. VALIDITY CONTEST. The Company will promptly pay any and all
legal fees and expenses incurred by the Executive from time to
time as a direct result of GMI or the Company contesting the due
execution, authorization, validity or enforceability of this
Agreement.
27. NO PRESUMPTION AGAINST INTEREST. This Agreement has been
negotiated, drafted, edited and reviewed by the respective
parties, and, therefore, no provision arising directly or
indirectly here from will be construed against any party as being
drafted by said party.
28. TAX WITHHOLDING. GMI and the Company will have the right to
deduct from all benefits and/or payments made under this
Agreement to the Executive any and all taxes required by law to
be paid or withheld with respect to such benefits or payments.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
The Company The Executive
GLOBAL MARINE
CORPORATE SERVICES INC.
s / Robert E. Rose
Robert E. Rose
s / Thomas R. Johnson
Thomas R. Johnson
Vice President
GMI
GLOBAL MARINE INC.
s / W. Matt Ralls
W. Matt Ralls
Senior Vice President,
Chief Financial Officer and Treasurer
ATTACHMENT A
[DATE]
[NAME AND ADDRESS]
Dear :
This letter will confirm the agreement and understanding
between Global Marine Inc. (the "Company") and you regarding
indemnification in connection with your service as a director,
officer, employee or agent of the Company.
It is and has been the policy of the Company to indemnify
its officers and directors and certain employees and agents
against any costs, expenses and other liabilities to which they
may become subject by reason of their service to the Company, and
to insure them against such liabilities, as and to the extent
available at a commercially reasonable rate, permitted by
applicable law and in accordance with the principles of good
corporate governance. In this regard, the Company's By-laws
(Section III-11) require that the Company indemnify and advance
costs and expenses to (collectively "indemnify") its directors
and officers, in each case including indemnity in respect of
service at the request of the Company as a director or officer of
an affiliate, and provide that the Company may indemnify its
employees and agents, as permitted by Delaware law. A copy of
the relevant provisions of the Company's By-laws, as currently in
effect, are attached hereto.
In consideration of your service to the Company, the Company
shall indemnify you, and hereby confirms its agreement to
indemnify you, to the full extent provided by applicable law and
the By-laws of the Company as currently in effect. In
particular, as provided by the By-laws, the Company shall make
any necessary determination as to your entitlement to
indemnification in respect of any liability within 60 days of
receiving a written request from you for indemnification against
such liability. You have agreed to provide the Company with such
information or documentation as the Company may reasonably
request to evidence the liabilities against which indemnification
is sought or as may be necessary to permit the Company to submit
a claim in respect thereof under any applicable directors and
officers liability insurance or other liability insurance policy.
You have further agreed to cooperate with the Company in the
making of any determination regarding your entitlement to
indemnification. If the Company does not make a determination
within the required 60-day period, a favorable determination will
be deemed to be made, and you shall be entitled to payment,
subject only to your written agreement to refund such payment if
a contrary determination is later made. In the event the Company
shall determine that you are not entitled to indemnification, the
Company shall give you written notice thereof specifying the
reason therefor, including any determinations of fact or
conclusions of law relied upon in reaching such determination.
Notwithstanding any determination made by the Company that you
are not entitled to indemnification, you shall be entitled to
seek a de novo judicial determination of your right to
indemnification under the By-laws, this Agreement or otherwise by
commencing an appropriate action therefor within 180 days after
the Company shall notify you of its determination. The Company
shall not oppose any such action by reason of any prior
determination made by it as to your right to indemnification or,
except in good faith, raise any objection not specifically
relating to the merits of your indemnification claim or not
considered by the Company in making its own determination. In
any such proceeding, the Company shall bear the burden of proof
in showing that your conduct did not meet the applicable standard
of conduct required by the By-laws or applicable law for
indemnification. It is understood that, as provided in Section
III-11 of the By-laws, any expenses incurred by you in any
investigation or proceeding by the Company or before any court
commenced for the purpose of making any such determination shall
be reimbursed by the Company. No future amendment of the By-laws
shall diminish your rights under this Agreement, unless you shall
have consented to such amendment.
Your right to indemnification as aforesaid shall be in
addition to any right to remuneration to which you may from time
to time be entitled as a director, officer, employee or agent of
the Company.
It is understood and agreed that your right to
indemnification shall not entitle you to continue in your present
position with the Company or any future position to which you may
be appointed or elected and that you shall be entitled to
indemnification under the By-laws only in respect to liabilities
arising out of acts or omissions or alleged acts or omissions by
you as a director, officer, employee or agent or as otherwise
provided by the By-laws, but you shall be entitled to such
indemnification with respect to any such liability, whether
incurred or arising during or after your service as a director,
officer, employee or agent and whether before or after the date
of this letter, in respect of any claim, cause, action,
proceeding or investigation, whether commenced, accruing or
arising during or after your service as a director, officer,
employee or agent and whether before or after the date of this
letter.
This Agreement shall terminate upon the later of (i) the
tenth anniversary of the date on which you shall cease to be a
director, officer, employee or agent of the Company or (ii) the
final termination or resolution of all actions, suits,
proceedings or investigations commenced within such ten-year
period and relating to the Company or any of its affiliates or
your services thereto to which you may be or become a party and
of all claims for indemnifications by you under this Agreement
asserted within such ten-year period.
It is understood and agreed that this Agreement is binding
upon the Company and its successors and shall inure to your
benefit and that of your heirs, distributees and legal
representatives. If any provisions of this Agreement shall be
deemed by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the balance of this Agreement shall
remain in effect, and if any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable
to all other persons and circumstances. This Agreement, and the
interpretation and enforcement thereof, shall be governed by the
laws of the state of Delaware. In confirmation of the provisions
of the Company's By-laws, the Company hereby agrees to pay, and
you shall be held harmless from and indemnified against, any
costs and expenses (including attorneys' fees) which you may
reasonably incur in connection with any challenge to the validity
of, or the performance and enforcement of, this Agreement, in the
same manner as provided by the Company's By-laws.
If the foregoing is in accordance with your understanding of
our agreement, kindly countersign the enclosed copy of this
letter, whereupon this letter shall become a binding agreement in
accordance with the laws of the state of Delaware.
GLOBAL MARINE INC.
By:
______________________________
[OFFICER]
_______________________________
[NAME]
GLOBAL MARINE INC.
BY-LAW REGARDING INDEMNIFICATION
SECTION III-11 INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS: (a)(i) The corporation, to the full
extent permitted, and in the manner required by the laws of the
state of Delaware, as in effect at the time of the adoption of
this revised Section III-11 or as such laws may be amended from
time to time, shall indemnify any person who was or is made a
party to or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (including any
appeal thereof), whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation), by reason of the fact that such person is or was a
director or officer of the corporation, or, if at a time when he
was a director or officer of the corporation, is or was serving
at the request of the corporation as a director, officer,
partner, trustee, fiduciary, employee or agent (a "Subsidiary
Officer") of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Affiliated
Entity"), against expenses (including attorneys' fees), costs,
judgments, fines, penalties and amounts paid in settlement
actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or
not opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful; provided,
however, that the corporation shall not be obligated to indemnify
against any amount paid in settlement unless the corporation has
consented to such settlement, which consent shall not be
unreasonably withheld. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent shall not, of itself,
create a presumption that the person did not act in good faith
and in a manner which such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, that such person
had reasonable cause to believe that his conduct was unlawful.
Notwithstanding anything to the contrary in the foregoing
provisions of this subparagraph (i) and except for any action,
suit or proceeding brought on behalf of a person to enforce the
right to indemnification hereunder or otherwise, a person shall
not be entitled, as a matter of right, to indemnification
pursuant to this subparagraph (i) against costs or expenses
incurred in connection with any action, suit or proceeding
commenced by such person against any person who is or was a
director, officer, fiduciary, employee or agent of the
corporation or a Subsidiary Officer of an Affiliated Entity, but
such indemnification may be provided by the corporation in any
specific case as permitted by paragraph (f) of this Section III-
11.
(ii) The corporation may indemnify any employee or agent of
the corporation in the manner and to the extent that it shall
indemnify any director or officer under this paragraph (a),
including indemnity in respect of service at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity.
(b)(i) The corporation, to the full extent permitted, and
in the manner required by the laws of the state of Delaware, as
in effect at the time of the adoption of this Section III-11 or
as such laws may be amended from time to time, shall indemnify
any person who was or is made a party to or is threatened to be
made a party to any threatened, pending or completed action or
suit (including any appeal thereof) brought in the right of the
corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the
corporation, or, if at a time when he was a director or officer
of the corporation, is or was serving at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity,
against expenses (including attorneys' fees) and costs actually
and reasonably incurred by such person in connection with such
action or suit if such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification
shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the
corporation unless, and except to the extent that, the Court of
Chancery of the state of Delaware or the court in which such
judgment was rendered shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses and costs as the Court of
Chancery of the state of Delaware or such other court shall deem
proper. Notwithstanding anything to the contrary in the
foregoing provisions of this subparagraph (b)(i), a person shall
not be entitled, as a matter of right, to indemnification
pursuant to this subparagraph (b)(i) against costs and expenses
incurred in connection with any action or suit in the right of
the corporation commenced by such person, but such
indemnification may be provided by the corporation in any
specific case as permitted by paragraph (f) of this Section III-
11.
(ii) The corporation may indemnify any employee or agent of
the corporation in the manner and to the extent that it shall
indemnify any director or officer under this paragraph (b),
including indemnity in respect of service at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity.
(c) Any indemnification under paragraph (a) or (b) of this
Section III-11 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper under the circumstances because such
person has met the applicable standard of conduct set forth in
paragraph (a) or (b) of this Section III-11. Such determination
shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to the
action, suit or proceeding in respect of which indemnification is
sought or by majority vote of the members of a committee of the
Board of Directors composed of at least three members each of
whom is not a party to such action, suit or proceeding, or (ii)
if such a quorum is not obtainable and/or such a committee is not
established or obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders. In the event
a request for indemnification is made by any person referred to
in subparagraph (i) of paragraph (a) or subparagraph (i) of
paragraph (b), the corporation shall cause such determination to
be made not later than 60 days after such request is made.
(d)(i) Notwithstanding the other provisions of this Section
III-11, to the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
paragraph (a) or (b) of this Section III-11, or in defense of any
claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) and costs actually
and reasonably incurred by such person in connection therewith.
(ii) To the extent any person who is or was a director or
officer of the corporation has served or prepared to serve as a
witness in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, or in any
investigation by the corporation or the Board of Directors
thereof or a committee thereof or by any securities exchange on
which securities of the corporation are or were listed or any
national securities association, by reason of his services as a
director or officer of the corporation or, if at a time when he
was a director or officer of the corporation, is or was serving
at the request of the corporation as a Subsidiary Officer of an
Affiliated Entity, the corporation shall indemnify such person
against expenses (including attorney's fees) and costs actually
and reasonably incurred by such person in connection therewith
within 30 days after the receipt by the corporation from such
person of a statement requesting such indemnification, averring
such service and reasonably evidencing such expenses and costs.
The corporation may indemnify any employee or agent of the
corporation to the same extent it is required to indemnify any
director or officer of the corporation pursuant to the foregoing
sentence of this paragraph.
(e)(i) Expenses and costs incurred by any person referred
to in subparagraph (i) of paragraph (a) or subparagraph (i) of
paragraph (b) of this Section III-11 in defending a civil,
criminal, administrative or investigative action, suit or
proceeding shall be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the corporation as authorized
by this Section III-11.
(ii) Expenses and costs incurred by any person referred to
in subparagraph (ii) of paragraph (a) or subparagraph (ii) of
paragraph (b) of this Section III-11 in defending a civil,
criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by
the Board of Directors, a committee thereof or an officer of the
corporation or a committee thereof authorized to so act by the
Board of Directors upon receipt of an undertaking by or on behalf
of such person to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by
the corporation as authorized by this Section III-11.
(f) The provision of indemnification to or the advancement
of expenses and costs to any person under this Section III-11, or
the entitlement of any person to indemnification or advancement
of expenses and costs under this Section III-11, shall not limit
or restrict in any way the power of the corporation to indemnify
or advance expenses and costs to such person in any other way
permitted by law or be deemed exclusive of any right to which any
person seeking indemnification or advancement of expenses and
costs may be entitled under any law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to
action in such person's capacity as an officer, director,
employee or agent of the corporation and as to action in any
other capacity while holding any such position.
(g) The indemnification provided or permitted under this
Section III-11 shall apply in respect of any expense, costs,
judgment, fine, penalty or amount paid in settlement, whether or
not the claim or cause of action in respect thereof accrued or
arose before or after the effective date of this revised Section
III-11. The right of any person who is or was a director,
officer, employee or agent of the corporation to indemnification
and advance payment of expenses and costs under this Section III-
11 shall continue after he shall have ceased to be a director,
officer, employee or agent and shall inure to the benefit of the
heirs, distributees, executors, administrators and other legal
representatives of such person.
(h) This Section III-11 shall be deemed to create a binding
obligation on the part of the corporation to its current and
former officers and directors and their heirs, distributees,
executors, administrators and other legal representatives, and
each director or officer in acting in such capacity shall be
entitled to rely on the provisions of this Section III-11,
without giving notice thereof to the corporation.
(i) The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request
of the corporation as a Subsidiary Officer of any Affiliated
Entity, against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation
would have the power to indemnify such person against such
liability under the provisions of this Section III-11 or
applicable law.
(j)(i) For purposes of this Section III-11, references to
"the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its corporate existence had continued, would
have been permitted under applicable law to indemnify its
directors, officers, employees or agents, so that any person who
is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of
such constituent corporation as a Subsidiary Officer of any
Affiliated Entity, shall stand in the same position under the
provisions of this Section III-11 with respect to the resulting
or surviving corporation as such person would have with respect
to such constituent corporation if its separate existence had
continued.
(ii) For purposes of this Section III-11, references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; references to "serving at
the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted
in good faith and in a manner such person reasonably believed to
be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interest of the corporation" as referred
to in this Section III-11.
EXHIBIT 10.30
Agreement
THIS AGREEMENT is entered into this 15th day of December
1999 by and between GLOBAL MARINE INC., a Delaware corporation
(the "Company"), and ________________ (the "Executive").
WHEREAS, the Company's Board of Directors (the "Board") has
determined that it is in the best interests of the Company and
its stockholders to ensure that the Company and its affiliates
will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a
termination of the Executive's employment in certain
circumstances, including following a Change in Control as defined
herein; and
WHEREAS, the Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened
termination of the Executive's employment in such circumstances
and to provide the Executive with compensation and benefits
arrangements upon such a termination which ensure that the
compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other
corporations;
NOW, THEREFORE, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement with
the Executive, and it is hereby agreed as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
terms will have the following meanings unless otherwise expressly
provided in this Agreement:
(a) BENEFICIARY. "Beneficiary" means any individual, trust
or other entity named by the Executive to receive the
severance payments and benefits payable hereunder in
the event of the death of the Executive during the
Salary Continuation Period or CIC Salary Continuation
Period (both as defined hereunder). Executive may
designate a Beneficiary to receive such payments and
benefits by completing a form provided by the Company
and delivering it to the Company's Corporate Secretary.
The Executive may change his or her designated
Beneficiary at any time (without the consent of any
prior Beneficiary) by completing and delivering to the
Company a new beneficiary designation form. If a
Beneficiary has not been designated by the Executive,
or if no designated Beneficiary survives the Executive,
then the payment and benefits provided under this
Agreement, if any, will be paid to the Executive's
estate.
(b) CAUSE. "Cause" means an act or acts of misconduct
harmful to the Company or any of its affiliates,
including without limitation any violation of any
policy regarding the use and possession of alcohol,
illegal drugs, firearms or dangerous weapons that is
applicable to the employees of the Company and its
affiliates generally, and will not mean inadequate
performance or incompetence.
(c) CHANGE IN CONTROL. A "Change in Control" means the
occurrence of any of the following events:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d) or
14(d) of the U.S. Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act)
of 35% or more of either (A) the then
outstanding shares of common stock of the
Company or of any affiliate of the Company by
which the Executive is employed or which
directly or indirectly owns or controls any
affiliate by which the Executive is employed
(the "Outstanding Company Common Stock") or
(B) the combined voting power of the then
outstanding voting securities of the Company
or of any affiliate of the Company by which
the Executive is employed or which directly
or indirectly owns or controls any affiliate
by which the Executive is employed entitled
to vote generally in the election of
directors (the "Outstanding Company Voting
Securities"); provided, however, that the
following acquisitions will not constitute a
Change in Control: (I) any acquisition by
the Company or by any affiliate of the
Company that remains under the Company's
control, (II) any acquisition by any employee
benefit plan (or related trust) sponsored or
maintained by the Company or by any affiliate
controlled by the Company, (III) the sale,
exchange, transfer or other disposition of
substantially all of the assets of the
Company or of any affiliate of the Company by
which the Executive is employed or which
directly or indirectly owns or controls any
affiliate by which the Executive is employed
to the Chief Executive Officer of the Company
or of any affiliate of the Company by which
the Executive is employed or which directly
or indirectly owns or controls any affiliate
by which the Executive is employed (the
"CEO"), alone or with other officers, or a
merger, consolidation or other reorganization
involving the Company or any affiliate of the
Company by which the Executive is employed or
which directly or indirectly owns or controls
any affiliate by which the Executive is
employed and the CEO, alone or with other
officers, or any entity in which the CEO
(alone or with other officers) has, directly
or indirectly, a substantial equity or
ownership interest, (IV) a transaction
otherwise commonly referred to as a
"management leveraged buyout," or (V) any
acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if,
following such reorganization, merger or
consolidation, the conditions described in
clauses (I), (II), (III), or (IV) are
satisfied; or
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however,
that any individual becoming a director
subsequent to the date hereof whose election,
or nomination for election by the Company's
stockholders, was approved by a vote of at
least a majority of the directors then
comprising the Incumbent Board will be
considered as though such individual were a
member of the Incumbent Board, but excluding
for this purpose any such individual whose
initial assumption of office occurs as a
result of either an actual or threatened
election contest (meaning a solicitation of
the type that would be subject to Rule 14a-ll
of Regulation 14A under the Exchange Act) or
other actual or threatened solicitation of
proxies or consents by or on behalf of a
Person other than the Board; or
(iii) Approval by the stockholders of the Company
of a reorganization, merger or consolidation,
in each case unless, following such
reorganization, merger or consolidation, (A)
more than 50% of, respectively, the then
outstanding shares of common stock of the
corporation resulting from such
reorganization, merger or consolidation and
the combined voting power of the then
outstanding voting securities of such
corporation entitled to vote generally in the
election of directors is then beneficially
owned, directly or indirectly, by all or
substantially all of the individuals and
entities who were the beneficial owners,
respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities immediately prior to such
reorganization, merger or consolidation in
substantially the same proportions as their
ownership, immediately prior to such
reorganization, merger or consolidation, of
the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the
case may be, (B) no Person (excluding the
Company, any affiliate of the Company that
remains under the Company's control, any
employee benefit plan (or related trust)
sponsored or maintained by the Company or by
any affiliate controlled by the Company or
such corporation resulting from such
reorganization, merger or consolidation, and
any Person beneficially owning, immediately
prior to such reorganization, merger or
consolidation, directly or indirectly, 35% or
more of the Outstanding Company Common Stock
or Outstanding Company Voting Securities, as
the case may be) beneficially owns, directly
or indirectly, 35% or more of, respectively,
the then outstanding shares of common stock
of the corporation resulting from such
reorganization, merger or consolidation or
the combined voting power of the then
outstanding voting securities of such
corporation entitled to vote generally in the
election of directors, and (C) at least a
majority of the members of the board of
directors of the corporation resulting from
such reorganization, merger or consolidation
were members of the Incumbent Board at the
time of the execution of the initial
agreement providing for such reorganization,
merger or consolidation; or
(iv) Approval by the stockholders of the Company of any
plan or proposal which would result directly or
indirectly in (A) a complete liquidation or
dissolution of the Company or of any affiliate of
the Company by which the Executive is employed, or
(B) the liquidation, transfer, sale or other
disposition of all or substantially all of the
assets of the Company or of any affiliate of the
Company by which the Executive is employed or
which directly or indirectly owns or controls any
affiliate by which the Executive is employed,
other than to a corporation with respect to which
following such sale or other disposition (I) more
than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the
combined voting power of the then outstanding
voting securities of such corporation entitled to
vote generally in the election of directors is
then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and
entities who were the beneficial owners,
respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such sale or other
disposition in substantially the same proportions
as their ownership, immediately prior to such sale
or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities, as the case may be, (II) no Person
(excluding the Company, any affiliate of the
Company that remains under the Company's control,
any employee benefit plan (or related trust)
sponsored or maintained by the Company or by any
affiliate controlled by the Company or such
corporation, and any Person beneficially owning,
immediately prior to such sale or other
disposition, directly or indirectly, 35% or more
of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly,
35% or more of, respectively, the then outstanding
shares of common stock of such corporation or the
combined voting power of the then outstanding
voting securities of such corporation entitled to
vote generally in the election of directors, and
(III) at least a majority of the members of the
board of directors of such corporation were
members of the Incumbent Board at the time of the
execution of the initial agreement or action of
the Board providing for such sale or other
disposition of assets.
(d) DISABILITY. "Disability" means the Executive's total
disability as defined under the terms of the Company's
long-term disability plan in effect on the Date of
Termination.
(e) EFFECTIVE PERIOD. The "Effective Period" means the 36-
month period following any Change in Control.
(f) GOOD REASONS "Good Reason" means, unless the
Executive has consented in writing thereto, the
occurrence of any of the following:
(i) The assignment to the Executive of any duties
inconsistent with the Executive's position,
including any change in status, title, authority,
duties or responsibilities or any other action
which results in a diminution in such status,
title, authority, duties or responsibilities,
excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company or
the Executive's employer promptly after receipt of
notice thereof given by the Executive;
(ii) A reduction by the Company or the Executive's
employer in the Executive's base salary;
(iii)The relocation of the Executive's office to a
location more than 40 miles outside Houston, Texas;
(iv) Following a Change in Control, unless a plan
providing a substantially similar compensation or
benefit is substituted, (A) the failure by the
Company or any of its affiliates to continue in
effect any material fringe benefit or compensation
plan, retirement plan, life insurance plan, health
and accident plan or disability plan in which the
Executive is participating prior to the Change in
Control, or (B) the taking of any action by the
Company or any of its affiliates which would
adversely affect the Executive's participation in
or materially reduce his benefits under any of
such plans or deprive him of any material fringe
benefit; or
(v) Following a Change in Control, the failure of the
Company or the affiliate of the Company by which
the Executive is employed, or any affiliate which
directly or indirectly owns or controls any
affiliate by which the Executive is employed, to
obtain the assumption in writing of the Company's
obligation to perform this Agreement by any
successor to all or substantially all of the
assets of the Company or such affiliate within 15
days after a reorganization, merger,
consolidation, sale or other disposition of assets
of the Company or such affiliate.
For purposes of this Agreement, any good faith
determination of "Good Reason" made by the Executive
will be conclusive.
2. TERM. The term ("Term") of this Agreement will commence
on the date first above written (the "Commencement Date") and
will end when the Executive is no longer an employee of GMI and
its affiliates and has received all severance payments and
benefits to which he or she is entitled under this Agreement.
3. NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company, or by any affiliate of the Company by
which the Executive is employed, for Cause, or by the Executive
for Good Reason will be communicated by Notice of Termination to
the other party hereto given in accordance with Paragraph 11 of
this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (a) indicates the
specific termination provision in this Agreement relied upon, (b)
to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated, and (c) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the
employment termination date. The failure to set forth in the
Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause will not waive any right of
the party giving the Notice of Termination hereunder or preclude
such party from asserting such fact or circumstance in enforcing
its rights hereunder.
4. DATE OF TERMINATION. "Date of Termination" means the
date of receipt of the Notice of Termination or any later date
specified therein, or the Executive's last date as an active
employee of the Company and its affiliates before a termination
of employment due to death or disability, or a termination other
than for Cause, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION OF EXECUTIVE'S
EMPLOYMENT.
(a) TERMINATION OF EMPLOYMENT FOR GOOD REASON OR OTHER THAN
FOR CAUSE. The Company will pay the following
severance payments and benefits to the Executive upon
the termination of the Executive's employment with the
Company and its affiliates, by the Company or by any
affiliate of the Company by which the Executive is
employed, other than for Cause, or by the Executive for
Good Reason within six months following the occurrence
of any event constituting Good Reason:
(i) Cash in the amount of the Executive's annual base
salary through the Date of Termination to the
extent not theretofore paid;
(ii) Any and all compensation deferred under a deferred
compensation plan or program of the Company or any
of its affiliates in a lump sum cash payment;
(iii) Cash in an amount equal to the product of two
times the Executive's annual base salary at the rate in effect
at the time Notice of Termination is given, payable in equal
monthly installments over a period of two years following the
Date of Termination (the"Salary Continuation Period");
(iv) If recommended specifically in the Executive's
case by the Company's Chief Executive Officer and
approved specifically in the Executive's case by
the Board's Compensation Committee, in their sole
and absolute discretion, a lump sum cash amount
equal to the sum of actual bonuses paid or
payable, including any amount deferred (whether
mandatory or elective), to the Executive in the
two years immediately prior to the Date of
Termination, payable within 30 days after the Date
of Termination;
(v) The continuation of the provision of health
insurance, dental insurance and life insurance
benefits for the Salary Continuation Period to the
Executive and the Executive's family at least
equal to those which would have been provided to
them in accordance with the plans, programs,
practices and policies of the Company as in effect
and applicable generally to other peer executives
and their families during the 90-day period
immediately preceding the Date of Termination;
provided, however, that if the Executive becomes
re-employed with another employer and is eligible
to receive medical or other welfare benefits under
another employer provided plan, the medical and
other welfare benefits described herein will be
secondary to those provided under such other plan
during such applicable period of eligibility;
(vi) The continued accrual of years of service under
any and all defined benefit retirement plans
sponsored or maintained by the Company or by any
affiliate controlled by the Company in effect on
and in which the Executive was a participant on
the Date of Termination, in each case for the
Salary Continuation Period, but in no event beyond
the date the Executive or Executive's spouse
begins to receive a benefit under any such plan;
and
(vii) The immediate vesting of benefits under the
Company's Executive Supplemental Retirement
Plan of 1990, as amended and in effect at the
Date of Termination, as if the Executive had
attained at least age 55 and at least 5 years
of service, thereby entitling the Executive
to Normal Retirement Benefits commencing at
any time on or after the Executive's Normal
Retirement Date or Early Retirement Benefits
commencing at any time on or after the
Executive attains or would have attained age
55, in each case as such term is defined in
said plan.
(b) TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN
CONTROL. If, during the Effective Period, the Company
or any affiliate of the Company by which the Executive
is employed terminates the Executive's employment,
other than for Cause, or any event constituting Good
Reason occurs and the Executive terminates employment
with the Company for Good Reason within six months
after such occurrence, the Company will pay the
following to the Executive:
(i) Cash in the amount of the Executive's annual base
salary through the Date of Termination to the
extent not theretofore paid;
(ii) Any and all compensation deferred under a deferred
compensation plan or program of the Company or any
of its affiliates in a lump sum cash payment;
(iii) Cash in an amount equal to the product of
three times the Executive's annual base
salary at the greater of (A) the rate in
effect at the time Notice of Termination is
given or (B) the rate in effect immediately
preceding the Change in Control, payable in
equal monthly installments over a period of
three years following the Date of Termination
(the "CIC Salary Continuation Period");
(iv) A lump sum cash amount equal to the product of
three times the highest total bonus paid or
payable in any one year, including any amounts
deferred (whether mandatory or elective), to the
Executive in the three years immediately prior to
the Date of Termination;
(v) The continuation of the provision of health
insurance, dental insurance and life insurance
benefits for the CIC Salary Continuation Period to
the Executive and the Executive's family at least
equal to those which would have been provided to
them in accordance with the plans, programs,
practices and policies of the Company as in effect
and applicable generally to other peer executives
and their families during the 90-day period
immediately preceding the Effective Period or on
the Date of Termination, at the election of the
Executive; provided, however, that if the
Executive becomes re-employed with another
employer and is eligible to receive medical or
other welfare benefits under another employer
provided plan, the medical and other welfare
benefits described herein will be secondary to
those provided under such other plan during such
applicable period of eligibility;
(vi) The continued accrual of years of service under
any and all defined benefit retirement plans
sponsored or maintained by the Company or by any
affiliate controlled by the Company in effect on
and in which the Executive was a Participant on
the Date of Termination, in each case for the CIC
Salary Continuation Period, but in no event beyond
the date the Executive or Executive's spouse
begins to receive a benefit under any such plan;
and
(vii)The immediate vesting of benefits under the
Company's Executive Supplemental Retirement Plan
of 1990, as amended and in effect at either the
Date of Termination or immediately preceding the
Change in Control, at the election of the
Executive, as if the Executive had attained at
least age 55 and at least 5 years of service,
thereby entitling the Executive to Normal
Retirement Benefits commencing at any time on or
after the Executive's Normal Retirement Date or
Early Retirement Benefits commencing at any time
on or after the Executive attains or would have
attained age 55, in each case as such term is
defined in said plan.
(c) TERMINATION OF EMPLOYMENT UPON EXECUTIVE'S DISABILITY.
In the event of the termination of the Executive's
employment with the Company and its affiliates due to
the Executive's Disability, the Company will pay to the
Executive the severance payments and benefits listed in
paragraph 5(a) of this Agreement; provided, however,
that the amounts that the Executive would otherwise be
entitled to receive under this Agreement in the amount
of or otherwise in respect of the Executive's annual
base salary will be reduced by the amount of any
disability payments received by the Executive that have
been funded or insured wholly or in part at the expense
of the Company or any affiliate of the Company.
(d) EFFECT OF DEATH. In the event of the Executive's death
during the Salary Continuation Period or the CIC Salary
Continuation Period, the severance payments and
benefits listed in paragraphs 5(a) or 5(b) of this
Agreement, as applicable, will be paid to the
Executive's Beneficiary for remainder of the Salary
Continuation Period or the CIC Salary Continuation
Period, as the case may be.
(e) "BASIC EARNINGS" UNDER RETIREMENT PLANS. Any and all
amounts paid under this Agreement in the amount of or
otherwise in respect of the Executive's annual base
salary and bonuses, whether or not deferred under a
deferred compensation plan or program, are intended to
be and will be "Basic Earnings" for purposes of
determining Basic Earnings under any and all retirement
plans sponsored or maintained by the Company or by any
affiliate controlled by the Company.
6. EFFECT OF RETIREMENT OR ATTAINMENT OF AGE 65. In the event
the Executive or the Executive's spouse begins to receive a
benefit under one or more retirement plans sponsored or
maintained by the Company or by any affiliate of the Company
before the Executive becomes or would have become eligible for
Normal Retirement under any such plan at age 65, the amounts that
the Executive or the Executive's spouse would otherwise be
entitled to receive under this Agreement in the amount of or
otherwise in respect of the Executive's annual base salary will
be reduced by the amount of any payments received by the
Executive or the Executive's spouse under such plan or plans.
Furthermore, in no event will the severance payments or benefits
provided for under this Agreement be paid or otherwise provided
to the Executive, the Executive's spouse, or the Beneficiary
beyond the date the Executive becomes or would have become
eligible for normal retirement at age 65 under one or more of the
retirement plans sponsored or maintained by the Company or any
affiliate of the Company.
7. MITIGATION OF DAMAGES. The Executive will not be required
to mitigate damages or the amount of any payment provided for
under this Agreement by seeking other employment or otherwise.
Except as otherwise specifically provided in this Agreement, the
amount of any payment provided for under this Agreement will not
be reduced by any compensation earned by the Executive as the
result of self-employment or employment by another employer or
otherwise.
8. TAX EFFECT.
(a) If the Company's independent accounting firm determines
that any non-stock payment or distribution, as defined
below, by the Company or its affiliates to or for the
benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of
this Agreement or otherwise) (a "Payment") constitutes
a "parachute payment" as defined in Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code")
(or any successor provision thereto) ("Parachute
Payment") which would be subject to the excise tax
imposed by Section 4999 of the Code, or any interest or
penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the
Executive will be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount equal to
the sum of the Excise Tax, any and all federal, state
and local income taxes and Medicare tax on the Excise
Tax, and the excise tax imposed by Section 4999 of the
Code on the Excise Tax, together with any interest or
penalties incurred by the Executive with respect to
such income, Medicare and excise taxes. For purposes
of this paragraph, a "non-stock payment or
distribution" is a payment, distribution, deemed
payment, or deemed distribution that is not in the form
of or in respect of a security that represents an
equity interest in the Company or a derivative thereof,
including without limitation Company stock, restricted
Company stock, Company performance stock, stock options
and stock appreciation rights in respect of Company
stock, the lapse or termination of any restriction in
respect of any of the foregoing, and any other similar
interest, right, or benefit.
(b) Subject to the provisions of paragraph 8(d) below, all
determinations required to be made under this paragraph
8, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determinations, will be made by the Company's
independent accounting firm, which will provide
detailed supporting calculations both to the Company
and the Executive within 15 business days of the
receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by
the Company. All fees and disbursements of the
Company's independent accounting firm will be paid by
the Company.
(c) Any Gross-Up Payment will be paid by the Company to the
Executive within five days of the Company's receipt of
the determination of the Company's independent
accounting firm. If such firm determines that no
Excise Tax is payable by the Executive, it will furnish
the Executive with a written opinion that the Executive
has substantial authority not to report any Excise Tax
on the Executive's Federal income tax return. If the
Executive is subsequently required to make a payment of
any Excise Tax , then the Company's independent
accounting firm will determine the amount of such
additional payment ("Gross-Up Underpayment"), and any
such Gross-Up Underpayment will be promptly paid by the
Company to or for the benefit of the Executive. The
fees and disbursements of the Company's independent
accounting firm will be paid by the Company.
(d) The Executive will notify the Company in writing within
15 days of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of a Gross-Up Payment. If the Company notifies
the Executive in writing that it desires to contest
such claim and that it will bear the costs and provide
the indemnification as required by this paragraph, the
Executive will:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company reasonably requests in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(iii)cooperate with the Company in good faith in order
to effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim; provided,
however, that the Company will bear and pay
directly all costs and expenses (including
additional interest and penalties) incurred in
connection with such contest and will indemnify
and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto,
imposed as a result of such representation and
payment of costs and expenses. The Company will
control all proceedings taken in connection with
such contest; provided, however, that if the
Company directs the Executive to pay such claim
and sue for a refund, the Company will advance the
amount of such payment to the Executive, on an
interest-free basis, and will indemnify and hold
the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including
interest or penalties with respect thereto,
imposed with respect to such advance or with
respect to any imputed income with respect to such
advance.
(e) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 8(d)(iv),
the Executive becomes entitled to receive any refund
with respect to such claim, the Executive will, within
10 days of receipt thereof, pay to the Company the
amount of such refund, together with any interest paid
or credited thereon after taxes applicable thereto.
If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 8(d)(iv),
a determination is made that the Executive will not be
entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to
the expiration of 30 days after such determination,
then such advance will be forgiven and will not be
required to be repaid and the amount of such advance
will offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
9. CONFIDENTIAL INFORMATION; NON-SOLICITATION. During all
periods while the Executive is an employee of the Company or any
of its affiliates and during any Salary Continuation Period or
CIC Salary Continuation Period, the Executive covenants and
agrees as follows:
(a) to hold in a fiduciary capacity for the benefit of the
Company and its affiliates all secret, proprietary or
confidential material, knowledge, data or any other
information relating to the Company or any of its
affiliated companies and their respective businesses
("Confidential Information"), which has been obtained
by the Executive during the Executive's employment by
the Company or any of its affiliated companies and that
has not been, is not now and hereafter does not become
public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of
this Agreement), and will not, without the prior
written consent of the Company or as may otherwise be
required by law or legal process, communicate or
divulge any such information, knowledge or data to
anyone other than the Company and those designated by
it; the Executive further agrees to return to the
Company any and all records and documents (and all
copies thereof) and all other property belonging to the
Company or relating to the Company, its affiliates or
their businesses, upon termination of Executive's
employment with the Company and its affiliates; and,
(b) not to solicit or entice any other employee of the
Company or its affiliates to leave the Company or its
affiliates to go to work for any other business or
organization which is in direct or indirect competition
with the Company or any of its affiliates, nor request
or advise a customer or client of the Company or its
affiliates to curtail or cancel such customer's
business relationship with the Company or its
affiliates.
10. RIGHTS AND REMEDIES UPON BREACH. If the Executive
breaches, or threatens to commit a breach of, any of the
provisions contained in paragraph 9 of this Agreement (the
"Restrictive Covenants"), the Company will have the following
rights and remedies, each of which rights and remedies will be
independent of the others and severally enforceable, and each of
which is in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity:
(a) SPECIFIC PERFORMANCE. The right and remedy to have
the Restrictive Covenants specifically enforced by any
court of competent jurisdiction, it being agreed that
any breach or threatened breach of the Restrictive
Covenants would cause irreparable injury to the Company
and that money damages would not provide an adequate
remedy to the Company.
(b) ACCOUNTING. The right and remedy to require the
Executive to account for and pay over to the Company
all compensation, profits, monies, accruals, increments
or other benefits derived or received by the Executive
as the result of any action constituting a breach of
the Restrictive Covenants.
(c) CESSATION OF SEVERANCE BENEFITS. The right and remedy
to cease any further severance, benefit or other
compensation payments under this Agreement to the
Executive or the Beneficiary from and after the
commencement of such breach by the Executive.
The Executive hereby acknowledges and agrees that the Restrictive
Covenants are reasonable and valid in duration and in all other
respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants will not thereby be
affected and will be given full effect without regard to the
invalid portions.
11. NOTICES. Any notice provided for in this Agreement will be
given in writing and will be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice
will be deemed given when so delivered personally, telegraphed,
telexed or sent by facsimile transmission, or, if mailed, on the
date of actual receipt thereof. Notices will be properly
addressed to the parties at their respective addresses set forth
below or to such other address as either party may later specify
by notice to the other in accordance with the provisions of this
paragraph:
If to the Company:
Global Marine Inc.
777 North Eldridge Parkway
Houston, Texas 77079-4493
Attention: Corporate Secretary
If to the Executive:
____________________________
____________________________
____________________________
12. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements, written or oral, with
respect thereto, including, without limitation, any and all prior
employment or severance agreements and related amendments entered
into between the Company and the Executive. Furthermore, the
severance payments and benefits provided for under this Agreement
are separate and apart from and, to the extent they are actually
paid, will be in lieu of any payment under any plan or policy of
the Company or any of its affiliates regarding severance payments
generally.
13. WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder will operate
as a waiver thereof, nor will any waiver on the part of any party
of any such right, power or privilege hereunder, nor any single
or partial exercise of any right, power or privilege hereunder,
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege hereunder.
14. GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the state of Texas
(without giving effect to the choice of law provisions thereof),
where the employment of the Executive will be deemed, in part, to
be performed, and enforcement of this Agreement or any action
taken or held with respect to this Agreement will be taken in the
courts of appropriate jurisdiction in Houston, Texas.
15. ASSIGNMENT. This Agreement, and any rights and obligations
hereunder, may not be assigned by the Executive and may be
assigned by the Company only to any successor in interest,
whether by merger, consolidation, acquisition or the like, or to
purchasers of substantially all of the assets of the Company.
16. BINDING AGREEMENT. This Agreement will inure to the benefit
of and be binding upon the Company and its respective successors
and assigns and the Executive and his legal representatives.
17. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered will
be deemed an original, but all of which together will constitute
one and the same instrument.
18. HEADINGS. The headings in this Agreement are for reference
purposes only and will not in any way affect the meaning or
interpretation of this Agreement.
19. AUTHORIZATION. The Company represents and warrants that the
Board of Directors of the Company has authorized the execution of
this Agreement.
20. VALIDITY. The invalidity or unenforceability of any
provisions of this Agreement will not affect the validity or
enforceability of any other provisions of this Agreement, which
will remain in full force and effect.
21. TAX WITHHOLDING. The Company will have the right to deduct
from all benefits and/or payments made under this Agreement to
the Executive any and all taxes required by law to be paid or
withheld with respect to such benefits or payments.
22. NO CONTRACT OF EMPLOYMENT. Nothing contained in this
Agreement will be construed as a contract of employment between
the Company or any of its affiliates and the Executive, as a
right of the Executive to be continued in the employment of the
Company or any of its affiliates, or as a limitation of the right
of the Company or any of its affiliates to discharge the
Executive with or without cause.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
The Company The Executive
GLOBAL MARINE INC.
________________________
By: ________________________ [Name]
Robert E. Rose
Chairman, President
and Chief Executive Officer
EXHIBIT 10.41
TO: ___________________ DATE: February 22, 2000
FROM: Robert E. Rose
SUBJECT: Performance Stock
In order to provide incentive compensation specifically directed
toward the achievement of long term performance goals, you have
been granted a conditional right to receive as many as ______
shares of Global Marine common stock. The company will issue and
deliver to you none, some or all of these shares at the time of
the first regular meeting of the company's board of directors in
2003, depending on the extent to which the performance objectives
set forth in the attached terms and conditions have been
achieved.
This grant amounts to an incremental opportunity to earn
significant compensation, provided that we are able to achieve
the ambitious targets established for relative total shareholder
return and cumulative net income over the period 2000-2002.
These long term performance goals were established by the
Compensation Committee of the board of directors and are designed
so the management team wins if the company's stockholders win.
The attachment contains the terms and conditions of your grant
under this incentive arrangement. I look forward to working with
you in an effective mutual effort to assure that the target goals
are more than accomplished.
Robert E. Rose
Attachment
Form 1C(3)
(2-00)
GLOBAL MARINE INC.
TERMS AND CONDITIONS
OF
PERFORMANCE STOCK GRANT
(Performance Period 2000-2002)
GLOBAL MARINE INC. (the "Company"), desiring to afford you a
conditional right to receive shares of the Company's common
stock, $.10 par value per share (the "Common Stock"), as added
incentive to achieve the long-term objectives of the Company and
its subsidiaries, has established the following terms and
conditions under which it will issue and deliver shares of Common
Stock to you under the Global Marine 1998 Stock Option and
Incentive Plan (the "Plan").
1. CONDITIONAL RIGHT TO RECEIVE SHARES. At the time of the
first regular meeting of the Company's board of directors
held in 2003, the Company will issue and deliver shares of
the Common Stock to you, up to the full number of shares
stated in the first paragraph of the cover page of this
memorandum (the "Shares"), subject to the terms and
conditions outlined in this memorandum and the terms and
conditions of the Plan as amended from time to time in
accordance with its terms.
2. NUMBER OF SHARES TO BE ISSUED AND DELIVERED. A percentage
of the total number of Shares stated in the first paragraph
of the cover page of this memorandum will be issued and
delivered to you, depending on actual performance of the
Company and its subsidiaries during the period 2000-2002 as
measured against the long-term performance goals of Relative
Total Shareholder Return and Cumulative Net Income (the
"Performance Goals"), which were established by the
Compensation Committee of the Company's board of directors
(the "Compensation Committee"). The percentage will be
determined according to the following grid. The exact
percentage of your recommended award earned under each
Performance Goal will be calculated based on straight-line
interpolation between the percentages shown on the grid.
<TABLE>
<CAPTION>
Percent of Recommended Award Earned
Performance Weighting
Measurement Factor 25% 75% 100%
<S> <C> <C> <S> <C> <S> <S>
Relative Total Shareholder Return 2000-2002(1) 50% Peer Median Peer 75th Pctile Peer Maximum
Cumulative Net Income 200-2002 50% $400MM $525MM $650MM
(1) Versus performance of peer group of companies: Global Marine Inc.;
Transocean Offshore Drilling Inc.; Diamond Offshore Drilling Inc.;
Rowan Companies; ENSCO International Inc.; R&B Falcon Corporation;
Noble Drilling Corp., and Santa Fe International Companies.
</TABLE>
3. NON-TRANSFERABLE. You may not transfer your right to
receive Shares under this memorandum other than by will or
by the laws of descent and distribution.
4. TERMINATION OF EMPLOYMENT. You will not be entitled to
receive any of the Shares after termination of your
employment with the Company and its subsidiaries unless such
termination is by reason of early retirement not objected to
by the Compensation Committee, normal retirement, disability
or death, or unless your employment with the Company and its
subsidiaries is terminated by the Company or any such
subsidiary other than for cause (to mean acts of misconduct
harmful to the Company, inadequate performance or
incompetence). If your employment is terminated by reason
of early retirement not objected to by the Compensation
Committee, normal retirement or disability, or by the
Company or any of its subsidiaries other than for cause, the
number of Shares that the Company would otherwise issue and
deliver to you at the time of the Company's first regular
board meeting held in 2003 will be prorated based on your
months of employment completed during the period 2000-2002
compared to 36 months, and the Company will issue and
deliver to you or your legal representative or
representatives, at the time of said board meeting, a
reduced number of Shares based on such proration. If your
employment is terminated by reason of your death, the total
number of Shares stated in the first paragraph of the cover
page of this memorandum will be multiplied by 50% and the
resulting number will be prorated based on your months of
employment completed during the period 2000-2002 compared to
36 months, and the Company will issue and deliver to the
appropriate person or persons named under your last will and
testament or determined under applicable intestate laws, as
soon as practicable following your death, a reduced number
of Shares based on such multiplication and proration.
Termination of your "employment" with the Company and its
subsidiaries will be deemed to occur at the close of
business on the earliest of (i) the last day on which you
are assigned to a position with the Company or any of its
subsidiaries for the purpose of performing your occupation,
in the case of termination by reason of your early or normal
retirement, disability or death, (ii) the last day of the
period during which you are entitled to receive salary
continuation under any agreement, policy, plan or other
arrangement with the Company or any of its affiliates, in
the case of any termination entitling you to such salary
continuation, (iii) the last day of an approved leave of
absence if you do not resume the performance of your
occupation for the Company or any of its subsidiaries on or
before the next business day, and (iv) the last day on which
you are assigned to a position with the Company or any of
its subsidiaries for the purpose of performing your
occupation in any other case. For purposes of this
paragraph, the term "disability" shall mean any physical or
mental condition which totally and permanently prevents you
from engaging in any substantial gainful activity, as
reasonably determined in good faith by the Compensation
Committee.
5. ADJUSTMENTS. Except as provided in the following paragraph,
if outstanding shares of the class then subject to the
conditional right to receive Shares outlined herein are
increased, decreased, changed into or exchanged for a
different number or kind of shares or securities of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse
stock split, then there will be substituted for each Share
then subject to such right and for each share upon which any
of the Performance Goals are then based the number and class
of shares or securities into or for which each share of the
class subject to such right shall be so changed or
exchanged. Such adjustments will become effective on the
effective date of any such transaction; except that in the
event of a stock dividend or of a stock split effected by
means of a stock dividend or distribution, such adjustments
will become effective immediately after the record date
therefor.
Upon a dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company is
not the surviving company, your right to acquire Shares and
the obligations of the Company hereunder will terminate,
unless provision is made in writing in connection with such
transaction for the assumption of such obligations, or the
substitution for such obligations of similar obligations
involving the stock of a successor employer corporation, or
a parent or subsidiary thereof, with appropriate adjustments
as to the conditions thereof and the number and kind of
Shares and prices, in which event your right to acquire
Shares and the obligations of the Company hereunder will
continue in the manner and under the terms so provided.
Adjustments under this Section 5 will be made by the
Compensation Committee, whose determination as to what
adjustments will be made, and the extent thereof, will be
final, binding and conclusive. No fractional shares of
stock will be issued pursuant to any right to receive Shares
hereunder or in connection with any adjustment contemplated
herein.
6. LIMITATION. You will not be entitled to the privileges of
stock ownership in respect of any of the Shares until they
have been issued and delivered pursuant to the terms and
conditions of this memorandum and the Plan.
7. REQUIREMENTS OF LAW AND STOCK EXCHANGES. Your right to
acquire the Shares and the issuance and delivery of the
Shares will be subject to compliance with all applicable
requirements of law. In addition, the Company will not be
required to issue or deliver any certificate or certificates
for any of the Shares prior to the admission of such Shares
to listing on notice of issuance on any stock exchange on
which shares of the same class are then listed.
By accepting receipt of any of the Shares as contemplated
herein, you will be representing and agreeing for yourself
and your transferees by will or by the laws of descent and
distribution that, unless a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"),
is in effect as to the Shares received, any and all Shares
so acquired will be acquired for investment and not for sale
or distribution, and each such acquisition will be
accompanied by a representation and warranty in writing,
signed by the person entitled to make such acquisition, that
the Shares are being so acquired in good faith for
investment and not for sale or distribution. In the event
the Company's legal counsel, at the Company's request,
advises it that registration of the acquired Shares under
the Securities Act is required prior to issuance thereof,
the Company will not be required to issue or deliver the
Shares unless and until such legal counsel advises it that
such registration has been completed or is not required.
By accepting receipt of any of the Shares, you also will be
representing and agreeing for yourself and your transferees
by will or the laws of descent and distribution that if you
are an officer of the Company or any other person who might
be deemed an "affiliate" of the Company under the Securities
Act at the time any Shares that have been acquired are
proposed to be sold, you or they will not sell such Shares
(a) without giving thirty days advance notice in writing to
the Company, and (b) until the Company has advised you or
them that such sale may be made without registration under
the Securities Act or, if such registration is required,
that such registration has been effected.
8. RESTRICTIONS ON SHARE TRANSFER BY CERTAIN PERSONS. Until
six months have elapsed after the date of the Company's
unconditional issuance of Shares to you, you may not
transfer such Shares in a transaction that would constitute
a "sale" under Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), if you are at the
time of the sale a person subject to the provisions of
Section 16 of the Exchange Act.
9. WAGE WITHHOLDING AND EMPLOYMENT TAXES. Your acquisition of
any of the Shares as outlined herein may result in ordinary
income at the time of acquisition. Such ordinary income
will be subject to both wage withholding and employment
taxes, and the Company or your employer may be required to
effect such withholding and/or deduct such taxes. Except as
set forth below, you may make an irrevocable election to
satisfy, in whole or in part, your obligation to reimburse
the Company or your employer for such taxes (an "Election")
by (i) making a cash payment to the Company, (ii) having the
Company deduct the required amount from any cash
compensation that the Company or any of its subsidiaries may
owe you, (iii) surrendering your right to acquire either a
specified number of the Shares or Shares having a specified
value, in each case with a value not in excess of your
related tax liability, (iv) tendering shares previously
issued pursuant to the Plan or other shares of the Company's
common stock owned by you, or (v) combining any or all of
the foregoing in any fashion; PROVIDED, HOWEVER, that, if
you are at the time the withholding obligation arises a
person subject to the provisions of Section 16 of the
Exchange Act, you must satisfy such obligation by
surrendering your right to acquire such number of Shares as
will have a value sufficient to satisfy such obligation, but
not in excess of such liability. The Compensation Committee
may disapprove of any Election or suspend or terminate the
right to make Elections at any time or from time to time.
All withheld or surrendered Shares and other shares tendered
in payment will be valued at their Fair Market Value on the
date the withholding obligation arises. "Fair Market Value"
with regard to stock of the Company on a particular date
shall mean the average of the high and low quotations at
which the stock is traded on that particular date as
reported in the "NYSE-Composite Transactions" section of the
Southwest Edition of THE WALL STREET JOURNAL for that date
(corrected for obvious typographical errors), or, if no
prices are quoted for that date, on the last preceding date
for which such prices of shares of stock are so quoted. In
the event "NYSE-Composite Transactions" cease to be reported
as such, or in the event that the Company's stock is no
longer quoted on the New York Stock Exchange, an appropriate
substitute published stock quotation system will be selected
by the Compensation Committee, consistent with appropriate
regulatory provisions.
10. CONTINUED EMPLOYMENT AND FUTURE GRANTS. Neither the
granting to you of a right to receive stock nor the other
arrangements outlined herein give you the right to remain in
the employ of the Company or any of its subsidiaries or to
be selected to receive similar or identical grants in the
future.
11. GLOBAL MARINE 1998 STOCK OPTION AND INCENTIVE PLAN, THE
BOARD AND THE COMMITTEE. The conditional right to receive
Shares outlined in this memorandum has been granted to you,
and any issuance and delivery of Shares will be made, under
and pursuant to the Plan as the same shall have been amended
from time to time in accordance with its terms. The
decision of the Company's board of directors or the
Committee on any questions concerning the interpretation or
administration of the Plan or any matters covered in this
memorandum will be final and conclusive. No amendment to
the Plan or decision of the board or the Committee will
deprive you, without your consent, of any rights hereunder.
A copy of the Plan in its present form is available at the
Company's principal office for inspection during business
hours by you or other persons who may be entitled to acquire
any of the Shares as contemplated herein.
References in this Exhibit A to "this memorandum" (and indirect
references such as "hereof," "hereunder" and "herein") refer to
the attached cover page of this memorandum and this Exhibit A,
each of which constitutes an integral part of this memorandum.
EXHIBIT 10.52
[DATE]
[NAME AND ADDRESS]
Dear :
This letter will confirm the agreement and understanding
between Global Marine Inc. (the "Company") and you regarding
indemnification in connection with your service as a director,
officer, employee or agent of the Company.
It is and has been the policy of the Company to indemnify its
officers and directors and certain employees and agents against any
costs, expenses and other liabilities to which they may become
subject by reason of their service to the Company, and to insure
them against such liabilities, as and to the extent available at a
commercially reasonable rate, permitted by applicable law and in
accordance with the principles of good corporate governance. In
this regard, the Company's By-laws (Section III-11) require that
the Company indemnify and advance costs and expenses to
(collectively "indemnify") its directors and officers, in each case
including indemnity in respect of service at the request of the
Company as a director or officer of an affiliate, and provide that
the Company may indemnify its employees and agents, as permitted by
Delaware law. A copy of the relevant provisions of the Company's
By-laws, as currently in effect, are attached hereto.
In consideration of your service to the Company, the Company
shall indemnify you, and hereby confirms its agreement to indemnify
you, to the full extent provided by applicable law and the By-laws
of the Company as currently in effect. In particular, as provided
by the By-laws, the Company shall make any necessary determination
as to your entitlement to indemnification in respect of any
liability within 60 days of receiving a written request from you
for indemnification against such liability. You have agreed to
provide the Company with such information or documentation as the
Company may reasonably request to evidence the liabilities against
which indemnification is sought or as may be necessary to permit
the Company to submit a claim in respect thereof under any
applicable directors and officers liability insurance or other
liability insurance policy. You have further agreed to cooperate
with the Company in the making of any determination regarding your
entitlement to indemnification. If the Company does not make a
determination within the required 60-day period, a favorable
determination will be deemed to be made, and you shall be entitled
to payment, subject only to your written agreement to refund such
payment if a contrary determination is later made. In the event
the Company shall determine that you are not entitled to
indemnification, the Company shall give you written notice thereof
specifying the reason therefor, including any determinations of
fact or conclusions of law relied upon in reaching such
determination. Notwithstanding any determination made by the
Company that you are not entitled to indemnification, you shall be
entitled to seek a de novo judicial determination of your right to
indemnification under the By-laws, this Agreement or otherwise by
commencing an appropriate action therefor within 180 days after the
Company shall notify you of its determination. The Company shall
not oppose any such action by reason of any prior determination
made by it as to your right to indemnification or, except in good
faith, raise any objection not specifically relating to the merits
of your indemnification claim or not considered by the Company in
making its own determination. In any such proceeding, the Company
shall bear the burden of proof in showing that your conduct did not
meet the applicable standard of conduct required by the By-laws or
applicable law for indemnification. It is understood that, as
provided in Section III-11 of the By-laws, any expenses incurred by
you in any investigation or proceeding by the Company or before any
court commenced for the purpose of making any such determination
shall be reimbursed by the Company. No future amendment of the By-
laws shall diminish your rights under this Agreement, unless you
shall have consented to such amendment.
Your right to indemnification as aforesaid shall be in
addition to any right to remuneration to which you may from time to
time be entitled as a director, officer, employee or agent of the
Company.
It is understood and agreed that your right to indemnification
shall not entitle you to continue in your present position with the
Company or any future position to which you may be appointed or
elected and that you shall be entitled to indemnification under the
By-laws only in respect to liabilities arising out of acts or
omissions or alleged acts or omissions by you as a director,
officer, employee or agent or as otherwise provided by the By-laws,
but you shall be entitled to such indemnification with respect to
any such liability, whether incurred or arising during or after
your service as a director, officer, employee or agent and whether
before or after the date of this letter, in respect of any claim,
cause, action, proceeding or investigation, whether commenced,
accruing or arising during or after your service as a director,
officer, employee or agent and whether before or after the date of
this letter.
This Agreement shall terminate upon the later of (i) the tenth
anniversary of the date on which you shall cease to be a director,
officer, employee or agent of the Company or (ii) the final
termination or resolution of all actions, suits, proceedings or
investigations commenced within such ten-year period and relating
to the Company or any of its affiliates or your services thereto to
which you may be or become a party and of all claims for
indemnifications by you under this Agreement asserted within such
ten-year period.
It is understood and agreed that this Agreement is binding
upon the Company and its successors and shall inure to your benefit
and that of your heirs, distributees and legal representatives. If
any provisions of this Agreement shall be deemed by a court of
competent jurisdiction to be invalid, illegal or unenforceable, the
balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and
circumstances. This Agreement, and the interpretation and
enforcement thereof, shall be governed by the laws of the state of
Delaware. In confirmation of the provisions of the Company's By-
laws, the Company hereby agrees to pay, and you shall be held
harmless from and indemnified against, any costs and expenses
(including attorneys' fees) which you may reasonably incur in
connection with any challenge to the validity of, or the
performance and enforcement of, this Agreement, in the same manner
as provided by the Company's By-laws.
If the foregoing is in accordance with your understanding of
our agreement, kindly countersign the enclosed copy of this letter,
whereupon this letter shall become a binding agreement in
accordance with the laws of the state of Delaware.
GLOBAL MARINE INC.
By: ___________________________________
[OFFICER]
_______________________________
[NAME]
GLOBAL MARINE INC.
BY-LAW REGARDING INDEMNIFICATION
SECTION III-11 INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS: (a)(i) The corporation, to the full extent
permitted, and in the manner required by the laws of the state of
Delaware, as in effect at the time of the adoption of this revised
Section III-11 or as such laws may be amended from time to time,
shall indemnify any person who was or is made a party to or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (including any appeal
thereof), whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), by
reason of the fact that such person is or was a director or officer
of the corporation, or, if at a time when he was a director or
officer of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, fiduciary,
employee or agent (a "Subsidiary Officer") of another corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Affiliated Entity"), against expenses (including
attorneys' fees), costs, judgments, fines, penalties and amounts
paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interest of the corporation,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful;
provided, however, that the corporation shall not be obligated to
indemnify against any amount paid in settlement unless the
corporation has consented to such settlement, which consent shall
not be unreasonably withheld. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent shall not, of itself,
create a presumption that the person did not act in good faith and
in a manner which such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, that such person had
reasonable cause to believe that his conduct was unlawful.
Notwithstanding anything to the contrary in the foregoing
provisions of this subparagraph (i) and except for any action, suit
or proceeding brought on behalf of a person to enforce the right to
indemnification hereunder or otherwise, a person shall not be
entitled, as a matter of right, to indemnification pursuant to this
subparagraph (i) against costs or expenses incurred in connection
with any action, suit or proceeding commenced by such person
against any person who is or was a director, officer, fiduciary,
employee or agent of the corporation or a Subsidiary Officer of an
Affiliated Entity, but such indemnification may be provided by the
corporation in any specific case as permitted by paragraph (f) of
this Section III-11.
(ii) The corporation may indemnify any employee or agent of
the corporation in the manner and to the extent that it shall
indemnify any director or officer under this paragraph (a),
including indemnity in respect of service at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity.
(b)(i) The corporation, to the full extent permitted, and in
the manner required by the laws of the state of Delaware, as in
effect at the time of the adoption of this Section III-11 or as
such laws may be amended from time to time, shall indemnify any
person who was or is made a party to or is threatened to be made a
party to any threatened, pending or completed action or suit
(including any appeal thereof) brought in the right of the
corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the
corporation, or, if at a time when he was a director or officer of
the corporation, is or was serving at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity,
against expenses (including attorneys' fees) and costs actually and
reasonably incurred by such person in connection with such action
or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation
unless, and except to the extent that, the Court of Chancery of the
state of Delaware or the court in which such judgment was rendered
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses and costs as the Court of Chancery of the state of
Delaware or such other court shall deem proper. Notwithstanding
anything to the contrary in the foregoing provisions of this
subparagraph (b)(i), a person shall not be entitled, as a matter of
right, to indemnification pursuant to this subparagraph (b)(i)
against costs and expenses incurred in connection with any action
or suit in the right of the corporation commenced by such person,
but such indemnification may be provided by the corporation in any
specific case as permitted by paragraph (f) of this Section III-11.
(ii) The corporation may indemnify any employee or agent of
the corporation in the manner and to the extent that it shall
indemnify any director or officer under this paragraph (b),
including indemnity in respect of service at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity.
(c) Any indemnification under paragraph (a) or (b) of this
Section III-11 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper under the circumstances because such
person has met the applicable standard of conduct set forth in
paragraph (a) or (b) of this Section III-11. Such determination
shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to the
action, suit or proceeding in respect of which indemnification is
sought or by majority vote of the members of a committee of the
Board of Directors composed of at least three members each of whom
is not a party to such action, suit or proceeding, or (ii) if such
a quorum is not obtainable and/or such a committee is not
established or obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders. In the event a
request for indemnification is made by any person referred to in
subparagraph (i) of paragraph (a) or subparagraph (i) of paragraph
(b), the corporation shall cause such determination to be made not
later than 60 days after such request is made.
(d)(i) Notwithstanding the other provisions of this Section
III-11, to the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
paragraph (a) or (b) of this Section III-11, or in defense of any
claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) and costs actually and
reasonably incurred by such person in connection therewith.
(ii) To the extent any person who is or was a director or
officer of the corporation has served or prepared to serve as a
witness in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, or in any investigation by the
corporation or the Board of Directors thereof or a committee
thereof or by any securities exchange on which securities of the
corporation are or were listed or any national securities
association, by reason of his services as a director or officer of
the corporation or, if at a time when he was a director or officer
of the corporation, is or was serving at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity, the
corporation shall indemnify such person against expenses (including
attorney's fees) and costs actually and reasonably incurred by such
person in connection therewith within 30 days after the receipt by
the corporation from such person of a statement requesting such
indemnification, averring such service and reasonably evidencing
such expenses and costs. The corporation may indemnify any
employee or agent of the corporation to the same extent it is
required to indemnify any director or officer of the corporation
pursuant to the foregoing sentence of this paragraph.
(e)(i) Expenses and costs incurred by any person referred to
in subparagraph (i) of paragraph (a) or subparagraph (i) of
paragraph (b) of this Section III-11 in defending a civil,
criminal, administrative or investigative action, suit or
proceeding shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that such person is not entitled
to be indemnified by the corporation as authorized by this Section
III-11.
(ii) Expenses and costs incurred by any person referred to in
subparagraph (ii) of paragraph (a) or subparagraph (ii) of
paragraph (b) of this Section III-11 in defending a civil,
criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
Board of Directors, a committee thereof or an officer of the
corporation or a committee thereof authorized to so act by the
Board of Directors upon receipt of an undertaking by or on behalf
of such person to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by
the corporation as authorized by this Section III-11.
(f) The provision of indemnification to or the advancement of
expenses and costs to any person under this Section III-11, or the
entitlement of any person to indemnification or advancement of
expenses and costs under this Section III-11, shall not limit or
restrict in any way the power of the corporation to indemnify or
advance expenses and costs to such person in any other way
permitted by law or be deemed exclusive of any right to which any
person seeking indemnification or advancement of expenses and costs
may be entitled under any law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such
person's capacity as an officer, director, employee or agent of the
corporation and as to action in any other capacity while holding
any such position.
(g) The indemnification provided or permitted under this
Section III-11 shall apply in respect of any expense, costs,
judgment, fine, penalty or amount paid in settlement, whether or
not the claim or cause of action in respect thereof accrued or
arose before or after the effective date of this revised Section
III-11. The right of any person who is or was a director, officer,
employee or agent of the corporation to indemnification and advance
payment of expenses and costs under this Section III-11 shall
continue after he shall have ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
distributees, executors, administrators and other legal
representatives of such person.
(h) This Section III-11 shall be deemed to create a binding
obligation on the part of the corporation to its current and former
officers and directors and their heirs, distributees, executors,
administrators and other legal representatives, and each director
or officer in acting in such capacity shall be entitled to rely on
the provisions of this Section III-11, without giving notice
thereof to the corporation.
(i) The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a Subsidiary Officer of any Affiliated Entity,
against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's
status as such, whether or not the corporation would have the power
to indemnify such person against such liability under the
provisions of this Section III-11 or applicable law.
(j)(i) For purposes of this Section III-11, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if
its corporate existence had continued, would have been permitted
under applicable law to indemnify its directors, officers,
employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a
Subsidiary Officer of any Affiliated Entity, shall stand in the
same position under the provisions of this Section III-11 with
respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its
separate existence had continued.
(ii) For purposes of this Section III-11, references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; references to "serving at the
request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed
to the best interest of the corporation" as referred to in this
Section III-11.
EXHIBIT 10.61
GLOBAL MARINE INC.
2000 MANAGEMENT INCENTIVE AWARD PLAN
PURPOSE AND PARTICIPANTS
The purpose of the 2000 Management Incentive Award Plan is to
provide management employees of Global Marine Inc. and its
subsidiaries with effective incentives in respect of their
service during 2000. The plan does this by focusing management
on and rewarding performance that is superior when evaluated
against the company's own internal performance measures and
against measures of performance relative to other companies in
Global Marine's industry peer group, particularly in areas that
enhance shareholder value. All employees of Global Marine Inc.
and its subsidiaries in grades 34 and above are eligible to
participate in the plan, although such eligibility shall not
create or imply any promise or other obligation of Global Marine
Inc. or any of its subsidiaries or any right of any individual
employee or of the collective employees of Global Marine Inc. and
its subsidiaries.
THE PLAN
THE TWO BONUS POOLS. There are two bonus pools under the plan -
a "GMI, GMDC & GMIS-E Pool" for employees of Global Marine Inc.
and its subsidiaries other than Applied Drilling Technology Inc.
and Challenger Minerals Inc., and an "ADTI & CMI Pool" for
employees of Applied Drilling Technology Inc. and Challenger
Minerals Inc.
A base dollar amount will be assigned to each of the two bonus
pools, and each pool's base dollar amount will be allocated to
performance measures. For each of the two pools, the total 2000
base pay received by all participants in each salary grade range
listed in Table A in the attachment will be multiplied by the
target bonus percentage indicated for that range in Table A, and
the resulting amounts for all ranges will be added to arrive at
that pool's base dollar amount. The total base dollar amount for
each pool will then be allocated to the performance measures
listed in Table B, based on the percentages for that pool listed
opposite the various measures.
THE GMI, GMDC & GMIS-E POOL. The GMI, GMDC & GMIS-E Pool is
based on two objective measures, one of which is an internal
measure and one of which is a measure of performance relative to
other companies in Global Marine's industry peer group. The two
measures for 2000 are: 1) consolidated net income compared to
budget; and 2) consolidated return on capital (net income
relative to invested capital) compared to the company's peers. A
specific goal has been set for each of the two performance
measures, such that exactly meeting the goal will result in
authorization to pay 100% of the base dollar amount allocated to
that performance measure. If the goal is not fully met, then a
percentage between 0% and 100%, the exact percentage dependent on
the exact amount of the shortfall, of that measure's base amount
will be authorized for bonus awards. If the goal is exceeded,
then a percentage between 100% and a maximum 200%, the exact
percentage dependent on the exact amount by which the goal is
exceeded, of that measure's base dollar amount will be
authorized. The total bonus any individual participant in the
GMI, GMDC & GMIS-E Pool can earn is capped at double the
percentage of his base salary indicated for his salary grade in
Table A in the attachment.
THE ADTI & CMI POOL. The ADTI & CMI Pool is based on three
objective measures, two of which are internal measures and one of
which is a measure of performance relative to other companies in
Global Marine's industry peer group. The three measures for 2000
are: 1) consolidated net income compared to budget; 2)
consolidated return on capital (net income relative to invested
capital) compared to the company's peers; and 3) Applied Drilling
Technology Inc. pre-tax income compared to budget. A specific
goal has been set for each of the three performance measures,
such that exactly meeting the goal will result in authorization
to pay 100% of the base dollar amount allocated to that
performance measure. If the goal is not fully met, then a
percentage between 0% and 100%, the exact percentage dependent on
the exact amount of the shortfall, of that measure's base amount
will be authorized for bonus awards. If the goal is exceeded,
then a percentage above 100%, the exact percentage dependent on the
exact amount by which the goal is exceeded, of that measure's
base dollar amount will be authorized.
DETERMINATION OF INDIVIDUAL BONUSES. At its first meeting in
2001, the Compensation Committee of the Board of Directors of
Global Marine Inc. will certify the level of 2000 performance
achieved under each pool's performance measures. The appropriate
multiplier for each measure, determined from Table B in the
attachment, will then be applied to the base dollar amount
allocated to that measure, and the resulting amounts for each
pool's measures will be added to determine the total amount
authorized for bonuses from that pool.
Individual bonuses from each pool will be based on individual
merit. Bonuses will be paid in cash or, at the Compensation
Committee's discretion, can be paid in shares of Global Marine
Inc. common stock in lieu of cash (applicable withholding taxes
being paid in cash).
RESPONSIBILITY AND AUTHORITY
The Chief Executive Officer and the Chief Administrative Officer
of Global Marine Inc. will take all such actions, do all such
things, make all such payments, and sign and deliver all such
documents and instruments as either or both of them may at any
time or from time to time deem necessary or desirable in order to
implement this plan.
<TABLE>
<CAPTION>
TABLE A
Target Bonus
Salary GMI, GMDC ADTI
Grades & GMIS-E & CMI
<C> <C> <C>
34-37 25% 35%
38-39 30% 40%
40-42 35% 45%
43-46 40% 50%
Executive Officers 60% 80%
CEO 80% -
</TABLE>
<TABLE>
TABLE B
<CAPTION>
Percentage of
Target Bonus
Performance GMI, GMDC ADTI Factors Determining
Measure & GMIS-E & CMI Performance Measure Multiplier (1)
<S> <C> <C> <S> <C> <C> <C> <C> <C>
Consolidated Company Performance as Percentage of Budget <=50% 75% 100% 125% 150%+
Net Income 50% 10% Performance Measure Multiplier 0 0.5 1.0 1.5 2.0
Consolidated Company Performance vs. Peer Group (3) 50th Pctile 75th Pctile Max
Return on Capital(2) 50% 10% Performance Measure Multiplier 0.5 1.0 2.0
ADTI Company Performance as Percentage of Budget 0% 100% 200%
Pre-Tax Income 0% 80% Performance Multiplier 0 1.0 2.0
100% 100%
</TABLE>
1) Performance between percentiles is based on straight-line interpolation.
2) Return must be positive for any payout under this measure.
3) Peer Group Companies include: Global Marine Inc,, Tranocean Offshore
Drilling Inc., Diamond Offshore Drilling Inc., Rowan Companies, ENSCO
International Inc., R&B Falcon Corporation, Noble Drilling Corporation,
Santa Fe International.
EXHIBIT 21.1
GLOBAL MARINE INC. AND SUBSIDIARIES
AS OF MARCH 7, 2000
STATE OR OTHER PERCENT OF VOTING
JURISDICTION OF STOCK OWNED BY
NAME OF COMPANY INCORPORATION IMMEDIATE PARENT
Global Marine Inc. Delaware -
Applied Drilling Technology Inc. Texas 100%
Arctic Systems Ltd. Canada 100%
Campeche Drilling Services Inc. Delaware 100%
Challenger Minerals Inc. California 100%
Global Marine Arctic Ltd. Canada 100%
Global Marine Drilling Company California 100%
Global Dolphin Drilling Company India 40%
Private Limited
Global Marine Caribbean, Inc. California 100%
Global Marine Development Inc. California 100%
Global Marine do Brasil
Perfuracoes Ltda. Brazil 50% (1)
Global Marine Leasing Corporation Bahamas 100%
Global Marine C. R. Luigs
Limited England 100%
Global Marine Holdings ApS Denmark 100%
Global Marine Drilling Norway AS Norway 100%
Global Marine Drilling Adriatic AS Norway 100%
Global Marine Drilling Services AS Norway 100%
Global Marine Baltic Inc. Delaware 100%
Global Marine International
Drilling Corporation Bahamas 85.1% (2)
Global Marine Denmark Holdings ApS Denmark 100%
Global Marine Norway AS Norway 100%
Global Marine B.V. The Netherlands 100%
Glomar International (Canada) Nova Scotia 100%
Drilling Company
Global Marine Denmark ApS Denmark 100%
Global Marine North Sea Limited Bahamas 100%
Global Marine Overseas Limited Bahamas 100%
Global Marine West Africa Bahamas 100%
Drilling Company Limited
Global Marine South America LLC Delaware 100%
Global Marine U.K. Limited Scotland 100%
Global Offshore Drilling Limited Nigeria 60%
Global Marine Capital Investments Inc. Delaware 100%
Global Marine Beaufort Sea Inc. Delaware 100%
Global Marine Corporate Services Inc. California 100%
Global Marine de Venezuela Inc. Delaware 100%
Global Marine Drilling (Malaysia)
Sdn. Bhd. Malaysia 100%
Global Marine Integrated Services -
International Inc. Delaware 100%
Intermarine Services Inc. Texas 100%
Turnkey Ventures de Mexico Inc. Delaware 100%
___________________________
(1) The remaining 50% of the voting stock is owned directly by
Global Marine Inc.
(2) The remaining 14.9% of the voting stock is owned by Global
Marine Drilling Company.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report dated February 29,
2000, on our audits of the consolidated financial statements and our report
dated February 29, 2000, on our audits of the financial statement schedule of
Global Marine Inc. and subsidiaries, as of December 31, 1999 and 1998, and for
the years ended December 31, 1999, 1998 and 1997, which reports are included in
this Annual Report on Form 10-K, into (i) the prospectus constituting part of
the Company's Registration Statements on Form S-8 (Registration Nos. 33-32088,
33-40961 and 33-63326), respectively, for the Global Marine Inc. 1989 Stock
Option and Incentive Plan 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 Statement 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.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
March 8, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Global Marine Inc. and subsidiaries as of
12-31-99 and the related consolidated statement of income for the twelve
months ended 12-31-99, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 83,300
<SECURITIES> 0
<RECEIVABLES> 105,200
<ALLOWANCES> 4,100
<INVENTORY> 0
<CURRENT-ASSETS> 213,000
<PP&E> 2,335,100
<DEPRECIATION> 466,500
<TOTAL-ASSETS> 2,264,500
<CURRENT-LIABILITIES> 149,600
<BONDS> 595,800
0
0
<COMMON> 17,400
<OTHER-SE> 1,117,600
<TOTAL-LIABILITY-AND-EQUITY> 2,264,500
<SALES> 8,300
<TOTAL-REVENUES> 791,000
<CGS> 6,300
<TOTAL-COSTS> 624,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,600
<INCOME-PRETAX> 115,300
<INCOME-TAX> 25,800
<INCOME-CONTINUING> 89,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,500
<EPS-BASIC> 0.51
<EPS-DILUTED> 0.51
</TABLE>
