<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
COMMISSION FILE NUMBER: 0-13857
NOBLE DRILLING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 73-0374541
(State of incorporation) (I.R.S. employer identification number)
10370 Richmond Avenue, Suite 400
Houston, Texas 77042
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (713) 974-3131
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. /X/ Yes / / No
Number of shares of Common Stock outstanding as of November 10, 1994:
77,811,401
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<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................. $ 95,706 $ 69,177
Restricted cash ....................................... 1,842 1,793
Investment in marketable securities ................... 41,223 39,451
Accounts receivable ................................... 66,590 66,219
Investment in marketable equity securities............. 10,408
Costs of uncompleted contracts in excess of billings... 221
Other current assets................................... 28,259 25,092
---------- ----------
Total current assets .......................... 244,249 201,732
---------- ----------
PROPERTY AND EQUIPMENT
Drilling equipment and facilities ..................... 795,438 765,807
Other.................................................. 19,736 15,801
---------- ----------
815,174 781,608
Accumulated depreciation .............................. (322,986) (299,579)
---------- ----------
492,188 482,029
---------- ----------
OTHER ASSETS ............................................... 10,650 12,792
---------- ----------
$ 747,087 $ 696,553
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term notes payable .............................. $ 4,000 $
Current installments of long-term debt ................ 546 546
Accounts payable ...................................... 36,832 21,525
Accrued payroll and related costs ..................... 11,198 10,116
Taxes ................................................. 15,225 7,098
Interest payable ...................................... 5,913 2,541
Other current liabilities ............................. 6,873 9,371
---------- ----------
Total current liabilities ..................... 80,587 51,197
---------- ----------
LONG-TERM DEBT ............................................. 126,865 127,144
OTHER LIABILITIES .......................................... 1,783 1,286
MINORITY INTEREST .......................................... 1,259 156
---------- ----------
210,494 179,783
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock ....................................... 7,015 7,015
Common stock .......................................... 7,804 7,637
Capital in excess of par value ........................ 590,505 583,110
Cumulative translation adjustment ..................... (1,733) (2,286)
Unrealized losses on marketable securities ............ (1,733)
Retained deficit ...................................... (63,515) (76,956)
Treasury stock, at cost ............................... (1,750) (1,750)
---------- ----------
536,593 516,770
---------- ----------
$ 747,087 $ 696,553
========== ==========
</TABLE>
See notes to interim financial statements.
-2-
<PAGE> 3
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1994 1993
--------- ---------
<S> <C> <C>
OPERATING REVENUES
Contract drilling services ........................... $ 68,252 $ 62,445
Turnkey drilling services ............................ 27,080
Engineering and consulting services .................. 1,092 384
Other revenue ........................................ 1,636 602
--------- ---------
98,060 63,431
--------- ---------
OPERATING COSTS AND EXPENSES
Contract drilling services ........................... 45,563 43,358
Turnkey drilling services ............................ 22,702
Engineering and consulting services .................. 1,073 325
Other expense ........................................ 997 554
Depreciation and amortization ........................ 1O,152 6,464
Selling, general and administrative .................. 15,407 6,321
Minority interest .................................... (50) (53)
--------- ---------
95,844 56,969
--------- ---------
OPERATING INCOME........................................... 2,216 6,462
OTHER INCOME (EXPENSE)
Interest expense ..................................... (3,213) (1,364)
Interest income ...................................... 1,469 340
Other, net ........................................... 3,437 1,156
--------- ---------
INCOME BEFORE INCOME TAXES ................................ 3,909 6,594
INCOME TAX PROVISION ...................................... (1,413) (609)
--------- ---------
NET INCOME ................................................ 2,496 5,985
PREFERRED STOCK DIVIDENDS ................................. (3,191) (1,682)
--------- ---------
NET INCOME APPLICABLE TO COMMON SHARES .................... $ (695) $ 4,303
========= =========
NET INCOME APPLICABLE TO COMMON SHARES
PER SHARE .............................................. $ (0.01) $ 0.07
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING................ 77,894 63,894
</TABLE>
See notes to interim financial statements.
-3-
<PAGE> 4
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
-------- --------
<S> <C> <C>
OPERATING REVENUES
Contract drilliug services ............................ $215,774 $178,045
Turnkey drilling services ............................ 42,309
Engineering and consulting services ................... 2,448 1,868
Other revenue ......................................... 4,045 3,308
-------- --------
264,576 183,221
-------- --------
OPERATING COSTS AND EXPENSES
Contract drilling services ............................ 141,876 126,475
Turnkey drilling services ............................. 35,188
Engineering and consulting services ................... 2,039 1,750
Other expense ......................................... 2,642 1,907
Depreciation and amortization ......................... 29,460 19,413
Selling, general and administrative ................... 35,295 19,633
Minority interest ..................................... 189 (134)
-------- --------
246,689 169,044
-------- --------
OPERATING INCOME ........................................ 17,887 14,177
OTHER INCOME (EXPENSE)
Interest expense ...................................... (9,327) (4,889)
Interest income ....................................... 4,002 1,350
Other, net ............................................ 15,131 484
-------- --------
INCOME BEFORE INCOME TAXES .............................. 27,693 11,122
INCOME TAX PROVISION .................................... (4,678) (2,583)
-------- --------
NET INCOME .............................................. 23,015 8,539
PREFERRED STOCK DIVIDENDS ............................... (9,574) (5,046)
-------- --------
NET INCOME APPLICABLE TO COMMON SHARES .................. $ 13,441 $ 3,493
======== ========
NET INCOME APPLICABLE TO COMMON SHARES PER SHARE ........ $ 0.17 $ 0.05
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .............. 77,275 63,669
</TABLE>
See notes to interim financial statements.
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<PAGE> 5
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
-------- --------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . $ 23,015 $ 8,539
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . 29,460 19,413
(Gain) loss on sale of assets . . . . . . . . . . . (8,772) (689)
Deferred income tax provision . . . . . . . . . . . 2,949
Other . . . . . . . . . . . . . . . . . . . . . . . (5,652) 58
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . 22,458 (10,475)
Deferred pension costs . . . . . . . . . . . . . 137 (267)
Other assets . . . . . . . . . . . . . . . . . . 12,675 2,494
Debt issuance costs . . . . . . . . . . . . . . . 303
Accounts payable . . . . . . . . . . . . . . . . (9,822) 4,556
Other liabilities . . . . . . . . . . . . . . . . (12,695) 3,570
-------- --------
54,056 27,199
-------- --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Purchase of property and equipment . . . . . . . . . . (36,360) (9,034)
Proceeds from acquisition of business,
net of cash paid . . . . . . . . . . . . . . . . . . 13,600
Proceeds from sale of property and equipment . . . . . 12,748 1,321
Investment in marketable securities . . . . . . . . . . (3,505) 4,088
Payments to minority interest holders, net . . . . . . (4,478)
Investment in unconsolidated affiliate . . . . . . . . (263) (23)
-------- --------
(18,258) (3,648)
-------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Payment of long-term debt . . . . . . . . . . . . . . . (279) (23,163)
Dividends paid on preferred stock . . . . . . . . . . . (9,574) (5,046)
Proceeds from issuance of common stock . . . . . . . . 2,380 2,432
Payment of short-term debt . . . . . . . . . . . . . . (1,566) (2,449)
(Increase) decrease in restricted cash . . . . . . . . (49)
(Increase) decrease in other assets and liabilities . . (87) 111
-------- --------
(9,175) (28,115)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH . . . . . . . . . (94) 620
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . 26,529 (3,944)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . 69,177 20,210
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . $ 95,706 $ 16,266
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . $ 5,852 $ 2,977
Income taxes . . . . . . . . . . . . . . . . . . . . $ 3,094 $ 663
Noncash investing and financing activities:
Acquisition of business . . . . . . . . . . . . . . . $ 9,169 $
</TABLE>
See notes to interim financial statements.
-5-
<PAGE> 6
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERNATIONAL FINANCIAL STATEMENTS
(Dollar amounts in tables are in thousands, except per share amounts)
(Unaudited)
NOTE 1- BASIS OF ACCOUNTING
The consolidated balance sheet as of September 30, 1994, of Noble
Drilling Corporation ("Noble Drilling" or, together with its consolidated
subsidiaries, unless the context requires otherwise, the "Company"), the
related consolidated statements of operations for the three- and nine-month
periods ended September 30, 1994 and 1993 and the consolidated statements of
cash flows for the nine-month periods ended September 30, 1994 and 1993 are
unaudited. In the opinion of management, all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of such
financial statements have been included. These interim financial statements and
notes are presented in condensed form as permitted by Form 10-Q.
On September 15, 1994, Chiles Offshore Corporation ("Chiles") merged
with the Company and the merger was accounted for as a pooling-of-interests
(see Note 3). All information in the current and prior period financial
statements has been restated to include this merger.
Certain reclassifications have been made to the 1993 consolidated
financial statements to conform to the classifications used in the 1994
consolidated financial statements.
NOTE 2 - NET INCOME APPLICABLE TO COMMON SHARES PER SHARE
Net income applicable to common shares per share has been computed on
the basis of the weighted average number of common shares and, where dilutive,
common share equivalents outstanding during the indicated periods. Each share
of the Noble Drilling $2.25 convertible exchangeable preferred stock and $1.50
convertible preferred stock was assumed to be converted into 5.41946 and 2.4446
shares of common stock, respectively, for purposes of calculating fully diluted
earnings per share. The calculation of income per share assuming full dilution
was antidilutive; therefore, fully diluted earnings per share was not
presented.
NOTE 3 - MERGER AND ACQUISITIONS
On September 15, 1994, Chiles was merged with a subsidiary of Noble
Drilling (the "Chiles Merger"). The merger was consummated through the exchange
of 28,844,280 shares of the Company's common stock for all the outstanding
shares of common stock of Chiles. In addition, 4,025,000 shares of Noble
Drilling $1.50 convertible preferred stock were issued at the time of the
Chiles Merger and exchanged for all of the outstanding shares of the Chiles
$1.50 convertible preferred stock.
-6-
<PAGE> 7
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The effect of the Chiles Merger on the statements of operations was to change
previously reported information as follows:
<TABLE>
<CAPTION>
COMPANY CHILES COMBINED
-------------- ------------ -----------
<S> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1994
Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . $ 130,841 $ 35,675 $ 166,516
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . 12,153 3,518 15,671
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,436 12,083 20,519
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . 3,364 3,019 6,383
Net income applicable to common shares . . . . . . . . . . . . . . 5,072 9,064 14,136
Net income applicable to common shares per share . . . . . . . . . 0.10 0.32 0.18
SIX MONTHS ENDED JUNE 30, 1993
Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . 91,655 28,135 119,790
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . 10,035 (2,320) 7,715
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . 7,489 (4,935) 2,554
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . 3,364 3,364
Net income (loss) applicable to common shares . . . . . . . . . . 4,125 (4,935) (810)
Net income (loss) applicable to common shares per share . . . . . 0.12 (0.17) (0.01)
THREE MONTHS ENDED JUNE 30, 1994
Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . 71,593 16,002 87,595
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . 5,213 96 5,309
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,969 8,429 12,398
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . 1,682 1,510 3,192
Net income applicable to common shares . . . . . . . . . . . . . . 2,287 6,919 9,206
Net income applicable to common shares per share . . . . . . . . . 0.05 0.24 0.12
THREE MONTHS ENDED JUNE 30, 1993
Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . 39,483 14,984 54,467
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . 4,984 473 5,457
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . 4,097 (1,210) 2,887
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . 1,682 1,682
Net income (loss) applicable to common shares . . . . . . . . . . 2,415 (1,210) 1,205
Net income (loss) applicable to common shares per share . . . . . 0.07 (0.04) 0.02
THREE MONTHS ENDED MARCH 31, 1994
Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . 59,248 19,673 78,921
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . 6,940 3,422 10,362
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,467 3,654 8,121
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . 1,682 1,509 3,191
Net income applicable to common shares . . . . . . . . . . . . . . 2,785 2,145 4,930
Net income applicable to common shares per share . . . . . . . . . 0.06 0.08 0.06
THREE MONTHS ENDED MARCH 31, 1993
Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . 52,172 13,151 65,323
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . 5,051 (2,793) 2,258
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . 3,392 (3,725) (333)
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . 1,682 1,682
Net income (loss) applicable to common shares . . . . . . . . . . 1,710 (3,725) (2,015)
Net income (loss) applicable to common shares per share . . . . . 0.05 (0.13) (0.03)
</TABLE>
-7-
<PAGE> 8
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMPANY CHILES COMBINED
-------------- ------------ -----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . $ 194,942 $ 69,589 $ 264,531
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . 23,661 5,248 28,909
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,916 1,936 22,852
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . 6,728 1,208 7,936
Net income applicable to common shares . . . . . . . . . . . . . . 14,188 728 14,916
Net income applicable to common shares per share . . . . . . . . . 0.37 0.03 0.23
YEAR ENDED DECEMBER 31, 1992
Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . 139,713 44,453 184,166
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . (4,516) (25,743) (30,259)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,457) (31,893) (43,350)
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . 6,728 6,728
Net loss applicable to common shares . . . . . . . . . . . . . . . (18,185) (31,893) (50,078)
Net loss applicable to common shares per share . . . . . . . . . . (0.53) (2.32) (1.12)
</TABLE>
The effect of the Chiles Merger on the balance sheets was to change previously
reported information as follows:
<TABLE>
<CAPTION>
COMPANY CHILES COMBINED
-------------- ------------ -----------
<S> <C> <C> <C>
AT JUNE 30, 1994
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,364 $ 64,980 $ 215,344
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . 388,881 145,129 534,010
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . 69,384 12,589 81,973
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . 129,854 475 130,329
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . 340,007 197,045 537,052
AT MARCH 31, 1994
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 126,021 87,235 213,256
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . 380,856 112,123 492,979
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . 47,032 9,098 56,130
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . 128,365 293 128,658
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . 331,480 189,967 521,447
AT DECEMBER 31, 1993
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 116,698 85,034 201,732
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . 383,019 111,802 494,821
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . 42,289 8,908 51,197
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . 128,475 111 128,586
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . 328,953 187,817 516,770
AT DECEMBER 31, 1992
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 78,836 29,682 108,518
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . 231,303 116,708 348,011
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . 55,102 10,423 65,525
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . 43,309 46,061 89,370
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . 211,728 89,906 301,634
</TABLE>
On April 22, 1994, the Company acquired all of the issued and
outstanding shares of common stock (the "Shares") of Triton Engineering
Services Company, a Texas corporation ("Triton"), pursuant to the terms of the
Stock Purchase Agreement dated April 22, 1994 ("Triton Acquisition"). In
consideration for the Shares, the Company paid approximately $4,085,000 in
cash, issued
-8-
<PAGE> 9
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
promissory notes in the aggregate amount of $4,000,000 and issued 751,864
shares of Noble Drilling common stock valued at $5,169,000. The promissory
notes were paid on October 21, 1994. In addition, the Company has a contingent
obligation on April 22, 1996 to pay additional consideration, including
issuance of up to 254,551 shares of Noble Drilling common stock, subject to
reduction as a result of certain events, as well as an indeterminable number of
additional shares in the event Triton achieves certain operating results in
1994. The Triton Acquisition has been accounted for under the purchase method,
and accordingly, the operating results have been included in the consolidated
operating results since the date of acquisition.
The Company acquired nine mobile offshore jackup drilling rigs and
associated assets (the "Western Acquisition") from The Western Company of North
America for $150,000,000 in cash on October 7, 1993. The Western Acquisition
has been accounted for under the purchase method, and accordingly, the
operating results have been included in the consolidated operating results
since the date of acquisition.
The following table summarizes certain unaudited pro forma condensed
consolidated results of operations information giving effect for the Western
Acquisition, Triton Acquisition and the Chiles Merger had these transactions
occurred on January 1, 1993.
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
--------------------------- ------------
1994 1993 1993
-------- -------- ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues . . . . . . . . . . $290,711 $281,251 $428,284
Operating income . . . . . . . . . . . 18,759 22,481 35,541
Net income . . . . . . . . . . . . . . 23,109 7,625 17,192
Preferred stock dividends . . . . . . 9,574 5,046 7,936
Net income applicable to
common shares . . . . . . . . . . . . 13,535 1,455 9,256
Net income applicable to
common shares per share . . . . . . . 0.17 0.02 0.12
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital . . . . . . . . . . . $163,662 $159,922
Total assets . . . . . . . . . . . . . 747,087 762,736
Long-term debt . . . . . . . . . . . . 126,865 127,144
Shareholders' equity . . . . . . . . . 536,593 521,939
</TABLE>
The pro forma results are not necessarily indicative of the actual
results that would have occurred had the acquisitions been in effect for the
entire periods presented. In addition, the pro forma results are not intended
to be a projection of future results from combined operations.
NOTE 4 - MARKETABLE SECURITIES
Effective January 1, 1994, the Company has adopted Statement of
Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." Under the provisions of SFAS No.
115, investments in debt and equity securities are required to be classified
into three categories - held-to-maturity, available-for-sale and trading
securities. At each reporting date, the appropriateness of such classification
is required to be reassessed.
-9-
<PAGE> 10
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
As of September 30, 1994, the Company categorized all of its debt
securities, with original maturities of three months or more, as
available-for-sale. These investments are classified as marketable securities
within current assets on the accompanying consolidated balance sheets. The
following table highlights information applicable to the Company's investments
categorized as available-for-sale as of September 30, 1994:
<TABLE>
<CAPTION>
UNREALIZED
DEBT SECURITY/MATURITY AMORTIZED COST FAIR VALUE LOSSES
---------------------- -------------- --------- -------
<S> <C> <C> <C>
Certificate of Deposit . . . . . . . . . . . $ 3,044 $ 3,042 $ (2)
Corporate Obligations
Mature within 1 year . . . . . . . . . . . 9,828 9,632 (196)
Mature after 1 year through 5 . . . . . . 5,203 5,069 (134)
------- ------- -------
15,031 14,701 (330)
------- ------- -------
U.S. Government Obligations:
Mature within 1 year . . . . . . . . . . . 525 521 (4)
Mature after 1 year through 5 . . . . . . 24,356 22,959 (1,397)
------- ------- -------
24,881 23,480 (1,401)
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . $42,956 $41,223 $(1,733)
======= ======= =======
</TABLE>
At September 30, 1994, the aggregate cost of current marketable
securities exceeded their aggregate market value by $1,733,000. An allowance
for unrealized losses has been established and included as a reduction of
shareholders' equity. Total realized losses related to short-term investments
for the nine-month period ended September 30, 1994 were $2,199,000.
The Company categorizes its investments in marketable equity
securities of $10,408,000 as trading securities and such investments are
classified as current assets and are recorded at fair value at September 30,
1994.
-10-
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
THE COMPANY
The Company's mobile offshore fleet consists of 44 rigs, comprised of
30 jackup drilling rigs, eight submersible rigs, four posted barges and two
platform rigs. The offshore fleet is currently diversified geographically as
follows: U.S. Gulf - 29 rigs; Mexican Gulf - two rigs; West Africa - eight
rigs; Venezuela - four rigs; and India - one rig. The Company's offshore
operations also include labor contracts for drilling and workover activities
covering 16 rigs owned by oil companies operating in the U.K. North Sea.
Through its wholly owned subsidiary, Triton, the Company provides turnkey
drilling services and other engineering and consulting services for the oil and
gas industry. The Company's land drilling operations are conducted principally
in Western Canada, Texas and Louisiana with an active fleet of 19 land drilling
rigs.
INDUSTRY CONDITIONS AND RISKS
Increasing U.S. natural gas prices resulted in significant
improvements in the U.S. Gulf of Mexico ("U.S. Gulf") rig demand and dayrates
during the second half of 1993. Declining world oil prices during this period
reduced rig demand outside the U.S. Gulf. As a result of declining
international rig demand and improved market conditions in the U.S. Gulf, many
contractors mobilized rigs from international markets back to the U.S. Gulf
during late 1993 and early 1994. The increased supply of drilling rigs in the
U.S. Gulf has more than offset the increased level of U.S. Gulf rig demand
during 1994, causing dayrates to deteriorate. Dayrates charged by the Company
in the third quarter of 1994 in the U.S. Gulf were 9 percent and 12 percent
lower than those the Company charged in the second quarter of 1994 and third
quarter of 1993, respectively. The Company continues to believe that absent an
improvement in rig demand outside the U.S. Gulf, movement of additional rigs to
the U.S. Gulf could further reduce dayrates and possibly affect the utilization
levels of the Company's rig fleet.
A major portion of the Company's revenues has been attributable to
international operations. Revenues from international sources accounted for
approximately 49 percent of the Company's operating revenues for the nine-month
period ended September 30, 1994. Currently, the Company has four offshore
drilling rigs under contract and three offshore drilling rigs stacked in
Nigeria. Revenues from drilling operations in Nigeria accounted for 13 percent
of the Company's operating revenues in the first nine months of 1994. Recent
political and economic instability in Nigeria has caused delays in the
Company's ability to renew existing contracts or to secure new drilling
contracts. No assurance can be given that the political and economic climate in
Nigeria will improve or that it will not worsen.
The Company began to operate in Venezuela in late 1993 and currently
has four jackup rigs under contract for Lagoven, a subsidiary of the
government-owned oil company of Venezuela. Revenues generated from drilling
operations accounted for approximately nine percent of the Company's operating
revenues in the first nine months of 1994. The Venezuelan economy has
experienced high inflation and a shortage of foreign currency. During a recent
banking crisis in Venezuela, the Venezuelan government imposed a program of
currency exchange controls and taxes on certain financial transactions that
temporarily impacted the ability of the government-owned oil companies and
their affiliates to make payment in U.S. dollars or other hard currencies to
oilfield service contractors. During this period, the Company's operations were
not materially affected. Although payments are currently being made, any such
government-imposed restriction could adversely affect the Company's operations
in Venezuela.
-11-
<PAGE> 12
SELECTED FINANCIAL DATA
The following table sets forth selected financial information of the
Company expressed as a percentage of total operating revenues for the periods
indicated.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------------- ----------------------------
1994 1993 1994 1993
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
Operating revenues
Contract drilling services
International offshore . . . . . . . . . . . . 24.6% 22.2% 30.2% 30.0%
Domestic offshore . . . . . . . . . . . . . . 28.5 49.8 33.2 41.7
International labor . . . . . . . . . . . . . 9.4 12.0 10.4 14.1
International land . . . . . . . . . . . . . . 4.9 10.9 5.3 8.5
Domestic land . . . . . . . . . . . . . . . . 2.2 3.5 2.5 2.9
Turnkey drilling services . . . . . . . . . . . . 27.6 16.0
Engineering and consulting services . . . . . . . 1.1 .6 .9 1.0
Other revenue . . . . . . . . . . . . . . . . . . 1.7 1.0 1.5 1.8
----- ----- ----- -----
100.0 100.0 100.0 100.0
Operating costs (1) . . . . . . . . . . . . . . . . . (71.7) (69.7) (68.7) (71.0)
Depreciation and amortization . . . . . . . . . . . . (10.4) (10.2) (11.1) (10.6)
Selling, general and administrative . . . . . . . . . (15.7) (10.0) (13.3) (10.7)
Minority interest . . . . . . . . . . . . . . . . . . 0.1 0.1 (0.1) 0.1
----- ----- ----- -----
Operating income . . . . . . . . . . . . . . . . . . 2.3 10.2 6.8 7.8
Interest expense . . . . . . . . . . . . . . . . . . (3.3) (2.2) (3.5) (2.7)
Interest income . . . . . . . . . . . . . . . . . . . 1.5 0.6 1.5 0.7
Other, net . . . . . . . . . . . . . . . . . . . . . 3.5 1.8 5.7 0.3
Income tax provision . . . . . . . . . . . . . . . . 1.4 (1.0) (1.8) (1.4)
----- ----- ----- -----
Net income . . . . . . . . . . . . . . . . . . . . . 2.6 9.4 8.7 4.7
Preferred stock dividends . . . . . . . . . . . . . . (3.3) (2.6) (3.6) (2.8)
----- ----- ----- -----
Net income (loss) applicable to common shares . . . . (0.7)% 6.8% 5.1% 1.9%
===== ===== ===== =====
</TABLE>
___________________
(1) Consists of operating costs and expenses other than depreciation and
amortization, selling, general and administrative, and minority
interest.
-12-
<PAGE> 13
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
During the three-month period ended September 30, 1994 (the "Current
Quarter"), the Company generated operating revenues of $98,060,000 compared to
$63,431,000 during the three-month period ended September 30, 1993 (the
"Comparable Quarter"). The increase in revenues was primarily due to the
operations of Triton, which was acquired in April 1994, and the addition to
the Company's drilling fleet of the nine rigs purchased through the Western
Acquisition in late 1993. Revenues in the Current Quarter for the domestic
offshore operations decreased by $3,661,000 from the Comparable Quarter even
though the number of operating days was slightly greater in the Current
Quarter; however, dayrates were approximately 12 percent lower in the Current
Quarter as compared to the Comparable Quarter.
Utilization for the Company's domestic offshore rig fleet was 87
percent in the Current Quarter compared to 91 percent in the Comparable
Quarter. The decrease was due to the influx of drilling rigs into the U.S. Gulf
from certain international offshore markets. The Company's international
offshore rig utilization rate increased to 79 percent during the Current
Quarter from 75 percent in the Comparable Quarter. At September 30, 1994, the
Company had 16 labor contracts on operator-owned rigs in its international
operations as compared to 14 contracts at September 30, 1993. The Company's
domestic land rig utilization rate was 46 percent in the Current Quarter as
compared to 48 percent in the Comparable Quarter. Utilization for the Company's
international land rig fleet was 87 percent in the Current Quarter compared to
50 percent in the Comparable Quarter, as drilling activity continues to be
relatively high in Western Canada.
Gross margins from offshore drilling operations were $18,887,000, or
36 percent of offshore drilling revenues, in the Current Quarter as compared to
$16,198,000, or 35 percent of offshore drilling revenues, in the Comparable
Quarter. Labor contract drilling gross margins were $2,094,000, or 23 percent
of labor contract revenues, in the Current Quarter compared to $1,618,000, or
21 percent of labor contract revenues, in the Comparable Quarter. Land drilling
operation's gross margins were $1,708,000, or 24 percent of land drilling
revenues, in the Current Quarter, compared to $1,277,000, or 14 percent of land
drilling revenues, in the Comparable Quarter. Turnkey drilling services gross
margins were $4,378,000, or 16 percent of turnkey drilling revenues, in the
Current Quarter.
Depreciation and amortization expenses were $10,152,000 in the Current
Quarter as compared to $6,464,000 in the Comparable Quarter. This increase of
$3,688,000 is primarily due to the depreciation of the assets purchased in the
Western and Triton Acquisitions and on the upgrades of several of the Company's
drilling rigs.
Selling, general and administrative expenses were $15,407,000 in the
Current Quarter compared to $6,321,000 in the Comparable Quarter. The increase
in selling, general and administrative expenses was a result of approximately
$5.3 million of pooling costs related to the Chiles Merger being expensed in
the Current Quarter and administrative expenses associated with the expanded
operations from the Western and Triton Acquisitions.
Interest expense was $3,213,000 in the Current Quarter compared to
$1,364,000 in the Comparable Quarter. The increase was principally due to the
issuance of senior debt discussed under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - Credit Facilities and Long-Term Debt."
Other, net was $3,437,000 in the Current Quarter as compared to
$1,156,000 in the Comparable Quarter. The increase in other, net was primarily
due to net gains of $3.1 million related to the Company's marketable
securities.
-13-
<PAGE> 14
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
During the nine-month period ended September 30, 1994 (the "Current
Period"), the Company generated operating revenues of $264,576,000 compared to
$183,221,000 during the nine-month period ended September 30, 1993 (the
"Comparable Period"). The increase in revenues was primarily due to the
operations of Triton, which was acquired in April 1994, and the addition to
the Company's drilling fleet of the nine rigs purchased through the Western
Acquisition in late 1993.
Utilization for the Company's domestic offshore rig fleet was 80
percent in the Current Period compared to 90 percent in the Comparable Period.
This decrease was due to the influx of drilling rigs into the U.S. Gulf from
certain international offshore markets. The Company's international offshore
rig utilization rate increased to 83 percent during the Current Period from 79
percent in the Comparable Period. The Company's domestic land rig utilization
rate was 47 percent in the Current Period as compared to 38 percent in the
Comparable Period. Utilization for the Company's international land rig fleet
was 76 percent in the Current Period compared to 38 percent in the Comparable
Period, as drilling activity continues to be relatively high in Western Canada.
Gross margins from offshore drilling operations were $62,975,000, or
38 percent of offshore drilling revenues, in the Current Period as compared to
$44,893,000, or 34 percent of offshore drilling revenues, in the Comparable
Period. Labor contract drilling gross margins were $5,880,000, or 21 percent of
labor contract revenues, in the Current Period compared to $4,685,000, or 18
percent of labor contract revenues, in the Comparable Period. Land drilling
operation's gross margins were $5,043,000, or 24 percent of land drilling
revenues, in the Current Period, compared to $2,474,000, or 12 percent of land
drilling revenues, in the Comparable Period. Turnkey drilling services gross
margins were $7,121,000, or 17 percent of turnkey drilling revenues, in the
Current Period.
Depreciation and amortization expenses were $29,460,000 in the Current
Period as compared to $19,413,000 in the Comparable Period. This increase of
$10,047,000 is primarily due to the depreciation of the assets purchased in the
Western and Triton Acquisitions and on the upgrades of several of the Company's
drilling rigs.
Selling, general and administrative expenses were $35,295,000 in the
Current Period compared to $19,633,000 in the Comparable Period. The increase
in selling, general and administrative expenses was a result of approximately
$5.3 million of pooling costs related to the Chiles Merger being expensed in
the Current Period and administrative expenses associated with the expanded
operations from the Western and Triton Acquisitions.
Interest expense was $9,327,000 in the Current Period compared to
$4,889,000 in the Comparable Period. This increase was principally due to the
issuance of senior debt in late 1993 that is discussed under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources - Credit Facilities and Long-Term
Debt."
Other, net was $15,131,000 in the Current Period as compared to
$484,000 in the Comparable Period. The increase of $14,647,000 in other, net
was primarily due to a gain of $8.0 million from the sale of a drilling rig in
the second quarter of 1994, net gains of $3.1 million related to the Company's
marketable securities and a gain of $1.6 million from a recovery of a
previously written-off note receivable in the second quarter of 1994.
-14-
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
At September 30, 1994, the Company had cash, cash equivalents,
restricted cash and investments in marketable securities of $140.6 million and
$26.0 million of funds available under various lines of credit. The Company
expects to continue to generate cash flow from operations for the remainder of
1994, assuming no material decrease in demand for contract drilling and turnkey
services. The Company will continue to have cash requirements for debt
principal and interest payments and preferred dividends, when and if declared.
For the remainder of 1994 and the first nine months of 1995, principal and
interest payments are estimated to be approximately $12.3 million. Assuming the
Company's call for full redemption of Noble Drilling's $2.25 convertible
exchangeable preferred stock ("$2.25 Preferred Stock") on December 31, 1994
and, as a result thereof, the assumed full conversion on December 30, 1994, no
dividends on the $2.25 Preferred Stock would be payable or paid for the fourth
quarter of 1994. Dividends on Noble Drilling's $1.50 convertible preferred
stock for the remainder of 1994 and the first nine months of 1995 are
approximately $6.0 million. The Company expects to fund these obligations,
totaling $18.3 million, out of cash and short-term investments as well as cash
expected to be provided by operations.
Capital expenditures for the remainder of 1994 and the first nine
months of 1995 are planned to aggregate approximately $50.0 million, of which
the majority are discretionary and relate to upgrades of equipment which
management considers desirable to improve the marketability of the fleet, but
which can be deferred if necessary. These capital expenditures will be funded
from operating cash flows to the extent available, existing cash balances
and/or available lines of credit.
CREDIT FACILITIES AND LONG-TERM DEBT
On June 16, 1994, the Company signed an agreement with First
Interstate Bank of Texas, N.A. for a $25.0 million revolving credit facility
and $5.0 million letter of credit facility. At September 30, 1994, the Company
had lines of credit totaling $26.0 million and letter of credit facilities
totaling $5.7 million subject to the Company's maintenance of certain levels of
collateral. Based on levels of collateral at September 30, 1994, the Company
had $26.0 million available under these lines of credit and $3.9 million
available to support the issuance of letters of credit.
In connection with the initial construction of the NN-1, the
predecessor of NN-1 Limited Partnership issued U.S. Government Guaranteed Ship
Financing Sinking Fund Bonds, of which $2.3 million was outstanding at June 30,
1994. The bonds are secured by the vessel, and the applicable security
agreement contains certain restrictions, among others, on distributions to
partners, dispositions of assets and services to related parties. In addition,
there are minimum working capital, net worth and long-term debt to net worth
requirements applicable to NN-1 Limited Partnership. The Company's sharing
percentage in NN-1 Limited Partnership's distributions from operations is
generally 90 percent.
On October 7, 1993, in connection with the Western Acquisition, the
Company issued 12,041,000 shares of common stock and $125,000,000 principal
amount of 9 1/4% Senior Notes Due 2003 (the "Senior Notes"). The Senior Notes
will mature on October 1, 2003. Interest on the Senior Notes is payable
semi-annually on April 1 and October 1 of each year. The Senior Notes are
redeemable at the option of the Company, in whole or in part, on or after
October 1, 1998 at 103.47 percent of principal amount, declining ratably to par
on or after October 1, 2001, plus accrued interest. Mandatory sinking fund
payments of 25 percent of the original principal amount of the Senior Notes at
par plus accrued interest will be required on October 1, 2001 and October 1,
2002. The indenture governing the Senior Notes contains certain restrictive
covenants, including limitations on additional indebtedness and the ability to
secure such indebtedness, restrictions on dividends and certain investments,
and limitations on sale of assets, sales and leasebacks, transactions with
affiliates, and mergers or consolidations.
-15-
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A special meeting of stockholders of Noble Drilling was held
in Houston, Texas, at 10:00 a.m., local time, on September 15,
1994.
(b) The meeting did not involve the election of directors.
(c) A total of 48,606,871 shares of common stock of Noble
Drilling were outstanding and entitled to vote at the meeting.
Shareholders voted on the following three matters:
(i) A proposal to approve the Agreement and Plan of
Merger dated June 13, 1994 among Noble Drilling, a
subsidiary of Noble Drilling and Chiles;
(ii) A proposal to amend Noble Drilling's Restated
Certificate of Incorporation to increase the number
of authorized shares of common stock of Noble
Drilling from 75,000,000 to 200,000,000; and
(iii) A proposal to amend the Noble Drilling Corporation
1991 Stock Option and Restricted Stock Plan to
increase from 1,900,000 to 5,200,000 the number of
shares of Noble Drilling common stock available for
issuance thereunder and to make certain amendments to
conform with recent changes in federal tax laws.
The results of the voting were as follows:
<TABLE>
<CAPTION>
BROKER
MATTER FOR AGAINST ABSTAIN NONVOTES
------ --- ------- ------- --------
<S> <C> <C> <C> <C>
Merger Proposal . . . . . . . . . 38,006,264 50,564 407,459 4,342,317
Charter Amendment Proposal . . . 39,793,085 2,244,326 565,463 205,720
Plan Amendment Proposal . . . . . 26,976,653 8,674,110 2,982,790 4,175,041
</TABLE>
(d) Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits.
The information required by this Item 6(a) is set forth in the
Index to Exhibits accompanying this quarterly report and is
incorporated herein by reference.
b) The following reports on Form 8-K were filed by the Company
during or after the quarter ended September 30, 1994:
Form 8-K dated September 23, 1994 (Date of Event: September
15, 1994), which reported the consummation of the Chiles
Merger with a subsidiary of Noble Drilling on September 15,
1994.
Form 8-K dated October 14, 1994 (Date of Event: October 7,
1994), which reported the change in the principal independent
accountants of the Company.
-16-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOBLE DRILLING CORPORATION
DATE: November 14, 1994 /s/ JAMES C. DAY
---------------------------------------
JAMES C. DAY,
Chairman, President and
Chief Executive Officer
DATE: November 14, 1994 /s/ BYRON L. WELLIVER
---------------------------------------
BYRON L. WELLIVER,
Senior Vice President-Finance,
Treasurer and Controller
(Principal Financial and
Accounting Officer)
-17-
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER Exhibit
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Exhibit 2.1 - Agreement and Plan of Merger dated June 13, 1994 among Noble Drilling, Chiles and Noble Offshore
Corporation (Filed as Exhibit I to the Prospectus constituting Part I of Registration Statement on Form
S-4 (No. 33-54495) of Noble Drilling and incorporated herein by reference.
Exhibit 10.1 - Registration Rights Agreement dated as of September 15, 1994 between Noble Drilling and P.A.J.W.
Corporation.
Exhibit 10.2 - Severance Agreement dated July 1, 1993 between Noble Offshore Corporation (as successor by merger to Chiles
Offshore Corporation) and C.R. Bearden.
Exhibit 27 - Financial Data Schedules
</TABLE>
-18-
<PAGE> 1
EXHIBIT 10.1
NOBLE DRILLING CORPORATION
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of September 15,1994 (this
"Agreement") by and between NOBLE DRILLING CORPORATION, a Delaware corporation
(the "Company"), and P.A.J.W. CORPORATION, a Delaware corporation (the
"Stockholder");
W I T N E S S E T H:
WHEREAS, the Stockholder is the holder of 11,535,587 shares of the
common stock, par value $0.01 per share, of Chiles Offshore Corporation, a
Delaware corporation ("COC",), constituting approximately 30.3% of the
currently outstanding shares of such class of stock;
WHEREAS, the Company, Noble Offshore Corporation, a newly formed,
wholly-owned subsidiary of the Company ("Sub"), and COC are parties to that
certain Agreement and Plan of Merger dated as of June 13, 1994 (the "Merger
Agreement") pursuant to which COC will be merged with and into Sub (the
"Merger") and all of the issued and outstanding capital stock of COC will be
converted into the right to receive capital stock of the Company (and cash in
lieu of fractional shares of common stock of the Company);
WHEREAS, the ability of the Stockholder to freely trade the shares of
common stock, par value $.10 per share, of the Company ("Common Stock")
received by the Stockholder pursuant to the Merger may be limited by applicable
federal securities laws so that such shares of Common Stock may be less liquid
than the shares of Common Stock received pursuant to the Merger by other
stockholders of COC;
WHEREAS, in order to improve the transferability of the Common Stock
to be received by the Stockholder pursuant to the Merger, the Stockholder has
requested the Company to provide to the Stockholder limited registration rights
with respect to the shares of Common Stock to be received by the Stockholder
pursuant to the Merger and the Company has agreed to provide such rights on the
terms and subject to the conditions herein; and
WHEREAS, the execution and delivery of this Agreement by the Company
and the Stockholder is a condition to the obligation of the Company to effect
the Merger;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
<PAGE> 2
ARTICLE I
REGISTRATION RIGHTS
The Company and the Stockholder covenant and agree as follows:
1.1 Definitions. For purposes of this Agreement:
(a) The terms "register," "registered" and "registration" refer to
a registration of securities effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act (as defined
below), and the declaration or ordering of effectiveness of such registration
statement or document.
(b) The term "Registrable Securities" means (i) the Common Stock
received by the Stockholder pursuant to the Merger and (ii) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Common Stock.
(c) The term "Restricted Securities" means the Registrable
Securities upon original issuance thereof, subject to the provisions of Section
1.2 hereof.
(d) The term "Person" means an individual, partnership,
corporation, trust or unincorporated organization, or government or agency or
political subdivision thereof.
(e) The term "Board" means the Board of Directors of the Company.
(f) The term "Commission" means the Securities and Exchange
Commission.
(g) The term "Securities Act" means the Securities Act of 1933, as
amended, and the term "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) The term "GECC Agreement" means that certain Registration
Rights Agreement dated as of January 29, 1988, between the Company and General
Electric Capital Corporation, as amended by the First Amendment thereto dated
February 5, 1993.
(i) The term "Beall Agreement" means that certain Registration
Agreement dated as of April 22, 1994, between the Company and Joseph E. Beall.
1.2 Securities Subject to this Agreement. The securities
entitled to the benefits of this Agreement are the Registrable Securities but
with respect to any particular Registrable Security, only so long as such
security continues to be a Restricted Security. A Registrable Security ceases
to be a Restricted Security when (a) it has been effectively registered under
the Securities Act and disposed of in accordance with the registration
statement covering it, (b) it is sold pursuant to Rule 144 or Rule 145 (or any
similar provision then in force) under the Securities Act or (c) it has
otherwise been transferred by the Stockholder.
-2-
<PAGE> 3
1.3 Demand Registration.
(a) If the Company shall receive, at any time after the later of
(i) the expiration of the term of the GECC Agreement and (ii) the time when
financial statements that include at least 30 days of combined operations of
the Company and COC after the Merger have been publicly reported, and prior to
the fifth anniversary of the date of this Agreement, a written request from the
Stockholder that the Company file a registration statement under the Securities
Act covering the registration of Registrable Securities, then the Company
shall, subject to the limitations of Sections 1.3(c), 1.5 and 1.7 hereof,
effect the registration of all Registrable Securities that the Stockholder
requests to be registered within 30 days of the receipt by the Company of such
written request by means of a "shelf" registration statement on any appropriate
form under the Securities Act for an offering to be made on a continuous basis
pursuant to Rule 415 under the Securities Act. The Company agrees to use its
best efforts to keep such shelf registration statement continuously effective
for a period of six months following the date on which such shelf registration
statement is declared effective (plus the number of days of any discontinuance
described below).
(b) If the Stockholder intends to distribute the Registrable
Securities covered by the request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to this Section 1.3.
(c) The Company is obligated to effect two registrations pursuant
to this Section 1.3; provided, however, that (i) the Company shall only be
required to effect one registration of Registrable Securities under this
Section 1.3 within any two-year period; (ii) if the Stockholder has the
opportunity under Section 1.4 to register Registrable Securities during the
term of this Agreement prior to the time the Company has effected two
registrations pursuant to this Section 1.3, then the Company shall only be
obligated to effect one registration under this Section 1.3 during the term of
this Agreement; (iii) the Stockholder shall lose the right to demand one
registration pursuant to this Section if the number of Registrable Securities
then held by the Stockholder decreases to less than five percent of the then
outstanding Common Stock; and (iv) the Company shall not be obligated to effect
any registration requested pursuant to this Section 1.3 if the number of shares
of Registrable Securities then held by the Stockholder shall be less than one
percent of the then outstanding Common Stock. A registration shall not be
deemed to have been effected (i) unless it has become effective and remained
effective for the period specified in Section 1.3(a) or until the Registrable
Securities registered under such registration statement have been sold, or (ii)
if, after it has become effective, such registration is terminated by a stop
order, injunction or other order of the Commission or other governmental agency
or court.
(d) Subject to Section 1.3(e), any holder of shares of Common
Stock of the Company that is a party to an agreement with the Company pursuant
to which such holder is granted registration rights under the Securities Act
shall also have the right to include such shares in any shelf registration
pursuant to this Section 1.3.
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(e) If any of the Registrable Securities registered pursuant to
any shelf registration pursuant to this Section 1.3 are to be sold in one or
more underwritten offerings, and the managing underwriter or underwriters
deliver an opinion to the Company and the Stockholder that the total number of
shares of Common Stock which the Stockholder and any other Persons intend to
include in such offering exceeds the number of shares that can be sold in such
offering, there shall be included in such underwritten offering the number of
shares of Common Stock which in the opinion of such underwriters can be sold,
and such shares shall be allocated pro rata among the holders of shares of
Common Stock to be sold on the basis of the number of shares of Common Stock to
be registered; provided, that if shares of Common Stock are being offered for
the account of other Persons as well as the Stockholder, a reduction in number
of shares shall first be made from the shares intended to be offered by such
Persons other than the Stockholder.
(f) Anything in this Agreement to the contrary notwithstanding,
the Company shall not be required to register any Registrable Securities
pursuant to this Section 1.3 if the Stockholder had the opportunity to register
Registrable Securities pursuant to Section 1.4 hereof within the six months
immediately preceding such request, but declined to do so; provided, however,
that the provisions of this paragraph (f) shall not apply if the Stockholder
requested registration of such Registrable Securities pursuant to Section 1.4
hereof and 25 percent or more of such Registrable Securities were excluded from
the offering by the managing underwriter or underwriters thereof.
1.4 Company Registration. At any time within five years of the
date of this Agreement that the Company proposes to register (including for
this purpose a registration effected by the Company for stockholders other than
the Stockholder, except as set forth below with respect to shares offered
pursuant to the Beall Agreement) any shares of its Common Stock under the
Securities Act for sale within such five-year period (other than registration
of the Company's Common Stock for issuance or sale (a) pursuant to Section 1.3
hereof, (b) pursuant to the Beall Agreement or (c) in connection with (i)
employee or non-employee director compensation or benefit programs, (ii) an
exchange offer or an offering of securities solely to the existing stockholders
or employees of the Company or (iii) an acquisition, merger or other business
combination using a registration statement on Form S-4 or any successor or
other appropriate form), the Company will give prompt written notice (which, in
any event, shall be given no less than 15 days prior to the filing of a
registration statement with respect to such offering) to the Stockholder of its
intention so to do and, upon the written request of the Stockholder sent within
15 days after the effective date of any such notice, the Company will, subject
to the provisions of Sections 1.5 and 1.7 hereof, use its best efforts to cause
all Registrable Securities as to which the Stockholder shall have so requested
registration, to be registered under the Securities Act, all to the extent
necessary to permit the sale in such offering of the Registrable Securities so
registered on behalf of the Stockholder in the same manner as the Company (or
stockholder other than the Stockholder, as the case may be) proposes to offer
its shares of Common Stock. The Company shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Registrable Securities requested by the Stockholder to be included
in the registration for such offering on the same terms and conditions as the
shares of Common Stock of the Company included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such
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offering deliver an opinion to the Company and the Stockholder that the total
number of shares of Common Stock which the Stockholder or the Company, and any
other Person, intend to include in such offering will in the good faith opinion
of such managing underwriter or underwriters materially and adversely affect
the success of such offering, then the number of shares of Common Stock to be
offered for the account of the Stockholder shall be reduced pro rata based upon
the number of shares of Common Stock proposed to be sold by the Company, the
Stockholder and other Persons to the extent necessary to reduce the total
number of shares of Common Stock to be included in such offering to the number
of shares recommended by such managing underwriter; provided, that if shares of
Common Stock are being offered for the account of other Persons as well as the
Company, such reduction shall first be made from the shares of Common Stock
intended to be offered by such Persons other than the Stockholder.
1.5 Obligations of the Company. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
the registration of any Registrable Securities, the Company shall as
expeditiously as reasonably practicable:
(a) Prepare and file with the Commission a registration statement
on an appropriate form under the Securities Act and use its best efforts to
cause such registration statement to become effective; provided, that before
filing a registration statement or prospectus or any amendments or supplements
thereto, including documents incorporated by reference after the initial filing
of any registration statement, as soon as practicable, the Company will furnish
to the Stockholder and the underwriters, if any, copies of all such documents
proposed to be filed, which documents will be subject to the review of the
Stockholder and the underwriters, and the Company will not file any
registration statement or amendment thereto, or any prospectus or any
supplement thereto (including such documents incorporated by reference) to
which the Stockholder or the underwriters, if any, shall reasonably object in
the light of the requirements of the Securities Act and any other applicable
laws and regulations.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to a registration statement as may be necessary to
keep such registration statement effective for the applicable period; cause the
related prospectus to be filed pursuant to Rule 424(b) under the Securities
Act; cause such prospectus to be supplemented by any required prospectus
supplement and, as so supplemented, to be filed pursuant to Rule 424(b) under
the Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during the applicable period in accordance with the intended methods
of disposition set forth in such registration statement or supplement to such
prospectus.
(c) Notify the Stockholder and the managing underwriters, if any,
promptly, and (if requested by any such Person) confirm such advice in writing,
(i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, and, with respect to a registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission for amendments or supplements to a registration
statement or related prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of a
registration
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statement or the initiation of any proceeding for that purpose, (iv) if at any
time the representations and warranties of the Company contemplated by Section
1.5(l) cease to be true and correct, (v) of the receipt by the Company of any
notification with respect to the suspension or qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (vi) of the happening of any event which requires
the making of any changes in a registration statement or related prospectus so
that such documents will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (vii) of the Company"s
reasonable determination that a post-effective amendment to a registration
statement would be appropriate or that there exist circumstances not yet
disclosed to the public which make further sales under such registration
statement advisable pending such disclosures and post-effective amendment.
(d) Make reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities for sale
in any jurisdiction, at the earliest possible moment.
(e) If requested by the managing underwriters or the Stockholder
in connection with an underwritten offering, immediately incorporate in a
prospectus supplement or post effective amendment such information as the
managing underwriters and the Stockholder agree should be included therein
relating to such sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of shares of
Registrable Securities being sold to such underwriters and the purchase price
being paid therefor by such underwriters and with respect to any other terms of
the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post- effective
amendment; and supplement or make amendments to any registration statement if
requested by the Stockholder or any underwriter of such Registrable Securities.
(f) Furnish to the Stockholder and each managing underwriter, if
any, without charge, at least one signed copy of the registration statement,
any post-effective amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference).
(g) Deliver without charge to the Stockholder and the
underwriters, if any, copies of the prospectus or prospectuses (including
each preliminary prospectus) and any amendment or supplement thereto as
such Persons may reasonably request; and the Company consents to the use of
such prospectus or any amendment or supplement thereto by the Stockholder and
the underwriters, if any, in connection with the offer and sale of the
Registrable Securities covered by such prospectus or any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities,
register or qualify or cooperate with the Stockholder, the underwriters, if
any, and respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Stockholder or an
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underwriter reasonably requests in writing; keep each such registration or
qualification effective during the period such registration statement is
required to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable registration statement; provided, however,
that the Company will not be required in connection therewith or as a condition
thereto to qualify generally to do business or subject itself to general
service of process in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Stockholder and the managing underwriters,
if any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends; and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters may request at least two
business days prior to any sale of Registrable Securities to the underwriters.
(j) Use its best efforts to cause the Registrable Securities
covered by the applicable registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary, if any, to consummate the disposition of such Registrable
Securities.
(k) Upon the occurrence of any event contemplated by Section
1.5(c) (ii) - (vii) above, prepare a supplement or post- effective amendment to
the applicable registration statement or related prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchaser of the Registrable Securities being
sold thereunder, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading.
(l) Enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is entered into and
whether or not the Registrable Securities to be covered by such registration
are to be offered in an underwritten offering: (i) make such representations
and warranties to the Stockholder with respect to the registration statement,
prospectus and documents incorporated by reference, if any, in form, substance
and scope as are customarily made by issuers to underwriters in underwritten
offerings and confirm the same if and when requested; (ii) obtain opinions of
counsel to the Company and updates thereof with respect to the registration
statement and the prospectus in the form, scope and substance which are
customarily delivered in underwritten offerings; (iii) in the case of an
underwritten offering, enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the managing
underwriters and the Stockholder) addressed to the Stockholder and the
underwriters, if any, covering the matters customarily covered in opinions
delivered in underwritten offerings and such other matters as may be reasonably
requested by the Stockholder and such underwriters; (iv) obtain "cold
comfort" letters and updates thereof from the Company's independent
certified public accountants
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<PAGE> 8
addressed to the Stockholder and the underwriters, if any, such letters to be
in customary form and covering matters of the type customarily covered in "cold
comfort" letters by accountants in connection with underwritten offerings; (v)
if any underwriting agreement is entered into, the same shall set forth in full
the indemnification provisions and procedures customarily included in
underwriting agreements in underwritten offerings; and (vi) the Company shall
deliver such documents and certificates as may be requested by the Stockholder
and the managing underwriters, if any, to evidence compliance with clause (i)
above and with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company. The above shall be done at each
closing under such underwriting or similar agreement or as and to the extent
required thereunder.
(m) Make available for inspection by a representative of the
Stockholder, any underwriter participating in any disposition pursuant to such
registration, and any attorney or accountant retained by the Stockholder or
such underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with
such registration; provided that any records, information or documents that are
designated by the Company in writing as confidential shall be kept confidential
by such Persons unless disclosures of such records, information or documents is
required by court or administrative order.
(n) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders earning statements satisfying the provisions of Section 11(a)
of the Securities Act, no later than 90 days after the end of any 12-month
period (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm or best efforts underwritten
offering and (ii) beginning with the first day of the Company's first fiscal
quarter next succeeding each sale of Registrable Securities after the effective
date of a registration statement, which statements shall cover said 12-month
periods.
(o) If the Company, in the exercise of its reasonable judgment,
objects to any change reasonably requested by the Stockholder or the
underwriters, if any, to any registration statement or prospectus or any
amendments or supplements thereto (including documents incorporated or to be
incorporated therein by reference) as provided for in this Section 1.5, the
Company shall not be obligated to make any such change and the Stockholder may
withdraw its Registrable Securities from such registration, in which event (i)
the Company shall pay all registration expenses (including its counsel fees and
expenses) incurred in connection with such registration statement or amendment
thereto or prospectus or supplement thereto, (ii) in the case of a shelf
registration, the shelf registration statement or amendment thereto shall be
filed as soon as agreement with respect to any proposed change shall be reached
among all the applicable parties and (iii) in the case of a registration being
effected pursuant to Section 1.3, such registration shall not count as one of
the registrations the Company is obligated to effect pursuant to Section 1.3(c)
hereof.
In connection with any registration of Registrable Securities, the
Company may require the Stockholder to furnish to the Company such information
regarding itself and the
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distribution of such securities as the Company may from time to time reasonably
request in writing.
The Stockholder agrees by acquisition of Registrable Securities that,
upon receipt of any notice from the Company of the happening of any event of
the kind described in Section 1.5(c)(ii)-(vii) hereof, the Stockholder will
forthwith discontinue disposition of Registrable Securities covered by such
registration statement or prospectus until the Stockholder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section
1.5(c)(i) hereof, or until it is advised in writing by the Company that the use
of the applicable prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in such
prospectus, and, if so directed by the Company, the Stockholder will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in the Stockholder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time period mentioned in
Section 1.3(a) shall be extended by the number of days during the time period
from and including the date of the giving of such notice pursuant to Section
1.5(c) hereof to and including the date when the Stockholder shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 1.5(c) hereof.
1.6 Expenses of Registration. All expenses incurred in connection
with a registration, filing or qualification pursuant to Section 1.3 hereof
(other than fees and expenses of the Company's counsel), including, without
limitation, registration, filing and qualification fees, printers' and
accounting fees, and the fees and disbursements of counsel for the Stockholder,
shall be borne and paid by the Stockholder, pro rata in such proportion as the
number of Registrable Securities registered pursuant to such registration bears
to the total amount of securities registered pursuant thereto. All expenses
incurred in connection with a registration pursuant to Section 1.4 (including,
but not limited to the expenses enumerated in the preceding sentence) shall be
borne by the Company, with the exception of fees and disbursements of the
Stockholder's counsel, which shall be borne by the Stockholder. In addition,
the Stockholder shall bear and pay all underwriting discounts and selling
commissions attributable to sales of Registrable Securities.
1.7 Underwritten Registrations.
(a) If any of the Registrable Securities covered by any
registration under Section 1.3 are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Stockholder; provided, that
such investment bankers and managers must be reasonably satisfactory to the
Company.
(b) The Stockholder may not participate in any underwritten
registration under Section 1.4 hereunder unless it (i) agrees to sell its
securities on the basis provided in any underwriting arrangements approved and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements. In connection with any underwritten
offering including
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securities being issued or sold by the Company, the Company shall be entitled
to approve the terms of the underwriting arrangements.
1.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless the Stockholder, the officers and directors of the Stockholder,
each underwriter of Registrable Securities and each other Person, if any, who
controls the Stockholder or such underwriter within the meaning of Section 15
of the Securities Act, against any losses, claims, damages, liabilities or
expenses, joint or several, to which any such Person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such Registrable
Securities were registered under the Securities Act pursuant hereto, or any
post-effective amendment thereof, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus, if
used prior to the effective date of the registration statement and not
corrected in the final prospectus, or contained in the final prospectus (as
amended or supplemented, if the Company shall have filed with the Commission
any amendment thereof or supplement thereto), or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse any
such Person for any legal or other expenses reasonably incurred by such Person
in connection with investigating or defending any such loss, claim, damage,
liability or expense; provided, however, that the indemnity agreement contained
in this Section 1.8(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld); and provided further that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon any such untrue statement or omission or alleged
untrue statement or omission which has been made in said registration
statement, preliminary prospectus, prospectus or amendment or supplement or
omitted therefrom in reliance upon and in conformity with information furnished
in writing to the Company by the Stockholder or such underwriter specifically
for use in the preparation thereof.
(b) To the extent permitted by law, the Stockholder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act, each
underwriter and each Person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against any losses, claims, damages,
liabilities or expenses, joint or several, to which the Company or any such
Person, may become subject under the Securities Act or otherwise, and will
reimburse the Company or any such Person for any legal or other expenses
reasonably incurred by the Company or such Person in connection with
investigating or defending any such loss, claim, damage, liability or
expense, but only insofar as such losses, claims, damages, liabilities or
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expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or omission or alleged untrue statement or omission of a
material fact referred to in clause (i) or (ii) of Section 1.8(a) hereof, in
each case to the extent (and only to the extent) that such untrue statement or
omission or alleged untrue statement or omission was made in reliance upon and
in conformity with information furnished in writing by or on behalf of the
Stockholder specifically for use in connection with such registration;
provided, however, that the indemnity agreement contained in this Section
1.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or expense if such settlement is effected without the consent
of the Stockholder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 1.8,
notify the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure so to notify an indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1.8, but the omission so to notify the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 1.8(c) hereof, any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 1.8(d) were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
1.9 Reports Under Exchange Act. With a view to making available
to the Stockholder the benefits of Rule 145 under the Securities Act and any
other rule or regulation of the Commission that may at any time permit the
Stockholder to sell securities of the Company to the public without
registration, the Company agrees to:
(a) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act, and the rules and regulations adopted by the Commission
thereunder; and
(b) furnish to the Stockholder forthwith upon request (i) a
written statement by the Company as to whether it has complied with the
reporting requirements of Rule 144, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents filed by
the Company pursuant to the Exchange Act and (iii) such other information as
may be reasonably requested in availing the Stockholder of any rule or
regulation of the Commission which permits the sale of any securities without
registration.
1.10 Assignment of Registration Rights. The right to cause the
Company to register Registrable Securities pursuant to this Agreement may not
be assigned, in whole or in part, by the Stockholder without the prior written
consent of the Company.
1.11 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Stockholder, enter into any agreement with any holder or
prospective holder of any securities of the Company which grants registration
rights under the Securities Act on terms and conditions more favorable than the
rights granted to the Stockholder in this Agreement. The Company is not a party
to any currently subsisting agreement with respect to its securities granting
any registration rights to any Person, except the GECC Agreement and the Beall
Agreement.
1.12 Hold-Back Agreements.
(a) If a registration statement is filed pursuant to Section 1.3
or 1.4 hereof, the Stockholder agrees not to effect any public sale or
distribution of the issue being registered or similar security of the Company,
including a sale pursuant to Rule 144 or Rule 145 under the Securities Act
(except as part of such underwritten registration), during the 14-day period
prior to, and during the 90-day period beginning on, the closing date of each
underwritten offering made pursuant to such registration statement, to the
extent timely notified in writing by the Company or the managing underwriters.
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(b) The Company agrees (i) not to effect any public sale or
distribution of any securities similar to those being registered during the
14-day period prior to, and during the 90-day period beginning on, the
effective date of a registration statement filed pursuant to Section 1.3 or 1.4
hereof (except as part of such underwritten registration or in connection with
(A) employee or non-employee director compensation or benefit programs, (B) an
exchange offer or an offering of securities solely to the existing stockholders
or employees of the Company, or (C) an acquisition, merger or other business
combination using a registration statement on Form S-4 or any successor or
other appropriate form), and (ii) to cause each holder of its privately placed
securities purchased from the Company at any time on and after the date of this
Agreement to agree not to effect any public sale or distribution of any such
securities during such period, including a sale pursuant to Rule 144 under the
Securities Act (except as part of such underwritten registration, if
permitted).
ARTICLE II
MISCELLANEOUS
2.1 Successors and Assigns; No Third Party Benefit. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective permitted successors and assigns. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto and their respective permitted successors and assigns any rights or
remedies under or by reason of this Agreement, except as expressly provided in
this Agreement.
2.2 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of the State of
Texas, without giving effect to the principles of conflicts of law thereof.
2.3 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by
all, the parties hereto.
2.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are inserted for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and shall be delivered by (a)
personal delivery, (b) expedited delivery service or (c) certified or
registered mail, postage prepaid. Any such notice shall be deemed given upon
its receipt at the following address:
(i) If to the Stockholder, initially at Potomac Tower, Suite 1700,
1001 19th Street North, Arlington, Virginia 22209 and thereafter at such other
address, notice of which is given to the Company in accordance with this
Section 2.5; and
-13-
<PAGE> 14
(ii) If to the Company, initially at 10370 Richmond Avenue, Suite
400, Houston, Texas 77042 and thereafter at such other address, notice of which
is given in accordance with this Section 2.5.
2.6 Adjustments Affecting Registrable Securities. The Company will
not take any action, or permit any change to occur, with respect to the
Registrable Securities which would adversely affect (a) the ability of the
Stockholders to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or (b) the marketability of such
Registrable Securities in any such registration.
2.7 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
(which may be generally or in a particular instance and either retroactively or
prospectively) may not be given, unless the Company has obtained the written
consent of the Stockholder.
2.8 Severability. If any provision or any portion of any
provision of this Agreement or the application of such provision or any portion
thereof to any Person or circumstance shall be held invalid or unenforceable,
the remaining portion of such provision, as it applies to other Persons or
circumstances and the remaining provisions, shall not be affected or impaired
thereby.
2.9 Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter herein contained. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company with
respect to the securities received by the Stockholder pursuant to the Merger.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
NOBLE DRILLING CORPORATION
By: /s/ James C. Day
James C. Day, Chairman,
President and Chief
Executive Officer
P.A.J.W. CORPORATION
By: /s/ Marc E. Leland
Marc E. Leland, President
-15-
<PAGE> 1
Exhibit 10.2
CHILES OFFSHORE CORPORATION
SEVERANCE AGREEMENT
This Severance Agreement ("Agreement") is made and effective as of the
1st day of July, 1993, by and between Chiles Offshore Corporation, a Delaware
corporation having its principal place of business in Houston, Harris County,
Texas (the "Company"), and Ray Bearden, an individual currently residing in
Houston, Texas ("Employee").
RECITALS
The Board of Directors of the Company (the "Board") has determined
that it is in the best interest of the Company to assure that the Company will
have the continued dedication of the Employee, notwithstanding the possibility,
threat, or occurrence of a Change of Control (as defined below). The Board
believes it is imperative to diminish the inevitable distraction of the
Employee by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control, to encourage the Employee's full attention and
dedication to the Company currently and in the event of any threatened or
pending Change of Control, and to provide Employee with compensation and
benefit arrangements upon a Change of Control which insure that such
compensation and benefits are competitive with other corporations.
AGREEMENT
Now, therefore, in consideration of Employee's continued employment by
the Company, as well as the promises, covenants and obligations contained
herein, the Company and Employee agree as follows:
1. Payment of Severance Amount. Upon the occurrence of a Termination
Event (as defined in paragraph 2), the Company shall:
(i) pay Employee an amount equal to Employee's Base Annual
Salary (as defined in paragraph 2) multiplied by the Employment Term
Factor (as defined in paragraph 2), payable as a lump sum cash payment
within 30 days after the date of the termination constituting such
Termination Event (the "Termination Date');
(ii) vest the Employee in the Additional Vesting Amount (as
defined in paragraph 2) of any unvested stock options granted to
Employee by the Company; and
(iii) provide Employee with life, disability, and medical
insurance at the level provided at either the date of the Change of
Control (as defined in paragraph 2) or the Termination Date, as
Employee shall in his sole discretion elect by providing written
notice thereof to the Company, for a period of time equal to twelve
(12) months multiplied by the Employment Term Factor (as defined in
paragraph 2) following the
<PAGE> 2
Termination Date, or such shorter period until Employee shall obtain
substantially equivalent insurance coverage from a subsequent
employer, if any, in the same manner as if Employee's employment had
not been terminated until the end of such period. Employee shall
immediately notify the Company upon obtaining any insurance from a
subsequent employer and shall provide all information required by
the Company regarding such insurance to enable the Company to make a
determination of whether such insurance is substantially equivalent.
2. Definitions.
(a) A "Termination Event" shall be deemed to have occurred if:
(i) The Company or any subsidiary thereof or successor
thereto shall terminate Employee's employment for any reason other
than for Cause within one year following the occurrence of a Change
of Control; or
(ii) The Employee shall voluntarily terminate his employment
within one year of a Change in Control for "good reason" upon the
occurrence of any one or more of the following:
[A] A significant and material change in the nature or
scope of the Employee's duties from those engaged
in immediately prior to the date on which a Change
of Control occurs to duties that are, taken as a
whole, inconsistent with Employee's range and
duration of experience; provided, however, that
Employee's title, scope of responsibility and
authority may be altered (by reason of demotion,
the creation of or filling of offices with the
Company senior to Employee's office or otherwise)
without constituting "good reason" so long as
Employee's new duties are not inconsistent with his
prior experience; and provided, further, that
Employee's title, scope of responsibility and
authority may be altered (by reason of demotion,
the creation of or filling of offices with the
Company senior to Employee's office or otherwise)
without constituting "good reason" if Employee is a
Rig Manager or Superintendent and such new duties
are assigned by the Company as a result of a
decrease in the drilling activity of the Company;
[B] A reduction in Employee's base salary of more than ten
percent (10%) from that provided to him immediately
prior to the date the Change in Control occurs, except
for across-the-board salary reductions similarly
affecting all executives of the Company;
[C] A diminution in Employee's eligibility to participate
in bonus, stock option or other incentive compensation
plans or employee benefit plans (including medical,
dental, life insurance and long-term disability plans)
-2-
<PAGE> 3
provided for executives with comparable duties; and
[D] Any required relocation of Employee of more than
fifty miles from Employee's then current location
(including any required business travel in excess of
the greater of 120 days per year or the level of
business travel of Employee prior to the most recent
Change of Control).
(b) A "Change of Control" shall be deemed to have occurred if:
(i) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least fifty-one percent (51%) of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders was approved
by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be, for purposes of this Agreement, considered
as though such person were a member of the Incumbent Board;
(ii) the stockholders of the Company shall approve a
reorganization, merger or consolidation, in each case, with respect to
which persons who were the stockholders of the Company immediately
prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than fifty percent (50%) of the
combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or of a liquidation or dissolution of
the Company or of the sale of all or substantially all of the assets
of the Company; or
(iii) The stockholders of the Company shall approve a sale of
all or substantially all of the assets of the Company.
(c) "Employment Term Factor" is equal to (i) the sum of (A) twelve
plus (B) the number of years' service Employee has with the Company and any
Named Entity (ii) divided by twelve. In no event will the Employment Term
Factor exceed two (2.0).
(d) "Base Annual Salary" shall, as determined on the Termination
Date, be equal to the greater of (i) Employee's annual salary excluding bonuses
and special incentive payments on the date of the earliest Change of Control to
occur during the eighteen month period prior to the Termination Date or (ii)
Employee's annual salary excluding bonuses and special incentive payments on
the Termination Date.
(e) A "Named Entity" shall mean any of the following companies:
Chiles Alexander International, Inc.; Chiles Alexander Offshore, Inc.; Chiles
Offshore, Inc.; Chiles Drilling Company; and Griffin Alexander Drilling
Company.
-3-
<PAGE> 4
(f) "Cause" as used herein with respect to termination of Employee's
employment shall mean termination for wilful misconduct of Employee with regard
to his employment or the commission of fraud by Employee against any person.
(g) "Additional Vesting Amount" shall mean, with respect to any
options to purchase stock of the Company granted to Employee by the Company,
options to purchase the number of shares equal to twenty percent (20%) of the
applicable original grant of options plus the number of options vesting on the
next vesting date pursuant to such grant; provided, however, that if the
Termination Event occurs on a vesting date pursuant to the applicable stock
option grant, the Additional Vesting Amount shall only equal twenty percent
(20%), and provided further, that the Additional Vesting Amount shall in no
event exceed thirty percent (30%) of the total number of options originally
granted pursuant to any applicable option, nor shall any options be deemed to
be more than 100% vested pursuant to the application of this Agreement.
3. Parachute Payment Limitations. To the extent that any amounts
payable pursuant to this Agreement would result in receipt by Employee of a
"parachute payment" (as such term is defined in section 280G(b)(2)(A) of the
Internal Revenue Code of 1954, as amended (the "Code")), Employee shall be
entitled to receive only that amount of compensation that would result in
Employee's receiving an aggregate present value of all payments in the nature
of compensation received by or for the benefit of Employee from the Company and
its affiliates that are contingent on a change in the ownership or effective
control of the Company or in the ownership of a substantial portion of the
assets of the Company, whether pursuant to this Agreement or any other
arrangement, which is equal to 2.999 times Employee's "base amount" (as such
term is defined in section 280G(b)(3)(A) of the Code). The foregoing limitation
is intended to provide the Company with the discretion to reduce payments in
the nature of compensation to or for the benefit of Employee that are
contingent on a change in the ownership or effective control of the Company or
in the ownership of a substantial portion of the assets of the Company, under
this Agreement and other arrangements, in whatever manner is most suitable
under the circumstances so as to avoid imposition of the sanctions imposed
under sections 280G and 4999 of the Code with respect to "excess parachute
payments" (as such term is defined in section 280G(b)(1) of the Code);
provided, however, that the Company shall have the obligation to exercise such
discretion in a manner that results in the minimization of federal income tax
incidence to Employee.
4. Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company to: Chiles Offshore Corporation
1400 Broadfield Blvd., Suite 400
Houston, Texas 77084
Attention: Corporate Secretary
-4-
<PAGE> 5
If to Employee to: Mr. Ray Bearden
2803 Autumn Lake Dr.
Katy, Texas 77450
or to such other address as either party may furnish to the other in writing
in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
5. Appicable Law. This contract is entered into under, and shall
be governed for all purposes by, the laws of the State of Texas.
6. Severability. If a court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then the
invalidity or unenforceability of that provision shall not affect the validity
or enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
8. Withholding of Taxes. Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
9. No Employment Agreement. Nothing in this Agreement shall give
Employee any rights (or impose any obligations) to continued employment by the
Company or any subsidiary thereof or successor thereto, nor shall it give the
Company any rights (or impose any obligations) with respect to continued
performance of duties by Employee for the Company or any subsidiary thereof or
successor thereto.
10. Assignment.
(i) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in the
remainder of this paragraph 10. Without limiting the foregoing, Employee's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his will or by the laws of descent or distribution, and in the
event of any attempted assignment or transfer contrary to this paragraph 10 the
Company shall have no liability to pay any amount so attempted to be assigned
or transferred. This Agreement shall inure to the benefit of and be enforceable
by Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
-5-
<PAGE> 6
(ii) The Company may: (x) as long as it remains obligated with
respect to this Agreement, cause its obligations hereunder to be performed by a
subsidiary or subsidiaries for which Employee performs services, in whole or in
part; (y) assign this Agreement and its rights hereunder in whole, but not in
part, to any corporation with or into which it may hereafter merge or
consolidate or to which it may transfer all or substantially all of its assets,
if said corporation shall by operation of law or expressly in writing assume
all liabilities of the Company hereunder as fully as if it had been originally
named the Company herein; but may not otherwise assign this Agreement or its
rights hereunder. Subject to the foregoing, this Agreement shall inure to the
benefit of and be enforceable by the Company's successors and assigns.
11. Modifications. This Agreement shall not be varied, altered,
modified, canceled, changed or in any way amended except by mutual agreement of
the parties in a written instrument executed by the parties hereto or their
legal representatives.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
CHILES OFFSHORE CORPORATION
By: RAY BEARDEN
/s/ Ray Bearden
______________________________
Name: Ray Bearden
Title: President
EMPLOYEE
RAY BEARDEN
/s/ Ray Bearden
_________________________________
Ray Bearden
-6-
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