<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
COMMISSION FILE NUMBER 1-12797
CLIFFS DRILLING COMPANY
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 76-0248934
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1200 SMITH STREET, SUITE 300
HOUSTON, TEXAS 77002
(Address of Principal Executive Offices) (Zip Code)
(713) 651-9426
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Common Stock outstanding as of August 12, 1998: 15,940,945
(Exhibit Index Located on Page 22)
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<PAGE> 2
CLIFFS DRILLING COMPANY
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Statements of Operations (Unaudited) -
CLIFFS DRILLING COMPANY
Three and Six Months Ended June 30, 1998 and 1997.........................................3
Consolidated Balance Sheets (Unaudited) -
CLIFFS DRILLING COMPANY
June 30, 1998 and December 31, 1997.......................................................4
Consolidated Statements of Cash Flows (Unaudited) -
CLIFFS DRILLING COMPANY
Three and Six Months Ended June 30, 1998 and 1997.........................................5
Notes to Interim Consolidated Financial Statements (Unaudited)..............................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................................9
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.............................................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............................18
ITEM 5. OTHER INFORMATION.................................................................18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................................19
SIGNATURES......................................................................................21
EXHIBIT INDEX...................................................................................22
</TABLE>
2
<PAGE> 3
CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(In thousands, except
per share amounts)
<S> <C> <C> <C> <C>
REVENUES:
Revenues .............................................................. $ 77,106 $ 59,842 $ 174,742 $ 120,125
Income from Equity Investments ........................................ 142 628 282 1,221
---------- ---------- ---------- ----------
77,248 60,470 175,024 121,346
COSTS AND EXPENSES:
Operating Expenses .................................................... 42,340 31,365 102,632 71,885
Depreciation, Depletion and Amortization .............................. 6,439 4,483 13,741 8,359
General and Administrative Expense .................................... 2,369 2,255 4,518 4,159
---------- ---------- ---------- ----------
51,148 38,103 120,891 84,403
---------- ---------- ---------- ----------
OPERATING INCOME ........................................................... 26,100 22,367 54,133 36,943
OTHER INCOME (EXPENSE):
Gain on Disposition of Assets ......................................... 128 2,575 123 2,472
Interest Income ....................................................... 496 174 1,049 542
Interest Expense ...................................................... (4,894) (3,809) (9,968) (7,786)
Exchange Rate Gain (Loss) ............................................. (277) 138 (602) 218
Other, net ............................................................ (251) (478) (399) (718)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES ................................................. 21,302 20,967 44,336 31,671
INCOME TAX EXPENSE ......................................................... 7,456 7,339 15,518 11,085
---------- ---------- ---------- ----------
NET INCOME ................................................................. $ 13,846 $ 13,628 $ 28,818 $ 20,586
========== ========== ========== ==========
NET INCOME PER COMMON SHARE:
Basic ................................................................. $ 0.87 $ 0.90 $ 1.82 $ 1.36
========== ========== ========== ==========
Diluted ............................................................... $ 0.86 $ 0.89 $ 1.80 $ 1.34
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Basic ................................................................. 15,851 15,143 15,846 15,139
========== ========== ========== ==========
Diluted ............................................................... 16,044 15,385 16,045 15,378
========== ========== ========== ==========
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE> 4
CLIFFS DRILLING COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
ASSETS (In thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents ....................................................... $ 17,265 $ 28,122
Accounts Receivable, net of allowance for doubtful accounts of $200 and $352
at June 30, 1998 and December 31, 1997, respectively ......................... 71,087 53,341
Notes and Other Receivables, Current ............................................ 4,961 10,190
Inventories ..................................................................... 9,612 7,551
Drilling Contracts in Progress .................................................. 12,691 16,503
Prepaid Insurance ............................................................... 1,852 1,772
Other Prepaid Expenses .......................................................... 11,543 6,595
------------ ------------
Total Current Assets ...................................................... 129,011 124,074
PROPERTY AND EQUIPMENT, AT COST:
Rigs and Related Equipment ...................................................... 493,635 453,915
Other ........................................................................... 17,530 15,373
------------ ------------
511,165 469,288
Less: Accumulated Depreciation, Depletion and Amortization ..................... (114,557) (100,061)
------------ ------------
Net Property and Equipment ................................................ 396,608 369,227
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES ............................ 2,369 1,828
DEFERRED CHARGES AND OTHER .......................................................... 4,613 5,022
------------ ------------
TOTAL ASSETS .............................................................. $ 532,601 $ 500,151
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable ................................................................ $ 36,742 $ 33,171
Accrued Interest ................................................................ 2,673 2,673
Other Accrued Expenses .......................................................... 24,814 30,414
------------ ------------
Total Current Liabilities ................................................. 64,229 66,258
10.25% SENIOR NOTES ................................................................. 203,271 203,606
DEFERRED INCOME TAXES ............................................................... 18,113 14,335
OTHER LIABILITIES ................................................................... 1,264 23
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value, 30,000,000 shares authorized; 16,332,296 and
16,321,932 shares issued and 15,930,053 and 15,906,880 shares outstanding
at June 30, 1998 and December 31, 1997, respectively .......................... 163 163
Paid-In Capital ................................................................. 182,716 182,420
Retained Earnings ............................................................... 69,760 40,942
Less: Restricted Stock ......................................................... (1,932) (2,467)
Treasury Stock, at cost, 402,243 and 415,052 shares at June 30,
1998 and December 31, 1997, respectively .............................. (4,983) (5,129)
------------ ------------
Total Shareholders' Equity ................................................ 245,724 215,929
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................................ $ 532,601 $ 500,151
============ ============
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
<PAGE> 5
CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income .................................................. $ 13,846 $ 13,628 $ 28,818 $ 20,586
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation, Depletion and Amortization ................. 6,439 4,483 13,741 8,359
Deferred Income Tax Expense .............................. 1,810 6,833 3,778 10,434
Mobilization Expense Amortization ........................ 198 -- 393 25
Gain on Disposition of Assets ............................ (128) (2,575) (123) (2,472)
Amortization of Debt Issue Costs ......................... 226 186 453 373
Amortization of Restricted Stock ......................... 164 55 318 78
Amortization of Debt Premium ............................. (167) -- (335) --
Other .................................................... 287 (29) 434 48
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable .................................. (18,862) (8,156) (12,517) (17,850)
Inventories .......................................... (870) (407) (2,014) (253)
Drilling Contracts in Progress ....................... (4,808) (1,436) 3,819 12,137
Prepaid Insurance and Other Prepaid Expenses ......... (3,865) (1,926) (5,421) 738
Investments in and Advances to Unconsolidated
Affiliates ......................................... (195) (770) (541) (1,363)
Accounts Payable and Other ........................... (14,242) (609) (780) 1,829
---------- ---------- ---------- ----------
Net Cash Provided By (Used In) Operating
Activities .................................. (20,167) 9,277 30,023 32,669
INVESTING ACTIVITIES:
Capital Expenditures ........................................ (18,416) (27,964) (42,166) (47,841)
Acquisition of Rigs and Related Equipment ................... -- -- -- (28,500)
Proceeds from Sale of Property and Equipment ................ 533 3,245 1,210 3,524
Collection of Notes Receivable .............................. -- 3,182 -- 3,537
---------- ---------- ---------- ----------
Net Cash Used In Investing Activities ......... (17,883) (21,537) (40,956) (69,280)
FINANCING ACTIVITIES:
Proceeds from Borrowings .................................... -- 6,500 -- 6,500
Payments on Borrowings ...................................... -- (6,500) -- (6,500)
Proceeds from Exercise of Stock Options ..................... 108 36 108 132
Debt Issue Costs ............................................ -- -- (32) --
---------- ---------- ---------- ----------
Net Cash Provided By Financing Activities ..... 108 36 76 132
---------- ---------- ---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS ....................... (37,942) (12,224) (10,857) (36,479)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................ 55,207 14,926 28,122 39,181
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 17,265 $ 2,702 $ 17,265 $ 2,702
========== ========== ========== ==========
</TABLE>
See accompanying notes to interim consolidated financial statements.
5
<PAGE> 6
CLIFFS DRILLING COMPANY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal and recurring adjustments) necessary to present a fair statement
of the results for the periods included herein have been made and the
disclosures contained herein are adequate to make the information presented not
misleading. Operating results for the three and six months ended June 30, 1998
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1997.
2. NOTES PAYABLE
Long-term debt at June 30, 1998 consists solely of 10.25% Senior Notes due
2003 (the "Senior Notes") in the aggregate principal amount of $200.0 million
and debt premium, net of amortization, of $3.3 million. In addition to the
$150.0 million of Senior Notes sold during 1996, the Company sold $50.0 million
of Senior Notes on August 7, 1997 at a premium of $3.9 million. Considering the
premium, the effective interest rate on the $50.0 million Senior Notes is 9.5%.
Interest on the Senior Notes is payable semi-annually during each May and
November. The Senior Notes do not require any payments of principal prior to
their stated maturity on May 15, 2003, but the Company is required to make
offers to purchase Senior Notes upon the occurrence of certain events as defined
in the indenture, such as asset sales or a change of control of the Company.
On or after May 15, 2000, the Senior Notes are redeemable at the option of
the Company, in whole or in part, at a price of 105% of principal if redeemed
during the twelve months beginning May 15, 2000, at a price of 102.5% of
principal if redeemed during the twelve months beginning May 15, 2001, or at a
price of 100% of principal if redeemed after May 15, 2002, in each case together
with interest accrued to the redemption date. Notwithstanding the foregoing, the
Company may at its option use all or a portion of the proceeds from a public
equity offering consummated on or prior to May 15, 1999, to redeem up to $50.0
million principal amount of the Senior Notes at a redemption price equal to 110%
of the principal amount, provided that at least $150.0 million in aggregate
principal amount of the Senior Notes remain outstanding immediately after such
redemption.
The Senior Notes are senior unsecured obligations of the Company, ranking
pari passu in right of payment with all senior indebtedness and senior to all
subordinated indebtedness. The Senior Notes are unconditionally guaranteed (the
"Subsidiary Guarantees") on a senior unsecured basis by the Company's principal
subsidiaries (the "Subsidiary Guarantors"), and the Subsidiary Guarantees rank
pari passu in right of payment with all senior indebtedness of the Subsidiary
Guarantors and senior to all subordinated indebtedness of the Subsidiary
Guarantors. The Subsidiary Guarantees may be released under certain
circumstances. The Senior Notes and the Subsidiary Guarantees are effectively
subordinated to all secured indebtedness, including amounts outstanding under
the Company's $35.0 million revolving credit facility ("Revolving Credit
Facility") with ING (U.S.) Capital Corporation ("ING"). The Subsidiary
Guarantees provide that each Subsidiary Guarantor will unconditionally
guarantee, jointly and severally, the full and prompt performance of the
Company's obligations under the indenture and the Senior Notes. Each Subsidiary
Guarantor is 100% owned by the Company.
6
<PAGE> 7
The indenture under which the Senior Notes are issued imposes significant
operating and financial restrictions on the Company. Such restrictions affect,
and in many respects limit or prohibit, among other things, the ability of the
Company to incur additional indebtedness, make capital expenditures, create
liens, sell assets and make dividends or other payments.
Separate financial statements and other disclosures concerning the
Subsidiary Guarantors are not presented because management has determined such
financial statements and other disclosures are not material to investors. The
assets, equity, income and cash flows of the non-guarantor subsidiaries on an
individual and combined basis are less than 1% of the consolidated assets,
equity, income and cash flows, respectively, of the Company and are
inconsequential. The combined condensed financial information of the Company's
Subsidiary Guarantors is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(In thousands)
<S> <C> <C>
Current Assets ......................... $ 9,372 $ 31,872
Non-Current Assets ..................... 63,269 214,462
------------ ------------
Total Assets ...................... $ 72,641 $ 246,334
============ ============
Current Liabilities .................... $ 2,122 $ 21,417
Non-Current Liabilities ................ 61,298 189,004
Equity ................................. 9,221 35,913
------------ ------------
Total Liabilities and Equity ...... $ 72,641 $ 246,334
============ ============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1998 1997
------------ ------------
(In thousands)
<S> <C> <C>
Revenues ............................... $ 13,614 $ 41,088
Operating Income ....................... $ 3,400 $ 17,826
Net Income ............................. $ 2,100 $ 7,544
</TABLE>
Effective May 31, 1998, three Subsidiary Guarantors were merged into Cliffs
Drilling Company.
The Company currently maintains a $35.0 million Revolving Credit Facility
with ING. The Revolving Credit Facility matured on May 31, 1998, and was renewed
through May 31, 2000. At June 30, 1998, the Company had no indebtedness
outstanding under the Revolving Credit Facility, but had $.4 million in letters
of credit outstanding, thereby leaving $34.6 million available under the credit
facility.
3. EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share," ("SFAS No. 128"). SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is similar to the previously reported fully diluted earnings
per share. The earnings per share amounts and weighted average number of common
and common equivalent shares outstanding for the three and six months ended June
30, 1997 have been restated as required to comply with SFAS No. 128.
7
<PAGE> 8
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Numerator:
Net Income ......................................... $ 13,846 $ 13,628 $ 28,818 $ 20,586
Preferred Stock Dividends .......................... -- -- -- --
---------- ---------- ---------- ----------
Numerator for Basic Earnings Per Share - Income
Available to Common Shareholders ................. 13,846 13,628 28,818 20,586
Effect of Dilutive Securities:
Preferred Stock Dividends ........................ -- -- -- --
---------- ---------- ---------- ----------
Numerator for Diluted Earnings Per
Share - Income Available to Common
Shareholders After Assumed Conversions ........... $ 13,846 $ 13,628 $ 28,818 $ 20,586
Denominator:
Denominator for Basic Earnings Per Share -
Weighted Average Shares .......................... 15,851 15,143 15,846 15,139
Effect of Dilutive Securities:
Stock Options .................................... 122 207 123 215
Restricted Stock ................................. 71 35 76 24
---------- ---------- ---------- ----------
Dilutive Potential Common Shares ................... 193 242 199 239
---------- ---------- ---------- ----------
Denominator for Diluted Earnings Per Share -
Adjusted Weighted Average Shares and Assumed
Conversions ...................................... 16,044 15,385 16,045 15,378
Net Income Per Common Share:
Basic .............................................. $ 0.87 $ 0.90 $ 1.82 $ 1.36
========== ========== ========== ==========
Diluted ............................................ $ 0.86 $ 0.89 $ 1.80 $ 1.34
========== ========== ========== ==========
</TABLE>
4. COMPREHENSIVE INCOME
During the first quarter of 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, "Reporting Comprehensive Income," ("SFAS No.
130"). SFAS No. 130 establishes new rules for the reporting and disclosure of
comprehensive income and its components in a full set of financial statements.
To the extent the Company has comprehensive income, it would present these items
in a statement of changes in shareholders' equity. However, the Company had no
items of comprehensive income during the three and six months ended June 30,
1998 and 1997 and therefore, comprehensive income is equal to net income for
each period.
5. SEGMENT REPORTING
In 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information," ("SFAS
No. 131"). SFAS No. 131 changes the reporting of segment information in annual
financial statements and also requires reporting selected segment information in
interim financial reports to shareholders. SFAS No. 131 is effective for years
beginning after December 15, 1997 and is not expected to have a significant
impact on the Company's consolidated financial statements and related
disclosures upon adoption.
6. RECENT DEVELOPMENTS
On August 10, 1998, the Company and R&B Falcon Corporation signed a letter
of intent for the merger of the two companies. In the merger, each share of
common stock, par value $0.01 per share, of the Company will be exchanged for
1.7 shares of common stock, par value $0.01 per share, of R&B Falcon
Corporation. The transaction is subject to, among other things, execution and
delivery of a definitive agreement and certain regulatory, third party and
shareholder approvals. The offer to the Company's shareholders will be made
only by means of a prospectus. Under certain circumstances, the Company could
become obligated to pay to R&B Falcon Corporation a $30 million break-up fee in
the event that the Company enters into an agreement for, or consummates, a
business combination with a third party within specified periods following
termination of the letter of intent.
7. CHANGE IN PRESENTATION
Certain financial statement items have been reclassified in the prior year
to conform with the current year presentation.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Form 10-Q regarding the
Company's financial position, business strategy, budgets and plans and
objectives of management for future operations are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed within this item and elsewhere in this Form 10-Q.
GENERAL
Activity in the contract drilling industry and related oil service
businesses improved over the last several years due to increased worldwide
demand for drilling rigs and related services. The supply of offshore drilling
rigs has declined while the demand for such rigs has increased, resulting in
increases in worldwide utilization rates. More recently, however, there has been
a decline in both dayrates and utilization of most classes of drilling rigs due
to a decline in crude oil prices. The financial condition and results of
operations of the Company and other drilling contractors are dependent upon the
price of oil and natural gas, as demand for their services is primarily
dependent upon the level of spending by oil and gas companies for exploration,
development and production activities. Crude oil and natural gas prices have
continued to fluctuate over the last several years. If crude oil prices decline
further or the current weakness in crude oil prices continues for an extended
period, there could be a further deterioration in both rig utilization and
dayrates. This price volatility creates some market uncertainties, despite the
overall improvement in oil and gas market fundamentals.
The Company's daywork drilling operations benefited during 1997 and 1998
from the tight supply of jack-up drilling rigs both in the U.S. Gulf of Mexico
and internationally. Increased exploration activity coupled with a reduction in
rig availability resulted in increasing dayrates and utilization of the
Company's drilling rigs. The same factors have positively and negatively
affected the Company's engineering services business segment during 1997 and
1998, in that increased exploration activity has caused an increase in demand
for the Company's engineering services; however, reduced rig availability has
made it more difficult for the Company to contract drilling rigs required for
performance of turnkey drilling operations. Lower crude oil prices are currently
affecting exploration and production spending which is creating lower dayrates
and utilization for offshore drilling companies and less demand for the
Company's engineering services, particularly in the U.S. Gulf of Mexico.
The oil and gas industry has experienced extreme market cycles over the
past decade. The Company has endeavored to mitigate the effect of this
volatility by diversifying its scope of operations. To achieve its strategic
objective, the Company established separate but related lines of business in
daywork drilling, engineering services and mobile offshore production unit
("MOPU") operations. The Company also has pursued foreign drilling and
production opportunities in order to expand geographically. Each of the
Company's business segments will continue to be affected, however, by the
unsettled energy markets, which are influenced by a variety of factors,
including general economic conditions, the extent of worldwide oil and gas
production and demand therefor, government regulations and environmental
concerns.
9
<PAGE> 10
RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 and 1997
The Company recognized net income of $13.8 million during the second
quarter of 1998 compared to net income of $13.6 million in the second quarter of
1997. Revenues increased $16.8 million and operating income increased $3.7
million in the same period. These increases were partially offset by a reduction
of $2.4 million in gains on disposition of assets and $1.1 million of increased
interest expense associated with the Senior Notes. Improved operating results
from the Company's daywork drilling and engineering services business segments
contributed to the increases in revenues and operating income.
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------- Increase
1998 1997 (Decrease)
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Revenues:
Daywork Drilling .............. $ 54,250 $ 39,684 $ 14,566
Engineering Services .......... 26,460 22,555 3,905
MOPU Operations ............... 2,352 1,733 619
Oil and Gas ................... 92 24 68
Eliminations .................. (5,906) (3,526) (2,380)
------------ ------------ ------------
Consolidated .............. $ 77,248 $ 60,470 $ 16,778
============ ============ ============
Operating Income (Loss):
Daywork Drilling .............. $ 18,531 $ 16,156 $ 2,375
Engineering Services .......... 9,162 7,736 1,426
MOPU Operations ............... 928 812 116
Oil and Gas ................... (49) (16) (33)
Corporate Office .............. (2,472) (2,321) (151)
------------ ------------ ------------
Consolidated .............. $ 26,100 $ 22,367 $ 3,733
============ ============ ============
</TABLE>
Daywork Drilling
Daywork drilling revenues increased $14.6 million and operating income
increased $2.4 million in the second quarter of 1998 compared to the second
quarter of 1997. The increases in revenues and operating income were primarily
due to an expansion of the Company's operating rig fleet, in addition to
improved rig dayrates.
One jack-up rig recently completed conversion activities from a MOPU to a
drilling rig and mobilized to offshore Venezuela to operate on a one-year
contract. The rig commenced operations during the third quarter of 1998.
The Company operates its drilling rigs on both a term and a spot
(well-to-well) basis. Drilling rigs contracted on a term basis generally work in
various international locations, while drilling rigs contracted on a spot basis
generally work in the U.S. Gulf of Mexico. The following table summarizes
revenues, utilization and average dayrates for significant classes of the
Company's drilling rigs:
10
<PAGE> 11
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------- Increase
1998 1997 (Decrease)
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Daywork Drilling Revenues (1):
Jack-up Rigs:
International ..................... $ 12,307 $ 9,969 $ 2,338
Domestic .......................... 25,828 18,216 7,612
Land Rigs ........................... 9,437 7,958 1,479
Platform / Workover Rigs ............ 6,009 1,055 4,954
Other (2) ........................... 669 2,486 (1,817)
------------ ------------ ------------
Total ......................... $ 54,250 $ 39,684 $ 14,566
============ ============ ============
Average Rig Utilization (3):
Jack-up Rigs:
International ..................... 100% 100%
Domestic .......................... 100% 100%
Land Rigs ........................... 88% 98%
Platform / Workover Rigs ............ 99% 100%
Average Dayrates (4):
Jack-up Rigs:
International ..................... $ 31,247 $ 28,900
Domestic .......................... 35,189 28,677
Land Rigs ........................... 16,936 12,412
Platform / Workover Rigs ............ 14,173 12,374
</TABLE>
- ------------------
(1) Includes revenues earned from affiliates.
(2) Includes joint venture operations in Trinidad in the second quarter of 1997
and joint venture operations in Mexico and labor maintenance contracts in
the second quarters of 1997 and 1998.
(3) Utilization rates are based upon the number of actively marketed rigs in
the fleet and exclude rigs which are unavailable for operations during
periods of refurbishment and upgrade.
(4) Daywork drilling revenues, less non-recurring revenues, divided by
aggregate contract days, adjusted to exclude days under contract at zero
dayrate.
Engineering Services
Engineering services revenues increased $3.9 million and operating income
increased $1.4 million in the second quarter of 1998 compared to the second
quarter of 1997. The Company completed 3 turnkey contracts in the second quarter
of 1998 compared to 4 turnkey contracts in the second quarter of 1997. Two of
the 3 contracts completed during the second quarter of 1998 were international
contracts in Venezuela compared to 3 international contract completions in the
second quarter of 1997.
International operating margins are currently stronger than domestic
margins due to improved drilling efficiencies and reductions in lost time well
activities. Domestic turnkey contractors continue to bid wells very
aggressively, resulting in intense competition which has adversely affected the
Company's domestic turnkey margins, as well as margins of other competitors.
During the second quarter of 1998, the Company signed a contract with PDVSA
Exploration and Production, the Venezuelan government-owned oil company
("PDVSA"), to drill 60 turnkey wells in Venezuela. Aggregate revenues for the 60
wells are expected to range from approximately $450 million to $500 million
depending upon, among other things, various options to be elected by PDVSA. The
program is expected to extend over approximately three and one-half years and
will utilize 7 of the Company's land drilling rigs which are currently located
in Venezuela. No assurance
11
<PAGE> 12
can be given that all 60 wells will ultimately be drilled or that the program
can be completed within the intended time frame. As a consequence of this
expanded program in Venezuela, the Company will be reducing its domestic turnkey
business as personnel are reassigned to Venezuela.
At June 30, 1998, the Company had 4 turnkey wells in progress in Venezuela.
MOPU Operations
MOPU revenues increased $.6 million and operating income increased $.1
million in the second quarter of 1998 compared to the second quarter of 1997.
The increases in revenues and operating income were primarily due to operations
associated with one MOPU which commenced operations late in the second quarter
of 1997, partially offset by the loss of earnings from another unit which was
recently converted to a jack-up drilling rig.
The Company currently owns 4 MOPUs, all of which are under contract and
currently operating.
Corporate Overhead
Corporate overhead increased $.2 million in the second quarter of 1998
compared to the second quarter of 1997. The increase was primarily due to
employment-related costs.
Other Income (Expense) and Income Taxes
The Company recognized $12.3 million of other expense, including income
taxes, during the second quarter of 1998 compared to $8.7 million of other
expense during the same period in 1997. The net increase resulted primarily from
a $2.4 million decrease in gains on disposition of assets and a $1.1 million
increase in interest expense associated with the Senior Notes. See "Liquidity
and Capital Resources."
12
<PAGE> 13
Six Months Ended June 30, 1998 and 1997
The Company recognized net income of $28.8 million in the first six months
of 1998 compared to net income of $20.6 million during the same period in 1997.
Revenues increased $53.7 million and operating income increased $17.2 million in
the same period. These increases were partially offset by a reduction of $2.3
million in gains on disposition of assets, $2.2 million of increased interest
expense associated with the Senior Notes and $4.4 million of increased income
taxes. Improved operating results from the Company's daywork drilling and
engineering services business segments contributed to the increases in revenues
and operating income.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------- Increase
1998 1997 (Decrease)
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Revenues:
Daywork Drilling .............. $ 115,222 $ 73,828 $ 41,394
Engineering Services .......... 70,089 49,256 20,833
MOPU Operations ............... 4,680 3,325 1,355
Oil and Gas ................... 222 193 29
Eliminations .................. (15,189) (5,256) (9,933)
------------ ------------ ------------
Consolidated .............. $ 175,024 $ 121,346 $ 53,678
============ ============ ============
Operating Income (Loss):
Daywork Drilling .............. $ 40,711 $ 30,373 $ 10,338
Engineering Services .......... 16,336 9,318 7,018
MOPU Operations ............... 1,896 1,533 363
Oil and Gas ................... (88) (11) (77)
Corporate Office .............. (4,722) (4,270) (452)
------------ ------------ ------------
Consolidated .............. $ 54,133 $ 36,943 $ 17,190
============ ============ ============
</TABLE>
Daywork Drilling
Daywork drilling revenues increased $41.4 million and operating income
increased $10.3 million in the first six months of 1998 compared to the same
period in 1997. The increases in revenues and operating income were primarily
due to an expansion of the Company's operating rig fleet, in addition to
improved rig dayrates.
See "Results of Operations -- Three Months Ended June 30, 1998 and 1997."
13
<PAGE> 14
The following table summarizes revenues, utilization and average dayrates
for significant classes of the Company's drilling rigs:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------- Increase
1998 1997 (Decrease)
-------------- -------------- --------------
(In thousands)
<S> <C> <C> <C>
Daywork Drilling Revenues (1):
Jack-up Rigs:
International............ $ 28,004 $ 18,697 $ 9,307
Domestic................. 51,544 34,726 16,818
Land Rigs.................. 21,719 14,060 7,659
Platform / Workover Rigs... 12,541 2,216 10,325
Other (2).................. 1,414 4,129 (2,715)
------------- ------------ -------------
Total................ $ 115,222 $ 73,828 $ 41,394
============= ============ =============
Average Rig Utilization (3):
Jack-up Rigs:
International............ 100% 100%
Domestic................. 100% 99%
Land Rigs.................. 88% 99%
Platform / Workover Rigs... 100% 100%
Average Dayrates (4):
Jack-up Rigs:
International............ $ 31,250 $ 28,320
Domestic................. 34,870 27,524
Land Rigs.................. 16,068 11,708
Platform / Workover Rigs... 13,937 12,337
</TABLE>
- ------------------
(1) Includes revenues earned from affiliates.
(2) Includes joint venture operations in Trinidad in the first six months of
1997 and joint venture operations in Mexico and labor maintenance contracts
in the first six months of 1997 and 1998.
(3) Utilization rates are based upon the number of actively marketed rigs in
the fleet and exclude rigs which are unavailable for operations during
periods of refurbishment and upgrade.
(4) Daywork drilling revenues, less non-recurring revenues, divided by
aggregate contract days, adjusted to exclude days under contract at zero
dayrate.
Engineering Services
Engineering services revenues increased $20.8 million and operating income
increased $7.0 million in the first six months of 1998 compared to the same
period in 1997. The Company completed 9 turnkey contracts in the first six
months of 1998 compared to 7 turnkey contracts in the same period in 1997. Six
of the 9 contracts completed during the first six months of 1998 were
international contracts in Venezuela compared to 5 international contract
completions in the same period in 1997. Three domestic turnkey contracts
incurred losses in the first six months of 1998 which reduced reported margins
compared to one domestic turnkey loss during the same period in 1997.
See "Results of Operations -- Three Months Ended June 30, 1998 and 1997."
MOPU Operations
MOPU revenues increased $1.4 million while operating income increased $.4
million in the first six months of 1998 compared to the same period in 1997. The
increases in revenues and operating income were primarily due to operations
associated with one MOPU which commenced operations
14
<PAGE> 15
late in the second quarter of 1997, partially offset by the loss of earnings
from another unit which was recently converted to a jack-up drilling rig.
See "Results of Operations -- Three Months Ended June 30, 1998 and 1997."
Corporate Overhead
Corporate overhead increased $.5 million in the first six months of 1998
compared to the same period in 1997. The increase was primarily due to
employment-related costs.
Other Income (Expense) and Income Taxes
The Company recognized $25.3 million of other expense, including income
taxes, during the first six months of 1998 compared to $16.4 million of other
expense during the same period in 1997. The net increase resulted primarily from
a $2.3 million decrease in gains on disposition of assets, a $2.2 million
increase in interest expense associated with the Senior Notes and an increase in
income taxes of $4.4 million. See "Liquidity and Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased $10.8 million from $28.1 million at
December 31, 1997 to $17.3 million at June 30, 1998. The decrease resulted from
$40.9 million used in investing activities, offset in part by $30.0 million
provided by operating activities and $.1 million provided by financing
activities.
Operating Activities
Net cash of $30.0 million provided by operating activities included $17.5
million used to fund working capital requirements and other activities.
"Accounts Receivable" increased from December 31, 1997 to June 30, 1998 due
primarily to the completion of international turnkey wells at the end of the
second quarter of 1998, offset in part by the receipt of refundable taxes
associated with the December, 1997 acquisition of 3 rigs in Trinidad.
Investing Activities
Net cash of $40.9 million used in investing activities during the first six
months of 1998 included capital expenditures totaling $42.2 million. Of that
total, $11.7 million was used to fund the reactivation of 2 land drilling rigs
acquired in January, 1997 for operations on Venezuelan turnkeys, $10.9 million
was used for the conversion of a MOPU to a drilling rig and $18.4 million was
spent on upgrade and renovation activities on other drilling rigs and MOPUs.
On December 29, 1997, the Company completed the acquisition of 2 offshore
platform drilling rigs, one self-propelled jack-up drilling/workover rig and
substantially all of the assets used in the offshore contract drilling business
in Trinidad (the "Well Services Acquisition") previously operated by Well
Services (Marine) Ltd. ("Well Services"). The purchase price totaled $44.0
million, consisting of cash of $23.5 million and the issuance by the Company of
437,939 shares of Common Stock, $0.01 par value per share ("Common Stock").
Additional contingent cash consideration may be paid to the sellers if certain
post-closing criteria are met. The outcome of the contingency is not
determinable at this time and relates to the ultimate valuation of the assets
acquired. The 2 platform rigs and the jack-up drilling/workover rig are
currently operating under contracts in Trinidad.
The Company recently completed the conversion of one of its MOPUs to a
jack-up drilling rig at a cost of approximately $21.7 million. The jack-up
drilling rig mobilized to Venezuela and commenced operations on a one-year
contract during the third quarter of 1998.
The Company has capital expenditure plans totaling approximately $25.2
million during the remainder of 1998. Of this total, $9.9 million relates to
planned upgrades of a platform rig obtained in the Well Services Acquisition and
$15.3 million relates primarily to other drilling rig capital
15
<PAGE> 16
expenditures and drill pipe purchases. The Company intends to fund these capital
expenditures with available cash and internally-generated cash flow.
Financing Activities
Long-term debt at June 30, 1998 consists solely of Senior Notes in the
aggregate principal amount of $200.0 million and debt premium, net of
amortization, of $3.3 million. In addition to the $150.0 million of Senior Notes
sold during 1996, the Company sold $50.0 million of Senior Notes on August 7,
1997 at a premium of $3.9 million. Considering the premium, the effective
interest rate on the $50.0 million Senior Notes is 9.5%. Interest on the Senior
Notes is payable semi-annually during each May and November. The Senior Notes do
not require any payments of principal prior to their stated maturity on May 15,
2003, but the Company is required to make offers to purchase Senior Notes upon
the occurrence of certain events as defined in the indenture, such as asset
sales or a change of control of the Company.
On or after May 15, 2000, the Senior Notes are redeemable at the option of
the Company, in whole or in part, at a price of 105% of principal if redeemed
during the twelve months beginning May 15, 2000, at a price of 102.5% of
principal if redeemed during the twelve months beginning May 15, 2001, or at a
price of 100% of principal if redeemed after May 15, 2002, in each case together
with interest accrued to the redemption date. Notwithstanding the foregoing, the
Company may at its option use all or a portion of the proceeds from a public
equity offering consummated on or prior to May 15, 1999, to redeem up to $50.0
million principal amount of the Senior Notes at a redemption price equal to 110%
of the principal amount, provided that at least $150.0 million in aggregate
principal amount of the Senior Notes remain outstanding immediately after such
redemption.
The Senior Notes are senior unsecured obligations of the Company, ranking
pari passu in right of payment with all senior indebtedness and senior to all
subordinated indebtedness. The Senior Notes are unconditionally guaranteed on a
senior unsecured basis by the Subsidiary Guarantors, and the Subsidiary
Guarantees rank pari passu in right of payment with all senior indebtedness of
the Subsidiary Guarantors and senior to all subordinated indebtedness of the
Subsidiary Guarantors. The Subsidiary Guarantees may be released under certain
circumstances. The Senior Notes and the Subsidiary Guarantees are effectively
subordinated to all secured indebtedness, including amounts outstanding under
the Revolving Credit Facility. The Subsidiary Guarantees provide that each
Subsidiary Guarantor will unconditionally guarantee, jointly and severally, the
full and prompt performance of the Company's obligations under the indenture and
the Senior Notes. Each Subsidiary Guarantor is 100% owned by the Company.
The indenture under which the Senior Notes are issued imposes significant
operating and financial restrictions on the Company. Such restrictions affect,
and in many respects limit or prohibit, among other things, the ability of the
Company to incur additional indebtedness, make capital expenditures, create
liens, sell assets and make dividends or other payments.
The Company currently maintains a $35.0 million Revolving Credit Facility
with ING. The Revolving Credit Facility matured on May 31, 1998, and was renewed
through May 31, 2000. At June 30, 1998, the Company had no indebtedness
outstanding under the Revolving Credit Facility, but had $.4 million in letters
of credit outstanding, thereby leaving $34.6 million available under the credit
facility.
Exchange Rate Gains and Losses
Approximately 62% of the Company's revenues and a substantial portion of
its operating income were sourced from its foreign operations in the first six
months of 1998. These operations are subject to customary political and foreign
currency risks in addition to operational risks. The Company has attempted to
reduce these risks through insurance and the structure of its contracts. The
Company may be exposed to the risk of foreign currency losses in connection with
its foreign operations. Such losses are the result of holding net monetary
assets (cash and receivables in excess of payables) denominated in foreign
currencies during periods of a strengthening U.S. dollar. The Company's foreign
exchange gains and losses are primarily attributable to the
16
<PAGE> 17
Venezuelan Bolivar. The effects of these transactions are reported as "Exchange
Rate Gain (Loss)" in the Consolidated Statements of Operations. The Company does
not speculate in foreign currencies or maintain significant foreign currency
cash balances. The Company will continue to be exposed to future foreign
currency gains and losses if the currency continues to be volatile. Despite the
political and economic risks in Venezuela, the Company believes that the country
continues to be a favorable market for its services.
Cautionary Statements
The ability of the Company to fund working capital, capital expenditures
and debt service in excess of cash on hand will depend upon the success of the
Company's domestic and foreign operations. To the extent that internal sources
are insufficient to meet those cash requirements, the Company can draw on its
available credit facility or seek other debt or equity financing; however, the
Company can give no assurance that such other debt or equity financing would be
available on terms acceptable to the Company.
In any case, the satisfaction of long-term capital requirements will depend
upon successful implementation by the Company of its business strategy and
future results of operations. Management believes it has successfully
implemented the strategy to achieve results of operations commensurate with its
immediate and near-term liquidity requirements.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result, many
computer programs have time-sensitive software that recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
Based on a recent assessment, the Company determined that it will be
required to modify or replace portions of its accounting software so that its
computer systems will function properly with respect to dates in the year 2000
and thereafter. The Company does not believe that operational equipment
programming modifications are necessary. The Company has determined that it will
replace certain accounting software rather than invest in the modification of
existing programs. The replacement software and related installation are
estimated to cost approximately $2.0 million, the majority of which will be
capitalized.
The software conversion is estimated to be completed not later than
December 31, 1998. The Company presently believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not timely completed, the
Year 2000 Issue could have a material impact on operations of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there is no guarantee that these estimates will be achieved, and actual results
could differ materially from those anticipated. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, the cost and extent of training
associated with needed conversions and similar uncertainties.
17
<PAGE> 18
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
During the first six months of 1998, 17,272 shares of the Company's Common
Stock held by the Company as treasury shares were contributed to the Cliffs
Drilling Company Savings Plan in satisfaction of the Company's matching
obligations under the Savings Plan. The 17,272 shares had an aggregate value of
$642,469, based on market prices on the various dates of transfer ranging from
$26 to $55 3/4 per share. These transactions either (i) do not constitute
"sales" and therefore are not subject to the registration requirements of the
Securities Act of 1933, as amended, or (ii) were made in reliance on an
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended, as transactions by the issuer not involving a public offering.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Shareholders was held on May 13, 1998, at
which the shareholders voted on the election of three directors, the proposal to
adopt the Company's 1998 Incentive Equity Plan and the appointment of the
Company's independent public accountants. Of the 13,882,528 shares of Common
Stock present in person or by proxy, 13,771,889 shares were voted for the
election of H. Robert Hirsch as a director, 13,771,905 shares were voted for the
election of Donald W. Keller as a director and 13,768,439 shares were voted for
the election of Joseph E. Reid as a director, with 110,639, 110,623 and 114,089
shares withheld, respectively; and 13,852,350 shares were voted for the
appointment of Ernst & Young LLP as the Company's independent public accountants
for 1998, while 14,615 shares were voted against such appointment with 15,563
shares abstaining. In addition, 7,457,700 shares were voted for the proposal to
adopt the Company's 1998 Incentive Equity Plan, while 1,803,584 shares were
voted against the proposal with 47,941 shares abstaining. Directors whose terms
of office continued were Michael M. Cone, Robert M. McInnes, Douglas E. Swanson
and John D. Weil.
ITEM 5. OTHER INFORMATION.
Recent Developments
- -------------------
On August 10, 1998, the Company and R&B Falcon Corporation signed a letter
of intent for the merger of the two companies. In the merger, each share of
common stock, par value $0.01 per share, of the Company will be exchanged for
1.7 shares of common stock, par value $0.01 per share, of R&B Falcon
Corporation. The transaction is subject to, among other things, execution and
delivery of a definitive agreement and certain regulatory, third party and
shareholder approvals. The offer to the Company's shareholders will be made
only by means of a prospectus. Under certain circumstances, the Company could
become obligated to pay to R&B Falcon Corporation a $30 million break-up fee in
the event that the Company enters into an agreement for, or consummates, a
business combination with a third party within specified periods following
termination of the letter of intent.
Shareholder Proposals
- ---------------------
The Securities and Exchange Commission recently adopted amendments to the
discretionary voting provisions of Rule 14a-4 of the proxy rules. The changes
became effective June 29, 1998. The amendments were intended to clarify when
management may use the discretionary authority customarily contained in a proxy
to vote against shareholder proposals made outside the mechanism of Rule 14a-8,
such as proposals made by a shareholder from the floor of the meeting or through
an independent proxy solicitation.
Rule 14a-4(c) has always clearly authorized management to use discretionary
authority granted in a proxy to vote against any shareholder proposal validly
omitted from the Company's proxy materials pursuant to Rule 14a-8. With respect
to proposals made entirely outside the mechanism of Rule 14a-8, such as a
proposal that the proponent makes only from the floor of the meeting or a
proposal that is the subject of an independent proxy solicitation by the
proponent, Rule 14a-4(c) was somewhat ambiguous.
Under revised Rule 14a-4(c), management may exercise discretionary
authority to vote against any shareholder proposal of which they did not have
notice at least 45 days before the date on which the Company first mailed its
proxy materials for the prior year's annual meeting. The Company's proxy
statement or proxy card must simply state that management intends to use its
discretionary authority in this way as a general matter.
If management receives notice of a non-14a-8 proposal on or before the
required date, revised Rule 14a-4(c) still permits management to use
discretionary voting authority to vote against the
18
<PAGE> 19
proposal. To do so, however, the Company's proxy materials must also include
advice on the nature of the particular matter and how the Company intends to
exercise its discretion on it.
Management may not use discretionary authority under revised Rule 14a-4(c)
to vote against a proposal with respect to which timely notice has been given,
if, in addition, the proponent (1) provides the Company by the notice date with
a written statement that it intends to solicit proxies from the holders of at
least the percentage of the Company's voting shares required to carry the
proposal, (2) includes a statement to that effect in the proponent's proxy
statement, and (3) thereafter provides the registrant with a verification that
such a solicitation has occurred. In such a case, management would have to
solicit specific proxy authority in its own proxy materials in order to vote
against the proposal rather than rely on discretion.
Revised Rule 14a-4(c) further provides that in the event of any advance
notice bylaw requiring that notice of a shareholder proposal be given by a
certain date, then the date designated in the advance notice bylaw will apply in
lieu of the 45 days designated in revised Rule 14a-4(c).
Section 4 of Article I of the Company's Bylaws provides that to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Company. To be
timely, a stockholder's notice must be delivered to or mailed to and received at
the principal executive offices of the Company, not less than 80 days prior to
the meeting; provided, that in the event of less than 90 days notice or prior
public disclosure of the date of the meeting, then notice by the stockholder to
be timely must be so received not later than the close of business on the tenth
day following the date on which such notice of the date for the annual meeting
was mailed or such public disclosure made.
Therefore, assuming the Company publicly discloses its annual meeting date
at least 90 days in advance, a stockholder's notice of intent to present a
proposal at an annual meeting must be delivered to or mailed to and received at
the principal executive offices of the Company not less than 80 days prior to
the meeting in order for the proposal to be brought before the meeting, and the
same time period will apply for purposes of determining the ability of
management to exercise discretionary authority with respect to shareholder
proposals under proxies pursuant to revised Rule 14a-4(c).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1.7 Certificate of Ownership and Merger and Articles of
Merger merging Greenbay Drilling Company with and into
Cliffs Drilling Company.
3.1.8 Certificate of Ownership and Merger merging Southwestern
Offshore Corporation, DRL, Inc. and Cliffs Drilling
Merger Company with and into Cliffs Drilling Company.
10.13.5 Third Restated Credit Agreement dated as of July 29,
1998 by and among Cliffs Drilling Company, Cliffs Oil
and Gas Company, Cliffs Drilling International, Inc. and
ING (U.S.) Capital Corporation.
10.24 Cliffs Drilling Company 1998 Incentive Equity Plan.
10.24.1 Amendment No. 1 dated May 13, 1998 to the Cliffs
Drilling Company 1998 Incentive Equity Plan.
10.25 Form of Non-Qualified Stock Option Agreement for
non-employee members of the Board of Directors.
10.26 Form of Non-Qualified Stock Option Agreement for key
employees and officers.
19
<PAGE> 20
10.27 Cliffs Drilling Company Savings Plan (As Amended and
Restated Effective June 21, 1988).
10.27.1 Amendment No. 1 to the Cliffs Drilling Company Savings
Plan (As Amended and Restated Effective June 21, 1988).
10.28 Cliffs Drilling Company Savings Trust (As Amended and
Restated Effective January 1, 1998).
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
20
<PAGE> 21
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.
CLIFFS DRILLING COMPANY
Date: August 12, 1998 By: /s/ EDWARD A. GUTHRIE
------------------------- -----------------------------
Edward A. Guthrie
Vice President - Finance
Date: August 12, 1998 By: /s/ CINDY B. TAYLOR
------------------------- -----------------------------
Cindy B. Taylor
Vice President - Controller
and Secretary
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.1.7 Certificate of Ownership and Merger and Articles of Merger merging
Greenbay Drilling Company with and into Cliffs Drilling Company.
3.1.8 Certificate of Ownership and Merger merging Southwestern Offshore
Corporation, DRL, Inc. and Cliffs Drilling Merger Company with and
into Cliffs Drilling Company.
10.13.5 Third Restated Credit Agreement dated as of July 29, 1998 by and
among Cliffs Drilling Company, Cliffs Oil and Gas Company, Cliffs
Drilling International, Inc. and ING (U.S.) Capital Corporation.
10.24 Cliffs Drilling Company 1998 Incentive Equity Plan.
10.24.1 Amendment No. 1 dated May 13, 1998 to the Cliffs Drilling Company
1998 Incentive Equity Plan.
10.25 Form of Non-Qualified Stock Option Agreement for non-employee
members of the Board of Directors.
10.26 Form of Non-Qualified Stock Option Agreement for key employees and
officers.
10.27 Cliffs Drilling Company Savings Plan (As Amended and Restated
Effective June 21, 1988).
10.27.1 Amendment No. 1 to the Cliffs Drilling Company Savings Plan (As
Amended and Restated Effective June 21, 1988).
10.28 Cliffs Drilling Company Savings Trust (As Amended and Restated
Effective January 1, 1998).
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.1.7
CERTIFICATE OF OWNERSHIP AND MERGER AND
ARTICLES OF MERGER
Pursuant to the provisions of Section 253 of the Delaware General
Corporation Law and the laws of the British Virgin Islands, the undersigned
domestic and foreign corporations (hereinafter referred to as "Constituent
Corporations"), approve, adopt, execute, acknowledge and file the following
Certificate of Ownership and Merger and Articles of Merger ("Certificate") as
prescribed by Delaware General Corporation Law and the laws of the British
Virgin Islands, for the purpose of merging them into one of such corporations:
1. The names of each of the Constituent Corporations and the
jurisdictions in which they are incorporated are as follows:
<TABLE>
<CAPTION>
Name of Corporation Jurisdiction of Incorporation
------------------- -----------------------------
<S> <C>
Cliffs Drilling Company Delaware
Greenbay Drilling Company Ltd. British Virgin Islands
</TABLE>
2. Cliffs Drilling Company owns all of the outstanding shares of
Greenbay Drilling Company Ltd. and such corporations wish to simplify their
business procedures, record keeping, and administrative structure, and to
eliminate duplicative functions.
3. The Certificate of Incorporation of Cliffs Drilling Company was
filed with the Delaware Secretary of State on April 14, 1988. The Memorandum of
Association and Articles of Association of Greenbay Drilling Company Ltd. were
filed with the Registrar of Companies of the British Virgin Islands on November
12, 1996.
4. The laws of the jurisdictions under which the Constituent Companies
were incorporated permit such merger.
5. The Plan of Merger has been approved, adopted, certified, executed,
and acknowledged by Cliffs Drilling Company in the manner prescribed by the
Delaware General Corporation Law, and has been approved, adopted, certified,
executed, and acknowledged by Greenbay Drilling Company Ltd. in the manner
prescribed by the laws of the British Virgin Islands.
6. For purposes of the laws of the British Virgin Islands, this
Certificate of Merger shall also constitute the appropriate Articles of Merger,
and, for purposes of the laws of the British Virgin Islands and the Delaware
General Corporation Law, the terms contained herein, shall be considered the
Plan of Merger. Upon the filing of this Certificate of Merger with the Delaware
Secretary of State and the Registrar of Companies of the British Virgin Islands,
Greenbay Drilling Company Ltd. shall be hereby merged with and into Cliffs
Drilling Company,
<PAGE> 2
the separate corporate existence of Greenbay Drilling Company Ltd. shall cease,
and Cliffs Drilling Company will be the surviving corporation. In connection
with the merger, each share of Greenbay Drilling Company Ltd. shall be canceled,
and the authorized capital stock of Cliffs Drilling Company shall not be
changed, but shall be and remain the same as before the merger. In addition to
the execution and filing of this Certificate of Merger with the Delaware
Secretary of State and the Registrar of Companies of the British Virgin Islands,
Cliffs Drilling Company and Greenbay Drilling Company Ltd. each shall make all
other filings required by the laws of the State of Delaware and of the British
Virgin Islands in connection with the merger in order to cause the merger to
become effective pursuant to this Certificate.
7. The name of the Surviving Corporation is Cliffs Drilling Company
(hereinafter referred to as the "Surviving Corporation"), and it is to be
governed by the laws of the State of Delaware. From and after the effective date
of the merger, the Surviving Corporation shall possess all of the properties,
rights, privileges and powers, and shall be subject to all of the liabilities
and obligations, of Greenbay Drilling Company Ltd. and Cliffs Drilling Company,
all in accordance with applicable laws of the State of Delaware and of the
British Virgin Islands.
8. The Certificate of Incorporation and Bylaws of Cliffs Drilling
Company, as of the effective date of the merger, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, in each case until
further amended as provided therein and in compliance with applicable law. The
directors and officers of Cliffs Drilling Company, as of the effective date of
the merger, shall be the directors and officers of the Surviving Corporation
following consummation of the merger, in each case until their respective
successors are duly elected and qualified.
9. The authorized capitalization for Greenbay Drilling Company Ltd., a
foreign corporation organized, existing under and by virtue of the laws of the
British Virgin Islands, is 3 million shares, par value US $10.00 per share, of
which 2,540,000 shares are issued and outstanding, all of which are owned by the
Surviving Corporation, and carry voting rights with respect to this transaction.
The authorized capitalization for Cliffs Drilling Company, a Delaware
corporation, is 3 million shares of preferred stock, without par value, none of
which are outstanding, and 30 million shares of common stock, par value US $.01,
of which 7,573,332 shares are issued and outstanding and carry no voting rights
with respect to this transaction. This merger transaction was authorized by
resolutions adopted by the Board of Directors of Cliffs Drilling Company at a
meeting held March 5, 1997, and pursuant to the Unanimous Consent of the Board
of Directors of Greenbay Drilling Company Ltd., dated May 23, 1997.
10. A true and correct copy of the resolutions of the Board of
Directors of Cliffs Drilling Company authorizing such merger, adopted on March
5, 1997, is set forth below:
WHEREAS, the Company owns all of the issued and outstanding
shares in the capital of Greenbay Drilling Company Ltd., a corporation
organized under the laws of the British Virgin Islands ("Greenbay");
and
-2-
<PAGE> 3
WHEREAS, it is deemed advisable that the Company merge with
Greenbay in order that all the estate, property, rights, privileges and
franchises of Greenbay, shall vest in and be possessed by the Company;
NOW, THEREFORE, IT IS RESOLVED, that Greenbay be merged with
and into the Company, and that the Company assume all of Greenbay's
obligations, pursuant to the terms and conditions set forth in the
Certificate of Ownership and Merger and Articles of Merger (the
"Certificate"); and further
RESOLVED, that the terms and conditions of the Plan of
Merger, all of which are set forth in the Certificate, have been
presented to and reviewed by the undersigned Directors and are hereby
approved in the manner required by the Delaware General Corporation
Law; and further
RESOLVED, that the proper officers of the Company are directed
to execute, acknowledge and file, in the office of the Secretary of
State of the State of Delaware, the Certificate, which includes a
certification as to the Company's ownership of all the stock of
Greenbay, and of the adoption and date of adoption of these
resolutions, and such other instruments as may be required in
connection therewith; and further
RESOLVED, that this Board of Directors hereby ratifies,
confirms, and approves, in all respects, all actions heretofore taken
by the officers of the Company for and on behalf of the Company, in
connection with the matters set forth in the preceding resolutions; and
further
RESOLVED, that the officers of the Company be, and each of
them hereby is, authorized in the name and on behalf of the Company to
execute and deliver all agreements, amendments, certificates, reports,
applications, notices, letters, or other documents, and to do or cause
to be done any and all such acts and things as, in the opinion of any
officer, may be necessary or appropriate in order to effectuate the
purposes and intent of the foregoing resolutions and Plan of Merger,
and any such action taken or any agreement, amendment, certificate,
report, application, notice, letter or other document executed and
delivered by them or any of them in connection with any such action
shall be conclusive evidence of their authority from the Company
therefor and the approval and ratification by the Company of such
documents or papers so executed and the actions so taken.
Dated: May 23, 1997
-3-
<PAGE> 4
CLIFFS DRILLING COMPANY
By: /s/ DOUGLAS E. SWANSON
----------------------------------
Douglas E. Swanson, President
GREENBAY DRILLING COMPANY LTD.
By: /s/ EDWARD A. GUTHRIE
----------------------------------
Edward A. Guthrie, Vice President
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 23rd day of May,
1997, by Douglas E. Swanson, President of Cliffs Drilling Company, a corporation
organized under the laws of the State of Delaware, on behalf of said
corporation.
[SEAL]
/s/ BRENDA D. TURRENTINE
----------------------------------
Notary Public in and for the
State of T E X A S
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 23rd day of May,
1997, by Edward A. Guthrie, Vice President of Greenbay Drilling Company Ltd., a
corporation organized under the laws of the British Virgin Islands, on behalf of
said corporation.
[SEAL]
/s/ SONIA VILLAGOMEZ
----------------------------------
Notary Public in and for the
State of T E X A S
-4-
<PAGE> 1
Exhibit 3.1.8
CERTIFICATE OF OWNERSHIP AND MERGER
CLIFFS DRILLING COMPANY
CLIFFS DRILLING COMPANY, a corporation organized and existing under the
laws of the State of Delaware (the "Company"), hereby certifies as follows:
FIRST: That the Board of Directors of the Company, acting at a meeting
held on May 13, 1998, adopted the following resolutions for the purpose of
authorizing the merger of (i) Southwestern Offshore Corporation, a wholly owned
subsidiary incorporated under the laws of the state of Delaware, (ii) DRL, Inc.,
a wholly owned subsidiary incorporated under the laws of the state of Delaware,
and (iii) Cliffs Drilling Merger Company, a wholly owned subsidiary incorporated
under the laws of the state of Delaware, respectively, with and into the
Company:
WHEREAS, the Company owns all of the issued and outstanding
capital stock of Southwestern Offshore Corporation, a Delaware
corporation ("Southwestern"), DRL, Inc., a Delaware corporation
("DRL"), and Cliffs Drilling Merger Company, a Delaware corporation
("CDMC"); and
WHEREAS, it is deemed advisable that Southwestern, DRL, and
CDMC be merged with and into the Company in order that all the estate,
property, rights, privileges, and franchises of Southwestern, DRL, and
CDMC shall vest in and be possessed by the Company; therefore be it
RESOLVED, that Southwestern, DRL, and CDMC be merged with and
into the Company, whereupon (i) the separate existence of Southwestern,
DRL, and CDMC shall cease, (ii) the Company shall assume all of the
obligations of Southwestern, DRL, and CDMC, and (iii) the Company shall
be the surviving corporation and shall continue to exist; and further
RESOLVED, that the President, any Vice-President or the
Secretary of the Company are hereby authorized and directed to (i)
execute and deliver, in the name and on behalf of the Company, a
Certificate of Ownership and Merger providing for the merger of
Southwestern, DRL, and CDMC with and into the Company, and certifying
as to the adoption and date of adoption of these resolutions, (ii) file
such certificate in the Office of the Secretary of State of the State
of Delaware, (iii) cause a certified copy of the certificate to be
recorded in the office of the Recorder of the County in Delaware in
which the registered office of each constituent corporation is located,
and (iv) do all other acts and things that they may consider necessary
or proper in order to carry out and effectuate the purpose of these
resolutions; and further
<PAGE> 2
RESOLVED, that any and all actions previously taken by any of
the officers of the Company in connection with the merger of
Southwestern, DRL, and CDMC with and into the Company be and hereby are
approved, ratified and accepted.
SECOND: That the aforesaid resolutions were duly adopted in accordance
with the applicable provisions of Sections 253 of the General Corporation Law of
the State of Delaware.
THIRD: That the merger authorized by the aforesaid resolutions shall
be effective as of the close of business on May 31, 1998.
CLIFFS DRILLING COMPANY
By: /s/ EDWARD A. GUTHRIE
----------------------------
Edward A. Guthrie
Vice President - Finance
STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 28th day of May, 1998
by Edward A. Guthrie, as Vice President - Finance of Cliffs Drilling Company.
Such person acknowledged to me that this Certificate of Ownership and Merger is
the deed and act of Cliffs Drilling Company and that all facts stated herein are
true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 28th day of May, 1998.
[SEAL]
/s/ SONIA VILLAGOMEZ
----------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
<PAGE> 1
EXHIBIT 10.13.5
- --------------------------------------------------------------------------------
THIRD RESTATED CREDIT AGREEMENT
-----------------------------------
CLIFFS DRILLING COMPANY,
AS BORROWER
CLIFFS OIL AND GAS COMPANY,
AND
CLIFFS DRILLING INTERNATIONAL, INC.,
AS GUARANTORS
AND
ING (U.S.) CAPITAL CORPORATION
AS AGENT
AND
CERTAIN FINANCIAL INSTITUTIONS
AS LENDERS
-----------------------------------
July 29, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.3 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.4 Calculations and Determinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 2
TERMS OF FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.1 Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.1.1 Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.1.1A. Request for New Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.1.2 Reduction of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.1.3 Extension of Commitment Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.1.4 Allocation of Credit to Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.1.4A. Reimbursement by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.1.4B. Letter of Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.1.4C. Participation by Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.1.4D. Distributions to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.1.4E. Drafts and Demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.1.4F. Extension of Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.1.4G. Transferees of Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.1.4H. Obligations in Excess of Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.1.4I. Acceleration of LC Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.1.5 Letter of Credit Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.1.6 Borrowing Base Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.1.7 Cure of Borrowing Base Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.1.8 Advances to Satisfy Obligations of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.2 Provisions Relating to All Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.2.1 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.2.2 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.2.3 Continuations and Conversions of Existing Loans . . . . . . . . . . . . . . . . . . . . . . . 30
2.2.4 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.2.5 Payments to Bank Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.2.6 Capital Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.2.7 Increased Cost of Eurodollar Loans or Letters of Credit . . . . . . . . . . . . . . . . . . . 33
2.2.8 Change of Law or Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.2.9 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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2.2.10 Reimbursable Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.2.11 Pledge of and Security Interest in Collateral Account and Right of Offset or Lien . . . . . . 35
2.2.12 Business Purpose; Margin Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 3
CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.1 Receipt of Loan Documents and Other Items . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.2 Additional Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.1 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.2 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.3 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.4 Security Instruments Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.5 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.6 No Legal Impediment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.7 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.8 Additional Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2.9 Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 4
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.1 Due Authorization and Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.2 Valid and Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.3 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.4 Scope and Accuracy of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.5 Liabilities, Litigation and Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.6 Authorizations and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.8 Proper Filing of Tax Returns and Payment of Taxes Due . . . . . . . . . . . . . . . . . . . . 40
4.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.10 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.11 Compliance with Federal Reserve Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.12 Investment Company Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.13 Public Utility Holding Company Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . 43
4.14 Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.16 No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.17 Casualties or Taking of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.18 Names of Business and Locations of Business, Offices and Property . . . . . . . . . . . . . . 44
</TABLE>
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4.19 Security Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.20 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.21 No Election to be Treated as a Utility . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.22 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.23 Brokerage Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.24 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 5
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.1 Maintenance and Access to Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.2 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.3 Quarterly Financial Statements and Contract Reports . . . . . . . . . . . . . . . . . . . . . 45
5.4 Annual Financial Statements and Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.5 Stockholder Communications and Securities and Exchange Commission Filings . . . . . . . . . . 46
5.6 Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.7 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.8 Compliance with Laws and Payment of Assessments and Charges . . . . . . . . . . . . . . . . . 47
5.9 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.10 Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.11 Hazardous Substances Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.12 Maintenance of Corporate Existence and Good Standing . . . . . . . . . . . . . . . . . . . . 49
5.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.14 Agreement to Deliver Security Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.15 Initial Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.16 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.17 Maintenance of Tangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.18 Maintenance of Insurance and Evidence Thereof . . . . . . . . . . . . . . . . . . . . . . . . 51
5.19 Inspection of Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.20 Payment of Notes and Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . 51
5.21 Performance of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.22 Lockbox and Lockbox Account Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.23 Payment and Performance Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 6
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.2 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.3 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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6.4 Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.5 Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.6 Changes in Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.7 Organization or Acquisition of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.8 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.9 Payment of Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.10 Loans or Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.11 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
6.12 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.13 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.14 Consolidated Adjusted Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.15 Funded Debt to Total Capitalization Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.16 Hedging Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.17 Cash Flow Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 7
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.1 Enumeration of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 8
AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.1. Appointment and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.2. Exculpation, Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.3. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.5. Rights as Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.6. Sharing of Set-Offs and Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.7. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.8. Benefit of Article 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.9. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 9
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.1 Transfers and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.2 Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . 65
9.3 Notices and Other Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.4 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
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<TABLE>
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<S> <C> <C>
9.5 Renewals and Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.6 No Waiver, Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.7 Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.8 Survival Upon Unenforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.9 Rights of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.10 Amendments or Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.11 Acknowledgements and Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.12 Agreement Construed as Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.13 Events and Circumstances Not Reducing or Discharging the Related Person's Liability . . . . . 68
9.13.1 Modifications, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.13.2 Adjustment, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.13.3 Condition of any Related Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.13.4 Release of Obligors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.13.5 Other Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.13.6 Release of Collateral, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.13.7 Care and Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.13.8 Status of Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.13.9 Payments Rescinded. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.13.10 Other Actions Taken or Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.14 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.15 Disposition of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.16 Limitation on Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.17 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.18 JURISDICTION AND VENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.19 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 71
9.20 AGREEMENT SUPERSEDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
9.21 Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
</TABLE>
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EXHIBITS
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Exhibit 1.1 -- Form of Borrowing Base Certificate
Exhibit 1.5 -- Form of Notice of Borrowing
Exhibit 1.7 -- Form of Receivables Report
Exhibit 1.8 -- Form of Note
Exhibit 2.3.4 -- Form of Rate Election
Exhibit 3.1.9 -- Form of Opinion of Counsel to Related Persons
Exhibit 4.3 -- Liens and Encumbrances
Exhibit 4.5 -- Liabilities, Litigation & Restrictions
Exhibit 4.18 -- Principal Places of Business and Chief Executive Offices
Exhibit 4.20 -- Subsidiaries
Exhibit 9.1.2 -- Assignment and Acceptance
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<PAGE> 8
THIRD RESTATED CREDIT AGREEMENT
THIS THIRD RESTATED CREDIT AGREEMENT is made and entered into this
29th day of July, 1998, by and among CLIFFS DRILLING COMPANY, a Delaware
corporation ("Borrower"), CLIFFS OIL AND GAS COMPANY, a Delaware corporation
("COG"), CLIFFS DRILLING INTERNATIONAL, INC., a Delaware corporation ("CDI"),
and ING (U.S.) CAPITAL CORPORATION, a Delaware corporation, in its capacity as
Agent ("Agent") and the Lenders referred to below.
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Third Restated Credit
Agreement, each of the following terms shall have the meaning assigned thereto
in this Section, unless the context otherwise requires:
"Accounts" shall mean all accounts receivable, book debts, notes,
drafts, instruments, documents, acceptances and other forms of obligations now
owned or hereafter received or acquired by or belonging or owing to any Related
Persons (including, without limitation, under any trade names, styles or
divisions thereof), whether arising from services rendered by it or from any
other transaction, whether or not the same involves the performance of services
by such Related Person (including, without limitation, any such obligation that
might be characterized as an account, general intangible, other than contract
rights under contracts containing prohibitions against assignment of or the
granting of a security interest in the rights of a party thereunder to the
extent such prohibitions are valid under applicable law, or chattel paper under
the Uniform Commercial Code in effect in any jurisdiction) and all of the
rights of any Related Persons in, to and under all purchase orders now owned or
hereafter received or acquired by it for services, and all of the rights of any
Related Persons to any goods represented by any of the foregoing, and all
monies due or to become due to any Related Persons under all contracts for the
performance of services by it (whether or not yet earned by performance on the
part of such Related Person) or in connection with any other transaction, now
in existence or hereafter arising, including, without limitation, the right to
receive the proceeds of such purchase orders and contracts, and all collateral
security and guarantees of any kind given by any Person with respect to any of
the foregoing.
"Affiliate" shall mean any Person directly or indirectly controlling,
or under common control with, any Related Persons and includes any "affiliate"
of any Related Persons or any Subsidiary within the meaning of the regulations
promulgated pursuant to the Securities Act of 1933, as amended, with "control,"
as used in this definition, meaning possession, directly or
<PAGE> 9
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of voting securities, contract, voting
trust, membership in management or in the group appointing or electing
management or otherwise through formal or informal arrangements or business
relationships.
"Agent" shall mean ING (U.S.) Capital Corporation, as Agent hereunder,
and its successors in such capacity.
"Agreement" shall mean this Third Restated Credit Agreement, as it may
be amended, modified, supplemented or restated from time to time.
"Applicable Lending Office" shall mean, with respect to each Lender,
such Lender's Domestic Lending Office in the case of Base Rate Loans and such
Lender's Eurodollar Lending Office in the case of Eurodollar Loans.
"Asset Sale" shall mean any sale, issuance, conveyance, transfer,
lease of other disposition (including any sale/leaseback transaction or a
merger or consolidation) (collectively for purposes of this definition, a
"transfer"), directly or indirectly, in one or a series of related
transactions, any of (a) any Capital Stock of any Related Person held by
Borrower or any other Related Person, (b) all or substantially all of the
Properties of any division or line of business of Borrower or any other Related
Person or (c) any other Properties of Borrower or any other Related Person
other than transfers of cash, Cash Equivalents, Investments permitted by clause
(B) of Section 6.11, Accounts, hydrocarbons or other Properties in the ordinary
course of business. For purposes of this definition, the term "Asset Sale"
also shall not include any of the following (i) any transfer of Properties
(including Capital Stock) which is governed by, and made in accordance with,
the provisions of Article VIII of the Indenture; (ii) any transfer of
Properties to an Unrestricted Subsidiary (as defined in the Indenture), if
permitted under Section 10.10 of the Indenture; (iii) sales of damaged,
worn-out or obsolete equipment or assets that, in Borrower's reasonable
judgment, are either (x) no longer used or (y) no longer useful in the business
of Borrower or the other Related Persons; (iv) any charter (bareboat or
otherwise) or other lease of any Property entered into in the ordinary course
of business and with respect to which Borrower or any other Related Person is
the lessor, except any such charter or lease that provides for the acquisition
of such Property by the lessee during or at the end of the term thereof for an
amount that is less than the fair market value thereof at the time the right to
acquire such Property is granted; (v) any trade or exchange by Borrower or any
other Related Person of one or more offshore drilling rigs for one or more
other offshore drilling rigs owned or held by another Person, provided that (x)
the fair value of the offshore drilling rig or rigs traded or exchanged by
Borrower or such Related Person (including any cash or Investments permitted by
clause (B) of Section 6.11 to be delivered by Borrower or such Related Person)
is reasonably equivalent to the fair value of the offshore drilling rig or rigs
(together with any cash or cash equivalents) to be received by Borrower or such
Related Person as determined by written appraisal by a nationally recognized
investment banking firm or appraisal firm, in either case specializing or
having a specialty in offshore drilling rigs, and (y) such exchange is approved
by a majority of the Directors of Borrower who do not
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<PAGE> 10
have any material direct or indirect financial interest with respect to such
exchange; (vi) any transfer by Borrower or any other Related Person to its
customers of drill pipe and associated drilling equipment utilized in
connection with a drilling contract for the employment of a drilling rig in the
ordinary course of business and consistent with past practice; and (vii) any
transfers that, but for this clause (vii) would be Asset Sales, if (A) Borrower
elects to designate such transfers as not constituting Assets Sales and (b)
after giving effect to such transfers, the aggregate fair market value of the
Properties transferred in such transaction or any such series of related
transactions so designated by Borrower does not exceed $500,000.
"Bank Parties" shall mean Agent, L/C Issuer and Lenders.
"Base Rate" shall mean the per annum rate of interest equal to the sum
of the Base Rate Margin plus the higher of (a) the Federal Funds Rate plus 1/2
of 1% per annum or (b) the arithmetic average of the rates of interest publicly
announced by The Chase Manhattan Bank, Citibank, N.A. and Morgan Guaranty Trust
Company of New York (or their respective successors) as their respective prime
commercial lending rates (or, as to any such bank that does not announce such a
rate, such bank's "base" or other rate determined by Agent to be the equivalent
rate announced by such bank), except that, if any such bank shall, for any
period, cease to announce publicly its prime commercial lending (or equivalent)
rate, Agent shall, during such period, determine the "Base Rate" based upon the
prime commercial lending (or equivalent) rates announced publicly by the other
such banks. The Base Rate shall change as and when the Federal Funds Rate and
such prime commercial lending rate change, without notice to Related Persons.
As used in this definition, "Base Rate Margin" means (i) zero, or (ii) during
any Interest Adjustment Period, .75% per annum.
"Base Rate Loan" shall mean any Loan which is not designated as a
Eurodollar Loan in a Rate Election.
"Borrower" shall mean Cliffs Drilling Company, a Delaware corporation.
"Borrowing Base" shall mean, at a particular date and as established
pursuant to Section 2.1.6, the sum of (a) 80% of Eligible Accounts at such
date, plus (b) 80% of the Eligible Turnkey Drilling Contract Amounts, plus (c)
50% of the Fleet Value, plus (d) 100% of Eligible Cash Equivalents; provided,
however, the amount of the Borrowing Base derived from the Eligible Accounts or
Eligible Turnkey Drilling Contract Amounts owned by COG or CDI, respectively,
shall not exceed the limitation of liability in the guaranty of such Related
Person.
"Borrowing Base Certificate" shall mean each certificate, in
substantially the form attached hereto as Exhibit 1.1, furnished by Borrower to
Agent from time to time in accordance with Section 5.2.
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<PAGE> 11
"Borrowing Base Deficiency" shall mean, at any time, the amount, if
any, by which the sum of (i) the Loan Balance plus (ii) all Reimbursement
Obligations, plus (iii) the L/C Exposure at such time exceeds the lesser of the
Commitment or the Borrowing Base in effect at such time.
"Business Day" shall mean a day other than (i) a Saturday, Sunday or
legal holiday for commercial banks under the laws of the State of New York and
(ii) a day on which significant transactions in dollars in the interbank
Eurocurrency market are not carried on.
"Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents in the equity
interests (however designated) in such Person, and any rights (other than debt
securities convertible into an equity interest) warrants or options exercisable
for, exchangeable for or convertible into such an equity interest in such
Person.
"Cash Equivalents" shall mean certificates of deposit acceptable to
Agent.
"CDI" shall mean Cliffs Drilling International, Inc., a Delaware
corporation.
"Change of Control" shall mean the occurrence of any event or series
of events by which: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
from time to time, the "Exchange Act") is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 50% of the total Voting Stock of Borrower; (b) Borrower consolidates with
or merges into another Person or any Person consolidates with, or merges into,
Borrower, in any such event pursuant to a transaction in which the outstanding
Voting Stock of Borrower is changed into or exchanged for cash, securities or
other property, other than any such transaction where (i) the outstanding
Voting Stock of Borrower is changed into or exchanged for Voting Stock of the
surviving or resulting Person that is Qualified Capital Stock and (ii) the
holders of the Voting Stock of Borrower immediately prior to such transaction
own, directly or indirectly, not less than a majority of the Voting Stock of
the surviving or resulting Person immediately after such transaction; (c)
Borrower, either individually or in conjunction with one or more of its
Subsidiaries, sells, assigns, conveys, transfers, leases or otherwise disposes
of, or Borrower's Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, all or substantially all of the properties of Borrower
and its Subsidiaries, taken as a whole (either in one transaction or a series
of related transactions), including Capital Stock of Borrower or its
Subsidiaries, to any Person (other than Borrower or a wholly owned Subsidiary
of Borrower); (d) during any consecutive two-year period, individuals who at
the beginning of such period constituted the board of directors of Borrower
(together with any new directors whose election by such board of directors or
whose nomination for election by the stockholders of Borrower was approved by a
vote of a two-thirds of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors of Borrower then in office; or (e) the
liquidation or dissolution of Borrower. "Voting Stock" means any class or
classes of Capital
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<PAGE> 12
Stock pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of any Person (irrespective of whether or not, at the
time, stock of any other class or classes shall have, or might have, voting
power by reason of the happening of any contingency). "Qualified Capital
Stock" means any Capital Stock that is not required to be redeemed or
repurchased prior to May 15, 2003, is not redeemable at the option of the
holder thereof at any time prior to May 15, 2003, and is not convertible into
or exchangeable for debt securities at any time prior to May 15, 2003.
"Closing Date" shall mean the effective date of this Agreement.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"COG" shall mean Cliffs Oil and Gas Company, a Delaware corporation.
"Collateral" shall mean, collectively, (a) the Accounts, (b) the Cash
Equivalents, (c) all equipment, inventory and vessels of the Related Persons
described in the Security Instruments, and (d) any other Property that is
subject to a Lien in favor of Agent for the benefit of Lenders or which, under
the terms of any Security Instrument is purported to be subject to such a Lien,
as security for payment or performance of all or any portion of the
Obligations.
"Commitment" shall mean the amount of $35,000,000.
"Commitment Fee" shall mean collectively the fees payable to Lenders
by Borrower pursuant to Section 2.2.2.
"Commitment Fee Rate" shall mean, on each day:
(a) three-eights of one percent ( 3/8%) when the Debt to
EBITDA Ratio on such day is less than 2.0 to 1.0, and
(b) one-half of one percent ( 1/2%) when the Debt to
EBITDA Ratio on such day is equal to or greater than 2.0 to 1.0.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean May 31, 2000 or any extension
thereof pursuant to Section 2.1.3 or, if such date is not a Business Day, the
Business Day next preceding such date, or any earlier date on which the
Commitment has been reduced to zero by Borrower or has been terminated pursuant
to Section 7.2.
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<PAGE> 13
"Commonly Controlled Entity" shall mean any Person (whether or not
incorporated) that is under common control with any Related Persons within the
meaning of Section 4001 of ERISA.
"Consolidated Adjusted Equity" shall mean, as to the Consolidated
Group and at a particular date, all amounts that would, in accordance with
GAAP, be included under consolidated common stock and other stockholders'
equity of the Consolidated Group (including, without limitation, amounts for
preferred stock, convertible preferred stock, cumulative convertible
exchangeable preferred stock (or the convertible subordinated debentures
exchanged therefor), common stock, capital surplus and retained earnings and
other stockholders' equity so long as none of the foregoing is subject to any
mandatory redemption) less amounts carried on the books of the Consolidated
Group, to the extent not already excluded in accordance with GAAP, for (a)
intangibles, including, without limitation, patents, patent applications,
copyrights, trademarks, trade names, experimental or organizational expenses
and other like intangibles, (b) treasury stock, and (c) any write-up in the
book value of any assets (other than the adjustments of book value for lower of
cost or market valuation of inventories) of any Consolidated Group Member
resulting from any reevaluation thereof subsequent to December 31, 1996.
"Consolidated Current Assets" shall mean all assets that would, in
accordance with GAAP, be included as current assets on a consolidated balance
sheet of the Consolidated Group as of the date of calculation.
"Consolidated Current Liabilities" shall mean such items as would be
included, in accordance with GAAP, as current liabilities on a consolidated
balance sheet of the Consolidated Group as of the date of calculation,
including, without limitation, the current portion of any Indebtedness of any
Consolidated Group Member treated as long term; provided, however, the
Consolidated Current Liabilities shall not include the Obligations or any part
thereof, regardless of whether the Obligations would be classified as current
liabilities under GAAP.
"Consolidated Funded Debt" shall mean, as of any date, the sum of the
following without duplication: (a) all Indebtedness of a Consolidated Group
Member as of that date, other than Consolidated Current Liabilities, (b) all
Indebtedness that would be classified as long-term indebtedness on a
consolidated balance sheet of the Consolidated Group prepared as of that date
in accordance with GAAP, (c) all Indebtedness, whether secured or unsecured, of
a Consolidated Group Member having a final maturity or which is renewable or
extendable at the option of the obligor for a period ending more than one year
after the date of creation of the Indebtedness, notwithstanding the fact that
payments with respect to the Indebtedness, whether installment, serial
maturity, or sinking fund payments, or otherwise, are required to be made by
the obligor less than one year after the date of the creation of the
Indebtedness and notwithstanding the fact that any amount of the Indebtedness
is at the time included also in Consolidated Current Liabilities, (d) all
Indebtedness of a Consolidated Group Member outstanding under a revolving
credit or similar agreement providing for borrowings and renewals and
extensions over a period of more than one year, notwithstanding the fact that
the Indebtedness is created within one year of the expiration of the agreement,
(e) the present value, discounted at the implicit rate, if known, or ten
percent
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<PAGE> 14
(10%) per annum otherwise, of all obligations with respect to capital leases of
a Consolidated Group Member, and (f) all obligations under guaranties of a
Consolidated Group Member.
"Consolidated Group" shall mean the Borrower, COG, CDI, and their
Subsidiaries on a consolidated basis.
"Consolidated Group Member" shall mean any member of the Consolidated
Group.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends or other obligations (for purposes of this definition, a "primary
obligation") of any other Person (for purposes of this definition, the
"primarily liable party") in any manner, whether directly or indirectly, or any
obligation of such Person, whether or not contingent, (a) to purchase any
primary obligation of the primarily liable party or any Property constituting
direct or indirect security therefor, (b) to advance or supply funds (i) for
the purchase or payment of any primary obligation of the primarily liable
party, or (ii) to maintain working capital or equity capital of the primarily
liable party in respect of any primary obligation or otherwise to maintain the
net worth or solvency of the primarily liable party in respect of any primary
obligation, (c) to purchase Property, securities or services primarily for the
purpose of assuring the owner of any primary obligation of the primarily liable
party of the ability of the primarily liable party in respect of such
obligation to make payment of such primary obligation, (d) to indemnify or
reimburse a bank in respect of drafts drawn under a letter of credit issued by
such bank in favor of a third party at the request of such Person, or (e)
otherwise to assure or hold harmless the owner of any such primary obligation
of the primarily liable party against loss in respect thereof.
"Contracts" shall mean agreements between a Related Person and any
other Person for the providing of services by Related Persons which contracts
have generated or will generate, as a result of performance of the obligations
of such Related Person thereunder, Credit Accounts.
"Contracts Report" shall mean each report executed by a Responsible
Officer of the applicable Related Person and submitted to Agent, in form and
substance satisfactory to Agent and including, among other information, (a) the
remaining term and status of performance and progress payments due under each
Contract then in effect and (b) the usage, backlog and rates for each drilling
rig of any Related Persons, and furnished from time to time in accordance with
subsection 5.2.
"Credit Accounts" shall mean, as to any Person, any "account," as such
term is defined in Section 9.106 of the UCC and any "chattel paper" as such
term is defined in Section 9.105(a)(2) of the UCC, now or hereafter owned by
such Person, which account is classified as a receivable on the balance sheet
of such Person.
"Debt to EBITDA Ratio" shall mean the ratio of Borrower's consolidated
Indebtedness as of the last day of the immediately preceding fiscal quarter to
the sum of (1) the consolidated net
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<PAGE> 15
income of Borrower for the immediately preceding four fiscal quarters, plus (2)
all interest paid or accrued during such period on Borrower's consolidated
Indebtedness which was deducted in determining such consolidated net income,
plus (3) all income taxes which were deducted in determining such consolidated
net income, plus (4) all depreciation, amortization and other non-cash charges
which were deducted in determining such consolidated net income, minus (5) all
non-cash items of income which were included in determining such consolidated
net income.
"Default" shall mean any event or occurrence that with the lapse of
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean, at the time in question, five percent (5%)
per annum plus the Base Rate then in effect; provided that, with respect to any
Eurodollar Loan, "Default Rate" shall mean five percent (5%) per annum plus the
related Fixed Rate. The Default Rate shall in no event, however, exceed the
Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Domestic Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" below its name
on the signature page hereto, or such other office as such Lender may from time
to time specify to Borrower and Agent.
"Earned Value" shall mean the sum of the following amounts, each as
set forth on the most current balance sheet of the Consolidated Group: (i) the
amount represented as "Drilling Contracts in Progress" and (ii) Turnkey Joint
Venture Advances.
"Eligible Accounts" shall mean, at a particular date, Credit Accounts:
(a) that are payable in U.S. dollars or any foreign
currency which is convertible into U.S. dollars; excluding, however,
any Credit Accounts payable in a foreign currency to the extent that
such foreign currency Credit Accounts exceed 60% of the aggregate
value of Eligible Accounts;
(b) that are not outstanding more than 90 days past the
due date expressed in the related invoice;
(c) that are not due more than 60 days after the
issuance date expressed in the related invoice;
(d) as to which the account debtor thereunder has been
sent an invoice within 30 days after such Credit Accounts have been
entered on the financial records of the appropriate Related Person;
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<PAGE> 16
(e) that are not owed by an obligor that is a
Consolidated Group Member, an Affiliate or employee of a Consolidated
Group Member, or an employee stock option plan of a Consolidated Group
Member;
(f) that are not owed by an obligor that has taken any
of the actions or suffered any of the events of the kind described in
Sections 7.1.6 or 7.1.7, unless the payment obligations of such
obligor in respect of any such Credit Account are supported by a
letter of credit the terms of which are reasonably satisfactory to
Agent;
(g) that arise from the sale of Property or the
rendition of services in the ordinary course of business;
(h) as to which neither the relevant Related Person nor
(to the best of the knowledge of any Related Persons) the other party
to such Credit Account is in default or is likely to become in default
in the performance or observance of any of the terms thereof, and as
to which the relevant Related Person has fully performed all its
obligations;
(i) against which no defense, offset, counterclaim or
claim has been asserted or alleged and which are not subject to any
defense, offset, counterclaim or claim;
(j) that are solely owned by a Related Person and in
which such Related Person has (i) granted a valid and continuing first
priority Lien in favor of Agent pursuant to the Security Instruments,
subject only to other Permitted Liens, (ii) duly taken all action
necessary or desirable to protect and perfect such Lien and (iii) good
and indefeasible title, free and clear of any and all Liens, other
than Permitted Liens, or rights of others;
(k) as to which no amounts payable under or in
connection with are evidenced by promissory notes or other instruments
except (i) instruments that constitute a part of chattel paper and
that have been individually marked to show the Lien created by the
Security Instruments, and (ii) notes or instruments that have been
properly endorsed and delivered to Agent;
(l) as to which no security agreement, financing
statement, equivalent security or lien instrument or continuation
statement covering all or any part thereof is on file or of record in
any public office, except such as may have been filed in favor of
Agent pursuant to the Security Instruments;
(m) with respect to Credit Accounts generated under
Turnkey Contracts, as to which not more than 45 days have elapsed
since the issuance date expressed in the related invoice;
(n) with respect to Credit Accounts generated under
Turnkey Contracts payable to one of the Subsidiaries of CDI, that such
Credit Accounts have been assigned
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<PAGE> 17
to one of the Related Persons pursuant to an assignment in form and
substance satisfactory to Agent; and
(o) that Agent, after consultation with Lenders, has not
otherwise reasonably determined, to be unacceptable in accordance with
its customary practices for working capital lines of credit based, in
whole or in part, on accounts receivable.
"Eligible Cash Equivalents" shall mean, at a particular date, Cash
Equivalents:
(a) that are solely owned by a Related Person;
(b) as to which such Related Person (i) has granted a
valid and continuing first priority Lien in favor of Agent pursuant to
the Security Instruments, subject only to other Permitted Liens, and
(ii) has good and indefeasible title, free and clear of any and all
Liens, other than Permitted Liens, or rights or others;
(c) as to which no security agreement, financing
statement, equivalent security or lien instrument or continuation
statement covering all or any part thereof is on file or of record in
any public office, except such as may have been filed in favor of
Agent pursuant to the Security Instruments; and
(d) as to which all action necessary or desirable to
protect and perfect the Lien of Agent pursuant to the Security
Instruments has been duly taken.
"Eligible Transferee" shall mean any Person which either (a) is a
Lender, or (b) is consented to as an Eligible Transferee by Agent and, so long
as no Event of Default is continuing, by Borrower, which consents in each case
will not be unreasonably withheld; provided, however, that so long as no Event
of Default is continuing, Borrower may withhold consent in its sole discretion
if the Facility Usage does not exceed $20,000,000 at the time such consent is
requested or if the proposed transfer would result in any one Lender other than
ING (U.S.) Capital Corporation having a Percentage Share in excess of 33%.
"Eligible Turnkey Drilling Contract Amounts" shall mean, at a
particular date, the aggregate amount that is the Earned Value but that is not
yet due and payable (and therefore not a Credit Account) of each Turnkey
Contract and:
(a) that are payable in Dollars and arise from services
rendered or goods delivered to an account debtor;
(b) that are not owed by an obligor that is a
Consolidated Group Member, an Affiliate or employee of a Consolidated
Group Member, or an employee stock option plan of a Consolidated Group
Member;
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<PAGE> 18
(c) that are not owed by an obligor that has taken any
of the actions or suffered any of the events of the kind described in
Sections 7.1.6 or 7.1.7, unless the payment obligations of such
obligor in respect of any such TurnKey Contract are supported by a
letter of credit the terms of which are reasonably satisfactory to
Agent;
(d) as to which neither the relevant Related Person nor
(to the best of the knowledge of any Related Persons) the other party
to such Turnkey Contract is in default or is likely to become in
default in the performance or observance of any of the terms thereof,
and as to which the relevant Related Person has fully performed all
its obligations;
(e) against which no defense, offset, counterclaim or
claim has been asserted or alleged and which are not subject to any
defense, offset, counterclaim or claim;
(f) that are solely owned by a Related Person and in
which such Related Person has (i) granted a valid and continuing first
priority Lien in favor of Agent pursuant to the Security Instruments,
subject only to other Permitted Liens, (ii) duly taken all action
necessary or desirable to protect and perfect such Lien and (iii) good
and indefeasible title, free and clear of any and all Liens, other
than Permitted Liens, or rights of others;
(g) as to which no amounts payable under or in
connection with are evidenced by promissory notes or other instruments
except (i) instruments that constitute a part of chattel paper and
that have been individually marked to show the Lien created by the
Security Instruments, and (ii) notes or instruments that have been
properly endorsed and delivered to Agent;
(h) as to which no security agreement, financing
statement, equivalent security or lien instrument or continuation
statement covering all or any part thereof is on file or of record in
any public office, except such as may have been filed in favor of
Agent pursuant to the Security Instruments;
(i) with respect to Turnkey Contracts payable to one of
the Subsidiaries of CDI, that such Turnkey Contract has been assigned
to one of the Related Persons pursuant to an assignment in form and
substance satisfactory to Agent; and
(j) that Agent, after consultation with Lenders, has not
otherwise reasonably determined to be unacceptable.
"Environmental Complaint" shall mean any formal, oral or written
complaint, order, directive, claim, citation, notice of environmental report,
notice of investigation or other notice by any Governmental Authority or any
other Person with respect to (a) air emissions, (b) spills, releases or
discharges to soils or any improvements located thereon, surface water,
groundwater or the sewer, septic system or waste treatment, storage or disposal
systems servicing any Property or any Consolidated Group Member, (c) solid or
liquid waste disposal, (d) the use, generation,
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<PAGE> 19
storage, transportation or disposal of any Hazardous Substance, or (e) other
environmental, health or safety matters affecting any Property of any
Consolidated Group Member, any improvements located thereon or the business
thereon conducted.
"Environmental Laws" shall mean (a) the following federal laws as they
may be cited, referenced and amended from time to time: the Clean Air Act, the
Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of any
Consolidated Group Member is situated, as they may be cited, referenced and
amended from time to time; (c) any rules or regulations promulgated under or
adopted pursuant to the above federal and state laws; and (d) any other
equivalent federal, state or local statute or any requirement, rule,
regulation, code, ordinance or order adopted pursuant thereto, including,
without limitation, those relating to the generation, transportation,
treatment, storage, recycling, disposal, handling or release of Hazardous
Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Eurodollar Loan" shall mean a Loan which Borrower designates as a
Eurodollar Loan in a Rate Election.
"Eurodollar Lending Office" shall mean, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending office" below
its name on the Lender Schedule attached hereto (or, if no such office is
specified, its Domestic Lending office), or such other office of such Lender as
such Lender may from time to time specify to Borrower and Agent.
"Eurodollar Rate" shall mean, with respect to each particular
Eurodollar Loan and the related Interest Period, the rate of interest per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%), reported, on the
date two Business days prior to the first day of such Interest Period, on
Telerate Access Service Page 3750 (British Bankers Association Settlement Rate)
as the London Interbank Offered Rate for Dollar deposits having a term
comparable to such Interest Period and in an amount of $1,000,000 or more (or,
if said Page shall cease to be publicly available or if the information
contained on said Page, in Agent's sole judgment, shall cease to accurately
reflect such London Interbank Offered Rate, as reported by any publicly
available source of similar market data selected by Agent that, in Agent's sole
judgment, accurately reflects such London Interbank Offered Rate).
"Event of Default" shall mean any of the events specified in Section
7.1 of this Agreement.
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<PAGE> 20
"Event of Loss" shall mean with respect to any drilling rig, MOPU or
related Property of any Related Person, (i) any damage to such drilling rig,
MOPU or related Property which results in an insurance settlement with respect
thereto on the basis of a total loss or a constructive or compromised total
loss or (ii) the confiscation, documentation or requisition of title to such
drilling rig, MOPU or related Property by any government or any instrumentality
or agency thereof. An Event of Loss shall be deemed to occur as of the date of
the insurance settlement, confiscation, condemnation or requisition of title,
as applicable.
"Facility Usage" shall mean, at the time in question, the sum of (i)
the Loan Balance; (ii) all Reimbursement Obligations, plus (iii) the L/C
Exposure outstanding at such time.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day and (ii) if such rate is not
so published for any day, the Federal Funds Rate for such day shall be the
average rate quoted to Agent on such day on such transactions as determined by
Agent.
"Financial Statements" shall mean statements of the financial
condition and results of operation of the Consolidated Group at the point in
time and for the period indicated and consisting of at least a balance sheet
and related statements of operations, statements of cash flows, and common
stock and other stockholders' equity, on a consolidated and consolidating basis
for the Consolidated Group and, when required by applicable provisions of this
Agreement to be audited, accompanied by the unqualified certification of
independent certified public accountants acceptable to Agent and footnotes to
any of the foregoing, all of which shall be prepared in accordance with GAAP
consistently applied and in comparative form with respect to the corresponding
period of the preceding fiscal year.
"Fixed Rate" shall mean, with respect to each particular Eurodollar
Loan and the associated Eurodollar Rate, the rate per annum calculated by Agent
(rounded upwards, if necessary, to the next higher 0.01%) determined on a daily
basis pursuant to the following formula:
Fixed Rate =
Eurodollar Rate + Fixed Rate Margin
---------------------------
100.0% - Reserve Percentage
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<PAGE> 21
"Fixed Rate Margin" shall mean:
(a) one percent (1%) when the Debt to EBITDA Ratio is
less than or equal to 1.3 to 1.0,
(b) one and one quarter percent (1.25%) when the Debt to
EBITDA Ratio is greater than 1.3 to 1.0 but less than 2.0 to 1.0, and
(c) one and five-eighths percent (1.625%) when the Debt
to EBITDA Ratio is equal to or greater than 2.0 to 1.0.
"Fixed Rate Payment Date" shall mean, with respect to any Eurodollar
Loan: (a) the day on which the related Interest Period ends, and (b) any day
on which past due interest or past due principal is owed hereunder with respect
to such Eurodollar Loan and is unpaid. If the terms hereof provide that
payments of interest or principal with respect to such Eurodollar Loan shall be
deferred from one Fixed Rate Payment Date to another day, such other day shall
also be a Fixed Rate Payment Date.
"Fleet" shall mean the mobile offshore drilling units, mobile offshore
production units and land drilling rigs, including all related personal
property and equipment, owned by Borrower and described as follows:
<TABLE>
<S> <C>
Langley U.S. Official No. 501872
Cliffs LaSalle U.S. Official No. 644595
Cliffs Drilling No. 8 U.S. Official No. 587412
Cliffs Drilling No. 10 U.S. Official No. 601376
Cliffs Drilling 155 U.S. Official No. 621912
Cliffs Drilling 4 (MOPU)
Rig 28 (Land)
Rig 40 (Land)
Rig 41 (Land)
Rig 42 (Land)
Rig 43 (Land)
Rig 54 (Land)
Cliffs Drilling 100 Liberian Official No. 9179
Cliffs Drilling 150 Liberian Official No. 8909
Cliffs Drilling 151 Liberian Official No. 8572
Cliffs Drilling 152 Liberian Official No. 8530
Cliffs Drilling 153 Liberian Official No. 8353
Cliffs Drilling 154 Liberian Official No. 8573
Cliffs Drilling 160 Liberian Official No. 6856
Cliffs Drilling 180 Liberian Official No. 9792
Cliffs Drilling 200 Liberian Official No. 8539
</TABLE>
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<PAGE> 22
"Fleet Value" shall mean the value attributed at a particular date, to
the Fleet in a published report by Jeffries & Companies, William McKay &
Gordon, or such other analyst of the market value of drilling rigs as is
reasonably acceptable to Agent; provided that in the event that such value has
not been updated by such a report reasonably acceptable to Agent within 12
months, or if such a value is in the reasonable determination of Agent no
longer reflective of market value of drilling rigs, the "Fleet Value" shall
mean the value determined by an appraisal of the Fleet, provided that the
appraiser and the form and scope of the appraisal are satisfactory to Agent.
If an appraisal of the Fleet is required by the preceding sentence, then, until
such appraisal is delivered to Agent, the "Fleet Value" may be determined by
the Majority Lenders in their sole discretion.
"GAAP" shall mean generally accepted accounting principles established
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants and in effect in the United States from time to
time.
"Governmental Authority" shall mean any nation, country, commonwealth,
territory, government, state, county, parish, municipality or other political
subdivision and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Guarantors" shall mean COG, CDI, and any other Subsidiary of a
Related Person that from time to time becomes a party to this Agreement and to
such other Loan Documents as may be requested by Agent.
"Hazardous Substances" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCB's), toxic substances or related materials,
petroleum and petroleum products and associated oil or natural gas exploration,
production and development wastes or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic substances"
under applicable Environmental Laws.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (a) all liabilities (excluding reserves for deferred income taxes,
deferred compensation liabilities and other deferred liabilities and credits)
that would appear on a balance sheet of such Person, prepared in accordance
with GAAP, (b) all Contingent Obligations for (i) guarantees of borrowed money
and (ii) liabilities to indemnify or reimburse a bank in respect of drafts
drawn under a letter of credit issued by such bank in favor of a third party at
the request of such Person, (c) all obligations of such Person evidenced by
bonds, debentures, promissory notes or such similar evidences of indebtedness,
(d) all other indebtedness of such Person for borrowed money, (e) all
obligations of others, to the extent any such obligation is secured by a lien
on the assets of such Person (whether or not such Person has assumed or become
liable for the obligation secured by such Lien).
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<PAGE> 23
"Indenture" shall mean collectively (a) that certain Indenture dated
as of May 15, 1996, among Cliffs Drilling Company, the subsidiary guarantors
named therein, and Fleet National Bank, predecessor of State Street Bank and
Trust Company, as trustee, and (b) that certain Indenture dated as of August 7,
1997, among Cliffs Drilling Company, the subsidiary guarantors named therein,
and State Street Bank and Trust Company, as trustee; in each case as the same
has been or may be supplemented or amended from time to time.
"Insolvent" or "Insolvency" shall mean, with respect to any
Multiemployer Plan, that such Plan is insolvent within the meaning of such term
as used in Section 4245 of ERISA.
"Insolvency Proceeding" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian or liquidator of any Person or of all
or a substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a case
under Title 11 of the United States Code, seeking liquidation, reorganization
or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's
relief or other similar law of the United States, the State of Texas or any
other jurisdiction.
"Intellectual Property" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how and processes.
"Interest Period" shall mean, with respect to each particular
Eurodollar Loan, a period of 1, 2 or 3 months, as specified in the Rate
Election applicable thereto, beginning on and including the date specified in
such Rate Election (which must be a Business Day), and ending on but not
including the same day of the month as the day on which it began (e.g., a
period beginning on the third day of one month shall end on but not include the
third day of another month), provided that each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (unless such next succeeding Business Day is the first
Business Day of a calendar month, in which case such Interest Period shall end
on the immediately preceding Business Day). No Interest Period may be elected
which would extend past the date on which a Note is due and payable in full or
which would require prepayment of a Eurodollar Loan prior to the end of the
Interest Period for such Eurodollar Loan.
"Investment" in any Person shall mean any stock, bond, note or other
evidence of Indebtedness or any other security (other than current trade and
customer accounts) of, investment or partnership interest in or loan to, such
Person.
"L/C Exposure" shall mean, at a particular date, the aggregate maximum
amount available to be drawn under outstanding Letters of Credit at such date
less the aggregate value of any L/C Collateral.
"L/C Collateral" shall have the meaning given it in Section 2.1.4H.
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<PAGE> 24
"L/C Issuer" shall mean ING (U.S.) Capital Corporation in its capacity
as the issuer of Letters of Credit hereunder, and its successors as in such
capacity. Agent may, with the consent of Borrower and the Lender in question,
appoint any Lender hereunder as the L/C Issuer in substitution of or in
addition to ING (U.S.) Capital Corporation.
"Lenders" shall mean each signatory hereto (other than Borrower and
Related Persons a party hereto), including ING (U.S.) Capital Corporation in
its capacity as a lender hereunder rather than as Agent or L/C Issuer, and the
successors of each such party as holder of a note.
"Letter of Credit" shall mean each commercial or standby letter of
credit, if any, issued by L/C Issuer for the account of any one or more Related
Persons pursuant to Section 2.1.4.
"Letter of Credit Application" shall mean the standard letter of
credit application employed by L/C Issuer from time to time in connection with
Letters of Credit, as modified in connection herewith.
"Letter of Credit Fee" shall mean each fee payable to L/C Issuer by
Borrower pursuant to Section 2.1.5 in connection with the issuance of Letters
of Credit.
"Lien" shall mean (i) any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of such Property, whether
such interest is based on common law, statute or contract, and including, but
not limited to, the lien or security interest arising from a mortgage, ship
mortgage, encumbrance, pledge, security agreement, conditional sale or trust
receipt, or a lease, consignment or bailment for security purposes (other than
true leases or true consignments), liens of mechanics, materialmen and
artisans, maritime liens and reservations affecting Property that secure an
obligation owed to, or a claim by, a Person other than the owner of such
Property (for the purpose of this Agreement, a Related Person shall be deemed
to be the owner of any Property that it has acquired or holds subject to a
conditional sale agreement, financing lease or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person
for security purposes), and the filing of any financing statement or other
security instrument or (ii) any exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions or encumbrances that are either not standard and customary in the
industry or that could have a Material Adverse Effect.
"Loan" shall have the meaning given it in Section 2.1.1.
"Loan Balance" shall mean the aggregate outstanding principal balance
of the Notes from time to time.
"Loan Documents" shall mean this Agreement, the Notes, the Letter of
Credit Applications, the Letters of Credit, the Security Instruments and all
other documents and instruments now or hereafter delivered pursuant to the
terms of or in connection with this Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit or the Security
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<PAGE> 25
Instruments, and all renewals and extensions of, or amendments or supplements
to, or restatements of any or all of the foregoing from time to time in effect.
"Lockbox" shall mean the Post Office Boxes established by the Related
Persons pursuant to a request by Agent pursuant to Section 5.22, to which the
Related Persons and Agent shall have access and to which all account debtors
under Credit Accounts of the Related Persons shall be directed to make
remittance to the Related Persons.
"Lockbox Account" shall mean an account or accounts established with a
Lender pursuant to a request by Agent pursuant to Section 5.22 in association
with the Lockbox and to which such Related Person and Agent shall have access
by way of draft, check, wire transfer of funds or otherwise, except as provided
to the contrary in Section 5.22.
"Majority Lenders" shall mean Lenders where Percentage Shares equal or
exceed sixty-six and two-thirds percent (66 2/3%).
"Material Adverse Effect" shall mean any material and adverse effect
upon the business, condition (financial or otherwise), operations or prospects
of the Consolidated Group.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Net Available Proceeds" shall mean, with respect to any Asset Sale,
the proceeds thereof in the form of cash or Investments permitted by clause (B)
of Section 6.11 including payments in respect of deferred payment obligations
when received in the form of cash or Investments (except to the extent that
such obligations are financed or sold with recourse to Borrower or any other
Related Person), net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of legal counsel, accountants and investment
banks) related to such Asset Sale, (ii) provisions for all taxes payable as a
result of such Asset Sale, (iii) amounts required to be paid to any Person
(other than any Related Person) owning a beneficial interest in the Property
subject to the Asset Sale or having a Lien thereon and (iv) appropriate amounts
to be provided by Borrower or any other Related Person, as the case may be, as
a reserve required in accordance with GAAP consistently applied against any
liabilities associated with such Asset Sale and retained by Borrower or any
other Related Person, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected
in a certificate signed by the Chairman of the Board, the President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of Borrower (an "Officer's Certificate") delivered to
Agent; provided, however, that any amounts remaining after adjustments,
revaluations or liquidations of such reserves shall constitute Net Available
Proceeds. "Net Available Proceeds" means, with respect to any Event of Loss,
the proceeds to Borrower or any other Related Persons as a result thereof in
the form of cash or Investments permitted by clause (B) of Section 6.11,
including insurance proceeds paid
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<PAGE> 26
to Borrower or any other Related Person, and all payments received by Borrower
or any other Related Person from any government or any instrumentality or
agency thereof by way of compensation for the requisition of title to Property,
net of all fees and expenses incurred by Borrower or any other Related Person
related to the collection or receipt of such proceeds, all as reflected in an
Officer's Certificate delivered to Agent.
"Notes" shall have the meaning given it in Section 2.1.1.
"Notice of Borrowing" shall mean each verbal (confirmed promptly by
facsimile of a written request or notice) or written request or notice or
facsimile of any such written request or notice (confirmed promptly by delivery
of the original written request or notice), in substantially the form attached
hereto as Exhibit 1.5, by Borrower to Agent with respect to a borrowing
pursuant to Section 2.1, each of which shall:
(a) be signed by the Chief Financial Officer or
Controller of Borrower;
(b) state (i) that no Default or Event of Default exists
or will occur after giving effect to the requested borrowing, (ii) the
purpose of any requested borrowing, and (iii) that Borrower is
entitled to any requested borrowing under this Agreement;
(c) specify the other information and contain the other
representations reflected in the form of such Exhibit 1.5 for the Loan
requested; and
(d) constitute a remaking, as of the date of such request
rather than the date hereof, of the representations and warranties set
forth in the Loan Documents, subject only to the matters set forth in
or contemplated by this Agreement.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Notes, (b) the Reimbursement Obligations, (c) the undrawn,
unexpired amount of all outstanding Letters of Credit, (d) the obligation of
the Related Persons for the payment of Letter of Credit Fees and Commitment
Fees, and (e) all other obligations and liabilities of the Related Persons to
any Bank Party, now existing or hereafter incurred, under, arising out of or in
connection with each Loan Document, and, with respect to all of the foregoing
to the extent that any of the same includes or refers to the payment of amounts
deemed or constituting interest, only so much thereof as shall have accrued,
been earned and remain unpaid at each relevant time of determination.
"Original Agreement" shall mean that certain Second Restated Credit
Agreement dated as of March 28, 1994, as amended by First Amendment to Second
Restated Credit Agreement dated as of May 17, 1994, Second Amendment to Second
Restated Credit Agreement dated as of September 26, 1995, Third Amendment to
Second Restated Credit Agreement dated as of December 19, 1995, and Fourth
Amendment to Second Restated Credit Agreement dated as of June 27, 1996 by and
among the Related Persons and ING (U.S.) Capital Corporation, as lender.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any entity succeeding to any or
all of its functions under ERISA.
"Percentage Share" shall mean, with respect to any Lender (a) when
used in Sections 2.1.1, 2.1.1A, and 2.2.2, in any Notice of Borrowing or when
no Loans are outstanding hereunder, the percentage set forth opposite such
Lender's name on the signature pages hereto, and (b) when used otherwise, the
percentage obtained by dividing, (i) the sum of the unpaid principal balance of
such Lender's Loans at the time in question plus the Reimbursement Obligations
which such Lender has funded pursuant to Section 2.1.4C plus the portion of the
L/C Exposure which Lender might be obligated to fund under Section 2.1.4C, by
(ii) the sum of the Loan Balance at such time plus the L/C Exposure and the
Reimbursement Obligations outstanding at such time.
"Permitted Liens" shall mean (a) Liens for taxes, assessments or other
governmental charges or levies not yet due or that (provided foreclosure,
distraint, sale or other similar proceedings shall not have been initiated) are
being contested in good faith by appropriate proceedings, and such reserve as
may be required by GAAP shall have been made therefor; (b) Liens in connection
with workers' compensation, unemployment insurance or other social security
(other than Liens created by Section 4068 or ERISA), old-age pension or public
liability obligations that are not yet due or that are being contested in good
faith by appropriate proceedings, if such reserve as may be required by GAAP
shall have been made therefor; (c) Liens in favor of vendors, carriers,
warehousemen, repairmen, mechanics, workmen, materialmen, construction or
similar Liens arising by operation of law in the ordinary course of business in
respect of obligations that are not yet due or that are being contested in good
faith by appropriate proceedings, provided such reserve as may be required by
GAAP shall have been made therefor, (d) Liens to operators and nonoperators
under joint operating agreements arising in the ordinary course of the business
of the relevant Related Person to secure amounts owing, which amounts are not
yet due or are being contested in good faith by appropriate proceedings, if
such reserve as may be required by GAAP shall have been made therefor; (e)
Liens under production sales agreements, division orders, operating agreements
and other agreements customary in the oil and gas business for processing,
producing and selling hydrocarbons; (f) easements, rights-of-way, restrictions
and other similar encumbrances, and minor defects in the chain of title that
are customarily accepted in the oil and gas financing industry, none of which
interferes with the ordinary conduct of the business of the relevant Related
Person or materially detracts from the value or use of the Property to which
they apply; (g) Liens of record under terms and provisions of the leases, unit
agreements, assignments and other transfer of title documents in the chain of
title under which the relevant Related Person acquired the relevant Property;
(h) legal or equitable Liens deemed to exist by reason of the existence of any
litigation or other legal proceeding or arising out of a judgment or award with
respect to which an appeal is being prosecuted so long as there exists an
adequate bond or such reserve as may be required by GAAP; (i) Liens created in
favor of Agent pursuant to the Security Instruments; and (j) other Liens
expressly permitted under the Security Instruments.
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"Person" shall mean an individual, corporation, partnership, trust,
unincorporated organization or a government or any agency or political
subdivision thereof.
"Plan" shall mean, at a particular date, any employee benefit plan
which is covered by ERISA and in respect of which any Related Persons or
Commonly Controlled Entity of any Related Persons is (or, if such plan were
terminated at such date, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"Prior Revolving Credit Note" shall mean that certain Revolving Credit
Note delivered to ING (U.S.) Capital Corporation, dated June 27, 1996, which
provided for a maximum Indebtedness of $35,000,000, executed by Borrower
pursuant to the Original Agreement.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Rate Election" has the meaning given it in Section 2.2.3.
"Receivables Report" shall mean each schedule of the Credit Accounts
of a Related Person, in substantially the form attached hereto as Exhibit 1.7,
with appropriate insertions, provided to Agent by such Related Person from time
to time pursuant to Section 5.2.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented from
time to time.
"Reimbursement Obligation" shall mean the obligation of the Related
Persons to provide to L/C Issuer or reimburse L/C Issuer for any amounts
payable, paid or incurred by L/C Issuer with respect to Letters of Credit.
"Related Persons" shall mean Borrower and the Guarantors.
"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal or discharge, except in accordance with a valid permit,
license, certificate or approval of the relevant Governmental Authority or of a
substance not subject to regulation under applicable Environmental Laws, of any
Hazardous Substance into or upon (a) the air, (b) soils or any improvements
located thereon, (c) surface water or groundwater, or (d) the sewer, septic
system or waste treatment, storage or disposal system servicing any Property of
any Consolidated Group Member.
"Reorganization" shall mean, with respect to any Multiemployer Plan,
that such Plan is in reorganization within the meaning of such term in Section
4241 of ERISA.
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"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 2615.
"Requirement of Law" shall mean, as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any applicable domestic or foreign law, treaty,
ordinance, order, judgment, rule, decree or regulation or determination of an
arbitrator, court or other Governmental Authority, including, without
limitation, rules, regulations and orders and requirements for permits,
licenses, registrations, approvals or authorizations, in each case as such now
exist or may be hereafter amended and are applicable to or binding upon such
Person or any of its Property or to which such Person or any of its Property is
subject.
"Responsible Officer" shall mean, as to any Person, its President,
Chief Executive Officer, Executive Vice President, Senior Vice President, Vice
President or Treasurer.
"Security Instruments" shall mean the security instruments executed
and delivered in satisfaction of the condition set forth in Section 3.1.7, and
all other documents and instruments at any time executed as security for all or
any portion of the Obligations.
"Senior Unsecured Notes" shall mean Borrower's 10.25% Senior Notes due
2003, Series B, and 10.25% Senior Notes due 2003, Series D, issued pursuant to
the Indenture.
"Single Employer Plan" shall mean any Plan that is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Subsidiary" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites that have been or during the
Commitment Period are listed on the Environmental Protection Agency National
Priority List (NPL) and eligible for remedial action, or any comparable state
registries or list in any state of the United States.
"Turnkey Contract" shall mean any Contract whereby a Related Person
agrees to drill one or more gas wells or oil wells to a specified depth for a
fixed or substantially fixed amount of compensation.
"Turnkey Joint Venture Advance" shall mean, at any time, the aggregate
amount advanced by the Related Persons into certain joint ventures relating to
Turnkey Contracts.
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"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of New York.
1.2 Number and Gender. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions
of terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.3 References. References in this Agreement to Exhibit,
Article or Section numbers shall be to Exhibits, Articles or Sections of this
Agreement, unless expressly stated to the contrary. References in this
Agreement to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," and "hereunder" shall be to this Agreement in its entirety and not
only to the particular Exhibit, Article or Section in which such reference
appears. Unless the context otherwise requires or unless otherwise provided
herein the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments and restatements of such agreement,
instrument or document, provided that nothing contained in this section shall
be construed to authorize any such renewal, extension, modification, amendment
or restatement.
1.4 Calculations and Determinations. Any determination
hereunder that is in a Bank Party's sole discretion or determination, shall
mean such Bank Party's sole determination on any basis as such Bank Party shall
determine to be appropriate without application of any implied standard or
duty. All calculations under the Loan Documents of fees and of interest shall
be made on the basis of actual days elapsed (including the first day but
excluding the last) and a year of 360 days. Each determination by a Bank Party
of amounts to be paid under Sections 2.2.6 through 2.2.10 or any other matters
which are to be determined hereunder by a Bank Party (such as any Eurodollar
Rate, Fixed Rate, Business Day, or Interest Period) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Majority Lenders otherwise consent all financial statements
and reports furnished to any Bank Party hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
ARTICLE 2
TERMS OF FACILITY
2.1 Line of Credit.
2.1.1 Commitment. Upon the terms and conditions (including,
without limitation, the right of Lenders to decline to make any Loan pursuant
to this Section so long as any Default or
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Event of Default exists) and relying on the representations and warranties
contained in this Agreement, each Lender agrees, during the Commitment Period,
to make loans to Borrower (herein called such Lender's "Loans"), in an amount
up to such Lender's Percentage Share of the Commitment, in immediately
available funds at the Applicable Lending Office, to or for the benefit of
Borrower, from time to time following receipt of a Notice of Borrowing;
provided, however, (a) Borrower shall use all funds from Loans only for capital
expenditures, the repurchase of shares of Borrower's common stock as permitted
by Section 6.5 hereof, and general working capital purposes, including, without
limitation, the issuance of Letters of Credit, and (b) after giving effect to
the requested Loans, the Facility Usage does not exceed the lesser of (i) the
Borrowing Base then in effect and (ii) the Commitment. Subject to the terms of
this Agreement, during the Commitment Period, Borrower may borrow, repay and
reborrow hereunder. The aggregate amount of all Loans requested of all Lenders
in any Notice of Borrowing must be greater than or equal to $100,000 or must
equal the unadvanced portion of the Commitment. The obligations of Borrower to
repay to each Lender the aggregate amount of all Loans made by such Lender
together with interest accruing in connection therewith, shall be evidenced by
a single promissory note (herein called such Lender's "Note" and collectively
referred to as the "Notes") made by Borrower payable to the order of such
Lender in the form of Exhibit 1.8 with appropriate insertions. The amount of
principal owing on any Lender's Note at any given time shall be the aggregate
amount of all Loans theretofore made by such Lender minus all payments of
principal theretofore received by such Lender on such Note. Interest on each
Note shall accrue and be due and payable as provided herein and therein.
2.1.1A. Request for New Loans. Upon receipt of any Notice of
Borrowing, Agent shall give each Lender prompt notice of the terms thereof. If
all conditions precedent to Loans requested thereunder have been met, each
Lender will on the date requested promptly remit to Agent at Agent's office in
New York, New York the amount of such Lender's new Loan in immediately
available funds, and upon receipt of such funds, unless to its actual knowledge
any conditions precedent to such Loans have been neither met nor waived as
provided herein, Agent shall promptly make such Loans available to Borrower.
The failure of any Lender to make any new Loan to be made by it hereunder shall
not relieve any other Lender of its obligation hereunder, if any, to make its
new Loan, but no Lender shall be responsible for the failure of any other
Lender to make any new Loan to be made by such other Lender.
2.1.2 Reduction of Commitment. Borrower shall have the right to
terminate at any time, or reduce in part from time to time, the Commitment,
provided that (a) Borrower shall give notice to Agent of each such termination
or reduction at least one Business Day prior to the date of the relevant
termination or reduction, and (b) each partial reduction shall be in an
aggregate amount at least equal to $500,000. Each such notice of termination
or reduction shall specify the amount of the Commitment to be terminated or
reduced. The Commitment once terminated or reduced may not be reinstated.
2.1.3 Extension of Commitment Termination Date. Each Lender
agrees, upon written request of Borrower prior to the Commitment Termination
Date, to review the financial condition
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of the Related Persons and the then value of the Collateral. At such time,
Lenders may, at their sole discretion, but shall not be obligated to, extend
the then Commitment Termination Date for a period selected by Lenders. Agent
shall furnish Borrower with written confirmation as to the decision of the
Lenders with respect to any requested extension of the Commitment Termination
Date. Should Lenders extend the Commitment Termination Date, the newly
established date shall become the Commitment Termination Date for all purposes
of this Agreement, and Borrower will execute any amendments requested by Agent.
Should Lenders, in the exercise of their sole discretion, elect not to extend
the Commitment Termination Date or should Agent fail to advise Borrower of any
extension, the Commitment Termination Date shall remain unchanged.
2.1.4 Allocation of Credit to Letters of Credit. Upon the terms
and conditions (including, without limitation, the right of L/C Issuer to
decline to issue any Letter of Credit so long as any Default or Event of
Default exists) and relying on the representations and warranties contained in
this Agreement, L/C Issuer agrees, during the Commitment Period, to issue
Letters of Credit following the receipt not less than two Business Days prior
to the requested Letter of Credit issuance of a Letter of Credit Application
executed by Borrower; provided, however, (a) no Letter of Credit shall have an
expiration date that exceeds the Commitment Termination Date, and (b) L/C
Issuer shall not be obligated to issue any Letter of Credit if (1) after giving
effect to the issuance thereof, (i) the L/C Exposure, when added to the Loan
Balance then outstanding, would exceed the lesser of the Commitment or the
Borrowing Base then in effect or (ii) the L/C Exposure would exceed
$10,000,000; (2) the issuance of such Letter of Credit would not be in
compliance with all applicable governmental restrictions, policies and
guidelines or would subject L/C Issuer to any cost which is not reimbursable
under Sections 2.2.7, 2.2.9 or 2.2.10 or (3) the form and terms of such Letter
of Credit are not acceptable to L/C Issuer in its sole and absolute discretion.
2.1.4A. Reimbursement by Borrower. Each Reimbursement Obligation
shall constitute a loan by L/C Issuer to Borrower. Borrower promises to pay to
L/C Issuer, or to L/C Issuer's order, on demand, the full amount of each
Reimbursement Obligation, together with interest thereon at the Default Rate.
2.1.4B. Letter of Credit Advances. If the beneficiary of any Letter
of Credit makes a draft or other demand for payment thereunder then Borrower
may, during the interval between the making thereof and the honoring thereof by
L/C Issuer, request Lenders to make Loans to Borrower in the amount of such
draft or demand, which Loans shall be made concurrently with L/C Issuer's
payment of such draft or demand and shall be immediately used by L/C Issuer to
repay the amount of the resulting Reimbursement Obligation. Such a request by
Borrower shall be made in compliance with all of the provisions hereof,
provided that for the purposes of calculating Facility Usage pursuant to the
first sentence of Section 2.1.1 the amount of such Loans shall be considered
but the amount of the Reimbursement Obligation to be concurrently paid by such
Loans shall not be considered.
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2.1.4C. Participation by Lenders. L/C Issuer irrevocably agrees to
grant and hereby grants to each Lender, and -- to induce L/C Issuer to issue
Letters of Credit hereunder -- each Lender irrevocably agrees to accept and
purchase and hereby accepts and purchases from L/C Issuer, on the terms and
conditions hereinafter stated and for such Lender's own account and risk an
undivided interest equal to such Lender's Percentage Share of L/C Issuer's
obligations and rights under each Letter of Credit issued hereunder and the
amount of each Reimbursement Obligation paid by L/C Issuer thereunder. Each
Lender unconditionally and irrevocably agrees with L/C Issuer that, if a
Reimbursement Obligation is paid under any Letter of Credit for which L/C
Issuer is not reimbursed in full by Borrower in accordance with the terms of
this Agreement and the related Letter of Credit Application (including any
reimbursement by means of concurrent Loans or by the application of L/C
Collateral), such Lender shall (in all circumstances and without set-off or
counterclaim) pay to L/C Issuer on demand, in immediately available funds at
L/C Issuer's address for notices hereunder, such Lender's Percentage Share of
such Reimbursement Obligation (or any portion thereof which has not been
reimbursed by Borrower). Each Lender's obligation to pay L/C Issuer pursuant
to the terms of this subsection is irrevocable and unconditional. If any
amount required to be paid by any Lender to L/C Issuer pursuant to this
subsection is paid by such Lender to L/C Issuer within three Business Days
after the date such payment is due, L/C Issuer shall in addition to such amount
be entitled to recover from such Lender, on demand, interest thereon calculated
from such due date at the Federal Funds Rate. If any amount required to be
paid by any Lender to L/C Issuer pursuant to this subsection is not paid by
such Lender to L/C Issuer within three Business Days after the date such
payment is due, L/C Issuer shall in addition to such amount be entitled to
recover from such Lender, on demand, interest thereon calculated from such due
date at the Default Rate.
2.1.4D. Distributions to Participants. Whenever L/C Issuer has in
accordance with this section received from any Lender payment of such Lender's
Percentage Share of any Reimbursement Obligation, if L/C Issuer thereafter
receives any payment of such Reimbursement Obligation or any payment of
interest thereon (whether directly from Borrower or by application of L/C
Collateral or otherwise, and excluding only interest for any period prior to
L/C Issuer's demand that such Lender make such payment of its Percentage
Share), L/C Issuer will distribute to such Lender its Percentage Share of the
amounts so received by L/C Issuer; provided, however, that if any such payment
received by L/C Issuer must thereafter be returned by L/C Issuer, such Lender
shall return to L/C Issuer the portion thereof which L/C Issuer has previously
distributed to it.
2.1.4E. Drafts and Demands. L/C Issuer is authorized and instructed
to accept and pay drafts and demands for payment under any Letter of Credit
without requiring, and without responsibility for, any determination as to the
existence of any event giving rise to said draft (other than the examination of
any documents stipulated in a Letter of Credit to be delivered to L/C Issuer),
either at the time of acceptance of payment or thereafter. L/C Issuer is under
no duty to determine the proper identity of anyone presenting such a draft or
making such a demand (whether by tested telex or otherwise) as the officer,
representative or agent of any beneficiary under any Letter of Credit, and
payment by L/C Issuer to any such beneficiary when requested
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by any such purported officer, representative or agent is hereby authorized and
approved. Borrower agrees to hold L/C Issuer and each other Bank Party
harmless and indemnified against any liability or claim in connection with or
arising out of the subject matter of this section, WHICH INDEMNITY SHALL APPLY
WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY
ANY BANK PARTY, provided only that no Bank Party shall be entitled to
indemnification for that portion, if any, of any liability or claim which is
proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
2.1.4F. Extension of Maturity. If the maturity of any Letter of
Credit is extended by its terms or by law or governmental action, if any
extension of the maturity or time for presentation of drafts or any other
modification of the terms of any Letter of Credit is made at the request of any
Related Person, or if the amount of any Letter of Credit is increased at the
request of any Related Person, this Agreement shall be binding upon all Related
Persons with respect to such Letter of Credit as so extended, increased or
otherwise modified, with respect to drafts and property covered thereby, and
with respect to any action taken by L/C Issuer, L/C Issuer's correspondents, or
any Bank Party in accordance with such extension, increase or other
modification.
2.1.4G. Transferees of Letter of Credit. If any Letter of Credit
provides that it is transferable, L/C Issuer shall have no duty to determine
the proper identity of anyone appearing as transferee of such Letter of Credit,
nor shall L/C Issuer be charged with responsibility of any nature or character
for the validity or correctness of any transfer or successive transfers, and
payment by L/C Issuer to any purported transferee or transferees as determined
by L/C Issuer is hereby authorized and approved, and Borrower further agrees to
hold L/C Issuer and each other Bank Party harmless and indemnified against any
liability or claim in connection with or arising out of the foregoing, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ANY BANK PARTY, provided only that no Bank Party shall be
entitled to indemnification for that portion, if any, of any liability or claim
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
2.1.4H. Obligations in Excess of Borrowing Base. If the outstanding
L/C Exposure causes the Facility Usage to exceed the Borrowing Base, and either
Borrower elects to cure the Borrowing Base Deficiency with L/C Collateral or
Majority Lenders require Borrower to provide L/C Collateral pursuant to Section
2.1.7, then Borrower will immediately pay to L/C Issuer an amount equal to such
excess L/C Exposure. L/C Issuer will hold such amount as security for the L/C
Exposure (all such amounts held as security being herein collectively called
"L/C Collateral") until such excess L/C Exposure become Reimbursement
Obligations, at which time such L/C Collateral may be applied to such
Reimbursement Obligations, or until such excess L/C Exposure
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is eliminated, at which time the L/C Collateral shall be returned to Borrower
or applied toward the Loan Balance, at the direction of Borrower. Neither this
subsection nor the following subsection shall, however, limit or impair any
rights which L/C Issuer may have under any other document or agreement relating
to any Letter of Credit or L/C Exposure, including any Letter of Credit
Application, or any rights which any Bank Party may have to otherwise apply any
payments by Borrower and any L/C Collateral under Section 2.2.5.
2.1.4I. Acceleration of LC Obligations. If the Obligations or any
part thereof become immediately due and payable pursuant to Section 7.1 then,
unless Majority Lenders otherwise specifically elect to the contrary (which
election may thereafter by retracted by Majority Lenders at any time), all L/C
Exposure shall become immediately due and payable without regard to whether or
not actual drawings or payments on the Letters of Credit have occurred, and
Borrower shall be obligated to pay to L/C Issuer immediately an amount equal to
the aggregate L/C Exposure and Reimbursement Obligations which are then
outstanding. All amounts so paid shall be applied first to Reimbursement
Obligations and then held by L/C Issuer as L/C Collateral until such LC
Exposure becomes Reimbursement Obligations, at which time such L/C Collateral
shall be applied to such Reimbursement Obligations. Pending application
thereof, all L/C Collateral shall be invested by L/C Issuer in such investments
as L/C Issuer may choose in its sole discretion. All interest on such
investments shall be reinvested or applied to Reimbursement Obligations. When
all Obligations have been satisfied in full, including all L/C Exposure and
Reimbursement Obligations, and all Letters of Credit have expired or been
terminated, L/C Issuer shall release any remaining L/C Collateral to Borrower.
Borrower hereby assigns and grants to L/C Issuer a continuing security interest
in all L/C Collateral paid by it to L/C Issuer, all investments purchased with
such L/C Collateral, and all proceeds thereof to secure its Reimbursement
Obligations and its Obligations under this Agreement, the Note, and the other
Loan Documents, and Borrower agrees that such L/C Collateral and investments
shall be subject to all of the terms and conditions of the Security
Instruments. Borrower further agrees that L/C Issuer shall have all of the
rights and remedies of a secured party under the Uniform Commercial Code as
adopted in the applicable State with respect to such security interest and that
an Event of Default under this Agreement shall constitute a default for
purposes of such security interest. When Borrower is required to provide L/C
Collateral for any reason and fails to do so on the day when required, L/C
Issuer may without notice to Borrower or any other Related Person provide such
L/C Collateral (whether by application of proceeds of other Collateral, by
transfers from other accounts maintained with L/C Issuer, or otherwise) using
any available funds of Borrower or any other Person also liable to make such
payments. Any such amounts which are required to be provided as L/C Collateral
and which are not provided on the date required shall, for purposes of each
Security Instrument, be considered past due Obligations owing hereunder, and
L/C Issuer is hereby authorized to exercise its respective rights under each
Security Instrument to obtain such amounts.
2.1.5 Letter of Credit Fee. In addition to interest on the Note
as provided herein and Commitment Fees payable hereunder, Borrower agrees to
pay to Agent for the account of all Lenders in accordance with their respective
Percentage Share a fee in arrears equal to the Fixed
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Rate Margin per annum, on the average daily undrawn and unexpired amount of
each issued and outstanding Letter of Credit during the period that such Letter
of Credit remains outstanding. Such fee with respect to Letters of Credit
shall be payable quarterly on the first day of each January, April, July and
October, commencing on the first of such dates to occur after the Closing Date,
and on the Commitment Termination Date. Notwithstanding the foregoing, with
respect to Letters of Credit in an amount less than $15,000, Borrower agrees to
pay Agent for the account of all Lenders in accordance with their respective
Percentage Share a fee in advance equal to $500 per annum for the entire stated
term of such Letter of Credit.
2.1.6 Borrowing Base Determinations.
(a) The Borrowing Base as of the Closing Date is
$35,000,000. The Borrowing Base shall be redetermined quarterly on the basis of
information supplied by the Related Persons in compliance with the provisions
of this Agreement, including, without limitation, Borrowing Base Certificates
and Receivable Reports, and all other information then available to Lenders.
Notwithstanding the foregoing, Majority Lenders may, in the exercise of their
good faith discretion, make redeterminations of the Borrowing Base (i) no more
frequently than quarterly on the basis of information then available to Lenders
regarding Credit Accounts, and (ii) at any time and from time to time upon the
occurrence of any event or change having a Material Adverse Effect.
(b) The Borrowing Base at any particular date shall be
that set forth in the most recent Borrowing Base Certificate submitted to Agent
pursuant to subsection 5.2, as such figure may be adjusted or redetermined from
time to time by Majority Lenders. Agent shall notify Borrower orally or by
facsimile within five Business Days after receipt of the Borrowing Base
Certificate (confirming such notice promptly in writing) of its determination,
and the Borrowing Base so communicated to Borrower shall become effective upon
such verbal or facsimile notification by Agent to Borrower. Any Borrowing Base
established pursuant to this Agreement shall remain in effect until the next
subsequent determination of the Borrowing Base. The Borrowing Base shall
represent the determination by Majority Lenders, in accordance with the
applicable definitions and provisions herein contained and with consideration
for the nature of the facilities established hereunder, of the value, for loan
purposes, of the Eligible Accounts, the Eligible Turnkey Drilling Contracts and
the Fleet Value. Furthermore, the Related Persons acknowledge that the
determination of the Borrowing Base contains an equity cushion (market value in
excess of loan value), which is acknowledged by the Related Persons to be
essential for the adequate protection of Bank Parties.
2.1.7 Cure of Borrowing Base Deficiency. Borrower shall, within
three Business Days of the occurrence of any Borrowing Base Deficiency, (a)
prepay, or make arrangements acceptable to Majority Lenders for the prepayment
of, the Loan Balance in the amount of such Borrowing Base Deficiency, (b) add
to the Collateral to secure the Obligations additional Property of a Related
Person acceptable to Majority Lenders in their sole discretion as to character
and amount, (c) secure all Letters of Credit (to the extent of the Borrowing
Base Deficiency) with L/C
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Collateral pursuant to Section 2.1.4.H in a manner acceptable to L/C Issuer in
its sole discretion, or (d) perform any combination of the alternatives
described in causes (a), (b) and (c) of this Section and acceptable to Majority
Lenders in their sole discretion.
2.1.8 Advances to Satisfy Obligations of Borrower. Upon the
occurrence of any Event of Default, Agent may, but shall not be obligated to,
pay any taxes, insurance premiums, expenses, attorneys' fees or other amounts
any Related Person is required to pay under any Loan Document. Borrower shall
immediately reimburse Agent for any such payments and each such amount shall
constitute an obligation owed hereunder which is due and payable on the date
such amount is paid by Agent.
2.2 Provisions Relating to All Loans.
2.2.1 Interest. Interest on the Loans shall accrue and be payable
at the rate per annum equal to (a) the applicable Fixed Rate for each
Eurodollar Loan during the applicable Interest Period and (b) otherwise at the
applicable Base Rate, as such interest is provided for herein and in the Notes;
provided, however, the interest on past due principal and, to the extent
permitted by applicable law, past due interest, shall accrue at the Default
Rate and shall be payable upon demand by Lenders at any time as to all or any
portion of such interest. Accrued interest on the Loans shall be payable on
the Fixed Rate Payment Date in the case of a Eurodollar Loan and on the last
Business Day of each calendar quarter in the case of a Base Rate Loan.
2.2.2 Fees. In addition to interest on the Notes as provided
herein and the Letter of Credit Fees payable hereunder and to compensate
Lenders for making the commitments hereunder and maintaining funds available,
Borrower shall pay to Agent for the account of each Lender in accordance with
such Lender's Percentage Share, in immediately available funds, a commitment
fee determined on a daily basis by applying the Commitment Fee Rate to the (i)
Commitment minus (ii) the Facility Usage on each date during the Commitment
Period, which fee shall be due and payable in arrears on the last day of each
June, September, December, and March and on the Commitment Termination Date.
2.2.3 Continuations and Conversions of Existing Loans. Borrower
may from time to time designate all or any portion of the Loans (including any
yet to be made) as Eurodollar Loans. Borrower may also make the following
elections with respect to Loans already outstanding: to convert Base Rate Loans
to Eurodollar Loans, to convert Eurodollar Loans to Base Rate Loans on the last
day of the Interest Period applicable thereto, or to continue Eurodollar Loans
beyond the expiration of such Interest Period by designating a new Interest
Period to take effect at the time of such expiration. To make any such
election, Borrower must give to Agent written notice (or telephonic notice
promptly confirmed in writing) of any such designation or of such conversion or
continuation of existing Loans. Each such notice must:
(a) specify (i) the aggregate amount of any Base Rate Loans
into which existing Loans are to be continued or converted and the
date on which such continuation or
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conversion is to occur, or (ii) the aggregate amount of any new Loans
which Borrower wishes to designate as Eurodollar Loans or the
aggregate amount of any Eurodollar Loans into which existing Loans are
to be continued or converted, the first day of the Interest Period
which is to apply to such Eurodollar Loans, and the length of the
applicable Interest Period; and
(b) be received by Agent not later than 10:00 a.m., New
York, New York time, on (i) the day on which any such continuation or
conversion to Base Rate Loans is to occur, or (ii) the third Business
Day preceding the first day of the specified Interest Period of any
Eurodollar Loans.
Each such written request or confirmation must be made in the form and
substance of the "Rate Election" attached hereto as Exhibit 2.3.4., duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Rate Election, Agent shall give each Lender prompt notice of the terms thereof.
Each Rate Election shall be irrevocable and binding on Borrower. During the
continuance of any Default, Borrower may not make any election to convert
existing Loans into Eurodollar Loans or continue existing Loans as Eurodollar
Loans. If (due to the existence of a Default or for any other reason) Borrower
fails to timely and properly give any notice of continuation or conversion with
respect to existing Eurodollar Loans at least three days prior to the end of
the Interest Period applicable thereto, such Eurodollar Loans shall
automatically be converted into Base Rate Loans at the end of such Interest
Period. No new funds shall be repaid by Borrower or advanced by any Lender in
connection with any continuation or conversion of existing Loans pursuant to
this section, and no such continuation or conversion shall be deemed to be a
new advance of funds for any purpose; such continuations and conversions merely
constitute a change in the interest rate applicable to already outstanding
Loans.
2.2.4 Optional Prepayments. Borrower may, upon one Business Day's
notice to each Lender, from time to time and without premium or penalty prepay
the Notes, in whole or in part, so long as the aggregate amount of all partial
prepayment of principal on the Note is greater than or equal to $100,000, and
so long as Borrower does not prepay any Eurodollar Loan. Each prepayment of
principal under this section shall be accompanied by all interest then accrued
and unpaid on the principal so prepaid. Any principal or interest prepaid
pursuant to this section shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the Loan Documents at the time of
such prepayment.
2.2.5 Payments to Bank Parties. Borrower will make each payment
which it owes under the Loan Documents to Agent for the account of the Bank
Party to whom such payment is owed. Each such payment must be received by
Agent not later than 3:00 p.m. New York time, on the date such payment becomes
due and payable, in lawful money of the United States of America and in
immediately available funds. Any payment received by Agent after such time
will be deemed to have been made on the next following Business Day. Should
any such payment
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become due and payable on a day other than a Business Day, the maturity of such
payment shall be extended to the next succeeding Business Day (unless, in the
case of a Eurodollar Loan, such next succeeding Business Day is the first day
of a calendar month, in which case such payment shall be due on the immediately
preceding Business Day), and, in the case of a payment of principal or past due
interest, interest shall accrue and be payable thereon for the period of such
extension as provided in the Loan Document under which such payment is due.
Each payment under a Loan Document shall be due and payable at the place
provided therein and, if no specific place of payment is provided, shall be due
and payable at the place of payment of Agent's Note. When Agent collects or
receives money on account of the Obligations, Agent shall distribute all money
so collected or received, and each Bank Party shall apply all such money so
distributed, as follows:
(a) first, for the payment of all Obligations which are then
due (and if such money is insufficient to pay all such Obligations,
first to any reimbursements due Agent under Section 2.1.8 or 5.16 and
then to the partial payment of all other Obligations then due in
proportion to the amounts thereof, or as Bank Parties shall otherwise
agree);
(b) then for the prepayment of amounts owing under the Loan
Documents (other than principal on the Notes) if so specified by
Borrower;
(c) then for the prepayment of principal on the Notes,
together with accrued and unpaid interest on the principal so prepaid;
and
(d) last, for the payment or prepayment of any other
Obligations.
All payments applied to principal or interest on any Note shall be applied
first to any interest then due and payable, then to principal then due and
payable, and last to any prepayment of principal and interest in compliance
with Section 2.2.4. All distributions of amounts described in any of
subsections (b), (c) or (d) above shall be made by Agent pro rata to each Bank
Party then owed Obligations described in such subsection in proportion to all
amounts owed to all Bank Parties which are described in such subsection;
provided that if any Lender then owes payments to Agent for the funding of a
Loan pursuant to Section 2.1.1.A or to L/C Issuer for the purchase of a
participation under Section 2.1.4C hereof, any amounts otherwise distributable
under this section to such Lender shall be deemed to belong to Agent or L/C
Issuer, as applicable, to the extent of such unpaid payments, and Agent shall
apply such amounts to make such unpaid payments rather than distribute such
amounts to such Lender.
2.2.5A Payments by Borrower. Payment by Borrower to Agent of any
principal, interest or other fees or expenses due hereunder shall extinguish
the obligation of the Borrower to each Bank Party for such Obligations actually
paid, and Agent shall indemnify and hold Borrower and Related Parties harmless
from and against the claims of any Bank Party with respect to the payment of
such Obligations to the extent of such principal, interest or other fees or
expenses actually paid.
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2.2.6 Capital Reimbursement. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any law, rule or regulation, or (b) the introduction or
implementation of or the compliance with any request, directive or guideline
from any central bank or other governmental authority (whether or not having
the force of law) affects or would affect the amount of capital required or
expected to be maintained by any Bank Party or any corporation controlling any
Bank Party, then, upon demand by such Bank Party, Borrower will pay to Agent
for the benefit of such Bank Party, from time to time as specified by such Bank
Party, such additional amount or amounts which such Bank Party shall determine
to be appropriate to compensate such Bank Party or any corporation controlling
such Bank Party in light of such circumstances, to the extent that such Bank
Party reasonably determines that the amount of any such capital would be
increased or the rate of return on any such capital would be reduced by or in
whole or in part based on the existence of the face amount of such Bank Party's
Loans, Letters of Credit, participation in Letters of Credit or commitments
under this Agreement.
2.2.7 Increased Cost of Eurodollar Loans or Letters of Credit. If
any applicable domestic or foreign law, treaty, rule or regulation (whether now
in effect or hereinafter enacted or promulgated), or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law):
(a) shall change the basis of taxation of payments to
any Bank Party of any principal, interest, or other amounts
attributable to any Eurodollar Loan or Letter of Credit or otherwise
due under this Agreement in respect of any Eurodollar Loan or Letter
of Credit (other than taxes imposed on the overall net income of such
Bank Party or any Applicable Lending Office of such Bank Party by any
jurisdiction in which such Bank Party or any such Applicable Lending
Office is located); or
(b) shall change, impose, modify, apply or deem
applicable any reserve, special deposit or similar requirements in
respect of any Eurodollar Loan or Letter of Credit (excluding those
for such Bank Party is fully compensated pursuant to adjustments made
in the definition of Eurodollar Rate) or against assets of, deposits
with or for the account of, or credit extended by, such Bank Party; or
(c) shall impose on any Bank Party or the interbank
Eurocurrency deposit market any other condition which increases the
cost to any Bank Party of funding or maintaining any Eurodollar Loan
or diffusing any Letter of Credit or reduces the amount of any sum
receivable by any Bank Party in respect of any Eurodollar Loan or
Letter of Credit by an amount deemed by such Bank Party to be
material,
then such Bank Party shall promptly notify Agent and Borrower of the happening
of such event and of the cost or loss which has resulted therefrom, and (i)
Borrower shall upon demand pay to Agent for the account of such Bank Party such
additional amount or amounts as will compensate such Bank Party for such cost
or loss, and (ii) Borrower may elect, by giving to Agent and such Bank Party
not less than three Business Days' notice, to convert all (but not less than
all) of any
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such Eurodollar Loans of such Bank Party into Base Rate Loans of such Bank
Party subject, however, to Sections 2.2.8 or 2.2.10.
2.2.8 Change of Law or Conditions. If any change in applicable
laws, treaties, rules or regulations or in the interpretation or administration
thereof of or in any jurisdiction whatsoever, domestic or foreign, shall make
it unlawful or impracticable for any Bank Party to fund or maintain Eurodollar
Loans, or shall materially restrict the authority of any Bank Party to purchase
or take offshore deposits of dollars (i.e., "Eurodollars"), or if any Bank
Party determines that the formula for calculating the Fixed Rate does not
fairly reflect the cost to such Bank Party of making or maintaining loans based
on such rate, then, upon notice by such Bank Party to Borrower, and Agent, then
Borrower's right to elect Eurodollar Loans from such Bank Party shall be
suspended to the extent and for the duration of such illegality,
impracticability or restriction and all Eurodollar Loans of such Bank Party
which are then outstanding or are then the subject of any Rate Election and
which cannot lawfully or practicably be maintained or funded shall immediately
become or remain Base Rate Loans of such Bank Party. Borrower agrees to
indemnify each Bank Party and hold it harmless against all costs, expenses,
claims, penalties, liabilities and damages which may result from any such
change in law, treaty, rule, regulation, interpretation or administration.
2.2.9 Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify each Bank Party against, and reimburse each
Bank Party on demand for, any loss or expense incurred or sustained by such
Bank Party (including without limitation any loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by a
Bank Party to fund or maintain Eurodollar Loans), as a result of (a) any
payment or prepayment (whether authorized or required hereunder or otherwise)
of all or a portion of a Eurodollar Loan on a day other than the day on which
the applicable Interest Period ends, (b) any payment or prepayment, whether
required hereunder or otherwise, of a Eurodollar Loan made after the delivery,
but before the effective date, of a Rate Election, if such payment or
prepayment prevents such Rate Election from becoming fully effective, (c) the
failure of any Eurodollar Loan to be made or of any Rate Election to become
effective due to any condition precedent to a Eurodollar Loan not being
satisfied or due to any other action or inaction of any Related Person, or (d)
any conversion (whether authorized or required hereunder or otherwise) of all
or any portion of any Eurodollar Loan into a Base Rate Loan or into a different
Eurodollar Loan on a day other than the day on which the applicable Interest
Period ends.
2.2.10 Reimbursable Taxes. Borrower covenants and agrees that:
(a) Borrower will indemnify each Bank Party against and
reimburse each Bank Party for, on an after-tax basis, all present and
future income, stamp and other taxes, levies, costs and charges
whatsoever imposed, assessed, levied or collected on or in respect of
this Agreement or any Eurodollar Loan (whether or not legally or
correctly imposed, assessed, levied or collected), excluding, however,
any thereof imposed on or measured by the overall net income of such
Bank Party or any Applicable Lending Office
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of such Bank Party by any jurisdiction in which such Bank Party or any
such Applicable Lending Office is located (all such non-excluded
taxes, levies, costs and charges being collectively called
"Reimbursable Taxes" in this section).
(b) All payments on account of the principal of, and
interest on, each Bank Party's Loans and Note, and all other amounts
payable by Borrower to any Bank Party hereunder shall be made in full
free and clear of, without set-off or court claim and without
deductions or withholdings of any nature by reason of any Reimbursable
Taxes, all of which will be for the account of Borrower. In the event
of Borrower being compelled by law or other regulations to make any
such deduction or withholding from any payment to any Bank Party,
Borrower shall pay on the due date, by way of additional interest,
such additional amounts receivable by such Bank Party after such
deduction or withholding shall equal the amount which would have been
receivable in the absence of any such deduction or withholding. If
Borrower should make any deduction or withholding as aforesaid,
Borrower shall within 60 days thereafter forward to such Bank Party an
official receipt or other official documentation evidencing payment of
such deduction or withholding.
2.2.11 Pledge of and Security Interest in Collateral Account and
Right of Offset or Lien. Related Persons hereby transfer, assign and pledge to
each Bank Party and grant to each Bank Party a security interest (as security
for the payment and performance of the Obligations, with such interest of Bank
Parties to be retransferred, reassigned and released by Bank Parties, as the
case may be, at the expense of Related Persons, upon termination of all rights
to borrow and Letters of Credit hereunder and upon payment in full and complete
performance by Related Persons of all Obligations) in all funds of any one or
more of Related Persons now or hereafter or from time to time on deposit with
any Bank Party, including, without limitation, the Cash Equivalents, with all
remedies available to such Bank Party as secured party or assignee of such
funds being exercisable upon the occurrence of any Event of Default, regardless
of whether the exercise of any such remedy would result in any penalty or loss
of interest or profit with respect to any withdrawal of funds deposited in a
time deposit account prior to the maturity thereof. Furthermore, Related
Persons hereby grant to each Bank Party (a) exercisable upon the occurrence of
any Event of Default, the right of offset or banker's lien against all funds of
any one or more of Related Persons now or hereafter or from time to time on
deposit with such Bank Party, including, without limitation, the Cash
Equivalents, (b) exercisable while there exists a Borrowing Base Deficiency but
no Event of Default, the right of offset or banker's lien against all funds of
any one or more of Related Persons now or hereafter or from time to time on
deposit with such Bank Party in the form of matured Cash Equivalents, but only
to the extent not reinvested by the relevant Related Persons in other Cash
Equivalents and (c) the right to apply any such funds received in accordance
with the provisions of clauses (a) or (b) above, as a prepayment of the
Obligations, in such order as such Bank Party may elect, regardless of whether
the exercise of any such remedy would result in any penalty or loss of interest
or profit with respect to any withdrawal of funds prior to the maturity
thereof.
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2.2.12 Business Purpose; Margin Securities. In no event shall the
funds from any Loan be used directly or indirectly by any Person for personal,
family, household or agricultural purposes or for the purpose, whether
immediate, incidental or ultimate, of purchasing, acquiring or carrying any
"margin stock" or any "margin securities" (as such terms are defined
respectively in Regulation U and Regulation G promulgated by the Board of
Governors of the Federal Reserve System) or to extend credit to others directly
or indirectly for the purpose of purchasing or carrying any such margin stock
or margin securities. Each Related Person represents and warrants to each Bank
Party that such Related Person is not engaged principally, or as one of such
Related Person's important activities, in the business of extending credit to
others for the purpose of purchasing or carrying such margin stock or margin
securities.
ARTICLE 3
CONDITIONS
The obligations of each Lender to make Loans and of L/C Issuer to
issue Letters of Credit are subject to the satisfaction of the following
conditions precedent:
3.1 Receipt of Loan Documents and Other Items. No Lender has
any obligation to make its first Loan, and L/C Issuer has no obligation to
issue the first Letter of Credit unless Agent shall have received the following
documents and other items, appropriately executed when necessary and, where
applicable, acknowledged by one or more Responsible Officers of the Related
Persons, all in form and substance satisfactory to Agent and dated, where
applicable, of even date herewith or a date prior thereto and acceptable to
Agent:
3.1.1 multiple counterparts of this Agreement, as
requested by Agent;
3.1.2 each Note;
3.1.3 a Third Restated Guaranty by each of the
Guarantors;
3.1.4 copies of the Articles of Incorporation of or
Certificate of Incorporation and all amendments thereto and the bylaws and all
amendments thereto of each of the Related Persons, accompanied by a certificate
issued by the secretary or an assistant secretary of the relevant Related
Persons to the effect that each such copy is correct and complete;
3.1.5 certificates of incumbency and signatures of all
Responsible Officers of each of the Related Persons who are authorized to
execute Loan Documents on behalf of such entity, each such certificate being
executed by the secretary or an assistant secretary of the relevant Related
Persons;
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3.1.6 copies of corporate resolutions approving the
Loan Documents and authorizing the transactions contemplated herein and
therein, duly adopted by the board of directors of each of the Related Persons,
accompanied by certificates of the secretary or an assistant secretary of the
relevant Related Persons to the effect that such copies are true and correct
copies of resolutions duly adopted at a meeting or by unanimous consent of the
board of directors of the relevant Related Persons, and that such resolutions
constitute all the resolutions adopted with respect to such transactions, have
not been amended, modified, or revoked in any respect, and are in full force
and effect as of the date of such certificate;
3.1.7 the following Security Instruments creating,
evidencing, perfecting and otherwise establishing the Liens in favor of Agent,
in and to the Collateral:
(a) Second Restated Security Agreement by and among
the Related Persons, as debtors, and Agent, as secured party, covering
the Accounts and covering all inventory, equipment and other personal
property and all substitutions and replacements of any of the
foregoing and proceeds with respect thereto;
(b) Second Restated Security Agreement by and among
the Related Persons, as debtors, and Agent, as secured party, covering
deposits and money market instruments and all substitutions and
replacements of any of the foregoing and proceeds with respect
thereto;
(c) First Restated First Preferred Fleet Mortgage by
Borrower in favor of Agent covering U.S. flag vessels; and
(d) First Restated First Preferred Fleet Mortgage by
Borrower in favor of Agent covering Liberian flag vessels.
3.1.8 Certificates dated as of a recent date from the
Secretary of State or other appropriate Governmental Authority evidencing the
existence or qualification and good standing of each Related Person in the
States of Delaware and Texas, and of COG in the State of Louisiana;
3.1.9 the opinion of Griggs & Harrison, counsel to
Related Persons, in substantially the form attached hereto as Exhibit 3.1.9;
3.1.10 opinion of Thompson & Knight, special counsel to
Agent; and
3.1.11 such other agreements, documents, instruments,
opinions, certificates, waivers, consents and evidence as Agent may reasonable
request.
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3.2 Additional Conditions Precedent. No Lender has any
obligation to make any Loan (including its first), and L/C Issuer has no
obligation to issue any Letter of Credit unless the following conditions
precedent have been satisfied:
3.2.1 No Defaults. No Event of Default or Default
shall exist or will occur after the requested Loan has been made or the
requested Letter of Credit has been issued.
3.2.2 No Material Adverse Effect. No event shall have
occurred which could have a Material Adverse Effect.
3.2.3 Representations and Warranties Correct. Each of
the representations and warranties contained in this Agreement shall be true
and correct and shall be deemed to be repeated by the Related Persons as if
made on the requested date for such Loan or the issuance or extension of such
Letter of Credit.
3.2.4 Security Instruments Effective. All of the
Security Instruments shall be in full force and effect and provide to Bank
Parties the security intended thereby.
3.2.5 Compliance. Each Related Person shall have
performed and complied with all agreements and conditions required in the Loan
Documents to be performed or complied with by it on or prior to the date of
such Loan or issuance of such Letter of Credit.
3.2.6 No Legal Impediment. The making of such Loan
shall not be prohibited by any law or any regulation or order of any court or
governmental agency or authority and shall not subject any Bank Party to any
penalty or other onerous condition under or pursuant to any such law,
regulation or order.
3.2.7 Notice. Notice of Borrowing shall have been
received by Agent at least the requisite time prior to the requested date for
the Loan, or a Letter of Credit Application shall have been received by L/C
Issuer at least one Business Day prior to the requested issuance date for the
relevant Letter of Credit.
3.2.8 Additional Documents. Agent shall have received
all documents and instruments which Agent has then requested, in addition to
those described in Section 3.1 (including opinions of legal counsel for the
Related Persons and Agent; corporate documents and records; documents
evidencing governmental authorizations, consents, approvals, licenses and
exemptions; and certificates of public officials and of officers and
representatives of the Related Persons and other Persons), as to (i) the
accuracy and validity of or compliance with all representations, warranties and
covenants made by any of the Related Persons in this Agreement and the other
Loan Documents, (ii) the satisfaction of all conditions contained herein or
therein, and (iii) all other matters pertaining hereto and thereto. All such
additional documents and instruments shall be satisfactory to Agent in form,
substance and date.
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3.2.9 Legal Matters. All legal matters relating to
the Loan Documents and the consummation of the transactions contemplated
thereby shall be satisfactory to legal counsel to Agent.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To confirm each Bank Party's understanding concerning Related Persons
and their business, properties and obligations, and to induce each Bank Party
to enter into this Agreement and to make the Loans, Related Persons jointly and
severally represent and warrant to each Bank Party (which representations and
warranties shall survive the delivery of the Notes) that:
4.1 Due Authorization and Corporate Existence. The execution
and delivery by each Related Person of this Agreement and the borrowings
hereunder; the execution and delivery by Borrower of the Notes; the repayment
of the Notes and interest provided in the Notes and this Agreement; the
execution and delivery of the other Loan Documents by each Related Person; and
the performance of all obligations of Related Persons under the Loan Documents
are within the power of such Related Person, have been duly authorized by all
necessary corporate action, do not and will not require the consent of any
Governmental Authority (except as has been previously obtained) and do not and
will not (a) contravene or conflict with any provision of law or the charter or
bylaws of any Related Person, (b) contravene or conflict in any material
respect with any material indenture, instrument or other agreement to which any
Related Person is a party or by which any Collateral or any other material
Property of any Related Person may be presently bound or encumbered, or (c)
other than as to Permitted Liens, result in or require the creation or
imposition of any Lien in, upon or on any Collateral or any other material
Property of any Related Person under any such indenture, instrument or other
agreement, other than the Loan Documents. Borrower is duly authorized to
borrow funds hereunder; and Guarantors are duly authorized to guaranty
Borrower's Obligations. Each Related Person is a corporation duly organized,
legally existing and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and is in good
standing in all jurisdictions wherein the ownership of Property or the
operation of its business necessitates the same, other than those jurisdictions
wherein the failure to so qualify will not have a Material Adverse Effect.
4.2 Valid and Binding Obligations. This Agreement, and each of
the other Loan Documents when duly executed and delivered by the Related
Persons, will be legal, valid and binding obligations of such Related Persons
that are parties thereto, enforceable against such Related Person in accordance
with their respective terms.
4.3 Title to Assets. Each Related Person has good and
indefeasible title to all of its Properties in all material respects, free and
clear of all Liens except for Permitted Liens and those set forth under the
caption heading "Liens and Encumbrances" on Exhibit 4.3 attached hereto.
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4.4 Scope and Accuracy of Financial Statements. The Financial
Statements of the Consolidated Group as of December 31, 1997, present fairly
the financial position and results of operations and cash flows of the
Consolidated Group in accordance with GAAP as at the relevant points in time or
for the periods indicated, as applicable. No event or circumstance has
occurred since December 31, 1997, that could reasonably be expected to have or
result in a Material Adverse Effect.
4.5 Liabilities, Litigation and Restrictions. Other than as
listed in the Financial Statements of the Consolidated Group as of December 31,
1997, including the notes thereto, none of the Related Persons has any
liabilities, direct or contingent, that may materially and adversely affect the
business or operations of the Consolidated Group, or their ownership of the
Collateral. Except as set forth under the heading "Litigation" on Exhibit 4.5
hereto, as of the date hereof, no litigation or other action of any nature
affecting any Related Person is pending before any Governmental Authority or,
to the knowledge of any Related Person, threatened against or affecting any
Related Person that might reasonably be expected to result in any material
impairment of its ownership of any material Collateral or any other Material
Adverse Effect. To the best of the knowledge of each Related Person, after due
inquiry, no unusual or unduly burdensome restriction, restraint or hazard
exists by contract, Requirement of Law or otherwise relative to the business or
operations of any Related Person or the ownership and operation of the
Collateral other than such as relate generally to Persons engaged in the
business activities conducted by such Related Person or that could not
reasonably be expected to have a Material Adverse Effect.
4.6 Authorizations and Consents. Except as expressly
contemplated by this Agreement or previously obtained, no authorization,
consent, approval, exemption, franchise, permit or license of, or filing with,
any Governmental Authority or any other Person is required to authorize or is
otherwise required in connection with the valid execution and delivery by the
Related Persons of any of the Loan Documents, the repayment by Related Persons
of the Notes and interest and fees provided in the Notes and this Agreement, or
the performance by Related Persons of their obligation under any of the Loan
Documents.
4.7 Compliance with Laws. Related Persons and their Property
are in compliance with all applicable Requirements of Law, including, without
limitation, Environmental Laws and the Natural Gas Policy Act of 1978, as
amended, except to the extent noncompliance could not reasonably be expected to
result in a Material Adverse Effect.
4.8 Proper Filing of Tax Returns and Payment of Taxes Due. Each
Related Person has duly and properly filed all United States income tax returns
and all other tax returns that are required to be filed, and has paid all
material taxes due except such as are being contested in good faith and as to
which adequate provisions and disclosures have been made. The respective
charges and reserves on the books of each Related Person with respect to any
taxes or other governmental charges are adequate in all material respects.
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4.9 ERISA. Each Related Person is in compliance in all material
respects with all applicable provisions of ERISA. No Reportable Event has
occurred with respect to any Single Employer Plan, and each Single Employer
Plan has complied with and has been administered in all material respects with
applicable provisions of ERISA and the Code. To the best knowledge of each
Related Person and each Commonly Controlled Entity, (a) no Reportable Event has
occurred with respect to any Multiemployer Plan, and (b) each Multiemployer
Plan has complied with and been administered in all material respects with
applicable provisions of ERISA and the Code. The present value of all benefits
vested under each Single Employer Plan maintained by any Related Person or any
Commonly Controlled Entity (based on the assumptions used to fund such Plan)
did not, as of the last annual valuation date applicable thereto, exceed the
value of the assets of such Plan allocable to such vested benefits. None of
Related Persons or any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan for which there is any withdrawal
liability. As of the most recent valuation date applicable thereto, none of
Related Persons or any Commonly Controlled Entity would become subject to any
liability under ERISA if Related Persons or any Commonly Controlled Entity were
to withdraw completely from all Multiemployer Plans. None of Related Persons
or any Commonly Controlled Entity has received notice that any Multiemployer
Plan is Insolvent or in Reorganization. To the best knowledge of Related
Persons, no such Insolvency or Reorganization is reasonably likely to occur.
Based upon GAAP existing as of the date of this Agreement and current factual
circumstances, Related Persons have no reason to believe that the annual cost
during the term of this Agreement to Related Persons and all Commonly
Controlled Entities for post-retirement benefits to be provided to the current
and former employees of Related Persons and all Commonly Controlled Entities
under Plans that are welfare benefit plans (as defined in Section 3(1) of
ERISA) will, in the aggregate, have a Material Adverse Effect.
4.10 Environmental Laws. To the best of the knowledge and belief
of Related Persons, except as would not have a Material Adverse Effect:
4.10.1 no Property of any Related Person is currently,
or has ever been, on any federal or state list of Superfund Sites;
4.10.2 no Hazardous Substances have in the past been
generated, transported, and or disposed of, by any Related Person at a
Superfund Site;
4.10.3 except in accordance with a valid permit,
license, certificate or approval of the relevant Governmental Authority, no
Release of Hazardous Substances by any Consolidated Group Member or from,
affecting or related to any Property of any Consolidated Group Member has
occurred;
4.10.4 no Environmental Complaint has been received by
any Related Person;
4.10.5 the Related Persons are conducting their
businesses in material compliance with all applicable Environmental Laws, and
have all permits, licenses and
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authorizations required in connection with the conduct of their businesses.
Each Related Person is in compliance with the terms and conditions of all such
permits, licenses and authorizations, and is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
Law or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder;
4.10.6 no Related Person has any known material contingent
liability in connection with any alleged generation, treatment, storage,
recycling, transportation, disposal, or Release of any Hazardous Substances;
4.10.7 no Related Person has handled any Hazardous
Substances, other than as a generator, on any properties now or previously owned
or leased by any Related Person to an extent that such handling has, or may
reasonably be expected to have, a Material Adverse Effect; and
a. no PCBs are or have been present at any properties now or
previously owned or leased by any Related Person to an extent
that has, or may reasonably be expected to have, a Material
Adverse Effect;
b. no asbestos is or has been present at any properties now or
previously owned or leased by any Related Person to an extent
that has, or may reasonably be expected to have, a Material
Adverse Effect;
c. there are no underground storage tanks for Hazardous
Materials, active or abandoned, at any properties now or
previously owned or leased by any Related Person to an extent
that has, or may reasonably be expected to have, a Material
Adverse Effect;
4.10.8 No Hazardous Substance generated by any Related
Person has been recycled, treated, stored, disposed of or released by any
Related Person other than in the ordinary course of business of such Related
Person in compliance with applicable Environmental Laws;
4.10.9 No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of any Related Person (and to
the best knowledge of Borrower, no such notification has been filed with
respect to any Related Person by any other Person), regarding a Release has, or
may reasonably be expected to have, a Material Adverse Effect and no property
now or previously owned or leased by any Related Person is listed or proposed
for listing as a Superfund Site;
4.10.10 There are no Liens arising under or pursuant to any
Environmental Laws on any of the real properties or properties owned or leased
by any Related Person, and no government actions have been taken or are in
process which could subject any of such properties
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to such Liens; nor would any Related Person be required to place any notice or
restriction relating to the presence of Hazardous Substances at any properties
owned by it in any deed to such properties.
4.10.11 There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or which are in
the possession of any Related Person in relation to any properties or facility
now or previously owned or leased by any Related Person which have not been
made available to Agent.
4.11 Compliance with Federal Reserve Regulations. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, U or X.
4.12 Investment Company Act Compliance. None of Related Persons
is, nor is any Related Person either directly or indirectly controlled by or
acting on behalf of any Person that is, an "investment company" or an
"affiliated person" of any "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.13 Public Utility Holding Company Act Compliance. None of
Related Persons is a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
4.14 Other Regulations. None of Related Persons is subject to
regulation under any Requirement of Law that limits its ability to incur
Indebtedness.
4.15 Intellectual Property. Each Related Person owns or is
licensed to use all Intellectual Property necessary for the conduct of its
business as currently conducted that is material to its condition (financial or
other), business, or operations. No claim has been asserted or is pending by
any Person with the respect to the use of any such Intellectual Property or
challenging or questioning the validity or effectiveness of any such
Intellectual Property, and none of Related Persons knows of any valid basis for
any such claim. The use of such Intellectual Property by such Related Person
does not infringe on the rights of any Person, except for such claims and
infringements as do not, in the aggregate, give rise to any material liability
on the part of such Related Person.
4.16 No Material Misstatements. No information, exhibit or report
prepared by or at the direction and with the supervision of any Related Person
and furnished to any Bank Party by or at the direction of any Related Person in
connection with the negotiation and preparation of this Agreement, nor any
information, exhibit or report prepared by any other Person and so furnished to
any Bank Party by or at the direction of any Related Person, contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading as of the
date made or deemed made.
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4.17 Casualties or Taking of Property. Since December 31, 1997,
neither the business nor any Property of any Related Person has been materially
adversely affected as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of Property or cancellation of contracts, permits or
concessions of any Governmental Authority, riot, activities of armed forces or
acts of God.
4.18 Names of Business and Locations of Business, Offices and
Property. None of Related Persons has, during the preceding five years had,
been known by, or used any other corporate, trade or fictitious name, except as
disclosed in Exhibit 4.18. Except as provided on Exhibit 4.18 under the
heading "Principal Places of Business; Chief Executive Offices," the principal
place of business and chief executive offices of each Related Person are
located at the respective address of Related Persons set forth in Section 9.3
or at such other location as such Related Person may have, by proper written
notice hereunder, advised Agent, provided that such other location is within a
state in which appropriate financing statements from such Related Person in
favor of Agent have been filed.
4.19 Security Instruments. The provisions of each Security
Instrument are effective to create in favor of Agent for the benefit of
Lenders, a legal, valid and enforceable Lien in all right, title and interest
of Related Persons in the Collateral described therein, which Liens constitute
fully perfected first priority Liens on all right, title and interest of
Related Persons in the Collateral described therein.
4.20 Subsidiaries. The Related Persons have no Subsidiaries other
than as described on Exhibit 4.20 hereto.
4.21 No Election to be Treated as a Utility. None of Related
Persons has elected to be treated as a utility or made a filing as a utility
pursuant to the provisions of TEX. BUS. & COM. CODE ANN. Section 35.01 et seq.
(Vernon 1987).
4.22 Permits. Except approvals as have previously been obtained
and consents required in the ordinary course of business, no consents,
licenses, approvals or authorizations are required in connection with the
execution, delivery and performance by Borrower of its obligations under the
Loan Documents, and the transactions contemplated thereby.
4.23 Brokerage Commissions. Any brokerage commissions due in
connection with the transactions contemplated hereby have been paid in full by
Borrower, and any such commissions coming due in the future will be promptly
paid by Borrower. Borrower agrees to and shall indemnify each Bank Party from
any liability, claims or losses arising by reason of any such brokerage
commissions.
4.24 No Default. No Related Person is materially in Default under
any agreement to which it is a party and no Event of Default (or event which
with the giving of notice and the lapse
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of the time or both or other applicable condition might constitute an Event of
Default) has occurred and is continuing under any such agreement.
ARTICLE 5
AFFIRMATIVE COVENANTS
To conform with the terms and conditions under which each Bank Party
is willing to have credit outstanding to Borrower, and to induce each Bank
Party to enter into this Agreement and to extend credit hereunder, each Related
Person jointly and severally warrants and covenants, so long as this Agreement
remains in effect unless agreed in writing by Majority Lenders to the contrary:
5.1 Maintenance and Access to Records. Each Related Person will
keep adequate records, in accordance with GAAP, of all its material
transactions so that at any time, and from time to time, its true and complete
financial condition may be readily determined in all material respects, and
promptly following the reasonable request of Agent, make such records available
for inspection by Agent or its representatives (including independent
accountants, auditors, agents, attorneys, appraisers and other Persons) and, at
the expense of Related Persons, allow Agent or such representatives to write
down information and to make and take away copies thereof.
5.2 Reports. Each Related Person will deliver to Agent, on or
before the 20th day after the end of each calendar quarter, a Borrowing Base
Certificate, a Receivables Report, a brief report on the status and location of
all drilling rigs and production units, and a Contracts Report, each of which
shall be certified by the Chief Financial Officer of each Related Person.
5.3 Quarterly Financial Statements and Contract Reports. Each
Related Person will deliver to Agent the following, which shall be certified by
the Chief Financial Officer of each Related Person, on or before the 45th day
after the close of each of the first three quarterly periods of each fiscal
year of the Consolidated Group, a copy of the unaudited consolidated and
consolidating Financial Statements of the Consolidated Group as at the close of
such quarterly period and from the beginning of such fiscal year to the end of
such period, as applicable, such Financial Statements to be prepared in
accordance with GAAP consistently applied and as a fair presentation of the
condition of the Consolidated Group subject to changes resulting from normal
year-end audit adjustments.
5.4 Annual Financial Statements and Budgets. Each Related Person
will deliver Agent, on or before the 90th day after the close of each fiscal
year of the Consolidated Group, a copy of (a) the annual audited consolidated
and unaudited consolidating Financial Statements of the Consolidated Group and
(b) the comment letter submitted by the accountants to management in connection
with the annual report. Each Related Person will deliver to Agent, on or
before the 30th day after the close of each fiscal year of the Consolidated
Group, a copy of the proposed annual budget and business plan of the
Consolidated Group.
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5.5 Stockholder Communications and Securities and Exchange
Commission Filings. Each Related Person will furnish to Agent within 5 days
after any material report (other than financial statements) or other
communication is sent by any Consolidated Group Member to its stockholders,
filed by any Consolidated Group Member with the Securities and Exchange
Commission or any successor or analogous Governmental Authority, filed by any
Consolidated Group Member with any stock exchange or issued as a press release,
copies of such report or communication, without exhibits except as may be
requested by Agent.
5.6 Notices of Certain Events. Each Related Person will deliver
to Agent, immediately upon having knowledge thereof, a written statement with
respect to the occurrence of any of the following events or circumstances,
signed by the Chief Financial Officer of the relevant Related Person and
setting forth the relevant event or circumstances and the steps being taken by
the relevant Related Person with respect to such event or circumstance:
5.6.1 any Default or Event of Default;
5.6.2 any default or event of default under any contractual
obligation of Related Persons or any Subsidiary of Related Persons, or any
litigation, investigation or proceeding between any Related Person or any
Subsidiary of any Related Person and any Governmental Authority that, in either
case, if not cured or if adversely determined, as the case may be, would have a
Material Adverse Effect;
5.6.3 any litigation or proceeding involving any Related
Person or any Subsidiary of any Related Person as a defendant or in which any
Property of any Related Person or any Subsidiary of any Related Person is
subject to a claim and in which the amount involved is $1,000,000 or more and
which is not covered by insurance or in which injunctive or similar relief is
sought;
5.6.4 any sale, transfer or other disposition of assets
owned by any Related Person or any Subsidiary of any Related Person whether now
owned or hereafter acquired (including, without limitation, any discount or
sale of Credit Accounts), the greater of the book value or the sale price of
which exceeds $5,000,000;
5.6.5 any Reportable Event or imminently expected
Reportable Event with respect to any Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan, or the
institution of proceedings or the taking of any other action by PBGC, any
Related Person or any Commonly Controlled Entity or Multiemployer Plan with
respect to the withdrawal from or the termination, Reorganization or Insolvency
of, any Single Employer Plan or Multiemployer Plan;
5.6.6 the receipt by any Related Person or any Subsidiary
of any Related Person of any Environmental Complaint or any formal request from
any Governmental Authority or other entity for information (other than
requirements for periodic reports required by any Governmental
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Authority pursuant to any permit or Requirement of Law) regarding any Release
of Hazardous Substances by any Consolidated Group Member or any Subsidiary of
any Consolidated Group Member or from, affecting or related to any Property of
any Consolidated Group Member or any Subsidiary of any Consolidated Group
Member, but only to the extent that such matter if not cured or if adversely
determined, as the case may be, would have a Material Adverse Effect;
5.6.7 any actual, proposed or threatened testing or other
investigation by any Governmental Authority or other entity concerning the
environmental condition of, or relating to, any Property of any Consolidated
Group Member or any Subsidiary of any Consolidated Group Member following any
allegation of a violation of any Requirement of Law, but only to the extent
that such matter if not cured or if adversely determined, as the case may be,
would have a Material Adverse Effect;
5.6.8 any Release of Hazardous Substances by any
Consolidated Group Member or any Subsidiary of any Consolidated Group Member or
from, affecting or related to any Property of any Consolidated Group Member of
any Subsidiary of any Consolidated Group Member, except in accordance with a
valid permit, license, certificate or approval of the relevant Governmental
Authority or of a substance not subject to regulation under Environmental Laws,
or the violation of any Environmental Law or the revocation, suspension or
forfeiture of or failure to renew, any permit, license, registration, approval
or authorization that could reasonably be expected to result in a Material
Adverse Effect;
5.6.9 any material decline in the value of the Collateral;
and
5.6.10 any other event or condition which could reasonably
be expected to cause a Material Adverse Effect.
5.7 Additional Information. Each Related Person will furnish to
Agent, promptly upon the reasonable request of Agent, such additional financial
or other information concerning the assets, liabilities, operations and
transactions of the Related Persons or any Subsidiary of any Related Person as
Agent may from time to time reasonably request; and notify Agent not less than
10 Business Days prior to any change in its name or the location of its
principal place of business or chief executive office, and, upon the request of
Agent, execute such additional Security Instruments as may be necessary or
appropriate in connection therewith.
5.8 Compliance with Laws and Payment of Assessments and Charges.
Each Related Person will comply, and cause each Subsidiary of any Related
Person to comply, with all Requirements of Law, including, without limitation,
the Natural Gas Policy Act of 1978, as amended, and pay all taxes, assessments,
governmental charges, rent and other Indebtedness that, if unpaid, might become
a Lien against its Property other than a Permitted Lien, except any of the
foregoing being contested in good faith and as to which adequate reserve in
accordance with GAAP has been established or unless failure to comply or pay
could not reasonably be expected to result in a Material Adverse Effect.
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5.9 Compliance with ERISA. To the extent, if any, ever
applicable, each Related Person will comply in all material respects with all
requirements, including, without limitation, the minimum funding requirements,
of ERISA, so as not to give rise to any material liability thereunder or to
incur any Reportable Event thereunder, and promptly furnish to Agent (a) if
requested, promptly after the filing thereof with the United States Secretary
of Labor or the PBGC, copies of each annual and other report with respect to
each Plan or any trust created thereunder, and (b) immediately upon becoming
aware of the occurrence of any Reportable Event or of any "prohibited
transaction," as such term is defined in Section 4975 of the Code in connection
with any Plan or any trust created thereunder, a written notice signed by a
Responsible Officer of the relevant Related Person specifying the nature
thereof, what action such Related Person is taking or proposes to take with
respect thereto, and, when known, any action taken by the Internal Revenue
Service with respect thereto.
5.10 Compliance with Environmental Laws.
(a) Each Related Person will comply, and cause each
Subsidiary of any Related Person to comply, in all material respects
with all Requirements of Law, including, without limitation,
Environmental Laws, (i) related to any natural or environmental
resource or media located on, above, within, in the vicinity of,
related to or affected by any Property of any Related Person in which
Agent has a Lien or any other Property of any Related Person, or (ii)
required for the performance or conduct of its operations, including,
without limitation, all permits, licenses, registrations, approvals
and authorizations, and, in this regard, comply fully and in a timely
manner with, and cause all employees, crew members, agents,
contractors, subcontractors and future lessees (pursuant to
appropriate lease provisions) of each Related Person and any
subsidiary of any Related Person while such Persons are acting within
the scope of their relationship with the relevant Related Person or
any Subsidiary of any Related Person, to so comply in all material
respects with, all Requirements of Law and other requirements with
respect to the Property of any Related Person or any Subsidiary of any
Related Person and the operation thereof necessary or appropriate to
enable any Related Person or any Subsidiary of any Related Person to
fulfill its obligations in all material respects under all
Requirements of Law applicable to the use, generation, handling,
storage, treatment, transport and disposal of any Hazardous Substances
now or hereafter located or present on or under any such Property.
(b) Promptly, and in any event within 30 days after the end
of each fiscal year of the Related Persons, the Related Persons will
deliver to Agent a certificate signed by the chief executive officer
of Borrower stating to his knowledge, that the Related Persons are in
compliance with the requirements of this Section 5.10 or setting
forth, to his knowledge any non-compliance with the requirements of
this Section, which certificate shall specifically cover any matters
brought to the attention of the boards of directors of the Related
Persons.
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5.11 Hazardous Substances Indemnification. Each Related Person
will, jointly and severally, defend, indemnify and hold each Bank Party, their
respective employees, agents, officers and directors harmless from and against
any and all claims, losses, damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings and orders, judgments, remedial
actions, requirements and enforcement actions of any kind, and all costs and
expenses incurred in connection therewith (including, without limitation,
attorneys' fees and expenses), arising directly or indirectly, in whole or in
part, from (a) the presence of any Hazardous Substances on, under or from its
Property, whether prior to or during the term hereof, (b) any activity carried
on or undertaken on or off its Property, whether prior to or during the term
hereof, and whether by any Related Person or any predecessor in title,
employee, agent, contractor or subcontractor of any Related Person or any
predecessor in title, or any third Persons at any time occupying or present on
such Property, in connection with the handling, treatment, removal, storage,
decontamination, cleanup, transportation or disposal of any Hazardous
Substances at any time located or present on or under such Property, or (c) any
residual contamination on or under the Property of any Related Person or any
Property of any other Person, or affecting any natural resources, and to any
contamination of any Property or natural resources arising in connection with
the generation, use, handling, storage, transportation or disposal of any
Hazardous Substances, irrespective of whether any of such activities were or
will be undertaken in accordance with applicable Requirements of Law,
INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING ARISING UNDER ANY CLAIM OR
THEORY OF STRICT LIABILITY OR FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON
THE PART OF ANY BANK PARTY; with the foregoing indemnity surviving satisfaction
of all Obligations and the termination of this Agreement, provided that such
indemnity shall not extend to any act or omission by any Bank Party with
respect to any Property subsequent to such Bank Party becoming the owner of
such Property and with respect to which Property such claim, loss, damage,
liability, fine, penalty, charge, proceeding, order, judgment, action or
requirement arises subsequent to the acquisition of title thereto by such Bank
Party.
5.12 Maintenance of Corporate Existence and Good Standing. Each
Related Person will maintain its corporate existence or qualification and good
standing in its jurisdiction of incorporation and in all jurisdictions wherein
the Property now owned or hereafter acquired or business now or hereafter
conducted necessitates same, unless the failure to do so would not have a
Material Adverse Effect.
5.13 Further Assurances. Each Related Person will promptly cure
any defects in the execution and delivery of any of the Loan Documents and all
agreements contemplated thereby, and execute, acknowledge and deliver such
other assurances and instruments as shall, in the reasonable opinion of Agent,
be necessary to fulfill the terms of the Loan Documents.
5.14 Agreement to Deliver Security Instruments. Each Related
Person agrees to deliver, to further secure the Obligations whenever requested
by Agent in its sole and absolute discretion, deeds of trust, mortgages,
chattel mortgages, security agreements, financing statements and other Security
Instruments in form and substance satisfactory to Agent for the purpose of
granting,
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confirming, and perfecting first and prior liens or security interests in any
real or personal property described in the Security Instruments in existence on
the Closing Date.
5.15 Initial Fees and Expenses. Each Related Person will promptly
pay directly, on behalf of Agent, all out of pocket costs and expenses of
Agent, including without limitation, reasonable fees and expenses of Thompson &
Knight, special counsel to Agent, in connection with the negotiation,
preparation, execution and delivery of this Agreement and all documentation
contemplated hereby, the satisfaction of the conditions precedent set forth
herein and the consummation of the transactions contemplated in this Agreement.
5.16 Expenses. The Related Persons, jointly and severally, agree
to pay or reimburse Agent for paying: (a) all reasonable out-of-pocket costs
and expenses of Agent (including, without limitation, the reasonable fees and
expenses of counsel, environmental consultants, insurance consultants and other
professionals retained by Agent) in connection with (i) any amendment,
modification or waiver of any of the terms of this Agreement or any of the
other Loan Documents requested by the Related Persons or required to preclude
the Related Persons from being in Default; (b) all reasonable costs and
expenses of Agent (including reasonable counsel fees) in connection with (i)
any Default and any enforcement or collection proceedings resulting therefrom
and (ii) the enforcement of this Section 5.16; (c) all transfer, stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement or any of the
other Loan Documents, or any other documents referred to herein or therein and
all costs, expenses, taxes, assessments and other charges incurred in
connection with any filing, registration, recording or perfection of any Lien
contemplated by this Agreement or any other Loan Document or any other document
referred to herein or therein; and (d) all reasonable out-of-pocket third-party
costs of engineers, environmental or any other consultants and agents incurred
in connection with this Agreement or the Loan Documents. In addition to the
foregoing, until all of the Obligations have been paid in full, Borrower will
also pay or reimburse Agent for all reasonable out-of-pocket costs and expenses
of Agent or its agents or employees in connection with the continuing
administration of the Loans and the related due diligence of Agent, including
travel and miscellaneous expenses and fees and expenses of Agent's outside
counsel, reserve engineers, and consultants engaged in connection with the Loan
Documents. The Related Persons hereby agree to indemnify each Bank Party and
their directors, officers, employees and agents for, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them arising out of or by reason of any investigation or
litigation or other proceedings (including any threatened investigation or
litigation or other proceedings) relating to this Agreement, or the Loan
Documents, the extensions of credit hereunder or any actual or proposed use by
the Related Persons of the proceeds of any of the extensions of credit
hereunder, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation or
other proceedings. THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT
SUCH LOSSES, LIABILITIES, CLAIMS, DAMAGES OR EXPENSES ARE IN ANY WAY OR TO ANY
EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT
LIABILITY, OR
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ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND
BY ANY BANK PARTY, BUT SHALL EXCLUDE ANY SUCH LOSSES, LIABILITIES, CLAIMS,
DAMAGES OR EXPENSES INCURRED SOLELY BY REASON OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED.
5.17 Maintenance of Tangible Property. Each Related Person will
maintain all of its tangible Property in good repair and condition, ordinary
wear and tear excepted, and make all necessary replacements thereof and operate
such Property in a good and workmanlike manner, except to the extent the
failure to do so would not have a Material Adverse Effect.
5.18 Maintenance of Insurance and Evidence Thereof. Each Related
Person will obtain and continue to maintain insurance as required by the
Security Instruments and such other insurance with respect to its Properties
and businesses against such liabilities, casualties, risks and contingencies as
is customary in the relevant industry and sufficient to prevent a Material
Adverse Effect (including, without limitation, Energy, Exploration and
Development coverage, sometimes referred to as "turnkey" insurance, which
"turnkey" insurance shall be maintained in the form and at least in the dollar
amounts currently held by such Related Person, all such insurance to be in
amounts and from insurers acceptable to Agent, and, upon any renewal of any
such insurance and at other times upon request by Agent, furnish to Agent
evidence, satisfactory to Agent, of the maintenance of such insurance.
5.19 Inspection of Tangible Assets. Each Related Person will
permit any authorized representative of Agent (including independent
accountants, auditors, agents, attorneys, appraisers and any other Persons),
following reasonable prior notice to the Related Persons and during normal
business hours, to visit and inspect any tangible asset of any Related Person,
at the sole risk of Agent, but at the expense of the Related Persons to the
extent of reasonable expenses incurred by Agent.
5.20 Payment of Notes and Performance of Obligations. Borrower
will pay the Notes according to the reading, tenor and effect thereof, as
modified hereby, and do and perform every act and discharge all other
Obligations.
5.21 Performance of Contracts. Each Related Person will perform
and observe in all material respects each of the provisions of the Contracts on
its part to be performed or observed prior to the termination thereof, unless
and to the extent only that the same shall be contested in good faith by
appropriate action by or on behalf of any Related Person.
5.22 Lockbox and Lockbox Account Arrangement. Upon request of
Agent, each Related Person will execute, maintain in full force and effect, and
comply in all respects with the provisions of such documentation as may be
reasonably required by Agent to establish the Lockbox and the Lockbox Account
(including, without limitation, a Lockbox Agreement for each Related Person
with an attached schedule of Lockbox Standard Processing Procedures and an
associated Lockbox Setup Checklist), and direct all account debtors under the
Credit Accounts of
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each Related Person to make remittance to the Lockbox; provided, however, upon
the occurrence of any Default or Event of Default, access by Related Persons to
the Lockbox Account shall terminate and funds accumulating in the Lockbox
Account shall, subject to the exercise of any remedy available to Lender upon
an Event of Default, be subject to investment, at the direction of Related
Persons and for the account of Related Persons (with any earnings on any such
investment to be deposited in and added to the balance of the Lockbox Account),
in Eligible Cash Equivalents.
5.23 Payment and Performance Bond. Except as permitted pursuant to
Section 6.2(a) hereof, Borrower shall not (i) contract for any payment or
performance bond, nor (ii) permit any modification, amendment or termination of
any payment or performance bond in any respect.
ARTICLE 6
NEGATIVE COVENANTS
To conform with the terms and conditions under which each Bank Party
is willing to have credit outstanding to Borrower and to induce each Bank Party
to enter into this Agreement and to extend credit hereunder, each Related
Person jointly and severally warrants and covenants that so long as this
Agreement remains in effect unless agreed in writing by Majority Lenders to the
contrary:
6.1 Indebtedness. No Related Person will create, incur, assume or
suffer to exist any Indebtedness other than that reflected in the financial
statements referred to in Section 4.4 above (and renewals and extensions of,
but not increases to, such Indebtedness) whether by way of loan or otherwise;
provided, however, the foregoing restriction shall not apply to (a) the
Obligations, (b) unsecured current accounts payable incurred in the ordinary
course of business, that are not unpaid in excess of 90 days beyond invoice
date or are being contested in good faith and as to which such reserve as is
required by GAAP has been made, (c) Indebtedness owed to any other Consolidated
Group Member and (d) Indebtedness of Borrower evidenced by the Senior Unsecured
Notes.
6.2 Contingent Obligations. No Related Person will create, incur,
assume or suffer to exist any Contingent Obligation other than that reflected
in the financial statements referred to in Section 4.4 above (and renewals and
extensions of, but not increases to, such Contingent Obligations) provided,
however, the foregoing restriction shall not apply to (a) performance
guarantees and performance, surety or other bonds provided in the ordinary
course of business, (b) trade credit incurred or operating leases entered into
in the ordinary course of business, (c) guarantees by the Borrower of the
obligations of any joint venture to which any of the Related Persons or any of
their respective Subsidiaries is a joint venturer, (d) the Obligations (with
respect to COG and CDI), (e) guarantees by Borrower's Subsidiaries of the
Indebtedness of Borrower evidenced by the Senior Unsecured Notes or (f)
guarantees by Borrower of the obligations of any of its wholly-owned
Subsidiaries; provided, however, with respect to any Contingent Obligations
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allowed pursuant to Section 6.2 (c), such obligations must be related to the
types of business currently being conducted by the Related Persons and such
Contingent Obligations may never exceed in the aggregate $2,500,000.
6.3 Liens. No Related Person will create, incur, assume or suffer
to exist any Lien on any of its Property (now owned or hereafter acquired);
provided, however, the foregoing restrictions shall not apply to (a) Permitted
Liens or (b) Liens provided for in Exhibit 4.3.
6.4 Sales of Assets.
(a) No Related Person will sell, transfer or otherwise
dispose of, in one or any series of transactions within any 12-month
period, assets, whether now owned or hereafter acquired (including,
without limitation, any discount or sale of Credit Accounts), the
higher of the aggregate book value or the sale price of which for the
Consolidated Group exceeds $5,000,000, or enter into any agreement to
do so; provided, however, the foregoing restriction shall not apply to
the sale of hydrocarbons or inventory in the ordinary course of
business.
(b) If any Related Person engages in an Asset Sale or incurs
an Event of Loss, Borrower or such Related Person may either, no later
than 360 days after such Asset Sale or such Event of Loss, (i) apply
all or any of the Net Available Proceeds therefrom to prepay the
Obligations, provided that concurrently with such prepayment, the
Commitment shall be permanently reduced by the amount of such
prepayment, or (ii) invest all or any part of the Net Available
Proceeds thereof in Property that replaces the Property that was the
subject of such Asset Sale or such Event of Loss, as the case may be,
or in other Property that will be used in the business of the Related
Persons. Nothing in this Section 6.4(b) shall be deemed to permit any
sale, transfer or other disposal of assets not permitted by Section
6.4(a).
6.5 Dividends and Distributions. In any fiscal year of the
Consolidated Group, Borrower will not declare, pay or make, whether in cash or
Property, any dividend or distribution on, or purchase, redeem or otherwise
acquire for value, any share of, any class of its capital stock; provided,
however, the foregoing restriction shall not apply to the purchase by Borrower
of an aggregate of up to 1,600,000 shares of its common stock (0.01 par value
per share) in the open market (in addition to 600,000 shares described in the
Original Agreement).
6.6 Changes in Corporate Structure.
6.6.1 Borrower will not issue, sell or otherwise dispose
of any shares of the capital stock of any Guarantor issued in the name of
Borrower such that Borrower would cease to own all of the outstanding capital
stock of all the Guarantors.
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6.6.2 CDI will not issue, sell or otherwise dispose of
any shares of the capital stock of any of its Subsidiaries issued in the name
of CDI such that CDI would cease to own all of the outstanding capital stock of
its Subsidiaries.
6.6.3 None of the Related Persons will enter into any
transaction of dissolution or liquidation of the Related Persons or any
Subsidiary of the Related Persons or any sale, transfer, lease or other
disposition of all or any substantial part of the Property, assets or business
of the Related Persons or any Subsidiary of the Related Persons.
6.6.4 No Related Person will become a party to any
merger or consolidation of any Related Persons, unless any Subsidiary of
Borrower merges into or consolidates with a Related Person.
6.7 Organization or Acquisition of Subsidiaries. No Related
Person will organize, acquire or agree to acquire in excess of 50% of the
outstanding shares of capital stock of any Person entitled to vote for the
election of directors of any Person unless, contemporaneously with such
acquisition, such Person is merged into a Related Person in compliance with
Section 6.6.4 above or such Person shall take such actions as necessary, in the
reasonable opinion of Agent to establish itself as a Guarantor.
6.8 Transactions with Affiliates. No Related Person will
directly or indirectly, enter into any transaction (including the sale, lease
or exchange of Property or the rendering of service) with any of its Affiliates
other than the other Related Persons, except upon fair and reasonable terms no
less favorable than could be obtained in an arm's length transaction with a
Person that was not an Affiliate.
6.9 Payment of Accounts Payable. No Related Person will allow
any account payable to be in excess of 90 days past due, except such as are
being contested in good faith and as to which such reserve as required by GAAP
has been established with respect thereto or if the failure to pay such account
payable would not have a Material Adverse Effect.
6.10 Loans or Advances. No Related Person will make or agree to
make or allow to remain outstanding any loans or advances to any Person in
excess of an aggregate of $1,000,000 at any point in time, except (a) advances
or extensions of credit in the form of accounts receivable incurred in the
ordinary course of business and upon terms common in the industry for such
accounts receivable, (b) loans, advances or extensions of credit to suppliers
or contractors under applicable contracts or agreements in connection with oil
and gas development activities of any Related Persons, (c) loans or advances to
any other Consolidated Group Member and (d) other loans and advances that may
be approved by Majority Lenders from time to time in their sole discretion.
6.11 Investments. No Related Person will make, agree to make or
suffer to exist any Investment other than (A) that reflected in the Financial
Statements referred to in Section 4.4.
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above, (B) overnight investments or other investment vehicles limited to the
following: (i) any evidence of Indebtedness with a maturity of 180 days or
less issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof), (ii)
demand and time deposits and certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500 million; (iii) commercial paper with a maturity
of 180 days or less issued by a corporation that is not an Affiliate of
Borrower and is organized under the laws of any state of the United States or
the District of Columbia and rated at least A-1 by Standard and Poor's Ratings
Group (a division of McGraw-Hill, Inc.), or at least P-1 by Moody's Investors
Service, Inc; (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any commercial bank meeting the specifications of clause (ii)
above; (v) overnight bank deposits and bankers' acceptances at any commercial
bank meeting the qualifications specified in clause (ii) above, (vi) demand and
time deposits and certificates of deposit or acceptances with a maturity of 180
days or less with any commercial bank not meeting the qualifications specified
in clause (ii) above, provided that all such demand and time deposits do not
exceed $15,000,000 in the aggregate at any one time, and (vii) investments in
money market or other mutual funds substantially all of whose assets comprise
securities of the types described in clauses (i) through (v) above.
6.12 Nature of Business. No Related Person will make or permit
to occur any material change in the nature of its business.
6.13 Current Ratio. Related Persons will not permit, at any time
the ratio, on a consolidated basis for the Consolidated Group, of Consolidated
Current Assets to Consolidated Current Liabilities to be less than 1.2 to 1.0.
6.14 Consolidated Adjusted Equity. Related Persons will not
permit at any time their Consolidated Adjusted Equity to be less than
$125,000,000 plus seventy-five percent (75%) of the cash proceeds of any
capital stock of Borrower sold pursuant to a public equity offering.
6.15 Funded Debt to Total Capitalization Ratio. Borrower shall
not permit Consolidated Funded Debt as of any date to exceed 60% of
Consolidated Total Capitalization. As used in this Section 6.15, "Consolidated
Total Capitalization" shall mean the sum of Consolidated Funded Debt, par value
of preferred stock (if any), par value of common stock, capital in excess of
par value of common and preferred stock and retained earnings, less treasury
stock (if any).
6.16 Hedging Contracts. No Related Person will be a party to or
in any manner be liable on any forward, future, swap or hedging contract,
except:
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6.16.1 contracts entered into by Borrower with the
purpose and effect of fixing interest rates on a principal amount of
indebtedness of the Related Persons that is accruing interest at a variable
rate, provided that (i) the aggregate notional amount of such contracts never
exceeds seventy-five percent (75%) of the anticipated outstanding principal
balance of the indebtedness to be hedged by such contracts or an average of such
principal balances calculated using a generally accepted method of matching
interest swap contracts to declining principal balances, (ii) the floating rate
index of each such contract generally matches the index used to determine the
floating rates of interest on the corresponding indebtedness to be hedged by
such contract and (iii) each such contract is with a counterparty or has a
guarantor of the obligation of the counterparty who (unless such counterparty is
Agent, any Lender or one of their respective Affiliates) at the time the
contract is made has long-term obligations rated A or A2 or better,
respectively, by Standard & Poor's Rating Group or Moody's Investors Service,
Inc. (or a successor credit rating agency).
6.16.2 contracts entered into with the purpose and effect
of fixing prices on oil and/or gas expected to be produced by the Related
Persons, provided that at all times: (i) no such contract fixes a price for a
term more than twelve (12) months; (ii) the aggregate monthly production covered
by all such contracts settled on a monthly basis, by a monthly proration
acceptable to Agent for any single month does not in the aggregate exceed
eighty- five percent (85%) of the Related Persons' aggregate Projected Oil and
Gas Production anticipated to be sold in the ordinary course of the Related
Persons' businesses for such month, (iii) no such contract requires any Related
Person to put up money, assets, letters of credit or other security against the
event of its nonperformance prior to actual default by such Related Person in
performing its obligations thereunder and (iv) each such contract shall be with
a counterparty or have a guarantor of the obligation of the counterparty who
(unless such counterparty is Lender or one of its affiliates) at the time the
contract is made has long-term obligations rated AA or Aa2 or better,
respectively, by Standard & Poor's Rating Group or Moody's Investor Services,
Inc. (or a successor credit rating agency). As used herein, the term "Projected
Oil and Gas Production" means the projected production of oil and/or gas
(measured by volume unit or BTU equivalent, not sales price) for the term of the
contracts or a particular month, as applicable, from properties and interests
owned by any Related Person which are located in or offshore of the United
States.
6.16.3 contracts entered into by a Related Person with
the purpose and effect of fixing currency exchange rates between U.S. dollars
and one or more foreign currencies in which a Related Person will be receiving
or making payments, provided that (i) the aggregate notional amount of such
contracts never exceeds ___% of the anticipated payments to be hedged by such
contracts and (ii) the obligation of the counterparty (unless such
counterparty is a Lender or one of its affiliates) at the time the contract is
made has long-term obligations rated A or A2 or better, respectively, by
Standard & Poor's Ratings Group or Moody's Investor Services, Inc. (or a
successor credit rating agency).
6.17 Cash Flow Coverage. The Related Persons' Cash Flow Ratio for
any fiscal quarter shall not be less than: 1.5 to 1.0 as of the end of each
fiscal quarter. As used in this section, the term "Related Persons' Cash Flow
Ratio" means the quotient of (i) the sum of the Consolidated
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net income of the Related Persons for such period plus amounts deducted in the
computation of such Consolidated net income for depreciation, depletion,
amortization and other non-cash items, plus cash interest expenses, divided by
(ii) the sum of all interest payments due on the Obligations and the Senior
Unsecured Notes for such period.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following
events shall constitute an Event of Default as that term is used herein:
7.1.1 default shall be made in the payment when due of
any installment of principal or interest under this Agreement or the Notes or
in the payment when due of any Commitment Fee or Letter of Credit Fee or any
other Obligation and, with respect to the payment of interest, such default
shall continue for one Business Day;
7.1.2 default shall be made in the due observance or
performance of Sections 6.1, 6.4, 6.5, 6.6, 6.7, 6.10, and 6.11.
7.1.3 there shall exist a default under or an Event of
Default as defined in any Loan Document or default shall be made by any Related
Persons in the due observance or performance of any agreement contained in any
of the Loan Documents (other than as specified in Sections 7.1.1 and 7.1.2) and
such default or Event of Default shall continue for 30 days after the earlier
of notice thereof to the Related Persons by Agent or actual knowledge thereof
by a Responsible Officer of the Related Persons.
7.1.4 any representation or warranty made by any
Related Persons in any of the Loan Documents, including, without limitation,
any Notice of Borrowing proves to have been untrue in any material respect or
any representation, statement (including Financial Statements), certificate or
data furnished or made to any Bank Party in connection herewith proves to have
been untrue in any material respect as of the date the facts therein set forth
were stated or certified;
7.1.5 default shall be made by any Related Person (as
principal or guarantor or other surety) in the payment or performance of any
bond, debenture, note or other evidence of Indebtedness the amount of which
exceeds $100,000 or under any credit agreement, loan agreement, indenture,
promissory note or similar agreement or instrument executed in connection with
any of the foregoing, and such default shall remain unremedied for in excess of
the period of grace, if any, with respect thereto, except such as is being
contested in good faith and as to which such reserve as is required by GAAP has
been made;
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7.1.6 any Related Person shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator of it or all or
a substantial part of its assets, (ii) file a voluntary petition commencing an
Insolvency Proceeding, (iii) make a general assignment for the benefit of
creditors, (iv) be unable, or admit in writing its inability, to pay its debts
generally as they become due, or (v) file an answer admitting the material
allegations of a petition filed against it in any Insolvency Proceeding;
7.1.7 an order, judgment or decree shall be entered
against any Related Person by any court of competent jurisdiction or by any
other duly authorized authority, on the petition of a creditor or otherwise,
granting relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver,
trustee, conservator, custodian or liquidator of it or all or any substantial
part of its assets and such order, judgment or decree shall not be dismissed or
stayed within 60 days;
7.1.8 any levy, execution, garnishment, attachment,
sequestration or other writ or similar proceeding against any material portion
of the Property of any Related Person that is not permanently dismissed,
discharged or stayed within 60 days after the levy;
7.1.9 a final and non-appealable order, judgment or
decree shall be entered against any Related Person for money damages and/or
Indebtedness due in an amount in excess of $200,000 and such order, judgment or
decree shall not be satisfied, dismissed or stayed within 60 days;
7.1.10 any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan; any "accumulated funding deficiency" (as defined in Section
302 of ERISA), whether or not waived, shall exist with respect to any Plan for
which an excise tax is due or would be due in the absence of a waiver; a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of Agent,
likely to result in the termination of such Plan for purposes of Title IV of
ERISA; any Single Employer Plan shall terminate for purposes of Title IV of
ERISA; any Related Person or Commonly Controlled Entity shall incur or, in the
reasonable opinion of Agent, be likely to incur any liability in connection
with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan; or any other event or condition shall occur or exist with respect to a
Plan and the result of such events or conditions referred to in this subsection
7.1.10 could subject any Related Person or Commonly Controlled Entity to any
tax (other than an excise tax under Section 4980 of the Code), penalty or other
liabilities which taken in the aggregate would exceed $100,000 and any such
circumstance shall exist for in excess of 90 days;
7.1.11 any charges are filed or any other action or
proceeding is instituted by any Governmental Authority against any Related
Person under the Racketeering Influence and
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Corrupt Organizations Statute (18 U.S.C. Section 1961 et seq.), the result of
which could be the forfeiture or transfer of any material Property of any
Related Person subject to a Lien pursuant to the Security Instruments without
(i) satisfaction or provision for satisfaction of such Lien, or (ii) such
forfeiture or transfer of such Property being expressly made subject to such
Lien;
7.1.12 any Related Person shall have (i) concealed,
removed or diverted, or permitted to be concealed, removed or diverted, any
part of its Property, with intent to hinder, delay or defraud its creditors or
any of them; (ii) made or suffered a transfer of any of its Property that is
fraudulent under any bankruptcy, fraudulent conveyance or similar law; (iii)
made any transfer of its Property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or (iv) shall have
suffered or permitted, while insolvent, any creditor to obtain a Lien upon any
of its Property through legal proceedings or distraint that is not vacated
within 90 days from the date thereof;
7.1.13 any Security Instrument shall for any reason
(other than the failure of the title of any Related Person in the Property
covered thereby) fail or cease to create valid and perfected first priority
Lien against the Collateral purportedly covered thereby, subject only to
Permitted Liens, and such failure shall continue for 30 days after the earlier
of notice thereof to such Related Person by Agent or knowledge thereof by any
Responsible Officer of such Related Person; or
7.1.14 the occurrence of a Material Adverse Effect and
the same shall remain unremedied for in excess of 30 days after notice given by
Agent.
7.1.15 the occurrence of a Change of Control.
7.1.16 Borrower fails to pay any interest or principal
installment, when due, of the Senior Unsecured Notes, or any Related Person
breaches or defaults in the performance of the Indenture or any other agreement
or instrument by which the Senior Unsecured Notes are governed or guaranteed,
and any such failure, breach or default continues beyond any applicable period
of grace provided therefor.
7.2 Remedies. Upon the occurrence with respect to Borrower of
an Event of Default specified in Sections 7.1.6 or 7.1.7, the aggregate
principal amount of all Obligations then outstanding hereunder and the interest
accrued thereon shall automatically become immediately due and payable; upon
the occurrence of any other Event of Default, Agent may (and upon written
instructions from Majority Lenders, Agent shall) declare the aggregate
principal amount of all Obligations then outstanding hereunder and the interest
accrued thereon immediately due and payable. In either case, the entire
principal balance of the Obligations and all accrued interest thereon shall
thereupon become immediately due and payable, without notice (including,
without limitation, notice of intent to accelerate maturity or notice of
acceleration of maturity) and without presentment, demand, protest, notice of
protest or other notice of default or dishonor of any kind, except as provided
to the contrary elsewhere herein, all of which are hereby expressly waived by
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each Related Person. Upon any acceleration, any obligation of any Lender to
make any further Loans shall be permanently terminated.
ARTICLE 8
AGENT
8.1. Appointment and Authority. Each Bank Party hereby
irrevocably authorizes Agent, and Agent hereby undertakes, to receive payments
of principal, interest and other amounts due hereunder as specified herein and
to take all other actions and to exercise such powers under the Loan Documents
as are specifically delegated to Agent by the terms hereof or thereof, together
with all other powers reasonably incidental thereto. The relationship of Agent
to the other Bank Parties is only that of one commercial lender acting as
administrative agent for others, and nothing in the Loan Documents shall be
construed to constitute Agent a trustee or other fiduciary for any holder of
any of the Notes or of any participation therein nor to impose on Agent duties
and obligations other than those expressly provided for in the Loan Documents.
With respect to any matters not expressly provided for in the Loan Documents
and any matters which the Loan Documents place within the discretion of Agent,
Agent shall not be required to exercise any discretion or take any action, and
it may request instructions from Lenders with respect to any such matter, in
which case it shall be required to act or to refrain from acting (and shall be
fully protected and free from liability to all Lenders in so acting or
refraining from acting) upon the instructions of Majority Lenders (including
itself), provided, however, that Agent shall not be required to take any action
which exposes it to a risk of personal liability that it considers unreasonable
or which is contrary to the Loan Documents or to applicable Law. Upon receipt
by Agent from Borrower of any communication calling for action on the part of
Lenders or upon notice from any other Bank Party to Agent of any Default or
Event of Default, Agent shall promptly notify each other Bank Party thereof.
8.2. Exculpation, Agent's Reliance, Etc. Neither Agent nor any
of its directors, officers, agents, attorneys, or employees shall be liable to
any Bank Party for any action taken or omitted to be taken by any of them under
or in connection with the Loan Documents, INCLUDING THEIR NEGLIGENCE OF ANY
KIND, except that each shall be liable for its own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, Agent (a) may
treat the payee of any Note as the holder thereof until Agent receives written
notice of the assignment or transfer thereof in accordance with this Agreement,
signed by such payee and in form satisfactory to Agent; (b) may consult with
legal counsel (including counsel for Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action taken
or omitted to be taken in good faith by it in accordance with the advice of
such counsel, accountants or experts; (c) makes no warranty or representation
to any other Bank Party and shall not be responsible to any other Bank Party
for any statements, warranties or representations made in or in connection with
the Loan Documents; (d) shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions
of the Loan Documents on the part of any Related Person or to inspect the
property
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(including the books and records) of any Related Person; (e) shall not be
responsible to any other Bank Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or any
instrument or document furnished in connection therewith; (f) may rely upon the
representations and warranties of each Related Person and the Lenders in
exercising its powers hereunder; and (g) shall incur no liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate
or other instrument or writing (including any telecopy, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper Person or
Persons.
8.3. Credit Decisions. Each Bank Party acknowledges that it has,
independently and without reliance upon any other Bank Party, made its own
analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Bank Party also acknowledges that it will, independently and without
reliance upon any other Bank Party and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents.
8.4. Indemnification. Each Lender agrees to indemnify Agent (to
the extent not reimbursed by Borrower within ten (10) days after demand) from
and against such Lender's Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions, judgments,
suits, settlements, costs, expenses or disbursements (including reasonable fees
of attorneys, accountants, experts and advisors) of any kind or nature
whatsoever (in this section collectively called "liabilities and costs") which
to any extent (in whole or in part) may be imposed on, incurred by, or asserted
against Agent growing out of, resulting from or in any other way associated
with any of the Collateral, the Loan Documents and the transactions and events
(including the enforcement thereof) at any time associated therewith or
contemplated therein (including any violation or noncompliance with any
Environmental Laws by any Person or any liabilities or duties of any Person
with respect to Hazardous Substances found in or released into the
environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY
CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,
provided only that no Lender shall be obligated under this section to indemnify
Agent for that portion, if any, of any liabilities and costs which is
proximately caused by Agent's own individual gross negligence or willful
misconduct, as determined in a final judgment. Cumulative of the foregoing,
each Lender agrees to reimburse Agent promptly upon demand for such Lender's
Percentage Share of any costs and expenses to be paid to Agent by Borrower
under Section 5.18 to the extent that Agent is not timely reimbursed for such
expenses by Borrower as provided in
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such section. As used in this section the term "Agent" shall refer not only to
the Person designated as such in Section 1.1 but also to each director,
officer, agent, attorney, employee, representative and Affiliate of such
Person.
8.5. Rights as Lender. In its capacity as a Lender, Agent shall
have the same rights and obligations as any Lender and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to,
act as Trustee under indentures of, and generally engage in any kind of
business with any Related Person or their Affiliates, all as if it were not
Agent hereunder and without any duty to account therefor to any other Lender.
8.6. Sharing of Set-Offs and Other Payments. Each Bank Party
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Agent under Section
2.2.5, causes such Bank Party to have received more than it would have received
had such payment been received by Agent and distributed pursuant to Section
2.2.5, then (a) it shall be deemed to have simultaneously purchased and shall
be obligated to purchase interests in the Obligations as necessary to cause all
Bank Parties to share all payments as provided for in Section 2.2.5, and (b)
such other adjustments shall be made from time to time as shall be equitable to
ensure that Agent and all Lenders share all payments of Obligations as provided
in Section 2.2.5; provided, however, that nothing herein contained shall in any
way affect the right of any Bank Party to obtain payment (whether by exercise
of rights of banker's lien, set-off or counterclaim or otherwise) of
indebtedness other than the Obligations. Borrower expressly consents to the
foregoing arrangements and agrees that any holder of any such interest or other
participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by law exercise any
and all rights of banker's lien, set-off, or counterclaim as fully as if such
holder were a holder of the Obligations in the amount of such interest or other
participation. If all or any part of any funds transferred pursuant to this
section is thereafter recovered from the seller under this section which
received the same, the purchase provided for in this section shall be deemed to
have been rescinded to the extent of such recovery, together with interest, if
any, if interest is required pursuant to any court order to be paid on account
of the possession of such funds prior to such recovery.
8.7. Investments. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lenders about how such funds should be distributed, Agent may choose to
defer distribution of the funds which are the subject of such uncertainty or
dispute. If Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Agent is otherwise required to invest funds
pending distribution to Lenders, Agent shall invest such funds pending
distribution; all interest on any such investment shall be distributed upon the
distribution of such investment and in the same proportion and to the same
Persons as such investment. All moneys received by Agent for distribution to
Lenders (other than to the Person who is Agent in its separate capacity as a
Lender) shall be held by Agent pending such
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distribution solely as Agent for such Lenders, and Agent shall have no
equitable title to any portion thereof.
8.8. Benefit of Article 8. The provisions of this Article (other
than the following Section 8.9) are intended solely for the benefit of Bank
Parties, and no Related Person shall be entitled to rely on any such provision
or assert any such provision in a claim or defense against any Bank Party.
Bank Parties may waive or amend such provisions as they desire without any
notice to or consent of Borrower or any Related Person.
8.9. Resignation. Agent may resign at any time by giving written
notice thereof to Lenders and Borrower. Each such notice shall set forth the
date of such resignation. Upon any such resignation, Borrower may, with the
written concurrence of Majority Lenders, designate a successor Agent. A
successor must be appointed for any retiring Agent, and such Agent's
resignation shall become effective when such successor accepts such
appointment. If, within thirty days after the date of the retiring Agent's
resignation, no successor Agent has been appointed and has accepted such
appointment, then the retiring Agent may appoint a successor Agent, which shall
be a commercial bank organized or licensed to conduct a banking or trust
business under the Laws of the United States of America or of any state
thereof. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation hereunder the provisions of this Article 8 shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under the Loan Documents.
ARTICLE 9
MISCELLANEOUS
9.1 Transfers and Participations. Neither Borrower nor any
Affiliate of Borrower shall directly or indirectly purchase or otherwise retire
any obligation owed to any Lender nor will any Lender accept any offer to do
so, unless each Lender shall have received substantially the same offer with
respect to the same Percentage Share of the Obligations owed to it. If
Borrower or any Affiliate of Borrower at any time purchases some but less than
all of the Obligations owed to all Bank Parties, such purchaser shall not be
entitled to any rights of any Bank Party under the Loan Documents unless and
until Borrower or its Affiliates have purchased all of the Obligations.
9.1.1 No Lender shall sell any participation interest in its
commitment hereunder or any of its rights under its Loans or under the Loan
Documents to any Person other than an Eligible Transferee, and then only if the
agreement between such Lender and such participant at all times provides: (i)
that such participation exists only as a result of the agreement between such
participant and such Lender and that such transfer does not give such
participant any right to vote as a Lender or any other direct claims or rights
against any Person other than such Lender, (ii) that such participant is not
entitled to payment from any Related Person under Sections 2.2.6
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through 2.2.10 of amounts in excess of those payable to such Lender under such
sections (determined without regard to the sale of such participation), and
(iii) unless such participant is an Affiliate of such Lender, that such
participant shall not be entitled to require such Lender to take any action
under any Loan Document or to obtain the consent of such participant prior to
taking any action under any Loan Document, except for actions which would
require the consent of all Lenders under Section 9.10. No Lender selling such
a participation shall, as between the other parties hereto and such Lender, be
relieved of any of its obligations hereunder as a result of the sale of such
participation. Each Lender which sells any such participation to any Person
(other than an Affiliate of such Lender) shall give prompt notice thereof to
Agent and Borrower.
9.1.2 Except for sales of participations under the immediately
preceding subsection 9.1.1, no Lender shall make any assignment or transfer of
any kind of its commitments or any of its rights under its Loans or under the
Loan Documents, except for assignments to an Eligible Transferee, and then only
if such assignment is made in accordance with the following requirements:
(a) Each such assignment shall apply to all Obligations owing to the
assignor Lender hereunder and to the unused portion of the assignor Lender's
commitments, so that after such assignment is made the assignor Lender shall
have a fixed (and not a varying) Percentage Share in its Loans and Note and be
committed to make that Percentage Share of all future Loans, the assignee shall
have a fixed Percentage Share in such Loans and Note and be committed to make
that Percentage Share of all future Loans, and the Percentage Share of the
Commitment of both the assignor and assignee shall equal or exceed $5,000,000.
(b) The parties to each such assignment shall execute and deliver to
Agent, for its acceptance and recording in the "Register" (as defined below in
this section), an Assignment and Acceptance in the form of Exhibit 9.1.2,
appropriately completed, together with the Note subject to such assignment and
a processing fee payable to Agent of $2,500. Upon such execution, delivery,
and payment and upon the satisfaction of the conditions set out in such
Assignment and Acceptance, then (i) Borrower shall issue new Notes to such
assignor and assignee upon return of the old Notes to Borrower, and (ii) as of
the "Settlement Date" specified in such Assignment and Acceptance the assignee
thereunder shall be a party hereto and a Lender hereunder and Agent shall
thereupon deliver to Borrower and each Lender a schedule showing the revised
Percentage Shares of such assignor Lender and such assignee Lender and the
Percentage Shares of all other Lenders.
(c) Each assignee Lender which is not a United States person (as such
term is defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended) for Federal income tax purposes, shall (to the extent it has not
already done so) provide Agent and Borrower with duly executed forms as
statements prescribed by law which permit Borrower to make payments hereunder
for the account of such assignee Lender free of deduction or withholding of
income or similar terms.
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9.1.3 Nothing contained in this section shall prevent or prohibit
any Lender from assigning or pledging all or any portion of its Loans and Note
to any Federal Reserve Bank as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank; provided that no such assignment or pledge
shall relieve such Lender from its obligations hereunder.
9.1.4 By executing and delivering an Assignment and Acceptance,
each assignee Lender thereunder will be confirming to and agreeing with
Borrower, Agent and each other Lender hereunder that such assignee understands
and agrees to the terms hereof, including Article 8 hereof.
9.1.5 Agent shall maintain a copy of each Assignment and
Acceptance and a register for the recordation of the names and addresses of
Lenders and the Percentage Shares of, and principal amount of the Loans owing
to, each Lender from time to time (in this section called the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and Borrower and each Bank Party may treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes. The Register shall be
available for inspection by Borrower or any Bank Party at any reasonable time
and from time to time upon reasonable prior notice.
9.2 Survival of Representations, Warranties and Covenants. All
representations and warranties of the Related Persons and all covenants and
agreements herein made shall survive the execution and delivery of the Notes
and the Security Instruments and shall remain in force and effect so long as
any Obligation is outstanding.
9.3 Notices and Other Communications. Except as to verbal or
facsimile notices expressly authorized herein, which verbal or facsimile
notices shall be confirmed in writing, all notices, requests and communications
hereunder shall be in writing (including by facsimile). Unless otherwise
expressly provided herein, any such notice, request, demand or other
communication shall be deemed to have been duly given or made when delivered by
hand, or, in the case of delivery by mail, deposited in the mail, certified
mail, return receipt requested, postage prepaid, or, in the case of facsimile
notice, when sent and telephonic or other confirmation received, addressed as
follows:
(a) if to Agent, to:
ING (U.S.) Capital Corporation
135 East 57th Street
New York, New York 10022-2101
Attention: King Grant
Senior Vice President
Telecopy No:(212) 832-3616
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(b) if to Related Persons, to:
Cliffs Drilling Company
Cliffs Oil and Gas Company
Cliffs Drilling International, Inc.
c/o Cliffs Drilling Company
300 Citicorp Center
1200 Smith Street
Houston, Texas 77002
Attention: Edward A. Guthrie,
Vice President - Finance
Telecopy No: (713) 951-0649
(c) if to any Bank Party other than Agent, at its
address specified on the signature pages hereto.
Any party may, by proper written notice hereunder to the others,
change the individuals or addresses to which such notices to it shall
thereafter be sent.
Borrower agrees to provide Agent with as many copies as Agent may
reasonably request of any notice, certificate, report or financial statement
required to be delivered to Agent pursuant to the terms hereof.
9.4 Parties in Interest. Subject to the restrictions on changes
in corporate structure set forth in Section 6.6 and other applicable
restrictions contained herein, all covenants and agreements herein contained by
or on behalf of Related Persons or Lender shall be binding upon and inure to
the benefit of Related Persons or Lender, as the case may be, and their
respective successors and assigns.
9.5 Renewals and Extensions. All provisions of this Agreement
relating to the Notes shall apply with equal force and effect to each
promissory note hereafter executed that in whole or in part represents a
renewal or extension of any part of the Indebtedness of Related Persons under
this Agreement, the Notes or any of the other Loan Documents.
9.6 No Waiver, Rights Cumulative. No course of dealing on the
part of any Bank Party, its officers or employees, nor any failure or delay by
any Bank Party with respect to exercising any of its rights under any Loan
Document shall operate as a waiver thereof. The rights of any Bank Party under
the Loan Documents shall be cumulative and the exercise or partial exercise of
any such right shall not preclude the exercise of any other right. No advance
of a Loan or issuance of a Letter of Credit hereunder shall constitute a waiver
of any of the covenants, warranties or conditions of Related Persons contained
herein. In the event Related Persons are unable to satisfy any such covenant,
warranty or condition, no such advance or issuance of a
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Letter of Credit shall have the effect of precluding Bank Parties from
thereafter declaring such inability to be an Event of Default as hereinabove
provided.
9.7 Incorporation of Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
9.8 Survival Upon Unenforceability. In the event any one or
more of the provisions contained in any of the Loan Documents or in any other
instrument referred to herein or executed in connection with the Obligations
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of any Loan Document or of any other instrument referred to
herein or executed in connection with such Obligations.
9.9 Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of Bank Parties and Related Persons. No
other Person shall have standing to require satisfaction of such provisions in
accordance with their terms.
9.10 Amendments or Modifications. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement
the change, waiver, discharge or termination is sought, and (i) if such party
is Borrower, by Borrower, (ii) if such party is Agent or L/C Issuer, by such
party, and (iii) if such party is a Lender, by such Lender or by Agent on
behalf of Lenders with the written consent of Majority Lenders (which consent
is given as to the termination of the Loan Documents). Notwithstanding
anything to the contrary herein, Agent may, with the written consent of the
Majority Lenders waive any provisions of Articles 5 or 6 hereof or any Event of
Default under Section 7.1.15 hereof. Subject to the immediately preceeding
sentence, but notwithstanding anything else to the contrary herein, Agent shall
not, without the prior consent of each individual Lender, execute and deliver
on behalf of such Lender any waiver or amendment which would: (1) waive any of
the conditions specified in Article 3 (provided that Agent may in its
discretion withdraw any request it has made under Section 3.2.8), (2) increase
the Commitment of such Lender or subject such Lender to any additional
obligations, (3) reduce any fees payable to such lender hereunder, or the
principal of, or interest on, such Lender's Note, (4) postpone any date fixed
for any payment of any such fees, principal or interest, (5) amend the
definition herein of "Majority Lenders" or otherwise change the aggregate
amount of Percentage Shares which is required for Agent, Lenders or any of them
to take any particular action under the Loan Documents, or (6) release Borrower
from its obligation to pay such Lender's Note or any Guarantor from its
guaranty of such payment.
9.11 Acknowledgements and Admissions. Each Related Person hereby
represents, warrants, acknowledges and admits that (i) it has been advised by
counsel in the negotiation, execution and delivery of the Loan Documents to
which it is a party, (ii) it has made an independent decision to enter into
this Agreement and the other Loan Documents to which it is a party, without
reliance on any representation, warranty, covenant or undertaking by Agent or
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any Lender, whether written, oral or implicit, other than as expressly set out
in this Agreement or in another Loan Document delivered on or after the date
hereof, (iii) there are no representations, warranties, covenants, undertakings
or agreements by any Bank Party as to the Loan Documents except as expressly
set out in this Agreement or in another Loan Document delivered on or after the
date hereof, (iv) no Bank Party has any fiduciary obligation toward Borrower
with respect to any Loan Document or the transactions contemplated thereby, (v)
the relationship pursuant to the Loan Documents between Borrower and the other
Related Persons, on one hand, and each Bank Party, on the other hand, is and
shall be solely that of debtor and creditor, respectively, (vi) no partnership
or joint venture exists with respect to the Loan Documents between any Related
Person and any Bank Party, (vii) Agent is not Borrower's Agent, but Agent for
Lenders, (viii) should an Event of Default or Default occur or exist, each Bank
Party will determine in its sole discretion and for its own reasons what
remedies and actions it will or will not exercise or take at that time, (ix)
without limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by any Bank Party, or any representative thereof,
and no such representation or covenant has been made, that any Bank Party will,
at the time of an Event of Default or Default, or at any other time, waive,
negotiate, discuss, or take or refrain from taking any action permitted under
the Loan Documents with respect to any such Event of Default or Default or any
other provision of the Loan Documents, and (x) all Bank Parties have relied
upon the truthfulness of the acknowledgements in this section in deciding to
execute and deliver this Agreement and to become obligated hereunder.
9.12 Agreement Construed as Entirety. This Agreement, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights and other legal relations of the parties hereto
shall be determined from this instrument as an entirety and without regard to
the aforesaid division into Articles and Sections and without regard to
headings prefixed to such Articles or Sections.
9.13 Events and Circumstances Not Reducing or Discharging the
Related Person's Liability. Related Persons hereby consent and agree to each
of the following to the fullest extent permitted by law, and agree that Related
Persons' liability under this Agreement and the Notes or the other Loan
Documents, as the case may be, shall not be released, diminished, impaired,
reduced or adversely affected by any of the following, and waive any rights
(including without limitation rights to notice) that Related Persons might
otherwise have as a result of or in connection with any of the following:
9.13.1 Modifications, etc. Any renewal, extension,
modification, increase, decrease, reissuance, replacement, alteration or
rearrangement of all or any part of the Obligations, including, without
limitation, the Notes, this Agreement or any other Loan Documents, or any
contract or understanding between any Related Person and any Bank Party or any
other Person, pertaining to the Obligations;
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9.13.2 Adjustment, etc. Any adjustment, indulgence,
forbearance or compromise that might be granted or given by any Bank Party to
any Related Person or any other Person liable on the Obligations;
9.13.3 Condition of any Related Person. The
insolvency, bankruptcy arrangement, adjustment, composition, liquidation,
reorganization, disability, dissolution or lack of power of any Related Persons
or any other Person at any time liable for the payment of all or part of the
Obligations; or any dissolution of any Related Persons or any other such Person
so liable, or any sale, lease or transfer of any or all of the assets of any
Related Person or any other such Person so liable;
9.13.4 Release of Obligors. Any full or partial
release of the liability of any Related Person on the Obligations or any part
thereof, it being recognized, acknowledged and agreed by Related Persons that a
Related Person may be required to pay the Obligations in full without
assistance or support of any other Person;
9.13.5 Other Security. The taking or accepting of any
other security, collateral or guaranty, or other assurance of payment, for all
or any part of the Obligations;
9.13.6 Release of Collateral, etc. Any release,
surrender, exchange, subordination, deterioration, waste, loss or impairment
(including without limitation negligent, willful, unreasonable or unjustifiable
impairment) of any collateral, property or security, at any time existing in
connection with, or assuring or securing payment of, all or any part of the
Obligations;
9.13.7 Care and Diligence. The failure of Lender or
any other Person to exercise diligence or reasonable care in the preservation,
protection, enforcement, sale or other handling or treatment of all or any part
of the Collateral;
9.13.8 Status of Liens. The fact that any collateral,
security, security interest or Lien contemplated or intended to be given,
created or granted as security for the repayment of the Obligations shall not
be properly perfected or created, or shall prove to be unenforceable or
subordinate to any other security interest or Lien, it being recognized and
agreed by the Related Person that Related Persons are not entering into this
Agreement in reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectability or value of any of the collateral for the
Obligations;
9.13.9 Payments Rescinded. Any payment by any Related
Person to Lender is held to constitute a preference under bankruptcy laws, or
for any reason Lender is required to refund such payment or pay such amount to
any Related Person or someone else; or
9.13.10 Other Actions Taken or Omitted. Any other
action taken or omitted to be taken with respect to this Agreement, the Notes,
the other Loan Documents, the Obligations
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or the security and collateral therefor, whether or not such action or omission
prejudices any Related Person or increases the likelihood that the Related
Person will be required to pay the Obligations pursuant to the terms hereof; it
being the unambiguous and unequivocal intention of any Related Person that each
Related Person shall be obligated to pay the Obligations when due,
notwithstanding any occurrence, circumstance, event, action, or omission
whatsoever, whether contemplated or uncontemplated, and whether or not
otherwise or particularly described herein, except for the full and final
payment and satisfaction of the Obligations.
9.14 Time of Essence. Time is of the essence of this Agreement
and of each provision hereof.
9.15 Disposition of Collateral. Notwithstanding any term or
provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of Agent; provided, however, that in no event shall Agent
violate applicable law or exercise rights and remedies other than those
provided in such Security Instruments or otherwise existing at law or in
equity.
9.16 Limitation on Interest. Bank Parties, the Related Persons
and the other parties to the Loan Documents intend to contract in strict
compliance with applicable usury law from time to time in effect. In
furtherance thereof such persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to provide
for interest in excess of the maximum amount of interest permitted to be
charged by applicable law from time to time in effect. Neither any Related
Person nor any present or future guarantors, endorsers, or other Persons
hereafter becoming liable for payment of any Obligation shall ever be liable
for unearned interest thereon or shall ever be required to pay interest thereon
in excess of the maximum amount that may be lawfully charged under applicable
law from time to time in effect, and the provisions of this section shall
control over all other provisions of the Loan Documents which may be in
conflict or apparent conflict herewith.
9.17 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (OTHER THAN
THE CONFLICT OF LAW PRINCIPLES THEREOF) AND THE LAWS OF THE UNITED STATES OF
AMERICA, EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER JURISDICTION ARE
EXPRESSLY ELECTED IN A LOAN DOCUMENT.
9.18 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH
RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED
TO OR FROM THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT MAY BE
LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF BANK PARTIES, IN COURTS
HAVING SITUS IN NEW YORK CITY,
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NEW YORK. THE RELATED PERSONS HEREBY SUBMIT TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURT LOCATED IN NEW YORK CITY, NEW YORK AND HEREBY WAIVE ANY
RIGHTS THEY MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY
LITIGATION BROUGHT AGAINST IT BY ANY BANK PARTY IN ACCORDANCE WITH THIS SECTION
9.18. IN FURTHERANCE THEREOF, THE RELATED PERSONS AND BANK PARTIES EACH HEREBY
ACKNOWLEDGE AND AGREE THAT IT WILL NOT BE INCONVENIENT NOR UNFAIR TO LITIGATE
OR OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS RELATING TO THIS AGREEMENT OR ANY
LOAN DOCUMENT IN ANY COURT SITTING IN NEW YORK CITY, NEW YORK.
EACH RELATED PERSON HEREBY IRREVOCABLY DESIGNATES CT CORPORATION
SYSTEM LOCATED AT 1633 BROADWAY NEW YORK, NEW YORK, 10019, AS ITS DESIGNEE,
APPOINTEE AND AGENT TO RECEIVE, FOR AND ON ITS BEHALF, ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE OTHER LOAN
DOCUMENTS. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT
WILL BE PROMPTLY FORWARDED BY OVERNIGHT COURIER TO THE RELATED PERSON AT ITS
ADDRESS FOR NOTICE PURSUANT TO SECTION 9.3, BUT THE FAILURE OF THE RELATED
PERSONS TO RECEIVE SUCH COPY SHALL NOT EFFECT IN ANY WAY THE SERVICE OF SUCH
PROCESS. EACH RELATED PERSON FURTHER IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS BY ANY COURTS HAVING SITUS IN NEW YORK CITY, NEW YORK IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT SAID ADDRESS, SUCH SERVICE TO BE
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE RELATED PERSONS, THE BANK PARTIES OR ANY HOLDER OF A NOTE TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
9.19 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF THE
RELATED PERSONS AND BANK PARTIES HEREBY (a) IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED
THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (b) IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (c) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR
COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR
IMPLIED THAT
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SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS, AND (d) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY
AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION.
9.20 AGREEMENT SUPERSEDING. THIS AGREEMENT CONSTITUTES THE
ENTIRE AGREEMENT OF THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND
SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN
OR ORAL, RELATING TO THE SUBJECT HEREOF. FURTHERMORE IN THIS REGARD, THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
9.21 Restatement. This Agreement restates and amends the
Original Agreement in its entirety, effective as of the Closing Date, and all
of the terms and provisions hereof shall supersede the terms and provisions
thereof.
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IN WITNESS WHEREOF, this Third Restated Credit Agreement is deemed
executed effective as of the date first above written.
Borrower:
CLIFFS DRILLING COMPANY
By: /s/ EDWARD A. GUTHRIE
------------------------------------
Edward A. Guthrie
Vice President - Finance
Guarantors:
CLIFFS OIL AND GAS COMPANY
By: /s/ EDWARD A. GUTHRIE
------------------------------------
Edward A. Guthrie
Vice President - Finance
CLIFFS DRILLING INTERNATIONAL, INC.
By: /s/ EDWARD A. GUTHRIE
------------------------------------
Edward A. Guthrie
Vice President - Finance
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Agent:
ING (U.S.) CAPITAL CORPORATION
By: /s/ W. KING GRANT
------------------------------------
W. King Grant
Senior Vice President
Lenders:
ING (U.S.) CAPITAL CORPORATION
By: /s/ W. KING GRANT
------------------------------------
W. King Grant
Senior Vice President
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Exhibit 10.24
CLIFFS DRILLING COMPANY
1998 INCENTIVE EQUITY PLAN
SECTION 1. PURPOSE.
This Cliffs Drilling Company 1998 Incentive Equity Plan is intended to
encourage Eligible Participants to become owners of Stock of Cliffs Drilling
Company in order to increase their interest in the Company's long-term success,
to provide incentive equity opportunities which are competitive with other
similarly situated corporations and to stimulate the efforts of Eligible
Participants by giving suitable recognition for services which contribute
materially to the Company's success.
SECTION 2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries which the Board designates as an "Affiliate" for the purposes of
this Plan.
(b) "Award" means any award or benefit granted to any Eligible
Participant pursuant to the Plan, inlcuduing without limitation, any Stock
Option, Stock Appreciation Right, Restricted Stock or Deferred Stock.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means a felony conviction of a participant or the failure
of a participant to contest prosecution for a felony, or a participant's willful
misconduct or dishonesty, or a participant's failure to perform his work in
accordance with reasonable standards established by the Company, any of which is
directly and materially harmful to the business or reputation of the Company or
any Subsidiary or Affiliate.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(f) "Committee" means the Committee referred to in Section 3 of the
Plan. If at any time a Committee shall not be in existence, then the functions
of the Committee specified in the Plan shall be exercised by the Board.
(g) "Company" means Cliffs Drilling Company, a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(h) "Deferral Period" means the initial period of time during which
shares of Deferred Stock awarded pursuant to Section 8 are subject to deferral
limitations under Section 8(c).
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(i) "Deferred Stock" means an Award made pursuant to Section 8 of the
right to receive Stock at the end of a specified deferral period.
(j) "Disability" means permanent and total disability as determined
under the Company's long-term disability program.
(k) "Eligible Participant" means (i) any employee of the Company or a
Subsidiary or Affiliate of the Company, (ii) any individual to whom a bona fide
written offer of employment from the Company or a Subsidiary or Affiliate of the
Company has been extended, and (iii) any Non-Employee Director of the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(m) "Fair Market Value" means, as of any given date, the closing price
of the Stock on such date as reported on the principal United States securities
exchange on which the Stock is listed, or if the Stock is not so listed, the
closing price as quoted on the NASDAQ National Market System, or if the Stock is
not so listed or quoted, the closing bid as quoted on the NASDAQ
over-the-counter market; provided, that if no such prices are so reported or
quoted on that date or if, in the discretion of the Committee, another means of
determining the Fair Market Value of a share of Stock at such date is deemed
necessary or advisable, the Committee may provide for another means for
determining such Fair Market Value.
(n) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422(b)
of the Code.
(o) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(p) "Non-Employee Director" means any director of the Company who at
the time of his or her service is not an employee of the Company or any
Subsidiary or Affiliate of the Company.
(q) "Plan" means the Cliffs Drilling Company 1998 Incentive Equity
Plan, as hereafter amended from time to time.
(r) "Restriction Period" means the period of time during which shares
of Stock awarded to a participant pursuant to Sections 8(a) and (b) remain
subject to the restrictions referred to in Section 8(b).
(s) "Restricted Stock" means an award of shares of Stock that is
subject to restrictions under Section 8.
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(t) "Retirement" means retirement from active employment or service
with the Company or any Subsidiary or Affiliate on or after the normal
retirement date specified in, or pursuant to the early retirement provisions of,
such employer's retirement policy.
(u) "Stock" means the shares of Common Stock, par value $.01 per share,
of the Company.
(v) "Stock Appreciation Right" means the right granted under Section 7
to surrender to the Company all or a portion of a Stock Option in exchange for a
payment in cash or Stock.
(w) "Stock Option" or "Option" means any option (including Incentive
Stock Options and Non-Qualified Stock Options) to purchase shares of Stock
granted pursuant to Section 6.
(x) "Subsidiary" means any corporation (other than the Company) during
any period in which it is a "subsidiary corporation," as defined in Section
424(f) of the Code, with respect to the Company.
In addition, the terms "Approval Date," "Change in Control," "Potential Change
in Control" and "Change in Control Price" shall have meanings set forth in
Section 9.
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Compensation Committee of the
Board of Directors, which shall consist of two or more members of the Board of
Directors who are appointed by, and serve at the pleasure of, the Board.
(b) The Committee shall have the power and authority to grant Awards
pursuant to, and to manage and control the operation and administration of, the
Plan. In particular, the Committee shall have the authority:
(i) to select from among the Eligible Participants those
persons to whom Awards may from time to time be granted;
(ii) to determine whether, when, and to what extent Awards are
granted;
(iii) to determine the types of Awards and the number of
shares to be covered by each such Award;
(iv) to determine the terms and conditions, not inconsistent
with the terms hereof, of any Award (including, but not limited to, the
share price and any restriction or limitation on, or any vesting,
acceleration or forfeiture waiver regarding, any Award, based on such
factors and criteria as the Committee shall determine, in its sole
discretion), and subject to the terms hereof, to cancel or suspend
Awards;
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(v) to determine the extent to which Awards under the Plan
will be structured to conform to the requirements applicable to
performance-based compensation as described in Section 162(m) of the
Code, and to take action, establish such procedures, and impose such
restrictions at the time such Awards are granted as the Committee
determines to be necessary or appropriate to conform to such
requirements; and
(vi) to determine the performance goals and measurements
(based on specified levels of, or growth in, one or more of the
following business criteria: net income, pre-tax income, earnings per
share, revenues, return on investment, return on net assets, return on
equity, operating ratio, cash flow, stockholder return, market
capitalization, total equity, economic profit (defined as the
difference between (A) after-tax earnings and (B) the cost of capital
multiplied by total capital used), economic value added (defined as
economic profit for the current year minus economic profit for the
prior year), quality improvements, market share, strategic positioning,
systems improvement or customer satisfaction) applicable to
performance-based Awards and to adjust any such performance goals and
measurements to include or exclude the impact of extraordinary or
unusual items, events or circumstances, to reflect change in applicable
tax or accounting rules and other developments, or as otherwise deemed
advisable by the Committee;
(vii) to determine whether and under what circumstances an
Award may be settled in cash, Stock or otherwise pursuant to Section
12(g) of the Plan.
(c) The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable; to interpret the terms and provisions
of the Plan and any Award and any agreements relating thereto; and to otherwise
supervise the administration of the Plan. All decisions made by the Committee
pursuant to the provisions hereof shall be made in the Committee's sole
discretion and shall be final and binding on all persons.
SECTION 4. ELIGIBILITY.
Eligible Participants may be granted Awards pursuant to the Plan, at
the discretion of the Committee. The individuals to whom Awards are granted
under the Plan shall be selected from time to time by the Committee, in its sole
discretion, from among the Eligible Participants.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Subject to the following provisions of this Section 5, the maximum
number of shares of Stock that may be delivered pursuant to the Plan shall be
equal to the sum of (i) 1,000,000 shares, (ii) any shares remaining available
for future awards under the 1988 Incentive Equity Plan as of the effective date
of this Plan, and (iii) any shares that are represented by awards granted under
the 1988 Incentive Equity Plan which are forfeited, expire or are canceled
without delivery of shares of Stock or which result in the forfeiture of shares
back to
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the Company. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
(b) Any shares of Stock granted pursuant to the Plan that are forfeited
because of the failure to meet an Award contingency or condition shall again be
available for delivery pursuant to new Awards granted under the Plan. To the
extent any shares of Stock covered by an Award are not delivered to a
participant or beneficiary because the Award is forfeited or canceled, or the
shares of Stock are not delivered because the Award is settled in cash, such
shares shall not be deemed to have been delivered for purposes of determining
the maximum number of shares of Stock available for delivery pursuant to the
Plan.
(c) If the exercise price of any Stock Option or the withholding
obligation of the participant in connection with any Award granted pursuant to
the Plan is satisfied by tendering shares of Stock to the Company, only the
number of shares of Stock issued, net of the shares of Stock tendered, shall be
deemed delivered for purposes of determining the maximum number of shares of
Stock available for delivery pursuant to the Plan.
(d) Shares of Stock delivered under the Plan in settlement, assumption
or substitution of outstanding Awards (or obligations to grant future awards)
under the plans or arrangements of another entity shall not reduce the maximum
number of shares of Stock available for delivery under the Plan, to the extent
that such settlement, assumption or substitution is a result of the Company or
any Subsidiary or Affiliate acquiring another entity (or an interest in another
entity).
(e) In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, Stock split, split-up, spin-off, combination,
exchange of shares, or other change in corporate structure affecting the Stock,
a substitution or adjustment shall be made (i) in the aggregate number and kind
of shares which may be delivered pursuant to the Plan, (ii) in the number and
kind of shares subject to outstanding Awards granted pursuant to the Plan, and
(iii) in the exercise price of outstanding Stock Options granted pursuant to the
Plan, in each case as may be determined to be appropriate by the Board, provided
that the number of shares subject to any Award shall always be a whole number.
(f) Subject to the foregoing provisions of Section 5, the following
additional maximums are imposed under the Plan:
(i) The maximum aggregate number of shares of Stock that may
be covered by Stock Options and SARs granted to any one individual
during any three consecutive calendar years pursuant to the Plan shall
be 200,000 shares.
(ii) The maximum aggregate number of shares of Restricted
Stock and Deferred Stock that may be granted to any one individual
during any three consecutive calendar years pursuant to the Plan shall
be 100,000 shares.
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SECTION 6. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other Awards
granted under the Plan. Any Stock Option granted under the Plan shall be in such
form as the Committee may from time to time approve, and the provisions of Stock
Option Awards need not be the same with respect to each optionee.
The Committee may grant Incentive Stock Options, Non-Qualified Stock
Options, or both types of Stock Options (in each case with or without Stock
Appreciation Rights) to any Eligible Participant; provided, however, that
Incentive Stock Options may be granted only to employees of the Company or its
Subsidiaries. To the extent that any Stock Option does not qualify as an
Incentive Stock Option, it shall constitute a separate Non-Qualified Stock
Option.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions not
inconsistent with the terms of the Plan, as the Committee deems appropriate:
(a) Exercise Price. The exercise price per share of Stock
purchasable under a Stock Option shall be not less than the Fair Market
Value on the day the Option is granted.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Stock Option shall be exercisable more than
ten years after the date such Option is granted.
(c) Exercise of Options. Stock Options shall become
exercisable at such time or times and subject to such terms and
conditions (including, without limitation, installment exercise
provisions) as shall be determined by the Committee, provided, however,
that, except as provided in Section 6(f) or (g) (in the case of
Disability) and Section 9, unless otherwise determined by the Committee
at or after grant, no Stock Option shall be exercisable prior to the
first anniversary date of the granting of the option. If the Committee
provides that any Stock Option is exercisable only in installments, the
Committee may waive such installment exercise provisions at any time in
whole or in part based on performance and/or such other factors as the
Committee may determine.
(d) Method of Exercise. Stock Options may be exercised in
whole or in part by giving written notice of exercise to the Company
specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price. As determined by
the Committee, at or after grant, payment of the exercise price, in
whole or in part, may be made as follows:
(i) by certified or bank check;
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(ii) by delivery to the Company of an executed
irrevocable option exercise form together with irrevocable
instructions to a broker-dealer to (A) sell a sufficient
portion of the shares acquired upon exercise of the Option and
(B) remit directly to the Company a sufficient portion of the
sale proceeds to pay the entire exercise price and any tax
withholding resulting from such exercise;
(iii) by tendering shares of Stock (either by actual
delivery or by attestation), with such shares valued at Fair
Market Value as of the date of exercise, upon terms and
conditions as determined by the Committee; or
(iv) by such other instrument as may be permitted in
accordance with rules or procedures adopted by the Committee.
An optionee shall generally have the rights of a shareholder with
respect to shares subject to the Option only when the optionee has
given written notice of exercise, has paid in full for such shares and,
if requested, given the representation described in Section 12(a).
(e) Non-Transferability of Options. Except as set forth in
this Section 6(e) and in the applicable stock option agreement, no
Stock Option shall be transferable by the optionee otherwise than by
will or by laws of descent and distribution or pursuant to a "domestic
relations order" as defined in the Code or Title I of the Employee
Retirement Income Security Act (or the rules promulgated thereunder),
and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee. At the request of an optionee, Stock
purchased upon exercise of an Option may be issued or transferred into
the name of the optionee and another person jointly with rights of
survivorship. The Committee may, in its discretion, authorize all or a
portion of any Non-Qualified Stock Options to be granted on terms which
permit transfer by the optionee to (i) the spouse, children,
stepchildren, siblings or grandchildren of the optionee, (ii) a trust
or trusts for the exclusive benefit of the spouse, children,
stepchildren, siblings or grandchildren of the optionee, or (iii) a
partnership or limited liability company in which the spouse, children,
stepchildren, siblings or grandchildren of the optionee are the only
partners or members, as applicable; provided in each case that (x)
there may be no consideration for any such transfer (other than in the
case of Clause (iii), units in the partnership or membership interests
in the limited liability company), (y) the stock option agreement
pursuant to which such Stock Options are granted must be approved by
the Committee, and must expressly provide for transferability in a
manner consistent with this Section 6(e), and (z) subsequent transfers
of transferred options shall be prohibited except those made in
accordance with this Section 6(e) or by will or by the laws of descent
and distribution or pursuant to a "domestic relations order" as defined
in the Code or Title I of the Employee Retirement Income Security Act
(or the rules promulgated thereunder). Following transfer, any such
Stock Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer. The
provisions with respect to expiration and termination of employment or
service with the Company set forth in subsections (f), (g) and (h) of
this Section 6 shall continue to apply with respect
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to the original optionee, in which event the Stock Options shall be
exercisable by the transferee only to the extent and for the periods
specified herein. The original optionee will remain subject to
withholding taxes upon exercise of any such Stock Option by the
transferee. The Company shall have no obligation whatsoever to provide
notice to any transferee of any matter, including without limitation,
early termination of a Stock Option on account of termination of the
original optionee's employment or service with the Company.
(f) Termination by Death. Subject to Section 6(i), if an
optionee's employment or service with the Company or any Subsidiary or
Affiliate terminates by reason of death, any Stock Option previously
granted to such optionee which remains unexercised may thereafter be
exercised, to the extent it was exercisable at the time of death or on
such accelerated basis as the Committee may determine at or after
grant, for a period of one year (or such other period up to three years
as the Committee may specify) from the date of death or until the
expiration of the stated term of such Stock Option, whichever period is
shorter.
(g) Termination by Reason of Disability or Retirement. Subject
to Section 6(i), if an optionee's employment or service with the
Company or any Subsidiary or Affiliate terminates by reason of
Disability or Retirement, any Stock Option previously granted to such
optionee which remains unexercised may thereafter be exercised, to the
extent it was exercisable at the time of such termination or on such
accelerated basis as the Committee may determine at or after grant, for
a period of three years (or such shorter period as the Committee may
specify at grant) from the date of such termination of employment or
service or until the expiration of the stated term of such Stock
Option, whichever period is shorter, provided, however, that, if the
optionee dies within such three-year period (or such shorter period),
any unexercised Stock Option shall thereafter be exercisable, to the
extent it was exercisable at the time of death, for a period of one
year from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter.
(h) Other Termination of Employment or Service. Unless
otherwise determined by the Committee at or after grant, if an
optionee's employment or service with the Company or any Subsidiary or
Affiliate terminates for any reason other than death, Disability or
Retirement, any Stock Option previously granted to such optionee which
remains unexercised may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of three
months from the date of such termination of employment or service or
until the expiration of the stated term of such Stock Option, whichever
period is shorter, except that, if the termination was for Cause, any
and all unexercised Stock Options previously granted to such optionee
shall be immediately canceled.
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(i) Incentive Stock Option Limitations.
(i) To the extent that the aggregate Fair Market
Value (determined as of the time of grant) of the Stock with
respect to which Incentive Stock Options granted after 1986
are exercisable for the first time by the optionee during any
calendar year under the Plan and any other stock option plan
of the Company or any Subsidiary or Affiliate exceeds
$100,000, such Options shall be treated as NonQualified Stock
Options, to the extent required by Section 422 of the Code.
(ii) The Committee may provide at grant, to the
extent permitted under Section 422 of the Code, that, if (i) a
participant's employment or service with the Company or its
Subsidiaries is terminated by reason of death, Disability or
Retirement and (ii) the portion of any Incentive Stock Option
that is otherwise exercisable during the post-termination
period specified under Section 6(f), (g) or (h), applied
without regard to this Section 6(i), is greater than the
portion of such Option that is exercisable as an "incentive
stock option" during such post- termination period under
Section 422, such post-termination period shall automatically
be extended (but not beyond the original option term) to the
extent necessary to permit the optionee to exercise such
Incentive Stock Option either as an Incentive Stock Option or,
if exercised after the expiration of the applicable exercise
periods under Section 422(a) of the Code, as a Non-Qualified
Stock Option. The Committee is also authorized to provide at
grant for a similar extension of the post-termination exercise
period in the event of a Change in Control or a Potential
Change in Control.
(iii) In the event of a participant's termination of
employment or service with the Company or its Subsidiaries by
reason of death, Disability or Retirement, if an Incentive
Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code,
such Stock Option shall thereafter be treated as a
Non-Qualified Stock Option.
SECTION 7. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Stock Option. Stock Appreciation Rights are exercisable as follows:
(i) A Stock Appreciation Right may be exercised by
surrendering the applicable portion of the related Stock Option in
accordance with procedures established by the Committee for such
purposes. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in
Section
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7(b). Stock Options which have been so surrendered shall no longer be
exercisable to the extent the related Stock Appreciation Rights have
been exercised.
(ii) A Stock Appreciation Right or applicable portion thereof
granted with respect to a given Stock Option shall terminate and no
longer be exercisable upon the termination or exercise of the related
Stock Option, except that, unless otherwise determined by the Committee
at the time of grant, a Stock Appreciation Right granted with respect
to less than the full number of shares covered by a related Stock
Option shall not be reduced until the number of shares covered by an
exercise or termination of the related Stock Option exceeds the number
of shares not covered by the Stock Appreciation Right.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such times and to the extent that the Stock Options to which they
relate are exercisable, in accordance with the provisions of Section 6
and this Section 7 of the Plan, provided that a Stock Appreciation
Right shall not be exercisable during the first six months of its term
by any optionee except in the event of death or Disability of the
optionee prior to the expiration of the six-month period.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash and/or shares
of Stock in the aggregate equal in value to the excess of the Fair
Market Value of one share of Stock over the option price per share
specified in the related Stock Option multiplied by the number of
shares in respect of which the Stock Appreciation Right shall have been
exercised, with the Committee having the right to determine the form of
payment.
(iii) Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock Option would be
transferable under Section 6(e) of the Plan.
(iv) The Committee may provide, at the time of grant, that
such Stock Appreciation Right can be exercised only in the event of a
Change in Control and/or a Potential Change in Control, subject to such
terms and conditions as the Committee may specify at grant.
SECTION 8. RESTRICTED STOCK AND DEFERRED STOCK.
(a) Authorization. Shares of Restricted Stock and/or Deferred Stock may
be issued either alone or in addition to other Awards granted under the Plan,
and upon terms and conditions established at the discretion of the Committee.
The provisions of Restricted Stock and Deferred Stock Awards need not be the
same with respect to each recipient.
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(b) Restrictions and Conditions Applicable to Restricted Stock Awards.
Restricted Stock Awards shall be subject to the following restrictions and
conditions:
(i) The consideration for issuance of shares of Restricted
Stock pursuant to the Plan shall be not less than their par value,
payable in cash or in services performed to or for the benefit of the
Company or its Subsidiaries or Affiliates, in the discretion of the
Committee.
(ii) Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter periods as the Committee may specify
at grant) after the Award date, by executing a Restricted Stock Award
Agreement and paying whatever price (if any) is required under Section
8(b)(i). The prospective recipient of an Award of Restricted Stock
shall not have any rights with respect to such Award, unless and until
such recipient has executed an agreement evidencing the Award and has
delivered a fully executed copy thereof of the Company, and has
otherwise complied with the applicable terms and conditions of such
Award.
(iii) Each participant receiving an Award of Restricted Stock
shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of
such participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award,
substantially in the following form:
"The transferability of this certificate and the
shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) of the Cliffs Drilling
Company 1988 Incentive Equity Plan and an Agreement entered
into between the registered owner of the shares and Cliffs
Drilling Company. Copies of such Plan and Agreement are on
file in the offices of Cliffs Drilling Company, Houston,
Texas."
The Committee may require that the stock certificates evidencing such
shares be held in custody by the Company until the restrictions thereon
shall have lapsed, and that, as a condition of any Restricted Stock
Award, the participant shall have delivered a stock power, endorsed in
blank, relating to the Stock covered by such Award.
(iv) Subject to the provisions of this Plan and the applicable
Award agreement, during a period set by the Committee commencing with
the date of such Award (the "Restriction Period"), the participant
shall not be permitted to sell, transfer, pledge, assign or otherwise
encumber shares of Restricted Stock awarded under the Plan. Based on
service, performance and/or such other factors or criteria as the
Committee may determine, the Committee may, however, at or after grant,
provide for the lapse of such restrictions in installments and/or may
accelerate or waive such restrictions in whole or in part.
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(v) Except as provided in this Section 8(b), the recipient
shall have, with respect to the shares of Restricted Stock covered by
any Award, all of the rights of a shareholder of the Company, including
the right to vote the shares, and the right to receive any dividends,
provided, however, that unless otherwise determined by the Committee,
any dividends on such shares shall be automatically deferred and
reinvested in additional Restricted Stock subject to the same
restrictions as the underlying Award, to the extent shares are
available under Section 5.
(vi) Except as otherwise provided in this Section 8(b) and in
the applicable Award agreement, upon termination of a participant's
employment or service with the Company or any Subsidiary or Affiliate
for any reason during the Restriction Period for any given Award of
Restricted Stock, all shares still subject to restriction shall be
forfeited by the participant, provided, however, the Committee may
provide for waiver of the restrictions in the event of termination of
employment or service due to death, Disability or Retirement.
(vii) In the event of hardship or other special circumstances
of a participant whose employment or service with the Company or any
Subsidiary or Affiliate is involuntarily terminated (other than for
Cause), the Committee may waive in whole or in part any or all
remaining restrictions with respect to any or all of the participant's
Restricted Stock, based on such factors and criteria as the Committee
may deem appropriate.
(viii) If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction
Period, unrestricted certificates for such shares shall be delivered to
the participant.
(c) Terms and Conditions Applicable to Deferred Stock Awards. Deferred
Stock Awards shall be subject to the following terms and conditions:
(i) Each Award of Deferred Stock shall be confirmed by, and
subject to the terms of, a Deferred Stock agreement executed by the
Company and the participant.
(ii) Subject to the provisions of this Plan and the applicable
Award agreement, the participant shall not be permitted to sell,
transfer, pledge, assign or otherwise encumber shares covered by an
Award of Deferred Stock during the period, commencing with the date of
such Award, specified by the Committee for purposes of such Award (the
"Deferral Period"). Based on service, performance and/or such other
factors or criteria as the Committee may determine, the Committee may,
however, at or after grant, accelerate the vesting of all or any part
of any Deferred Stock Award and/or waive the deferral limitations for
all or any part of such Award.
(iii) Unless otherwise determined by the Committee, amounts
equal to any dividends that would have been payable during the Deferral
Period with respect to the
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number of shares covered by a Deferred Stock Award if such shares had
been outstanding shall be automatically deferred and deemed to be
reinvested in additional Deferred Stock, subject to the same deferral
limitations as the underlying Award.
(iv) Except to the extent otherwise provided in this Section
8(c) and in the applicable Award agreement, upon termination of a
participant's employment or service with the Company or any Subsidiary
or Affiliate for any reason during the Deferral Period for a given
Award, the Deferred Stock covered by such Award shall be forfeited by
the participant, provided, however, the Committee may provide for
accelerated vesting in the event of termination of employment or
service due to death, Disability or Retirement.
(v) In the event of hardship or other special circumstances of
a participant whose employment or service with the Company or any
Subsidiary or Affiliate is involuntarily terminated (other than for
Cause), the Committee may waive in whole or in part any or all of the
remaining deferral limitations imposed hereunder with respect to any or
all of the participant's Deferred Stock, based on such factors and
criteria as the Committee deems appropriate.
(vi) At the expiration of the Deferral Period, share
certificates shall be delivered to the participant, or his legal
representative, in a number equal to the number of shares covered by
the Award.
SECTION 9. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. In the event of:
(x) a "Change in Control" as defined in Section 9(b), or
(y) a "Potential Change in Control" as defined in Section
9(c),
the Committee or the Board may provide that one or more of the following
acceleration and valuation provisions shall apply:
(i) Any or all Stock Appreciation Rights outstanding for at
least six months on the date that such Change in Control or Potential
Change in Control is determined to have occurred and any or all Stock
Options awarded under this Plan not previously exercisable and vested
shall become fully exercisable and vested.
(ii) The restrictions and deferral limitations applicable to
any or all Restricted Stock and Deferred Stock Awards shall lapse and
such shares and Awards shall be fully vested.
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<PAGE> 14
(iii) The value of any or all outstanding Stock Options,
Restricted Stock and Deferred Stock Awards shall be cashed out on the
basis of the "Change in Control Price" as defined in Section 9(d) as of
the date such Change in Control or Potential Change in Control is
determined to have occurred or such other date as the Committee may
determine prior to the Change in Control.
(b) Definition of "Change in Control." For purposes of Section 9(a), a
"Change in Control" means the happening of any of the following:
(i) A tender offer is made and consummated for the ownership
of 30% or more of the outstanding voting securities of the Company;
(ii) The Company shall merge or consolidate with another
corporation and as a result of such merger or consolidation less than
75% of the outstanding voting securities of the surviving or resulting
corporation shall be owned in the aggregate by the former shareholders
of the Company, other than affiliates (within the meaning of the
Exchange Act as in effect on the date the Plan was first approved by
the shareholders of the Company (the "Approval Date")) of any party to
such merger or consolidation, as the same shall have existed
immediately prior to such merger or consolidation;
(iii) The Company shall sell substantially all of its assets
to another corporation which is not a Subsidiary; or
(iv) A person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the Approval Date) of the Exchange
Act, shall acquire 30% or more of the outstanding voting securities of
the Company (whether directly, indirectly, beneficially or of record).
For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) (as in effect on the Approval Date) pursuant to the Exchange
Act.
(c) Definition of "Potential Change in Control". For purposes of
Section 9(a), a "Potential Change in Control" means the happening of any one of
the following:
(i) The entering into an agreement by the Company, the
consummation of which would result in a Change in Control of the
Company as defined in Section 9(b); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
Subsidiary or any Company employee benefit plan) (including any trustee
of such plan acting as such trustee) of securities of the Company
representing 5% or more of the combined voting power of the Company's
outstanding securities, and the adoption by the Board of a resolution
to the
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<PAGE> 15
effect that a "Potential Change in Control" of the Company has occurred
for the purposes of this Plan.
(d) Change in Control Price. For the purposes of this Section 9,
"Change in Control Price" means the highest price per share paid in any
transaction reported on the principal United States securities exchange, the
NASDAQ National Market System or other principal market on which the stock is
traded, or paid or offered in any bona fide transaction related to an actual or
Potential Change in Control of the Company, at the time during the preceding
sixty-day period as determined by the Committee, except that, in the case of
Incentive Stock Options and Stock Appreciation Rights relating to Incentive
Stock Options, such price shall be based only on transactions reported for the
date as of which the Committee decides to cashout such options.
SECTION 10. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan, including without
limitation, the automatic grant provisions set forth in Section 13 of the Plan,
at any time, but no amendment, alteration, or discontinuation shall be made
which would impair the rights of a participant under an Award theretofore
granted without the written consent of the affect participant (or if not then
living, the affected beneficiary), or which, without the approval of the
Company's stockholders, would, except as expressly provided in the Plan,
increase the total number of shares reserved for delivery pursuant to the Plan.
The Committee may amend the terms of any outstanding Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any holder without the holder's consent.
SECTION 11. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant by the Company, nothing contained herein shall give any such
participant any rights that are greater than those of a general creditor of the
Company. The Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Stock or
payments hereunder consistent with the foregoing.
SECTION 12. GENERAL PROVISIONS.
(a) Notwithstanding any other provision of the Plan, the Company shall
have no liability to deliver any shares of Stock pursuant to the Plan or make
any other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including without
limitation, the requirements of the Securities Act of 1933, as amended), and the
applicable requirements of any securities exchange or similar entity. The
Committee may require each person acquiring shares pursuant to an Award under
the Plan to represent to and agree with the Company in writing that such person
is acquiring the shares without a view to distribution thereof. The certificates
for such shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer. All certificates for shares
-15-
<PAGE> 16
of Stock or other securities delivered under the Plan shall be subject to such
stock transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is then listed and
any applicable Federal or state securities law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Company, a
Subsidiary or an Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any individual any
right to continued employment or service with the Company or a Subsidiary or
Affiliate, as the case may be, nor shall it interfere in any way with the right
of the Company or any Subsidiary or Affiliate to terminate the employment or
service of any individual at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of a participant for Federal income tax purposes
with respect to any Award under the Plan, the participant shall pay to the
Company, or make any arrangements satisfactory to the Committee regarding the
payment of any Federal, state or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Company, withholding obligations may be settled with Stock, including Stock that
is part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Subsidiaries or Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from the
payment(s) otherwise due to the participant.
(e) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid.
(f) Subject to the overall limitation of the maximum number of shares
of Stock that may be delivered pursuant to the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or any Subsidiary or Affiliate, including the plans and arrangements of
the Company or any Subsidiary or Affiliate acquiring another entity (or any
interest in another entity).
(g) Awards may be settled through cash payments, the delivery of shares
of Stock, the granting of replacement Awards, or any combination thereof as the
Committee shall determine. Any Award settlement may be subject to such
conditions, restrictions and contingencies as the Committee shall determine.
-16-
<PAGE> 17
SECTION 13. AUTOMATIC AWARD OF STOCK OPTIONS TO CERTAIN PERSONS.
Subject to stockholder approval of the Plan and subject to the
availability of a sufficient number of shares of Stock for delivery pursuant to
the Plan, (a) Non-Qualified Stock Options to purchase an aggregate of 4,000
shares of Stock (subject to adjustment pursuant to Section 5) shall
automatically be granted pursuant to the Plan, without the need for any further
any action by the Committee, to each of the Company's Non-Employee Directors, on
the date of their initial election to the Board of Directors of the Company, and
(b) Non-Qualified Stock Options to purchase an aggregate of 2,000 shares of
Stock (subject to adjustment pursuant to Section 5) shall automatically be
granted pursuant to the Plan, without the need for any further action by the
Committee, to each of the Company's continuing or re-elected Non-Employee
Directors, on the date of each annual meeting of shareholders of the Company; in
each case commencing with the election of directors at the annual meeting of
shareholders of the Company to be held in 1998. Each such Stock Option shall
have an exercise price equal to the Fair Market Value of the Stock on the date
of grant, and will be for a term of ten years from the date of grant, subject to
earlier termination as set forth in Sections 6(f), (g) and (h), with 50% of the
shares becoming exercisable after one year and 25% after each of the succeeding
two years; provided, however, that such options shall become immediately
exercisable upon a "Change of Control" or "Potential Change of Control" as and
to the extent provided in Section 9.
SECTION 14. EFFECTIVE DATE.
The Plan shall be effective on the date it is approved by the
stockholders of the Company.
-17-
<PAGE> 1
EXHIBIT 10.24.1
AMENDMENT NO. 1
TO THE
CLIFFS DRILLING COMPANY
1998 INCENTIVE EQUITY PLAN
Pursuant to the terms and provisions of Section 10 of the Cliffs
Drilling Company 1998 Incentive Equity Plan (the "Plan"), Cliffs Drilling
Company, a Delaware corporation (the "Company"), hereby adopts the following
Amendment No. 1 to the Plan (the "Amendment No.
1").
1.
The last sentence of Section 10 of the Plan is hereby amended in its
entirety by substituting the following therefor:
"The Committee may amend the terms of any outstanding Award
theretofore granted, prospectively or retroactively, but no such
amendment shall impair the rights of any holder without the holder's
consent, and no such amendment shall reduce the exercise price of any
outstanding stock option other than in accordance with Section 5(e) of
the Plan."
2.
Each amendment made by this Amendment No. 1 to the Plan has been
effected in conformity with the provisions of the Plan.
3.
This Amendment No. 1 was adopted by the Board of Directors of the
Company on May 13, 1998. Approval of this Amendment No. 1 by the shareholders of
the Company is not required pursuant to the terms and provisions of the Plan.
Dated: May 14, 1998.
CLIFFS DRILLING COMPANY
By: /s/ CINDY B. TAYLOR
---------------------------------------
Cindy B. Taylor
Vice President-Controller and Secretary
<PAGE> 1
EXHIBIT 10.25
CLIFFS DRILLING COMPANY
Non-Qualified Stock Option Agreement
WHEREAS, ___________________, (hereinafter called the "Optionee") is an
officer or other key employee of Cliffs Drilling Company (hereinafter called the
"Company"); and
WHEREAS, the Board of Directors of the Company by resolution duly
adopted on February 18, 1988 authorized the Cliffs Drilling Company 1998
Incentive Equity Plan (the "Plan"), which was approved by the Company's
shareholders on May 13, 1998; and
WHEREAS, pursuant to the Plan the Board of Directors is authorized to
select the key employees and officers of the Company who will receive grants
under the Plan, and to determine the size of such grants; and the Board of
Directors has approved this grant to the Optionee, and the size of this grant;
and
WHEREAS, pursuant to the Plan the Board of Directors is authorized to
determine the terms and conditions applicable to stock options granted pursuant
to the Plan, and the Board of Directors has approved the form of this
Non-Qualified Stock Option Agreement;
NOW, THEREFORE, pursuant to the Plan the Company hereby grants to the
Optionee this Non-Qualified Stock Option to purchase _________ common shares of
the Company, par value $.01 per share ("Common Shares"), at the price of _______
dollars and _______ cents ($XX.XX) per share, which purchase price was not less
than the closing price of the Common Shares on the New York Stock Exchange on
the date awarded, _______________, and agrees to cause certificates for any
shares purchased hereunder to be delivered to the Optionee upon payment of the
purchase price in full, all subject, however, to the terms and conditions of the
Plan and the terms and conditions hereinafter set forth.
1. This option (until terminated or exercised as hereinafter
provided) shall be exercisable only to the extent of (i) one-half of the shares
herein above specified upon the date one year
<PAGE> 2
from the granting of the option, during which time the Optionee shall have been
in the continuous employ of the Company or of any Subsidiary of Affiliate and
(ii) an additional one-fourth of such shares on each of the next two
anniversaries of the date of grant, during which time the Optionee shall have
been in the continuous employ of the Company or of any Subsidiary or Affiliate.
To the extent exercisable, this option may be exercised in whole or in part from
time to time.
2. Notwithstanding the foregoing paragraph, in the event of a
"Change in Control" as defined in Section 9(b) of the Plan, or a "Potential
Change in Control" as defined in Section 9(c) of the Plan, this option shall
become immediately exercisable in full.
3. Notwithstanding any other provision of this Agreement, this
option shall not be exercised any time after the end of business,
_______________. Upon the Optionee's termination of employment with the Company
or any Subsidiary or Affiliate, this option shall be canceled immediately to the
extent that is not exercisable at that time. If the Optionee terminates
employment with the Company or any Subsidiary or Affiliate because of (i) his
Retirement or Disability, this option shall be exercisable, to the extent then
exercisable, for a maximum of three years from the date of the Optionee's
termination of employment, (ii) his death, this option shall be exercisable, to
the extent then exercisable, for a maximum of one year from the date of death.
If the Optionee terminates employment with the Company or any Subsidiary or
Affiliate because of his Retirement or Disability, and then dies before
exercising this option, this option shall be exercisable, to the extent then
exercisable, for a maximum of one year from the date of death. If the Optionee
terminates employment with the Company or any Subsidiary or Affiliate for any
other reason other than his death, Disability or Retirement, this option shall
be exercisable, to the extent then exercisable, for a maximum of three months
from the date of the Optionee's termination of employment; however, if the
Optionee's employment with the Company, Subsidiary or Affiliate is terminated
for Cause this option shall be canceled immediately.
For the purposes of this Section 3 "Cause" means a felony conviction of
the Optionee or the
2
<PAGE> 3
failure of Optionee to contest prosecution for a felony, or Optionee's willful
misconduct or dishonesty, or Optionee's failure to perform his work in
accordance with reasonable standards established by the Company, any of which is
directly and materially harmful to the business or reputation of the Company or
any Subsidiary or Affiliate. For the purposes of this Section 3 "Disability"
means permanent and total disability as determined under the Company's long term
disability program. For the purposes of this Section 3 "Retirement" means
retirement from active employment with the Company or any Subsidiary or
Affiliate on or after the normal retirement date specified in, or pursuant to
the early retirement provisions of the Company's retirement policy.
4. This option is not transferable by the Optionee otherwise than by
will or the laws of descent and distribution, or pursuant to a "domestic
relations order" as defined in the Internal Revenue Code or Title I of the
Employee Retirement Income Security Act (or the rules promulgated thereunder).
Subject to the foregoing, this option is exercisable, during the lifetime of the
Optionee, only by the Optionee, and after the lifetime of the Optionee, is
exercisable solely by the legal representative of his estate or by the legatee
of the Optionee under the will of the Optionee, subject to the provisions of
Section 3 hereof.
5. This option shall not be exercisable if such exercise would
involve a violation of any applicable Federal or state securities law, and the
Company hereby agrees to make reasonable efforts to comply with such securities
laws. The Company may require, as a condition to its issuance and delivery of
certificates for the shares acquired by exercise of this option, the Optionee's
delivery to the Company of a commitment in writing that at the time of such
exercise it is his intention to acquire such shares for his own account for
investment only and not with a view to, or for resale in connection with, the
distribution thereof. The Company may place on the certificates evidencing such
shares an appropriate legend reflecting this commitment and other restrictions
the Company may deem advisable under the latest regulations and other
requirements of the Securities and Exchange Commission or of any stock
3
<PAGE> 4
exchange upon which the shares are listed or of any applicable Federal or state
securities laws.
6. In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, split-up, spin-off, combination,
exchange of shares, or other change in the Company's capital structure the Board
shall make such adjustments in the exercise price and in the number or kind of
shares to be issued upon the exercise of this option as may be determined to be
appropriate by the Board.
In the event of any "Change of Control" as defined in Section 9(b) of
the Plan, the Board or the Compensation Committee may, with the consent of the
acquiring party (or, if there is more than a single acquiring party, the
appropriate acquiring parties), or the party directly or indirectly in control
of the acquiring party or parties ("controlling party"), provide for an
appropriate substitution for this option. Under any of such circumstances, the
Board or the Compensation Committee may, with such consent, provide for an
appropriate substitution for this option, to the extent then unexercised, of an
option to acquire an equity interest in an acquiring party or parties or an
option to acquire an equity interest in the controlling party, or to provide, in
such substitution, for such other alternative consideration, including a
restricted equity interest (restricted to provide a substantial risk of
forfeiture and nontransferable, as described in Section 83 of the Internal
Revenue Code of 1986, as amended) in an acquiring party or parties or the
controlling party, as the Board or the Compensation Committee, with such
consent, may believe, in good faith, to be fair and equitable to avoid
diminution or enlargement of the rights of the Optionee. In order to implement
such substitution, the Board or the Compensation Committee may cause the
surrender of this option, to the extent then unexercised, in consideration for
such substitution.
7. For purposes of this Non-Qualified Stock Option Agreement, the
continuous employ of the Optionee with the Company or any Subsidiary or
Affiliate shall not be deemed interrupted, and the Optionee shall not be deemed
to have ceased to be an employee of the Company or any Subsidiary or Affiliate,
by reason of the transfer of his employment among the Company and any Subsidiary
or
4
<PAGE> 5
Affiliate, or by reason of a leave of absence approved by the Compensation
Committee for illness, military or governmental service, or other cause.
8. Notwithstanding any other provision of this Agreement, the option
herein granted shall not be exercisable unless a Registration Statement with
respect to the shares to be issued upon the exercise of this option is in effect
at that time.
9. Nothing contained herein shall confer upon the Optionee any right
to continued employment or service with the Company or any Subsidiary or
Affiliate, nor shall it interfere in any way with the right of the Company or
any Subsidiary or Affiliate to terminate the employment or service of the
Optionee or to adjust the compensation of the Optionee at any time.
10. This option may be exercised by giving written notice to the
Company specifying the number of shares to be purchased. This notice must be
accompanied by payment in full of the purchase price. As determined by the
Compensation Committee, the exercise price may be paid by certified or official
bank check, by delivery of irrevocable instructions to a broker dealer for
remitting proceeds, by tendering already-owned Common Shares, or by such other
instrument as may be permitted in accordance with rules or procedures adopted by
the Compensation Committee, together with payment, or arrangement for payment
satisfactory to the Compensation Committee, of any Federal, state, or local
taxes required to be withheld by the Company with respect to this option.
11. The Optionee shall not have any rights as a shareholder in
respect of any shares as to which this option has not been duly exercised.
12. No later than the date as of which an amount first becomes
includable in the gross income of the Optionee for Federal income tax purposes
with respect to this option, the Optionee shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any Federal,
state or local or foreign taxes of any kind required to be withheld with respect
to such amount.
13. Defined terms not otherwise defined herein shall have the
meanings assigned to them in
5
<PAGE> 6
the Plan, unless the context clearly indicates otherwise.
14. The Optionee and the Company each agree that it is the intent of
each that this option not be deemed or treated as an incentive stock option
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended.
15. The Compensation Committee shall have authority to interpret the
provisions of this Non-Qualified Stock Option Agreement and the Plan, to adopt,
alter and repeal such administrative rules, guidelines and practice governing
the Plan as it shall, from time to time, deem advisable, and to otherwise
supervise the administration of the Plan. All decisions made by the Compensation
Committee pursuant to the provisions hereof shall be made in the Compensation
Committee's sole discretion and shall be final and binding on all persons.
DATED as of _______________.
CLIFFS DRILLING COMPANY
By
---------------------------------------
Cindy B. Taylor
Vice President - Controller & Secretary
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Non-Qualified Stock Option Agreement and accepts the option
granted thereunder.
---------------------------------------
XXXXXXXXXXXXXXX
6
<PAGE> 1
EXHIBIT 10.26
CLIFFS DRILLING COMPANY
Non-Qualified Stock Option Agreement
WHEREAS, _______________, (hereinafter called the "Optionee") is a
director of Cliffs Drilling Company (hereinafter called the "Company"); and
WHEREAS, the Board of Directors of the Company by resolution duly
adopted on February 18, 1988 authorized the Cliffs Drilling Company 1998
Incentive Equity Plan (the "Plan"), which was approved by the Company's
shareholders on May 13, 1998; and
WHEREAS, pursuant to the Plan the continuing non-employee members of
the Board of Directors are automatically granted non-qualified stock options on
the date of each annual meeting of shareholders of the Company commencing with
the annual meeting held in 1998; and
WHEREAS, pursuant to the Plan the Board of Directors is authorized to
determine the terms and conditions applicable to stock options granted pursuant
to the Plan, and the Board of Directors has approved the form of this
Non-Qualified Stock Option Agreement;
NOW, THEREFORE, pursuant to the Plan the Company hereby grants to the
Optionee this Non-Qualified Stock Option to purchase ________ common shares of
the Company, par value $.01 per share ("Common Shares"), at the price of ______
dollars and _______ cents ($XX.XX) per share, which purchase price was not less
than the closing price of the Common Shares on the New York Stock Exchange on
the date awarded, _______________, and agrees to cause certificates for any
shares purchased hereunder to be delivered to the Optionee upon payment of the
purchase price in full, all subject, however, to the terms and conditions of the
Plan and the terms and conditions hereinafter set forth.
1. This option (until terminated or exercised as hereinafter
provided) shall be exercisable only to the extent of (i) one-half of the shares
herein above specified upon the date one year from the granting of the option,
during which time the Optionee shall have been in the continuous service
<PAGE> 2
of the Company and (ii) an additional one-fourth of such shares on each of the
next two anniversaries of the date of grant, during which time the Optionee
shall have been in the continuous service of the Company. To the extent
exercisable, this option may be exercised in whole or in part from time to time.
2. Notwithstanding the foregoing paragraph, in the event of a
"Change in Control" as defined in Section 9(b) of the Plan, or a "Potential
Change in Control" as defined in Section 9(c) of the Plan, this option shall
become immediately exercisable in full.
3. Notwithstanding any other provision of this Agreement, this
option shall not be exercised any time after the end of business, _____________.
Upon the Optionee's termination of service with the Company, this option shall
be canceled immediately to the extent that is not exercisable at that time. If
the Optionee terminates service with the Company because of (i) his Retirement
or Disability, this option shall be exercisable, to the extent then exercisable,
for a maximum of three years from the date of the Optionee's termination of
service, (ii) his death, this option shall be exercisable, to the extent then
exercisable, for a maximum of one year from the date of death. If the Optionee
terminates service with the Company because of his Retirement or Disability, and
then dies before exercising this option, this option shall be exercisable, to
the extent then exercisable, for a maximum of one year from the date of death.
If the Optionee terminates service with the Company for any other reason other
than his death, Disability or Retirement, this option shall be exercisable, to
the extent then exercisable, for a maximum of three months from the date of the
Optionee's termination of service; however, if the Optionee's service with the
Company is terminated for Cause this option shall be canceled immediately.
For the purposes of this Section 3 "Cause" means a felony conviction of
the Optionee or the failure of Optionee to contest prosecution for a felony, or
Optionee's willful misconduct or dishonesty, or Optionee's failure to perform
his service in accordance with reasonable standards established by the Company,
any of which is directly and materially harmful to the business or reputation of
the Company
2
<PAGE> 3
or any Subsidiary or Affiliate. For the purposes of this Section 3 "Disability"
means permanent and total disability as determined under the Company's long term
disability program. For the purposes of this Section 3 "Retirement" means
retirement from active employment with the Company or any Subsidiary or
Affiliate on or after the normal retirement date specified in, or pursuant to
the early retirement provisions of the Company's retirement policy.
4. This option is not transferable by the Optionee otherwise than by
will or the laws of descent and distribution, or pursuant to a "domestic
relations order" as defined in the Internal Revenue Code or Title I of the
Employee Retirement Income Security Act (or the rules promulgated thereunder).
Subject to the foregoing, this option is exercisable, during the lifetime of the
Optionee, only by the Optionee, and after the lifetime of the Optionee, is
exercisable solely by the legal representative of his estate or by the legatee
of the Optionee under the will of the Optionee, subject to the provisions of
Section 3 hereof.
5. This option shall not be exercisable if such exercise would
involve a violation of any applicable Federal or state securities law, and the
Company hereby agrees to make reasonable efforts to comply with such securities
laws. The Company may require, as a condition to its issuance and delivery of
certificates for the shares acquired by exercise of this option, the Optionee's
delivery to the Company of a commitment in writing that at the time of such
exercise it is his intention to acquire such shares for his own account for
investment only and not with a view to, or for resale in connection with, the
distribution thereof. The Company may place on the certificates evidencing such
shares an appropriate legend reflecting this commitment and other restrictions
the Company may deem advisable under the latest regulations and other
requirements of the Securities and Exchange Commission or of any stock exchange
upon which the shares are listed or of any applicable Federal or state
securities laws.
6. In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, split-up, spin-off, combination,
exchange of shares, or other change in the
3
<PAGE> 4
Company's capital structure the Board shall make such adjustments in the
exercise price and in the number or kind of shares to be issued upon the
exercise of this option as may be determined to be appropriate by the Board.
In the event of any "Change of Control" as defined in Section 9(b) of
the Plan, the Board or the Compensation Committee may, with the consent of the
acquiring party (or, if there is more than a single acquiring party, the
appropriate acquiring parties), or the party directly or indirectly in control
of the acquiring party or parties ("controlling party"), provide for an
appropriate substitution for this option. Under any of such circumstances, the
Board or the Compensation Committee may, with such consent, provide for an
appropriate substitution for this option, to the extent then unexercised, of an
option to acquire an equity interest in an acquiring party or parties or an
option to acquire an equity interest in the controlling party, or to provide, in
such substitution, for such other alternative consideration, including a
restricted equity interest (restricted to provide a substantial risk of
forfeiture and nontransferable, as described in Section 83 of the Internal
Revenue Code of 1986, as amended) in an acquiring party or parties or the
controlling party, as the Board or the Compensation Committee, with such
consent, may believe, in good faith, to be fair and equitable to avoid
diminution or enlargement of the rights of the Optionee. In order to implement
such substitution, the Board or the Compensation Committee may cause the
surrender of this option, to the extent then unexercised, in consideration for
such substitution.
7. For purposes of this Non-Qualified Stock Option Agreement, the
continuous service of the Optionee with the Company shall not be deemed
interrupted, and the Optionee shall not be deemed to have ceased to be an
director of the Company, by reason of the transfer of his service among the
Company and any Subsidiary or Affiliate, or by reason of a leave of absence
approved by the Compensation Committee for illness, military or governmental
service, or other cause.
8. Notwithstanding any other provision of this Agreement, the option
herein granted shall not be exercisable unless a Registration Statement with
respect to the shares to be issued upon the
4
<PAGE> 5
exercise of this option is in effect at that time.
9. Nothing contained herein shall confer upon the Optionee any right
to continued employment or service with the Company or any Subsidiary or
Affiliate, nor shall it interfere in any way with the right of the Company or
any Subsidiary or Affiliate to terminate the employment or service of the
Optionee or to adjust the compensation of the Optionee at any time.
10. This option may be exercised by giving written notice to the
Company specifying the number of shares to be purchased. This notice must be
accompanied by payment in full of the purchase price. As determined by the
Compensation Committee, the exercise price may be paid by certified or official
bank check, by delivery of irrevocable instructions to a broker dealer for
remitting proceeds, by tendering already-owned Common Shares, or by such other
instrument as may be permitted in accordance with rules or procedures adopted by
the Compensation Committee, together with payment, or arrangement for payment
satisfactory to the Compensation Committee, of any Federal, state, or local
taxes required to be withheld by the Company with respect to this option.
11. The Optionee shall not have any rights as a shareholder in
respect of any shares as to which this option has not been duly exercised.
12. No later than the date as of which an amount first becomes
includable in the gross income of the Optionee for Federal income tax purposes
with respect to this option, the Optionee shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any Federal,
state or local or foreign taxes of any kind required to be withheld with respect
to such amount.
13. Defined terms not otherwise defined herein shall have the
meanings assigned to them in the Plan, unless the context clearly indicates
otherwise.
14. The Optionee and the Company each agree that it is the intent of
each that this option not be deemed or treated as an incentive stock option
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended.
5
<PAGE> 6
15. The Compensation Committee shall have authority to interpret the
provisions of this Non-Qualified Stock Option Agreement and the Plan, to adopt,
alter and repeal such administrative rules, guidelines and practice governing
the Plan as it shall, from time to time, deem advisable, and to otherwise
supervise the administration of the Plan. All decisions made by the Compensation
Committee pursuant to the provisions hereof shall be made in the Compensation
Committee's sole discretion and shall be final and binding on all persons.
DATED as of _______________.
CLIFFS DRILLING COMPANY
By
---------------------------------------
Cindy B. Taylor
Vice President - Controller & Secretary
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Non-Qualified Stock Option Agreement and accepts the option
granted thereunder.
---------------------------------------
XXXXXXXXXXXX
6
<PAGE> 1
EXHIBIT 10.27
CLIFFS DRILLING COMPANY
SAVINGS PLAN
(As Amended and Restated Effective June 21, 1988)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - DEFINITIONS
1.1 Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Active Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Actual Contribution Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Actual Contribution Percentage Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Actual Contribution Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Actual Deferral Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Actual Deferral Percentage Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Actual Deferral Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Additional Salary Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Additional Salary Deferral Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Additional Salary Deferral Contribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Adjusted Beginning Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Affiliated Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Aggregation Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Allocation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 Allocation Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 Annual Addition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Annual Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Annuity Starting Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 Applicable Life Expectancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.21 Approved Leave of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.25 Considered Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.26 Defined Benefit Fraction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 Defined Contribution Fraction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.28 Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.30 Discretionary Employer Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.31 Discretionary Employer Contribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.32 Distribution Calendar Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.33 Early Retirement Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.34 Early Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.35 Earned Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.36 Elective Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.37 Eligible Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.38 Eligible Retirement Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.39 Eligible Rollover Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.40 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.41 Employee Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.42 Employee Contribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.43 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.44 Employer Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.45 Employer Contribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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1.46 Employer Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.47 Employer Matching Contribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.48 Employment Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.49 Entry Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.50 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.51 Excess Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.52 Excess Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.53 Excess 401(k) Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.54 Excess 401(m) Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.55 Family Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.56 Five Percent Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.57 Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.58 Highly Compensated Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.59 Hour of Covered Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.60 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.61 Individual Medical Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.62 Investment Gain or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.63 Key Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.64 Leased Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.65 Leasing Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.66 Life Only Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.67 Limitation Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.68 Maximum Permissible Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.69 Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.70 Non-Highly Compensated Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.71 Non-Key Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.72 Normal Retirement Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.73 Normal Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.74 OBRA '93 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.75 Parental Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.76 Period of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.77 Period of Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.78 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.79 Plan Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.80 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.81 Projected Annual Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.82 Qualified Domestic Relations Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.83 Qualified Joint and Survivor Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.84 Qualified Military Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.85 Qualified Preretirement Survivor Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.86 Reemployment Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.87 Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.88 Required Beginning Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.89 Required Salary Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.90 Required Salary Deferral Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.91 Required Salary Deferral Contribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.92 Responsible Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.93 Restoration Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.94 Restricted Discretionary Employer Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.95 Restricted Discretionary Employer Contribution Account . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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1.96 Restricted Employer Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.97 Restricted Employer Matching Contribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.98 Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.99 Rollover Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.100 Rollover Contribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.101 Salary Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.102 Salary Deferral Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.103 Salary Deferral Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.104 Section 401(a)(17) Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.105 Section 401(a)(17) Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.106 Section 401(k) Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.107 Section 401(k) Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.108 Section 401(m) Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.109 Section 415 Transition Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.110 Self-Employed Individual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.111 Separation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.112 Severance from Service Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.113 Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.114 Top-Heavy Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.115 Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.116 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.117 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.118 Valuation Calendar Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.119 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.120 Valuation Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.121 Welfare Benefit Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.122 Year of Eligibility Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.123 Year of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.124 Year of Vesting Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2 - SERVICE
2.1 Years of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2 Period of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3 Period of Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.4 Employment Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.5 Reemployment Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.6 Severance from Service Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.7 Parental Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.8 Approved Leave of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.9 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.10 Service Excluded for All Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.11 Service Excluded for Vesting Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.12 Service Credit for Other Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.13 Service Credit for Leased Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.14 Service Credit Required under Federal Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.15 Service Prior to Amendment and Restatement of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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ARTICLE 3 - PARTICIPATION
3.1 Commencement of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Cessation of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 Recommencement of Participation by Former Members . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.4 Frozen Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 4 - EMPLOYEE CONTRIBUTIONS
4.1 Employee Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Actual Contribution Percentage Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 Actual Contribution Percentage Fail Safe Provision . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Special Actual Contribution Percentage Rules For Family Members . . . . . . . . . . . . . . . . . . . . 21
4.5 Distributions of Income Allocable to Excess 401(m) Contributions . . . . . . . . . . . . . . . . . . . 21
4.6 Rollover Contributions and Plan-to-Plan Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5 - EMPLOYER CONTRIBUTIONS
5.1 Salary Deferral Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 Salary Deferral Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 Employer Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Discretionary Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Restricted Discretionary Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 Restricted Employer Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.7 Restoration Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.8 Limitation upon Salary Deferral Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.9 Correction of Excess Deferrals During Taxable Year . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.10 Correction of Excess Deferrals After Taxable Year . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.11 Actual Deferral Percentage Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.12 Actual Deferral Percentage Fail Safe Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.13 Special Actual Deferral Percentage Rules For Family Members . . . . . . . . . . . . . . . . . . . . . 24
5.14 Distributions of Income Allocable to Excess 401(k) Contributions . . . . . . . . . . . . . . . . . . . 25
5.15 Additional Required Test if Alternative Compliance is Used . . . . . . . . . . . . . . . . . . . . . . 25
5.16 Treatment of Correcting Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.17 Nondeductible Contributions Prohibited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.18 Form of Payment of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.19 Deadline for Payment of Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 6 - ALLOCATIONS
6.1 Information Statements from Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2 Allocation of Salary Deferral Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.3 Allocation of Employer Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.4 Allocation of Discretionary Employer Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Allocation of Restricted Employer Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Allocation of Restricted Discretionary Employer Contribution . . . . . . . . . . . . . . . . . . . . . 27
6.7 Allocation of Investment Gain or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.8 Interim Valuation of Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.9 Allocations Attributable to Directed Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.10 Allocation of Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.11 Restoration of Forfeited Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.12 Effective Date of Allocations and Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.13 No Vesting Unless Otherwise Prescribed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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ARTICLE 7 - LIMITATIONS ON ALLOCATIONS
7.1 Basic Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.2 Estimation of Maximum Permissible Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3 Attribution of Excess Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Disposition of Excess Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 Members Participating in Qualified Defined Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8 - TOP-HEAVY PROVISIONS
8.1 Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Top-Heavy Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Vesting if Plan Becomes Top-Heavy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4 Minimum Contribution if Plan Becomes Top-Heavy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.5 Disregard of Government Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.6 Coverage Under Defined Contribution and Defined Benefit Top-Heavy Plans . . . . . . . . . . . . . . . . 33
8.7 Adjustment of Section 415 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 9 - BENEFITS AND EVENTS ENTITLING MEMBERS TO DISTRIBUTION OF BENEFITS
9.1 Death, Retirement, or Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Severance Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Forfeiture upon Break in Service or Payment of Severance Benefit . . . . . . . . . . . . . . . . . . . 34
9.4 Time for Determining Account Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.5 Withdrawal of Employee Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.6 Accounting for Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.7 Receipt of Domestic Relations Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.8 Employee Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.9 Withdrawal for Financial Hardship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 10 - DISTRIBUTION OF BENEFITS
10.1 Qualified Joint and Survivor Annuity and Qualified Preretirement Survivor Annuity . . . . . . . . . . 39
10.2 Distribution Methods Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Pre-1984 Distribution Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Death of Joint Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.5 Choice of Distribution Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.6 Single Sum Payment of Small Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.7 Time of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.8 Member Consent to Early Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.9 Compliance with Statutory Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.10 Direct Transfer of Eligible Rollover Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.11 Qualified Domestic Relations Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.12 Distributions to Disabled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.13 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.14 No Duplication of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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10.15 Missing Distributees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.16 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.17 Claims Appeal Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 11 - COMMITTEE
11.1 Appointment, Term, Resignation, and Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.3 Member-Directed Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.4 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.5 Quorum and Majority Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.6 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.7 Disqualification of Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.8 Disclosure to Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.9 Standard of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.10 Liability of Committee and Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.11 Indemnification of Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.12 Bonding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.13 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.14 Persons Serving in Dual Fiduciary Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.15 Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.16 Named Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.17 Standard of Judicial Review of Committee Actions . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 12 - ADOPTION OF PLAN BY OTHER EMPLOYERS
12.1 Adoption Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.2 No Joint Venture Implied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.3 All Trust Assets Available to Pay All Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.4 Qualification a Condition Precedent to Participation . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 13 - AMENDMENT AND TERMINATION
13.1 Sponsor's Right to Amend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.2 Limitations on Right to Amend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.3 Retroactive Amendments to Meet Labor or Tax Requirements . . . . . . . . . . . . . . . . . . . . . . . 54
13.4 Employer's Right to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.5 Vesting upon Termination, Partial Termination, and Discontinuance of Employer Contributions . . . . . 55
13.6 Plan Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.7 Transition Rules for Amended and Restated Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 14 - MISCELLANEOUS
14.1 No Reversionary Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
14.2 Plan Does Not Constitute an Employment Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
14.3 Benefits Provided Solely by Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
14.4 Spendthrift Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
14.5 Form of Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
14.6 Governing Laws; Parties to Legal Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
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14.7 Plan Document Controlling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
14.8 Severability of Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
14.9 Cross References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
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CLIFFS DRILLING COMPANY
SAVINGS PLAN
THIS AGREEMENT by Cliffs Drilling Company, a Delaware corporation (the
"Sponsor"),
W I T N E S S E T H:
WHEREAS, the Sponsor previously adopted the plan known as "The Cliffs
Drilling Company 401(k) Savings Plan" (the "Plan");
WHEREAS, the Sponsor reserved the right to amend the Plan from time to
time;
WHEREAS, it has been determined that the Plan should be completely
amended and restated to comply with the requirements of the Internal Revenue
Code of 1986, the Employee Retirement Income Security Act of 1974, and all
other applicable laws, as currently in effect;
WHEREAS, the Sponsor has adopted concurrently herewith the Cliffs
Drilling Company Savings Trust as an amendment and restatement of the trust
provisions related to the Plan; and
WHEREAS, the Plan, as amended and restated, is intended to be a profit
sharing plan which is qualified under Section 401(a) and meets the requirements
of Section 401(k) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, the Sponsor hereby adopts the plan hereinafter set
forth as a complete amendment and restatement of the Plan.
ARTICLE 1
DEFINITIONS
The terms defined in this Article shall have the meanings attributed
to them unless the context obviously requires another meaning:
1.1 ACCOUNT. "Account" shall mean any of the ledger accounts
pertaining to a Member that are maintained by the Committee to reflect the
Member's interest in the Trust Fund. The Committee shall establish the Accounts
specifically described in the Plan and any additional Accounts that the
Committee considers to be necessary in order to reflect the entire interest of
the Member in the Trust Fund. Each of the Accounts shall reflect any
contributions, forfeitures, and Investment Gain or Loss allocable to the
Account.
1.2 ACTIVE MEMBER. "Active Member" shall mean a Member who
(i) is a member of the Eligible Class on the last day of the Plan Year, or (ii)
incurs a Separation because of death, Retirement, or Disability during the Plan
Year.
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1.3 ACTUAL CONTRIBUTION PERCENTAGE. "Actual Contribution Percentage"
shall mean, for a specified group of Employees for a Plan Year, the average of
the Actual Contribution Ratios of eligible Employees in the group for that Plan
Year, calculated to the nearest hundredth of a percentage point.
1.4 ACTUAL CONTRIBUTION PERCENTAGE TEST. "Actual Contribution
Percentage Test" shall mean the test set forth in Section 4.2.
1.5 ACTUAL CONTRIBUTION RATIO. "Actual Contribution Ratio" shall
mean the ratio of an Employee's Section 401(m) Contributions for a Plan Year to
the Employee's Annual Compensation for such Plan Year, calculated to the
nearest hundredth of a percentage point. For purposes of determining an
Employee's Actual Contribution Ratio, Annual Compensation shall include only
compensation earned during that portion of the Plan Year that the Employee was
eligible to participate in the Plan.
1.6 ACTUAL DEFERRAL PERCENTAGE. "Actual Deferral Percentage" shall
mean, for a specified group of Employees for a Plan Year, the average of the
Actual Deferral Ratios of eligible Employees in the group for that Plan Year,
calculated to the nearest hundredth of a percentage point.
1.7 ACTUAL DEFERRAL PERCENTAGE TEST. "Actual Deferral Percentage
Test" shall mean the test set forth in Section 5.11.
1.8 ACTUAL DEFERRAL RATIO. "Actual Deferral Ratio" shall mean the
ratio of an Employee's Section 401(k) Contributions for a Plan Year to the
Employee's Annual Compensation for such Plan Year, calculated to the nearest
hundredth of a percentage point. For purposes of determining an Employee's
Actual Deferral Ratio, Annual Compensation shall include only compensation
earned during that portion of the Plan Year that the Employee was eligible to
participate in the Plan.
1.9 ADDITIONAL SALARY DEFERRAL. "Additional Salary Deferral" shall
mean that portion of the Member's Salary Deferral designated as such pursuant
to the provisions of Section 5.1, if any.
1.10 ADDITIONAL SALARY DEFERRAL CONTRIBUTION. "Additional Salary
Deferral Contribution" shall mean that portion of the Employer's contribution
made pursuant to the provisions of Section 5.2 that is attributable to the
Members' Additional Salary Deferrals, if any.
1.11 ADDITIONAL SALARY DEFERRAL CONTRIBUTION ACCOUNT. "Additional
Salary Deferral Contribution Account" shall mean the ledger account maintained
by the Committee for each Member that reflects any portion of the Additional
Salary Deferral Contributions allocated to the Member and any Investment Gain
or Loss attributable to such contributions.
1.12 ADJUSTED BEGINNING BALANCE. "Adjusted Beginning Balance" shall
mean the balance of an Account as of the last Valuation Date preceding the
current Valuation Period, reduced by the amount of any distributions allocable
to that Account made during the current Valuation Period. If the Valuation
Period is longer than one month, the balance of an Account as of the last
Valuation Date preceding the current Valuation Period shall be increased by one
half of any amounts allocated thereto during the Valuation Period.
1.13 AFFILIATED EMPLOYER. "Affiliated Employer" shall mean the
Employer and any other business organization required to be aggregated with the
Employer under Sections 414(b), 414(c), 414(m), or 414(o) of the Code. In
determining whether a business organization is an Affiliated Employer for
purposes of Section 415 of the Code and any provisions of the Plan relating to
Section 415 of the Code, the
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<PAGE> 11
modification required under Section 415(h) of the Code shall be given effect in
applying Sections 414(b) and 414(c) of the Code.
1.14 AGGREGATION GROUP. "Aggregation Group" shall mean (i) each plan
of any Affiliated Employer in which a Key Employee is a participant and (ii)
each other plan of any Affiliated Employer which enables any plan described in
clause (i) of this sentence to meet the requirements of either Section
401(a)(4) or 410 of the Code. Any Employer may treat a plan not required to be
included in the Aggregation Group as being a part of the group if the group
would continue to meet the requirements of Sections 401(a)(4) and 410 of the
Code with that plan being taken into account.
1.15 ALLOCATION DATE. "Allocation Date" shall mean the last day of
each calendar quarter.
1.16 ALLOCATION PERIOD. "Allocation Period" shall mean the period
beginning on the day following an Allocation Date (or on the first day of the
first Plan Year, in the case of the first Allocation Period) and ending on the
immediately succeeding Allocation Date.
1.17 ANNUAL ADDITION. "Annual Addition" shall mean the sum of the
following amounts for the Limitation Year: (i) employer contributions; (ii)
employee contributions; (iii) forfeitures; (iv) amounts allocated after March
31, 1984, to an Individual Medical Account; (v) amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to post-retirement medical benefits,
allocated to the separate account of a Key Employee under a Welfare Benefit
Fund; and (vi) any Excess Amount applied in the Limitation Year to reduce
Employer Contributions.
1.18 ANNUAL COMPENSATION. "Annual Compensation" shall mean all
wages, salaries, fees for professional services, and other amounts received
during a Limitation Year (without regard to whether or not an amount is paid in
cash) for personal services actually rendered in the course of employment with
an Affiliated Employer to the extent that the amounts are includable in gross
income for federal income tax purposes. "Annual Compensation" includes, but is
not limited to, commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums, tips,
bonuses, fringe benefits, and reimbursements or other expense allowances under
a nonaccountable plan (as described in Reg. Section 1.62-2(c)). In the case
of an Employee who is an employee within the meaning of Section 401(c)(1) of
the Code and the regulations thereunder, "Annual Compensation" includes such
Employee's Earned Income. "Annual Compensation" also includes amounts
includable in income that are described in Sections 104(a)(3), 105(a), and
105(h) of the Code; amounts paid or reimbursed by an Affiliated Employer for
moving expenses to the extent that at the time of payment it is reasonable to
believe that such amounts are not deductible by the Employee under Section 217
of the Code; the value of a nonqualified stock option to the extent the value
of the option is includable in income in the year of grant; and the amount
includable in income upon making an election under Section 83(b) of the Code.
"Annual Compensation" includes foreign earned income (as defined in Section
911(b) of the Code), whether or not excludable from gross income under Section
911 of the Code. "Annual Compensation" shall be determined without regard to
the exclusions from gross income in Sections 931 and 933 of the Code. "Annual
Compensation" excludes the following:
(a) contributions to a plan of deferred compensation to the
extent that, before the application of the limitation of Section 415
of the Code to that plan, the contributions are not included in the
Employee's gross income for the taxable year in which contributed,
contributions to a simplified employee pension plan to the extent the
contributions are deductible by the Employee, and any distributions
from a plan of deferred compensation;
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(b) amounts realized from the exercise of a nonqualified
stock option and the value of restricted stock or property held by the
Employee when it becomes freely transferable or is no longer subject
to a substantial risk of forfeiture;
(c) amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock option; and
(d) other amounts that receive special tax benefits, such as
premiums for group term life insurance (to the extent premiums are
excludable from income) and contributions (whether or not under a
salary reduction agreement) towards the purchase of an annuity
contract described in Section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of the
Employee).
For the purpose of determining whether a person is a Highly Compensated
Employee or a Key Employee and minimum contributions under Section 8.4, "Annual
Compensation" also includes elective contributions under a cafeteria plan
described in Section 125 of the Code and elective contributions to any plan
qualified under Sections 401(k), 408(k), or 403(b) of the Code. Notwithstanding
the preceding provisions of this Section, amounts in excess of the Section
401(a)(17) Limitation for the Limitation Year or Plan Year with respect to
which Annual Compensation is being determined shall be disregarded.
1.19 ANNUITY STARTING DATE. "Annuity Starting Date" shall mean the
first day of the first period for which an amount is paid as an annuity or in
any other form.
1.20 APPLICABLE LIFE EXPECTANCY. "Applicable Life Expectancy" shall
mean the life expectancy (or joint and last survivor expectancy) calculated
using the attained age of the Member (or Beneficiary) as of the Member's (or
Beneficiary's) birthday in the applicable calendar year reduced by one for each
calendar year which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the Applicable Life
Expectancy shall be the life expectancy as so recalculated. The "applicable
calendar year" shall be the first Distribution Calendar Year, and if life
expectancy is being recalculated each succeeding calendar year.
1.21 APPROVED LEAVE OF ABSENCE. "Approved Leave of Absence" shall
mean an unpaid absence from work pursuant to and in accordance with the
Employer's policies and procedures regarding leaves of absence.
1.22 BENEFICIARY. "Beneficiary" shall mean any person(s), trust(s),
or other entity(ies), including the Member's estate, entitled to receive the
benefits payable hereunder upon the Member's death.
1.23 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.24 COMMITTEE. "Committee" shall mean the committee appointed by
the Sponsor to administer the Plan.
1.25 CONSIDERED COMPENSATION. "Considered Compensation" shall mean
the total cash remuneration paid to an Employee by the Employer for personal
services as reported on the Employee's federal income tax withholding statement
or statements (Form W-2 or its subsequent equivalent), modified to include all
of the following types of elective contributions and all of the following types
of deferred compensation: (i) elective contributions that are not includable
in gross income under Sections 125 (relating to cafeteria plans), 402(a)(8)
prior to January 1, 1993, or 402(e)(3) after December 31, 1992 (relating to
Section 401(k) plans), 402(h) (relating to simplified employee pensions), and
403(b) (relating
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to certain annuity contracts) of the Code; (ii) compensation deferred under an
eligible deferred compensation plan within the meaning of Section 457(b) of the
Code; and (iii) employee contributions (under governmental plans) described in
Section 414(h)(2) of the Code that are picked up by the employing unit and thus
are treated as employer contributions. However, "Considered Compensation" shall
not include bonuses, any extraordinary severance payments such as accrued
vacation or sick pay, special payments such as moving expenses, and benefits
provided under any Employer sponsored employee benefit program.
Notwithstanding the preceding provisions of this Section, amounts in
excess of the Section 401(a)(17) Limitation for the Plan Year with respect to
which Considered Compensation is being determined shall be disregarded.
Considered Compensation shall include all remuneration for the entire Plan Year
(regardless of whether the Employee is a Member during the entire Plan Year).
1.26 DEFINED BENEFIT FRACTION. "Defined Benefit Fraction" shall mean
a fraction, the numerator of which is the sum of the Member's Projected Annual
Benefits under all the defined benefit plans (whether or not terminated)
maintained by any Affiliated Employer; and the denominator of which is the
lesser of 125 percent of the dollar limitation in effect for the Limitation
Year under Section 415(b)(1)(A) of the Code or 140 percent of the Member's
average compensation for the period of consecutive calendar years (not more
than three) during which the Member both was an active Member and had the
greatest aggregate Annual Compensation from the Affiliated Employers, taking
into account any adjustments required under Section 415(b) of the Code.
Notwithstanding the immediately preceding sentence, the Defined Benefit
Fraction shall be the fraction determined under the Section 415 Transition
Rules, if applicable.
1.27 DEFINED CONTRIBUTION FRACTION. "Defined Contribution Fraction"
shall mean a fraction, the numerator of which is the sum of the Annual
Additions to the Member's account under all the defined contribution plans
(whether or not terminated) maintained by any Affiliated Employer for the
current and all prior Limitation Years (including the Annual Additions
attributable to the Member's nondeductible employee contributions to all
defined benefit plans, whether or not terminated, maintained by any Affiliated
Employer, and the Annual Additions attributable to all Welfare Benefit Funds
and Individual Medical Accounts), and the denominator of which is the sum of
the maximum aggregate amounts for the current and all prior Limitation Years of
service with any Affiliated Employer (regardless of whether a defined
contribution plan was maintained by any Affiliated Employer). The maximum
aggregate amount in any Limitation Year is the lesser of 125 percent of the
dollar limitation in effect under Section 415(c)(1)(A) of the Code or 35
percent of the Member's Annual Compensation for such year. Notwithstanding the
preceding sentence, the Defined Contribution Fraction shall be the fraction
determined under the Section 415 Transition Rules, if applicable.
1.28 DETERMINATION DATE. "Determination Date" shall mean, for a
given Plan Year, the last day of the preceding Plan Year or, in the case of the
first Plan Year, the last day of that Plan Year.
1.29 DISABILITY. "Disability" shall mean the Member has incurred a
physical or mental incapacity that, in the opinion of a physician approved by
the Committee, will permanently prevent him from performing the usual duties of
employment and earning a reasonable livelihood with the Employer.
1.30 DISCRETIONARY EMPLOYER CONTRIBUTION. "Discretionary Employer
Contribution" shall mean the Employer's contribution made pursuant to the
provisions of Section 5.4, if any.
1.31 DISCRETIONARY EMPLOYER CONTRIBUTION ACCOUNT. "Discretionary
Employer Contribution Account" shall mean the ledger account maintained by the
Committee for each Member that reflects any
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portion of the Discretionary Employer Contributions and forfeitures allocated
to the Member and any Investment Gain or Loss attributable to such
contributions and forfeitures.
1.32 DISTRIBUTION CALENDAR YEAR. "Distribution Calendar Year" shall
mean a calendar year for which a minimum distribution is required. For
distributions beginning before the Member's death, the first Distribution
Calendar Year is the calendar year immediately preceding the calendar year
which contains the Member's Required Beginning Date. For distributions
beginning after the Member's death, the first Distribution Calendar Year is the
calendar year in which distributions are required to begin pursuant to Section
10.9(c).
1.33 EARLY RETIREMENT AGE. "Early Retirement Age" shall mean the
later of (i) the age of 55 years, or (ii) the Member's age upon completion of
five Years of Vesting Service.
1.34 EARLY RETIREMENT DATE. "Early Retirement Date" shall mean the
first day of the month coincident with or next following the Member's
Separation (i) after his attainment of Early Retirement Age and (ii) prior to
his Normal Retirement Date.
1.35 EARNED INCOME. "Earned Income" shall mean the net earnings from
self-employment, as defined in Section 1402(a) of the Code, derived from the
trade or business with respect to which the Plan is established and in which
personal services of the individual are a material income-producing factor.
Earned Income shall be computed without regard to items that are not included
in gross income for United States income tax purposes and the deductions
properly allocable to or chargeable against such items, but with regard to the
deductions allowed the individual under Section 404 of the Code for
contributions to a qualified plan, which contributions shall reduce Earned
Income to the extent they are deductible. Net earnings from self-employment
shall be determined with regard to the deduction allowed to the individual by
Section 164(f) of the Code for taxable years beginning after December 31, 1989.
1.36 ELECTIVE DEFERRAL. "Elective Deferral" shall mean the aggregate
amount deferred on behalf of a Member during any taxable year under plans or
arrangements described in Sections 401(k), 403(b), 408(k), and 501(c)(18) of
the Code.
1.37 ELIGIBLE CLASS. "Eligible Class" shall mean all Employees who
are employed by the Employer, regardless of employment classification, other
than Employees who are (i) Leased Employees, (ii) included in a unit of
Employees covered by a collective bargaining agreement between the Employees'
representative and the Employer, if retirement benefits were the subject of
good faith bargaining between the Employees' representative and the Employer
and the agreement does not require the Employer to include such Employees in
the Plan, or (iii) nonresident aliens who receive no Earned Income from sources
within the United States. For purposes of this Section, an "Employees'
representative" does not include any organization more than one-half the
members of which are Employees who are owners, officers, or executives of the
Employer.
1.38 ELIGIBLE RETIREMENT PLAN. "Eligible Retirement Plan" shall mean
(i) an individual retirement account described in Section 408(a) of the Code,
(ii) an individual retirement annuity described in Section 408(b) (other than
an endowment contract), (iii) an employees' trust described in Section 401(a)
of the Code which is exempt from tax under Section 501(a) of the Code, provided
that it is a defined contribution plan that permits the acceptance of rollover
contributions, and (iv) an annuity plan described in Section 403(a) of the
Code.
1.39 ELIGIBLE ROLLOVER DISTRIBUTION. "Eligible Rollover
Distribution" shall mean any distribution to a Member of all or any portion of
the Member's interest in the Plan; except that such term shall not
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include (i) any distribution which is one of a series of substantially equal
periodic payments (not less frequently than annually) made (a) for the life (or
life expectancy) of the Member or the joint lives (or joint life expectancies)
of the Member and the Member's Beneficiary, or (b) for a specified period of
ten years or more, and (ii) any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code.
1.40 EMPLOYEE. "Employee" shall mean an individual who is (i) a
common law employee of an Affiliated Employer, including officers and directors
who are common-law employees, (ii) a Self-Employed Individual who derives
Earned Income from an Affiliated Employer, or (iii) a Leased Employee with
respect to an Affiliated Employer.
1.41 EMPLOYEE CONTRIBUTION. "Employee Contribution" shall mean the
Member's contribution made pursuant to the provisions of Section 4.1.
1.42 EMPLOYEE CONTRIBUTION ACCOUNT. "Employee Contribution Account"
shall mean the ledger account maintained by the Committee for each Member that
reflects any Employee Contributions made by the Member and any Investment Gain
or Loss attributable to such contributions.
1.43 EMPLOYER. "Employer" shall mean the Sponsor and any other
business organization that has adopted this Plan.
1.44 EMPLOYER CONTRIBUTION. "Employer Contribution" shall mean the
aggregate of the Employer's Salary Deferral Contribution, Employer Matching
Contribution, Discretionary Employer Contribution, Restricted Employer Matching
Contribution, Restricted Discretionary Employer Contribution, and Restoration
Contribution.
1.45 EMPLOYER CONTRIBUTION ACCOUNT. "Employer Contribution Account"
shall mean (i) either the Member's Required Salary Deferral Contribution
Account, Additional Salary Deferral Contribution Account, Employer Matching
Contribution Account, Discretionary Employer Contribution Account, Restricted
Employer Matching Contribution Account, or Restricted Discretionary Employer
Contribution Account; or (ii) all such Accounts.
1.46 EMPLOYER MATCHING CONTRIBUTION. "Employer Matching
Contribution" shall mean the Employer's contribution made pursuant to the
provisions of Section 5.3, if any.
1.47 EMPLOYER MATCHING CONTRIBUTION ACCOUNT. "Employer Matching
Contribution Account" shall mean the ledger account maintained by the Committee
for each Member that reflects any portion of the Employer Matching
Contributions and forfeitures allocated to the Member and any Investment Gain
or Loss attributable to such contributions and forfeitures.
1.48 EMPLOYMENT COMMENCEMENT DATE. "Employment Commencement Date"
shall mean the date specified in Section 2.4.
1.49 ENTRY DATE. "Entry Date" shall mean the first day of each
calendar quarter.
1.50 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.51 EXCESS AMOUNT. "Excess Amount" shall mean the excess of the
Annual Additions credited to the Member's Account for the Limitation Year over
the Maximum Permissible Amount.
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1.52 EXCESS DEFERRAL. "Excess Deferral" shall mean the excess of the
amounts deferred on behalf of the Member under plans or arrangements described
in Sections 401(k), 403(b), 408(k), 457, or 501(c)(18) of the Code during the
Member's taxable year over the dollar limitation in effect under Section 402(g)
of the Code for such taxable year.
1.53 EXCESS 401(k) CONTRIBUTIONS. "Excess 401(k) Contributions"
shall mean, with respect to any Highly Compensated Employee for any Plan Year,
the amount (if any) by which such Employee's share of the Salary Deferral
Contributions must be reduced for the Employee's Actual Deferral Ratio to equal
the highest permitted Actual Deferral Ratio under the Plan. To calculate the
highest permitted Actual Deferral Ratio under the Plan, the Actual Deferral
Ratio of the Highly Compensated Employee with the highest Actual Deferral Ratio
shall be reduced by the amount required to cause such Employee's Actual
Deferral Ratio to equal the ratio of the Highly Compensated Employee with the
next highest Actual Deferral Ratio. If a lesser reduction would enable the Plan
to satisfy the Actual Deferral Percentage Test, only such lesser reduction
shall be made. This process shall be repeated until the Plan satisfies the
Actual Deferral Percentage Test. The highest Actual Deferral Ratio remaining
under the Plan after leveling is the highest permitted Actual Deferral Ratio.
1.54 EXCESS 401(m) CONTRIBUTIONS. "Excess 401(m) Contributions"
shall mean, with respect to any Highly Compensated Employee for any Plan Year,
the amount (if any) by which such Employee's Employee Contributions and his
share of Employer Matching Contributions must be reduced for the Employee's
Actual Contribution Ratio to equal the highest permitted Actual Contribution
Ratio under the Plan. To calculate the highest permitted Actual Contribution
Ratio under the Plan, the Actual Contribution Ratio of the Highly Compensated
Employee with the highest Actual Contribution Ratio shall be reduced by the
amount required to cause such Employee's Actual Contribution Ratio to equal the
ratio of the Highly Compensated Employee with the next highest Actual
Contribution Ratio. If a lesser reduction would enable the Plan to satisfy the
Actual Contribution Percentage Test, only such lesser reduction shall be made.
This process shall be repeated until the Plan satisfies the Actual Contribution
Percentage Test. The highest Actual Contribution Ratio remaining under the Plan
after levelling is the highest permitted Actual Contribution Ratio. For each
Highly Compensated Employee, the amount of Excess 401(m) Contributions for a
Plan Year is equal to the total contributions taken into account in determining
the Employee's Actual Contribution Ratio, minus the amount determined by
multiplying the Employee's Actual Contribution Ratio (determined after
application of the preceding provisions of this Section) by the compensation
used in determining the ratio.
1.55 FAMILY MEMBER. "Family Member" shall mean the spouse and lineal
ascendants or descendants and the spouses of those lineal ascendants or
descendants of a Five Percent Owner or of a Highly Compensated Employee who is
one of the 10 employees receiving the greatest Annual Compensation from the
Affiliated Employers during the Plan Year.
1.56 FIVE PERCENT OWNER. "Five Percent Owner" shall mean an Employee
who is a 5-percent owner as defined in Section 416(i) of the Code at any time
during the Plan Year ending with or within the calendar year in which such
Employee attains age 66 1/2 or any subsequent Plan Year.
1.57 FUND. "Fund" shall mean any of the investment funds established
under the Trust Agreement.
1.58 HIGHLY COMPENSATED EMPLOYEE. "Highly Compensated Employee"
shall mean a highly compensated employee within the meaning of Section 414(q)
of the Code, including an Employee who, during the Plan Year or the preceding
Plan Year, (i) was at any time a Five Percent Owner, (ii) received Annual
Compensation in excess of the amount in effect under Section 414(q)(1)(B) of
the Code for the Plan
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Year, (iii) received Annual Compensation in excess of the amount in effect
under Section 414(q)(1)(C) of the Code for the Plan Year and was in the 20
percent of Employees of the Affiliated Employers who were the highest paid for
the Plan Year, or (iv) was at any time an officer and received Annual
Compensation in excess of 50 percent of the amount in effect under Section
415(b)(1)(A) of the Code. An Employee who is not described in clause (ii),
(iii), or (iv) of the immediately preceding sentence with respect to the
preceding Plan Year (without regard to this sentence) shall not be treated as
described in clause (ii), (iii), or (iv) of the immediately preceding sentence
unless such Employee is a member of the group consisting of the 100 Employees
paid the greatest compensation during the Plan Year for which the determination
is being made. For purposes of this Section, no more than 50 Employees or, if
lesser, the greater of three Employees or 10 percent of the Employees shall be
treated as officers.
Notwithstanding the preceding provisions of this Section, if the
Employer maintained significant business activities (and employed Employees) in
at least two significantly separate geographic areas at all times during a Plan
Year, such Employer may elect that in determining whether an Employee is a
Highly Compensated Employee for such Plan Year, (i) $50,000 shall be
substituted for $75,000 in applying Section 414(q)(1)(B) of the Code; and (ii)
clause (iii) of the first sentence of this Section shall not apply.
A former Employee shall be treated as a Highly Compensated Employee if
such former Employee separated from service (or was deemed to have separated)
prior to the determination year, performs no service for the Employer during
the determination year, and was a Highly Compensated Employee for either the
separation year or any determination year ending on or after the Employee's
55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a Five Percent Owner who is an active or former
Employee or a Highly Compensated Employee who is one of the 10 most highly
compensated Employees ranked on the basis of Annual Compensation paid by the
Employer during such year, then the family member and the Five Percent Owner or
top-ten highly compensated Employee shall be aggregated. In such case, the
family member and Five Percent Owner or top-ten Highly Compensated Employee
shall be treated as a single Employee receiving compensation and Plan
contributions or benefits equal to the sum of such compensation and
contributions or benefits of the family member and Five Percent Owner or
top-ten Highly Compensated Employee. For purposes of this Section, family
member includes the spouse, lineal ascendants and descendants of the Employee
or former Employee and the spouses of such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of employees in the top-paid
group, the top 100 employees, the number of employees treated as officers and
the compensation that is considered, shall be made in accordance with Section
414(q) of the Code and the regulations thereunder.
1.59 HOUR OF COVERED SERVICE. "Hour of Covered Service" shall mean
an Hour of Service that is attributable to an Employee's employment while a
member of the Eligible Class.
1.60 HOUR OF SERVICE. "Hour of Service" shall mean an hour for which
an Employee is entitled to credit under Section 2.9.
1.61 INDIVIDUAL MEDICAL ACCOUNT. "Individual Medical Account" shall
mean an individual medical account, as defined in Section 415(l)(2) of the
Code, maintained by any Affiliated Employer.
1.62 INVESTMENT GAIN OR LOSS. "Investment Gain or Loss" shall mean
the sum of the income, appreciation, and realized gains on Trust Fund assets,
minus the sum of expenses, depreciation, and realized losses on Trust Fund
assets.
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1.63 KEY EMPLOYEE. "Key Employee" shall mean an individual who at
any time during the Plan Year containing the Determination Date or any of the
four preceding Plan Years is (i) an officer of any Affiliated Employer whose
Annual Compensation is greater than 50 percent of the amount in effect under
Section 415(b)(1)(A) of the Code for the Plan Year, (ii) one of the Employees
having Annual Compensation greater than the limitation in effect under Section
415(c)(1)(A) of the Code for the Plan Year and owning (or considered as owning
within the meaning of Section 318 of the Code) one of the 10 largest interests
in any Affiliated Employer, treated separately, (iii) a 5-percent owner of any
Affiliated Employer, treated separately, or (iv) a 1-percent owner of any
Affiliated Employer, treated separately, having Annual Compensation of more
than $150,000.00. No more than 50 employees or, if lesser, the greater of
three employees or 10 percent of the employees, shall be treated as officers.
The rules of Section 416(i) of the Code shall be applied in determining
percentage of ownership. If two or more employees have the same interest in an
Affiliated Employer, the employee with the greater Annual Compensation from the
Affiliated Employer shall be treated as having the larger interest.
1.64 LEASED EMPLOYEE. "Leased Employee" shall mean any person (i)
who is not a common law employee of an Affiliated Employer or a Self-Employed
Individual who derives Earned Income from an Affiliated Employer, and (ii) who
(pursuant to an agreement between the Employer and any other person) has
performed services for the Employer (or for the Employer and related persons
determined in accordance with Section 414(n)(6) of the Code) on a substantially
full-time basis for a period of at least one year, and such services are of a
type historically performed by employees in the business field of the Employer.
1.65 LEASING ORGANIZATION. "Leasing Organization" shall mean the
common law employer of a Leased Employee.
1.66 LIFE ONLY ANNUITY. "Life Only Annuity" shall mean an annuity
for the life of the Member.
1.67 LIMITATION YEAR. "Limitation Year" shall mean the calendar
year. All qualified plans maintained by any Affiliated Employer must use the
same Limitation Year. If the Limitation Year is amended to a different
12-consecutive month period, the new Limitation Year must begin on a date
within the Limitation Year in which the amendment is made.
1.68 MAXIMUM PERMISSIBLE AMOUNT. "Maximum Permissible Amount" shall
mean the lesser of (i) the dollar limitation in effect under Section
415(c)(1)(A) of the Code for the Limitation Year, or (ii) 25 percent of the
Member's Annual Compensation for the Limitation Year. The Annual Compensation
limitation referred to in clause (ii) of the immediately preceding sentence
shall not apply to any contribution for medical benefits (within the meaning of
Section 401(h) or Section 419(A)(f)(2) of the Code) that is otherwise treated
as an Annual Addition under Section 415(l)(1) or Section 419(A)(d)(2) of the
Code. If a short Limitation Year is created because of an amendment changing
the Limitation Year to a different 12-consecutive month period, the Maximum
Permissible Amount shall not exceed the dollar limitation in effect under
Section 415(c)(1)(A) of the Code multiplied by a fraction, the numerator of
which is the number of months in the short Limitation Year, and the denominator
of which is 12.
1.69 MEMBER. "Member" shall mean a person who qualifies as such
under the provisions of Article 3.
1.70 NON-HIGHLY COMPENSATED EMPLOYEE. "Non-Highly Compensated
Employee" shall mean any Employee who is not a Highly Compensated Employee.
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1.71 NON-KEY EMPLOYEE. Non-Key Employee" shall mean any Employee who
is not a Key Employee.
1.72 NORMAL RETIREMENT AGE. "Normal Retirement Age" shall mean the
age of 65 years. If the Employer enforces a mandatory retirement age, the
Normal Retirement Age shall be the lesser of that mandatory age or the age
specified above in this Section.
1.73 NORMAL RETIREMENT DATE. "Normal Retirement Date" shall mean the
first day of the month coincident with or next following a Member's attainment
of Normal Retirement Age.
1.74 OBRA '93 EFFECTIVE DATE. "OBRA '93 Effective Date" shall mean
the first day of the first Plan Year beginning after December 31, 1993.
1.75 PARENTAL ABSENCE. "Parental Absence" shall mean an absence from
work that begins on or after the first day of the first Plan Year beginning
after December 31, 1984 (i) by reason of the pregnancy of the individual, (ii)
by reason of the birth of a child of the individual, (iii) by reason of the
placement of a child with the individual in connection with the adoption of
such child by such individual, or (iv) for purposes of caring for such child
for a period beginning immediately following such birth or placement.
1.76 PERIOD OF SERVICE. "Period of Service" shall mean a period of
service taken into account under the Plan, as determined pursuant to the
provisions of Section 2.2.
1.77 PERIOD OF SEVERANCE. "Period of Severance" shall mean a period
of absence, as determined pursuant to the provisions of Section 2.3.
1.78 PLAN. "Plan" shall mean all aspects of the program known as
Cliffs Drilling Company Savings Plan, the purpose of which is to provide
retirement, death, and other severance benefits to Members, surviving spouses,
and other Beneficiaries. The Plan comprehends the Plan Document and the Trust
Agreement under which it is maintained; the assets of the Trust Fund used to
fund benefits; and the rights, powers, duties, and obligations of the
Affiliated Employers, the Trustee, the Members, the Beneficiaries, and all
other interested parties.
1.79 PLAN DOCUMENT. "Plan Document" shall mean this agreement, as
amended from time to time.
1.80 PLAN YEAR. "Plan Year" shall mean the 12-consecutive-month
annual accounting period of the Plan, which shall end on the last day of
December of each calendar year.
1.81 PROJECTED ANNUAL BENEFIT. "Projected Annual Benefit" shall mean
the annual retirement benefit (adjusted to an actuarially equivalent straight
life annuity if such benefit is expressed in a form other than a straight life
annuity or Qualified Joint and Survivor Annuity) to which the Member would be
entitled under the terms of the Plan, assuming (i) the Member will continue
employment until Normal Retirement Age under the Plan (or current age, if
later), and (ii) the Member's Annual Compensation for the current Limitation
Year and all other relevant factors used to determine benefits under the Plan
will remain constant for all future Limitation Years.
1.82 QUALIFIED DOMESTIC RELATIONS ORDER. "Qualified Domestic
Relations Order" shall mean any order determined by the Committee to be a
qualified domestic relations order within the meaning of Section 414(p) of the
Code.
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1.83 QUALIFIED JOINT AND SURVIVOR ANNUITY. "Qualified Joint and
Survivor Annuity" shall mean an annuity that is payable for the life of the
Member, with a survivor annuity for the life of the Member's spouse that is 50
percent of the amount of the annuity that is payable during the joint lives of
the Member and his spouse. The monthly amount of such annuity shall be such as
can be provided under a commercial annuity purchased with the nonforfeitable
portion of the Member's Accounts. Such purchase shall be from any life
insurance company licensed to conduct business in the state of the situs of the
Trust Fund. Any such annuity shall be issued or endorsed as nontransferable,
so that the owner thereof can not sell, assign, discount, or pledge as
collateral for a loan, as security for the performance of an obligation, or for
any other purpose his interest in such contract to any person other than the
issuer of such annuity upon the surrender thereof. In the event of any
conflict between applicable provisions of the Plan and the terms of such
commercial annuity purchased hereunder, the terms of the Plan shall control.
1.84 QUALIFIED MILITARY SERVICE. "Qualified Military Service" shall
mean any military service with respect to which the Employee has reemployment
rights with the Affiliated Employers under applicable federal law.
1.85 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. "Qualified
Preretirement Survivor Annuity" shall mean an annuity for the life of the
surviving spouse. The amount of such annuity shall be such as can be provided
under a commercial annuity purchased with the balance of the Member's Accounts.
The issuer and terms of any such annuity contract must satisfy the requirements
specified in Section 1.83. A surviving former spouse of a Member shall be
treated as the surviving spouse as necessary to comply with a Qualified
Domestic Relations Order, and, to the same extent, any spouse of the Member
shall not be treated as a spouse of the Member.
1.86 REEMPLOYMENT COMMENCEMENT DATE. "Reemployment Commencement
Date" shall mean the date specified in Section 2.5.
1.87 REGULATION. "Regulation" shall mean the Internal Revenue
Service regulation specified, as it may be changed from time to time.
1.88 REQUIRED BEGINNING DATE. "Required Beginning Date" shall mean:
(a) Except as otherwise provided in this Section, April 1 of
the calendar year following the calendar year in which the Employee
attains age 70 1/2;
(b) In the case of an individual who attains age 70 1/2
before January 1, 1988, and is not a Five Percent Owner, April 1 of
the calendar year following the later of (i) the calendar year in
which the individual attains age 70 1/2, or (ii) the calendar year in
which occurs the individual's Separation;
(c) In the case of an individual who attains age 70 1/2
before January 1, 1988, and is a Five Percent Owner, April 1 of the
calendar year following the later of (i) the calendar year in which
the individual attains age 70 1/2 or (ii) the earlier of (A) the
calendar year with or within which ends the Plan Year in which the
individual becomes a Five Percent Owner, or (B) the calendar year in
which occurs the individual's Separation;
(d) In the case of an individual who attains age 70 1/2
during 1988, who is not a Five Percent Owner, and who had not retired
prior to January 1, 1989, April 1, 1990; and
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(e) Notwithstanding the provisions of the preceding
paragraphs, the date on which distribution is to commence under an
applicable designation made in accordance with Section 242(b)(2) of
the Tax Equity and Fiscal Responsibility Act of 1982.
1.89 REQUIRED SALARY DEFERRAL. "Required Salary Deferral" shall mean
that portion of the Member's Salary Deferral designated as such pursuant to the
provisions of Section 5.1, if any.
1.90 REQUIRED SALARY DEFERRAL CONTRIBUTION. "Required Salary
Deferral Contribution" shall mean that portion of the Employer's contribution
made pursuant to the provisions of Section 5.2 that is attributable to the
Members' Required Salary Deferrals, if any.
1.91 REQUIRED SALARY DEFERRAL CONTRIBUTION ACCOUNT. "Required Salary
Deferral Contribution Account" shall mean the ledger account maintained by the
Committee for each Member that reflects any portion of the Required Salary
Deferral Contributions allocated to the Member and any Investment Gain or Loss
attributable to such contributions.
1.92 RESPONSIBLE EMPLOYER. "Responsible Employer" shall mean with
respect to an Employee the Employer for whom the Employee most recently
performed an Hour of Covered Service.
1.93 RESTORATION CONTRIBUTION. "Restoration Contribution" shall mean
the Employer's contribution made pursuant to the provisions of Section 5.7, if
any.
1.94 RESTRICTED DISCRETIONARY EMPLOYER CONTRIBUTION. "Restricted
Discretionary Employer Contribution" shall mean the Employer's contribution, if
any, made pursuant to the provisions of Section 5.5 for the purpose of causing
the Plan to satisfy the Actual Contribution Percentage Test or the Actual
Deferral Percentage Test, which contribution shall meet the Section 401(k)
Requirements.
1.95 RESTRICTED DISCRETIONARY EMPLOYER CONTRIBUTION ACCOUNT.
"Restricted Discretionary Employer Contribution Account" shall mean the ledger
account maintained by the Committee for each Member that reflects any portion
of the Restricted Discretionary Employer Contributions allocated to the Member
and any Investment Gain or Loss attributable to such contributions.
1.96 RESTRICTED EMPLOYER MATCHING CONTRIBUTION. "Restricted Employer
Matching Contribution" shall mean the Employer's contribution, if any, made
pursuant to the provisions of Section 5.6 for the purpose of causing the Plan
to satisfy the Actual Contribution Percentage Test or the Actual Deferral
Percentage Test, which contribution shall meet the Section 401(k) Requirements;
provided, however, that Restricted Employer Matching Contributions shall not
include any Employer contributions to the extent that such contributions are
used to satisfy the minimum contribution requirements of Section 416 of the
Code.
1.97 RESTRICTED EMPLOYER MATCHING CONTRIBUTION ACCOUNT. "Restricted
Employer Matching Contribution Account" shall mean the ledger account
maintained by the Committee for each Member that reflects any portion of the
Restricted Employer Matching Contributions allocated to the Member and any
Investment Gain or Loss attributable to such contributions.
1.98 RETIREMENT. "Retirement" shall mean a Member's Separation (for
reasons other than death) upon or after his attainment of his Early Retirement
Age or his Normal Retirement Age.
1.99 ROLLOVER CONTRIBUTION. "Rollover Contribution" shall mean a
contribution to this Plan by a Member of all or a portion of the amount he
received as a distribution of all or a portion of his interest
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<PAGE> 22
in an eligible retirement plan (as defined in Section 402(a)(5)(E)(iv) of the
Code), where the amount contributed is excluded from the Member's gross income
under applicable provisions of the Code.
1.100 ROLLOVER CONTRIBUTION ACCOUNT. "Rollover Contribution Account"
shall mean the ledger account maintained by the Committee for each Member that
reflects any Rollover Contributions made by the Member and any Investment Gain
or Loss attributable to such contributions.
1.101 SALARY DEFERRAL. "Salary Deferral" shall mean (i) either the
Member's Required Salary Deferral or the Member's Additional Salary Deferral,
or (ii) the aggregate of the Member's Required Salary Deferral and the Member's
Additional Salary Deferral, as the context may require.
1.102 SALARY DEFERRAL AGREEMENT. "Salary Deferral Agreement" shall
mean an agreement of the type described in Section 5.1.
1.103 SALARY DEFERRAL CONTRIBUTION. "Salary Deferral Contribution"
shall mean (i) either the Employer's Required Salary Deferral Contribution or
the Employer's Additional Salary Deferral Contribution, or (ii) the aggregate
of the Employer's Required Salary Deferral Contribution and the Employer's
Additional Salary Deferral Contribution, as the context may require.
1.104 SECTION 401(a)(17) EFFECTIVE DATE. "Section 401(a)(17)
Effective Date" shall mean the first day of the first Plan Year beginning after
December 31, 1988.
1.105 SECTION 401(a)(17) LIMITATION. "Section 401(a)(17) Limitation"
shall mean (i) with respect to any Plan Year beginning before the OBRA '93
Effective Date, $150,000, and (ii) with respect to any Plan Year beginning on
or after the OBRA '93 Effective Date, $150,000, adjusted as provided in Section
401(a)(17)(B) of the Code, as in effect after December 31, 1993.
Notwithstanding the preceding provisions of this Section, for purposes of
determining the terms of the Plan in effect on or after the Section 401(a)(17)
Effective Date and prior to the OBRA '93 Effective Date, "Section 401(a)(17)
Limitation" shall mean (i) with respect to any Plan Year beginning before the
Section 401(a)(17) Effective Date, $200,000, and (ii) with respect to any Plan
Year beginning on or after the Section 401(a)(17) Effective Date, $200,000,
adjusted in the manner provided in Section 401(a)(17) of the Code, as in effect
prior to January 1, 1994. Notwithstanding the preceding provisions of this
Section, for purposes of determining the terms of the Plan in effect prior to
the Section 401(a)(17) Effective Date, "Section 401(a)(17) Limitation" shall
mean (i) $200,000 for purposes of Section 8.4, and (ii) compensation as
determined under the Plan without any dollar limitation for all other purposes
of the Plan. If the Plan determines Annual Compensation or Considered
Compensation on a period of time that contains fewer than 12 calendar months,
then the dollar limitation for the calendar year in which the compensation
period begins shall be multiplied by the ratio obtained by dividing the number
of full months in the period by 12. In determining the Annual Compensation or
Considered Compensation of a Member for purposes of the preceding limitation,
if any individual is a member of the family of a Five Percent Owner or of a
Highly Compensated Employee in the group consisting of the ten Highly
Compensated Employees paid the greatest Annual Compensation during the year,
then (i) such individual shall not be considered a separate Employee, and (ii)
any Annual Compensation paid to such individual (and any applicable
contribution or benefit on behalf of such individual) shall be treated as if it
were paid to (or on behalf of) the Five Percent Owner or Highly Compensated
Employee. For purposes of the immediately preceding sentence the term "family"
shall include only the spouse of the Member and any lineal descendants of the
Member who have not attained age 19 before the close of the Plan Year. If, as
a result of the application of such rules the Section 401(a)(17) Limitation is
exceeded, then the limitation shall be prorated among the affected individuals
in proportion to each such individual's Annual Compensation or Considered
Compensation as determined under the Plan prior to the application of such
limitation.
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1.106 SECTION 401(k) CONTRIBUTIONS. "Section 401(k) Contributions"
shall mean the Salary Deferral Contributions allocated to the Member's Accounts
for the Plan Year. "Section 401(k) Contributions" shall also include Restricted
Discretionary Employer Contributions and Restricted Employer Matching
Contributions allocated to the Member's Accounts for the Plan Year to the
extent that such contributions are treated as Section 401(k) Contributions for
the Plan Year by the Committee.
1.107 SECTION 401(k) REQUIREMENTS. "Section 401(k) Requirements"
shall mean that amounts attributable to the contribution (i) may not be
distributable to Members or Beneficiaries earlier than (a) Separation, death,
or Disability; (b) the termination of the Plan, the disposition of the assets
of a corporate Employer, or the disposition of a subsidiary (as described in
Section 401(k)(10) of the Code); (c) the attainment of age 59; or (d) upon the
hardship of the Member; and (ii) shall be nonforfeitable.
1.108 SECTION 401(m) CONTRIBUTIONS. "Section 401(m) Contributions"
shall mean the sum of Employer Matching Contributions and Employee
Contributions allocated to the Member's Accounts for the Plan Year. "Section
401(m) Contributions" shall also include Restricted Discretionary Employer
Contributions, Restricted Employer Matching Contributions, and Salary Deferral
Contributions allocated to the Member's Accounts for the Plan Year to the
extent that such contributions are treated as Section 401(m) Contributions for
the Plan Year by the Committee; provided, however, that Employer Matching
Contributions are not Section 401(m) Contributions to the extent that they are
used to satisfy the minimum contribution requirements of Section 416 of the
Code.
1.109 SECTION 415 TRANSITION RULES. "Section 415 Transition Rules"
shall mean Sections 2004(a)(3) and 2004(d) of P.L. 93-406; Sections 235(g)(3)
and (4) of P.L. 97-248, as amended by Sections 713(a) and (f) of P.L. 98-369;
Section 1106(i)(3) of P.L. 99-514; and Sections 415(e)(4) and (6) of the Code,
which provisions preserve the rights of Members to benefits accrued prior to
the effective date of statutory requirements reducing maximum benefits
permitted under plans qualified under Section 401(a) of the Code.
1.110 SELF-EMPLOYED INDIVIDUAL. "Self-Employed Individual" shall
mean any individual who has Earned Income for the Plan Year. Such term shall
also include an individual who would otherwise qualify but for the fact that
the trade or business carried on by such individual did not have net income for
the Plan Year.
1.111 SEPARATION. "Separation" shall mean an individual's
termination of employment with an Affiliated Employer without commencing or
continuing employment with any other Affiliated Employer.
1.112 SEVERANCE FROM SERVICE DATE. "Severance from Service Date"
shall mean the date specified in Section 2.6.
1.113 SPONSOR. "Sponsor" shall mean Cliffs Drilling Company, a
Delaware corporation, or any other business organization that assumes the
primary responsibility for maintaining this Plan with the consent of the last
preceding Sponsor.
1.114 TOP-HEAVY PLAN. "Top-Heavy Plan" shall mean any plan that has
been determined to be top-heavy under the test described in this Plan.
1.115 TRUST AGREEMENT. "Trust Agreement" shall mean that certain
instrument entitled "Cliffs Drilling Company Savings Trust," executed by the
Sponsor and P W Trust Company, as amended from time to time hereafter.
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<PAGE> 24
1.116 TRUST FUND. "Trust Fund" shall mean all of the assets (and
related liabilities) held by the Trustee under the terms of the Trust Agreement
to fund this Plan.
1.117 TRUSTEE. "Trustee" shall mean collectively one or more persons
or corporations with trust powers which have been appointed by the Sponsor and
have accepted the duties of Trustee under the Trust Agreement and any and all
successors appointed by the Sponsor.
1.118 VALUATION CALENDAR YEAR. "Valuation Calendar Year" shall mean
the calendar year immediately preceding the related Distribution Calendar Year.
1.119 VALUATION DATE. "Valuation Date" shall mean the last day of
each calendar quarter, such other dates as may be designated by the Committee
pursuant to the provisions of Section 6.8, and any other day or days selected
by the Committee on which the Trust Fund (or any portion thereof) is to be
valued. One or more investment funds may have different Valuation Dates from
other investment funds. Valuation Dates must be announced to all Members.
1.120 VALUATION PERIOD. "Valuation Period" shall mean the period
beginning on the day following a Valuation Date (or on the first day of the
first Plan Year, in the case of the first Valuation Period) and ending on the
immediately succeeding Valuation Date.
1.121 WELFARE BENEFIT FUND. "Welfare Benefit Fund" shall mean a
welfare benefit fund, as defined in Section 419(e) of the Code, maintained by
any Affiliated Employer.
1.122 YEAR OF ELIGIBILITY SERVICE. "Year of Eligibility Service"
shall mean a Year of Service taken into account for eligibility purposes, as
determined under Article 2.
1.123 YEAR OF SERVICE. "Year of Service" shall mean a Year of
Eligibility Service and/or a Year of Vesting Service, as determined under
Article 2.
1.124 YEAR OF VESTING SERVICE. "Year of Vesting Service" shall mean
a Year of Service as taken into account for vesting purposes, as determined
under Article 2.
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ARTICLE 2
SERVICE
2.1 YEARS OF SERVICE. An Employee shall be credited with the number
of Years of Service equal to the number of whole years of the Employee's Period
of Service, whether or not such Period of Service was completed consecutively.
Except as otherwise provided in this Article, in determining the number of
whole years of an Employee's Period of Service, nonsuccessive Periods of
Service shall be aggregated, and less than whole year Periods of Service
(whether or not consecutive) shall be aggregated on the basis that 365 days of
service equal a whole Year of Service.
2.2 PERIOD OF SERVICE. Except as otherwise provided in Sections 2.7
and 2.8, a Period of Service is a period of service with the Affiliated
Employers commencing on the Employee's Employment Commencement Date or
Reemployment Commencement Date, whichever is applicable, and ending on the
Severance from Service Date. If an Employee severs from service by reason of a
quit, discharge, or retirement that occurs when the Employee is not absent from
service for any reason, and the Employee then is entitled to be credited with
an Hour of Service within 12 months of the Severance from Service Date, such
Employees' Period of Severance shall be deemed to have been a Period of
Service. If an Employee severs from service by reason of a quit, discharge, or
retirement during an absence from service for any reason other than a quit,
discharge, retirement, or death, and then is entitled to be credited with an
Hour of Service within 12 months of the date on which the Employee was first
absent from service, such Employee's Period of Severance shall be deemed to
have been a Period of Service. Qualified Military Service shall be deemed to
be a Period of Service.
2.3 PERIOD OF SEVERANCE. A Period of Severance is the period of time
commencing on the Severance from Service Date and ending on the date on which
the Employee again performs an Hour of Service.
2.4 EMPLOYMENT COMMENCEMENT DATE. An Employee's Employment
Commencement Date is the date on which he is first entitled to credit for an
Hour of Service.
2.5 REEMPLOYMENT COMMENCEMENT DATE. An Employee's Reemployment
Commencement Date is the date on which he is first entitled to credit for an
Hour of Service following a Period of Severance not deemed to have been a
Period of Service.
2.6 SEVERANCE FROM SERVICE DATE. Except as otherwise provided in
Section 2.7, an Employee's Severance from Service Date is the earlier of (i)
the date on which he quits, retires, is discharged, or dies; or (ii) the first
anniversary of the first date of a period in which he remains absent from
service (with or without pay) for any reason other than a quit, retirement,
discharge, death, Qualified Military Service, or Approved Leave of Absence,
such as vacation, holiday, sickness, disability, leave of absence, or layoff.
2.7 PARENTAL ABSENCE. The Severance from Service Date of an Employee
who is absent from service on and after the first anniversary of the first day
of absence by reason of a Parental Absence is the second anniversary of the
first day of such absence. The period between the first and second
anniversaries of the first day of absence from service is neither a Period of
Service nor a Period of Severance.
2.8 APPROVED LEAVE OF ABSENCE. The period during which an Employee
is on an Approved Leave of Absence after the first anniversary of the first day
of such absence is neither a Period of Service nor a Period of Severance.
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2.9 HOUR OF SERVICE. An Hour of Service is an hour for which an
individual is paid, or entitled to payment, for the performance of duties for
an Affiliated Employer.
2.10 SERVICE EXCLUDED FOR ALL PURPOSES. In the case of an Employee
who has no vested right under the Plan to any portion of his Employer
Contribution Account at the time he incurs a Period of Severance of five or
more years, the Years of Eligibility Service and Years of Vesting Service
completed by such Employee before such Period of Severance shall be disregarded
if at such time the Period of Severance equals or exceeds the aggregate number
of his Years of Service, whether or not consecutive, completed before such
Period of Severance. In computing the aggregate number of his Years of Service
prior to any such Period of Severance, Years of Service which could have been
disregarded under this Section by reason of any prior Period of Severance shall
be disregarded.
2.11 SERVICE EXCLUDED FOR VESTING PURPOSES. Only for purposes of
determining the number of Years of Vesting Service to be used in computing the
Employee's vested percentage in that portion of the Employer Contribution
Account that accrued prior to a Period of Severance of five or more years, the
Years of Vesting Service completed after such Period of Severance shall be
disregarded.
2.12 SERVICE CREDIT FOR OTHER EMPLOYMENT. For purposes of
determining an Employee's number of Years of Service, (i) an Employee's service
with Marlin Drilling Co., Inc., including service prior to January 18, 1989,
shall be treated as service with an Affiliated Employer for purposes of
determining Years of Vesting Service, provided the Employee was employed as of
January 18, 1989, and (ii) an Employee's service with a predecessor employer
shall be treated as service with an Affiliated Employer if an Affiliated
Employer maintains a plan of such predecessor. All covered service and all
contiguous noncovered service with an organization that has adopted the Plan of
the Employer but that is not an Affiliated Employer shall be deemed to be
service with the Employer. "Covered service" shall mean service within a job
classification or class of Employees covered under the Plan. "Contiguous
noncovered service" shall mean service other than covered service which
precedes or follows covered service, if no quit, discharge, or retirement
occurs between such covered service and such other service.
2.13 SERVICE CREDIT FOR LEASED EMPLOYEES. The performance of
services as a Leased Employee shall be treated in the same manner as the
performance of services as a common law employee for all purposes of the Plan,
including the determination of an Employee's number of Years of Service and the
existence of an employment relationship between an Employee and the Employer.
The entire period for which a Leased Employee has performed services for the
Employer or any related person (within the meaning of Section 414(n)(6) of the
Code) shall be taken into account for purposes of determining a Leased
Employee's number of Years of Service.
2.14 SERVICE CREDIT REQUIRED UNDER FEDERAL LAW. An Employee shall be
credited with such additional Years of Eligibility Service and Years of Vesting
Service as is required under any applicable law of the United States.
2.15 SERVICE PRIOR TO AMENDMENT AND RESTATEMENT OF PLAN.
Notwithstanding the preceding provisions of this Article, a Member's number of
Years of Service with respect to periods prior to January 1, 1998, shall be
determined under the provisions of the Plan as in effect from time to time
prior to such date.
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ARTICLE 3
PARTICIPATION
3.1 COMMENCEMENT OF PARTICIPATION. Each Employee shall become a
Member on the later of (i) the effective date of the adoption of the Plan by
the Employee's Employer; (ii) the Entry Date which coincides with or next
follows the later of (a) the date on which the Employee attains the applicable
age specified in the immediately following sentence, or (b) the date which is
ninety days after the Employee's Employment Commencement Date; or (iii) the
date on which the Employee first becomes a member of the Eligible Class. For
all periods prior to July 1, 1998, the applicable age is 21 years, and for all
periods on and after July 1, 1998, the applicable age is 18 years.
Notwithstanding the preceding provisions of this Section, an individual shall
not become a Member on the otherwise applicable Entry Date if he is not a
member of the Eligible Class on such date, but shall instead become a Member on
the date he thereafter becomes a member of the Eligible Class, if he satisfies
all other requirements of this Section at that time.
3.2 CESSATION OF PARTICIPATION. An individual who has become a
Member shall cease to be a Member on the later of (i) the first date on which
he ceases to be a member of the Eligible Class, or (ii) the first date on which
no portion of his Accounts remains to be distributed and no amounts remain to
be credited to his Accounts.
3.3 RECOMMENCEMENT OF PARTICIPATION BY FORMER MEMBERS. A former
Member shall again become a Member on the first day on which he again becomes a
member of the Eligible Class, unless all of his Years of Eligibility Service
have been permanently disregarded, in which case he shall become a Member in
accordance with the provisions of Section 3.1.
3.4 FROZEN ACCOUNTS. A Member's Accounts shall be frozen as of the
date that he is no longer a member of the Eligible Class, but he has not
incurred a Separation. A Member whose Accounts have been frozen shall not be
permitted to contribute to the Plan, nor shall his Accounts share in the
allocation of any Employer Contributions or forfeitures which are allocated
among Members' Accounts as of a date on or after the date as of which his
Account is frozen. Such a Member's Accounts, however, shall continue to share
in any Investment Gain or Loss of the Trust Fund during the period of time that
his Accounts are frozen. The Accounts of such a Member shall be unfrozen
immediately upon his return to the Eligible Class, and he shall thereupon
participate in the Plan in accordance with the terms thereof.
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ARTICLE 4
EMPLOYEE CONTRIBUTIONS
4.1 EMPLOYEE CONTRIBUTIONS. The Committee shall determine from time
to time whether Employee Contributions shall be permitted. If Employee
Contributions are permitted, each Member may contribute for any given
Allocation Period such amount as he shall designate in writing in accordance
with the following provisions of this Article. The Member shall file a written
designation specifying the amount of his Considered Compensation to be
contributed as Employee Contributions. Such written designation shall be in a
form acceptable to the Committee. The Committee shall establish and announce to
the Members the rules governing the administration of Employee Contributions,
including any limitations upon the amount that may be contributed, and the
procedures for and any limitations upon a Member's right to revoke or change
his designation. Employee Contributions may be made by periodic payroll
deductions or by other methods, as determined from time to time by the
Committee. The Employer shall deposit each Member's Employee Contribution with
the Trustee within 30 days after its receipt from the Employee.
4.2 ACTUAL CONTRIBUTION PERCENTAGE TEST. Notwithstanding any other
provision of the Plan, unless all Members are Highly Compensated Employees, the
Actual Contribution Percentage for Highly Compensated Employees for any Plan
Year must not exceed the greater of the following:
(i) The Actual Contribution Percentage for the Non-Highly
Compensated Employees multiplied by 1.25; or
(ii) The lesser of (a) the Actual Contribution Percentage for
the Non-Highly Compensated Employees multiplied by two, or (b) the
Actual Contribution Percentage for the Non-Highly Compensated
Employees plus two percentage points.
For purposes of this test an eligible Employee is an Employee who is directly
or indirectly eligible to make Employee Contributions or to receive an
allocation of Employer Matching Contributions for all or part of the Plan Year.
A person who is suspended from making Employee Contributions because he has
made a withdrawal is an eligible Employee. If no Section 401(m) Contributions
are made on behalf of an eligible Employee the Actual Contribution Ratio that
shall be included for him in determining the Actual Contribution Percentage is
zero. If this Plan and any other plan or plans to which Section 401(m)
Contributions are made are considered as one plan for purposes of Section
401(a) or Section 410(b) of the Code, this Plan and those plans are to be
treated as one. If any Highly Compensated Employee is a participant in this
Plan and any other plans of the Employer, all Section 401(m) Contributions are
to be aggregated. Notwithstanding the foregoing, certain plans shall be
treated as separate if mandatorily disaggregated under Regulations issued under
Section 401(m) of the Code.
4.3 ACTUAL CONTRIBUTION PERCENTAGE FAIL SAFE PROVISION. From time to
time during the Plan Year, the Committee may determine whether the Actual
Contribution Percentage for the Highly Compensated Employees is likely to
exceed the limitation set forth in Section 4.2 for such Plan Year. If the
limitation is likely to be exceeded for a Plan Year, the Committee may require
such prospective adjustments in the amount of each Member's Employee
Contributions as it may deem appropriate to prevent such an occurrence. If the
limitation set forth in Section 4.2 is exceeded for any Plan Year, before the
close of the following Plan Year (i) the amount of the Excess 401(m)
Contributions for that Plan Year (and any income allocable to those
Contributions as calculated in the manner set forth in Section 4.5) shall be
distributed, (ii) the Employer may make a Restricted Discretionary Employer
Contribution, or (iii) the Employer may make a Restricted Employer Matching
Contribution. If the Members' Discretionary Employer Contribution Accounts
satisfy the Section 401(k) Requirements, the Committee may treat any
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<PAGE> 29
portion of the Discretionary Employer Contribution as a Section 401(m)
Contribution. If the Members' Employer Matching Contribution Accounts satisfy
the Section 401(k) Requirements, the Committee may treat any portion of the
Employer Matching Contribution as a Section 401(m) Contribution. The same
amount may not be treated as both a Section 401(k) Contribution and a Section
401(m) Contribution. Any distributions of the Excess 401(m) Contributions for
any Plan Year are to be made to Highly Compensated Employees on the basis of
the respective portions of the amounts attributable to each of them.
Forfeitures of Excess 401(m) Contributions may not be allocated to Members
whose contributions are reduced under this Section.
4.4 SPECIAL ACTUAL CONTRIBUTION PERCENTAGE RULES FOR FAMILY MEMBERS.
If a Member is a Highly Compensated Employee and a Family Member, the combined
Actual Contribution Ratio for the family group (which is treated as one Highly
Compensated Employee) shall be determined by combining the Section 401(m)
Contributions and Annual Compensation of all the eligible Family Members. If
an Employee is required to be aggregated as a member of more than one family
group in the Plan, all eligible Employees who are members of those family
groups that include that Employee shall be aggregated as one family group. The
correction of Excess 401(m) Contributions of a Highly Compensated Employee
whose Actual Contribution Ratio is determined under the family aggregation
rules shall be accomplished by reducing the Actual Contribution Ratio and
allocating the Excess 401(m) Contributions for the family group among the
Family Members in proportion to the Section 401(m) Contributions of each Family
Member that is aggregated to determine the Actual Contribution Ratio. The
family aggregation rules do not apply to Non-Highly Compensated Employees.
4.5 DISTRIBUTIONS OF INCOME ALLOCABLE TO EXCESS 401(m) CONTRIBUTIONS.
The income allocable to Excess 401(m) Contributions for a Plan Year shall be
determined by multiplying the income for the Plan Year allocable to Section
401(m) Contributions by a fraction. The numerator of the fraction shall be the
amount of Excess 401(m) Contributions made on behalf of the Member for the Plan
Year. The denominator of the fraction shall be the Member's total Account
balance attributable to Section 401(m) Contributions as of the beginning of the
Plan Year plus the Member's Section 401(m) Contributions for the Plan Year.
4.6 ROLLOVER CONTRIBUTIONS AND PLAN-TO-PLAN TRANSFERS. The Committee
may permit Rollover Contributions by Members and/or direct transfers to or from
another qualified plan on behalf of Members from time to time. If Rollover
Contributions and/or direct transfers to or from another qualified plan are
permitted, the opportunity to make those contributions and/or transfers must be
made available to all Members on a nondiscriminatory basis. A direct transfer
of assets from another qualified plan shall not be accepted if it would cause
the Plan to be subject to the qualified preretirement survivor annuity
requirements set forth in Section 401(a)(11)(A) of the Code, and it would not
otherwise be subject to such provisions. A Member shall not be permitted to
make a Rollover Contribution if the property he intends to contribute is for
any reason unacceptable to the Trustee. In addition, Rollover Contributions
and/or direct transfers to or from another qualified plan on the part of
Employees who are not Members may be permitted by the Employer on the same
basis as Rollover Contributions are permitted on the part of Members. A
Rollover Contribution Account shall be established for any Employee making such
a Rollover Contribution, and such Rollover Contribution Account shall be
subject to all provisions of the Plan applicable to Rollover Contribution
Accounts maintained for the benefit of Members. Rollover Contributions shall
not be considered part of a Member's Employee Contributions under the Plan and
shall have no effect upon any limitation under the Plan based upon a Member's
Employee Contributions.
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ARTICLE 5
EMPLOYER CONTRIBUTIONS
5.1 SALARY DEFERRAL AGREEMENTS. A Salary Deferral Agreement shall be
an agreement in a form satisfactory to the Committee to prospectively receive
Considered Compensation from the Employer in a reduced amount and to have the
Employer contribute an amount equal to the amount of the reduction to the Trust
Fund on account of the Member. The Salary Deferral Agreement shall specify the
amount of the deferral to be considered a Required Salary Deferral and the
amount of the deferral to be considered an Additional Salary Deferral. Any such
Salary Deferral Agreement shall be revocable in accordance with its terms,
provided that no revocation shall be retroactive or permit payment to the
Member of the amount required to be contributed to the Trust Fund. A Member
shall be entitled to prospectively modify his Salary Deferral Agreement at
least once a year. The Committee shall establish and announce to the Members
the rules governing the administration of Salary Deferrals, including any
limitations upon the amount that may be deferred or designated as either type
of Salary Deferral, and the procedures for and any limitations upon a Member's
right to revoke or change his designation. Unless otherwise determined by the
Committee and announced to the Members, the Required Salary Deferral shall not
exceed six percent of the Member's Considered Compensation for the Allocation
Period and the total Salary Deferral shall not exceed 16 percent of the
Member's Considered Compensation for the Allocation Period. Salary Deferrals
may be made by periodic payroll deductions or by other methods, as determined
from time to time by the Committee.
5.2 SALARY DEFERRAL CONTRIBUTIONS. The Employer shall, for each
Allocation Period, make a Salary Deferral Contribution in an amount equal to
the Salary Deferrals of its Members' for such Allocation Period. A Member's
right to benefits derived from Salary Deferral Contributions made to the Plan
on his behalf shall be nonforfeitable.
5.3 EMPLOYER MATCHING CONTRIBUTIONS. The Employer shall, for each
Allocation Period, make an Employer Matching Contribution in an amount equal to
(i) 100 percent of the Required Salary Deferrals for all Members, reduced by
(ii) the amount of forfeitures available for allocation under Section 6.10 as
part of the Employer Matching Contribution to be allocated under Section 6.3.
5.4 DISCRETIONARY EMPLOYER CONTRIBUTIONS. The Employer may, for any
Plan Year, make a Discretionary Employer Contribution in such amount, if any,
as shall be determined by the Employer or determinable under a formula
established by it.
5.5 RESTRICTED DISCRETIONARY EMPLOYER CONTRIBUTIONS. The Employer
may, for any Plan Year, make a Restricted Discretionary Employer Contribution
in such amount, if any, as shall be determined by the Employer. The portion of
any Employer Contribution intended to be a Restricted Discretionary Employer
Contribution shall be designated as such by the Employer at the time the
contribution is made.
5.6 RESTRICTED EMPLOYER MATCHING CONTRIBUTIONS. The Employer may,
for any Plan Year, make a Restricted Employer Matching Contribution in such
amount, if any, as shall be determined by the Employer. The portion of any
Employer Contribution intended to be a Restricted Employer Matching
Contribution shall be designated as such by the Employer at the time the
contribution is made.
5.7 RESTORATION CONTRIBUTIONS. The Responsible Employer shall, for
each Plan Year, make a Restoration Contribution in an amount equal to the sum
of (i) such amount, if any, as shall be necessary to fully restore all Accounts
required to be restored pursuant to the provisions of Section 6.11, after
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application of all forfeitures available for such restoration; plus (ii) an
amount equal in value to the value of forfeited benefits described in and
payable under Section 10.15.
5.8 LIMITATION UPON SALARY DEFERRAL CONTRIBUTIONS. The Salary
Deferral Contribution that a Member may elect to have made to the Plan on his
behalf during his taxable year may not, when added to his Elective Deferrals
under other plans or arrangements during the Member's taxable year, exceed the
dollar limitation in effect under Section 402(g) of the Code for the taxable
year.
5.9 CORRECTION OF EXCESS DEFERRALS DURING TAXABLE YEAR. A Member who
has Excess Deferrals for a taxable year may receive a correcting distribution
of Excess Deferrals during the same year, if the Member designates the
distribution as an Excess Deferral. A Member shall be deemed to have designated
the distribution as an Excess Deferral to the extent the Member has Excess
Deferrals for the taxable year calculated by taking into account only Elective
Deferrals under the Plan and other plans of the Affiliated Employers. The
correcting distribution shall be made after the date on which the Plan received
the Excess Deferral. The Plan shall designate the distribution as a
distribution of Excess Deferrals.
5.10 CORRECTION OF EXCESS DEFERRALS AFTER TAXABLE YEAR. If any
amount is included in the gross income of a Member for a taxable year because
his Excess Deferrals exceeded the limitations set forth in Section 5.8, the
Member may notify the Plan of the amount of the Excess Deferrals received by
the Plan. A Member shall be deemed to have notified the Plan of Excess
Deferrals to the extent the Member has Excess Deferrals for the taxable year,
calculated by taking into account only Elective Deferrals under the Plan and
other plans of the Affiliated Employers. Not later than the first April 15
following the close of the taxable year, the Plan may distribute to the Member
the amount designated under the preceding provisions of this Section (and any
income allocable to that amount). The income allocable to that amount shall be
determined by multiplying the Investment Gain or Loss for the taxable year
allocable to the Member's Additional Salary Deferral Contribution Account or
Required Salary Deferral Contribution Account, as the case may be, by a
fraction. The numerator of the fraction is the amount of Excess Deferrals by
the Member for the taxable year. The denominator of the fraction is equal to
the sum of (a) the balance of the applicable Salary Deferral Contribution
Account as of the beginning of the taxable year, plus (b) the Member's Salary
Deferrals of the applicable type for the taxable year.
5.11 ACTUAL DEFERRAL PERCENTAGE TEST. Notwithstanding any other
provision of the Plan, unless all Members are Highly Compensated Employees, the
Actual Deferral Percentage for Highly Compensated Employees for any Plan Year
must not exceed the greater of the following:
(i) The Actual Deferral Percentage for the Non-Highly
Compensated Employees for the preceding Plan Year multiplied by 1.25;
or
(ii) The lesser of (a) the Actual Deferral Percentage for the
Non-Highly Compensated Employees for the preceding Plan Year
multiplied by two, or (b) the Actual Deferral Percentage for the
Non-Highly Compensated Employees for the preceding Plan Year plus two
percentage points.
For Plan Years beginning before January 1, 1998, the preceding sentence shall
be applied by substituting "current" for "preceding" wherever it appears in
such sentence, and the Sponsor may elect to apply such sentence with such
substitution for any Plan Year in accordance with applicable requirements of
the Internal Revenue Service. For purposes of this test an eligible Employee is
an Employee who is directly or indirectly eligible to make Salary Deferral
Contributions for all or part of the Plan Year. A person who is suspended from
making Salary Deferral Contributions because he has made a withdrawal is an
eligible Employee. If no Salary Deferral Contributions are made for an eligible
Employee, the Actual Deferral
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<PAGE> 32
Ratio that shall be included for him in determining the Actual Deferral
Percentage is zero. If this Plan and any other plan or plans which include cash
or deferred arrangements are considered as one plan for purposes of Section
401(a) or Section 410(b) of the Code (which is permissible only if all such
plans have the same plan year for plan years beginning after December 31,
1989), the cash or deferred arrangements included in this Plan and the other
plans shall be treated as one plan for purposes of this Section. If any Member
who is a Highly Compensated Employee is a participant in any other cash or
deferred arrangements of the Employer, when determining the Actual Deferral
Ratio of such Member, all such cash or deferred arrangements shall be treated
as one. Notwithstanding the foregoing, certain plans shall be treated as
separate if mandatorily disaggregated under regulations under Section 401(k) of
the Code.
5.12 ACTUAL DEFERRAL PERCENTAGE FAIL SAFE PROVISION. From time to
time during the Plan Year, the Committee may determine whether the Actual
Deferral Percentage for the Highly Compensated Employees is likely to exceed
the limitation set forth in Section 5.11 or Section 5.15 for such Plan Year. If
the limitation is likely to be exceeded for a Plan Year, the Committee may
require such prospective adjustments in the amount of each Member's Salary
Deferrals as it may deem appropriate to prevent such an occurrence. As soon as
practicable after the close of each Plan Year, the Committee shall determine
whether the Actual Deferral Percentage for the Highly Compensated Employees
exceeds the limitation set forth in Section 5.11 or Section 5.15. If the
limitation is exceeded for a Plan Year, before the close of the following Plan
Year (i) the amount of Excess 401(k) Contributions for that Plan Year (and any
income allocable to those contributions as calculated in the specific manner
required by Section 5.14) shall be distributed, (ii) if Employee Contributions
are allowed, to the extent provided in Regulations and permitted by the
Committee, the Member may elect to treat the amount of the Excess 401(k)
Contributions as an amount distributed to the Member and then contributed by
the Member to the Plan as an Employee Contribution, (iii) the Employer may make
a Restricted Discretionary Employer Contribution, or (iv) the Employer may make
a Restricted Employer Matching Contribution. If the Members' Discretionary
Employer Contribution Accounts satisfy the Section 401(k) Requirements, the
Committee may treat any portion of the Discretionary Employer Contribution as a
Section 401(k) Contribution. If the Members' Employer Matching Contribution
Accounts satisfy the Section 401(k) Requirements, the Committee may treat any
portion of the Employer Matching Contribution as a Section 401(k) Contribution.
The same amount may not be treated as both a Section 401(k) Contribution and a
Section 401(m) Contribution. Excess 401(k) Contributions may not be
recharacterized after 2 1/2 months after the close of the Plan Year to which
the recharacterization relates. The amount of recharacterized Excess 401(k)
Contributions, in combination with Employee Contributions actually made by the
Member, may not exceed the maximum amount of Employee Contributions (determined
without regard to Section 4.2) that the Member could have made under the
provisions of the Plan in effect on the first day of the Plan Year in the
absence of recharacterization. Any distributions of the Excess 401(k)
Contributions for any Plan Year are to be made to Highly Compensated Employees
on the basis of the respective portions of the Excess 401(k) Contributions
attributable to each of them. The amount of Excess 401(k) Contributions to be
distributed or recharacterized for any Plan Year must be reduced by any Excess
Deferrals previously distributed for the taxable year ending in the same Plan
Year.
5.13 SPECIAL ACTUAL DEFERRAL PERCENTAGE RULES FOR FAMILY MEMBERS. If
a Member is a Highly Compensated Employee and a Family Member, the combined
Actual Deferral Ratio for the family group (which is treated as one Highly
Compensated Employee) must be determined by combining the Section 401(k)
Contributions and Annual Compensation of all the eligible Family Members. If an
Employee is required to be aggregated as a member of more than one family group
in the Plan, all eligible Employees who are members of those family groups that
include that Employee are aggregated as one family group. The correction of
Excess 401(k) Contributions of a Highly Compensated Employee whose Actual
Deferral Ratio is determined under the family aggregation rules is accomplished
by reducing the Actual Deferral Ratio and allocating the Excess 401(k)
Contributions for the family group among the
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Family Members in proportion to the Section 401(k) Contributions of each Family
Member that is combined to determine the Actual Deferral Ratio. These family
aggregation rules do not apply to Non-Highly Compensated Employees.
5.14 DISTRIBUTIONS OF INCOME ALLOCABLE TO EXCESS 401(k)
CONTRIBUTIONS. The income allocable to Excess 401(k) Contributions for the
Plan Year shall be determined by multiplying the income for the Plan Year
allocable to Section 401(k) Contributions by a fraction. The numerator of the
fraction shall be the amount of Excess 401(k) Contributions made on behalf of
the Member for the Plan Year. The denominator of the fraction shall be the
Member's total Account balance attributable to Section 401(k) Contributions as
of the beginning of the Plan Year plus the Member's Section 401(k)
Contributions for the Plan Year.
5.15 ADDITIONAL REQUIRED TEST IF ALTERNATIVE COMPLIANCE IS USED. If
the second alternative permitted in Sections 4.2 and 5.11 is used for both the
Actual Deferral Percentage Test and the Actual Contribution Percentage Test the
following additional limitation on Salary Deferral Contributions shall apply.
The Actual Deferral Percentage plus the Actual Contribution Percentage of the
Highly Compensated Employees cannot exceed the greater of (i) or (ii), where
(i) is the sum of:
(a) 1.25 times the greater of the Actual Deferral
Percentage or the Actual Contribution Percentage of the
Non-Highly Compensated Employees, and
(b) the lesser of (x) two percentage points plus the
lesser of the Actual Deferral Percentage or the Actual
Contribution Percentage of the Non-Highly Compensated
Employees or (y) two times the lesser of the Actual Deferral
Percentage or the Actual Contribution Percentage of the group
of Non- Highly Compensated Employees; and
(ii) is the sum of:
(a) 1.25 times the lesser of the Actual Deferral
Percentage or the Actual Contribution Percentage of the
Non-Highly Compensated Employees, and
(b) the lesser of (x) two percentage points plus the
greater of the Actual Deferral Percentage or the Actual
Contribution Percentage of the Non-Highly Compensated
Employees or (y) two times the greater of the Actual Deferral
Percentage or the Actual Contribution Percentage of the group
of Non- Highly Compensated Employees.
5.16 TREATMENT OF CORRECTING DISTRIBUTIONS. Any correcting
distribution (exclusive of income) made pursuant to the provisions of Section
5.9, 5.10, or 5.12 shall be treated first as a reduction of the Member's share
of the Additional Salary Deferral Contributions to the extent thereof for the
applicable Plan Year; and second as a reduction of the Member's share of the
Required Salary Deferral Contributions for the applicable Plan Year, to the
extent the amount distributed (exclusive of income) exceeds the Member's share
of the Additional Salary Deferral Contributions for such Plan Year. Any portion
of the Employer Matching Contribution attributable to that portion of a
correcting distribution treated as a reduction of the Member's share of the
Required Salary Deferral Contributions shall be forfeited as of the last day of
the applicable Plan Year. In the case of a correcting distribution under
Section 5.9 or 5.10, the applicable Plan Year shall be the Plan Year ended with
or within the Member's taxable year for which the Excess Deferral occurred. In
the case of a correcting distribution under Section 5.12, the applicable Plan
Year shall be the Plan Year for which the Excess 401(k) Contributions were
made.
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<PAGE> 34
5.17 NONDEDUCTIBLE CONTRIBUTIONS PROHIBITED. Notwithstanding any
other provision of the Plan, no Employer shall make any contribution that would
be a "nondeductible contribution" within the meaning of Section 4972 of the
Code. From time to time during the Plan Year, the Committee may determine
whether the Employer Contribution for the Plan Year is likely to exceed the
limitation set forth in this Section for such Plan Year. If the limitation is
likely to be exceeded for a Plan Year, the Committee may require such
prospective adjustments in the amount of each Member's Salary Deferrals as it
may deem appropriate to prevent such an occurrence.
5.18 FORM OF PAYMENT OF CONTRIBUTIONS. Contributions may be paid to
the Trustee either in cash or in kind, including qualifying employer securities
and qualifying employer real property (as such terms are defined in Section
407(d) of ERISA) or any combination thereof, provided that payment may not be
made in any form constituting a prohibited transaction under Section 4975 of
the Code or Section 406 of ERISA.
5.19 DEADLINE FOR PAYMENT OF EMPLOYER CONTRIBUTIONS. The Employer's
Salary Deferral Contribution shall be paid to the Trustee in installments. The
installment for each payroll period shall be paid within 90 days after the end
of the Allocation Period in which such payroll period ends, and shall be in an
amount equal to the amount by which all Members' Considered Compensation was
reduced pursuant to Salary Deferral Agreements. The Employer Matching
Contribution, Restricted Employer Matching Contribution, Discretionary Employer
Contribution, and Restricted Discretionary Employer Contribution for each Plan
Year shall be paid to the Trustee in one or more installments, as the Employer
may from time to time determine; provided, however, that such Employer
Contributions may be paid not later than the time prescribed by law (including
extensions thereof) for filing the Employer's income tax return for its taxable
year ending with or within such Plan Year. Any Employer Contribution paid by
the Employer after the last day of its taxable year but on or before the date
specified in the immediately preceding sentence shall, for all purposes of the
Plan, be treated as if it had been received by the Trustee on the last day of
such taxable year if (i) the Employer designates such Employer Contribution in
writing to the Trustee as a payment on account of such taxable year, or (ii)
the Employer claims such Employer Contribution as a deduction on its tax return
for such taxable year.
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ARTICLE 6
ALLOCATIONS
6.1 INFORMATION STATEMENTS FROM EMPLOYER. As soon as practical after
each Allocation Date, the Employer shall provide the Committee with a schedule
setting forth the amount of its Salary Deferral Contribution, Employer Matching
Contribution, Restricted Employer Matching Contribution, Discretionary Employer
Contribution, Restricted Discretionary Employer Contribution, and Restoration
Contribution; the names of its Active Members and other Members; the amount of
each of its Employee's Required Salary Deferral, Additional Salary Deferral,
and Employee Contribution; the number of Years of Eligibility Service and Years
of Vesting Service of each of its Members; the amount of Annual Compensation
and Considered Compensation paid to each Member; and the amount of Annual
Compensation and Considered Compensation paid to all its Members. Such
schedules shall be conclusive evidence of such facts.
6.2 ALLOCATION OF SALARY DEFERRAL CONTRIBUTION. The Committee shall
allocate the Employer's Salary Deferral Contribution for each Allocation Period
among the Employer's Members by allocating to each such Member an amount equal
to his Salary Deferrals for such Allocation Period. Each Member's share shall
be credited to his Required Salary Deferral Contribution Account to the extent
of his Required Salary Deferrals and to his Additional Salary Deferral
Contribution Account to the extent of his Additional Salary Deferrals.
6.3 ALLOCATION OF EMPLOYER MATCHING CONTRIBUTION. The Committee
shall separately allocate the Employer Matching Contribution for each
Allocation Period among the Employer's Members by allocating to each such
Member an amount equal to 100 percent of the Member's Required Salary
Deferrals. Each Member's proportionate share shall be credited to his Employer
Matching Contribution Account.
6.4 ALLOCATION OF DISCRETIONARY EMPLOYER CONTRIBUTION. The Committee
shall separately allocate the Discretionary Employer Contribution for each Plan
Year among the Employer's Active Members in the proportion that the Considered
Compensation of each such Member for that Plan Year bears to the total
Considered Compensation of all such Members for that Plan Year. Each Member's
proportionate share shall be credited to his Discretionary Employer
Contribution Account.
6.5 ALLOCATION OF RESTRICTED EMPLOYER MATCHING CONTRIBUTION. The
Committee shall separately allocate the Restricted Employer Matching
Contribution for each Plan Year only among the Employer's Active Members who
are Non-Highly Compensated Employees in the same manner as the Employer
Matching Contribution.
6.6 ALLOCATION OF RESTRICTED DISCRETIONARY EMPLOYER CONTRIBUTION.
The Committee shall separately allocate the Restricted Discretionary Employer
Contribution for each Plan Year only among the Employer's Active Members who
are Non- Highly Compensated Employees in the same manner as the Discretionary
Employer Contribution.
6.7 ALLOCATION OF INVESTMENT GAIN OR LOSS. The Trustee shall
determine the fair market value of all assets of the Trust Fund as of each
Valuation Date. The Committee shall then allocate the Investment Gain or Loss
for the Valuation Period then ended among all Accounts in the proportion that
the Adjusted Beginning Balance of each Account on the immediately preceding
Valuation Date bears to the total Adjusted Beginning Balances of all Accounts
on such date. No Investment Gain or Loss shall be allocated to any suspense
account. Any cash dividends on shares of common stock of the Sponsor shall be
allocated as of the record date for such dividend.
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<PAGE> 36
6.8 INTERIM VALUATION OF TRUST FUND. The Committee may designate any
administratively practicable date as a Valuation Date if necessary to prevent
significant discrimination among Members. The Committee shall then allocate as
of that date any Investment Gain or Loss to the Accounts in the same manner
specified in Section 6.7.
6.9 ALLOCATIONS ATTRIBUTABLE TO DIRECTED INVESTMENTS. If multiple
Funds or other Member-directed investments are maintained or permitted, each
valuation and determination of Investment Gain or Loss provided for hereunder
shall reflect the value of the different Funds and other investments
separately. The Committee shall allocate Investment Gain or Loss attributable
to each such Fund or other Member-directed investment among the Members'
various Accounts (each type of Account being considered separately) in the
ratio that the amount in each Account which was invested in a particular Fund
or Member-directed investment as of the first day of the applicable Valuation
Period bears to the amount in all Accounts which was invested in such Fund or
Member-directed investment as of the first day of such applicable Valuation
Period. Unless otherwise provided in the rules established by the Committee, or
unless otherwise specified by the Member in accordance with such rules, the
amount in each Account of the Member invested in each investment shall be
deemed to be in the same ratio as the balances of such Accounts on the first
day of the applicable Valuation Period.
6.10 ALLOCATION OF FORFEITURES. As of the last day of each Plan Year
the Committee shall determine the total amount of forfeitures arising under the
Plan because of occurences during such Plan Year, including both forfeitures
that, under the terms of the Plan, are deemed to occur during the Plan Year
just completed and those that are deemed to occur on the first day of the
immediately following Plan Year. Any forfeitures deemed to occur during the
Plan Year just completed shall first be applied to restore any Account required
to be restored under the provisions of Section 6.11 because of a repayment
occurring during such Plan Year or the immediately preceding Plan Year. Any
remaining forfeitures (to the extent not in excess of the Employer Matching
Contribution that would be required under Section 5.3 if there were no
forfeitures available under this Section) deemed to occur during the Plan Year
just completed shall be added to the Employer Matching Contribution for the
Allocation Period ending on the last day of such Plan Year and allocated among
the Employer Matching Contribution Accounts as part of the Employer Matching
Contribution for such Allocation Period. Any remaining forfeitures deemed to
occur during the Plan Year just completed shall be added to the Discretionary
Employer Contribution for such Plan Year and allocated among the Discretionary
Employer Contribution Accounts as part of the Discretionary Employer
Contribution for such Plan Year. Any forfeitures (to the extent not in excess
of the Employer Matching Contribution that would be required under Section 5.3
if there were no forfeitures available under this Section) deemed to occur on
the first day of the immediately following Plan Year shall be added to the
Employer Matching Contribution for the first Allocation Period of such Plan
Year ending after the determination of the amount of such forfeitures and
allocated among the Employer Matching Contribution Accounts as part of the
Employer Matching Contribution for such Allocation Period. Any remaining
forfeitures deemed to occur on the first day of the immediately following Plan
Year shall be similarly allocated among the Employer Matching Contribution
Accounts as part of the Employer Matching Contribution for each succeeding
Allocation Period ending on or before the last day of such Plan Year. Any
remaining forfeitures deemed to occur on the first day of the immediately
following Plan Year shall be added to the Discretionary Employer Contribution
for such Plan Year and allocated among the Discretionary Employer Contribution
Accounts as part of the Discretionary Employer Contribution for such Plan Year.
6.11 RESTORATION OF FORFEITED AMOUNTS. If a Member or former Member
who forfeited any portion of his Employer Contribution Account pursuant to the
provisions of Section 9.2 resumes employment covered under the Plan, then the
following provisions shall apply:
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(a) REPAYMENT REQUIREMENT. The Member's forfeited Account
shall be restored if he repays to the Trustee the full amount of any
distribution from such Account prior to the applicable date
hereinafter specified in this Section. Such repayment must be made
prior to the earlier of (i) the fifth anniversary of the first date on
which the Member is subsequently re-employed by the Employer or (ii)
the date on which he incurs a Period of Severance of five years
commencing after the distribution.
(b) MEMBERS WITH NO VESTED INTEREST. If a Member or former
Member forfeited the entire balance of an Account pursuant to the
provisions of Section 9.3 and received no distribution from such
Account as a result of his termination of participation in the Plan
(because his vested percentage was zero), that Account shall be
restored if, and only if, he resumes employment covered under the Plan
prior to incurring a Period of Severance of five years.
(c) AMOUNT RESTORED. The amount to be restored under the
preceding provisions of this Section shall be the amount in the
Member's forfeited Account, both the amount distributed and the amount
forfeited, unadjusted by any subsequent gains or losses. The Member's
Account balance shall be restored (as soon as administratively
practicable after the later of the date the Member resumes employment
covered under the Plan or the date on which any required repayment is
completed) effective as of the date on which occurs the event which
gives rise to the restoration of such Account. No distribution shall
be made to a Member from his Account as a result of a prior Separation
after the restoration of such Account has been effectuated.
(d) NO OTHER BASIS FOR RESTORATION. Except as otherwise
provided above, a Member's Account shall not be restored upon
resumption of employment covered by the Plan. Any portion of the Trust
Fund attributable to Years of Service prior to resumption of
employment by a Member whose Account has not been restored shall be
held and distributed in accordance with applicable provisions of the
Plan and elections made thereunder. A separate Account shall be
established and maintained for Employer Contributions subject to a
vesting schedule allocable to such a Member after his resumption of
employment covered by the Plan.
6.12 EFFECTIVE DATE OF ALLOCATIONS AND ADJUSTMENTS. The Committee
shall credit to each Member's Accounts such Member's Employee Contributions and
Rollover Contributions, and his portion of the Salary Deferral Contribution, so
that all such amounts shall be entered in the Member's Accounts as soon as
administratively practicable following the date on which such amount is paid to
the Trustee. The Committee shall credit to each Member's Employer Contribution
Account such Member's portion of the Employer Contribution and forfeitures so
that all such Employer Contributions and forfeitures shall become effective and
be entered in each Member's Account as of the last day of the Plan Year or
other Allocation Period to which they are attributable. The Committee shall
credit to each Member's Accounts such Member's portion of the adjustments and
allocations required by Sections 6.7, 6.8, and 6.9, so that all such
adjustments and allocations shall become effective and be entered in such
Member's Accounts as of the Valuation Date or other applicable date with
respect to which they are attributable.
6.13 NO VESTING UNLESS OTHERWISE PRESCRIBED. No allocations,
adjustments, credits, or transfers shall ever vest in any Member any right,
title, or interest in the Trust Fund except at the times and upon the terms and
conditions herein set forth.
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ARTICLE 7
LIMITATIONS ON ALLOCATIONS
7.1 BASIC LIMITATION. The Annual Additions which may be credited to
a Member's Accounts under this Plan for any Limitation Year shall not exceed
the Maximum Permissible Amount reduced by the Annual Additions credited to a
Member's Account for the same Limitation Year under any other qualified Defined
Contribution Plans, Welfare Benefit Funds, and Individual Medical Accounts
maintained by any Affiliated Employer. If the Annual Additions with respect to
the Member under such other plans, funds, and accounts are less than the
Maximum Permissible Amount and the Employer Contribution that would otherwise
be contributed or allocated to the Member's Accounts under this Plan would
cause the Annual Additions for the Limitation Year to exceed this limitation,
the amount contributed or allocated shall be reduced so that the Annual
Additions under all such plans, funds, and accounts for the Limitation Year
shall equal the Maximum Permissible Amount. If the Annual Additions with
respect to the Member under such other plans, funds, and accounts in the
aggregate are equal to or greater than the Maximum Permissible Amount, no
amount shall be contributed or allocated to the Member's Account under this
Plan for the Limitation Year.
7.2 ESTIMATION OF MAXIMUM PERMISSIBLE AMOUNT. Prior to determining
the Member's actual Annual Compensation for the Limitation Year, the Employer
may determine the Maximum Permissible Amount on the basis of a reasonable
estimation of the Member's Annual Compensation for such Limitation Year,
uniformly determined for all Members similarly situated. From time to time
during the Limitation Year, the Committee may determine whether any Member's
anticipated Annual Additions are likely to result in an Excess Amount for such
Plan Year. If an Excess Amount is likely to result for a Member, the Committee
may require such prospective adjustments in the amount of each Member's
Employee Contributions and/or Salary Deferrals as it may deem appropriate to
prevent such an occurrence. As soon as is administratively feasible after the
end of the Limitation Year, the Maximum Permissible Amount for the Limitation
Year shall be determined on the basis of the Member's actual Annual
Compensation for such Limitation Year.
7.3 ATTRIBUTION OF EXCESS AMOUNTS. If, pursuant to Section 7.2 or as
a result of the allocation of forfeitures, or for any other reason permitted by
the Internal Revenue Service, a Member's Annual Additions under this Plan and
all such other plans, funds, and accounts result in an Excess Amount, such
Excess Amount shall be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a Welfare Benefit Fund
or Individual Medical Account shall be deemed to have been allocated first
regardless of the actual allocation date. If an Excess Amount was allocated to
a Member's Account on an allocation date of this Plan which coincides with an
allocation date of another plan, the Excess Amount attributed to this Plan
shall be the product of:
(i) the total Excess Amount allocated as of such date, times
(ii) the ratio of (a) the Annual Additions allocated to the
Member's Account for the Limitation Year as of such date under this
Plan, to (b) the total Annual Additions allocated to the Member's
Accounts for the Limitation Year as of such date under all qualified
defined contribution plans.
7.4 DISPOSITION OF EXCESS AMOUNTS. Any Excess Amounts attributed to
this Plan shall be disposed of in the manner set forth in this Section. First,
any nondeductible Employee Contributions, to the extent that the return would
reduce the
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<PAGE> 39
Excess Amount, shall be returned to the Member. If an Excess Amount still
exists, any Additional Salary Deferral Contributions, to the extent that the
return would reduce the Excess Amount, shall be returned to the Member. If an
Excess Amount still exists, and the Member is in the Eligible Class at the end
of the Limitation Year, then such Excess Amounts shall not be distributed to
the Member, but shall be reallocated to a suspense account and shall be
reapplied to reduce future Employer Contributions (including any allocation of
forfeitures) under this Plan for such Member in the next Limitation Year, and
for each succeeding Limitation Year, if necessary. If an Excess Amount still
exists, and the Member is not in the Eligible Class at the end of the
Limitation Year, then such Excess Amounts in the Member's Accounts shall not be
distributed to the Member, but shall be reallocated to a suspense account and
shall be reapplied to reduce future Employer Contributions (including
allocation of any forfeitures), for all remaining Members in the next
Limitation Year and each succeeding Limitation Year if necessary. If a suspense
account is in existence at any time during the Limitation Year pursuant to this
Section, it shall not participate in the allocation of the Investment Gain or
Loss. If a suspense account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be allocated and
reallocated to Members' Accounts before any Employer or any Employee
Contributions may be made to the Plan for that Limitation Year. Except as
specifically provided in this Section, Excess Amounts may not be distributed to
Members or former Members.
7.5 MEMBERS PARTICIPATING IN QUALIFIED DEFINED BENEFIT PLAN. If any
Affiliated Employer maintains, or at any time maintained, a qualified defined
benefit plan covering any Member in this Plan, the sum of the Member's Defined
Benefit Fraction and Defined Contribution Fraction shall not exceed 1.0 in any
Limitation Year except as permitted under the Section 415 Transition Rules. The
benefits payable to any such Member under the any defined benefit plan shall be
limited as necessary to meet the limitations of this Section.
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<PAGE> 40
ARTICLE 8
TOP-HEAVY PROVISIONS
8.1 APPLICATION. The requirements described in this Article shall
apply to each Plan Year that this Plan is determined to be a Top-Heavy Plan
under the test set out in Section 8.2.
8.2 TOP-HEAVY TEST. If on the Determination Date the total of the
Accounts of Key Employees in the Plan exceeds 60 percent of the total of the
Accounts of all Employees in the Plan, this Plan shall be a Top-Heavy Plan for
that Plan Year. In addition, if this Plan is required to be included in an
Aggregation Group and that group is a top-heavy group, this Plan shall be
treated as a Top-Heavy Plan. An Aggregation Group is a top-heavy group if on
the Determination Date the sum of (i) the present value of the cumulative
accrued benefits for Key Employees under all defined benefit plans in the
Aggregation Group which contains this Plan plus (ii) the total of all of the
accounts of Key Employees under all defined contribution plans included in the
Aggregation Group (which contains this Plan) is more than 60 percent of a
similar sum determined for all employees covered in the Aggregation Group which
contains this Plan.
In applying the above tests, the following rules shall apply: (i) in
determining the present value of the accumulated accrued benefit for any
Employee or the amount in the account of any Employee, the value or amount
shall be increased by all distributions made to or for the benefit of the
Employee under the Plan during the five year period ending on the Determination
Date; (ii) all rollover contributions made after December 31, 1983 by the
Employee to the plan shall not be considered by the plan for either test; (iii)
if an Employee is a Non-Key Employee under the plan for the Plan Year but was a
Key Employee under the plan for another prior Plan Year, his account shall not
be considered; and (iv) benefits shall not be taken into account in determining
the top-heavy ratio for any Employee who has not performed services for the
Employer during the last five-year period ending on the Determination Date.
All actuarial calculations required under this Section shall use an
interest rate of eight percent and UP-1984 Mortality Table (Unisex) as the
mortality table.
8.3 VESTING IF PLAN BECOMES TOP-HEAVY. If a Member has at least one
Hour of Service during a Plan Year when the Plan is a Top-Heavy Plan his vested
percentage of his Employer Accounts shall be determined under the following
provisions of this Section or under the other vesting provisions of the Plan,
whichever results in the greater vested percentage. If this Section applies, a
Member's vested percentage shall be determined under the following schedule,
based on his number of years of Vesting Service:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
If the Plan ceases to be Top-Heavy, only the vesting provisions other than
those set forth in the schedule in this Section shall apply; provided, however,
that any such change shall be treated as an amendment to the vesting schedule
subject to the limitations and requirements set forth in Section 13.2.
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<PAGE> 41
8.4 MINIMUM CONTRIBUTION IF PLAN BECOMES TOP-HEAVY. For any Plan
Year during which the Plan is a Top-Heavy Plan, the Employer Contributions and
forfeitures allocated on behalf of any Member who is not a Key Employee shall
not be less than the lesser of (i) three percent of such Member's Annual
Compensation, or (ii) in the case where no Affiliated Employer has a defined
benefit plan that designates this Plan to satisfy Section 401 of the Code, the
largest percentage of Employer Contributions and forfeitures, as a percentage
of the Key Employee's Annual Compensation, allocated on behalf of any Key
Employee for that Plan Year. Salary Deferral Contributions shall be disregarded
for purposes of the immediately preceding sentence. Each Employee who is
eligible to be a Member and is employed by any Affiliated Employer on the last
day of the Plan Year shall be entitled to receive an allocation under this
Section, regardless of whether he has made any required employee contributions,
whether his Annual Compensation is less than a stated amount, or whether he has
completed any minimum number of Hours of Service (or other period of
employment) during the Plan Year. All defined contribution plans required to
be included in the Aggregation Group shall be treated as one plan for purposes
of meeting the three percent minimum, unless this Plan is also required to be
included in an Aggregation Group which includes a defined benefit plan and this
Plan enables that defined benefit plan to meet the requirements of Sections
401(a)(4) or 410 of the Code. The minimum contribution required (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
8.5 DISREGARD OF GOVERNMENT PROGRAMS. If this Plan is a Top-Heavy
Plan, it must meet the vesting and benefit requirements described in this
Article without taking into account contributions or benefits under Chapter 2
of the Code (relating to tax on self-employment income), Chapter 21 of the Code
(relating to Federal Insurance Contributions Act), Title II of the Social
Security Act, or any other Federal or State law.
8.6 COVERAGE UNDER DEFINED CONTRIBUTION AND DEFINED BENEFIT TOP-HEAVY
PLANS. If this is a Top-Heavy Plan and a Member who is a Non-Key Employee is
also covered by a defined benefit plan maintained by an Affiliated Employer, he
shall receive an allocation of contributions and forfeitures under the Plan of
at least five percent of Annual Compensation.
8.7 ADJUSTMENT OF SECTION 415 LIMITATION. If the Plan is determined
to be a Top-Heavy Plan, the number "1.00" shall be substituted for the number
"1.25" when applying the limitations of Section 415 of the Code to this Plan,
unless the Plan would not be a Top-Heavy Plan if "90 percent" were substituted
for "60 percent" and the Employer Contribution for the Plan Year for each
Non-Key Employee who is a Member is not less than four percent of the Member's
Annual Compensation.
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<PAGE> 42
ARTICLE 9
BENEFITS AND EVENTS ENTITLING MEMBERS
TO DISTRIBUTION OF BENEFITS
9.1 DEATH, RETIREMENT, OR DISABILITY. A Member's Accounts shall be
nonforfeitable upon his attainment of Normal Retirement Age. A Member whose
Separation occurs on account of his Retirement or after incurring a Disability
shall be entitled to a benefit equal to 100 percent of the amount credited to
all of his Accounts. The beneficiary of a Member whose separation occurs on
account of death shall be entitled to a benefit equal to 100 percent of the
amount credited to all of his Accounts plus the proceeds of any insurance
policies on the Member's life held as part of the Trust Fund on the Member's
date of death.
9.2 SEVERANCE BENEFIT. A Member whose Separation occurs for any
reason other than death, Retirement, or Disability shall be entitled to a
severance benefit equal to the sum of (i) the total amount credited to all of
his Accounts other than his Employer Matching Contribution Account and
Discretionary Employer Contribution Account, plus (ii) his vested percentage of
the total amount credited to his Employer Matching Contribution Account and
Discretionary Employer Contribution Account, as shown in the vesting schedule
set forth below:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C>
Less than 2 0%
2 40%
3 60%
4 80%
5 or more 100%
</TABLE>
9.3 FORFEITURE UPON BREAK IN SERVICE OR PAYMENT OF SEVERANCE BENEFIT.
A Member shall forfeit the nonvested portion of his Employer Contribution
Account if he incurs a Period of Severance of five years. If earlier than the
time specified in the immediately preceding sentence, a Member shall forfeit
the nonvested portion of his Employer Contribution Account if the Member (i)
receives a distribution from the Trust Fund due to termination of the Member's
participation in the Plan, and (ii) either (a) the amount of the distribution
is equal to his entire vested interest and is not more than $5,000 ($3,500 for
Plan Years beginning before August 6, 1997) or (b) the Member voluntarily
elects to receive the distribution. A Member who has no vested interest in the
Plan shall be deemed to have received a distribution of zero dollars,
constituting his entire vested interest in the Plan, on the date of his
Separation. Any distribution to which a Member or Beneficiary has become
entitled under the provisions of Section 9.1 or 9.2 of the Plan shall be deemed
to be made on termination of participation in the Plan. In the case of a
voluntary distribution of an amount in excess of the amount specified in clause
(ii)(a) of the first sentence of this Section which is less than the Member's
full vested interest, the amount forfeited shall be the nonvested portion of
the Member's Account multiplied by a fraction, the numerator of which is the
amount distributed and the denominator of which is the vested portion of such
Account immediately prior to such distribution. Any forfeiture arising under
this Section shall occur on the first day of the Plan Year next following (i)
the last day of the fifth year of the Period of Severance or (ii) the date of
the distribution or deemed distribution, as the case may by. Distributions
described in this Section shall be accounted for in the manner set forth in
Section 9.6.
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<PAGE> 43
9.4 TIME FOR DETERMINING ACCOUNT BALANCES. Effective for any period
during which every day is a Valuation Date, the amount credited to a Member's
Accounts shall be determined, for purposes of this Article, as of the Valuation
Date coincident with the date of the Member's Separation on account of death,
Retirement, Disability, or other termination of employment. Effective for any
period during which the first sentence of this Section does not apply, the
amount credited to a Member's Accounts shall be determined, for purposes of
Section 9.1, as of the Valuation Date coincident with or next preceding the
date of the Member's Separation on account of death, Retirement, or Disability;
provided, however, that a Member whose Separation does not occur on a Valuation
Date may elect that such amount shall be determined, for purposes of Section
9.1, as of the Valuation Date next following the date of the Member's
Separation on account of death, Retirement, or Disability. In any event, the
amount credited to the Member's Account shall include any amount allocated
thereto following his Separation. Effective for any period during which the
first sentence of this Section does not apply, the amount credited to a
Member's Accounts shall be determined, for purposes of Section 9.2, as of the
Valuation Date coincident with or next following the date of the Member's
Separation for any reason other than death, Retirement, or Disability.
9.5 WITHDRAWAL OF EMPLOYEE CONTRIBUTIONS. If Employee Contributions
are permitted, each Member, upon giving 30 days' written notice to the
Committee, shall be entitled to withdraw from his Employee Contribution Account
such amount as he may specify, but not in excess of the balance of such
Account. A withdrawal from such Account shall terminate the Member's right to
make any further Employee Contributions until six months after the Member's
request for a withdrawal is delivered to the Committee. A Member shall be
allowed to make only one withdrawal from his Employee Contribution Account
during any Plan Year. The Employer shall ensure that all reports to the
appropriate governmental agencies and Members are made at such time and in such
manner as prescribed in applicable regulations or other authority. No vested
benefit shall be forfeited because of a withdrawal under this Section.
9.6 ACCOUNTING FOR DISTRIBUTIONS. The balance of an Account shall be
reduced as of the first day of the Valuation Period by the amount of any
forfeitures, withdrawals, payments, distributions, or other amounts properly
chargeable to such Account during such Valuation Period. If any amount is
distributed or withdrawn from any of the Member's Employer Contribution
Accounts at a time when such Account is not fully vested, a separate subaccount
shall thereafter be maintained with respect to the portion of such Account that
remains after the withdrawal. No further Employer Contributions shall be
credited to such subaccount, but it shall continue to share in its
proportionate part of the allocations made under Sections 6.7, 6.8, and 6.9.
The Member's vested portion of such subaccount shall be determined by the
following formula: X=P(AB+(RxD))-(RxD). For purposes of applying the formula: P
is the vested percentage at the relevant time; AB is the Account balance at the
relevant time; D is the amount of the distribution; R is the ratio of the
Account balance at the relevant time to the Account balance after such
distribution; and the relevant time is the time at which, under the Plan, the
vested percentage in the Account cannot increase. Similar principles shall be
applied in determining the Member's vested portion of the subaccount after any
subsequent withdrawal therefrom.
9.7 RECEIPT OF DOMESTIC RELATIONS ORDER. The receipt of a judicial
decree or order shall constitute an event permitting distribution under the
Plan, provided that such judicial decree or order would constitute a Qualified
Domestic Relations Order if the requirement that such an order not require a
plan to make distribution to an alternate payee prior to a Members earliest
retirement age, as defined in Section 414(p)(4)(B) of the Code, were
disregarded.
9.8 EMPLOYEE LOANS. Upon application to the Committee, and subject
to the rules and procedures adopted by the Committee, each Member who is
actively employed by an Employer shall be entitled to borrow from the Plan an
amount which, when added to the outstanding balance of all other loans from
this Plan and all other qualified plans maintained by any Affiliated Employer
does not exceed the lesser of (i)
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<PAGE> 44
$50,000 reduced by the excess, if any, of the highest outstanding balance of
loans during the one-year period ending on the day before the loan is made,
over the outstanding balance of loans from the Plan on the date the loan is
made, (ii) one-half of the vested portion of the Member's Accounts, or (iii)
100 percent of the vested portion of the Member's Accounts other than his
Employer Matching Contribution Account. In determining whether a loan would
exceed these limits, all loans under all qualified plans of the Affiliated
Employers shall be treated as loans under this Plan.
All loans shall be secured by 50 percent of the Member's vested
interest in his Accounts at the date of the loan. The loan shall (i) be
evidenced by a written note and security agreement, (ii) require level
amortization of the principal and interest, with payments at least quarterly,
and (iii) have a term of not more than five years except when the loan is used
to purchase a dwelling which is to be used within a reasonable time as the
principal residence of the Member. When required by law, every person receiving
a loan must be given a statement clearly reflecting the charges involved in
each loan transaction which will be charged to him or his Account, specifying
the dollar amount, the annual interest rate, and any finance charge and setting
forth any other information required under the truth-in-lending laws or any
other applicable federal or state law. The interest rate applicable to a loan
made pursuant to this Section shall be a rate determined to be reasonable by
the Committee.
Notwithstanding any other provision of the Plan, a Member may not make
a withdrawal or receive a distribution if the remaining vested balance of the
Member's Account would be less than the outstanding loan balance or the
withdrawal or distribution would violate any security requirements of the loan.
If a Member or Beneficiary is entitled to a distribution while a loan to the
Member is outstanding, the amount distributable shall be reduced by the amount
necessary to prevent reduction of the vested balance of the Member's Accounts
below the remaining unpaid loan principal and accrued interest. The Member
shall remain liable for any balance due on a loan to him after complete
distribution of his Accounts.
The Committee is authorized to establish written guidelines which, if
and when adopted, shall become part of this Plan and shall establish the class
of Members eligible for loans under the Plan (which shall not exclude any
Member who is a party in interest with respect to the Plan, within the meaning
of Section 3(14) of ERISA), the procedures for applying for loans, the minimum
amount of any loan, the basis on which loans will be approved or denied, the
limitations (if any) on the types and amounts of loans offered, the procedure
for determining a reasonable rate of interest, the events causing acceleration
of the note or constituting default, and the steps that will be taken to
preserve plan assets in the event of a default. No such guidelines shall be
adopted which would operate to prevent loans from being available to all
Members on a reasonably equivalent basis or permit loans in greater amounts to
Highly Compensated Employees. A Member who is entitled to a Qualified Joint and
Survivor Annuity and/or a Qualified Preretirement Survivor Annuity must obtain
the consent of his or her spouse, if any, within the 90-day period before the
time any portion of the Member's Account balance is used as security for the
loan. A new consent is required if the Account balance is used for any increase
in the amount of security. The consent shall comply with the requirements of
Section 10.1(c) of the Plan, but shall be deemed to meet any requirements
contained in such Section relating to the consent of any subsequent spouse.
Notwithstanding the foregoing provisions of this Section, no loans
shall be made to any Owner-Employee, member of the family (as defined in
Section 267(c)(4)) of any Owner-Employee, or any corporation controlled by an
Owner- Employee through the direct or indirect ownership of 50 percent or more
of the voting power or value of the stock of such corporation. For purposes of
the preceding sentence, a shareholder-employee (as defined in Section 1379 of
the Code, as in effect on the day before the date of enactment of the
Subchapter S Revision Act of 1982), shall be deemed to be an Owner-Employee.
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<PAGE> 45
The Committee may specify that, subject to such limitations as may be
uniformly imposed by the Committee, the Member shall designate the portion of
the principal amount of the loan that shall be attributable to each Account and
each Fund. The principal amount of the loan to the Member shall be funded by
liquidating a portion of the general investment fund, or if other
Member-directed investments are permitted and Members are not permitted to
designate the Funds used to fund the loan, by liquidating a pro rata portion of
each of the Member's other investments, based on the respective value of each
other investment as of the most recent date on which Member investment
directions are effective. A loan to a Member shall be a Member-directed
investment of his Account. All principal and interest paid on the loan shall be
credited to the Member's loan account and held in a cash equivalent investment
until the next date on which Member investment directions are effective. At
that time, the monies received may be transferred to other funds as may be
directed by the Member or transferred to the general fund if Members are not
then allowed to direct investments.
9.9 WITHDRAWAL FOR FINANCIAL HARDSHIP. Any Member may make
application to the Committee to withdraw from his Rollover Contribution
Account, Additional Salary Deferral Contribution Account, and Required Salary
Deferral Contribution Account an amount not in excess of the vested balance of
such Accounts. Withdrawals made pursuant to this Section shall be permitted
only in the event of immediate and heavy financial need incurred by the Member.
Whether or not a Member has incurred an immediate and heavy financial need
shall be determined by the Committee on the basis of all relevant facts
available to the Committee and in accordance with written procedures
established by the Committee. Such written procedures shall specify the
requirements for requesting and receiving distributions on account of hardship,
including what forms must be submitted and to whom. The Committee shall
uniformly and consistently apply such written procedures so that all Members in
similar circumstances are treated alike. All determinations regarding financial
hardship must be made in accordance with objective nondiscretionary criteria.
Such determinations must also comply with applicable Department of Treasury
regulations. A financial need shall not fail to qualify as immediate and heavy
merely because such need was reasonably foreseeable or voluntarily incurred by
the Member. A distribution shall be deemed to be made on account of an
immediate and heavy financial need of the Member if the distribution is for (a)
medical expenses described in Section 213(d) of the Code previously incurred by
the Member, the Member's spouse, or any dependents of the Member (as defined in
Section 152 of the Code) or necessary for these persons to obtain medical care
described in Section 213(d) of the Code, not reimbursed by insurance or
otherwise, (b) costs directly related to the purchase of a principal residence
for the Member (excluding mortgage payments), (c) payment of tuition and
related educational fees for the next 12 months of post-secondary education for
the Member, or his or her spouse, children, or dependents, (d) payments
necessary to prevent the eviction of the Member from his principal residence or
foreclosure on the mortgage of the Member's principal residence, or (e) any
other reason specified by the Committee as a "deemed immediate and heavy
financial need." An application for a withdrawal made pursuant to this Section
must be in writing and must state the reason or reasons for the need of such
Member to make such a withdrawal. Such application must specify the amount
necessary to satisfy the Member's immediate and heavy financial need, and the
Member must have obtained all distributions, other than hardship distributions,
and all nontaxable (at the time of the loan) loans currently available under
all plans maintained by the Affiliated Employers. The Committee shall be
entitled to rely upon the Employee's representations set forth in his
application, to the extent that such reliance is reasonable. A distribution
made pursuant to this Section shall not exceed the amount of the immediate and
heavy financial need of the Member. The amount of an immediate and heavy
financial need may include any amounts necessary to pay any federal, state, or
local income taxes or penalties reasonably anticipated to result from the
distribution. Applications under this Section shall be processed as soon as
administratively feasible. The Committee shall direct the Trustee when to
disburse any funds as a hardship withdrawal. Notwithstanding the foregoing, a
Member shall not be entitled to make a financial hardship withdrawal of any
Investment Gain or Loss credited to the Member's Required Salary Deferral
Contribution Account or Additional Salary Deferral Contribution Account after
December 31, 1988. The
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<PAGE> 46
Member's election to withdraw funds pursuant to this Section shall suspend the
Member's right to make Employee Contributions and to have Salary Deferral
Contributions made to the Plan on his behalf for a period of twelve months
beginning on the date that the Member receives a hardship distribution pursuant
to this Section. No withdrawal may be made under this Section unless the
Member is prohibited, under the terms of the plan or an otherwise legally
enforceable agreement, from making elective contributions and employee
contributions to any other plan maintained by any Affiliated Employer for at
least 12 months after receipt of the distribution under this Section. For
purposes of the immediately preceding sentence, the phrase "any other plan"
means all qualified and nonqualified plans of deferred compensation, including
a stock option, stock purchase, or similar plan, or a cash or deferred
arrangement that is part of a cafeteria plan within the meaning of Section 125
of the Code. Such phrase, however, does not include the mandatory employee
contribution portion of a defined benefit plan, nor does it include a health or
welfare benefit plan (including one that is part of a cafeteria plan within the
meaning of Section 125). Moreover, the Member shall not be entitled to have
Salary Deferral Contributions made to the Plan on his behalf for the Member's
taxable year immediately following the taxable year of the distribution in
excess of the applicable limit of Code Section 402(g) for such next taxable
year less the amount of the Member's Salary Deferral Contributions for the
taxable year of the hardship distribution.
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<PAGE> 47
ARTICLE 10
DISTRIBUTION OF BENEFITS
10.1 QUALIFIED JOINT AND SURVIVOR ANNUITY AND QUALIFIED PRERETIREMENT
SURVIVOR ANNUITY. The following provisions of this Section shall apply with
respect to any Member (and only those Members) (i) whose Account is derived in
part from (a) a direct or indirect transfer from any defined contribution plan
described in Sections 401(a) and 414(i) of the Code which is subject to the
funding standards of Section 412 of the Code or any defined benefit plan
described in Sections 401(a) and 414(j) of the Code, or (b) a direct or
indirect transfer from any other defined contribution plan described in
Sections 401(a) and 414(i) of the Code to which clause (a) applied to such
Member as a participant in such plan, or (ii) who elects a payment of Plan
benefits in the form of a life annuity.
(a) STANDARD FORM OF LIFETIME BENEFITS. Except as otherwise
provided in Section 10.6, each Member (i) who does not die before the
Annuity Starting Date and (ii) who is married on the Annuity Starting
Date shall be paid in the form of a Qualified Joint and Survivor
Annuity, unless he elects otherwise with the consent of his spouse.
Except as otherwise provided in Section 10.6, each Member who would be
described in the immediately preceding sentence except that he is not
married on the Annuity Starting Date shall be paid in the form of a
Life Only Annuity unless he elects otherwise. If the Member and the
spouse to whom he is married on the Annuity Starting Date do not
remain married for at least a one-year period that includes the
Annuity Starting Date, the Member shall be treated as not having been
married on the Annuity Starting Date. In such event, no survivor
benefit shall be payable to the spouse. After notice of termination of
the marriage has been received by the Committee, payments to the
Member shall be in the form of a Life Only Annuity in the amount that
would have been payable had such form commenced on the Annuity
Starting Date, and no retroactive correction of the amount previously
paid to the Member shall be made.
(b) FORM OF DEATH BENEFITS. Except as otherwise provided in
Section 10.6, a surviving spouse who is entitled to receive a death
benefit under Section 9.1 shall receive such benefit in the form of a
Qualified Preretirement Survivor Annuity. Except as otherwise provided
in Section 10.6, a Beneficiary who is entitled to receive a death
benefit under Section 10.2 shall receive such benefit in accordance
with the terms of the form of benefit in effect on the date of the
Member's death.
(c) WAIVER OF STANDARD FORMS. A valid election to waive the
Qualified Joint and Survivor Annuity, the Life Only Annuity, or the
Qualified Preretirement Survivor Annuity may be made only in
accordance with the following provisions:
(i) GENERAL REQUIREMENTS. Any such election shall
be made in writing by the Member and consented to by the
Member's spouse (if any). Any consent executed by the spouse
shall be witnessed by a notary public (or equivalent official
in a country other than the United States). The consent to a
waiver is valid only with respect to the spouse who signs it;
and if the Member remarries after executing the waiver, the
Member's new spouse must execute a new consent. An unmarried
Member shall be deemed to have waived the Qualified
Preretirement Survivor Annuity; however, this deemed waiver
shall be null and void if the Member later marries.
(ii) TERMS OF WAIVER AND SPECIFIC CONSENT. Except
as otherwise provided in this Section, both the Member's
waiver and the spouse's consent (i) shall state the specific
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<PAGE> 48
nonspouse Beneficiary (including any class of Beneficiaries or
any contingent Beneficiaries) who will receive any optional
benefit, and (ii) in the case of a waiver of the Qualified
Joint and Survivor Annuity or the Life Only Annuity, shall
specify the particular optional form of benefit.
(iii) TERMS OF GENERAL CONSENT. In lieu of a
specific consent in the form described in the immediately
preceding paragraph, the spouse may execute a general consent
permitting the Member to waive the standard form of payment
and change the designated Beneficiary or the optional form of
benefit payment without any further consent by such spouse.
Any such general consent shall acknowledge that the spouse has
the right to limit consent to a specific Beneficiary and a
specific optional form of benefit, if applicable, and that the
spouse voluntarily elects to relinquish both of such rights. A
general consent may be limited to certain Beneficiaries or
forms of benefit payment.
(iv) EXCEPTIONS TO CONSENT REQUIREMENT. If the
Member establishes to the satisfaction of the Committee that
the spouse's written consent cannot be obtained because there
is no spouse or the spouse cannot be located, a waiver signed
only by the Member shall be considered a valid election. If
the Member's spouse is legally incompetent to give consent,
the legal guardian of the spouse may give consent. If the
Member is legally separated or the Member has been abandoned
(within the meaning of local law) and the Member has a court
order to such effect, spousal consent shall not be required
unless a Qualified Domestic Relations Order provides
otherwise. Spousal consent shall not be required for a
distribution required by Section 401(a)(9) or Section 415 of
the Code.
(v) ELECTION PERIOD FOR LIFETIME BENEFITS. An
election to waive the Qualified Joint and Survivor Annuity or
the Life Only Annuity shall be valid only if it is made within
the 90-day period that ends on the Annuity Starting Date. In
the case of an Annuity Starting Date that occurs on or after
the Member's Normal Retirement Date, an election to waive the
Qualified Joint and Survivor Annuity or the Life Only Annuity
shall apply to any benefits that accrue after the Annuity
Starting Date. In the case of an Annuity Starting Date that
occurs prior to the Member's Normal Retirement Date, an
election to waive the Qualified Joint and Survivor Annuity or
the Life Only Annuity shall not apply with respect to any
benefits accrued after such Annuity Starting Date. An election
to waive the Qualified Joint and Survivor Annuity or the Life
Only Annuity with respect to such subsequently accrued
benefits shall be valid only if it is made within the 90-day
period that ends on the Annuity Starting Date applicable to
such benefits.
(vi) PRE-AGE 35 ELECTION PERIOD FOR QUALIFIED
PRERETIREMENT SURVIVOR ANNUITY. A Member who will not have
attained age 35 as of the end of the current Plan Year may
make a special qualified election to waive the Qualified
Preretirement Survivor Annuity for the period beginning on the
date of such election and ending on the first day of the Plan
Year in which the Member will attain age 35. Such election
shall not be valid unless the Member receives a written
explanation of the Qualified Preretirement Survivor Annuity in
such terms as are comparable to the information provided under
Section 10.1(d). Qualified Preretirement Survivor Annuity
coverage shall be automatically reinstated as of the first day
of the Plan Year in which the Member attains age 35. Any new
waiver on or after such day shall be subject to the full
requirements of this Section.
(vii) POST-AGE 35 OR POST-SEPARATION ELECTION PERIOD
FOR QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Except as
otherwise provided in Section 10.1(c)(vi) and this
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Subsection, an election to waive the Qualified Preretirement
Survivor Annuity shall be valid only if it is made on or after
the first day of the Plan Year in which the Member attains age
35 and before the Member's death. If a Member's Separation
occurs prior to the first day of the Plan Year in which he
attains age 35, with respect to the balance of the Member's
accounts as of the date of Separation, the election period
shall begin on the date of Separation.
(viii) REVOCABILITY. The spouse's consent to the
waiver of the Qualified Joint and Survivor Annuity or the
Qualified Preretirement Survivor Annuity shall be irrevocable.
The Member may revoke a prior waiver without his spouse's
consent at any time before benefit payments begin.
(d) INFORMATION PROVIDED TO MEMBERS. Information regarding
the form of benefits available under the Plan shall be provided to
Members in accordance with the following provisions:
(i) GENERAL INFORMATION. Except as otherwise
provided in Section 10.1(e), each Member shall be provided
with a written general explanation or description of (i) the
Qualified Joint and Survivor Annuity and the Qualified
Preretirement Survivor Annuity (in the case of a married
Member) or the Life Only Annuity (in the case of an unmarried
Member), (ii) the circumstances in which benefits shall be
provided in such forms unless the Member has elected otherwise
(with the consent of his spouse, if applicable), (iii) the
rights of a Member's spouse, (iv) the availability of such
elections, (v) the relative financial effect on the Member's
benefit of any such election, (vi) the eligibility conditions
and other material features of the optional forms of benefit
available under the Plan, (vii) the relative values of the
optional forms of benefit available under the Plan, (viii) the
Member's right, if any, to defer receipt of the distribution,
(ix) the availability of the specific information described in
Section 10.1(d)(ii), and (x) the procedures for obtaining the
specific information described in Section 10.1(d)(ii).
(ii) SPECIFIC INFORMATION. A Member shall be
furnished, upon receipt by the Committee of a timely written
request, with a written explanation of the terms and
conditions of the Qualified Joint and Survivor Annuity and the
Qualified Preretirement Survivor Annuity (in the case of a
married Member) or the Life Only Annuity (in the case of an
unmarried Member) and the financial effect upon the particular
Member's annuity of making any election under Section 10.1(c).
Such financial effect shall be given in terms of dollars per
annuity payment. A Member shall be entitled to make only one
such request with respect to either the Qualified Joint and
Survivor Annuity or the Life Only Annuity, and one such
request with respect to the Qualified Preretirement Survivor
Annuity. The response to the Member's request shall be
personally delivered or mailed (first class mail, postage
prepaid) to the Member within 30 days from the date of the
Member's written request.
(iii) TIME FOR GIVING NOTICE REGARDING QUALIFIED
PRERETIREMENT SURVIVOR ANNUITY. The written general
explanation or description regarding the Qualified
Preretirement Survivor Annuity shall be provided to the Member
during whichever of the following periods ends last:
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(A) the period beginning with the first day
of the Plan Year in which the Member attains age 32
and ending with the close of the Plan Year preceding
the Plan Year in which the Member attains age 35;
(B) the two-year period beginning one year
prior to the date on which the Member commences
participation in the Plan;
(C) the two-year period beginning one year
prior to the date on which the Member and his spouse
become legally married; and
(D) in the case of a Member who incurs a
Separation before attaining age 35, the two- year
period beginning one year before such Separation.
(iv) TIME FOR GIVING NOTICE REGARDING LIFETIME
BENEFITS. The written general explanation or description
regarding the Qualified Joint and Survivor Annuity (in the
case of a married Member), the Life Only Annuity (in the case
of an unmarried Member), and any optional forms of benefit
available under the Plan shall be provided to Members no less
than 30 days and no more than 90 days before the Annuity
Starting Date.
(e) EXCEPTION FOR MEMBERS WITH SMALL BENEFIT AMOUNTS.
Notwithstanding the preceding provisions of this Section, no
information regarding any form of benefit payable in whole or in part
during the life of the Member shall be provided to the Member if his
benefit is payable in a single sum under Section 10.6.
10.2 DISTRIBUTION METHODS AVAILABLE. Subject to Section 10.1,
distributions shall be paid in cash under any one or a combination of the
distribution methods listed below. If the Member so requests, distributions
shall be paid in kind in the case of (i) any stock of the Sponsor held in the
Trust Fund that is attributable to the Member's Employer Matching Contribution
Account and (ii) any asset held in the Trust Fund as a specific Member-directed
investment pursuant to Section 11.3; provided, however, that no in kind
distribution shall be made if the Committee determines that such a distribution
would violate any law, regulation, or administrative rule of any governmental
authority. The present value of the total distribution under any method shall
be no less than the Member's vested Account balance. The distribution methods
available under the Plan are as follows:
(a) A single sum payment.
(b) Any optional form of benefit available at the sole
discretion of the Member under the Plan as in effect on the later of
the date of adoption or the effective date of any amendment thereto
that is adopted after July 30, 1984, but only with respect to benefits
accrued prior to such date of adoption or effective date.
(c) Any optional form of benefit available under the Plan as
operated on or after the effective date of Regulation Section
1.411(d)(4) with respect to the Plan, but only with respect to
benefits accrued prior to the later of the date of adoption or the
effective date of any amendment thereto that eliminates such benefit.
10.3 PRE-1984 DISTRIBUTION ELECTIONS. Notwithstanding any provision
of the Plan other than Section 10.1, distribution on behalf of any Member,
including a 5-percent owner in a Top-Heavy Plan, may be made in accordance with
a designation that satisfies the following requirements (regardless of when
such distribution commences):
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(a) The distribution from the Trust Fund is one which would
not have disqualified the Plan under Section 401(a)(9) of the Code as
in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982 or the Tax Reform Act of 1984.
(b) The distribution is in accordance with a method of
distribution designated by the Member whose interest in the Plan is
being distributed or, if the Member is deceased, by a Beneficiary of
such Member.
(c) Such designation was in writing, was signed by the Member
or the Beneficiary, and was made before January 1, 1984.
(d) The Member had accrued a benefit under the Plan as of
December 31, 1983.
(e) The method of distribution designated by the Member or
the Beneficiary specifies the time at which distribution shall
commence, the period over which distributions shall be made, and in
the case of any distribution upon the Member's death, the
Beneficiaries of the Member listed in order of priority.
A distribution upon death shall not be covered by this Section unless the
information in the designation contains the required information described
above with respect to the distributions to be made upon the death of the
Member. For any distribution that commences before January 1, 1984, but
continues after December 31, 1983, the Member or the Beneficiary to whom such
distribution is being made shall be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements of applicable law. If a designation is revoked any subsequent
distribution must satisfy the requirements of Section 401(a)(9) of the Code.
Any changes in the designation shall be considered to be a revocation of the
designation. However, the mere substitution or addition of another Beneficiary
(one not named in the designation) under the designation shall not be
considered to be a revocation of the designation, so long as such substitution
or addition does not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example, by altering the
relevant measuring life).
10.4 DEATH OF JOINT ANNUITANT. If a Member's joint annuitant dies
before a Member's Annuity Starting Date, any otherwise applicable joint and
survivor form of pension shall become inapplicable, and the Member shall
instead receive the benefit payable under Section 10.1, if applicable, or if
not, such other benefit as he may elect in accordance with the terms hereof. If
the Member's joint annuitant dies on or after the date any joint and survivor
annuity is to begin, that annuity shall continue under its terms and the amount
of the Member's pension shall not be increased.
10.5 CHOICE OF DISTRIBUTION METHODS. Each Member (or Beneficiary, in
the case of a death benefit for which the method of distribution has not been
specified by the Member) shall have the right to elect the method of
distribution applicable to him. An election of an option available under this
Article shall be made within the 90-day period that ends on the Annuity
Starting Date, and may be rescinded or changed by a Member (with the consent of
his spouse, if required) at any time prior to 30 days before his Annuity
Starting Date. An election, change, or rescission of an option must be made by
executing and properly filing the form or forms approved by the Committee.
Proof of age and other information may be required by the Committee.
10.6 SINGLE SUM PAYMENT OF SMALL AMOUNTS. Notwithstanding any other
provision of the Plan, each Member (i) who does not die before the Annuity
Starting Date and (ii) whose vested Account balance is $5,000 ($3,500 for Plan
Years beginning before August 6, 1997) or less shall be paid in the form of a
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single sum payment. A surviving spouse or other Beneficiary of a Member whose
Account balance is $5,000 ($3,500 for Plan Years beginning before August 6,
1997) or less shall be paid in the form of a single sum payment.
10.7 TIME OF DISTRIBUTION. Subject to any contrary provisions in
this Article, distributions provided for in the Plan shall be made or commenced
as soon as practical, and in any event, within one year after the Member's
Separation; provided, however, that no distribution shall be made or commenced
until at least 30 days after the Plan has provided the notice required under
Section 10.1(d)(iv), unless the Member affirmatively requests that distribution
be made or commenced earlier and spousal consent is not required.
10.8 MEMBER CONSENT TO EARLY DISTRIBUTIONS. Notwithstanding any
provision of the Plan except the last sentence of this Section, no lifetime
benefit shall be distributed or commence to be distributed to a Member prior to
the later of his attainment of Normal Retirement Age or age 62 without his
consent, unless the benefit is payable in a single sum under Section 10.6. Any
such consent shall be valid only if given not more than 90 days prior to the
Member's Annuity Starting Date and after his receipt of the notice regarding
lifetime benefits described in Section 10.1(d). The Member's consent shall not
be required for a distribution required by Section 401(a)(9) or Section 415 of
the Code.
10.9 COMPLIANCE WITH STATUTORY REQUIREMENTS. Notwithstanding any
other provision of the Plan, all benefits payable under the Plan shall be
distributed, or commence to be distributed, in compliance with the following
provisions:
(a) LIFETIME BENEFITS. The entire interest of each Member
(i) shall be distributed to such Member not later than the Required
Beginning Date; or (ii) shall be distributed, commencing not later
than the Required Beginning Date, in accordance with Regulations, over
the life of such Member or over the lives of such Member and a
designated Beneficiary (or over a period not extending beyond the life
expectancy of such Member or the life expectancy of such Member and a
designated Beneficiary).
(b) DEATH BENEFITS AFTER COMMENCEMENT OF DISTRIBUTION. If
the distribution of the Member's interest has begun in accordance with
clause (ii) of the only sentence in Section 10.9(a) and the Member
dies before his entire interest has been distributed to him, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution being used under such
clause as of the date of his death.
(c) DEATH BENEFITS PRIOR TO COMMENCEMENT OF DISTRIBUTION. If
a Member dies before the distribution of the Member's interest has
begun in accordance with clause (ii) of the only sentence in Section
10.9(a), the entire interest of the Member shall be distributed within
five years after his death. If (i) any portion of the Member's
interest is payable to (or for the benefit of) a designated
Beneficiary, (ii) such portion shall be distributed (in accordance
with Regulations) over the life of such designated Beneficiary (or
over a period not extending beyond the life expectancy of such
Beneficiary), and (iii) such distributions begin not later than one
year after the date of the Member's death or such later date as
Regulations may prescribe, for purposes of the immediately preceding
sentence, the portion referred to in clause (i) of this sentence shall
be treated as distributed on the date on which such distributions
begin. If the designated Beneficiary referred to in clause (i) of the
immediately preceding sentence is the surviving spouse of the Member,
(i) the date on which the distributions are required to begin under
clause (iii) of the immediately preceding sentence shall not be
earlier than the date on which the Member would have attained age 70
1/2, and (ii) if the surviving spouse dies before the distributions to
such spouse begin, this sentence shall be applied as if the surviving
spouse were the Member.
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(d) LIMITATIONS ON DEATH BENEFITS. Benefits payable under
the Plan shall not be provided in any form that would cause a Member's
death benefit to be more than incidental. Any distribution required to
satisfy the incidental benefit requirement shall be considered a
required distribution for purposes of Section 401(a)(9) of the Code.
(e) COMPUTATION OF AMOUNT OF DISTRIBUTION.
(i) If a Member's Benefit is to be distributed over
(i) a period not extending beyond the life expectancy of the
Member or the joint life and last survivor expectancy of the
Member and the Member's Beneficiary or (ii) a period not
extending beyond the life expectancy of the Beneficiary, the
amount required to be distributed for each calendar year,
beginning with distributions for the first Distribution
Calendar Year, must at least equal the quotient obtained by
dividing the Member's benefit by the Applicable Life
Expectancy.
(ii) For calendar years beginning before January 1,
1989, if the Member's spouse is not the Beneficiary, the
method of distribution selected must assure that at least 50
percent of the present value of the amount available for
distribution is paid within the life expectancy of the Member.
(iii) For calendar years beginning after December
31, 1988, the amount to be distributed each year, beginning
with distributions for the first Distribution Calendar Year
shall not be less than the quotient obtained by dividing the
Member's benefit by the lesser of (i) the Applicable Life
Expectancy or (ii) if the Member's spouse is not the
Beneficiary, the applicable divisor determined from the table
set forth in proposed Regulation Section 1.401(a)(9)-2, Q&A-4.
Distributions after the death of the Member shall be
distributed using the Applicable Life Expectancy in Section
10.9(e)(i) as the relevant division without regard to proposed
Regulations Section 1.401(a)(9)-2.
(iv) The minimum distribution required for the
Member's first Distribution Calendar Year must be made on or
before the Member's Required Beginning Date. The minimum
distribution for other calendar years, including the minimum
distribution for the Distribution Calendar Year in which the
Member's Required Beginning Date occurs, must be made on or
before December 31 of that Distribution Calendar Year.
(v) The Member's benefit subject to this Section
shall be the balance of the Member's Accounts as of the last
Valuation Date in the Valuation Calendar Year increased by the
amount of any contributions or forfeitures allocated to the
Member's Accounts as of dates in the Valuation Calendar Year
after the Valuation Date and decreased by distributions made
in the Valuation Calendar Year after the Valuation Date. For
purposes of the immediately preceding sentence, if any portion
of the minimum distribution for the first Distribution
Calendar Year is made in the second Distribution Calendar Year
on or before the Required Beginning Date, the amount of the
minimum distribution made in the second Distribution Calendar
Year shall be treated as if it had been made in the
immediately preceding Distribution Calendar Year.
(f) COMPLIANCE WITH SECTION 401(a)(9). All distributions
under the Plan shall be made in accordance with the requirements of
Section 401(a)(9) of the Code and all Regulations promulgated
thereunder. The provisions of the Plan reflecting Section 401(a)(9) of
the Code override any
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distribution options in the Plan inconsistent with such Section, other
than those complying with Sections 401(a)(11) and 417 of the Code.
(g) COMPLIANCE WITH SECTION 401(a)(14). Unless the Member
otherwise elects, the payment of benefits under the Plan to the Member
shall begin not later than the 60th day after the close of the Plan
Year in which occurs the latest of (i) the date on which the Member
attains the earlier of age 65 or the Normal Retirement Age, (ii) the
10th anniversary of the year in which the Member commenced
participation in the Plan, or (iii) the Member's Separation.
10.10 DIRECT TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTION. Effective
for distributions after December 31, 1992, if the distributee of any Eligible
Rollover Distribution (i) elects to have such distribution paid directly to an
Eligible Retirement Plan, and (ii) specifies the Eligible Retirement Plan to
which such distribution is to be paid (in such form and at such time as the
Committee may prescribe), such distribution shall be made in the form of a
direct trustee-to-trustee transfer to the Eligible Retirement Plan so
specified. The immediately preceding sentence shall apply only to the extent
that the Eligible Rollover Distribution would be includable in gross income if
not transferred as provided in such sentence (determined without regard to
Sections 402(c) and 403(a)(4) of the Code).
10.11 QUALIFIED DOMESTIC RELATIONS ORDERS. Payment shall be made in
accordance with the provisions of any Qualified Domestic Relations Order.
10.12 DISTRIBUTIONS TO DISABLED. If the Committee determines that
any person to whom a payment is due is unable to care for his affairs because
of physical or mental disability, it shall have the authority to cause the
payments to be made to the spouse, brother, sister, or other person the
Committee determines to have incurred, or to be expected to incur, expenses for
that person unless a prior claim is made by a qualified guardian or other legal
representative. The Committee shall not be responsible to oversee the
application of those payments. Payments made pursuant to this power shall be a
complete discharge of all liability under the Plan. Any amount payable to a
minor under any provision of this Plan including the foregoing provisions of
this Section may be paid directly to the minor. The receipt by the minor shall
be a complete discharge of all liability under the Plan.
10.13 DESIGNATION OF BENEFICIARY. Each Member has the right to
designate and to revoke the designation of his Beneficiary. Each designation or
revocation must be evidenced by a written document in the form required by the
Committee, signed by the Member, and filed with the Committee. If no
designation is on file at the time of a Member's death or if the Committee
determines that the designation is ineffective, the designated Beneficiary
shall be the Member's spouse, if living, or if not, the executor,
administrator, or other personal representative of the Member's estate.
If a Member is considered to be married under local law, the Member's
designation of any Beneficiary, other than the Member's spouse, shall not be
valid unless the spouse consents to such designation in a manner that would
satisfy the requirements of Section 10.1, other than Sections 10.1(c)(v)
through 10.1(c)(vii).
10.14 NO DUPLICATION OF BENEFITS. There shall be no duplication of
benefits under this Plan. Without regard to any other language in this Plan,
all distributions are to be debited to a Member's Account as of the date of the
distribution.
10.15 MISSING DISTRIBUTEES. The Committee shall make reasonable
efforts to locate any person entitled to a distribution. Such efforts shall
include utilization of the services of the Social Security Administration and
the Internal Revenue Service to attempt to ascertain the current mailing
address of any
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such person or for the purpose of forwarding correspondence from the Plan to
any such person. If the efforts to locate a person entitled to a distribution
are unsuccessful, the Committee may instruct the Trustee to distribute such
benefits into an interest-bearing federally-insured bank account opened in such
person's name or to purchase an annuity for such person. Such person shall have
an unconditional right to withdraw funds from any such bank account. All
ordinary and reasonable expenses incurred in connection with attempting to
locate a person entitled to benefits under the Plan and in establishing an
account or purchasing an annuity for a person who cannot be located shall be
deducted from the benefit payable to such person.
If a person entitled to a distribution cannot be located within one
year of the date any benefits payable under the Plan should be paid or commence
to be paid, the Member's Account may be forfeited as of the first day of any
Plan Year beginning after such one-year period and allocated as any other
forfeiture. Notwithstanding the preceding sentence, if at any time prior to
termination of the Plan and complete distribution of the Trust Fund, the Member
or Beneficiary files a valid claim for the forfeited benefits payable under the
Plan, then (a) as soon as administratively practicable, the forfeited benefits
payable to such former Member or Beneficiary shall be reinstated effective as
of the date or receipt of the claim and (b) as soon as administratively
practicable following the reinstatement of such forfeited benefits and
compliance with any applicable notice and consent requirements, the value of
the reinstated benefits shall be paid pursuant to the provisions of this
Article to the Member or Beneficiary thereof. Should the Plan be joined as a
party to any escheat proceedings, the Plan shall comply with any final judgment
involving such a benefit, shall treat the judgment as if it were a claim filed
by the Member or Beneficiary, and shall pay in accordance with that judgment.
In the event of the termination of the Plan, amounts payable to
persons who cannot be located that have not previously been forfeited and
reallocated shall be used to established a bank account or individual
retirement account, or to purchase an annuity, for such person.
10.16 CLAIMS PROCEDURE. When a benefit is or is about to be due, the
Member or Beneficiary must submit a claim to the Committee. Under normal
circumstances, a final decision shall be made as to a claim within 90 days
after receipt of the claim. If the Committee notifies the claimant in writing
during the initial 90-day period, it may extend the period up to 180 days after
the initial receipt of the claim. The written notice must contain the
circumstances necessitating the extension and the anticipated date for the
final decision. If a claim is denied during the claims period, the Committee
must notify the claimant in writing. The denial must include the specific
reasons for it, the Plan provisions upon which the denial is based, and the
claims review procedure. If no action is taken during the claims period, the
claim is treated as if it were denied on the last day of the claims period.
10.17 CLAIMS APPEAL PROCEDURE. If a Member's or Beneficiary's claim
is denied and he wants a review, he must apply to the Committee in writing.
That application can include any comment or argument the claimant wants to
make. The claimant can either represent himself or appoint a representative,
either of whom has the right to inspect all documents pertaining to the claim
and its denial. The Committee can schedule any meeting with the claimant or his
representative that it finds necessary or appropriate to complete its review.
The request for review must be filed within 90 days after the denial. If it is
not, the denial becomes final. If a timely request is made, the Committee must
make its decision, under normal circumstances, within 60 days of the receipt of
the request for review. However, if the Committee notifies the claimant prior
to the expiration of the initial review period, it can extend the period of
review up to 120 days following the initial receipt of the request for a
review. All decisions of the Committee must be in writing and must include the
specific reasons for its action and the Plan provisions on which its decision
is based. If a decision is not given to the claimant within the review period,
the claim is treated as if it were denied on the last day of the review period.
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ARTICLE 11
COMMITTEE
11.1 APPOINTMENT, TERM, RESIGNATION, AND REMOVAL. The Sponsor shall
appoint a Committee of not less than one person, the members of which shall
serve until their resignation, death, or removal. The Sponsor shall notify the
Trustee in writing of its composition from time to time. Any member of the
Committee may resign at any time by giving written notice of such resignation
to the Sponsor. Any member of the Committee may be removed by the Sponsor, with
or without cause. Vacancies in the Committee arising by resignation, death,
removal, or otherwise shall be filled by such persons as may be appointed by
the Sponsor.
11.2 POWERS. The Committee shall have exclusive responsibility for
the administration of the Plan, according to the terms and provisions thereof,
and shall have all powers necessary to accomplish such purposes, including, but
not by way of limitation, the right, power, and authority:
(i) To make rules and regulations for the administration of
the Plan which are not inconsistent with the terms and provisions
thereof, provided such rules and regulations are evidenced in writing;
(ii) To construe all terms, provisions, conditions, and
limitations of the Plan; and its construction thereof made in good
faith and without discrimination in favor of or against any Member
shall be final and conclusive on all persons;
(iii) To correct any defect, supply any omission, or
reconcile any inconsistency which may appear in the Plan in such
manner and to such extent as it shall deem expedient to carry out the
intent of the Sponsor in establishing and maintaining the Plan, and
its judgment in such matters shall be final and conclusive as to all
persons;
(iv) To select, employ, and compensate from time to time such
consultants, actuaries, accountants, attorneys, and other agents and
employees as the Committee may deem necessary or advisable for the
proper and efficient administration of the Plan, and any agent, firm,
or employee so selected by the Committee may be a disqualified person,
but only if the requirements of Section 4975(d) of the Code have been
met;
(v) To resolve all questions relating to the eligibility of
Employees to become Members, and to determine the number of Years of
Service and the amount of Considered Compensation upon which the
benefits of each Member shall be calculated;
(vi) To resolve all controversies relating to the
administration of the Plan, including but not limited to (a)
differences of opinion arising between the Employer and a Member, and
(b) any questions it deems advisable to determine in order to promote
the uniform and nondiscriminatory administration of the Plan;
(vii) To direct and instruct the Trustee in all matters
relating to the payment of Plan benefits and to determine a Member's
entitlement to a benefit should he appeal a denial of his claim for a
benefit or any portion thereof; and
(viii) To delegate such of its clerical and recordation
duties under the Plan as it may deem necessary or advisable for the
proper and efficient administration of the Plan.
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Notwithstanding the foregoing provisions of this Section, the Committee shall
have no authority that would prevent the Trustee from being an "agent
independent of the issuer," as that term is defined in Rule 10b-18 promulgated
under the Securities Exchange Act of 1934, at any time that the Trustee's
failure to maintain such status would result in the Sponsor or any other person
engaging in a "manipulative or deceptive device or contrivance" under the
provisions of Rule 10b-6 of such Act;
11.3 MEMBER-DIRECTED INVESTMENTS. The Committee may authorize the
Trustee to establish separate investment Funds and permit each Member to
specify the portion of his Accounts to be invested in each such Fund.
Alternatively, or in addition, the Committee may authorize the Trustee to
follow any investment direction given by a Member with respect to his Accounts,
subject only to such limitations as may be specified by the Committee. Once the
Committee has selected or changed the mode of investments for a Fund, or for
other Member-directed investments, it shall establish rules pertaining to the
administration thereof, including but not limited to selection of forms, rules
for making selections effective, establishing the frequency of permitted
changes, the minimum percentage in any Fund, and all other necessary or
appropriate regulations.
11.4 ORGANIZATION. The Committee shall select from among its members
a chairman, who shall preside at all of its meetings, and shall select a
secretary, without regard as to whether that person is a member of that
Committee, who shall keep the minutes of its proceedings and all records,
documents, and data pertaining to its supervision of the administration of the
Plan.
11.5 QUORUM AND MAJORITY ACTION. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at any meeting shall decide any
question brought before that meeting. In addition, the Committee may decide any
question by a vote, taken without a meeting, of a majority of its members.
11.6 SIGNATURES. The chairman, the secretary and any one or more of
the members of the Committee to which the Committee has delegated the power,
shall each, severally, have the power to execute any document on behalf of the
Committee, and to execute any certificate or other written evidence of the
action of the Committee. The Trustee, after being notified of any such
delegation of power in writing, shall thereafter accept and may rely upon any
document executed by such member or members as representing the action of the
Committee until the Committee files with the Trustee a written revocation of
that delegation of power.
11.7 DISQUALIFICATION OF COMMITTEE MEMBERS. A member of the
Committee who is also a Member of the Plan shall not vote or act upon any
matter relating solely to himself, unless he is the sole member of the
Committee.
11.8 DISCLOSURE TO MEMBERS. The Committee shall make available to
each Member and Beneficiary for his examination such records, documents, and
other data as are required under ERISA, but only at reasonable times during
business hours. No Member or Beneficiary shall have the right to examine any
data or records reflecting the compensation paid to any other Member or
Beneficiary, and the Committee shall be required to make no data or records
available other than those required by ERISA.
11.9 STANDARD OF PERFORMANCE. The Committee and each of its members
shall use the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with such
matters would use in conducting his business as the administrator of the Plan;
shall, when exercising its power to direct investments, diversify the
investments of the Plan so as to minimize the risk of large losses, unless
under the circumstances it is clearly prudent not to do so; and shall otherwise
act in accordance with the provisions of the Plan and ERISA.
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11.10 LIABILITY OF COMMITTEE AND LIABILITY INSURANCE. No member of
the Committee shall be liable for any act or omission of any other member of
the Committee, the Trustee, any investment manager, or any Member who directs
the investment of his Account or other agent appointed by the Committee except
to the extent required by the terms of ERISA or any other applicable state or
federal law under which liability cannot be waived. No member of the Committee
shall be liable for any act or omission on his own part except to the extent
required by the terms of ERISA or any other applicable state or federal law
under which liability cannot be waived. In this connection, each provision
hereof is severable and if any provision is found to be void as against public
policy, it shall not affect the validity of any other provision hereof.
Further, it is specifically provided that the Trustee may, at the
direction of the Committee, purchase out of the Trust Funds hereof insurance
for the members of the Committee and any other fiduciaries appointed by the
Committee, and for the Trust Fund itself to cover liability or losses occurring
by reason of the act or omission of any one or more of the members of the
Committee or any other fiduciary appointed by them under this Plan, provided
such insurance permits recourse by the insurer against the members of the
Committee or the other fiduciaries concerned in the case of a breach of a
fiduciary obligation by one or more members of the Committee or other fiduciary
covered thereby.
11.11 INDEMNIFICATION OF COMMITTEE MEMBERS. The Sponsor shall
indemnify each member of the Committee and his heirs, successors, and assigns
against all expenses (including, without limitation, taxes of every kind and
character, the costs of investigating and responding to claims, the amount of
judgments, the amount of settlements made with a view to the curtailment of
costs of litigation, attorney's fees, interest, penalties, and all costs,
expenses, losses, and damages of every kind) incurred by such member, his
heirs, successors, or assigns in connection with or arising out of his having
served as a member of the Committee.
11.12 BONDING. No member of the Committee shall be required to give
bond for the performance of his duties hereunder unless required by a law which
cannot be waived.
11.13 COMPENSATION. The Committee shall serve without compensation
for their services, but shall be reimbursed by the Employers for all expenses
properly and actually incurred in the performance of their duties under the
Plan unless the Employers elect to have such expenses paid out of the Trust
Fund.
11.14 PERSONS SERVING IN DUAL FIDUCIARY ROLES. Any person, group of
persons, corporations, firm, or other entity may serve in more than one
fiduciary capacity with respect to the Plan, including the ability to serve
both as a trustee and as a member of the Committee.
11.15 ADMINISTRATOR. For all purposes of ERISA, the Administrator of
the Plan shall be the Sponsor. The Administrator of the Plan shall have final
responsibility for compliance with all reporting and disclosure requirements
imposed with respect to the Plan under any federal or state law, or any
regulations promulgated thereunder.
11.16 NAMED FIDUCIARY. The members of the Committee shall be the
"named fiduciary" for purposes of Section 402(a)(1) of ERISA, and as such shall
have the authority to control and manage the operation and administration of
the Plan, except to the extent such authority and control is allocated or
delegated to other persons pursuant to the terms of the Plan.
11.17 STANDARD OF JUDICIAL REVIEW OF COMMITTEE ACTIONS. The Committee
has full and absolute discretion in the exercise of each and every aspect of
its authority under the Plan, including without limitation, the authority to
determine any person's right to benefits under the Plan, the correct amount and
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form of any such benefits, the authority to decide any appeal, the authority to
review and correct the actions of any prior administrative committee, and all
of the rights, powers, and authorities specified in Sections 10.16, 10.17, and
11.2. Notwithstanding any provision of law or any explicit or implicit
provision of the Plan, any action taken, or ruling or decision made, by the
Committee in the exercise of any of its powers and authorities under the Plan
shall be final and conclusive as to all persons other than the Sponsor,
including without limitation all Members and Beneficiaries, regardless of
whether the Committee or one or more members thereof may have an actual or
potential conflict of interest with respect to the subject matter of such
action, ruling, or decision. No such final action, ruling, or decision of the
Committee shall be subject to de novo review in any judicial proceeding; and no
such final action, ruling, or decision of the Committee may be set aside unless
it is held to have been arbitrary and capricious by a final judgment of a court
having jurisdiction with respect to the issue.
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ARTICLE 12
ADOPTION OF PLAN BY OTHER EMPLOYERS
12.1 ADOPTION PROCEDURE. Any business organization may, with the
approval of the Sponsor, adopt this Plan by:
(i) executing an authorized adoption instrument agreeing to
be bound as an Employer by all the terms, conditions, and limitations
of this Plan except those, if any, specifically described in the
adoption instrument; and
(ii) providing all information required by the Committee and
the Trustee.
An adoption may be retroactive to the beginning of a Plan Year if
these conditions are complied with on or before the last day of that Plan Year.
12.2 NO JOINT VENTURE IMPLIED. The document which evidences the
adoption of the Plan by an Employer shall become a part of this Plan. However,
neither the adoption of this Plan by an Employer nor any act performed by it in
relation to this Plan shall ever create a joint venture or partnership relation
between it and any other Employer.
12.3 ALL TRUST ASSETS AVAILABLE TO PAY ALL BENEFITS. Except to the
extent, if any, required in connection with the maintenance of separate Funds,
the Accounts of Members employed by the Employers which adopt this Plan shall
be commingled for investment purposes. All assets in the Trust Fund shall be
available to pay benefits to all Members employed by any Employer.
12.4 QUALIFICATION A CONDITION PRECEDENT TO PARTICIPATION.
Participation in this Plan by a business organization is contingent upon and
subject to the express condition precedent that such participation does not
cause the Plan to fail to qualify under Section 401(a) of the Code. In the
event that participation in the Plan by an Employer causes the Plan to be
disqualified for any reason, such participation shall fail retroactively for
failure to meet the condition precedent, and that portion of the Trust Fund
attributable to the period of disqualifying participation by such Employer
shall be immediately spun off, retroactively as of the first date of such
disqualifying participation, to a separate trust fund for the sole benefit of
the Employees employed by that Employer during the period of disqualifying
participation, and a separate plan identical to the Plan shall be created,
retroactively effective as of the first date of such disqualifying
participation, for the benefit of such Employees.
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ARTICLE 13
AMENDMENT AND TERMINATION
13.1 SPONSOR'S RIGHT TO AMEND. Subject to the limitations prescribed
by Section 13.2, the Sponsor may at any time and from time to time modify or
amend the Plan in whole or in part. Any amendment shall be made by an
instrument in writing, executed by the appropriate officer of the Sponsor,
setting forth the nature of the amendment and its effective date.
13.2 LIMITATIONS ON RIGHT TO AMEND. No amendment shall vest in any
Employer, directly or indirectly, any right, title or interest in or to control
over any Trust Fund or any portion thereof. No part of the Trust Fund shall by
reason of any amendment be used for or diverted to purposes other than the
exclusive benefit of Members and their Beneficiaries. If the Plan is amended in
any manner, the nonforfeitable percentage of the accrued benefit derived from
Employer Contributions (determined as of the later of the date of the adoption
of the amendment or of the effective date of the amendment) of each Member
shall not be less than such nonforfeitable percentage computed under the Plan
without regard to such amendment. If the Plan's vesting schedule is amended, if
the Plan is amended in any way that directly or indirectly affects the
computation of the Member's nonforfeitable percentage, or if the Plan is deemed
amended by an automatic change to or from a Top-Heavy vesting schedule, each
Member with at least three Years of Vesting Service may elect to have the
nonforfeitable percentage computed under the Plan without regard to such
amendment or change. The period during which the election may be made shall
begin on the date on which the amendment is adopted or deemed to be made and
shall end on the day which is 60 days after the latest of (i) the day the
amendment is adopted or deemed to be made; (ii) the day the amendment becomes
effective; or (iii) the day the Member is issued written notice of the
amendment by the Employer. No amendment shall decrease the Account balance of a
Member or eliminate an optional form of benefit with respect to benefits
attributable to service before the amendment in violation of Section 411(d)(6)
of the Code. No amendment shall increase substantially the duties or
responsibilities of the Trustee without its written consent. If any Employer is
subject to the Securities Act of 1934, the Plan shall not be amended more than
once every six months, other than to comport with changes in the Code, ERISA,
or the rules thereunder, in any manner that would affect the method of
determining the amount, price, and timing of securities of such Employer
allocated to the Accounts of officers and directors or categories of officers
and directors of such Employer.
13.3 RETROACTIVE AMENDMENTS TO MEET LABOR OR TAX REQUIREMENTS. It is
the intention of the Sponsor that Employer Contributions to the Plan be
deductible under the applicable provisions of the Code; that the Plan meet all
requirements of ERISA; that (except as otherwise prescribed by applicable law)
such contributions not be subject to the Federal Social Security Act; that to
the extent permitted under applicable law such contributions not be subject to
withholding under the Internal Revenue Code of 1986 or the Federal Social
Security Act; and that such contributions not be subject to the Fair Labor
Standards Act of 1938, as amended, as part of its Employees' "regular rate."
The Sponsor shall make such amendments to the Plan as may be necessary to carry
out this intention. All such amendments may be made retroactively as limited by
the applicable federal law.
13.4 EMPLOYER'S RIGHT TO TERMINATE. The Employer may terminate the
Plan by appropriate action evidenced in writing and delivered to the Sponsor.
The Plan shall terminate as to an Employer upon the happening of any of the
following events:
(i) Delivery to the Sponsor of a notice of termination
executed by the Employer, based on the action described in the
preceding sentence and specifying the date as of which the Plan shall
terminate;
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(ii) Adjudication of the Employer as a bankrupt, general
assignment by the Employer, based on the action described in the
preceding sentence, to or for the benefit of creditors, or cessation
of business of the Employer; and
(iii) Termination of the business of the Employer or the
transfer by the Employer of all or substantially all of its assets and
business without provision for continuing the Plan, except that, in
any such event, the Plan may be continued by any successor to the
Employer or any transferee of all or substantially all of its assets
and business, and in the event election is made to continue the Plan,
such successor or transferee shall automatically become substituted
for the Employer hereunder upon receipt by the Sponsor of written
notice of such election and delivery of the Sponsor's written consent
to the successor or transferee.
Should any Employer terminate participation in the Plan without
provision for continuation of the portion thereof attributable thereto, subject
to application of Section 13.5, any forfeitures arising incident to the
distributions described above shall be applied in accordance with Section 6.10
and any unapplied portion (comprised of Excess Amounts arising from or
attributable to contributions of the terminating Employer) of any suspense
account described in Article 7 shall be applied pro-rata in accordance with the
provisions of Article 7 to reduce future contributions of the remaining
Employers.
13.5 VESTING UPON TERMINATION, PARTIAL TERMINATION, AND
DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS. Notwithstanding any other provision
of the Plan, upon the termination or partial termination of the Plan, or upon
the complete discontinuance of contributions under the Plan, the rights of each
affected Employee to the amount credited to his Account at such time shall be
nonforfeitable. If substantial contributions are resumed after an event
described in the preceding sentence, all amounts allocated to the affected
Member's Accounts with respect to the Plan Years for which the contributions
are resumed and thereafter continued shall again vest only in accordance with
the vesting schedules set forth herein.
13.6 PLAN MERGERS. Notwithstanding any other provision hereof, the
Plan shall not be merged or consolidated with, nor shall any assets or
liabilities of the Plan be transferred to, any other plan unless each Member
would (if the plan then terminated) receive a benefit immediately after the
merger, consolidation, or transfer which is equal to or greater than the
benefit he would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had then terminated).
13.7 TRANSITION RULES FOR AMENDED AND RESTATED PLANS. Except as
otherwise provided, in the event that the Employer adopts the Plan as an
amendment, restatement, and continuation of an existing plan, the provisions of
the Plan shall apply only to Employees whose employment with the Employer
terminates after the effective date of the Plan. If an Employee's employment
with the Employer terminates prior to the effective date of the Plan, the
former Employee shall be entitled to benefits under the terms and provisions of
the Employer's plan as that plan existed on the date of the termination of
employment.
Amounts credited to a Member's Accounts under the plan as in effect
immediately prior to the effective date of its amendment, restatement and
continuation hereunder shall constitute the opening balances of corresponding
Accounts which shall be established under the Plan. To the extent individual
direction of investment of individual Accounts is no longer permitted under the
Plan after the effective date, the Committee may direct that such Accounts
shall be liquidated and the proceeds shall establish opening Account balances
as of the date specified by the Committee whereupon such Accounts shall become
part of the commingled Trust Fund subject to otherwise applicable rules for
allocating Investment Gain or Loss to Accounts.
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Employee elections under the plan as in effect immediately prior to
the effective date of its amendment, restatement, and continuation hereunder
shall continue in effect under the Plan unless the Committee otherwise directs.
Similarly, any Beneficiary designation in effect under the plan immediately
prior to its amendment, restatement, and continuation hereunder shall be deemed
to be a valid designation filed with the Committee, to the extent consistent
with the provisions of this Plan, unless and until the Member revokes such
Beneficiary designation.
Withdrawals and loans made under the plan as in effect immediately
prior to the effective date of its amendment, restatement, and continuation
hereunder shall continue to be governed by the provisions of the Employer's
plan as it existed on the date of the withdrawal and/or loan.
Unless the Committee otherwise directs, trust accounting for periods
prior to the effective date of the amendment, restatement, and continuation for
income, gain, loss, appreciation, depreciation, and forfeitures shall continue
under the rules of the plan as in effect prior to the effective date of such
amendment, restatement, and continuation.
Amounts being paid to a former Member or Beneficiary under the plan as
in effect immediately prior to the effective date of its amendment,
restatement, and continuation hereunder shall continue to be paid in accordance
with such provisions.
Unless the Sponsor otherwise directs, members of the Committee (or
comparable governing authority) and agent for service of legal process under
the prior plan shall continue in such capacity under this Plan.
The Committee shall have the power to take any action (short of
amending the Plan) it deems necessary or appropriate to effect and implement
the transition between the Plan as evidenced by this and the plan(s) as in
effect prior to its amendment, restatement, and continuation hereunder. Any
such action shall be taken pursuant to nondiscriminatory rules which shall be
uniformly applied in the best interest of the Members.
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ARTICLE 14
MISCELLANEOUS
14.1 NO REVERSIONARY INTEREST. In no event shall the principal or
income of the Trust Fund be paid to or revert to the Employer or be used for
any purpose other than the exclusive benefit of the Members or Beneficiaries
and the reasonable expenses of administering the Plan, except that:
(i) If the Employer makes a contribution by mistake of fact,
such mistaken contribution shall revert and be repaid to the Employer
within one year after the payment of the contribution.
(ii) The Employer's Contribution for each Plan Year is
conditioned on the Plan's initial qualification under Section 401 of
the Code. If the Plan receives an adverse determination with respect
to its initial qualification, the Employer's Contribution shall revert
and be repaid to the Employer within one year after the date of such
determination, but only if the application for determination is made
by the time prescribed by law for filing the Employer's return for the
taxable year in which the Plan was adopted, or such later date as the
Secretary of the Treasury may prescribe.
(iii) The Employer's Contribution is conditioned upon the
deductibility thereof under Section 404 of the Code. To the extent the
deduction is disallowed the contribution shall revert and be repaid to
the Employer within one year after the disallowance of the deduction.
In any case hereinabove described in clause (i) or (iii) of this
Section, the amount which may be repaid to the Employer may not exceed the
excess of (i) the amount contributed over (ii) the amount that would have been
contributed had there not occurred a mistake of fact or a mistake in
determining the deduction. Earnings attributable to such excess contribution
shall not be repaid, and losses attributable thereto shall reduce the amount
which may be returned. If the repayment of the amount attributable to the
mistaken contribution would cause the balance of any Member's Accounts to be
reduced to less than the balance which would have been in the Accounts had the
mistaken amount not been contributed, then the amount which may be repaid to
the Employer shall be limited so as to avoid such reduction.
14.2 PLAN DOES NOT CONSTITUTE AN EMPLOYMENT CONTRACT. The adoption
and maintenance of the Plan shall not be deemed to be a contract between any
Employer and any Member. Nothing contained herein shall be deemed to give any
Member the right to be retained in the employment of the Employer or to
interfere with the rights of the Employer to discharge any Member at any time,
nor shall it interfere with the Member's right to terminate his employment at
any time.
14.3 BENEFITS PROVIDED SOLELY BY TRUST FUND. All benefits payable
under the Plan shall be paid or provided for solely from the Trust Fund, and
the Employer assumes no liability or responsibility therefor.
14.4 SPENDTHRIFT CLAUSE. Except as otherwise specifically provided,
no principal or income payable or to become payable from the Trust Fund shall
be subject to anticipation or assignment by any Member or by any Beneficiary or
be subject to attachment by, or to the interference or control of, any creditor
of a Member or Beneficiary, or be taken or reached by any legal or equitable
process in satisfaction of any debt or liability of a Member or Beneficiary
prior to its actual receipt by such Member or Beneficiary. The interests of the
Employer in the assets, earnings and profits of the Trust Fund shall not be
subject to garnishment, attachment, levy, or execution of any kind for debts or
defaults of any person, natural or legal, having an interest in any portion of
the Trust Fund. Any attempted conveyance, transfer,
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assignment, mortgage, pledge, or encumbrance of the Trust Fund, or any part
thereof, or any interest therein, by a Member or Beneficiary, prior to
distribution as herein provided, shall be absolutely and wholly void, whether
such conveyance, transfer, assignment, mortgage, pledge or encumbrance be
intended to take place or become effective before or after the expiration of
the period herein fixed for the continuance of the said Trust Fund. The Trustee
shall never under any circumstances be required to recognize any conveyance,
transfer, assignment, mortgage, or pledge by a Member or Beneficiary hereunder,
of any part of the Trust Fund, or of any interest therein, and the Trustee
shall never be required to pay any money or thing of value thereon or therefor
to any creditor of a Member or Beneficiary, nor upon any debt created by a
Member or Beneficiary for any cause whatsoever. This Section shall also apply
to the creation, assignment, or recognition of a right to any benefit payable
with respect to a Member pursuant to a domestic relations order, unless (i)
such order is determined to be a Qualified Domestic Relations Order, or (ii)
such order was entered before January 1, 1985, and the Committee determines
that sufficient uncontroverted information is available to permit such order to
be treated in the same manner as a Qualified Domestic Relations Order.
14.5 FORM OF ELECTIONS. Except as otherwise specifically provided in
the Plan, in order to be effective, any election by a Member or Beneficiary
that is required or permitted under the Plan shall be in writing on a form
provided or approved by the Committee, signed by the person entitled to make
the election, and filed with the Committee. Any permitted revocation of such an
election shall be irrevocable except to the extent specifically provided
otherwise in the applicable provision of the Plan.
14.6 GOVERNING LAWS; PARTIES TO LEGAL ACTIONS. The provisions of the
Plan shall be construed, administered and enforced according to the laws of the
United States and, to the extent not preempted, the state of Texas. The Trustee
or the Employer may at any time initiate any legal action or proceeding for the
settlement of the accounts of the Trustee or for the determination of any
questions, including questions of construction which may arise, or for
instruction, and the only necessary parties to such action or proceeding shall
be the Trustee and the Employer, except that any other person or persons may be
included as parties defendant at the election of the Trustee and the Employer.
14.7 PLAN DOCUMENT CONTROLLING. In the event that there is a
discrepancy between the terms of this document and the terms of any policy or
contract issued under the Plan, the provisions of this document shall control.
14.8 SEVERABILITY OF CLAUSES. Each provision of the Plan Document is
severable and if any provision is found to be unenforceable for any reason, it
shall not affect the validity of any other provision.
14.9 CROSS REFERENCES. All Section references are to Sections of
this document, unless otherwise specified.
IN WITNESS WHEREOF, the Sponsor has executed this Agreement this 13th
day of April, 1998, to be effective as of June 21, 1988, except as otherwise
specified or as otherwise required to comply with applicable provisions of the
Code, any statute amending the Code, or any other applicable statute,
regulation, or ruling.
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CLIFFS DRILLING COMPANY
By /s/ EDWARD A. GUTHRIE
---------------------------
Vice President-Finance
ATTEST:
/s/ CINDY B. TAYLOR
- ----------------------------
Secretary
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on April 13, 1998, by
Edward A. Guthrie, Vice President-Finance of Cliffs Drilling Company, a
Delaware corporation, on behalf of said corporation.
/s/ SONIA VILLAGOMEZ
----------------------------
Notary Public in and for
the State of Texas
[SEAL]
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<PAGE> 1
Exhibit 10.27.1
AMENDMENT NO. 1
TO THE
CLIFFS DRILLING COMPANY
AMENDED AND RESTATED
SAVINGS PLAN
Pursuant to the terms and provisions of Article 13 of the Cliffs
Drilling Company Savings Plan, as Amended and Restated Effective June 21, 1988
(the "Plan"), Cliffs Drilling Company, a Delaware corporation (the "Company"),
hereby adopts the following Amendment No. 1 to the Plan (the "Amendment No. 1").
1.
Section 1.25 of the Plan is hereby amended in its entirety by
substituting the following therefor:
"1.25 CONSIDERED COMPENSATION. 'Considered Compensation' shall
mean the total cash remuneration paid to an Employee by the Employer
for personal services as reported on the Employee's federal income tax
withholding statement or statements (Form W-2 or its subsequent
equivalent), modified to include all of the following types of elective
contributions and all of the following types of deferred compensation:
(i) elective contributions that are not includable in gross income
under Sections 125 (relating to cafeteria plans), 402(a)(8) prior to
January 1, 1993, or 402(e)(3) after December 31, 1992 (relating to
Section 401(k) plans), 402(h) (relating to simplified employee
pensions), and 403(b) (relating to certain annuity contracts) of the
Code; (ii) compensation deferred under an eligible deferred
compensation plan within the meaning of Section 457 (b) of the Code;
and (iii) employee contributions (under governmental plans) described
in Section 414(h)(2) of the Code that are picked up by the employing
unit and thus are treated as employer contributions. However,
'Considered Compensation' shall not include (i) bonus compensation
under the Employer's Incentive Bonus Plan (but shall include cash bonus
payments under any other Employer sponsored bonus plan or program),
(ii) any extraordinary severance payments such as accrued vacation or
sick pay, (iii) special payments such as moving expenses, and (iv)
benefits (other than cash bonus payments addressed above) provided
under any Employer sponsored employee benefit program.
Notwithstanding the preceding provisions of this Section,
amounts in excess of the Section 401(a)(17) Limitation for the Plan
Year with respect to which Considered Compensation is being determined
shall be disregarded. Considered Compensation shall include all
remuneration for the entire Plan Year (regardless of whether the
Employee is a Member during the entire Plan Year)."
<PAGE> 2
2.
This Amendment No. 1 was adopted by the Compensation Committee of the
Board of Directors of the Company on May 12, 1998, effective, however, as of May
1, 1998, except as otherwise required to comply with any applicable statute,
regulation or ruling.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing amendments to the Plan, the Company, as Sponsor of the Plan, has
caused this Amendment No. 1 to the Cliffs Drilling Company Amended and Restated
Savings Plan to be executed by its duly authorized officers this 18th day of
May, 1998, effective as set forth above.
ATTEST: CLIFFS DRILLING COMPANY
/s/ CINDY B. TAYLOR By: /s/ EDWARD A. GUTHRIE
- ------------------------------ ------------------------------------
Cindy B. Taylor Edward A. Guthrie
Vice President and Secretary Vice President - Finance
and Chief Financial Officer
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 18th day of May,
1998, by Edward A. Guthrie, Vice President - Finance and Chief Financial Officer
of Cliffs Drilling Company, a Delaware corporation, on behalf of said
corporation.
/s/ SONIA VILLAGOMEZ
--------------------------------
[SEAL] Notary Public in and for the
State of T E X A S
-2-
<PAGE> 1
EXHIBIT 10.28
CLIFFS DRILLING COMPANY
SAVINGS TRUST
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - DEFINITIONS
1.1 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Discretionary Employer Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Employer Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Trust Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 - DIVISION OF RESPONSIBILITY
2.1 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Directions by Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Directions by Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3 - THE POWERS, DUTIES AND RESPONSIBILITIES OF THE TRUSTEE
3.1 Availability of Individual Investments or Investment Funds . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Allocation to Various Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Powers Relating to Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Indicia of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Standard of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Powers Relating to Payments and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 Payments on Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.8 Proof of Trustee's Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.9 Employment of Legal Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.10 Exemption from Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4 - NOTICES AND DIRECTIONS
4.1 Effective Time of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Certification of Members of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Directions by Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Reliance Upon Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Notices to the Committee and/or Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 5 - TRUSTEE'S FEES AND EXPENSE
ARTICLE 6 - LIABILITY OF THE TRUSTEE
6.1 Liability for Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Liability When Directed by Committee or Investment Manager . . . . . . . . . . . . . . . . . . . . . . 10
6.3 General Liability of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.4 Trustee's Right to Seek Advice of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.5 Trustee's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 7 - SETTLEMENT OF THE ACCOUNTS OF THE TRUSTEE
7.1 Maintenance of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Commingled Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Accounting Required by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 8 - RESIGNATION, REMOVAL AND SUBSTITUTION OF TRUSTEE
8.1 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.2 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.3 Vacancy Does Not Terminate Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.4 Appointment of Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.5 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.6 Successor Trustee Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 9 - ADOPTION BY AN EMPLOYER
9.1 Adoption Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.2 Adoption Does Not Create Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 10 - AMENDMENT AND TERMINATION
10.1 Right to Amend and Limitations Thereon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.2 Retroactive Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.3 Withdrawal of Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.4 Voluntary and Involuntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.5 Continuance Permitted Upon Sale or Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 11 - MISCELLANEOUS
11.1 Trust Agreement Not an Employment Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.2 Spendthrift Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.3 No Reversionary Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.4 Words Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.5 Governing Law; Parties to Legal Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.6 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.7 Cross References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.8 Multiple Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE> 4
CLIFFS DRILLING COMPANY
SAVINGS TRUST
THIS AGREEMENT by and between Cliffs Drilling Company, a Delaware
corporation (the "Sponsor"), and P W Trust Company, a New Jersey trust company,
as Trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Sponsor has heretofore adopted a qualified plan and
exempt trust for the exclusive benefit of its employees and their
beneficiaries;
WHEREAS, it has been determined that the trust should now be
completely amended and restated in order to (a) affect numerous technical
changes for the benefit of eligible employees and beneficiaries, and (b) ensure
the continued exemption under the applicable provisions of the Internal Revenue
Code of 1986, as amended, and the Employee Retirement Income Security Act of
1974, as amended; and
WHEREAS, it is intended that other business organizations may adopt
the plan and this trust for the exclusive benefit of their employees and their
employees' beneficiaries;
NOW, THEREFORE, this Agreement is entered into in order to set forth
the terms of the trust which are as follows:
ARTICLE 1
DEFINITIONS
1.1 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.2 COMMITTEE. "Committee" shall mean the Committee appointed by the
Sponsor to administer the Plan.
1.3 DISCRETIONARY EMPLOYER CONTRIBUTION. "Discretionary Employer
Contribution" shall mean the Employer's contribution made pursuant to the
provisions of Section 5.4 of the Plan, if any.
1.4 EMPLOYER. "Employer" shall mean the Sponsor and any other
business entity which has adopted the Plan and the Trust Agreement.
1.5 EMPLOYER MATCHING CONTRIBUTION. "Employer Matching Contribution"
shall mean the Employer's contribution made pursuant to the provisions of
Section 5.3 of the Plan, if any.
1.6 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.7 INVESTMENT MANAGER. "Investment Manager" shall mean the person
or entity, appointed by the Sponsor under the authority granted it in Section
2.4, that has the power to direct the Trustee as to the management, investment,
and reinvestment of that part of the Trust Fund it has been appointed to
manage.
<PAGE> 5
The person or entity appointed must (i) be a fiduciary in relation to the Plan
and Trust, (ii) be either registered as an investment advisor under the
Investment Advisors Act of 1940, a bank, as defined in that Act, or an
insurance company qualified to manage, acquire, and dispose of plan assets
under the laws of more than one state, and (iii) acknowledge in writing that
he, she, or it is a fiduciary with respect to the Plan and Trust Fund.
1.8 MEMBER. "Member" shall mean an employee of the Employer who is
eligible to and does participate in the Plan.
1.9 PLAN. "Plan" shall mean the Cliffs Drilling Company Savings
Plan.
1.10 SPONSOR. "Sponsor" shall mean Cliffs Drilling Company, a
Delaware corporation, which has assumed the sponsorship of the Plan, and its
successor or successors, if any.
1.11 TRUST AGREEMENT. "Trust Agreement" shall mean this agreement,
as amended from time to time.
1.12 TRUST FUND. "Trust Fund" shall mean all of the assets (and
related liabilities) held by the Trustee under the terms of the Trust Agreement
to fund the Plan.
1.13 TRUST YEAR. "Trust Year" shall mean the fiscal year of the
trust. The Trust Year shall end on the last day of December of each calendar
year.
1.14 TRUSTEE. "Trustee" shall mean P W Trust Company, or any
successor Trustee appointed pursuant to the terms of the Trust Agreement. When
more than one person or entity is serving as Trustee all actions may be
authorized by a majority vote with or without a meeting.
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<PAGE> 6
ARTICLE 2
DIVISION OF RESPONSIBILITY
2.1 TRUSTEE. The Trustee is a fiduciary with respect to the Trust
Fund. The Trustee has the exclusive responsibility for and all the powers
necessary to receive, hold, preserve, manage, invest and reinvest the Trust
Fund and to pay all costs and expenses incident to the management of the Trust
Fund. The Trustee is responsible only for the funds actually received by it as
Trustee. The Trustee is not required to compute the amount to be paid to it by
any Employer nor to collect any contributions from any Employer.
2.2 COMMITTEE. The Committee alone is the administrator of the Plan.
The Committee in its sole discretion shall decide all questions arising in the
administration, interpretation, and application of the Plan and Trust
Agreement. Its decisions shall be conclusive and shall bind all parties. The
Trustee shall not be required to make any determination relating to any matters
pertaining to the administration of the Plan.
2.3 DIRECTIONS BY COMMITTEE. The Committee shall not have the power
to direct the Trustee as to the management, investment, and reinvestment of any
part or all of the Trust Fund.
2.4 DIRECTIONS BY INVESTMENT MANAGER. The Sponsor may appoint one or
more Investment Managers. Any such Investment Manager may direct the Trustee as
to the management, investment, and reinvestment of the entire Trust Fund or any
part of the Trust Fund designated by the Sponsor. If the Investment Manager, as
a co-fiduciary, exercises its power given under the Trust Agreement, to direct
the Trustee in the management, investment, and reinvestment of the Trust held
by it, then the Trustee shall be subject to all proper directions of the
Investment Manager which are made in accordance with the terms of the Trust
Agreement, the Code, and ERISA.
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<PAGE> 7
ARTICLE 3
THE POWERS, DUTIES AND RESPONSIBILITIES OF THE TRUSTEE
3.1 AVAILABILITY OF INDIVIDUAL INVESTMENTS OR INVESTMENT FUNDS. The
assets of the Trust Fund may be invested in one commingled fund, in one or more
separate investment funds, or in individual investments as chosen by individual
Members, as determined from time to time by the Committee. When the Committee
decides there shall be separate investment funds or individual selection of
investments may be made by Members, it shall notify the Trustee in writing,
describing the type of assets to be held in each investment fund or the
parameters within which Members may select individual investments.
Notwithstanding any other provision of this Agreement, all amounts attributable
to Employer Matching Contributions and Employer Discretionary Contributions
shall be invested in common stock of the Sponsor.
When the Trustee receives funds to be invested or determines that
assets from the commingled fund, a separate investment fund or an individual
investment, if applicable, should be sold and the proceeds held for a period of
time pending reinvestment or other purpose, the funds may be held in cash or
invested in short-term investments such as certificates of deposit, U.S.
Treasury bills, savings accounts, commercial paper, demand notes, money market
funds, any common, pooled or collective trust funds which the Trustee uses for
such short-term investments, and any other similar assets which may be offered
by the federal government, national or state banks (whether or not serving as
Trustee under the Trust Agreement), or any savings and loan association, as may
be determined by the Committee. Until the Trustee receives a direction from the
Committee, all funds, to the extent possible, are to be held in short-term
investments which earn interest. The assets shall always remain a part of the
fund from which they came.
The assets of the Trust Fund may from time to time be commingled for
investment purposes with the assets of one or more other trusts which are used
to fund one or more other plans qualified under Section 401(a) of the Code and
maintained by the Sponsor. In the event the assets of the Trust Fund are
commingled with the assets of other trusts, the Committee or an agent appointed
by it must maintain records to clearly reflect the interest of the Trust Fund
in those commingled investments.
3.2 ALLOCATION TO VARIOUS FUNDS. It is the duty of the Committee to
advise the Trustee as to the portion of each Employer or Member contribution
which is to be placed in the various separate investment funds described in
Section 3.1 or the individual investments selected, if applicable, and as to
the portion of assets which are to be transferred from one separate investment
fund or investment to another. Until the Trustee receives a direction from the
Committee, any funds received by it shall be held in one or more of the
short-term investments described in Section 3.1.
3.3 POWERS RELATING TO INVESTMENTS. Except to the extent the Trustee
is otherwise directed pursuant to Article , the Trustee shall have the
following powers relating to the receipt, preservation, management, investment,
and reinvestment of both principal and income of the Trust Fund in addition to
all of the powers granted the Trustee under common law, the applicable state
trust law and all other applicable statutes:
(i) to handle, deal with and dispose of the Trust Fund
property as if the Trustee were fee simple owner of the property;
(ii) except where prohibited by applicable laws which cannot
be waived, to cause
-4-
<PAGE> 8
any investment to be registered or held in the name of some other
corporation, partnership or person with a power of attorney for their
transfer attached, or in bearer or Federal Reserve Book-Entry form or
in the name of the Trustee without disclosing the fiduciary capacity
of the Trustee;
(iii) to vote, either in person or by proxy, any share of
stock held as a part of the assets of the Trust Fund;
(iv) to collect the principal and income of the Trust Fund as
it becomes due and to give binding receipt for it;
(v) to take any action, whether by legal proceeding,
compromise, or otherwise, as the Trustee in its sole discretion
believes to be in the best interest of the beneficiaries of the Trust
Agreement if there is a default in the payment of any principal or
income of the Trust at any time;
(vi) to hold cash uninvested at any time in any amount;
(vii) to invest and reinvest the Trust Fund assets, or any
part of them, in any property of any kind, whether real, personal or
mixed, whether tangible or intangible, whether or not productive of
income, in any rights or interests in property, or in any evidence or
indicia of property, including but not limited to the following types
of properties or any of a similar kind, character, or class:
nonproductive property, common or preferred stock, interests in
so-called Massachusetts trusts, individual annuity contracts, group
annuity contracts, deposit administration contracts, investment
contracts with one or more responsible insurance companies providing
for investments in fixed income or equity type investments, with or
without guarantees, fees, beneficial interests, leaseholds, bonds,
mortgages, leases, notes, obligations, oil and gas payments, oil and
gas contracts, common group or collective trust funds that the Trustee
has or may adopt, or savings accounts, certificates of deposit or like
investments with the commercial department of any bank or savings and
loan association, including any bank acting as Trustee so long as they
bear a reasonable interest rate and the bank or savings and loan
association is supervised by the United States or a state;
(viii) To invest up to 100 percent of the assets of the Trust
Fund in qualifying employer securities, qualifying employer real
property, or any combination thereof, as such terms are defined in and
in compliance with ERISA;
(ix) to hold one or more insurance policies on the lives of
Members in the Plan;
(x) to lease, enter into leasebacks and let all or any
portion of the properties held as part of the Trust Fund for the
development or production of oil, gas, sulphur or other minerals, or
for any other purpose, on the terms, times and conditions (including a
term which shall extend beyond the term of the Trust Agreement), and
for the considerations or royalties that the Trustee believes is
proper; and
(xi) to borrow from or loan (except as prohibited
specifically by federal law or state statute) any sum the Trustee
considers necessary or desirable, and for that purpose, to mortgage or
pledge all or any part of the Trust Fund.
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<PAGE> 9
In addition to the powers given above, without regard to any other
provision of the Trust Agreement, all or any part of the assets may be
transferred to and invested in any collective investment trust then qualified
for tax exemption under Section 401(a) of the Code which is then maintained by
any person, including the Trustee, co-trustee, agent for the Trustee, or by an
Investment Manager. The provisions of the document governing the collective
investment trust, as amended from time to time, shall govern any investment in
that collective investment trust and are incorporated in the Trust Agreement.
The Trustee is not required to take any legal action to collect,
preserve or maintain any Trust Fund property unless it has been indemnified
either by the Trust Fund itself, with the approval of the Committee, or by an
Employer with respect to any expenses or losses to which it may be subjected by
taking the action. Any property acquired by the Trustee through the enforcement
or compromise of any claim or claims it has as Trustee under the Trust
Agreement shall become a part of the Trust Fund.
3.4 INDICIA OF OWNERSHIP. Except to the extent permitted under 29
C.F.R. Section 2550.404b-1, the indicia of ownership of all Trust Fund assets
shall be maintained within the jurisdiction of the district courts of the
United States.
3.5 STANDARD OF PERFORMANCE. The Trustee when discharging its duties
under the Trust Agreement shall do so in the interest of the participants and
beneficiaries solely. It shall use the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with the matters would use in the conduct of an
enterprise of a like character. The Trustee shall diversify the investments of
the Trust Fund when separate investment funds or individual selection of
investments by Members are not being used, so as to minimize the risk of large
losses unless under the circumstances it is clearly prudent not to do so and
shall otherwise act in accordance with the provisions of the Trust Agreement
and ERISA.
3.6 POWERS RELATING TO PAYMENTS AND DISTRIBUTIONS. The Trustee shall
from time to time on direction of the Committee make payments to the persons in
the manner, amount and for the purpose specified in the directions.
3.7 PAYMENTS ON TERMINATION. If the Plan is terminated, the Trustee
shall dispose of the Trust Fund assets in accordance with the written
directions of the Committee.
3.8 PROOF OF TRUSTEE'S AUTHORITY. All persons dealing with the
Trustee are entitled to rely upon the representations of the Trustee as to its
authority and are released from any duty to inquire into its authority for
taking or omitting any action or to verify that any money paid or other
property delivered to the Trustee is used by the Trustee for purposes proper
under the Trust Agreement. Any action of the Trustee under the Trust Agreement
shall be conclusively evidenced for all purposes by a document signed by the
Trustee which shall be conclusive evidence of the facts recited in it. All
persons shall be fully protected when acting or relying upon any notice,
resolution, instruction, direction, order, certificate, opinion, letter,
telegram or other document believed by the persons to be genuine, to have been
signed by the Trustee, and to be the act of the Trustee.
3.9 EMPLOYMENT OF LEGAL COUNSEL. The Trustee may engage and consult
with legal counsel of its choice, who may be counsel for any Employer or
Trustee's own general counsel, with respect to the meaning or construction of
the Plan, the Trust Agreement, or the Trustee's obligations or duties under the
Trust Agreement.
3.10 EXEMPTION FROM BOND. The Trustee shall not be required to give
bond or any other security
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<PAGE> 10
for the faithful performance of its duties unless it is required by a law which
cannot be waived. The Trustee shall not be required to make any inventory,
return, or report of any kind to any court unless it is required by a law which
cannot be waived.
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<PAGE> 11
ARTICLE 4
NOTICES AND DIRECTIONS
4.1 EFFECTIVE TIME OF NOTICE. The Trustee is not to be bound by any
certificate, notice, resolution, consent, order, information or other
communication unless it has been received in writing.
4.2 CERTIFICATION OF MEMBERS OF COMMITTEE. The Trustee may accept as
evidence of the authority of any persons acting as members of the Committee a
written notice executed by the Sponsor designating such persons as members of
the Committee, together with a specimen signature of the members. The Trustee
shall be entitled to recognize them and act upon the instructions, directions,
consents, and requests of the members of the Committee as last certified to it.
The Trustee may continue to act in accordance with any notice until the receipt
by it of a notice rescinding or superseding the prior notice.
4.3 DIRECTIONS BY COMMITTEE. Instructions, directions, or notices of
the Committee to the Trustee, certified to by the chairman, secretary, or any
one or more members of the Committee who were delegated the authority by a
majority of the Committee, shall be accepted as conclusive evidence of the
proper issuance and contents of the document.
4.4 RELIANCE UPON DIRECTION. The Trustee, when it acts in good
faith, may rely upon any notice, resolution, instruction, direction, order,
certificate, opinion, letter, telegram or other document believed by the
Trustee to be genuine, to have been signed by a proper representative of the
Committee or any Investment Manager appointed by it and to be the act of the
Committee or the Investment Manager. It shall accept any certificate or other
instrument duly signed by a proper representative of the Committee or any
Investment Manager appointed by it which purports to evidence an instruction,
direction, or order of the Committee or any Investment Manager appointed by it
as conclusive.
4.5 NOTICES TO THE COMMITTEE AND/OR INVESTMENT MANAGER. Notices or
communications from the Trustee to the Committee and/or any Investment Manager
shall be addressed to the person or persons which have been certified to the
Trustee by the Committee or by the Investment Manager and shall be sent to the
person or persons at the principal office of the Sponsor or the applicable
Investment Manager, unless the Trustee is instructed in writing to send the
communications to another address.
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<PAGE> 12
ARTICLE 5
TRUSTEE'S FEES AND EXPENSES
The Trustee, when composed of one or more individuals, shall receive
no compensation for services rendered but shall be reimbursed for expenses
properly and actually incurred in the performance of the Trustee's duties.
However, any corporate Trustee shall receive compensation as may be agreed upon
from time to time between the Trustee and the Sponsor and it shall be
reimbursed for expenses properly and actually incurred in the performance of
its duties under the Plan. The Trustee's compensation and the expenses
incurred in connection with management of the Trust Fund shall be paid from the
Trust Fund assets, unless paid by the Employers. If paid by the Employers, each
Employer shall bear such portion of the compensation and expense as is
determined by the Committee in its sole discretion.
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<PAGE> 13
ARTICLE 6
LIABILITY OF THE TRUSTEE
6.1 LIABILITY FOR INVESTMENTS. The Trustee shall not be liable to
the Trust Fund or to any person having a beneficial interest in the Trust Fund
for any losses or decline in value which may be incurred upon any investment of
the Trust Fund assets, or for failure of the assets to produce any or greater
earnings, interest, or profits, so long as the Trustee acts in good faith and
in accordance with the responsibilities, obligations and duties placed on it
under ERISA.
6.2 LIABILITY WHEN DIRECTED BY COMMITTEE OR INVESTMENT MANAGER. The
Trustee shall not be liable for any act or omission by it because of a
direction authorized under the Trust Agreement given by the Committee or any
Investment Manager, nor for any act or omission of the Committee, any
Investment Manager, or any other agent appointed by the Committee or the
Sponsor, except to the extent required by ERISA or any other applicable state
or federal law under which liability cannot be waived. When the Trustee has
made any payment out of the Trust Fund in accordance with the directions of the
Committee or any Investment Manager, it shall not be responsible for the
correctness of the amount of the payment to the recipient, or the method by
which it is paid. The Trustee shall also be protected in relying upon any
certificate, notice, resolution, consent, order, or other communication
purporting to have been so signed on behalf of the Committee or any Investment
Manager which it believes to be genuine, without any obligation on the part of
the Trustee to ascertain whether or not the provisions of the Plan are being
complied with.
6.3 GENERAL LIABILITY OF TRUSTEE. The Trustee and each person
individually who may be serving with others collectively as Trustee shall not
be liable for any act or omission on its own part except to the extent required
by ERISA or any other applicable state or federal law under which liability
cannot be waived.
6.4 TRUSTEE'S RIGHT TO SEEK ADVICE OF COMMITTEE. If at any time the
Trustee is in doubt concerning the course which it should follow in connection
with any matter relating to the administration of the Trust Fund, it may
request the Committee to advise it with respect to the proper course. It shall
be protected in relying upon any written advice or direction which may be given
by the Committee in response to the request.
6.5 TRUSTEE'S INSURANCE. The Trustee may, with the written approval
of the Committee, purchase out of the Trust Fund insurance for the Trustee and
for the Trust Fund itself to cover any liability and losses occurring by reason
of the act or omission of the Trustee if the insurance permits recourse by the
insurer against the Trustee in the case of a breach of fiduciary obligation by
it.
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<PAGE> 14
ARTICLE 7
SETTLEMENT OF THE ACCOUNTS OF THE TRUSTEE
7.1 MAINTENANCE OF RECORDS. The Trustee shall keep records as may be
necessary in the management of the Trust Fund. The Trustee's books and records
of the Trust Fund shall be open to inspection by any Employer and the Committee
at all reasonable times during business hours of the Trustee.
7.2 COMMINGLED TRUST FUND. If the Committee determines that the
Trust Fund shall be maintained as a single commingled fund, all income,
profits, recoveries, contributions, and any and all monies, securities and
properties of any kind at any time received or held by the Trustee for the
benefit of the Trust Fund shall be held for investment purposes as one single
fund. Separate accounts or records may be maintained for operational and
accounting purposes, but no account or record shall be considered as
segregating any funds or property from any other funds or property contained in
the single fund.
7.3 ACCOUNTING REQUIRED BY TRUSTEE. As soon as possible after the
close of each Trust Year, at other times as requested by the Committee, and as
of the date of the removal or resignation of the Trustee, the Trustee shall
render to the Sponsor and the Committee a report of the Trust Fund assets
during the accounting period. The report shall reflect the transactions for the
period covered and shall reflect the assets and their fair market value as of
the end of the accounting period.
-11-
<PAGE> 15
ARTICLE 8
RESIGNATION, REMOVAL AND SUBSTITUTION OF TRUSTEE
8.1 RESIGNATION. The Trustee and any successor Trustee may resign at
any time by filing with the Sponsor its written resignation. No resignation
shall take effect until 30 days from the date of the delivery of the
resignation unless prior to that time a successor Trustee has been appointed
and it has accepted.
8.2 REMOVAL. The Trustee and any successor Trustee may be removed by
the Sponsor at any time. No removal shall take effect until 30 days from the
date that the notice in writing was delivered to the Trustee unless prior to
that time a successor Trustee has been appointed, it has accepted and the
Trustee consents to the earlier date.
8.3 VACANCY DOES NOT TERMINATE TRUST. Any vacancy in the office of
Trustee created by the resignation or removal of the Trustee shall not
terminate the Trust Agreement or the trust created thereunder.
8.4 APPOINTMENT OF SUCCESSOR TRUSTEE. The appointment of a successor
Trustee shall be accomplished by the delivery to the resigning or removed
Trustee of an instrument in writing from the Sponsor, appointing the successor
Trustee and an acceptance in writing of the appointment as successor by the new
Trustee. All of the provisions of this agreement applicable to the Trustee
shall relate to each successor Trustee.
8.5 TRANSFER OF ASSETS. Any successor Trustee, after acknowledging
acceptance of this trust and accepting the Trust Fund assets from the retiring
Trustee, shall be vested with all the estates, titles, rights, powers, duties,
and discretions granted to the retiring Trustee. The retiring Trustee shall
execute and deliver all assignments or other instruments as may be necessary or
advisable in the discretion of the successor Trustee to transfer all Trust Fund
assets.
8.6 SUCCESSOR TRUSTEE LIABILITY. To the extent permitted by ERISA or
any other applicable state or federal statute, any successor Trustee is
relieved of any duty to examine the acts of any prior fiduciary, without the
necessity of any court accounting, and any successor Trustee shall be
responsible only for those assets which are actually delivered to such Trustee.
-12-
<PAGE> 16
ARTICLE 9
ADOPTION BY AN EMPLOYER
9.1 ADOPTION PROCEDURE. With the consent of the Sponsor and the
Trustee, any organization may agree to be bound as an Employer to all of the
terms, provisions, conditions and limitations of the Trust Agreement through a
written adoption agreement.
9.2 ADOPTION DOES NOT CREATE JOINT VENTURE. Neither the adoption of
the Trust Agreement by an Employer nor any act performed by it in relation to
the Trust Agreement shall ever create a joint venture or partnership
relationship between it and any other Employer.
-13-
<PAGE> 17
ARTICLE 10
AMENDMENT AND TERMINATION
10.1 RIGHT TO AMEND AND LIMITATIONS THEREON. The Sponsor shall have
the sole right to amend the Trust Agreement with the consent of the Trustee.
Each amendment shall be made by an instrument in writing executed by authorized
representatives of the Sponsor and the Trustee, setting forth the nature of the
amendment and its effective date. No amendment shall:
(i) have the effect of vesting in any Employer any interest
in the Trust Fund assets, except to the extent permitted under Section
11.3; or
(ii) cause or permit any Trust Fund assets to be diverted to
any purpose other than the exclusive benefit of the present or future
Members and their beneficiaries except to the extent permitted under
Section 11.3.
When an amendment occurs, each other Employer shall be deemed to have consented
to and adopted the amendment unless an Employer notifies the Committee of its
rejection in writing within 30 days after receipt of a copy of the amendment. A
rejection shall constitute a withdrawal from the Plan and the Trust Agreement
by that Employer unless the Sponsor acquiesces in the rejection.
10.2 RETROACTIVE AMENDMENT. The Sponsor shall make all amendments as
may be necessary to maintain compliance with the various tax, labor, and
securities laws. Any amendment may be made retroactively.
10.3 WITHDRAWAL OF EMPLOYER. An Employer may withdraw from the Trust
Agreement either by rejecting an amendment to the Plan or the Trust Agreement
if the Sponsor does not acquiesce in the rejection or by giving written notice
of its intent to withdraw to the Sponsor, the Committee and the Trustee. The
Committee shall then determine, within 60 days following the receipt of the
rejection or notice, the portion of the Trust Fund attributable to the Members
employed by the withdrawing Employer as of the day of withdrawal and shall
forward a copy of that determination to the Trustee. As soon as
administratively practicable thereafter, the Trustee shall segregate assets
equal to the withdrawing Employer's portion of the Trust Fund and shall
transfer those assets to the successor Trustee or Trustees upon receipt of a
designation of the successor from the withdrawing Employer.
A withdrawal from the Trust Agreement shall not terminate the Plan or
Trust Agreement with respect to the withdrawing Employer. Instead, the
withdrawing Employer shall, as soon as practicable, either appoint a successor
Trustee or Trustees and reaffirm the Trust Agreement as a new and separate
Trust Agreement intended to provide for funding the Plan and to be qualified
under Section 401(a) of the Code, or establish another plan and trust intended
to qualify under Section 401(a) of the Code.
The determination of the Committee, in its sole discretion, of the
portion of the Trust Fund attributable to the Members employed by the
withdrawing Employer as of the day of the withdrawal shall be final and shall
be binding upon all parties at interest. The Trustee's transfer of those assets
to the designated successor Trustee shall relieve the Trustee of any further
obligation, liability or duty to the withdrawing Employer, the Members employed
by that Employer, their beneficiaries, and the successor Trustee or Trustees.
10.4 VOLUNTARY AND INVOLUNTARY TERMINATION. An Employer may
terminate the Trust Agreement
-14-
<PAGE> 18
with respect to itself by executing and delivering to the Trustee a notice of
termination which specifies the date on which the Plan and Trust Agreement
shall terminate. Likewise, the Trust Agreement shall automatically terminate
with respect to any Employer upon the adjudication of that Employer as a
bankrupt, the general assignment by that Employer to or for the benefit of its
creditors, or the dissolution of that Employer without a successor. Upon the
termination of the Trust Agreement by any Employer, the Trustee shall
distribute to each Member employed by the terminating Employer an annuity
contract or cash in the amount certified by the Committee to be the appropriate
benefit as directed by the Committee.
If the entire Trust Agreement terminates, the Trustee may notify the
Internal Revenue Service of the termination and the Employer may apply to the
Internal Revenue Service for a determination letter with respect to the
termination. The Trustee may retain sufficient assets to cover any tax that may
become due upon a determination as to the effect of the termination on the
exemption of the Trust Fund if the Trust Fund assets are distributed prior to
the receipt of a determination letter.
The termination of the Trust Agreement as to any one or more Employers
shall not constitute a termination of the Trust Agreement with respect to the
other remaining Employers.
10.5 CONTINUANCE PERMITTED UPON SALE OR TRANSFER OF ASSETS. The
Trust Agreement shall not automatically terminate with respect to an Employer
in the event it consolidates, merges, and is not the surviving corporation,
sells substantially all of its assets, is a party to a reorganization and its
Employees and substantially all of its assets are transferred to another
entity, liquidates, or dissolves, if there is a successor organization.
Instead, the resulting successor person, firm, or corporation may continue the
Trust Agreement by executing a written adoption agreement providing for the
continuance of the Trust Agreement.
-15-
<PAGE> 19
ARTICLE 11
MISCELLANEOUS
11.1 TRUST AGREEMENT NOT AN EMPLOYMENT CONTRACT. The adoption and
maintenance of the Trust Agreement shall not be deemed to be a contract between
any Employer and its employees which gives any employee the right to be
retained in the employment of any Employer, to interfere with the rights of any
Employer to discharge any employee at any time, or to interfere with the
employee's right to terminate his employment at any time.
11.2 SPENDTHRIFT CLAUSE. Except as otherwise specifically provided,
no principal or income payable or to become payable from the Trust Fund shall
be subject to anticipation or assignment by any Member or by any beneficiary or
be subject to attachment by, or to the interference or control of, any creditor
of a Member or beneficiary, or be taken or reached by any legal or equitable
process in satisfaction of any debt or liability of a Member or beneficiary
prior to its actual receipt by such Member or beneficiary. The interests of the
Employer in the assets, earnings and profits of the Trust Fund shall not be
subject to garnishment, attachment, levy, or execution of any kind for debts or
defaults of any person, natural or legal, having an interest in any portion of
the Trust Fund. Any attempted conveyance, transfer, assignment, mortgage,
pledge, or encumbrance of the Trust Fund, or any part thereof, or any interest
therein, by a Member or beneficiary, prior to distribution as herein provided,
shall be absolutely and wholly void, whether such conveyance, transfer,
assignment, mortgage, pledge or encumbrance be intended to take place or become
effective before or after the expiration of the period herein fixed for the
continuance of the said Trust Fund. The Trustee shall never under any
circumstances be required to recognize any conveyance, transfer, assignment,
mortgage, or pledge by a Member or beneficiary hereunder, of any part of the
Trust Fund, or of any interest therein, and the Trustee shall never be required
to pay any money or thing of value thereon or therefor to any creditor of a
Member or beneficiary, nor upon any debt created by a Member or beneficiary for
any cause whatsoever. This Section shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with respect to a
Member pursuant to a domestic relations order, unless such order is determined
to be a Qualified Domestic Relations Order, or any domestic relations order
entered before January 1, 1985.
11.3 NO REVERSIONARY INTEREST. In no event shall the principal or
income of the Trust Fund be paid to or revert to the Employer or be used for
any purpose other than the exclusive benefit of the Members or beneficiaries
and the reasonable expenses of administering the Plan, except that:
(a) If the Employer makes a contribution by mistake of fact,
such mistaken contribution shall revert and be repaid to the Employer
within one year after the payment of the contribution.
(b) The Employer's contribution for each Plan Year is
conditioned on the Plan's initial qualification under Section 401 of
the Code. If the Plan receives an adverse determination with respect
to its initial qualification, the Employer's contribution shall revert
and be repaid to the Employer within one year after the date of such
determination, but only if the application for determination is made
by the time prescribed by law for filing the Employer's return for the
taxable year in which the Plan was adopted, or such later date as the
Secretary of the Treasury may prescribe.
(c) The Employer's contribution is conditioned upon the
deductibility thereof under Section 404 of the Code. To the extent
the deduction is disallowed the contribution shall revert and be
repaid to the Employer within one year after the disallowance of the
deduction.
-16-
<PAGE> 20
In any case hereinabove described in Section 11.3(a) or Section
11.3(c), the amount which may be repaid to the Employer may not exceed the
excess of (i) the amount contributed over (ii) the amount that would have been
contributed had there not occurred a mistake of fact or a mistake in
determining the deduction. Earnings attributable to such excess contribution
shall not be repaid, and losses attributable thereto shall reduce the amount
which may be returned. If the repayment of the amount attributable to the
mistaken contribution would cause the balance of any Member's Accounts to be
reduced to less than the balance which would have been in the Accounts had the
mistaken amount not been contributed, then the amount which may be repaid to
the Employer shall be limited so as to avoid such reduction.
11.4 WORDS USED. When the context requires words of the masculine,
feminine or neuter gender shall be construed to include the other genders.
Words used in the singular or plural may in instances be construed to include
the other. When the Trustee is composed of several persons or entities the
Trustee collectively may be referred to in the neuter.
11.5 GOVERNING LAW; PARTIES TO LEGAL ACTIONS. The provisions of the
Trust Agreement shall be construed, administered, and enforced according to the
laws of the United States and, to the extent not preempted, the state of Texas.
The Trustee or any Employer may at any time initiate a legal action or
proceeding for the settlement of the account of the Trustee, or for the
determination of any question or for instructions. The only necessary parties
to any action or proceeding are the Trustee and the Employer concerned;
however, any other person or persons may be included as parties at the election
of the Trustee and the Employer.
11.6 SEVERABILITY OF PROVISIONS. Each Section and each provision of
each Section is severable. If any Section or Sections, or any provision or
provisions of any Section are found to be void as against public policy,
unenforceable, or invalid for any other reason, that finding shall not affect
the validity or enforceability of any other provision or Section.
11.7 CROSS REFERENCES. All Section references are to Sections of the
Trust Agreement, unless otherwise specified.
11.8 MULTIPLE COPIES. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement and shall be binding on the
respective successors and assigns of the Sponsor, the Employers, the Trustee,
and all other interested parties.
IN WITNESS WHEREOF, the Sponsor and the Trustee have executed this
Agreement this 13th day of April, 1998, to be effective as of January 1, 1998,
except as otherwise specified or as otherwise required to comply with
applicable provisions of the Code, any statute amending the Code, or any other
applicable statute, regulation, or ruling.
-17-
<PAGE> 21
CLIFFS DRILLING COMPANY
ATTEST: By /s/ EDWARD A. GUTHRIE
----------------------------------
Vice President-Finance
/s/ CINDY B. TAYLOR
- -----------------------------
Secretary
P W TRUST COMPANY, TRUSTEE
ATTEST:
By /s/ STEVE AWERMAN
----------------------------------
July 21, 1998
- -----------------------------
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on April 13, 1998, by
Edward A. Guthrie, Vice President-Finance of Cliffs Drilling Company, a
Delaware corporation, on behalf of said corporation.
/s/ SONIA VILLAGOMEZ
----------------------------------------
[SEAL] Notary Public in and for
the State of Texas
-18-
<PAGE> 22
THE STATE OF NEW JERSEY )
)
COUNTY OF HUDSON )
This instrument was acknowledged before me on July 21, 1998, by Steve
Awerman, ____________ of P W Trust Company, the trustee of the Cliffs Drilling
Company Savings Trust.
/s/ MELODY SCHNEPF
------------------------------------
[SEAL] Notary Public in and for
the State of New Jersey
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 17,265
<SECURITIES> 0
<RECEIVABLES> 76,248
<ALLOWANCES> 200
<INVENTORY> 9,612
<CURRENT-ASSETS> 129,011
<PP&E> 511,165
<DEPRECIATION> 114,557
<TOTAL-ASSETS> 532,601
<CURRENT-LIABILITIES> 64,229
<BONDS> 203,271
0
0
<COMMON> 163
<OTHER-SE> 245,561
<TOTAL-LIABILITY-AND-EQUITY> 532,601
<SALES> 175,024
<TOTAL-REVENUES> 175,024
<CGS> 102,632
<TOTAL-COSTS> 120,891
<OTHER-EXPENSES> (171)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,968
<INCOME-PRETAX> 44,336
<INCOME-TAX> 15,518
<INCOME-CONTINUING> 28,818
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,818
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.80
</TABLE>
