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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, 1999
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.)
901 Threadneedle
Houston, Texas 77079
(Address of Principal Executive Offices) (Zip Code)
(281) 496-5000
(Registrant's Telephone Number, Including Area Code)
1200 Smith Street, Suite 300
Houston, Texas 77002
(Former Address)
The registrant meets the conditions set forth in General
Instructions H (1) (a) and (b) of Form 10-Q and is therefore filing
this Form 10-Q with the reduced disclosure format.
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 ___
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CLIFFS DRILLING COMPANY
Form 10-Q
For the Three and Six Months Ended June 30, 1999
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Operations (Unaudited) -
CLIFFS DRILLING COMPANY
Three and Six Months Ended June 30, 1999 and 1998
Consolidated Balance Sheets -
CLIFFS DRILLING COMPANY
June 30, 1999 (Unaudited) and December 31, 1998
Consolidated Statements of Cash Flows (Unaudited) -
CLIFFS DRILLING COMPANY
Three and Six Months Ended June 30, 1999 and 1998
Notes to Interim Consolidated Financial
Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
- ----------------------------------------------------------------------
CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
Post - Pre - Post - Pre -
Acquisition Acquisition Acquisition Acquisition
----------- ----------- ----------- -----------
REVENUES:
Revenues $ 83,556 $ 77,106 $ 163,352 $ 174,742
Income from Equity 61 142 221 282
-------- -------- --------- ---------
Investments 83,617 77,248 163,573 175,024
COSTS AND EXPENSES:
Operating Expenses 63,977 42,489 118,437 103,111
Depreciation, Depletion and
Amortization 9,721 6,439 18,598 13,741
General and Administrative
Expense 1,905 2,369 3,892 4,518
-------- -------- --------- ---------
75,603 51,297 140,927 121,370
-------- -------- --------- ---------
OPERATING INCOME 8,014 25,951 22,646 53,654
OTHER INCOME (EXPENSE):
Interest Income 673 496 1,138 1,049
Interest Expense (5,206) (4,894) (10,437) (9,968)
Other, net (105) (251) (151) (399)
-------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 3,376 21,302 13,196 44,336
INCOME TAX EXPENSE 1,182 7,456 4,619 15,518
-------- -------- --------- ---------
NET INCOME $ 2,194 $ 13,846 $ 8,577 $ 28,818
======== ======== ========= =========
NET INCOME PER COMMON SHARE:
Basic N/A $ 0.87 N/A $ 1.82
======== ======== ========= =========
Diluted N/A $ 0.86 N/A $ 1.80
======== ======== ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Basic N/A 15,851 N/A 15,846
======== ======== ========= =========
Diluted N/A 16,044 N/A 16,045
======== ======== ========= =========
See accompanying notes to interim consolidated financial statements.
The merger of RBF Cliffs Acquisition Corp., a wholly-owned
subsidiary of R&B Falcon Corporation, with and into Cliffs Drilling
Company was effective on December 1, 1998 and was accounted for using
the purchase method of accounting. The purchase price adjustments were
"pushed down" and recorded in the consolidated financial statements of
Cliffs Drilling Company, which affects the comparability of the post-
acquisition and pre-acquisition results of operations and cash flows.
See Note 2.
CLIFFS DRILLING COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1999 1998
--------- ------------
ASSETS (In thousands, except
share information)
CURRENT ASSETS:
Cash and Cash Equivalents $ 74,637 $ 36,276
Accounts Receivable, net of allowance
for doubtful accounts of $1,072 and
$472 at June 30, 1999 and December 31,
1998, respectively 36,366 35,670
Notes and Other Receivables, Current 3,384 6,704
Inventories 9,975 10,335
Drilling Contracts in Progress 18,384 29,483
Prepaid Insurance 1,818 2,248
Other Prepaid Expenses 4,330 2,893
--------- ---------
Total Current Assets 148,894 123,609
PROPERTY AND EQUIPMENT, AT COST:
Rigs and Related Equipment 507,923 504,189
Other 6,222 4,550
--------- ---------
514,145 508,739
Less: Accumulated Depreciation,
Depletion and Amortization since
December 1, 1998 (20,436) (2,898)
--------- ---------
Net Property and Equipment 493,709 505,841
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill, net of accumulated amortization
of $1,039 and $150 at June 30, 1999 and
December 31, 1998, respectively 71,448 70,579
Debt Issue Costs and Other 3,751 4,139
Investments in and Advances to
Unconsolidated Affiliates 5,439 2,580
Due from Parent 6,276 10,508
--------- ---------
TOTAL ASSETS $ 729,517 $ 717,256
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 31,126 $ 28,843
Accrued Interest 2,666 2,672
Other Accrued Expenses 17,981 21,426
--------- ---------
Total Current Liabilities 51,773 52,941
10.25% SENIOR NOTES 202,272 202,935
DEFERRED INCOME TAXES 60,688 55,094
OTHER LIABILITIES 1,718 1,797
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value, 1,000 share
authorized, issued and outstanding at June
30, 1999 and 30,000,000 shares authorized
and 1,000 shares issued and outstanding at
December 31, 1998 - -
Paid-in Capital 405,069 405,069
Retained Earnings (Deficit) since
December 1, 1998 7,997 (580)
--------- ---------
Total Shareholders' Equity 413,066 404,489
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 729,517 $ 717,256
========= =========
See accompanying notes to interim consolidated financial statements.
CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(In thousands)
Post - Pre - Post - Pre -
Acquisition Acquisition Acquisition Acquisition
----------- ----------- ----------- -----------
OPERATING ACTIVITIES:
Net Income $ 2,194 $ 13,846 $ 8,577 $ 28,818
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY (USED IN) OPERATING
ACTIVITIES:
Depreciation, Depletion and
Amortization 9,721 6,439 18,598 13,741
Deferred Income Tax Expense 1,063 1,810 5,594 3,778
Mobilization Expense
Amortization - 198 - 393
Gain on Disposition of Assets (18) (128) (191) (123)
Amortization of Debt Issue Costs 231 226 462 453
Amortization of Restricted Stock - 164 - 318
Amortization of Debt Premium (167) (167) (335) (335)
Other (1,778) 287 (1,713) 434
CHANGES IN OPERATING ASSETS
AND LIABILITIES:
Accounts Receivable 18,040 (18,862) 2,624 (12,517)
Inventories 847 (870) 1,139 (2,014)
Drilling Contracts in Progress 9,368 (4,808) 11,099 3,819
Prepaid Insurance and
Other Prepaid Expenses (1,926) (3,865) (1,007) (5,421)
Investments in and Advances
to Unconsolidated Affiliates (1,602) (195) (2,859) (541)
Due from Parent 4,212 - 4,232 -
Accounts Payable and
Other Accrued Expenses (6,472) (14,242) (1,247) (780)
-------- -------- -------- --------
Net Cash Provided By (Used
In) Operating Activities 33,713 (20,167) 44,973 30,023
INVESTING ACTIVITIES:
Capital Expenditures (1,828) (18,416) (6,831) (42,166)
Proceeds from Sale of Property
and Equipment 35 533 547 1,210
-------- -------- -------- --------
Net Cash Used In Investing
Activities (1,793) (17,883) (6,284) (40,956)
FINANCING ACTIVITIES:
Payments on Borrowings - - (328) -
Proceeds from Exercise of Stock - 108 - 108
Options
Debt Issue Costs - - - (32)
-------- -------- -------- --------
Net Cash Provided By (Used
In) Financing Activities - 108 (328) 76
-------- -------- -------- --------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 31,920 (37,942) 38,361 (10,857)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 42,717 55,207 36,276 28,122
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 74,637 $ 17,265 $ 74,637 $ 17,265
======== ======== ======== ========
See accompanying notes to interim consolidated financial statements.
The merger of RBF Cliffs Acquisition Corp., a wholly-owned
subsidiary of R&B Falcon Corporation, with and into Cliffs Drilling
Company was effective on December 1, 1998 and was accounted for
using the purchase method of accounting. The purchase price
adjustments were "pushed down" and recorded in the consolidated
financial statements of Cliffs Drilling Company, which affects the
comparability of the post-acquisition and pre-acquisition results of
operations and cash flows. See Note 2.
CLIFFS DRILLING COMPANY
Notes to Interim Consolidated Financial Statements (Unaudited)
June 30, 1999
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, 1999 are not
necessarily indicative of the results that may be expected for the
year ended December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in
the Cliffs Drilling Company (the "Company") annual report on Form 10-
K for the year ended December 31, 1998.
2. Business Combination
Effective December 1, 1998, a change in control of the Company
occurred as a result of the merger of RBF Cliffs Acquisition Corp., a
wholly-owned subsidiary of R&B Falcon Corporation ("R&B Falcon"),
with and into the Company (the "Merger"). As a result of the Merger,
each outstanding share of common stock, $0.01 par value ("Common
Stock") of the Company was converted into 1.7 shares of R&B Falcon
common stock and cash in lieu of fractional shares, as provided for
in an Agreement and Plan of Merger dated August 21, 1998 (the "Merger
Agreement"). The Company is now a wholly-owned subsidiary of R&B
Falcon.
The Merger was accounted for using the purchase method of
accounting. Accordingly, an allocation of the purchase price was
assigned to the assets and liabilities of the Company based on their
estimated fair values. The purchase price adjustments were "pushed
down" to the consolidated financial statements of the Company.
The accompanying Consolidated Statements of Operations include the
effects of the Merger beginning December 1, 1998. Unaudited pro forma
consolidated operating results of the Company for the six months
ended June 30, 1998, assuming the Merger was effective as of January
1, 1998, are summarized as follows:
(In thousands)
Revenues $175,024
Operating Income 49,659
Net Income 26,222
The pro forma information for the six months ended June 30, 1998
includes adjustments for additional depreciation of $3.1 million
based on the fair market values of the drilling rigs and other
property and equipment, goodwill amortization of $.9 million and a
reduction in income taxes of $1.4 million. The pro forma information
is not necessarily indicative of the results of operations had the
Merger occurred on the assumed dates or the results of operations for
any future period.
3. Notes Payable
Long-term debt at June 30, 1999 consists solely of 10.25% Senior
Notes due 2003 (the "Senior Notes") in the aggregate principal amount
of $199.7 million and debt premium, net of amortization, of $2.6
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.
Upon consummation of the Merger, the Company offered to purchase
for cash all of the outstanding Senior Notes at a purchase price
equal to 101% of the principal amount, plus accrued and unpaid
interest to the change of control payment date, as required by the
indenture governing the Senior Notes (the "Change of Control Offer").
On January 28, 1999, the Company purchased the $.3 million principal
amount of Senior Notes that were tendered pursuant to the Change of
Control Offer.
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"). Each Subsidiary Guarantor is 100% owned by
the Company. R&B Falcon is not a guarantor of the Senior Notes.
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:
June 30, December 31,
1999 1998
-------- --------
(In thousands)
Current Assets $ 7,122 $ 7,133
Non-Current Assets 69,184 68,766
-------- --------
Total Assets $ 76,306 $ 75,899
======== ========
Current Liabilities $ 2,423 $ 3,794
Non-Current Liabilities 61,404 63,089
Equity 12,479 9,016
-------- --------
Total Liabilities and Equity $ 76,306 $ 75,899
======== ========
Six Months Ended
June 30,
---------------------
1999 1998
-------- --------
(In thousands)
Revenues $ 10,011 $ 13,614
Operating Income $ 2,666 $ 3,400
Net Income $ 1,529 $ 2,100
4. Rig Management Agreement
Effective April 1, 1999, the Company entered into a rig management
agreement to lease 10 of its jack-up drilling rigs operating in the
U.S. Gulf of Mexico to R&B Falcon Drilling USA, Inc. ("RBF USA") (the
"Management Agreement"). Based upon the terms of the Management
Agreement, RBF USA manages these rigs for a fixed daily rate and
earns 20% of the net profit and bears 20% of the net loss generated
by each rig. The Company retains the remaining 80% of the net
profit or loss from each rig. The Company recognized revenues of $4.5
million and operating expenses of $5.8 million associated with the
Management Agreement during the second quarter of 1999.
5. Business Segments
The Company's operating results by business segment are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1999 1998 1999 1998
-------- -------- --------- ---------
(In thousands)
Revenues:
Daywork Drilling $ 33,292 $ 54,250 $ 73,470 $ 115,222
Engineering Services 59,368 26,460 108,360 70,089
MOPU Operations 1,232 2,352 2,453 4,680
Corporate Office and Other 63 92 129 222
Eliminations (a) (10,338) (5,906) (20,839) (15,189)
-------- -------- --------- ---------
Consolidated $ 83,617 $ 77,248 $ 163,573 $ 175,024
======== ======== ========= =========
Operating Income (Loss):
Daywork Drilling $ (22) $ 18,557 $ 4,151 $ 40,508
Engineering Services 10,162 8,987 22,901 16,060
MOPU Operations 437 928 792 1,896
Corporate Office and Other (2,563) (2,521) (5,198) (4,810)
-------- -------- --------- ---------
Consolidated $ 8,014 $ 25,951 $ 22,646 $ 53,654
======== ======== ========= =========
(a) Eliminations include intersegment sales between the Daywork
Drilling and Engineering Services business segments.
Revenues from PDVSA Exploration and Production, the Venezuelan
government-owned oil company ("PDVSA"), and its predecessors
accounted for approximately 49% and 52% of the Company's consolidated
revenue for the three and six months ended June 30, 1999,
respectively.
6. Derivatives and Hedging Instruments
In 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS No. 133"). SFAS No. 133
establishes accounting and reporting standards requiring that every
derivative instrument be measured at its fair value, recorded in the
balance sheet as either an asset or liability and that changes in the
derivative's fair value be recognized currently in earnings. SFAS No.
133 is effective for all fiscal quarters for fiscal years beginning
after June 15, 2000 and is not expected to have a significant impact
on the Company's consolidated financial statements and related
disclosures upon adoption.
7. Executive Terminations
Certain executive officers of the Company were terminated during
the period from May to July of 1999 as a result of the Merger.
Management of R&B Falcon has assumed responsibilities previously
performed by these individuals.
8. Change in Presentation
Certain financial statement items have been reclassified in the
prior year to conform with the current year presentation.
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
Effective December 1, 1998, a change in control of the Company
occurred as a result of the Merger. The Company is now a wholly-owned
subsidiary of R&B Falcon. The Merger was accounted for using the
purchase method of accounting. Accordingly, an allocation of the
purchase price was assigned to the assets and liabilities of the
Company based on their estimated fair values. The purchase price
adjustments were "pushed down" to the consolidated financial
statements of the Company, which affects the comparability of the
post-acquisition and pre-acquisition results of operations and cash
flows.
Activity in the contract drilling industry and related oil service
businesses has deteriorated significantly in the past year due to
decreased worldwide demand for drilling rigs and related services
resulting from a substantial decline in crude oil prices. In recent
months, crude oil prices have recovered somewhat, but there can be no
assurance that demand for drilling rigs and services will increase.
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. In late 1998 and early 1999,
lower crude oil prices affected exploration and production spending,
which created significantly lower dayrates and utilization for
offshore drilling companies, particularly in the U.S. Gulf of Mexico.
Crude oil and natural gas prices have continued to fluctuate over the
last several years. If crude oil prices decline from current levels,
or a weakness in crude oil prices continued for an extended period,
there could be a further deterioration in both rig utilization and
dayrates.
The Company's daywork drilling operations benefited during early
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 increased
dayrates and utilization of the Company's drilling rigs. The same
factors both positively and negatively affected the Company's
engineering services business segment during early 1998, in that
increased exploration activity caused an increase in demand for the
Company's engineering services; however, reduced rig availability
made it more difficult for the Company to contract drilling rigs
required for performance of turnkey drilling operations.
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.
Results of Operations
Three Months Ended June 30, 1999 and 1998
The Company recognized net income of $2.2 million during the second
quarter of 1999 compared to net income of $13.8 million in the second
quarter of 1998. Revenues increased $6.4 million and operating income
decreased $17.9 million in the same period. The decrease in operating
income was partially offset by a decrease in income taxes of $6.3
million. Decreased operating results from the Company's daywork
drilling business segment contributed to the reduction in operating
income.
Three Months Ended
June 30,
------------------- Increase
1999 1998 (Decrease)
-------- -------- --------
(In thousands)
Revenues:
Daywork Drilling $ 33,292 $ 54,250 $(20,958)
Engineering Services 59,368 26,460 32,908
MOPU Operations 1,232 2,352 (1,120)
Corporate Office and Other 63 92 (29)
Eliminations (10,338) (5,906) (4,432)
-------- -------- --------
Consolidated $ 83,617 $ 77,248 $ 6,369
======== ======== ========
Operating Income (Loss):
Daywork Drilling $ (22) $ 18,557 $(18,579)
Engineering Services 10,162 8,987 1,175
MOPU Operations 437 928 (491)
Corporate Office (2,563) (2,521) (42)
-------- -------- --------
Consolidated $ 8,014 $ 25,951 $(17,937)
======== ======== ========
Daywork Drilling
Daywork drilling revenues decreased $21.0 million and operating
income decreased $18.6 million in the second quarter of 1999 compared
to the second quarter of 1998. The decreases in revenues and
operating income were primarily due to reduced dayrates and
utilization. These decreases were partially offset by revenues and
operating income from 3 rigs which commenced operations subsequent to
the second quarter of 1998.
Effective April 1, 1999, the Company entered into a rig management
agreement to lease 10 of its jack-up drilling rigs operating in the
U.S. Gulf of Mexico to RBF USA. Based upon the terms of the
Management Agreement, RBF USA manages these rigs for a fixed daily
rate and earns 20% of the net profit and bears 20% of the net loss
generated by each rig. The Company retains the remaining 80% of
the net profit or loss from each rig. The Company recognized revenues
of $4.5 million and operating expenses of $5.8 million associated
with this Management Agreement during the second quarter of 1999.
The Company operates its drilling rigs on both a term and a spot
(well-to-well) basis. The following table summarizes revenues,
utilization and average dayrates for significant classes of the
Company's drilling rigs:
Three Months Ended
June 30,
------------------- Increase
1999 1998 (Decrease)
-------- -------- --------
(In thousands)
Daywork Drilling Revenues (1):
Jack-up Rigs:
International $ 7,519 $ 12,307 $ (4,788)
Domestic 5,243 25,828 (20,585)
Land Rigs 16,304 9,437 6,867
Platform / Workover Rigs 4,165 6,009 (1,844)
Other 61 669 (608)
-------- -------- --------
Total $ 33,292 $ 54,250 $(20,958)
======== ======== ========
Average Rig Utilization (2):
Jack-up Rigs:
International 44% 100%
Domestic 42% 100%
Land Rigs 91% 88%
Platform / Workover Rigs 63% 99%
Average Dayrates:
Jack-up Rigs:
International $ 28,934 $ 31,247
Domestic 14,133 35,189
Land Rigs 16,449 16,936
Platform/Workover Rigs 15,076 14,173
- ---------
(1)Includes revenues earned from affiliates.
(2)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.
Engineering Services
Engineering services revenues increased $32.9 million and operating
income increased $1.2 million in the second quarter of 1999 compared
to the second quarter of 1998. The Company completed 14 turnkey
contracts in the second quarter of 1999 compared to 3 turnkey
contracts completed in the second quarter of 1998. Five of the 14
contracts completed during the second quarter of 1999 were
international contracts in Venezuela compared to 2 international
contract completions in the second quarter of 1998. The Company has
expanded its turnkey operations in the U.S. Gulf of Mexico and
completed 9 contracts in the second quarter of 1999 compared to only
one completion in the second quarter of 1998.
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 affected the Company's domestic turnkey margins, as well as
margins of other competitors.
In April, 1998, the Company was awarded a contract from 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 Company commenced drilling under the program
in March, 1998. The program is expected to extend over approximately
three and one-half years and is expected to utilize 7 of the
Company's land drilling rigs in Venezuela. As of June 30, 1999, the
Company had completed 19 of the 60 wells, with cumulative revenues
realized in the amount of $154.9 million. During the first quarter of
1999, PDVSA and the Company renegotiated prices for the next 14 wells
to be drilled under this program in response to the market downturn
that had occurred. As a result, both revenues and average margins to
be realized on these wells are expected to decline. The Company
expects to drill 13 of these 14 wells during 1999. No assurance can
be given that the remaining wells will ultimately be drilled or that
the program can be completed within the intended time frame.
At June 30, 1999, the Company had 7 turnkey wells in progress in
Venezuela and one turnkey well in progress in the U.S. Gulf of
Mexico.
MOPU Operations
MOPU revenues decreased $1.1 million and operating income decreased
$.5 million in the second quarter of 1999 compared to the second
quarter of 1998. The Company currently owns 4 MOPUs, 3 of which are
under contract and currently operating. The decreases in revenues and
operating income were primarily due to one MOPU that was stacked
during 1999.
Corporate Office and Other
Corporate Office and Other includes corporate overhead and other
non-reportable business segments. Operating losses were consistent in
the second quarter of 1999 and 1998. In July 1999, the Company's
corporate personnel were relocated to R&B Falcon's corporate office.
Other Income (Expense) and Income Taxes
The Company recognized $5.8 million of other expense, including
income taxes, during the second quarter of 1999 compared to $12.1
million of other expense during the same period in 1998. The net
decrease resulted primarily from a $6.3 million decrease in income
taxes. The Company will file federal income taxes as part of the R&B
Falcon consolidated group. See "Liquidity and Capital Resources."
Six Months Ended June 30, 1999 and 1998
The Company recognized net income of $8.6 million in the first six
months of 1999 compared to net income of $28.8 million during the
same period in 1998. Revenues decreased $11.5 million and operating
income decreased $31.0 million in the same period. These decreases
were partially offset by a reduction in income taxes of $10.9
million. Decreased operating results from the Company's daywork
drilling business segment contributed to the reduction in revenues
and operating income.
Six Months Ended
June 30,
--------------------- Increase
1999 1998 (Decrease)
--------- --------- ---------
(In thousands)
Revenues:
Daywork Drilling $ 73,470 $ 115,222 $ (41,752)
Engineering Services 108,360 70,089 38,271
MOPU Operations 2,453 4,680 (2,227)
Corporate Office and Other 129 222 (93)
Eliminations (20,839) (15,189) (5,650)
--------- --------- ---------
Consolidated $ 163,573 $ 175,024 $ (11,451)
========= ========= =========
Operating Income (Loss):
Daywork Drilling $ 4,151 $ 40,508 $ (36,357)
Engineering Services 22,901 16,060 6,841
MOPU Operations 792 1,896 (1,104)
Corporate Office and Other (5,198) (4,810) (388)
--------- --------- ---------
Consolidated $ 22,646 $ 53,654 $ (31,008)
========= ========= =========
Daywork Drilling
Daywork drilling revenues decreased $41.8 million and operating
income decreased $36.4 million in the first six months of 1999
compared to the same period in 1998. The decreases in revenues and
operating income were primarily due to reduced dayrates and
utilization. These decreases were partially offset by revenues and
operating income from 3 rigs which commenced operations subsequent to
the second quarter of 1998 and revenues associated with a contract
termination during the first quarter of 1999.
Contract termination revenues of $1.5 million recorded in the first
quarter of 1999 represent unrecovered costs for modifications made to
the jack-up drilling rig which operated in Qatar. In accordance with
the terms of the contract for this rig, the Company will also receive
additional contract termination revenues in the amount of $2.4
million, which will be recognized as revenue over the remaining term
of the contract or until such time as the rig begins a new contract.
Effective April 1, 1999, the Company entered into a rig management
agreement to lease 10 of its jack-up drilling rigs operating in the
U.S. Gulf of Mexico to RBF USA. Based upon the terms of the
Management Agreement, RBF USA manages these rigs for a fixed daily
rate and earns 20% of the net profit and bears 20% of the net loss
generated by each rig. The Company retains the remaining 80% of
the net profit or loss from each rig. The Company recognized revenues
of $4.5 million and operating expenses of $5.8 million associated
with this Management Agreement during the first six months of 1999.
See "Results of Operations Three Months Ended June 30, 1999 and
1998."
The following table summarizes revenues, utilization and average
dayrates for significant classes of the Company's drilling rigs:
Six Months Ended
June 30,
-------------------- Increase
1999 1998 (Decrease)
-------- --------- ---------
(In thousands)
Daywork Drilling Revenues (1):
Jack-up Rigs:
International $ 20,049 $ 28,004 $ (7,955)
Domestic 12,223 51,544 (39,321)
Land Rigs 33,550 21,719 11,831
Platform / Workover Rigs 7,427 12,541 (5,114)
Other 221 1,414 (1,193)
-------- --------- ---------
Total $ 73,470 $ 115,222 $ (41,752)
======== ========= =========
Average Rig Utilization (2):
Jack-up Rigs:
International 66% 100%
Domestic 43% 100%
Land Rigs 91% 88%
Platform / Workover Rigs 62% 100%
Average Dayrates:
Jack-up Rigs:
International $ 31,791 $ 31,250
Domestic 17,136 34,870
Land Rigs 16,471 16,068
Platform / Workover Rigs 13,586 13,937
(1)Includes revenues earned from affiliates.
(2)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.
Engineering Services
Engineering services revenues increased $38.3 million and operating
income increased $6.8 million in the first six months of 1999
compared to the same period in 1998. The Company completed 20 turnkey
contracts in the first six months of 1999 compared to 9 turnkey
contracts in the same period in 1998. Ten of the 20 contracts
completed during the first six months of 1999 were international
contracts in Venezuela compared to 6 international contract
completions in the same period in 1998. The Company has expanded its
turnkey operations in the U.S. Gulf of Mexico and completed 10
contracts in the first six months of 1999 compared to 3 wells
completed during the same period in 1998. The 3 domestic turnkey
contracts completed in the first six months of 1998 incurred losses
which negatively affected margins in that period.
See "Results of Operations Three Months Ended June 30, 1999 and
1998."
MOPU Operations
MOPU revenues decreased $2.2 million while operating income
decreased $1.1 million in the first six months of 1999 compared to
the same period in 1998. The decreases in revenues and operating
income were primarily due to one MOPU which was stacked during the
first six months of 1999. The Company's other 3 MOPUs are currently
under contract and operating.
See "Results of Operations Three Months Ended June 30, 1999 and
1998."
Corporate Office and Other
Corporate Office and Other includes corporate overhead and other
non-reportable business segments. Operating losses increased $.4
million in the first six months of 1999 compared to the same period
in 1998 primarily due to goodwill amortization recorded during the
first six months of 1999.
See "Results of Operations Three Months Ended June 30, 1999 and
1998."
Other Income (Expense) and Income Taxes
The Company recognized $14.1 million of other expense, including
income taxes, during the first six months of 1999 compared to $24.8
million of other expense during the same period in 1998. The net
decrease resulted primarily from a decrease in income taxes of $10.9
million. See "Liquidity and Capital Resources."
See "Results of Operations Three Months Ended June 30, 1999 and
1998."
Liquidity and Capital Resources
Cash and cash equivalents increased $38.4 million from $36.2
million at December 31, 1998 to $74.6 million at June 30, 1999. The
increase resulted from $45.0 million provided by operating
activities, offset in part by $6.3 million used in investing
activities and $.3 million used in financing activities.
Operating Activities
Net cash of $45.0 million provided by operating activities included
$14.0 million provided by working capital and other activities.
"Drilling Contracts in Progress" decreased due to the completion of
the 8 turnkey contracts that were in progress at December 31, 1998.
Investing Activities
Net cash of $6.3 million used in investing activities during the
first six months of 1999 included capital expenditures of $6.8
million used primarily to fund renovation activities on various
drilling rigs and to purchase drill pipe.
The Company has capital expenditure plans totaling approximately
$12 million during the remainder of 1999 primarily for drilling rig
capital expenditures and drill pipe purchases. The Company intends to
fund these capital expenditures with available cash and internally-
generated cash flow. The Company's projection of 1999 capital
expenditures is based upon a continuation of the Company's program to
upgrade rigs and related equipment. The actual level of capital
expenditures may be higher due to contract requirements or in the
event of unforeseen breakdown of equipment that was not scheduled for
replacement, or lower in the event of inadequate cash flow from
operations.
Financing Activities
Long-term debt at June 30, 1999 consists solely of Senior Notes in
the aggregate principal amount of $199.7 million and debt premium,
net of amortization, of $2.6 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.
Upon consummation of the Merger, the Company offered to purchase
for cash all of the outstanding Senior Notes at a purchase price
equal to 101% of the principal amount, plus accrued and unpaid
interest to the change of control payment date, as required by the
indenture governing the Senior Notes. On January 28, 1999, the
Company purchased all of the $.3 million principal amount of Senior
Notes tendered pursuant to the Change of Control Offer.
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.
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, as
hereinafter defined. 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. R&B Falcon is not a guarantor
of the Senior Notes.
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 ("Revolving Credit Facility") with ING (U.S.) Capital
Corporation ("ING") which matures on January 3, 2000. At June 30,
1999, 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.
Foreign Operations
Approximately 77% of the Company's revenues and a substantial
portion of its operating income were derived from its foreign
operations, primarily Venezuela, in the first six months of 1999.
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
Venezuelan Bolivar. The effects of these transactions resulted in a
loss of $.1 million in the first six months of 1999 which is included
in "Operating Expenses" 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 this country continues
to be a favorable market for its services.
Revenues from PDVSA Exploration and Production, the Venezuelan
government-owned oil company ("PDVSA"), and its predecessors
accounted for approximately 49% and 52% of the Company's consolidated
revenue for the three and six months ended June 30, 1999,
respectively.
Cautionary Statements
This Quarterly Report on Form 10-Q may contain or incorporate by
reference certain forward-looking statements, including by way of
illustration and not of limitation, statements relating to liquidity,
revenues, expenses, margins and contract rates and terms. The Company
strongly encourages readers to note that some or all of the
assumptions, upon which such forward-looking statements are based,
are beyond the Company's ability to control or estimate precisely,
and may in some cases be rapid and material changes. Such assumptions
include the contract status of the Company's offshore units, general
market conditions prevailing in the drilling industry (including
dayrates and utilization) and various other trends affecting the
drilling industry, including world oil and gas prices, the
exploration and development programs of the Company's customers, the
actions of the Company's competitors and economic conditions
generally.
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
General Description of the Year 2000 Issue
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 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.
Year 2000 Issue Evaluations and Assessments
Based upon preliminary equipment analyses and evaluations, the
Company does not believe that operational equipment programming
modifications are necessary. The Company has communicated with
vendors, suppliers and shippers (collectively referred to as "third
party vendors") regarding Year 2000 compliance and will work with
them to minimize disruption in the Company's operations as a result
of their Year 2000 problems. To date, the Company is not aware of any
third party vendors with a Year 2000 issue that would materially
impact the Company's results of operations, liquidity or capital
resources. Based upon internal assessments, the Company determined
that it was necessary to modify or replace portions of its accounting
software so that its computer systems would function properly with
respect to dates in the year 2000 and thereafter. The Company elected
to replace certain accounting software rather than invest in
modifications of existing programs. 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.
Costs
The replacement software and related installation costs were
approximately $2.3 million, the majority of which was capitalized as
of December 31, 1998. The software conversions were substantially
completed as of December 31, 1998. The Company expects to incur
approximately $.5 million during 1999 for other modifications and
conversions.
Risks
Management of the Company believes it has an effective program in
place to resolve the Year 2000 Issue in a timely manner. The Company
has not yet completed all necessary phases of the Year 2000 program.
In the event that the Company does not complete any additional
phases, modifications or conversions, disruptions generally resulting
from Year 2000 issues could materially adversely affect the Company.
The amount of potential liability and lost revenue cannot be
reasonably estimated at this time.
The Company has no means of ensuring that third party vendors will
be Year 2000 ready. The inability of third party vendors to complete
their Year 2000 resolution process in a timely fashion could
materially impact the Company. The effect of non-compliance by third
party vendors is not determinable.
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.
Contingency Plans
The Company has contingency plans for certain critical applications
and is evaluating such plans for others. These contingency plans
involve manual workarounds and replacement equipment.
Other
Certain executive officers of the Company were terminated during
the period from May to July of 1999 as a result of the Merger.
Management of R&B Falcon has assumed responsibilities previously
performed by these individuals.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions arising in the
normal course of business. After taking into consideration the
evaluation of such actions by counsel for the Company, management is
of the opinion that the outcome of all known and potential claims and
litigation will not have a material adverse effect on the Company's
business or consolidated financial position or results of operations.
Item 6. Exhibits and Reports on Form 8-K.
(a)Exhibits
*3.2 Amended and Restated Bylaws of Cliffs Drilling Company.
4.2 Amended and Restated Bylaws of Cliffs Drilling Company
(included as Exhibit 3.2).
*10.7.1 Limited Waiver and Consent and Amendment No. 1 to Credit
Agreement and Promissory Note dated as of June 30, 1999,
among ING (U.S.) Capital Corporation, as agent and sole
lender, and the Company, Cliffs Oil and Gas Company and
Cliffs Drilling International, Inc.
*10.21.1 Termination Agreement dated as of July 31, 1999 between
Douglas E. Swanson and the Company.
*10.21.2 Agreement dated as of July 31, 1999 among Douglas E.
Swanson, R&B Falcon Corporation and the Company.
*10.23.1 Termination Agreement dated as of May 31, 1999 between
Edward A. Guthrie and the Company.
*10.28 R&B Falcon Corporation 1998 Acquisition Option Plan.
*10.29 Form of Stock Option Agreement for key employees under the
R&B Falcon Corporation 1998 Acquisition Option Plan.
*10.30 Rig Management Agreement dated April 1, 1999 between R&B
Falcon Drilling USA, Inc. and the Company.
*27 Financial Data Schedule.
___________
* Filed herewith
(b)Reports on Form 8-K
One report on Form 8-K dated May 19, 1999 was filed by the
Company during the three months ended June 30, 1999, to reflect
a change in the Company's certifying accountant.
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 11, 1999 By:/s/ CINDY B. TAYLOR
------------------ ------------------------
Cindy B. Taylor
Vice President - Controller
and Secretary
(Chief Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description
*3.2 Amended and Restated Bylaws of Cliffs Drilling Company.
4.2 Amended and Restated Bylaws of Cliffs Drilling Company
(included as Exhibit 3.2).
*10.7.1 Limited Waiver and Consent and Amendment No. 1 to Credit
Agreement and Promissory Note dated as of June 30, 1999,
among ING (U.S.) Capital Corporation, as agent and sole
lender, and the Company, Cliffs Oil and Gas Company and
Cliffs Drilling International, Inc.
*10.21.1 Termination Agreement dated as of July 31, 1999 between
Douglas E. Swanson and the Company.
*10.21.2 Agreement dated as of July 31, 1999 among Douglas E.
Swanson, R&B Falcon Corporation and the Company.
*10.23.1 Termination Agreement dated as of May 31, 1999 between
Edward A. Guthrie and the Company.
*10.28 R&B Falcon Corporation 1998 Acquisition Option Plan.
*10.29 Form of Stock Option Agreement for key employees under the
R&B Falcon Corporation 1998 Acquisition Option Plan.
*10.30 Rig Management Agreement dated April 1, 1999 between R&B
Falcon Drilling USA, Inc. and the Company.
*27 Financial Data Schedule.
___________
* Filed herewith
_______________________________
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
CLIFFS DRILLING COMPANY
Article I
Offices
Section 1. Registered Office. The registered office of the
Corporation required by the General Corporation Law of the State
of Delaware to be maintained in the State of Delaware, shall be
the registered office named in the original Certificate of
Incorporation of the Corporation, or such other office as may be
designated from time to time by the Board of Directors in the
manner provided by law. Should the Corporation maintain a
principal office within the State of Delaware such registered
office need not be identical to such principal office of the
Corporation.
Section 2. Other Offices. The Corporation may also have offices
at such other places both within and without the State of
Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
Article II
Stockholders
Section 1. Place of Meetings. All meetings of the stockholders
shall be held at the principal office of the Corporation, or at
such other place within or without the State of Delaware as shall
be specified or fixed in the notices or waivers of notice
thereof.
Section 2. Quorum; Adjournment of Meetings. Unless otherwise
required by law or provided in the Certificate of Incorporation
or these bylaws, the holders of a majority of the stock issued
and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at any meeting
of stockholders for the transaction of business and the act of a
majority of such stock so represented at any meeting of
stockholders at which a quorum is present shall constitute the
act of the meeting of stockholders. The stockholders present at a
duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Notwithstanding the other provisions of the Certificate of
Incorporation or these bylaws, the chairman of the meeting or the
holders of a majority of the issued and outstanding stock,
present in person or represented by proxy, at any meeting of
stockholders, whether or not a quorum is present, shall have the
power to adjourn such meeting from time to time, without any
notice other than announcement at the meeting of the time and
place of the holding of the adjourned meeting. If the adjournment
is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of
record entitled to vote at such meeting. At such adjourned
meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at
the meeting as originally called.
Section 3. Annual Meetings. An annual meeting of the
stockholders, for the election of directors to succeed those
whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such
place, within or without the State of Delaware, on such date, and
at such time as the Board of Directors shall fix and set forth in
the notice of the meeting, which date shall be within thirteen
(13) months subsequent to the later of the date of incorporation
or the last annual meeting of stockholders.
Section 4. Special Meetings. Unless otherwise provided in
the Certificate of Incorporation, special meetings of the
stockholders for any purpose or purposes may be called at any
time by the Chairman of the Board (if any), by the President or
by a majority of the Board of Directors, or by a majority of the
executive committee (if any), and shall be called by the Chairman
of the Board (if any), by the President or the Secretary upon the
written request therefor, stating the purpose or purposes of the
meeting, delivered to such officer, signed by the holder(s) of at
least ten percent (10%) of the issued and outstanding stock
entitled to vote at such meeting.
Section 5. Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of
stockholders, or any adjournment thereof, or entitled to express
consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors of the
Corporation may fix, in advance, a date as the record date for
any such determination of stockholders, which date shall not be
more than sixty (60) days nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any
other action.
If the Board of Directors does not fix a record date for
any meeting of the stockholders, the record date for determining
stockholders entitled to notice of or to vote at such meeting
shall be at the close of business on the day next preceding the
day on which notice is given, or, if in accordance with Article
VIII, Section 3 of these bylaws notice is waived, at the close of
business on the day next preceding the day on which the meeting
is held. If, in accordance with Section 12 of this Article II,
corporate action without a meeting of stockholders is to be
taken, the record date for determining stockholders entitled to
express consent to such corporate action in writing, when no
prior action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed. The
record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned meeting.
Section 6. Notice of Meetings. Written notice of the place,
date and hour of all meetings, and, in case of a special meeting,
the purpose or purposes for which the meeting is called, shall be
given by or at the direction of the Chairman of the Board (if
any) or the President, the Secretary or the other person(s)
calling the meeting to each stockholder entitled to vote thereat
not less than ten (10) nor more than sixty (60) days before the
date of the meeting. Such notice may be delivered either
personally or by mail. If mailed, notice is given when deposited
in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the
Corporation.
Section 7. Stock List. A complete list of stockholders
entitled to vote at any meeting of stockholders, arranged in
alphabetical order for each class of stock and showing the
address of each such stockholder and the number of shares
registered in the name of such stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified,
at the place where the meeting is to be held. The stock list
shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
Section 8. Proxies. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to a
corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy. Proxies for
use at any meeting of stockholders shall be filed with the
Secretary, or such other officer as the Board of Directors may
from time to time determine by resolution, before or at the time
of the meeting. All proxies shall be received and taken charge of
and all ballots shall be received and canvassed by the secretary
of the meeting who shall decide all questions touching upon the
qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes, unless an inspector or
inspectors shall have been appointed by the chairman of the
meeting, in which event such inspector or inspectors shall decide
all such questions.
No proxy shall be valid after three (3) years from its
date, unless the proxy provides for a longer period. Each proxy
shall be revocable unless expressly provided therein to be
irrevocable and coupled with an interest sufficient in law to
support an irrevocable power.
Should a proxy designate two or more persons to act as
proxies, unless such instrument shall provide the contrary, a
majority of such persons present at any meeting at which their
powers thereunder are to be exercised shall have and may exercise
all the powers of voting or giving consents thereby conferred, or
if only one be present, then such powers may be exercised by that
one; or, if an even number attend and a majority do not agree on
any particular issue, each proxy so attending shall be entitled
to exercise such powers in respect of the same portion of the
shares as he is of the proxies representing such shares.
Section 9. Voting, Elections, Inspectors. Unless otherwise
required by law or provided in the Certificate of Incorporation,
each stockholder shall have one vote for each share of stock
entitled to vote which is registered in his name on the record
date for the meeting. Shares registered in the name of another
corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the bylaw (or comparable instrument) of such
corporation may prescribe, or in the absence of such provision,
as the Board of Directors (or comparable body) of such
corporation may determine. Shares registered in the name of a
deceased person may be voted by his executor or administrator,
either in person or by proxy.
All voting, except as required by the Certificate of
Incorporation or where otherwise required by law, may be by a
voice vote; provided, however, that upon demand therefor by
stockholders holding a majority of the issued and outstanding
stock present in person or by proxy at any meeting a stock vote
shall be taken. Every stock vote shall be taken by written
ballots, each of which shall state the name of the stockholder or
proxy voting and such other information as may be required under
the procedure established for the meeting. All elections of
directors shall be by ballot, unless otherwise provided in the
Certificate of Incorporation.
At any meeting at which a vote is taken by ballots, the
chairman of the meeting may appoint one or more inspectors, each
of whom shall subscribe an oath or affirmation to execute
faithfully the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. Such
inspector shall receive the ballots, count the votes and make and
sign a certificate of the result thereof. The chairman of the
meeting may appoint any person to serve as inspector, except no
candidate for the office of director shall be appointed as an
inspector.
Unless otherwise provided in the Certificate of
Incorporation, cumulative voting for the election of directors
shall be prohibited.
Section 10. Conduct of Meetings. The meetings of the
stockholders shall be presided over by the Chairman of the Board
(if any), or if he is not present, by the President, or if
neither the Chairman of the Board (if any), nor President is
present, by a chairman elected at the meeting. The Secretary of
the Corporation, if present, shall act as secretary of such
meetings, or if he is not present, an Assistant Secretary shall
so act; if neither the Secretary nor an Assistant Secretary is
present, then a secretary shall be appointed by the chairman of
the meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct
of discussion as seem to him in order. Unless the chairman of the
meeting of stockholders shall otherwise determine, the order of
business shall be as follows:
(a) Calling of meeting to order.
(b) Election of a chairman and the appointment of a secretary if
necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of
a quorum.
(e) Reading and settlement of the minutes of the previous
meeting.
(f) Reports of officers and committees.
(g) The election of directors if an annual meeting, or a meeting
called for that purpose.
(h) Unfinished business.
(i) New business.
(j) Adjournment.
Section 11. Treasury Stock. The Corporation shall not vote,
directly or indirectly, shares of its own stock owned by it and
such shares shall not be counted for quorum purposes.
Section 12. Action Without Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action
permitted or required by law, the Certificate of Incorporation or
these bylaws to be taken at a meeting of stockholders, may be
taken without a meeting, without prior notice and without a vote,
if a consent in writing, setting forth the action so taken, shall
be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of
the taking of the corporate action without a meeting by less than
a unanimous written consent shall be given by the Secretary to
those stockholders who have not consented in writing.
Article III
Board of Directors
Section 1. Power; Number; Term of Office. The business and
affairs of the Corporation shall be managed by or under the
direction of the Board of Directors, and subject to the restric-
tions imposed by law or the Certificate of Incorporation, they
may exercise all the powers of the Corporation.
The number of directors which shall constitute the whole
Board of Directors, shall be determined from time to time by
resolution of the stockholders (provided that no decrease in the
number of directors which would have the effect of shortening the
term of an incumbent director may be made by the stockholders).
If the stockholders make no such determination, the number of
directors shall be three (3). Each director shall hold office for
the term for which he is elected, and until his successor shall
have been elected and qualified or until his earlier death,
resignation or removal.
Unless otherwise provided in the Certificate of
Incorporation, directors need not be stockholders nor residents
of the State of Delaware.
Section 2. Quorum. Unless otherwise provided in the
Certificate of Incorporation, a majority of the total number of
directors shall constitute a quorum for the transaction of
business of the Board of Directors and the vote of a majority of
the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 3. Place of Meetings, Order of Business. The
directors may hold their meetings and may have an office and keep
the books of the Corporation, except as otherwise provided by
law, in such place or places, within or without the State of
Delaware, as the Board of Directors may from time to time
determine by resolution. At all meetings of the Board of
Directors business shall be transacted in such order as shall
from time to time be determined by the Chairman of the Board (if
any), or in his absence by the President, or by resolution of the
Board of Directors.
Section 4. First Meeting. Each newly elected Board of
Directors may hold its first meeting for the purpose of
organization and the transaction of business, if a quorum is
present, immediately after and at the same place as the annual
meeting of the stockholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each
year at which a quorum shall be present, held next after the
annual meeting of stockholders, the Board of Directors shall
proceed to the election of the officers of the Corporation.
Section 5. Regular Meetings. Regular meetings of the Board
of Directors shall be held at such times and places as shall be
designated from time to time by resolution of the Board of
Directors. Notice of such regular meetings shall not be required.
Section 6. Special Meetings. Special meetings of the Board
of Directors may be called by the Chairman of the Board (if any),
the President or, on the written request of any two directors, by
the Secretary, in each case on at least twenty-four (24) hours
personal, written, telegraphic, cable or wireless notice to each
director. Such notice, or any waiver thereof pursuant to Article
VIII, Section 3 hereof, need not state the purpose or purposes of
such meeting, except as may otherwise be required by law or
provided for in the Certificate of Incorporation or these bylaws.
Section 7. Removal. Any director or the entire Board of
Directors may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election
of directors; provided that, if the Certificate of Incorporation
expressly grants to stockholders the right to cumulate votes for
the election of directors and if less than the entire board is to
be removed, no director may be removed without cause if the votes
cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire Board of
Directors, or, if there be classes of directors, at an election
of the class of directors of which such director is a part.
Section 8. Vacancies; Increases in the Number of Directors.
Unless otherwise provided in the Certificate of Incorporation,
vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a
majority of the directors then in office, although less than a
quorum, or a sole remaining director; and any director so chosen
shall hold office until the next annual election and until his
successor shall be duly elected and shall qualify, unless sooner
displaced.
If the directors of the Corporation are divided into
classes, any directors elected to fill vacancies or newly created
directorships shall hold office until the next election of the
class for which such directors shall have been chosen, and until
their successors shall be duly elected and shall qualify.
Section 9. Compensation. Unless otherwise restricted by the
Certificate of Incorporation, the Board of Directors shall have
the authority to fix the compensation of directors.
Section 10. Action Without a Meeting; Telephone Conference
Meeting . Unless otherwise restricted by the Certificate of
Incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors, or any committee
designated by the Board of Directors, may be taken without a
meeting if all members of the Board of Directors or committee, as
the case may be consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board
of Directors or committee. Such consent shall have the same force
and effect as a unanimous vote at a meeting, and may be stated as
such in any document or instrument filed with the Secretary of
State of Delaware.
Unless otherwise restricted by the Certificate of
Incorporation, subject to the requirement for notice of meetings,
members of the Board of Directors, or members of any committee
designated by the Board of Directors, may participate in a
meeting of such Board of Directors or committee, as the case may
be, by means of a conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting
shall constitute presence in person at such meeting, except where
a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that
the meeting is not lawfully called or convened.
Section 11. Approval or Ratification of Acts or Contracts
by Stockholders. The Board of Directors in its discretion may
submit any act or contract for approval or ratification at any
annual meeting of the stockholders, or at any special meeting of
the stockholders called for the purpose of considering any such
act or contract, and any act or contract that shall be approved
or be ratified by the vote of the stockholders holding a majority
of the issued and outstanding shares of stock of the Corporation
entitled to vote and present in person or by proxy at such
meeting (provided that a quorum is present), shall be as valid
and as binding upon the Corporation and upon all the stockholders
as if it has been approved or ratified by every stockholder of
the Corporation. In addition, any such act or contract may be
approved or ratified by the written consent of stockholders
holding a majority of the issued and outstanding shares of
capital stock of the Corporation entitled to vote and such
consent shall be as valid and as binding upon the Corporation and
upon all the stockholders as if it had been approved or ratified
by every stockholder of the Corporation.
Article IV
Committees
Section 1. Designation; Powers. The Board of Directors may,
by resolution passed by a majority of the whole board, designate
one or more committees, including, if they shall so determine, an
executive committee, each such committee to consist of one or
more of the directors of the Corporation. Any such designated
committee shall have and may exercise such of the powers and
authority of the Board of Directors in the management of the
business and affairs of the Corporation as may be provided in
such resolution, except that no such committee shall have the
power or authority of the Board of Directors in reference to
amending the Certificate of Incorporation, adopting an agreement
of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of
a dissolution of the Corporation, or amending, altering or
repealing the bylaws or adopting new bylaws for the Corporation
and, unless such resolution or the Certificate of Incorporation
expressly so provides, no such committee shall have the power of
authority to declare a dividend or to authorize the issuance of
stock. Any such designated committee may authorize the seal of
the Corporation to be affixed to all papers which may require it.
In addition to the above such committee or committees shall have
such other powers and limitations of authority as may be
determined from time to time by resolution adopted by the Board
of Directors.
Section 2. Procedure; Meetings; Quorum. Any committee
designated pursuant to Section I of this Article shall choose its
own chairman, shall keep regular minutes of its proceedings and
report the same to the Board of Directors when requested, shall
fix its own rules or procedures, and shall meet at such times and
at such place or places as may be provided by such rules, or buy
resolution of such committee or resolution of the Board of
Directors. At every meeting of any such committee, the presence
of a majority of all the members thereof shall constitute a
quorum and the affirmative vote of a majority of the members
present shall be necessary for the adoption by it of any
resolution.
Section 3. Substitution of Members. The Board of Directors
may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at
any meeting of such committee. In the absence or disqualification
of a member of a committee, the member or members present at any
meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of the
absent or disqualified member.
Article V
Officers
Section 1. Number, Titles and Term of Office. The officers
of the Corporation shall be a President, a Secretary and, if the
Board of Directors so elects, a Chairman of the Board and such
other officers as the Board of Directors may from time to time
elect or appoint. Each officer shall hold office until his
successor shall be duly elected and shall qualify or until his
death or until he shall resign or shall have been removed in the
manner hereinafter provided. Any number of offices may be held by
the same person, unless the Certificate of Incorporation provides
otherwise. Except for the Chairman of the Board, if any, no
officer need be a director.
Section 2. Salaries. The salaries or other compensation of
the officers and agents of the Corporation shall be fixed from
time to time by the Board of Directors.
Section 3. Removal. Any officer or agent elected or
appointed by the Board of Directors may be removed, either with
or without cause, by the vote of a majority of the whole Board of
Directors at a special meeting called for the purpose, or at any
regular meeting of the Board of Directors, provided the notice
for such meeting shall specify that the matter of any such
proposed removal will be considered at the meeting but such
removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 4. Vacancies. Any vacancy occurring in any office
of the Corporation may be filled by the Board of Directors.
Section 5. Powers and Duties of the Chief Executive
Officer. The President shall be the chief executive officer of
the Corporation unless the Board of Directors designates the
Chairman of the Board as chief executive officer. Subject to the
control of the Board of Directors and the executive committee (if
any), the chief executive officer shall have general executive
charge, management and control of the properties, business and
operations of the Corporation with all such powers as may be
reasonably incident to such responsibilities; he may agree upon
and execute all leases, contracts, evidences of indebtedness and
other obligations in the name of the Corporation and may sign all
certificates for shares of capital stock of the Corporation; and
shall have such other powers and duties as designated in
accordance with these bylaws and as from time to time may be
assigned to him by the Board of Directors.
Section 6. Powers and Duties of the Chairman of the Board.
If elected, the Chairman of the Board shall preside at all
meetings of the stockholders and of the Board of Directors; and
he shall have such other powers and duties as designated in these
bylaws and as from time to time may be assigned to him by the
Board of Directors.
Section 7. Powers and Duties of the President. Unless the
Board of Directors otherwise determines, the President shall have
the authority to agree upon and execute all leases, contracts,
evidences of indebtedness and other obligations in the name of
the Corporation; and, unless the Board of Directors otherwise
determines, he shall, in the absence of the Chairman of the Board
or if there be no Chairman of the Board, preside at all meetings
of the stockholders and (should he be a director) of the Board of
Directors; and he shall have such other powers and duties as
designated in accordance with these bylaws and as from time to
time may be assigned to him by the Board of Directors.
Section 8. Vice Presidents. In the absence of the
President, or in the event of his inability or refusal to act, a
Vice President designated by the Board of Directors shall perform
the duties of the President, and when so acting shall have all
the powers of and be subject to all the restrictions upon the
President. In the absence of a designation by the Board of
Directors of a Vice President to perform the duties of the
President, or in the event of his absence or inability or refusal
to act, the Vice President who is present and who is senior in
terms of time as a Vice President of the Corporation shall so
act. The Vice Presidents shall perform such other duties and have
such other powers as the Board of Directors may from time to time
prescribe.
Section 9. Treasurer. The Treasurer shall have
responsibility for the custody and control of all the funds and
securities of the Corporation, and he shall have such other
powers and duties as designated in these bylaws and as from time
to time may be assigned to him by the Board of Directors. He
shall perform all acts incident to the position of Treasurer,
subject to the control of the chief executive officer and the
Board of Directors; and he shall, if required by the Board of
Directors, give such bond for the faithful discharge of his
duties in such form as the Board of Directors may require.
Section 10. Assistant Treasurers. Each Assistant Treasurer
shall have the usual powers and duties pertaining to his office,
together with such other powers and duties as designated in these
bylaws and as from time to time may be assigned to him by the
chief executive officer or the Board of Directors. The Assistant
Treasurers shall exercise the powers of the Treasurer during that
officer's absence or inability or refusal to act.
Section 11. Secretary. The Secretary shall keep the minutes
of all meetings of the Board of Directors, committees of
directors and the stockholders, in books provided for that
purpose; he shall attend to the giving and serving of all
notices; he may in the name of the Corporation affix the seal of
the Corporation to all contracts of the Corporation and attest
the affixation of the seal of the Corporation thereto; he may
sign with the other appointed officers all certificates for
shares of capital stock of the Corporation; he shall have charge
of the certificate books, transfer books and stock ledgers, and
such other books and papers as the Board of Directors may direct,
all of which shall at all reasonable times be open to inspection
of any director upon application at the office of the Corporation
during business hours; he shall have such other powers and duties
as designated in these bylaws and as from time to time may be
assigned to him by the Board of Directors; and he shall in
general perform all acts incident to the office of Secretary,
subject to the control of the chief executive officer and the
Board of Directors.
Section 12. Assistant Secretaries. Each Assistant Secretary
shall have the usual powers and duties pertaining to his office,
together with such other powers and duties as designated in these
bylaws and as from time to time may be assigned to him by the
chief executive officer or the Board of Directors. The Assistant
Secretaries shall exercise the powers of the Secretary during
that officer's absence or inability or refusal to act.
Section 13. Action with Respect to Securities of Other
Corporation . Unless otherwise directed by the Board of
Directors, the chief executive officer shall have power to vote
and otherwise act on behalf of the Corporation, in person or by
proxy, at any meeting of security holders of or with respect to
any action of security holders of any other corporation in which
this Corporation may hold securities and otherwise to exercise
any and all rights and powers which this Corporation may possess
by reason of its ownership of securities in such other
corporation.
Article VI
Indemnification of Directors,
Officers, Employees and Agents
Section 1. Right to Indemnification. Each person who was or
is made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was or has
agreed to become a director or officer of the Corporation or is
or was serving or has agreed to serve at the request of the
Corporation as a director or officer of another corporation or of
a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while
serving or having agreed to serve as a director or officer, shall
be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended, (but, in the
case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to
provide prior to such amendment) against all expense, liability
and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to serve in the
capacity which initially entitled such person to indemnity
hereunder and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that the
Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part
thereof) was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this
Article VI shall be a contract right and shall include the right
to be paid by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposition;
provided, however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a current,
former or proposed director or officer in his or her capacity as
a director or officer or proposed director or officer (and not in
any other capacity in which service was or is or has been agreed
to be rendered by such person while a director or officer,
including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding, shall
be made only upon delivery to the Corporation of an undertaking,
by or on behalf of such indemnified person, to repay all amounts
so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this
Section or otherwise.
Corporation may hold securities and otherwise to exercise any and
all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
Article VI
Indemnification of Directors,
Officers, Employees and Agents
Section 1. Right to Indemnification. Each person who was or
is made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was or has
agreed to become a director or officer of the Corporation or is
or was serving or has agreed to serve at the request of the
Corporation as a director or officer of another corporation or of
a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while
serving or having agreed to serve as a director or officer, shall
be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended, (but, in the
case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to
provide prior to such amendment) against all expense, liability
and loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to serve in the
capacity which initially entitled such person to indemnity
hereunder and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that the
Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part
thereof) was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this
Article VI shall be a contract right and shall include the right
to be paid by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposition;
provided, however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a current,
former or proposed director or officer in his or her capacity as
a director or officer or proposed director or officer (and not in
any other capacity in which service was or is or has been agreed
to be rendered by such person while a director or officer,
including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding, shall
be made only upon delivery to the Corporation of an undertaking,
by or on behalf of such indemnified person, to repay all amounts
so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this
Section or otherwise.
Section 2. Indemnification of Employees and Agents. The
Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation,
individually or as a group, with the same scope and effect as the
indemnification of directors and officers provided for in this
Article.
Section 3. Right of Claimant to Bring Suit. If a written
claim received by the Corporation from or on behalf of an
indemnified party under this Article VI is not paid in full by
the Corporation within ninety days after such receipt, the
claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to
be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding
in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard
of conduct.
Section 4. Nonexclusivi1y of Rights. The right to
indemnification and the advancement and payment of expenses
conferred in this Article VI shall not be exclusive of any other
right which any person may have or hereafter acquire under any
law (common or statutory), provision of the Certificate of
Incorporation of the Corporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 5. Insurance. The Corporation may maintain
insurance, at its expense, to protect itself and any person who
is or was serving as a director, officer, employee or agent of
the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware
General Corporation Law.
Section 6. Savings Clause. If this Article VI or any
portion hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Corporation shall nevertheless
indemnify and hold harmless each director and officer of the
Corporation as to costs, charges and expenses (including
attorneys' fees), judgments, fines, and amounts paid in
settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the
full extent permitted by any applicable portion of this Article
VI that shall not have been invalidated and to the fullest extent
permitted by applicable law.
Article VII
Capital Stock
Section 1. Certificates of Stock. The certificates for
shares of the capital stock of the Corporation shall be in such
form, not inconsistent with that required by law and the
Certificate of Incorporation, as shall be approved by the Board
of Directors. The Chairman of the Board (if any), President or a
Vice President shall cause to be issued to each stockholder one
or more certificates, under the seal of the Corporation or a
facsimile thereof if the Board of Directors shall have provided
for such seal, and signed by the Chairman of the Board (if any),
President or a Vice President and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer certifying
the number of shares (and, if the stock of the Corporation shall
be divided into classes or series, the class and series of such
shares) owned by such stockholder in the Corporation; provided,
however, that any of or all the signatures on the certificate may
be facsimile. The stock record books and the blank stock
certificate books shall be kept by the Secretary, or at the
office of such transfer agent or transfer agents as the Board of
Directors may from time to time by resolution determine. In case
any officer, transfer agent or registrar who shall have signed or
whose facsimile signature or signatures shall have been placed
upon any such certificate or certificates shall have ceased to be
such officer, transfer agent or registrar before such certificate
is issued by the Corporation, such certificate may nevertheless
be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date
of issue. The stock certificates shall be consecutively numbered
and shall be entered in the books of the, Corporation as they are
issued and shall exhibit the holder's name and number of shares.
Section 2. Transfer of Shares. The shares of stock of the
Corporation shall be transferable only on the books of the
Corporation by the holders thereof in person or by their duly
authorized attorneys or legal representatives upon surrender and
cancellation of certificates for a like number of shares. Upon
surrender to the Corporation or a transfer agent of the
Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation to
issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 3. Ownership of Shares. The Corporation shall be
entitled to treat the holder of record of any share or shares of
capital stock of the Corporation as the holder in fact thereof
and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of
the State of Delaware.
Section 4. Regulations Regarding Certificates. The Board of
Directors shall have the power and authority to make all such
rules and regulations as they may deem expedient concerning the
issue, transfer and registration or the replacement of
certificates for shares of capital stock of the Corporation.
Section 5. Lost or Destroyed Certificates. The Board of
Directors may determine the conditions upon which a new
certificate of stock may be issued in place of a certificate
which is alleged to have been lost, stolen or destroyed; and may,
in their discretion, require the owner of such certificate or his
legal representative to give bond, with sufficient surety, to
indemnify the Corporation and each transfer agent and registrar
against any and all losses or claims which may arise by reason of
the issue of a new certificate in the place of the one so lost,
stolen or destroyed.
Article VIII
Miscellaneous Provisions
Section 1. Fiscal Year. The fiscal year of the Corporation
shall be such as established from time to time by the Board of
Directors.
Section 2. Corporate Seal. The Board of Directors may
provide a suitable seal, containing the name of the Corporation.
The Secretary shall have charge of the seal (if any). If and when
so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or
by the Assistant Secretary or Assistant Treasurer.
Section 3. Notice and Waiver of Notice. Whenever any notice
is required to be given by law, the Certificate of Incorporation
or under the provisions of these bylaws, said notice shall be
deemed to be sufficient if given (i) by telegraphic, cable or
wireless transmission or (ii) by deposit of the same in a post
office box in a sealed prepaid wrapper addressed to the person
entitled thereto at his post office address, as it appears on the
records of the Corporation, and such notice shall be deemed to
have been given on the day of such transmission or mailing, as
the case may be.
Whenever notice is required to be given by law, the
Certificate of Incorporation or under any of the provisions of
these bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors
need be specified in any written waiver of notice unless so
required by the Certificate of Incorporation or the bylaws.
Section 4. Resignations. Any director, member of a
committee or officer may resign at any time. Such resignation
shall be made in writing and shall take effect at the time
specified therein, or if no time be specified, at the time of its
receipt by the chief executive officer or Secretary. The
acceptance of a resignation shall not be necessary to make it
effective, unless expressly so provided in the resignation.
Section 5. Facsimile Signatures. In addition to the
provisions for the use of facsimile signatures elsewhere
specifically authorized in these bylaws, facsimile signatures of
any officer or officers of the Corporation may be used whenever
and as authorized by the Board of Directors.
Section 6. Reliance upon Books, Reports and Records. Each
director and each member of any committee designated by the Board
of Directors shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or
reports made to the Corporation by any of its officers, or by an
independent certified public accountant, or by an appraiser
selected with reasonable care by the Board of Directors or by any
such committee, or in relying in good faith upon other records of
the Corporation.
Article IX
Amendments
If provided in the Certificate of Incorporation of the
Corporation, the Board of Directors shall have the power to
adopt, amend and repeal from time to time bylaws of the
Corporation, subject to the right of the stockholders entitled to
vote with respect thereto to amend or repeal such bylaws as
adopted or amended by the Board of Directors.
WITNESS the seal and the signature of its duly authorized
Secretary or Assistant Secretary this day of May,
1999.
Name:
Title:
EXHIBIT 10.7.1
EXECUTION
LIMITED WAIVER AND CONSENT AND
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AND PROMISSORY NOTE
RECITALS:
Reference is made to that certain Third Restated Credit
Agreement dated as of July 29, 1998 (as heretofore amended or
supplemented, the "Agreement"), 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 LLC (formerly
known as ING (U.S.) Capital Corporation; in its capacities as the
sole Lender and Agent under the Agreement, "ING"). Terms used and
not defined herein shall have the meanings given them in the
Agreement.
Borrower, COG and CDI have requested that ING consent to the
provisions set forth in this Limited Waiver and Consent and
Amendment No. 1 to Credit Agreement and Promissory Note (this
"Limited Waiver and Consent").
WAIVER AND CONSENT:
Sections 6.1 and 6.2 of the Agreement contain certain
restrictions on each Related Person's ability to incur Indebtedness
or Contingent Obligations without Majority Lenders' consent.
Without Majority Lenders' consent, each Related Person's ability to
merger or consolidate with any other Person is restricted by
Section 6.6.4 of the Agreement, and each Related Person's ability
to make Investments is restricted by Section 6.11 of the Agreement.
Subject to the conditions and limitations set forth below, ING
hereby consents to, and waives any violation of Sections 6.1, 6.2,
6.6.4 and 6.11 of the Agreement caused by:
(a) the merger of Falcon Drilling de Venzuela,
Inc.("Falcon Venezuela"), an in-direct wholly owned Subsidiary
of R&B Falcon Corporation, with and into Borrower, with
Borrower being the surviving entity; and
(b) the guaranty by Borrower, as successor by merger to
Falcon Venzuela, of approximately $5,250,000 of unsecured
Indebtedness of R&B Falcon Holdings, Inc.
AMENDMENTS
The definition of "Commitment Termination Date" is hereby
amended in its entirety to read as set forth below:
"`Commitment Termination Date' shall mean January 3, 2000
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."
The paragraph on page two of ING's Note which immediately
follows the definitions set forth therein and currently reads as
follows:
"The principal amount of this Note, together with all
interest occurred hereon, shall be due and payable in full on
May 31, 2000."
is hereby amended in its entirety to read as follows:
"The principal amount of this Note, together with all
interest accrued hereon, shall be due and payable in full on
January 3, 2000."
LIMITATIONS AND CONDITIONS:
Borrower, COG and CDI each hereby represent and warrant to ING
that immediately after giving effect to this Limited Waiver and
Consent there shall exist no Default or Event of Default and
immediately after giving effect to this Limited Waiver and Consent
all representations and warranties contained herein, in the
Agreement or otherwise made in writing by any Related Person in
connection herewith or therewith shall be true and correct in all
material respects with the same force and effect as if those
representations and warranties had been made on and as of the date
hereof.
Except as expressly waived or agreed herein, all covenants,
obligations and agreements of Borrower, COG and CDI contained in
the Agreement shall remain in full force and effect in accordance
with their terms. Without limitation of the foregoing, the
consents, waivers and agreements set forth herein are limited
precisely to the extent set forth herein and shall not be deemed to
(a) be a consent or agreement to, or waiver or modification of, any
other term or condition of the Agreement or any of the documents
referred to therein, or (b) except as expressly set forth herein,
prejudice any right or rights which ING may now have or may have in
the future under or in connection with the Agreement or any of the
documents referred to therein. Except as expressly modified or
amended hereby, the terms and provisions of the Agreement and any
other documents or instruments executed in connection with any of
the foregoing, are and shall remain in full force and effect, and
the same are hereby ratified and confirmed by Borrower, COG and CDI
in all respects. Any reference to the Agreement in any Loan
Document shall be deemed to be a reference to the Agreement as
modified and amended hereby.
Borrower agrees to reimburse and save ING harmless from and
against liabilities for the payment of all out-of-pocket costs and
expenses arising in connection with the preparation, execution,
delivery, amendment, modification, waiver and enforcement of, or
the preservation of any rights under, this Limited Waiver and
Consent, including, without limitation, the reasonable fees and
expenses of legal counsel to ING which may be payable in respect
of, or in respect of any modification of, this Limited Waiver and
Consent.
This Limited Waiver and Consent and the rights and obligations
of the parties hereunder shall be construed in accordance with and
be governed by the laws of the State of New York.
This Limited Waiver and Consent is a "Loan Document" as
defined and described in the Agreement and all of the terms and
provisions of the Agreement relating to Loan Documents shall apply
hereto.
This Limited Waiver and Consent may be separately executed in
counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to
constitute one and the same agreement.
THIS LIMITED WAIVER AND CONSENT AND THE DOCUMENTS REFERRED TO
HEREIN REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the undersigned parties have executed this
Limited Waiver and Consent as of the ___ day of June, 1999.
ING (U.S.) CAPITAL CORPORATION,
in its capacity as Agent and as
sole Lender
By:_____________________________
Frank Ferrara
Senior Associate
CLIFFS DRILLING COMPANY
By:_____________________________
Douglas E. Swanson
President and Chief Executive
Officer
CLIFFS OIL AND GAS COMPANY
By:_____________________________
Douglas E. Swanson
President and Chief Executive
Officer
CLIFFS DRILLING INTERNATIONAL,
INC.
By:_____________________________
Douglas E. Swanson
President and Chief Executive
Officer
EXHIBIT 10.21.1
TERMINATION AGREEMENT
This Termination Agreement (the "Agreement"), entered into and
effective as of July 31, 1999 (the "Effective Date"), is between Douglas
E. Swanson ("Swanson") and Cliffs Drilling Company ("CDC").
In consideration of the mutual obligations set out below and in that
agreement of the same effective date between Swanson and CDC and
substantially in the form attached as Exhibit "A" hereto (the "Non-
Compete Agreement"), the parties agree as follows:
1. As of the Effective Date Swanson tenders his resignation as
President, Chief Executive Officer and Director of CDC and as a
director, officer and/or employee of all direct and indirect
subsidiaries and affiliated companies of CDC [other than R&B
Falcon Corporation ("RBF") of which Swanson shall continue to
be a director], as the case may be, which CDC accepts on its
behalf and on behalf of RBF, such subsidiaries and affiliated
companies.
2. Upon execution of this Agreement and subject to the payment and
other obligations of CDC and RBF set out in this Agreement and
in the Non-Compete Agreement, this Agreement and the Non-
Compete Agreement constitute full satisfaction of all
obligations of CDC under and pursuant to Section 4 of that
Employment Agreement dated as of December 1, 1998 between
Swanson and CDC (the "Employment Agreement").
3. Notwithstanding anything to the contrary in (i) this Agreement,
(ii) Section 7 of the Employment Agreement, or (iii) the Non-
Compete Agreement, Swanson shall not be entitled to, and CDC
shall have no obligation to make to Swanson, any Gross-Up
Payment (as defined in Section 7 of the Employment Agreement)
with respect to any Excise Tax (as defined in Section 7 of the
Employment Agreement) imposed on or with respect to the stock
options held by Swanson under the Stock Option Agreements,
which are referred to in Section 4 of the Non-Compete Agreement,
provided, however, the remaining obligations of CDC in Section
7 of the Employment Agreement shall continue to be in full
force and effect.
4. Swanson shall have the option, exercisable if at all only by
written notice to CDC given within 60 days following the
Effective Date, to acquire full ownership of those certain
split dollar insurance policies, being Policy No. 13905796
dated January 1, 1997 and Policy No. 13347465 dated January 1,
1995, each issued by The Northwestern Mutual Life Insurance
Company, together with a release of the collateral assignments
granted in favor of CDC under and pursuant to the two Split
Dollar Insurance Agreements dated January 1, 1995 between
Swanson and CDC (the "Insurance Agreements"), upon payment by
Swanson of the Company's Policy Interest (as defined in the
Insurance Agreements). If such option is exercised and upon
payment of the sum referred in the preceding sentence by
Swanson and release of the collateral assignments by CDC,
neither Swanson nor the Company shall thereafter have any
obligation to the other under the Insurance Agreements.
For purposes of this Section 4, such notice, if given, shall be
addressed as follows and sent via registered or certified mail:
Cliffs Drilling Company
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Mr. Paul B. Loyd, Jr.
5. The Agreement shall be binding upon and shall inure to the
benefit of the parties, their respective representatives,
agents, attorneys, successors and assigns, and, in particular,
without limiting the generality of the foregoing, to CDC's
directors, officers and employees and to Swanson's heirs,
executors, administrators, legal and personal representatives
and assigns.
6. This Agreement shall be deemed to be a contract made under and
governed by, the laws of the State of Texas, without reference
to principles of conflicts of law.
7. This Agreement and the Non-Compete Agreement constitutes the
complete and entire agreement between the parties. Subject to
Sections 4, 5 and 7 (as modified by Section 3 of this
Agreement) of the Employment Agreement, this Agreement
supersedes and cancels all prior or contemporaneous
representations, promises or agreements between the parties.
This Agreement cannot be amended or modified except by written
agreement signed by each of the parties hereto.
8. The provisions of this Agreement are severable. If a court or
other tribunal of competent jurisdiction rules any provision
of this Agreement is invalid or unenforceable, such ruling
will not affect the validity or enforceability of any other
provision of the Agreement, and this Agreement shall be deemed
to be modified and amended so as to be enforceable to the
extent permitted by law.
This Agreement is signed in Houston, Texas on July , 1999.
________________________________
Douglas E. Swanson
CLIFFS DRILLING COMPANY
By:_____________________________
Its duly authorized
officer
EXHIBIT "A"
AGREEMENT
This Agreement (the "Agreement"), entered into and effective as of July
31, 1999 (the "Effective Date"), is among Douglas E. Swanson ("Swanson"),
Cliffs Drilling Company ("CDC") and R&B Falcon Corporation ("RBF").
In consideration of the mutual obligations set out below, Swanson, CDC and
RBF agree as follows:
1. Within two business days following the execution of this
Agreement CDC agrees to pay to Swanson a lump sum in cash, less
deductions required by law, of $2,587,500.
2. From the Effective Date and continuing until December 1, 2001
CDC agrees to provide Swanson and his family, at the expense of
CDC, all benefits under (or substantially equivalent benefits
to) RBF's welfare benefit plans, practices, policies and
programs (including, without limitation, medical, prescription,
dental, vision, disability, salary continuance, group life and
supplemental group life and accidental death insurance plans and
programs), to the extent generally applicable to other RBF
executives.
3. For a period of three (3) years following the Effective Date
(the "Restricted Period") Swanson agrees:
(a) Not to engage in Competition with CDC. For purposes of this
Section 3(a), "Competition" shall mean Swanson engaging in
or otherwise being a director, officer, employee,
principal, agent, stockholder, member, owner or partner of,
or permitting his name to be used in connection with the
activities of any corporation or other business
organization in the offshore contract drilling industry in
direct or indirect competition with CDC, its parent,
subsidiary or affiliated companies, but shall not preclude
Swanson from being or becoming the registered or beneficial
owner of up to five (5%) of any class of capital voting
stock (or equivalent voting interest) of any corporation or
other business organization in the offshore contract
drilling industry, provided Swanson does not participate
actively in such business until the end of the Restricted
Period.
(b) Not to disclose to any third party not a member of the
Company Group (as hereinafter defined), its or their legal
counsel or independent auditors, Confidential Information
(as hereinafter defined) or Trade Secrets (as hereinafter
defined), except any of the Confidential Information or
Trade Secrets which shall be or become in the public domain
other than by breach by Swanson of his obligations set out
in this Section 3(b) or shall be required to be disclosed
by applicable laws or regulations, any judicial or admin-
istrative authority or stock exchange rule or regulation.
For purposes of this Section 3(b): "Company Group" shall
mean CDC, its parent corporation, subsidiaries and affil-
iates; "Confidential Information" shall mean (r) internal
policies and procedures, (s) financial information, (t)
marketing strategies, (u) secret discoveries, inventions,
formulae, designs, methods, processes and know-how not con-
stituting Trade Secrets, and (v) other non-public inform-
ation relating to the Company Group's business, the
disclosure of which would materially adversely affect the
Company Group's business or financial condition; and "Trade
Secrets" shall mean all secret discoveries, inventions,
formulae, designs, methods, processes and know-how entitled
to protection as trade secrets under the laws of the state
of Texas.
4. (a) The Stock Option Agreements between Swanson and CDC
referred to below are respectively amended: (i) to revise
the number of option shares covered by each such agreement
and to revise the option exercise price per share to
reflect the adjustments necessary to take into account the
conversion of CDC shares to shares of RBF effected as a
result of the merger transaction between CDC and RBF
concluded December 1,1998, and (ii) to extend the period of
time within which Swanson shall be entitled to exercise the
outstanding stock options granted to him thereunder,
notwithstanding the provisions of such Stock Option
Agreements, as follows:
Option
Date of Agreement No. of Options Exercise Price Period of Time
(per share) to Exercise
May 22, 1996 47,600 $ 8.24 May 21, 2006
May 21, 1997 34,000 19.27 May 20, 2007
May 13, 1998 85,000 29.71 May 12, 2008
(b) The Stock Option Agreement between Swanson and RBF dated
December 1, 1998 is amended to remove the restrictions on
vesting and extend the period of time within which Swanson
shall be entitled to exercise the outstanding stock options
granted to him thereunder to December 1, 2008, notwith-
standing the provisions of such Stock Option Agreement.
5. The Agreement shall be binding upon and shall inure to the
benefit of the parties, their respective representatives, agents,
attorneys, successors and assigns, and, in particular, without
limiting the generality of the foregoing, to CDC's and RBF's
directors, officers and employees and to Swanson's heirs,
executors, administrators, legal and personal representatives
and assigns.
6. This Agreement shall be deemed to be a contract made under and
governed by, the laws of the State of Texas, without reference
to principles of conflicts of law.
7. The provisions of this Agreement are severable. If a court or
other tribunal of competent jurisdiction rules any provision of
this Agreement is invalid or unenforceable, such ruling will not
affect the validity or enforceability of any other provision of
the Agreement, and this Agreement shall be deemed to be modified
and amended so as to be enforceable to the extent permitted by
law.
This Agreement is signed in Houston, Texas on July , 1999.
__________________________________
Douglas E. Swanson
CLIFFS DRILLING COMPANY
By:_______________________________
Its duly authorized
officer
R&B FALCON CORPORATION
By:_______________________________
Its duly authorized
officer
EXHIBIT 10.21.2
AGREEMENT
This Agreement (the "Agreement"), entered into and effective as of July
31, 1999 (the "Effective Date"), is among Douglas E. Swanson ("Swanson"),
Cliffs Drilling Company ("CDC") and R&B Falcon Corporation ("RBF").
In consideration of the mutual obligations set out below, Swanson, CDC and
RBF agree as follows:
1. Within two business days following the execution of this
Agreement CDC agrees to pay to Swanson a lump sum in cash, less
deductions required by law, of $2,587,500.
2. From the Effective Date and continuing until December 1, 2001
CDC agrees to provide Swanson and his family, at the expense of
CDC, all benefits under (or substantially equivalent benefits
to) RBF's welfare benefit plans, practices, policies and
programs (including, without limitation, medical, prescription,
dental, vision, disability, salary continuance, group life and
supplemental group life and accidental death insurance plans and
programs), to the extent generally applicable to other RBF
executives.
3. For a period of three (3) years following the Effective Date
(the "Restricted Period") Swanson agrees:
(a) Not to engage in Competition with CDC. For purposes of this
Section 3(a), "Competition" shall mean Swanson engaging in
or otherwise being a director, officer, employee,
principal, agent, stockholder, member, owner or partner of,
or permitting his name to be used in connection with the
activities of any corporation or other business
organization in the offshore contract drilling industry in
direct or indirect competition with CDC, its parent,
subsidiary or affiliated companies, but shall not preclude
Swanson from being or becoming the registered or beneficial
owner of up to five (5%) of any class of capital voting
stock (or equivalent voting interest) of any corporation or
other business organization in the offshore contract
drilling industry, provided Swanson does not participate
actively in such business until the end of the Restricted
Period.
(b) Not to disclose to any third party not a member of the
Company Group (as hereinafter defined), its or their legal
counsel or independent auditors, Confidential Information
(as hereinafter defined) or Trade Secrets (as hereinafter
defined), except any of the Confidential Information or
Trade Secrets which shall be or become in the public domain
other than by breach by Swanson of his obligations set out
in this Section 3(b) or shall be required to be disclosed
by applicable laws or regulations, any judicial or admin-
istrative authority or stock exchange rule or regulation.
For purposes of this Section 3(b): "Company Group" shall
mean CDC, its parent corporation, subsidiaries and affil-
iates; "Confidential Information" shall mean (r) internal
policies and procedures, (s) financial information, (t)
marketing strategies, (u) secret discoveries, inventions,
formulae, designs, methods, processes and know-how not con-
stituting Trade Secrets, and (v) other non-public inform-
ation relating to the Company Group's business, the
disclosure of which would materially adversely affect the
Company Group's business or financial condition; and "Trade
Secrets" shall mean all secret discoveries, inventions,
formulae, designs, methods, processes and know-how entitled
to protection as trade secrets under the laws of the state
of Texas.
4. (a) The Stock Option Agreements between Swanson and CDC
referred to below are respectively amended: (i) to revise
the number of option shares covered by each such agreement
and to revise the option exercise price per share to
reflect the adjustments necessary to take into account the
conversion of CDC shares to shares of RBF effected as a
result of the merger transaction between CDC and RBF
concluded December 1,1998, and (ii) to extend the period of
time within which Swanson shall be entitled to exercise the
outstanding stock options granted to him thereunder,
notwithstanding the provisions of such Stock Option
Agreements, as follows:
Option
Date of Agreement No. of Options Exercise Price Period of Time
(per share) to Exercise
May 22, 1996 47,600 $ 8.24 May 21, 2006
May 21, 1997 34,000 19.27 May 20, 2007
May 13, 1998 85,000 29.71 May 12, 2008
(b) The Stock Option Agreement between Swanson and RBF dated
December 1, 1998 is amended to remove the restrictions on
vesting and extend the period of time within which Swanson
shall be entitled to exercise the outstanding stock options
granted to him thereunder to December 1, 2008, notwith-
standing the provisions of such Stock Option Agreement.
5. The Agreement shall be binding upon and shall inure to the
benefit of the parties, their respective representatives, agents,
attorneys, successors and assigns, and, in particular, without
limiting the generality of the foregoing, to CDC's and RBF's
directors, officers and employees and to Swanson's heirs,
executors, administrators, legal and personal representatives
and assigns.
6. This Agreement shall be deemed to be a contract made under and
governed by, the laws of the State of Texas, without reference
to principles of conflicts of law.
7. The provisions of this Agreement are severable. If a court or
other tribunal of competent jurisdiction rules any provision of
this Agreement is invalid or unenforceable, such ruling will not
affect the validity or enforceability of any other provision of
the Agreement, and this Agreement shall be deemed to be modified
and amended so as to be enforceable to the extent permitted by
law.
This Agreement is signed in Houston, Texas on July , 1999.
__________________________________
Douglas E. Swanson
CLIFFS DRILLING COMPANY
By:_______________________________
Its duly authorized
officer
R&B FALCON CORPORATION
By:_______________________________
Its duly authorized
officer
EXHIBIT 10.23.1
TERMINATION AGREEMENT
This Termination Agreement (the "Agreement"), entered into and
effective as of May 31, 1999 (the "Effective Date"), is between
Edward A. Guthrie ("Guthrie") and Cliffs Drilling Company
("Cliffs").
Guthrie and Cliffs agree that the termination of Guthrie's
employment will be governed by the following terms and conditions:
1. As of the Effective Date Guthrie tenders his resignation
as Executive Vice President - Finance and Chief Financial Officer
of Cliffs and as a director, officer and/or employee of all direct
and indirect subsidiaries and affiliated companies of Cliffs, as
the case may be, which Cliffs accepts on its behalf and on behalf
of such subsidiaries and affiliated companies.
2. Upon execution of this Agreement Cliffs agrees to provide
to Guthrie a severance package consisting of the following:
a. A lump sum in cash, less deductions required by law,
equal to the sum of (1) $300,000 plus (2) any unreimbursed
expenses and any accrued vacation pay, to the extent not
theretofore paid.
b. Notwithstanding anything to the contrary in the Stock
Option Agreement dated as of December 1, 1998, between R&B
Falcon Corporation and Guthrie, the options to purchase the
common stock of R&B Falcon Corporation awarded to Guthrie
thereunder shall vest on the Effective Date, with the right to
exercise all such options at any time until December 1, 2008.
c. The period of time within which Guthrie shall be entitled
to exercise the outstanding stock options granted to him under
the Non-Qualified Stock Option Agreements between Cliffs and
Guthrie dated as of May 29, 1996, May 21, 1997 and May 13,
1998 shall be extended to May 21, 2006, May 20, 2007, and May
12, 2008, respectively, notwithstanding the provisions of such
stock option agreements.
d. Guthrie shall be entitled all rights as to which he has
vested under (1) the Cliffs 401(k) Plan, (2) the Cliffs
Compensation Deferral Plan, and (3) the R&B Falcon Corporation
Pension Plan. For purposes of determining eligibility and
vesting in the R&B Falcon Corporation Pension Plan, credit
will be given for the years of service with Cliffs. For
purposes of determining accrual of benefits under the R&B
Pension Plan, credit will be given for service from December
1, 1998 through May 31, 1999.
e. Guthrie shall be entitled to exercise all rights afforded
to him under "COBRA".
f. Guthrie shall pay to the Company the sum of
$51,401.11, representing the value of the Company's interest
in the split dollar insurance policy on Guthrie's life, and
the Company shall relinquish and assign to Guthrie all of the
Company's rights in such policy.
All cash payments due to Guthrie under the terms of this Agreement
shall be paid by Cliffs within two business days following the date
this agreement has been executed by both parties.
3. Upon execution of this Agreement and subject to the
payment and other obligations of Cliffs set out in Section 2 above,
this Agreement constitutes full satisfaction of all obligations of
Cliffs under the Employment Agreement dated as of December 1, 1998
between Guthrie and Cliffs. Except for the rights of Guthrie
hereunder (including the rights under the Stock Option Agreements
described under Section 2 above, as modified thereby), Guthrie
releases Cliffs, R&B Falcon Corporation, their direct and indirect
subsidiaries and affiliated companies, and the officers, directors
and employees of each of such entities, from all claims and
liabilities.
4. The Agreement shall be binding upon and shall inure to
the benefit of the parties, their respective representatives,
agents, attorneys, successors and assigns, and, in particular,
without limiting the generality of the foregoing, to the directors,
officers and employees of Cliffs, R&B Falcon Corporation, and their
direct and indirect subsidiaries, and to Guthrie's heirs,
executors, administrators, legal and personal representatives and
assigns.
5. This Agreement shall be deemed to be a contract made
under and governed by, the laws of the State of Texas, without
reference to principles of conflicts of law.
6. This Agreement constitutes the complete and entire
agreement between the parties. This Agreement supersedes and
cancels all prior or contemporaneous representations, promises or
agreements between the parties. This Agreement cannot be amended
or modified except by written agreement signed by each of the
parties hereto.
7. The provisions of this Agreement are severable. If a
court or other tribunal of competent jurisdiction rules any
provision of this Agreement is invalid or unenforceable, such
ruling will not affect the validity or enforceability of any other
provision of the Agreement, and this Agreement shall be deemed to
be modified and amended so as to be enforceable to the extent
permitted by law.
8. R&B Falcon Corporation joins in the execution hereof to
evidence its agreement to the provisions of paragraphs b and c of
Section 2.
9. This Agreement is signed in Houston, Texas to be
effective as of May 31, 1999.
_____________________________
Edward A. Guthrie
CLIFFS DRILLING COMPANY
By:__________________________
R&B FALCON CORPORATION
By:__________________________
EXHIBIT 10.28
R&B FALCON CORPORATION
1998 ACQUISITION OPTION PLAN
1. Purpose. Reference is made to the Agreement and Plan of
Merger dated as of August 21, 1998 (the "Merger Agreement"),
among R&B Falcon Corporation (the "Company"), RBF Cliffs
Acquisition Corp. and Cliffs Drilling Company ("Cliffs").
Pursuant to the Merger Agreement, the Company agreed to grant to
certain Cliffs employees options to acquire R&B Falcon Common
Stock. The Merger Agreement provided such options would be
granted pursuant to the R&B Falcon Corporation 1998 Employee
Long-Term Incentive Plan. The Company has determined that it
would be desirable to grant such options under a separate plan
having terms that are in all material respects the same as the
R&B Falcon 1998 Corporation Employee Long-Term Incentive Plan.
Cliffs Drilling Company has agreed that such options may be
granted under a separate plan. This R&B Falcon Corporation 1998
Acquisition Option Plan (the "Plan") is established and adopted
for the purpose of fulfilling the Company's obligations to grant
stock options to Cliffs employees pursuant to the Merger
Agreement.
2. Definitions. As used herein, the terms set forth
below -shall have the following respective meanings:
"Award" means the grant of a non-qualified stock option
pursuant hereto.
"Award Agreement" means a written agreement between the
Company and a Participant that sets forth the terms, conditions
and limitations applicable to an Award.
"Board" means the Board of Directors of the Company.
"Common Stock" means the Common Stock, par value $0.01
per share, of the Company.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Committee" means such committee of the Board as is
designated by the Board to administer the Plan. The Committee
shall be constituted to permit the Plan to comply with Rule 16b-3
and shall initially consist of not less than two members of the
Board who are "disinterested persons" within the meaning of such
Rule.
"Director" means an individual serving as a member of
the Board.
"Effective Time" has the meaning given to it in the
Merger Agreement.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time,
"Fair Market Value" means, as of a particular date, (i)
if the shares of Common Stock are listed on the New York Stock
Exchange, the mean between the highest and lowest sales price per
share of Common Stock on such national securities exchange on
such date, or if there shall have been no such sale so reported
on that date, on the last preceding date on which such sale was
so reported, (ii) if the shares of Common Stock are not so listed
but are quoted in the NASDAQ National Market System, the mean
between the highest and lowest sales price per share of Common
Stock on the NASDAQ National Market System on that date, or, if
there shall have been no such sale so reported on that date, on
the last preceding date on which such a sale was so reported or
(iii) if the Common Stock is not so listed or quoted, the mean
between the closing bid and asked price on that date, or, if
there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as
reported by NASDAQ, or, if not reported by NASDAQ, by the
National Quotation Bureau, Inc.
"Participant" means an employee of the Company or any
of its Subsidiaries to whom an Award has been made under this
Plan.
"Rule 16b-3" means Rule l6b-3 promulgated under the
Exchange Act, or any successor rule.
"Subsidiary" means any corporation of which the Company
directly or indirectly owns shares representing more than 50% of
the voting power of all classes or series of capital stock of
such corporation which have the right to vote generally on
matters submitted to a vote of the stockholders of such
corporation.
3. Eligibility. Persons identified in Schedule 5. 10 of
the Merger Agreement shall be eligible for an Award under this
Plan.
4. Common Stock Available for Awards. There shall be
available for Awards granted wholly or partly in Common Stock
(including rights or options which may be exercised for or
settled in Common Stock) during the term of this Plan an
aggregate of 1,000,000 shares of Common Stock. The Board of
Directors and the appropriate officers of the Company shall from
time to time take whatever actions are necessary to file required
documents with governmental authorities and stock exchanges and
transaction reporting systems to make shares of Common Stock
available for issuance pursuant to Awards.
5. Administration. This Plan shall be administered by the
Committee, which shall have full and exclusive power to interpret
this Plan, to grant waivers of the restrictions set forth in this
Plan and to adopt such rule, regulations and guidelines for
carrying out this Plan as it may deem necessary or proper, all of
which powers shall be exercised in the best interests of the
Company and in keeping with the objectives of this Plan. The
Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any Award in the
manner and to the extent the Committee deems necessary or
desirable to carry it into effect. Any decision of the Committee
in the interpretation and administration of this Plan shall lie
within its sole and absolute discretion and shall be final,
conclusive and binding on all parties concerned. No member of the
Committee or officer of the Company to whom it has delegated
authority in accordance with the provisions of Paragraph 6 of
this Plan shall be liable for anything done or committed to be
done by him or her, by any member of the Committee or by any
officer of the Company in connection with the performance of any
duties under this Plan, except for his or her own willful
misconduct or as expressly provided by statute.
6. Delectation of Authority. The Committee may delegate to
the Chief Executive Officer and to other senior officers of the
Company its duties under this Plan pursuant to such conditions or
limitations as the Committee may establish, except that the
Committee may not delegate to any person the authority to grant
Awards to, or take other action with respect to, Participants who
are subject to Section 16 of the Exchange Act.
7. Awards.
(a) Awards hereunder shall consist of a right to purchase
shares of Common Stock at a price equal to the closing sales
price of the Common Stock, as reported on the New York Stock
Exchange, on the date on which the Effective Time occurs. Such
options shall be granted to each person identified in Schedule 5.
10; to the Merger Agreement in the amount set forth beside each
such person's name in said Schedule 5. 10; provided, however, if
any such person is no longer employed by Cliffs Drilling Company
or an affiliate thereof at the Effective Time, no options shall
be granted to such person. The options shall have a term of ten
years from the Effective Time and shall vest as to 50% of such
options on the first anniversary of the Effective Time, as to an
additional 25% on the second anniversary of the Effective Time,
and as to the remaining 25% on the third anniversary of the
Effective Time. Each Award made hereunder shall he embodied in an
Award Agreement which shall be signed by the Participant and by
the Chief Executive Officer or any Vice President of the Company
for and on behalf of the Company. Except as specified above,
Award Agreements shall be in form and substance consistent with
those used in employee stock option grants by R&B Falcon
Corporation prior to the Effective Time.
(b) Notwithstanding anything to the contrary in the Plan or
any Award Agreement, any shares of Common Stock received by a
Participant who is an officer or director of the Company pursuant
to an Award hereunder (other than shares of Common Stock received
in connection with the Participants death, disability, retirement
or termination of employment or as required to be made pursuant
to a provision of the Code) must be held by such officer or
director for a period of six months following such acquisition
[such condition may be satisfied with respect to a derivative
security (as defined in Rule 16b-3) if at least six months elapse
from the date of acquisition of the derivative security to the
date of disposition of the derivative security (other than upon
exercise or conversion) or its underlying security].
8. Stock Option Exercise. The price at which shares of
Common Stock may be purchased under a stock option shall be paid
in full at the time of exercise in cash or, if permitted by the
Committee, by means of tendering Common Stock or surrendering
another award, including restricted stock, valued at Fair Market
Value on the date of exercise, or any combination thereof the
Committee shall determine acceptable methods for tendering Common
Stock or other Awards to exercise a stock option as it deems
appropriate. The Committee may provide for loans from the Company
to permit the exercise or purchase of Awards and may provide for
procedures to permit the exercise or purchase of Awards by use of
the proceeds to be received from the sale of Common Stock
issuable pursuant to an Award. Unless otherwise provided in the
applicable Award Agreement, in the event shares of restricted
stock are tendered as consideration for the exercise of a stock
option, a number of the shares issued upon the exercise of the
stock option, equal to the number of shares of restricted stock
used as consideration therefor, shall be subject to the same
restrictions as the restricted stock so submitted as well as any
additional restrictions that may be imposed by the Committee.
9. Tax Withholding. The Company shall have the right to
deduct applicable taxes from any Award payment and withhold at
the time of delivery or vesting of shares of Common Stock under
this Plan, an appropriate number of shares of Common Stock for
payment of taxes required by law or to take such other action as
may be necessary in the opinion of the Company to satisfy all
obligations for withholding of such taxes. The Committee may also
permit withholding to be satisfied by the transfer to the Company
of shares of Common Stock theretofore owned by the holder of the
Award with respect to which withholding is required. If shares of
Common Stock are used to satisfy tax withholding, such shares
shall be valued based on the Fair Market Value when the tax
withholding is required to be made.
10. Amendment, Modification, Suspension or Termination. The
Board may amend, modify, suspend or terminate this Plan for the
purpose of meeting or addressing any changes in legal
requirements or for any other purpose permitted by law except
that (i) no amendment or alteration that would impair the rights
of any Participant under any Award granted to such Participant
shall be made without such Participant's consent and (ii) no
amendment or alteration shall be effective prior to approval by
the Company's stockholders to the extent such approval is then
required pursuant to Rule 16b-3 in order to preserve the
applicability of any exemption provided by such rule to any Award
then outstanding (unless the holder of such Award consents) or to
the extent stockholder approval is otherwise required by
applicable legal requirements.
11. Termination of Employment. Upon the termination of
employment by a Participant, any unexercised, deferred or unpaid
Awards shall be treated as provided in the specific Award
Agreement evidencing the Award. In the event of such a
termination, the Committee may, in its discretion, provide for
the extension of the exercisability of an Award, accelerate the
vesting of an Award, eliminate or make less restrictive any
restrictions contained in an Award or otherwise amend or modify
the Award in any manner not adverse to such Participant.
12. Assignability. No Award or any other benefit under this
Plan constituting a stock option or other derivative security
within the meaning of Rule 16b-3 shall be assignable or otherwise
transferable except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder. However, an officer
or director may designate a beneficiary for any Award made to
such officer or director.
13. Adjustments.
(a) The existence of outstanding Awards shall not affect in
any manner the right or power of the Company or its stockholders
to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the capital stock of the
Company or its business or any merger or consolidation of the
Company, or any issue of bonds, debentures, or preferred stock
(whether or not such issue is prior to, on a parity with or
junior to the Common Stock) or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding of
any kind, whether or not of a character similar to that of the
acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of
outstanding shares of Common Stock or declaration of a dividend
payable in shares of Common Stock or capital reorganization or
reclassification or other transaction involving an increase or
reduction in the number of outstanding shares of Common Stock,
the Committee may adjust proportionally (i) the number of shares
of Common Stock reserved under this Plan and covered by
outstanding Awards denominated in Common Stock or units of Common
Stock; (ii) the exercise or other price in respect of such
Awards; and (iii) the appropriate Fair Market Value and other
price determinations of such Awards. In the event of any
consolidation or merger of the Company with another corporation
or entity or the adoption by the Company of a plan of exchange
affecting the Common Stock or any distribution to holders of
Common Stock of securities or property (other than normal cash
dividends or dividends payable in Common Stock), the Committee
shall make such adjustments or other provisions as it my deem
equitable, including adjustments to avoid fractional shares, to
give proper effect to such event. In the event of a corporate
merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, the Committee shall be
authorized to issue or assume stock options, regardless of
whether in a transaction to which Section 425(a) of the Code
applies, by means of substitution of new options for previously
issued options or an assumption of previously issued options, or
to make provision for the acceleration of the exercisability of,
or lapse of restrictions with respect to, Awards and the
termination of unexercised options in connection with such
transaction
14. Restrictions. No Common Stock or other form of payment
shall be issued with respect to any Award unless the Company
shall be satisfied based on the advice of its counsel that such
issuance will be in compliance with applicable federal and state
securities laws. It is the intent of the Company that this Plan
comply in all respects with Rule 16b-3, that any ambiguities or
inconsistencies in the construction of this Plan be interpreted
to give effect to such intention, and that if any provision of
this Plan is found not to be in compliance with Rule 16b-3, such
provision shall be null and void to the extent required to permit
this Plan to comply with Rule 16b-3. Certificates evidencing
shares of Common Stock delivered under this Plan may be subject
to such stop 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
securities exchange or transaction reporting system upon which
the Common Stock is then listed and any applicable federal and
state securities law. The Committee may cause a legend or legends
to be placed upon any such certificates to make appropriate
reference to such restrictions.
15. Unfunded Plan. Insofar as it provides for Awards of
cash, Common Stock or rights thereto, this Plan shall be
unfunded. Although bookkeeping accounts may be established with
respect to Participants who are entitled to cash, Common Stock or
rights thereto under this Plan, any such accounts shall be used
merely as a bookkeeping convenience. The Company shall not be
required to segregate any assets that may at any time be
represented by cash, Common Stock or rights thereto, nor shall
this Plan be construed as providing for such segregation, nor
shall the Company nor the Board nor the Committee be deemed to be
a trustee of any cash, Common Stock or rights thereto to be
granted under this Plan. Any liability or obligation of the
Company to any Participant with respect to a grant of cash,
Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by
this Plan and any Award Agreement, and no such liability or
obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company.
Neither the Company nor the Board nor the Committee shall be
required to give any security or bond for the performance of any
obligation that may be created by this Plan.
16. Governing Law. This Plan and all determinations made and
actions taken pursuant hereto, to the extent not otherwise
governed by mandatory provisions of the Code or the securities
laws of the United States, shall be governed by and construed in
accordance with the laws of the State of Delaware,
17. Effective Date of Plan. This Plan shall be effective as
of December 1, 1998.
EXHIBIT 10.29
R&B FALCON CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made between
R&B Falcon Corporation, a Delaware corporation ("Company"), and
____________________ ("Optionee") as of December 1, 1998 (the
"Effective Date").
WITNESSETH:
Whereas, pursuant to the Agreement and Plan of Merger dated
as of the 2 1 day of August, 1998, among R&B Falcon Corporation,
RBF Cliffs Acquisition Corp. and Cliffs Drilling Company (the
"Merger Agreement"), R&B Falcon Corporation (the "Company")
agreed to grant stock options to certain employees of Cliffs
Drilling Company;
Whereas, the Company has adopted the R&B Falcon Corporation
1998 Acquisition Option Plan (the "Plan") to fulfill its
obligations under the Merger Agreement to grant such stock
options.
NOW THEREFORE, for and in consideration of these premises,
it is hereby agreed as follows:
1. As used herein, the terms set forth below shall have the
following respective meanings:
(a) "Cause" means Involuntary Termination as described in
Company's Personnel Policies and Procedures, in effect from time
to time,
(b) "Change of Control" means a Change of Control as
defined in Section 18 of this Agreement.
(c) "Disability" means Disability as defined in the
Company's Personnel Policies and Procedures, in effect from time
to time,
2. The option awarded hereunder is issued in accordance with
and subject to all of the terms, conditions and provisions of the
Plan and administrative interpretations thereunder, if any, which
have been adopted by the Committee and are in effect on the date
hereof. Capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Plan.
3. On the terms and subject to the conditions contained
herein, The Company hereby grants to the Optionee an option (the
"Option") for a term of ten years ending on December 1, 2008
("Option Period") to purchase from the Company _______ shares
("Option Shares") of the Company's Common Stock, at a price equal
to $9.125 per share.
4. This Option shall not be exercisable, except upon the
death or Disability of the Optionee, until after 6 months
immediately following the Effective Date, and thereafter shall be
exercisable for Common Stock as follows:
(a) After one year following the Effective Date, this Option
shall be exercisable for any number of shares up to and
including, but not in excess of, 50% of the aggregate number of
shares subject to this Option;
(b) After two years following the Effective Date, this
Option shall be exercisable for any number of shares up to and
including, but not in excess of, 75% of the aggregate number of
shares subject to this Option; and
(c) After three years following the Effective Date, this
Option shall be exercisable for any number of shares of Common
Stock up to and including, but not in excess of, 100% of the
aggregate number of shares subject to this Option;
provided the number of shares as to which this Option becomes
exercisable shall, in each case, be reduced by the number of
shares theretofore purchased pursuant to the terms hereof.
Notwithstanding anything to the contrary in this Agreement
(including, without limitation, this Section and Section 7
below), this Option shall not be exercisable unless and until the
Optionee has been continuously employed by the Company
(including, for this purpose only, Cliffs Drilling Company)
and/or its Affiliates for a period of one year.
5. The Option may be exercised by the Optionee, in whole or
in part, by giving written notice to the Compensation and
Benefits Department of the Company setting forth the number of
Option Shares with respect to which the option is to be
exercised, accompanied by payment for the shares to be purchased
and any appropriate withholding taxes, and specifying the address
to which the certificate for such shares is to be mailed (or to
the extent permitted by the Company, the written instructions
referred to in the last sentence of this section). Payment shall
be by means of cash, certified check, bank draft or postal money
order payable to the order of the Company. As promptly as
practicable after receipt of such written notification and
payment, the Company shall deliver, or cause to be delivered, to
the Optionee certificates for the number of Option Shares with
respect to which the Option has been so exercised (or to the
extent permitted by the Company from time to time, to have such
number of Option Shares electronically transferred to Optionee's
account at Optionee's broker in accordance with Optionee's
written instructions).
6. Subject to approval of the Committee, which shall not be
unreasonably withheld, the Optionee may pay for any Option Shares
with respect to which the Option is exercised by tendering to the
Company other shares of Common Stock at the time of the exercise
or partial exercise hereof. The certificates representing such
other shares of Common Stock must be accompanied by a stock power
duly executed with signature guaranteed in accordance with market
practice. The value of the Common Stock so tendered shall be its
Fair Market Value.
7. (a) Upon the first to occur during the Option Period
of:
(i) Change of Control; or
(ii) the termination of the Optionee's
employment due to (A) death or Disability, (B)
involuntary termination by the Company and all
Affiliates for any reason other than Cause or
(C) retirement at age 60 or over;
the applicable restrictions on exercise set out in Section 4
above (other than the initial six months immediately following
the Effective Date) shall terminate and the Optionee's right to
exercise this Option thereafter shall no longer be subject to
such restrictions on exercise.
(b) If the Optionee's employment with the Company and all
Affiliates terminates prior to the occurrence of a date set forth
in Section 7(a)(i) above for any reason (other than any of the
reasons expressly set out in Section 7(a)(ii) above), then the
Option granted herein shall immediately terminate and thereafter
may not be exercised in whole or in part by Optionee.
8. The Option shall not be transferable by the Optionee
otherwise than as expressly permitted by the Plan. During the
lifetime of the Optionee, the Option shall be exercisable only by
her or him. No transfer of the Option shall be e5ective to bind
the Company unless the Company shall have been furnished with
written notice thereof and a copy of such evidence as the
Committee may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferees of
the terms and conditions hereof.
9. The Optionee shall have no rights as a stockholder with
respect to any Option Shares until the date of issuance of a
certificate for Option Shares purchased pursuant to this
Agreement (or to the extent permitted by the Company, from time
to time, the number of such Option Shares has been electronically
transferred to Optionee's account at Optionee's broker). Until
such time, the Optionee shall not be entitled to dividends or to
vote at meetings of the stockholders of the Company.
10. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines
is required in connection with the option herein granted. The
Optionee may pay all or any portion of the taxes required to be
withheld by the Company or paid by the Optionee in connection
with the exercise of all or any portion of the option herein
granted by electing to have the Company withhold shares of Common
Stock, or by delivering previously owned shares of Common Stock,
having a Fair Market Value equal to the amount required to be
withheld or paid. The Optionee must make the foregoing election
on or before the date that the amount of tax to be withheld is
determined ("Tax Date"). Any such election is irrevocable and
subject to disapproval by the Committee. If the Optionee is
subject to the short-swing profits recapture provisions of
Section 16(b) of the Exchange Act, any such election shall be
subject to the following additional restrictions:
(a) Such election may not be made within six months of the
grant of this option, provided that this limitation shall not
apply in the event of death or Disability.
(b) Such election must be made either in an Election Window
(as hereinafter defined) or at such other time as may be
consistent with Section 16(b) of the Exchange Act and the rules
promulgated thereunder, Where the Tax Date in respect of the
exercise of all or any portion of this Option is deferred until
after such exercise and the Optionee elects stock withholding,
the full amount of shares of Common Stock shall be issued or
transferred to the Optionee upon exercise of this Option, but the
Optionee shall be unconditionally obligated to tender back to the
Company on the Tax Date the number of shares necessary to
discharge with respect to such Option exercise the greater of (i)
the Company's withholding obligation and (ii) all or any portion
of the holder's federal and state tax obligation attributable to
the Option exercise. An Election Window is any period commencing
on the third business day following the Company's release of a
quarterly or annual summary statement of sales and earnings and
ending on the twelfth business day following such release.
11. Upon the acquisition of any shares pursuant to the
exercise of the Option, the Optionee will enter into such written
representations, warranties and agreements as the Company may
reasonably request in order to comply with applicable securities
laws or with this Agreement
12. The certificates representing the Option Shares
purchased by exercise of an option will be stamped or otherwise
imprinted with a legend in such form as the Company or its
counsel may require with respect to any applicable restrictions
on sale or transfer, and the stock transfer records of the
Company will reflect stop-transfer instructions, as appropriate,
with respect to such shares.
13. Unless otherwise provided herein, every notice
hereunder shall be in writing and shall be delivered by hand or
by registered or certified mail. All notices of the exercise by
the Optionee of any option hereunder shall be directed to R&B
Falcon Corporation, Attention: Benefits and Compensation
Department, at the Company's principal office address from time
to time. Any notice given by the Company to the Optionee directed
to him or her at his or her address on file with the Company
shall be effective to bind any other person who shall acquire
rights hereunder. The Company shall be under no obligation
whatsoever to advise the Optionee of the existence, maturity or
termination of any of the Optionee's rights hereunder and the
Optionee shall be deemed to have familiarize himself with all
matters contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder,
14. Whenever the term "Optionee" is used herein under
circumstances applicable to any other person or persons to whom
this award, in accordance with the provisions of Paragraph 8, may
be transferred, the word "Optionee" shall be deemed to include
such person or persons. References to the masculine gender herein
also include the feminine gender for all purposes.
15. Notwithstanding any of the other provisions hereof, the
Optionee agrees that he or she will not exercise the Option, and
that the Company will not be obligated to issue any shares
pursuant to this Agreement, if the exercise of the Option or the
issuance of such shares of Common Stock would constitute a
violation by the Optionee or by the Company of any provision of
any law or regulation of any governmental authority or any
national securities exchange.
16. This Agreement is subject to the Plan, a copy of which
will be provided the to Optionee upon written racquets. The terms
and provisions of the Plan (including any subsequent amendments
thereto) are incorporated herein by reference. In the event of a
conflict between any term or provision contained herein and a
term or provision of the Plan, the applicable terms and
provisions of the Plan will govern and prevail. All definitions
of words and terms contained in the Plan shall be applicable to
this Agreement,
17. In the event of a corporate merger or other business
combination in which the Company is not the surviving entity, the
economic equivalent number of the voting shares of common stock
of, or participating interests in, the surviving entity, based on
the terms of such merger or other business combination, shall be
substituted for the Option Shares hereunder, and the price per
share set out in Section 3 hereof shall be adjusted to reflect
substantially the same economic equivalent value of the Option
Shares to the Optionee immediately prior to any such merger or
other business combination.
18. For the purpose of this Agreement, a "Change of Control"
shall mean: (a) any "Person", as such term is used in Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Optionee, (ii)
the Company or any of its subsidiaries or Affiliates (as that
term is defined in the Exchange Act), (iii) any Person subject,
as of the date of Us Agreement or at any prior time, to the
reporting or filing requirements of Section 13(d) of the Exchange
Act with respect to the securities of the Company or any
Affiliate, (iv) any trustee or other fiduciary holding or owning
securities under an employee benefit plan of the Company, (v) any
underwriter temporarily holding or owning securities of the
Company, or (vi) any corporation owned directly or indirectly by
the current stockholders of the Company in substantially the same
proportion as their then ownership of stock of the Company)
becomes, after the date of this Agreement, the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing forty
percent (40%) or more of the combined voting power of the
Company's then outstanding securities; or (b) at any time a
majority of the members of the board of directors of the Company
is comprised of other than Continuing Directors (and for this
purpose "Continuing Directors" shall mean members of the board of
directors of the Company who were directors as of the date of
this Agreement, or who were nominated by a majority of the
members of the board of directors of the Company and such
majority was comprised only of Continuing Directors at the time
of such nomination).
19. Adjustments. In the event of a corporate merger or other
business combination in which the Company is not the surviving
entity, the economic equivalent number of the voting shares of
common stock of, or participating interests in, the surviving
entity, based on the terms of such merger or other business
combination, shall be substituted for the number of Option Shares
held by the Participant hereunder, and the exercise price per
share set out in Section 3 above shall be likewise adjusted, to
reflect substantially the same economic equivalent value of the
Option Shares to the Participant prior to any such merger or
other business combination. In the event of a split-off, spin-off
or creating of a different class of common stock of the Company
(including, without limitation, a tracking stock), the
Participant shall receive an option to purchase an equivalent
number of the shares of common stock or voting interests of such
separate entity being split-off or spun-off or of the shares of
the new class of common stock of the Company, as if Participant
had owned the shares underlying the Option Shares on the record
date for any such split-off, spin-off or creation of a new class
of common stock of the Company, and the exercise prices set out
in Section 3 hereof and applicable to the options to purchase
shares or the voting interests of the new entity being spin-off
or spin-off shall be adjusted to reflect substantially the same
economic equivalent value of the Option Shares to the Optionee
prior to any such split-off, spin-off or creation of a new class
of common stock of the Company
IN WITNESS WHEREOF, this Agreement is executed effective
as of December 1, 1998.
R&B FALCON CORPORATION
By:_______________________
Leighton E. Moss,
Senior Vice President
OPTIONEE
__________________________
EXHIBIT 10.30
RIG MANAGEMENT AGREEMENT
THIS RIG MANAGEMENT AGREEMENT(the "Agreement") is entered
into effective as of the 1st day of April, 1999, by and between
CLIFFS DRILLING COMPANY, a Delaware corporation (hereinafter
referred to as "Owner"), and R&B FALCON DRILLING USA, INC., a
Delaware corporation (hereinafter referred to as "Manager").
WITNESSETH:
WHEREAS, Owner is the owner and operator of the following
jack-up drilling rigs (individually a "Vessel" and collectively
the "Vessels"):
Cliffs Drilling 100 Liberia Official No. 9179
Cliffs Drilling 150 Liberia Official No. 8909
Cliffs Drilling 151 Liberia Official No. 8572
Cliffs Drilling 152 Liberia Official No. 8530
Cliffs Drilling 153 Liberia Official No. 8353
Cliffs Drilling 154 Liberia Official No. 8573
Cliffs Drilling 155 U.S. Official No. 621912
Cliffs Drilling 156 Panama Official No. 17081-PEXT-3
Cliffs Drilling 180 Liberia Official No. 9792
Cliffs Drilling 200 Liberia Official No. 8539
WHEREAS, Owner desires to engage Manager to manage the
Vessels, and Manager desires to perform management services on
behalf of Owner with respect to the Vessels, in accordance with
the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby represent, warrant, covenant,
and agree as follows:
ARTICLE I
MANAGEMENT SERVICES
1.1 Term of Agreement. Manager shall perform or arrange
for the performance of the management services provided for
herein for the term of this Agreement. The term of this
Agreement shall commence as of the date hereof and shall end upon
the expiration of 60 days prior written notice by either Manager
or Owner to terminate this Agreement with respect to all of the
Vessels; provided, however, that Manager may not terminate this
Agreement with respect to any Vessel without the written consent
of Owner if such termination would result in a breach of or
default under any then-current drilling contract for such Vessel;
and provided, further, that Owner shall remain liable to Manager
for all accrued but unpaid management fees and cost
reimbursements due Manager pursuant to Section 1.3 of this
Agreement, notwithstanding any such termination..
1.2 Services to be Performed. Subject to the terms and
conditions of this Agreement, Manager agrees to use its
reasonable best efforts during the term of this Agreement to (a)
maintain the Vessels in good repair, (b) obtain for the Vessels
drilling contracts with reputable and solvent persons, at market
rates and terms, and (c) operate the Vessels profitably. In this
regard, Manager shall provide the following:
(i) all necessary and desirable management services,
including management of the day-to-day operations of the
Vessels and long-range planning for the operations of the
Vessels;
(ii) all necessary and desirable accounting, tax, and
clerical services, including maintaining the necessary and
desirable books and records with respect to the Vessels,
preparation of monthly, quarterly and annual financial
reports and tax returns, and all necessary and desirable
payroll and accounts payable services;
(iii) all necessary and desirable purchasing,
maintenance and personnel services, including purchasing and
expediting of supplies for the Vessels, maintenance and
repair of the Vessels, and hiring, training and safety of
personnel to work on the Vessels;
(iv) all necessary and desirable bidding, contracting
and marketing services, including all necessary efforts to
maintain maximum utilization of the Vessels;
(v) all necessary working capital to fund the direct
and indirect costs associated with operating and maintaining
the Vessels; and
(vi) as necessary, Manager's executive and senior
management personnel and all other personnel required in
order to perform the services enumerated in this Paragraph
1.2.
1.3 Compensation. During the term of this Agreement, the
following compensation will be due with respect to each Vessel:
(i) Management Fee. In lieu of any indirect cost
allocation or reimbursement obligation, Owner will pay to
Manager on a monthly basis in arrears a fixed management fee
of $700 per day with respect to each Vessel.
(ii) Profit Sharing. Owner and Manager will share
ratably in the net profit or loss resulting from each
Vessel, after taking into account all direct operating costs
paid by Manager. The profit sharing ratio shall be 80%
(Owner) and 20% (Manager). Such profit or loss shall be
determined on a pre-tax basis in accordance with generally
accepted accounting principles consistently applied.
Manager shall prepare and submit to Owner within twenty (20)
days after the end of each calendar quarter a management
report identifying the direct costs incurred by, and
reflecting the net profit and loss resulting from, each
Vessel. In the event that the quarterly management report
indicates a net profit resulting from the Vessels, Manager
shall remit to Owner, within thirty (30) days following the
end of the calendar quarter, an amount equal to 80% of such
net profit. In the event that the quarterly management
report indicates a net loss resulting from the Vessels,
Owner shall remit to Manager, within thirty (30) days
following the end of the calendar quarter, an amount equal
to 80% of such net loss.
1.4 Capital Expenditures. During the term of this
Agreement, Owner will pay for the cost of capital expenditures
incurred in connection with the Vessels and for ancillary
equipment acquired for the Vessels. Capital expenditures are
defined to include all such betterments which extend the useful
or economic life of the Vessel or its equipment.
ARTICLE II
CONFLICT OF INTEREST
2.1 Conflict of Interest. Owner expressly acknowledges
that Manager and its affiliates own and operate drilling rigs
which may compete with the business of Owner, and, accordingly,
that conflicts of interest may arise between the interest of
Manager and its affiliates in the employment of drilling rigs
owned and/or operated by them, on the one hand, and the interest
of Owner in the employment of the Vessels, on the other hand.
Owner hereby waives any and all rights, remedies and recourses
which it might otherwise have under law or under this Agreement
against Manager and any of its affiliates arising out of such
conflicts of interest as long as all reasonable efforts are made
to secure employment for the Vessels in the same manner and on
the same terms as efforts are made to secure employment for the
drilling rigs owned and/or operated by Manager and its
affiliates. Without limiting the generality of the foregoing,
Manager, or any of its affiliates, shall not be deemed to have
been unfair or to have acted in bad faith or in breach of any
obligation that Manager or any of its affiliates may have under
law or under this Agreement where a decision is made to employ a
drilling rig owned and/or operated by Manager or its affiliates
rather than the Vessels when Manager or its affiliate determines
in good faith that (i) such drilling rig is more suitable to the
requirements of the particular job either because of the
capabilities of such drilling rig, its location, crew, relatively
better availability than the Vessels, or other factors; (ii) the
contracting party indicate a preference for such other drilling
rig; or (iii) other opportunities to employ the Vessels are then
available, or may reasonably be expected to be available in the
relatively near future, on reasonably comparable terms and
conditions to Owner.
ARTICLE III
COVENANTS
3.1 Covenants of the Manager. Manager hereby covenants and
agrees with Owner that:
(a) It will act in good faith and perform its obligations
hereunder in a timely, professional, and safe manner and in
accordance with standard industry practices and applicable
manufacturers' specifications;
(b) It will, in all material respects, carry out its
obligations hereunder in accordance with all applicable laws,
regulations, and ordinances;
(c) It will promptly inform Owner of any material adverse
change in the condition of the Vessels;
(d) It will at all times give Owner and its representatives
access to the Vessels;
(e) It will direct that proceeds of insurance on the
Vessels or other property of Owner be paid to appropriate parties
under applicable mortgages and drilling contracts, and otherwise
to Owner (and not to Manager).
3.1 Covenants of the Owner. Owner covenants and agrees
with Manager that:
(a) It will act in good faith and perform its obligations
hereunder;
(b) It will permit Manager to have and maintain custody of
the Vessels during the term of this Agreement.
ARTICLE IV
INDEMNIFICATION
4.1 Acknowledgment of Risks and Hazards. It is stipulated
and agreed by Owner that operation of the Vessels involves
substantial risks and hazards. Manager shall not be held liable
or responsible to Owner for the negligence of Manager or its
agents, independent contractors, or employees. Except as
otherwise provided in this Agreement, Manager shall have no
liability or obligation to Owner for any decision made or action
taken in connection with the discharge of Manager's rights,
duties, and obligations hereunder if such decision or action is
made and taken in good faith, and Owner shall indemnify and hold
harmless Manager (and all shareholders, officers, directors, and
employees thereof) from and against any and all claims, demands,
liabilities, costs, and causes of action arising out of or
incident to any such decision or action, the negligence of
Manager notwithstanding. Manager shall be liable, however, to
Owner for all damages suffered by Owner as a result of Manager's
own gross negligence or willful misconduct with respect to
operation of the Vessels or breach of this Agreement. The
indemnification rights herein contained shall be cumulative of,
and in addition to, any and all rights, remedies, and recourses
to which Manager shall be entitled, whether pursuant to other
provisions of this Agreement, at law, or in equity. Manager's
rights under this Section 4.1 shall survive the termination of
such Manager's status as manager of the Vessels.
ARTICLE V
MISCELLANEOUS
5.1 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered by
(i) personal delivery, (ii) expedited delivery service, (iii)
certified or registered mail, postage prepaid, or (iv) facsimile
with confirmation of transmission. Any such notice shall be
deemed given upon its receipt at the following address:
(a) If to the Owner, at:
Cliffs Drilling Company
1200 Smith Street, Suite 300
Houston, Texas 77002
Attn: Mr. Douglas E. Swanson
Facsimile: (713) 951-0649
(b) If to the Manager, at:
R&B Falcon Drilling U.S.A., Inc.
901 Threadneedle
Houston, Texas 77079-2982
Attn: Mr. Bernie Stewart
Facsimile: (281) 496-0285
Any party may, by notice given in accordance with this Section
5.1 to the other party, designate another address or person for
receipt of notices hereunder.
5.2 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the transactions
contemplated hereby and supersedes all prior agreements, written
or oral, with respect to the subject matter hereof.
5.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended,
superseded, canceled, renewed, or extended, and the terms hereof
may be waived, only by a written instrument signed by Owner and
Manager or, in the case of a waiver, by the party waiving
compliance. No delay on the part of a party in exercising any
right, power, or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any
such right, power, or privilege, or any single or partial
exercise of any such right, power, or privilege, preclude any
further exercise thereof. The rights and remedies herein
provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.
5.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE SUBSTANTIVE
LAWS OF THE STATE OF TEXAS EXCLUDING ITS CHOICE OF LAW RULES.
5.5 Binding Effect; No Assignment; No Third Party
Benefit. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and
permitted assigns. Unless otherwise expressly provided herein,
no rights or obligations under this Agreement are assignable.
Nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason of
this Agreement on any person other than the parties to this
Agreement and their respective successors and permitted assigns.
5.6 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such
counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all,
the parties hereto.
5.7 Severability of Provisions. If any provision, or any
portion of any provision, of this Agreement shall be held invalid
or unenforceable, or if the application of any provision or any
portion thereof to any person or circumstances shall be held
invalid or unenforceable, the remaining portion of such
provision, or such provision as it applied to other persons or
circumstances, and the remaining provisions shall not be affected
thereby.
5.8 References and Titles. All references in this
Agreement to articles, sections, subsections, and other
subdivisions refer to corresponding articles, sections,
subsections, and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning
of any of such subdivisions are for convenience only and shall
not constitute part of such subdivision and shall be disregarded
in construing the language contained in such subdivision. The
words "this Agreement," "herein," "hereby," "hereunder," and
words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited.
Words in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires.
5.9 Independent Contractor Status. The parties hereto
agree that the Manager is an independent contractor and that no
employee of Manager is, or is to be deemed for any purpose to be,
an employee of Owner.
IN WITNESS WHEREOF, this Agreement has been executed as of
the date first above written.
OWNER: CLIFFS DRILLING COMPANY
By:_____________________________
Douglas E. Swanson, President
MANAGER: R&B FALCON DRILLING USA, INC.
By:_____________________________
Bernie Stewart, President
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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>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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0
0
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