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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED JUNE 30, 1997
COMMISSION FILE NUMBER 0-6352
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
281-492-2929
---------------
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 and (2) has been subject to such filings requirements
for the past 90 days. Yes X No
Number of outstanding shares of Common Stock, $1 par value, as of June 30, 1997:
6,749,563.
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PAGE 2
PART I. FINANCIAL INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
The condensed financial statements herein have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, although the Company
believes that the disclosures are adequate to make the information not
misleading. The financial statements reflect all adjustments which are, in the
opinion of management, necessary to present fairly the financial position as of
June 30, 1997 and September 30, 1996, and the results of its operations for the
three months and nine months ended June 30, 1997 and 1996, respectively, and the
statements of cash flows for the nine months then ended. All adjustments were of
a normal recurring nature. It is suggested these condensed financial statements
be read in conjunction with the financial statements and the notes thereto
included in the Company's September 30, 1996 Annual Report to Shareholders.
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PAGE 3
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, September 30,
1997 1996
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,715 $ 17,565
Accounts receivable 13,757 16,687
Inventories of materials and supplies,
at lower of average cost or market 6,590 5,454
Prepaid expenses and other 2,161 4,464
-------- --------
Total Current Assets 32,223 44,170
-------- --------
SECURITIES HELD FOR INVESTMENT:
Held to maturity, at amortized cost 22,580 22,576
Available-for-sale, at fair value 376 351
-------- --------
22,956 22,927
-------- --------
PROPERTY AND EQUIPMENT:
Drilling vessels, equipment and drill pipe 231,971 191,801
Other 5,252 4,810
-------- --------
237,223 196,611
Less-accumulated depreciation 112,197 105,487
-------- --------
Net Property and Equipment 125,026 91,124
-------- --------
DEFERRED COSTS AND OTHER ASSETS 758 1,088
-------- --------
$180,963 $159,309
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, September 30,
1997 1996
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term notes payable $ 17,271 $ 7,933
Short-term note payable 20,000 ---
Accounts payable 4,238 2,615
Accrued liabilities 11,005 7,471
--------- ---------
Total Current Liabilities 52,514 18,019
--------- ---------
LONG-TERM NOTES PAYABLE,
net of estimated current maturities 750 26,540
--------- ---------
DEFERRED CREDITS:
Income taxes 1,795 2,289
Other 8,899 6,907
--------- ---------
10,694 9,196
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value;
1,000,000 shares authorized,
none outstanding --- ---
Common stock, $1 par value;
10,000,000 share authorized with
6,750,000 and 6,691,000
shares issued and outstanding
as of June 30, 1997 and September
30, 1996, respectively 6,750 6,691
Paid-in capital 56,148 55,470
Net unrealized holding loss on
available-for-sale securities (120) (139)
Retained earnings 54,227 43,532
--------- ---------
Total Shareholders' Equity 117,005 105,554
--------- ---------
$ 180,963 $ 159,309
========= =========
The accompanying notes are an integral part of these consolidated
finanical statements.
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PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
-------- -------- ------ ------
(In thousands, except per share amounts)
REVENUES:
Contract drilling $ 21,490 $ 18,891 $ 63,404 $ 55,712
Contract management 579 236 1,563 639
-------- -------- -------- --------
22,069 19,127 64,967 56,351
-------- -------- -------- --------
COSTS AND EXPENSES:
Contract drilling 12,668 11,721 36,841 37,510
Contract management 226 158 691 453
Depreciation 2,493 2,312 7,205 7,380
General and administrative 1,432 1,337 4,636 3,691
------- -------- ------- --------
16,819 15,528 49,373 49,034
------- -------- ------- --------
OPERATING INCOME 5,250 3,599 15,594 7,317
------- -------- ------- --------
OTHER INCOME (EXPENSE)
Interest expense (137) (609) (868) (1,918)
Interest income 547 648 1,785 1,828
------ -------- ------- --------
410 39 917 (90)
------ -------- ------- --------
INCOME BEFORE INCOME TAXES 5,660 3,638 16,511 7,227
PROVISION FOR INCOME TAXES 1,998 1,259 5,816 2,855
------ -------- ------- -----
NET INCOME $3,662 $ 2,379 $10,695 $ 4,372
====== ======== ======= ========
EARNINGS PER COMMON SHARE $ .54 $ .36 $ 1.59 $ .66
====== ======== ======= ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,746 6,688 6,728 6,656
======= ===== ====== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
1997 1996
---- ----
(In thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 10,695 $ 4,372
-------- --------
Adjustments to reconcile net
income to net cash
provided (used) by operating activities:
Depreciation 7,205 7,380
Amortization of deferred costs 106 474
Deferred federal income tax
provision (benefit) (550) 310
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 2,930 (3,394)
Increase (decrease) in accounts payable 1,623 (378)
Increase in accrued liabilities 3,534 2,952
Other 3,377 2,265
-------- --------
Total adjustments 18,225 9,609
-------- ---------
Net cash provided by
operating activities 28,920 13,981
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (41,055) (5,256)
-------- --------
Net cash used by investing activities (41,055) (5,256)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on long-term
notes payable (16,452) (3,000)
Proceeds from exercises of stock options 737 733
Proceeds (payment) from/on short-term
note payable 20,000 (1,500)
-------- --------
Net cash provided (used) by
financing activities 4,285 (3,767)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,850) 4,958
CASH AND CASH EQUIVALENTS, at beginning of period 17,565 11,984
-------- --------
CASH AND CASH EQUIVALENTS, at end of period $ 9,715 $ 16,942
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for domestic
and foreign income tax $ 3,799 $ 1,105
======== ========
Cash paid during the period for interest $ 1,242 $ 1,751
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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PAGE 7
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In January 1997, the Company executed a drilling contract for the
ATWOOD SOUTHERN CROSS which requires substantial refurbishment and
upgrade of the rig. The Company will incur approximately $32 million in
refurbishment and upgrade costs. Management estimates that this rig
will commence drilling operations in Australia in early fiscal 1998.
2. A three-year contract option was exercised for the ATWOOD FALCON which
will require the Company to upgrade the rig to drill in up to 3,500
feet of water. The rig should be mobilized to shipyard during the
second half of fiscal 1998 for the water depth upgrade, which is
expected to cost approximately $50 million.
3. In July 1997, the Company entered into a $125 million revolving credit
facility with a bank group and initially borrowed $48 million under the
facility. These funds were utilized to repay $20 million borrowed under
a short-term line-of-credit and $16.5 million outstanding under an
existing bank group credit facility.
4. On February 4, 1997, the Company filed a Registration Statement on Form
S-3 with the Securities and Exchange Commission with respect to a
public offering by the Company of 1,500,000 shares of common stock.
However, in the opinion of management, the stock price range did not
adequately reflect the value of the Company, and therefore, the public
offering was subsequently withdrawn.
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PAGE 8
PART I. ITEM 2
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS 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 in "Liquidity and Capital Resources" and elsewhere in
this Form 10-Q. All subsequent written and oral forward-looking statements
attributable to the Company, or persons acting on its behalf, are expressly
qualified in their entirety by the Cautionary Statements.
GENERAL
The international offshore drilling market continues to remain strong,
especially for the deeper water drilling units. Several significant events have
recently occurred that should positively impact the Company's future operations.
A three-year contract option was exercised for the ATWOOD FALCON which will
require a water-depth upgrade of the rig of approximately $50 million to enable
it to drill in up to 3,500 feet of water. Additionally, the Company recently
executed a contract for the ATWOOD EAGLE for operations in the Mediterranean Sea
under a minimum 200 day program at significantly higher dayrates commencing
immediately upon completion of the current contract.
The ATWOOD HUNTER is currently undergoing the final phase of its
upgrade in Galveston, Texas, and should commence operations under a three-year
drilling contract in September, 1997. The water depth upgrade of the ATWOOD
SOUTHERN CROSS continues, and the rig should commence drilling operations during
the first quarter of fiscal 1998.
In July 1997, the Company entered into a $125 million revolving credit
facility with a bank group. On August 6, 1997, the Company's common stock
commenced trading on the New York Stock Exchange under the symbol ATW.
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PAGE 9
RESULTS OF OPERATIONS
Contract revenues increased $2.9 million (15%) and $8.6 million (15%),
respectively for the three months and nine months ended June 30, 1997 compared
to the same periods in fiscal 1996. These increases are primarily the result of
higher dayrate revenues on several of the Company's mobile rigs. A comparative
analysis of contract revenues is as follows:
CONTRACT REVENUES
---------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ------------------------------
June 30, June 30, Variance June 30, June 30, Variance
1997 1996 1997 1996
(In millions)
ATWOOD FALCON $4.2 $ 2.5 $1.7 $12.5 $ 7.5 $ 5.0
ATWOOD HUNTER 0.0 2.8 (2.8) 3.5 8.0 (4.5)
ATWOOD EAGLE 5.0 3.1 1.9 14.3 10.7 3.6
RIG-200 1.9 0.7 1.2 3.9 1.4 2.5
SEAHAWK 2.8 2.7 0.1 8.4 8.1 0.3
VICKSBURG 1.3 1.3 0.0 3.8 3.8 0.0
RIG-19 2.1 2.1 0.0 4.9 6.1 (1.2)
RICHMOND 2.3 1.6 0.7 6.5 4.4 2.1
GOODWYN 'A' 1.8 2.1 (0.3) 5.5 5.7 (0.2)
NORTH RANKIN 'A' 0.6 0.2 0.4 1.6 0.6 1.0
--- --- --- --- --- ---
$22.0 $19.1 $2.9 $64.9 $56.3 $8.6
===== ===== ===== ===== ===== =====
The increase in revenues for the ATWOOD FALCON was due to an increase
of approximately 60% in the rig's contract dayrate commencing in the quarter
ended September 30, 1996. The ATWOOD HUNTER completed its work in Malaysia in
December 1996 and was mobilized to Singapore to undergo the first phase of its
water-depth upgrade. The final phase of the rig's upgrade should be completed in
September 1997, with commencement of drilling operations in the United States
Gulf of Mexico in October 1997. No income or expense associated with the ATWOOD
HUNTER is recognized while the upgrade of the rig is in progress. During fiscal
1996, the ATWOOD EAGLE was relocated from Australia to Equatorial Guinea with an
approximate 25% increase in contract dayrate. RIG-200 was installed on an
offshore platform during November and December 1996 and commenced drilling
operations in January 1997, thereby accounting for its increase in revenues.
Stable contracts for the SEAHAWK and VICKSBURG continue to provide consistency
to these operations. The decline in RIG-19 revenues for the nine months ended
June 30, 1997 was due to the rig being relocated to a new platform during the
first fiscal 1997 quarter, causing a reduction in revenues as no revenues were
recognized during the relocation period. The RICHMOND continues to experience an
increase in dayrate revenues. The decrease in GOODWYN 'A' revenues was due to a
decrease in labor services provided to the rig; while, NORTH RANKIN 'A' revenues
increased due to additional labor services being provided.
Contract drilling and management costs increased $1.0 million (9%)
during the third quarter of fiscal 1997 compared to the third quarter of fiscal
1996, while there was a $.5 million (1%) decrease in contract drilling and
management costs for the nine months ended June 30, 1997 compared to the same
period in fiscal 1996. A comparative analysis of contract drilling and
management costs is as follows:
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PAGE 10
CONTRACT DRILLING AND MANAGEMENT COSTS
-------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- ---------------------------
June 30, June 30, Variance June 30, June 30, Variance
1997 1996 1997 1996
(In millions)
ATWOOD FALCON $ 1.8 $ 1.6 $ 0.2 $ 5.2 $ 5.0 $ 0.2
ATWOOD HUNTER 0.0 1.7 (1.7) 1.9 5.3 (3.4)
ATWOOD EAGLE 2.6 1.4 1.2 7.5 6.8 0.7
RIG-200 0.7 0.1 0.6 1.3 0.1 1.2
SEAHAWK 1.9 1.6 0.3 5.3 4.9 0.4
VICKSBURG 1.0 0.7 0.3 2.7 2.2 0.5
RIG-19 1.6 1.6 0.0 3.9 4.6 (0.7)
RICHMOND 1.3 1.2 0.1 3.9 3.5 0.4
GOODWYN 'A' 1.4 1.6 (0.2) 4.4 4.4 0.0
NORTH RANKIN 'A' 0.2 0.2 0.0 0.6 0.4 0.2
OTHER 0.4 0.2 0.2 0.8 0.8 0.0
--- --- --- --- --- ---
$12.9 $11.9 $1.0 $37.5 $38.0 $(0.5)
===== ===== ===== ===== ===== =====
The increases in operating costs for the ATWOOD FALCON, SEAHAWK,
VICKSBURG and RICHMOND were due primarily to increases in payroll related costs.
The decrease in operating costs for the ATWOOD HUNTER was due to the
capitalization of costs associated with the rig during the upgrade periods. The
significant increase in the operating costs for the ATWOOD EAGLE was due to the
rig operating the entire third quarter of fiscal 1997 compared to being under
mobilization for some of the third quarter of fiscal 1996. The increase in
operating costs associated with RIG-200 is attributable to the fact that
virtually no operating costs were incurred on RIG-200 prior to its commencement
of drilling operations in Australia in January 1997. The relocation of RIG-19 to
a new platform during the first quarter of 1997 accounted for its reduction in
costs for the nine months ended June 30, 1997, as no costs were recognized
during the relocation period.
The current status of the Company's drilling contracts is as follows:
NAME OF RIG LOCATION CONTRACT STATUS AT AUGUST 12, 1997
ATWOOD FALCON Malaysia/Thailand Estimated completion of current contract
is November Joint Development Area
1997. Upon completion of the current
drilling program, the rig will be
mobilized will be mobilized to the
Philippines to drill at least two wells
before undergoing a water-depth
upgrade for a three-year drilling
program in up to 3,500 feet of water
in the Philippine South China Sea.
ATWOOD HUNTER United States
Gulf of Mexico Upon completion of final upgrade process
(estimated August 1997), the rig will
commence drilling operation in up to
3,500 feet of water under a three-year
contract.
ATWOOD EAGLE Equatorial Guinea Under contract until November 1997, with
one six-month option. Upon completion of
the current drilling contract, the rig
will be mobilized to the Mediterranean
Sea for a minimum 200-day drilling
program.
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PAGE 11
SEAHAWK Malaysia Upon completion of drilling on current
platform (estimated August/September
1997), the rig will be relocated to
another platform where drilling
operations could continue through
calendar 1998.
VICKSBURG Australia Estimated completion of current
contract is December 1997. The rig is a
candidate for upgrade upon
completion of its current contract.
RIG-19 Australia Term contract (estimated drilling work
of between 9 and 12 months from January
1997).
RICHMOND United States
Gulf of Mexico Under contract until May 1998 with one
six-month option.
ATWOOD
SOUTHERN CROSS Singapore The rig is currently in a shipyard in
Singapore being refurbished and
upgraded to operate in up to
to 2,000 feet of water
for a 300-day contract estimated to
commence in early fiscal 1998.
RIG-200 Australia Term contract (minimum duration of two
years from January 1997).
GOODWYN 'A'/ Australia Term contracts (currently discussing
NORTH RANKIN 'A' management of upgrades and ongoing
work).
An analysis of depreciation expense by rig is as follows:
DEPRECIATION EXPENSE
-------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- ----------------------------
June 30, June 30, Variance June 30, June 30, Variance
1997 1996 1997 1996
(In millions)
ATWOOD FALCON $0.7 $0.6 $0.1 $2.1 $2.0 $0.1
ATWOOD HUNTER 0.0 0.4 (0.4) 0.3 1.2 (0.9)
ATWOOD EAGLE 0.5 0.5 0.0 1.5 1.5 0.0
RIG-200 0.5 0.0 0.5 0.9 0.0 0.9
SEAHAWK 0.6 0.6 0.0 1.7 1.7 0.0
VICKSBURG 0.0 0.0 0.0 0.0 0.0 0.0
RIG-19 0.0 0.1 (0.1) 0.1 0.5 (0.4)
RICHMOND 0.1 0.1 0.0 0.3 0.3 0.0
OTHER 0.1 0.0 0.1 0.3 0.2 0.1
---- ---- ---- ---- ---- ----
$2.5 $2.3 $0.2 $7.2 $7.4 $(0.2)
==== ==== ==== ==== ==== =====
The reduction in depreciation expense for the ATWOOD HUNTER was a
result of moving the rig into the shipyard in December 1996 for upgrade. While
undergoing upgrade, no depreciation expense is recognized on the rig.
Depreciation of RIG- 200 commenced with startup of its drilling operations in
January 1997. The decrease in depreciation associated with RIG-19 is
attributable to the rig completing its book depreciable life.
The increase in general and administration expenses is primarily
attributable to increase in payroll related costs and professional fees, coupled
with costs incurred with respect to the filing of a Registration Statement on
<PAGE>
PAGE 12
Form S-3 with the Securities and Exchange Commission which was subsequently
withdrawn. As a result of a reduction in outstanding long-term debt, interest
expense declined. Due to an increase in profitability and a reduction in tax
attributes, provision for income taxes has increased.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal 1997, operating cash flow
(before changes in assets and liabilities) increased 40% from $12.5 million for
the first nine months of fiscal 1996 to $17.5 million. For the nine months ended
June 30, 1997, the Company incurred approximately $41 million of capital
expenditures, primarily related to the upgrades of the ATWOOD HUNTER and the
ATWOOD SOUTHERN CROSS. During the first nine months of fiscal 1997, the Company
funded its capital expenditures through utilization of excess cash, as well as
through borrowings under a short-term line-of-credit facility which accounts for
the decline in cash of $7.9 million and increase in short-term notes payable of
$20 million, at June 30, 1997 compared to September 30, 1996.
Upon executing the $125 million revolving credit agreement in July
1997, the Company borrowed $48 million, which was utilized to repay $20 million
outstanding under a short-term line-of-credit facility and $16.5 outstanding
under a long-term bank loan facility, as well as fund certain rig upgrade costs.
Proceeds from this credit facility should provide the Company with the cash
resources to upgrade the ATWOOD FALCON and VICKSBURG, as well as complete
funding for the upgrades of the ATWOOD HUNTER and ATWOOD SOUTHERN CROSS.
Commencing in March 1999, the $125 million revolving commitment reduces at a
rate of $8.3 million per quarter.
The final phase of the ATWOOD HUNTER upgrade should be completed in
August 1997, with a total upgrade cost of approximately $42 million, offset in
part by a $10 million mobilization fee of which $5.5 million has already been
paid. The Company estimates that the total cost of the ATWOOD SOUTHERN CROSS
refurbishment and upgrade will be approximately $32 million. The ATWOOD FALCON
should be mobilized to a shipyard in Singapore sometime during the second half
of fiscal 1998 to commence a six month water-depth upgrade at an estimated cost
of $50 million. The cost to upgrade the VICKSBURG, which should occur in fiscal
1998, could be in excess of $40 million.
At June 30, 1997, the Company continued to have approximately $23
million invested in United States treasury bonds with maturities in the year
2000 and 2001. These bonds, along with certain drilling equipment, have been
pledged as security under the $125 million revolving credit facility. The
Company's portfolio of accounts receivable is comprised of major international
corporate entities with stable payment experience. Thus, the Company continues
to experience no difficulties in receivable collections.
The rollover of contracts with higher dayrates for the ATWOOD FALCON,
ATWOOD EAGLE, and RICHMOND along with the commencement of term contracts for the
ATWOOD HUNTER and ATWOOD SOUTHERN CROSS following their upgrade programs should
significantly enhance fiscal 1998 cash flows and profitability. The $125 million
revolving credit facility should provide adequate cash resources to enable the
Company to complete all currently planned rig upgrades. In addition to focusing
on rig upgrades, the Company will continue to explore other growth
opportunities, which could require additional external financing. The Company
will continue to monitor market conditions and to evaluate other external
financing possibilities; however, the Company can give no assurance that such
other financing would be available on terms acceptable to the Company.
<PAGE>
PAGE 13
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 5. Other Information
TO OUR SHAREHOLDERS AND EMPLOYEES:
Net income increased $1.4 million (54%) and operating revenues
increased $2.9 million (15%) for the third quarter of fiscal 1997 compared to
the third quarter of fiscal 1996. The improvement in financial results was
achieved without contributions from the ATWOOD HUNTER ("HUNTER") and ATWOOD
SOUTHERN CROSS ("SOUTHERN CROSS"), both of which are currently undergoing
upgrade.
The upside potential for the Company from contract expirations and
upgrade opportunities remains positive with world dayrates for semisubmersibles
and jackups continuing their upward movement and fleet utilization remaining at
high levels. The rollover of contracts with higher dayrates for the ATWOOD
FALCON ("FALCON"), ATWOOD EAGLE ("EAGLE") and RICHMOND along with the
commencement of term contracts for the HUNTER and SOUTHERN CROSS following their
upgrade programs should enable the Company to reflect significantly enhanced
operating results in fiscal 1998.
A contract option has been exercised for the semisubmersible FALCON to
extend drilling operations in the Philippines for three years under an existing
two-well contract currently expected to commence late fourth quarter of calendar
1997. The contract extension requires an approximate $50 million water-depth
upgrade of the rig.
The EAGLE should finish its present contract between November, 1997 and
May, 1998. A contract was recently executed for the EAGLE to operate in the
Mediterranean Sea under a minimum 200-day program at significantly higher
dayrates. A commitment has been received from the SEAHAWK's present operator for
operations on a further platform. These operations are expected to commence
later this year, and should extend the SEAHAWK's present program until late
calendar 1998 or early calendar 1999.
The HUNTER is currently undergoing the final phase of its upgrade
program in Galveston, Texas after being dry- transported from Singapore and
should commence drilling operations in the Gulf of Mexico during September 1997.
The SOUTHERN CROSS continues with its water-depth upgrade and should commence
drilling operations in Australia during the first fiscal quarter of 1998.
In other positive developments, the Company recently entered into a
$125 million revolving credit facility with a bank group. The proceeds from the
credit facility will be used for repaying approximately $36 million of existing
debt, funding of capital expenditures to upgrade existing offshore drilling
rigs, as well as for other general corporate purposes. Additionally, the
Company's common stock recently commenced trading on the New York Stock Exchange
under the symbol ATW.
The focus of the Company and its employees on safe operations was again
clearly evident during our third fiscal quarter. The Company's employees are to
be commended for their contributions during the quarter and we thank the
Company's shareholders for their continued support.
<PAGE>
PAGE 14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 ATWOOD OCEANICS, INC. 1996 Incentive Equity Plan
27.1 FINANCIAL DATA SCHEDULE
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
third quarter of fiscal 1997.
The Company filed a report on Form 8-K dated July 10,
1997 advising that Shell Philippines Exploration B.V. gave
notice to extend drilling operations for the ATWOOD FALCON for
three years beyond its current commitment of a two well
drilling program, which will require the Company to spend
approximately $50 million for water-depth upgrade.
The Company filed a report on Form 8-K dated July 21,
1997 advising that the Company entered into a $125 million
revolving credit facility with a bank group.
<PAGE>
PAGE 15
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.
ATWOOD OCEANICS, INC.
Date: August 14, 1997 By: s/JAMES M. HOLLAND
--------------------
James M. Holland
Senior Vice President
and Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
10.1 ATWOOD OCEANICS, INC. 1996 INCENTIVE EQUITY PLAN
27.1 FINANCIAL DATA SCHEDULE
EXHIBIT 10.1
ATWOOD OCEANICS, INC.
1996 INCENTIVE EQUITY PLAN
Section 1. Purpose.
The 1996 Incentive Equity Plan (the "Plan") is intended to encourage
key executives and managerial employees of Atwood Oceanics, Inc. (the "Company")
and its Subsidiaries or Affiliates to become owners of Stock of the Company in
order to increase their interest in the Company's long-term success, to provide
incentive equity opportunities which are competitive with other similarly
situated corporations and to stimulate the efforts of such employees by giving
suitable recognition for services which contribute materially to the Company's
success.
Section 2. Definitions.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries which the Board designates as an "Affiliate" for the
purposes of this Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means a felony conviction of a participant or the failure
of a participant to contest prosecution for a felony, or a
participant's willful misconduct or dishonesty, or a participant's
failure to perform his work in accordance with reasonable standards
established by the Company, any of which is directly and materially
harmful to the business or reputation of the Company or any Subsidiary
or Affiliate.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(e) "Committee" means the Committee referred to in Section 3 of the
Plan. If at any time a Committee shall not be in existence, then the
functions of the Committee specified in the Plan shall be exercised by
the Board.
(f) "Company" means Atwood Oceanics, Inc., a corporation
organized under the laws of the State of Texas, or any successor
corporation.
(g) "Disability" means permanent and total disability as determined
under the Company's long-term disability program.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(i) "Fair Market Value" means, as of any given date, the closing price
of the Stock on such date as reported on the principal United States
securities exchange on which the Stock is listed, or if the Stock is
not so listed, the closing price as quoted on the NASDAQ National
Market System, or if the Stock is not so listed or quoted, the closing
bid as quoted on the NASDAQ over-the-counter market; provided, that if
no such prices are so reported or quoted on that date or if, in the
discretion of the Committee, another means of determining the Fair
Market Value of a share of Stock at such date is deemed necessary or
advisable, the Committee may provide for another means for determining
such Fair Market Value.
(j) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section
422 of the Code.
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(k) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3) as promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, or any successor definition
adopted by the Commission.
(l) "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option.
(m) "Plan" means the Atwood Oceanics, Inc. 1996 Incentive Equity
Plan, as hereafter amended from time to time.
(n) "Restriction Period" means the period of time during which shares
of Stock awarded to a participant pursuant to Section 7 remain subject
to the restrictions referred to in Section 7(b).
(o) "Restricted Stock" means an award of shares of Stock that is
subject to restrictions under Section 7.
(p) "Retirement" means retirement from active employment with the
Company or any Subsidiary or Affiliate on or after the normal
retirement date or pursuant to the early retirement provisions set
forth in the applicable pension plan of such employer.
(q) "Rule 16b-3" means such rule as promulgated and amended from time
to time by the Securities and Exchange Commission pursuant to Section
16(b) of the Exchange Act.
(r) "Stock" means the shares of Common Stock, par value $1.00 per
share, of the Company.
(s) "Stock Option" or "Option" means any option (including Incentive
Stock Options and Non- Qualified Stock Options) to purchase shares of
Stock granted pursuant to Section 6.
(t) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of
the corporations (other than the last corporation in the unbroken
chain) owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
In addition, the terms "Approval Date" and "Change in Control" shall have
meanings set forth in Section 8.
Section 3. Administration.
The Plan shall be administered by the Compensation Committee of the
Board of Directors, which shall consist solely of two or more Non-Employee
Directors who are appointed by, and serve at the pleasure of, the Board. The
Committee shall have the power and authority to grant to eligible employees
Stock Options and Restricted Stock. In particular, the Committee shall have the
authority:
(i) to select the key employees of the Company, its
Subsidiaries and Affiliates to whom Stock Options and other awards may
from time to time be granted;
(ii) to determine whether and to what extent Stock Options
and Restricted Stock are granted;
(iii) to determine the number of shares to be covered by
each such award granted;
(iv) to determine the terms and conditions, not inconsistent
with the terms hereof, of any award granted (including, but not limited
to, the share price and any restriction or limitation on, or any
vesting, acceleration or forfeiture waiver regarding, any award, based
on such factors and criteria as the Committee shall determine, in its
sole discretion); and
(v) to determine and adjust the performance goals and
measurements applicable to performance-
<PAGE>
based Restricted Stock awards to include or exclude the impact of
extraordinary or unusual items, events or circumstances and/or to
reflect change in applicable tax or accounting rules and other
developments.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award granted and any agreements relating thereto; and to otherwise
supervise the administration of the Plan. All decisions made by the Committee
pursuant to the provisions hereof shall be made in the Committee's sole
discretion and shall be final and binding on all persons.
Section 4. Eligibility.
Officers and key employees of the Company, its Subsidiaries and its
Affiliates (but excluding members of the Committee and any person who serves
only as a director) who are responsible for or contribute to the management,
growth and/or profitability of the business of the Company, its Subsidiaries or
its Affiliates are eligible to be granted Stock Options, Restricted Stock
Awards. The participants under the Plan shall be selected from time to time by
the Committee, in its sole discretion, from among those eligible.
Section 5. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution pursuant to Stock Options or Restricted Stock hereunder shall be
335,000 shares; provided, however, that not more than ten percent (10%) of such
shares shall be available for distribution pursuant to Restricted Stock
hereunder. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
If any shares of Stock that have been optioned cease to be subject to a
Stock Option, or if any such shares of Stock that are subject to any Restricted
Stock award granted hereunder are forfeited or any such Option or other award
otherwise terminates without a payment being made to the participant in the form
of Stock, such shares shall again be available for distribution in connection
with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding Options granted under the Plan, and in
the number of shares subject to other outstanding awards granted under the Plan
as may be determined to be appropriate by the Board, provided that the number of
shares subject to any award shall always be a whole number.
Section 6. Stock Options.
Stock Options may be granted alone or in addition to other awards
granted under the Plan. Any Stock Option granted under the Plan shall be in such
form as the Committee may from time to time approve, and the provisions of Stock
Option awards need not be the same with respect to each optionee.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options; and (ii) Non- Qualified Stock Options (provided that Incentive
Stock Options may not be granted to employees of Affiliates). The Committee may
grant to any optionee Incentive Stock Options, Non-Qualified Stock Options, or
both types of Stock Options. To the extent that any Stock Option does not
qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the optionee(s) affected, to disqualify any Incentive
Stock Option under such Section 422.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such
<PAGE>
additional terms and conditions not inconsistent with the terms of the Plan, as
the Committee deems appropriate:
(a) Exercise Price. The exercise price per share of
Stock purchasable under a Stock Option shall be not less than the Fair
Market Value on the day the Option is granted.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable
more than ten years after the date such Option is granted and no
Non-Qualified Stock Option shall be exercisable more than ten years and
one day after the date such Option is granted.
(c) Exercise of Options. Options shall become exercisable at
such time or times and subject to such terms and conditions (including,
without limitation, installment exercise provisions) as shall be
determined by the Committee, provided, however, that, except as
provided in Section 6(f) or (g) (in the case of Disability) and Section
8, unless otherwise determined by the Committee at or after grant, no
Stock Option shall be exercisable prior to the first anniversary date
of the granting of the option. If the Committee provides that any Stock
Option is exercisable only in installments, the Committee may waive
such installment exercise provisions at any time in whole or in part
based on performance and/or such other factors as the Committee may
determine.
(d) Method of Exercise. Options may be exercised in whole or
in part by giving written notice of exercise to the Company specifying
the number of shares to be purchased. Such notice shall be accompanied
by payment in full of the purchase price, either by certified or bank
check, or such other instrument as may be permitted in accordance with
rules or procedures adopted by the Committee.
As determined by the Committee at or after grant, payment in
full or in part may also be made by delivery to the Company of an
executed irrevocable option exercise form together with irrevocable
instructions to a broker-dealer to sell a sufficient portion of the
shares and deliver the sale proceeds directly to the Company in
satisfaction of the exercise price. As determined by the Committee at
or after grant, payment in full or in part may also be made in the form
of unrestricted Stock already owned by the optionee (based on the Fair
Market Value of the Stock on the date the Option is exercised, as
determined by the Committee).
No shares of Stock shall be transferred until full payment
therefor has been made. An optionee shall generally have the rights of
a shareholder with respect to shares subject to the Option only when
the optionee has given written notice of exercise, has paid in full for
such shares and, if requested, given the representation described in
Section 11(a).
(e) Transferability of Options. The Committee may, in its
discretion, authorize all or a portion of any Non-Qualified Stock
Options to be granted on terms which permit transfer by the optionee to
(i) the spouse, children or grandchildren of the optionee, (ii) a trust
or trusts for the exclusive benefit of the spouse, children or
grandchildren of the optionee, or (iii) a partnership in which the
spouse, children or grandchildren of the optionee are the only
partners; provided in each case that (x) there may be no consideration
for any such transfer, (y) the stock option agreement pursuant to which
such Stock Options are granted must be approved by the Committee, and
must expressly provide for transferability in a manner consistent with
this section, and (z) subsequent transfers of transferred options shall
be prohibited except those made in accordance with this section or by
will or by the laws of descent and distribution. Following transfer,
any such Stock Options shall continue to be subject to the same terms
and conditions as were applicable immediately prior to transfer. The
provisions with respect to termination of employment set forth in
subsections (f), (g) and (h) of this Section 6 shall continue to apply
with respect to the original optionee, in which event the Stock Options
shall be exercisable by the transferee only to the extent and for the
periods specified herein. The original optionee will remain subject to
withholding taxes upon exercise of any such Stock Option by the
transferee. The Company shall have no obligation whatsoever to provide
notice to any transferee of any matter, including without limitation,
early termination of a Stock Option on account of termination of
employment of the original optionee.
<PAGE>
Except as set forth above and in the applicable stock option
agreement, no Stock Option shall be transferable by the optionee
otherwise than by will or by laws of descent and distribution, and all
Stock Options shall be exercisable, during the optionee's lifetime,
only by the optionee. At the request of an optionee, Stock purchased
upon exercise of an Option may be issued or transferred into the name
of the optionee and another person jointly with rights of survivorship.
(f) Termination by Death. Subject to Section 6(i), if an
optionee's employment by the Company or any Subsidiary or Affiliate
terminates by reason of death, any Stock Option held by such optionee
may thereafter be exercised, to the extent it was exercisable at the
time of death or on such accelerated basis as the Committee may
determine at or after grant, by the legal representative of the estate
or by the legatee of the optionee under the will of the optionee, for a
period of one year (or such other period up to three years as the
Committee may specify) from the date of death or until the expiration
of the stated term of such Stock Option, whichever period is shorter.
(g) Termination by Reason of Disability or Retirement. Subject
to Section 6(i), if an optionee's employment by the Company or any
Subsidiary or Affiliate terminates by reason of Disability or
Retirement, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time
of such termination or on such accelerated basis as the Committee may
determine at or after grant, for a period of three years (or such
shorter period as the Committee may specify at grant) from the date of
such termination of employment or until the expiration of the stated
term of such Stock Option, whichever period is shorter; provided,
however, that, if the optionee dies within such three-year period (or
such shorter period), any unexercised Stock Option held by such
optionee shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of one year from the
date of such death or until the expiration of the stated term of such
Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Disability or Retirement, if an
Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code,
such Stock Option shall thereafter be treated as a Non-Qualified Stock
Option.
(h) Other Termination of Employment. Unless otherwise
determined by the Committee at or after grant, if an optionee's
employment by the Company or any Subsidiary or Affiliate terminates for
any reason other than death, Disability or Retirement, the optionee
will have three months from the date of termination to exercise any and
all Stock Options that are then exercisable, except that, if the
termination was for Cause, any and all Options shall be immediately
canceled.
(i) Incentive Stock Option Limitations. To the extent required
for "incentive stock option" status under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
Stock with respect to which Incentive Stock Options granted after 1986
are exercisable for the first time by the optionee during any calendar
year under the Plan and any other stock option plan of the Company or
any Subsidiary or parent corporation (within the meaning of Section 425
of the Code) or any predecessor of any such corporation, in each case
after 1986 shall not exceed $100,000.
The Committee may provide at grant, to the extent permitted
under Section 422 of the Code, that, if (i) a participant's employment
with the Company or its Subsidiaries is terminated by reason of death,
Disability or Retirement and (ii) the portion of any Incentive Stock
Option that is otherwise exercisable during the post-termination period
specified under Section 6(f), (g) or (h), applied without regard to
this Section 6(i), is greater than the portion of such Option that is
exercisable as an "incentive stock option" during such post-termination
period under Section 422, such post-termination period shall
automatically be extended (but not beyond the original option term) to
the extent necessary to permit the optionee to exercise such Incentive
Stock Option either as an Incentive Stock Option or, if exercised after
the expiration of the applicable exercise periods under Section 422(a)
of the Code, as a Non-Qualified Stock Option. The Committee is also
authorized to provide at grant for a similar extension of the
post-termination exercise period in the event of a Change in Control.
<PAGE>
Section 7. Awards of Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and its Subsidiaries or
Affiliates to whom, and the time or times at which, such grants will be made,
the number of shares to be awarded, the price (if any) to be paid by the
recipient of an award, the time or times within which such awards may be subject
to forfeiture, and all other conditions of the awards. The Committee may
condition grants of Restricted Stock upon the attainment of specified
performance goals or such other factors or criteria as the Committee may
determine. The provisions of Restricted Stock awards need not be the same with
respect to each recipient.
(b) Restrictions and Conditions Applicable to Restricted Stock
Awards. Restricted Stock awards shall be subject to the following
restrictions and conditions:
(i) The consideration for issuance of shares of Restricted
Stock pursuant to the Plan shall be not less than their par value,
payable in cash or in services performed, at the discretion of the
Committee.
(ii) Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter periods as the Committee may specify
at grant) after the award date, by executing a Restricted Stock Award
Agreement and paying whatever price (if any) is required under Section
7(b)(i).
The prospective recipient of a Restricted Stock award shall
not have any rights with respect to such award, unless and until such
recipient has executed an agreement evidencing the award and has
delivered a fully executed copy thereof of the Company, and has
otherwise complied with the applicable terms and conditions of such
award.
(iii) Each participant receiving a Restricted Stock award
shall be issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of
such participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such award,
substantially in the following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and conditions
(including forfeiture) of the Atwood Oceanics, Inc. 1996 Incentive
Equity Plan and an Agreement entered into between the registered owner
and Atwood Oceanics, Inc. Copies of such Plan and Agreement are on file
in the offices of Atwood Oceanics, Inc., Houston, Texas."
The Committee may require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(iv) Subject to the provisions of this Plan and the applicable
award agreement, during a period set by the Committee commencing with
the date of such award (the "Restriction Period"), the participant
shall not be permitted to sell, transfer, pledge, assign or otherwise
encumber shares of Restricted Stock awarded under the Plan. Based on
service, performance and/or such other factors or criteria as the
Committee may determine, the Committee may, however, at or after grant
provide for the lapse of such restrictions in installments and/or may
accelerate or waive such restrictions in whole or in part.
(v) Except as provided in this Section 7(b), the recipient
shall have, with respect to the shares of Restricted Stock covered by
any award, all of the rights of a shareholder of the Company, including
the right to vote the shares, and the right to receive any dividends,
provided, however, that unless otherwise
<PAGE>
determined by the Committee, any dividends on such shares shall be
automatically deferred and reinvested in additional Restricted Stock
subject to the same restrictions as the underlying award, to the extent
shares are available under Section 5.
(vi) Except as otherwise provided in this Section 7(b) and in
the applicable award agreement, upon termination of a participant's
employment with the Company or any Subsidiary or Affiliate for any
reason during the Restriction Period for a given award, all shares
still subject to restriction shall be forfeited by the participant,
provided, however, the Committee may provide for waiver of the
restrictions in the event of termination of employment due to death,
Disability or Retirement.
(vii) In the event of hardship or other special circumstances
of a participant whose employment with the Company or any Subsidiary or
Affiliate is involuntarily terminated (other than for Cause), the
Committee may waive in whole or in part any or all remaining
restrictions with respect to any or all of the participant's Restricted
Stock, based on such factors and criteria as the Committee may deem
appropriate.
(viii) If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction
Period, unrestricted certificates for such shares shall be delivered to
the participant.
Section 8. Change in Control Provisions.
(a) Impact of Event. In the event of a "Change in Control" as defined
in Section 8(b), the Committee or the Board may provide that one or more of the
following acceleration and valuation provisions shall apply:
(i) Any or all Stock Options awarded under this Plan not
previously exercisable and vested shall become fully exercisable and
vested.
(ii) The restrictions applicable to any or all Restricted
Stock awards shall lapse and such shares and awards shall be fully
vested.
(b) Definition of "Change in Control." For purposes of Section
8(a), a "Change in Control" means the happening of any of the
following:
(i) A tender offer is made and consummated for the ownership
of 20% or more of the outstanding voting securities of the Company;
(ii) The Company shall merge or consolidate with another
corporation and as a result of such merger or consolidation less than
80% of the outstanding voting securities of the surviving or resulting
corporation shall be owned in the aggregate by the former shareholders
of the Company, other than affiliates (within the meaning of the
Exchange Act as in effect on the date the Plan was first approved by
the shareholders of the Company (the "Approval Date")) of any party to
such merger or consolidation, as the same shall have existed
immediately prior to such merger or consolidation;
(iii) The Company shall sell substantially all of its assets
to another corporation which is not a Subsidiary; or
(iv) A person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the Approval Date) of the Exchange
Act, shall acquire 20% or more of the outstanding voting securities of
the Company (whether directly, indirectly, beneficially or of record).
For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) (as in effect on the Approval Date) pursuant to the Exchange
Act.
<PAGE>
Section 9. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of an
optionee or participant under a Stock Option or Restricted Stock award
theretofore granted, without the optionee's or participant's consent, or which,
without the approval of the Company's stockholders, would, except as expressly
provided in the Plan, increase the total number of shares reserved for purposes
of the Plan.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent. Subject to the
above provisions, the Board shall have the authority to amend the Plan to take
into account changes in applicable tax and securities law and accounting rules,
as well as other developments.
Section 10. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. The Committee may authorize the creation of trusts or
other arrangements to meet the obligations created under the Plan to deliver
Stock or payments hereunder consistent with the foregoing.
Section 11. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
the Plan to represent to and agree with the Company in writing that such person
is acquiring the shares without a view to distribution thereof. The certificates
for such shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer. All certificates for shares of Stock or
other securities delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is then listed, and
any applicable Federal or state securities law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Company, a
Subsidiary or an Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any employee of the
Company or any Subsidiary or Affiliate any right to continued employment with
the Company or a Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or any Subsidiary or
Affiliate to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the optionee for Federal income tax purposes
with respect to any Stock Option or other award under the Plan, the participant
shall pay to the Company, or make any arrangements satisfactory to the Committee
regarding the payment of any Federal, state or local taxes of any kind required
by law to be withheld with respect to such amount. Unless otherwise determined
by the Company, withholding obligations may be settled with Stock, including
Stock that is part of the award that gives rise to the withholding requirement.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company and its Subsidiaries or Affiliates
shall, to the extent permitted by law, have the right to deduct any such taxes
from the payment(s) otherwise due to the participant.
(e) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid.
(f) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Texas.
<PAGE>
Section 12. Effective Date of Plan.
The Plan shall be effective on the date it is approved by the
stockholders of the Company. Grants made prior to such stockholder approval
shall be contingent on such approval.
Section 13. Term of Plan.
No Stock Option or Restricted Stock shall be granted pursuant to the
Plan on or after the tenth anniversary of the effective date of the plan, but
awards granted prior to such tenth anniversary may extend beyond that date.
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