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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___ TO ___
ROWAN COMPANIES, INC.
Incorporated in Delaware Commission File I. R. S. Employer
Number 1-5491 Identification:
75-0759420
5450 Transco Tower
2800 Post Oak Boulevard, Houston, Texas 77056-6196
Registrant's telephone number, including area code: (713) 621-7800
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Common Stock, $.125 Par Value New York Stock Exchange
Pacific Stock Exchange
11-7/8% Senior Notes due 2001 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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 ___.
The aggregate market value as of March 1, 1995 of the Common Stock
held by non-affiliates of the registrant was approximately $500 million.
The number of shares of Common Stock, $.125 par value, outstanding at
March 1, 1995 was 84,310,787.
DOCUMENTS INCORPORATED BY REFERENCE
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Document Part of Form 10-K
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Annual Report to Stockholders for
fiscal year ended December 31, 1994 Parts I, II and IV
Proxy Statement for the 1995 Annual
Meeting of Stockholders Part III
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TABLE OF CONTENTS
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Page
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PART I
Item 1. Business .................................................... 1
Contract Drilling .................................................. 1
Offshore Operations ............................................. 1
Onshore Operations .............................................. 3
Contracts ....................................................... 3
Competition ..................................................... 4
Regulations and Hazards ......................................... 5
Aircraft Operations ................................................ 7
Contracts ....................................................... 8
Competition ..................................................... 8
Regulations and Hazards ......................................... 9
Manufacturing Operations............................................ 9
Raw Materials.................................................... 10
Competition...................................................... 10
Regulations and Hazards.......................................... 11
Employees .......................................................... 12
Item 2. Properties .................................................. 13
Drilling Rigs ...................................................... 13
Aircraft ........................................................... 16
Manufacturing Facilities............................................ 16
Item 3. Legal Proceedings ........................................... 16
Item 4. Submission of Matters to a Vote of Security Holders ......... 17
Additional Item. Executive Officers of the Registrant ................ 17
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters ....................................... 19
Item 6. Selected Financial Data ..................................... 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 19
Item 8. Financial Statements and Supplementary Data ................. 19
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ....................... 19
PART III
Item 10. Directors and Executive Officers of the Registrant .......... 19
Item 11. Executive Compensation ...................................... 19
Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................................ 20
Item 13. Certain Relationships and Related Transactions .............. 20
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ....................................... 20
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PART I
ITEM 1. BUSINESS
Rowan Companies, Inc. (the "Company"), organized in 1947 as a Delaware
corporation and a successor to a contract drilling business conducted since
1923 under the name Rowan Drilling Company, Inc., is engaged principally in the
contract drilling of oil and gas wells in domestic and foreign areas. As noted
below, it also provides aircraft services and, since February 1994, has
operated a mini-steel mill, a heavy equipment manufacturing plant and a marine
rig construction yard through the purchase of the net assets of Marathon
LeTourneau Company.
Offshore operations of the Company consist primarily of contract
drilling services utilizing mobile rigs, principally a fleet of 20
self-elevating drilling platforms ("jack-up rigs"), including three heavy duty
cantilever jack-up rigs ("Gorilla Class rigs"). Beginning in 1992, the Company
moved towards Total Project Management, an approach to drilling operations
which emphasizes drilling and completing wells on a turnkey basis. In that same
year it began providing offshore platform installation and removal services.
The Company provides contract and charter helicopter and fixed-wing
aircraft services, with its fleet consisting on March 31, 1995 of 89
helicopters and 17 fixed-wing aircraft. The Company's aircraft services
include flightseeing, medivac transportation, forest fire control and support
for oil and gas related operations out of its two primary bases in Alaska and
Louisiana. In addition, the Company provides airline services in Alaska using
its fixed-wing aircraft. Since 1991, the Company has owned a 49% interest in a
Dutch-based joint venture company, KLM ERA Helicopters B.V. ("KLM ERA"), which
owns a fleet consisting of 10 helicopters in the Dutch and British sectors of
the North Sea.
In February 1994, the Company purchased through its wholly-owned
subsidiary, LeTourneau, Inc., the net assets of Marathon LeTourneau Company.
LeTourneau, Inc. operates a mini-steel mill that recycles scrap and produces
alloy steel and steel plate; a manufacturing facility that produces heavy
equipment for the mining, timber and transportation industries including, among
other things, front-end loaders up to 50 ton capacity and trucks up to 240
ton capacity; and a marine group that has built over one-third of all mobile
offshore jack-up drilling rigs, including all 20 operated by Rowan.
Information regarding revenues, operating profit, identifiable assets
and export sales of the Company's industry segments and foreign and domestic
operations for each of the three years in the period ended December 31, 1994,
is incorporated by reference herein and provided in Footnote 10 of the Notes to
Consolidated Financial Statements on pages 25 and 26 of the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1994 ("Annual
Report"), incorporated portions of which are filed as Exhibit 13 hereto.
In the years 1992, 1993 and 1994, the Company had revenues from
individual customers representing 10% or more of consolidated revenues as
follows: Conoco - 11% for 1992; Phillips Petroleum Company - 17% for 1993 and
AMOCO Corp. - 10% for 1994. Such revenues were primarily from drilling
operations.
For a discussion of the Company's availability of funds for future
operations and estimated capital expenditures for 1995, see "Liquidity and
Capital Resources" under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 14 of the Annual Report, which
information is incorporated herein by reference.
CONTRACT DRILLING
In 1994, drilling operations generated an operating profit (income
from operations before deducting general and administrative expenses) of
$174,000.
Offshore Operations
At December 31, 1994, the Company's drilling fleet consisted of 20
deep-water jack-up rigs (eight conventional and twelve cantilever, including
three Gorilla Class rigs in the latter category), one semi-submersible rig and
three submersible barge
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rigs. The Company owns all of the rigs comprising its fleet except for two
cantilever jack-up rigs leased under sale/leaseback arrangements expiring in
1999 and 2000.
Since completing a major drilling rig expansion program conducted in
the early to mid-1980s, the Company's capital expenditures have been primarily
for improvements to existing drilling rigs and the purchase of aircraft.
Adding to these capital expenditures were the purchases of the 49% interest in
KLM ERA and the net assets of Marathon LeTourneau in 1991 and 1994,
respectively. See ITEM 2. PROPERTIES on page 13 of this Form 10-K for
additional information with respect to the operating status of the Company's
rigs.
The Gorilla Class rigs are a heavier class of jack-up rig, intended to
drill up to 30,000 feet in water depths up to 328 feet in extreme hostile
environments (winds up to 100 miles per hour and seas up to 90 feet). Each
Gorilla Class rig is equipped with a "top-drive", a drilling system costing
approximately $1.25 million which assists in faster drilling while reducing the
hazard of the drill string sticking, and is particularly advantageous in the
case of horizontal drilling.
Of the Company's other jack-up rigs, six Class 116-C rigs and one
Class 116 rig have been modified to provide (but to a lesser extent than
Gorilla Class rigs) the capability of operating in hostile environments. The
Company's nine Class 116-C jack-up rigs, two Class 116 jack-up rigs, two Class
84 jack-up rigs and two of its four Class 52 jack-up rigs have been equipped
with top-drive drilling systems.
In 1989, the Company acquired a patent (U. S. Patent No. 4,103,503)
applicable to the transfer of a drilling rig substructure from a jack-up type
drilling unit to a fixed platform. In conjunction with technology contained in
the patent, the Company has developed additional substructure transfer or "skid
base" technology which has allowed the Company's conventional jack-up rigs to
work over wells on a production platform that heretofore required a cantilever
jack-up or platform rig. At March 31, 1995, two Class 116 jack-up rigs, two
Class 84 jack-up rigs and one of its Class 52 jack-up rigs have been equipped
with skid base units.
In 1992, the Company purchased a 550-ton ABS certified crane and
formed a new subsidiary for conducting offshore platform installation and
removal services. Utilizing the skid base technology discussed above, the
drilling package on a jack-up rig can be skidded off to allow the heavy-lift
crane to be skidded on, thereby transforming the unit into a crane barge or,
reversing the process, transforming the unit back into a drilling rig. The
Company has a patent (U.S. Patent No. 5,388,930) to cover such technology. At
March 31, 1995, one Class 52 jack-up rig had been modified to provide this dual
purpose capability and is able to operate in water depths up to 225 feet.
In the last three years, the Company's rigs located in the North Sea
have undergone modifications in order to meet new offshore safety standards
being implemented in the United Kingdom. The Company's four Class 116-C
jack-up rigs presently in the North Sea are subject to undergoing more
modifications pending the finalization of the safety standards being negotiated
for each rig. Some of the safety standards under government consideration,
many of which the Company has already modified its North Sea rigs to meet, are
as follows: a minimum of two independent sources of sea water for firefighting;
a temporary safe refuge for personnel near the escape capsules which will
provide a high degree of protection from fire, smoke and gas inhalation and
will contain additional safety, communication and survival gear; additional
enclosed motorized escape capsules; and expanded smoke and gas protection in
the crew quarters. Because of continued market weakness in the North Sea, the
Company moved drilling rigs to other markets as follows: one Gorilla Class
jack-up in 1992 and another in 1994, one Class 116-C jack-up in 1992 and one
Class 116 jack-up in 1992.
Since 1970, the Company has pursued a policy of concentrating on
jack-up rigs. Jack-ups are utilized for both offshore exploratory and
development drilling and, in certain areas, for well workover operations. The
Company operates larger deep-water type jack-up rigs capable of drilling to
depths of 20,000 to 30,000 feet in maximum water depths ranging from 225 to 450
feet, depending on the size of the rig and its location. A jack-up rig
consists of a floating hull with three independent elevating legs. The
Company's rigs are equipped with propulsion thrusters to assist in towing. The
entire drilling unit, consisting of the drilling rig, supplies, crew quarters,
loading and unloading facilities, helicopter landing deck and other related
equipment,
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is mounted on the hull. At the drilling site, the legs are lowered until they
penetrate the ocean floor, and the platform hull is jacked up on the legs to the
desired elevation above the water. The platform hull then serves as a drilling
platform until the well is completed and the operation is reversed by lowering
the platform hull into the water and towing it to the next drilling site. The
cantilever feature contained on the Company's newer jack-ups provides for the
extension of the portion of the drilling platform containing the drilling rig
over fixed production platforms so that the drilling rig may be utilized to
perform development or workover operations on the platforms with a minimum of
interruption to production.
The Company's semi-submersible rig is utilized principally for
offshore exploratory drilling from a floating position in waters to depths of
1,000 feet. A semi-submersible drilling rig consists of a drilling platform
raised above multiple hulls by columns. The hulls are flooded so as to be
submerged beneath the surface, in which position the rig is anchored during
drilling operations. The same type of equipment which is contained on a jack-up
rig is mounted on the drilling platform. After completion of the well, the
submerged hull is deballasted to reduce vessel draft and facilitate towing,
assisted by its own thrusters, to another drilling location.
The Company's submersible barge rigs are used in shallow coastal and
inland waters in depths up to 26 feet for exploratory, development and workover
drilling. A submersible barge rig consists of a drilling rig with crew
quarters mounted on an elevated platform on top of a floating hull. At the
drilling site the hull is flooded so that it rests on the bottom and the
elevated platform protruding above the water serves as a stationary drilling
platform.
Onshore Operations
The Company has drilling equipment, personnel and camps available on a
contract basis for exploration and development of onshore areas. It currently
owns 17 land rigs located as follows: deep-well rigs - eight in the Anadarko
and Permian basins of Oklahoma and Texas and one in Mississippi; winterized
rigs - five in Alaska; and trailer-mounted rigs - three in Argentina.
In the first half of 1994, five of the Company's land rigs completed a
three-year drilling contract in Venezuela and all were returned to the United
States where three of the five had sporadic work in the second half of 1994.
Subsequently, three of these rigs have been moved to Argentina to perform a
two-year drilling contract that commenced in late March 1995. Two of the rigs
presently located in Oklahoma are scheduled to be moved to Argentina to perform
multiple well drilling contracts. Except for one deep-well rig that worked
most of the last two and a half quarters of 1994 in Texas and one winterized
land rig in Alaska that worked in the first quarter of 1992, another that
worked in the first quarter of 1993 and another that worked for most of the
first four months of 1994, the deep-well land rigs based in Texas, Oklahoma and
Alaska have been idle since mid-1988 due to inadequate rates. Accordingly,
seven of the Company's land rigs remained "mothballed" at March 31, 1995. The
cost of maintaining these rigs is modest and the remaining investment in the
rigs is not significant.
The drilling equipment comprising an onshore rig consists basically of
engines, drawworks or hoist, derrick, pumps to circulate the drilling fluid,
drill pipe and drilling bits. The type of rig required by a customer depends
upon the anticipated well depth, terrain and conditions in the drilling area.
Contracts
The Company's policy with regard to day rates and contract durations
depends upon the prevailing strength or weakness of the market. During periods
when the offshore rig markets are weak and declining rates prevail, the Company
generally pursues a policy of entering into lower rate contracts to remain in a
competitive position and to offset the substantial cost of maintaining and
reactivating stacked rigs. During those times when the markets are strong and
increasing rates prevail, the Company's policy is generally one of negotiating
short rather than long-term contracts for its offshore rigs because such policy
allows the Company to maximize its ability to obtain the benefit of rate
increases and to pass through cost increases to customers.
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The Company's drilling contracts are obtained either through
competitive bidding or individual negotiations. Rates obtained depend upon the
type of equipment used, its availability and its location, as well as the type
of operations involved. Both offshore and onshore contracts for use of the
Company's drilling equipment are "well-to-well", "multiple well" or, except for
work done on a turnkey basis, for a fixed term generally ranging from four to
twelve months. Well-to-well contracts are cancelable at the option of either
party upon completion of drilling at any one site, and fixed-term contracts
customarily provide for termination by either party if drilling operations are
suspended for extended periods by events of force majeure. While most current
fixed-term contracts are for relatively short periods, some fixed-term and
well-to-well contracts continue for a longer period than the original term or
for a specific series of wells. Contracts, particularly those for offshore
operations, generally contain renewal or extension provisions exercisable at
the option of the customer at prices mutually agreeable to the Company and the
customer and, in many cases, provide for additional payments for mobilization
and demobilization. Most of the Company's drilling contracts in the North Sea
are well-to-well contracts or short-term contracts of similar duration lasting
60-120 days, while most of the company's current contracts in the gulf of
Mexico are well-to-well contracts lasting 30-45 days.
The Company's drilling contracts, other than those for work done on a
turnkey basis, provide for drilling compensation on a day rate basis. In the
case of contracts for work done on a turnkey basis, the Company's compensation
is contingent on the Company successfully drilling a well to a specified depth
for a fixed price. In the event certain operational problems occur which cause
the Company to be unable to reach the specified turnkey depth, the Company may
not be entitled to any portion of the turnkey price thereby causing it to
absorb substantial out-of-pocket expenses. For this reason, wells drilled on a
turnkey basis generally involve greater economic risk to the Company than
wells drilled on a day rate basis. Contracts for work in foreign countries
generally provide for payment in United States dollars except for minimal
amounts required to meet local expenses.
Contracts for platform installation and removal services typically
contain the same types of provisions and features described herein for drilling
contracts.
The Company believes that the contract status of its onshore and
offshore rigs is more informative than backlog calculations, and that backlog
information is neither calculable nor meaningful given the cancellation options
contained in, and the short duration of, fixed-term contracts and the
indeterminable duration of well-to-well and multiple well contracts. See ITEM
2. PROPERTIES on page 13 of this Form 10-K for the contract status of rigs as
of March 31, 1995.
Competition
The Company encounters continual competition in securing domestic and
foreign drilling contracts from approximately 40 offshore drilling contractors
operating or having available to operate about 530 mobile rigs, approximately
13 major domestic drilling contractors operating or having available to operate
43 land rigs in the deep-well market in the Permian and Anadarko Basins, and
five domestic drilling contractors operating or having available to operate
about 21 winterized land rigs on the Alaskan North Slope. The Argentina land
rig market is currently in a state of expansion, thereby causing the number of
contractors and rigs to be indeterminable. Some of the Company's competitors
with greater financial and other resources may be in a better position than the
Company to make the continuous capital investments required to make
technological improvements to existing equipment or to replace equipment that
becomes obsolete. Furthermore, a few of the Company's competitors have been
substantially relieved of debt burdens by bankruptcy proceedings.
Technological advances in equipment, particularly offshore equipment,
may cause older equipment having lower capital costs to be less suitable for
some proposed drilling operations. As a result, the Company carried out over
the 1980-1986 period a drilling rig expansion program and since 1987 a drilling
rig modification program, both designed to provide the Company's fleet with
jack-ups reflecting recent technological advancements and which generally meet
known government-imposed safety and pollution control requirements.
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The offshore markets in which the Company competes are chosen on the
basis of those which offer the greatest market potential and are generally
located in the more politically stable areas of the world. Accordingly, since
1989 the Company has moved drilling rigs from one offshore market to another as
follows: one Class 116-C jack-up rig from the North Sea to Southeast Asia in
1990 and then to Alaska in 1993; one Gorilla Class rig from the Gulf of Mexico
to offshore eastern Canada in 1990; one submersible barge rig from the Gulf of
Mexico to Gabon, West Africa in 1991 and back to the Gulf of Mexico in 1992;
one Class 116 jack-up rig from the Gulf of Mexico to the North Sea and back to
the Gulf of Mexico, both in 1992; one Class 116-C jack-up rig from the North
Sea to the Gulf of Mexico in 1992; one Gorilla Class rig from the North Sea to
Trinidad in 1992; one Class 52 jack-up rig from the Gulf of Mexico to Colombia
in 1992 and back to the Gulf of Mexico in 1993; two submersible barges from
Southeast Asia to the Gulf of Mexico in 1993; one class 116-C rig from Alaska
to the Gulf of Mexico in 1994; and one Gorilla Class rig from the North Sea to
the Gulf of Mexico in 1994. Relocation of drilling rigs from one geographic
location to another is dependent upon changing market dynamics with moves
occurring only when the likelihood of higher returns make such action
economical. At March 31, 1995, 14 jack-ups were located in the Gulf of Mexico,
four jack-ups were located in the North Sea, one jack-up was located offshore
eastern Canada, one jack-up was located offshore Trinidad, one semi-submersible
rig was located in the Gulf of Mexico and three submersible barges were located
in the Gulf of Mexico.
A number of factors affect a drilling contractor's ability both
onshore and offshore to obtain contracts at a profitable rate within an area.
Such factors include the location and availability of equipment, its
suitability for the project, the comparative cost of the equipment, the
competence of personnel and the reputation of the contractor. The ability to
obtain a profitable rate of return is also dependent upon receiving adequate
rates to compensate for the added cost of moving equipment to drilling
locations. See "Contracts" beginning on page 3 of this Form 10-K concerning
the pricing policies pursued by the Company under various market conditions.
The Company markets its drilling services by directly contacting
present and potential customers, including large international energy
companies, many smaller energy companies and foreign government-owned or
controlled energy companies. Downsizings by major energy companies, coupled
with the significant reductions of exploration by such companies in offshore
U.S. waters, have resulted in the Company adapting its marketing efforts such
that increasing emphasis is placed on targeting small independent operators.
Because the exploration activities of the Company's present and potential
customers are impacted by state, federal and foreign regulations associated
with the production and transportation of oil and gas, the demand for the
Company's drilling services is impacted accordingly.
In the case of offshore platform installation and removal services,
the Company competes against approximately 12 contractors operating or having
available to operate about 19 mobile derrick barges in the Gulf of Mexico
market. Because the Company is a relatively new entrant in this field, many of
the Company's competitors have the advantage of having offered these services
for a longer period of time, including the benefits of established
technological know-how and more extensive customer bases.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 12 through 14 of the Annual Report, the
information under which caption is incorporated herein by reference, for a
discussion of current industry conditions and their impact on operations.
Regulations and Hazards
The offshore and onshore operations of the Company are subject to many
hazards. In the drilling business, inherent hazards include blowouts and well
fires, which could cause personal injury, suspend drilling operations,
seriously damage or destroy the equipment involved and cause substantial
damage to producing formations and the surrounding areas. Offshore drilling
operations and platform installation and removal operations are also subject to
the hazards incident to marine operations, either on site or while under tow,
such as capsizing, collision or grounding. Raising and lowering the legs of
jack-up rigs into the ocean bottom and ballasting semi-submersible units
require skillful handling to avoid capsizing or other serious damage. Drilling
deviated holes into high pressure formations is a complex process and problems
frequently occur. The process of removing platforms and caissons using
underwater
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explosives involves substantial risks and requires a significant amount of skill
in order to confine the resulting destruction to the intended areas.
The Company believes that it is adequately insured for physical damage
to its rigs, and for marine liabilities, workers compensation, Maritime
Employees Liability, automobile liability and for various other types of
exposures customarily encountered in providing the Company's services. Certain
of the Company's liability insurance policies specifically exclude coverage for
fines, penalties and punitive or exemplary damages. Under current conditions,
the Company anticipates that its present insurance coverage will be maintained,
but no assurance can be given that insurance coverage will continue to be
available at rates considered reasonable, that self-insured amounts or
deductibles will not increase or that certain types of coverage will be
available at any cost.
Foreign operations are subject to certain political, economic and
other uncertainties not encountered in domestic operations, including risks of
expropriation of equipment as well as expropriation of a particular energy
company operator's property and drilling rights, taxation policies, customs
restrictions, currency rate fluctuations and the general hazards associated
with foreign sovereignty over certain areas in which operations are conducted.
The Company attempts to minimize the risk of currency rate fluctuations by
generally denominating contract payment terms in United States dollars.
Many aspects of the operations of the Company are subject to
government regulation, including those relating to equipping and operating
vessels, drilling practices and methods and the level of taxation. In
addition, various countries (including the United States) have regulations
relating to environmental protection and pollution control affecting drilling
operations. Recent events have also increased the sensitivity of the oil and
gas industry to environmental matters. The Company may be liable for damages
resulting from pollution of offshore waters and, under United States
regulations, must establish financial responsibility. Generally, the Company
is substantially indemnified under drilling contracts compensated on a day rate
basis from pollution damages, except in certain cases of pollution emanating
above the surface of land or water from spills of pollutants, or in the case of
pollutants emanating from the Company's drilling rigs, but no assurance can be
given regarding the enforceability of such indemnification provisions.
In performing a contract for work done on a turnkey basis, the Company
is normally responsible for certain risks that would customarily be assumed by
the customer under a contract compensated on a day rate basis. These risks
include liability for pollution resulting from a blowout or uncontrolled flow
from the well bore, an underground blowout, the cost of controlling a wild well
and the expense to redrill a well which has blown out. The Company carries
insurance to cover such risks and generally obtains an indemnity from its
customers with respect to liabilities exceeding the amount of insurance carried
by the Company.
The Company believes that it complies with all material legislation
and regulations affecting its operations in the drilling of oil and gas wells,
and in controlling the discharge of wastes. To date the Company has made
significant modifications to its rigs located in the Gulf of Mexico in order to
reduce waste and rain water discharge from such rigs and believes that it could
operate those rigs at "zero discharge" without material additional
expenditures. Other than these expenditures and those relating to the
previously discussed United Kingdom safety standards, compliance has not, to
date, materially affected the capital expenditures, earnings or competitive
position of the Company, although these measures add to the costs of operating
drilling equipment in some instances, and in others they may operate to reduce
drilling activity. Further legislation or regulation may reasonably be
anticipated, but the effects thereof on operations cannot be predicted.
The Company is subject to the requirements of the federal Occupational
Safety and Health Act ("OSHA") and comparable state statutes. The OSHA hazard
communication standard, the Environmental Protection Agency "community
right-to-know" regulations under Title III of the Federal Superfund Amendment
and Reauthorization Act and comparable state statutes require the Company to
organize and report certain information about the hazardous materials used in
its operations to employees, state and local government authorities, and local
citizens.
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AIRCRAFT OPERATIONS
The Company provides charter and contract helicopter and fixed-wing
aircraft services principally in Alaska, the coastal areas of Louisiana and
Texas, and the western United States. In Alaska, a diversified range of
services has been developed to include tourism, commercial fishing support and
medical evacuation as well as support for forest fire control, mining
operations and seismic testing. Additionally, the fixed-wing division of the
Company conducts scheduled airline service between six cities from a hub in
Anchorage and to 18 villages from a hub in Bethel, Alaska. Services provided
offshore Louisiana and Texas are primarily to oil and gas related industries.
In the western United States, the majority of helicopter services are provided
to governmental agencies in support of forest fire control and to a lesser
extent support of construction, seismic testing and onshore and offshore oil
field support. The Company also provides airborne environmental survey
services.
In 1991, the Company acquired a 49% interest in KLM Helikopters B.V.,
a wholly-owned subsidiary of KLM Royal Dutch Airlines, as a means of gaining
access to the North Sea aviation market. The joint venture company, renamed
KLM ERA Helicopters B.V., currently owns 10 helicopters and leases two others.
Operating locations and the numbers of helicopters deployed at March 31, 1995
were as follows: eight in the Dutch sector of the North Sea, two in Croatia,
and two in the British sector of the North Sea, which helicopters are leased by
a wholly-owned subsidiary of KLM ERA. KLM ERA serves principally the offshore
oil and gas drilling, production and service companies operating in the Dutch
Sector of the North Sea.
Based on the number of helicopters operating, the Company is the
largest helicopter operator in Alaska. It provides charter services from bases
at Anchorage, Deadhorse (on the North Slope), Fairbanks, Juneau, Kenai and
Valdez. The Company's charter and contract services are provided throughout
Alaska with particular emphasis in the oil, mining and high density tourist
regions within the state.
Helicopters are usually operated on a seasonal basis in Alaska because
of the prevalent climatic conditions. The peak utilization period in Alaska is
May through September, with the winter months comprising the least active
period. The seasonal nature of the Alaska business has been ameliorated in
prior years by moving helicopters on a limited basis to the Gulf of Mexico area
and, more recently, moving helicopters to the West and Northwest regions of the
United States and various overseas locations, the most recent being Trinidad
and China.
Since 1983, the Company has operated a scheduled commuter airline
service in Alaska encompassing the transportation of passengers, mail and
cargo. The Company currently serves Valdez, Kenai, Homer, Kodiak, Iliamna and
Cordova from its base hub in Anchorage. In addition, it services 18 remote
villages from its hub in Bethel, Alaska. The Company operates under a code
sharing agreement with Alaska Airlines which is the largest carrier of
passengers from the contiguous United States to Alaska. The Company's commuter
airline is the largest airline operation of that type within the state of
Alaska and is the 4th largest carrier of passengers into and out of the
Anchorage International Airport, including the large jet carriers.
Since 1979, the Company has been providing charter and contract
helicopter services in the Gulf of Mexico area primarily to the offshore oil
and gas industry. Operations are conducted from the division office in Lake
Charles, Louisiana and from bases in the Louisiana cities of Morgan City,
Cameron, New Iberia, Intracoastal City, Venice, Fourchon and Houma and the
Texas cities of Sabine Pass and Houston. Based upon the number of helicopters
operating, the Company is the third largest helicopter operator in the Gulf of
Mexico.
In 1987, upon receiving FAA certification, the Company began
manufacturing and marketing, from its Gulf Coast Division facility at Lake
Charles, Louisiana, a composite external auxiliary fuel tank for use on Bell
205, 212 and 412 helicopters and the military "Huey" helicopter. The tank
system provides enhanced range with nominal drag while increasing the passenger
seats available. Sales to date have been to both military and civilian
customers. Other aircraft accessories are also manufactured at the facility.
-7-
<PAGE> 10
In June 1990, the Company expanded its airborne environmental service
capabilities by acquiring the patents, rights and equipment relating to two
unique airborne remote sensing technologies - an Airborne Ground Penetrating
Radar ("AGPR") and an Airborne Cathodic Monitoring System ("ACMS"). The AGPR
system is used primarily for the detection of subsurface contaminants,
including free hydrocarbons. In addition, the system can be used for finding
subsurface coal veins, water tables and tunnels, drums, tanks and other
man-made objects. The ACMS system is used to provide an early warning of
potential corrosion failure of underground pipelines. Mounted on a helicopter,
this system can survey up to 300 miles of pipeline per day and provides a
substantial cost savings compared to conventional techniques. Both services
are now marketed from the Company's Reno, Nevada facility following the closing
of the Company's Santa Maria facility in early 1995.
As previously noted, the Company has operated helicopters in various
overseas locations, including Croatia and Macedonia where the Company had as
many as six owned and two 49%-owned helicopters working for the United Nations
at various times in 1994.
In 1994, aviation operations generated an operating profit (income
from operations before deducting general and administrative expenses) of $4.6
million.
Contracts
The Company's flight services generally are engaged by customers by
entering into master service agreements, term contracts or day-to-day charter
arrangements. Master service agreements provide for incremental payments based
on usage, in some instances with fixed terms ranging from one month to one
year, and are cancelable upon notice by either party in 30 days or less. Some
contracts are not cancelable by either party and generally provide for
payments, depending upon the term, as follows: less than one month - either
incremental payments based on usage or incremental payments based on usage plus
a base daily rental; and one month to one year - incremental payments based on
usage plus a base monthly rental. Under day-to-day charters, the compensation
arrangement is the same as that of term contracts having a term of less than
one month. Payment, duration and cancellation features of the agreements,
contracts and charter arrangements used by KLM ERA are similar in nature and in
principle to those used in the Company's domestic operations. Because master
service agreements and day-to-day charters are the most common types of
engagements for its flight services, the Company believes that the contract
status of its aircraft as discussed in the following paragraph is more
informative than backlog information, which it believes is neither calculable
nor meaningful.
Company owned aircraft available for contract use and day charters on
March 31, 1995 consisted of 89 helicopters (of which 49 were based in Alaska
and 40 in the Gulf of Mexico area) and 17 fixed-wing aircraft that were based
in Alaska. The contract status as of March 31, 1995 consisted of: 27 master
helicopter service agreements and 28 aircraft term contracts (24 helicopters
and 4 fixed-wing aircraft). The remaining aircraft were being operated under
day charters or were available for operation under day charter or contract
arrangements.
KLM ERA owned aircraft available for contract use and day charters on
March 31, 1995 consisted of 8 helicopters based in The Netherlands and two in
Great Britain. The contract status of such aircraft as of March 31, 1995
consisted of: five master service agreements and five term contracts.
Competition
Although the Company maintains the largest helicopter operation in
Alaska in terms of numbers of aircraft and revenues, it encounters intense
competition from several other companies which furnish similar services.
Approximately six other operators compete directly with the Company in Alaska
on a contract or charter basis. The Company competes over its scheduled
airline routes with up to four other carriers. In the Gulf of Mexico area, the
Company competes directly with five other operators and ranks third in the
number of helicopters operating with approximately 6% of the market. A number
of other helicopter operators compete with the Company in the West and
Northwest regions of the United States and in overseas locations.
At present, KLM ERA has only one competitor in the Dutch sector of the
North Sea. KLM ERA's share of this helicopter market is estimated to be in
excess of 65%.
-8-
<PAGE> 11
Regulations and Hazards
The operation of scheduled airline services in the United States
requires a certificate under the Federal Aviation Act of 1958, as presently
administered by the Department of Transportation. The granting of a
certificate is conditioned upon a showing of financial ability and operational
expertise. A similar certificate authorizing the right to operate a charter
service is not required by any jurisdiction in the Company's operating areas.
KLM ERA holds the necessary certificates for operating aircraft in The
Netherlands and, since June 1993, in the U.K sector of the North Sea. Other
operating certificates will be obtained on a case by case basis depending upon
the contracts to be awarded.
Operation of helicopters and fixed-wing aircraft, particularly under
weather conditions prevailing in Alaska, is considered potentially hazardous,
although the Company conducts rigorous safety training programs to minimize
these hazards. The Company believes that it is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment, but carries no insurance against loss of earnings.
Although the area of Croatia in which the Company's helicopters are
flying for the United Nations is not a combat area at present, the region is
highly unstable.
The Company believes that KLM ERA is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment.
MANUFACTURING OPERATIONS
In 1994, LeTourneau, Inc. ("LeTourneau"), a wholly-owned subsidiary of
the Company, acquired the net assets of Marathon LeTourneau Company, which is
headquartered in Longview, Texas. As more fully detailed below, LeTourneau
operates a manufacturing facility that produces heavy equipment, a mini-steel
mill that recycles scrap and produces steel plate and forging ingots and a
marine group that has built over one-third of all mobile offshore jack-up
drilling rigs, including all 20 operated by the Company. The Company holds a
number of patents on its inventions and the "LeTourneau" name is considered to
be significant to its manufacturing operation.
The mining equipment product line of LeTourneau includes off-road
trucks with capacities of 190, 200 and 240 tons and loaders with bucket
capacities of 17, 22, 28 and 33 cubic yards. LeTourneau's loaders and trucks
are generally used in coal, gold, copper, iron ore and other mines. Both the
loaders and the trucks utilize the LeTourneau diesel electric-drive systems
with solid state controls. The primary benefit of the diesel electric-drive
system is to allow large, mobile equipment to stop, start and reverse without
gear shifting and high maintenance braking. LeTourneau loaders can load
LeTourneau rear-dump trucks and competitive trucks in the 85 ton to 240 ton
size range. LeTourneau's mining equipment and parts are distributed through a
world-wide network of independent distributors and a captive distribution
company serving the Western United States.
The forestry equipment product line includes diesel electric powered
log stackers having either two or four wheel drive configurations with load
capacities ranging from 40 to 65 tons. LeTourneau is the only manufacturer
that sells electrically powered jib cranes with ratings from 25,000 to 52,000
lbs. at a reach of 100 to 150 feet and having a 360 degree rotation. The
forestry equipment is marketed primarily in North America through independent
distributors and a captive distribution network in the Northwestern United
States.
LeTourneau's material handling equipment line includes the manufacture
and sale of several different types of equipment called intermodals. These
include 50 ton capacity, diesel electric, gantry cranes and large forklift type
vehicles, called side porters, used for lifting, transporting and stacking
large shipping containers and trailers at ports and rail yards. Gantry Cranes
equipped with a spreader can lift containers from the top and also have
retractable arms which are used in loading and unloading piggyback trailers.
Gantry cranes not having a spreader can span up to
-9-
<PAGE> 12
seven rows plus a truck aisle and stack 9 ft. 6 inch containers up to five
high. The intermodal equipment is marketed primarily in North America through
independent distributors and a captive distribution network in the Northwestern
United States.
LeTourneau also sells parts and components to repair and maintain
mining, forestry and intermodal equipment. Equipment parts are marketed
through one dealer and a captive distribution company in the United States with
17 parts stocking branches, one dealer in Canada with over 19 parts stocking
branches, and 31 international dealers with over 50 parts stocking locations.
LeTourneau's mini-steel mill located in Longview, Texas produces
carbon and alloy plate products and specialty steel. LeTourneau concentrates
on "niche" markets that require alloy, specialty steel grades, or "exotic"
versions of carbon steel products including mold steels, tool steels, aircraft
quality steels, stainless steel and Hydrogen Induced Cracking steels. External
steel sales, which are garnered through a direct sales force of LeTourneau
employees, consist primarily of steel plate, but also include forging ingots
and value-added fabrication of steel products. Steel products are generally
sold to steel service centers, fabricators, manufacturers, forge shops and
brokers. The market for carbon steel plate products and fabricated products is
regional and encompasses Texas, Oklahoma, Louisiana, Mississippi and Arkansas.
The Steel Group ships alloy and specialty grades of plate products nationally
and exports quantities to Mexico and Canada. The forging ingot market is
concentrated in the Gulf Coast region of Texas. Carbon and alloy plate
products are also used internally in the production of heavy equipment and
parts.
LeTourneau's marine group has a shipyard in Vicksburg, Mississippi for
the construction of mobile self-elevating offshore drilling platforms.
LeTourneau has built over one-third of all mobile offshore jack-up drilling
rigs, including all 20 operated by the Company utilizing this and other
shipyards. The marine group has the capability of providing engineering
support and spare parts to the drilling industry. This facility is currently
closed, and the ongoing rig component manufacturing and marine repair service
businesses, as well as a marine design engineering business, are now located at
the Company's Longview, Texas facility.
In 1994, manufacturing operations generated an operating profit
(income from operations before deducting general and administrative expenses)
of $7.7 million and had a firm backlog for all of its product lines at March 1,
1995 of $27 million.
LeTourneau, engages in a limited amount of research and product
development, primarily to develop larger capacity trucks and loaders used in
the mining industry. The Company evaluates on an ongoing basis the LeTourneau
product and service lines with the intention of making enhancements.
Raw Materials
The principal raw material utilized in LeTourneau's manufacturing
operations is steel plate, most of which is supplied by LeTourneau's mini-steel
mill. Other required materials are generally available in sufficient
quantities through purchases in the open market to meet its manufacturing
needs. LeTourneau does not believe that it is dependent on any single supplier.
Competition
LeTourneau's large trucks and loaders compete worldwide with several
competitors. The company believes it is the third or fourth largest supplier of
this size and type of equipment in the world. The loader market also includes
vigorous competition from smaller-sized equipment. Large loaders compete
against four manufacturers of loaders and the electric mining shovels and
LeTourneau trucks compete against three manufacturers.
The market for LeTourneau forestry and intermodal equipment is also
characterized by vigorous competition. Even though the company's jib crane is
unique, it does encounter competition from other equipment manufacturers that
offer alternate methods for meeting the requirements. The number of major
competitors by type of equipment are as follows: log stackers - four, jib
cranes - three, side porters - six, and gantry cranes - more than ten.
-10-
<PAGE> 13
LeTourneau's mini-steel mill encounters competition from a total of
eight major competitors, with the breakdown by product line being as follows:
plate products - four; fabricated products - two and forging ingots - two.
The competition LeTourneau encounters in the parts business is
extremely fragmented with only three other companies being considered to be
competitors. Vendors supplying parts directly to end-users and well-fitters
who obtain parts and copy them to supply less expensive and lower quality
substitutes represent more intense competition than that of direct competitors.
In order to be competitive in the mining and forestry heavy equipment
markets, LeTourneau offers warranties at the time of purchase as well as parts
guarantees. Warranties, which are based upon stipulated years of ownership or
hours of usage, whichever occurs first, generally cover the drive train and, in
the case of LeTourneau trucks, cover the frame. Parts consumption guaranties
and maintenance and repair contracts are also made on the same basis.
LeTourneau pursues a parts return policy, which provides that returned parts
must be in new, usable condition, be in current production and be readily
resalable.
There are no other significantly active competitors in the marine rig
construction and support industry due to the current low demand. However, if
demand for marine rigs increases, new competitors could be expected to enter
the market.
Historically, the make up of LeTourneau's customer base has been such
that none of the product lines have been dependent upon any one customer or
small group of customers.
Regulations and Hazards
LeTourneau's manufacturing operations and facilities are subject to
regulation by a variety of local, state and federal agencies which regulate
safety and the discharge of materials into the environment, including the
Environmental Protection Agency (EPA), the Texas Natural Resources Conservation
Commission (TNRCC) and the Mississippi Department of Environmental Quality.
LeTourneau's manufacturing facilities are also subject to the requirements of
the Occupational Safety Health Act and comparable state statutes.
Hazardous materials are generated at LeTourneau's Longview plant in
association with the steel making process. Industrial waste water generated at
the mini-steel mill facility for cooling operations is recirculated and quality
tests are conducted regularly. The facility has permits for waste water
discharges, solid waste disposal and air emissions. Waste products considered
hazardous by the EPA are disposed of by shipment to an EPA or state permitted
waste disposal facility.
As a part of the acquisition of the net assets of Marathon LeTourneau
Company, the sellers agreed to remediate certain environmental conditions at
the Longview, Texas and Vicksburg, Mississippi sites. This work will be
performed over the next 25 years. The remediation efforts include, among other
things, post-closure care for a landfill at the Longview facility closed by
Marathon LeTourneau Company prior to LeTourneau's acquisition.
LeTourneau jack-up designs are subject to regulatory approvals by
various agencies depending upon the customer's selection of geographic areas
where the rig will qualify for drilling. The rules vary by location and are
subject to frequent change. These rules primarily relate to safety and
environmental issues in addition to those which classify the jack-up as a
vessel.
LeTourneau may be liable for damages resulting from pollution of air,
land and inland waters associated with its manufacturing operations.
LeTourneau believes that compliance with environmental protection laws and
regulations will have no material effect on its capital expenditures, earnings
or competitive position during 1995. Although further legislation or
regulation pertaining to the protection of the environment may reasonably be
anticipated, the effects thereof on LeTourneau's manufacturing operations
cannot be accurately predicted.
As a manufacturing company, LeTourneau may be responsible for certain
risks associated with the use of its products. These risks include product
liability claims
-11-
<PAGE> 14
for personal injury and/or death, property damage, loss of use of product,
business interruption and necessary legal expenses to defend LeTourneau against
such claims. LeTourneau carries insurance which it believes adequately covers
such risks. LeTourneau did not assume certain liabilities of Marathon
LeTourneau Company, such as product liability and tort claims, associated with
all products manufactured, produced, marketed or distributed prior to the date
of the acquisition.
LeTourneau anticipates incurring expenses associated with the warranty
of its products, including those existing at the date of the acquisition. In
the non-marine business segments, dealers of LeTourneau's products perform the
warranty work for the manufacturer, and in the marine segment, LeTourneau
generally performs warranty work directly.
Employees
The total number of employees of the Company at March 15, 1995 and at
December 31, 1994, 1993 and 1992 were as follows: 3,507, 3,484, 2,560 and
2,333, respectively. Some of the employees included in these numbers
are not United States citizens. None of the Company's employees are covered by
collective bargaining agreements with labor unions. The Company considers
relations with its employees to be satisfactory.
-12-
<PAGE> 15
ITEM 2. PROPERTIES
The Company leases as its corporate headquarters 57,800 square feet of
space in an office tower located at 2800 Post Oak Boulevard in Houston, Texas.
DRILLING RIGS
The following is a summary of the principal drilling equipment owned or
operated by the Company and in service at March 31, 1995. See "Liquidity and
Capital Resources" as appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 14 in the Annual Report
which page is incorporated herein by reference.
OFFSHORE
<TABLE>
<CAPTION>
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
-------------- ------------- ------- ------------- --------------------------
<S> <C> <C> <C> <C>
Cantilever Jack-up Rigs:
Rowan Gorilla II 450'/30,000' 1984 Gulf of Mexico Kerr McGee Corporation
200-C (d) (e) (h) (l) Multiple Well (m) June 1995
Rowan Gorilla III 328'/30,000' 1984 Eastern Canada LASMO Nova Scotia Limited
200-C (d) (e) (l) Term (m) January 1997
Rowan Gorilla IV 328'/30,000' 1986 Trinidad Amoco Trinidad Oil Company
200-C (d) (e) (l) Multiple Well (m) April 1995
Rowan-California 225'/30,000' 1983 North Sea Phillips Petroleum U.K. Limited
116-C (c) (e) (l) Multiple Well (m) November 1995
Rowan-Halifax 225'/30,000' 1982 North Sea Mobil North Sea Limited
116-C (c) (e) (i) (l) Multiple Well (m) October 1995
Cecil Provine 225'/30,000' 1982 North Sea Amoco (U.K.) Exploration Company
116-C (c) (e) (j) (l) Multiple Well (m) December 1995
Arch Rowan 225'/30,000' 1981 North Sea Amoco (U.K.) Exploration Company
116-C (c) (e) (l) Multiple Well (m) December 1995
Gilbert Rowe 350'/30,000' 1981 Gulf of Mexico Samedan Oil Company
116-C (c) (e) (h) (l) Multiple Well (m) June 1995
Charles Rowan 350'/30,000' 1981 Gulf of Mexico Amoco Production Company
116-C (c) (e) (h) (l) Multiple Well (m) October 1995
Rowan-Paris 350'/30,000' 1980 Gulf of Mexico Amoco Production Company
116-C (e) (h) (l) Multiple Well (m) May 1995
Rowan-Middletown 350'/30,000' 1980 Gulf of Mexico Amoco Production Company
116-C (e) (h) (l) Multiple Well (m) November 1995
Rowan-Fort Worth 350'/30,000' 1978 Gulf of Mexico Walter Oil & Gas Corporation
116-C (e) (h) (l) Multiple Well (m) August 1995
</TABLE>
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<PAGE> 16
ITEM 2. PROPERTIES
OFFSHORE(Continued)
<TABLE>
<CAPTION>
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
-------------- ------------- ------- ------------- --------------------------
<S> <C> <C> <C> <C>
Conventional Jack-up Rigs:
Rowan-Juneau 300'/30,000' 1977 Gulf of Mexico Shell Offshore, Inc.
116 (c) (e) (f) (l) Single Well (Turnkey) (m) May 1995
Rowan-Odessa 350'/30,000' 1977 Gulf of Mexico Not Committed
116 (e) (f) (h)
Rowan-Louisiana 350'/30,000' 1975 Gulf of Mexico King Ranch Oil & Gas, Inc.
84 (e) (f) (h) (l) Multiple Well (m) April 1995
Rowan-Alaska 350'/30,000' 1975 Gulf of Mexico Forcenergy Gas Exploration, Inc.
84 (e) (f) (h) (l) Multiple Well (m) July 1995
Rowan-Texas 250'/20,000' 1973 Gulf of Mexico Not Committed
52
Rowan-Anchorage 250'/20,000' 1972 Gulf of Mexico Sonat Exploration Company
52 (e) (l) Single Well (m) April 1995
Rowan-New Orleans 250'/20,000' 1971 Gulf of Mexico American Exploration Company
52 (f) (g) (l) Crane operation (m) April 1995
Rowan-Houston 250'/20,000' 1970 Gulf of Mexico Forcenergy Gas Exploration, Inc.
52 (e) (l) Multiple Well (m) May 1995
Semi-Submersible Rig:
Rowan-Midland 1,000'/25,000' 1976 Gulf of Mexico Ashland Exploration, Inc.
(l) Multiple Well (m) August 1995
Submersible Barges:
Rowan-Fourchon 24'/30,000' 1970 Gulf of Mexico Flores & Rucks
(l) Multiple Well (m) July 1995
Rowan-Fairbanks 26'/25,000' 1975 Gulf of Mexico Cold Stacked
Rowan-Morgan City 26'/25,000' 1973 Gulf of Mexico Kerr McGee Corporation
(l) Multiple Well (m) July 1995
</TABLE>
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<PAGE> 17
ITEM 2. PROPERTIES
(Continued)
ONSHORE (k)
<TABLE>
<CAPTION>
Contracting Party/
Maximum (l) Type of Contract
Description Drilling Depth Location (m) Estimated Release Date
------------ ---------------- --------- -------------------------------
<S> <C> <C> <C>
One rig 18,000'-30,000' Oklahoma Davis Petroleum
(l) Single Well(Turnkey)(m) March 1995
Argentina (n) Triton Energy, Inc.
(l) Multiple Well (m) December 1995
One rig 18,000'-30,000' Oklahoma Davis Petroleum
(l) Single Well(Turnkey)(m) May 1995
Argentina (o) Argentina Hunt Oil Company
(l) Multiple Well (m) December 1995
One rig 18,000'-30,000' Texas Phillips Petroleum
(l) Multiple Well (m) August 1995
One rig 18,000'-30,000' Mississippi Amerada Hess
(l) Multiple Well (m) May 1995
Five rigs 18,000'-30,000' Oklahoma & Texas Not committed
Three rigs 10,000' Argentina YPF S.A.
(l) Term (m) August 1996
Five rigs 20,000' Alaska Not Committed
</TABLE>
----------
(a) Classes 200-C ("Gorilla"), 116-C, 116, 84 and 52 are nomenclature
assigned by LeTourneau, Inc. to jack-ups of its design and construction.
(b) Indicates rated water depth in current location and rated drilling depth,
respectively.
(c) Unit modified to increase operating capability in hostile environments.
(d) Gorilla Class unit designed for extreme hostile environment capability.
(e) Unit equipped with a "top-drive" drilling system.
(f) Unit equipped with a "skid base" unit.
(g) Unit equipped with drilling/heavy-lift crane option.
(h) Unit equipped with leg extensions.
(i) Rig sold December 1984 and leased back for 15 years.
(j) Rig sold December 1985 and leased back for 15 years.
(k) Onshore rigs, including the three used rigs purchased in 1991, were
constructed at various dates between 1960 and 1982, utilizing, in some
instances, new as well as used equipment. Most of the older rigs have
been substantially rebuilt subsequent to their respective dates of
construction.
(l) Refer to "Contracts" on page 3 of this Form 10-K for definition of types
of contracts.
(m) Indicates estimated completion date of work to be performed.
(n) Rig scheduled for shipment to Argentina in May 1995.
(o) Rig scheduled for shipment to Argentina in June 1995.
The Company's drilling division leases and, in some cases, owns various
operating and administrative facilities generally consisting of office,
maintenance and storage space in the states of Alaska, Texas and Louisiana and,
on a foreign basis, in the countries of Canada, Argentina, England, Scotland,
The Netherlands, and Trinidad.
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<PAGE> 18
AIRCRAFT
At March 31, 1995 the U.S.-based Company-owned helicopter fleet
consisted of 14 twin-engine turbine IFR rated Bell 212 helicopters (14
passenger), 16 twin-engine turbine IFR rated Bell 412 helicopters (14
passenger), 30 twin-engine turbine MBB BO-105CBS helicopters (five passenger),
two Aerospatiale 332L Super Puma helicopters (19 passenger) and 27 various
single-engine turbine helicopters (four to six passenger). The U.S.-based
fixed-wing fleet of Company-owned aircraft consisted of four Convair 580s (50
passenger), nine DeHavilland Twin Otters (9-19 passenger), two DeHavilland Dash
8s (37 passenger), one Lear Jet 35A (six passenger) and one Beechcraft King Air
200C (six passenger).
Helicopters owned by KLM ERA on March 31, 1995 consisted of five
twin-engine turbine IFR rated Sikorsky S-61N helicopters (26 passenger) and
five twin-engine turbine IFR rated Sikorsky S-76B helicopters (13 passenger).
The Company's principal aircraft bases in Alaska, all located on
leased property, are a fixed-wing air service center (57,000 square feet of
hangar, repair and office facilities) at Anchorage International Airport, with
an adjacent helicopter hangar facility (14,800 square feet) and hangar, office
and repair facilities at Fairbanks International Airport (13,000 square feet).
The Company also maintains similar, smaller helicopter facilities in Alaska at
Deadhorse, Juneau, Valdez and Yakutat.
The Company's principal facilities to accommodate its Gulf of Mexico
operations are located on leased property at Lake Charles Regional Airport.The
facilities, comprising 53,000 square feet, include helicopter hangars, a repair
facility and an operations and administrative building. The Company also
operates a helicopter facility (20,700 square feet of hangar, repair and office
facilities) located on leased property at the Terrebonne Airport in Houma,
Louisiana and a helicopter facility (5,700 square feet of hangar, repair and
office facilities) located on leased property in New Iberia, Louisiana.
KLM ERA's principal facility to accommodate its operations in the
Dutch sector of the North Sea is a base located in Den Helder. The facility,
comprising 35,000 square feet, includes a helicopter hangar, a repair facility
and an operations and administrative building. A facility located in Amsterdam
was shutdown and consolidated with the Den Helder operations in March 1995.
Manufacturing Facilities
LeTourneau's principal manufacturing facility and headquarters are
located in Longview, Texas on approximately 2,400 acres with about 1.2 million
square feet under roof. Included within the facility are: A mini-steel mill
having approximately 330,000 square feet of covered work space and housing two
25-ton electric arc furnaces having an aggregate 120,000 tons per year
capacity; a fabrication shop having approximately 300,000 square feet of
covered work space and housing a 3,000 ton vertical bender for making roll-ups
or flattening materials up to 2 1/2 inches thick by 11 feet wide; a machine
shop having approximately 140,000 square feet of covered work space and housing
various types of machinery; and an assembly shop having approximately 124,000
square feet and housing various types of machinery.
The marine group's facility located in Vicksburg, Mississippi is
located on 1,850 acres of land and has approximately 476,000 square feet of
covered work space. This facility is currently closed and the businesses
formerly carried on at this location have been relocated to the Longview, Texas
facility.
The LeTourneau Portland Division's distributor for forest products in
the Northwestern United States, is located on a six acre site in Troutdale,
Oregon with approximately 22,000 square feet of building space.
The Western Mining Division of LeTourneau headquartered in Tucson,
Arizona is housed in a 20,000 square foot leased facility. It functions as the
distributor for LeTourneau's mining equipment products in the Western United
States.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising out of
the conduct of the Company's operations and other matters, not all the
potential liabilities with respect to which are covered by the terms of the
Company's insurance policies. While the Company
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<PAGE> 19
is unable to predict the ultimate liabilities which may result from such
litigation, the Company believes that no such litigation in which the Company
was involved as of March 31, 1995 will have a material adverse effect on the
financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's common
stockholders during the fourth quarter of the fiscal year ended December 31,
1994.
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions, years of accredited service and ages of the
officers of the Company and certain officers of the Company's wholly-owned
subsidiaries, Era Aviation, Inc. and LeTourneau Inc., as of March 31, 1995 are
listed below. Officers of all three entities are normally appointed annually
by the entities' Board of Directors at the bylaws-prescribed meetings held in
the spring and serve at the discretion of the Board of Directors. There are no
family relationships among these officers, nor any arrangements or
understandings between any officer and any other person pursuant to which the
officer was selected.
<TABLE>
<CAPTION>
Years of
Accredited
Name Position Service Age
-------------------- -------------------------------- ---------- -----
<S> <C> <C>
Executive Officers of the Registrant:
C. R. Palmer Chairman of the Board, President 34 60
and Chief Executive Officer
R. G. Croyle Executive Vice President 21 52
D. F. McNease Senior Vice President, Drilling 21 43
E. E. Thiele Senior Vice President, Finance, 25 55
Administration and Treasurer
J. Earl Beckman(1) Vice President, Manufacturing 1 57
John L. Buvens Vice President, Legal 14 39
James B. Davis Vice President, Engineering 21 44
C. W. Johnson(2) Vice President, Aviation 17 51
Mark A. Keller Vice President, Marketing - 3 42
North American Drilling
Paul L. Kelly Vice President, Special Projects 12 55
Bill S. Person Vice President, Industrial Relations 27 46
William C. Provine Vice President, Investor Relations 8 48
Other Officers of the Registrant:
William H. Wells Controller 1 33
Mark H. Hay Secretary and Assistant Treasurer 16 50
P. G. Wheeler Assistant Treasurer 20 47
Lynda A. Aycock Assistant Treasurer and 23 48
Assistant Secretary
Certain Officer of Era Aviation, Inc.:
James Vande Voorde Vice President 21 55
</TABLE>
(1) Also serves as President and Chief Executive Officer of LeTourneau, Inc.
(2) Also serves as President and Chief Operating Officer of Era Aviation, Inc.
Each of the executive officers and other officers of the Company as well
as the officers of Era Aviation, Inc. and LeTourneau, Inc. listed above
continuously served in the position shown above for more than the past five
years except as noted in the following paragraphs.
-17-
<PAGE> 20
Since October 1993, Mr. Croyle's principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Croyle
served as Vice President, Legal of the Company.
Since October 1993, Mr. McNease's principal occupation has been in the
position set forth. From April 1991 to October 1993, Mr. McNease served as
Vice President, Drilling of the Company. For more than five years prior to
that time, he served as Vice President of Rowandrill, Inc., a subsidiary of the
Company.
Since April 1994, Mr. Thiele's principal occupation has been in the
position set forth. From January 1994 to April 1994, Mr. Thiele served in the
position of Vice President, Finance, Administration and Treasurer. From
February 1989 to January 1994, he served as Vice President, Finance and
Administration.
Since April 1994, Mr. Beckman's principal occupation has been in the
position set forth. From February 1994 to present, Mr. Beckman has also served
in the position of President and Chief Executive Officer of LeTourneau, Inc, a
subsidiary of the Company. For more than five years prior to that time, he
served as President of Marathon LeTourneau Company, a company whose net assets
were purchased by LeTourneau, Inc. in February 1994. Marathon LeTourneau was
not, and is not now, a parent, subsidiary or affiliate of the Company.
Since October 1993, Mr. Buvens' principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Buvens
served as an Attorney for the Company.
Since October 1993, Mr. Davis' principal occupation has been in the
position set forth. From January 1990 to October 1993, Mr. Davis served as
Manager of Engineering/Purchasing & Chief Engineer of the Company. From June
1989 to January 1990, he served as an Engineer for the Company. For more than
five years prior to that time, he served as a Tool Pusher for the Company.
Since April 1994, Mr. Johnson's principal occupation has been in the
position set forth. From December 1993 to present, Mr. Johnson has also served
in the position of President and Chief Operating Officer of Era Aviation, Inc.,
a subsidiary of the Company. For more that five years prior to that time, he
served as Executive Vice President of Era.
Since April 1994, Mr. Keller's principal occupation has been in the
position set forth. From July 1992 to present and April 1993 to present, Mr.
Keller has also served in the positions of Vice President of Terminator, Inc.
and Rowandrill, Inc., respectively, both subsidiaries of the Company. From
April 1992 to July 1992, Mr. Keller served as Marketing Coordinator for
Terminator, Inc. For more than five years prior to April 1992, he served as
Senior Vice President of Chiles Offshore Corp. Chiles is not a parent,
subsidiary or affiliate of the Company.
Since October 1993, Mr. Person's principal occupation has been in the
position set forth. From April 1990 to October 1993, Mr. Person served as
Director of British American Offshore Limited, a subsidiary of the Company.
For more than five years prior to that time, he served as Manager of Industrial
Relations of the Company.
Since October 1993, Mr. Provine's principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Provine
served as Vice President of Rowandrill, Inc., a subsidiary of the Company.
Since joining the Company in March 1994, Mr. Wells' occupation has
been in the position set forth. For more than five years prior to that time,
Mr. Wells served in various positions with the independent accounting firm of
Deloitte & Touche LLP, including Audit Manager and, most recently, Senior Audit
Manager. Deloitte & Touche is not a parent, subsidiary or affiliate of the
Company but does serve as the Company's independent auditors.
Since April 1994, Ms. Aycock's principal occupation has been in the
position set forth. From October 1993 to April 1994, Ms. Aycock served in the
position of Assistant Treasurer. For more than five years prior to that time,
Ms. Aycock served as an Accountant for the Company.
In addition to serving in the position shown above, Mr. Wheeler has
also served as Corporate Tax Director of the Company for more than five years.
-18-
<PAGE> 21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required hereunder regarding the Common Stock price
range and cash dividend information for 1994 and 1993 and the number of holders
of Common Stock is set forth on page 27 of the Company's Annual Report under the
title "Common Stock Price Range, Cash Dividends and Stock Splits", and is
incorporated herein by reference, except for the final two paragraphs under such
title. Also incorporated herein by reference to the Annual Report is the fifth
paragraph in the right hand column appearing on page 14 within "Management's
Discussion and Analysis of Financial Condition and Results of Operations", such
paragraph provides information pertinent to the Company's ability to pay cash
dividends subject to certain restrictions. The Company's Common Stock is listed
on the New York Stock Exchange and the Pacific Stock Exchange.
ITEM 6. SELECTED FINANCIAL DATA
The information required hereunder is set forth on page 10 of the
Company's Annual Report under the title "Financial Review" and is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required hereunder is set forth on pages 12, 13 and 14
under the title "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's Annual Report and is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K on page 20 of this Form 10-K for a listing of financial statements
of the registrant and its subsidiaries, all of which financial statements are
incorporated by reference under this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information provided under the columns entitled Name, Principal
Occupation for the Past Five Years, Age and Year First Became Director in the
table on pages 5 and 6, in footnotes (1) and (3) on page 6 and in the paragraph
following footnote (5) on page 4 of the Proxy Statement for the Company's 1995
Annual Meeting of Stockholders (the "Proxy Statement") is incorporated herein by
reference. There are no family relationships among the directors or nominees
for directors and the executive officers of the Company, nor any arrangements or
understandings between any director or nominee for director and any other person
pursuant to which such director or nominee for director was selected. Except as
otherwise indicated, each director or nominee for director of the Company has
been employed or engaged for the past five years in the principal occupation set
forth opposite his name in the information incorporated by reference. See
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT on pages 17 and 18 of this
Form 10-K for information relating to executive officers.
ITEM 11. EXECUTIVE COMPENSATION
The standard arrangement for compensating directors described under the
title, "Director Compensation" at the bottom of page 11 of the Proxy Statement
and the information appearing under the titles "Summary Compensation Table",
"Option Grants in Last Fiscal Year", "Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values", "Option Plans", "Convertible Debenture
Incentive Plan" and "Pension Plan" on pages 7 through 11 of the Proxy Statement
are incorporated herein by reference. In accordance with
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<PAGE> 22
the instructions to Item 402 of Regulation S-K, the information contained
in the Proxy Statement under the titles "Board Compensation Committee Report on
Executive Compensation" and "Stockholder Return Performance Presentation" shall
not be deemed to be filed as part of this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding security ownership of certain beneficial
owners and management of the Company set forth under the headings "Voting
Securities Outstanding" appearing on page 2 and "Security Ownership of
Management and Principal Stockholders" appearing on pages 2 through 4 of the
Proxy Statement is incorporated herein by reference.
The business address of all directors is the principal executive offices
of the Company as set forth on the facing page of this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain business relationships and transactions
between the Company and certain of the directors of the Company under the
heading "Certain Transactions" appearing on page 15 of the Proxy Statement is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following financial statements and independent auditors'
report, included in the Annual Report, are incorporated herein
by reference:
<TABLE>
<CAPTION>
Page of 1994
Annual Report
-------------
<S> <C>
Independent Auditors' Report............................. 15
Consolidated Balance Sheet,
December 31, 1994 and 1993.............................. 16
Consolidated Statement of Operations for the
Years Ended December 31, 1994, 1993 and 1992 ........... 17
Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended December 31, 1994, 1993 and
1992 ................................................... 18
Consolidated Statement of Cash Flows for
the Years Ended December 31, 1994, 1993 and 1992........ 19
Notes to Consolidated Financial Statements............... 20
Selected Quarterly Financial Data (Unaudited) for
the Quarters Ended March 31, June 30, September 30
and December 31, 1994 and 1993.......................... 27
</TABLE>
2. Financial Statement Schedules
Financial Statement Schedules I, II, III, IV, and V are not included
in this Form 10-K because such schedules are not required, not significant or
because the required information is shown in Notes to the Consolidated
Financial Statements of the Company's Annual Report.
3. Exhibits:
Unless otherwise indicated below as being incorporated by reference to
another filing of the Company with the Securities and Exchange
Commission, each of the following exhibits is filed herewith:
-20-
<PAGE> 23
<TABLE>
<S> <C>
3a Restated Certificate of Incorporation of the Company, dated February 17, 1984, incorporated by reference to: Exhibit
3a to the Company's Form 10-K for the fiscal year ended December 31, 1983 (File No. 1-5491); Exhibit 4.2 to the
Company's Registration Statement on Form S-3 (Registration No. 33-13544); and Exhibits 4a, 4b, 4c and 4d below.
3b Bylaws of the Company amended as of April 23, 1993, incorporated by reference to Exhibit 3 to the Company's Form 10-Q
for the quarter ended March 31, 1993 (File No. 1-5491).
4a Certificate of Designation of the Company's $2.125 Convertible Exchangeable Preferred Stock incorporated by reference
to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-6476).
4b Certificate of Designation of the Company's Series I Preferred Stock incorporated by reference to Exhibit 4b to the
Company's Form 10-K for the fiscal year ended December 31, 1986 (File No.1-5491).
4c Certificate of Designation of the Company's Series II Preferred Stock incorporated by reference to Exhibit 4c to the
Company's Form 10-K for the fiscal year ended December 31, 1987 (File No.1-5491).
4d Certificate of Designation of the Companies Series III Preferred Stock.
4e Certificate of Designation of the Company's Series A Junior Preferred Stock dated March 2, 1992 incorporated by
reference to Exhibit 4d to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
4f Amendment Nos. 1 and 2 dated September 19, 1994 and September 26, 1994, respectively, to the Rights Agreement dated
as of February 25, 1992 between the Company and Citibank, N.A. as Rights Agent.
4g Rights Agreement as amended dated as of February 25, 1992 between the Company and Citibank, N.A. as Rights Agent.
4h Indenture dated December 1, 1991 between the Company and Bankers Trust Company, as Trustee, relating to the Company's
11-7/8% Senior Notes due 2001 incorporated by reference to Exhibit 28.1 to the Company's Current Report on Form 8-K
dated December 12, 1991 (File No. 1-5491).
4i Specimen Common Stock certificate, incorporated by reference to Exhibit 4g to the Company's Form 10-K for the fiscal
year ended December 31, 1992 (File No. 1-5491).
4j Form of Promissory Note dated November 30, 1994 between the purchasers of Series III Floating Rate Subordinated
Convertible Debentures due 2004 and the Company.
10a 1980 Nonqualified Stock Option Plan of the Company together with form of Stock Option Agreement related thereto
incorporated by reference to Exhibit 5.10 to the Company's Registration Statement on Form S-7 (Registration
No. 2-68622).
10b 1988 Nonqualified Stock Option Plan of the Company as amended together with form of Stock Option Agreement related
thereto incorporated by reference to Exhibit 10b of the Company's Form 10-K for the fiscal year ended December 31,
1992 (File No. 1-5491).
10c Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1980
Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10c to the Company's Form 10-K
for the fiscal year ended December 31, 1990 (File No. 1-5491).
10d Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1980 Nonqualified
Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal
year ended December 31, 1991 (File No. 1-5491).
10e Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1988
Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K
for the fiscal year ended December 31, 1990 (File No. 1-5491).
</TABLE>
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<PAGE> 24
<TABLE>
<S> <C>
10f Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1988 Nonqualified
Stock Option Plan of the Company incorporated by reference to Exhibit 10f to the Company's Form 10-K for the fiscal
year ended December 31, 1991 (File No. 1-5491).
10g Amendment Nos. 1 and 2 dated June 12, 1986 and October 21, 1994, respectively, to the 1986 Convertible Debenture
Incentive Plan of the Company.
10h 1986 Convertible Debenture Incentive Plan of the Company as amended.
10i Pension Restoration Plan of the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the
fiscal year ended December 31, 1992 (File No. 1-5491).
10j Pension Restoration Plan of LeTourneau, Inc.
10k Credit Agreement dated September 22, 1986 (including amendatory letter dated March 25, 1987) and First Preferred
Ship Mortgage dated November 7, 1986 between the Company and Marathon LeTourneau Company incorporated by reference
to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1986 and amendatory letter dated
February 21, 1992 incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
10L Participation Agreement dated December 1, 1984 between the Company and Textron Financial Corporation et al. and
Bareboat Charter dated December 1, 1984 between the Company and Textron Financial Corporation et al. incorporated by
reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No. 1-5491).
10M Participation Agreement dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. and Bareboat
Charter dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. incorporated by reference
to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No.1-5491).
10n Corporate Continuing Guaranty dated December 31, 1986 between Shearson Lehman Brothers Holdings Inc. and the Company
incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File
No.1-5491).
10o Corporate Continuing Guaranty dated September 10, 1987 between Shearson Lehman Brothers Holdings Inc. and the Company
incorporated by reference to Exhibit 10i to the Company's Form 10-K for the fiscal year ended December 31, 1987 (File
No.1-5491).
10p Cross-Border Corporate Continuing Guaranty dated May 29, 1991 between Citicorp and the Company's wholly-owned
subsidiary, Rowan International, Inc. incorporated by reference to Exhibit 10o to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No. 1-5491).
10q Amendment No. 1 dated April 1, 1994 to the Consulting Agreement dated March 1, 1991 between the Company and C. W.
Yeargain.
10r Consulting Agreement as amended dated March 1, 1991 between the Company and C. W. Yeargain.
10s Acquisition Agreement dated as of November 7, 1991, among KLM Royal Dutch Airlines, Blue Yonder I B.V., KLM
Helikopters B.V. and Rowan Aviation (Netherlands) B.V. incorporated by reference to Exhibit 28.1 to the Company's
Current Report on Form 8-K dated November 7, 1991 (File No. 1-5491).
10t Business Loan Agreement dated January 27, 1993 between Key Bank of Alaska and the Company's wholly-owned subsidiary,
Era Aviation, Inc. incorporated by reference to Exhibit 10s to the Company's Form 10-K for the fiscal year ended
December 31, 1992 (File No. 1-5491).
</TABLE>
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<PAGE> 25
<TABLE>
<S> <C>
10u Asset Purchase Agreement dated as of November 12, 1993, among Rowan Companies, Inc., Rowan Equipment, Inc., General
Cable Corporation, Marathon LeTourneau Company, Marathon LeTourneau Sales & Service Company and Marathon LeTourneau
Australia Pty. Ltd. incorporated by reference to the Company's Current Report on Form 8-K dated February 11, 1994
(File No. 1-5491).
11 Computation of Primary and Fully Diluted Earnings (Loss) Per Share for the years ended December 31, 1994, 1993 and
1992 appearing on page 26 in this Form 10-K.
*13 Annual Report to Stockholders for fiscal year ended December 31, 1994.
21 Subsidiaries of the Registrant as of March 31, 1995.
23 Independent Auditors' Consent.
24 Powers of Attorney pursuant to which names were affixed to this Form 10-K for the fiscal year ended December 31, 1994.
27 Financial Data Schedule for the year ended December 31, 1994.
</TABLE>
The Company agrees to furnish to the Commission upon request a copy of
all instruments defining the rights of holders of long-term debt of the Company
and its subsidiaries.
___________
* Only portions specifically incorporated herein are deemed to be filed.
EXECUTIVE COMPENSATION PLANS
AND ARRANGEMENTS
Compensatory plans in which directors and executive officers of the
Company participate are listed as follows:
o 1980 Nonqualified Stock Option Plan of the Company together
with form of Stock Option Agreement related thereto incorporated
by reference to Exhibit 5.10 to the Company's Registration
Statement on Form S-7 (Registration No. 2-68622); Amendment No. 1
dated October 25, 1990, to all then outstanding Stock Option
Agreements related to such Plan incorporated by reference to
Exhibit 10c to the Company's Form 10-K for the fiscal year
ended December 31, 1990 (File No. 1-5491); and Amendment No. 2
dated May 23, 1991, to all then outstanding Stock Option
Agreements related to such Plan incorporated by reference to
Exhibit 10d to the Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
o 1988 Nonqualified Stock Option Plan of the Company as amended
together with form of Stock Option Agreement related thereto
incorporated by reference to Exhibit 10b to the Company's Form 10-K
for the fiscal year ended December 31, 1992 (File No. 1-5491;
Amendment No. 1 dated October 25, 1990, to all then outstanding
Stock Option Agreements related to such Plan incorporated by
reference to Exhibit 10d to the Company's Form 10-K for the fiscal
year ended December 31, 1990 (File No. 1-5491); and Amendment No. 2
dated May 23, 1991, to all then outstanding Stock Option Agreements
related to such Plan incorporated by reference to Exhibit 10f to
the Company's Form 10-K for the fiscal year ended December 31,
1991 (File No. 1-5491).
o 1986 Convertible Debenture Incentive Plan of the Company as amended
included as Exhibit 10h to this Form 10K.
o Pension Restoration Plan of the Company incorporated by reference
to Exhibit 10h to the Company's Form 10-K for the fiscal year
ended December 31, 1992 (File 1-5491).
o Pension Restoration Plan of LeTourneau, Inc. included as Exhibit
10j to this Form 10k.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the fourth
quarter of fiscal year 1994.
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<PAGE> 26
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933,
the undersigned registrant hereby undertakes as follows, which undertaking
shall be incorporated by reference into registrant Registration Statements on
Form S-8 Nos. 2-67866 (filed May 22, 1980), 2-58700, as amended by
Post-Effective Amendment No. 4 (filed June 11, 1980), 33-33755, as amended by
Amendment No. 1 (filed March 29, 1990),33-61444 (filed April 23, 1993),
33-51103 (filed November 18, 1993) 33-51105 (filed November 18, 1993) and
33-51109 (filed November 18, 1993):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the act and will be governed by the final
adjudication of such issue.
-24-
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ROWAN COMPANIES, INC.
By: C. R. PALMER
(C. R. Palmer, Chairman of
the Board, President and
Chief Executive Officer)
Date: March 31, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
C. R. PALMER Chairman of the Board, President March 31, 1995
(C. R. Palmer) and Chief Executive Officer
E. E. THIELE Principal Financial Officer March 31, 1995
(E. E. Thiele)
WILLIAM H. WELLS Principal Accounting Officer March 31, 1995
(William H. Wells)
*RALPH E. BAILEY Director March 31, 1995
(Ralph E. Bailey)
*HENRY O. BOSWELL Director March 31, 1995
(Henry O. Boswell)
*H. E. LENTZ Director March 31, 1995
(H. E. Lentz)
*WILFRED P. SCHMOE Director March 31, 1995
(Wilfred P. Schmoe)
*CHARLES P. SIESS, JR. Director March 31, 1995
(Charles P. Siess, Jr.)
*PETER SIMONIS Director March 31, 1995
(Peter Simonis)
*C. W. YEARGAIN Director March 31, 1995
(C. W. Yeargain)
* BY C. R. PALMER
(C. R. Palmer, Attorney-in-fact)
</TABLE>
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<PAGE> 28
EXHIBIT 11
ROWAN COMPANIES, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY
DILUTED EARNINGS (LOSS) PER SHARE
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended December 31
-----------------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Weighted average shares of common stock
outstanding 84,092 78,924 73,021
Stock options (treasury stock method) 1,436 (A) 1,377 (A) 1,305 (A)
-------------------------------------------------------
Weighted average shares for primary
earnings (loss) per share calculation 85,528 80,301 74,326
Stock options (treasury stock method) 30 (A)
Shares issuable from assumed conversion
of floating rate subordinated
convertible debentures 612 (A) 516 (A) 652 (A)
-------------------------------------------------------
Weighted average shares for fully diluted
earnings (loss) per share calculation 86,140 80,817 75,008
=======================================================
Net income (loss) for primary calculation $ (22,989) $ (13,259) $ (73,753)
Subordinated debenture interest 301 282 353
-------------------------------------------------------
Net income (loss) for fully diluted
calculation $ (22,688) $ (12,977) $ (73,400)
=======================================================
Primary earnings (loss) per share $ (0.27) $ (0.17) $ (0.99)
=======================================================
Fully diluted earnings (loss) per share $ (0.26)(B) $ (0.16)(B) $ (0.98)(B)
=======================================================
</TABLE>
Note: Reference is made to Note 1 to Consolidated Financial Statements
regarding computation of per share amounts.
(A) Included in accordance with Regulation S-K Item 601(b)(11) although not
required to be provided for by Accounting Principles Board Opinion No. 15
because the effect is insignificant.
(B) This calculation is submitted in accordance with regulation S-K Item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an antidilutive result.
<PAGE> 29
EXHIBIT INDEX
Page 1 Of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
------------- ----------- --------------------------------------------------
<S> <C> <C>
(1) 3a Restated Certificate of Incorporation of the
Company, dated February 17, 1984, incorporated by
reference to: Exhibit 3a to the Company's Form 10-K
for the fiscal year ended December 31, 1983 (File
No. 1-5491); Exhibit 4.2 to the Company's
Registration Statement on Form S-3 (Registration No.
33-13544); and Exhibits 4a, 4b, 4c and 4d below.
(1) 3b Bylaws of the Company amended as of April 23, 1993,
incorporated by reference to Exhibit 3 to the
Company's Form 10-Q for the quarter ended March 31,
1993 (File No. 1-5491).
(1) 4a Certificate of Designation of the Company's $2.125
Convertible Exchangeable Preferred Stock
incorporated by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-3
(Registration No. 33-6476).
(1) 4b Certificate of Designation of the Company's Series I
Preferred Stock incorporated by reference to Exhibit
4b to the Company's Form 10-K for the fiscal year
ended December 31, 1986 (File No.1-5491).
(1) 4c Certificate of Designation of the Company's Series
II Preferred Stock incorporated by reference to
Exhibit 4c to the Company's Form 10-K for the fiscal
year ended December 31, 1987 (File No.1-5491).
(2) 4d Certificate of Designation of the Companies Series
III Preferred Stock.
(1) 4e Certificate of Designation of the Company's Series A
Junior Preferred Stock dated March 2, 1992
incorporated by reference to Exhibit 4d to the
Company's Form 10-k for the fiscal year ended
December 31, 1991 (File No. 1-5491).
(2) 4f Amendment Nos. 1 and 2 dated September 19, 1994 and
September 26, 1995, respectively, to the Rights
Agreement dated as of February 25, 1992 between the
Company and Citibank, N.A. as Rights Agent.
(2) 4g Rights Agreement as Amended dated as of February 25,
1992 between the Company and Citibank, N.A. as
Rights Agent.
(1) 4h Indenture dated December 1, 1991 between the Company
and Bankers Trust Company, as Trustee, relating to
the Company's 11-7/8% Senior Notes due 2001
incorporated by reference to Exhibit 28.1 to the
Company's Current Report on Form 8-k dated December
12, 1991 (File No. 1-5491).
(1) 4i Specimen Common Stock Certificate, incorporated by
reference to Exhibit 4g to the Company's Form 10-K
for the fiscal year ended December 31, 1992 (File
No. 1-5491).
</TABLE>
<PAGE> 30
EXHIBIT INDEX
Page 2 Of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
------------- --------- --------------------------------------------------
<S> <C> <C>
(2) 4j Form of Promissory Note dated November 30, 1994
between the purchasers of Series III Floating Rate
Subordinated Convertible Debentures due 2004 and the
Company.
(1) 10a 1980 Nonqualified Stock Option Plan of the Company
together with Form of Stock Option Agreement related
thereto incorporated by reference to Exhibit 5.10 to
the Company's Registration Statement on Form S-7
(Registration No. 2-68622).
(1) 10b 1988 Nonqualified Stock Option Plan of the Company
as amended together with form of Stock Option
Agreement related thereto incorporated by reference
to Exhibit 10b of the Company's Form 10-K for the
fiscal year ended December 31, 1992 (File No.
1-5491).
(1) 10c Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the
1980 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10c to the
Company's Form 10-K for the fiscal year ended
December 31, 1990 (File No. 1-5491).
(1) 10d Amendment No. 2 dated May 23, 1991, to all then
outstanding Stock Option Agreements related to the
1980 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10d to the
Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
(1) 10e Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the
1988 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10d to the
Company's Form 10-K for the fiscal year ended
December 31, 1990 (File No. 1-5491).
(1) 10f Amendment No. 2 dated May 23, 1991, to all then
outstanding Stock Option Agreements related to the
1988 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10f to the
Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
(2) 10g Amendment Nos. 1 and 2 Dated June 12, 1986 and
October 21, 1994, respectively, to the 1986
Convertible Debenture Incentive Plan of the Company.
(2) 10h 1986 Convertible Debenture Incentive Plan of the
Company as amended.
(1) 10i Pension Restoration Plan of the Company incorporated
by reference to Exhibit 10h to the Company's Form
10-K for the fiscal year ended December 31, 1992
(File No. 1-5491).
(2) 10j Pension Restoration Plan of LeTourneau, Inc.
</TABLE>
<PAGE> 31
EXHIBIT INDEX
Page 3 Of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
------------- ----------- -----------------------------------------------
<S> <C> <C>
(1) 10k Credit Agreement dated September 22, 1986 (including
amendatory letter dated March 25, 1987) and First
Preferred Ship Mortgage dated November 7, 1986
between the Company and Marathon LeTourneau Company
incorporated by reference to Exhibit 10c to the
Company's Form 10-K for the fiscal year ended
December 31, 1986 and amendatory letter dated
February 21, 1992 incorporated by reference to
Exhibit 10h to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No.
1-5491).
(1) 10l Participation Agreement dated December 1, 1984
between the Company and Textron Financial
Corporation et. al. and Bareboat Charter dated
December 1, 1984 between the Company and Textron
Financial Corporation et. al. incorporated by
reference to Exhibit 10c to the Company's Form 10-K
for the fiscal year ended December 31, 1985 (File
No. 1-5491).
(1) 10m Participation Agreement dated December 1, 1985
between the Company and Eaton Leasing Corporation
et. al. and Bareboat Charter dated December 1, 1985
between the Company and Eaton Leasing Corporation
et. al. incorporated by reference to Exhibit 10d to
the Company's Form 10-K for the fiscal year ended
December 31, 1985 (File No. 1-5491).
(1) 10n Corporate Continuing Guaranty dated December 31,
1986 between Shearson Lehman Brothers Holdings Inc.
and the Company incorporated by reference to Exhibit
10h to the Company's Form 10-K for the fiscal year
ended December 31, 1986 (File No. 1-5491).
(1) 10o Corporate Continuing Guaranty dated September 10,
1987 between Shearson Lehman Brothers Holdings Inc.
and the Company incorporated by reference to Exhibit
10i to the Company's Form 10-K for the fiscal year
ended December 31, 1987 (File No. 1-5491).
(1) 10p Cross-Border Corporate Continuing Guaranty dated May
29, 1991 between Citicorp and the Company's
wholly-owned subsidiary, Rowan International, Inc.
incorporated by reference to Exhibit 10o to the
Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
(2) 10q Amendment No. 1 dated April 1, 1994 to the
Consulting Agreement dated March 1, 1991 between the
Company and C. W. Yeargain.
(2) 10r Consulting Agreement as amended dated March 1, 1991
between the Company and C. W. Yeargain.
(1) 10s Acquisition Agreement dated as of November 7, 1991,
among KLM Royal Dutch Airlines, Blue Yonder I B.V.,
KLM Helikopters B.V. and Rowan Aviation
(Netherlands) B.V. incorporated by reference to
Exhibit 28.1 to the Company's Current Report on Form
8-K dated November 7, 1991 (File No. 1-5491).
</TABLE>
<PAGE> 32
EXHIBIT INDEX
Page 4 Of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
--------- ----------- --------------------------------------------
<S> <C> <C>
(1) 10t Business Loan Agreement dated January 27, 1993
between Key Bank of Alaska and the Company's
wholly-owned subsidiary, Era Aviation, Inc.
incorporated by reference to Exhibit 10s to the
Company's Form 10-K for the fiscal year ended
December 31, 1992 (File No. 1-5491).
(1) 10u Asset Purchase Agreement dated as of November 12,
1993, among Rowan Companies, Inc., Rowan Equipment,
Inc., General Cable Corporation, Marathon LeTourneau
Company, Marathon LeTourneau Sales & Service Company
and Marathon LeTourneau Australia Pty. Ltd.
incorporated by reference to the Company's Current
Report on Form 8-k dated February 11, 1994 (File No.
1-5491).
(3) 11 Computation of Primary and Fully Diluted Earnings
(Loss) Per Share for the years ended December 31,
1994, 1993 and 1992 appearing on page 26 in this
Form 10-K.
(4) 13 Annual Report to Stockholders for fiscal year ended
December 31, 1994.
(2) 21 Subsidiaries of the Registrant as of March 31, 1995.
(2) 23 Independent Auditors' Consent.
(2) 24 Powers of Attorney pursuant to which names were
affixed to this Form 10-K for the fiscal year ended
December 31, 1994.
(2) 27 Financial Data Schedule for the year ended December
31, 1994.
</TABLE>
__________________________________________
(1) Incorporated herein by reference to another filing of the company
with the Securities and Exchange Commission as indicated.
(2) Included herein.
(3) Included in Form 10-K on page 26.
(4) Included herein. See ITEM 1, ITEMS 5-8 and Subpart (a)1. of ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K on
pages 20 through 23 on Form 10-K for specific portions
incorporated herein by reference.
<PAGE> 1
EXHIBIT 4d
ROWAN COMPANIES, INC.
CERTIFICATE OF DESIGNATIONS
Providing for an Issue of Series III Preferred Stock
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
ROWAN COMPANIES, INC., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Certificate of Incorporation, and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, its Board of
Directors has duly adopted, at a meeting held on April 25, 1986, and at
meetings of the 1986 Debenture Plan Committee of the Board of Directors held on
August 25, 1987 and October 21, 1994, the following resolutions creating and
providing for the issuance of a series of shares of Preferred Stock as
hereinafter described, and further providing for the voting powers,
designations, preferences and relative, participating, optional or other rights
thereof, and the qualifications, limitations or restrictions thereof, in
addition to those set forth in said Certificate of Incorporation, all in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, and that such resolutions have at all times since
remained in effect and are now in effect, unamended:
"RESOLVED, that pursuant to Paragraph A of Article Fourth of the
Certificate of Incorporation of the Corporation, as amended (which creates and
authorizes 5,000,000 shares of preferred stock, par value of $1.00 per share,
hereinafter called the "Preferred Stock"), the Board of Directors hereby
establishes and provides for the issue of a series of 10,300 shares of
Preferred Stock, designated as Series III Preferred Stock (the "Series Stock"),
which shares shall be issuable only upon conversion of the Series III Floating
Rate Subordinated Convertible Debentures (the "Related Debentures") of the
Corporation and shall be convertible into shares of common stock, $.125 par
value, of the Corporation (the "Common Stock"), pursuant to the terms and
conditions hereinafter set forth.
RESOLVED, that the voting powers, preferences and relative,
participating, optional, conversion, and other rights of the shares of the
Series Stock, and the qualifications, limitations or restrictions thereof, in
addition to those set forth in said Article Fourth, are as follows:
Section 1. Dividends. The holders of shares of Series Stock
shall not be entitled to receive cash dividends on such shares.
Section 2. Liquidation Preference. (A) Upon the complete
liquidation, dissolution, or winding-up of the Corporation, whether
voluntarily or involuntarily, the Series Stock shall be entitled, before
any distribution is made to the holders of Common Stock and of any other
capital stock of the Corporation which ranks junior to the Series Stock in
respect of distributions of
<PAGE> 2
assets on liquidation, dissolution or winding-up of the Corporation, to
be paid $1.00 per share, and shall not be entitled to any further
payment.
(B) In case the net assets of the Corporation are insufficient
to pay all outstanding shares of Series Stock, and any other class of
stock of the Corporation ranking in parity upon a liquidation,
dissolution, or winding-up) with the Series Stock ("Parity Stock"), the
liquidation preferences to which all such shares are entitled, then the
entire net assets of the Corporation shall be distributed ratably to all
outstanding shares of the Series Stock and Parity Stock, if any, in
proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution, or winding-up.
(C) The merger or consolidation of the Corporation into or with
another corporation or the merger or consolidation of any other
corporation into or with the Corporation, or the sale, lease or conveyance
of all or substantially all the assets, property or business of the
Corporation shall not be deemed to be a liquidation, dissolution, or
winding-up of the Corporation within the meaning of this Section 2.
Section 3. Certain Restrictions. Without the consent of the
holders of at least two-thirds of the total number of shares of Series
Stock outstanding, given in person or by proxy, either in writing or by
vote at a meeting called for the purpose, the Corporation shall not create
or authorize any additional shares of Series Stock or amend, alter or
repeal any of the rights, preferences or powers of the holders of Series
Stock so as to affect adversely any such rights, preferences or powers;
provided, however, that without the consent of the holders of all
outstanding shares of Series Stock, the corporation shall not amend the
Series Stock to adversely affect the Conversion Ratio thereof.
Section 4. Conversion. Each share of the Series Stock may be
converted at any time within thirty days of the issuance thereof, at the
option of the holder thereof, into shares of Common Stock of the
Corporation, on the terms and conditions set forth below in this Section
4:
(A) Subject to the provisions for adjustment hereinafter set
forth, the number of shares of Common Stock which shall be deliverable
upon conversion of a share of Series Stock shall equal the face value of
the Related Debenture which was converted into such shares of Series
Stock, divided by the closing price of the Common Stock on the Trading
Date prior to the date of sale of such Related Debenture. For the purpose
of this subparagraph (A) of this Section 4, the terms "closing price" and
"Trading Date" shall have the meanings attributed to them in subparagraph
(B)(6) of this Section 4.
(B) The number of shares of Common Stock which shall be
deliverable upon conversion of a share of Series Stock (the "Conversion
Ratio") shall be adjusted from time to time as follows:
(1) In case the Corporation at any time or from time to
time following the date of issuance of the Related Debentures
-2-
<PAGE> 3
which may be converted into shares of Series Stock shall pay or
make a dividend or other distribution on any class of capital
stock of the Corporation in Common Stock, the Conversion
Ratio in effect at the opening of business on the day following
the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be increased by
multiplying such Conversion Ratio by a fraction of which the
numerator shall be the sum of the number of shares of Common
Stock outstanding at the close of business on the date fixed for
such determination and the total number of shares of Common Stock
constituting such dividend or other distribution, and the
denominator shall be the total number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination, such increase to become effective immediately
after the opening of business on the day following the date fixed
for such determination. For the purposes of this subparagraph
(B)(1), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Corporation but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common
Stock. The Corporation will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of
the Company.
(2) In case the Corporation shall issue rights or
warrants to all holders of its Common Stock entitling them (for
periods ending within 180 days) to subscribe for or purchase
shares of Common Stock at a price per share less than the current
market price per share (determined as provided in subparagraph
(B)(6) of this Section) of the Common Stock on the date fixed for
the determination of stockholders entitled to receive such rights
or warrants, the Conversion Ratio in effect at the opening of
business on the day following the date fixed for such
determination shall be increased by multiplying such Conversion
Ratio by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares
of Common Stock so offered for subscription or purchase, and the
denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would
purchase at such current market price, such increase to become
effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes
of this subparagraph (B)(2), the number of shares of
-3-
<PAGE> 4
Common Stock at any time outstanding shall not include shares
held in the treasury of the Corporation but shall include shares
issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Corporation will not
issue any rights or warrants in respect of shares of Common
Stock held in the treasury of the Corporation.
(3) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Ratio in effect at the opening of business on the day
following the day upon which such subdivision becomes effective
shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a
smaller number of shares of Common Stock, the Conversion Ratio in
effect at the opening of business on the day following the day
upon which such combination becomes effective shall be
proportionately decreased, such increase or reduction, as the
case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision
or combination becomes effective.
(4) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness or assets (including securities,
but excluding any rights or warrants referred to in subparagraph
(B)(2) of this Section, any dividend or distribution paid in cash
out of the earned surplus of the Company and any dividend or
distribution referred to in subparagraph (B)(1) of this Section),
the Conversion Ratio shall be adjusted so that the same shall
equal that number determined by multiplying the Conversion Ratio
in effect immediately prior to the close of business on the date
fixed for the determination of stockholders entitled to receive
such distribution by a fraction of which the numerator shall be
the current market price per share (determined as provided in
subparagraph (B)(6) of this Section) of the Common Stock on the
date fixed for such determination and the denominator shall be
such current market price per share of the Common Stock less the
then fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a
resolution of such Board of Directors) of the portion of the
assets or evidences of indebtedness so distributed applicable to
one share of Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following
the date fixed the determination of stockholders entitled to
receive such distribution.
-4-
<PAGE> 5
(5) The reclassification (including any reclassification upon a
consolidation or merger in which the Corporation is the
continuing corporation) of Common Stock into securities including
other than Common Stock shall be deemed to involve (a) a
distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of stockholders entitled to receive such
distribution" and "the date fixed for such determination" within
the meaning of subparagraph (B)(4) of this Section), and (b) a
subdivision or combination, as the case may be, of the number of
shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which
such subdivision becomes effective" or "the day upon which such
combination becomes effective," as the case may be, and "the day
upon which such subdivision or combination becomes effective"
within the meaning of subparagraph (B)(3) of this Section).
(6) For the purpose of any computation under
subparagraphs (B)(2) and (B)(4) of this Section, the current
market price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices for the 15
consecutive "Trading Days" selected by the Company commencing not
less than 20 nor more than 30 Trading Days before the day in
question. The closing price for each day shall be the last
reported sales price regular way or, in case no such reported
sale takes place on such day, the average of the reported closing
bid and asked prices regular way, in either case on the New York
Stock Exchange or, if the Common Stock is not listed or admitted
to trading on such Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading or, if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked
prices as furnished by any New York Stock Exchange member firm
selected from time to time by the Corporation for that purpose.
The term "Trading Date" shall mean a day on which the principal
national securities exchange on which shares of the Common Stock
are listed or admitted to trading is open for the transaction of
business or, if not listed or admitted to trading on any national
securities exchange, a Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the City of Houston,
Texas are not authorized or obligated by law or executive order
to close.
-5-
<PAGE> 6
(7) The Corporation may make such increases in the
Conversion Ratio, in addition to those required by subparagraphs
(B)(1), (B)(2), (B)(3) and (B)(4) of this Section, as it
considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock
rights shall not be taxable to the recipients.
(8) No adjustment in the Conversion Ratio shall be
required unless such adjustment would require an increase or
decrease of at least one percent in such Conversion Ratio;
provided, however, that any adjustment which by reason of this
subparagraph (B)(8) is not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Article shall be made to the nearest
1/100 of a share.
(C) The holder of any shares of the Series Stock may exercise
his option to convert such shares into shares of Common Stock by
surrendering for such purpose to the Corporation, at its principal office
or at such other office or agency maintained by the Corporation for that
purpose, a certificate or certificates representing the shares of Series
Stock to be converted accompanied by a written notice stating that such
holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this Section 4. As promptly as
practicable, and in any event within five business days after the
surrender of such certificates and the receipt of such notice relating
thereto, the Corporation shall deliver or cause to be delivered (i)
certificates representing the number of validly issued, fully paid and
nonassessable shares of Common Stock of the Corporation to which the
holder of the Series Stock so converted shall be entitled and (ii) if less
than the full number of shares of the Series Stock evidenced by the
surrendered certificate or certificates are being converted, a new
certificate or certificates, of like tenor, for the number of shares
evidenced by such surrendered certificate or certificates less the number
of shares converted. Conversions shall be deemed to have been made at the
close of business on the date of giving of such notice and of such
surrender of the certificate or certificates representing the shares of
the Series Stock to be converted so that the rights of the holder shall
cease with respect to such surrendered certificates except for the right
to receive Common Stock of the Corporation in accordance herewith, and the
converting holder shall be treated for all purposes as having become the
record holder of such Common Stock of the Corporation at such time.
(D) In connection with the conversion of any shares of the
Series Stock, no fractions of shares or Common Stock shall be issued, but
the Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount equal to the market value of such fractional
interest. In such event, the market value of a share of Common Stock of
the Corporation shall be the current market price per share (as defined in
subparagraph (B)(6) of this Section 4) of such shares on the last Trading
Date on which such shares were
-6-
<PAGE> 7
traded immediately preceding the date upon which such shares of Series
Stock are deemed to have been converted.
(E) The Corporation shall at all times reserve and keep
available out of its authorized Common Stock the full number of shares of
Common Stock of the Corporation issuable upon (a) the conversion of all
outstanding shares of the Series Stock, and (b) the conversion or exercise
of any other outstanding securities or rights convertible or exercisable
into Common Stock, including outstanding Related Debentures.
Section 5. Adjustments for Certain Corporate Transactions. In
case of any consolidation of the Corporation with, or merger of the
Corporation into, any other corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and in which
no change is made in the outstanding Common Stock), or in case of any sale
or transfer of all or substantially all of the assets of the Corporation,
the corporation formed by such consolidation or the corporation resulting
from such merger or the person which shall have acquired such assets, as
the case may be, shall make adequate provision providing that the holder
of each share of Series Stock then outstanding shall have the right
thereafter to convert such Series Stock into the kind and amount of stock
or other securities and property receivable upon such consolidation,
merger, sale or transfer by a holder of the number of shares of Common
Stock into which such Series Stock might have been converted immediately
prior to such consolidation, merger, sale or transfer. Adequate provision
shall also be made to provide for adjustments which, for events subsequent
to such consolidation, merger, sale or transfer, shall be as nearly
equivalent as may be practicable to the adjustments provided for in
Section 4. The above provisions of this Section 5 shall similarly apply to
successive consolidations, mergers, sales or transfers.
Section 6. Reports of Adjustments. Whenever the Conversion Ratio
is adjusted as provided in Sections 4 and 5, the Corporation shall
promptly compute such adjustment and promptly mail to each registered
holder of the Series Stock and the Related Debentures a certificate,
signed by the chief financial officer of the Corporation, setting forth
the number of shares of Common Stock into which each share of the Series
Stock is convertible as a result of such adjustment, a brief statement of
the facts requiring such adjustment and the computation thereof and when
such adjustment will become effective.
Section 7. Voting. Except as otherwise provided elsewhere in the
Certificate of Incorporation of the Corporation or required by law, the
holders of Series Stock shall have no voting power in the election of
directors or for any other purposes.
RESOLVED, that, before the Corporation shall issue any shares of
the Series Stock, a certificate of designations pursuant to Section 151 of
the General Corporation Law of the State of Delaware shall be made,
executed, acknowledged, filed and recorded in accordance with the
provisions of said
-7-
<PAGE> 8
Section 151; and the proper officers of the Corporation are hereby
authorized and directed to do all acts and things which may be necessary
or proper in their opinion to carry into effect the purposes and intent
of this and the foregoing resolutions."
IN WITNESS WHEREOF, said ROWAN COMPANIES, INC. has caused this
Certificate to be duly executed by the Chairman of its Board of Directors, its
President or a Vice President and attested to by its Secretary or Assistant
Secretary and has caused its corporate seal to be affixed hereto, this 30th day
of November, 1994
ROWAN COMPANIES, INC.
By: /s/ E. E. THIELE
-------------------------------
Senior Vice President
[Corporate Seal]
ATTEST:
/s/ MARK H. HAY
--------------------------------------
Secretary
-8-
<PAGE> 9
THE STATE OF TEXAS }
}
COUNTY OF HARRIS }
Before me, a Notary Public, on this day personally appeared E. E.
Thiele, known to me to be the person and officer whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was the act of
the said Rowan Companies, Inc., a Delaware corporation, that he has executed
the same as the act of such corporation for the purposes and consideration
therein expressed, and that the facts stated therein are true.
Given under my hand and seal of office this 30th day of November, 1994
/s/ MARCIA BRIDGES
------------------------------
Notary Public, in and for
the State of Texas
My Commission Expires:
7-18-98
-------------------------------
-9-
<PAGE> 1
EXHIBIT 4g
================================================================================
ROWAN COMPANIES, INC.
and
CITIBANK, N.A.,
Rights Agent
_______________
Rights Agreement
As Amended
Dated as of February 25, 1992
================================================================================
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C> <C>
1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3 Issue of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4 Form of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5 Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6 Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7 Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . . . . . . . . . 13
8 Cancellation and Destruction of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . 16
9 Reservation and Availability of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10 Junior Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11 Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12 Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . 34
13 Consolidation, Merger or Sale or Transfer of Assets
or Earning Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14 Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15 Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
16 Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
17 Rights Certificate Holder Not Deemed a Shareholder . . . . . . . . . . . . . . . . . . . . . . . 43
18 Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
19 Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . 45
20 Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
21 Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
22 Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
23 Redemption and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
24 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
25 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
26 Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
27 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
28 Determinations and Actions by the Board of Directors, etc. . . . . . . . . . . . . . . . . . . . 56
29 Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
30 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
31 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
32 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
33 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
Exhibit C -- Certificate of Designation
-ii-
<PAGE> 4
RIGHTS AGREEMENT
RIGHTS AGREEMENT ("Agreement"), dated as of February 25, 1992 (the
"Agreement"), between Rowan Companies, Inc., a Delaware corporation (the
"Company"), and Citibank, N.A., a national banking association (the "Rights
Agent").
WHEREAS, on February 25, 1992 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a
distribution of one Right for each share of common stock, par value $.125 per
share, of the Company (the "Company Common Stock") outstanding at the Close of
Business on March 11, 1992 (the "Record Date"), and has authorized the issuance
of one Right (as such number may hereinafter be adjusted pursuant hereto) for
each share of Company Common Stock issued between the Record Date (whether
originally issued or delivered from the Company's treasury) and, except as
otherwise provided in Section 22, the Distribution Date, each Right initially
representing the right to purchase upon the terms and subject to the conditions
hereinafter set forth one Unit of Series A Junior Preferred Stock (the
"Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (other than the
Company, any Subsidiaries of the Company, any employee benefit plan maintained
by the Company or any of its Subsidiaries or any trustee or fiduciary with
respect to such plan acting in such capacity) which shall be the Beneficial
Owner of 15% or more of the shares of Company Common Stock then outstanding.
<PAGE> 5
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own", any securities:
(i) of which such Person or any of such Person's Affiliates
or Associates is considered to be a "beneficial owner" under Rule
13d-3 of the General Rules and Regulations under the Exchange Act (the
"Exchange Act Regulations") as in effect on the date hereof, provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own", any securities under this subparagraph (i)
as a result of an agreement, arrangement or understanding to vote such
securities if such agreement, arrangement or understanding (A) arises
solely from a revocable proxy given in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the Exchange Act and the Exchange Act Regulations, and
(B) is not reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report);
(ii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate of such other
Person) with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether
or not in writing) (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide
public offering of securities), for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in the
proviso to subparagraph (i) of this paragraph (c)) or disposing of
such securities; provided, however, that in no case shall an officer
or director of
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<PAGE> 6
the Company be deemed (x) the Beneficial Owner of any securities
beneficially owned by another officer or director of the Company
solely by reason of actions undertaken by such persons in their
capacity as officers and directors of the Company or (y) the
Beneficial Owner of securities held of record by the trustee of any
employee benefit plan of the Company or any Subsidiary of the Company
for the benefit of any employee of the Company or any Subsidiary of
the Company, other than the officer or director, by reason of any
influence that such officer or director may have over the voting of
the securities held in the plan;
(iii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right or obligation to
acquire (whether such right or obligation is exercisable immediately
or only after the passage of time or upon the satisfaction of
conditions) pursuant to any agreement, arrangement or understanding
(whether or not in writing) (other than customary agreements with and
between underwriters and selling group members with respect to a bona
fide public offering of securities) or upon the exercise of conversion
rights, exchange rights, rights (other than these Rights), warrants or
options, or otherwise; or
(iv) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
vote pursuant to any agreement, arrangement or understanding (whether
or not in writing);
provided, however, that under this paragraph (c) a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own", (A) securities tendered
pursuant to a tender or exchange offer made in accordance with Exchange Act
Regulations by such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange, (B)
securities that may be issued upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities that may be issued upon
exercise of Rights from and after the occurrence of a
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<PAGE> 7
Triggering Event, which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(c) or Section 22 hereof (the "Original Rights") or pursuant to
Section 11(i) hereof in connection with an adjustment made with respect to any
Original Rights.
(d) "Board Approval" shall mean the adoption by the Board of
Directors of the Company of a resolution or resolutions authorizing or
approving the action or determination (A) by the unanimous written consent of
all of the members of the Board of Directors of the Company or (B) by the
affirmative vote of not less than a majority of the members of the Board of
Directors of the Company (including not less than a majority of Continuing
Directors) at a meeting duly called and held at which a quorum was present and
acting throughout, provided, that at the time of adoption by the Board of
Directors of any such resolution or resolutions (x) there are not less than
three Continuing Directors and (y) a majority of the members of the Board of
Directors of the Company are Continuing Directors.
(e) "Board of Directors" shall mean the Board of Directors of the
Company.
(f) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the states of New York or
Texas are authorized or obligated by law or executive order to close.
(g) "Close of Business" on any given date shall mean 5:00 P.M.,
New York, New York time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New York, New York time, on the
next succeeding Business Day.
(h) "Common Stock" of any Person other than the Company shall mean
the capital stock of such Person with the greatest voting power, or, if such
Person shall have no capital stock, the equity securities or other equity
interest having power to control or direct the management of such Person.
-4-
<PAGE> 8
(i) "common stock equivalents" has the meaning set forth in Section
11(a)(iii).
(j) "Company Common Stock" has the meaning set forth in the
Whereas Clause.
(k) "Continuing Director" shall mean, as of the time a
determination is made, a member of the Board of Directors of the Company who is
not an Acquiring Person or an Affiliate or Associate of an Acquiring Person or
a director, officer or agent of an Acquiring Person or of any such Affiliate or
Associate, and who either (i) was a member of the Board of Directors of the
Company on February 25, 1992 or (ii) subsequently becomes a director of the
Company and whose election or nomination for election by the Company's
stockholders, received Board Approval.
(l) "current market price" has the meaning set forth in Section
11(d).
(m) "Current Value" has the meaning set forth in Section
11(a)(iii).
(n) "Distribution Date" has the meaning set forth in Section 3(a).
(o) "equivalent preferred stock" has the meaning set forth in
Section 11(b).
(p) "Expiration Date" has the meaning set forth in Section 7(a).
(q) "Final Expiration Date" has the meaning set forth in Section
7(a).
(r) "Junior Preferred Stock" shall mean the Series A Junior
Preferred Stock, $1.00 par value, of the Company having the voting powers,
designation, preferences and relative, participating, optional or other special
rights and qualifications, limitations and restrictions set forth in the form
of Certificate of Designation attached to this Agreement as Exhibit C.
(s) "Person" shall mean any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other entity,
as well as any syndicate or group deemed to be a person under Section 14(d)(2)
of the Exchange Act.
(t) "Principal Party" has the meaning set forth in Section 13(b).
-5-
<PAGE> 9
(u) "Purchase Price" has the meaning set forth in Section 7(b).
(v) "Record Date" has the meaning set forth in the Whereas Clause.
(w) "Redemption Price" has the meaning set forth in Section 23.
(x) "Right" has the meaning set forth in the Whereas Clause.
(y) "Rights Certificate" has the meaning set forth in Section 3(a).
(z) "Rights Dividend Declaration Date" has the meaning set forth
in the Whereas Clause.
(aa) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A), (B) or (C) hereof.
(bb) "Section 13 Event" shall mean any event described in clause
(x), (y) or (z) of Section 13(a) hereof.
(cc) "Stock Acquisition Date" shall mean the earlier of (i) the
first date of public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such and (ii) the first date on which the Company
has actual knowledge of a filing with the Securities and Exchange Commission of
a report pursuant to Section 13(d) or 13(f) of the Exchange Act (which shall
include, without limitation, reports on Schedule 13D, Schedule 13G and Form
13F) by an Acquiring Person reflecting that an Acquiring Person has become
such.
(dd) "Subsidiary" shall mean, with reference to any Person, any
other Person of which an amount of voting securities or equity interests
sufficient to elect at least a majority of the directors or equivalent
governing body of such other Person is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such first-mentioned
Person.
(ee) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
(ff) "Unit" has the meaning set forth in Section 7(b).
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3, shall prior to the Distribution Date also
be holders of the Common Stock) in accordance with the terms and conditions
hereof,
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<PAGE> 10
and the Rights Agent hereby accepts such appointment. With the consent of the
Rights Agent, the Company may from time to time appoint such Co-Rights Agents
("Co-Rights Agents") as it may deem necessary or desirable. In the event the
Company appoints one or more Co-Rights Agents, the respective duties of the
Rights Agent and any Co-Rights Agents shall be as the Company shall determine.
SECTION 3. ISSUE OF RIGHTS CERTIFICATES. (a) Until the earlier of (i)
the Close of Business on the tenth day after the Stock Acquisition Date, and
(ii) the Close of Business on the tenth day after the date of the commencement
of, or first public announcement of the intention of any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or fiduciary with respect
to such plan acting in such capacity) to commence (which intention to commence
remains in effect for five business days after such announcement), a tender or
exchange offer, if upon consummation thereof such Person would be the
Beneficial Owner of 30% or more of the shares of Company Common Stock then
outstanding (the earlier of (i) and (ii) above being the "Distribution Date"),
(x) the Rights will be evidenced (subject to the provisions of paragraph (b) of
this Section 3) by the certificates for shares of Company Common Stock
registered in the names of the holders of shares of Company Common Stock as of
and subsequent to the Record Date (which certificates for shares of Company
Common Stock shall be deemed also to be certificates for Rights) and not be
separate certificates, and (y) the Rights will be transferable only in
connection with the transfer of the underlying shares of Company Common Stock
(including a transfer to the Company). As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign and the Company will send or cause to be sent (and the Rights Agent
will, if requested by the Company, send) by first-class, insured, postage
prepaid mail, to each record holder of shares of Company Common Stock as of the
Close of Business on the Distribution
-7-
<PAGE> 11
Date, at the address of such holder shown on the records of the Company, one or
more rights certificates, in substantially the form of Exhibit A hereto (the
"Rights Certificates"), evidencing one Right for each share of Company Common
Stock so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Company Common Stock has been
made pursuant to Section 11(p) hereof, at the time of distribution of the
Rights Certificates, the Company may make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution
Date, the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Junior Preferred
Stock, in a form which may be appended to certificates that represent shares of
Company Common Stock, in substantially the form attached hereto as Exhibit B
(the "Summary of Rights"), by first-class, postage prepaid mail, to each record
holder of shares of Company Common Stock as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the Company.
(c) Rights shall, without any further action, be issued in respect
of all shares of Company Common Stock which are issued (including any shares of
Company Common Stock held in treasury) after the Record Date but prior to the
earlier of the Distribution Date and the Expiration Date. Certificates,
representing such shares of Company Common Stock, issued after the Record Date
shall bear the following legend:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement between
Rowan Companies, Inc. (the "Company") and Citibank, N.A. (the "Rights
Agent") dated as of February 25, 1992 (the "Rights Agreement"), the
terms of
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<PAGE> 12
which are hereby incorporated herein by reference and a copy
of which is on file at the principal office of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights may be redeemed, may expire, or may be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement), whether currently held by or on behalf of such
Person or by any subsequent holder, may become null and void."
With respect to certificates representing shares of Company Common Stock
(whether or not such certificates include the foregoing legend or have appended
to them the Summary of Rights), until the earlier of the Distribution Date and
the Expiration Date, the Rights associated with the shares of Company Common
Stock represented by such certificates shall be evidenced by such certificates
alone and registered holders of the shares of Company Common Stock shall also
be the registered holders of the associated Rights, and the transfer of any of
such certificates shall also constitute the transfer of the Rights associated
with the shares of Company Common Stock represented by such certificates.
SECTION 4. FORM OF RIGHTS CERTIFICATE. (a) The Rights Certificates
(and the forms of election to purchase, assignment and certificate to be
printed on the reverse thereof) shall each be substantially in the form set
forth in Exhibit A hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or any
rule or regulation thereunder or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of
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<PAGE> 13
the Record Date and on their face shall entitle the holders thereof to purchase
such number of Units of Junior Preferred Stock as shall be set forth therein at
the price set forth therein, but the amount and type of securities, cash or
other assets that may be acquired upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant hereto that represents
Rights beneficially owned by: (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) which becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) which becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and which receives such
Rights pursuant to either (A) a transfer (whether or not for consideration)
from the Acquiring Person (or any such Associate or Affiliate) to holders of
equity interests in such Acquiring Person (or such Associate or Affiliate) or
to any Person with whom such Acquiring Person (or such Associate or Affiliate)
has any continuing agreement, arrangement or understanding regarding either the
transferred Rights, shares of Company Common Stock or the Company or (B) a
transfer which the Board of Directors by Board Approval has determined to be
part of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of Section 7(e) hereof shall, upon the written direction
of the Board of Directors, contain (to the extent feasible), the following
legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and void
in the circumstances specified in Section 7(e) of such Agreement.
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<PAGE> 14
The Company shall notify the Rights Agent and, if such notification is
given orally, the Company shall confirm same in writing on or prior to the
Business Day next following, at such time as the Company has notice that any
Person constitutes an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, and until such notice is received by the Rights Agent, the
Rights Agent may conclusively presume for all purposes that the foregoing
legend need be imprinted only on Rights Certificates beneficially owned by
Persons that the Company has previously identified to the Rights Agent as
constituting an Acquiring Person or an Affiliate or Associate of an Acquiring
Person and transferees of any such Persons.
The provisions of Section 7(e) shall be operative whether or not the
foregoing legend is contained on any such Rights Certificate.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Rights
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Rights Certificate
may be manual or facsimile. Rights Certificates bearing the manual or
facsimile signatures of the individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
countersignature of such Rights Certificates or did not hold such offices at
the date of such Rights Certificates. No Rights Certificate shall be entitled
to any benefit under this Agreement or be valid for any purpose unless there
appears on such Rights Certificate a countersignature, for purposes of
authentication only, duly executed by the Rights Agent by manual signature of
an authorized signatory, and such countersignature upon any Rights Certificate
shall be conclusive evidence, and the only evidence, that such Rights
Certificates has been duly countersigned as
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<PAGE> 15
required hereunder. It shall not be necessary for the same signatory of the
Rights Agent to countersign all of the Rights Certificates issued hereunder.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for surrender of Rights Certificates
upon exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder and shall keep such books until three years
following the first to occur of (i) the Expiration Date or (ii) the effective
date of redemption of the Rights pursuant to Section 23. Such books shall show
the name and address of each holder of the Rights Certificates, the number of
Rights evidenced on its face by each Rights Certificate, the Certificate number
and the date of each Rights Certificate.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES. (a)
Subject to the provisions of Sections 4(b), 7(e) and 14 hereof, at any time
after the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of Units of Junior Preferred Stock (or, following a Triggering
Event, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Rights Certificate or Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the office of the Rights Agent designated for such purpose. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have completed and executed the certificate set
forth in the form of assignment on the reverse side of such
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<PAGE> 16
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) of the Rights
represented by such Rights Certificate or Associates or Affiliates thereof as
the Company shall reasonably request; whereupon the Rights Agent shall, subject
to the provisions of Section 4(b), Section 7(e) and Section 14, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of a
Rights Certificate or Rights Certificates.
(b) If a Rights Certificate shall be mutilated, lost, stolen or
destroyed, upon request by the registered holder of the Rights represented
thereby and upon payment to the Company and the Rights Agent of all reasonable
expenses incident thereto, there shall be issued, in exchange for and upon
cancellation of the mutilated Rights Certificate, or in substitution for the
lost, stolen or destroyed Rights Certificate, a new Rights Certificate, in
substantially the form of the prior Rights Certificate, of like tenor and
representing the equivalent number of Rights, but, in the case of loss, theft
or destruction, only upon receipt of evidence satisfactory to the Company and
the Rights Agent of such loss, theft or destruction of such Rights Certificates
and, if requested by the Company or the Rights Agent, indemnity also
satisfactory to it.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS. (a) Prior to the earlier of (i) the Close of Business on February 25,
2002 (the "Final Expiration Date"), or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the earlier of (i) and (ii) being
the "Expiration Date"), the registered holder of any Rights Certificate may,
subject to the provisions of Sections 7(e) and 9(c), exercise the Rights
evidenced thereby in whole or in part at any time after the Distribution Date
upon surrender of the Rights Certificate, with
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<PAGE> 17
the form of election to purchase and the certificate on the reverse side
thereof duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase
Price (as hereinafter defined for the number of Units of Junior Preferred Stock
(or, following a Triggering Event, other securities, cash or other assets, as
the case may be) for which such surrendered Rights are then exercisable.
(b) The purchase price for each one one-hundredth of a share (each
such one one-hundredth of a share being a "Unit") of Junior Preferred Stock
upon exercise of Rights shall be $30.00, subject to adjustment from time to
time as provided in Sections 11 and 13(a) hereof (such purchase price, as so
adjusted, being the "Purchase Price"), and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment, with respect to each Right so exercised, of
the Purchase Price for the Units of Junior Preferred Stock (or, following a
Triggering Event, other securities, cash or other assets, as the case may be)
to be purchased thereby as set forth below and an amount equal to any
applicable transfer tax or evidence satisfactory to the Company of payment of
such tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) requisition from any transfer agent of the Junior Preferred Stock
or Company Common Stock, as the case may be (or make available, if the Rights
Agent is the transfer agent) certificates for the number of Units of Junior
Preferred Stock or Company Common Stock, as the case may be, to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests,(ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates, cause the same to be delivered to or
upon the order of the registered
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<PAGE> 18
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) after receipt thereof, deliver such cash,
if any, to or upon the order of the registered holder of such Rights
Certificate. In the event that the Company is obligated to issue Company
Common Stock, other securities of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such Company Common Stock, other securities,
cash and/or other property are available for distribution by the Rights Agent,
if and when appropriate. The payment of the Purchase Price (as such amount may
be reduced pursuant to Section 11(a)(iii) hereof) may be made in cash or by
certified or bank check or money order payable to the order of the Company.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights remaining unexercised shall be issued by the Rights Agent
and delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and which receives such Rights pursuant
to either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Associate or Affiliate) to holders of equity interests in
such Acquiring Person (or any such Associate or
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<PAGE> 19
Affiliate) or to any Person with whom the Acquiring Person (or such Associate
or Affiliate) has any continuing agreement, arrangement or understanding
(whether or not in writing) regarding the transferred Rights, shares of Company
Common Stock or the Company or (B) a transfer which the Board of Directors by
Board of Approval has determined to be part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall be null and void without any further action, and no holder
of such Rights shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The Company shall
use all reasonable efforts to ensure that the provisions of this Section 7(e)
and Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights or any other Person as a result of its failure to make any
determination under this Section 7(e) or such Section 4(b) with respect to an
Acquiring Person or its Affiliates, Associates or transferees.
(f) Notwithstanding anything in this Agreement or any Rights
Certificate to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder upon the
occurrence of any purported exercise by such registered holder unless such
registered holder shall have (i) completed and executed the certificate
following the form of election to purchase set forth on the reverse side of the
Rights Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of the Rights represented by such Rights Certificate or
Associates or Affiliates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATE. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered
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to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall
be issued in lieu thereof except as expressly permitted by this Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any Rights Certificates acquired
by the Company otherwise than upon the exercise thereof. The Rights Agent
shall deliver all cancelled Rights Certificates to the Company, or shall, at
the written request of the Company, destroy such cancelled Rights Certificates,
and in such case shall deliver a certificate of destruction thereof to the
Company.
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. (a) The
Company shall at all times prior to the Expiration Date cause to be reserved
and kept available out of its authorized and unissued shares of Junior
Preferred Stock, the number of shares of Junior Preferred Stock that, as
provided in this Agreement, will be sufficient to permit the exercise in full
of all outstanding Rights. Upon the occurrence of any events resulting in an
increase in the aggregate number of shares of Junior Preferred Stock (or other
equity securities of the Company) issued upon exercise of all outstanding
Rights above the number then reserved, the Company shall make appropriate
increases in the number of shares so reserved,
(b) So long as the shares of Junior Preferred Stock to be issued
and delivered upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall during the period from the Distribution
Date through the Expiration Date use its best efforts to cause all securities
reserved for such issuance to be listed on such exchange upon official notice
of issuance upon such exercise.
(c) The Company shall use its best efforts (i) as soon as
practicable following the occurrence of a Section 11(a)(ii) Event and a
determination by the Company in accordance with Section 11(a)(iii) hereof of
the consideration to be delivered by the Company upon exercise of the Rights
or, if so required by law, as
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soon as practicable following the Distribution Date (such date being the
"Registration Date"), to file a registration statement on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities that may be acquired upon exercise of the Rights (the
"Registration Statement"), (ii) to cause the Registration Statement to become
effective as soon as practicable after such filing, (iii) to cause the
Registration Statement to continue to be effective (and to include a prospectus
complying with the requirements of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for the securities
covered by the Registration Statement, and (B) the Expiration Date and (iv) to
take as soon as practicable following the Registration Date such action as may
be required to ensure that any acquisition of securities upon exercise of the
Rights complies with any applicable state securities or "blue sky" laws.
(d) The Company shall take such action as may be necessary to
ensure that all shares of Junior Preferred Stock (and, following the occurrence
of a Triggering Event, any other securities that may be delivered upon exercise
of Rights) shall be, at the time of delivery of the certificates or depositary
receipts for such securities, duly and validly authorized and issued and fully
paid and non-assessable.
(e) The Company shall pay any documentary, stamp or transfer tax
imposed in connection with the issuance or delivery of the Rights Certificates
or upon the exercise of Rights; provided, however, the Company shall not be
required to pay any such tax imposed in connection with the issuance or
delivery of Units of Junior Preferred Stock, or any certificates or depositary
receipts for such Units of Junior Preferred Stock (or, following the occurrence
of a Triggering Event, any other securities, cash or assets, as the case may
be) to any Person other than the registered holder of the Rights Certificates
evidencing the Rights surrendered for exercise. The Company shall not be
required to issue or deliver any certificates or depositary
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receipts for Units of Junior Preferred Stock (or, following the occurrence of a
Triggering Event, any other securities, cash or assets, as the case may be) to,
or in a name other than that of, the registered holder upon the exercise of any
Rights until any such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
SECTION 10. JUNIOR PREFERRED STOCK RECORD DATE. Each Person in whose
name any certificate for Units of Junior Preferred Stock (or, following the
occurrence of a Triggering Event, other securities) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Units of Junior Preferred Stock (or, following the occurrence of a
Triggering Event, other securities) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Junior Preferred
Stock (or following the occurrence of a Triggering Event, other securities)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such securities on, and such certificate shall be
dated, the next succeeding Business Day on which the Junior Preferred Stock
(or, following the occurrence of a Triggering Event, other securities) transfer
books of the Company are open and, further provided, however, that if delivery
of Units of Junior Preferred Stock is delayed pursuant to Section 9(c) hereof,
such Persons shall be deemed to have become the record holders of such Units of
Junior Preferred Stock only when such Units first become deliverable. Prior to
the exercise of the Rights evidenced thereby, the holder of a Rights
Certificates shall not be entitled to any rights of a stockholder of the
Company with respect to securities for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive
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dividends or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the Company,
except as and to the extent provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of securities
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Junior Preferred Stock payable
in shares of Junior Preferred Stock, (B) subdivide the outstanding Junior
Preferred Stock, (C) combine the outstanding Junior Preferred Stock into a
smaller number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Junior Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of Junior
Preferred Stock or capital stock, as the case may be, issuable on such date
upon exercise of the Rights, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive,
upon payment of the Purchase Price then in effect, the aggregate number and
kind of shares of Junior Preferred Stock or capital stock, as the case may be,
which, if such Right had been exercised immediately prior to such date, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. If an
event occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the
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adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11 (a)(ii)
hereof.
(ii) In the event:
(A) Any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, (1) shall merge into the Company or otherwise
combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the Company
Common Stock shall remain outstanding and unchanged, (2) shall, in one
transaction or a series of transactions, transfer any assets to the
Company or to any of its Subsidiaries in exchange (in whole or in
part) for shares of Company Common Stock, for other equity securities
of the Company or any such Subsidiary, or for securities exercisable
for or convertible into shares of equity securities of the Company or
any of its Subsidiaries (whether Company Common Stock or otherwise) or
otherwise obtain from the Company or any of its Subsidiaries, with or
without consideration, any additional shares of such equity securities
or securities exercisable for or convertible into such equity
securities (other than pursuant to a pro rata distribution to all
holders of Company Common Stock), (3) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose
of, in one transaction or a series of transactions, to, from or with
(as the case may be) the Company or any of its Subsidiaries or any
employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan
acting in such capacity, assets (including securities) on terms and
conditions less favorable to the Company or such Subsidiary or plan
than those that could have been obtained in arm's-length negotiations
with an unaffiliated third party, other than pursuant to a transaction
set forth in Section 13(a) hereof, (4) shall sell, purchase, lease,
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exchange, mortgage, pledge, transfer or otherwise acquire or dispose
of, in one transaction or a series of transactions, to, from or with
the Company or any of the Company's Subsidiaries or any employee
benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such
capacity, assets (including securities) having an aggregate fair
market value of more than $5,000,000, other than pursuant to a
transaction set forth in Section 13(a) hereof, (5) shall receive, or
any designee, agent or representative of such Acquiring Person or any
Associate or Affiliate of such Acquiring Person shall receive, any
compensation from the Company or any of its Subsidiaries other than
compensation for full-time employment as a regular employee at rates
in accordance with the Company's (or its Subsidiaries') past
practices, or (6) shall receive the benefit, directly or indirectly
(except proportionately as a holder of Company Common Stock or as
required by law or governmental regulation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits
or other tax advantage provided by the Company or any of its
Subsidiaries or any employee benefit plan maintained by the Company or
any of its Subsidiaries or any trustee or fiduciary with respect to
such plan acting in such capacity; or
(B) any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan maintained by the Company or
any of its Subsidiaries or any trustee or fiduciary with respect to
such plan acting in such capacity) shall become the Beneficial Owner
of 15% or more of the shares of Company Common Stock then outstanding,
other than pursuant to any transaction set forth in Section 13(a)
hereof, or
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse
stock split) or recapitalization of the Company, or any merger or
consolidation of the Company
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with any of its Subsidiaries or any other transaction or series of
transactions involving the Company or any of its Subsidiaries, other
than a transaction or transactions to which the provisions of Section
13(a) apply (whether or not with or into or otherwise involving an
Acquiring Person), which has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of the outstanding
shares of any class of equity securities of the Company or any of its
Subsidiaries which is directly or indirectly beneficially owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring
Person;
then, immediately upon the date of the occurrence of an event described in
Section 11(a)(ii)(A)-(C) hereof (a "Section 11(a)(ii) Event"), proper provision
shall be made so that each holder of a Right (except as provided below and in
Section 7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of the number of Units of Junior Preferred Stock for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, such number of shares of Company Common Stock as shall equal
the result obtained by (x) multiplying the then current Purchase Price by the
then number of Units of Junior Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event (such product thereafter being, for all purposes of this Agreement other
than Section 13 hereof, the "Purchase Price"), and (y) dividing that product by
50% of the then current market price (determined pursuant to Section 11(d)
hereof) per share of Company Common Stock on the date of such first occurrence
(such number of shares of Company Common Stock being the "Adjustment Shares").
(iii) In the event that, upon the occurrence of a Section 11(a)(ii)
Event, the number of shares of Company Common Stock which are treasury shares
or are authorized by the Company's Certificate of Incorporation and are not
issued or
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reserved for issuance for purposes other than upon exercise of the Rights is
not sufficient to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of this Section 11(a), the Company, by Board
Approval, shall: (a) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess being the "Spread"), and (B) with respect to each
Right, make adequate provision to substitute for such Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) a number of shares, or units of shares, or other equity
securities of the Company (including, without limitation, shares, or units of
shares, of preferred stock (such other shares being "common stock
equivalents")), (4) debt securities of the Company, (5) other assets or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Board of Directors
by Board Approval, after receiving advice from a nationally recognized
investment banking firm; provided, however, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above within 90
days following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant to
Section 23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(iii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Company Common Stock (to the extent
available) and then, if necessary, cash, which shares of Company Common Stock
and/or cash shall have an aggregate value equal to the Spread. To the extent
that the Company determines that some action need be taken pursuant to the
first sentence of this Section 11(a)(iii), the Company shall provide, subject
to Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights. For purposes of this Section 11(a)(iii), the value of a
share of Company Common Stock
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shall be the current market price (as determined pursuant to Section 11(d)
hereof) per share of Company Common Stock on the Section 11(a)(iii) Trigger
Date and the value of any common stock equivalent shall be deemed to have the
same value as the Company Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Junior Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within 45
calendar days after such record date) shares of Junior Preferred Stock (or
shares having substantially the same rights, privileges and preferences as
shares of Junior Preferred Stock ("equivalent preferred stock")) or securities
convertible into Junior Preferred Stock or equivalent preferred stock at a
price per share of Junior Preferred Stock or per share of equivalent preferred
stock (or having a conversion price per share, if a security convertible into
Junior Preferred Stock or equivalent preferred stock) less than the current
market price (as determined pursuant to Section 11(d) hereof) per share of
Junior Preferred Stock on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the sum of the number of shares of Junior Preferred Stock
outstanding on such record date plus the number of shares of Junior Preferred
Stock which the aggregate offering price of the total number of shares of
Junior Preferred Stock and/or equivalent preferred stock so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price, and the denominator
of which shall be the number of shares of Junior Preferred Stock outstanding on
such record date plus the number of additional shares of Junior Preferred Stock
and/or equivalent preferred stock to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible). In case such subscription price may be paid by delivery of
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<PAGE> 29
consideration part or all of which may be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors by Board Approval, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Shares of Junior Preferred Stock owned by or
held for the account of the Company or any Subsidiary shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of shares of Junior Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend out of the earnings or retained
earnings of the Company), assets (other than a dividend payable in shares of
Junior Preferred Stock, but including any dividend payable in stock other than
Junior Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the current market price (as determined pursuant to Section
11(d) hereof) per share of Junior Preferred Stock on such record date less the
fair market value (as determined in good faith by the Board of Directors by
Board Approval, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the holder
of the Rights) of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants distributable in respect
of a share of Junior Preferred Stock and the
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<PAGE> 30
denominator of which shall be such current market price (as determined pursuant
to Section 11(d) hereof) per share of Junior Preferred Stock. Such adjustments
shall be made successively whenever such a record date is fixed, and in the
event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current
market price" per share of Company Common Stock or Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of such
shares for the ten consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, if prior to the
expiration of such requisite ten Trading Day period the issuer announces either
(A) a dividend or distribution on such shares payable in such shares or
securities convertible into such shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such shares, then, following
the ex-dividend date for such dividend or the record date for such subdivision,
as the case may be, the "current market price" shall be properly adjusted to
take into account such event. The closing price for each date shall be, if the
shares are listed and admitted to trading on a national securities exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which such shares are listed or admitted to trading or, if such shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such
other system then in use, or, if on any such date such shares are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such shares
selected by the Board of Directors by Board Approval. If on
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any such date no market maker is making a market in such shares, the fair value
of such shares on such date as determined in good faith by the Board of
Directors by Board Approval shall be used. If such shares are not publicly
held or not so listed or traded, "current market price" per share shall mean
the fair value per share as determined in good faith by the Board of Directors
by Board Approval, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes. The term
"Trading Day" shall mean, if such shares are listed or admitted to trading on
any national securities exchange, a day on which the principal national
securities exchange on which such shares are listed or admitted to trading is
open for the transaction of business or, if such shares are not so listed or
admitted, a Business Day.
(ii) For the purpose of any computation hereunder, the "current
market price" per share of Junior Preferred Stock shall be determined in the
same manner as set forth above for Company Common Stock in clause (i) of this
Section 11(d) (other than the fourth sentence thereof). If the current market
price per share of Junior Preferred Stock cannot be determined in the manner
provided above or if the Junior Preferred Stock is not publicly held or listed
or traded in a manner described in clause (i) of Section 11(d), the "current
market price" per share of Junior Preferred Stock shall be conclusively deemed
to be an amount equal to 100 (as such amount may be appropriately adjusted for
such events as stock splits, stock dividends and recapitalizations with respect
to Company Common Stock occurring after the date of this Agreement) multiplied
by the current market price per share of Company Common Stock. If neither
Company Common Stock nor Junior Preferred Stock is publicly held or so listed
or traded, "current market price" per share of the Junior Preferred Stock shall
mean the fair value per share as determined in good faith by the Board of
Directors by Board Approval whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and
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<PAGE> 32
the holders of the Rights. For all purposes of this Agreement, the "current
market price" of a Unit of Junior Preferred Stock shall be equal to the
"current market price" of one share of Junior Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the
nearest cent or to the nearest ten-thousandth of a share of Company Common
Stock or Common Stock or other share or one-millionth of a share of Junior
Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of any provision of Sections 11(a)(ii) or 13(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock other than Junior Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Junior Preferred Stock contained in Sections
11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), (l) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Junior
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted, Purchase Price, the number of Units of Junior
Preferred Stock (or other securities or amount of cash or combination thereof)
that may be
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acquired from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Units of Junior Preferred Stock (calculated to the nearest one-ten thousandth
of a Unit) obtained by (i) multiplying (x) the number of Units of Junior
Preferred Stock covered by a Right immediately prior to this adjustment by (y)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of Units of Junior Preferred Stock that may be acquired upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of Units of Junior
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number
of Rights shall become that number of Rights (calculated to the nearest
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effective
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have
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been issued, shall be at least ten days later than the date of such public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for herein (and
may bear, at the option of the Company, the adjusted Purchase Price) and shall
be registered in the names of the holders of record of Rights Certificates on
the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of Units of Junior Preferred Stock issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Unit and the number of Units of
Junior Preferred Stock which was expressed in the initial Rights Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value of the number of Units of
Junior Preferred Stock issuable upon exercise of the Rights, or below the then
par value of the shares of Company Common Stock if then issuable upon exercise
of the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue such fully paid and non-assessable number of Units of Junior
Preferred Stock or, if applicable, shares
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of Company Common Stock at such adjusted Purchase Price. If upon any exercise
of the Rights, a holder is to receive a combination of Units of Junior
Preferred Stock and preferred stock equivalents or Company Common Stock and
common stock equivalents, a portion of the consideration paid upon such
exercise, equal to at least the then par value of a share of Junior Preferred
Stock or Company Common Stock, as the case may be, shall be allocated as
payment for each share of Junior Preferred Stock or Company Common Stock so
received.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of that number of Units of Junior Preferred Stock and shares of other capital
stock or securities of the Company, if any, issuable upon such exercise over
and above the number of Units of Junior Preferred Stock and shares of other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence
of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors by Board
Approval shall determine to be advisable in order that any (i) consolidation or
subdivision of the Junior Preferred Stock, (ii) issuance wholly for cash of any
shares of Junior Preferred Stock at less than the current market price, (iii)
issuance wholly for cash of shares of Junior Preferred Stock or securities
which by their terms are convertible into or
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exchangeable for shares of Junior Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Junior Preferred Stock, shall
not be taxable to such holders or shall reduce the taxes payable by such
holders.
(n) The Company shall not, at any time after the Distribution
Date, (i) consolidate with any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), (ii) merge
with or into any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or (iii) sell or
transfer (or permit any Subsidiary to sell or transfer), in one transaction, or
a series of transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), if (x) at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the Person which constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) hereof shall
have distributed or otherwise transferred (or will distribute or otherwise
transfer) to its stockholders, or other persons holding an equity interest in
such Person, Rights previously owned by such Person or any of its Affiliates
and Associates; provided, however, this Section 11(n) shall not affect the
ability of any Subsidiary of the Company to consolidate with, merge with or
into, or sell or transfer assets or earning power to, any other Subsidiary of
the Company.
(o) After the Distribution Date, the Company shall not, except as
permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary to
take)
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any action if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or otherwise eliminate the
benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Company Common Stock payable in shares of Company
Common Stock, (ii) subdivide the outstanding shares of Company Common Stock,
(iii) combine the outstanding shares of Company Common Stock into a smaller
number of shares, or (iv) issue any shares of its capital stock in a
reclassification of Company Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), the number of Rights associated with each
share of Company Common Stock then outstanding, or issued or delivered
thereafter but prior to the Distribution Date, shall be proportionately
adjusted so that the number of Rights thereafter associated with each share of
Company Common Stock following any such event shall equal the result obtained
by multiplying the number of Rights associated with each share of Company
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Company Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Company Common Stock outstanding
immediately following the occurrence of such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Junior
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Preferred Stock and the Company Common Stock, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
shares of Company Common Stock) in accordance with Section 25 hereof; provided,
however, that the failure of the Company to make such a certificate or give
such notice shall not affect the validity or the force or effect of the
requirement for such an adjustment. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of any such adjustment unless and until
it shall have received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. (a) In the event that, following the Stock Acquisition Date,
directly or indirectly, either (x) the Company shall consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall
not be the continuing or surviving corporation of such consolidation or merger,
(y) any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Company
Common Stock shall be converted into or exchanged for stock or other securities
of any other Person or cash or any other property, or (z) the Company shall
sell or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer) to any Person or Persons (other than the Company or any of
its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), in one or more transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) (any such event being a "Section 13 Event"),
then, and in each such case, proper provision
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shall be made so that: (i) each holder of a Right, except as provided in
Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price, such number of validly
authorized and issued, fully paid, and non-assessable shares of Common Stock of
the Principal Party (as such term is hereinafter defined), which shares shall
not be subject to any liens, encumbrances, rights of call or first refusal,
transfer restrictions or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of
Units of Junior Preferred Stock for which a Right is exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section 11
(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such Units for which a Right would be exercisable
hereunder but for the occurrence of such Section 11(a)(ii) Event by the
Purchase Price which would be in effect hereunder but for such first
occurrence) and (2) dividing that product (which, following the first
occurrence of a Section 13 Event, shall be the "Purchase Price" for all
purposes of this Agreement) by 50% of the current market price (determined
pursuant to Section 11(d) hereof) per share of the Common Stock of such
Principal Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant
to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to ensure that the provisions of this Agreement
shall thereafter be applicable to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the
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provisions of Section 11(a)(ii) hereof shall be of no further effect following
the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), (A) the Person that is
the issuer of any securities into which shares of Company Common Stock
are converted in such merger or consolidation, or, if there is more
than one such issuer, the issuer of Common Stock that has the highest
aggregate current market price (determined pursuant to Section 11(d)
hereof) and (B) if no securities are so issued, the Person that is the
other party to such merger or consolidation, or, if there is more than
one such Person, the Person the Common Stock of which has the highest
aggregate current market price (determined pursuant to Section 11(d)
hereof); and
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a), the Person that is the party
receiving the largest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions received
the same portion of the assets or earning power transferred pursuant
to such transaction or transactions or if the Person receiving the
largest portion of the assets or earning power cannot be determined,
whichever Person the Common Stock of which has the highest aggregate
current market price (determined pursuant to Section 11(d) hereof);
provided, however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
twelve-month period registered under Section 12 of the Exchange Act
("Registered Common Stock"), or such Person is not a corporation, and such
Person is a direct or indirect Subsidiary of another Person that has Registered
Common Stock outstanding,
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"Principal Party" shall refer to such other Person; (2) if the Common Stock of
such Person is not Registered Common Stock or such Person is not a corporation,
and such Person is a direct or indirect Subsidiary or another Person but is not
a direct or indirect Subsidiary of another Person which has Registered Common
Stock outstanding, "Principal Party" shall refer to the ultimate parent entity
of such firstmentioned Person; (3) if the Common Stock of such Person is not
Registered Common Stock or such Person is not a corporation, and such Person is
directly or indirectly controlled by more than one Person, and one or more of
such other Persons has Registered Common Stock outstanding, "Principal Party"
shall refer to whichever of such other Persons is the issuer of the Registered
Common Stock having the highest aggregate current market price (determined
pursuant to Section 11(d) hereof); and (4) if the Common Stock of such Person
is not Registered Common Stock or such Person is not a corporation, and such
Person is directly or indirectly controlled by more than one Person, and none
of such other Persons have Registered Common Stock outstanding, "Principal
Party" shall refer to whichever ultimate parent entity is the corporation
having the greatest shareholders equity or, if no such ultimate parent entity
is a corporation, shall refer to whichever ultimate parent entity is the entity
having the greatest net assets.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13, and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that the Principal Party will:
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(i) (A) prepare and file on an appropriate form, as soon as
practicable following the execution of such agreement and at its own
expense, a registration statement under the Securities Act with
respect to the Common Stock that may be acquired upon exercise of the
Rights, (B) use its best efforts to cause such registration statement
to become and remain effective (and to include a prospectus complying
with the requirements of the Securities Act) until the Expiration
Date, and (C) as soon as practicable following the execution of such
agreement, take such action as may be required to ensure that any
acquisition of such Common Stock upon the exercise of the Rights
complies with any applicable state security or "blue sky" laws; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
(d) In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or
other instrument governing its corporate affairs, which provision would have
the effect of (i) causing such Principal Party to issue, in connection with, or
as a consequence of, the consummation of a transaction referred to in this
Section 13, shares of Common Stock of such Principal Party at less than the
then current market price per share (determined pursuant to Section 11(d)
hereof) or securities exercisable for, or convertible into, Common Stock of
such Principal Party at less than such than current market price (other than,
in each case, to holders of Rights pursuant to this Section 13) or (ii)
providing for any special payment, tax or similar provisions in connection with
the issuance of the Common Stock of such Principal Party pursuant to the
provisions of this Section 13; then, in such event, the Company shall not
consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and
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delivered to the Rights Agent a supplemental agreement providing that the
provision in question of such Principal Party shall have been cancelled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company
shall not be required to issue fractions of Rights or to distribute Rights
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the Persons to which such fractional Rights
would otherwise be issuable, an amount in cash equal to such fraction of the
market value of a whole Right. For purposes of this Section 14(a), the market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be,
if the Rights are listed or admitted to trading on a national securities
exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading or, if the
Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making
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a market in the Rights selected by the Board of Directors by Board Approval.
If on any such date no such market maker is making a market in the Rights, the
fair value of the Rights on such date as determined in good faith by the Board
of Directors by Board Approval shall be used and such determination shall be
described in a statement filed with the Rights Agent and the holders of the
Rights.
(b) The Company shall not be required to issue fractions of shares
of Junior Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Junior Preferred Stock) upon exercise of the
Rights or to distribute certificates which evidence such fractional shares of
Junior Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Junior Preferred Stock). Fractions of shares
of Junior Preferred Stock in integral multiples of one one-hundredth of a share
of Junior Preferred Stock may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company
and a depositary selected by it provided that such agreement shall provide that
the holders of such depositary receipts shall have all the rights, privileges
and preferences to which they are entitled as beneficial owners of the
fractions of shares of Junior Preferred Stock represented by such depositary
receipts. In lieu of such fractional shares of Junior Preferred Stock that are
not integral multiples of one one-hundredth of a share, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the then current market price of a share of Junior Preferred Stock on the day
of exercise, determined in accordance with Section 11(d) hereof.
(c) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
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SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Section 18, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing shares of Company Common Stock); and any registered
holder of a Rights Certificate (or, prior to the Distribution Date, of a
certificate representing shares of Company Common Stock), without the consent
of the Rights Agent or of the holder of any other Rights Certificate (or, prior
to the Distribution Date, of a certificate representing shares of Company
Common Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company or
any other Person to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to
specific performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder of any Person
subject to this Agreement. Holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred by them in
any contested action to enforce the provisions of this Agreement where that
action is terminated and the relief requested by the holders is granted.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Company Common
Stock;
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(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the office of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates duly
executed;
(c) subject to Section 6(a) and Section 7(f), the Company
and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated
Company Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the
associated Company Common Stock certificate made by anyone other than
the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence
of Section 7(e), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or any other Person as a result of
its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or
any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; provided, however, the
Company must use its best efforts to have any such order, decree or
ruling lifted or otherwise overturned as promptly as practicable.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
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dividends or be deemed for any purpose the holder of the number of shares of
Junior Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or, except as provided in Section
24 hereof, to receive notice of meetings or other actions affecting
stockholders, or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions thereof.
SECTION 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses, including reasonable fees and disbursements of its counsel, incurred
in connection with the execution and administration of this Agreement and the
exercise and performance of its duties hereunder. The Company shall indemnify
the Rights Agent for, and hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability arising
therefrom, directly or indirectly, or prosecuting any action to determine the
rights or obligations of the parties hereunder.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Junior Preferred Stock or Company Common
Stock or for other
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securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement or other paper or document believed by it to be
genuine and to have been signed, executed and, where necessary, verified or
acknowledged by the proper Person or Persons.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT. (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or shareholder services businesses of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any document or any further act on
the part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name
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and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be specified herein) may be deemed to
be conclusively proved and established by a certificate signed by the Chairman
of the Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; provided, however, that so long as any Person is
an Acquiring Person hereunder, such certificate shall be signed and delivered
by a majority of the Continuing Directors; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
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(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any responsibility for the
validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or for the validity or execution of any
Rights Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or failure by the
Company to satisfy conditions contained in this Agreement or in any Rights
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or Section 13 hereof or for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after receipt by the Rights Agent of
the certificate describing any such adjustment contemplated by Section 12); nor
shall it be responsible for any determination by the Board of Directors by
Board Approval of Current Value or Spread pursuant to the provisions of Section
11(a)(iii) or the current market price of the Junior Preferred Stock, Company
Common Stock or any other security pursuant to the provisions of Section 11(d);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Junior
Preferred Stock or any other securities to be issued pursuant to this Agreement
or any Rights Certificate or as to whether any shares of Junior Preferred Stock
or any other securities will, when so issued, be validly authorized and issued,
fully paid and non-assessable; nor shall it be liable for
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any federal or state transfer taxes or charges that may be due upon the
issuance or transfer of any shares of Junior Preferred Stock, Company Common
Stock or other securities or any Rights Certificate.
(f) The Company shall perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further
acts, instruments and assurances as may reasonably be required by the Rights
Agent for the performance by the Rights Agent of its duties under this
Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer;
provided, however, that so long as any Person is an Acquiring Person hereunder,
the Rights Agent shall accept such instructions and advice only from a majority
of the Continuing Directors and shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with such instructions
of the majority of the Continuing Directors. Any application by the Rights
Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted
by the Rights Agent under this Rights Agreement and the date on and/or after
which such action shall be taken or such omission shall be effective. The
Rights Agent shall not be liable for any action taken by, or omission of, the
Rights Agent in accordance with a proposal included in any such application on
or after the date specified in such application (which date shall not be less
than five Business Days after the date any such officer of the Company actually
receives such application, unless any such officer shall have consented in
writing to an earlier date) unless,
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prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in
response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties or in the exercise of its rights hereunder
if the Rights Agent shall have reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed, not signed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting with
the Company. If such certificate has been completed and signed and shows a
negative response to clauses 1 and 2 of such certificate, unless previously
instructed otherwise in writing by the Company (which
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instructions may impose on the Rights Agent additional ministerial
responsibilities, but no discretionary responsibilities), the Rights Agent may
assume without further inquiry that the Rights Certificate is not owned by a
person described in Section 4(b) or Section 7(e) hereof and shall not be
charged with any knowledge to the contrary.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' prior notice in writing mailed to the Company, and to
each transfer agent of the Junior Preferred Stock and the Company Common Stock,
by registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days'prior notice in writing, mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to each transfer agent of
the Junior Preferred Stock and the Company Common Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent
or by the holder of a Rights Certificate (who shall, with such notice, submit
his Rights Certificate for inspection by the Company), then any registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
corporation organized and doing business under the laws of the United States or
the States of Texas or New York in good standing, shall be authorized to do
business as a banking institution in the State of New York, shall be authorized
under such laws to exercise corporate trust or stock transfer powers, shall be
subject to supervision or examination by
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<PAGE> 54
federal or state authorities and shall have at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an
Affiliate of a corporation described in clause (a). After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Junior Preferred Stock
and the Company Common Stock, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such
form as may be approved by the Board of Directors by Board Approval to reflect
any adjustment or change made in accordance with the provisions of this
Agreement in the Purchase Price or the number or kind or class of shares or
other securities or property that may be acquired under the Rights
Certificates. In addition, in connection with the issuance or sale of shares
of Company Common Stock following the Distribution Date and prior to the
Expiration Date, the Company (a) shall, with respect to shares of Company
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and
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(b) may, in any other case, if deemed necessary or appropriate by the Board of
Directors by Board Approval, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
SECTION 23. REDEMPTION AND TERMINATION. (a) Subject to Section 30
hereof, the Company may, at its option, by the Board of Directors acting by
Board Approval, at any time prior to the earlier of (i) the Close of Business
on the tenth day following the Stock Acquisition Date, or (ii) the Close of
Business on the Final Expiration Date, redeem all but not less than all of the
then outstanding Rights at a redemption price of $.Ol per Right, as such amount
may be appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"), and the Company may,
at its option, by the Board of Directors acting by Board Approval, pay the
Redemption Price either in cash, shares of Company Common Stock (based on the
"current market price", as defined in Section 11(d) hereof, of the shares of
Company Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors by Board Approval.
(b) Immediately upon the action of the Board of Directors by Board
Approval ordering the redemption of the Rights, evidence of which shall be
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of
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<PAGE> 56
Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors by Board Approval ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for Company Common Stock. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be
made. Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other than
that specifically set forth in this Section 23, and other than in connection
with the purchase or acquisition of Company Common Stock prior to the
Distribution Date.
SECTION 24. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Junior Preferred Stock or to
make any other distribution to the holders of Junior Preferred Stock (other
than a regular quarterly cash dividend out of earnings or retained earnings of
the Company), (ii) to offer to the holders of Junior Preferred Stock rights or
warrants to subscribe for or to purchase any additional shares of Junior
Preferred Stock or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Junior Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Junior Preferred Stock), (iv) to effect any consolidation or merger
into or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other
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<PAGE> 57
transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
or (v) to effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Junior Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least 20 days prior to the
record date for determining holders of the shares of Junior Preferred Stock for
purposes of such action, and in the case of any such other action, at least 20
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Junior Preferred Stock
whichever shall be the earlier; provided, however, no such notice shall be
required pursuant to this Section 24, if any Subsidiary of the Company effects
a consolidation or merger with or into, or effects a sale or other transfer of
assets or earning power to, any other Subsidiary of the Company.
(b) In case any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof.
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SECTION 25. NOTICES. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
any telex, telegram or cable) and mailed or sent or delivered, if to the
Company, at its address at:
Rowan Companies, Inc.
5450 Transco Tower
2800 Post Oak Boulevard
Houston, Texas 77056-6196
Attention: Secretary
And if to the Rights Agent, at its address at:
Citibank, N.A.
111 Wall Street
5th Floor, Equity Administration
New York, New York 10043
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Company Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company or the Rights Agent,
as the case may be.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution
Date and subject to the penultimate sentence of this Section 26, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Company Common Stock. From and after the Distribution
Date and subject to the penultimate sentence of this Section 26, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time
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period hereunder, or (iv) to change or supplement the provisions hereunder in
any manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, however, this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) subject to Section 30
hereof, a time period relating to when the Rights may be redeemed at such time
as the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of
a certificate from an appropriate officer of the Company or, so long as any
Person is an Acquiring Person hereunder, from the majority of the Continuing
Directors which states that the proposed supplement or amendment is in
compliance with the terms of this Section 26, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Purchase Price, the Expiration Date or the
number of Units of Junior Preferred Stock for which a Right is exercisable
without the approval of a majority of the Continuing Directors. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Company Common Stock.
SECTION 27. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF
DIRECTORS, ETC. For all purposes of this Agreement, any calculation of the
number of shares of Company Common Stock outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding shares of Company
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Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the date hereof. Except
as otherwise specifically provided herein, the Board of Directors of the
Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power (i) to interpret the provisions of this Agreement, and (ii) to make all
determinations deemed necessary or advisable for the administration of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board or by a majority of the
Continuing Directors in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board or any member thereof to any liability
to the holders of the Rights.
SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Company Common Stock)
any legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Company Common
Stock).
SECTION 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and
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restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors by Board Approval
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement
and the Rights shall not then be redeemable, the right of redemption set forth
in Section 23 hereof shall be reinstated and shall not expire until the Close
of Business on the tenth day following the date of such determination by a
majority of the Continuing Directors.
SECTION 31. GOVERNING LAW. THIS AGREEMENT, EACH RIGHT AND EACH
RIGHTS CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
EXECUTED IN AND TO BE PERFORMED ENTIRELY IN SUCH STATE.
SECTION 32. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original,
but all of which taken together shall constitute one and the same instrument.
SECTION 33. DESCRIPTIVE HEADINGS. The headings contained in
this Agreement are for descriptive purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be daily executed, all as of the date first above written.
ATTEST: ROWAN COMPANIES, INC.
By: /s/ MARK H. HAY By: /s/ E.E. THIELE
Name: Mark H. Hay Name: E.E. Thiele
Title: Corporate Secretary Title: Vice President
ATTEST: CITIBANK, N.A.
By: /s/ JOHN W. REASOR By: /s/ P. DEFELICE
Name: John W. Reasor Name: P. Defelice
Title: Assistant Vice President Title: Vice President
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<PAGE> 1
EXHIBIT 4j
PROMISSORY NOTE
Houston, Texas December ____, 1994
_____________, for value received, promises and agrees to pay on or
before December ___, 2004 unto the order of Rowan Companies, Inc. (hereinafter
called "Payee"), at the offices of the Payee in Houston, Texas in lawful money
of the United States of America, the principal sum
of_____________________________________________, together with interest
thereon, from and after the date hereof, on March 31, June 30, September 30 and
December 31 of each year unless such day is not a business day, in which case
it shall mean the immediately succeeding business day, the first such interest
payment for the period beginning on and including the date hereof and ending on
and excluding December 31, 1994, at the per annum interest rate announced
publicly by Citibank, N.A. in New York, New York from time to time as its Base
Rate plus 1/2% per annum; provided, that if any such interest rate shall be
lower than the applicable interest rate for such period determined under
Sections 483 and 1274 (d) of the Internal Revenue Code of 1954, as amended (the
"Federal Rate"), such Federal Rate shall apply. The amount of interest payable
for any such period is computed by multiplying the decimal equivalent of the
applicable interest rate for such period by the actual number of days in such
period, dividing by 360 and multiplying the resulting quotient by the principal
amount hereof. If the principal of this Note is prepaid in whole or in part,
all accrued and unpaid interest with respect to such principal amount prepaid
is due and payable on the date of such prepayment.
Payment of this Note when due is secured by a pledge of and lien on
the Series III Floating Rate Subordinated Convertible Debenture due 2004 of the
Payee dated _______________ in the principal amount of $___________, issued in
the name of the undersigned, which Debenture, accompanied by an executed
transfer power for such Debenture and in proper form for transfer, has been
delivered to the Payee.
In the event of the non-payment when due of any liability of the
undersigned to the Payee hereunder, then, or at any time after the happening of
such event, the holder of this Note may, without demand upon or notice to the
undersigned (both of which are expressly waived by the undersigned), declare
all sums owing hereon to be, and such sums shall become, due and payable. Upon
such declaration, the Payee will, to the extent practicable, set off any amounts
owing hereon by the undersigned with amounts owing by the Payee pursuant to the
Series III Floating Rate Subordinated Debenture due 2004. This Note shall be
construed according to and governed by the laws of the State of Texas.
By its acceptance hereof, the Payee of this promissory note, hereby
acknowledges and agrees that if (i) Rowan Companies, Inc., a Delaware
corporation (the "Company") fails, at any time, to fulfill its payment
obligations owing in respect of its Series III Floating Rate Subordinated
Convertible
<PAGE> 2
Debentures due 2004 (collectively, the "Debentures") or (ii) an Event of
Default (as such term is defined in the Debentures) has occurred and is
continuing, the payment obligations (with respect to principal and interest) of
the undersigned maker of this promissory note under the terms hereof will
automatically be suspended and terminated until such time, if any, that the
Company has fulfilled all of its payment obligations then due and owing in
respect of the Debentures or such Event of Default no longer exists, as the
case may be.
_____________________________
<PAGE> 1
EXHIBIT 10g
ROWAN COMPANIES, INC.
Amendment Nos. 1 and 2 to the 1986 Convertible Debenture Incentive Plan.
AMENDMENT NO. 1:
Resolution adopted by the registrant's Board of Directors on June 12,
1986:
RESOLVED, pursuant to the provision of Section 10 of the Company's
1986 Convertible Debenture Incentive Plan (the "Plan"), in order
to allow the Company to make the loans referred to in the above
resolution on a non-recourse basis, that Section 8 of the Plan is
hereby amended by adding the phrase "(or, in the case of an
aggregate of $5,125,000 in principal amount of loans made by the
Company to Purchasers on June 13, 1986, non-recourse)" after the
word "recourse" and before the word "loans" in the first sentence
of such Section 8.
AMENDMENT NO. 2:
Resolution adopted by the registrant's Board of Directors on October 21,
1994:
RESOLVED, that pursuant to the provisions of Section 10 of the
Company's 1986 Convertible Debenture Incentive Plan, the
following amendment is hereby adopted:
Section 3.03 Conversion of the Debentures: delete "after
one year from date of issuance" and insert the words "in
quantities and after time periods determined by the
Committee, which in no event will be less than one year
after the date of issuance."
<PAGE> 1
EXHIBIT 10h
ROWAN COMPANIES, INC.
1986 CONVERTIBLE DEBENTURE INCENTIVE PLAN
AS AMENDED
1. Purpose. The Rowan Companies, Inc. 1986 Convertible Debenture
Incentive Plan (the "Plan") is intended to promote the interests of Rowan
Companies, Inc. (the "Company") and its stockholders by allowing officers and
other key personnel of the Company and its subsidiaries the opportunity to
invest in corporate debt in the form of the Company's floating interest rate
subordinated debentures (the "Debentures") which are convertible into shares of
Preferred stock, $1 par value, of the Company (the "Preferred Stock"), which
shares of Preferred Stock are convertible into shares of common stock, $.125
par value, of the Company (the "Common Stock"), thereby giving key personnel
added incentive to work toward the continued growth and success of the Company.
The Company's Board of Directors also contemplates that the Plan will enable
the Company and its subsidiaries to compete more effectively for the services
of management personnel needed for the continued growth and success of the
Company.
2. Issuance of the Debentures. The Company shall have authority to
issue Debentures in such amounts and to such of the key employees of the
Company and its subsidiaries (as defined by Section 425 of the Internal Revenue
Code of 1954, as amended) as the Committee (as defined in Section 9) shall from
time to time determine. Such employees purchasing Debentures are designated
herein as "Purchasers".
3. General Terms and Conditions of the Debentures.
Section 3.01. General. The Committee shall from time to time determine
with respect to each series of Debentures to be issued the interest rate
thereof, the conversion price applicable thereto (including the conversion
ratio of the Preferred Stock), and such other terms and conditions of the
Debentures, all to the extent not inconsistent with the provisions of this
Plan.
Section 3.02. Form and Term of Debentures. Debentures will be issued in
series the terms and conditions of which may differ among series and shall be
in such form and in such denominations as the Committee may approve. Each
series will be due not earlier than five years, or later than ten years, from
the date of issuance, or on such earlier date as the Company redeems any
Debenture, which date is referred to herein as the "Due Date".
Section 3.03. Conversion of the Debentures. Subject to the provisions of
this Section 3.03, the Debentures will be convertible at the conversion price
in effect at the time of conversion into fully paid and non-assessable shares
of Preferred Stock, which will be immediately convertible into fully paid and
nonassessable shares of Common Stock of the Company, at any time in quantities
and after time periods determined by the Committee, which in no event will be
less than one year after the date of issuance until the close of business on
the Due Date. Each series of Debentures shall be convertible into a separate
series of Preferred Stock. The conversion privilege with respect to any
Debenture may be exercised only by the Purchaser thereof or by the estate of a
deceased Purchaser or a beneficiary under such estate.
Upon termination of a Purchaser's employment, the conversion privilege
will terminate with respect to each Debenture issued to such Purchaser on the
earlier of the Due Date or a date determined as follows:
<PAGE> 2
(a) Three years after the date of termination of
employment as a result of retirement or disability;
(b) Two years after the date of termination of employment
as a result of death;
(c) Prior to the date of termination of employment as a
result of discharge for cause (as determined in the sole discretion of
the Committee); or
(d) Three months after the date of termination of
employment for any other reason.
The conversion privilege with respect to any Debenture (i) will
terminate if the Purchaser, without the Company's consent, sells, assigns,
transfers, pledges, hypothecates or otherwise disposes of a Debenture except as
permitted by Section 3.04 and (ii) will not be exercisable during such time as
the Debenture is pledged to secure loans as permitted by Section 3.04.
In no event may any Purchaser or the estate of a deceased Purchaser or
a beneficiary under such estate exercise the conversion privilege associated
with a Debenture prior to one year from the date of issuance of such Debenture
or after the Due Date.
Section 3.04. Transfer and Pledge of Debentures. A Purchaser may not
sell, assign, transfer, pledge, hypothecate or otherwise dispose of a Debenture
except by (i) will or the laws of descent and distribution or (ii) a pledge
("Permitted Pledge") of Debentures to a lender (which may be the Company if a
loan is made pursuant to Section 8 hereof) as security for loans to provide all
or part of the financing to purchase the Debentures. If such loan shall be made
by other than the Company, the Purchaser shall give advance written notice to
the Company prior to making any Permitted Pledge and the Purchaser and such
Lender shall give notice of discharge of any Debenture from a Permitted Pledge,
which notice shall be conclusive evidence that the conversion privilege with
respect to such Debenture will again be exercisable subject to the provisions
of Section 3.03.
Section 3.05. Redemption of Debentures. Subject to the provisions of
this Section 3.05, the Company may, upon at least thirty days prior written
notice to all Debenture holders, redeem as a class, on any interest payment
date, all of the Debentures issued under this Plan. The Company (i) shall
redeem on the next interest payment date after termination of the conversion
privilege with respect thereto any Debenture with respect to which the
conversion privilege has terminated pursuant to clauses (a), (b) or (d) of
Section 3.03, (ii) may redeem any Debenture pledged pursuant to Section 3.04 on
the next interest payment date following notice received by the Company from a
lender (other than the Company) that a loan for which such Debenture is pledged
is in default, provided such default has not been cured, and (iii) may at its
option redeem, on any interest payment date, any Debenture with respect to
which the conversion privilege has terminated for any other reason provided in
Section 3.03. The holder of any Debenture redeemed pursuant to this Section
3.05 shall be entitled to receive only the face amount of the Debenture plus
accrued interest thereof to the Due Date.
4. Authorized Amount of Debentures. The Company may issue up to
$20,000,000 in aggregate principal amount of all Debentures.
5. Effective Date. The Plan shall become effective upon approval
thereof by the vote of the holders of a majority of the shares of Common Stock
of the Company voting at the 1986 Annual Meeting of Stockholders, and shall
expire when all of the Company's obligations with respect to all of the
<PAGE> 3
outstanding Debentures have been discharged; provided, however, that no
Debenture shall be issued after April 1, 1995.
6. Offers and Sales Price of Debentures. The Debentures shall be
sold by the Company to Purchasers at a price equal to the higher of (a) face
value plus any accrued interest to the date of sale or (b) the fair market value
of the Debentures as of the date the Purchaser elects to purchase the
Debentures, as determined by an independent investment banking firm. If the
Internal Revenue Service determines that the value of a Debenture at the time
of sale exceeded its sale price and if (a) the Company receives a federal
income tax benefit as a result of such determination and (b) the Purchaser has
contested such determination in a manner which the Company determines to be
appropriate under the circumstances, then the Company will pay to the Purchaser
or his estate or a beneficiary under his estate the lesser of (x) the federal
income tax benefit derived by the Company as a result of the sale of the
Debenture to the Purchaser or (y) the amount estimated by the Company (based on
the highest marginal federal income tax rate applicable with respect to
compensation income for the year in which the sale occurred and the amount
determined by the Internal Revenue Service to be taxable income to the
Purchaser as a result of his purchase of the Debenture) to be Purchaser's
federal income tax liability resulting from his purchase of the Debenture.
The Debentures may be offered only on April 15, May 30, August 30 and
November 30 of each year (any such date is referred to herein as an "Offering
Date"). An employee may elect to purchase all or none of the Debentures offered
to him on an Offering Date by giving written notice to the Company of his
election within 10 business days of such Offering Date. Payment for such
Debentures shall be in cash or in Common Stock (valued at the reported last
sales price of Common Stock prior to the date of such payment, as shown on the
Composite Tape for securities listed on the New York Stock Exchange) and shall
be made within 20 business days of such Offering Date.
7. Conversion Price. The price (the "Conversion Price") at which
shares of Preferred Stock shall be delivered upon conversion of a series of
Debentures shall be set at a price at least equal to the reported last sales
price of the Company's Common Stock prior to the date of sale of such series of
Debentures, as shown on the Composite Tape for securities listed on the New
York Stock Exchange. The number of shares of Common Stock which shall be
delivered upon conversion of any shares of a series of Preferred Stock (the
"Conversion Ratio") shall not exceed the face value of the related Debentures
which were converted into such Preferred Stock divided by the reported last
sales price of the Company's Common Stock prior to the date of sale of such
Debentures as shown on the composite tape for securities listed on the New York
Stock Exchange. Upon any change in the capital stock of the Company, through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, spin-off, split up, dividend in kind or other change in the corporate
structure or distribution to stockholders, appropriate adjustments to the
Conversion Price and Conversion Ratio and the kind of shares delivered upon
conversion of the Debentures and Preferred Stock may be made by the Committee
(or, if the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation) with respect to both
outstanding and unissued Debentures and Preferred Stock. If the Internal
Revenue Service determines that the conversion of Debentures into Preferred
Stock or that the subsequent conversion of Preferred Stock into Common Stock is
a taxable transaction and if (a) the Company receives a federal income tax
benefit as a result of such determination and (b) the Purchaser has contested
such determination in a manner which the Company deems to be appropriate under
the circumstances, then the Company will pay to the Purchaser or his estate or
a beneficiary under his estate the lesser of (x) the federal income tax benefit
derived by the Company with respect to such conversion or (y) the amount
estimated by the Company (based on the highest marginal federal income tax rate
applicable with respect to compensation income for the year in which the
conversion occurred and the
<PAGE> 4
amount determined by the Internal Revenue Service to be taxable income to the
Purchaser as a result of such conversion) to be Purchaser's federal income tax
liability resulting from such conversion.
8. Company Loans. The Company may, from time to time, make full
recourse (or, in the case of an aggregate of $5,125,000 in principal amount of
loans made by the Company to Purchasers on June 13, 1986, non-recourse) loans
("Company Loans") to Purchasers for the purpose of providing all or part of the
financing necessary to purchase any Debenture; provided, however, that the
maximum amount of the Company Loan shall not exceed the purchase price of the
Debentures. Subject to the foregoing, Company Loans may be made to such
Purchasers in such amounts bearing interest at such rates (not less than the
higher of the interest rate on the Debenture or a floating rate determined
under Sections 483 and 1274(d) of the Internal Revenue Code of 1954, as
amended), shall be secured by a pledge of and lien on the Debenture (which may
be inferior to the pledge and lien securing the Bank Loan) and on such other
terms and conditions as the Committee may from time to time approve.
9. Administration. The Plan shall be administered by a committee of
the Board of Directors (the "Committee") which shall consist of three or more
persons. No Debentures may be sold to any member of the Committee during the
term of his membership on the Committee. No person shall be eligible to serve
on the Committee unless he is a "disinterested person" within the meaning of
Paragraph (d)(3) of Rule 16b-3, under the Securities Exchange Act of 1934 or
any successor thereto as then in effect ("Rule 16b-3"). The members of the
Committee shall be appointed by the Board of Directors, and any vacancy on the
Committee shall be filled by the Board of Directors.
Subject to the foregoing paragraphs, the Committee shall interpret the
Plan and the Debentures sold under the Plan, shall make such rules as it deems
necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defect or supply any omission or reconcile any inconsistency
in the Plan or in any Debenture in the manner and to the extent the Committee
deems desirable to administer the Plan or the Debentures. The Committee's
determination of any matter within its authority shall be conclusive and
binding upon the Company and all other persons.
10. Amendment and Discontinuance. Subject to the provisions of this
Section 10, the Committee may amend, suspend or terminate the Plan. No
amendment, suspension or termination of the Plan may:
(a) Without the consent of the holder of a Debenture,
terminate his Debenture or adversely affect his rights under the
Debenture in any material respect;
(b) Without the consent of a majority of the shares of
voting stock of the Company voting at any meeting of Stockholders (i)
increase the amount of Debentures available under the Plan, (ii)
change materially the persons eligible to purchase Debentures under
the Plan, (iii) increase materially the benefits under the Plan, or
(iv) extend the termination date of the Plan; or
(c) Cause the plan to fail to meet the requirements of
Rule 16b-3.
11. Other Provisions.
(a) The Purchaser of a Debenture shall not be entitled to
any rights as a stockholder of the Company until such Purchaser has
exercised the conversion privilege contained in the Debenture.
<PAGE> 5
(b) No Debenture shall be construed as limiting any right
which the Company or any subsidiary of the Company may have to
terminate at any time, with or without cause, the employment of a
Purchaser to whom a Debenture has been sold.
(c) Notwithstanding any provision of the Plan or the
terms of any Debenture sold pursuant to the Plan, (i) the Company
shall not be required to issue any Debentures hereunder if such
issuance would, in the judgment of the Committee, constitute a
violation of any state or Federal law, or of the rules or regulations
of any governmental regulatory body, and (ii) any amount of interest
paid or payable on a Debenture which exceeds the amount legally
payable to a Purchaser under the applicable usury laws will be paid by
the Company as compensation to the Purchaser.
<PAGE> 1
EXHIBIT 10j
PENSION BENEFIT RESTORATION PLAN
OF
LETOURNEAU, INC.
SECTION 1. PURPOSE
The purpose of the Pension Benefit Restoration Plan of LeTourneau,
Inc. ("Plan") is to provide a select group of management or highly compensated
employees ("Key Employees") who are members of the LeTourneau Retirement Income
Plan ("Pension Plan") all benefits otherwise payable in accordance with the
terms of the Pension Plan but for the limitations on maximum benefits and
annual compensation for qualified plans set forth in Section 415 and/or 401
(a)(17), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code"), and as the Pension Pension Plan's definition of compensation is
modified for purposes of the Plan, as provided in 3(b) below.
SECTION 2. ADMINISTRATION
(a) The Plan shall be administered by the "administrator" of the
Pension Plan ("Committee") or by any other person or persons designated by the
Committee.
(b) The Committee shall have the power to interpret the Plan,
establish rules for the administration of the Plan and make all other
determinations necessary or desirable for the Plan's administration, including,
without limitation a person's entitlement to, and the amount of, any benefit
under the Plan.
(c) The decision of the Committee on any question concerning or
involving the interpretation or administration of the Plan shall be final and
conclusive.
SECTION 3. ELIGIBILITY FOR BENEFITS AND AMOUNT OF BENEFITS
(a) The Board of Directors of LeTourneau, Inc. (the "Board of
Directors"), in its sole discretion, shall select the Key Employees eligible to
receive benefits under the Plan, and any question concerning or involving
eligibility shall be made by the Board of Directors.
(b) All participants in the Plan as selected by the Board of
Directors ("Participants"), who would otherwise be entitled to benefits from
the Pension Plan in accordance with the terms thereof, but for the limitations
on maximum benefits set forth in Section 415 of the Code and the annual
compensation limit specified in Section 401(a) (17) of the Code, shall be paid
benefits pursuant to this Plan to the extent such benefits exceed the
limitations. The differences between the amount of pension benefit which would
have been payable but for the limitations imposed by Sections 415 and
401 (a)(17) of the Code and calculated, for purposes of this Plan, based
solely on the
<PAGE> 2
participants' base compensation, excluding, without limitation any bonuses or
other items of compensation and, the amount of the benefit actually payable
under the Pension Plan is hereinafter referred to as the "Pension Benefit
Restoration Amount."
SECTION 4. PAYMENT OF BENEFITS
(a) This Plan shall be an unfunded plan and payments of benefits
pursuant to this Plan shall be made from the general assets of LeTourneau, Inc.
("Company"). No special or separate fund need to be established and no
segregation of assets need be made to assure the payment of such benefits. No
Participant shall have any interest in any particular asset of the Company by
virtue of his rights under this Plan. Any person entitled to a payment under
this Plan shall be a general unsecured creditor of the Company with respect to
such payment.
(b) The payment of the Pension Benefit Restoration Amount under this
Plan shall be deemed to be compensation for services, and shall constitute a
liability to the Company in accordance with the terms hereof.
(c) The Company shall pay a Participant's Pension Benefit Restoration
Amount to such Participant or the Participant's designated beneficiary in such
manner and at the same time as benefits are paid under the Pension Plan;
provided, however, the Company may convert the payment of the Pension Benefit
Restoration Amount into any actuarially equivalent form of payment as
determined by the Committee at it's sole discretion with the advice of the
actuary for the Pension Plan. In determining the actuarially equivalent form of
payment hereunder, the Committee and actuary for the Pension Plan shall use the
factors and assumptions set forth in the definition of "Actuarial Equivalent"
as found in the Pension Plan.
SECTION 5. BENEFICIARIES
(a) Beneficiaries under this Plan shall be the persons who are the
Participant's beneficiaries under the Pension Plan.
(b) Notwithstanding anything to the contrary contained herein or in
the Pension Plan, a Participant or the Participant's beneficiary named to
receive benefits under this Plan may, until death, change the beneficiary
designated to receive benefits under this Plan subsequent to their respective
deaths.
(c) In no event shall any change in beneficiary pursuant to Section
5(b) affect the amount of benefits payable under this Plan.
SECTION 6. AMENDMENT, SUSPENSION, TERMINATION
(a) The Board of Directors may at any time amend, suspend or
terminate this Plan.
<PAGE> 3
(b) No amendment to this Plan or termination of the Plan by the Board
of Directors shall divest a Participant of any benefit payable to such
Participant under this Plan, unless the Participant agrees in writing to such
divestment. Upon the termination of the Plan, the difference between (x) the
amount of pension benefit which would have been accrued under the Pension Plan
as of the date of termination of the Plan, but for the limitations, and (y) the
Participant's accrued benefit under the Pension Plan as of such date shall be
the Pension Benefit Restoration Amount. A lump sum equal to the Actuarial
Equivalent of such Pension Benefit Restoration Amount shall be immediately paid
to the Participant.
SECTION 7. NON-ALIENATION OF BENEFITS
The interest of a Participant or the Participant's designated
beneficiary to any benefit under this Plan may not be sold, transferred,
assigned, or encumbered in any manner, either voluntarily or involuntarily, and
any attempt to so anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be null and void; neither shall the benefits
hereunder be liable or subject to the debts, contracts, liabilities,
engagements, or torts of any person to whom such benefits or funds are payable,
nor shall they be subject to the garnishment, attachment, or other legal or
equitable process, nor shall they be an asset in bankruptcy, except that no
amount shall be payable hereunder until and unless any and all amounts
representing debts or other obligations owed to the Company or any affiliate of
the Company by the Participant with respect to whom such amount would otherwise
be payable shall have been fully paid and satisfied.
SECTION 8. TAX WITHHOLDING
The Company shall withhold from all payments hereunder all applicable
taxes that it is required to withhold.
SECTION 9. JURISDICTION
The situs of the Plan hereby created is Texas. All provisions of the
Plan shall be construed in accordance with the laws of Texas except to the
extent preempted by federal law.
SECTION 10. EFFECTIVE DATE
The Plan shall become effective as of January 1, 1994.
SECTION 11. CLAIMS PROCEDURE
All Participants shall have all the rights and remedies as set forth
in the Pension Plan.
<PAGE> 4
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Company has executed this Plan on behalf of the Company this 9th day of
December, 1994.
LeTOURNEAU, INC.
ATTEST:
By: /s/ E. E. THIELE
--------------------------------
E. E. Thiele
Vice President
Print Name & Title
/s/ MARK H. HAY
--------------------------------
Corporate Secretary
<PAGE> 1
EXHIBIT 10q
ROWAN COMPANIES, INC.
Amendment No. 1 to the Consultancy
Agreement Dated March 1, 1991
Between Rowan Companies, Inc.
and C. W. Yeargain
Effective April 1, 1994:
Section 2 of the Agreement, Duties of the Consultant, is amended by
adding an additional paragraph as follows:
(B) The Consultant also shall serve as a Director of LeTourneau, Inc.
and as Chairman of the Board of Directors of LeTourneau, Inc. and
shall provide such services as may be required, from time to time, in
connection with serving in such capacities.
Section 4 of the Agreement, Consideration and Expenses, is hereby
deleted and the following is substituted therefor:
(A) The Company shall pay $50,000 annually (payable quarterly) plus
the per diem rate of US $500.00 for services rendered. Further, the
Company shall reimburse to the Consultant all proper and reasonable
out-of-pocket expenses (including, but not limited to, all travel and
accommodation expenses).
<PAGE> 2
EXHIBIT 10r
DATED MARCH 1, 1991
ROWAN COMPANIES, INC. (1)
-AND-
C. W. YEARGAIN (2)
AGREEMENT
FOR THE PROVISION OF CONSULTANCY SERVICES,
AS AMENDED
<PAGE> 3
Page 1
THIS AGREEMENT is dated March 1, 1991 and is entered into BY and BETWEEN:
(1) ROWAN COMPANIES, INC. OF 5450 Transco Tower Building, Houston, Texas
77056-6196 ("the Company"); and
(2) C. W. YEARGAIN ("the Consultant") of #8 Tokeneke Trail, Houston, Texas
77024
NOW IT IS HEREBY AGREED as follows:
1. Appointment
(A) The Company hereby engages the Consultant and the Consultant hereby
agrees to act as consultant to the Company including any of its incorporated
affiliates (hereafter referred to as "the Group") pursuant to the terms of this
Agreement.
B) The said engagement, which shall be deemed to have commenced on
March 1, 1991, shall continue hereafter unless and until terminated (i) by
either party by not less than three (3) months' prior notice in writing given
to the other party or (ii) pursuant to the provisions of clause 6.
2. Duties of the Consultant
(A) The Consultant shall advise the Group on a when-requested basis in
connection with matters pertaining to the Group's existing and prospective
worldwide business operations.
(B) The Consultant also shall serve as a Director of LeTourneau, Inc.
and as Chairman of the Board of Directors of LeTourneau, Inc. and shall provide
such services as may be required, from time to time, in connection with serving
in such capacities.
3. Conflict of Interest
(A) The Consultant hereby undertakes at all times to perform his
obligations hereunder with the utmost good faith and shall not deliberately do
or omit to do anything whereby a conflict is likely to arise between the
interests of the Group and the Consultant's own interests or the interests of
any other person or organization on whose behalf the Consultant is so employed.
(B) The Consultant shall not at any time knowingly make or cause or
permit to be made any untrue or misleading statement in relation to the Group
nor in particular after the termination of this Agreement represent or cause or
permit any representation to be made that he is connected with the Group.
<PAGE> 4
Page 2
4. Consideration and Expenses
(A) The Company shall pay $50,000 annually (payable quarterly) plus the
per diem rate of US $500.00 for services rendered. Further, the Company shall
reimburse to the Consultant all proper and reasonable out-of-pocket expenses
(including, but not limited to, all travel and accommodation expenses).
(B) All payments to be made pursuant to this agreement shall be made by
the Company upon receipt of an invoice from the Consultant specifying the
amount payable.
5. Confidentiality
(A) The Consultant undertakes that he shall not, either during or after
the termination of this Agreement without limit in point of time:
(i) divulge or communicate or cause or permit to be divulged or
communicated whether directly or indirectly to any other
person or persons (except to those of the officials of the
Group whose province it is to know the same); or
(ii) use for his own purposes or for any purpose other than those
of the Group any secret, confidential or other information:
(a) relating to the private affairs of the Group; or
(b) which the Group has obtained from any third party on
terms restricting its disclosure or use
but these restrictions shall cease to apply to any information or knowledge
which may come into the public domain (otherwise than through the default of
the Consultant).
(B) All notes, memoranda, records and other documents made or created
in relation to the performance by the Consultant of his duties hereunder shall
be and remain the property of the Company and shall be handed over by the
Consultant to the Company from time to time on demand and in any event on the
termination of this Agreement.
6. Events of Termination
The Company only on the occurrence of the events specified in (B) below and
either party on the occurrence of the events specified in (A) below shall have
the right at any time by giving notice in writing to the other party to
terminate this Agreement forthwith:
(A) if the other party commits a material breach of any of the terms of
this Agreement and fails to remedy the same within 30 days of being required in
writing to do so by the party not in breach (if such breach shall be capable of
remedy);
<PAGE> 5
Page 3
(B) upon the demise or incapacity of the Consultant;
(C) upon the termination of the engagement by not less than the period
of notice provided for in clause 1 or upon the proper termination as provided
in this clause 6, the Consultant shall not have any claims for damages or
compensation of any nature whatsoever other than to any outstanding fees and
properly documented expenses due pursuant to clause 4 hereof.
7. Status of Agreement
Nothing herein contained shall be deemed to constitute a partnership between
the parties hereto and the Consultant shall have no power to bind the Group or
pledge its credit. Consultant agrees that he is an independent contractor and
is solely responsible for the performance of any duties required under this
Agreement. The Consultant agrees that he shall solely be responsible for any
income tax liability asserted by any taxing jurisdiction upon payments of
consideration received under this Agreement.
8. Assignment
Neither party shall be entitled to assign its rights hereunder without the
prior written consent of the other.
9. Notice
All notices to be given under this Agreement shall be in writing and shall
either be delivered personally or sent by first class registered post to the
address of the party to be served given at the head of this Agreement or such
other address as shall from time to time be notified to the other party and
shall be deemed duly served (i) in the case of a notice delivered personally,
at the time of delivery, and (ii) in the case of a notice sent by post, five
clear business days after the date of dispatch.
10. Entire Agreement
This Agreement constitutes the entire Agreement between the parties hereto with
respect to its subject matter and shall have effect to the exclusion of any
other memorandum, agreement or understanding of any kind between the parties
hereto preceding the date of this Agreement and touching and concerning its
subject matter.
11. Amendments in Writing
This Agreement may be amended, superseded, cancelled or any of its terms and
conditions waived only by written instrument signed by or on behalf of the
Company and Consultant or, in the case of waiver, by the party which is waiving
compliance.
<PAGE> 6
Page 4
12. Governing Law
This Agreement shall be governed by and construed in accordance with the Laws
of the State of Texas and each of the parties hereto hereby agrees to submit to
the non-exclusive jurisdiction of the courts of Texas in connection with any
matter arising out of this Agreement.
IN WITNESS whereof this Agreement has been entered into the day and year first
above written.
) /s/ C. R. Palmer
SIGNED BY )-----------------------------
duly authorized signatory ) C. R. Palmer
for and on behalf of
ROWAN COMPANIES, INC. President
in the presence of: -----------------------------
/s/ Kitty Lindley
-----------------------------
SIGNED BY ) /s/ C. W. Yeargain
C. W. Yeargain )-----------------------------
) C. W. Yeargain
In the presence of:
/s/ Mary H. Cocca
-----------------------------
<PAGE> 1
EXHIBIT 13
Rowan Companies, Inc. and Subsidiaries
FINANCIAL REVIEW
<TABLE>
<CAPTION>
(In thousands except per share amounts and ratios) 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Revenues:
Drilling services $ 245,917 $ 271,022 $ 162,121 $ 170,739 $ 180,118
Aircraft services 95,578 82,174 87,877 101,433 111,992
Manufacturing sales and services 96,664
--------------------------------------------------------------------------------------------------------------------------
Total 438,159 353,196 249,998 272,172 292,110
--------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Drilling services 207,577 211,095 162,816 147,853 130,845
Aircraft services 79,955 68,882 74,347 82,364 88,182
Manufacturing sales and services 87,382
Depreciation and amortization 50,790 51,918 51,367 52,954 50,702
General and administrative 13,862 13,940 12,092 11,739 9,549
--------------------------------------------------------------------------------------------------------------------------
Total 439,566 345,835 300,622 294,910 279,278
--------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (1,407) 7,361 (50,624) (22,738) 12,832
--------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (27,530) (25,361) (26,254) (21,379) (21,601)
Gain on disposals of property,
plant and equipment 1,344 1,955 731 1,660 3,996
Interest income 4,813 2,348 2,658 4,763 8,635
Other -- net 260 150 165 127 178
--------------------------------------------------------------------------------------------------------------------------
Other income (expense) -- net (21,113) (20,908) (22,700) (14,829) (8,792)
--------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (22,520) (13,547) (73,324) (37,567) 4,040
Provision (credit) for income taxes 469 (288) 429 1,174 2,081
--------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary charge (22,989) (13,259) (73,753) (38,741) 1,959
Extraordinary charge from redemption
of debt (5,627)
--------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (22,989) $ (13,259) $ (73,753) $ (44,368) $ 1,959
--------------------------------------------------------------------------------------------------------------------------
Per share of common stock:
Net income (loss):
Primary $ (.27) $ (.17) $ (1.01) $ (.61)* $ .03
--------------------------------------------------------------------------------------------------------------------------
Fully diluted $ (.27) $ (.17) $ (1.01) $ (.61)* $ .03
--------------------------------------------------------------------------------------------------------------------------
Cash dividends $ -- $ -- $ -- $ -- $ --
--------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 195,945 $ 172,117 $ 61,397 $ 125,996 $ 134,393
--------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment -- at cost:
Drilling equipment 961,391 950,538 939,793 913,379 885,264
Aircraft and related equipment 176,874 166,791 162,001 158,361 138,327
Manufacturing plant and equipment 18,955
Other property and equipment 86,883 81,636 79,801 76,251 73,504
--------------------------------------------------------------------------------------------------------------------------
Total 1,244,103 1,198,965 1,181,595 1,147,991 1,097,095
--------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment -- net 506,121 507,193 537,819 552,481 549,608
Total assets 805,179 765,263 684,301 895,889 739,133
Capital expenditures 43,377 21,989 39,528 85,618 59,905
Long-term debt 248,504 207,137 212,907 220,764 153,621
Common stockholders' equity 442,347 460,300 375,754 445,368 485,748
--------------------------------------------------------------------------------------------------------------------------
STATISTICAL INFORMATION
Current ratio 4.39 4.90 2.47 1.71** 4.00
Long-term debt/total capitalization .36 .31 .36 .33 .24
Book value per share of common stock $ 5.25 $ 5.49 $ 5.13 $ 6.11 $ 6.69
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes $.08 per share effect of extraordinary charge.
** At December 31, 1991, the $125,000,000 principal amount of the
Company's 13 3/4% Senior Notes had been called for redemption and
appeared as a current liability.
If redemption had occurred prior to year-end, the current ratio would
have been 3.61.
10
<PAGE> 2
Rowan Companies, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following analysis highlights the Company's operating results for the years
indicated (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Drilling $ 245.9 $ 271.0 $ 162.1
Aviation 95.6 82.2 87.9
Manufacturing 96.7
--------------------------------------------------------------------------
Total $ 438.2 $ 353.2 $ 250.0
==========================================================================
Operating Profit (Loss)*:
Drilling $ 0.2 $ 19.1 $ (40.4)
Aviation 4.6 2.2 1.9
Manufacturing 7.7
--------------------------------------------------------------------------
Total $ 12.5 $ 21.3 $ (38.5)
==========================================================================
Net Income (Loss) $ (23.0) $ (13.3) $ (73.8)
==========================================================================
</TABLE>
* Income (loss) from operations before deducting general and
administrative expenses.
Continued volatility in energy prices and in the resulting demand for
drilling and aviation services, has pervaded the principal markets in which the
Company has operated during the past several years. As shown above, the
Company's results have been directly impacted. Faced with reorganizations and
downsizings by major energy companies, domestic drilling moratoriums and
increasing governmental regulations, the Company has taken several steps during
this period to broaden its revenue base and maintain or enhance its operating
results, including:
o the introduction of Total Project Management drilling services in
mid-1992, which has to date contributed $169.0 million in turnkey revenues
and a 9% incremental return
o the continued diversification of aircraft services toward non-energy markets
o the acquisition, completed in early 1994, of substantially all of the net
manufacturing assets of Marathon LeTourneau Company, including a mini-steel
mill, a manufacturing facility that produces heavy equipment for the mining,
timber and transportation industries, and a marine division that has built
over one-third of all mobile offshore jack-up drilling rigs, including all
20 operated by the Company.
The increase in the Company's net loss in 1994 in comparison to 1993
resulted primarily from a decrease in turnkey drilling revenues and a softening
of drilling day rates, which more than offset the improved results of aviation
operations and the addition of profitable manufacturing operations. The
Company's results in 1993 were improved over 1992 as a result of strong natural
gas prices and the growth of Total Project Management, principally turnkey
drilling.
DRILLING OPERATIONS. The Company's drilling operating results are dependent
upon rig rates and the level of rig utilization achieved in its offshore
drilling business conducted primarily in the Gulf of Mexico and the North Sea.
In turn, the rates obtained and the utilization of the Company's offshore rigs
are influenced by the level of offshore expenditures by energy companies.
The offshore drilling industry has fluctuated throughout the 1992-1994
period but overall, has continued to experience weak market conditions since the
early 1980's. Throughout much of 1992, low natural gas prices curtailed drilling
activity in the Gulf of Mexico and depressed drilling day rates. In the North
Sea, energy prices remained more stable and, as a result, utilization and day
rates were not as affected. In late 1992, conditions in the two markets moved in
opposite directions. An improvement in natural gas prices strengthened
utilization and day rates in the Gulf of Mexico throughout 1993 and most of
1994, while North Sea drilling activity and rates weakened due to energy
companies downsizing their drilling programs in the face of impending changes in
United Kingdom energy policies. In response, the Company relocated the
Rowan-Gorilla II from the North Sea to the Gulf of Mexico during the first half
of 1994. In late 1994, Gulf of Mexico utilization and day rates were again
forced to lower levels by the downward trend of natural gas prices. The North
Sea market appears to have stabilized and shows prospects for improvement in
1995.
The effects of fluctuations in activity and day rates are shown in the
following analysis of changes in the Company's contract drilling revenues (in
millions):
<TABLE>
<CAPTION>
1993 1992
to 1994 to 1993
------------------------------------------------------------------
<S> <C> <C>
Utilization $ 22.1 $ 25.4
Drilling Rates (20.7) 9.3
==================================================================
</TABLE>
12
<PAGE> 3
These fluctuations, combined with the impact of Total Project
Management, resulted in a 9% decrease in 1994 drilling revenues compared to
1993, which was 67% improved over 1992. Drilling operations expenses decreased
2% in 1994 compared to 1993, which was 30% higher than 1992. The expense
variations do not correlate with the revenue fluctuations primarily due to the
effects of Total Project Management operations.
The number of marine rigs operated by the Company at the end of each
year in the 1992-1994 period and the rig utilization percentages (number of
days producing revenue as a percent of days the rig was available for service)
for each of those years are reflected in the following table:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------
<S> <C> <C> <C>
Jack-ups:
Number 20 20 20
Utilization 86% 85% 70%
Semi-submersible:
Number 1 1 1
Utilization 73% 94% 37%
Submersible Barges:
Number 3 3 3
Utilization 52% 30% 22%
==============================================================
</TABLE>
In the Gulf of Mexico drilling market, where the Company currently has
18 of its 24 marine rigs, three notable changes occurring in recent years
continue to affect the market. First, the Gulf of Mexico is now the only
domestic market in which large scale drilling activity is occurring, because the
U.S. government has imposed moratoriums on drilling in most other domestic
offshore areas. Second, many major energy companies have downsized their
domestic drilling organizations and have generally abandoned the United States
market. Third, a growing number of independent energy companies have become
operators in this market, in part because the Minerals Management Service of the
U.S. government has modified the process by which such companies are permitted
to farm-in on existing leases. These changes have led the Company to move
towards Total Project Management, which emphasizes drilling and completing wells
on a turnkey basis.
Perceptible trends existing in the offshore drilling markets in which
the Company operates are shown below:
--------------------------------------------------------------------------------
GULF OF MEXICO - Weak market demand due to depressed natural gas prices in the
near term
NORTH SEA - Moderately improving drilling activity for jack-up rigs used in the
exploration and development of natural gas
EASTERN CANADA - Generally stable demand
TRINIDAD - Decreasing demand in 1995, increasing in 1996
================================================================================
The drilling markets in which the Company competes frequently
experience significant changes in supply and demand. Drilling
utilization and day rates achievable in offshore markets are affected by
changes in overall exploration and development expenditures, as well as shifts
in such expenditures between markets. These expenditures, in turn, are
influenced by discoveries of oil and natural gas reserves, shifts in the
political climate, regulatory changes, seasonal weather patterns, contractual
requirements under leases or concessions and, perhaps most disruptive, changes
in oil and natural gas prices. The Company can, as it did on two separate
occasions in 1994, relocate its drilling rigs from one geographic area to
another, but only when such moves are economically justified.
The volatile nature of the various factors affecting the level of
offshore expenditures by energy companies and shifts of such expenditures
between domestic and international markets prevent the Company from being able
to predict whether the perceptible market trends reflected in the preceding
table will continue, or their impact on the results of drilling operations in
1995.
Five of the Company's land rigs were under contract in Texas, Oklahoma,
Mississippi and New Mexico at year end and one of the Company's arctic land rigs
worked most of the first quarter in Alaska. The Company's three trailer-mounted
rigs recently arrived in Argentina to commence a two year assignment. The
Company's remaining four arctic land rigs and four rigs in western Texas and
Oklahoma were idle in 1994. The cost of maintaining the idle rigs is modest and
the remaining investment in the rigs is not significant.
AVIATION OPERATIONS. Although the aviation division's operating results are
still heavily influenced by oil and natural gas exploration and production,
principally in the Gulf of Mexico, and seasonal weather conditions, primarily in
Alaska, the division has continued to diversify its flight services. The Company
offers forest fire control, commuter airline services, flightseeing, medivac
services, airborne environmental surveys and other services. The Company further
broadened its aviation operations in 1994 to include China and Trinidad.
Aviation revenues increased by $13.4 million or 16% in 1994 compared to
1993, which was 6% below 1992. Comparable period fluctuations in aviation
division expenses were a 16% increase and a 7% decrease, respectively. The
increase in 1994 was primarily due to significant forest fire control services
provided during much of the third and fourth quarters throughout the western
United States. The Company had as many as 25 aircraft involved in fighting fires
at one time. In addition, the Company's commuter airline services grew by 15% in
1994, maintaining its 28% share of total division revenues.
The number of aircraft operated by the Company at the end of each year
in the 1992-1994 period and the revenue hours for each of those years are
reflected in the following table:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C>
Twin Engine Helicopters:
Number 63 63 64
Revenue Hours 33,330 29,715 31,370
Single Engine Helicopters:
Number 27 31 30
Revenue Hours 11,574 10,150 10,700
Fixed-wing Aircraft:
Number 17 15 13
Revenue Hours 23,136 22,728 21,426
===========================================================================
</TABLE>
13
<PAGE> 4
Excluded from the preceding table are eleven twin engine helicopters
owned by the Company's Dutch affiliate which recorded revenue hours of 8,134,
8,420 and 9,800 in 1994, 1993 and 1992, respectively.
Perceptible trends existing in the aviation markets in which the Company
operates are shown below:
--------------------------------------------------------------------------------
ALASKA -- Generally stable market conditions
GULF OF MEXICO -- Generally stable market conditions in the near term
NORTH SEA -- Moderately improving flight support activity
CHINA -- Generally stable demand in 1995, possibly improving in 1996
TRINIDAD -- Generally stable demand
================================================================================
The Company cannot predict whether these market trends will continue.
Changes in energy company exploration and production activities, seasonal
weather patterns and other factors can affect the demand for flight services in
the aviation markets in which the Company competes. The Company can, as it has
done in the past, move aircraft from one market to another, but only when the
likelihood of higher returns makes such action economical.
MANUFACTURING OPERATIONS. In February 1994, the Company completed the
acquisition of the net assets of Marathon LeTourneau Company for $52.1 million
with $10.4 million cash paid at the time of closing and the balance being
financed by nonrecourse promissory notes bearing interest at 7% and payable at
the end of five years. The manufacturing division generated $96.7 million in
revenues and an 8% operating profit in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Key balance sheet amounts and ratios for 1994 and 1993 were as follows (dollars
in millions):
<TABLE>
<CAPTION>
December 31, 1994 1993
--------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $111.1 $116.8
Current assets $253.7 $216.3
Current liabilities $ 57.8 $ 44.2
Current ratio 4.39 4.90
Current maturities of long-term debt $ 0.3 $ 8.1
Long-term debt $248.5 $207.1
Stockholders' equity $442.3 $460.3
Long-term debt/total capitalization .36 .31
==========================================================================
</TABLE>
Reflected in the comparison above is the acquisition of the net assets
of Marathon LeTourneau Company discussed previously, as well as the effects of
net cash provided by operations of $42.8 million, property, plant and equipment
additions of $33.0 million, and repayments of borrowings totaling $8.1 million.
Capital expenditures included acquisitions of four aircraft ($9.3
million), major rig enhancements ($7.1 million) and the purchase of a marine
yard ($3.1 million). The remainder reflects new assets or enhancements to
existing assets as expenditures for routine maintenance and major repairs are
charged to operations as incurred.
The Company estimates 1995 capital expenditures to be between $30
million and $35 million. The Company may also spend amounts to acquire
additional aircraft as market conditions justify and to upgrade existing
offshore rigs.
In 1993, the Company sold 10 million shares of common stock using the
$92 million net proceeds to expand the Company's turnkey drilling operations
and increase working capital. Also during 1993, the Company repaid $10 million
outstanding under its $35 million unsecured revolving line of credit, canceling
the line at the time of repayment, and entered into a $3.6 million nonrecourse
bank loan agreement to finance the purchase of two fixed-wing aircraft in
conjunction with a five-year medivac service contract.
Cash flow from operations improved to $42.8 million in 1994, more than
double the amount generated in 1993, which was a $48.3 million improvement over
1992. Based on current operating levels and the previously discussed market
trends, management believes that cash provided by operations and existing
working capital will be adequate to sustain planned capital expenditures and
debt service requirements for the foreseeable future.
At December 31, 1994, the provisions of the Company's existing
indebtedness would allow the Company to enter into sale/leaseback transactions
with a maximum value of approximately $74 million.
In 1992 and through the first five months of 1993, the Company was
prohibited from paying dividends on its common stock under the terms of its
Senior Notes. With the addition of the proceeds from the June 1993 public
offering, the Company's ability to pay cash dividends was restored, although no
dividends were paid. Furthermore, the Company does not intend to pay dividends
on its common stock until it achieves and sustains a suitable level of
profitability. See Note 5 of the Notes to Consolidated Financial Statements.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employer's Accounting for Postretirement
Benefits Other Than Pensions." The effect of adopting the statement for the
year ended December 31, 1993 was to increase net periodic postretirement
benefit cost and the net loss by approximately $3 million. See Note 6 of the
Notes to Consolidated Financial Statements.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." The effect of
adopting the statement on the Company's 1993 consolidated financial statements
was not significant due to the expected realization of sufficient tax loss
carryforwards and other future deductible amounts to offset future taxable
amounts, based on the projected reversal of such differences. See Note 7 of the
Notes to Consolidated Financial Statements.
14
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
Rowan Companies, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Rowan
Companies, Inc. and Subsidiaries (the "Company") as of December 31, 1994 and
1993, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of December
31, 1994 and 1993, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1994 in conformity
with generally accepted accounting principles.
As described in Notes 1 and 6 to the Consolidated Financial Statements,
the Company changed its methods of accounting for income taxes and the cost of
retiree health care effective January 1, 1993 to conform with the provisions of
Statements of Financial Accounting Standards Nos. 109 and 106, respectively.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
March 3, 1995
15
<PAGE> 6
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
-------------------------------
(In thousands except share amounts) 1994 1993
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 111,070 $ 116,778
Receivables -- trade and other 78,317 83,429
Inventories:
Raw materials and supplies 42,364 14,002
Work-in-progress 14,238
Finished goods 2,784
Prepaid expenses 3,290 1,312
Cost of turnkey drilling contracts in progress 1,642 785
------------------------------------------------------------------------------------------------------------------------
Total current assets 253,705 216,306
------------------------------------------------------------------------------------------------------------------------
Investment In and Advances To 49% Owned Companies 34,476 33,569
------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment -- at cost:
Drilling equipment 961,391 950,538
Aircraft and related equipment 176,874 166,791
Manufacturing plant and equipment 18,955
Other property and equipment 86,883 81,636
------------------------------------------------------------------------------------------------------------------------
Total 1,244,103 1,198,965
Less accumulated depreciation and amortization 737,982 691,772
------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment -- net 506,121 507,193
------------------------------------------------------------------------------------------------------------------------
Other Assets and Deferred Charges 10,877 8,195
------------------------------------------------------------------------------------------------------------------------
Total $ 805,179 $ 765,263
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt (Note 2) $ 289 $ 8,127
Accounts payable -- trade 20,513 15,887
Other current liabilities (Note 4) 36,958 20,175
------------------------------------------------------------------------------------------------------------------------
Total current liabilities 57,760 44,189
------------------------------------------------------------------------------------------------------------------------
Long-Term Debt -- less current maturities (Note 2) 248,504 207,137
------------------------------------------------------------------------------------------------------------------------
Other Liabilities (Notes 6 and 9) 36,557 30,409
------------------------------------------------------------------------------------------------------------------------
Deferred Credits:
Income taxes (Note 7) 4,468 4,314
Gain on sale/leaseback transactions (Note 9) 15,543 18,742
Other 172
------------------------------------------------------------------------------------------------------------------------
Total deferred credits 20,011 23,228
------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities (Note 9)
------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, $1.00 par value:
Authorized 5,000,000 shares issuable in series:
Series I Preferred Stock, authorized 6,500 shares, none issued
Series II Preferred Stock, authorized 6,000 shares, none issued
Series III Preferred Stock, authorized 10,300 shares, none issued
Series A Junior Preferred Stock, authorized 1,500,000 shares, none issued
Common stock, $.125 par value; authorized 150,000,000 shares;
issued 85,737,581 shares at December 31, 1994 and 85,349,906 shares at
December 31, 1993 (Note 3) 10,717 10,669
Additional paid-in capital 390,925 385,937
Retained earnings (Note 5) 43,190 66,179
Less cost of treasury stock -- 1,457,919 shares 2,485 2,485
------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 442,347 460,300
------------------------------------------------------------------------------------------------------------------------
Total $ 805,179 $ 765,263
========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
16
<PAGE> 7
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------
(In thousands except per share amounts) 1994 1993 1992
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Drilling services $245,917 $271,022 $162,121
Aircraft services 95,578 82,174 87,877
Manufacturing sales and services 96,664
----------------------------------------------------------------------------------------------------------
Total 438,159 353,196 249,998
----------------------------------------------------------------------------------------------------------
Costs and Expenses:
Drilling services 207,577 211,095 162,816
Aircraft services 79,955 68,882 74,347
Manufacturing sales and services 87,382
Depreciation and amortization 50,790 51,918 51,367
General and administrative 13,862 13,940 12,092
----------------------------------------------------------------------------------------------------------
Total 439,566 345,835 300,622
----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations (1,407) 7,361 (50,624)
----------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest expense (27,530) (25,361) (26,254)
Gain on disposals of property, plant and equipment 1,344 1,955 731
Interest income 4,813 2,348 2,658
Other -- net 260 150 165
----------------------------------------------------------------------------------------------------------
Other income (expense) -- net (21,113) (20,908) (22,700)
----------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes (22,520) (13,547) (73,324)
Provision (credit) for income taxes (Note 7) 469 (288) 429
----------------------------------------------------------------------------------------------------------
Net Income (Loss) $(22,989) $(13,259) $(73,753)
----------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share of Common Stock (Note 1) $ (.27) $ (.17) $ (1.01)
==========================================================================================================
See Notes to Consolidated Financial Statements.
17
</TABLE>
<PAGE> 8
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Years Ended December 31, 1994, 1993 and 1992
------------------------------------------------------------
Common Stock
------------------------------------
Issued In Treasury Additional
----------------- ---------------- Paid-in Retained
(In thousands) Shares Amount Shares Amount Capital Earnings
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1992 74,327 $ 9,291 1,458 $2,485 $285,371 $153,191
Exercise of stock options 318 40 279
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 3,820
Net loss (73,753)
-----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 74,645 9,331 1,458 2,485 289,470 79,438
Exercise of stock options 531 66 464
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 4,282
Conversion of subordinated debentures 174 22 978
Sale of common stock (Note 3) 10,000 1,250 90,743
Net loss (13,259)
-----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 85,350 10,669 1,458 2,485 385,937 66,179
Exercise of stock options 388 48 340
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 4,648
Net loss (22,989)
-----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 85,738 $10,717 1,458 $2,485 $390,925 $ 43,190
=================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
18
<PAGE> 9
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
(In thousands) 1994 1993 1992
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Provided By (Used In):
Operations:
Net income (loss) $(22,989) $ (13,259) $ (73,753)
Noncash charges (credits) to net income (loss):
Depreciation and amortization 50,790 51,918 51,367
Gain on disposals of property, plant and equipment (1,344) (1,955) (731)
Compensation expense 4,648 4,282 3,820
Change in sale/leaseback payable (1,405) (273) 1,668
Amortization of sale/leaseback gain (3,198) (3,198) (3,207)
Provision for pension and postretirement benefits 7,536 6,123 2,881
Other -- net (503) (1,271) (1,936)
Changes in current assets and liabilities:
Receivables -- trade and other 18,080 (28,867) (3,815)
Inventories (9,205) 670 1,212
Other current assets (2,464) 2,257 (2,622)
Current liabilities 6,064 774 (6,457)
Net changes in other noncurrent assets and liabilities (3,205) 1,165 1,628
------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations 42,805 18,366 (29,945)
------------------------------------------------------------------------------------------------------------
Investing activities:
Capital expenditures:
Property, plant and equipment additions (32,963) (21,989) (39,528)
Acquisition of net manufacturing assets (10,414)
Advances to affiliates (100) (1,956)
Proceeds from disposal of property, plant and equipment 2,604 2,929 2,686
------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (40,773) (19,160) (38,798)
------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from common stock offering, net of issue costs 91,993
Proceeds from revolving credit arrangements 10,000
Payments on revolving credit arrangements (10,000)
Proceeds from other borrowings 3,560
Repayments of other borrowings (8,127) (8,061) (132,857)
Premium on redemption of debt (3,750)
Other -- net 387 530 319
------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (7,740) 88,022 (136,288)
------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (5,708) 87,228 (205,031)
Cash and Cash Equivalents, Beginning of Year 116,778 29,550 234,581
------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $111,070 $116,778 $ 29,550
============================================================================================================
See Notes to Consolidated Financial Statements.
19
</TABLE>
<PAGE> 10
Rowan Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Rowan Companies, Inc. and all of its wholly and majority owned
subsidiaries (the "Company").
On February 11, 1994, the Company completed the acquisition of
substantially all of the assets, and assumed certain related liabilities, of
Marathon LeTourneau Company for $52,070,000 pursuant to an agreement with
General Cable Corporation dated November 12, 1993. The acquisition was financed
with $10,414,000 in cash and $41,656,000 in 7% promissory notes due in 1999 and
has been recorded using the purchase method of accounting. The accompanying
consolidated financial statements give effect to the acquisition as of January
1, 1994 and include the financial position, results of operations and cash flows
associated with the acquired net assets from that date. Had the acquisition been
completed effective January 1, 1993, the Company's unaudited pro forma operating
results for 1993 would have been as follows: revenues -- $449,400,000, net loss
-- $10,300,000 and net loss per share of common stock -- $.13.
The Company accounts for its investment in 49% owned companies using
the equity method.
The excess of cost over the net assets of subsidiaries at dates of
acquisitions ($8,452,000) is being amortized over a thirty-year period. At
December 31, 1994, the unamortized excess cost was $3,244,000.
Intercompany transactions are eliminated in consolidation.
REVENUE RECOGNITION. Most drilling contracts are on a day rate basis, and
revenues and expenses are recognized as the work progresses. The Company also
utilizes turnkey contracts for certain of its drilling operations. Under these
short-term, fixed price arrangements, revenues and expenses are recognized on a
completed contract basis.
The Company's aviation services generally are provided under master
service agreements (which provide for incremental payments based on usage), term
contracts, or day-to-day charter arrangements. Aviation revenues and expenses
are recognized as services are rendered.
Manufacturing sales and related costs are generally recognized as
products are shipped. Revenues and costs and expenses in 1994 included sales and
costs of sales of $90,460,000 and $72,717,000, respectively.
INVENTORIES. Manufacturing inventories are stated principally at lower of
first-in, first-out cost or market. Drilling and aviation materials and supplies
are carried at average cost.
STATEMENT OF CASH FLOWS. The Company generally considers all highly liquid
instruments with a maturity of three months or less when purchased to be cash
equivalents.
Noncash financing activities consisted of the issuance of $41,656,000 7%
promissory notes in connection with the acquisition of the net assets of
Marathon LeTourneau Company in 1994, the issuance of $10,300,000 Series III
Floating Rate Convertible Subordinated Debentures in 1994 and the conversion of
$1,000,000 principal amount of Series I Floating Rate Convertible Subordinated
Debentures into 173,913 shares of common stock in 1993. See Notes 2 and 3.
PROPERTY AND DEPRECIATION. For financial reporting purposes, the Company
computes depreciation using the straight-line method over the estimated useful
lives of the related assets as follows:
<TABLE>
<CAPTION>
Salvage
Years Value
-------------------------------------------------------------------------------
<S> <C> <C>
Marine drilling equipment:
Semi-submersible 15 20%
Cantilever jack-ups 15 20%
Conventional jack-ups 12 20%
Barges 12 20%
Land drilling equipment 8 to 12 20%
Drill pipe and tubular equipment 4 10%
Aviation equipment:
Aircraft 7 to 10 15% to 25%
Other 2 to 10 various
Manufacturing plant and equipment:
Buildings and improvements 10 to 25 10% to 20%
Other 2 to 12 various
Other property and equipment 3 to 40 various
================================================================================
</TABLE>
The Company depreciates its equipment from the date placed in service
until the equipment is sold or becomes fully depreciated.
The Company capitalizes, during the construction period, an allocation
of the interest cost incurred during the period required to complete the asset.
Engineering salaries and other expenses related to the construction of drilling
equipment are also capitalized.
Expenditures for new property or enhancements to existing property are
capitalized. Expenditures for routine maintenance and major repairs are charged
to operations as incurred. See Note 10.
INCOME TAXES. Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109")
20
<PAGE> 11
under which deferred income tax assets and liabilities reflect the future tax
consequences of differences between the financial statement and tax bases of
assets and liabilities. The cumulative effect of adopting SFAS 109 on the
Company's 1993 consolidated financial statements was not significant. In 1992,
the Company provided for income taxes under Accounting Principles Board Opinion
No. 11, which was superseded by SFAS 109.
EARNINGS (LOSS) PER COMMON SHARE. Earnings (loss) per share amounts are
computed by dividing net income (loss) by the weighted average number of common
shares outstanding during the year. Shares issuable upon conversion of the
Series I, Series II and Series III Floating Rate Convertible Subordinated
Debentures are excluded from the computation because their effect is
antidilutive. Additionally, shares issuable upon the exercise of stock options
are excluded because their effect is insignificant.
RECLASSIFICATIONS. Certain reclassifications have been made in the 1993 and
1992 amounts to conform with the 1994 presentations.
2. LONG-TERM DEBT
--------------------------------------------------------------------------------
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
11 7/8% Senior Notes due 2001 $200,000 $200,000
Nonrecourse note payable in
quarterly installments through
1994 at various rates 7,857
Nonrecourse notes payable in quarterly
installments through 1998 with a
final balloon payment due at
maturity; bearing interest at 7% and
collateralized by two aircraft costing
approximately $3,600,000 3,087 3,357
Nonrecourse notes payable due 1999
bearing interest at 7% 41,656
Series I subordinated convertible
debentures due 1996 bearing interest
at 1/2% above prime rate 450 450
Series II subordinated convertible
debenture due 1997 bearing interest
at 1/2% above prime rate 3,600 3,600
--------------------------------------------------------------------------------
Total 248,793 215,264
Less current maturities 289 8,127
--------------------------------------------------------------------------------
Remainder $248,504 $207,137
================================================================================
</TABLE>
Maturities of long-term debt for the five years ending December 31, 1999
are as follows: 1995 -- $289,000, 1996 -- $759,000, 1997 -- $3,932,000, 1998 --
$2,157,000 and 1999 -- $41,656,000.
The 11 7/8% Senior Notes due 2001 may be redeemed early, in whole or in
part from time to time at the Company's option, beginning December 1, 1996, upon
payment of a premium of 6% and descending 2% annually from that date to December
1, 1999, when the Company may redeem them at the principal amount.
In January 1993, the Company entered into a five-year nonrecourse loan
agreement with a bank to finance the purchase of two fixed-wing aircraft for
$3,560,000. The resulting notes payable are collateralized by the aircraft and
bear a fixed interest rate of 7%. The notes will be repaid in quarterly
installments through 1998, with a final balloon payment due at maturity.
In February 1994, in connection with the acquisition of net
manufacturing assets, the Company issued $41,656,000 in 7% promissory notes due
in 1999. See Note 1 for further information.
The $450,000 principal amount of Series I Floating Rate Convertible
Subordinated Debentures is convertible into $450,000 Series I Preferred Stock,
which may be converted into an aggregate of 78,261 shares of the Company's
common stock. At December 31, 1994, the interest rate was 9%. See Note 3 for
further information.
The $3,600,000 principal amount of the Series II Floating Rate
Convertible Subordinated Debenture is convertible into $3,600,000 Series II
Preferred Stock, which may be converted into an aggregate of 400,000 shares of
the Company's common stock. At December 31, 1994, the interest rate was 9%. See
Note 3 for further information.
In November 1994, the Company issued $10,300,000 principal amount of
Series III Floating Rate Convertible Subordinated Debentures. The debentures are
convertible into $10,300,000 Series III Preferred Stock, which may be converted
into an aggregate of 1,525,926 shares of the Company's common stock. The
debentures were issued in exchange for promissory notes containing provisions
for setoff. Accordingly, the debentures and notes, and the related interest
amounts, have been offset in the consolidated financial statements pursuant to
Financial Accounting Standards Board Interpretation No. 39. See Note 3 for
further information.
Interest payments for 1994, 1993 and 1992 were $26,900,000, $24,867,000
and $32,965,000, respectively.
Certain debt agreements of the Company contain provisions that require
an excess of current assets over current liabilities, require an excess of
stockholders' equity over consolidated funded indebtedness, and restrict
investments, sale/leaseback transactions, mergers, consolidations, sales of
assets, borrowings, creation of liens, purchases of the Company's capital stock,
and present and future common stock dividend payments. See Note 5 for further
information.
3. STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
The Company has two nonqualified stock option plans through which options have
been granted to certain key employees.
Under the terms of the Company's 1980 Nonqualified Stock Option Plan
(the "1980 Plan"), the Board of Directors granted options to purchase a total of
1,000,000 shares of the Company's common stock. The Board of Director's
authority to grant additional options under the 1980 Plan expired on January 25,
1990.
Under the original terms of the 1988 Nonqualified Stock Option Plan (the
"1988 Plan"), the Board of Directors could grant before January 21, 1998 options
to purchase a total of 2,000,000 shares of the Company's common stock.
Subsequently, at its April 1992 annual meeting, the stockholders of the Company
approved an
21
<PAGE> 12
amendment to extend the term of the 1988 Plan to January 21, 2003 and to
increase to 7,000,000 the number of shares of common stock that could be issued
pursuant to options granted thereunder.
At December 31, 1994, options for 4,798,504 shares had been granted at
an exercise price of $1.00 per share and 301 active, key employees had been
granted options. Options are exercisable to the extent of 25% after one year
from date of grant, 50% after two years, 75% after three years and 100% after
four years. All options not exercised expire ten years after the date of grant.
For financial accounting purposes, the Company recognizes compensation
expense with respect to any nonqualified option in an amount equal to the
difference between the market price per share and the option price per share on
the date of grant. The compensation is recorded as expense over the period of
time during which the employee performs services to earn the right to exercise
the option and an equal amount is credited to additional paid-in capital.
Stock option activity was as follows:
<TABLE>
<CAPTION>
Number of Shares
-----------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Stock options outstanding,
January 1 1,616,325 1,490,475 1,492,900
Changes during the year:
Granted, at $1.00
per share 982,000 707,250 344,750
Exercised (387,675) (530,650) (318,675)
Forfeited (28,000) (50,750) (28,500)
--------------------------------------------------------------------------------
Stock options outstanding,
December 31 2,182,650 1,616,325 1,490,475
================================================================================
Stock options exercisable,
December 31 440,338 317,137 389,975
================================================================================
Stock options available for
grant, December 31:
1988 Plan 3,463,821 4,417,821 5,074,321
================================================================================
</TABLE>
The Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan (the
"Plan") provides for the issuance to key employees of up to $20,000,000 in
aggregate principal amount of the Company's floating rate convertible
subordinated debentures. The debentures are initially convertible into
preferred stock which has no voting rights (except as required by law or the
Company's charter), no dividend and a nominal liquidation preference. The
preferred stock is immediately convertible into common stock.
Since the inception of the plan, debentures in the aggregate principal
amount of $19,925,000 have been issued by the Company. Out of the initial issue
of $5,125,000 principal amount of debentures in 1986, $450,000 were outstanding
at December 31, 1994 and are ultimately convertible into common stock at
$5.75 per share for each $1,000 principal amount of debenture at any time
through June 13, 1996, unless earlier redeemed or the conversion privilege is
terminated. In 1987, the Company issued a debenture in the principal amount of
$4,500,000, of which $3,600,000 was outstanding at December 31, 1994. This
residual amount is ultimately convertible into common stock at $9.00 per share
for each $1,000 principal amount of debenture at any time through September 10,
1997, unless earlier redeemed or the conversion privilege is terminated. In
November 1994, the Company issued debentures in the principal amount of
$10,300,000 which are ultimately convertible into common stock at $6.75 per
share for each $1,000 principal amount of debenture through November 30, 2004,
as follows, unless earlier redeemed or the conversion privilege is terminated:
$2,350,000 on or after November 30, 1995; $4,800,000 on or after November 30,
1996; $7,500,000 on or after November 30, 1997 and $10,300,000 on or after
November 30, 1998.
On February 25, 1992, the Company adopted a Stockholder Rights
Agreement to protect against coercive takeover tactics. The agreement provides
for the distribution to the Company's stockholders of one Right for each
outstanding share of common stock. Each Right entitles the holder to purchase
from the Company one one-hundredth of a share of Series A Junior Preferred
Stock of the Company at an exercise price of $30. In addition, under certain
circumstances, each Right will entitle the holder to purchase securities of
the Company or an acquiring entity at 1/2 market value. The Rights are
exercisable only if a person or group acquires 15% or more of the Company's
outstanding common stock or makes a tender offer for 30% or more of the
Company's outstanding common stock. The Rights will expire on February 25,
2002. The Company may generally redeem the Rights at a price of $.01 per Right
at any time until the 10th day following public announcement that a 15%
position has been acquired.
In June 1993, the Company sold 10,000,000 shares of its common stock
in a public offering. Net proceeds of the sale were $91,993,000 after deducting
underwriting commissions and direct offering costs totaling $4,257,000.
4. OTHER CURRENT LIABILITIES
Other current liabilities consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Gain on sale/leaseback transactions $ 3,198 $ 3,198
Accrued liabilities:
Income taxes 577 596
Compensation and related employee costs 15,803 9,082
Interest 2,195 2,018
Taxes and other 15,185 5,281
--------------------------------------------------------------------------------
Total $36,958 $20,175
================================================================================
</TABLE>
5. RESTRICTIONS ON RETAINED EARNINGS
--------------------------------------------------------------------------------
Under the terms of certain debt agreements, the Company has agreed not
to declare dividends or make any distribution on its common stock unless the
total dividends or distributions subsequent to December 31, 1991 are less than
the sum of a) $20,000,000, plus b) 50% of cumulative consolidated net income, if
positive, subsequent to December 31,
22
<PAGE> 13
1991, plus c) the net proceeds from the sale of any class of capital stock
after December 31, 1991, less d) 100% of cumulative consolidated net income, if
negative, subsequent to December 31, 1991. Under this dividend restriction, the
Company had a computed positive balance of $1,992,000 at December 31, 1994.
Subject to these restrictions, the Board of Directors will determine payment,
if any, of future dividends or distributions in light of conditions then
existing, including the Company's earnings, financial condition and
requirements, opportunities for reinvesting earnings, business conditions and
other factors.
6. BENEFIT PLANS
--------------------------------------------------------------------------------
Since 1952, the Company has sponsored defined benefit pension plans covering
substantially all of its employees. The benefits are based on an employee's
years of service and average earnings for the five highest consecutive calendar
years of compensation during the ten years immediately preceding retirement.
The Company's policy is to fund the minimum amount required by the Internal
Revenue Code.
The following table sets forth the plans' funded status and the amounts
recognized in the Company's consolidated balance sheet and includes, at
December 31, 1994, amounts related to a separate plan covering manufacturing
employees that was assumed in the acquisition of net manufacturing assets (in
thousands):
<TABLE>
<CAPTION>
December 31, 1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
Vested benefits $ 80,539 $ 76,974
================================================================================
Total benefits $ 87,380 $ 83,960
================================================================================
Plan assets at fair value $ 88,650 $ 89,843
Projected benefit obligation
for service rendered to date 99,275 98,263
--------------------------------------------------------------------------------
Plan assets less than projected
benefit obligation (10,625) (8,420)
Unrecognized net loss 2,941 4,091
Unrecognized net benefits being
recognized over 15 years (6,057) (7,268)
Unrecognized prior service cost 671 892
--------------------------------------------------------------------------------
Accrued pension cost included in
Other Liabilities $(13,070) $(10,705)
================================================================================
</TABLE>
The plans' assets consist primarily of equity securities and U.S.
Treasury bonds and notes and, at December 31, 1994, included 1,500,000 shares
of the Company's common stock at an average cost of $4.81 per share.
At December 31, 1994, $12,120,000 of the plans' assets were invested
in a dedicated bond fund. The plans had a basis in these assets of $10,757,000
yielding approximately 6.4% to maturity.
Net pension costs included the following components (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the period $ 4,784 $ 3,982 $ 3,632
Interest cost on projected
benefit obligation 7,879 6,796 6,334
Actual return on plan assets 7,264 (8,580) (9,590)
Net amortization and deferral (17,105) (5) 1,948
--------------------------------------------------------------------------------
Net periodic pension cost $ 2,822 $ 2,193 $ 2,324
================================================================================
</TABLE>
Assumptions used in calculations were:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 8.75% 7.5% 8.5%
Rate of compensation increase 4.0% 4.5% 4.5%
Expected rate of return on
plan assets 9.0% 9.0% 9.0%
================================================================================
</TABLE>
The Company also sponsors pension restoration plans to supplement the
benefits for certain key executives that would otherwise be limited by section
415 of the Internal Revenue Code. The plans are unfunded and had projected
benefit obligations at December 31, 1994 and 1993 of $2,404,000 and $2,246,000,
respectively. The net pension liabilities included in the Company's
consolidated balance sheet were $1,497,000 and $1,118,000 at December 31, 1994
and 1993, respectively. Net pension cost was $437,000 in 1994, $408,000 in 1993
and $557,000 in 1992.
In addition to providing pension benefits, the Company provides
certain health care and life insurance benefits for retired employees.
Substantially all of the Company's drilling and aviation employees may become
eligible for those benefits if they reach normal retirement age while working
for the Company.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employer's Accounting for Postretirement
Benefits Other Than Pensions," which requires accrual of the cost of retiree
health care and other postretirement benefits during the years an employee
provides services. Prior to 1993, the Company recognized the cost of these
benefits as they were paid. The effect of adopting the statement for the year
ended December 31, 1993 was to increase net periodic postretirement benefit
cost and the net loss by approximately $3,000,000 ($.04 per share).
23
<PAGE> 14
The following table sets forth the plan's status and the amounts
recognized in the Company's consolidated balance sheet (in thousands):
<TABLE>
<CAPTION>
December 31, 1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligations:
Retirees $ 8,081 $ 8,980
Fully eligible active plan participants 5,388 5,880
Other active plan participants 9,057 9,464
--------------------------------------------------------------------------------
Total benefits 22,526 24,324
Unrecognized transition obligation
being recognized over 20 years (17,022) (17,967)
Unrecognized net gain (loss) 1,195 (3,321)
--------------------------------------------------------------------------------
Accrued postretirement benefit cost
included in Other Liabilities $ 6,699 $ 3,036
================================================================================
</TABLE>
The actuarially determined accumulated postretirement benefit obligation
reflects health care cost trend rates of 13% for 1994 and decreasing by 1%
annually through 2001 and a discount rate of 8.75%. A one percentage point
increase in the assumed health care cost trend rate would increase net periodic
postretirement benefit cost by approximately $729,000 and increase the
accumulated postretirement benefit obligation by approximately $3,837,000.
Net postretirement benefit cost included the following components (in
thousands):
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Service cost $ 1,475 $ 1,039
Interest cost 1,799 1,537
Net amortization and deferral 1,003 946
--------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 4,277 $ 3,522
================================================================================
</TABLE>
Cash payments for postretirement benefits in 1994, 1993 and 1992 were
approximately $614,000, $500,000 and $856,000, respectively.
In October 1994, the Board of Directors approved the Rowan Companies,
Inc. Savings and Investment Plan in conformity with section 401(k) of the
Internal Revenue Code. The plan will commence on or about April 1, 1995 and
cover all drilling and aviation employees. Manufacturing employees are covered
by a separate plan to which the Company contributed approximately $397,000
in 1994.
7. INCOME TAXES
--------------------------------------------------------------------------------
The detail of income tax provisions (credits) is presented below (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ (98) $ 123 $ (82)
Foreign 145 501 707
State 268 7
--------------------------------------------------------------------------------
Total current provision 315 624 632
Deferred -- foreign and other 154 (912) (203)
--------------------------------------------------------------------------------
Total income tax provision (credit) $ 469 $(288) $ 429
================================================================================
</TABLE>
Total income tax expense (credit) shown in the consolidated statement
of operations differs from the amount that would be computed if the income
(loss) before income taxes was multiplied by the federal income tax rate
(statutory rate) applicable in each year. The reasons for this difference
are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35% 35% 34%
Tax at statutory rate $(7,883) $(4,742) $(24,930)
Increase (decrease) in taxes resulting
from:
Limitation on utilization of tax
benefits 7,663 3,679 24,214
Additional taxes on foreign source
income 753 551 505
Nondeductible compensation expense 28 609
Alternative minimum tax (98) 123
Other -- net 34 73 31
--------------------------------------------------------------------------------
Total income tax provision (credit) $ 469 $ (288) $ 429
================================================================================
</TABLE>
Temporary differences and carryforwards which gave rise to deferred
tax assets and liabilities at December 31, 1994 and 1993 were as follows
(in thousands):
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax asset:
Deferred sale/leaseback gain $ 6,563 $ 7,682
Accrued pension and postretirement
benefit costs 7,454 5,109
ESOP/PAYSOP contributions 1,753 1,836
Net operating loss carryforward 95,352 91,869
Investment tax credit carryforward 56,450 58,256
Other 3,256 1,629
--------------------------------------------------------------------------------
170,828 166,381
Valuation allowance (69,031) (61,665)
--------------------------------------------------------------------------------
101,797 104,716
--------------------------------------------------------------------------------
Deferred tax liability:
Property, plant and equipment 102,113 104,974
Foreign income taxes 3,030 2,644
Other 1,122 1,412
--------------------------------------------------------------------------------
106,265 109,030
--------------------------------------------------------------------------------
Deferred tax liability - net $ 4,468 $ 4,314
================================================================================
</TABLE>
The valuation allowance consists of investment tax credit
carryforwards and a portion of the net operating loss carryforwards which are
forecast as not being utilized prior to their statutory expiration dates.
The valuation allowance increased by $7,366,000 in 1994 primarily as a result
of the Company's loss in the current year.
At December 31, 1994, the Company had $51,441,000 of regular
investment tax credits and $5,009,000 of ESOP (Employee Stock Ownership Plan)
tax credits available for application against future federal taxes payable.
Total credits, if not utilized, will expire as follows: 1995 -- $6,954,000,
1996 -- $12,772,000, 1997 -- $11,069,000,
24
<PAGE> 15
1998 -- $8,027,000, 1999 -- $10,110,000, 2000 -- $2,017,000 and 2001 --
$5,501,000.
At December 31, 1994, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $272,434,000 which will
expire, if not utilized, as follows: 2001 -- $88,977,000, 2002 -- $129,123,000,
2007 -- $49,047,000, 2008 -- $3,003,000 and 2009 -- $2,284,000.
Deferred income taxes not provided for undistributed earnings of foreign
subsidiaries, because such earnings are considered to be permanently invested
abroad, amounted to approximately $3,500,000 at December 31, 1994.
Loss before income taxes consisted of $(21,640,000), $(10,346,000) and
$(64,158,000) of domestic losses, and $(880,000), $(3,201,000) and $(9,166,000)
of foreign losses for 1994, 1993 and 1992, respectively.
Income tax payments exceeded refunds by $393,000 in 1994, $248,000 in
1993 and $1,493,000 in 1992.
8. FAIR VALUES OF FINANCIAL INSTRUMENTS
--------------------------------------------------------------------------------
At December 31, 1994, the carrying amount of the Company's cash and cash
equivalents approximated fair value due to the short maturity of the
instruments. Except for the 11 7/8% Senior Notes discussed below, the carrying
amount of the Company's long-term debt was estimated to approximate its fair
value at December 31, 1994 based upon quoted market prices for similar issues.
The 11 7/8% Senior Notes had a fair value of $210,000,000 at
December 31, 1994, or a $10,000,000 premium to carrying value, based upon
the closing price quoted on the New York Stock Exchange.
9. COMMITMENTS AND CONTINGENT LIABILITIES
--------------------------------------------------------------------------------
During 1984, the Company entered into a sale/leaseback transaction whereby the
Company sold the Rowan-Halifax, a cantilever jack-up, for $66,500,000 in cash
and leased the rig back under a 15-year operating lease at an effective
interest rate of 9.3%. In 1985, the Company sold a similar jack-up, the Cecil
Provine, for $60,000,000 in cash and entered into a 15-year operating lease at
an effective interest rate of 8.0%. Under each lease agreement, at the end of
the basic 15-year lease, the Company has an option to purchase the rig at the
then fair market value, terminate the lease, or renew the lease at the lesser
of a) a fixed rental renewal of 50% of the weighted average amount of the semi-
annual installments during the basic term, or b) a fair market rental renewal.
Each transaction has resulted in a gain which has been deferred for financial
statement purposes and is being recognized over its respective lease term.
Total payments to be made under the sale/leaseback agreements are being
expensed on a straight-line basis though the payments themselves are variable.
The excess of inception-to-date sale/leaseback expenses over related payments
was $14,089,000 and $15,549,000 at December 31, 1994 and 1993, respectively.
The Company has operating leases covering aircraft hangars, offices and
computer equipment and the sale/leaseback rigs. Net rental expense under all
operating leases was $20,756,000 in 1994, $17,633,000 in 1993 and $18,746,000
in 1992.
As of December 31, 1994, the future minimum payments to be made under
noncancelable operating leases were (in thousands):
<TABLE>
<S> <C>
1995 $ 21,907
1996 20,499
1997 22,653
1998 18,549
1999 21,007
Later Years 18,254
----------------------------------------------------------
Total $122,869
==========================================================
</TABLE>
The Company estimates 1995 capital expenditures at between $30,000,000
and $35,000,000.
In management's opinion, at December 31, 1994, there were no
contingencies, claims or lawsuits against the Company which are expected to
have a material adverse effect on its financial position or results of
operations.
10. SEGMENTS OF BUSINESS
--------------------------------------------------------------------------------
The Company has three principal segments of business: contract and turnkey
drilling of oil and gas wells, both onshore and offshore ("Drilling"), charter
helicopter and fixed-wing aircraft services ("Aviation") and, beginning in
1994, the manufacture of heavy equipment for the mining, timber and
transportation industries, alloy steel and steel plate and marine drilling
equipment ("Manufacturing").
Drilling services are provided in both domestic and foreign areas.
Aviation services include charter airline, flightseeing and forest fire control
services in Alaska as well as oil and gas related services in the Gulf of
Mexico. Manufacturing operations are conducted in Longview, Texas, but sales and
services are carried out throughout the United States and in many foreign
locations.
Total revenues reported by industry segments consist principally of
revenues from unaffiliated customers. The Company had revenues, primarily from
drilling operations, of 10% or more of consolidated revenues from one customer
in each of 1994 (10%), 1993 (17%) and 1992 (11%).
The Company believes that it has no significant concentrations of
credit risk. The Company has never experienced any significant credit losses
and its drilling and aviation services customers have heretofore primarily
been large energy companies and government entities. The addition of
manufacturing operations in 1994 has diversified the Company's operations and
attendant credit risk. Further, the Company has the ability to relocate its
major drilling and aviation assets over significant distances on a timely
basis in response to changing market conditions.
Assets are identified to a segment by their direct use. The Company
classifies its drilling rigs for segment purposes as domestic or foreign based
upon the drilling rig's country of registry. Accordingly, drilling rigs
registered in the United States are classified with domestic operations and
revenues generated from foreign operations of these rigs are considered export
revenues. Revenues generated by foreign-registered drilling rigs from
operations offshore the United States are classified as foreign revenues.
Assuming revenues derived from all drilling operations within the United
States, both onshore and offshore, were treated as domestic revenues and
export revenues were treated as foreign revenues, revenues from foreign
drilling operations would have been $84,343,000 in 1994.
25
<PAGE> 16
Domestic drilling operations included export revenues of
$84,025,000 in 1994, $79,697,000 in 1993 and $91,563,000 in 1992. Except for
$34,533,000 in 1994, $38,005,000 in 1993 and $30,552,000 in 1992, from other
foreign areas, such export revenues were generated from North Sea operations.
Manufacturing operations in 1994 included export sales of $34,543,000.
At December 31, 1994, 35 drilling rigs, 18 of which were marine rigs,
with a carrying value of $213,454,000 were located in the United States and
6 marine drilling rigs having a carrying value of $164,175,000 were located
in foreign jurisdictions.
Information concerning the Company's operations is summarized by
segment as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Drilling services:
Domestic $217,395 $243,993 $143,818
Foreign 28,522 27,029 18,303
Aviation services 95,578 82,174 87,877
Manufacturing sales and services 96,664
-----------------------------------------------------------------------------------------------
Consolidated $438,159 $353,196 $249,998
===============================================================================================
Operating profit (loss):
Drilling services:
Domestic $ 4,771 $ 22,856 $(36,726)
Foreign (4,597) (3,803) (3,688)
Aviation services 4,614 2,248 1,882
Manufacturing sales and services 7,667
-----------------------------------------------------------------------------------------------
Consolidated 12,455 21,301 (38,532)
Gain on disposals of property, plant and equipment 1,344 1,955 731
Interest and other income 5,073 2,498 2,823
General and administrative (13,862) (13,940) (12,092)
Interest expense (27,530) (25,361) (26,254)
-----------------------------------------------------------------------------------------------
Income (loss) before income taxes $(22,520) $(13,547) $(73,324)
===============================================================================================
Identifiable assets at December 31:
Drilling services:
Domestic $531,990 $584,583 $491,456
Foreign 40,863 41,687 50,061
Aviation services 148,710 138,993 142,784
Manufacturing sales and services 83,616
-----------------------------------------------------------------------------------------------
Total assets at December 31 $805,179 $765,263 $684,301
===============================================================================================
</TABLE>
Certain other financial information for each of the Company's principal
business segments is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization:
Drilling $38,166 $40,874 $39,719
Aviation 11,009 11,044 11,648
Manufacturing 1,615
Capital expenditures:
Drilling 17,033 12,741 31,014
Aviation 14,657 9,248 8,514
Manufacturing 11,687
Maintenance and repairs:
Drilling 26,499 22,129 19,515
Aviation 16,138 10,197 13,718
Manufacturing 7,836
==============================================================================================
</TABLE>
11. RELATED PARTY TRANSACTIONS
The chairman of the board of one of the Company's drilling customers served as
a director of the Company until 1993. Transactions with this customer involved
day rates and operating costs which were comparable to those experienced by the
Company in connection with third party contracts for similar rigs. Because of
the aforementioned relationship, each drilling contract between the Company and
the customer was reviewed and ratified by the Board of Directors of the Company
during his tenure as a board member. Related revenues were $3,469,000 in 1993
and $5,284,000 in 1992 and trade receivables at December 31, 1993 included
$216,000 from this customer.
In 1993, a director of the Company was an investment banker with one
of the underwriters of the Company's 10,000,000 share common stock offering.
That underwriter received $2,876,000 in commissions from the offering.
26
<PAGE> 17
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
--------------------------------------------------------------------------------
The following unaudited information for the quarters ended March 31, June 30,
September 30 and December 31, 1993 and 1994 includes, in the Company's opinion,
all adjustments (which comprise only normal recurring accruals) necessary for a
fair presentation of such amounts (in thousands except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993:
Revenues $ 73,540 $ 82,093 $106,629 $ 90,934
Operating profit (loss) (4,093) 1,195 16,385 7,814
Net income (loss) (13,509) (8,197) 8,175 272
Earnings (loss) per common share (.18) (.11) .10 .00
--------------------------------------------------------------------------------
1994:
Revenues $100,704 $105,380 $129,219 $102,856
Operating profit (loss) 3,432 3,596 13,859 (8,432)
Net income (loss) (5,958) (5,862) 5,646 (16,815)
Earnings (loss) per common share (.07) (.07) .07 (.20)
================================================================================
</TABLE>
The sum of the per share amounts for the quarters may not equal the
per share amounts for the full years since the quarterly and full year per
share computations are made independently.
COMMON STOCK PRICE RANGE,
CASH DIVIDENDS AND STOCK SPLITS
--------------------------------------------------------------------------------
The price range below is as reported by the New York Stock Exchange on the
Composite Tape. On March 1, 1995 there were approximately 3,800 holders of
record.
<TABLE>
<CAPTION>
Quarter 1994 1993
--------------------------------------------------------------------------------
High Low High Low
--------------------------------------------------------
<S> <C> <C> <C> <C>
First $9.13 $6.88 $10.00 $6.63
Second 8.75 6.63 10.75 8.63
Third 9.25 7.00 10.38 7.63
Fourth 7.88 5.75 10.63 7.50
================================================================================
</TABLE>
The Company did not pay any dividends on its common stock during 1994
and 1993. See Note 5 of the Notes to the Consolidated Financial Statements for
restrictions on dividends.
Stock splits and stock dividends since the Company became publicly
owned in 1967 have been as follows: 2 for 1 stock splits on January 25, 1973,
December 16, 1976 and May 13, 1980; 2 for 1 stock splits effected in the
form of a stock dividend on February 6, 1978 and January 20, 1981; and a 5%
stock dividend on May 21, 1975.
On the basis of these splits and dividends, each share acquired prior
to January 25, 1973 would be represented by 33.6 shares if still owned at
present.
27
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of subsidiaries of the Registrant:
Registrant and Parent:
Rowan Companies, Inc.
Wholly-Owned Subsidiaries of Registrant:
Era Aviation, Inc., a Washington corporation
Rowan International, Inc., a Panamanian corporation
Rowandrill, Inc., a Texas corporation
Rowan Drilling Company, Inc., a Texas corporation
Atlantic Maritime Services, Inc., a Texas corporation
Rowan Petroleum, Inc., a Texas corporation
LeTourneau, Inc., a Texas corporation
Note: Certain subsidiaries have been omitted from this listing because
such subsidiaries, when considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Rowan Companies, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 4
to Registration Statement No. 2-58700, Amendment No. 1 to Registration
Statement No. 33-33755, Registration Statement No. 33-61444, Registration
Statement No. 33-51103, Registration Statement No. 33-51105 and Registration
Statement No. 33-51109, each on Form S-8, and to the incorporation by reference
in Amendment No. 1 to Registration Statement No 33-15721, Amendment No. 2 to
Registration Statement No. 33-30057 and Amendment No. 2 to Registration
Statement No. 33-61696, each on Form S-3, of our report dated March 3, 1995,
incorporated by reference in this Annual Report on Form 10-K of Rowan
Companies, Inc., for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Houston, Texas
March 31, 1995
<PAGE> 1
EXHIBIT 24
Form 10-K for the Year Ended December 31, 1994
The Exchange Act of 1934
____________________
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C. R. Palmer or E. E. Thiele, or either
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign to the Company's Form 10-K for the year ended
December 31, 1994 and any or all amendments, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
____________________
Pursuant to the requirement of the Exchange Act of 1934, the Company's
Form 10-K for the year ended December 31, 1994 or amendment has been signed
below by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
------------------------------- President, Chairman of the
(C. R. Palmer) Board and Chief Executive Officer
RALPH E. BAILEY Director March 31, 1995
(Ralph E. Bailey)
HENRY O. BOSWELL Director March 31, 1995
(Henry O. Boswell)
H. E. LENTZ Director March 31, 1995
(H. E. Lentz)
WILFRED P. SCHMOE Director March 31, 1995
(Wilfred P. Schmoe)
CHARLES P. SIESS, JR. Director March 31, 1995
(Charles P. Siess, Jr.)
PETER SIMONIS Director March 31, 1995
(Peter Simonis)
C. W. YEARGAIN Director March 31, 1995
(C. W. Yeargain)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ROWAN COMPANIES, INC. FOR THE YEAR ENDED
DECEMBER 31, 1994 INCLUDED IN ITS 1994 ANNUAL REPORT TO STOCKHOLDERS AND
INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> $ 111,070
<SECURITIES> 0
<RECEIVABLES> 78,317
<ALLOWANCES> 0
<INVENTORY> 59,386
<CURRENT-ASSETS> 253,705
<PP&E> 1,244,103
<DEPRECIATION> 737,982
<TOTAL-ASSETS> 805,179
<CURRENT-LIABILITIES> 57,760
<BONDS> 248,504
<COMMON> 10,717
0
0
<OTHER-SE> 431,630
<TOTAL-LIABILITY-AND-EQUITY> 805,179
<SALES> 90,460
<TOTAL-REVENUES> 438,159
<CGS> 72,717
<TOTAL-COSTS> 439,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,530
<INCOME-PRETAX> (22,520)
<INCOME-TAX> 469
<INCOME-CONTINUING> (22,989)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,989)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
