<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1995
REGISTRATION NO. 33-62885
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ROWAN COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5450 TRANSCO TOWER 75-0759420
(STATE OR OTHER JURISDICTION OF 2800 POST OAK BOULEVARD (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) HOUSTON, TEXAS 77056-6196 IDENTIFICATION
(713) 621-7800 NUMBER.)
(ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)
C.R. PALMER
5450 TRANSCO TOWER
2800 POST OAK BOULEVARD
HOUSTON, TEXAS 77056-6196
(713) 621-7800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration
Statement, as determined by the Selling Stockholders in light of market
conditions
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. [x]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Proposed Maximum Proposed Maximum
Amount Offering Price Aggregate Offering Amount of
Title of Securities to be Registered to be Registered(1) Per Share(2) Price(2) Registration Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.125 per
share 1,525,926 $8.0625 $12,302,778 $4,242.34
=========================================================================================================================
</TABLE>
(1) There are also registered hereunder such indeterminate number of
additional shares of Common Stock, par value $.125 per share, of the
Registrant as may be issuable upon conversion of the Series III Preferred
Stock, par value $1.00 per share, of the Registrant pursuant to the
anti-dilution and similar provisions of such Series III Preferred Stock.
(2) Estimated pursuant to Regulation 457(c) solely for the purpose of
calculating the registration fee based on the average of the high and low
prices reported on the New York Stock Exchange as of September 20, 1995.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Information required
S-3 S-K to be included in Location
Item No. Item No. the Prospectus in Prospectus
-------- -------- -------------- -------------
<S> <C> <C> <C>
Item 1 501(C) Cover page Cover
Item 2 502 Inside Front; Outside Back Cover Page Inside Front; Outside Back
Cover Page
502(a) Available Information
502(c) Incorporation by Reference Inside Front; Outside Back
Cover Page
502(e) Dealer Representation *
Item 3 503(c) Summary *
503(b) Address, Telephone Number Inside Front Cover
503(c) Risk Factors Risk factors
Item 4 504 Use of Proceeds *
Item 5 505 Determination of Offering Price *
Item 6 506 Dilution *
Item 7 507 Selling Securities Holders Selling Stockholders
Item 8 508 Plan of Distribution *
Item 9 202 Description of Securities Description of the Securities
Item 10 509 Interests of Named Experts and Counsel Legal Opinions; Experts
Item 11 -- Material changes Incorporation of certain
Documents by Reference;
Risk Factors
Item 12 -- Incorporation of certain Documents by Incorporation of certain
Reference Documents by Reference;
Risk Factors
Item 13 SEC Policy on Indemnification Indemnification of Directors
and Officers
----------------
* Not Applciable
</TABLE>
<PAGE> 3
PROSPECTUS
ROWAN COMPANIES, INC.
1,525,926 SHARES
COMMON STOCK, $.125 PAR VALUE
This Prospectus relates to the sale of up to 1,525,926 shares of the
common stock, $.125 par value per share ("Common Stock"), of Rowan Companies,
Inc., a Delaware corporation (the "Company"), to be offered and sold by any
selling stockholder named herein (each a "Selling Stockholder" and
collectively, the "Selling Stockholders"). It is anticipated that offers of
such shares of Common Stock will be made on the New York Stock Exchange at
prevailing prices on said exchange on the date of sale. See "Selling
Stockholders." The Company will not receive any of the proceeds of the sale of
the Common Stock offered hereby. Investors should be aware of certain factors
in connection with this offering. See "Risk Factors" located on pages 5-8 of
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER 30, 1995
<PAGE> 4
AVAILABLE INFORMATION
Rowan Companies, Inc. (together with its subsidiaries, when
applicable, the "Company" or "Rowan") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at The Citicorp Center, 500 West Madison
Street (Suite 1400), Chicago, Illinois 60661, and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material also may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, such material also
may be inspected and copied at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005 and the Pacific Stock Exchange
Incorporated, 301 Pine Street, San Francisco, California 94104, on which
exchanges the Common Stock of the Company is listed.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements contained herein
concerning provisions of certain documents are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference. For
further information, reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates into this Prospectus by reference the
following documents filed with the Commission (File No. 1-5491) pursuant to the
Exchange Act: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (the "Form 10-K"); (ii) the Company's Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1995 and June 30, 1995, (iii) the
description of the Company's common stock, $.125 par value (the "Common
Stock"), contained in the Company's Registration Statement on Form 8-A, as
amended, relating thereto and (iv) the description of the Company's Preferred
Stock Purchase Rights contained in the Company's Registration Statement on Form
8-A, as amended, relating thereto.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Company will provide, without charge, to each person to whom a
copy of this Prospectus is delivered, upon the written or oral request of any
such person, a copy of any or all of the documents or information which are
incorporated herein by reference, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to Rowan Companies, Inc., 5450 Transco Tower, 2800
Post Oak Boulevard, Houston, Texas 77056-6196, Attention: Corporate
Secretary, telephone: (713) 621-7800.
-2-
<PAGE> 5
SELLING STOCKHOLDERS
This Prospectus relates to offers and sales by Selling Stockholders of
the shares of Common Stock received or to be received by them upon conversion
of shares of Series III Preferred Stock, par value $1.00 per share, of the
Company ("Series III Preferred Stock") held or to be held by them. The Selling
Stockholders currently hold an aggregate of $10,300,000 face amount of Series
III Floating Rate Subordinated Convertible Debentures due 2004 (the "Series III
Debentures") which were purchased from the Company at par pursuant to the terms
of the Company's 1986 Convertible Debenture Incentive Plan, as amended (the
"Plan"), previously approved by the Company's stockholders. Without taking into
account antidilution adjustments, the outstanding Series III Debentures are
convertible, in specified amounts and intervals until November 30, 2004, into
an aggregate of 10,300 shares of Series III Preferred Stock, which possess
nominal rights other than the right to convert into an aggregate of 1,525,926
shares of Common Stock at an initial conversion price of $6.75 per share (the
closing price of the Common Stock on the date prior to the date the related
debentures were issued). On November 30, 1995, $2,350,000 of the Series III
Debentures will be convertible into 2,350 shares of Series III Preferred Stock,
and such Series III Preferred Stock, upon issuance, will be immediately
convertible into 348,148 shares of Common Stock.
The Company has been advised by the Selling Stockholders that they
intend to sell any shares of Common Stock covered hereby from time to time on
the New York Stock Exchange. Any such sales will be made at prices prevailing
on such exchange on the date of sale. Any Selling Stockholder, however, may
also make privately negotiated sales directly or through a broker or brokers.
The following table sets forth the names and positions with the Company
of the Selling Stockholders, the number of shares of Common Stock beneficially
owned by each of them as of October 30, 1995 and the number of shares of Common
Stock covered by this Prospectus. Because only a portion of the Debentures
owned by the Selling Stockholders are convertible within 60 days of the filing
of this Registration Statement, the remaining shares of Common Stock into which
such Debentures ultimately may be converted are not included in the number of
shares of Common Stock shown as beneficially owned by each such Selling
Stockholder.
<TABLE>
<CAPTION>
Number of Amount to be Held
Number of Shares After Offering(5)
Shares Covered ------------------------------
Selling Position with Beneficially by this Number
Stockholder the Company(1) Owned(2) Prospectus(3) of Shares(4) Percentage
- ---------------- ------------------------ ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
C. R. Palmer Chairman of the Board, 751,808(6) 711,111 588,845 (4)
President, Chief
Executive Officer
R. G. Croyle Executive Vice President 109,015(7)(8) 162,963 71,978(8) (4)
D. F. McNease Senior Vice President - 56,792(7) 162,963 19,755 (4)
Drilling
E. E. Thiele Senior Vice President - 102,787(7) 162,963 65,750 (4)
Finance, Administration
and Treasurer
J.E. Beckman Vice President - 37,037(7) 162,963 -0- (4)
Manufacturing;
President and Chief
Executive Officer of
LeTourneau, Inc.
C. W. Johnson Vice President - 53,609(7) 162,963 16,572 (4)
Aviation; President and
Chief Operating Officer
of Era Aviation, Inc.
</TABLE>
-3-
<PAGE> 6
__________________________
(1) Each of the Selling Stockholders continuously served in the positions
shown herein for more than the past three years except as follows: Mr.
Croyle served as Vice President, Legal until October 1993; Mr. McNease
served as Vice President, Drilling until October 1993; Mr. Thiele served in
the position of Vice President, Finance, Administration and Treasurer from
January 1994 to April 1994 and prior to January 1994, he served as Vice
President, Finance and Administration; Mr. Beckman served in the position
of President and Chief Executive Officer of LeTourneau, Inc., a subsidiary
of the Company, from February 1994 to April 1994 and prior to February
1994, he served as President of Marathon LeTourneau Company, a company
whose net assets were purchased by LeTourneau, Inc. in February 1994; and
Mr. Johnson served in the position of President and Chief Operating
Officer of Era Aviation, Inc., a subsidiary of the Company, from December
1993 to April 1994 and prior to December 1993, he served as Executive Vice
President of Era.
(2) Included herein are shares of Common Stock that may be acquired within 60
days of October 30, 1995 through (i) the conversion of Series I Floating
Rate Convertible Subordinated Debentures (the "Series I Debentures"), the
Series II Floating Rate Convertible Subordinated Debenture (the "Series II
Debenture") and the first of four tranches of the Series III Floating Rate
Convertible Subordinated Debentures convertible on November 30, 1995
("Initial Series III Debenture Tranche") and (ii) the exercise of
Nonqualified Stock Options (the "Options") as follows: C. R. Palmer -
Series II Debenture, Initial Series III Debenture Tranche and Options -
400,000 shares, 162,963 shares and 182,500 shares, respectively; R. G.
Croyle - Series I Debentures, Initial Series III Debenture Tranche and
Options - 43,478 shares, 37,037 shares and 27,500 shares, respectively;
D. F. McNease - Initial Series III Debenture Tranche and Options -
37,037 and 18,750 shares, respectively; E. Thiele - Initial Series III
Debenture Tranche - 37,037 shares; J. E. Beckman - Initial Series III
Debenture Tranche - 37,037 shares; and C. W. Johnson - Initial Series III
Debenture Tranche - 37,037 shares.
(3) These amounts reflect for each Selling Stockholder the total offering of
Series III Debentures, which includes the Initial Series III Debenture
Tranche amounts referred to in (2) above. Also, see (5) below for the
timing of the conversions.
(4) Less than one percent of the shares outstanding as of October 30, 1995
including the shares of Common Stock to be received by the Selling
Stockholder's upon conversion of the Series III Debentures.
(5) Assumes that each Selling Stockholder converts all of his Series III
Debentures into Series III Preferred Stock, converts all such Series III
Preferred Stock into Common Stock, and sells all such Common
Stock. As to the timing of the conversions, the number of shares of Common
Stock which would result, if each of the four tranches of
debentures were to be converted by the Selling Stockholders at the earliest
permissible dates, are as follows:
<TABLE>
<CAPTION>
Timing of the Conversion
and the Shares to be Acquired
--------------------------------------------------
Selling Stockholder 11/30/95 11/30/96 11/30/97 11/30/98 Total Shares
- ------------------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
C. R. Palmer 162,963 177,778 177,778 192,592 711,111
R. G. Croyle 37,037 37,037 44,444 44,445 162,963
D. F. McNease 37,037 37,037 44,444 44,445 162,963
E. E. Thiele 37,037 37,037 44,444 44,445 162,963
J. E. Beckman 37,037 37,037 44,444 44,445 162,963
C. W. Johnson 37,037 37,037 44,444 44,445 162,963
</TABLE>
(6) Of the 711,111 shares of Common Stock registered herein on behalf of
Mr. Palmer, 162,963 shares are beneficially owned by him and 548,148 shares
are obtainable by him at periodic dates more than 60 days after the date of
this prospectus.
(7) Of the 162,963 shares of Common Stock registered herein on behalf of each
of Messrs. Croyle, McNease, Thiele, Beckman and Johnson, 37,037 shares are
benefically owned by each of them and 125,926 shares are obtainable by each
of them at periodic dates more than 60 days after the date of this
prospectus.
(8) Includes 1,000 shares owned by Mr. Croyle's children. Mr. Croyle disclaims
beneficial ownership of such shares.
-4-
<PAGE> 7
RISK FACTORS
Prospective purchasers should consider carefully the following matters,
as well as the information contained elsewhere in this Prospectus and
incorporated herein by reference.
RELIANCE ON OIL AND GAS INDUSTRY
The Company's drilling and aviation operations are both dependent upon
the condition of the oil and gas industry, in particular upon the level of
offshore drilling activity. Despite occasional improvements, the market for
offshore contract drilling and related services has been depressed for over a
decade.
An improvement in natural gas prices strengthened utilization and day
rates in the Gulf of Mexico throughout most of 1994. However, natural gas
prices began a downward trend in late 1994 which continued through the first
few months of 1995 thereby softening offshore day rates. By mid-year 1995,
Gulf of Mexico day rates began to strengthen even though soft energy prices
persisted. The North Sea drilling market, on the other hand, experienced weak
drilling activity and day rates throughout 1994 due to energy companies
downsizing their drilling programs. By mid-year 1995, the North Sea market had
begun to show improvement both in terms of utilization and day rates. It is
not possible to predict whether the recent upturns in both the Gulf of Mexico
and North Sea markets represent the beginning of long-term trends or merely a
repeat of short-term cycles. Drilling revenues represented 56% and 52% of the
Company's consolidated revenues for 1994 and the first half of 1995,
respectively.
Although the Company has continued to diversify its aircraft services
toward non-energy markets, e.g., forest fire control, commuter airline
services, flightseeing and medivac services, the results of its aviation
division are still heavily influenced by oil and natural gas exploration and
production, principally in the Gulf of Mexico. Aviation revenues represented
22% and 18% of the Company's consolidated revenues for 1994 and the first half
of 1995, respectively.
With the exception of its marine rig construction and support
operations, the Company's manufacturing segment is not dependent upon the
condition of the oil and gas industry. The manufacturing segment was added in
1994 when the Company purchased through its wholly-owned subsidiary,
LeTourneau, Inc., the net assets of Marathon LeTourneau Company.
OPERATING LOSSES AND LIQUIDITY PROBLEMS
The Company has incurred net losses in four of the last five years and
losses from operations in three of the last five years. For the first six
months of 1995, the Company experienced a loss from operations, a net loss and
an operating cash deficit. Market conditions and the Company's operations have
improved since June 30 and the Company expects to be profitable and generate an
operating cash surplus over the last half of 1995. However, there can be no
assurance that market conditions or the Company's operations will continue to
improve and even with such improvements, the Company will likely incur a net
loss in 1995. In addition, any cash provided by operations in 1995 may not be
sufficient to cover planned capital expenditures, which are estimated to be
$40 to $45 million for 1995, and debt service requirements during the year.
The Company currently has no outside sources of funds but believes that
existing working capital will be adequate to cover its commitments at least
through the remainder of 1995.
ADDITIONAL RISK OF TURNKEY DRILLING OPERATIONS
The Company has been providing drilling services on a turnkey basis
since mid 1992. In 1993, the first full year of operation, 33% of the
Company's drilling revenues were from this source. In 1994 and the first half
of 1995, the percentages had dropped to 26% and 18%, respectively. Turnkey
drilling contributed incremental operating profits of $9.7 million, $3.1
million and $61,000 in 1993, 1994 and the first half of 1995, respectively.
-5-
<PAGE> 8
Under turnkey contracts, the Company's compensation is contingent on
successfully drilling to a specified depth and, under certain contracts,
completing the well. The turnkey drilling contractor is responsible for making
all critical decisions, whereas under day rate contracts ultimate control is
exercised by the operator. The amount of the Company's compensation is fixed
at the amount bid by the Company to drill the well. Thus, if operational
problems prevent performance, the Company will not be paid unless it chooses to
drill a new well at its own expense, and if unforeseen problems arise that
cause the cost of performance to exceed the turnkey price, the Company must
absorb the loss. In a day rate contract, those risks are retained by the
operator. Drilling deviated holes into high-pressure formations is a complex
process and problems frequently occur. The Company routinely budgets for
contingencies and believes that its experience and database on drilling
conditions in the Gulf of Mexico permit it to calculate drilling risks within
tolerable limits; there can be no assurance, however, that the cost of
contingencies will not exceed budgeted amounts. The Company carries insurance
against certain other risks associated with turnkey drilling operations.
Except for one drilling assignment in the North Sea, all of the
Company's offshore turnkey drilling to date has been in the Gulf of Mexico.
The Company may, however, conduct turnkey drilling operations in other areas in
the future.
INTENSE COMPETITION
All three of the Company's business segments are subject to intense
competition in each of the markets they serve. A few of the Company's
competitors possess greater financial resources than the Company and, in the
case of drilling, many of the competitors have been substantially relieved of
debt burdens by bankruptcy courts.
In the case of drilling operations, there has been an oversupply of
rigs for more than a decade, although availability has tightened in various
geographical markets from time to time. The Company believes that competition
for drilling contracts in non-niche markets will continue to be intense for the
foreseeable future.
Because the Company is a relatively new entrant in the business of
providing offshore platform and removal services, many of the Company's
competitors have the advantages of having offered these services for longer
periods of time, which include the benefits of established technological
know-how and more extensive customer bases. While competition can be expected
to be intense, the Company is the only provider of such services to operate a
crane from a jack-up rig, as opposed to a barge, a feature that gives the
Company an operating advantage under adverse weather conditions.
The Company's aviation and manufacturing operations also face vigorous
competition in each of the markets in which they compete, typically against
more than one competitor. In many instances, such competitors have
significantly larger market shares.
OPERATIONAL HAZARDS
The 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 removal and installation 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 floor and ballasting
-6-
<PAGE> 9
semi-submersible units require skillful handling to avoid capsizing or other
serious damage. The process of removing platforms and caissons using underwater
explosives involves substantial risks and requires a significant amount of skill
in order to confine the resulting destruction to the intended areas.
Under turnkey contracts, the Company is normally responsible for
certain risks that would generally be assumed by the customer under day rate
contracts. 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 that has
blown out. The Company carries insurance to cover such risks in turnkey
operations, with coverage terms the Company believes are at least comparable to
industry practices. The Company's day rate contracts generally provide that
the Company is substantially indemnified by its customers against 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 or availability of such indemnities.
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's manufacturing operations are considered
potentially hazardous as a result of the possibility of the air, land and
inland waters associated with its manufacturing processes becoming polluted and
the possibility of injury and/or death and property damage arising from the use
of its products.
The Company believes that it is adequately insured for physical damage
to its rigs and aircraft, and for marine and aviation liabilities and various
other types of exposures customarily encountered in providing the Company's
services, but carries no insurance against the loss of earnings. The Company
has experienced incidents related to many of the hazards discussed above,
including loss or damage to drilling rights due to blowout, fire and loss while
under tow and to aircraft due to accidents. Additionally, the Company believes
that it is adequately insured for risks arising from its manufacturing
operations, including product injury claims for personal injury and/or death,
property damage, loss of use of product, business interruption and necessary
legal expenses to defend itself from such claims. To date, the Company has not
suffered any material uninsured losses. Under current conditions, the Company
anticipates that its present insurance coverages will be maintained, but no
assurance can be given that insurance coverages 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.
RISKS OF FOREIGN OPERATIONS
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's property and drilling rights, taxation policies, foreign exchange
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.
EXTENSIVE REGULATIONS
Many aspects of the operations of the Company's three business
segments are subject to government regulation, including those relating to:
equipping drilling vessels and aircraft; drilling practices; manufacturing
plant waste water discharges, solid waste disposal and air emissions; and the
level of taxation. In addition, various countries (including the United
States) have regulations relating to environmental protection and
-7-
<PAGE> 10
pollution control. Recent events have also increased the sensitivity of the
Company's operations 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 in order to drill in such
waters.
The Company believes that it complies with all material legislation
and regulations affecting the operations in the drilling of oil and gas wells,
in equipping aircraft and carrying on aircraft operations, in controlling the
discharge of wastes from drilling rigs and in controlling waste water
discharges, solid waste disposals and air emissions from its manufacturing
plant. Further legislation may be reasonably anticipated, but their effects
on the Company's operations cannot be predicted.
FLEET EXPANSION
In April 1995, the Company announced plans for the design and
construction of the jack-up rig, Rowan Gorilla V, an enhanced version of the
Company's Gorilla Class jack-up. The rig will be constructed at the Company's
Vicksburg, Mississippi shipyard and should be completed during the second
quarter of 1998 at an estimated cost of $135 million. The Company expects to
finance a significant portion of the construction cost and is currently
evaluating credit alternatives. The reactivation of the Company's Vicksburg
shipyard is estimated to cost approximately $20 million, most of which will be
incurred in the first half of 1996 and financed through operations or existing
working capital.
DIVIDEND RESTRICTION
Under the terms of its 11 7/8% Senior Notes, the Company is currently
prohibited from paying a cash dividend. The Company does not intend to pay
dividends on its Common Stock until it achieves and sustains a suitable level
of profitability.
AUTHORIZED PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
preferred stock with designations, rights and preferences determined by its
Board of Directors. Accordingly, the Company's Board of Directors is
empowered, without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights that could adversely
affect the voting power or other rights of the holders of the Common Stock. The
Company has reserved 1.5 million shares of preferred stock for possible
issuance in connection with its Stockholders Rights Agreement (the "Rights
Agreement") adopted by the Company on February 25, 1992 (see Description of
the Securities). In the event of issuance, the preferred stock could be used,
under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that it will not do so in the future.
DESCRIPTION OF THE SECURITIES
As of July 31, 1995, the Company had 84,705,237 shares of Common Stock
outstanding. The Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange. Each share of Common Stock has attached to it rights
(the "Rights") to acquire on one one-hundredth of a share of Series A Junior
Preferred Stock of the Company pursuant to the Rights Agreement.
The Rights 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 thereof to purchase from the Company one
one-hundredth of a share of new Series A Junior Preferred Stock of the Company
at an exercise price of $30.00. 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
-8-
<PAGE> 11
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. One million five hundred thousand shares of the
Company's preferred stock have been designated Series A Junior Preferred Stock
and reserved for issuance upon exercise of the Rights. Additional information
concerning the terms of the Rights is contained in the Company's Registration
Statement on Form 8-A relating to the Rights, which Registration Statement has
been incorporated by reference herein.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and Bylaws contain
provisions permitted by the Delaware General Corporation Law (under which the
Company is organized) which, in general terms, provide that directors and
officers will be indemnified by the Company, to the full extent authorized or
permitted by law, for all losses that may be incurred by them in connection
with any claim or legal action in which they may become involved by reason of
their service as a director or officer of the Company. In addition, the
Company's Certificate of Incorporation contains provisions permitted by the
Delaware General Corporation Law which limit the monetary liability of
directors of the Company for certain breaches of their fiduciary duty of care.
Since July 14, 1995, the Company has carried directors' and officers' liability
insurance.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
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 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of
the Company 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 Company 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 Securities Act and will be governed
by the final adjudication of such issue.
-9-
<PAGE> 12
LEGAL OPINIONS
Certain legal matters with respect to the Common Stock offered hereby
will be passed upon for the Company by Andrews & Kurth, L.L.P., 4200 Texas
Commerce Tower, Houston, Texas 77002.
EXPERTS
The consolidated financial statements of Rowan Companies, Inc. and
subsidiaries as of December 31, 1994 and 1993 and for each of the three years
in the period ended December 31, 1994 incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated by reference, and
have been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
-10-
<PAGE> 13
====================================== ======================================
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN
THE COMMON STOCK TO WHICH IT RELATES
OR AN OFFER TO OR SOLICITATION OF ANY
PERSON IN ANY JURISDICTION IN WHICH ROWAN COMPANIES, INC.
SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
--------------------
TABLE OF CONTENTS 1,525,926 SHARES OF
COMMON STOCK
<TABLE>
<S> <C>
AVAILABLE INFORMATION . . . . . . . . 2
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE . . . . . 2
SELLING STOCKHOLDERS . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . 5
DESCRIPTION OF THE SECURITIES . . . . 8
INDEMNIFICATION OF DIRECTORS AND
OFFICERS . . . . . . . . . . . . 9
LEGAL OPINIONS . . . . . . . . . . . 10
EXPERTS . . . . . . . . . . . . . . 10
</TABLE>
-------------------- --------------------
PROSPECTUS
--------------------
====================================== ======================================
<PAGE> 14
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
Common Stock being registered are estimated as follows:
<TABLE>
<S> <C>
Registration fee . . . . . . . . . . . . . . . . . $ 4,242
Blue Sky fees and expenses . . . . . . . . . . . . 150
Legal fees and expenses . . . . . . . . . . . . . . 5,000
Accounting fees and expenses . . . . . . . . . . . 1,500
Printing and engraving expenses . . . . . . . . . . 500
Stock exchange listing fee . . . . . . . . . . . . 2,750
Miscellaneous expenses . . . . . . . . . . . . . . 358
----------
Total . . . . . . . . . . . . . . . . . . . . . $ 14,500
==========
</TABLE>
All of the expenses set forth above have been or will be paid by the
Company. Any additional expenses incurred in connection with the sale of
Common Stock offered hereby by Selling Stockholders will be paid by such
Selling Stockholders. It is impracticable to estimate any such additional
expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The statutes of Delaware generally give a corporation power to indemnify
any of its officers or directors against certain expenses, judgments, fines and
amounts paid in settlement in connection with certain actions, suits or
proceedings provided generally that such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reason to believe his conduct was unlawful. In addition, the statutes of
Delaware contain provisions to the general effect that any director shall, in
the performance of his duties, be fully protected in relying in good faith upon
the records of the corporation and upon such information, opinions, reports or
statements presented to the corporation by any of the corporation's officers or
employees, or committees of the board of directors, or by any other person as
to matters the member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the corporation.
The Company's Certificate of Incorporation and Bylaws contain provisions
permitted by the Delaware General Corporation Law (under which the Company is
organized) which, in general terms, provide that directors and officers will be
indemnified by the Company, to the full extent authorized or permitted by law,
for all losses that may be incurred by them in connection with any claim or
legal action in which they may become involved by reason of their service as a
director or officer of the Company. In addition, the Company's Certificate of
Incorporation contains provisions permitted by the Delaware General Corporation
Law which limit the monetary liability of directors of the Company for certain
breaches of their fiduciary duty of care. Since July 14, 1995, the company has
carried directors' and officers' liability insurance.
See also the undertakings set out in response to Item 17.
II-1
<PAGE> 15
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
----------- -----------
<S> <C>
4.1 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, 4d and 4e to the Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
4.2 Bylaws of the Company, as amended, incorporated by reference to Exhibit 3 to the Company's Form 10-Q
For the quarter ended March 31, 1993 (File No. 1-5491).
4.3 Rights Agreement, as amended, as of February 25, 1992, between the Company and Citibank, N.A. as Rights
Agent, incorporated by reference to Exhibit 4g to the Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
5 Opinion of Andrews & Kurth L.L.P., counsel for Rowan Companies, Inc.
23.1* Consent of Deloitte & Touche LLP.
23.2 Consent of Andrews & Kurth L.L.P. (included in Exhibit 5).
24 Powers of Attorney.
99.1* Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan, as amended.
- ---------------
* Filed herewith.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed
in the Registration Statement or any material
change to such information in the Registration
Statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to be
included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the
Registration Statement.
II-2
<PAGE> 16
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment
shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the
offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act 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 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
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act, Rowan Companies,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas on October 30,
1995.
ROWAN COMPANIES, INC.
(Registrant)
By: /s/ C.R. PALMER
------------------------------------
C.R. Palmer,
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ C.R. PALMER Chairman of the Board, October 30, 1995
--------------------------- President, Chief Executive Officer
C.R. Palmer and Director
/s/ E.E. THIELE Senior Vice President, Finance, October 30, 1995
--------------------------- Administration and Treasurer
E.E. Thiele (Principal Financial Officer)
/s/ WILLIAM H. WELLS Controller (Principal Accounting October 30, 1995
--------------------------- Officer)
William H. Wells
RALPH E. BAILEY* Director October 30, 1995
---------------------------
Ralph E. Bailey
HENRY O. BOSWELL* Director October 30, 1995
---------------------------
Henry O. Boswell
H. E. LENTZ* Director October 30, 1995
---------------------------
H. E. Lentz
WILFRED P. SCHMOE* Director October 30, 1995
---------------------------
Wilfred P. Schmoe
</TABLE>
II-4
<PAGE> 18
<TABLE>
<S> <C> <C>
CHARLES P. SIESS, JR.* Director October 30, 1995
---------------------------
Charles P. Siess, Jr.
PETER SIMONIS* Director October 30, 1995
---------------------------
Peter Simonis
C. W. YEARGAIN* Director October 30, 1995
---------------------------
C. W. Yeargain
*By: /s/ C.R. PALMER
---------------------------
(C.R. Palmer as attorney-in-fact for
each of the persons indicated)
</TABLE>
II-5
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
4.1 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, 4d and 4e to the Company's Form 10-K for the fiscal
year ended December 31, 1994 (File No. 1-5491).
4.2 Bylaws of the Company, as amended, incorporated by reference to Exhibit 3 to
the Company's Form 10-Q For the quarter ended March 31, 1993 (File
No. 1-5491).
4.3 Rights Agreement, as amended, as of February 25, 1992, between the Company
and Citibank, N.A. as Rights Agent, incorporated by reference to Exhibit 4g
to the Company's Form 10-K for the fiscal year ended December 31, 1994 (File
No. 1-5491).
5 Opinion of Andrews & Kurth L.L.P., counsel for Rowan Companies, Inc.
23.1* Consent of Deloitte & Touche LLP.
23.2 Consent of Andrews & Kurth L.L.P. (included in Exhibit 5).
24 Powers of Attorney.
99.1* Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan, as amended.
- ------------
* Filed herewith.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 33-62885 of Rowan Companies, Inc. on Form S-3 of
our report dated March 3, 1995, incorporated by reference in the Annual Report
on Form 10-K of Rowan Companies, Inc. for the year ended December 31, 1994,
and to the reference to us under the heading "Experts" in the Prospectus,
which is a part of this Registration Statement.
DELOITTE & TOUCHE LLP
Houston, Texas
October 30, 1995
<PAGE> 1
EXHIBIT 99.1
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 saleor (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 (1) an aggregate of $5,125,000 in principal amount
of loans made by the Company to Purchasers on June 13, 1986 and (2) an
aggregate of $10,300,000 in principal amount of loans made by the Company to
Purchasers on November 30, 1994, 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.
<PAGE> 5
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.
(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.
