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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, 1996
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:
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
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 February 27, 1997 of the Common Stock
held by non-affiliates of the registrant was approximately $1,642 million.
The number of shares of Common Stock, $.125 par value, outstanding at
February 27, 1997 was 85,609,984.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
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Annual Report to Stockholders for
fiscal year ended December 31, 1996 Parts I, II and IV
Proxy Statement for the 1997 Annual
Meeting of Stockholders Part III
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TABLE OF CONTENTS
PART I Page
Item 1. Business .................................................... 1
Drilling Operations................................................. 1
Offshore Operations ............................................. 2
Onshore Operations .............................................. 3
Contracts ....................................................... 4
Competition ..................................................... 5
Regulations and Hazards ......................................... 6
Manufacturing Operations............................................ 7
Raw Materials.................................................... 8
Competition...................................................... 8
Regulations and Hazards.......................................... 9
Aviation Operations ................................................ 10
Contracts ....................................................... 11
Competition ..................................................... 11
Regulations and Hazards ......................................... 12
Employees .......................................................... 12
Item 2. Properties .................................................. 13
Drilling Rigs ...................................................... 13
Manufacturing Facilities............................................ 18
Aircraft ........................................................... 18
Item 3. Legal Proceedings ........................................... 19
Item 4. Submission of Matters to a Vote of Security Holders ......... 19
Additional Item. Executive Officers of the Registrant ................ 19
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters ....................................... 21
Item 6. Selected Financial Data ..................................... 21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 21
Item 8. Financial Statements and Supplementary Data ................. 21
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ....................... 21
PART III
Item 10. Directors and Executive Officers of the Registrant .......... 22
Item 11. Executive Compensation ...................................... 22
Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................................ 22
Item 13. Certain Relationships and Related Transactions .............. 22
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ...................................... 23
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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 operates a mini-steel mill, a
heavy equipment manufacturing plant and a marine rig construction yard.
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"). See "DRILLING OPERATIONS" below
for information with respect to the ongoing construction of one rig and planned
construction of two others, each being an enhanced version of the Company's
Gorilla Class jack-ups. In 1992, the Company began providing offshore platform
installation and removal services as well as Total Project Management, an
approach to drilling operations which emphasizes drilling and completing wells
on a turnkey basis. In light of the increasing demand for the Company's daywork
drilling services, and the relatively unfavorable results of its turnkey
drilling operations during the recent past, the Company has elected to focus on
daywork drilling and project management contracts and not pursue additional
turnkey work at this time.
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 200 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 the Company. As
discussed more fully below in "DRILLING OPERATIONS", the marine group is
currently constructing for the Company at its Vicksburg, Mississippi shipyard
the first of three enhanced Gorilla Class jack-up rigs.
The Company's wholly-owned subsidiary, Era Aviation, Inc., provides
contract and charter helicopter and fixed-wing aircraft services, with its fleet
consisting on March 28, 1997 of 88 helicopters and 21 fixed-wing aircraft. The
Company's aircraft services include flightseeing, medivac services, forest fire
control and support for oil and gas related operations out of its primary bases
in Alaska, Louisiana and Nevada. In addition, the Company provides commuter
airline services in Alaska using its fixed-wing aircraft. The Company also owns
a 49% interest in a Dutch-based joint venture company, KLM ERA Helicopters B.V.
("KLM ERA"), which owns a fleet consisting of 15 helicopters in the Dutch and
British sectors of the North Sea.
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, 1996 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, 1996 ("Annual
Report"), incorporated portions of which are filed as Exhibit 13 hereto.
In 1996, no customer accounted for 10% or more of consolidated
revenues. In 1994 and 1995, the Company had revenues (primarily from drilling
operations) representing 10% or more of consolidated revenues from one customer,
specifically AMOCO Corp., which provided 10% and 11%, respectively.
DRILLING OPERATIONS
In 1996, drilling operations generated an operating profit (income from
operations before deducting general and administrative expenses) of $79,247,000.
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Offshore Operations
At December 31, 1996, 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) and one semi-submersible rig.
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.
In 1995, the Company sold its three submersible barge rigs.
In April 1995, the Company announced plans for the design and
construction of Rowan Gorilla V, an enhanced version of the Company's Gorilla
Class jack-ups, which will be the world's largest bottom supported mobile
offshore drilling unit. The rig will be able to operate year-round in 400 feet
of water south of the 61st parallel, within the worst case combination of
100-year storm criteria for waves, wave periods, winds and currents.
Construction of the rig, which began in early 1996, is being carried out at
LeTourneau's Vicksburg, Mississippi shipyard and is expected to be completed
during the third quarter of 1998 at an estimated cost of $175 million. The
Company is financing up to 87.5% of the construction cost through a 12-year bank
loan guaranteed by the Maritime Administration of the U.S. Department of
Transportation under its Title XI Program.
On October 28, 1996, the Company announced plans for the construction
of Rowan Gorilla VI and Rowan Gorilla VII. Each rig will be a combination
drilling and production unit like Gorilla V, capable of operating in hostile
environments like the North Sea in water depths of up to 400 feet. These rigs
will also be constructed at the Company's Vicksburg facility at a combined cost
of approximately $380 million. Delivery is expected during the first quarter of
1999 and the second quarter of 2000.
This major construction project to build three enhanced Gorilla Class
rigs represents the Company's first new construction since a major drilling rig
expansion program was conducted in the early to mid-1980s. In the intervening
years, 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. For a discussion
of the Company's availability of funds in 1997 for future operations and for
estimated capital expenditures, including those related to the reactivation of
the Company's marine construction capability, the construction and associated
financing of Gorilla V, Gorilla VI and Gorilla VII and Company plans with
respect to its $200 million 11-7/8% Senior Notes, see "Liquidity and Capital
Resources" under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 14 and 15 of the Annual Report, which
information is incorporated herein by reference. Also, 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 Company's existing 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,
one semi-submersible rig and three 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 28,
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1997, 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.
The Company's four Class 116-C rigs and one Gorilla Class rig presently
located in the North Sea continue to undergo modifications in order to meet new
offshore safety standards being implemented in the United Kingdom. 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.
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, 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 1,200 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 to another drilling
location.
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 14 land rigs located as follows: deep-well rigs - three in Oklahoma, one in
Southeast Texas, three in Louisiana, and two in Argentina, which are scheduled
to be moved to the United States in the second quarter of 1997; and winterized
rigs - five in Alaska. Three trailer-mounted land rigs, along with the Company's
Argentina subsidiary, were sold in late 1996.
Over the 1992-1996 period, the drilling areas providing the greatest
amount of activity for the Company's land rigs have been Venezuela and
Argentina. At the start of that five year period going through mid-1994, five of
the Company's rigs carried out a three-year drilling contract in Venezuela and
were then returned to the United States where three of the five had sporadic
work in the second half of 1994. Three of these rigs were moved to Argentina in
March 1995 to perform a two-year drilling contract. Two deep-well land rigs were
also moved to Argentina in 1995. Except for four deep-well land rigs that have
worked fairly consistently in Texas, Mississippi and Louisiana since mid-1994,
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, Louisiana and Alaska have been idle since mid-1988 due to inadequate
rates. Accordingly, seven of the Company's land rigs remained "mothballed" at
March 28, 1997.
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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.
Drilling contracts presently being sought by the Company are those
which provide for drilling compensation on a day rate basis, such contracts
being 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 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. Contracts for work in foreign countries generally provide for
payment in United States dollars except for minimal amounts required to meet
local expenses. 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 contracts in the Gulf of Mexico are
well-to-well contracts lasting 30-60 days.
Beginning in 1992 and going through late 1996, the Company also sought
drilling contracts for work done on a turnkey basis. In the case of such
contracts, the Company's compensation was contingent on the Company successfully
drilling a well to a specified depth for a fixed price. In the event certain
operational problems would occur causing the Company to not be unable to reach
the specified turnkey depth, the Company was not 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 involved greater
economic risk to the Company than wells drilled on a day rate basis. As
previously noted, the Company is not presently pursuing additional turnkey work
due to the relatively unfavorable results during the recent past.
The Company expects to conclude its current turnkey operations in early 1997.
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 beginning on page 13 of this Form 10-K for the contract status of
rigs as of March 28, 1997.
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Competition
The Company encounters continual competition in securing domestic and
foreign drilling contracts from approximately 34 offshore drilling contractors
operating or having available to operate about 557 mobile rigs, approximately
14 major domestic drilling contractors operating or having available to operate
about 50 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 16 winterized land rigs on the Alaskan North Slope. 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 has employed the
following strategy: during the 1980-1986 period - carried out a drilling rig
expansion program, including the development of the heavier jack-up rig class
known as the Gorilla rig; during the period 1987 through the present - engaged
in a drilling rig modification program designed to provide the Company's fleet
with jack-ups reflecting recent technological advancements and which meet known
government-imposed safety and pollution control requirements; and during the
period 1995 to present - began to carry out a drilling rig expansion program
involving the development of an enhanced version of the Gorilla Class rig. The
completion schedule for the three rigs comprising the current expansion program
is as follows: Rowan Gorilla V - third quarter 1998; Rowan Gorilla VI - first
quarter 1999 and Rowan Gorilla VII - second quarter 2000.
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. 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 28, 1997, 14 jack-ups were located in the
Gulf of Mexico, five jack-ups were located in the North Sea, one jack-up was
located offshore eastern Canada, and one semi-submersible rig was 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" on page 4
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. Beginning in 1992, downsizings by major energy companies, coupled
with the significant reductions of exploration by such companies in offshore
U.S. waters, resulted in the Company adapting its marketing efforts to increase
emphasis on 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.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 12 through 15 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.
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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
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, worker's 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
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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.
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 described 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 loaders and
off-road trucks. The primary production line is front-end loaders with bucket
capacities of 17, 22, 28 and 33 cubic yards. A secondary product line is
off-road trucks with capacities of 190 and 200 tons. LeTourneau's loaders and
trucks are generally used in coal, gold, copper, iron ore and other mines and
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 310 ton size range. LeTourneau's mining
equipment and parts are distributed through a world-wide network of independent
distributors and a Company-owned distribution network 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 35 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 Company-owned distribution network in the northwestern United
States.
LeTourneau's material handling equipment line includes several
different types of intermodal equipment. 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 can span up to 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 Company-owned 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 Company-owned distribution network 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.
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LeTourneau's mini-steel mill located in Longview, Texas produces
carbon, alloy and specialty steel plate products. 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, 400 series stainless steel and hydrogen induced crack resistant 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. LeTourneau 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 has a shipyard in Vicksburg, Mississippi for the
construction of mobile self-elevating offshore drilling platforms. LeTourneau
also has the capability of providing engineering support and spare parts to the
drilling industry. With the announcement of the construction of Rowan Gorilla V
in April 1995, the Company began, and has now largely completed, the rebuilding
of this facility. The yard currently employs about 625, most of whom have been
newly hired. Ongoing rig component manufacturing and marine repair service
businesses, as well as a marine design engineering business, have been and
continue to be located at the Company's Longview, Texas facility.
In 1996, manufacturing operations generated an operating profit (income
from operations before deducting general and administrative expenses) of
$9,468,000 and had an external backlog for all of its product lines at March 1,
1997 of approximately $36 million.
LeTourneau engages in a limited amount of research and product
development, primarily to increase the capacity of and provide innovative
improvements to the product lines. 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 loaders and large trucks compete worldwide with several
competitors. LeTourneau's loader product line has only two direct competitors;
however, the larger loader models compete with other types of loading equipment,
primarily electric and hydraulic mining shovels. The LeTourneau truck competes
with five truck manufacturers all of whom offer a broader range of truck sizes
than LeTourneau, including trucks in the 240-ton class. Three competitors have
recently introduced models in the 260-ton to 310-ton class.
The market for LeTourneau forestry and intermodal equipment is also
characterized by vigorous competition. Even though LeTourneau'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.
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.
-8-
<PAGE> 11
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 periods of ownership or
hours of usage, whichever occurs first, generally cover the drive train and, in
the case of LeTourneau trucks, covers 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.
At present, LeTourneau has a limited number of competitors in the
marine rig construction and support industry due to low demand over a prolonged
period. However, as demand for marine rigs increases, new competitors can 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. In September 1996, the Company
assumed certain environmental liabilities related to these facilities in
exchange for a negotiated amount of cash and a reduction in a promissory note.
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 1997. 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.
-9-
<PAGE> 12
As a manufacturing company, LeTourneau may be responsible for certain
risks associated with the use of its products. These risks include product
liability claims 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.
AVIATION OPERATIONS
The Company, through its wholly-owned subsidiary, Era Aviation, Inc.
("Era"), 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 17 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, construction, seismic testing and onshore and offshore
oil field support.
Since 1991, the Company has owned 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, KLM
ERA Helicopters B.V., currently owns 15 helicopters. Operating locations and the
numbers of helicopters deployed at March 28, 1997 were as follows: ten in the
Dutch Sector of the North Sea and five in the British Sector of the North Sea.
KLM ERA serves principally the offshore oil and gas drilling, production and
service companies operating in the Dutch and British Sectors 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), 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, by moving helicopters to the west and northwest regions of the
United States and various overseas locations, the most recent being the Peoples
Republic of China. From 1992 to 1995, the Company had operations in Croatia and
Macedonia flying for the United Nations.
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 May 1997, scheduled services will begin to
Whitehorse in the Yukon from Anchorage. In addition, it services 17 remote
villages from its hub in Bethel, Alaska. The Company operates under a code
sharing agreement with Alaska Airlines which
-10-
<PAGE> 13
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 third 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, Houma, Schriever and Johnson Bayou
and the Texas cities of Houston, Corpus Christi, Bay City and Sabine Pass. 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 civilian and military customers,
including emergency float systems for US Army UH-1 Helicopters. Other aircraft
accessories are also manufactured at the facility.
In 1996, aviation operations generated an operating profit (profit from
operations before deducting general and administrative expenses) of $6,547,000.
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 28, 1997 consisted of 88 helicopters (of which 45 were based in Alaska and
43 in the Gulf of Mexico area) and 21 fixed-wing aircraft that were based in
Alaska. The contract status as of March 28, 1997 consisted of: 31 master
helicopter service agreements and 39 term contracts (34 helicopters and five
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 28, 1997 consisted of ten helicopters based in The Netherlands and five in
the United Kingdom. The contract status of such aircraft as of March 28, 1997
consisted of six master service agreements and six 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.
-11-
<PAGE> 14
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 8% 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, the number of competitors that KLM ERA has in the areas of
the North Sea in which it operates are as follows: Dutch Sector - one; southern
British Sector - three. KLM ERA's share of the helicopter markets in those two
areas are estimated to be 55% and 30%, respectively.
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.
The Company believes that KLM ERA is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment.
EMPLOYEES
The total numbers of employees of the Company at March 15, 1997 and at
December 31, 1996, 1995 and 1994 were as follows: 4,624, 4,587, 3,930 and 3,484,
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 59,600 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 28, 1997. See "Liquidity and
Capital Resources" as appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 14 and 15 in the Annual
Report, which pages are 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 BHP Petroleum (Americas), Inc.
200-C (d) (e) (h) (l) Single Well (m) June 1997
Rowan Gorilla III 328'/30,000' 1984 Eastern Canada PanCanadian Nova Scotia Limited
200-C (d) (e) (l) Term (m) December 1997
Rowan Gorilla IV 328'/30,000' 1986 North Sea Phillips Petroleum U.K. Limited
200-C (d) (e) (l) Multiple Well (m) January 1998
Rowan-California 225'/30,000' 1983 North Sea Wintershall Noordzee B.V.
116-C (c) (e) (l) Multiple Well (m) October 1997
Rowan-Halifax 225'/30,000' 1982 North Sea Mobil North Sea Limited
116-C (c) (e) (i) (l) Term (m) November 1998
Cecil Provine 225'/30,000' 1982 North Sea Wintershall Noordzee B.V.
116-C (c) (e) (j) (l) Multiple Well (m) May 1997;
Talisman
(1) Single Well (m) July 1997
Wintershall Noordzee B.V.
(1) Multiple Well (m) September 1997
Arch Rowan 225'/30,000' 1981 North Sea Amoco Netherlands B.V.
116-C (c) (e) (1) Multiple Well (m) June 1997
Gilbert Rowe 350'/30,000' 1981 Gulf of Mexico Walter Oil & Gas Corporation
116-C (c) (e) (h) (l) Multiple Well (m) June 1997
</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>
Cantilever Jack-up Rigs:
Charles Rowan 350'/30,000' 1981 Gulf of Mexico Amoco Production Company
116-C (c) (e) (h) (l) Multiple Well (m) August 1997
Rowan-Paris 350'/30,000' 1980 Gulf of Mexico Union Pacific Resources Company
116-C (e) (h) (l) Multiple Well (m) June 1997
Rowan-Middletown 350'/30,000' 1980 Gulf of Mexico Amoco Production Company
116-C (e) (h) (l) Multiple Well (m) September 1997
Rowan-Fort Worth 350'/30,000' 1978 Gulf of Mexico Mobil Exploration & Production U.S., Inc.
116-C (e) (h) (1) Single Well (m) June 1997
</TABLE>
<PAGE> 17
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 Pennzoil Exploration & Production Co.
116 (c) (e) (f) (l) Single Well (Turnkey) (m) April 1997
Mariner Exploration, Inc.
(1) Single Well (m) May 1997
Rowan-Odessa 350'/30,000' 1977 Gulf of Mexico Barrett Resources Corp.
116 (e) (f) (h) (1) Multiple Well (m) May 1997
Rowan-Louisiana 350'/30,000' 1975 Gulf of Mexico Seneca Resources Corp.
84 (e) (f) (h) (1) Single Well (m) April 1997
Rowan-Alaska 350'/30,000' 1975 Gulf of Mexico CXY Energy, Inc.
84 (e) (f) (h) (l) Multiple Well (m) July 1997
Rowan-Texas 250'/20,000' 1973 Gulf of Mexico Forcenergy Gas Exploration, Inc.
52 (e) (1) Multiple Well (m) April 1997;
Zilka Energy Corp.
(1) Term (m) October 1997
Rowan-Anchorage 250'/20,000' 1972 Gulf of Mexico Apache Corporation
52 (e) (l) Term (m) January 1998
Rowan-New Orleans 250'/20,000' 1971 Gulf of Mexico Barrett Resources Corp.
52 (f) (g) (l) Term (m) September 1997
Rowan-Houston 250'/20,000' 1970 Gulf of Mexico Hall-Houston Oil Company
52 (e) (l) Term (m) June 1997
</TABLE>
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<PAGE> 18
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>
Semi-Submersible Rig:
Rowan-Midland (e) 1,200'/25,000' 1976 Gulf of Mexico Murphy Exploration & Production Co.
(l) Single Well (m) May 1997
</TABLE>
<TABLE>
<CAPTION>
ONSHORE (k) Contracting Party/
Maximum (l) Type of Contract
Description Drilling Depth Location (m) Estimated Release Date
- ----------- -------------- --------- ---------------------------
<S> <C> <C> <C>
Rig 9 25,000' Louisiana Egan Hub Partners, LP
(l) Single Well (m) May 1997
Rig 26 25,000' Louisiana Chesapeake Operating, Inc.
(1) Term (m) August 1997
Rig 31 30,000' Louisiana Chesapeake Operating, Inc.
(l) Single Well (m) May 1997
Rig 12 20,000' Southeast Texas Reata Oil & Gas
(1) Single Well (m) April 1997
Rig 7 20,000' Argentina/Texas(n) Aegis Energy, Inc.
(1) Single Well (m) June 1997
Rig 30 20,000' Argentina/Texas(n) Not Committed
Three rigs 30,000' Oklahoma Not Committed
Five rigs 18,000'/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.
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<PAGE> 19
(Footnotes continued)
(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 in December 1984 and leased back for 15 years.
(j) Rig sold in December 1985 and leased back for 15 years.
(k) Onshore rigs 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 4 of this Form 10-K for definition of types
of contracts.
(m) Indicates estimated completion date of work to be performed.
(n) The rigs will be relocated from Argentina in the second quarter of 1997.
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, England, Scotland and The
Netherlands.
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<PAGE> 20
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 560,000 square feet of
covered work space. In conjunction with the announcement of the construction of
Rowan Gorilla V, this facility has now been reopened and has been essentially
rebuilt.
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.
AIRCRAFT
At March 28, 1997, the U.S.-based Company-owned helicopter fleet
consisted of 16 twin-engine turbine IFR rated Bell 212 helicopters (14
passenger), 16 twin-engine turbine IFR rated Bell 412 helicopters (14
passenger), 28 twin-engine turbine MBB BO-105CBS helicopters (five passenger),
two Aerospatiale 332L Super Puma helicopters (19 passenger) and 26 various
single-engine turbine helicopters (four to six passenger). The U.S.-based
fixed-wing fleet of Company-owned aircraft consisted of five Convair 580s (50
passenger), ten DeHavilland Twin Otters (9-19 passenger), two DeHavilland Dash
8s (37 passenger), two Douglas DC-3s (28 passenger), one Lear Jet 35A (six
passenger) and one Beechcraft King Air 200C (six passenger).
Helicopters owned by KLM ERA on March 28, 1997 consisted of five
twin-engine turbine IFR rated Sikorsky S-61N helicopters (26 passenger), eight
twin-engine turbine IFR rated Sikorsky S-76B helicopters (13 passenger) and two
MBB BO-105CBS helicopters equipped as air ambulances.
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 two
adjacent hangars housing the Company's helicopter and fixed-wing operations
totaling aproximately 45,000 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 63,000 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. To accommodate its operations in
the British Sector of the North Sea, KLM ERA also has a helicopter hangar
(13,000 square feet) and office facility (2,800 square feet) located at Norwich
Airport.
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<PAGE> 21
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 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 28, 1997 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,
1996.
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions, years of credited 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 28, 1997 are listed below.
Officers of all three entities are normally appointed annually by each entity's
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
Credited
Name Position Service Age
------------------- ------------------------------------ --------- ---
<S> <C> <C> <C>
Executive Officers of the Registrant:
C. R. Palmer Chairman of the Board, President 36 62
and Chief Executive Officer
R. G. Croyle Executive Vice President 23 54
Paul L. Kelly Senior Vice President, Special Projects 14 57
D. F. McNease Senior Vice President, Drilling 23 45
E. E. Thiele Senior Vice President, Finance, 27 57
Administration and Treasurer
John L. Buvens Vice President, Legal 16 41
C. W. Johnson(1) Vice President, Aviation 19 53
Mark A. Keller Vice President, Marketing - 5 44
North American Drilling
Bill S. Person Vice President, Industrial Relations 29 48
William C. Provine Vice President, Investor Relations 10 50
Other Officers of the Registrant:
William H. Wells Controller 3 34
Mark H. Hay Secretary and Assistant Treasurer 18 52
P. G. Wheeler Assistant Treasurer 22 49
Lynda A. Aycock Assistant Treasurer and 25 50
Assistant Secretary
Certain Officer of LeTourneau, Inc.:
Dan C. Eckermann President and Chief 6 49
Executive Officer
Certain Officer of Era Aviation, Inc.:
James Vande Voorde Senior Vice President 23 57
</TABLE>
(1) Also serves as President and Chief Operating Officer of Era Aviation, Inc.
-19-
<PAGE> 22
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.
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 April 1996, Mr. Kelly's principal occupation has been in the
position set forth. For more than five years prior to that time Mr. Kelly
served as Vice President, Special Projects.
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 October 1993, Mr. Buvens' principal occupation has been in the
position set forth. From April 1988 to present and April 1994 to present,
Mr. Buvens has also served in the positions of Vice President of Rowandrill,
Inc. and Rowan International, Inc., respectively, both subsidiaries of
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 LLP 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.
-20-
<PAGE> 23
Since September 1996, Mr. Eckermann's principal occupation has been in
the position set forth. From February 1994 to September 1996, Mr. Eckermann
served in the position of President of LeTourneau Marine Group and Vice
President, Operations of LeTourneau, Inc, a subsidiary of the Company. From May
1990 to February 1994, he served as President of Marathon LeTourneau Marine
Company, a subsidiary of Marathon LeTourneau Company. Marathon LeTourneau was 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 1982, Mr. Vande Voorde's principal occupation has been in
the position set forth. For more than five years prior to that time, Mr. Vande
Voorde served as Vice President of Era Aviation, Inc., a subsidiary of 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.
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 1996 and 1995 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 (Unaudited)",
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 eighth paragraph appearing on page 15 within "Management's Discussion and
Analysis of Financial Condition and Results of Operations", which 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 pages 10 and 11 of the
Company's Annual Report under the title "Ten-Year Financial Data" and is
incorporated herein by reference except for the information for the years 1991,
1990, 1989, 1988 and 1987.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required hereunder is set forth on pages 12 through 15
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 pages 23 through 27 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
-21-
<PAGE> 24
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 page 6, in footnotes (1) and (3) on page 7 and in the paragraph under
the caption, "Section 16(a) Beneficial Ownership Reporting Compliance" on page 4
of the Proxy Statement for the Company's 1997 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 19 through 21 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 12 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 Plans" on pages 8 through 12 of the Proxy Statement
are incorporated herein by reference. In accordance with 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 1 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 "Compensation Committee Interlocks and Insider Participation; Certain
Transactions" appearing on page 18 of the Proxy Statement is incorporated herein
by reference.
-22-
<PAGE> 25
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 1996
Annual Report
-------------
<S> <C>
Consolidated Balance Sheet
December 31, 1996 and 1995 ............................. 16
Consolidated Statement of Operations for the
Years Ended December 31, 1996, 1995 and 1994 ........... 17
Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended December 31, 1996, 1995 and
1994 18
Consolidated Statement of Cash Flows for
the Years Ended December 31, 1996, 1995 and 1994........ 19
Notes to Consolidated Financial Statements............... 20
Independent Auditors' Report............................. 27
Selected Quarterly Financial Data (Unaudited) for
the Quarters Ended March 31, June 30, September 30
and December 31, 1996 and 1995.......................... 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:
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, 4d and 4e below.
3b Bylaws of the Company amended as of August 30, 1996,
incorporated by reference to Exhibit 3 to the Company's
Form 10-Q for the quarter ended September 30, 1996
(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).
-23-
<PAGE> 26
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 Company's Series III Preferred
Stock incorporated by reference to Exhibit 4d to the Company's
Form 10-K for the fiscal year ended December 31, 1994
(File No. 1-5491).
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 Rights Agreement as amended dated 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).
4g 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).
4h Specimen Common Stock certificate.
4i Form of Promissory Note dated November 30, 1994 between the
purchasers of Series III Floating Rate Subordinated Convertible
Debentures due 2004 and the Company incorporated by reference to
Exhibit 4j to the Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
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).
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 No. 4 dated July 24, 1996 to the 1996 convertible
Debenture Incentive Plan.
10h 1986 Convertible Debenture Incentive Plan of the Company
amended as of July 24, 1996.
-24-
<PAGE> 27
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. incorporated by
reference to Exhibit 10j to the Company's Form 10-K for the
fiscal year ended December 31, 1994 (File No. 1-5491).
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 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).
10o 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).
10p Consulting Agreement as amended dated April 1, 1995 between
the Company and C. W. Yeargain incorporated by reference to
Exhibit 10q to the Company's Form 10-K for the fiscal year
ended December 31, 1995 (File No. 1-5491)
10q 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).
10r 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).
10s Asset Purchase and Sale Agreement dated December 5, 1995
between Era Aviation, Inc. and Columbia Helicopters, Inc.,
Alaska Helicopters, Inc. and BIJOS Enterprises. Incorporated
by reference to Exhibit 10u to the Company's Form 10-K for the
fiscal year ended December 31, 1995 (File No. 1-5491)
10t Commitment to Guarantee Obligations and First Preferred Ship
Mortgage both dated December 17, 1996 between the Company and
the Maritime Administration of the U.S. Department of
Transportation.
10u Credit Agreement and Trust Indenture both dated December 17,
1996 between the Company and Citibank, N.A.
-25-
<PAGE> 28
11 Computation of Primary and Fully Diluted Earnings (Loss) Per
Share for the years ended December 31, 1996, 1995 and 1994
appearing on page 29 in this Form 10-K.
*13 Annual Report to Stockholders for fiscal year ended
December 31, 1996.
21 Subsidiaries of the Registrant as of March 28, 1997.
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, 1996.
27 Financial Data Schedule for the year ended December 31, 1996.
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:
. 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).
. 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).
. 1986 Convertible Debenture Incentive Plan of the Company as amended
included as Exhibit 10h of this Form 10-K.
. Pension Restoration Plan of the Company incorporated by reference to
Exhibit 10i to the Company's Form 10-K for the fiscal year ended December
31, 1992 (File 1-5491).
. Pension Restoration Plan of LeTourneau, Inc. incorporated by reference
to Exhibit 10j to the Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
-26-
<PAGE> 29
(b) Reports on Form 8-K:
. No reports on Form 8-K were filed by the Registrant during the fourth
quarter of fiscal year 1996.
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.
-27-
<PAGE> 30
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 28, 1997
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 28, 1997
(C. R. Palmer) and Chief Executive Officer
E. E. THIELE Principal Financial Officer March 28, 1997
(E. E. Thiele)
WILLIAM H. WELLS Principal Accounting Officer March 28, 1997
(William H. Wells)
*RALPH E. BAILEY Director March 28, 1997
(Ralph E. Bailey)
*HENRY O. BOSWELL Director March 28, 1997
(Henry O. Boswell)
*H. E. LENTZ Director March 28, 1997
(H. E. Lentz)
*HON. COLIN B. MOYNIHAN Director March 28, 1997
(Hon. Colin B. Moynihan)
*WILFRED P. SCHMOE Director March 28, 1997
(Wilfred P. Schmoe)
*CHARLES P. SIESS, JR. Director March 28, 1997
(Charles P. Siess, Jr.)
*PETER SIMONIS Director March 28, 1997
(Peter Simonis)
*C. W. YEARGAIN Director March 28, 1997
(C. W. Yeargain)
</TABLE>
* BY C. R. PALMER
(C. R. Palmer, Attorney-in-fact)
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<PAGE> 31
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal year ended: Commission file number:
December 31, 1996 1-5491
- -------------------------- -----------------------
ROWAN COMPANIES, INC.
--------------------------------------------------------
(Exact name of Registrant as specified in its charter)
EXHIBITS
<PAGE> 32
EXHIBIT INDEX
<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, 4d and 4e below.
(1) 3b Bylaws of the Company amended as of August 30, 1996,
incorporated by reference to Exhibit 3 to the
Company's Form 10-Q for the quarter ended September
30, 1996 (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).
(1) 4d Certificate of Designation of the Companies Series III
Preferred Stock incorporated by reference to Exhibit
4d to the Company's Form 10-K for the fiscal year
ended December 31, 1994 (File No. 1-5491).
(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).
(1) 4f Rights Agreement as amended dated 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).
(1) 4g 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).
(2) 4h Specimen Common Stock certificate.
</TABLE>
<PAGE> 33
EXHIBIT INDEX
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ------- --------------------------------------------------------
<S> <C> <C>
(1) 4i Form of Promissory Note dated November 30, 1994
between the purchasers of Series III Floating Rate
Subordinated Convertible Debentures due 2004 and the
Company incorporated by reference to Exhibit 4j to the
Company's Form 10-K for the fiscal year ended December
31, 1994 (File No. 1-5491).
(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 No. 4 dated July 24, 1996 to the 1996
Convertible Debenture Incentive Plan.
(2) 10h 1986 Convertible Debenture Incentive Plan of the
Company amended as of July 24, 1996.
(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).
(1) 10j Pension Restoration Plan of LeTourneau, Inc
incorporated by reference to Exhibit 10j to the
Company's Form 10-K for the fiscal year ended December
31, 1994 (File No. 1-5491).
</TABLE>
<PAGE> 34
EXHIBIT INDEX
<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 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) 10o 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).
(1) 10p Consulting Agreement as amended dated April 1, 1995
between the Company and C. W Yeargain incorporated by
reference to Exhibit 10q to the Company's Form 10-K
for the fiscal year ended December 31, 1996 (File No.
1-5491).
(1) 10q 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> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ------- --------------------------------------------------------
<S> <C> <C>
(1) 10r 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).
(1) 10s Asset Purchase and Sale Agreement dated December 5,
1995 between Era Aviation, Inc. and Columbia
Helicopters, Inc., Alaska Helicopters, Inc. and BIJOS
Enterprises.
(2) 10t Commitment to Guarantee Obligations and First
Preferred Ship Mortgage both dated December 17, 1996
between the Company and the Maritime Administration of
the U.S. Department of Transportation.
(2) 10u Credit Agreement and Trust Indenture both dated
December 17, 1996 between the Company and Citibank,
N.A.
(3) 11 Computation of Primary and Fully Diluted Earnings
(Loss) Per Share for the years ended December 31,
1996, 1995 and 1994 appearing on page 29 in this Form
10-K.
(4) 13 Annual Report to Stockholders for fiscal year ended
December 31, 1996.
(2) 21 Subsidiaries of the Registrant as of March 28,
1996
(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, 1996.
(2) 27 Financial Data Schedule for the year ended December
31, 1996.
</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 29.
(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
21 through 23 on Form 10-K for specific portions incorporated herein
by reference.
<PAGE> 1
EXHIBIT 4h
NUMBER SHARES
- --------------------- ---------------------
- --------------------- ---------------------
S
[LOGO]
ROWAN COMPANIES, INC
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS CUSIP 779382 10 0
OF THE STATE OF DELAWARE THIS CERTIFICATE IS TRANSFERABLE
IN CHICAGO, ILLINOIS OR NEW YORK, NEW YORK
THIS CERTIFIES THAT _______________________________ IS THE OWNER OF
SEE REVERSE FOR
CERTAIN DEFINITIONS
FULL-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE
PAR VALUE OF $.12 1/2 EACH OF
ROWAN COMPANIES, INC., TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY
THE HOLDER HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF
THIS CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE AND THE SHARES
REPRESENTED HEREBY ARE ISSUED AND SHALL BE SUBJECT TO ALL OF THE PROVISIONS OF
THE CERTIFICATE OF INCORPORATION, AS NOW OR HEREAFTER AMENDED, TO ALL OF WHICH
THE HOLDER HEREOF BY ACCEPTANCE HEREOF ASSENTS.
THIS CERTIFICATE IS NOT VALID UNLESS COUNTERSIGNED AND REGISTERED BY A
TRANSFER AGENT AND REGISTRAR OF THE CORPORATION.
WITNESS THE FACSMILE SEAL OF THE CORPORATION AND THE FACSMILE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
DATED
MARK H. HAY C. R. PALMER
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED:
ROWAN COMPANIES, INC. HARRIS TRUST AND SAVINGS BANK
CORPORATE SEAL TRANSFER AGENT AND REGISTRAR
1947 BY
DELAWARE
(C) SECURITY-COLUMBIAN UNITED STATES BANKNOTE COMPANY AUTHORIZED AGENT
<PAGE> 2
EXHIBIT 4h
ROWAN COMPANIES, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR
SERIES THEREOF OF THE CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO
THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT Custodian
TEN ENT - as tenants by the entireties -------- -----------
JT TEN - as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
---------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received,__________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
--------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
_______________________________________________________________________ ATTORNEY
TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN NAMED
CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED_________________________________
_________________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF
NOTICE: THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
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 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.
<PAGE> 1
EXHIBIT 10g
ROWAN COMPANIES, INC
AMENDMENT NO. 4 TO THE 1986 CONVERTIBLE DEBENTURE INCENTIVE PLAN:
WHEREAS, there is reserved to the Committee in Section 10 of the Rowan
Companies, Inc. 1986 Convertible Debenture Incentive Plan (the "Plan")
the right to amend the Plan in whole or in part at any time and in
such manner as it may deem advisable, subject to certain restrictions
set forth in the Plan; be it
RESOLVED, THAT, Section 3.03 of the Plan is hereby amended effective
as of July 24, 1996, by adding thereto the following:
Notwithstanding the foregoing or any provision in the Plan to
the contrary, effective with the occurrence of a Corporate Change, as defined
in the Company's 1988 Nonqualified Stock Option Plan, each Debenture that has
been issued and outstanding for more than one year as of the date of the
Corporate Change shall automatically be fully convertible on and after the date
of such Corporate Change.
<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.
<PAGE> 2
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:
(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.
Notwithstanding the foregoing or any provision in the Plan to the
contrary, effective with the occurrence of a Corporate Change, as defined in
the Company's 1988 Nonqualified Stock Option Plan, each Debenture that has been
issued and outstanding for more than one year as of the date of the Corporate
Change shall automatically be fully convertible on and after the date of such
Corporate Change.
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
<PAGE> 3
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
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
<PAGE> 4
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
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;
<PAGE> 5
(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.
(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 10t
Contract No. MA-13257
COMMITMENT TO GUARANTEE OBLIGATIONS
BY
THE UNITED STATES OF AMERICA
UNDER TITLE XI
OF THE MERCHANT MARINE ACT, 1936, AS AMENDED
ACCEPTED BY
ROWAN COMPANIES, INC.
Dated as of December 17, 1996
<PAGE> 2
COMMITMENT TO GUARANTEE OBLIGATIONS
by
THE UNITED STATES OF AMERICA
Accepted by
ROWAN COMPANIES, INC.
Shipowner
(Under Title XI, Merchant Marine Act, 1936,
as amended, and in effect on the
date of this Guarantee Commitment)
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Document
Number Document
------ --------
<S> <C>
1 Commitment to Guarantee Obligations
2 Appendix I -- Form of Credit Agreement
3 Appendix II -- Form of Trust Indenture
4 Schedule A -- Schedule of Definition to Trust Indenture
5 Exhibit 1 -- General Provisions Incorporated
into the Trust Indenture by Reference
6 Exhibit 2 -- Form of Floating Rate Note
7 Exhibit 3 -- Form of Fixed Rate Note
8 Exhibit 4 -- Form of Authorization Agreement
9 Exhibit 5 -- Form of Secretary's Supplemental Indenture
10 Appendix III -- Security Agreement
11 Exhibit 1 -- General Provisions Incorporated
into the Security Agreement by Reference
12 Schedule X -- Schedule of Definitions
13 Exhibit 2 -- Form of Secretary's Note
14 Exhibit 3 -- Form of First Preferred Ship Mortgage
15 Exhibit 4 -- Title XI Reserve Fund and Financial Agreement
16 Exhibit 1 -- General Provisions Incorporated
into the Title XI Reserve Fund and Financial Agreement
17 Exhibit 5 -- Consent of Shipyard
18 Exhibit 6 -- Construction Contract
19 Exhibit 7 -- Depository Agreement
</TABLE>
<PAGE> 3
Contract No.
MA-13257
COMMITMENT TO GUARANTEE OBLIGATIONS
by
THE UNITED STATES OF AMERICA
accepted by
ROWAN COMPANIES, INC.
Shipowner
TABLE OF CONTENTS (*)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I Findings and Determinations of Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II Commitment to Guarantee Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III The Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV Covenants of the Shipowner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V Conditions to Execution and Delivery of the Authorization
Agreement, and the Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VI Variation of Guarantee Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VII Termination or Assignment of Guarantee Commitment . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VIII Conformity To Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IX Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
- ---------------
(*) This Table of Contents is not a part of the Guarantee Commitment
and has no bearing upon the interpretation of any of its terms and provisions.
<PAGE> 4
Table A
Appendix I - Form of Credit Agreement
Appendix II - Form of Trust Indenture
Appendix III - Security Agreement
<PAGE> 5
COMMITMENT TO GUARANTEE OBLIGATIONS
by
THE UNITED STATES OF AMERICA
Accepted by
ROWAN COMPANIES, INC.
Shipowner
-------------
THIS COMMITMENT TO GUARANTEE OBLIGATIONS, dated as of December 17,
1996 (the "Guarantee Commitment"), is made and entered into by the UNITED
STATES OF AMERICA (the "United States"), represented by the SECRETARY OF
TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the
"Secretary"), and accepted on said date by ROWAN COMPANIES, INC., a Delaware
corporation (the "Shipowner").
RECITALS:
A. The Shipowner will be the sole owner of the mobile,
self-contained and elevating drilling platform to be named the GORILLA V (the
"Vessel") built pursuant to certain construction contract (the "Construction
Contract") with LETOURNEAU, INC., a Texas corporation (the "Shipyard").
B. To aid in financing the construction of the Vessel, the
Shipowner will borrow an aggregate principal amount approximately equal to, but
in no event in excess of, 87 1/2% of the Actual Cost of the Vessel.
C. As one means of such financing, the Shipowner has entered into
a Credit Agreement (said Credit Agreement, as the same may be amended, modified
or supplemented from time to time as permitted thereunder, herein called the
"Credit Agreement"), by and between the Shipowner and CITIBANK, N.A., a
national banking association (the "Lender").
D. The Shipowner will on the Closing Date, execute and deliver a
Trust Indenture (the "Indenture"), between the Shipowner and CITIBANK, N.A., a
national banking association, as Indenture Trustee (the "Indenture Trustee"),
in connection with the Obligations to be issued in respect of the Vessel, in
the aggregate amount, with the maturity and bearing interest at the rate
specified in the Indenture.
E. Under the Authorization Agreement (the "Authorization Agreement"),
Contract MA-13258 to be entered into on the Closing Date between the Secretary
and the Indenture Trustee, the
<PAGE> 6
Indenture Trustee will be authorized to endorse and execute, by means of
facsimile signature of the Secretary and the facsimile seal of the Department
of Transportation, on each of the Obligations issued and to authenticate a
guarantee by the Secretary of the payment in full of all the unpaid interest
on, and the unpaid balance of the principal of, each Obligation, including
interest accruing between the date of default under such Obligation and the
date of payment by the Secretary (individually, a "Guarantee" and,
collectively, the "Guarantees").
F. The Shipowner, as security for the Guarantees, and as security
to the Secretary for the payment to the Secretary of the principal of, and the
interest due or to become due on, the Secretary's Note to be executed in
accordance with the terms thereof, will, on the Closing Date, enter into a
Security Agreement with the Secretary (the "Security Agreement"), Contract
MA-13259, pursuant to which the Shipowner will assign to the Secretary, among
other things, all of the Shipowner's interest in the Construction Contract, and
all other contracts which relate to the construction of the Vessel, as
specified therein, and all property, including the Vessel, in which the
Shipowner has or will have an interest pursuant to the Construction Contract.
G. The Shipowner will as further security to the Secretary,
execute and deliver on the Delivery Date, a First Preferred Ship Mortgage,
Contract MA-13260, created under and pursuant to Chapter 313, Title 46 United
States Code, to the Secretary, as Mortgagee, upon and attaching to the Vessel.
H. In connection with the execution and delivery of the Security
Agreement, the Shipyard will enter into a consent to the assignment of the
Construction Contract (the "Consent of Shipyard").
I. In order to implement certain aspects of the transactions
contemplated by the Security Agreement and the Indenture, the Secretary, the
Shipowner and CITIBANK, N.A., a national banking association, (the
"Depository") will enter into the Depository Agreement, Contract MA-13262 (the
"Depository Agreement").
J. The Shipowner will as further security to the Secretary, enter
into a Title XI Reserve Fund and Financial Agreement, Contract MA-13261, with
the Secretary (the "Title XI Reserve Fund and Financial Agreement").
-2-
<PAGE> 7
W I T N E S E T H:
That under the provisions of Title XI of the Merchant Marine Act,
1936, as amended and in effect on the date hereof (said provisions, as so
amended and in effect on the date hereof, being called "Title XI") and in
consideration of (i) the covenants of the Shipowner contained herein, (ii) the
payment by the Shipowner to the Secretary of the charges for this Guarantee
Commitment pursuant to Section 1104(f) of Title XI, and (iii) other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Secretary hereby commits itself as herein provided.
The following executed documents are annexed to each counterpart of
this Guarantee Commitment: the Security Agreement, the Title XI Reserve Fund
and Financial Agreement, and the Depository Agreement.
Annexed to each counterpart of this Guarantee Commitment are forms of
the Consent of Shipyard, the Credit Agreement, the Indenture, the Obligations,
the Authorization Agreement, the Mortgage, and the Secretary's Note. As used
herein, the "Closing Date" refers to the date for the execution and delivery of
the Obligations as provided in the Credit Agreement annexed hereto, subject to
the conditions contained in Article V hereof.
The Consent of Shipyard, the Credit Agreement, the Indenture, the
Obligations, the Authorization Agreement, and the Secretary's Note (except as
otherwise required by the Secretary), shall be executed and delivered
substantially in the respective forms annexed hereto, except that the blanks,
if any, therein shall be filled in as contemplated therein and herein and,
except further that the maturity dates and interest rates of the Obligations
must be further approved by the Secretary. The Mortgage shall be executed and
delivered substantially in the form annexed hereto on the Delivery Date.
ARTICLE I
Findings and Determinations of Secretary
Pursuant to Section 1104(d) of Title XI, the Secretary has found that
the property or project with respect to which the Obligations will be executed
will be, in his opinion, economically sound.
Pursuant to Sections 1101(f), 1101(g) and 1104(b)(2) of Title XI, the
Secretary has determined that the Actual Cost of the Vessel is $175,042,902.
The Actual Cost of the Vessel is comprised of the amounts determined by the
Secretary set forth in
-3-
<PAGE> 8
Table A annexed hereto, and the Secretary has determined that the amounts set
forth in said Table A are itemized as also set forth therein. The Secretary
may, at the request of the Shipowner, make a redetermination of the Actual Cost
of the Vessel to include, in addition to the items set forth or referred to in
said Table A, any other items or any increase in the amounts of the items set
forth or referred to therein.
The aggregate principal amount of the Obligations will not exceed
87-1/2% of the Actual Cost of the Vessel, and the Shipowner may execute the
Obligations in amounts less than 87-1/2% of the Actual Cost during the
Construction Period, provided that on or prior to two years after the Delivery
Date, the Shipowner shall have executed and delivered Obligations equal to
87-1/2% of Actual Cost, subject to the provisions of the preceding paragraph.
Pursuant to Section 1104(b)(3) and 1104(b)(5) of Title XI,
respectively, the Secretary has determined that the maturity date of the
Obligations is satisfactory and that the interest rate to be borne by the
Obligations (exclusive of the charges for the Guarantee Fee and service
charges, if any) to be issued on the Closing Date is reasonable, taking into
account the range of interest rates prevailing in the private market for
similar loans and risks assumed by the Secretary.
Pursuant to Section 1104(b)(4) of Title XI, the Secretary has
determined that payments of principal required by the Obligations are
satisfactory.
ARTICLE II
Commitment to Guarantee Obligations
The United States, represented by the Secretary, HEREBY COMMITS ITSELF
TO GUARANTEE (as provided in the Obligations) the payment of the unpaid
interest on, and the unpaid balance of the principal of, the Obligations,
including interest accruing between the date of default under the Obligations
and the payment in full of the Guarantees, and, to effect this Guarantee
Commitment, hereby commits itself to execute and deliver the Authorization
Agreement, the Security Agreement, the Title XI Reserve Fund and Financial
Agreement, and the Depository Agreement on the Closing Date and the Mortgage on
the Delivery Date.
-4-
<PAGE> 9
ARTICLE III
The Obligations
The Obligations shall be as provided in the Indenture and in the form
of the Obligations annexed as Exhibit 2 to the Indenture. The Obligations shall
be subject to all of the terms and conditions set forth in the Indenture and in
the forms thereof. The Credit Agreement, the Indenture, the Obligations, the
Security Agreement, the Secretary's Note, the Title XI Reserve Fund and
Financial Agreement, and the Depository Agreement shall be executed and
delivered by the Shipowner on the Closing Date. The Mortgage shall be executed
and delivered by the Shipowner on the Delivery Date. The forms of the Credit
Agreement, the Indenture, the Obligations, the Authorization Agreement, the
Security Agreement, the Mortgage, the Secretary's Note, the Title XI Reserve
Fund and Financial Agreement, and the Depository Agreement are hereby approved
by the Secretary.
ARTICLE IV
Covenants of the Shipowner
The Shipowner represents and, until termination of this Guarantee
Commitment, agrees:
(a) that the Vessel will be constructed substantially in
accordance with the plans and specifications, as applicable, pursuant to the
Construction Contract, as amended, by LETOURNEAU, INC., a shipyard within the
United States approved by the Secretary, and on the Delivery Date will be and
shall remain documented under the laws of the United States;
(b) to furnish to the Secretary, promptly upon written
request, such reasonable, material and pertinent reports, evidence, proof or
information, in addition to that furnished pursuant to the further provisions
of this Guarantee Commitment or in the application for this Guarantee
Commitment under Title XI or otherwise available to the Secretary, as the
Secretary may reasonably deem necessary or appropriate in connection with the
performance by the Secretary of his duties and functions under the Act;
(c) to maintain records of all amounts paid or obligated
to be paid by or for the account of the Shipowner for the construction of the
Vessel;
(d) to permit the Secretary, promptly upon request, to
make such reasonable, material and pertinent examination and audit of the
Shipowner's books, records and accounts and to take
-5-
<PAGE> 10
such information therefrom and make such transcripts or copies thereof, as the
Secretary may reasonably deem necessary or appropriate in connection with the
performance by the Secretary of his duties and functions under the Act;
(e) to maintain its United States citizenship within the
meaning of Section 2 of the Shipping Act, 1916, as amended, for the purpose of
operation of the Vessel in the trade or trades in which the Shipowner proposes
to operate the Vessel, to the satisfaction of the Secretary and, at the time of
the execution and delivery of the Authorization Agreement, to submit to the
Secretary such supplemental proof of citizenship as the Secretary may deem
appropriate to evidence the continued United States citizenship of the
Shipowner for said purpose; and
(f) to execute and deliver on the Closing Date, the
Credit Agreement, the Obligations, the Indenture, the Security Agreement, the
Secretary's Note, the Title XI Reserve Fund and Financial Agreement, and the
Depository Agreement, and on the Delivery Date, to execute and deliver the
Mortgage.
ARTICLE V
Conditions to Execution and Delivery of the
Authorization Agreement and the Security Agreement
On the Closing Date, the Authorization Agreement shall be executed and
delivered by the United States and the Indenture Trustee; the Security
Agreement, and the Title XI Reserve Fund and Financial Agreement shall be
executed and delivered by the Shipowner and the Secretary; the Credit Agreement
shall be executed and delivered by the Shipowner and the Lender; the
Construction Contract shall be executed and delivered by the Shipowner and the
Shipyard; the Consent of the Shipyard shall be executed and delivered by the
Shipyard; and the Depository Agreement shall be executed and delivered by the
Shipowner, the Secretary and the Depository; and the Secretary's Note shall be
executed and delivered and the Obligations shall be issued and delivered by the
Shipowner. The obligation of the United States represented by the Secretary to
execute and deliver the Authorization Agreement, the Security Agreement, the
Depository Agreement and the Title XI Reserve Fund and Financial Agreement on
the Closing Date shall be subject to the following conditions unless waived in
writing by the Secretary:
(a) the Closing Date shall occur prior to March 31, 1997;
(b) the Shipowner shall have undertaken to execute and
deliver to the Secretary on the Delivery Date a certification
-6-
<PAGE> 11
that the Vessel shall be free of any claim, lien, charge, mortgage or other
encumbrance of any character (except the Mortgage, the Security Agreement, and
liens otherwise permitted by Section 2.04 of Exhibit 1 to the Security
Agreement); and the Credit Agreement shall have been executed and delivered on
or prior to the Closing Date and the Indenture and the Obligations shall have
been duly executed and delivered on the Closing Date;
(c) on the Closing Date, the Shipowner shall be a citizen
of the United States within the meaning of Section 2 of the Shipping Act, 1916,
as amended, and shall have furnished to the Secretary an affidavit setting
forth data showing such citizenship to the Secretary's satisfaction at least 30
days prior to the Closing Date and the Shipowner shall have submitted pro forma
affidavits at least ten days prior to the Closing Date;
(d) (i) there shall have been delivered to the Secretary
two executed counterparts of the Credit Agreement, and two executed
counterparts of the Indenture, (ii) two specimen copies of the Obligations
issued under the Indenture; and (iii) two originals of all other documents
delivered by the Shipowner or the Indenture Trustee on the Closing Date;
(e) the following representations and warranties shall
have been made to the Secretary in writing and shall be true as of the Closing
Date:
(i) the Shipowner is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, has not failed to qualify to do business in any
jurisdiction in the United States in which its business or properties
require such qualification, and had and has full legal right,
corporate power and authority to own its own properties and assets and
conduct its business as it is presently conducted;
(ii) the Shipowner had and has legal power and
authority to enter into and carry out the terms of this Guarantee
Commitment, the Construction Contract, the Credit Agreement, the
Obligations, the Indenture, the Security Agreement, the Secretary's
Note, the Title XI Reserve Fund and Financial Agreement, and the
Depository Agreement;
(iii) each and all of the documents and instruments
referred to in clause (ii) hereof have been duly authorized, executed
and delivered by the Shipowner and constitute, in accordance with
their respective terms, legal, valid and binding instruments
enforceable against the Shipowner, except to the extent limited by
applicable bankruptcy, reorganization, insolvency, moratorium or the
-7-
<PAGE> 12
similar laws of general application relating to or affecting the
enforcement of creditors rights as from time to time in effect;
(iv) the consummation of the transactions
contemplated by and compliance by the Shipowner of all the terms and
provisions of the documents and instruments referred to in clause (ii)
hereof will not violate any provisions of the Certificate of
Incorporation or By-laws, as amended, of the Shipowner and will not
result in a breach of the terms and provisions of, or constitute a
default under any other agreement or undertaking by the Shipowner or
by which the Shipowner is bound or any order of any court or
administrative agency entered into in any proceedings to which the
Shipowner is or has been a party;
(v) there is no litigation, proceeding or
investigation pending or, to the best of the Shipowner's knowledge,
threatened, involving the Shipowner or any of its property which could
prevent or jeopardize the performance by the Shipowner of the
documents and instruments referred to in clause (ii) hereof.
(f) there shall have been delivered to the Secretary a
copy of each document and legal opinion delivered to the Lender on the Closing
Date;
(g) the Secretary shall have received the Guarantee Fee
payable under the Security Agreement;
(h) all charges levied or assessed by the Secretary under
Section 1104(f) of Title XI shall have been paid by the Shipowner;
(i) the Shipowner shall have performed without material
breach its agreements under Article IV hereof, and the further terms,
conditions and provisions of this Guarantee Commitment shall have been complied
with in all material respects;
(j) there shall not have occurred any event which
constitutes (or after any period of time or any notice, or both, would
constitute) a "Default" under the Security Agreement;
(k) there shall have been delivered to the Secretary by
the Shipowner an opinion (or opinions) of counsel acceptable to the Secretary,
and in form and substance satisfactory to the Secretary, to the effect that:
(i) by the terms of the Security Agreement, the
Shipowner has granted to the Secretary a fully perfected,
-8-
<PAGE> 13
first priority security interest in each of the assets which
constitutes the Security, as defined therein;
(ii) all filings and recordings required or
available to perfect the Secretary's first priority security interests
in the Security, as defined in the Security Agreement, granted by the
Shipowner in the Security Agreement, and to render such security
interests valid and enforceable under the laws of the States of
Delaware, Texas and Mississippi (including without limitation, all
filings of financing statements under the UCC) have been duly
effected, and no periodic refiling or periodic re-recording is
required to protect and preserve the perfection and first priority of
such security interests, except as provided by the laws of such
States;
(iii) all agreements have been executed and all
action has been taken which are required under the laws of the State
of New York to establish a bailment by the Shipowner/Secretary/Bailor
of the amounts held or to be held by the Depository/Bailee under the
Depository Agreement, at whatever time, whether such amounts are cash,
instruments, negotiable documents, chattel paper, proceeds thereof or
otherwise (the "Funds"), in order to insure that the Secretary has a
fully perfected first priority security interest in the Funds;
(l) there shall have been executed and delivered to the
Secretary an opinion of counsel in form and substance satisfactory to the
Secretary;
(m) the Secretary shall have received a letter agreement
from the Shipowner to provide the Secretary within a reasonable time after the
Closing Date, with seven conformed copies of the Guarantee Commitment and each
of the Appendices and Exhibits thereto executed on or prior to such date;
(n) on the Closing Date, the qualifying requirements set
forth in Section 15 of the Title XI Reserve Fund and Financial Agreement shall
have been complied with and certified to as required therein;
(o) at least ten days prior to the Closing Date, there
shall have been delivered to the Secretary, pro forma balance sheets for the
Shipowner as of the last date of the month immediately preceding the Closing
Date, certified by an officer of the Shipowner showing, among other things, all
non-Title XI debt of the Shipowner;
-9-
<PAGE> 14
(p) on the Closing Date, the Shipowner shall certify that
all non-Title XI loans to the Shipowner relating to the vessel have been
discharged;
(q) at least ten days prior to the Closing Date the
Shipowner shall have provided the Secretary with satisfactory evidence of
insurance and at least ten days prior to the Delivery Date the Shipowner shall
have provided the Secretary with satisfactory evidence of marine insurance as
required by the Security Agreement; and
(r) on the Closing Date, the Shipowner shall have
undertaken to execute and deliver the Mortgage to the Secretary on the Delivery
Date.
ARTICLE VI
Variation of Guarantee Commitment
No variation from the terms and conditions hereof shall be permitted
except pursuant to an amendment executed by the Secretary and accepted by the
Shipowner.
ARTICLE VII
Termination or Assignment of Guarantee Commitment
This Guarantee Commitment may terminate and the parties hereto shall
have no further rights or obligations hereunder, upon written notice by the
Secretary, after the earlier of (a) the termination of the obligations of the
United States pursuant to the Shipowner's failure to satisfy one or more
conditions set forth in Article V hereof or (b) the execution and delivery of
the Security Agreement and the Authorization Agreement.
This Guarantee Commitment may not be assigned by the Shipowner without
the prior written approval of the Secretary and any attempt to do so shall be
null and void ab initio.
ARTICLE VIII
Conformity with Regulations
The Secretary hereby affirms that, with respect to the rights of the
Indenture Trustee and the Holders of the Obligations, this Guarantee Commitment
conforms to its existing regulations governing the issuance of commitments to
guarantee and guarantees under Title XI of the Act and that this Guarantee
Commitment contains a complete list of conditions required for
-10-
<PAGE> 15
the execution and delivery of guarantees including the Guarantees.
ARTICLE IX
Miscellaneous
(a) The table of contents and the titles of the Articles are
inserted as a matter of convenient reference and shall not be construed as a
part of this Guarantee Commitment. This Guarantee Commitment may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
(b) For all purposes of this Guarantee Commitment, unless
otherwise expressly provided or unless the context shall otherwise require:
(i) The terms "hereof," "herein," "hereby,"
"hereto," "hereunder," "hereinafter" and "herewith" refer to this
Guarantee Commitment as the same may be supplemented or amended as
herein provided; and
(ii) Terms defined in Schedule X of the Security
Agreement annexed hereto or by reference therein to other instruments
shall have the respective meanings stated in Schedule X or such other
instruments.
-11-
<PAGE> 16
IN WITNESS WHEREOF, this Commitment to Guarantee Obligations has been
executed by the United States and accepted by the Shipowner, all as of the day
and year first above written.
UNITED STATES OF AMERICA,
SECRETARY OF TRANSPORTATION
BY: MARITIME ADMINISTRATION
[SEAL]
BY: Joel C. Richard
-----------------------------------
Secretary
Maritime Administration
Attest:
Sarah J. Johnson
- -----------------------
Assistant Secretary
Maritime Administration
ACCEPTED BY:
ROWAN COMPANIES, INC.
as Shipowner
BY: E. E. Thiele
-----------------------------------
Senior Vice President
[SEAL]
Attest:
BY: Mark H. Hay
-------------------
Secretary
-12-
<PAGE> 17
Document 14
FIRST PREFERRED SHIP MORTGAGE
Covering the whole of the Vessel
listed in the GRANTING CLAUSE
Exhibit 3
to
Security Agreement
<PAGE> 18
Contract No. MA-13260
FIRST PREFERRED SHIP MORTGAGE
$153,091,000
ROWAN COMPANIES, INC.
Shipowner and Mortgagor
-----------------------
-----------------------
to
THE UNITED STATES OF AMERICA
Mortgagee
represented by the Secretary of Transportation
acting by and through the
Maritime Administrator
Maritime Administration, U.S. Department of Transportation
400 Seventh Street, S.W.
Washington, D.C. 20590
Dated as of ____________
-----------------------
Covering the whole of the Vessel
listed in the
GRANTING CLAUSE
<PAGE> 19
FIRST PREFERRED SHIP MORTGAGE
THIS FIRST PREFERRED SHIP MORTGAGE, effective as of _______________,
19__, is made by ROWAN COMPANIES, INC., a Delaware corporation (the "Shipowner"
and "Mortgagor") located at 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
Texas 77056-6196, to the UNITED STATES OF AMERICA (the "United States"),
represented by the Secretary of Transportation, acting by and through the
Maritime Administrator (the "Secretary" and "Mortgagee") located at the U.S.
Department of Transportation, 400 Seventh Street, S.W., Washington, D.C. 20590.
WHEREAS, the Shipowner is the sole owner of the whole of the GORILLA V
more fully described in the Granting Clause below;
WHEREAS, the Shipowner has, in consideration of the issuance of
certain Guarantees (the "Guarantees") by the Secretary, pursuant to Title XI of
the Merchant Marine Act, 1936, as amended ("Title XI"), of the payment of the
unpaid interest on, and the unpaid balance of the principal of, the United
States Government Guaranteed Ship Financing Obligations, GORILLA V Series
issued by the Shipowner in the aggregate principal amount of $153,091,000 (the
"Obligations"), and pursuant to the terms and provisions of the Security
Agreement, dated December 17, 1996, between the Shipowner and the Secretary
(herein as it may be amended or supplemented, called the "Security Agreement"),
issued and delivered to the Secretary its promissory note dated December 17,
1996, payable to the Secretary in the principal amount of $153,091,000 (said
promissory note in the form attached to the Security Agreement as Exhibit 2
being herein called the "Secretary's Note"); and the Shipowner has agreed to
execute and deliver this First Preferred Ship Mortgage to the Secretary
(hereinafter referred to in this Mortgage as the "Mortgagee") for the purpose
of securing the Shipowner's obligations to the Secretary with respect to the
Guarantees and the payment of the principal of and interest on the Secretary's
Note in accordance with its terms, and the terms of the Security Agreement and
this Mortgage (the Mortgage, as the same may hereafter be amended or
supplemented in accordance with the terms hereof, herein called the
"Mortgage");
NOW, THEREFORE, THIS MORTGAGE WITNESSETH:
That, in consideration of the premises and of the additional covenants
herein contained and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and as security for the Guarantees
and in order to secure the payment of the above-mentioned interest on and
principal of the Secretary's Note and all other sums that may be
<PAGE> 20
secured by the Mortgage and the Security Agreement, and to secure the due
performance and observance of all the agreements and covenants in the
Secretary's Note and herein contained, the Shipowner has granted, conveyed,
mortgaged, pledged, confirmed, assigned, transferred and set over, and by these
presents does grant, convey, mortgage, pledge, confirm, assign, transfer and set
over unto the Mortgagee, the whole of the Vessel described as follows: GORILLA
V, O.N._______, which Vessel is more fully described in its certificate of
documentation, together with all of its boilers, engines, machinery, masts,
spares, rigging, boats, anchors, cables, chains, tackle, tools, pumps and
pumping equipment, apparel, furniture, fittings and equipment, spare parts and
all other appurtenances to said Vessel appertaining or belonging, whether now
owned or hereafter acquired whether on board or not and all additions,
improvements, renewals and replacements hereafter made in or to said Vessel or
said appurtenances.
TO HAVE AND TO HOLD, all and singular, the above mortgaged and
described property unto the Mortgagee, to its own use, benefit and behoof
forever;
PROVIDED, HOWEVER, and these presents are upon the condition that, if
the above-mentioned principal of and interest on the Secretary's Note are paid
or satisfied in accordance with the terms thereof, the Security Agreement and
this Mortgage, and all other job obligations and liabilities that may be secured
by the Security Agreement and this Mortgage are paid in accordance with their
terms, then this Mortgage and the estate and rights hereunder shall cease,
determine and be void, otherwise to remain in full force and effect.
The Shipowner hereby agrees with the Mortgagee that the Vessel subject
to the lien of this mortgage is to be held subject to the further agreements
and conditions hereinafter set forth.
ARTICLE FIRST
Section 1. The execution and delivery of this Mortgage and the
execution and delivery of the Secretary's Note have each been duly authorized
by the Shipowner and are not in contravention of any indenture or undertaking
to which the Shipowner is a party or by which it is bound.
Section 2. All of the covenants and agreements on the part of the
Shipowner including, without limitation, those relating to maintenance of
United States citizenship; organization and existence of the Shipowner; title
to and possession of the Vessel; sale, transfer or charter of the Vessel;
taxes; liens; documentation of the Vessel; material changes in the Vessel;
2
<PAGE> 21
compliance with applicable laws; maintenance of marine insurance; requisition
of title; and compliance with Chapter 313 of Title 46 of the United States
Code, which are set forth in, and all of the rights, immunities, powers and
remedies of the Secretary which are provided for in the Security Agreement
(including the Special Provisions thereof and the General Provisions of Exhibit
1 thereto), except for the Granting Clause thereof, together with all other
provisions of the Security Agreement, are incorporated herein by reference with
the same force and effect as though set forth at length in this Mortgage, and
true copies of the form of the Special Provisions of and Exhibit 1 to the
Security Agreement are annexed hereto.
Section 3. A Default pursuant to the provisions of the Security
Agreement shall constitute a default hereunder, and shall give the Mortgagee
the rights and remedies established by Chapter 313 of Title 46 of the United
States Code, and as provided in the Security Agreement.
Section 4. This instrument is executed as and shall constitute an
instrument supplemental to the Security Agreement, and shall be construed in
connection with, and as part of, the Security Agreement.
ARTICLE SECOND
Section 1. This Mortgage may be executed in any number of counterparts
and all such counterparts executed and delivered each as an original shall
constitute but one and the same instruments.
Section 2. All the covenants, promises, stipulations and agreements of
the Shipowner in this Mortgage shall bind the Shipowner and its successors and
assigns, and shall inure to the benefit of the Mortgagee and its successors and
assigns, and all the covenants, promises, stipulations and agreements of the
Mortgagee in this Mortgage contained herein, shall bind the Mortgagee and its
successors and assigns, and shall inure to the benefit of the Shipowner and its
successors and assigns, whether so expressed or not.
Section 3. Any term used herein which is defined in the Security
Agreement and which is not specifically defined herein shall have the meaning
specified in the Security Agreement, unless the context otherwise requires.
Section 4. No provision of this Mortgage or of the Security Agreement
shall be deemed to constitute a waiver by the Mortgagee of the preferred status
of the Mortgage given by 46 U.S.C. Section 31305, and any provision of this
Mortgage or of the Security
3
<PAGE> 22
Agreement which would otherwise constitute such a waiver, shall to such extent
be of no force and effect.
Section 5. If the Secretary's Note shall have been satisfied and
discharged, and if the Shipowner shall pay or cause to be paid all other sums
that may have become secured under the Security Agreement and this Mortgage,
then this Mortgage and the estate and rights hereunder shall cease, determine,
and become null and void; and the Secretary, on request of the Shipowner and at
the Shipowner's cost and expense, shall forthwith cause satisfaction and
discharge of this Mortgage to be entered upon its and other appropriate
records, and shall execute and deliver to the Shipowner such instruments as may
be necessary, duly acknowledging the satisfaction and discharge of this
Mortgage.
ARTICLE THIRD
The total principal amount of the obligations that is secured by this
First Preferred Ship Mortgage is ONE HUNDRED FIFTY THREE MILLION NINETY ONE
THOUSAND DOLLARS AND NO/100's ($153,091,000) (together with any additional sums
owed by the Shipowner to the Secretary pursuant to the provisions of the
Security Agreement including, but not limited to, sections 2.14 and 6.05),
excluding interest, expenses, and fees (such as custodial costs and attorneys'
fees). The date of maturity is July 1, 2010.
4
<PAGE> 23
IN WITNESS WHEREOF, this instrument has been executed on the date
below indicated, and effective as of the day and year first above written.
ROWAN COMPANIES, INC.,
as Shipowner
[SEAL]
BY:
-----------------------------------
Senior Vice President
Date Signed:
---------------------
Attest:
- -------------------------------
Secretary
CONSENTED TO:
UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
acting by and through the
MARITIME ADMINISTRATOR
By:
-----------------------------------
Secretary
Maritime Administration
5
<PAGE> 24
ACKNOWLEDGEMENT
DISTRICT OF COLUMBIA )
) ss:
CITY OF WASHINGTON )
On this day _____ of ____________, 19__, before me, _________________,
a Notary Public in and for the District of Columbia, personally appeared
______________________, duly known to me to be the Senior Vice President of
ROWAN COMPANIES, INC., a Delaware corporation, the corporation described in and
that executed the instrument hereto annexed and acknowledged to me that the
seal affixed to said instrument is such corporation's seal, that it was so
affixed by authority set forth in the By-laws or said corporation, and that
he/she signed his/her name thereto by like authority.
------------------------------------------------
NOTARY PUBLIC
My Commission Expires:
[NOTARIAL SEAL]
6
<PAGE> 25
ACKNOWLEDGEMENT
DISTRICT OF COLUMBIA )
) ss:
CITY OF WASHINGTON )
I, the undersigned, a Notary Public in and for the District of
Columbia, do hereby certify that _____________, Secretary of the Maritime
Administration, personally appeared before me in said District, the aforesaid
officer being personally well known to me as the person who executed the
Mortgage hereto annexed, and acknowledged the same to be his/her act and deed
as said officer.
Given under my hand and seal this ____ day of ______________.
------------------------------------------------
NOTARY PUBLIC
My Commission Expires:
[NOTARIAL STAMP AND SEAL]
7
<PAGE> 1
EXHIBIT 10u
CREDIT AGREEMENT
dated as of December 17, 1996
between
ROWAN COMPANIES, INC.
as Shipowner
and
CITIBANK, N.A.
as the Lender
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Principles of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. THE CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.01 Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.02 Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.03 Disbursements and Minimum Amount of Utilizations . . . . . . . . . . . . . . . . . . . . . 2
2.04 Floating Rate Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. DISBURSEMENT REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.01 Disbursement Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 4. TERMS OF THE CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.01 Principal Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.02 Interest Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.03 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.04 Recapture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.05 Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.06 Limit of United States Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.01 Conditions Precedent to Lender's Obligations Under this Agreement . . . . . . . . . . . . 6
5.02 Conditions Precedent to Each Disbursement . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6. FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.02 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.03 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.04 Additional or Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 7. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.01 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.02 Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 8. REPRESENTATIONS AND WARRANTIES BY THE SHIPOWNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.01 Representations and Warranties of the Shipowner . . . . . . . . . . . . . . . . . . . . . 12
8.02 Agreements of the Shipowner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 9. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.01 Cancellation by the Shipowner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.02 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.03 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 10. GOVERNING LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.01 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.02 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.03 Waiver of Security Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.04 No Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.01 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.03 Disposition of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.04 Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11.06 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.08 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.09 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.10 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.12 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.13 Shipowner Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
Exhibits
Exhibit 1 Schedule of Definitions
Annexes
Annex A Form of Disbursement Requests
<PAGE> 4
THIS CREDIT AGREEMENT, dated as of December 17, 1996, is made by and
between ROWAN COMPANIES, INC., a Delaware corporation, as the Shipowner, and
CITIBANK, N.A., a national banking association, as the Lender.
BACKGROUND
WHEREAS:
(A) by this Agreement, the Lender has established a credit
facility (the "Credit Facility") in the amount of $153,091,000, pursuant to
which the Lender shall, subject to the terms and conditions hereof, extend
financing to the Shipowner (i) for the manufacture, construction, fabrication,
financing and purchase by the Shipowner of the Vessel; (ii) for the payment of
the related Construction Period Interest; and (iii) for the payment of the
Guarantee Fees;
(B) the establishment of the Credit Facility is in reliance upon
the commitment of the United States to guarantee the payment of the unpaid
interest on, and the unpaid balance of the principal of, the Floating Rate
Note, including interest accruing between the date of an Indenture Default
under the Floating Rate Note and the payment in full of the Guarantee;
(C) a condition to the Lender's extension of the Credit Facility
under this Agreement is the Lender's timely receipt of Certificates Authorizing
Disbursement and issuance of the Guarantee of the Floating Rate Note; and
(D) the Credit Facility may be utilized by the Shipowner in
accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.01 Defined Terms. For the purposes of this Agreement, unless
otherwise defined herein, defined terms shall have the meanings specified in
Exhibit 1 hereto.
1.02 Principles of Construction.
(a) The meanings set forth for defined terms in this Agreement
shall be equally applicable to both the singular and plural forms of the terms
defined.
(b) Unless otherwise specified, all references in this Agreement
to Annexes or Exhibits are to Annexes or Exhibits in or to this Agreement.
<PAGE> 5
-2-
(c) The headings of the Sections in this Agreement are included
for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
SECTION 2. THE CREDIT FACILITY
2.01 Amount. The Lender hereby establishes the Credit Facility,
upon the terms and conditions set forth in this Agreement, in favor of the
Shipowner in the maximum amount of $153,091,000 (the "Credit Facility Amount"),
to enable the Shipowner to finance: (i) the manufacture, construction,
fabrication, financing and purchase of the Vessel; (ii) Construction Period
Interest; and (iii) the Guarantee Fees. The Lender will, subject to the terms
and conditions provided herein, be obligated to fund under the Credit Facility
the amount (the "Available Amount") which is equal to the excess, if any, of
the Credit Facility Amount over the outstanding principal amount evidenced by
the Floating Rate Note ("Outstanding Principal").
2.02 Availability. Disbursements under the Credit Facility may be
made once a calendar month and up to and including the Final Disbursement Date.
"Final Disbursement Date" shall mean either October 31, 1998 or, if earlier,
the date on which the Available Amount under the Credit Facility is cancelled
in accordance with Section 9.01 or reduced to zero.
2.03 Disbursements and Minimum Amount of Utilizations. Upon
satisfaction of Sections 3.01, 5.01 and 5.02, disbursements shall be made by
advances from the Lender to the Shipowner ("Disbursements") in accordance with
Section 3.01. Notwithstanding anything in this Agreement to the contrary, the
Shipowner may not request a Disbursement under the Credit Facility for an
amount (a) less than the smaller of (i) $1,000,000 or (ii) the Available Amount
or (b) more than the Available Amount.
2.04 Floating Rate Note. Disbursements from the Credit Facility
shall become the indebtedness of the Shipowner to the Lender under the Floating
Rate Note.
SECTION 3. DISBURSEMENT REQUIREMENTS
3.01 Disbursement Procedures. Upon receipt of each Certificate
Authorizing Disbursement at least five Business Days prior to the proposed
disbursement date, the Lender shall disburse funds in accordance with the terms
of such Certificate Authorizing Disbursement to the Shipowner subject to the
terms of this Agreement; provided that, if the Certificate Authorizing
Disbursement and the request for disbursement referred to therein do not
specify a disbursement date, then the disbursement date shall be the fifth
Business Day (or such earlier or later Business Day as is requested by the
Shipowner and is acceptable to the Lender) following the Lender's receipt of
such Certificate Authorizing Disbursement. Promptly following each
Disbursement, the Lender shall transmit to the Indenture Trustee a copy of the
Certificate Authorizing Disbursement, a confirmation that the Disbursement was
made, and a copy of Exhibit A to the Floating Rate Note, updated to reflect
such Disbursement and other intervening, related events.
SECTION 4. TERMS OF THE CREDIT
4.01 Principal Repayment. The Shipowner shall repay all
Outstanding Principal in twenty-four (24) approximately equal, successive
semi-annual installments, with each such installment to be payable on a Payment
Date, provided that, on the last Payment Date, the Shipowner shall repay in
full the remaining Outstanding Principal.
<PAGE> 6
-3-
4.02 Interest Payment.
(a) On each Interest Payment Date the Shipowner shall pay interest
on the Outstanding Principal, calculated at an interest rate per annum equal to
the Applicable Interest Rate therefor, as determined for each successive
Interest Period. The interest rate on such amount shall be determined by the
Indenture Trustee pursuant to the definition of Applicable Interest Rate. From
time to time, the Lender will confirm LIBOR, Base Rate, and Applicable Interest
Rate to the Indenture Trustee, provided, however, such confirmation shall not
relieve the Indenture Trustee of its obligations under the Indenture to
determine the Applicable Interest Rate.
(b) The Shipowner shall pay to the Person entitled to any Unpaid
Amount, on demand, interest on such Unpaid Amount (to the extent permitted by
applicable law) for each Post Maturity Period at an interest rate per annum
equal to the sum (the "Post Maturity Interest Rate") of (1) two percent (2%),
plus (2) the Post Maturity Applicable Interest Rate. With respect to any
Unpaid Amounts, the "Post Maturity Applicable Interest Rate" shall mean either
(i) LIBOR on the Quotation Date therefor plus during the Construction Period,
nine-twentieths of one percent (0.45%) per annum and thereafter, one-half of
one percent (0.50%) per annum, or (ii) if, for any such Post Maturity Period,
LIBOR cannot be determined, the rate per annum reasonably determined by the
Person to whom such Unpaid Amount is owed before the last day of such Post
Maturity Period to be that which expresses as a percentage rate per annum the
cost which such Person would incur in funding such Unpaid Amount from whatever
source it reasonably deems appropriate for such Post Maturity Period plus
during the Construction Period, nine-twentieths of one percent (0.45%) per
annum and thereafter, one-half of one percent (0.50%) per annum or (iii) if any
such Unpaid Amount is an Accelerated Repayment, then during the first Post
Maturity Period the rate which would have been applicable to such Unpaid Amount
had it not so fallen due. In the absence of an Indenture Default, any interest
which shall have accrued under this Section 4.02(b) in respect of an Unpaid
Amount shall be due and payable and shall be paid by the Shipowner on demand on
such dates as the Person to whom such Unpaid Amount is owed may specify by
written notice to the Shipowner, or if there is an Indenture Default, any
interest which shall have accrued under this Section 4.02(b) in respect of an
Unpaid Amount shall be due and payable immediately and shall be paid by the
Shipowner without demand and any payment by, or on behalf of, the Shipowner
hereunder shall be governed by Section 7.02 and the provisions of the last
paragraph of Section 9.03.
As used herein, "Unpaid Amount" means all or any part of principal,
accrued interest, fees or other amounts owing to the Lender under this
Agreement or the Floating Rate Note which is not paid in full when and as due
and payable, whether at Stated Maturity, by acceleration or otherwise, or any
sum due and payable by the Shipowner to the Lender under any judgment of any
court or arbitral tribunal in connection with this Agreement which is not paid
on the date of such judgment; provided, however, that it is agreed that Unpaid
Amount shall not include any part of the principal and interest on the Floating
Rate Note, except that Unpaid Amount shall include all such amounts thereof as
are not paid by the Shipowner as and when they are due but are paid by the
Shipowner prior to payment thereof by the Secretary. "LIBOR" shall mean, in
relation to any Post Maturity Period (other than the first Post Maturity Period
contemplated by clause (iii) of Section 4.02(b)), the rate of interest per
annum (rounded upward, if necessary, to the nearest 1/16 of 1%) last quoted by
the principal London office of CITIBANK, N.A. prior to the close of business at
such London office on the Quotation Date for the offering to leading banks in
the London interbank market of U.S. Dollar deposits on an overnight basis and
in an amount comparable to the Unpaid Amount to which LIBOR is to apply.
"Accelerated Repayment" shall mean any part of the principal of the Floating
Rate Note which became due and payable on a day other than its Payment Date.
"Post Maturity Period" shall mean with respect to the period from the date an
Unpaid Amount was due until such amount shall have been paid in full, each
successive period, the first of which shall start on the date such Unpaid
Amount was due (or the date of any such judgment or arbitral award, if earlier)
and each other of which shall start on the last day of the preceding such
period, and the duration of each of which shall be one day, or if LIBOR
applies, then from and including the Quotation Date for such Post Maturity
Period to but excluding the next Quotation Date or such other duration selected
by the Person to whom such Unpaid Amount is due, provided, however, that in the
case of any Accelerated Repayment, the first such Post Maturity Period
applicable thereto shall be of a duration equal to the unexpired portion of its
then applicable Interest Period. "Quotation Date" in relation to any Post
Maturity Period means the day on which quotations would ordinarily be given by
CITIBANK, N.A. in the London interbank market
<PAGE> 7
-4-
for dollar deposits for delivery on the first day of that period, provided,
however, that if, for any such Post Maturity Period, quotations would
ordinarily be given on more than one date, the Quotation Date for that period
shall be the last of those dates.
4.03 Prepayment. (a) The Shipowner may from time to time prepay on
any Interest Payment Date all or part of the Outstanding Principal evidenced by
the Floating Rate Note, provided that: (i) any partial prepayment shall be in
a minimum principal amount of $10,000,000, unless otherwise required by the
Indenture; (ii) the Shipowner shall have given the Lender and the Indenture
Trustee prior written notice of the prepayment (which shall be not less than 40
nor more than 60 days); (iii) the Shipowner shall have paid in full all amounts
due under this Agreement as of the date of such prepayment, including, without
limitation, interest which has accrued to the date of prepayment on the amount
prepaid and all other amounts payable hereunder relating to the prepayment; and
(iv) any amount prepaid hereunder shall not be considered part of the Available
Amount.
(b) Upon delivery to the Shipowner and the Secretary of the
instrument satisfying and discharging the Indenture contemplated by Section
12.01 of the Exhibit 1 to the Indenture, all of the Shipowner's indebtedness,
liabilities and obligations under this Agreement and the Fee Letter shall
become immediately due and payable without demand upon, or notice to, the
Shipowner.
(c) Notwithstanding any other provision to the contrary herein, the
Shipowner or the Secretary (after the Secretary's assumption of the Floating
Rate Note pursuant to Section 6.09 of Exhibit 1 to the Indenture) may from time
to time prepay all or part of the principal amount of the Floating Rate Note
without any prepayment penalty or premium in accordance with Article III of
Exhibit 1 to the Indenture.
4.04 Recapture. (a) The Shipowner shall pay to the Lender, upon
the written request of the Lender, such amounts as shall be sufficient (in the
reasonable judgment of the Lender) to compensate the Lender for any loss,
expense or liability (including, without limitation, any loss, expense or
liability incurred by reason of the liquidation or redeployment of deposits
from third parties or in connection with obtaining funds to make or maintain
any Disbursement) which the Lender reasonably determines is attributable to:
(i) any failure to make scheduled payments on a Payment Date or any
payment due in connection with any Redemption; or
(ii) any failure by the Shipowner to borrow any advance for which a
Certificate Authorizing Disbursement has been issued; or
(iii) any revocation of a notice of prepayment given pursuant to
Section 4.03(a); or
(iv) any prepayment of the Floating Rate Note (including, without
limitation, due to the issuance of any fixed rate notes) other than on an
Interest Payment Date after giving five Business Days prior written notice to
the Lender.
(b) Without prejudice to any other provision hereof (and at the
Shipowner's expense), the Lender shall use such reasonable efforts as it shall
determine in its sole discretion to minimize any loss, expense or liability to
the extent possible.
4.05 Evidence of Debt. The Shipowner agrees that to evidence
further its obligation to repay all amounts disbursed under the Credit
Facility, with interest accrued thereon, it shall issue and deliver to the
Lender the Floating Rate Note. The Floating Rate Note shall (i) be in the form
of Exhibit 2 to the Indenture; (ii) bear the Secretary's Guarantee, and (iii)
be valid and enforceable as to its principal amount at any time only to the
extent of the aggregate amounts then disbursed and outstanding thereunder, and,
as to interest, only to the extent of the interest accrued thereon at the rate
guaranteed by the Secretary; with any interest in excess thereof being
evidenced by this Agreement.
<PAGE> 8
-5-
4.06 Limit of United States Guarantee. None of the interest, fees,
and expenses arising under Section 6 and none of the Indemnified Amounts,
commissions, Taxes, Other Taxes, Post Maturity Interest Rate, interest in
excess of 10.25% under the Floating Rate Note, the costs of obtaining any
interest rate protection, or any other charges, costs, expenses, or
indebtedness owed by the Shipowner under this Agreement to any Person is
guaranteed by the United States. The Guarantee of the United States extends
only to the principal and interest owed under the Floating Rate Note and only
to the extent specified therein.
SECTION 5. CONDITIONS PRECEDENT
5.01 Conditions Precedent to Lender's Obligations Under this
Agreement. The obligations of the Lender under this Agreement shall be subject
to the delivery to the Lender of the following documents on or before the
Closing Date:
<PAGE> 9
-6-
(a) This Agreement, the Floating Rate Note and the Fee Letter.
This Agreement and the Fee Letter, each fully executed by the parties thereto
in form and substance satisfactory to the Lender, which shall be in full force
and effect and the Floating Rate Note shall have been fully executed by the
Shipowner, endorsed by, or on behalf of, the United States, and delivered to
the Lender and all amounts then payable under the Fee Letter shall have been
paid to the Person entitled thereto.
(b) Existence. Evidence in form and substance satisfactory to the
Lender that the Shipowner is duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full power, authority
and legal right to own its property and to carry on its business as now
conducted.
(c) Authority. Evidence in form and substance satisfactory to the
Lender of the authority of the Shipowner to execute, deliver, perform and
observe the terms and conditions of this Agreement, the Floating Rate Note, and
the Indenture and evidence of authority (including specimen signatures) for
each Person who, on behalf of the Shipowner, signed this Agreement, the
Floating Rate Note, and the Indenture, or will otherwise act as representatives
of the Shipowner in the operation of the Credit Facility.
(d) Governmental and Other Authorizations. Copies, certified as
true copies by a duly authorized officer of the Shipowner, of each consent,
license, authorization or approval of, and exemption by, any Governmental
Authority and any governmental authorities within the United States or
elsewhere, which are necessary or advisable (i) for the execution, delivery,
performance and observance by the Shipowner of this Agreement, the Floating
Rate Note and the Indenture; and (ii) for the validity, binding effect and
enforceability of this Agreement, the Floating Rate Note and the Indenture, or
if none is necessary, a written certification from the Shipowner that none is
necessary.
(e) Legal Opinions. (1) Opinion of legal counsel for the
Shipowner concerning this Agreement, the Floating Rate Note, and the Indenture;
(2) Opinion of the Chief Counsel of the Maritime Administration dated the
Closing Date, signed by or on behalf of such Chief Counsel, addressed to the
Lender to the effect that the Guarantees and the Authorization Agreement have
been or will be duly authorized, executed and delivered by the United States of
America, and constitute legal, valid, and binding obligations of the United
States of America enforceable in accordance with their respective terms; and
(3) Opinion of Mayer, Brown & Platt addressed to the Lender and the Indenture
Trustee concerning this Agreement, the Indenture and the Floating Rate Note.
(f) Guarantee Commitment. A copy of the fully executed Guarantee
Commitment, which shall be in full force and effect until completion of the
Closing.
(g) Authorization Agreement. The fully executed Authorization
Agreement, which shall be in full force and effect.
(h) Indenture. The fully executed Indenture, which shall be in
full force and effect.
5.02 Conditions Precedent to Each Disbursement. The obligation of
the Lender to make any Disbursement, including the first Disbursement, shall be
subject only to the Lender's receipt of a Certificate Authorizing Disbursement
and the Lender may conclusively rely thereon.
<PAGE> 10
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SECTION 6. FEES AND EXPENSES
6.01 Fees. The Shipowner shall pay or cause to be paid to the
Person entitled thereto such fees and other amounts as are set forth in that
certain Fee Letter (as amended, restated or otherwise modified from time to
time with the prior written consent of the Secretary, the "Fee Letter") dated
as of December 17, 1996 by the Shipowner and accepted by, among others, the
Lender, in each case when and as due.
6.02 Taxes.
(a) The Shipowner agrees to pay all amounts owing by it under this
Agreement or the Floating Rate Note free and clear of and without deduction for
any and all present and future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding in the case
of the Lender, taxes imposed on its income, and franchise taxes imposed on it
in lieu of income taxes, by either (i) the jurisdiction under the laws of which
the Lender is organized or any political subdivision thereof, or (ii) the
jurisdiction of the Lender's applicable lending office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes"). In addition, the Shipowner agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Floating Rate
Note or from the execution, delivery, or registration of, or otherwise with
respect to, this Agreement or the Floating Rate Note (hereinafter referred to
as "Other Taxes").
(b) The Shipowner further agrees:
(i) that, if the Shipowner is prevented by operation of law from
paying any such Taxes or Other Taxes, or if any such Taxes or Other Taxes are
required to be deducted or withheld, then the fees or expenses required to be
paid under this Agreement shall, on an after-tax basis, be increased by the
amount necessary to yield to the Lender fees or expenses in the amounts
provided for in this Agreement after the provision for the payment of all such
Taxes and Other Taxes;
(ii) that the Shipowner shall, at the request of the Lender,
execute and deliver to the Lender such further instruments as may be necessary
or desirable to effect the payment of the increased amounts as provided for in
subsection (i) above, provided, however, that the Shipowner may not amend the
Floating Rate Note without the prior written consent of the Secretary;
(iii) that the Shipowner shall hold the Lender harmless from and
against the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 6.02) and any and all liabilities (including,
without limitation, penalties, interest and expenses) arising from, or with
respect to, any Taxes or Other Taxes (whether or not properly or legally
asserted) and whether paid, or payable, by the Shipowner, the Lender or any
other Person;
(iv) that, at the request of the Lender, the Shipowner shall
provide the Lender within the later of thirty (30) calendar days after such
request or thirty (30) calendar days after the payment of such Taxes or Other
Taxes, a copy evidencing the payment of any Taxes or Other Taxes by the
Shipowner; and
(v) that each payment under this Section 6.02 shall be made within
30 days from the date the Lender makes written demand therefor. Each demand
for payment by the Lender under Section 6.02(b)(v) for amounts paid or incurred
by the Lender shall be accompanied by a certificate (with accompanying
documentation supporting the demand) showing in reasonable detail the basis for
the calculation of the amounts demanded, which certificate, in the absence of
manifest error, shall be conclusive and binding for all purposes.
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(c) Notwithstanding anything to the contrary contained herein, the
agreements in this Section 6.02 shall survive the termination of this Agreement
and the payment of the Floating Rate Note and all other amounts due hereunder.
6.03 Expenses. The Shipowner agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay, or reimburse the
Lender promptly upon demand for the payment of all reasonable and duly
documented costs and expenses arising in connection with the preparation,
printing, execution, delivery, registration, implementation, modification of or
waiver or consent under this Agreement, the Floating Rate Note or the
Indenture, including, without limitation, the reasonable and duly documented
out-of-pocket expenses of the Lender (incurred in respect of
telecommunications, mail or courier service, travel and the like), and the fees
and expenses of counsel for the Lender. The Shipowner shall also pay all of
the costs and expenses (including, without limitation, the fees and expenses of
counsel) incurred by or charged to the Lender in connection with the amendment
or enforcement of this Agreement, the Floating Rate Note or the Indenture or
the protection or preservation of any right or claim of the Lender arising out
of this Agreement, the Floating Rate Note or the Indenture.
6.04 Additional or Increased Costs.
(a) If, due to either (i) the introduction of or any change in or
in the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to the Lender of agreeing to make or making, funding or maintaining the
Disbursements or the Credit Facility, then the Shipowner shall from time to
time, upon demand by the Lender, pay to the Lender additional amounts
sufficient to compensate the Lender for such increased cost.
(b) If the Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or
would affect the amount of capital required to be maintained by the Lender or
any corporation controlling the Lender and that the amount of such capital is
increased by or based upon the existence of the Lender's commitment to lend
hereunder and other commitments of this type, then, upon demand by the Lender,
the Shipowner shall immediately pay to the Lender, from time to time as
specified by the Lender, additional amounts sufficient to compensate the Lender
or such corporation in the light of such circumstances, to the extent that the
Lender reasonably determines such increase in capital to be allocable to the
existence of the Lender's commitment to lend hereunder.
(c) The Lender shall take such reasonable steps as it shall
determine to minimize amounts demanded under this Section 6.04. In the event
that the Lender transfers the booking office of the Credit Facility or the
Floating Rate Note to minimize amounts demanded under this Section 6.04, any
costs and expenses incurred in such transfer shall be paid by the Shipowner.
(d) Each demand for payment by the Lender under this Section 6.04
shall be accompanied by a certificate showing in reasonable detail the basis
for the calculation of the amounts demanded, which certificate, in the absence
of manifest error, shall be conclusive and binding for all purposes.
(e) The Lender shall notify the Shipowner of any event occurring
after the date of this Agreement which entitles the Lender to compensation
pursuant to this Section 6.04, as promptly as practicable, and in any event
within ninety (90) days after it has knowledge of such event and has determined
that a request for compensation hereunder shall be made. The Shipowner shall
not be obligated to reimburse the Lender for any loss or cost incurred more
than ninety (90) days prior to delivery of notice to the Shipowner by the
Lender requesting compensation under this Section 6.04.
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SECTION 7. PAYMENTS
7.01 Method of Payment.
(a) All payments to be made by the Shipowner under this Agreement
and the Floating Rate Note shall be made without set-off or counterclaim in
Dollars in immediately available and freely transferable funds no later than
11:00 A.M. (New York City time) on the date on which due. The Shipowner shall
pay the principal and the guaranteed amount of the Applicable Interest Rate on
the Floating Rate Note to the Indenture Trustee and all other amounts due under
this Agreement directly to the Person entitled thereto, in each case, by wire
transfer in same day and immediately available and freely transferable funds.
Wire transfer instructions shall be provided to the Shipowner.
(b) Except as otherwise provided herein, whenever any payment
would otherwise fall due on a day which is not a Business Day, the due date for
payment shall be the immediately succeeding Business Day, and interest and fees
shall be computed in accordance with Section 11.01.
7.02 Application of Payments. In the absence of an Indenture
Default, the Lender shall apply payments received by it under this Agreement
and the Floating Rate Note (whether at Stated Maturity, by reason of
acceleration, prepayment or otherwise), in the following order of priority:
(i) interest due pursuant to Section 4.02(a); (ii) installments of principal
due; (iii) interest due pursuant to Section 4.02(b) other than the amount
described in clause (i) above; (iv) all amounts due under the Fee Letter; and
(v) all other amounts due under this Agreement and not otherwise provided for
in this Section 7.02. Upon the occurrence of an Indenture Default, the Lender
shall hold any payments it receives after an Indenture Default from, or on
behalf of, the Shipowner under this Agreement, the Fee Letter and any related
agreement (excluding the Floating Rate Note) and shall promptly deliver such
payments to the Secretary if the Secretary has been required to honor a
Guarantee as a result of said Indenture Default. All such amounts received
during an Indenture Default and delivered to the Secretary in accordance with
the preceding sentence shall be applied first to pay, satisfy and discharge all
amounts owed by the Shipowner to the Secretary under the Secretary's Note and
the Mortgage and then to pay, satisfy and discharge any and all amounts owed to
the Lender.
SECTION 8. REPRESENTATIONS AND WARRANTIES BY THE SHIPOWNER
8.01 Representations and Warranties of the Shipowner. The
Shipowner represents and warrants to the Lender that, as of the Closing Date:
(a) Existence and Authority. The Shipowner is duly organized,
validly existing under the laws of the State of Delaware, is in good standing
under the laws of the State of Delaware, has been duly qualified to do business
in, and is in good standing as a foreign corporation in each jurisdiction in
which the conduct of its business or the ownership of its properties requires
it to be so qualified, has full power, authority and legal right to own its
properties and conduct its business as it is presently now conducted, and is a
"citizen of the United States" within the meaning of Section 2 of the Shipping
Act, 1916, as amended, for the purpose of operating the Vessel in the trades or
manner in which the Shipowner proposes to operate the Vessel.
The Shipowner has full power, authority and legal right (i) to execute
and deliver this Agreement, the Floating Rate Note and the Indenture, (ii) to
perform and observe the terms and provisions of each of said documents to be
performed or observed by it, (iii) to consummate the transactions contemplated
thereby and (iv) to own its properties (including, without limitation, the
Vessel owned or to be owned by it) and conduct its business as presently
conducted.
(b) Government and Other Authorizations. All consents, licenses,
authorizations and approvals of, and exemptions by, any Governmental Authority
and any governmental authorities within the United States or elsewhere and any
other Persons that are necessary or advisable: (i) for the execution, delivery,
performance and
<PAGE> 13
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observance by the Shipowner of this Agreement, the Floating Rate Note, and the
Indenture; and (ii) for the validity, binding effect and enforceability of this
Agreement, the Floating Rate Note, and the Indenture have been obtained and are
in full force and effect.
(c) Restrictions. The execution, delivery and performance or
observance by the Shipowner of the terms of, and consummation by the Shipowner
of the transactions contemplated by, this Agreement, the Floating Rate Note,
and the Indenture do not and will not conflict with or result in a breach or
violation of: (i) the charter, by-laws or similar documents of the Shipowner;
(ii) any federal or state law of the United States or any other ordinance,
decree, constitutional provision, regulation or other requirement of any
Governmental Authority (including, without limitation, any restriction on
interest that may be paid by the Shipowner); or (iii) any order, writ,
injunction, judgment or decree of any court or other tribunal. Further, the
execution, delivery and performance or observance by the Shipowner of the terms
of, and consummation by the Shipowner of the transactions contemplated by, this
Agreement, the Floating Rate Note, and the Indenture does not and will not
conflict with or result in a breach of any agreement or instrument to which the
Shipowner is a party, or by which it or any of its revenues, properties or
assets may be subject, or result in the creation or imposition of any Lien upon
any of the revenues, properties or assets of the Shipowner pursuant to any such
agreement or instrument. "Lien" shall mean any lien, lease, mortgage, pledge,
hypothecation, preferential arrangement relating to payments, or other
encumbrance or security interest.
(d) Binding Effect. This Agreement, the Floating Rate Note, and
the Indenture which have been executed on or before the date hereof have been
duly executed and delivered by the Shipowner. Each of the Agreement, the
Floating Rate Note, and the Indenture constitutes, and each of the Agreement,
the Floating Rate Note, and the Indenture as it may hereafter be amended will
constitute, a direct, general and unconditional obligation of the Shipowner
which is legal, valid and binding upon the Shipowner and enforceable against
the Shipowner in accordance with its respective terms. All obligations
evidenced by the Floating Rate Note will be entitled to the benefits of the
Guarantees and the Authorization Agreement.
(e) Choice of Law. Under applicable conflict of laws principles,
the choice of law provisions of this Agreement, the Floating Rate Note and the
Indenture are valid, binding and not subject to revocation by the Shipowner,
and, in any proceedings brought for enforcement of this Agreement, the
Indenture or the Floating Rate Note, the choice of the law of the State of New
York as the governing law of such documents will be recognized and such law
will be applied.
(f) Legal Proceedings. No legal proceedings are pending or, to
the best of the Shipowner's knowledge, threatened before any court or
governmental agency which might: (i) materially and adversely affect the
Shipowner's financial condition, business or operations; (ii) restrain or
enjoin or have the effect of restraining or enjoining the performance or
observance of the terms and conditions of any of this Agreement, the Indenture
or the Floating Rate Note; or (iii) in any other manner question the validity,
binding effect or enforceability of any of this Agreement, the Indenture or the
Floating Rate Note.
(g) Use of the Vessel. The Vessel will be used for lawful
purposes.
(h) Shipowner Financial Statements. The Shipowner Financial
Statements present fairly the financial condition of the Shipowner at the date
of such statements and the results of the operations of the Shipowner for such
fiscal year. The Shipowner Financial Statements have been prepared in
accordance with generally accepted accounting principles in the United States
consistently applied. Except as fully reflected in the Shipowner Financial
Statements, there are no liabilities or obligations with respect to the
Shipowner of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) for the period to which the Shipowner
Financial Statements relate that, either individually or in the aggregate,
would be material to the Shipowner. Since the date of the most recent audited
Shipowner Financial Statements, there has been no material adverse change in
the financial condition, business prospects or operations of the Shipowner.
"Shipowner Financial Statements" shall mean the financial statements of the
Shipowner furnished to the Lender prior to the date of this Agreement.
<PAGE> 14
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(i) No Taxes. There is no Tax imposed on or in connection with:
(i) the execution, delivery or performance of this Agreement, the Indenture or
the Floating Rate Note; (ii) the enforcement of this Agreement, the Indenture
or the Floating Rate Note; or (iii) on any payment to be made to the Lender
under this Agreement or the Floating Rate Note.
(j) Laws. None of this Agreement, the Indenture, the Floating
Rate Note, the transactions contemplated thereunder nor any Person party to
this Agreement, the Indenture or the Floating Rate Note is required to qualify
under the Trust Indenture Act or register or qualify under any securities law.
(k) Defaults. No Event of Default has occurred and is continuing
and no event or circumstance has occurred and is continuing which with the
passage of time, the giving of notice or both would constitute an Event of
Default.
8.02 Agreements of the Shipowner. The Shipowner agrees that until
all amounts owing under this Agreement and the Floating Rate Note have been
paid in full, the Shipowner will, unless the Lender shall have consented in
writing:
(a) Interest Rate Protection. At all times that (1) a Floating
Rate Note exists and (2) the Applicable Interest Rate is greater than 9.5%, the
Shipowner (at its expense) within 15 Business Days thereafter, shall (A) enter
into, and thereafter maintain in full force and effect, an amortizing interest
rate cap agreement with a strike price providing for a cap based on the
Applicable Interest Rate not in excess of 10.25% per annum and otherwise
acceptable to the Lender, with a counterparty rated "A" or better by any
nationally recognized rating agency or such other counterparty reasonably
acceptable to the Lender, covering the Floating Rate Note and based on the
expected amortization schedule of such Note, and (B) execute such documents and
instruments as may be necessary, or in the opinion of the Lender desirable, to
effect the assignment of its rights thereunder to the Lender in every case with
such terms as are reasonably acceptable to the Lender for the protection of the
Lender. If the Shipowner fails to satisfy the requirements of this Section
8.02(a) within the 15 Business Days set forth above, the Lender may (in its
sole discretion) and if the Lender so elects, the Shipowner hereby authorizes
and directs the Lender to, satisfy the requirements of this Section 8.02(a),
all at the expense of the Shipowner, due on demand.
(b) Notice of Defaults. Promptly, but in no event later than ten
(10) days after the occurrence of an Indenture Default or an Event of Default
of which the Shipowner has knowledge, notify the Lender and the Indenture
Trustee of any report required by the Shipowner Documents (or any other
document entered into by the Shipowner in connection therewith), and send a
copy thereof to the Lender, in each case by telecopier or hand delivery.
(c) Financial Reports. Beginning with the fiscal year in which
this Agreement is executed and continuing until all amounts owing under this
Agreement and the Floating Rate Note have been paid in full, the Shipowner
shall furnish to the Lender a copy of all financial reports furnished to the
Secretary pursuant to the Title XI Reserve Fund and Financial Agreement.
(d) [Intentionally Omitted]
(e) Other Acts. From time to time, do and perform any and all
acts and execute any and all documents as may be necessary or as reasonably
requested by the Lender or the Indenture Trustee in order to effect the
purposes of this Agreement and to protect the interests of the Lender in the
Floating Rate Note and the interests of the Lender in the Guarantee.
(f) Use of Proceeds. Use proceeds from each Disbursement solely
to finance: (i) the manufacture, construction, fabrication, financing and
purchase of the Vessel; (ii) Construction Period Interest; and (iii) the
Guarantee Fees. Use the proceeds from the issuance of any fixed rate notes to
repay amounts owed under the
<PAGE> 15
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Floating Rate Note or to finance: (i) the manufacture, construction,
fabrication, financing and purchase of the Vessel; (ii) Construction Period
Interest; and (iii) the Guarantee Fees.
(g) Successors. Require that any successor to all or
substantially all of its business as a result of any merger or consolidation
with any other entity; dissolution or termination of legal existence; sale,
lease, transfer or other disposal of any substantial part of its properties or
any of its properties essential to the conduct of its business or operations,
as now or hereafter conducted; any change in control; any agreement to do any
of, or any combination of, the foregoing, to assume all of the Shipowner's
indebtedness, liabilities and obligations under this Agreement and the Floating
Rate Note.
SECTION 9. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT
9.01 Cancellation by the Shipowner. The Shipowner may cancel at
any time all or any part of the Available Amount of the Credit Facility,
provided that (i) thirty (30) days' prior irrevocable written notice is given
to the Lender, the Indenture Trustee, and the Secretary and (ii) the Shipowner
shall have paid to the Lender any commitment fees accrued and unpaid under
Section 6.01 and all other amounts due and payable under this Agreement and the
Floating Rate Note as of the proposed date of cancellation. In the absence of
an Indenture Default, the Lender may not for any reason cancel at any time any
part of the Available Amount of the Credit Facility.
9.02 [Intentionally Omitted]
9.03 Events of Default. Upon the occurrence of any of the
following events or conditions (each, an "Event of Default"):
(a) any failure by the Shipowner to pay when and as due any amount
owing under this Agreement, but which is not guaranteed by the Secretary; or
(b) any failure by the Shipowner to comply with its obligations
under Section 8.02(b) or 8.02(f); or any failure by the Shipowner to perform or
comply with any of its agreements set forth in this Agreement (exclusive of any
events specified as an Event of Default in any other subsection of this Section
9.03 and exclusive of Section 8.02(a)), which failure, if capable of being
cured, remains uncured for a period of thirty (30) days after written notice
thereof has been given to the Shipowner by the Lender; or
(c) the Shipowner shall be unable to pay its debts when and as
they fall due or shall admit in writing its inability to pay its debts as they
fall due or shall become insolvent; or the Shipowner shall apply for or consent
to the appointment of any liquidator, receiver, trustee or administrator for
all or a substantial part of its business, properties, assets or revenues; or a
liquidator, receiver, trustee or administrator shall be appointed for the
Shipowner and such appointment shall continue undismissed, undischarged or
unstayed for a period of thirty (30) days, or the Shipowner shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy,
arrangement, readjustment of debt, dissolution, liquidation or similar
executory or judicial proceeding; or a bankruptcy, arrangement, readjustment of
debt, dissolution, liquidation or similar executory or judicial proceeding
shall be instituted against the Shipowner and shall remain undismissed,
undischarged or unstayed for a period of thirty (30) days; or
(d) an Indenture Default has occurred;
then, and in any such event, and at any time thereafter, if such event is
continuing, and if there is no Indenture Default (or if there is an Indenture
Default, only after the Secretary has received all payments due under the
Secretary's Note and the Mortgage), the Lender (by written notice to the
Shipowner), shall have the right to institute any judicial or other proceedings
under this Agreement to recover all amounts owing under this Agreement. The
Lender agrees that so long as an Indenture Default exists, all amounts received
during such period from, or on
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behalf of, the Shipowner shall be applied in the manner set forth in Section
7.02. Notwithstanding an Event of Default, the Lender may not terminate the
Available Amount of the Credit Facility without the Secretary's consent;
provided, however, that the Shipowner's use of the Available Amount of the
Credit Facility shall remain subject to the requirements of Sections 2.02,
3.01, and 5.02. Except as expressly provided above in this Section 9.03,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived. Notwithstanding any other provision of this Agreement, if
Section 9.03(c) is applicable, the Lender may file appropriate claims in
connection therewith, but shall apply any funds collected as a consequence of
said filings in accordance with the provisions of Section 7.02 of this
Agreement.
SECTION 10. GOVERNING LAW AND JURISDICTION
10.01 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.02 Submission to Jurisdiction. Each of the Shipowner and the
Lender hereby irrevocably agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement, or any of the transactions
contemplated hereby, may be instituted by the other parties hereto in the
Courts of the State of New York or the Federal Courts sitting in the Borough of
Manhattan, City of New York, State of New York. Each of the Shipowner and the
Lender hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it may have now or hereafter to the laying of the venue or any
objection based on forum non conveniens, or based on the grounds of
jurisdiction with respect to any such legal suit, action or proceeding and
irrevocably submits generally and unconditionally to the jurisdiction of any
such court in any such suit, action or proceeding. Each of the Shipowner and
the Lender agrees that a judgment, after exhaustion of all available appeals,
in any such action or proceeding shall be conclusive and binding upon it and
may be enforced in any other jurisdiction by suit upon such judgment, a
certified copy of which shall be conclusive evidence of the judgment. Each of
the Shipowner and the Lender waives personal service of any summons, complaint,
or other process, which service may be made by such or any other means
permitted by New York law.
10.03 Waiver of Security Requirements. To the extent the
Shipowner may, in any action or proceeding arising out of or relating to this
Agreement be entitled under applicable law to require or claim that the Lender
post security for costs or take similar action, the Shipowner hereby
irrevocably waives and agrees not to claim the benefit of such entitlement.
10.04 No Limitation. Nothing in this Section 10 shall affect the
right of the Lender to serve process in any manner permitted by law or to
commence legal proceedings or otherwise proceed against the Shipowner in any
jurisdiction; provided, however, that except as provided in Section 9.03, in
the event of an Indenture Default, the Lender may not proceed against the
Shipowner without the Secretary's consent unless the Secretary has received
full payment under the Secretary's Note.
SECTION 11. MISCELLANEOUS
11.01 Computations. Each determination of an interest rate, fee
or other amounts by the Lender or any other Person pursuant to any provision of
this Agreement, the Fee Letter or the Floating Rate Note, in the absence of
manifest error, shall be conclusive and binding on the Shipowner. All
computations of interest and fees hereunder and under the Floating Rate Note
shall be made on the basis of a year of three hundred sixty-five (365) days
and actual days elapsed; provided, however, that LIBOR shall be determined on
the basis of a year of 360 days and actual days elapsed.
11.02 Notices. Except as otherwise specified, all notices given
hereunder shall be in writing, and shall be given by mail, telecopier, tested
telex or personal delivery and shall be deemed to be given for the purposes of
this Agreement on the day that such notice is received by the intended
recipient thereof. Unless otherwise
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specified in a notice delivered in accordance with this Section 11.02, all
notices shall be delivered to the parties hereto and to the Indenture Trustee
and the Secretary at their respective addresses indicated below:
To CITIBANK, N.A., as the Lender
Address: CITIBANK, N.A.
399 Park Avenue
New York, New York 10043
Attention: Structured Trade Finance
Facsimile: (212) 793-2330
Telephone: (212) 559-6787
with a copy to:
Citibank International Plc
335 Strand, 6th Floor
London WC2R1LS England
Attention: Alfred Rodrigues
Telephone: 01144171500 1394
Facsimile: 01144171500 0479
To the Shipowner
Address: ROWAN COMPANIES, INC.
5450 Transco Tower
2800 Post Oak Boulevard
Houston, Texas 77056
Attention: Chief Financial Officer
Telephone: (713) 960-7686
Facsimile: (713) 960-7660
To the Secretary
Address: SECRETARY OF TRANSPORTATION
c/o Maritime Administrator
400 Seventh Street, S.W.
Washington, D.C. 20590
Attention: Office of Ship Finance
Telephone: (202) 366-5744
Facsimile: (202) 366-7901
To the Indenture Trustee
Address: CITIBANK, N.A.
120 Wall Street
13th Floor
New York, New York 10043
Attention: Corporate Agency and Trust Department
Telephone: (212) 412-6243
Facsimile: (212) 480-1614
<PAGE> 18
-15-
11.03 Disposition of Indebtedness. Once the Shipowner has
completely drawn down on the Credit Facility and the Available Amount is zero,
the Lender may sell, assign, transfer, negotiate, or otherwise dispose of all
or any part of its interest in all or any part of the Shipowner's indebtedness
under this Agreement and the Floating Rate Note to any party (collectively, a
"Disposition of Indebtedness"), and any such party shall enjoy all the rights
and privileges of the Lender under this Agreement and the Floating Rate Note;
provided, however, that each Disposition of Indebtedness to any Person other
than a domestic Affiliate of the Lender shall require the prior written consent
of the Shipowner (which consent shall not be unreasonably withheld or delayed);
provided, further, however, that the Lender may pledge or grant participation
in all or any part of its interest in all or any part of the Shipowner's
indebtedness under this Agreement and the Floating Rate Note to any party at
any time without the Secretary's prior written consent so long as the Lender's
commitment to lend the Available Amount under this Agreement is not affected
thereby and without the Shipowner's prior written consent. The Shipowner
shall, at the request of the Lender, execute and deliver to the Lender or to
any party that the Lender may designate, any such further instruments as may be
necessary or desirable to give full force and effect to a Disposition of
Indebtedness by the Lender.
11.04 Disclaimer. The Lender shall not be responsible in any way
for the performance of the Construction Contract or any other Shipowner
Document, and no claim against the Shipbuilder or any other Person with respect
to the performance of the Construction Contract will affect the obligations of
the Shipowner under this Agreement or the Floating Rate Note.
11.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Lender in exercising any right, power or privilege under this
Agreement, the Floating Rate Note or the Indenture and no course of dealing
between or among the Shipowner and the Lender shall operate as a waiver of the
rights of the Shipowner and the Lender against each other under this Agreement;
nor shall any single or partial exercise of any right, power or privilege
hereunder or under the Floating Rate Note or the Indenture preclude the
Shipowner and the Lender from exercising against each other any other right,
power or privilege hereunder. The rights and remedies expressly provided
herein are cumulative and not exclusive of any rights or remedies which the
Lender would otherwise have. No notice to or demand on the Shipowner in any
case shall entitle the Shipowner to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Lender under this Agreement to any other or further action in any circumstances
without notice or demand. Notwithstanding any other provision to the contrary
herein, no provision in this Agreement or any other related agreement preserves
any rights in favor of the parties against the Secretary in the event that
either party fails or delays to exercise any rights, powers, or privileges
under this Agreement, the Floating Rate Note or the Indenture or engages in any
particular course of dealing.
11.06 Currency. All payments of principal, interest, fees or
other amounts due hereunder and under the Floating Rate Note shall be made in
Dollars, regardless of any law, rule, regulation or statute, whether now or
hereafter in existence or in effect in any jurisdiction, which affects or
purports to affect such obligations.
11.07 Severability. To the extent permitted by applicable law,
the illegality or unenforceability of any provision of this Agreement shall not
in any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement.
11.08 Amendment or Waiver. This Agreement may not be changed,
discharged or terminated without the written consent of the parties hereto, and
no provision hereof may be waived without the written consent of the party to
be bound thereby. There may be no change, discharge, termination or claim of
waiver of the terms of this Agreement without the prior written consent of the
Secretary, who is entitled to enforce his rights under this Agreement as an
intended third party beneficiary to this Agreement. The parties hereto
acknowledge, however, that nothing in this Agreement creates in either the
Shipowner or the Lender any right whatsoever against the Secretary.
<PAGE> 19
-16-
11.09 Indemnification. Without limiting any other rights that the
Lender may have hereunder or under applicable law, the Shipowner hereby agrees
to indemnify the Lender from and against any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable attorneys'
fees and disbursements (all the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by the Lender arising out of
or as a result of this Agreement or the Floating Rate Note excluding, however,
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of the Lender. In the event of an Indenture Default,
all amounts received by the Lender pursuant to such indemnification after an
Indenture Default shall be held and paid in the manner required by Section
7.02.
11.10 Benefit of Agreement. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that the Shipowner may not
assign any of its rights or obligations hereunder without the prior written
consent of the Lender and, to the extent set forth in paragraph 11.03 hereof,
the Secretary.
11.11 Waiver of Jury Trial. Each of the Shipowner and the Lender
waives its respective rights to a trial by jury of any claim or cause of action
based upon or arising out of or related to this Agreement, any assignment or
the transactions contemplated hereby, in any action, proceeding or other
litigation of any type brought by any party against the other parties, whether
with respect to contract claims, tort claims, or otherwise. Each of the
Shipowner and the Lender agrees that any such claim or cause of action shall be
tried by a court trial without a jury. Without limiting the foregoing, the
parties further agree that their respective right to a trial by jury is waived
by operation of this section as to any action, counterclaim or other proceeding
which seeks, in whole or in part, to challenge the validity or enforceability
of this Agreement, any assignment or any provision hereof or thereof. This
waiver shall apply to any subsequent amendments, renewals, supplements or
modifications to this Agreement or any assignment.
11.12 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. Delivery of an executed counterpart of a signature page to
this Agreement by facsimile shall be effective as delivery of a manually
executed counterpart of this Agreement.
11.13 Shipowner Documents. Notwithstanding the provisions of this
Agreement, in any conflict between this Agreement and the provisions of the
Shipowner Documents, the Shipowner Documents shall govern the agreement between
the parties hereto, but only with respect to the subject matter thereof.
Notwithstanding the previous sentence, any provision in the Indenture (or any
other agreement the Shipowner has entered into with any other Person)
purporting to release the Shipowner of any indebtedness, liability or
obligation shall not apply to any indebtedness, liability or obligation of the
Shipowner hereunder and no termination of the Indenture (or any other agreement
the Shipowner has entered into with any other Person) shall affect the
continued effectiveness of this Agreement, which shall continue in full force
and effect until the Credit Facility has been terminated and all indebtedness,
liabilities and obligations of the Shipowner have been fully discharged and
satisfied, the Floating Rate Note have been paid, satisfied and discharged in
full, and there has elapsed a year and a day from the last payment received
from, or on behalf, of the Shipowner. However, this Section 11.13 shall have
no affect on the relationships established and the agreements entered into by
the parties to the Shipowner Documents (and such other agreements the Shipowner
has entered into with any other Person), in each case to which the Lender is
not a party in its capacity as the Lender hereunder.
11.14 Entire Agreement. This Agreement, the Fee Letter and the
Floating Rate Note contain the entire agreement among the parties hereto
regarding the Credit Facility.
<PAGE> 20
-17-
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered as of the date first above written.
ROWAN COMPANIES, INC. CITIBANK, N.A., as the Lender
By: E. E. Thiele By: Ae Kyong Chung
-------------------------- -------------------------
(Signature) (Signature)
Name: E. E. Thiele Name: Ae Kyong Chung
------------------------ -----------------------
(Print) (Print)
Title: Senior Vice President Title: Attorney-in-Fact
----------------------- ----------------------
(Print) (Print)
<PAGE> 21
SCHEDULE OF DEFINITIONS
EXHIBIT 1 to
CREDIT AGREEMENT
<PAGE> 22
Schedule of Definitions to Credit Agreement
Dated as of December 17, 1996
"Accelerated Repayment" shall have the meaning set forth in Section
4.02(b) of the Credit Agreement.
"Act" means the Merchant Marine Act, 1936, as amended, and in effect
on the Closing Date.
"Affiliate" or "Affiliated" means any Person directly or indirectly
controlling, controlled by, or under common control with, another Person.
"Applicable Interest Rate" shall mean a rate per annum equal to LIBOR
plus during the Construction Period, nine-twentieths of one percent (0.45%) per
annum and thereafter, one-half of one percent (0.50%) per annum; provided,
however, that, if the Lender shall have determined, prior to the commencement
of any Interest Period that: (A) Dollar deposits of sufficient amount and
maturity for funding a Disbursement are not available to such Lender in the
London interbank market in the ordinary course of business; or (B) by reason of
circumstances affecting the relevant market, adequate and fair means do not
exist for ascertaining the rate of interest to be applicable to a Disbursement;
or (C) the relevant rate of interest referred to in the definition of LIBOR
which is to be used to determine the rate of interest for a Disbursement does
not cover the funding cost to the Lender of making or maintaining the
Disbursement, then the Lender shall so notify the Indenture Trustee, who shall
give notice to the Shipowner of such condition and interest shall, effective as
of the date of such notice and so long as such condition shall exist, accrue
during each applicable Interest Period at the Base Rate; provided, further,
however that if, in the Lender's reasonable judgment, it becomes unlawful at
any time for such Lender to make or maintain Disbursements based upon LIBOR,
the Lender shall so notify the Indenture Trustee, who shall give notice to the
Shipowner of such determination and, effective as of the date of such notice
and so long as such condition shall exist, interest shall thereafter accrue
during each applicable Interest Period at the Base Rate.
"Authorization Agreement" means the Authorization Agreement, Contract
No. MA-13258, dated the Closing Date, between the Secretary and the Indenture
Trustee, whereby the Secretary authorizes the Guarantee of the United States of
America to be endorsed on the Floating Rate Note, as the same is originally
executed, or as modified, amended or supplemented in accordance with the
applicable provisions thereof.
"Available Amount" shall have the meaning set forth in Section 2.01 of
the Credit Agreement.
"Base Rate" means, for any Interest Period or any other period, a
fluctuating interest rate per annum as shall be in effect from time to time
which rate per annum shall at all times be equal to the higher of:
(a) the rate of interest announced publicly by Citibank,
N.A. in New York, New York, from time to time, as Citibank, N.A.'s
base rate; or
(b) 1/2 of one percent per annum above the latest
three-week moving average of secondary market morning offering rates
in the United States for three-month certificates of deposit of major
United States money market banks, such three-week moving average being
determined weekly on each Monday (or, if any such day is not a
Business Day, on the next succeeding Business Day) for the three-week
period ending on the previous Friday by Citibank, N.A. on the basis of
such rates reported by certificate of deposit dealers to and published
by the Federal Reserve Bank of New York, or, if such publication shall
be suspended or terminated, on the basis of quotations for such rates
received by Citibank, N.A. from three New York certificate of deposit
dealers of recognized standing selected by Citibank, N.A., in either
case
- 1 -
<PAGE> 23
adjusted to the nearest 1/4 of one percent or, if there is no nearest
1/4 of one percent, to the next higher 1/4 of one percent.
"Business Day" shall mean any day on which dealings in Dollar deposits
are carried on in the London interbank market and on which commercial banks in
London and New York City are open for domestic and foreign exchange business.
"Certificate Authorizing Disbursement" shall mean, with respect to a
Disbursement, the United States Certificate Authorizing Disbursement
substantially in the form set forth on page A-4 of Annex A to the Credit
Agreement.
"Closing Date" means December 17, 1996.
"Construction Contract" means that certain Mobile Platform
Construction Agreement (LeTourneau Hull No. 219), dated October 24, 1995, by
and between the Shipowner and the Shipyard, as the same may be amended,
modified or supplemented in accordance with the applicable provisions thereof.
"Construction Period" shall mean the period from the date hereof to
the Delivery Date.
"Construction Period Interest" shall mean all interest that accrues on
the Outstanding Principal during the Construction Period.
"Credit Facility" shall have the meaning set forth in Whereas Clause
(A) of the Credit Agreement.
"Credit Facility Amount" shall have the meaning set forth in Section
2.01 of the Credit Agreement.
"Credit Agreement" or "Agreement" shall mean the Credit Agreement
dated as of the Closing Date, between the Shipowner and CITIBANK, N.A.,
including any Annex, Exhibit, and other attachment thereto, as the same may be
amended, modified or supplemented in accordance with the application provisions
thereof.
"Delivery Date" means the date on which the Vessel is delivered to and
accepted by the Shipowner.
"Depository Agreement" means the Depository Agreement, Contract No.
MA-13262, dated the Closing Date, between the Shipowner, CITIBANK, N.A., as
Depository-Bailee, and the Secretary, as the same is originally executed, or
amended, modified or supplemented in accordance with the applicable provisions
thereof.
"Disbursements" shall have the meaning set forth in Section 2.03 of
the Credit Agreement.
"Disbursement Date" shall mean, in relation to any Disbursement, the
Business Day on which the Lender shall make such Disbursement.
"Disposition of Indebtedness" shall have the meaning set forth in
Section 11.03 of the Credit Agreement.
"Dollars," "U.S. Dollars," "U.S.D.," "U.S.$" or "$" shall mean the
lawful currency of the United States of America.
"Event of Default" shall have the meaning set forth in Section 9.03 of
the Credit Agreement.
- 2 -
<PAGE> 24
"Fee Letter" shall have the meaning set forth in Section 6.01 of the
Credit Agreement.
"Final Disbursement Date" shall have the meaning set forth in Section
2.02 of the Credit Agreement.
"Floating Rate Note" shall mean the Note substantially in the form of
Exhibit 2 to the Indenture, appropriately completed.
"Governmental Authority" shall mean the government of any country, any
agency, department or other administrative authority or instrumentality
thereof, and any local or other governmental authority within any such country.
"Guarantee" or "Guarantees" means the guarantee of the Floating Rate
Note by the United States of America pursuant to Title XI of the Act, as
provided in the Authorization Agreement.
"Guarantee Commitment" means the Commitment to Guarantee Obligations,
Contract No. MA-13257, dated as of the Closing Date, executed by the Secretary
and accepted by the Shipowner with respect to the Guarantees, as originally
executed or as modified, amended or supplemented in accordance with the
applicable provisions thereof.
"Guarantee Fees" shall mean the amounts described in the Guarantee
Commitment payable in consideration for the commitment therein described and
payable as provided in such Guarantee Commitment.
"Holder" means each holder of the Floating Rate Note.
"Indemnified Amounts" shall have the meaning set forth in Section
11.09 of the Credit Agreement.
"Indenture" means the Trust Indenture dated as of the Closing Date,
between the Shipowner and the Indenture Trustee, as the same is originally
executed, or as modified, amended or supplemented in accordance with the
applicable provisions thereof.
"Indenture Default" has the meaning specified in Article VI of Exhibit
1 to the Indenture.
"Indenture Trustee" means CITIBANK, N.A., a national banking
association, and any successor trustee permitted under the Indenture.
"Interest Payment Date" means, with respect to the Floating Rate Note,
the date when any installment of interest on such Note is due and payable,
which are January 1 and July 1 of each year, beginning on July 1, 1997 and the
date of any prepayment of the Floating Rate Note.
"Interest Period" shall mean, with respect to any Disbursement, (i)
the period commencing on the Disbursement Date and extending up to, but not
including, the next Interest Payment Date; and (ii) thereafter the period
commencing on each Interest Payment Date and extending up to, but not
including, the next Interest Payment Date.
"Lender" shall mean CITIBANK, N.A., a national banking association,
and its permitted successors and assigns.
"LIBOR" shall mean (a) in relation to any Interest Period, the rate of
interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%)
quoted by the principal London office of CITIBANK, N. A., at
- 3 -
<PAGE> 25
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for the offering to leading banks in the London
interbank market of U.S. Dollar deposits for a period and in an amount
comparable to such Interest Period and the principal amount upon which interest
is to be paid during such Interest Period and (b) in relation to any Post
Maturity Period, have the meaning set forth in Section 4.02(b) of the Credit
Agreement.
"Lien" shall have the meaning set forth in Section 8.01(c) of the
Credit Agreement.
"Maturity," when used with respect to the Floating Rate Note, means
the date on which the principal of, or interest on, such Note becomes due and
payable as therein provided, whether on a Payment Date, at the Stated Maturity
or by prepayment, repayment, redemption or declaration of acceleration or
otherwise.
"Mortgage" means the first preferred ship mortgage on the Vessel,
Contract No. MA-13260, between the Shipowner and the Secretary, as originally
executed or as modified, amended or supplemented in accordance with the
applicable provisions thereof.
"Obligation" means the Floating Rate Note.
"Other Taxes" shall have the meaning set forth in Section 6.02(a) of
the Credit Agreement.
"Outstanding Principal" shall have the meaning set forth in Section
2.01 of the Credit Agreement.
"Payment Date" shall mean January 1 and July 1 of each year, beginning
on January 1, 1999.
"Payment Default" has the meaning specified in Section 6.01(a) of
Exhibit 1 to the Indenture.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Post Maturity Applicable Interest Rate" shall have the meaning set
forth in Section 4.02(b) of the Credit Agreement.
"Post Maturity Interest Rate" shall have the meaning set forth in
Section 4.02(b) of the Credit Agreement.
"Post Maturity Period" shall have the meaning set forth in Section
4.02(b) of the Credit Agreement.
"Quotation Date" shall have the meaning set forth in Section 4.02(b)
of the Credit Agreement.
"Redemption" means with respect to the redemption of the Floating Rate
Note, the repayment or prepayment of the Floating Rate Note as applicable.
"Redemption Date" means, with respect to the Floating Rate Note, a
date fixed for the prepayment, repayment or redemption of such Note by or
pursuant to Section 4 of the Credit Agreement, Article Fourth of the Indenture,
or Article III of Exhibit 1 to the Indenture.
- 4 -
<PAGE> 26
"Redemption Price" means, with respect to the Floating Rate Note, the
price at which the Floating Rate Note is to be prepaid, repaid, or redeemed
pursuant to Section 4 of the Credit Agreement, Article Fourth of the Indenture,
or Article III of Exhibit 1 to the Indenture.
"Secretary" means the Secretary of Transportation or any official or
official body from time to time duly authorized to perform the duties and
functions of the Secretary of Transportation under Title XI of the Act
(including the Maritime Administrator, the Acting Maritime Administrator, and
to the extent so authorized, the Deputy Maritime Administrator and other
officials of the Maritime Administration).
"Secretary's Note" means a promissory note issued and delivered by the
Shipowner to the Secretary described in Article Third of the Security Agreement
and shall also mean any promissory note issued in substitution for and
replacement thereof pursuant to the Security Agreement.
"Security Agreement" shall mean that certain security agreement,
Contract No. MA-13259, dated as of the Closing Date, with respect to the
Vessel, executed by the Shipowner and the Secretary relating to the security in
respect to the Guarantees, as originally executed or as modified, amended or
supplemented in accordance with the applicable provisions thereof.
"Shipowner" means ROWAN COMPANIES, INC., a Delaware corporation, and
for purposes of the Indenture and the Floating Rate Note, subject to the
provisions of Sections 6.09, 8.01 and 8.02 of Exhibit 1 to the Indenture, shall
also include its successors and assigns; provided, however, that for purposes
of the Credit Agreement, the term Shipowner shall also include the Shipowner's
permitted successors and assigns under the Credit Agreement.
"Shipowner's Documents" means the Security Agreement, the Mortgage,
the Title XI Reserve Fund and Financial Agreement, the Depository Agreement,
and the Secretary's Note.
"Shipowner Financial Statements" shall have the meaning set forth in
Section 8.01(h) of the Credit Agreement.
"Shipyard" or "Shipbuilder" means LETOURNEAU, INC., a Texas
corporation.
"Stated Maturity," when used with respect to the Floating Rate Note,
means the date determinable as set forth in such Note as the final date on
which the principal of such Note is due and payable, which shall include,
without limitation, each of the Payment Dates.
"Taxes" shall have the meaning set forth in Section 6.02(a) of the
Credit Agreement.
"Title XI Reserve Fund and Financial Agreement" means that certain
Title XI Reserve Fund and Financial Agreement, Contract No. 13261, dated as of
the Closing Date, executed by the Shipowner and the Secretary, as amended,
modified or supplemented in accordance with the applicable provisions thereof.
"United States" means the United States of America.
"Unpaid Amount" shall have the meaning set forth in Section 4.02(b) of
the Credit Agreement.
"Vessel" means the Shipowner's self-elevating mobile offshore
drilling unit to be named the GORILLA V and constructed by LETOURNEAU, INC. in
accordance with the Construction Contract, including all work and
- 5 -
<PAGE> 27
material heretofore or hereafter performed upon or installed in or placed on
board such Vessel, together with related appurtenances, additions,
improvements, and replacements.
- 6 -
<PAGE> 28
FORM OF DISBURSEMENT REQUESTS
Annex A
to
Credit Agreement
-1-
<PAGE> 29
ROWAN COMPANIES, INC.
5450 Transco Tower
2800 Post Oak Boulevard
Houston, Texas 77056
__________, 1996
Secretary of Transportation
c/o Maritime Administrator
Department of Transportation
400 Seventh Street, S.W.
Washington, D.C. 20590
Ladies and Gentlemen:
We are enclosing herewith our disbursement Request No. ___ and
Certificate plus the following documents for disbursement from the Credit which
has been established for LeTourneau Hull No. 219:
1. Shipyard's Certificate of no Liens pursuant to
Section 2.04(d) of Exhibit 1 to the Security
Agreement.
2. Wire transfer instructions for Shipyard, Shipowner,
or Lender.
3. Request for Actual Cost Approval and Reimbursement
(___________) with Supplemental Schedules Nos. __ and
___.
4. Certificate Authorizing Disbursements
The amount requested, U.S.$ __________ represents:
Progress payment No. __ for LeTourneau Hull No. 219.
Very truly yours,
ROWAN COMPANIES, INC.
By:______________________
Title:___________________
A-1
<PAGE> 30
ROWAN COMPANIES, INC.
DISBURSEMENT REQUEST NO. __
AND CERTIFICATE
TO ACCOMPANY DISBURSEMENT
FROM CREDIT FOR
HULL 219
__________, 1996
Secretary of Transportation
c/o Maritime Administration
Department of Transportation
400 Seventh Street, S.W.
Washington, D.C. 20590
Rowan Companies, Inc. (the "Shipowner") hereby requests the
Secretary of Transportation, acting by and through the Maritime Administrator
(the "Secretary") to approve disbursement from the Credit Facility for Hull No.
219 under the Credit Agreement dated December 17, 1996, (the "Agreement"), in
accordance with the accompanying wire transfer instructions. In support of
said request and in order to induce the Secretary to approve said disbursement,
the Shipowner hereby certifies:
I. That the Termination Date of the Credit Facility has
not occurred and that there is no default under the Security Agreement dated
December 17, 1996, Contract No. MA-13259 (the "Security Agreement").
II. That the requested Disbursement is properly due and
payable to the following payee(s), in the following amount(s) and in respect of
the following items(s):
Payee Amount Item
______________ $___________ ____________________________
III. That all prior Disbursements (if any) from the Credit
Facility have been used for the purposes stated in prior certificates furnished
to the Secretary.
IV. That the requested Disbursement is not to be used to
pay, or to reimburse the Shipowner for the payment of, any item(s) or amount(s)
paid or reimbursed from any prior Disbursement(s) from the Credit.
V. That the amount (if any) stated in II above to be
paid to the _____________ for the payment of interest, is the amount of
interest on the Obligations equal to the interest payable on
______________________, 199___.
VI. That the amount(s) (if any) stated in II above to be
paid to the Lender, Shipyard or other persons entitled thereto, or to the
Shipowner as reimbursement for amounts which it shall have paid or have caused
to be paid to said parties, is (are) properly payable from the Credit because:
A-2
<PAGE> 31
A. The total amount paid by or for the account of the
Company on account of the items, amounts and increases set
forth or referred to in Article First of the Special
Provisions of the Security Agreement from sources other than
the proceeds of the Obligations equals at least 12-1/2% of
the Actual Cost of the Vessel stated in the Security
Agreement. (1)
B. The amount(s) (if any) stated in II above to be paid
to the Company would not have the effect of reducing the total
amount paid referred to in A above, below the minimum set
forth in A above;
All terms used herein shall have the same meaning as they have
in the Security Agreement.
ROWAN COMPANIES, INC.
By:
Title:
____________________
(1) If such Actual Cost has been redetermined by the Secretary, add: "as the
same was redetermined by the Secretary on ____________________, 199__.
A-3
<PAGE> 32
CERTIFICATE AUTHORIZING DISBURSEMENT
Date ___________________
CITIBANK, N.A., as Lender
New York, New York
Subject: Credit Agreement dated December 17, 1996
Rowan Companies, Inc.
Certificate Authorizing Disbursement No. ____
Ladies and Gentlemen:
In accordance with the terms and conditions of the Credit
Agreement ("Agreement"), dated as of December 17, 1996, by and among ROWAN
COMPANIES, INC., a Delaware corporation (the "Shipowner" or "Borrower") and
CITIBANK, N.A., a national banking association (the "Lender"), and with the
Shipowner's Request for Disbursement, we hereby authorize the Lender to make a
Disbursement under the Credit Facility in the amount of U.S. $________ on or
after ___________ , 199_, by paying to the Lender from the proceeds of the
Disbursement the Construction Period Interest payable to such Lender in the
amount of U.S. $___________________, and then paying the balance of the
proceeds of the Disbursement to the account of [identify the Shipowner's
account as it is carried on the books of the payee bank] at [complete name and
address of the payee bank].
The defined terms in this Certificate shall have the
respective meanings specified in the Credit Agreement.
UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
Attest: By: Maritime Administration
By:
- -------------------------- -------------------------
Assistant Secretary Secretary
Maritime Administration Maritime Administration
A-4
<PAGE> 33
CERTIFICATE OF NO LIENS
LeTourneau, Inc., a Texas corporation (the "Shipyard"), does
hereby certify that, on the date hereof, the Vessel being constructed pursuant
to that certain construction contract dated October 24, 1995, as amended,
between the Shipyard and Rowan Companies, Inc., a company organized and
existing under the laws of Delaware, (the "Shipowner") (the "Construction
Contract"), which is identified as Shipbuilder's Hull No. 219, and its
component parts are free of any liens and rights in rem.
IN WITNESS WHEREOF, the Shipyard has caused this Certificate
to be duly executed and delivered this _____ day of ________________________.
LETOURNEAU, INC.
a Texas Corporation
By:
Name:
Title:
A-5
<PAGE> 34
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUMMARY SHEET
Shipowner's Name Rowan Companies, Inc.
Shipowner's Address 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
TX 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P. O. Box 2307-57606, Longview, Texas 75606
Name of Vessel GORILLA V Shipyard Hull No. 219
Type of Vessel Mobile self-contained and elevating drilling Platform
LOA LBP BEAM DEPTH SHP
Submittal No. Date
Period Covered From: ______________ to: ____________ Final Cost Submittal [ ]
Date of Last Previous Submittal: ____________________
A-6
<PAGE> 35
INSTRUCTIONS TO SHIPOWNER
Requests for actual cost approvals and remittances must be submitted on this
form and on the supplemental schedules listed below as applicable. Specific
instructions are included on each supplemental schedule.
<TABLE>
<CAPTION>
===============================================================================================================
Previous Cumulative
Supplemental Cumulative Actual Cost Actual Cost
Remittances to Shipyard Schedule No. Total This Submittal to Date
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Contract Base Cost 1
Escalation
Changes & Extras
Other Items
------------------------------------------------------------------
1
------------------------------------------------------------------
2 & 2A
------------------------------------------------------------------
3
- ---------------------------------------------------------------------------------------------------------------
1. Subtotal-Actual Construction Cost
- ---------------------------------------------------------------------------------------------------------------
Owner Furnished Items 4
Design, Engineering and Inspection at
Owner's Cost
2. Subtotal-Actual Owner's Cost
------------------------------------------------------------------
5
------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
TOTAL (1&2) ACTUAL CONSTRUCTION
& OUTFITTING COST:
LESS: ITEMS OF FOREIGN COST
------------------------------------------------------------------
6
- ---------------------------------------------------------------------------------------------------------------
3. Subtotal-Actual Construction and
Owner's Outfitting Cost
- ---------------------------------------------------------------------------------------------------------------
Financing Costs: Commitment Fees 7
Interest Fees
Interest Income
------------------------------------------------------------------
------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
4. Subtotal-Financing Costs
- ---------------------------------------------------------------------------------------------------------------
TOTAL-ACTUAL COST
- ---------------------------------------------------------------------------------------------------------------
5. Source of Payments
- ---------------------------------------------------------------------------------------------------------------
Credit
Shipowner
General Fund
TOTAL
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
===============================================================================================================
</TABLE>
Notes, Comments, Etc.
A-7
<PAGE> 36
CERTIFICATION OF PAYMENT
The undersigned has examined the records of N/A
and certifies the above cost figures and the supplemental schedules to
accurately state the actual costs, both paid and to be paid, of ___ in
accordance with generally accepted accounting practices.
Date:
A-8
<PAGE> 37
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 1
CONTRACT BASE COST AND ESCALATION
Shipowner's Name Rowan Companies, Inc.
Shipowner's Address 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P. O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA V Shipyard Hull No. 219
Submittal No. Date
INSTRUCTIONS TO SHIPOWNER
List all remittances made to the shipyard for the construction of the vessel as
shown in the contract specifications. Include escalation, if applicable, as
defined in the contract. Do not include the cost of subsequent amendments to
the contract or changes and extras which are to be listed on Schedules 2 and
2A.
<TABLE>
<CAPTION>
DATE OF NOTES OR COMMENTS CONTRACT
PAYMENT (IF REQUIRED) BASE COST ESCALATION TOTAL
- ------- ------------- --------- ---------- -----
<S> <C> <C> <C> <C>
</TABLE>
A-9
<PAGE> 38
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 2
INDEX OF CHANGES AND EXTRAS
Shipowner's Name Rowan Companies, Inc.
Shipowner's Address 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P. O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA V Shipyard Hull No. 219
Submittal No. Date
INSTRUCTIONS TO SHIPOWNER
List all changes and extras in numerical order as indicated below. Fill in all
information requested. Show total cost claimed at the end of the list. Attach
Schedule 2A with information requested arranged in the same sequence.
If preferred, the Applicant may request the shipyard to forward this schedule
and Schedule 2A directly to Chief, Division of Cost Estimates and Analysis,
Maritime Administration, Code MAR-722, Room 2122, 400 Seventh Street, S.W.,
Washington, D.C. 20590.
<TABLE>
<CAPTION>
CHANGE NO. DESCRIPTION OR IDENTIFICATION SUBCONTRACTOR (IF APPLIC.) COST PER SHIP
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
A-10
<PAGE> 39
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 2A
CHANGE AND EXTRA DETAILS
Shipowner's Name Rowan Companies, Inc.
Shipowner's Address 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P. O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA V Shipyard Hull No. 219
Submittal No. Date
INSTRUCTIONS TO SHIPOWNER
Enter below the details requested for each change order in the same sequence as
listed in Schedule 2. The scope of work for each change should be briefly
described. Major items of material and/or labor should be set forth
individually-whether added or deleted. Sufficient detail should be included
to justify the cost added or deleted for each change. Include as many changes
as possible on each sheet.
<TABLE>
<CAPTION>
TITLE OR CHANGE/SCOPE OF NET COST
CHANGE WORK BY PHASES/MATERIAL MATERIAL COST LABOR OF CHANGE
NO. DESCRIPTION/LABOR DESCRIPTION UNIT TOTAL HOURS COST (+)OR(-)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
A-11
<PAGE> 40
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 3
OTHER ITEMS
Shipowner's Name Rowan Companies, Inc.
Shipowner's Address 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P. O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA V Shipyard Hull No. 219
Submittal No. Date
INSTRUCTIONS TO SHIPOWNER
List below all items paid directly to the shipyard which qualify as
construction cost, but do not belong in the categories of basic contract cost,
changes, extras, and escalation. Example: insurance, storage of owner
furnished items, performance bond; if such items are not provided for in
construction contract.
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION COST
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
A-12
<PAGE> 41
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 4
OTHER FURNISHED ITEMS
Shipowner's Name Rowan Companies, Inc.
Shipowner's Address 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P. O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA V Shipyard Hull No. 219
Submittal No. Date
INSTRUCTIONS TO SHIPOWNER
List below all furnished materials, equipment and services where the total cost
per invoice exceeds $2,500. At the end of the list include all invoices
costing less than $2,500 in a lump sum opposite the description "Miscellaneous
Owner Items." Description of individual items listed should include quantity,
material specification, model No., horse power, capacity, etc., as applicable
to allow review for reasonability of cost and eligibility as Title XI actual
cost. Invoices containing the above information may be submitted in lieu of
filling this form out provided a summary of all such invoices is provided with
each submittal.
<TABLE>
<CAPTION>
ITEM DESCRIPTION OR MANUFACTURE'S NAME VENDOR'S COST PER
NO. QUANTITY IDENTIFICATION CITY AND COUNTY INVOICE NO. SHIPSET
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
A-13
<PAGE> 42
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 5
DESIGN, INSPECTION AND ENGINEERING AT OWNER'S COST
Shipowner's Name Rowan Companies, Inc.
Shipowner's Address 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P. O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA V Shipyard Hull No. 219
Submittal No. Date
INSTRUCTIONS TO SHIPOWNER
List below expenditures paid by the Applicant for design, inspection and
engineering in sufficient detail to permit review for Title XI eligibility and
reasonability of cost.
<TABLE>
<CAPTION>
NAMES OF APPLICANT'S EMPLOYEES AND/OR
ITEM NAMES OF SUBCONTRACTORS NO. OR INVOICE NO.
NO. NATURE OF WORK PERFORMED HOURS RATE/HOUR COST
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A-14
<PAGE> 43
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 6
ITEMS OF FOREIGN MANUFACTURE, GROWTH OR ORIGIN
Shipowner's Name Rowan Companies, Inc.
Shipowner's Address 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P. O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA V Shipyard Hull No. 219
Submittal No. Date
INSTRUCTIONS TO SHIPOWNER
Under Maritime Administration policy all items of foreign manufacture, growth
or origin are ineligible as Title XI actual cost. It is the responsibility of
the Applicant to furnish the information listed below for each such item. This
includes both goods and services. The total cost of the items listed will be
deducted from the total actual cost eligible for Title XI Guarantee unless a
waiver has been requested by letter from Maritime and granted by Maritime by
letter.
<TABLE>
<CAPTION>
ITEM DESCRIPTION OR VENDOR'S NAME VENDOR'S COST PER
NO. QUANTITY IDENTIFICATION CITY AND COUNTRY INVOICE NO. SHIP
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
A-15
<PAGE> 44
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 7
INTEREST AND COMMITMENT FEES
Shipowner's Name Rowan Companies, Inc.
Shipowner's Address 5450 Transco Tower, 2800 Post Oak Blvd., Houston,
Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P. O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA V Shipyard Hull No. 219
Submittal No. Date
INSTRUCTIONS TO SHIPOWNER
Fill out the information requested below concerning the commitment fees for
which you are requesting reimbursement in the submittal.
<TABLE>
<CAPTION>
PERIOD CHECK WHICH PAID PRINCIPAL INTEREST AMOUNT
COVERED INT. FEE TO AMOUNT RATE PAID
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
A-16
<PAGE> 45
Document 3
TRUST INDENTURE
Relating to United States Government
Guaranteed Ship Financing Obligations
A-1
<PAGE> 46
_________________________________________________________
TRUST INDENTURE
Relating to United States Government Guaranteed
Ship Financing Obligations
Between
ROWAN COMPANIES, INC.
Shipowner
AND
CITIBANK, N.A.
Indenture Trustee
Dated as of December 17, 1996
A-2
<PAGE> 47
_________________________________________________________
TRUST INDENTURE
Between
ROWAN COMPANIES, INC.
Shipowner
AND
CITIBANK, N.A.
Indenture Trustee
Dated as of December 17, 1996
A-3
<PAGE> 48
TABLE OF CONTENTS TO SPECIAL PROVISIONS OF THE INDENTURE (1/)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE FIRST
Incorporation of General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE SECOND
The Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE THIRD
Interest Rate Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE FOUR
Certain Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
__________________
(1) This Table of Contents is not a part of the Indenture and has no bearing
upon the interpretation of any of its terms and provisions.
A-4
<PAGE> 49
<TABLE>
<S> <C>
ARTICLE FIFTH
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE SIXTH
Additions, Deletions and Amendments to Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
EXHIBITS TO TRUST INDENTURE
SCHEDULE A Schedule of Definitions to Trust Indenture
EXHIBIT 1 General Provisions of the Indenture
Incorporated by Reference
EXHIBIT 2 Form of Floating Rate Note
EXHIBIT 3 Form of Fixed Rate Note
EXHIBIT 4 Authorization Agreement
EXHIBIT 5 Form of Secretary Supplemental Indenture
A-5
<PAGE> 50
TRUST INDENTURE
SPECIAL PROVISIONS
THIS TRUST INDENTURE, is dated as of December 17, 1996 (said Trust
Indenture, as the same may be amended, modified or supplemented from time to
time as permitted hereunder, herein called the "Indenture"), is between (i)
ROWAN COMPANIES, INC., a Delaware corporation (herein called the "Shipowner"),
and (ii) CITIBANK, N.A., a national banking association, (said bank, any
successor or assign hereunder, herein called the "Indenture Trustee").
RECITALS:
A. As provided in Article Fifth hereof, the terms defined in Schedule
A to this Indenture shall have the respective meanings stated in said Schedule;
B. The Shipowner has duly executed this Indenture, and duly authorized
the issuance hereunder of $153,091,000 principal amount of its Obligations
pursuant to Section 2.03 of Exhibit 1 to this Indenture (herein together with
any Obligations issued in respect thereof pursuant to Sections 2.09, 2.10, 2.12
and 3.10(b) of said Exhibit 1, called the "Obligations") designated "United
States Government Guaranteed Ship Financing Obligations, GORILLA V Series;"
C. The Obligations will be issued by the Shipowner to aid in the
financing of the cost of construction of a self-elevating mobile offshore
drilling unit to be named the GORILLA V (the "Vessel");
D. To aid in financing the construction of the Vessel, the
Shipowner has entered into a credit agreement (the "Credit Agreement") with
CITIBANK, N.A., a national banking association as Lender, providing for the
delivery of no more than $153,091,000 principal amount of note designated
"United States Government Guaranteed Ship Financing Obligations, GORILLA V
Series";
E. Under the Authorization Agreement in the form set forth as Exhibit
4 hereto, the Secretary, on behalf of the United States, has agreed and will
agree to execute on the Obligations to be issued, a Guarantee of the payment of
the unpaid interest to the date of such payment on, and the unpaid balance of
the principal of, such Obligation under the provisions of Title XI of the Act,
and the Indenture Trustee is authorized to cause the Guarantees, bearing the
facsimile signature of the Secretary, and the facsimile seal of the United
States Department of Transportation, to be imprinted on the Obligations, and to
authenticate and deliver the Obligations and the Guarantees issued on the
Closing Date and from time to time thereafter, such agreements and
authorizations being subject to the conditions set forth in the Authorization
Agreement;
F. Pursuant to Section 1104(b)(5) of the Act, the Secretary will
determine that the interest to be borne by the Obligations (exclusive of
charges for the guarantee fee and service charges, if any) is reasonable; and
G. All actions necessary have been or will be taken in order (1) to
make the Obligations, when executed by the Shipowner, authenticated by the
Indenture Trustee and issued under the Indenture, the valid, binding and legal
obligations of the Shipowner in accordance with their terms, (2) to make the
Guarantees to be endorsed on the
1
<PAGE> 51
Obligations, when executed on behalf of the Secretary, authenticated by the
Indenture Trustee and delivered under this Indenture, the valid, binding and
legal obligations of the United States in accordance with their terms, and (3)
to make this Indenture the valid, binding and legal agreement of the parties
hereto in accordance with its terms.
NOW THEREFORE, in consideration of the premises, of the mutual
covenants herein contained, of the purchase of the Obligations by the Holder
and of other good and valuable consideration, the receipt and adequacy of which
the parties hereby acknowledge, and for the equal and proportionate benefit of
the present and future Holder, the parties hereto agree as follows:
ARTICLE FIRST
INCORPORATION OF GENERAL PROVISIONS
This Indenture shall consist of two parts: the Special Provisions and
the General Provisions attached hereto as Exhibit 1, made a part of this
Indenture and incorporated herein by reference.
2
<PAGE> 52
ARTICLE SECOND
THE OBLIGATIONS
(a) The Obligations issued hereunder shall be designated "United
States Government Guaranteed Ship Financing Obligations, GORILLA V Series," and
shall be in the form of Exhibit 2 to this Indenture; and, the principal amount
of Obligations which may be issued under this Indenture shall not exceed
$153,091,000 except as provided in Sections 2.09, 2.10, 2.12 and 3.10(b) of
Exhibit 1 hereto.
(b) The Obligations shall be in the denominations of $1,000 or any
integral multiple thereof.
(c) The Shipowner shall at all times cause to be maintained in the
City of Houston, State of Texas an office or agency for the purposes specified
in Section 5.03 of Exhibit 1 to this Indenture.
(d) The Indenture Trustee shall at all times have its Corporate Trust
Office in the City of New York, State of New York.
ARTICLE THIRD
INTEREST RATE CALCULATIONS
Upon the terms and subject to the conditions contained in the
Obligations, the Indenture Trustee will calculate the Applicable Interest Rate
on the Obligations in the manner and at the times provided in the Obligations
and shall communicate the same to the Shipowner, the Secretary and any paying
agent identified to it in writing as soon as practicable after each
determination. The Indenture Trustee will, upon the request of the Holder of
the Obligations, determine the Applicable Interest Rate then in effect with
respect to the Obligations.
3
<PAGE> 53
ARTICLE FOURTH
CERTAIN REDEMPTIONS
(a) Scheduled Mandatory Redemption. The Obligations are subject to
redemption at a Redemption Price equal to 100% of the principal amount thereof,
together with interest accrued thereon to the applicable Redemption Date,
through the operation of scheduled repayment providing for the semi-annual
redemption on January 1 and July 1 of each year, commencing January 1, 1999, of
$6,380,000 principal amount of Obligations (or such lesser principal amount of
Obligations as shall then be outstanding), which amount represents
approximately one twenty-fourth (1/24) of the Original Principal Amount of
Obligations, plus interest accrued thereon to the Redemption Date. There shall
be a final redemption of the remaining outstanding principal on the earlier of
(i) July 1, 2000, or (ii) two (2) years after the Delivery Date.
Notwithstanding the foregoing provisions of this subsection (a), if
the principal amount of Outstanding Obligations shall be reduced by reason of
any redemption pursuant to Section 3.04 of Exhibit 1 to this Indenture, the
principal amount of Obligations to be redeemed pursuant to this subsection (a)
on each subsequent Redemption Date for such Obligations shall be reduced by an
amount equal to the principal amount of such Obligations retired by reason of
such redemption pursuant to Section 3.04 of Exhibit 1 hereto divided by the
number of Redemption Dates (including the Stated Maturity of such Obligations)
scheduled thereafter to July 1, 2000 (subject to such increase as shall be
necessary so that the total principal amount of Obligations to be redeemed on
any such Redemption Date shall be an integral multiple of $1,000); provided
that, the entire unpaid principal amount of the Outstanding Obligations shall
be paid not later than July 1, 2000. The Shipowner shall, in accordance with
Section 3.02(d) of Exhibit 1 hereto, promptly after each redemption pursuant to
said Section 3.04, furnish to the Secretary, the Indenture Trustee and each
Holder a revised table of scheduled repayments reflecting the reductions made
pursuant to this subsection (a) as a result of such redemption.
(b) Optional Redemption of Obligations Without Premium.
At its option, the Shipowner may without premium,
(i) prepay on any Interest Payment Date the Obligation, in
whole or in part, in a minimum principal amount of $10,000,000, at a Redemption
Price equal to 100% of the principal amount thereof together with interest
accrued thereon to the Redemption Date, or
(ii) redeem or prepay the Obligation, in whole or in part, on
a Redemption Date designated by the Shipowner, from the proceeds from the
issuance of fixed rate notes.
(c) If the Shipowner shall elect to make any such optional
redemptions pursuant to this Article, the Shipowner shall, at least 40 days but
not more than 60 days prior to the date fixed for redemption, deliver to the
Indenture Trustee a Request stating that the Shipowner intends to exercise its
rights as above set forth to make such optional redemptions and specifying the
Redemption Date and the principal amount which the Shipowner intends to redeem
on such date.
4
<PAGE> 54
ARTICLE FIFTH
DEFINITIONS
For all purposes of this Indenture, unless otherwise expressly
provided or unless the context otherwise requires:
(1) All references herein to Articles, Sections or
other subdivisions, unless otherwise specified, refer to the
corresponding Articles, Sections and other subdivisions of
this Indenture;
(2) The terms "hereof," "herein," "hereby," "hereto,"
"hereunder" and "herewith" refer to this Indenture; and
(3) The terms used herein and defined in Schedule A
to this Indenture shall have the respective meanings stated in
said Schedule.
ARTICLE SIXTH
ADDITIONS, DELETIONS AND AMENDMENTS TO EXHIBIT 1
The following additions, deletions and amendments are hereby made to
Exhibit 1 to this Indenture.
(a) Concerning Citibank, N.A. Citibank, N.A. and its affiliates may
accept deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of
business with, the Shipowner, any of its subsidiaries or affiliates, and any
Person who may do business with or own securities of the Shipowner or any such
subsidiary or affiliates, all as if Citibank, N.A. were not the Indenture
Trustee and without any duty to account therefor to the Holder.
(b) Concerning Immediately Available Funds. Notwithstanding any
provision in Exhibit 1 to this Indenture to the contrary, all payments are to
be made in immediately available funds.
(c) Concerning Mandatory Scheduled Redemptions. The terms "sinking
fund payment" and "sinking fund redemption" in Exhibit 1 to this Indenture
refer to the mandatory scheduled redemption.
(d) Concerning Section 2.02. Section 2.02(c) is revised to read as
follows:
(c) If the Maturity of any Obligation or an Interest Payment Date for
any Obligation shall be a day other than a Business Day, then such
payment may be made on the next succeeding Business Day, with the same
force and effect as if made on the Interest Payment Date for such
payment, provided, however, that interest shall accrue thereon for the
period after said Interest Payment Date (whether or not such next
succeeding Business Day occurs in a succeeding month).
(e) Concerning Section 2.04. Prior to the earlier of (i) July 1,
2000, or (ii) two (2) years from the Delivery Date, the Shipowner and the
Indenture Trustee may enter into a Supplemental Indenture, and the Indenture
Trustee may enter into a supplement to the Authorization Agreement, pursuant to
Section 2.04 of Exhibit 1 to this Indenture, to provide for the issuance of
fixed rate obligations in the form of Exhibit 3 hereto for the purpose of
repaying the Obligations, provided however, that the Shipowner and Indenture
Trustee have obtained the prior written consent of the Secretary.
5
<PAGE> 55
(f) Concerning Section 2.06. Interest at the Applicable Interest
Rate shall be due on each Disbursement at the end of each Interest Period. The
Indenture Trustee will determine the Applicable Interest Rate for each Interest
Period.
(g) Concerning Section 2.10. Section 2.10(c) is revised to read as
follows:
(c) The Shipowner or the Indenture Trustee shall not be required to
register transfers or make exchanges of (1) Obligations for a period
of 15 days immediately prior to (A) an Interest Payment Date or (B)
any selection of Obligations to be redeemed, (2) Obligations after
demand for payment of the Guarantees and prior to the payment thereof
or rescission of such demand pursuant to Section 6.02(a), or (3) any
Obligation which has been selected for redemption in whole or in part,
except as to the unredeemed portion of any Obligation being redeemed
in part.
(h) Concerning Section 2.12. With respect to clause (1) of the
proviso to Section 2.12 of Exhibit 1 to the Indenture, a written agreement of
indemnity which is satisfactory in form and substance to the Secretary, the
Shipowner, and the Indenture Trustee, executed and delivered by an
institutional Holder having a capital and surplus of at least $100,000,000
shall be considered sufficient indemnity to the Secretary, the Shipowner, and
the Indenture Trustee in connection with the execution, authentication and
delivery of any new Obligations or the making of any payment as contemplated by
said Section 2.12.
(i) Concerning Payment of the Obligations. Notwithstanding
anything to the contrary in Exhibit 1 hereto, the Obligations to be issued
hereunder shall be payable as to principal, premium (if any), and interest, at
an office or agency maintained by the Shipowner for such purpose at the
Corporate Trust Office of the Indenture Trustee, or at the option of the
Shipowner, as to payments of principal, premium (if any), or interest by wire,
in immediately available funds, by such Corporate Trust Office to the Obligees
as appear in the Obligation Register, subject in any event to the provisions
hereof concerning home office payment and subject to the Indenture Trustee's
prior receipt of funds sufficient for the payment of principal, premium (if
any) or interest by wire or other immediately available funds. The Indenture
Trustee shall have no obligation to determine whether such wires or payments
were received by the Obligees.
(j) Concerning Section 3.02. Section 3.02(c) and (d) are revised to
read as follows:
(c) Scheduled Redemptions. If the Obligations of any series and
Stated Maturity or the Special Provisions hereof or the Supplemental
Indenture establishing such series shall so provide, such Obligations
shall be subject to (i) scheduled redemption through the operation of
a mandatory redemption schedule, in such amounts, at such times and
subject to such credits (if any) as may be specified therein, and (ii)
redemption at the option of the Shipowner, in connection with the
operation of any such mandatory redemption schedule, in such
additional amounts and subject to such conditions as may be specified
therein.
(d) Adjustments of Redemption Payments. If the Obligations of any
series and Stated Maturity or the Special Provisions hereof or of the
Supplemental Indenture establishing such series provide for an
adjustment in scheduled redemption payments as a result of any
redemption or cancellation of Obligations, the Shipowner shall
recompute the remaining scheduled redemption payments pursuant to such
provisions and shall, at least 60 days prior to the next Interest
Payment Date which occurs at least 60 days following any such
redemption or cancellation of Obligations of such series requiring
such recomputation, submit to the Secretary for his review such
recomputation to ascertain compliance with the provisions of such
Obligations or the Special Provisions hereof or such Supplemental
Indenture, and table of revised
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mandatory redemption schedule payments on the Obligations of such
series reflecting the adjustments made pursuant to such provisions as
a result of such redemption or cancellation. Upon advice by the
Secretary that he finds such recomputation to comply with such
provisions, the Shipowner shall submit said table to the Indenture
Trustee and the Indenture Trustee shall promptly submit a copy thereof
to each Holder of an Obligation of such series.
(k) Concerning Section 3.03. The date required by Section 3.03 of
Exhibit 1 hereto is the earlier of July 1, 2000, or (ii) two (2) years from the
Delivery Date.
(l) Concerning Section 3.06. Section 3.06 of Exhibit 1 hereto is
hereby amended in its entirety to read as follows:
SECTION 3.06. Redemption After Assumption by the Secretary. Upon
receipt by the Indenture Trustee of written instructions from the
Secretary stating that the principal amount of Obligations specified
in such instructions are required to be redeemed on the date specified
therein (which shall be not less than 40 nor more than 60 days from
the receipt of such instructions by the Indenture Trustee) at the
option of the Secretary at any time after the Secretary's assumption
of the Obligations pursuant to Section 6.09, the Indenture Trustee
shall promptly give notice as provided in Section 3.08 of the
redemption on the Redemption Date of the principal amount of
Obligations specified in such instructions and the Indenture Trustee
shall, on such Redemption Date, redeem such Obligations together with
interest accrued thereon to such Redemption Date; provided that, the
Secretary shall redeem at the principal amount thereof and interest
accrued thereon the Outstanding Obligations relating to the Vessel if
the Vessel has been sold pursuant to Section 8.02 to a purchaser or
purchasers who have not assumed such Obligations by notice to the
Indenture Trustee in accordance with this Section 3.06 within 40 days
of the nonassumption of the Obligations by such purchaser.
(m) Concerning Section 3.07. Section 3.07(a) is revised to delete
the phrase "or 3.05."
(n) Concerning Section 3.09. Section 3.09 is revised to read as
follows:
SECTION 3.09. Deposit of Redemption Moneys. No later than 11:00 a.m.
in New York City on any Redemption Date, the Shipowner shall, except
as contemplated by Section 3.08(b), deposit or cause to be deposited
with the Indenture Trustee or with any Paying Agent an amount in
immediately available funds sufficient for such redemption (after
taking into account any amounts then held by the Indenture Trustee or
such Paying Agent and available for such redemption) with irrevocable
directions to it to so apply the same.
(o) Concerning Section 4.01. Section 4.01(b) of Exhibit 1 hereto
is hereby amended in its entirety to read as follows:
"(b) Cash held by the Indenture Trustee or any Paying Agent
(other than the Shipowner) under this Indenture -
(i) need not be segregated;
(ii) shall not be invested except as permitted by
clause (iv) of this Section 4.01(b);
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<PAGE> 57
(iii) shall not bear interest except as the
Shipowner and the Indenture Trustee (or such Paying
Agent) may agree in writing; and
(iv) if the Shipowner shall have deposited or caused
to be deposited with the Indenture Trustee funds
sufficient for the payment of the Obligations at
their Maturity, including interest to the date of
Maturity, and the date of Maturity is more than one
(1) Business Days after the deposit of such funds,
the Indenture Trustee upon the Request of the
Shipowner shall invest such funds, as directed by the
Shipowner in writing, in direct obligations of the
United States Government maturing at or prior to the
date of Maturity of such Obligations and having a
principal amount equal to not less than the amount of
the funds so invested. Such investments shall be
held in trust for the purpose for which the funds so
invested were held. After the Obligations in respect
of which the funds were deposited have been paid in
full (except as to unclaimed amounts as referred to
in Section 4.03) any of such funds (including
interest received in respect of such investments and
gain on matured investments purchased at a discount)
held by the Indenture Trustee in excess of amounts to
which Holders of such Obligations are entitled shall
upon the Request of the Shipowner be paid by the
Indenture Trustee to the Shipowner but only in the
absence of a Default hereunder."
(p) Concerning Section 4.02. The appointment of a Paying Agent by
the Shipowner is subject to the prior consent of the Secretary and Indenture
Trustee, which consent shall not be unreasonably withheld.
(q) Concerning Section 4.03. Section 4.03 is revised to read as
follows:
SECTION 4.03. Unclaimed Amounts. Any moneys received by the
Indenture Trustee or a Paying Agent, for the payment of Obligations or
Guarantees and remaining unclaimed by the Holders thereof for 6 years
after the date of the Maturity of said Obligations or the date of
payment by the Secretary of the Guarantees shall, upon delivery to the
Indenture Trustee of a Request by the Shipowner, be paid to the
Shipowner; provided that, not less than 30 days prior to such payment,
the Shipowner shall publish notice thereof to the Obligees at least
once in the Authorized Newspapers. In such event, such Holders shall
thereafter be entitled to look only to the Shipowner (and the settlor
or settlors of any trust for which the Shipowner is trustee, to the
extent paid over to it or them) for the payment thereof, and the
Indenture Trustee or such Paying Agent, as the case may be, shall
thereupon be relieved from all responsibility to such Holders
therefor. No such Request, publication or payment shall be construed
to extend any statutory period of limitations which would have been
applicable in the absence of such Request, publication or payment.
(r) Concerning Sections 5.01 and 5.02. Sections 5.01 and 5.02 are
revised to read as follows:
SECTION 5.01. Authorization, Execution and Delivery of Indenture and
Performance. The Shipowner has duly authorized the execution, delivery
and performance of this Indenture.
SECTION 5.02. Payment and Procedure for Payment of Obligations. The
Shipowner will duly and punctually pay the principal of (and premium,
if any) and interest on the Obligations according to the terms thereof
and of this Indenture. The Shipowner will deposit with the Indenture
Trustee or (subject to Section 3.09) a Paying Agent no later than
11:00 a.m. in New York City on each date fixed for such payment or as
8
<PAGE> 58
otherwise provided by the Special Provisions hereof an amount in
immediately available funds sufficient for such payment (after taking
into account any amounts then held by the Indenture Trustee or such
Paying Agent and available for such payment) with irrevocable
directions to it to so apply the same; provided that, payments of
interest may be made as provided in Section 2.02(b)(4); and provided
further, that except with the consent of the Secretary the Shipowner
shall not deposit any such amount more than ten days prior to the date
of the payment for which such amount is deposited, unless otherwise
provided by the Special Provisions hereof.
(s) Concerning Section 6.06. Section 6.06(a) revised to read as
follows:
SECTION 6.06. (a) Obligees' Right to Direct Indenture Trustee after
Indenture Default. During the continuance of any Indenture Default,
the Holders of a majority in principal amount of the Outstanding
Obligations shall have the right, by an Act of Obligees, to direct the
Indenture Trustee:
(1) to exercise or to refrain from exercising any
right or to enforce any remedy granted to it by this
Indenture; and
(2) to direct the time, method and place of the
exercise of any such right or the enforcement of any such
remedy;
provided that, subject to Section 7.03, the Indenture Trustee shall
have the right not to take any such action if it shall determine in
good faith that the action would involve it in personal liability, or
would be unjustly prejudicial to the Obligees not parties to such
direction.
Anything in this Section 6.06(a) to the contrary notwithstanding, the
Indenture Trustee shall be obligated to demand payment of the
Guarantees as provided in Section 6.02(a) unless the Holders of all
Outstanding Obligations shall have elected to terminate the Guarantees
as provided in Section 6.04(a)(2), in which case the Indenture Trustee
shall be obligated to refrain from making such demand.
(t) Concerning Section 6.09. The reference to "Exhibit 4" in Section
6.09 is revised to read "Exhibit 5."
(u) Concerning Section 7.02. The reference to "$3,000,000" in
Section 7.02 is revised to read "$75,000,000."
(v) Concerning Section 7.03. Section 7.03(h) and (o) are revised to
read as follows:
(h) In all cases where this Indenture does not make express provision
as to the evidence on which the Indenture Trustee may act or refrain
from acting, the Indenture Trustee shall be entitled to receive and
shall be protected (subject to paragraph (c) of this Section) in
acting or refraining from acting hereunder in reliance upon an
Officer's Certificate as to the existence or nonexistence of any fact.
(o) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers.
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<PAGE> 59
(w) Concerning Section 7.04. Section 7.04 is revised to read as
follows:
SECTION 7.04. Compensation, Expenses and Indemnification of Indenture
Trustee. The Shipowner shall (1) pay such compensation to the
Indenture Trustee as they may agree upon in writing from time to time
and reimburse it for its reasonable expenses and disbursements
(including counsel fees and expenses) and (2) indemnify the Indenture
Trustee for, and hold it harmless against, any loss, liability or
expense which it may incur or suffer without negligence or bad faith
in acting under this Indenture or the Authorization Agreement. The
compensation of the Indenture Trustee shall not be limited to the
compensation provided by law for a trustee acting under an express
trust. The obligations of the Shipowner under this Section 7.04 shall
survive the termination of the Indenture and resignation or removal of
the Indenture Trustee.
(x) Concerning Sections 8.01 and 8.02. Sections 8.01 and 8.02 are
revised to read as follows:
SECTION 8.01. Consolidation, Merger or Sale by Shipowner. Nothing in
this Indenture shall prevent any lawful consolidation or merger of the
Shipowner with or into any other Person, or any sale of the Vessel to
any other Person lawfully entitled to acquire and operate the Vessel
or any sale by the Shipowner of all or substantially all of its assets
to any other Person; provided that, except where the Shipowner shall
be the Person surviving a merger or consolidation, the Person formed
by or surviving such consolidation or merger, or to which the sale of
the Vessel shall be made, shall, by Supplemental Indenture, expressly
assume the payment of the principal of and interest (and premium, if
any) on the Outstanding Obligations relating to the Vessel in
accordance with the terms of the Obligations and of the Indenture and
shall expressly assume the performance of the agreements of the
Shipowner in the Indenture; provided further, that to the extent the
Outstanding Obligations are not so assumed, the Shipowner shall redeem
or cause to be redeemed the Outstanding Obligations, such redemption
to be in accordance with the terms of the Obligations and of the
Indenture. When a Person so assumes this Indenture and the
Outstanding Obligations, the Supplemental Indenture shall discharge
and release the Shipowner from any and all obligations thereunder
relating to the Outstanding Obligations. In the event of such an
assumption by a Person to whom the Vessel has been sold (a) such
Person shall succeed to, and be substituted for, and may exercise
every right and power of the original Shipowner with the same effect
as if such successor Shipowner had been named as the Shipowner herein
and (b) the Outstanding Obligations shall be surrendered to the
Indenture Trustee for appropriate notation or for the issuance of new
Obligations in exchange for the Outstanding Obligations in the name of
the successor Shipowner, as required by the Secretary.
SECTION 8.02. Sale of the Vessel by the Secretary. Nothing contained
in this Indenture shall prevent the sale of the Vessel to any other
Person by the Secretary, by a court of law or by the Shipowner
following, in connection with or in lieu of a foreclosure or similar
action. Following any such sale (1) the Person to whom the Vessel has
been sold may, by Supplemental Indenture, expressly assume the payment
of principal and interest (and premium, if any) on all of the
Outstanding Obligations in accordance with the terms of the
Obligations and the Indenture and shall expressly assume the
performance of the agreements of the Shipowner in the Indenture; and
(2) in the event such Person does not so assume, the Secretary shall
prepay or redeem all of the Outstanding Obligations without premium
pursuant to Section 3.06 hereof; provided that, the Secretary shall
allow or permit the sale of the Vessel to the original Shipowner or to
any affiliate of the original Shipowner only if (i) the Secretary has
not prepaid or redeemed such Obligations prior to such sale, and (ii)
such purchaser assumes all of the Outstanding Obligations as
contemplated by the preceding clause (1). When a Person so assumes
this Indenture and all of the Outstanding Obligations, the
Supplemental Indenture shall discharge and release the Secretary from
any and all obligations
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<PAGE> 60
thereunder in the Secretary's capacity as Shipowner relating to the
Outstanding Obligations. In the event of such an assumption by a
Person to whom the Vessel has been sold (a) such Person shall succeed
to, and be substituted for, and may exercise every right and power of
the original Shipowner with the same effect as if such successor
Shipowner had been named as the Shipowner herein and (b) the
Outstanding Obligations shall be surrendered to the Indenture Trustee
for appropriate notation or for the issuance of new Obligations in
exchange for the Outstanding Obligations in the name of the successor
Shipowner, as required by the Secretary. Any such sale or the
execution of a Supplemental Indenture by an successor Shipowner shall
not discharge or in any manner affect the obligation of the United
States to pay the Guarantees pursuant to the terms thereof.
(y) Concerning Notices. Subject to the provisions of Section 13.01
of Exhibit 1 to this Indenture, any notice, request, demand, direction,
consent, waiver, approval or other communication to be given to a party
hereto or the Secretary, shall be deemed to have been sufficiently given or
made when addressed to:
The Indenture Trustee as: CITIBANK, N.A.
120 Wall Street, 13th Floor
New York, New York 10043
Attn: Corporate Agency and
Trust Department
The Shipowner as: ROWAN COMPANIES, INC.
5450 Transco Tower
2800 Post Oak Boulevard
Houston, Texas 77056-6196
Attn: Chief Financial Officer
The Secretary as: SECRETARY OF TRANSPORTATION
c/o Maritime Administrator
Department of Transportation
400 Seventh Street, SW
Washington, D.C. 20590
Attention: Office of the Chief Counsel
(z) Concerning Applicable Law. This Indenture and each Obligation
shall be governed by the laws of the State of New York, and to the extent
applicable, the laws of the United States.
(aa) Execution of Counterparts. This Indenture may be executed in any
number of counterparts. All such counterparts shall be deemed to be originals,
and shall constitute but one and the same instrument.
(bb) Concerning Disbursement Notations. Upon receipt from the Lender
of documents confirming Disbursements, the Indenture Trustee shall review
Exhibit A of the Floating Rate Note (The "Grid"), and calculate principal and
applicable interest thereon. If the Indenture Trustee's calculations are not
consistent with those of the Lender, the calculations of the former shall
prevail. The Indenture Trustee shall promptly thereafter send a copy of the
Grid bearing its calculations to the Holder, who shall endorse the Indenture
Trustee's calculations on the original Exhibit A to the Floating Rate Note, and
send a copy thereof, so noted, to the Indenture Trustee, who, in turn, shall
promptly send a copy thereof to the Secretary.
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IN WITNESS WHEREOF, this Trust Indenture has been duly executed by the
parties hereto as of the day and year first above written.
[SEAL] ROWAN COMPANIES, INC.
Shipowner
ATTEST:
Mark H. Hay By: E.E. Thiele
- -------------------- -----------------------------------
Secretary Senior Vice President
CITIBANK, N.A.
Indenture Trustee
[SEAL]
ATTEST:
Carol Ng By: Authur Aslasian
- -------------------- -----------------------------------
Vice President Vice President
12
<PAGE> 62
DISTRICT OF COLUMBIA )
) SS:
CITY OF WASHINGTON )
On this 17th day of December, 1996, before me personally appeared
Edward E. Thiele to me known, who being by me duly sworn, did depose and say
that he is the Senior Vice President of ROWAN COMPANIES, INC., that he knows
the seal affixed to said instrument is such corporation's seal; that it was so
affixed by authority of the Board of Directors of said corporation, and that he
signed his name thereto by like authority.
In testimony whereof, I have hereunto set my hand and seal this 17th
day of December, 1996.
Lisa M. Henshaw
---------------
NOTARY PUBLIC
[NOTARIAL STAMP AND SEAL]
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<PAGE> 63
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
Be it known this 17th day of December, 1996, personally
appeared before me, Arthur W. Aslanian, who after being duly sworn, deposed and
said that he/she is a Vice President of CITIBANK, N.A., a national banking
association, which is described in and executed the instrument hereto annexed,
and that he/she signed the instrument hereto annexed by order of the Board of
Directors of the said national banking association, and acknowledged the
annexed instrument to be the free act and deed of the said national banking
association.
In testimony whereof, I have hereunto set my hand and seal this 17th
day of December, 1996.
Karen Katlan
-------------
NOTARY PUBLIC
[NOTARIAL STAMP AND SEAL]
<PAGE> 64
Document 4
SCHEDULE OF DEFINITIONS
SCHEDULE A to
Trust Indenture
<PAGE> 65
Schedule of Definitions to Trust Indenture
Dated as of December 17, 1996
"Act" means the Merchant Marine Act, 1936, as amended, and in
effect on the Closing Date.
"Act of Obligees" means any request, demand, authorization,
direction, notice, consent, waiver or other action to be given or taken by the
Obligees and embodied in one or more documents of the type, and executed in the
manner, required by the Indenture.
"Actual Cost" means the actual cost of the Vessel as
determined and re-determined by the Secretary pursuant to Sections 1101(f) and
1104(b)(2) of the Act.
"Actual Knowledge" means actual knowledge of a Responsible
Officer of a Person.
"Affiliate" or "Affiliated" means any Person directly or
indirectly controlling, controlled by, or under common control with, another
Person.
"Applicable Interest Rate" shall mean the rate per annum equal
to the lesser of (i) 10.25% per annum, or (ii) LIBOR plus during the
Construction Period, nine-twentieths of one percent (0.45%) per annum and
thereafter, one-half of one percent (0.50%) per annum; provided, however,
that, if the Lender shall have determined, prior to the commencement of any
Interest Period that: (A) Dollar deposits of sufficient amount and maturity
for funding a Disbursement are not available to such Lender in the London
interbank market in the ordinary course of business; or (B) by reason of
circumstances affecting the relevant market, adequate and fair means do not
exist for ascertaining the rate of interest to be applicable to a Disbursement;
or (C) the relevant rate of interest referred to in the definition of LIBOR
which is to be used to determine the rate of interest for a Disbursement does
not cover the funding cost to the Lender of making or maintaining the
Disbursement, then the Lender shall so notify the Indenture Trustee, who shall
give notice to the Shipowner of such condition and interest shall, effective as
of the date of such notice and so long as such condition shall exist, accrue
during each applicable Interest Period at the Base Rate; provided, further,
however that if, in the Lender's reasonable judgment, it becomes unlawful at
any time for such Lender to make or maintain Disbursements based upon LIBOR,
the Lender shall so notify the Indenture Trustee, who shall give notice to the
Shipowner of such determination and, effective as of the date of such notice
and so long as such condition shall exist, interest shall thereafter accrue
during each applicable Interest Period at the Base Rate.
"Authorization Agreement" means the Authorization Agreement,
Contract No. MA-13258, dated the Closing Date, between the Secretary and the
Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United
States of America to be endorsed on each of the Obligations, as the same is
originally executed, or as modified, amended or supplemented in accordance with
the applicable provisions thereof.
"Authorized Newspapers" means The Wall Street Journal (all
editions) and The Journal of Commerce. Whenever successive weekly publications
in the Authorized Newspapers are required under any agreement or other
document, such publications may be made (unless otherwise expressly provided
under any agreement or other document) on the same or different days of the
week and in the same or in different Authorized Newspapers. If it is impossible
or impractical to publish any notice required under any agreement or other
document in the manner therein provided, then such publication in lieu thereof
as shall be made with the approval of the
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<PAGE> 66
Secretary (in the case of notice under the Authorization Agreement or Security
Agreement), or approval of the Indenture Trustee (in the case of notice under
this Indenture), shall constitute a sufficient publication of such notice.
"Base Rate" means, for any Interest Period or any other
period, a fluctuating interest rate per annum as shall be in effect from time
to time which rate per annum shall at all times be equal to the higher of:
(a) the rate of interest announced publicly by
Citibank, N.A. in New York, New York, from time to time, as
Citibank, N.A.'s base rate; or
(b) 1/2 of one percent per annum above the latest
three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of
deposit of major United States money market banks, such
three-week moving average being determined weekly on each
Monday (or, if any such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on
the previous Friday by Citibank, N.A. on the basis of such
rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York, or, if such
publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank, N.A. from
three New York certificate of deposit dealers of recognized
standing selected by Citibank, N.A., in either case adjusted
to the nearest 1/4 of one percent or, if there is no nearest
1/4 of one percent, to the next higher 1/4 of one percent
but in neither event shall the Base Rate exceed 10.25% per annum.
"Borrower" means the Shipowner.
"Business Day" shall mean any day on which dealings in Dollar
deposits are carried on in the London interbank market and on which commercial
banks in London and New York City are open for domestic and foreign exchange
business.
"Certificate Authorizing Disbursement" shall mean, with
respect to a Disbursement, the United States Certificate Authorizing
Disbursement substantially in the form set forth in Annex A to the Credit
Agreement.
"Closing Date" means December 17, 1996.
"Construction Contract" means that certain Mobile Platform
Construction Agreement (LeTourneau Hull No. 219), dated October 24, 1995, by
and between the Shipowner and the Shipyard, as the same may be amended,
modified or supplemented in accordance with the applicable provisions thereof.
"Construction Period" shall mean the period from the date
hereof to the Delivery Date.
"Construction Period Interest" shall mean all interest that
accrues on the Disbursements during the Construction Period.
"Corporate Trust Office" means the principal corporate trust
office of the Indenture Trustee at which, at any time, its corporate trust
business shall be principally administered, which office at the date of
execution of the Indenture is located at 120 Wall Street, 13th Floor, New York,
New York, 10043, Attention: Corporate Agency and Trust Department, except that
for purposes of presentation of Obligations for payment or registration or
transfer exchange, "Corporate Trust Office" means the office of the Indenture
Trustee at which, at any time, its corporate agency business shall be
principally administered, which office at the date of execution of the Indenture
is located at 111 Wall Street, 5th Floor, New York, New York 10043.
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<PAGE> 67
"Credit Agreement" or "Agreement" shall mean the Credit
Agreement dated as of the Closing Date between the Shipowner and CITIBANK,
N.A., including any Annex, Exhibit, and other attachment thereto, as the same
may be amended, modified or supplemented in accordance with the applicable
provisions thereof.
"Credit Facility" shall have the meaning set forth in Whereas
Clause (A) of the Credit Agreement.
"Delivery Date" means the date on which the Vessel is
delivered to and accepted by the Shipowner.
"Depreciated Actual Cost" means the depreciated actual cost of
the Vessel as determined and redetermined by the Secretary pursuant to
Sections 1101(g) and 1104(b)(2) of the Act.
"Disbursement" shall have the meaning set forth in Section
2.03 of the Credit Agreement.
"Disbursement Date" shall mean, in relation to any
Disbursement, the Business Day on which the Lender shall make such
Disbursement.
"Dollars," "U.S. Dollars," "U.S.D.," "U.S.$" or "$" shall
mean the lawful currency of the United States of America.
"Final Disbursement Date" shall have the meaning set forth in
Section 2.02 of the Credit Agreement.
"Floating Rate Note" shall mean the Obligation substantially
in the form of Exhibit 2 to the Indenture, appropriately completed.
"Governmental Authority" shall mean the government of any
country, any agency, department or other administrative authority or
instrumentality thereof, and any local or other governmental authority within
any such country.
"Guarantee" or "Guarantees" means the guarantee of an
Obligation by the United States of America pursuant to Title XI of the Act, as
provided in the Authorization Agreement.
"Guarantee Commitment" means the Commitment to Guarantee
Obligations, Contract No. MA-13257, dated as of the Closing Date, executed by
the Secretary and accepted by the Shipowner with respect to the Guarantees, as
originally executed or as modified, amended or supplemented in accordance with
the applicable provisions thereof.
"Guarantee Fees" shall mean the amounts described in the
Guarantee Commitment payable in consideration for the commitment therein
described and payable as provided in such Guarantee Commitment.
"Holder" means the holder of an Obligation.
"Indenture" means the Trust Indenture dated as of the Closing
Date, between the Shipowner and the Indenture Trustee, as the same is
originally executed, or as modified, amended or supplemented in accordance with
the applicable provisions thereof.
"Indenture Default" has the meaning specified in Article VI of
Exhibit 1 to the Indenture.
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<PAGE> 68
"Indenture Trustee" means CITIBANK, N.A., a national banking
association, and any successor trustee permitted under the Indenture.
"Interest Payment Date" means, with respect to any Obligation,
the date when any installment of interest on such Obligation is due and
payable, which are January 1 and July 1 of each year, beginning on July 1, 1997
and the date of any prepayment of any Obligation.
"Interest Period" shall mean, with respect to any
Disbursement, (i) the period commencing on the Disbursement Date and extending
up to, but not including, the next Interest Payment Date; and (ii) thereafter
the period commencing on each Interest Payment Date and extending up to, but
not including, the next Interest Payment Date.
"Lender" shall mean CITIBANK, N.A., a national banking
association, and its successors and assigns.
"LIBOR" shall mean, in relation to any Interest Period, the
rate of interest per annum (rounded upward, if necessary, to the nearest 1/16
of 1%) quoted by the principal London office of CITIBANK, N. A., at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for the offering to leading banks in the London
interbank market of U.S. Dollar deposits for a period and in an amount
comparable to such Interest Period and the principal amount upon which interest
is to be paid during such Interest Period.
"Maturity," when used with respect to any Obligation, means
the date on which the principal of, or interest on, such Obligation becomes due
and payable as therein provided, whether on a Payment Date, at the Stated
Maturity or by prepayment, repayment, redemption or declaration of acceleration
or otherwise.
"Mortgage" means the first preferred ship mortgage on the
Vessel, Contract No. MA-13260, between the Shipowner and the Secretary, as
originally executed or as modified, amended or supplemented in accordance with
the applicable provisions thereof.
"Obligation" or "Obligations" shall mean the Floating Rate
Note of the Shipowner bearing a Guarantee and authenticated and delivered
pursuant to the Indenture and the Authorization Agreement.
"Obligee" means each Holder.
"Officer's Certificate" means a certificate conforming to
Section 1.02 of Exhibit 1 to the Indenture and signed by a Responsible Officer
of the Person giving such certificate.
"Opinion of Counsel" means an opinion of counsel conforming to
Section 1.02 of Exhibit 1 to the Indenture.
"Outstanding," when used with reference to the Obligations,
shall mean all Obligations theretofore issued under the Indenture, except:
(1) Obligations Retired or Paid; and
(2) Obligations in lieu of which other
Obligations have been issued under the
Indenture.
-4-
<PAGE> 69
For the purposes of Articles VI and X of Exhibit 1 to the Indenture, and also
in determining whether the Holders of a stated percentage of the principal
amount of Outstanding Obligations have taken any Act of Obligees required or
permitted by the Indenture, Obligations owned by the Shipowner or by any
Affiliate of the Shipowner (excluding (a) Obligations held by an Affiliate of
the Shipowner when such Affiliate is acting in a fiduciary capacity if it is
established to the satisfaction of the Indenture Trustee that neither the
Shipowner nor another Affiliate has a beneficial interest therein and (b)
Obligations pledged in good faith by the Shipowner or by any Affiliate of the
Shipowner, if the pledgee (i) is not an Affiliate of the pledgor and (ii)
establishes to the satisfaction of the Indenture Trustee that the pledgee has
the right to vote such Obligations) shall be disregarded and deemed not to be
Outstanding; provided however that, for the purpose of determining whether the
Indenture Trustee shall be protected in relying on any such Act of Obligees,
only Obligations which the Indenture Trustee has actual knowledge are so owned
shall be so disregarded and deemed not to be Outstanding. Obligations which
are not Outstanding shall not be entitled to any rights or benefits provided in
the Indenture.
"Note" shall mean the Floating Rate Note.
"Paying Agent" means any bank or trust company having the
qualifications set forth in clauses (1), (3), (4) and (5) of Section 7.02(a) of
Exhibit 1 to the Indenture, which shall be appointed by the Shipowner in
accordance with Section 4.02 of Exhibit 1 to the Indenture to pay the principal
of (and premium, if any) or interest on the Obligations on behalf of the
Shipowner.
"Payment Date" shall mean January 1 and July 1 of each year,
beginning on January 1, 1999.
"Payment Default" has the meaning specified in Section 6.01(a)
of Exhibit 1 to the Indenture.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment" means the place at which an Obligation is
to be redeemed pursuant to Article III of Exhibit 1 to the Indenture.
"Principal Office," when used with respect to the Shipowner,
means the office of the Shipowner at which, at any particular time, its
corporate business is principally administered, which office at the date of
execution of the Indenture is located at 5450 Transco Tower, 2800 Post Oak
Boulevard, Houston, Texas 77056.
"Redeem" means with respect to the redemption of Obligations,
to repay or prepay.
"Redemption" means with respect to the redemption of
Obligations, the repayment or prepayment of Obligations as applicable.
"Redemption Date" means, with respect to any Obligation, a
date fixed for the prepayment, repayment or redemption of such Obligation by or
pursuant to Article Fourth of the Indenture or Article III of Exhibit 1 to the
Indenture.
"Redemption Price" means, with respect to any Obligation, the
price at which an Obligation is to be prepaid, repaid, or redeemed pursuant to
Article Fourth of the Indenture or Article III of Exhibit 1 to the Indenture.
-5-
<PAGE> 70
"Request" means a written request to a Person for the action
therein specified, signed by the Person making such request or a Responsible
Officer thereof.
"Responsible Officer" means (i) in the case of any business
corporation, the chairman of the board of directors, the president, any
vice-president, the secretary, assistant secretary, the treasurer or assistant
treasurer thereof, (ii) in the case of any commercial bank, the chairman or
vice-chairman of the executive committee of the board of directors or trustees,
the president, any vice president, the secretary, the treasurer, any trust
officer, any executive, senior, second or assistant vice president or any
officer or assistant officer customarily performing functions similar to those
performed by the persons who at the time shall be such officers or to whom any
related matter is referred because of his/her knowledge of and familiarity with
the particular subject, (iii) in the case of the Indenture Trustee, any senior
trust officer or trust officer, or any vice president associated with the
Corporate Agency and Trust Department, (iv) with respect to the signing or
authentication of Obligations and Guarantees by the Indenture Trustee, any
person specifically authorized by the Indenture Trustee to sign or authenticate
Obligations.
"Retired or Paid," as applied to Obligations and the
indebtedness evidenced thereby, means that such Obligations shall be deemed to
have been retired or paid and shall no longer be entitled to any rights or
benefits provided in the Indenture if:
(1) such Obligations shall have been paid in full
in immediately available funds;
(2) such Obligations shall have been cancelled by
the Indenture Trustee or shall have been
delivered to the Indenture Trustee for
cancellation; or
(3) such Obligations shall have become due and
payable at Maturity and funds sufficient for
the payment of such Obligations (including
interest to the date of Maturity, or in the
case of a payment after Maturity, to the date
of payment, together with any premium
thereon) and available for such payment
(whether as a result of payment pursuant to
the Guarantees or otherwise) shall be held by
the Indenture Trustee or any Paying Agent
pursuant to Section 4.02 of Exhibit 1 to the
Indenture (or shall have been so held and
shall thereafter have been paid to the
Shipowner pursuant to Section 4.03 of Exhibit
1 to the Indenture) in trust for the purpose
or with irrevocable directions, to apply the
same;
provided that, the foregoing definition is subject to the provisions of Section
6.08 of Exhibit 1 to the Indenture.
"Secretary" means the Secretary of Transportation or any
official or official body from time to time duly authorized to perform the
duties and functions of the Secretary of Transportation under Title XI of the
Act (including the Maritime Administrator, the Acting Maritime Administrator,
and to the extent so authorized, the Deputy Maritime Administrator and other
officials of the Maritime Administration).
"Secretary's Note" means a promissory note issued and
delivered by the Shipowner to the Secretary described in Article Third of the
Security Agreement and shall also mean any promissory note issued in
substitution for and replacement thereof pursuant to the Security Agreement.
"Secretary's Notice" means a notice from the Secretary to the
Indenture Trustee to the effect that (a) a default, within the meaning of
Section 1105(b) of the Act, has occurred under a mortgage, loan agreement, or
other security agreement that has been entered into between the Secretary, the
Shipowner and any other parties in order to protect the interests of the
United States of America in connection with the Guarantees, (b) such notice is
given for the purposes of Section 6.01(b) of Exhibit 1 to the Indenture in
order to protect the security interests of the
-6-
<PAGE> 71
United States of America under such mortgage, loan agreement or other security
agreement, and (c) the Guarantees will terminate upon the expiration of 60 days
from the date of such notice if the Indenture Trustee and each Obligee shall
have failed to demand payment of the Guarantees as provided in the Indenture,
the Guarantees or the Act. Such notice shall be given (i) in writing, by
registered mail, return receipt requested, deposited in the United States Mail
on the date of such notice and addressed to a Responsible Officer in the
Corporate Trust Office of the Indenture Trustee in accordance with the Special
Provisions of the Indenture, (ii) by telegram, telex, telecopy or similar means
of transmission dispatched on such date and addressed to the Responsible
Officer in the Corporate Trust Office of the Indenture Trustee, as aforesaid,
and (iii) by collect telephone call made on such date to a Responsible Officer
in the Corporate Trust Office of the Indenture Trustee. A Secretary's Notice
shall not be deemed to have been given unless it shall have been given in
accordance with all the provisions of this definition, and the date of any
Secretary's Notice shall be deemed to be the last date on which it is so given
pursuant to clauses (i) through (iii) above.
"Secretary's Supplemental Indenture" means a Supplemental
Indenture evidencing the succession, pursuant to Section 6.09 of Exhibit 1 to
the Indenture, of the Secretary to the Shipowner, and the assumption by the
Secretary of the obligations of the Shipowner under the Indenture.
"Section 1104" means Section 1104A of the Act, and when used
with reference to subsections of Section 1104, means subsections of Section
1104A.
"Security Agreement" shall mean that certain security
agreement, Contract No. MA-13259, dated as of the Closing Date, with respect to
the Vessel, executed by the Shipowner and the Secretary relating to the
security in respect to the Guarantees, as originally executed or as modified,
amended or supplemented in accordance with the applicable provisions thereof.
"Shipowner" means ROWAN COMPANIES, INC., a Delaware
corporation, and subject to the provisions of Sections 6.09, 8.01 and 8.02 of
Exhibit 1 to the Indenture, shall also include its successors and assigns.
"Shipyard" or "Shipbuilder" means LETOURNEAU, INC., a Texas
corporation.
"Stated Maturity," when used with respect to any Obligation,
means the date determinable as set forth in such Obligation as the final date
on which the principal of such Obligation is due and payable, which shall
include, without limitation, each of the Payment Dates.
"Supplemental Indenture" shall mean any indenture supplement
to the Indenture entered into pursuant to Article X thereof.
"Title XI" means Title XI of the Act.
"Title XI Reserve Fund and Financial Agreement" means that
certain Title XI Reserve Fund and Financial Agreement, Contract No. 13261,
dated as of the Closing Date, executed by the Shipowner and the Secretary, as
amended, modified or supplemented in accordance with the applicable provisions
thereof.
"United States" means the United States of America.
"Vessel" means the Shipowner's self-elevating mobile offshore
drilling unit to be named the GORILLA V and constructed by LETOURNEAU, INC. in
accordance with the Construction Contract, including all work and material
heretofore or hereafter performed upon or installed in or placed on board such
Vessel, together with related appurtenances, additions, improvements, and
replacements.
-7-
<PAGE> 1
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
-------------------------------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Weighted average shares of common stock
outstanding 85,335 84,589 84,092
Stock options (treasury stock method) 2,107 630 (A) 444 (A)
-------------------------------------------------
Weighted average shares for primary
earnings (loss) per share calculation 87,442 85,219 84,536
Stock options (treasury stock method) 450 790 (A)
Shares issuable from assumed conversion
of floating rate subordinated
convertible debentures 400 400 (A) 400 (A)
-------------------------------------------------
Weighted average shares for fully diluted
earnings (loss) per share calculation 88,292 86,409 84,936
=================================================
Net income (loss) for primary calculation $61,338 ($18,436) ($22,989)
Subordinated debenture interest 323 374 301
-------------------------------------------------
Net income (loss) for fully diluted
calculation $61,661 ($18,062) ($22,688)
=================================================
Primary earnings (loss) per share $0.70 ($0.22) ($0.27)
=================================================
Fully diluted earnings (loss) per share $0.70 ($0.21) (B) ($0.27)
=================================================
</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 or 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> 1
EXHIBIT 13
Rowan Companies, Inc. and Subsidiaries
TEN-YEAR FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands except per share
amounts and ratios) 1996 1995 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS
Revenues:
Drilling services $ 316,123 $ 250,080 $ 245,917 $ 271,022
Manufacturing sales and services 143,768 133,755 96,664
Aviation services 111,269 87,462 95,578 82,174
---------- ---------- ---------- ----------
Total 571,160 471,297 438,159 353,196
---------- ---------- ---------- ----------
Costs and expenses:
Drilling services 202,878 207,934 207,577 211,095
Manufacturing sales and services 131,665 120,378 87,382
Aviation services 93,473 79,993 79,955 68,882
Depreciation and amortization 47,882 50,555 50,790 51,918
General and administrative 16,591 14,692 13,862 13,940
---------- ---------- ---------- ----------
Total 492,489 473,552 439,566 345,835
---------- ---------- ---------- ----------
Income (loss) from operations 78,671 (2,255) (1,407) 7,361
---------- ---------- ---------- ----------
Other income (expense):
Interest expense (27,547) (27,702) (27,530) (25,361)
Less interest capitalized 2,516
Gain on disposals of property,
plant and equipment 2,359 6,598 1,344 1,955
Interest income 4,157 5,209 4,813 2,348
Other -- net 374 468 260 150
---------- ---------- ---------- ----------
Other income (expense) -- net (18,141) (15,427) (21,113) (20,908)
---------- ---------- ---------- ----------
Income (loss) before income taxes 60,530 (17,682) (22,520) (13,547)
Provision (credit) for income taxes (808) 754 469 (288)
---------- ---------- ---------- ----------
Income (loss) before extraordinary charge 61,338 (18,436) (22,989) (13,259)
Extraordinary charge from
redemption of debt
---------- ---------- ---------- ----------
Net income (loss) $ 61,338 $ (18,436) $ (22,989) $ (13,259)
---------- ---------- ---------- ----------
Per share of common stock:
Net income (loss):
Primary $ .70 $ (.22) $ (.27) $ (.17)
---------- ---------- ---------- ----------
Fully diluted $ .70 $ (.22) $ (.27) $ (.17)
---------- ---------- ---------- ----------
Cash dividends $ -- $ -- $ -- $ --
---------- ---------- ---------- ----------
FINANCIAL POSITION
Working capital $ 232,045 $ 200,588 $ 195,945 $ 172,117
---------- ---------- ---------- ----------
Property, plant and equipment -- at cost:
Drilling equipment 954,249 944,021 961,391 950,538
Aircraft and related equipment 188,681 189,954 176,874 166,791
Manufacturing plant and equipment 37,377 25,037 18,955
Construction in progress 77,318
Other property and equipment 94,517 91,089 86,883 81,636
---------- ---------- ---------- ----------
Total 1,352,142 1,250,101 1,244,103 1,198,965
---------- ---------- ---------- ----------
Property, plant and equipment -- net 546,200 487,039 506,121 507,193
Total assets 899,308 802,488 805,179 765,263
Capital expenditures 117,947 33,881 43,377 21,989
Long-term debt 267,321 247,744 248,504 207,137
Common stockholders' equity 496,219 429,155 442,347 460,300
---------- ---------- ---------- ----------
STATISTICAL INFORMATION
Current ratio 3.72 3.75 4.39 4.90
Long-term debt/total capitalization .35 .37 .36 .31
Book value per share of common stock $ 5.80 $ 5.06 $ 5.25 $ 5.49
========== ========== ========== ==========
</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
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987
- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 162,121 $ 170,739 $ 180,118 $ 128,818 $ 144,018 $ 90,145
87,877 101,433 111,992 97,446 72,667 52,984
- ---------- ---------- ---------- ---------- ---------- ----------
249,998 272,172 292,110 226,264 216,685 143,129
- ---------- ---------- ---------- ---------- ---------- ----------
162,816 147,853 130,845 119,182 126,288 113,348
74,347 82,364 88,182 75,943 62,571 48,996
51,367 52,954 50,702 52,062 60,324 61,312
12,092 11,739 9,549 7,690 7,313 6,766
- ---------- ---------- ---------- ---------- ---------- ----------
300,622 294,910 279,278 254,877 256,496 230,422
- ---------- ---------- ---------- ---------- ---------- ----------
(50,624) (22,738) 12,832 (28,613) (39,811) (87,293)
- ---------- ---------- ---------- ---------- ---------- ----------
(26,254) (21,379) (21,601) (23,682) (23,920) (23,463)
237 319
731 1,660 3,996 2,320 27,578 1,814
2,658 4,763 8,635 12,709 4,002 4,917
165 127 178 161 345 407
- ---------- ---------- ---------- ---------- ---------- ----------
(22,700) (14,829) (8,792) (8,492) 8,242 (16,006)
- ---------- ---------- ---------- ---------- ---------- ----------
(73,324) (37,567) 4,040 (37,105) (31,569) (103,299)
429 1,174 2,081 672 32 (34,009)
- ---------- ---------- ---------- ---------- ---------- ----------
(73,753) (38,741) 1,959 (37,777) (31,601) (69,290)
(5,627)
- ---------- ---------- ---------- ---------- ---------- ----------
$ (73,753) $ (44,368) $ 1,959 $ (37,777) $ (31,601) $ (69,290)
- ---------- ---------- ---------- ---------- ---------- ----------
$ (1.01) $ (.61)* $ .03 $ (.52) $ (.44) $ (1.12)
- ---------- ---------- ---------- ---------- ---------- ----------
$ (1.01) $ (.61)* $ .03 $ (.52) $ (.44) $ (1.12)
- ---------- ---------- ---------- ---------- ---------- ----------
$ -- $ -- $ -- $ -- $ -- $ --
- ---------- ---------- ---------- ---------- ---------- ----------
$ 61,397 $ 125,996 $ 134,393 $ 143,963 $ 152,335 $ 76,779
- ---------- ---------- ---------- ---------- ---------- ----------
939,793 913,379 885,264 867,540 863,450 946,127
162,001 158,361 138,327 107,985 97,500 98,860
79,801 76,251 73,504 70,598 88,039 88,113
- ---------- ---------- ---------- ---------- ---------- ----------
1,181,595 1,147,991 1,097,095 1,046,123 1,048,989 1,133,100
- ---------- ---------- ---------- ---------- ---------- ----------
537,819 552,481 549,608 542,995 585,365 697,144
684,301 895,889 739,133 737,826 800,684 827,785
39,528 85,618 59,905 22,945 18,318 14,123
212,907 220,764 153,621 163,473 181,330 184,187
375,754 445,368 485,748 479,287 515,491 546,078
- ---------- ---------- ---------- ---------- ---------- ----------
2.47 1.71 ** 4.00 4.55 4.07 2.88
.36 .33 .24 .25 .26 .25
$ 5.13 $ 6.11 $ 6.69 $ 6.64 $ 7.16 $ 7.59
========== ========== ========== ========== ========== ==========
</TABLE>
11
<PAGE> 3
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>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Drilling $ 316.1 $ 250.1 $ 245.9
Manufacturing 143.8 133.7 96.7
Aviation 111.3 87.5 95.6
-------- -------- --------
Total $ 571.2 $ 471.3 $ 438.2
-------- -------- --------
Operating Profit (Loss)*:
Drilling $ 79.3 $ 5.0 $ 0.2
Manufacturing 9.5 11.7 7.7
Aviation 6.5 (4.3) 4.6
-------- -------- --------
Total $ 95.3 $ 12.4 $ 12.5
-------- -------- --------
Net Income (Loss) $ 61.3 $ (18.4) $ (23.0)
======== ======== ========
</TABLE>
* Income (loss) from operations before deducting general and administrative
expenses.
Growing worldwide demand for energy products, higher oil and natural gas
prices, lower finding and recovery costs and the relative scarcity of capable
equipment combined to dramatically improve energy service economics in 1996,
enabling the Company to achieve its best results since 1982. As reflected
above, the Company's 1996 operating results were significantly improved over
1995 primarily through the strength of the drilling division, as near-100%
utilization of the offshore rig fleet afforded continual escalations in
drilling day rates. The Company achieved near-record aviation services revenues
primarily in support of oil and gas and fire control activities and commuter
transportation, and the manufacturing division continued to provide meaningful
returns while assuming a lead role in the Company's offshore drilling fleet
expansion program.
The Company's 1995 results were improved over 1994 primarily due to higher
rig utilization and, beginning in the second quarter, increasing drilling day
rates which, coupled with gains realized on sales of drilling and aviation
equipment and continued growth in the Company's manufacturing operations, more
than offset unfavorable results of aviation operations and reduced turnkey
drilling.
DRILLING OPERATIONS. The Company's drilling operating results are generally a
function of rig rates and activity achieved in its offshore drilling business
conducted primarily in the Gulf of Mexico and the North Sea. Such rates and
activity are, in turn, primarily influenced by the level of offshore
expenditures by energy companies and the availability of competitive equipment.
Market conditions in the offshore drilling industry improved considerably
during the last half of the 1994 -- 1996 period. Firming natural gas prices
strengthened offshore utilization and day rates in the Gulf of Mexico
throughout much of 1994, while North Sea drilling activity and rates were
generally weak due to many energy companies downsizing their drilling programs
in the face of anticipated changes in United Kingdom energy policies. In late
1994, Gulf of Mexico utilization and day rates were impaired by softening
natural gas prices while the North Sea market began to stabilize as changes in
UK policies were deferred. Beginning in the second quarter of 1995, both
markets began to offer improving returns due to increasing worldwide demand for
oil and gas. Activity and day rates in the Gulf of Mexico were positively
influenced by strengthening natural gas prices, while North Sea utilization
approached 100% due to the relatively scarce supply of harsh environment
drilling equipment. The Gulf of Mexico and North Sea drilling markets continued
to improve dramatically in 1996 primarily due to consistently high energy
prices and advances in horizontal drilling and 3-D seismic technologies which
together have yielded the following industry conditions, each of which has
proven directly or indirectly beneficial to the Company's operations:
o the economic viability of deep-water prospects in the Gulf of Mexico
o the growth of drilling markets in west Africa, southeast Asia and The
Netherlands
o the trend toward longer-term drilling contracts.
As a result, the Company's Gulf of Mexico rigs were 99% utilized in 1996 and
achieved a 41% increase in average day rates compared to 1995, while the North
Sea fleet was 94% utilized and averaged a 32% increase in day rates between
years. The Company considers only revenue-producing days in computing rig
utilization.
The Company's worldwide fleet of 20 jack-ups (two of which are leased) was
utilized 97%, 90% and 86% in 1996, 1995 and 1994, respectively, while the
Company's semi-submersible achieved 100%, 85% and 73%, respectively. The
Company sold its three submersible barge rigs during the fourth quarter of
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>
1995 1994
TO 1996 TO 1995
-------- --------
<S> <C> <C>
Utilization $ 24.0 $ 33.9
Drilling Rates 79.4 (13.3)
======== ========
</TABLE>
12
<PAGE> 4
These fluctuations, net of a decline in turnkey drilling, yielded a $66.0
million or 26% increase in 1996 drilling revenues compared to 1995, which was
2% over 1994. Drilling operations expenses were 2% lower in 1996 compared to
1995, which was unchanged from 1994. The expense variations do not correlate
with the revenue fluctuations primarily due to the effects of turnkey drilling
operations.
Three of the Company's deep-well land rigs were under contract in Texas and
Louisiana for almost all of 1996 and one other worked much of the third quarter
and all of the fourth in Louisiana. The Company sold its ongoing Argentina
operations in November 1996 including its three trailer-mounted rigs. Two other
deep-well land rigs in Argentina were idle at year end. The Company's five
arctic land rigs and remaining three rigs in Oklahoma were idle in 1996. The
cost of maintaining the idle rigs is modest and the remaining investment in
such rigs is not significant.
Perceptible trends existing in the offshore drilling markets in which the
Company operates are shown below:
- -------------------------------------------------------------------------------
GULF OF MEXICO -- Continuing high levels of exploration and development
activity
NORTH SEA -- Continuing high levels of drilling activity for jack-up rigs
EASTERN CANADA -- Improving demand
===============================================================================
The drilling markets in which the Company competes frequently experience
significant fluctuations in the demand for drilling services, as measured by the
level of exploration and development expenditures, and the supply of capable
drilling equipment. These expenditures, in turn, are affected by many factors
such as existing and newly discovered oil and natural gas reserves, political
and regulatory policies, seasonal weather patterns, contractual requirements
under leases or concessions, trends in finding and extraction costs and,
probably most influential, oil and natural gas prices. The volatile nature of
such factors prevents the Company from being able to accurately predict whether
existing market conditions or the perceptible market trends reflected in the
preceding table will continue beyond the near term. In response to fluctuating
market conditions, the Company can, as it has done in the past, relocate its
drilling rigs from one geographic area to another, but only when such moves are
economically justified. Assuming current conditions and trends prevail, the
drilling division should experience increased profitability in 1997.
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, among other services, forest fire control, commuter airline services,
flightseeing and medivac services, and, in recent years, has developed and sold
auxiliary fuel tanks for helicopters. The Company further broadened its aviation
operations in 1994 to include China, where two twin engine helicopters are
currently under contract.
Aviation revenues grew by 27% in 1996 compared to 1995, which was 8% less
than 1994. Aviation division expenses in 1996 were up by 17% over 1995, which
was unchanged from 1994. Though each of the Company's aviation service lines and
areas contributed to the improved 1996 operating performance, the largest growth
beyond oil and gas related flying was achieved in forest fire control services,
which are traditionally provided during the third quarter throughout the western
United States, and in the Company's scheduled and charter airline services in
Alaska.
The number of aircraft operated by the Company at the end of each year in
the 1994 -- 1996 period and the revenue hours for each of those years are
reflected in the following table:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Twin Engine Helicopters:
Number 62 62 63
Revenue Hours 34,848 29,129 33,330
Single Engine Helicopters:
Number 26 25 27
Revenue Hours 11,466 9,563 11,574
Fixed-Wing Aircraft:
Number 21 19 17
Revenue Hours 20,669 20,430 23,136
======== ======== ========
</TABLE>
Excluded from the preceding table are fifteen twin engine helicopters owned
by the Company's Dutch affiliate which recorded revenue hours of 10,378 in
1996, 8,907 in 1995 and 8,134 in 1994.
Perceptible trends existing in the aviation markets in which the Company
operates are shown below:
- -------------------------------------------------------------------------------
ALASKA -- Moderately improving market conditions
GULF OF MEXICO -- Moderately improving market conditions
NORTH SEA -- Moderately improving flight support activity
CHINA -- 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. Assuming the
foregoing trends continue, the aviation division should contribute positive
operating results in 1997.
13
<PAGE> 5
MANUFACTURING OPERATIONS. The Company's manufacturing division generated a 7%
increase in revenues in 1996 compared to 1995, which was 38% higher than 1994,
and continued to measurably enhance operating results while devoting
substantial efforts towards reactivating its marine rig construction capability
and the design and construction of Rowan Gorilla V. The heavy equipment line
shipped 56 mining, timber and transportation loaders, stackers and cranes
during 1996, or 19% more than in 1995, which was 34% higher than 1994.
Consolidated manufacturing operations exclude approximately $46.9 million of
products and services provided to the Company's drilling division in 1996
compared to $4.7 million in 1995.
The Company's manufacturing operations are considerably less volatile than
its drilling and aviation operations. Given a year-end external backlog of
about $44 million and barring unforeseen circumstances, the Company's
manufacturing division should continue to contribute positive operating results
during 1997.
- -------------------
The Company's overall financial goals for 1997 include revenues approaching
$650 million and earnings near $160 million. Most of the expected improvement
over 1996 should be contributed by the drilling division.
In light of the increasing demand for the Company's daywork drilling
services, and the relatively unfavorable results of the Company's turnkey
drilling operations during the recent past, management has elected to focus on
daywork drilling and project management contracts and not pursue additional
turnkey work at this time. The Company expects to conclude its current turnkey
operations during the first quarter of 1997. The Company estimates that its
first quarter 1997 earnings will be in the range of $24 million to $26 million
(before an extraordinary charge from the redemption of debt).
LIQUIDITY AND CAPITAL RESOURCES
Key balance sheet amounts and ratios for 1996 and 1995 were as follows (dollars
in millions):
<TABLE>
<CAPTION>
December 31, 1996 1995
-------- --------
<S> <C> <C>
Cash and cash equivalents $ 97.2 $ 90.3
Current assets $ 317.3 $ 273.5
Current liabilities $ 85.3 $ 72.9
Current ratio 3.72 3.75
Note payable and current maturities
of long-term debt $ 3.9 $ 7.0
Long-term debt $ 267.3 $ 247.7
Stockholders' equity $ 496.2 $ 429.2
Long-term debt/total capitalization .35 .37
======== ========
</TABLE>
Reflected in the comparisons above are the effects of net cash provided by
operations of $83.7 million, capital expenditures of $117.9 million, proceeds
from equipment disposals and the sale of the Argentina operations totaling
$13.8 million, and proceeds from borrowings of $29.0 million.
During 1996, the Company began construction of Rowan Gorilla V, an enhanced
version of the Company's Gorilla Class jack-ups, which will be the world's
largest bottom supported mobile offshore drilling unit. The rig is being
constructed at the Company's Vicksburg, Mississippi shipyard and should be
completed by mid-1998 at an estimated cost of $175 million. The Company is
financing up to 87.5% of the construction cost through a 12-year bank loan
guaranteed by the Maritime Administration of the U.S. Department of
Transportation under its Title XI Program.
Under the Title XI Program, the Company obtains funding for Gorilla V as
construction progress is achieved and outstanding borrowings bear interest at
.45% above a short-term LIBOR rate. The Company may fix the interest rate at
any time and must fix the rate on all outstanding principal amounts on the
earlier of July 1, 2000 or two years following completion of construction.
Interest is payable semi-annually beginning July 1, 1997 and principal will be
repaid in semi-annual installments commencing January 1, 1999. Gorilla V is
pledged as security for the government guarantee. At December 31, 1996, the
Company had drawn down about $29 million of the $153 million total credit
facility at an interest rate of 6.075%
The reactivation of the Company's marine construction capability,
principally through rebuilding of the Vicksburg shipyard, should be
substantially complete in early 1997. Capital expenditures encompass new assets
or enhancements to existing assets as expenditures for routine maintenance and
major repairs are charged to operations as incurred.
Capital expenditures in 1996 included $68.5 million toward the design and
construction of Gorilla V and about $15 million related to reactivation of the
Company's Vicksburg facility. The remainder primarily reflects major rig
enhancements and purchases of aircraft and components.
14
<PAGE> 6
On October 28, 1996, the Company announced plans for the construction of
Rowan Gorilla VI and Rowan Gorilla VII. Each rig will be a combination drilling
and production unit like Gorilla V, capable of operating in hostile
environments like the North Sea in water depths of up to 400 feet. The rigs
will be constructed at the Company's Vicksburg facility at a combined cost of
approximately $380 million, with delivery expected during the first quarter of
1999 and the second quarter of 2000. The Company believes that if operating
conditions continue to improve as expected, internally generated working
capital may be sufficient to finance construction of both rigs, with outside
financing obtained if necessary. There can be no assurance that working capital
will be adequate or that outside financing will be available. The Company
currently has no other available credit facilities.
The Company estimates 1997 capital expenditures to be between $160 and $170
million, including $85 -- 90 million for Gorilla V and $35 -- 40 million for
Gorilla VI. The Company may also spend amounts to acquire additional aircraft
as market conditions justify and to upgrade existing offshore rigs.
On February 3, 1997, the Company announced plans for a partial redemption
of its $200 million 11 7/8% Senior Notes due 2001. On April 1, 1997, the Company
will redeem $50 million of the notes and pay a 6% premium. The Company will
record an estimated $3.5 million loss on the transaction as an extraordinary
charge in the first quarter of 1997, though remaining 1997 operations will be
enhanced by an estimated $2.6 million reduction in net interest cost. The
Company intends to refinance the remaining $150 million of 11 7/8% Senior Notes
during 1997 and would realize an estimated $10 million extraordinary loss upon
such redemption.
Based on current operating levels and the previously discussed market
trends, management believes that 1997 operations, together with existing
working capital and available financial resources, will generate sufficient
cash flow to sustain planned capital expenditures and debt service requirements
at least through the remainder of 1997.
At December 31, 1996, the provisions of the Company's existing indebtedness
would allow the Company to enter into sale/leaseback transactions with a
maximum value of approximately $81 million.
In December 1995, in connection with the purchase of 16 aircraft and a
hangar and office facility in Alaska, the Company issued a $7 million
non-interest bearing promissory note payable at the end of one year. The note
was repaid in full during 1996.
In February 1994, the Company paid $10.4 million in cash and issued $41.7
million of 7%, 5-year notes in connection with its acquisition of the net
manufacturing assets of Marathon LeTourneau Company. During 1996, the Company
assumed certain environmental obligations related to its manufacturing
facilities from the previous owners in exchange for $4 million in cash and a
$5.5 million reduction in one of the notes. The Company believes it has
adequately accrued for environmental liabilities. See Notes 1 and 9 of the
Notes to Consolidated Financial Statements.
The Company did not pay any dividends on its common stock during the
1994--1996 period. See Note 5 of the Notes to Consolidated Financial
Statements.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, which governs accounting for the impairment of
long-lived assets. The effect of adopting the statement on the Company's
financial position and results of operations was not material.
The Company does not intend to adopt the accounting provisions of Statement
of Financial Accounting Standards No. 123, but rather has elected to continue
to apply Accounting Principles Board Opinion No. 25 for measurement and
recognition of employee stock-based compensation. The Company estimates that
the provisions of the statement, if adopted, would not have materially affected
reported amounts for net income (loss) and earnings (loss) per share in 1996
and 1995.
This report contains forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including, without
limitation, statements as to the expectations, beliefs and future expected
financial performance of the Company that are based on current expectations and
are subject to certain risks, trends and uncertainties that could cause actual
results to differ materially from those projected by the Company. Among the
factors that could cause actual results to differ materially are the following:
o oil and natural gas prices
o the level of offshore expenditures by energy companies
o the general economy, including inflation
o weather conditions in the Company's principal operating areas
o environmental and other laws and regulations.
Other relevant factors have been disclosed in the Company's filings with the
U.S. Securities and Exchange Commission.
15
<PAGE> 7
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
----------------------
(In thousands except share amounts) 1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 97,225 $ 90,338
Receivables -- trade and other 112,836 87,811
Inventories:
Raw materials and supplies 65,734 51,898
Work-in-progress 21,181 23,015
Finished goods 1,758 708
Prepaid expenses 8,750 11,430
Cost of turnkey drilling contracts in progress 9,835 8,259
---------- ----------
Total current assets 317,319 273,459
---------- ----------
Investment In and Advances To 49% Owned Companies 28,049 29,770
---------- ----------
Property, Plant and Equipment -- at cost:
Drilling equipment 954,249 944,021
Aircraft and related equipment 188,681 189,954
Manufacturing plant and equipment 37,377 25,037
Construction in progress 77,318
Other property and equipment 94,517 91,089
---------- ----------
Total 1,352,142 1,250,101
Less accumulated depreciation and amortization 805,942 763,062
---------- ----------
Property, plant and equipment -- net 546,200 487,039
---------- ----------
Other Assets and Deferred Charges 7,740 12,220
---------- ----------
Total $ 899,308 $ 802,488
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable and current maturities of long-term debt (Note 2) $ 3,932 $ 7,039
Accounts payable -- trade 28,106 21,774
Other current liabilities (Note 4) 53,236 44,058
---------- ----------
Total current liabilities 85,274 72,871
---------- ----------
Long-Term Debt -- less current maturities (Note 2) 267,321 247,744
---------- ----------
Other Liabilities (Notes 6 and 9) 39,573 36,227
---------- ----------
Deferred Credits:
Income taxes (Note 7) 1,774 4,146
Gain on sale/leaseback transactions (Note 9) 9,147 12,345
---------- ----------
Total deferred credits 10,921 16,491
---------- ----------
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 87,054,028
shares at December 31, 1996 and 86,353,792 shares at December 31, 1995 (Note 3) 10,882 10,794
Additional paid-in capital 401,730 396,092
Retained earnings (Note 5) 86,092 24,754
Less cost of treasury stock -- 1,457,919 shares 2,485 2,485
---------- ----------
Total stockholders' equity 496,219 429,155
---------- ----------
Total $ 899,308 $ 802,488
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
16
<PAGE> 8
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------
(In thousands except per share amounts) 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Drilling services $ 316,123 $ 250,080 $ 245,917
Manufacturing sales and services 143,768 133,755 96,664
Aviation services 111,269 87,462 95,578
--------- --------- ---------
Total 571,160 471,297 438,159
--------- --------- ---------
Costs and Expenses:
Drilling services 202,878 207,934 207,577
Manufacturing sales and services 131,665 120,378 87,382
Aviation services 93,473 79,993 79,955
Depreciation and amortization 47,882 50,555 50,790
General and administrative 16,591 14,692 13,862
--------- --------- ---------
Total 492,489 473,552 439,566
--------- --------- ---------
Income (Loss) From Operations 78,671 (2,255) (1,407)
--------- --------- ---------
Other Income (Expense):
Interest expense (27,547) (27,702) (27,530)
Less: interest capitalized 2,516
Gain on disposals of property, plant and equipment 2,359 6,598 1,344
Interest income 4,157 5,209 4,813
Other -- net 374 468 260
--------- --------- ---------
Other income (expense) -- net (18,141) (15,427) (21,113)
--------- --------- ---------
Income (Loss) Before Income Taxes 60,530 (17,682) (22,520)
Provision (credit) for income taxes (Note 7) (808) 754 469
--------- --------- ---------
Net Income (Loss) $ 61,338 $ (18,436) $ (22,989)
========= ========= =========
Earnings (Loss) Per Share of Common Stock (Note 1):
Primary $ .70 $ (.22) $ (.27)
Fully Diluted $ .70 $ (.22) $ (.27)
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
17
<PAGE> 9
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Years Ended December 31, 1996, 1995 and 1994
-----------------------------------------------------------
Common Stock
--------------------------------------- Additional
Issued In Treasury Paid-in Retained
(In thousands) Shares Amount Shares Amount Capital Earnings
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 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
Exercise of stock options 538 67 472
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 4,255
Conversion of subordinated debentures 78 10 440
Net loss (18,436)
-------- -------- -------- -------- -------- --------
Balance, December 31, 1995 86,354 10,794 1,458 2,485 396,092 24,754
Exercise of stock options 626 78 548
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 4,600
Conversion of subordinated debentures 74 10 490
Net income 61,338
-------- -------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1996 87,054 $ 10,882 1,458 $ 2,485 $401,730 $ 86,092
======== ======== ======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
18
<PAGE> 10
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------
(In thousands) 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash Provided By (Used In):
Operations:
Net income (loss) $ 61,338 $ (18,436) $ (22,989)
Noncash charges (credits) to net income (loss):
Depreciation and amortization 47,882 50,555 50,790
Gain on disposals of property, plant and equipment (2,359) (6,598) (1,344)
Compensation expense 4,600 4,255 4,648
Change in sale/leaseback payable (1,232) (1,460) (1,405)
Amortization of sale/leaseback gain (3,198) (3,198) (3,198)
Provision for pension and postretirement benefits 1,217 7,402 6,922
Other -- net (210) 1,161 (503)
Changes in current assets and liabilities:
Receivables -- trade and other (28,658) (9,494) 18,080
Inventories (13,052) (16,235) (9,205)
Other current assets 2,713 (17,718) (2,464)
Current liabilities 11,033 3,148 6,064
Net changes in other noncurrent assets and liabilities 3,673 (171) (2,591)
--------- --------- ---------
Net cash provided by (used in) operations 83,747 (6,789) 42,805
--------- --------- ---------
Investing activities:
Capital expenditures:
Property, plant and equipment additions (117,947) (33,881) (32,963)
Acquisition of net manufacturing assets (10,414)
Proceeds from sale of Argentina drilling operations 6,946
Proceeds from disposals of property, plant and equipment 6,829 16,013 2,604
Repayments from affiliates 32 3,676
--------- --------- ---------
Net cash used in investing activities (104,140) (14,192) (40,773)
--------- --------- ---------
Financing activities:
Proceeds from borrowings 29,009
Repayments of borrowings (2,355) (290) (8,127)
Other -- net 626 539 387
--------- --------- ---------
Net cash provided by (used in) financing activities 27,280 249 (7,740)
--------- --------- ---------
Increase (Decrease) in Cash and Cash Equivalents 6,887 (20,732) (5,708)
Cash and Cash Equivalents, Beginning of Year 90,338 111,070 116,778
--------- --------- ---------
Cash and Cash Equivalents, End of Year $ 97,225 $ 90,338 $ 111,070
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
19
<PAGE> 11
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.
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, 1996, the unamortized excess cost was $2,690,000.
Intercompany transactions are eliminated in consolidation.
REVENUE RECOGNITION. Most drilling contracts provide for payment 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 included sales and costs of sales
of $134,929,000 and $111,973,000, $119,640,000 and $97,324,000, and $90,460,000
and $72,717,000 in 1996, 1995 and 1994, 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 in 1996 consisted of the retirement of
$4,684,000 of debt through the disposition of aviation equipment, a $5,500,000
reduction in debt in exchange for assumption of certain environmental
obligations and the conversion of $500,000 of Series III Floating Rate
Convertible Subordinated Debentures into 74,074 shares of common stock. Noncash
transactions in 1995 included the issuance of a $6,972,000 non-interest bearing
promissory note in connection with the purchase of certain aviation assets and
the conversion of $450,000 of Series I Floating Rate Convertible Subordinated
Debentures into 78,261 shares of common stock. Noncash transactions in 1994
included the issuance of $10,300,000 Series III Floating Rate Convertible
Subordinated Debentures and the issuance of $41,656,000 7% promissory notes in
connection with the acquisition of the net assets of Marathon LeTourneau
Company. See Notes 2, 3 and 9.
PROPERTY AND DEPRECIATION. For financial reporting purposes, the Company
computes depreciation using the straight-line method over the estimated lives
of the related assets as follows:
<TABLE>
<CAPTION>
Salvage
Years Value
- ------------------------------------------------------------
<S> <C> <C>
Offshore drilling equipment:
Semi-submersible 15 20%
Cantilever jack-ups 15 20%
Conventional jack-ups 12 20%
Land drilling equipment 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.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." This statement generally
requires a periodic review of long-lived assets for indications that their
carrying amount may not be recoverable and governs the measurement and
disclosure of any resulting impairment loss. Its application did not have a
material impact on the Company's financial position or results of operations.
ENVIRONMENTAL MATTERS. Environmental remediation costs are accrued based on
estimates of known remediation requirements even if uncertainties about the
ultimate cost of the remediation exist. Ongoing environmental compliance costs
are expensed as incurred and expenditures to mitigate or prevent future
environmental contamination are capitalized. The Company's estimated liability
is not discounted. See Note 9.
INCOME TAXES. The Company accounts for income taxes under an asset and
liability approach that requires the recognition of deferred income tax assets
and liabilities which reflect the future tax consequences of differences
between the financial statement and tax bases of assets and liabilities. See
Note 7.
20
<PAGE> 12
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, plus any shares issuable upon the exercise
of stock options and the conversion of debentures, when dilutive.
MANAGEMENT ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS. Certain reclassifications have been made in the 1995 and
1994 amounts to conform with the 1996 presentations.
2. LONG-TERM DEBT
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1996 1995
-------- --------
<C> <C> <C>
11 7/8% Senior Notes due 2001 $200,000 $200,000
Nonrecourse notes payable in quarterly
installments through 1997 with a
final balloon payment due
in 1998; bearing interest at 7% and
collateralized by two aircraft costing
approximately $3.6 million 2,488 2,797
Nonrecourse notes payable due 1999
bearing interest at 7% 36,156 41,656
Promissory note payable in 1996; non-
interest bearing and secured by 15
aircraft costing approximately
$ 6.7 million 6,730
Floating-rate note payable guaranteed under
U.S. Department of Transportation
Title XI; secured by drilling rig
Rowan Gorilla V 29,009
Series II subordinated convertible
debenture due 1997 bearing interest
at 1/2% above prime rate 3,600 3,600
-------- --------
Total 271,253 254,783
Less current maturities 3,932 7,039
-------- --------
Remainder $267,321 $247,744
======== ========
</TABLE>
Maturities of long-term debt for the five years ending December 31, 2001
are as follows: 1997 -- $3,932,000, 1998 -- $2,156,000, 1999 -- $38,573,000,
2000 -- $2,417,000 and 2001 -- $202,417,000.
The 11 7/8% Senior Notes due 2001 became redeemable on December 1, 1996, in
whole or in part, upon payment of a premium of 6%. The premium decreases by 2%
annually from that date to December 1, 1999, when the Company may redeem the
notes at the principal amount. See Note 12.
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 1997, with a final balloon payment due in January 1998.
In February 1994, in connection with the acquisition of certain net
manufacturing assets, the Company issued $41,656,000 in 7% promissory notes due
in 1999. During 1996, the Company obtained a $5,500,000 reduction in one of the
notes in return for assuming certain environmental remediation obligations. See
Note 9 for further information.
In December 1996, the Company obtained financing for up to $153,091,000 of
the cost of designing and constructing Rowan Gorilla V through a 12-year bank
loan guaranteed by the Maritime Administration of the U.S. Department of
Transportation under its Title XI Program. The Company obtains funding as
construction progress is achieved and outstanding borrowings bear interest at
.45% above a short-term LIBOR rate. At December 31, 1996, the interest rate was
6.075%. The Company may fix the interest rate at any time and must fix the rate
on all outstanding principal on the earlier of July 1, 2000 or two years
following completion of construction. Interest is payable semi-annually
beginning July 1, 1997 and principal will be repaid in semi-annual installments
commencing January 1, 1999. Rowan Gorilla V is pledged as security for the
government guarantee.
The $3,600,000 principal amount of the Series II Floating Rate Convertible
Subordinated Debenture is convertible into $3,600,000 of Series II Preferred
Stock, which may be converted into an aggregate of 400,000 shares of the
Company's common stock. At December 31, 1996, the interest rate was 8.75%. 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. At December 31, 1996,
debentures in the amount of $9,200,000 were outstanding. The outstanding
debentures are convertible into $9,200,000 of Series III Preferred Stock, which
may be converted into an aggregate of 1,362,963 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 1996, 1995 and 1994 were $27,073,000, $27,433,000 and
$26,900,000, respectively.
Certain debt agreements of the Company contain provisions that require an
excess of current assets over current liabilities, an excess of stockholders'
equity over consolidated funded indebtedness and a minimum level of
stockholders' equity, 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.
The Company's 1980 Nonqualified Stock Option Plan authorized the Board of
Directors to grant, through January 25, 1990, options to purchase a total of
1,000,000 shares of the Company's common stock.
21
<PAGE> 13
Under the terms of the 1988 Nonqualified Stock Option Plan, as amended (the
"1988 Plan"), the Board of Directors can grant, before January 21, 2003,
options to purchase a total of 7,000,000 shares of the Company's common stock.
At December 31, 1996, options for 6,453,504 shares had been granted at
exercise prices ranging from $1.00 to $15.25 per share, and 348 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.
The Company recognizes compensation expense with respect to any
nonqualified option pursuant to Accounting Principles Board (APB) Opinion No.
25 as 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 in which the employee performs services to earn the right to
exercise the option and an equal amount is credited to additional paid-in
capital. The Company has elected not to adopt Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" which offers an
alternative method for measuring compensation cost. The statement, if adopted,
would not have materially affected reported amounts for net income (loss) and
earnings (loss) per share in 1996 and 1995.
Stock option activity was as follows:
<TABLE>
<CAPTION>
Number of Shares
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Stock options outstanding,
January 1 2,499,700 2,182,650 1,616,325
Changes during the year:
Granted:
at $1.00 per share 928,000 982,000
at $7.625 per share 525,000
at $8.00 per share 25,000
at $15.25 per share 177,000
Exercised, at
$ 1.00 per share (626,162) (537,950) (387,675)
Forfeited (102,250) (73,000) (28,000)
---------- ---------- ----------
Stock options outstanding,
December 31 2,498,288 2,499,700 2,182,650
---------- ---------- ----------
Stock options exercisable,
December 31 564,476 494,513 440,338
========== ========== ==========
Stock options available for
grant, December 31:
1988 Plan 1,984,071 2,608,821 3,463,821
========== ========== ==========
</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. At December 31, 1996,
all $5,125,000 principal amount of Series I debentures issued in 1986 had been
converted into common stock at $5.75 per share. In 1987, the Company issued a
Series II debenture in the principal amount of $4,500,000, of which $3,600,000
was outstanding at December 31, 1996. 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 Series III debentures in the principal amount of $10,300,000, of
which $9,200,000 was outstanding at December 31, 1996. This amount is
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: $4,300,000 through
November 29, 1997; $6,700,000 on or after November 30, 1997 and $9,200,000 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 one-half 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.
4. OTHER CURRENT LIABILITIES
Other current liabilities consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1996 1995
--------- ---------
<S> <C> <C>
Gain on sale/leaseback transactions $ 3,198 $ 3,198
Accrued liabilities:
Income taxes 1,009 1,321
Compensation and related
employee costs 29,084 25,610
Interest 2,033 2,012
Taxes and other 17,912 11,917
--------- ---------
Total $ 53,236 $ 44,058
========= =========
</TABLE>
22
<PAGE> 14
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, 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 $44,894,000 at December 31, 1996. 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. In 1994, in connection with its acquisition
of certain manufacturing assets, the Company assumed the assets and obligations
of a separate plan covering manufacturing employees.
Pension 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 (in thousands):
<TABLE>
<CAPTION>
December 31, 1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
Vested benefits $ 113,833 $ 107,803
========= =========
Total benefits $ 121,455 $ 115,533
========= =========
Plan assets at fair value $ 141,997 $ 108,056
Projected benefit obligation
for service rendered to date 136,721 130,722
--------- ---------
Plan assets in excess of (less than)
projected benefit obligation 5,276 (22,666)
Unrecognized net (gain) loss (16,013) 9,857
Unrecognized net benefits being
recognized over 15 years (3,634) (4,845)
Unrecognized prior service cost 440 555
--------- ---------
Accrued pension cost included in
Current and Other Liabilities $ (13,931) $ (17,099)
========= =========
</TABLE>
The plans' assets consist primarily of equity securities and U.S. Treasury
bonds and notes and, at December 31, 1996, included 1,500,000 shares of the
Company's common stock at an average cost of $4.81 per share.
At December 31, 1996, $11,800,000 of the plans' assets were invested in a
dedicated bond fund. The plans had a basis in these assets of $9,300,000
yielding approximately 5.7% to maturity.
Net pension cost included the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost -- benefits
earned during the period $ 5,757 $ 4,335 $ 4,784
Interest cost on projected
benefit obligation 9,477 8,580 7,879
Actual return on plan
assets -- (gain) loss (31,607) (24,166) 7,264
Net amortization
and deferral 20,692 15,280 (17,105)
-------- -------- --------
Net periodic pension cost $ 4,319 $ 4,029 $ 2,822
======== ======== ========
</TABLE>
Assumptions used in actuarial calculations were:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Discount rate 7.5% 7.25% 8.75%
Rate of compensation
increase 4.0% 4.0% 4.0%
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, 1996 and 1995 of $3,317,000 and $3,021,000,
respectively. The net pension liabilities included in the Company's
consolidated balance sheet were $2,615,000 and $2,230,000 at December 31, 1996
and 1995, respectively. Net pension cost was $508,000 in 1996, $473,000 in 1995
and $437,000 in 1994.
In addition to 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.
The following table sets forth the plans' funded status and the amounts
recognized in the Company's consolidated balance sheet (in thousands):
<TABLE>
<CAPTION>
December 31, 1996 1995
-------- --------
<S> <C> <C>
Accumulated postretirement
benefit obligations:
Retirees $ 12,322 $ 12,006
Fully eligible active plan
participants 8,933 7,751
Other active plan participants 12,257 11,570
-------- --------
Total benefits 33,512 31,327
Unrecognized transition obligation
being recognized over 20 years (12,103) (12,859)
Unrecognized net gain (loss) (7,803) (8,870)
-------- --------
Accrued postretirement benefit cost
included in Other Liabilities $ 13,606 $ 9,598
======== ========
</TABLE>
The actuarially determined accumulated postretirement benefit obligation
reflects health care cost trend rates of 11% for 1996 and decreasing by 1%
annually through 2001 and a discount rate of 7.5%. A one percentage point
increase in the assumed health care cost trend rate would increase net periodic
postretirement benefit cost by approximately $535,000 and increase the
accumulated postretirement benefit obligation by approximately $3,125,000.
23
<PAGE> 15
Net postretirement benefit cost included the following components (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost $ 1,686 $ 1,157 $ 1,475
Interest cost 2,269 1,998 1,799
Net amortization and
deferral 1,129 797 1,003
-------- -------- --------
Net periodic postretirement
benefit cost $ 5,084 $ 3,952 $ 4,277
======== ======== ========
</TABLE>
Cash payments for postretirement benefits in 1996, 1995 and 1994 were
approximately $1,076,000, $1,052,000 and $614,000, respectively.
During 1995, the Company commenced the Rowan Companies, Inc. Savings and
Investment Plan in conformity with section 401(k) of the Internal Revenue Code.
The plan, to which the Company contributed about $1,377,000 in 1996 and
$988,000 in 1995, covers all drilling and aviation employees. Manufacturing
employees are covered by a separate plan to which the Company contributed
approximately $637,000, $620,000 and $433,000 in 1996, 1995 and 1994,
respectively.
7. INCOME TAXES
The detail of income tax provisions (credits) is presented below (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 1,236 $ 87 $ (98)
Foreign 141 787 145
State 187 202 268
-------- -------- --------
Total current provision 1,564 1,076 315
Deferred -- Foreign and other (2,372) (322) 154
-------- -------- --------
Total income tax
provision (credit) $ (808) $ 754 $ 469
======== ======== ========
</TABLE>
Total income tax expense (credit) shown in the consolidated statement of
operations is reconciled to the amount that would be computed if the income
(loss) before income taxes was multiplied by the federal income tax rate
(statutory rate) as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Statutory rate 35% 35% 35%
Tax at statutory rate $ 21,186 $ (6,189) $ (7,883)
Increase (decrease)
in taxes resulting from:
Net operating loss
carryforward (21,155) 6,224 7,663
Foreign taxes (2,336) 465 753
Alternative minimum tax 1,226 87 (98)
Other -- net 271 167 34
-------- -------- --------
Total income tax
provision (credit) $ (808) $ 754 $ 469
======== ======== ========
</TABLE>
Temporary differences and carryforwards which gave rise to deferred tax
assets and liabilities at December 31, 1996 and 1995 were as follows (in
thousands):
<TABLE>
<CAPTION>
December 31, 1996 1995
--------- ---------
<S> <C> <C>
Deferred tax asset:
Deferred sale/leaseback gain $ 4,324 $ 5,443
Accrued pension and
postretirement benefit costs 10,574 10,190
ESOP/PAYSOP contributions 832 1,428
Net operating loss carryforward 77,912 97,608
Investment tax credit carryforward 36,723 49,495
Other 6,439 4,457
--------- ---------
136,804 168,621
--------- ---------
Valuation allowance (38,415) (69,278)
--------- ---------
98,389 99,343
--------- ---------
Deferred tax liability:
Property, plant and equipment 97,062 99,162
Foreign income taxes 393 2,632
Other 2,708 1,695
--------- ---------
100,163 103,489
--------- ---------
Deferred tax liability -- net $ 1,774 $ 4,146
========= =========
</TABLE>
The valuation allowance at December 31, 1996 consists primarily of
investment tax credit carryforwards which are forecast as not being utilized
prior to their statutory expiration dates. The valuation allowance decreased by
$30,863,000 in 1996 primarily as a result of expiring tax credits and reduced
net operating loss carryforwards.
At December 31, 1996, the Company had $34,345,000 of regular investment tax
credits and $2,378,000 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: 1997 -- $11,069,000, 1998 --
$8,026,000, 1999 -- $10,110,000, 2000 -- $2,017,000 and 2001 -- $5,501,000.
At December 31, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $222,607,000 which will expire, if
not utilized, as follows: 2001 -- $30,986,000, 2002 -- $129,124,000, 2006 --
$1,860,000, 2007 -- $50,260,000, 2008 -- $3,002,000, 2009 -- $1,465,000 and
2010 -- $5,910,000.
Deferred income taxes not provided for undistributed earnings of foreign
subsidiaries, because such earnings are considered permanently invested abroad,
amounted to approximately $6,951,000 at December 31, 1996.
Income (loss) before income taxes consisted of $58,573,000, $(17,292,000)
and $(21,640,000) of domestic earnings (losses), and $1,957,000, $(390,000) and
$(880,000) of foreign earnings (losses) for 1996, 1995 and 1994, respectively.
Income tax payments exceeded refunds by $1,747,000 in 1996, $388,000 in
1995 and $393,000 in 1994.
8. FAIR VALUES OF FINANCIAL INSTRUMENTS
At December 31, 1996, the carrying amounts of the Company's cash and cash
equivalents, receivables and payables approximated their fair values due to the
short maturity of such financial 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, 1996 based upon quoted
market prices for similar issues.
24
<PAGE> 16
The 11 7/8% Senior Notes had a fair value of $213,250,000 at December 31,
1996, or a $13,250,000 premium to carrying value, based upon the closing price
quoted on the New York Stock Exchange.
9. COMMITMENTS AND CONTINGENT LIABILITIES
During 1984 and 1985, the Company sold two cantilever jack-ups, Rowan-Halifax
and Cecil Provine, for a total of $126,500,000 in cash and leased each rig back
under 15-year operating leases at effective interest rates of 9.3% and 8.0%,
respectively. In each of 1999 and 2000, the Company will have an option to
purchase the respective 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 resulted in a gain which
is being recognized over the respective lease term.
Total payments to be made under the sale/leaseback agreements are being
expensed on a straight-line basis though the payments are variable. Other
liabilities at December 31, 1996 and 1995 included the excess of
inception-to-date sale/lease-back expenses over related payments of $8,063,000
and $12,857,000, respectively.
In September 1996, the Company assumed certain environmental liabilities
related to its manufacturing facilities in exchange for $4,000,000 in cash and
a $5,500,000 reduction in a promissory note. The measurement of remediation
costs is subject to uncertainties, including the evolving nature of
environmental regulations and the extent of any agreements to mitigate
remediation costs. Other liabilities at December 31, 1996 included $8,763,000
related to environmental matters. The Company believes that it has adequately
accrued for environmental liabilities.
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 $20,820,000 in 1996, $20,365,000 in 1995 and $20,756,000
in 1994.
As of December 31, 1996, the future minimum payments to be made under
noncancelable operating leases were (in thousands):
<TABLE>
<S> <C>
1997 $ 24,698
1998 20,254
1999 22,277
2000 17,781
2001 249
Later years 1,518
--------
Total $ 86,777
========
</TABLE>
The Company estimates 1997 capital expenditures at between $160,000,000 and
$170,000,000, including $120,000,000 to $130,000,000 toward construction of the
offshore rigs Rowan Gorilla V and Rowan Gorilla VI.
In the Company's opinion, at December 31, 1996, there were no
contingencies, claims or lawsuits against the Company which could 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, manufacture and sale 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 are provided primarily in Alaska, the western United States and along
the Gulf Coast and include charter airline, flightseeing and forest fire
control services as well as oil and gas related flying. Manufacturing
operations are primarily 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, in excess of 10% of consolidated revenues from one
customer in each of 1995 (11%) and 1994 (10%). In 1996, no customer accounted
for more than 10% of consolidated revenues.
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 bodies. The addition of manufacturing
operations in 1994 has diversified the Company's operations and attendant
credit risk. Further, the Company retains 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 $105,010,000 in 1996.
Domestic drilling operations included export revenues of $104,596,000 in
1996, $82,177,000 in 1995 and $84,025,000 in 1994. Except for $46,000,000 in
1996, $39,826,000 in 1995 and $34,533,000 in 1994, from other foreign areas,
such export revenues were generated from North Sea operations. Manufacturing
operations included export sales of $70,695,000, $48,222,000 and $34,543,000 in
1996, 1995 and 1994, respectively.
At December 31, 1996, 27 drilling rigs, including 15 offshore rigs, with a
carrying value of $206,430,000 were located in the United States and 8 drilling
rigs, including 6 offshore rigs, with a carrying value of $121,674,000 were
located in foreign jurisdictions.
25
<PAGE> 17
Information concerning the Company's operations is summarized by segment as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Drilling services:
Domestic $ 289,622 $ 224,563 $ 216,983
Foreign 26,501 25,517 28,934
Manufacturing sales
and services 143,768 133,755 96,664
Aviation services 111,269 87,462 95,578
--------- --------- ---------
Consolidated $ 571,160 $ 471,297 $ 438,159
========= ========= =========
Operating profit (loss):
Drilling services:
Domestic $ 72,549 $ 9,075 $ 1,942
Foreign 6,698 (4,056) (1,768)
Manufacturing sales
and services 9,468 11,737 7,667
Aviation services 6,547 (4,319) 4,614
--------- --------- ---------
Consolidated 95,262 12,437 12,455
Gain on disposals
of property, plant
and equipment 2,359 6,598 1,344
Interest and other
income 4,531 5,677 5,073
General and
administrative (16,591) (14,692) (13,862)
Interest expense -- net (25,031) (27,702) (27,530)
--------- --------- ---------
Income (loss) before
income taxes $ 60,530 $ (17,682) $ (22,520)
========= ========= =========
Identifiable assets at
December 31:
Drilling services:
Domestic $ 573,849 $ 483,354 $ 531,990
Foreign 44,592 56,077 40,863
Manufacturing sales
and services 135,750 108,798 83,616
Aviation services 145,117 154,259 148,710
--------- --------- ---------
Total assets $ 899,308 $ 802,488 $ 805,179
========= ========= =========
</TABLE>
Certain other financial information for each of the Company's principal
business segments is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Depreciation and amortization:
Drilling $ 33,998 $ 37,127 $ 38,166
Aviation 11,248 11,788 11,009
Manufacturing 2,636 1,640 1,615
Capital expenditures:
Drilling 87,927 14,846 17,033
Aviation 8,913 12,897 14,657
Manufacturing 21,107 6,138 11,687
Maintenance and repairs:
Drilling 32,947 25,870 27,237
Aviation 18,248 13,911 16,138
Manufacturing 9,389 9,071 7,836
-------- -------- --------
</TABLE>
11. RELATED PARTY TRANSACTIONS
A member of the Company's Board of Directors also served as a director of one
of the Company's drilling customers during 1995 and part of 1996. The
transaction with this customer in 1995 involved a day rate 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, the contract between the Company and the customer was reviewed
and ratified by the Board of Directors of the Company. Related 1995 revenues
were $2,755,000.
12. SUBSEQUENT EVENT
On February 3, 1997, the Company announced plans for a partial redemption of
its $200,000,000 11 7/8% Senior Notes due 2001. On April 1, 1997, the Company
will redeem $50,000,000 of the notes and pay a 6% premium plus accrued
interest. The Company will record an estimated $3,500,000 loss on the
transaction as an extraordinary charge in the first quarter of 1997.
26
<PAGE> 18
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, 1996 and
1995, 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, 1996. 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,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
March 3, 1997
SELECTED QUARTERLY
FINANCIAL DATA (UNAUDITED)
The following unaudited information for the quarters ended March 31, June
30, September 30 and December 31, 1995 and 1996 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>
1995:
Revenues $ 92,797 $ 117,382 $ 134,343 $ 126,775
Operating
profit (loss) (13,637) 5,261 10,184 10,629
Net income (loss) (21,735) (3,706) 663 6,342
Earnings (loss) per
common share (.26) (.04) .01 .07
--------- --------- --------- ---------
1996:
Revenues $ 126,808 $ 137,166 $ 154,683 $ 152,503
Operating profit 10,315 21,825 32,324 30,798
Net income 2,357 12,665 22,710 23,606
Earnings per
common share .03 .15 .26 .27
========= ========= ========= =========
</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 (UNAUDITED)
The price range below is as reported by the New York Stock Exchange on the
Composite Tape. On February 27, 1997 there were approximately 3,100 holders of
record.
<TABLE>
<CAPTION>
Quarter 1996 1995
------------------ ------------------
High Low High Low
-------- -------- -------- --------
<S> <C> <C> <C> <C>
First $ 13.13 $ 8.88 $ 6.75 $ 5.38
Second 16.75 12.75 8.38 6.38
Third 19.13 14.00 8.63 6.75
Fourth 24.50 18.50 10.00 6.00
======== ======== ======== ========
</TABLE>
The Company did not pay any dividends on its common stock during 1996 and
1995. 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, Amendment No. 2 to Registration Statement No. 33-61696,
and Amendment No. 1 to Registration Statement No. 33-62885, each on Form S-3, of
our report dated March 3, 1997 incorporated by reference in this Annual Report
on Form 10-K of Rowan Companies, Inc., for the year ended December 31, 1996. We
also consent to the reference to us under the heading "Experts" in Amendment No.
1 to Registration Statement No. 33-62885.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Houston, Texas
March 28, 1997
<PAGE> 1
EXHIBIT 24
Form 10-K for the Year Ended December 31, 1996
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, 1996 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, 1996 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
/s/ RALPH E. BAILEY
--------------------------- Director March 28, 1997
(Ralph E. Bailey)
/s/ HENRY O. BOSWELL
--------------------------- Director March 28, 1997
(Henry O. Boswell)
/s/ H. E. LENTZ
--------------------------- Director March 28, 1997
(H. E. Lentz)
/s/ HON. COLIN B. MOYNIHAN
--------------------------- Director March 28, 1997
(Hon. Colin B. Moynihan)
/s/ WILFRED P. SCHMOE
--------------------------- Director March 28, 1997
(Wilfred P. Schmoe)
/s/ CHARLES P. SIESS, JR.
--------------------------- Director March 28, 1997
(Charles P. Siess, Jr.)
/s/ PETER SIMONIS
--------------------------- Director March 28, 1997
(Peter Simonis)
/s/ C. W. YEARGAIN
--------------------------- Director March 28, 1997
(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, 1996 INCLUDED IN ITS 1996 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-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 97,225
<SECURITIES> 0
<RECEIVABLES> 112,836
<ALLOWANCES> 0
<INVENTORY> 88,673
<CURRENT-ASSETS> 317,319
<PP&E> 1,352,142
<DEPRECIATION> 805,942
<TOTAL-ASSETS> 899,308
<CURRENT-LIABILITIES> 85,274
<BONDS> 267,321
0
0
<COMMON> 10,882
<OTHER-SE> 485,337
<TOTAL-LIABILITY-AND-EQUITY> 899,308
<SALES> 134,929
<TOTAL-REVENUES> 571,160
<CGS> 111,973
<TOTAL-COSTS> 492,489
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,031
<INCOME-PRETAX> 60,530
<INCOME-TAX> (808)
<INCOME-CONTINUING> 61,338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,338
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.70
</TABLE>
