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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 31,1997
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
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. [X]
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, 1998 of the Common Stock
held by non-affiliates of the registrant was approximately $2,397 million.
The number of shares of Common Stock, $.125 par value, outstanding at
February 27, 1998 was 86,864,282.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
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Annual Report to Stockholders for
fiscal year ended December 31, 1997 Parts I, II and IV
Proxy Statement for the 1998 Annual
Meeting of Stockholders Part III
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TABLE OF CONTENTS
<TABLE>
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PART I Page
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Item 1. Business .................................................... 1
Drilling Operations................................................. 2
Offshore Operations ............................................. 2
Onshore Operations .............................................. 3
Contracts ....................................................... 4
Competition ..................................................... 4
Regulations and Hazards ......................................... 5
Manufacturing Operations............................................ 7
Raw Materials.................................................... 8
Competition...................................................... 8
Regulations and Hazards.......................................... 9
Aviation Operations ................................................ 10
Contracts ....................................................... 11
Competition ..................................................... 11
Regulations and Hazards ......................................... 11
Employees .......................................................... 12
Item 2. Properties .................................................. 13
Drilling Rigs ...................................................... 13
Manufacturing Facilities............................................ 17
Aircraft ........................................................... 17
Item 3. Legal Proceedings ........................................... 18
Item 4. Submission of Matters to a Vote of Security Holders ......... 18
Additional Item. Executive Officers of the Registrant ................ 18
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters ....................................... 20
Item 6. Selected Financial Data ..................................... 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 20
Item 8. Financial Statements and Supplementary Data ................. 20
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ....................... 20
PART III
Item 10. Directors and Executive Officers of the Registrant .......... 21
Item 11. Executive Compensation ...................................... 21
Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................................ 21
Item 13. Certain Relationships and Related Transactions .............. 21
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ...................................... 22
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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 two rigs (one in a much
more advanced stage of completion than the other) and the planned construction
of one other, each being an enhanced version ("Super Gorilla Class") of the
Company's Gorilla Class jack-ups. Since 1992, the Company has provided Total
Project Management, an approach to drilling operations which emphasizes drilling
and completing wells on a turnkey basis. Due to the increasing demand for the
Company's daywork drilling services and the unfavorable results of its turnkey
drilling operations during the recent past, the Company elected in early 1997 to
focus on daywork drilling contracts. The Company is not pursuing 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 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
designed and 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 two of three Super
Gorilla Class jack-up rigs. In addition, LeTourneau has entered into contracts
with others to provide the design and major components for two new 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 27, 1998 of 95 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. On January 30, 1998, the
Company received, as a part of a termination agreement, a distribution of assets
approximating its 49% interest in a Dutch-based joint venture company, KLM ERA
Helicopters B.V. ("KLM ERA"), which operated a fleet of 15 helicopters in the
Dutch and British sectors of the North Sea.
Information regarding revenues, operating profit, assets and foreign sales of
the Company's industry segments for each of the three years in the period ended
December 31, 1997 is incorporated by reference herein and provided in Footnote
10 of the Notes to Consolidated Financial Statements on pages 27, 28 and 29 of
the Company's Annual Report to Stockholders for the fiscal year ended December
31, 1997 ("Annual Report"), incorporated portions of which are filed as Exhibit
13 hereto.
In 1997 and 1996, no customer accounted for 10% or more of consolidated
revenues. In 1995, the Company had revenues (primarily from drilling
operations) representing 11% of consolidated revenues from AMOCO Corp.
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DRILLING OPERATIONS
In 1997, drilling operations generated an operating profit (income from
operations before deducting general and administrative expenses) of $185.0
million, after a $20.2 million write-off related to the suspension of turnkey
operations.
Offshore Operations
At December 31, 1997, 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 during 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. To date, the Company has assembled a significant portion of the rig,
which is expected to be completed during the third quarter of 1998. 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 at the Company's Vicksburg facility. 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. Gorilla VI, which is in the early stages of construction, is expected
to be delivered during the second quarter of 1999. Gorilla VII is expected to
be delivered in the third quarter of 2000.
This major construction project to build three Super 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 1998 for future operations and for
estimated capital expenditures, including those related to construction of
Gorilla V, Gorilla VI and Gorilla VII, 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 three 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
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.
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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 27, 1998, two Class 116 jack-up rigs, two
Class 84 jack-up rigs and one of its Class 52 jack-up rigs have been equipped
for 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 is a floating hull with
three independent elevating legs and drilling equipment, which is comprised of
engines, drawworks or hoist, derrick, pumps to circulate the drilling fluid,
drill pipe and drilling bits, along with supplies, crew quarters, loading and
unloading facilities, helicopter landing deck and other related equipment. The
Company's rigs are equipped with propulsion thrusters to assist in towing. 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 and is capable of drilling to a
depth of 25,000 feet in water depths up to 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
deep-well land rigs located as follows: two in Oklahoma, two in Texas, six in
Louisiana, and four in Alaska, which are winterized. Three trailer-mounted land
rigs, along with the Company's Argentina subsidiary, were sold in late-1996.
Four deep-well land rigs have worked fairly consistently in Texas, Mississippi
and Louisiana since mid-1994 and one other rig was reactivated during the third
quarter of 1997. Two other deep-well land rigs were returned from Argentina
during the second quarter of 1997 and worked most of the rest of the year in
Louisiana and Texas. The Company is currently completing the reactivation of
two additional rigs in Texas and Oklahoma. The Company's five remaining
deep-well
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land rigs based in Alaska and Oklahoma have been idle since mid-1988 due to
inadequate rates, and remain "mothballed" at March 27, 1998. 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.
From 1992 through early 1997, the Company 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 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.
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 27,
1998.
Competition
The Company encounters continual competition in securing domestic and foreign
drilling contracts from approximately 25 offshore drilling contractors operating
or having available to operate about 457 mobile rigs, approximately 25 major
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domestic drilling contractors operating or having available to operate about 177
land rigs in the deep-well markets, and five domestic drilling contractors
operating or having available to operate about 15 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.
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 - second
quarter 1999 and Rowan Gorilla VII - third 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 27, 1998, 13 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, one jack-up was en route to 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.
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
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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 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
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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 designed and 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 product lines.
The mining equipment product line of LeTourneau includes loaders and off-road
trucks. The primary product 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 container rows plus a
truck aisle and stack nine ft. six 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
independent distributor and a Company-owned distribution network in the United
States with 17 parts stocking branches, one independent distributor in Canada
with over 19 parts stocking branches, and 31 other international distributors
with over 50 parts stocking locations.
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
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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, 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 and forge shops. 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 and for 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
completed, the rebuilding of this facility. The yard currently employs about
770, most of whom have been hired since 1995. 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 1997, manufacturing operations generated an operating profit of $16.3 million
and had an external backlog for all of its product lines at February 28, 1998 of
approximately $70 million.
In 1997, two shipyards were licensed by the Company to build LeTourneau-designed
Super 116-Class drilling rigs. Each of these yards currently has construction
activity for which the Company is supplying proprietary components.
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.
The competition LeTourneau encounters in the parts business is extremely
fragmented with only three other companies being considered to be competitors.
-8-
<PAGE> 11
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. These warranties are based upon stipulated periods of ownership or
hours of usage, whichever occurs first. 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 but growing number of competitors in the
marine rig construction and support industry. 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 OSHA 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 $4.0 million of cash and a $5.5 million 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 1998. Although further legislation or regulation pertaining to the
protection of the environment may reasonably be anticipated, the effects
thereof on LeTourneau's manufacturing operations cannot be accurately predicted.
As a manufacturing company, LeTourneau may be responsible for certain risks
associated with the use of its products. These risks include product liability
claims 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
-9-
<PAGE> 12
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 seven 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.
From 1991 until January 1998, the Company 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., served principally the offshore oil and gas
drilling, production and service companies operating in the Dutch and British
Sectors of the North Sea with its fleet of as many as 15 helicopters. On
January 30, 1998, the Company agreed to terminate its ownership in KLM ERA in
return for cash and equipment approximating the carrying value of its
investment.
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 to the
west and northwest regions of the United States and various overseas locations.
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, Whitehorse and
Cordova from its base hub in 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 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 second 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
-10-
<PAGE> 13
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 1997, aviation operations generated an operating loss of $1.9 million.
Contracts
The Company's flight services generally are engaged by customers by entering
into master service agreements, term contracts or day-to-day charter
arrangements. Master service agreements provide for incremental payments based
on usage, in some instances with fixed terms ranging from one month to one year,
and, in some instances, 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. 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-operated aircraft available for contract use and day charters on March
27, 1998 consisted of 95 helicopters (of which 46 were based in Alaska and 49 in
the Gulf of Mexico area) and 21 fixed-wing aircraft that were based in Alaska.
The contract status as of March 27, 1998 consisted of: 86 master helicopter
service agreements and 29 term contracts. The remaining aircraft were being
operated under day charters or were available for operation under day charter or
contract arrangements.
Competition
Although the Company maintains the largest helicopter operation in Alaska in
terms of numbers of aircraft and revenues, it encounters intense competition
from several other companies which furnish similar services. Approximately six
other operators compete directly with the Company in Alaska on a contract or
charter basis. The Company competes over its scheduled airline routes with up
to four other carriers. In the Gulf of Mexico area, the Company competes
directly with five other operators and ranks third in the number of helicopters
operating with approximately 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.
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 presently
required by any jurisdiction in the Company's operating areas.
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
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<PAGE> 14
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.
EMPLOYEES
The total numbers of employees of the Company at March 10, 1998 and at December
31, 1997, 1996 and 1995 were as follows: 5,250, 5,004, 4,587 and 3,930,
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 27, 1998. 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 328'/30,000' 1984 Eastern Canada (k) Mobil Oil Canada Properties
200-C (d) (e) (l) Term (m) December 1999
Rowan Gorilla III 328'/30,000' 1984 Eastern Canada PanCanadian Petroleum Limited
200-C (d) (e) (l) Term (m) December 1998
Rowan Gorilla IV 328'/30,000' 1986 North Sea Phillips Petroleum Company Limited
200-C (d) (e) United Kingdom
(l) Term (m) January 1999
Rowan-California 225'/30,000' 1983 North Sea Shell U.K. Limited
116-C (c) (e) (l) Term (m) March 1999
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 Arco British Limited
116-C (c) (e) (j) (l) Term (m) December 1999
Arch Rowan 225'/30,000' 1981 North Sea BHP Petroleum Limited
116-C (c) (e) (l) Multiple Well (m) March 2000
Gilbert Rowe 350'/30,000' 1981 Gulf of Mexico CXY Energy Inc.
116-C (c) (e) (h) (l) Multiple Well (m) June 1998
</TABLE>
-13-
<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 Chevron U.S.A. Inc.
116-C (c) (e) (h) (l) Single Well (m) May 1998
Rowan-Paris 350'/30,000' 1980 Gulf of Mexico Samedan Oil Corporation
116-C (e) (h) (l) Multiple Well (m) June 1998
Rowan-Middletown 350'/30,000' 1980 Gulf of Mexico Soco Offshore, Inc.
116-C (e) (h) (l) Multiple Well (m) June 1998
Rowan-Fort Worth 350'/30,000' 1978 Gulf of Mexico Enserch Exploration, Inc.
116-C (e) (h) (l) Multiple Well (m) April 1998
Conventional Jack-up Rigs:
Rowan-Juneau 300'/30,000' 1977 Gulf of Mexico Shell Offshore, Inc.
116 (c) (e) (f) (l) Single Well (m) May 1998
Rowan-Odessa 350'/30,000' 1977 Gulf of Mexico Walter Oil & Gas Corporation
116 (e) (f) (h) (l) Multiple Well (m) April 1998;
Anadarko Petroleum Corporation
(l) Multiple Well (m) August 1998
Rowan-Louisiana 350'/30,000' 1975 Gulf of Mexico Coastal Oil & Gas Corporation
84 (e) (f) (h) (l) Term (m) July 1998
Rowan-Alaska 350'/30,000' 1975 Gulf of Mexico Samedan Oil Corporation
84 (e) (f) (h) (l) Multiple Well (m) June 1998
Rowan-Texas 250'/20,000' 1973 Gulf of Mexico Apache Corporation
52 (e) (l) Term (m) September 1998
Rowan-Anchorage 250'/20,000' 1972 Gulf of Mexico Apache Corporation
52 (e) (l) Term (m) July 1998
</TABLE>
-14-
<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-New Orleans 250'/20,000' 1971 Gulf of Mexico Mariner Energy Inc.
52 (f) (g) (l) Single Well (m) April 1998;
ATP
(l) Single Well (m) May 1998;
Offshore Energy Development Corp.
(l) Multiple Well (m) September 1998
Rowan-Houston 250'/20,000' 1970 Gulf of Mexico Newfield Exploration Company
52 (e) (l) Multiple Well (m) June 1998;
Walter Oil & Gas Corp.
(l) Single Well (m) July 1998;
Union Pacific Resources Corp.
(l) Single Well (m) August 1998
Semi-Submersible Rig:
Rowan-Midland (e) 1,200'/25,000' 1976 Gulf of Mexico Marathon Oil Company
(l) Single Well (m) May 1998
ORYX Energy Company
(1) Single Well (m) July 1998
Walter Oil & Gas Corporation
(l) Single Well (m) August 1998
</TABLE>
(a) Classes 200-C ("Gorilla"), 116-C, 116, 84 and 52 are nomenclature
assigned by LeTourneau, Inc. to jack-ups of its design and
construction.
(b) Indicates rated water depth in current location and
rated drilling depth, respectively.
(c) Unit modified to increase operating capability in
hostile environments.
(d) Gorilla Class unit designed for extreme hostile
environment capability.
(e) Unit equipped with a "top-drive" drilling system.
(f) Unit equipped with a "skid base" unit.
(g) Unit equipped with drilling/heavy-lift crane option.
(h) Unit equipped with leg extensions.
(i) Rig sold in December 1984 and leased back for 15 years.
(j) Rig sold in December 1985 and leased back for 15 years.
(k) Unit is being mobilized to eastern Canada from the Gulf of Mexico.
(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.
-15-
<PAGE> 18
ITEM 2. PROPERTIES
ONSHORE (a)
<TABLE>
<CAPTION>
Contracting Party/
Maximum (b) Type of Contract
Description Drilling Depth Location (c) Estimated Release Date
- ------------ ---------------- --------- --------------------------
<S> <C> <C> <C>
Rig 7 20,000' Louisiana Burlington Resources, Inc.
(b) Single Well (c) April 1998
Rig 9 25,000' Louisiana Snyder Oil Corporation
(b) Single Well (c) August 1998
Rig 12 20,000' Southeast Texas Not Committed
Rig 14 30,000' Louisiana Burlington Resources, Inc.
(b) Single Well (c) June 1998
Rig 15 30,000' Oklahoma Rigging up
Rig 26 25,000' Louisiana Not Committed
Rig 30 20,000' Louisiana Samedan Oil Corporation
(b) Single Well (c) April 1998
Rig 31 30,000' Louisiana Chesapeake Operating, Inc.
(b) Multiple Well (c) July 1998
Rig 41 20,000' Texas Rigging up
One rig 25,000' Oklahoma Not Committed
Four rigs 25,000' Alaska Not Committed
</TABLE>
(a) 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.
(b) Refer to "Contracts" on page 4 of this Form 10-K for definition of
types of contracts.
(c) Indicates estimated completion date of work to be performed.
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<PAGE> 19
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.
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 Company-owned Portland 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 Company-owned Tucson, Arizona distributor 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 27, 1998, 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), three twin-engine turbine Sikorsky
S-61N helicopters (26 passenger) and 27 various single-engine turbine
helicopters (four to six passenger). The U.S.-based fixed-wing fleet of
Company-owned aircraft consisted of 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). In addition, the Company had
leases on three Aerospatiale 350BA Astar helicopters (five passenger).
The Company's principal aircraft bases in Alaska, all located on leased
property, are a fixed-wing air service center (57,000 square feet of hangar,
repair and office facilities) at Anchorage International Airport, with two
adjacent hangars housing the Company's helicopter and fixed-wing operations
totaling approximately 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.
-17-
<PAGE> 20
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 27, 1998 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, 1997.
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 27, 1998 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:
C. R. Palmer Chairman of the Board, President 37 63
and Chief Executive Officer
R. G. Croyle Executive Vice President and Director 24 55
Paul L. Kelly Senior Vice President, Special Projects 15 58
D. F. McNease Senior Vice President, Drilling and Director 24 46
E. E. Thiele Senior Vice President, Finance, 28 58
Administration and Treasurer
John L. Buvens Vice President, Legal 17 42
C. W. Johnson(1) Vice President, Aviation 20 54
Mark A. Keller Vice President, Marketing - 6 45
North American Drilling
Bill S. Person Vice President, Industrial Relations 30 49
William C. Provine Vice President, Investor Relations 11 51
OTHER OFFICERS:
William H. Wells Controller 4 35
Mark H. Hay Secretary and Assistant Treasurer 19 53
P. G. Wheeler Assistant Treasurer 23 50
Lynda A. Aycock Assistant Treasurer and 26 51
Assistant Secretary
CERTAIN OFFICERS:
Dan C. Eckermann President and Chief Executive 11 50
Officer - LeTourneau, Inc.
James Vande Voorde Senior Vice President - Era 24 58
Aviation, Inc.
</TABLE>
(1) Also serves as President and Chief Operating Officer of Era Aviation, Inc.
-18-
<PAGE> 21
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. In addition to his position of Executive
Vice President, Mr. Croyle has been a director of the Company since January 22,
1998.
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. In addition to his position of Senior Vice President, Drilling, Mr.
McNease has been a director of the Company since January 22, 1998.
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 than 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.
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.
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.
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
-19-
<PAGE> 22
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 August 1996, 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 1997 and 1996 and the number of holders of Common
Stock is set forth on page 31 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
full 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 Review" and is
incorporated herein by reference except for the information for the years 1992,
1991, 1990, 1989 and 1988.
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 22 through 26 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
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<PAGE> 23
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 1998 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 18 through 20 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 18 of the Proxy Statement and the
information appearing under the titles "Summary Compensation Table", "Option
Grants in Last Fiscal Year", "Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values", "Option Plans", "Convertible Debenture
Incentive Plan" and "Pension Plan" on pages 14 through 18 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 22 of the Proxy Statement is incorporated herein
by reference.
-21-
<PAGE> 24
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 1997
Annual Report
-------------
<S> <C>
Consolidated Balance Sheet, December 31, 1997 and 1996 ........ 16
Consolidated Statement of Operations for the Years
Ended December 31, 1997, 1996 and 1995 ................ 17
Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended December 31, 1997,
1996 and 1995 ......................................... 18
Consolidated Statement of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995 ................ 19
Notes to Consolidated Financial Statements .................... 20
Independent Auditors' Report .................................. 30
Selected Quarterly Financial Data (Unaudited) for the
Quarters Ended March 31, June 30, September 30
and December 31, 1997 and 1996 ........................ 31
</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:
<TABLE>
<S> <C>
3a Restated Certificate of Incorporation of the Company, dated
February 17, 1984, incorporated by reference to: Exhibit 3a to the
Company's Form 10-K for the fiscal year ended December 31, 1983 (File
No. 1-5491); Exhibit 4.2 to the Company's Registration Statement on Form
S-3 (Registration No. 33-13544); and Exhibits 4a and 4b below.
3b Amendment dated January 22, 1998 to the Bylaws of the Company.
3c Bylaws of the Company as amended.
4a 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).
4b 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).
4c Amendment No. 3 dated July 24, 1997 to the Rights Agreement as amended
between the Company and Citibank N.A. as Rights Agent.
4d Rights Agreement as amended between the Company and Citibank, N.A. as
Rights Agent.
</TABLE>
-22-
<PAGE> 25
<TABLE>
<S> <C>
4e Specimen Common Stock certificate incorporated by reference to Exhibit 4h to the Company's
Form 10-K for the fiscal year ended December 31, 1996 (File No. 1-5491).
4f 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 1986 Convertible Debenture Incentive Plan of the Company as amended incorporated by
reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31,
1996 (File No. 1-5491).
10h 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).
10i 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).
10j 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).
10k 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).
10l Amendment No. 3 dated May 1, 1997 to the Consulting Agreement between the Company and
C. W. Yeargain.
</TABLE>
-23-
<PAGE> 26
<TABLE>
<S> <C>
10m Consulting Agreement as amended between the Company and C. W. Yeargain.
10n 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).
10o 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 incorporated by reference to Exhibit 10t to the Company's Form 10-K for
fiscal year ended December 31, 1996 (File No. 1-5491).
10p Amendment No. 1 dated June 30, 1997 to Commitment to Guarantee
Obligations between the Company and the Maritime Administration of the U.S.
Department of Transportation.
10q Credit Agreement and Trust Indenture both dated December 17, 1996 between the Company and
Citibank, N.A. incorporated by reference to Exhibit 10u to the Company's Form 10-K for the
fiscal year ended December 31, 1996 (File No. 1-5491).
10r Amendment No. 1 to the Credit Agreement and Supplement No. 1 to
Trust Indenture both dated July 1, 1997 between the Company and Citibank,
N.A.
10s Revolving Credit Agreement dated as of October 30, 1997 among the Company, Citibank, N.A.,
Christiania Bank og Kreditkasse (New York Branch), Arab Banking Corporation (B.S.C.), Wells
Fargo Bank (Texas) National Association, Credit Lyonnais (New York Branch) and Sumitomo Bank
Limited.
11 Computation of Basic and Diluted Earnings (Loss) Per Share for the years ended December 31,
1997, 1996 and 1995 appearing on page 28 in this Form 10-K.
13* Annual Report to Stockholders for fiscal year ended December 31, 1997.
21 Subsidiaries of the Registrant as of March 27, 1998.
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, 1997.
27 Financial Data Schedule for the year ended December 31, 1997.
</TABLE>
The Company agrees to furnish to the Commission upon request a copy of all
instruments defining the rights of holders of long-term debt of the Company and
its subsidiaries.
__________________________
* Only portions specifically incorporated herein are deemed to be filed.
EXECUTIVE COMPENSATION PLANS
AND ARRANGEMENTS
Compensatory plans in which directors and executive officers of the Company
participate are listed as follows:
o 1980 Nonqualified Stock Option Plan of the Company together with form of
Stock Option Agreement related thereto incorporated by reference to Exhibit
5.10 to the Company's Registration Statement on Form S-7 (Registration No.
2-68622); Amendment No. 1 dated October 25, 1990, to all then outstanding
-24-
<PAGE> 27
o Stock Option Agreements related to such Plan incorporated by reference to
Exhibit 10c to the Company's Form 10-K for the fiscal year ended December
31, 1990 (File No. 1-5491); and Amendment No. 2 dated May 23, 1991, to all
then outstanding Stock Option Agreements related to such Plan incorporated
by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year
ended December 31, 1991 (File No. 1-5491).
o 1988 Nonqualified Stock Option Plan of the Company as amended together
with form of Stock Option Agreement related thereto incorporated by
reference to Exhibit 10b to the Company's Form 10-K for the fiscal year
ended December 31, 1992 (File No. 1-5491; Amendment No. 1 dated October 25,
1990, to all then outstanding Stock Option Agreements related to such Plan
incorporated by reference to Exhibit 10d to the Company's Form 10-K for the
fiscal year ended December 31, 1990 (File No. 1-5491); and Amendment No. 2
dated May 23, 1991, to all then outstanding Stock Option Agreements related
to such Plan incorporated by reference to Exhibit 10f to the Company's Form
10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
o 1986 Convertible Debenture Incentive Plan of the Company as amended
included as Exhibit 10h of this Form 10-K incorporated by reference to
Exhibit 10h to the Company's Form 10-K for the fiscal year ended December
31, 1996 (File No. 1-5491).
o 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).
o 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).
-25-
<PAGE> 28
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the fourth
quarter of fiscal year 1997.
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's 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), 33-51109 (filed November 18, 1993), 333-25041
(filed April 11, 1997) and 333-25125 (filed April 14, 1997):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant's 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.
-26-
<PAGE> 29
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 27, 1998
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, March 27, 1998
(C. R. Palmer) President and Chief
Executive Officer
E. E. THIELE Principal Financial Officer March 27, 1998
(E. E. Thiele)
WILLIAM H. WELLS Principal Accounting Officer March 27, 1998
(William H. Wells)
*RALPH E. BAILEY Director March 27, 1998
(Ralph E. Bailey)
*HENRY O. BOSWELL Director March 27, 1998
(Henry O. Boswell)
*R. G. CROYLE Director March 27, 1998
(R. G. Croyle)
*H. E. LENTZ Director March 27, 1998
(H. E. Lentz)
*D. F. MCNEASE Director March 27, 1998
(D. F. McNease)
*LORD MOYNIHAN Director March 27, 1998
(Lord Moynihan)
................... Director
(Wilfred P. Schmoe)
*CHARLES P. SIESS, JR. Director March 27, 1998
(Charles P. Siess, Jr.)
*C. W. YEARGAIN Director March 27, 1998
(C. W. Yeargain)
* BY C. R. PALMER
(C. R. Palmer, Attorney-in-fact)
</TABLE>
-27-
<PAGE> 30
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, 1997 1-5491
ROWAN COMPANIES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
EXHIBITS
<PAGE> 31
EXHIBIT INDEX
Page 1 of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ---------- ------- -----------------------------------------------------------
<S> <C> <C>
(1) 3a Restated Certificate of Incorporation of the Company,
dated February 17, 1984, incorporated by reference to:
Exhibit 3a to the Company's Form 10-K for the fiscal year
ended December 31, 1983 (File No. 1-5491); Exhibit 4.2 to
the Company's Registration Statement on Form S-3
(Registration No. 33-13544); and Exhibits 4a and 4b below.
(2) 3b Amendment dated January 22, 1998 to the Bylaws of the
Company.
(2) 3c Bylaws of the Company as amended.
(1) 4a 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) 4b Certificate of Designation of the Company's Series A
Junior Preferred Stock dated March 2, 1992 incorporated by
reference to Exhibit 4d to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No. 1-5491).
(2) 4c Amendment No. 3 dated July 24, 1997 to the Rights Agreement
as amended between the Company and Citibank N.A. as Rights
Agent.
(2) 4d Rights Agreement as amended between the Company and
Citibank, N.A. as Rights Agent.
(1) 4e Specimen Common Stock certificate incorporated by
reference to Exhibit 4h to the Company's Form 10-K for the
fiscal year ended December 31, 1996 (File No. 1-5491).
</TABLE>
<PAGE> 32
EXHIBIT INDEX
Page 2 of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ---------- ------- -----------------------------------------------------------
<S> <C> <C>
(1) 4f 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).
(1) 10g 1986 Convertible Debenture Incentive Plan of the Company
as amended incorporated by reference to Exhibit 10h to the
Company's Form 10-K for the fiscal year ended December 31,
1996 (File No. 1-5491).
(1) 10h 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) 10i 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> 33
EXHIBIT INDEX
Page 3 of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ---------- ------- -----------------------------------------------------------
<S> <C> <C>
(1) 10j 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) 10k 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).
(2) 10l Amendment No. 3 dated May 1, 1997 to the Consulting
Agreement between the Company and C. W. Yeargain.
(2) 10m Consulting Agreement as amended between the Company and C.
W. Yeargain.
(1) 10n 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) 10o 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 incorporated by reference to
Exhibit 10t to the Company's Form 10-K for fiscal year
ended December 31, 1996 (File No. 1-5491).
(2) 10p Amendment No. 1 dated June 30, 1997 to Commitment to
Guarantee Obligations between the Company and the Maritime
Administration of the U.S. Department of Transportation.
(1) 10q Credit Agreement and Trust Indenture both dated December
17, 1996 between the Company and Citibank, N.A.
incorporated by reference to Exhibit 10u to the Company's
Form 10-K for the fiscal year ended December 31, 1996
(File No. 1-5491).
(2) 10r Amendment No. 1 to the Credit Agreement and Supplement No.
1 to Trust Indenture both dated July 1, 1997 between the
Company and Citibank, N.A.
</TABLE>
<PAGE> 34
EXHIBIT INDEX
Page 4 of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ---------- ------- -----------------------------------------------------------
<S> <C> <C>
(2) 10s Revolving Credit Agreement dated as of October 30, 1997
among the Company, Citibank, N.A., Christiania Bank og
Kreditkasse (New York Branch), Arab Banking Corporation
(B.S.C.), Wells Fargo Bank (Texas) National Association,
Credit Lyonnais (New York Branch) and Sumitomo Bank
Limited.
(3) 11 Computation of Basic and Diluted Earnings (Loss)
Per Share for the years ended December 31, 1997, 1996
and 1995 appearing on page 28 in this Form 10-K.
(4) 13 Annual Report to Stockholders for fiscal year ended
December 31, 1997.
(2) 21 Subsidiaries of the Registrant as of March 27, 1998.
(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,
1997.
(2) 27 Financial Data Schedule for the year ended December 31,
1997.
</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 28.
(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 3b
ROWAN COMPANIES, INC.
Amendment Dated
January 22, 1998 to the
Bylaws of the Company,
as Amended
Section 2. Classes of Directors and Term of Office. As provided
in the Certificate of Incorporation, the Board of Directors shall be and
is divided into three classes, Class I, Class II and Class III, which
shall be as nearly equal in number as possible. Each director shall
serve for a term ending on the date of the third annual meeting
following the annual meeting at which such class of directors of which
he is a member was elected. Effective as of January 22, 1998, Class I
and Class II shall have three directors and Class III shall have four
directors. Each director shall serve until his successor is elected and
qualified or until death, retirement, resignation or removal for cause.
<PAGE> 1
Exhibit 3c
BYLAWS
AS AMENDED
ROWAN COMPANIES, INC.
A DELAWARE CORPORATION
JANUARY 22, 1998
<PAGE> 2
B Y L A W S
I N D E X
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ARTICLE I. OFFICES
Section 1. Principal Offices 4
Section 2. Registered Office 4
Section 3. Other Offices 4
ARTICLE II. MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings 4
Section 2. Notice of Meetings 4
Section 3. Quorum 5
Section 4. Annual Meetings; Election of Directors 5
Section 5. Special Meetings 5
Section 6. Voting; Elections; Inspectors;
Votes by Ballot 5
Section 7. Conduct of Stockholders' Meetings 6
Section 8. Validity of Proxies; Ballots, etc. 6
Section 9. Stock List 6
ARTICLE III. BOARD OF DIRECTORS
Section 1. Number, Qualification and Nominations 7
Section 2. Classes of Directors and Term of Office 8
Section 3. Newly Created Directorships 8
Section 4. Vacancies 8
Section 5. Compensation 8
ARTICLE IV. MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of Directors 8
Section 2. First Meeting 8
Section 3. Election of Officers 8
Section 4. Regular Meetings 9
Section 5. Special Meetings 9
Section 6. Notice 9
Section 7. Quorum 9
Section 8. Order of Business 9
Section 9. Presumption of Assent 9
Section 10. Action Without a Meeting or Telephone
Conference Meeting 9
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ARTICLE V. COMMITTEES
Section 1. Executive Committee and Other Committees 10
Section 2. Procedure; Meetings; Quorum 10
ARTICLE VI. OFFICERS
Section 1. Number, Titles, and Term of Office 11
Section 2. Salaries 11
Section 3. Removal of Officers 11
Section 4. The Chairman of the Board 11
Section 5. Powers and Duties of the President 11
Section 6. Vice Presidents 11
Section 7. Treasurer 12
Section 8. Assistant Treasurer 12
Section 9. Secretary 12
Section 10. Assistant Secretaries 12
ARTICLE VII. INDEMNIFICATION OF DIRECTORS, OFFICERS
EMPLOYEES AND AGENTS
Section 1. Right to Indemnification 12
Section 2. Indemnification of Employees and Agents 13
Section 3. Right of Claimant to Bring Suite 13
Section 4. Nonexclusivity of Rights 14
Section 5. Insurance 14
Section 6. Savings Clause 14
Section 7. Definitions 14
ARTICLE VIII. CAPITAL STOCK
Section 1. Certificates of Stock 14
Section 2. Transfer of Shares 15
Section 3. Ownership of Shares 15
Section 4. Record Date 15
Section 5. Regulations Regarding Certificates 15
Section 6. Dividends 15
Section 7. Lost or Destroyed Certificates 15
ARTICLE IX. MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year 16
Section 2. Seal 16
Section 3. Notice and Waiver of Notice 16
Section 4. Resignations 16
ARTICLE X. AMENDMENTS 16
</TABLE>
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<PAGE> 4
BYLAWS
OF
ROWAN COMPANIES, INC.
AS AMENDED
Article I
Offices
Section 1. Principal Office. The principal office of the Corporation
shall be in the City of Houston, County of Harris, State of Texas.
Section 2. Registered Office. Until the Board of Directors otherwise
determines, the registered office of the Corporation required by law (meaning,
here and hereinafter, as required from time to time by the General Corporation
Law of the State of Delaware) to be maintained in the State of Delaware, shall
be in the City of Wilmington, County of New Castle, State of Delaware, and the
name of the resident agent in charge thereof is The Corporation Trust Company,
or such other office and agent as may be designated from time to time by the
Board of Directors in the manner provided by law. Such registered office need
not be identical to the principal place of business of the Corporation.
Section 3. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
Article II
Meetings of Stockholders
Section 1. Place of Meetings. All meetings of the stockholders shall be
held in the City of Houston at the principal offices of the Corporation or at
such other places as may be designated by the Board of Directors or Executive
Committee and shall be specified or fixed in the notices or waivers of notices
thereof.
Section 2. Notice of Meetings. Written or printed notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman
of the Board, the President, the Secretary, or the officer or person calling
the meeting, to each stockholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the stockholder at his address as it appears on
the records of the Corporation, with postage thereon prepaid.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date, and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30)
days after the date for the original meeting, or if after the
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adjournment a new record date is fixed for the adjourned meeting, written
notice of the place, date, and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
Section 3. Quorum. The holders of at least a majority of the outstanding
shares entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum at all meetings of stockholders for the transaction
of business, except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws. If, however, such quorum shall not be
present or represented at any meeting of stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting of the time and place to which the meeting is being
adjourned, to a time when a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally called. A holder of a share shall be treated as being present at a
meeting if the holder of such share is (i) present in person at the meeting or
(ii) represented at the meeting by a valid proxy, whether the proxy card
granting such proxy is marked as casting a vote or abstaining or is left blank.
Section 4. Annual Meetings; Election of Directors. An annual meeting of
the stockholders, for the election of directors to succeed those whose terms
expire and for the transaction of such other business as may properly come
before the meeting, shall be held on the fourth Friday in April of each year,
at 9:00 a.m., local time, if not a legal holiday, at the principal offices of
the Corporation in Houston, Texas or at such other place, date, and time as the
Board of Directors or Executive Committee shall designate each year. Any
business may be transacted at the annual meeting, except as otherwise provided
by law, the Certificate of Incorporation or these Bylaws.
Section 5. Special Meetings. In addition to any condition that may be
provided for in the Certificate of Incorporation, special meetings of the
stockholders for any purpose or purposes may be called at any time in the
interval between annual meetings by the Chairman of the Board, the President,
the Board of Directors, or the Executive Committee. Special meetings of the
Stockholders may not be called by any other person or persons.
Section 6. Voting; Elections; Inspectors; Votes by Ballot. Unless
otherwise provided in the Certificate of Incorporation, at all meetings of
stockholders, every stockholder of record of any class entitled to vote thereat
shall have one vote for each share of stock standing in his name on the books
of the Corporation on the date for the determination of stockholders entitled
to vote at such meeting, either in person or by proxy appointed by instrument
in writing subscribed by such stockholder or his duly authorized attorney, and
bearing a date not more than three years prior to said meeting unless said
instrument provides for a longer period.
If a quorum exists, action on a matter (including the election of
directors) shall be approved if the votes cast in favor of the matter or
election of the director exceed the votes cast opposing the matter or election
of such director. In determining the number of votes cast, shares abstaining
from voting on a matter (including elections) will not be treated as votes
cast. The provisions of this paragraph will govern with respect to all votes
of stockholders except as otherwise provided for in these Bylaws or in the
Certificate of Incorporation or by some specific
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<PAGE> 6
statutory provision superseding the provisions contained in these Bylaws or the
Certificate of Incorporation.
At any meeting of stockholders, the chairman of the meeting may, and upon
the request of the holders of 10% of the stock present in person or represented
by proxy and entitled to vote at such meeting, shall appoint two inspectors of
election who shall subscribe an oath or affirmation to execute faithfully the
duties of inspectors at such election with strict impartiality and according to
the best of their ability shall canvass the votes and make and sign a
certificate of the results thereof. No candidate for the office of director
shall be appointed as such inspector.
As provided in the Certificate of Incorporation of the Corporation, all
elections of directors shall be viva voce unless one or more stockholders
present at the meeting at which directors are elected shall request in writing
that such election be by ballot. The chairman of the meeting may cause a vote
by ballot to be taken upon any other matter, and such vote by ballot shall be
taken upon the request of the holders of 10% of the stock present and entitled
to vote on such other matter.
Section 7. Conduct of Stockholders' Meetings. The meetings of the
stockholders shall be presided over by the Chairman of the Board, or if he is
not present, by the President, or if he is not present, by a Vice President, or
if neither the Chairman of the Board, President nor a Vice President is
present, by a chairman elected at the meeting. The Secretary of the
Corporation, if present, shall act as secretary of such meetings, or if he is
not present, an Assistant Secretary shall so act; if neither the Secretary nor
an Assistant Secretary is present, then a secretary shall be appointed by the
chairman of the meeting.
The chairman of any meeting of stockholders shall determine the order of
business and the procedures at the meeting, including such regulation of the
manner of voting which is not otherwise prescribed by law, the Certificate of
Incorporation or these Bylaws.
Section 8. Validity of Proxies; Ballots, etc. At every meeting of the
stockholders, all proxies shall be received and taken charge of, and all
ballots shall be received and canvassed by, the secretary of the meeting who
shall decide all questions touching the qualification of voters, the validity
of the proxies, and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed by the chairman of the meeting, in which
event such inspectors of election shall decide all such questions.
Section 9. Stock List. At least ten (10) days before every meeting of
stockholders, the Secretary shall prepare (or cause to be prepared) a complete
list of stockholders entitled to vote at any meeting of stockholders, arranged
in alphabetical order for each class of stock and showing the address of each
such stockholder and the number of shares registered in his name. Such list
shall be open to the examination of any such stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
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Article III
Board of Directors
Section 1. Number, Qualification and Nominations,. The business and
property of the Corporation shall be managed by the Board of Directors, and
subject to the restrictions imposed by law, the Certificate of Incorporation or
these Bylaws, they may exercise all the powers of the Corporation. Directors
need not be stockholders or residents of Delaware.
The Board of Directors shall consist of not less than one nor more than
thirty directors, as so determined from time to time by resolution of the Board
of Directors. If the Board of Directors makes no such determination, the
number of directors shall be the number set forth in the Certificate of
Incorporation. Within the above limits, the number of directors may be
increased or decreased (provided such decrease does not shorten the term of any
incumbent director) from time to time by resolution of the Board of Directors.
Nominations of candidates for election as directors of the Corporation at
any meeting of stockholders of the Corporation may be made by the Chairman of
the Board of Directors, the President or by any stockholder entitled to vote at
such meeting who complies with the provisions of this paragraph. Not less than
60 days prior to the date of the anniversary of the annual meeting held in the
prior year, in the case of an annual meeting, or, in the case of a special
meeting called by the Chairman of the Board, the President, the Board of
Directors or the Executive Committee for the purpose of electing directors, not
more than 10 days following the earlier of the date of notice of such special
meeting or the date on which a public announcement of such meeting is made, any
stockholder who intends to make a nomination at the meeting shall deliver
written notice to the Secretary of the Corporation setting forth (i) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (ii) a representation that the stockholder
(A) is a holder of record of stock of the Corporation specified in such notice,
(B) is or will be entitled to vote at such meeting, and (C) intends to appear
in person or by proxy at the meeting to nominate the person or persons
specified in the notice; and (iii) such other information concerning each such
nominee as would be required under the rules of the Securities and Exchange
Commission in a proxy statement soliciting proxies for the election of such
nominee and in a Schedule 14B (or other comparable required filing then in
effect) under the Securities Exchange Act of 1934. In the event that a person
is validly designated as a proposed nominee in accordance with this paragraph
(including a bona fide statement that the nominee is willing to be nominated)
and shall thereafter become unable or unwilling to stand for election to the
Board of Directors, the stockholder who made such designation may designate
promptly in the manner set forth above a substitute proposed nominee,
notwithstanding the minimum time period set forth in this paragraph. No person
may be elected as a director at a meeting of stockholders unless nominated in
accordance with this paragraph, and any purported nomination or purported
election not made in accordance with the procedures as set forth in this
paragraph shall be void. In addition to any other requirements relating to
amendments to these Bylaws, no proposal by any stockholder to repeal or amend
this paragraph shall be brought before any meeting of the stockholders of the
Corporation unless written notice is given of (i) such proposed repeal or the
substance of such proposed amendment; (ii) the name and address of the
stockholder who intends to propose such repeal or amendment, and (iii) a
representation that the stockholder is a holder of record of stock of the
Corporation specified in such notice, is or will be entitled to vote at such
meeting and intends to appear in person or by proxy at such meeting to make the
proposal. Such notice shall be given in the manner and at the time specified
above in this paragraph. Any proposal to repeal or amend or any such purported
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<PAGE> 8
repeal or purported amendment of this paragraph not made or adopted in
accordance with the procedures set forth in this paragraph shall be void.
Section 2. Classes of Directors and Term of Office. As provided in the
Certificate of Incorporation, the Board of Directors shall be and is divided
into three classes, Class I, Class II and Class III, which shall be as nearly
equal in number as possible. Each director shall serve for a term ending on
the date of the third annual meeting following the annual meeting at which such
class of directors of which he is a member was elected. Effective as of
January 22, 1998, Class I and Class II shall have three directors and Class III
shall have four directors. Each director shall serve until his successor is
elected and qualified or until death, retirement, resignation or removal for
cause.
Section 3. Newly Created Directorships. In the event of any increase or
decrease in the authorized number of directors, (i) each director then serving
as such shall nevertheless continue as a director of the class of which he is a
member until the expiration of his current term, or his prior death,
retirement, resignation, or removal for cause, and (ii) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of directors so
as to maintain such classes as nearly equal as possible.
Section 4. Vacancies. Should a vacancy occur or be created, whether
arising through death, resignation or removal of a director for cause, or
through an increase in the number of directors of any class, such vacancy shall
be filled by a majority vote of the remaining directors of the class in which
such vacancy occurs, or by the sole remaining director of that class if only
one such director remains, or by the majority vote of the remaining directors
of the other two classes if there be no remaining member of the class in which
the vacancy occurs. A director so elected to fill a vacancy shall serve for
the remainder of the then present term of office of the class to which he was
elected.
Section 5. Compensation. The Board of Directors shall have the authority
to fix the compensation of directors.
Article IV
Meetings of the Board of Directors
Section 1. Meetings of Directors. The directors may hold their meetings
and may have an office and keep the books of the corporation, except as
otherwise provided by the Certificate of Incorporation or Bylaws, in such place
or places in the State of Delaware, or outside the State of Delaware, as the
Board of Directors may from time to time determine.
Section 2. First Meeting. Each newly elected Board of Directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of the stockholders, and no notice of such meeting shall be
necessary.
Section 3. Election of Officers. At the first meeting of the Board of
Directors in each year at which a quorum shall be present, held next after the
annual meeting of stockholders, the Board of Directors shall proceed to the
election of the officers of the Corporation.
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Section 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as shall be designated from time to time
by resolution of the Board of Directors. Notice of such regular meetings shall
not be required.
Section 5. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, the President, or
by a majority of the directors in office at the time. Each such special
meeting shall be held at such time and place as shall be designated by the
officer or directors calling such meeting.
Section 6. Notice. The Secretary shall give notice of each special
meeting in person, or by mail or telegraph to each director at least twenty-
four (24) hours before the time of such meeting. The attendance of a director
at any meeting shall constitute a waiver of notice of such meeting, except
where a director attends a meeting for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is not lawfully
called or convened. Notice may also be waived in writing as provided in
Article IX, Section 3 of these Bylaws. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board of
Directors need be specified in any written waiver of notice of such meeting.
Section 7. Quorum. Unless the Certificate of Incorporation or these
Bylaws otherwise require, a majority of the total number of directors then in
office shall constitute a quorum for the transaction of business, but if at any
meeting of the Board of Directors there is less than a quorum present, a
majority of those present or any director solely present may adjourn the
meeting from time to time without further notice. The act of a majority of the
directors present at a meeting at which a quorum is in attendance shall be the
act of the Board of Directors, unless the act of a greater number is required
by the Certificate of Incorporation or by these Bylaws.
Section 8. Order of Business. At meetings of the Board of Directors,
business shall be transacted in such order as from time to time the Board of
Directors may determine and the Chairman of the Board shall preside. In the
absence of the Chairman of the Board, the President shall preside, and in the
absence of the President a chairman shall be chosen by the Board of Directors
from among the directors present. The Secretary of the Corporation shall act
as secretary of the meetings of the Board of Directors, but in the absence of
the Secretary, the presiding officer may appoint any person to act as secretary
of the meeting.
Section 9. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 10. Action Without a Meeting or Telephone Conference Meeting. Any
action permitted or required by law, the Certificate of Incorporation or these
Bylaws, to be taken at a meeting of the Board of Directors (or any committee
designated by the Board of Directors) may be taken without a meeting if a
consent in writing, setting forth the action to be taken is signed by all the
members of the Board of Directors or committee, as the case may be. Such
consent shall have the same force and effect as a unanimous vote at a meeting,
and may be stated as such in any document or instrument filed with the
Secretary of State. Subject to the
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requirement for notice of meetings, members of the Board of Directors (or
members of any committee designated by the Board of Directors), may participate
in and hold a meeting of such Board of Directors or committee, as the case may
be, by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
and participation in such a meeting shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Article V
Committees
Section 1. Executive Committee and Other Committees. The Board of
Directors, by resolution adopted by a majority of the whole Board of Directors,
may designate from among its members an Executive Committee and one or more
other committees, each of which, to the extent provided in such resolution,
shall have and may exercise all of the authority of the Board of Directors in
the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority of the
Board of Directors in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors pursuant to Article Fourth of the Restated Certificate of
Incorporation of the Corporation, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending, altering or repealing the bylaws of
the Corporation or adopting new bylaws for the Corporation, filling vacancies
in the Board of Directors or any such committee, electing or removing officers
or members of any such committee, fixing the compensation of any member of such
committee or altering or repealing any resolution of the Board of Directors
which by its terms provided that it shall not be so amendable or repealable
and, unless such resolution expressly so provides, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
shares of the Corporation or to adopt a certificate of ownership and merger
pursuant to Section 253 of the Delaware General Corporation Law. The
designation of such committee and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed by law.
All action by any committee shall be reported to the Board of Directors at
its meeting next succeeding such action, and shall be subject to revision or
alteration by the Board of Directors; provided that no rights of third parties
shall be affected by any such revision or alteration.
Section 2. Procedure; Meetings; Quorum. The Board of Directors shall
designate the Chairman and Secretary of each committee appointed by the Board
of Directors. Each such committee shall fix its own rules or procedure, and
shall meet at such times and at such place
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or places as may be provided by such rules, or by resolution of the Executive
Committee or of the Board of Directors. A majority of all the then members of
a committee shall be necessary to constitute a quorum and the affirmative vote
of a majority of the members present shall be necessary for the adoption by it
of any resolution. The Board of Directors shall have power at any time to
change the number, subject as aforesaid, and members of any such committee, to
fill vacancies, and to discharge any such committee.
Article VI
Officers
Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary, a Treasurer, and such other officers as the Board of
Directors may from time to time elect or appoint. Each officer shall hold
office until his successor shall have been duly elected and qualified or until
his death or until he shall resign or shall have been removed in the manner
hereinafter provided. Any two offices may be held by the same person. None of
the officers need be a director, except that the Chairman of the Board and the
President shall be directors.
Section 2. Salaries. The salaries or other compensation of the officers
shall be fixed from time to time by the Board of Directors, and no officer
shall be prevented from receiving such salary or other compensation by reason
of the fact that he is also a director of the Corporation.
Section 3. Removal of Officers. Any officer or agent elected or
appointed by the Board of Directors may be removed, either with or without
cause, by the Board of Directors whenever in its judgment the best interests of
the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of an officer or agent shall not of itself create contract
rights.
Section 4. The Chairman of the Board. The Chairman of the Board shall
preside at all meetings of stockholders and directors and shall have such other
powers and duties as from time to time may be assigned to him by the Board of
Directors.
Section 5. Powers and Duties of the President. The President shall be
the chief executive and administrative officer of the Corporation and, subject
to the Board of Directors, he shall be in charge of, and manage the properties
and operations of the Corporation in the ordinary course of its business with
all such powers with respect to such properties and operations as may be
reasonably incident to such responsibilities; in the absence of the Chairman of
the Board, he shall preside at all meetings of stockholders and directors; he
may agree upon and execute all division and transfer orders, bonds, agreements,
contracts and other obligations in the name of the Corporation; and he shall
have such other powers and duties as designated in these Bylaws and as from
time to time may be assigned to him by the Board of Directors.
Section 6. Vice Presidents. Each Vice President shall have such powers
and duties as may be assigned to him by the Board of Directors and shall
exercise the powers of Chairman of the Board or President during their absence,
refusal or inability to act. Any action taken by a Vice President in the
performance of the duties of the Chairman of the Board or the President shall
be conclusive evidence of the absence, refusal or inability of the Chairman of
the Board or the President to act at the time such action was taken.
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Section 7. Treasurer. The Treasurer shall have custody of all the funds
and securities of the Corporation which come into his hands. When necessary or
proper, he may endorse, on behalf of the Corporation, for collection, checks,
notes and other obligations and shall deposit the same to the credit of the
Corporation in such bank or banks or depositaries as shall be designated by,
and in the manner prescribed by, the Board of Directors; he may sign all
receipts and vouchers for payments made to the Corporation, either alone or
jointly with such other officer as is designated by the Board of Directors; he
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements. Whenever required by
the Board of Directors, he shall render a statement of his cash account; he
shall enter or cause to be entered regularly in the books of the Corporation to
be kept by him for that purpose full and accurate accounts of all monies
received and paid out on account of the Corporation; and he shall perform all
acts incident to the position of Treasurer subject to the control of the Board
of Directors; he shall, if required by the Board of Directors, give such bond
for the faithful discharge of his duties in such form as the Board of Directors
may require.
Section 8. Assistant Treasurer. Each Assistant Treasurer shall have the
usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors. The
Assistant Treasurer shall exercise the powers of the Treasurer during the
officer's absence, refusal or inability to act.
Section 9. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and the minutes of all meetings of the
stockholders, in books provided for that purpose; he shall attend to the giving
and serving of all notices; he may sign with the Chairman of the Board or the
President in the name of the Corporation all contracts of the Corporation and
affix the seal of the Corporation thereto; he may affix and attest the seal of
the Corporation to such instruments and documents as may be properly executed
by the Corporation; and he shall have charge of the certificate books, transfer
books and stock ledgers, and such other books and papers as the Board of
Directors may direct, all of which shall at all reasonable times be open to the
inspection of any director upon application at the office of the Corporation
during ordinary business hours, and he shall in general perform all duties
incident to the office of Secretary subject to the control of the Board of
Directors.
Section 10. Assistant Secretaries. Each Assistant Secretary shall have
the usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors or the
Secretary. The Assistant Secretaries shall exercise the powers of the
Secretary during the officer's absence, refusal or inability to act.
Article VII
Indemnification of Directors,
Officers, Employees and Agents
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is the legal
representative, is or was or has agreed to become a director or officer of the
Corporation or is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any
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<PAGE> 13
other capacity while serving or having agreed to serve as a director or
officer, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended, (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment) against all expense, liability and loss
(including without limitation, attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to serve in the
capacity which initially entitled such person to indemnity hereunder and shall
inure to the benefit of his or her heirs, executors and administrators;
provided, however, that the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred
in this Article VII shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
current, former or proposed director or officer in his or her capacity as a
director or officer or proposed director or officer (and not in any other
capacity in which service was or is or has been agreed to be rendered by such
person while a director or officer, including, without limitation, service to
an employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such indemnified person, to repay all amounts so advanced if it shall
ultimately be determined that such indemnified person is not entitled to be
indemnified under this Section or otherwise.
Section 2. Indemnification of Employees and Agents. The Corporation may,
by action of its Board of Directors, provide indemnification to employees and
agents of the Corporation, individually or as a group, with the same scope and
effect as the indemnification of directors and officers provided for in this
Article.
Section 3. Right of Claimant to Bring Suit. If a written claim received
by the Corporation from or on behalf of an indemnified party under this Article
VII is not paid in full by the Corporation within ninety days after such
receipt, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
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<PAGE> 14
Section 4. Nonexclusivity of Rights. The right to indemnification and
the advancement and payment of expenses conferred in this Article VII shall not
be exclusive of any other right which any person may have or hereafter acquire
under any law (common or statutory), provision of the Certificate of
Incorporation of the Corporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 5. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any person who is or was serving as a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Savings Clause. If this Article VII or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify and hold harmless each director
and officer of the Corporation, as to costs, charges and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative to the full extent permitted by any applicable portion of this
Article VII that shall not have been invalidated and to the fullest extent
permitted by applicable law.
Section 7. Definitions. For purposes of this Article, reference to the
"Corporation" shall include, in addition to the Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger prior to (or, in the case of an entity specifically
designated in a resolution of the Board of Directors, after) the adoption
hereof and which, if its separate existence had continued, would have had the
power and authority to indemnify its directors, officers and employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
Article VIII
Capital Stock
Section 1. Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
statutory provisions and the Certificate of Incorporation, as shall be approved
by the Board of Directors. The Chairman of the Board, President or a Vice
President shall cause to be issued to each stockholder one or more certificates
under the seal of the Corporation and signed by the Chairman of the Board,
President or Vice President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer certifying the number of shares (and, if
the stock of the Corporation shall be divided into classes or series, the class
and series of such shares) owned by such stockholder in the Corporation;
provided, however, that any or all of the signatures on the certificate may be
facsimile. The stock record books and the blank stock certificate books shall
be kept by the Secretary, or at the office of such transfer agent or transfer
agents as the Board of Directors or the Executive Committee may from time to
time by resolution determine. In case any officer, transfer agent or registrar
who shall have signed or whose facsimile signature or signatures
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<PAGE> 15
shall have been used on, any such certificate or certificates shall cease to be
such officer, transfer agent or registrar, whether because of death,
resignation or otherwise, before such certificate or certificates shall have
been issued by the Corporation, such certificate or certificates may
nevertheless be issued and delivered by the Corporation as though the officer,
transfer agent or registrar who signed such certificate or certificates or
whose facsimile signature or signatures shall have been used thereon had not
ceased to be such officer, transfer agent or registrar.
Section 2. Transfer of Shares. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. Ownership of Shares. The Corporation shall be entitled to
treat the holder of record of any share or shares as the holder in fact thereof
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the laws of the State of Delaware.
Section 4. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper purpose, the
Board of Directors of the Corporation may fix, in advance, a date as record
date for any such determination of stockholders, such date in any case not to
be more than sixty (60) days (unless a shorter period is provided for in the
Certificate of Incorporation) and, in case of a meeting of stockholders, not
less than ten (10) days prior to the date on which the particular action
requiring such determination of stockholders is to be taken. If no record date
is fixed for the determination of stockholders entitled to notice of or to vote
at a meeting of stockholders or either (a) to notice of or to vote at a meeting
of stockholders or (b) to receive payment of a dividend, the close of business
on the day next preceding the date on which the notice of the meeting is mailed
or on the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of stockholders.
Section 5. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Corporation.
Section 6. Dividends. The Board of Directors may, from time to time,
declare, and the Corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and the
Certificate of Incorporation.
Section 7. Lost or Destroyed Certificates. The Board of Directors or the
Executive Committee may determine the conditions upon which a new certificate
of stock may be issued in place of a certificate which is alleged to have been
lost or destroyed; and may, in their discretion, require the owner of such
certificate or his legal representative to give bond, with sufficient surety,
to indemnify the Corporation and each transfer agent against any and all losses
or claims which may arise by reason of the issue of a new certificate in the
place of the one so lost or destroyed.
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<PAGE> 16
Article IX
Miscellaneous Provisions
Section 1. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year or such other period as shall be established by the Board of
Directors from time to time.
Section 2. Seal. The seal of the Corporation shall be such as from time
to time may be approved by the Board of Directors.
Section 3. Notice and Waiver of Notice. Whenever any notice whatever is
required to be given under the provisions of these Bylaws, said notice shall be
deemed to be sufficient if given by depositing the same in a post office box in
a sealed postpaid wrapper addressed to the person entitled thereto at his post
office address, as it appears on the books of the Corporation, and such notice
shall be deemed to have been given on the day of such mailing. A waiver of
notice, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
Section 4. Resignations. Any director or officer may resign at any time.
Such resignations shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt by
the Chairman of the Board, the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
Article X
Amendments
As provided in the Certificate of Incorporation of the Corporation, the
Board of Directors shall have the power to make, adopt, alter, amend and repeal
from time to time bylaws of the Corporation, subject to the right of the
stockholders entitled to vote with respect thereto to adopt, alter, amend and
repeal such bylaws as adopted, altered or amended by the Board of Directors;
provided, however, that bylaws shall not be adopted, altered, amended or
repealed by the stockholders of the Corporation except by the vote of the
holders of not less than eighty percent (80%) of the outstanding shares of
capital stock of the Corporation normally entitled to vote in the election of
directors.
Amendment No. 1 herein: Article III Section 2. Classes of Directors and
Term of Office, October 26, 1984.
Amendment No. 2 herein: Article II Section 4. Annual Meetings;
Election of Directors, July 26, 1985.
Amendment No. 3 herein: Article V Section 1. Executive Committee and
Other Committees, June 30, 1986.
Amendment No. 4 herein: Article VII (in entirety) Indemnification of
Directors, Officers, Employees and Agents, April 23, 1987.
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<PAGE> 17
Amendment No. 5 herein: Article III Section 2. Classes of Directors and
Term of Office, October 23, 1987.
Amendment No. 6 herein: Article III Section 2. Classes of Directors and
Term of Office, April 28, 1989.
Amendment No. 7 herein: Article III Section 2. Classes of Directors and
Term of Office, January 25, 1990.
Amendment No. 8 herein: Article II Section 5. Special Meetings,
February 25, 1992.
Amendment No. 9 herein: Article III Section 2. Classes of Directors and
Term of Office, April 24, 1992.
Amendment No. 10 herein: Article II Section 3. Quorum and Section 6.
Voting; Elections; Inspectors; Votes by Ballot, December 21, 1992.
Amendment No. 11 herein: Article III Section 2. Classes of Directors and
Term of Office, April 23, 1993.
Amendment No. 12 herein: Article III Section 2. Classes of Directors and
Term of Office, April 26, 1996.
Amendment No. 13 herein: Article III Section 1. Number, Qualifications
and Nominations, September 1, 1996.
Amendment No. 14 herein: Article III Section 2. Classes of Directors and
Term of Office, April 25, 1997
Amendment No. 15 herein: Article III Section 2. Classes of Directors and
Term of Office, January 22, 1998
-17-
<PAGE> 1
Exhibit 4c
ROWAN COMPANIES, INC.
Amendment No. 3
to the Rights Agreement
as Amended Between
the Company and Citibank N.A.
as Rights Agent
Effective July 24, 1997:
Section 7(b) is amended by deleting the reference
to the initial dollar amount of the Purchase Price
designated therein as "$30.00" and replacing it
with "$75.00."
<PAGE> 1
EXHIBIT 4d
================================================================================
ROWAN COMPANIES, INC.
and
CITIBANK, N.A.,
Rights Agent
_______________
Rights Agreement
As Amended
Dated as of February 25, 1992
================================================================================
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3 Issue of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4 Form of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5 Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6 Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7 Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . . . . . . . . . 13
8 Cancellation and Destruction of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . 16
9 Reservation and Availability of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10 Junior Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11 Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12 Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . 34
13 Consolidation, Merger or Sale or Transfer of Assets
or Earning Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14 Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15 Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
16 Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
17 Rights Certificate Holder Not Deemed a Shareholder . . . . . . . . . . . . . . . . . . . . . . . 43
18 Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
19 Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . 45
20 Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
21 Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
22 Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
23 Redemption and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
24 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
25 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
26 Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
27 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
28 Determinations and Actions by the Board of Directors, etc. . . . . . . . . . . . . . . . . . . . 56
29 Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
30 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
31 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
32 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
33 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
Exhibit C -- Certificate of Designation
-ii-
<PAGE> 4
RIGHTS AGREEMENT
RIGHTS AGREEMENT ("Agreement"), dated as of February 25, 1992 (the
"Agreement"), between Rowan Companies, Inc., a Delaware corporation (the
"Company"), and Citibank, N.A., a national banking association (the "Rights
Agent").
WHEREAS, on February 25, 1992 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a
distribution of one Right for each share of common stock, par value $.125 per
share, of the Company (the "Company Common Stock") outstanding at the Close of
Business on March 11, 1992 (the "Record Date"), and has authorized the issuance
of one Right (as such number may hereinafter be adjusted pursuant hereto) for
each share of Company Common Stock issued between the Record Date (whether
originally issued or delivered from the Company's treasury) and, except as
otherwise provided in Section 22, the Distribution Date, each Right initially
representing the right to purchase upon the terms and subject to the conditions
hereinafter set forth one Unit of Series A Junior Preferred Stock (the
"Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (other than the
Company, any Subsidiaries of the Company, any employee benefit plan maintained
by the Company or any of its Subsidiaries or any trustee or fiduciary with
respect to such plan acting in such capacity) which shall be the Beneficial
Owner of 15% or more of the shares of Company Common Stock then outstanding.
<PAGE> 5
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own", any securities:
(i) of which such Person or any of such Person's Affiliates
or Associates is considered to be a "beneficial owner" under Rule
13d-3 of the General Rules and Regulations under the Exchange Act (the
"Exchange Act Regulations") as in effect on the date hereof, provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own", any securities under this subparagraph (i)
as a result of an agreement, arrangement or understanding to vote such
securities if such agreement, arrangement or understanding (A) arises
solely from a revocable proxy given in response to a proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the Exchange Act and the Exchange Act Regulations, and
(B) is not reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report);
(ii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate of such other
Person) with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether
or not in writing) (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide
public offering of securities), for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in the
proviso to subparagraph (i) of this paragraph (c)) or disposing of
such securities; provided, however, that in no case shall an officer
or director of
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<PAGE> 6
the Company be deemed (x) the Beneficial Owner of any securities
beneficially owned by another officer or director of the Company
solely by reason of actions undertaken by such persons in their
capacity as officers and directors of the Company or (y) the
Beneficial Owner of securities held of record by the trustee of any
employee benefit plan of the Company or any Subsidiary of the Company
for the benefit of any employee of the Company or any Subsidiary of
the Company, other than the officer or director, by reason of any
influence that such officer or director may have over the voting of
the securities held in the plan;
(iii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right or obligation to
acquire (whether such right or obligation is exercisable immediately
or only after the passage of time or upon the satisfaction of
conditions) pursuant to any agreement, arrangement or understanding
(whether or not in writing) (other than customary agreements with and
between underwriters and selling group members with respect to a bona
fide public offering of securities) or upon the exercise of conversion
rights, exchange rights, rights (other than these Rights), warrants or
options, or otherwise; or
(iv) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
vote pursuant to any agreement, arrangement or understanding (whether
or not in writing);
provided, however, that under this paragraph (c) a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own", (A) securities tendered
pursuant to a tender or exchange offer made in accordance with Exchange Act
Regulations by such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange, (B)
securities that may be issued upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities that may be issued upon
exercise of Rights from and after the occurrence of a
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<PAGE> 7
Triggering Event, which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(c) or Section 22 hereof (the "Original Rights") or pursuant to
Section 11(i) hereof in connection with an adjustment made with respect to any
Original Rights.
(d) "Board Approval" shall mean the adoption by the Board of
Directors of the Company of a resolution or resolutions authorizing or
approving the action or determination (A) by the unanimous written consent of
all of the members of the Board of Directors of the Company or (B) by the
affirmative vote of not less than a majority of the members of the Board of
Directors of the Company (including not less than a majority of Continuing
Directors) at a meeting duly called and held at which a quorum was present and
acting throughout, provided, that at the time of adoption by the Board of
Directors of any such resolution or resolutions (x) there are not less than
three Continuing Directors and (y) a majority of the members of the Board of
Directors of the Company are Continuing Directors.
(e) "Board of Directors" shall mean the Board of Directors of the
Company.
(f) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the states of New York or
Texas are authorized or obligated by law or executive order to close.
(g) "Close of Business" on any given date shall mean 5:00 P.M.,
New York, New York time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New York, New York time, on the
next succeeding Business Day.
(h) "Common Stock" of any Person other than the Company shall mean
the capital stock of such Person with the greatest voting power, or, if such
Person shall have no capital stock, the equity securities or other equity
interest having power to control or direct the management of such Person.
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<PAGE> 8
(i) "common stock equivalents" has the meaning set forth in Section
11(a)(iii).
(j) "Company Common Stock" has the meaning set forth in the
Whereas Clause.
(k) "Continuing Director" shall mean, as of the time a
determination is made, a member of the Board of Directors of the Company who is
not an Acquiring Person or an Affiliate or Associate of an Acquiring Person or
a director, officer or agent of an Acquiring Person or of any such Affiliate or
Associate, and who either (i) was a member of the Board of Directors of the
Company on February 25, 1992 or (ii) subsequently becomes a director of the
Company and whose election or nomination for election by the Company's
stockholders, received Board Approval.
(l) "current market price" has the meaning set forth in Section
11(d).
(m) "Current Value" has the meaning set forth in Section
11(a)(iii).
(n) "Distribution Date" has the meaning set forth in Section 3(a).
(o) "equivalent preferred stock" has the meaning set forth in
Section 11(b).
(p) "Expiration Date" has the meaning set forth in Section 7(a).
(q) "Final Expiration Date" has the meaning set forth in Section
7(a).
(r) "Junior Preferred Stock" shall mean the Series A Junior
Preferred Stock, $1.00 par value, of the Company having the voting powers,
designation, preferences and relative, participating, optional or other special
rights and qualifications, limitations and restrictions set forth in the form
of Certificate of Designation attached to this Agreement as Exhibit C.
(s) "Person" shall mean any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other entity,
as well as any syndicate or group deemed to be a person under Section 14(d)(2)
of the Exchange Act.
(t) "Principal Party" has the meaning set forth in Section 13(b).
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(u) "Purchase Price" has the meaning set forth in Section 7(b).
(v) "Record Date" has the meaning set forth in the Whereas Clause.
(w) "Redemption Price" has the meaning set forth in Section 23.
(x) "Right" has the meaning set forth in the Whereas Clause.
(y) "Rights Certificate" has the meaning set forth in Section 3(a).
(z) "Rights Dividend Declaration Date" has the meaning set forth
in the Whereas Clause.
(aa) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A), (B) or (C) hereof.
(bb) "Section 13 Event" shall mean any event described in clause
(x), (y) or (z) of Section 13(a) hereof.
(cc) "Stock Acquisition Date" shall mean the earlier of (i) the
first date of public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such and (ii) the first date on which the Company
has actual knowledge of a filing with the Securities and Exchange Commission of
a report pursuant to Section 13(d) or 13(f) of the Exchange Act (which shall
include, without limitation, reports on Schedule 13D, Schedule 13G and Form
13F) by an Acquiring Person reflecting that an Acquiring Person has become
such.
(dd) "Subsidiary" shall mean, with reference to any Person, any
other Person of which an amount of voting securities or equity interests
sufficient to elect at least a majority of the directors or equivalent
governing body of such other Person is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such first-mentioned
Person.
(ee) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
(ff) "Unit" has the meaning set forth in Section 7(b).
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3, shall prior to the Distribution Date also
be holders of the Common Stock) in accordance with the terms and conditions
hereof,
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<PAGE> 10
and the Rights Agent hereby accepts such appointment. With the consent of the
Rights Agent, the Company may from time to time appoint such Co-Rights Agents
("Co-Rights Agents") as it may deem necessary or desirable. In the event the
Company appoints one or more Co-Rights Agents, the respective duties of the
Rights Agent and any Co-Rights Agents shall be as the Company shall determine.
SECTION 3. ISSUE OF RIGHTS CERTIFICATES. (a) Until the earlier of (i)
the Close of Business on the tenth day after the Stock Acquisition Date, and
(ii) the Close of Business on the tenth day after the date of the commencement
of, or first public announcement of the intention of any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or fiduciary with respect
to such plan acting in such capacity) to commence (which intention to commence
remains in effect for five business days after such announcement), a tender or
exchange offer, if upon consummation thereof such Person would be the
Beneficial Owner of 30% or more of the shares of Company Common Stock then
outstanding (the earlier of (i) and (ii) above being the "Distribution Date"),
(x) the Rights will be evidenced (subject to the provisions of paragraph (b) of
this Section 3) by the certificates for shares of Company Common Stock
registered in the names of the holders of shares of Company Common Stock as of
and subsequent to the Record Date (which certificates for shares of Company
Common Stock shall be deemed also to be certificates for Rights) and not be
separate certificates, and (y) the Rights will be transferable only in
connection with the transfer of the underlying shares of Company Common Stock
(including a transfer to the Company). As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign and the Company will send or cause to be sent (and the Rights Agent
will, if requested by the Company, send) by first-class, insured, postage
prepaid mail, to each record holder of shares of Company Common Stock as of the
Close of Business on the Distribution
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<PAGE> 11
Date, at the address of such holder shown on the records of the Company, one or
more rights certificates, in substantially the form of Exhibit A hereto (the
"Rights Certificates"), evidencing one Right for each share of Company Common
Stock so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Company Common Stock has been
made pursuant to Section 11(p) hereof, at the time of distribution of the
Rights Certificates, the Company may make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution
Date, the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Junior Preferred
Stock, in a form which may be appended to certificates that represent shares of
Company Common Stock, in substantially the form attached hereto as Exhibit B
(the "Summary of Rights"), by first-class, postage prepaid mail, to each record
holder of shares of Company Common Stock as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the Company.
(c) Rights shall, without any further action, be issued in respect
of all shares of Company Common Stock which are issued (including any shares of
Company Common Stock held in treasury) after the Record Date but prior to the
earlier of the Distribution Date and the Expiration Date. Certificates,
representing such shares of Company Common Stock, issued after the Record Date
shall bear the following legend:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement between
Rowan Companies, Inc. (the "Company") and Citibank, N.A. (the "Rights
Agent") dated as of February 25, 1992 (the "Rights Agreement"), the
terms of
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which are hereby incorporated herein by reference and a copy
of which is on file at the principal office of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights may be redeemed, may expire, or may be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement), whether currently held by or on behalf of such
Person or by any subsequent holder, may become null and void."
With respect to certificates representing shares of Company Common Stock
(whether or not such certificates include the foregoing legend or have appended
to them the Summary of Rights), until the earlier of the Distribution Date and
the Expiration Date, the Rights associated with the shares of Company Common
Stock represented by such certificates shall be evidenced by such certificates
alone and registered holders of the shares of Company Common Stock shall also
be the registered holders of the associated Rights, and the transfer of any of
such certificates shall also constitute the transfer of the Rights associated
with the shares of Company Common Stock represented by such certificates.
SECTION 4. FORM OF RIGHTS CERTIFICATE. (a) The Rights Certificates
(and the forms of election to purchase, assignment and certificate to be
printed on the reverse thereof) shall each be substantially in the form set
forth in Exhibit A hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or any
rule or regulation thereunder or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of
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<PAGE> 13
the Record Date and on their face shall entitle the holders thereof to purchase
such number of Units of Junior Preferred Stock as shall be set forth therein at
the price set forth therein, but the amount and type of securities, cash or
other assets that may be acquired upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant hereto that represents
Rights beneficially owned by: (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) which becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) which becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and which receives such
Rights pursuant to either (A) a transfer (whether or not for consideration)
from the Acquiring Person (or any such Associate or Affiliate) to holders of
equity interests in such Acquiring Person (or such Associate or Affiliate) or
to any Person with whom such Acquiring Person (or such Associate or Affiliate)
has any continuing agreement, arrangement or understanding regarding either the
transferred Rights, shares of Company Common Stock or the Company or (B) a
transfer which the Board of Directors by Board Approval has determined to be
part of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of Section 7(e) hereof shall, upon the written direction
of the Board of Directors, contain (to the extent feasible), the following
legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and void
in the circumstances specified in Section 7(e) of such Agreement.
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<PAGE> 14
The Company shall notify the Rights Agent and, if such notification is
given orally, the Company shall confirm same in writing on or prior to the
Business Day next following, at such time as the Company has notice that any
Person constitutes an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, and until such notice is received by the Rights Agent, the
Rights Agent may conclusively presume for all purposes that the foregoing
legend need be imprinted only on Rights Certificates beneficially owned by
Persons that the Company has previously identified to the Rights Agent as
constituting an Acquiring Person or an Affiliate or Associate of an Acquiring
Person and transferees of any such Persons.
The provisions of Section 7(e) shall be operative whether or not the
foregoing legend is contained on any such Rights Certificate.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Rights
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Rights Certificate
may be manual or facsimile. Rights Certificates bearing the manual or
facsimile signatures of the individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
countersignature of such Rights Certificates or did not hold such offices at
the date of such Rights Certificates. No Rights Certificate shall be entitled
to any benefit under this Agreement or be valid for any purpose unless there
appears on such Rights Certificate a countersignature, for purposes of
authentication only, duly executed by the Rights Agent by manual signature of
an authorized signatory, and such countersignature upon any Rights Certificate
shall be conclusive evidence, and the only evidence, that such Rights
Certificates has been duly countersigned as
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<PAGE> 15
required hereunder. It shall not be necessary for the same signatory of the
Rights Agent to countersign all of the Rights Certificates issued hereunder.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for surrender of Rights Certificates
upon exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder and shall keep such books until three years
following the first to occur of (i) the Expiration Date or (ii) the effective
date of redemption of the Rights pursuant to Section 23. Such books shall show
the name and address of each holder of the Rights Certificates, the number of
Rights evidenced on its face by each Rights Certificate, the Certificate number
and the date of each Rights Certificate.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES. (a)
Subject to the provisions of Sections 4(b), 7(e) and 14 hereof, at any time
after the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of Units of Junior Preferred Stock (or, following a Triggering
Event, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Rights Certificate or Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the office of the Rights Agent designated for such purpose. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have completed and executed the certificate set
forth in the form of assignment on the reverse side of such
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<PAGE> 16
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) of the Rights
represented by such Rights Certificate or Associates or Affiliates thereof as
the Company shall reasonably request; whereupon the Rights Agent shall, subject
to the provisions of Section 4(b), Section 7(e) and Section 14, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of a
Rights Certificate or Rights Certificates.
(b) If a Rights Certificate shall be mutilated, lost, stolen or
destroyed, upon request by the registered holder of the Rights represented
thereby and upon payment to the Company and the Rights Agent of all reasonable
expenses incident thereto, there shall be issued, in exchange for and upon
cancellation of the mutilated Rights Certificate, or in substitution for the
lost, stolen or destroyed Rights Certificate, a new Rights Certificate, in
substantially the form of the prior Rights Certificate, of like tenor and
representing the equivalent number of Rights, but, in the case of loss, theft
or destruction, only upon receipt of evidence satisfactory to the Company and
the Rights Agent of such loss, theft or destruction of such Rights Certificates
and, if requested by the Company or the Rights Agent, indemnity also
satisfactory to it.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS. (a) Prior to the earlier of (i) the Close of Business on February 25,
2002 (the "Final Expiration Date"), or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the earlier of (i) and (ii) being
the "Expiration Date"), the registered holder of any Rights Certificate may,
subject to the provisions of Sections 7(e) and 9(c), exercise the Rights
evidenced thereby in whole or in part at any time after the Distribution Date
upon surrender of the Rights Certificate, with
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<PAGE> 17
the form of election to purchase and the certificate on the reverse side
thereof duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase
Price (as hereinafter defined for the number of Units of Junior Preferred Stock
(or, following a Triggering Event, other securities, cash or other assets, as
the case may be) for which such surrendered Rights are then exercisable.
(b) The purchase price for each one one-hundredth of a share (each
such one one-hundredth of a share being a "Unit") of Junior Preferred Stock
upon exercise of Rights shall be $75.00, subject to adjustment from time to
time as provided in Sections 11 and 13(a) hereof (such purchase price, as so
adjusted, being the "Purchase Price"), and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment, with respect to each Right so exercised, of
the Purchase Price for the Units of Junior Preferred Stock (or, following a
Triggering Event, other securities, cash or other assets, as the case may be)
to be purchased thereby as set forth below and an amount equal to any
applicable transfer tax or evidence satisfactory to the Company of payment of
such tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) requisition from any transfer agent of the Junior Preferred Stock
or Company Common Stock, as the case may be (or make available, if the Rights
Agent is the transfer agent) certificates for the number of Units of Junior
Preferred Stock or Company Common Stock, as the case may be, to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests,(ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates, cause the same to be delivered to or
upon the order of the registered
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<PAGE> 18
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) after receipt thereof, deliver such cash,
if any, to or upon the order of the registered holder of such Rights
Certificate. In the event that the Company is obligated to issue Company
Common Stock, other securities of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such Company Common Stock, other securities,
cash and/or other property are available for distribution by the Rights Agent,
if and when appropriate. The payment of the Purchase Price (as such amount may
be reduced pursuant to Section 11(a)(iii) hereof) may be made in cash or by
certified or bank check or money order payable to the order of the Company.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights remaining unexercised shall be issued by the Rights Agent
and delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and which receives such Rights pursuant
to either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Associate or Affiliate) to holders of equity interests in
such Acquiring Person (or any such Associate or
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<PAGE> 19
Affiliate) or to any Person with whom the Acquiring Person (or such Associate
or Affiliate) has any continuing agreement, arrangement or understanding
(whether or not in writing) regarding the transferred Rights, shares of Company
Common Stock or the Company or (B) a transfer which the Board of Directors by
Board of Approval has determined to be part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall be null and void without any further action, and no holder
of such Rights shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The Company shall
use all reasonable efforts to ensure that the provisions of this Section 7(e)
and Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights or any other Person as a result of its failure to make any
determination under this Section 7(e) or such Section 4(b) with respect to an
Acquiring Person or its Affiliates, Associates or transferees.
(f) Notwithstanding anything in this Agreement or any Rights
Certificate to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder upon the
occurrence of any purported exercise by such registered holder unless such
registered holder shall have (i) completed and executed the certificate
following the form of election to purchase set forth on the reverse side of the
Rights Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of the Rights represented by such Rights Certificate or
Associates or Affiliates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATE. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered
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<PAGE> 20
to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall
be issued in lieu thereof except as expressly permitted by this Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any Rights Certificates acquired
by the Company otherwise than upon the exercise thereof. The Rights Agent
shall deliver all cancelled Rights Certificates to the Company, or shall, at
the written request of the Company, destroy such cancelled Rights Certificates,
and in such case shall deliver a certificate of destruction thereof to the
Company.
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. (a) The
Company shall at all times prior to the Expiration Date cause to be reserved
and kept available out of its authorized and unissued shares of Junior
Preferred Stock, the number of shares of Junior Preferred Stock that, as
provided in this Agreement, will be sufficient to permit the exercise in full
of all outstanding Rights. Upon the occurrence of any events resulting in an
increase in the aggregate number of shares of Junior Preferred Stock (or other
equity securities of the Company) issued upon exercise of all outstanding
Rights above the number then reserved, the Company shall make appropriate
increases in the number of shares so reserved,
(b) So long as the shares of Junior Preferred Stock to be issued
and delivered upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall during the period from the Distribution
Date through the Expiration Date use its best efforts to cause all securities
reserved for such issuance to be listed on such exchange upon official notice
of issuance upon such exercise.
(c) The Company shall use its best efforts (i) as soon as
practicable following the occurrence of a Section 11(a)(ii) Event and a
determination by the Company in accordance with Section 11(a)(iii) hereof of
the consideration to be delivered by the Company upon exercise of the Rights
or, if so required by law, as
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soon as practicable following the Distribution Date (such date being the
"Registration Date"), to file a registration statement on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities that may be acquired upon exercise of the Rights (the
"Registration Statement"), (ii) to cause the Registration Statement to become
effective as soon as practicable after such filing, (iii) to cause the
Registration Statement to continue to be effective (and to include a prospectus
complying with the requirements of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for the securities
covered by the Registration Statement, and (B) the Expiration Date and (iv) to
take as soon as practicable following the Registration Date such action as may
be required to ensure that any acquisition of securities upon exercise of the
Rights complies with any applicable state securities or "blue sky" laws.
(d) The Company shall take such action as may be necessary to
ensure that all shares of Junior Preferred Stock (and, following the occurrence
of a Triggering Event, any other securities that may be delivered upon exercise
of Rights) shall be, at the time of delivery of the certificates or depositary
receipts for such securities, duly and validly authorized and issued and fully
paid and non-assessable.
(e) The Company shall pay any documentary, stamp or transfer tax
imposed in connection with the issuance or delivery of the Rights Certificates
or upon the exercise of Rights; provided, however, the Company shall not be
required to pay any such tax imposed in connection with the issuance or
delivery of Units of Junior Preferred Stock, or any certificates or depositary
receipts for such Units of Junior Preferred Stock (or, following the occurrence
of a Triggering Event, any other securities, cash or assets, as the case may
be) to any Person other than the registered holder of the Rights Certificates
evidencing the Rights surrendered for exercise. The Company shall not be
required to issue or deliver any certificates or depositary
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receipts for Units of Junior Preferred Stock (or, following the occurrence of a
Triggering Event, any other securities, cash or assets, as the case may be) to,
or in a name other than that of, the registered holder upon the exercise of any
Rights until any such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
SECTION 10. JUNIOR PREFERRED STOCK RECORD DATE. Each Person in whose
name any certificate for Units of Junior Preferred Stock (or, following the
occurrence of a Triggering Event, other securities) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Units of Junior Preferred Stock (or, following the occurrence of a
Triggering Event, other securities) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Junior Preferred
Stock (or following the occurrence of a Triggering Event, other securities)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such securities on, and such certificate shall be
dated, the next succeeding Business Day on which the Junior Preferred Stock
(or, following the occurrence of a Triggering Event, other securities) transfer
books of the Company are open and, further provided, however, that if delivery
of Units of Junior Preferred Stock is delayed pursuant to Section 9(c) hereof,
such Persons shall be deemed to have become the record holders of such Units of
Junior Preferred Stock only when such Units first become deliverable. Prior to
the exercise of the Rights evidenced thereby, the holder of a Rights
Certificates shall not be entitled to any rights of a stockholder of the
Company with respect to securities for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive
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dividends or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the Company,
except as and to the extent provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES
OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of securities
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Junior Preferred Stock payable
in shares of Junior Preferred Stock, (B) subdivide the outstanding Junior
Preferred Stock, (C) combine the outstanding Junior Preferred Stock into a
smaller number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Junior Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of Junior
Preferred Stock or capital stock, as the case may be, issuable on such date
upon exercise of the Rights, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive,
upon payment of the Purchase Price then in effect, the aggregate number and
kind of shares of Junior Preferred Stock or capital stock, as the case may be,
which, if such Right had been exercised immediately prior to such date, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. If an
event occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the
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adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11 (a)(ii)
hereof.
(ii) In the event:
(A) Any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, (1) shall merge into the Company or otherwise
combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the Company
Common Stock shall remain outstanding and unchanged, (2) shall, in one
transaction or a series of transactions, transfer any assets to the
Company or to any of its Subsidiaries in exchange (in whole or in
part) for shares of Company Common Stock, for other equity securities
of the Company or any such Subsidiary, or for securities exercisable
for or convertible into shares of equity securities of the Company or
any of its Subsidiaries (whether Company Common Stock or otherwise) or
otherwise obtain from the Company or any of its Subsidiaries, with or
without consideration, any additional shares of such equity securities
or securities exercisable for or convertible into such equity
securities (other than pursuant to a pro rata distribution to all
holders of Company Common Stock), (3) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose
of, in one transaction or a series of transactions, to, from or with
(as the case may be) the Company or any of its Subsidiaries or any
employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan
acting in such capacity, assets (including securities) on terms and
conditions less favorable to the Company or such Subsidiary or plan
than those that could have been obtained in arm's-length negotiations
with an unaffiliated third party, other than pursuant to a transaction
set forth in Section 13(a) hereof, (4) shall sell, purchase, lease,
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exchange, mortgage, pledge, transfer or otherwise acquire or dispose
of, in one transaction or a series of transactions, to, from or with
the Company or any of the Company's Subsidiaries or any employee
benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such
capacity, assets (including securities) having an aggregate fair
market value of more than $5,000,000, other than pursuant to a
transaction set forth in Section 13(a) hereof, (5) shall receive, or
any designee, agent or representative of such Acquiring Person or any
Associate or Affiliate of such Acquiring Person shall receive, any
compensation from the Company or any of its Subsidiaries other than
compensation for full-time employment as a regular employee at rates
in accordance with the Company's (or its Subsidiaries') past
practices, or (6) shall receive the benefit, directly or indirectly
(except proportionately as a holder of Company Common Stock or as
required by law or governmental regulation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits
or other tax advantage provided by the Company or any of its
Subsidiaries or any employee benefit plan maintained by the Company or
any of its Subsidiaries or any trustee or fiduciary with respect to
such plan acting in such capacity; or
(B) any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan maintained by the Company or
any of its Subsidiaries or any trustee or fiduciary with respect to
such plan acting in such capacity) shall become the Beneficial Owner
of 15% or more of the shares of Company Common Stock then outstanding,
other than pursuant to any transaction set forth in Section 13(a)
hereof, or
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse
stock split) or recapitalization of the Company, or any merger or
consolidation of the Company
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with any of its Subsidiaries or any other transaction or series of
transactions involving the Company or any of its Subsidiaries, other
than a transaction or transactions to which the provisions of Section
13(a) apply (whether or not with or into or otherwise involving an
Acquiring Person), which has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of the outstanding
shares of any class of equity securities of the Company or any of its
Subsidiaries which is directly or indirectly beneficially owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring
Person;
then, immediately upon the date of the occurrence of an event described in
Section 11(a)(ii)(A)-(C) hereof (a "Section 11(a)(ii) Event"), proper provision
shall be made so that each holder of a Right (except as provided below and in
Section 7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of the number of Units of Junior Preferred Stock for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, such number of shares of Company Common Stock as shall equal
the result obtained by (x) multiplying the then current Purchase Price by the
then number of Units of Junior Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event (such product thereafter being, for all purposes of this Agreement other
than Section 13 hereof, the "Purchase Price"), and (y) dividing that product by
50% of the then current market price (determined pursuant to Section 11(d)
hereof) per share of Company Common Stock on the date of such first occurrence
(such number of shares of Company Common Stock being the "Adjustment Shares").
(iii) In the event that, upon the occurrence of a Section 11(a)(ii)
Event, the number of shares of Company Common Stock which are treasury shares
or are authorized by the Company's Certificate of Incorporation and are not
issued or
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reserved for issuance for purposes other than upon exercise of the Rights is
not sufficient to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of this Section 11(a), the Company, by Board
Approval, shall: (a) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess being the "Spread"), and (B) with respect to each
Right, make adequate provision to substitute for such Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) a number of shares, or units of shares, or other equity
securities of the Company (including, without limitation, shares, or units of
shares, of preferred stock (such other shares being "common stock
equivalents")), (4) debt securities of the Company, (5) other assets or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Board of Directors
by Board Approval, after receiving advice from a nationally recognized
investment banking firm; provided, however, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above within 90
days following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant to
Section 23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(iii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Company Common Stock (to the extent
available) and then, if necessary, cash, which shares of Company Common Stock
and/or cash shall have an aggregate value equal to the Spread. To the extent
that the Company determines that some action need be taken pursuant to the
first sentence of this Section 11(a)(iii), the Company shall provide, subject
to Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights. For purposes of this Section 11(a)(iii), the value of a
share of Company Common Stock
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shall be the current market price (as determined pursuant to Section 11(d)
hereof) per share of Company Common Stock on the Section 11(a)(iii) Trigger
Date and the value of any common stock equivalent shall be deemed to have the
same value as the Company Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Junior Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within 45
calendar days after such record date) shares of Junior Preferred Stock (or
shares having substantially the same rights, privileges and preferences as
shares of Junior Preferred Stock ("equivalent preferred stock")) or securities
convertible into Junior Preferred Stock or equivalent preferred stock at a
price per share of Junior Preferred Stock or per share of equivalent preferred
stock (or having a conversion price per share, if a security convertible into
Junior Preferred Stock or equivalent preferred stock) less than the current
market price (as determined pursuant to Section 11(d) hereof) per share of
Junior Preferred Stock on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the sum of the number of shares of Junior Preferred Stock
outstanding on such record date plus the number of shares of Junior Preferred
Stock which the aggregate offering price of the total number of shares of
Junior Preferred Stock and/or equivalent preferred stock so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price, and the denominator
of which shall be the number of shares of Junior Preferred Stock outstanding on
such record date plus the number of additional shares of Junior Preferred Stock
and/or equivalent preferred stock to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible). In case such subscription price may be paid by delivery of
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<PAGE> 29
consideration part or all of which may be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors by Board Approval, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Shares of Junior Preferred Stock owned by or
held for the account of the Company or any Subsidiary shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of shares of Junior Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend out of the earnings or retained
earnings of the Company), assets (other than a dividend payable in shares of
Junior Preferred Stock, but including any dividend payable in stock other than
Junior Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the current market price (as determined pursuant to Section
11(d) hereof) per share of Junior Preferred Stock on such record date less the
fair market value (as determined in good faith by the Board of Directors by
Board Approval, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the holder
of the Rights) of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants distributable in respect
of a share of Junior Preferred Stock and the
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<PAGE> 30
denominator of which shall be such current market price (as determined pursuant
to Section 11(d) hereof) per share of Junior Preferred Stock. Such adjustments
shall be made successively whenever such a record date is fixed, and in the
event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current
market price" per share of Company Common Stock or Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of such
shares for the ten consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, if prior to the
expiration of such requisite ten Trading Day period the issuer announces either
(A) a dividend or distribution on such shares payable in such shares or
securities convertible into such shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such shares, then, following
the ex-dividend date for such dividend or the record date for such subdivision,
as the case may be, the "current market price" shall be properly adjusted to
take into account such event. The closing price for each date shall be, if the
shares are listed and admitted to trading on a national securities exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which such shares are listed or admitted to trading or, if such shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such
other system then in use, or, if on any such date such shares are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such shares
selected by the Board of Directors by Board Approval. If on
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<PAGE> 31
any such date no market maker is making a market in such shares, the fair value
of such shares on such date as determined in good faith by the Board of
Directors by Board Approval shall be used. If such shares are not publicly
held or not so listed or traded, "current market price" per share shall mean
the fair value per share as determined in good faith by the Board of Directors
by Board Approval, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes. The term
"Trading Day" shall mean, if such shares are listed or admitted to trading on
any national securities exchange, a day on which the principal national
securities exchange on which such shares are listed or admitted to trading is
open for the transaction of business or, if such shares are not so listed or
admitted, a Business Day.
(ii) For the purpose of any computation hereunder, the "current
market price" per share of Junior Preferred Stock shall be determined in the
same manner as set forth above for Company Common Stock in clause (i) of this
Section 11(d) (other than the fourth sentence thereof). If the current market
price per share of Junior Preferred Stock cannot be determined in the manner
provided above or if the Junior Preferred Stock is not publicly held or listed
or traded in a manner described in clause (i) of Section 11(d), the "current
market price" per share of Junior Preferred Stock shall be conclusively deemed
to be an amount equal to 100 (as such amount may be appropriately adjusted for
such events as stock splits, stock dividends and recapitalizations with respect
to Company Common Stock occurring after the date of this Agreement) multiplied
by the current market price per share of Company Common Stock. If neither
Company Common Stock nor Junior Preferred Stock is publicly held or so listed
or traded, "current market price" per share of the Junior Preferred Stock shall
mean the fair value per share as determined in good faith by the Board of
Directors by Board Approval whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and
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<PAGE> 32
the holders of the Rights. For all purposes of this Agreement, the "current
market price" of a Unit of Junior Preferred Stock shall be equal to the
"current market price" of one share of Junior Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the
nearest cent or to the nearest ten-thousandth of a share of Company Common
Stock or Common Stock or other share or one-millionth of a share of Junior
Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of any provision of Sections 11(a)(ii) or 13(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock other than Junior Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Junior Preferred Stock contained in Sections
11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), (l) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Junior
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted, Purchase Price, the number of Units of Junior
Preferred Stock (or other securities or amount of cash or combination thereof)
that may be
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acquired from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Units of Junior Preferred Stock (calculated to the nearest one-ten thousandth
of a Unit) obtained by (i) multiplying (x) the number of Units of Junior
Preferred Stock covered by a Right immediately prior to this adjustment by (y)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of Units of Junior Preferred Stock that may be acquired upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of Units of Junior
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number
of Rights shall become that number of Rights (calculated to the nearest
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effective
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have
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been issued, shall be at least ten days later than the date of such public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for herein (and
may bear, at the option of the Company, the adjusted Purchase Price) and shall
be registered in the names of the holders of record of Rights Certificates on
the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of Units of Junior Preferred Stock issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Unit and the number of Units of
Junior Preferred Stock which was expressed in the initial Rights Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value of the number of Units of
Junior Preferred Stock issuable upon exercise of the Rights, or below the then
par value of the shares of Company Common Stock if then issuable upon exercise
of the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue such fully paid and non-assessable number of Units of Junior
Preferred Stock or, if applicable, shares
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of Company Common Stock at such adjusted Purchase Price. If upon any exercise
of the Rights, a holder is to receive a combination of Units of Junior
Preferred Stock and preferred stock equivalents or Company Common Stock and
common stock equivalents, a portion of the consideration paid upon such
exercise, equal to at least the then par value of a share of Junior Preferred
Stock or Company Common Stock, as the case may be, shall be allocated as
payment for each share of Junior Preferred Stock or Company Common Stock so
received.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of that number of Units of Junior Preferred Stock and shares of other capital
stock or securities of the Company, if any, issuable upon such exercise over
and above the number of Units of Junior Preferred Stock and shares of other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence
of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors by Board
Approval shall determine to be advisable in order that any (i) consolidation or
subdivision of the Junior Preferred Stock, (ii) issuance wholly for cash of any
shares of Junior Preferred Stock at less than the current market price, (iii)
issuance wholly for cash of shares of Junior Preferred Stock or securities
which by their terms are convertible into or
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exchangeable for shares of Junior Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Junior Preferred Stock, shall
not be taxable to such holders or shall reduce the taxes payable by such
holders.
(n) The Company shall not, at any time after the Distribution
Date, (i) consolidate with any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), (ii) merge
with or into any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or (iii) sell or
transfer (or permit any Subsidiary to sell or transfer), in one transaction, or
a series of transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), if (x) at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the Person which constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) hereof shall
have distributed or otherwise transferred (or will distribute or otherwise
transfer) to its stockholders, or other persons holding an equity interest in
such Person, Rights previously owned by such Person or any of its Affiliates
and Associates; provided, however, this Section 11(n) shall not affect the
ability of any Subsidiary of the Company to consolidate with, merge with or
into, or sell or transfer assets or earning power to, any other Subsidiary of
the Company.
(o) After the Distribution Date, the Company shall not, except as
permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary to
take)
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any action if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or otherwise eliminate the
benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Company Common Stock payable in shares of Company
Common Stock, (ii) subdivide the outstanding shares of Company Common Stock,
(iii) combine the outstanding shares of Company Common Stock into a smaller
number of shares, or (iv) issue any shares of its capital stock in a
reclassification of Company Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), the number of Rights associated with each
share of Company Common Stock then outstanding, or issued or delivered
thereafter but prior to the Distribution Date, shall be proportionately
adjusted so that the number of Rights thereafter associated with each share of
Company Common Stock following any such event shall equal the result obtained
by multiplying the number of Rights associated with each share of Company
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Company Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Company Common Stock outstanding
immediately following the occurrence of such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Junior
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Preferred Stock and the Company Common Stock, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
shares of Company Common Stock) in accordance with Section 25 hereof; provided,
however, that the failure of the Company to make such a certificate or give
such notice shall not affect the validity or the force or effect of the
requirement for such an adjustment. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of any such adjustment unless and until
it shall have received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. (a) In the event that, following the Stock Acquisition Date,
directly or indirectly, either (x) the Company shall consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall
not be the continuing or surviving corporation of such consolidation or merger,
(y) any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Company
Common Stock shall be converted into or exchanged for stock or other securities
of any other Person or cash or any other property, or (z) the Company shall
sell or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer) to any Person or Persons (other than the Company or any of
its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), in one or more transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) (any such event being a "Section 13 Event"),
then, and in each such case, proper provision
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shall be made so that: (i) each holder of a Right, except as provided in
Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price, such number of validly
authorized and issued, fully paid, and non-assessable shares of Common Stock of
the Principal Party (as such term is hereinafter defined), which shares shall
not be subject to any liens, encumbrances, rights of call or first refusal,
transfer restrictions or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of
Units of Junior Preferred Stock for which a Right is exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section 11
(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such Units for which a Right would be exercisable
hereunder but for the occurrence of such Section 11(a)(ii) Event by the
Purchase Price which would be in effect hereunder but for such first
occurrence) and (2) dividing that product (which, following the first
occurrence of a Section 13 Event, shall be the "Purchase Price" for all
purposes of this Agreement) by 50% of the current market price (determined
pursuant to Section 11(d) hereof) per share of the Common Stock of such
Principal Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant
to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to ensure that the provisions of this Agreement
shall thereafter be applicable to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the
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provisions of Section 11(a)(ii) hereof shall be of no further effect following
the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), (A) the Person that is
the issuer of any securities into which shares of Company Common Stock
are converted in such merger or consolidation, or, if there is more
than one such issuer, the issuer of Common Stock that has the highest
aggregate current market price (determined pursuant to Section 11(d)
hereof) and (B) if no securities are so issued, the Person that is the
other party to such merger or consolidation, or, if there is more than
one such Person, the Person the Common Stock of which has the highest
aggregate current market price (determined pursuant to Section 11(d)
hereof); and
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a), the Person that is the party
receiving the largest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions received
the same portion of the assets or earning power transferred pursuant
to such transaction or transactions or if the Person receiving the
largest portion of the assets or earning power cannot be determined,
whichever Person the Common Stock of which has the highest aggregate
current market price (determined pursuant to Section 11(d) hereof);
provided, however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
twelve-month period registered under Section 12 of the Exchange Act
("Registered Common Stock"), or such Person is not a corporation, and such
Person is a direct or indirect Subsidiary of another Person that has Registered
Common Stock outstanding,
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"Principal Party" shall refer to such other Person; (2) if the Common Stock of
such Person is not Registered Common Stock or such Person is not a corporation,
and such Person is a direct or indirect Subsidiary or another Person but is not
a direct or indirect Subsidiary of another Person which has Registered Common
Stock outstanding, "Principal Party" shall refer to the ultimate parent entity
of such firstmentioned Person; (3) if the Common Stock of such Person is not
Registered Common Stock or such Person is not a corporation, and such Person is
directly or indirectly controlled by more than one Person, and one or more of
such other Persons has Registered Common Stock outstanding, "Principal Party"
shall refer to whichever of such other Persons is the issuer of the Registered
Common Stock having the highest aggregate current market price (determined
pursuant to Section 11(d) hereof); and (4) if the Common Stock of such Person
is not Registered Common Stock or such Person is not a corporation, and such
Person is directly or indirectly controlled by more than one Person, and none
of such other Persons have Registered Common Stock outstanding, "Principal
Party" shall refer to whichever ultimate parent entity is the corporation
having the greatest shareholders equity or, if no such ultimate parent entity
is a corporation, shall refer to whichever ultimate parent entity is the entity
having the greatest net assets.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13, and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that the Principal Party will:
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(i) (A) prepare and file on an appropriate form, as soon as
practicable following the execution of such agreement and at its own
expense, a registration statement under the Securities Act with
respect to the Common Stock that may be acquired upon exercise of the
Rights, (B) use its best efforts to cause such registration statement
to become and remain effective (and to include a prospectus complying
with the requirements of the Securities Act) until the Expiration
Date, and (C) as soon as practicable following the execution of such
agreement, take such action as may be required to ensure that any
acquisition of such Common Stock upon the exercise of the Rights
complies with any applicable state security or "blue sky" laws; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
(d) In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or
other instrument governing its corporate affairs, which provision would have
the effect of (i) causing such Principal Party to issue, in connection with, or
as a consequence of, the consummation of a transaction referred to in this
Section 13, shares of Common Stock of such Principal Party at less than the
then current market price per share (determined pursuant to Section 11(d)
hereof) or securities exercisable for, or convertible into, Common Stock of
such Principal Party at less than such than current market price (other than,
in each case, to holders of Rights pursuant to this Section 13) or (ii)
providing for any special payment, tax or similar provisions in connection with
the issuance of the Common Stock of such Principal Party pursuant to the
provisions of this Section 13; then, in such event, the Company shall not
consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and
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delivered to the Rights Agent a supplemental agreement providing that the
provision in question of such Principal Party shall have been cancelled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company
shall not be required to issue fractions of Rights or to distribute Rights
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the Persons to which such fractional Rights
would otherwise be issuable, an amount in cash equal to such fraction of the
market value of a whole Right. For purposes of this Section 14(a), the market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be,
if the Rights are listed or admitted to trading on a national securities
exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading or, if the
Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making
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a market in the Rights selected by the Board of Directors by Board Approval.
If on any such date no such market maker is making a market in the Rights, the
fair value of the Rights on such date as determined in good faith by the Board
of Directors by Board Approval shall be used and such determination shall be
described in a statement filed with the Rights Agent and the holders of the
Rights.
(b) The Company shall not be required to issue fractions of shares
of Junior Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Junior Preferred Stock) upon exercise of the
Rights or to distribute certificates which evidence such fractional shares of
Junior Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Junior Preferred Stock). Fractions of shares
of Junior Preferred Stock in integral multiples of one one-hundredth of a share
of Junior Preferred Stock may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company
and a depositary selected by it provided that such agreement shall provide that
the holders of such depositary receipts shall have all the rights, privileges
and preferences to which they are entitled as beneficial owners of the
fractions of shares of Junior Preferred Stock represented by such depositary
receipts. In lieu of such fractional shares of Junior Preferred Stock that are
not integral multiples of one one-hundredth of a share, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the then current market price of a share of Junior Preferred Stock on the day
of exercise, determined in accordance with Section 11(d) hereof.
(c) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
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SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Section 18, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing shares of Company Common Stock); and any registered
holder of a Rights Certificate (or, prior to the Distribution Date, of a
certificate representing shares of Company Common Stock), without the consent
of the Rights Agent or of the holder of any other Rights Certificate (or, prior
to the Distribution Date, of a certificate representing shares of Company
Common Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company or
any other Person to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to
specific performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder of any Person
subject to this Agreement. Holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred by them in
any contested action to enforce the provisions of this Agreement where that
action is terminated and the relief requested by the holders is granted.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Company Common
Stock;
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(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the office of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates duly
executed;
(c) subject to Section 6(a) and Section 7(f), the Company
and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated
Company Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the
associated Company Common Stock certificate made by anyone other than
the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence
of Section 7(e), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or any other Person as a result of
its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or
any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; provided, however, the
Company must use its best efforts to have any such order, decree or
ruling lifted or otherwise overturned as promptly as practicable.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
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dividends or be deemed for any purpose the holder of the number of shares of
Junior Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or, except as provided in Section
24 hereof, to receive notice of meetings or other actions affecting
stockholders, or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions thereof.
SECTION 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses, including reasonable fees and disbursements of its counsel, incurred
in connection with the execution and administration of this Agreement and the
exercise and performance of its duties hereunder. The Company shall indemnify
the Rights Agent for, and hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability arising
therefrom, directly or indirectly, or prosecuting any action to determine the
rights or obligations of the parties hereunder.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Junior Preferred Stock or Company Common
Stock or for other
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securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement or other paper or document believed by it to be
genuine and to have been signed, executed and, where necessary, verified or
acknowledged by the proper Person or Persons.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT. (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or shareholder services businesses of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any document or any further act on
the part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name
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and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be specified herein) may be deemed to
be conclusively proved and established by a certificate signed by the Chairman
of the Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; provided, however, that so long as any Person is
an Acquiring Person hereunder, such certificate shall be signed and delivered
by a majority of the Continuing Directors; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
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(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any responsibility for the
validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or for the validity or execution of any
Rights Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or failure by the
Company to satisfy conditions contained in this Agreement or in any Rights
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or Section 13 hereof or for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after receipt by the Rights Agent of
the certificate describing any such adjustment contemplated by Section 12); nor
shall it be responsible for any determination by the Board of Directors by
Board Approval of Current Value or Spread pursuant to the provisions of Section
11(a)(iii) or the current market price of the Junior Preferred Stock, Company
Common Stock or any other security pursuant to the provisions of Section 11(d);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Junior
Preferred Stock or any other securities to be issued pursuant to this Agreement
or any Rights Certificate or as to whether any shares of Junior Preferred Stock
or any other securities will, when so issued, be validly authorized and issued,
fully paid and non-assessable; nor shall it be liable for
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any federal or state transfer taxes or charges that may be due upon the
issuance or transfer of any shares of Junior Preferred Stock, Company Common
Stock or other securities or any Rights Certificate.
(f) The Company shall perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further
acts, instruments and assurances as may reasonably be required by the Rights
Agent for the performance by the Rights Agent of its duties under this
Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer;
provided, however, that so long as any Person is an Acquiring Person hereunder,
the Rights Agent shall accept such instructions and advice only from a majority
of the Continuing Directors and shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with such instructions
of the majority of the Continuing Directors. Any application by the Rights
Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted
by the Rights Agent under this Rights Agreement and the date on and/or after
which such action shall be taken or such omission shall be effective. The
Rights Agent shall not be liable for any action taken by, or omission of, the
Rights Agent in accordance with a proposal included in any such application on
or after the date specified in such application (which date shall not be less
than five Business Days after the date any such officer of the Company actually
receives such application, unless any such officer shall have consented in
writing to an earlier date) unless,
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prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in
response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties or in the exercise of its rights hereunder
if the Rights Agent shall have reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed, not signed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting with
the Company. If such certificate has been completed and signed and shows a
negative response to clauses 1 and 2 of such certificate, unless previously
instructed otherwise in writing by the Company (which
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instructions may impose on the Rights Agent additional ministerial
responsibilities, but no discretionary responsibilities), the Rights Agent may
assume without further inquiry that the Rights Certificate is not owned by a
person described in Section 4(b) or Section 7(e) hereof and shall not be
charged with any knowledge to the contrary.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' prior notice in writing mailed to the Company, and to
each transfer agent of the Junior Preferred Stock and the Company Common Stock,
by registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days'prior notice in writing, mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to each transfer agent of
the Junior Preferred Stock and the Company Common Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent
or by the holder of a Rights Certificate (who shall, with such notice, submit
his Rights Certificate for inspection by the Company), then any registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
corporation organized and doing business under the laws of the United States or
the States of Texas or New York in good standing, shall be authorized to do
business as a banking institution in the State of New York, shall be authorized
under such laws to exercise corporate trust or stock transfer powers, shall be
subject to supervision or examination by
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federal or state authorities and shall have at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an
Affiliate of a corporation described in clause (a). After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Junior Preferred Stock
and the Company Common Stock, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such
form as may be approved by the Board of Directors by Board Approval to reflect
any adjustment or change made in accordance with the provisions of this
Agreement in the Purchase Price or the number or kind or class of shares or
other securities or property that may be acquired under the Rights
Certificates. In addition, in connection with the issuance or sale of shares
of Company Common Stock following the Distribution Date and prior to the
Expiration Date, the Company (a) shall, with respect to shares of Company
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and
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(b) may, in any other case, if deemed necessary or appropriate by the Board of
Directors by Board Approval, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
SECTION 23. REDEMPTION AND TERMINATION. (a) Subject to Section 30
hereof, the Company may, at its option, by the Board of Directors acting by
Board Approval, at any time prior to the earlier of (i) the Close of Business
on the tenth day following the Stock Acquisition Date, or (ii) the Close of
Business on the Final Expiration Date, redeem all but not less than all of the
then outstanding Rights at a redemption price of $.Ol per Right, as such amount
may be appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"), and the Company may,
at its option, by the Board of Directors acting by Board Approval, pay the
Redemption Price either in cash, shares of Company Common Stock (based on the
"current market price", as defined in Section 11(d) hereof, of the shares of
Company Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors by Board Approval.
(b) Immediately upon the action of the Board of Directors by Board
Approval ordering the redemption of the Rights, evidence of which shall be
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of
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Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors by Board Approval ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for Company Common Stock. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be
made. Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other than
that specifically set forth in this Section 23, and other than in connection
with the purchase or acquisition of Company Common Stock prior to the
Distribution Date.
SECTION 24. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Junior Preferred Stock or to
make any other distribution to the holders of Junior Preferred Stock (other
than a regular quarterly cash dividend out of earnings or retained earnings of
the Company), (ii) to offer to the holders of Junior Preferred Stock rights or
warrants to subscribe for or to purchase any additional shares of Junior
Preferred Stock or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Junior Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Junior Preferred Stock), (iv) to effect any consolidation or merger
into or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other
-53-
<PAGE> 57
transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
or (v) to effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Junior Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least 20 days prior to the
record date for determining holders of the shares of Junior Preferred Stock for
purposes of such action, and in the case of any such other action, at least 20
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Junior Preferred Stock
whichever shall be the earlier; provided, however, no such notice shall be
required pursuant to this Section 24, if any Subsidiary of the Company effects
a consolidation or merger with or into, or effects a sale or other transfer of
assets or earning power to, any other Subsidiary of the Company.
(b) In case any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof.
-54-
<PAGE> 58
SECTION 25. NOTICES. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
any telex, telegram or cable) and mailed or sent or delivered, if to the
Company, at its address at:
Rowan Companies, Inc.
5450 Transco Tower
2800 Post Oak Boulevard
Houston, Texas 77056-6196
Attention: Secretary
And if to the Rights Agent, at its address at:
Citibank, N.A.
111 Wall Street
5th Floor, Equity Administration
New York, New York 10043
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Company Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company or the Rights Agent,
as the case may be.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution
Date and subject to the penultimate sentence of this Section 26, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Company Common Stock. From and after the Distribution
Date and subject to the penultimate sentence of this Section 26, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time
-55-
<PAGE> 59
period hereunder, or (iv) to change or supplement the provisions hereunder in
any manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, however, this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) subject to Section 30
hereof, a time period relating to when the Rights may be redeemed at such time
as the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of
a certificate from an appropriate officer of the Company or, so long as any
Person is an Acquiring Person hereunder, from the majority of the Continuing
Directors which states that the proposed supplement or amendment is in
compliance with the terms of this Section 26, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Purchase Price, the Expiration Date or the
number of Units of Junior Preferred Stock for which a Right is exercisable
without the approval of a majority of the Continuing Directors. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Company Common Stock.
SECTION 27. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF
DIRECTORS, ETC. For all purposes of this Agreement, any calculation of the
number of shares of Company Common Stock outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding shares of Company
-56-
<PAGE> 60
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the date hereof. Except
as otherwise specifically provided herein, the Board of Directors of the
Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power (i) to interpret the provisions of this Agreement, and (ii) to make all
determinations deemed necessary or advisable for the administration of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board or by a majority of the
Continuing Directors in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board or any member thereof to any liability
to the holders of the Rights.
SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Company Common Stock)
any legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of shares of Company Common
Stock).
SECTION 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and
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<PAGE> 61
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors by Board Approval
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement
and the Rights shall not then be redeemable, the right of redemption set forth
in Section 23 hereof shall be reinstated and shall not expire until the Close
of Business on the tenth day following the date of such determination by a
majority of the Continuing Directors.
SECTION 31. GOVERNING LAW. THIS AGREEMENT, EACH RIGHT AND EACH
RIGHTS CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
EXECUTED IN AND TO BE PERFORMED ENTIRELY IN SUCH STATE.
SECTION 32. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original,
but all of which taken together shall constitute one and the same instrument.
SECTION 33. DESCRIPTIVE HEADINGS. The headings contained in
this Agreement are for descriptive purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
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<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be daily executed, all as of the date first above written.
ATTEST: ROWAN COMPANIES, INC.
By: /s/ MARK H. HAY By: /s/ E.E. THIELE
Name: Mark H. Hay Name: E.E. Thiele
Title: Corporate Secretary Title: Vice President
ATTEST: CITIBANK, N.A.
By: /s/ JOHN W. REASOR By: /s/ P. DEFELICE
Name: John W. Reasor Name: P. Defelice
Title: Assistant Vice President Title: Vice President
-59-
<PAGE> 1
EXHIBIT 10l
ROWAN COMPANIES, INC.
Amendment No. 2 to the Consultancy
Agreement Dated March 1, 1991
Between Rowan Companies, Inc.
and C. W. Yeargain
Effective April 1, 1995:
Section 2 of the Agreement, Duties of the Consultant, is amended by adding
an additional paragraph as follows:
(B) The Consultant also shall serve as a Director of LeTourneau, Inc. and
as Chairman of the Board of Directors of LeTourneau, Inc. and shall provide
such services as may be required, from time to time, in connection with
serving in such capacities.
(C) The Consultant shall provide advice as may be required for the design
and construction of the enhanced Gorilla design jack-up rig, designated
GORILLA V.
Section 4 of the Agreement, Consideration and Expenses, is hereby deleted
and the following is substituted therefor:
(A) The Company shall pay $150,000 annually (payable quarterly) plus the
per diem rate of US $500.00 for services rendered. Further, the Company
shall reimburse to the consultant all proper and reasonable out-of-pocket
expenses (including, but not limited to, all travel and accommodation
expenses).
<PAGE> 1
EXHIBIT 10m
DATED MARCH 1, 1991
ROWAN COMPANIES, INC. (1)
-AND-
C. W. YEARGAIN (2)
AGREEMENT
FOR THE PROVISION OF CONSULTANCY SERVICES,
AS AMENDED
<PAGE> 2
Page 1
THIS AGREEMENT is dated March 1, 1991 and is entered into BY and BETWEEN:
(1) ROWAN COMPANIES, INC. OF 5450 Transco Tower Building, Houston, Texas
77056-6196 ("the Company"); and
(2) C. W. YEARGAIN ("the Consultant") of #8 Tokeneke Trail, Houston, Texas
77024
NOW IT IS HEREBY AGREED as follows:
1. Appointment
(A) The Company hereby engages the Consultant and the Consultant hereby
agrees to act as consultant to the Company including any of its incorporated
affiliates (hereafter referred to as "the Group") pursuant to the terms of this
Agreement.
(B) The said engagement, which shall be deemed to have commenced on March
1, 1991, shall continue hereafter unless and until terminated (i) by either
party by not less than three (3) months' prior notice in writing given to the
other party or (ii) pursuant to the provisions of clause 6.
2. Duties of the Consultant
(A) The Consultant shall advise the Group on a when-requested basis in
connection with matters pertaining to the Group's existing and prospective
worldwide business operations.
(B) The Consultant also shall serve as a Director of LeTourneau, Inc. and
as Chairman of the Board of Directors of LeTourneau, Inc. and shall provide
such services as may be required, from time to time, in connection with serving
in such capacities.
(C) The Consultant shall provide advice as may be required for the design
and construction of the enhanced Gorilla design jack-up rig, designated GORILLA
V.
3. Conflict of Interest
(A) The Consultant hereby undertakes at all times to perform his
obligations hereunder with the utmost good faith and shall not deliberately do
or omit to do anything whereby a conflict is likely to arise between the
interests of the Group and the Consultant's own interests or the interests of
any other person or organization on whose behalf the Consultant is so employed.
(B) The Consultant shall not at any time knowingly make or cause or permit
to be made any untrue or misleading statement in relation to the Group nor in
particular after the termination of this Agreement represent or cause or permit
any representation to be made that he is connected with the Group.
<PAGE> 3
Page 2
4. Consideration and Expenses
(A) The Company shall pay 150,000 annually (payable quarterly) plus the
per diem rate of US $500.00 for services rendered. Further, the Company shall
reimburse to the Consultant all proper and reasonable out-of-pocket expenses
(including, but not limited to, all travel and accommodation expenses).
(B) All payments to be made pursuant to this agreement shall be made by
the Company upon receipt of an invoice from the Consultant specifying the
amount payable.
5. Confidentiality
(A) The Consultant undertakes that he shall not, either during or after
the termination of this Agreement without limit in point of time:
(i) divulge or communicate or cause or permit to be divulged or
communicated whether directly or indirectly to any other person
or persons (except to those of the officials of the Group whose
province it is to know the same); or
(ii) use for his own purposes or for any purpose other than those of
the Group
any secret, confidential or other information:
(a) relating to the private affairs of the Group; or
(b) which the Group has obtained from any third party on terms
restricting its disclosure or use
but these restrictions shall cease to apply to any information or knowledge
which may come into the public domain (otherwise than through the default of
the Consultant).
(B) All notes, memoranda, records and other documents made or created in
relation to the performance by the Consultant of his duties hereunder shall be
and remain the property of the Company and shall be handed over by the
Consultant to the Company from time to time on demand and in any event on the
termination of this Agreement.
6. Events of Termination
The Company only on the occurrence of the events specified in (B) below and
either party on the occurrence of the events specified in (A) below shall have
the right at any time by giving notice in writing to the other party to
terminate this Agreement forthwith:
(A) if the other party commits a material breach of any of the terms of
this Agreement and fails to remedy the same within 30 days of being required in
writing to do so by the party not in breach (if such breach shall be capable of
remedy);
<PAGE> 4
Page 3
(B) upon the demise or incapacity of the Consultant;
(C) upon the termination of the engagement by not less than the period of
notice provided for in clause 1 or upon the proper termination as provided in
this clause 6, the Consultant shall not have any claims for damages or
compensation of any nature whatsoever other than to any outstanding fees and
properly documented expenses due pursuant to clause 4 hereof.
7. Status of Agreement
Nothing herein contained shall be deemed to constitute a partnership between
the parties hereto and the Consultant shall have no power to bind the Group or
pledge its credit. Consultant agrees that he is an independent contractor and
is solely responsible for the performance of any duties required under this
Agreement. The Consultant agrees that he shall solely be responsible for any
income tax liability asserted by any taxing jurisdiction upon payments of
consideration received under this Agreement.
8. Assignment
Neither party shall be entitled to assign its rights hereunder without the
prior written consent of the other.
9. Notice
All notices to be given under this Agreement shall be in writing and shall
either be delivered personally or sent by first class registered post to the
address of the party to be served given at the head of this Agreement or such
other address as shall from time to time be notified to the other party and
shall be deemed duly served (i) in the case of a notice delivered personally,
at the time of delivery, and (ii) in the case of a notice sent by post, five
clear business days after the date of dispatch.
10. Entire Agreement
This Agreement constitutes the entire Agreement between the parties hereto with
respect to its subject matter and shall have effect to the exclusion of any
other memorandum, agreement or understanding of any kind between the parties
hereto preceding the date of this Agreement and touching and concerning its
subject matter.
11. Amendments in Writing
This Agreement may be amended, superseded, cancelled or any of its terms and
conditions waived only by written instrument signed by or on behalf of the
Company and Consultant or, in the case of waiver, by the party which is waiving
compliance.
<PAGE> 5
Page 4
12. Governing Law
This Agreement shall be governed by and construed in accordance with the Laws
of the State of Texas and each of the parties hereto hereby agrees to submit to
the non-exclusive jurisdiction of the courts of Texas in connection with any
matter arising out of this Agreement.
IN WITNESS whereof this Agreement has been entered into the day and year first
above written.
)
SIGNED BY ) /s/ C. R. Palmer
-----------------------------
duly authorized signatory ) C. R. Palmer
for and on behalf of
ROWAN COMPANIES, INC.
in the presence of: President
----------------------------
/s/ Kitty Lindley
- --------------------------
SIGNED BY )
C. W. Yeargain ) /s/ C. W. Yeargain
-----------------------------
) C. W. Yeargain
In the presence of:
/s/ Mary H. Cocca
- --------------------------
<PAGE> 1
EXHIBIT 10p
AMENDMENT NO. 1
TO
COMMITMENT TO GUARANTEE OBLIGATIONS
THIS AMENDMENT NO. 1, dated June 30, 1997 (the "Amendment", to that
certain Commitment to Guarantee Obligations, dated as of December 17, 1996 (the
"Commitment") is by and between the United States of America, represented by
the Secretary of Transportation, acting by and through the Maritime
Administration (the "Secretary"), and ROWAN COMPANIES, INC. (the "Shipowner",
and together with the Secretary, the "Parties").
WHEREAS, on December 17, 1996, the Shipowner executed the Indenture,
and issued thereunder a Floating Rate Note (the "Obligations") designated,
"United States Government Guaranteed Ship Financing Obligations, GORILLA V
Series" (the "Initial Transaction") with a maximum principal amount of
$153,091,000;
WHEREAS, pursuant to Title XI of the Merchant Marine Act, 1936, the
Secretary guaranteed the payment of outstanding principal of and interest on
the Obligations;
WHEREAS, Article Fourth of the Special Provisions of the Trust
Indenture provides that the Shipowner may redeem or repay the Floating Rate
Note, in whole or in part, on a Redemption Date designated by the Shipowner,
from the proceeds of the issuance of a fixed rate note; and
WHEREAS, the Parties wish to amend certain documents relating to the
Initial Transaction in order to provide for the redemption of a part of the
Floating Rate Note by the Shipowner's issuance of a fixed rate note,
NOW THEREFORE, in consideration of the mutual rights and obligations
set forth herein and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
SECTION 1.01 Annexed to each counterpart of this Amendment No. 1 to
the Commitment to Guarantee Obligations are the forms of the Obligation
Purchase Agreement, Amendment No. 1 to the Credit Agreement, Supplement No. 1
to the Trust Indenture, Amendment No. 1 to the Security Agreement, the
Secretary's Note and the Obligations, the forms of which are hereby approved by
the Secretary.
SECTION 1.02 Article III of the Commitment shall be amended pursuant
to Article VI thereof, as follows:
The Obligations shall be as provided in the Indenture and in the form of
the Floating Rate Note and the form of the Fixed Rate Note annexed as Exhibits
2 and 3 to the Indenture, respectively. The Obligations shall be subject to
all of the terms and conditions set forth in the Indenture. Supplement No. 1
to the Trust Indenture, Amendment No. 1 to the Security Agreement,
1
<PAGE> 2
the Secretary's Note and the Obligations shall be executed and delivered by the
Shipowner on the Effective Date.
Except as so amended, the provisions of the Commitment shall apply to
and govern this Amendment No. 1 to Commitment to Guarantee Obligations.
Capitalized terms not specifically defined herein shall have the
respective meanings stated in Schedule A to the Trust Indenture dated as of
December 17, 1996, as amended, between the Shipowner and the Indenture Trustee.
This Amendment No. 1 to Commitment to Guarantee Obligations may be executed
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
2
<PAGE> 3
IN WITNESS WHEREOF, this Amendment No. 1 to Commitment to Guarantee
Obligations has been executed and sealed by the United States and accepted and
sealed by the Shipowner on the day and year first above written.
UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
BY: MARITIME ADMINISTRATOR
(SEAL)
ATTEST:
----------------------------------
Secretary
- --------------------------
Assistant Secretary
ROWAN COMPANIES, INC.
(SEAL)
ATTEST: By:
-------------------------------
Senior Vice President
- --------------------------
Secretary
3
<PAGE> 1
EXHIBIT 10r
AMENDMENT NO. 1
TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of June 30, 1997,
effective July 1, 1997 (the "Amendment") to that certain Credit Agreement,
dated as of December 17, 1996, (the "Original Credit Agreement"), is by and
between ROWAN COMPANIES, INC., a Delaware corporation, as the Shipowner, and
CITIBANK, N.A., a national banking association, as the Lender (Shipowner and
Lender are referred to collectively herein as "Parties").
WHEREAS, on December 17, 1996, the Shipowner executed the Indenture,
and issued thereunder a Floating Rate Note designated, "United States
Government Guaranteed Ship Financing Obligations, GORILLA V Series" (the
"Initial Transaction") with a maximum principal amount of $153,091,000;
WHEREAS, Article Fourth of the Special Provisions of the Indenture
provides that the Shipowner may redeem or repay the Floating Rate Note, in
whole or in part, on a Redemption Date designated by the Shipowner, from the
proceeds of the issuance of a fixed rate note; and
WHEREAS, the Parties wish to amend certain documents relating to the
Initial Transaction in order to provide for the redemption of a part of the
Floating Rate Note by the Shipowner's issuance of a fixed rate note,
NOW THEREFORE, in consideration of the mutual rights and obligations
set forth herein and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
The Original Credit Agreement shall be amended pursuant to Section
11.08 thereof as follows:
Section 1. The Credit Facility. Sections 2.01 and 2.04 of the Credit
Agreement are restated in their entirety as follows:
2.01 Amount.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, plus the
aggregate outstanding principal amount evidenced by Fixed Rate Notes
("Outstanding Principal").
* * *
1
<PAGE> 2
2.04 Relationship of Floating Rate Note and Fixed Rate Note.
Disbursements from the Credit Facility shall become the indebtedness of the
Shipowner to the Lender under the Floating Rate Note. The Shipowner shall
convert indebtedness under the Floating Rate Note to indebtedness under one or
more Fixed Rate Notes no later than the earlier of (i) two years from the
Delivery Date, or (ii) July 1, 2000. At its option, and from time to time, the
Shipowner may convert any portion, or all, of the indebtedness of the Floating
Rate Note to a Fixed Rate Note or series of Fixed Rate Notes at any time during
or after the construction of the Vessel, so long as the conversion of the
Floating Rate Note to the Fixed Rate Note does not occur more than two years
after the Delivery Date and, except for the final disbursement, each conversion
is in a minimum amount of $50,000,000; and the Shipowner shall have paid any
amount payable under Section 4.04(a)(iv) or any other provision hereof in
connection therewith.
Section 2. Terms of the Credit. Section 4.03 of the Credit Agreement is
amended by adding the following paragraph (d):
(d) Notwithstanding any other provision to the contrary herein, the
Shipowner shall have the right to prepay any portion of the Floating Rate
Note and convert that Obligation to a Fixed Rate Note so long as it first
obtains the Secretary's consent to the interest rate applicable to the
Fixed Rate Note and, except for the final disbursement, such conversion
equals or exceeds $50,000,000 principal; and the Shipowner shall have paid
any amount payable under Section 4.04(a)(iv) or any other provision hereof
in connection therewith.
Section 3. Definitions. The Schedule of Definitions attached as Exhibit 1
to the Original Credit Agreement is amended by: (a) adding alphabetically the
following definitions:
"Fixed Rate Note" shall mean an Obligation substantially in the form of
Exhibit 3 to the Indenture, appropriately completed.
"Note" shall mean a Floating Rate Note or a Fixed Rate Note.
(b) amending and restating each of the definitions of Maturity and
Obligation to read as follows:
"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.
"Obligation" or "Obligations" shall mean the Floating Rate Note or Fixed
Rate Note(s) of the Shipowner bearing a Guarantee and authenticated and
delivered pursuant to the Indenture and the Authorization Agreement.
All other capitalized terms used herein have the meanings set forth in the
Schedule of Definitions attached as Exhibit 1 to the Original Credit Agreement.
2
<PAGE> 3
This Amendment No. 1 to the Credit Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
No. 1 to Credit Agreement to be duly executed and delivered as of the date
first above written.
ROWAN COMPANIES CITIBANK, N.A., as the Lender
By: By:
-------------------------- ---------------------------
(Signature) (Signature)
Name: Name:
------------------------ -------------------------
(Print) (Print)
Title: Title:
----------------------- ------------------------
(Print) (Print)
Consent:
Pursuant to Section 11.08 of the Credit Agreement, the Secretary hereby
consents to this Amendment No. 1 to the Credit Agreement.
ATTEST: UNITED STATES OF AMERICA,
SECRETARY OF TRANSPORTATION
BY: MARITIME ADMINISTRATION
- ------------------
BY:
-----------------------------
Secretary
Maritime Administration
3
<PAGE> 4
EXHIBIT 10r
SUPPLEMENT NO. 1
TO
TRUST INDENTURE
THIS SUPPLEMENT NO. 1, dated as of June 30, 1997, effective July 1,
1997 (the "Supplement"), to that certain Trust Indenture dated as of December
17, 1996 (the "Indenture") is by and between CITIBANK, N.A., a national banking
association, as indenture trustee (the "Indenture Trustee"), and ROWAN
COMPANIES, INC. (the "Shipowner", and together with the Indenture Trustee, the
"Parties").
WHEREAS, on December 17, 1996, the Shipowner executed the Indenture,
and issued thereunder a Floating Rate Note designated, "United States
Government Guaranteed Ship Financing Obligations, GORILLA V Series" (the
"Initial Transaction") with a maximum principal amount of $153,091,000;
WHEREAS, Article Fourth of the Special Provisions of the Indenture
provides that the Shipowner may redeem or repay the Floating Rate Note, in
whole or in part, on a Redemption Date designated by the Shipowner, from the
proceeds of the issuance of a fixed rate note; and
WHEREAS, the Parties wish to amend certain documents relating to the
Initial Transaction in order to provide for the redemption of a part of the
Floating Rate Note by the Shipowner's issuance of a fixed rate note;
NOW THEREFORE, in consideration of the mutual rights and obligations
set forth herein and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE FIRST
SECTION 1.01 SCHEDULE A. Schedule A to the Indenture is hereby
amended by adding the following definitions:
"Applicable Interest Rate" shall mean:
(a) with respect to Obligations which are the Floating Rate Note, 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
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<PAGE> 5
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.
(b) with respect to Obligations which are Fixed Rate Notes, the
interest rate set forth in each such Obligation, which interest rate shall
be as approved by the Secretary as reasonable pursuant to Section 1104A
(b)(5) of the Act.
"Cede" means Cede & Company.
"DTC" means The Depository Trust Company.
"Definitive Obligation" has the meaning specified in Article Sixth,
paragraph (cc) of the Special Provisions of the Indenture.
"Effective Date" means July 1, 1997.
"Fixed Rate Note" shall mean an Obligation substantially in the form of
Exhibit 3 to the Indenture, appropriately completed.
"Global Obligation" has the meaning specified in Article Sixth, paragraph
(cc) of the Special Provisions of the Indenture.
"Letter of Representations" means the Letter of Representations between the
Shipowner and the Indenture Trustee and other documentation necessary or
desirable to effectuate the issuance of the Fixed Rate Notes as Global
Obligations.
"Make-Whole Premium" means an amount equal to the excess, if any, between
(i) the sum of the respective Payment Values of each Prospective Payment, over
(ii) 100% of the aggregate principal amount being prepaid on the Redemption
Date.
"Make-Whole Premium Determination Date" means the second Business Day
before the applicable Redemption Date.
"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
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on a Payment Date, at the Stated Maturity or by prepayment, repayment,
redemption or declaration of acceleration or otherwise.
"Note" shall mean a Floating Rate Note or a Fixed Rate Note.
"Obligation" or "Obligations" shall mean the Floating Rate Note or Fixed
Rate Note(s) of the Shipowner bearing a Guarantee and authenticated and
delivered pursuant to the Indenture and the Authorization Agreement.
"Obligation Owners" has the meaning specified in Article Sixth, paragraph
(cc) of the Special Provisions of the Indenture.
"Obligation Register" has the meaning specified in Section 2.10 of Exhibit
1 to the Indenture.
"Original Principal Amount" shall mean the maximum principal amount of the
Obligations.
"Payment Value" of each Prospective Payment shall be determined by
discounting such Prospective Payment at the Reinvestment Rate for the period
from the Payment Date on which such Prospective Payment was scheduled to be
paid to the applicable Redemption Date.
"Prospective Payment" means, with respect to the Fixed Rate Notes: (i)
each scheduled interest payment on each scheduled principal amount to be
prepaid; and (ii) the scheduled principal amount to be prepaid.
"Reinvestment Rate" means the yield determined by the Indenture Trustee to
be the yield of the issue of actively traded United States Treasury securities
having a maturity equal to the Weighted Average Life to Final Maturity;
provided, however, that if such Weighted Average Life to Final Maturity is not
equal to the maturity of an actively traded United States Treasury security
(rounded to the nearest one-twelfth of a year), such yield shall be obtained by
linear interpolation from the yields of actively traded United States Treasury
securities having the greater maturity closest to and the lesser maturity
closest to such Weighted Average Life to Final Maturity. The yields shall be
determined by reference to the yields as indicated by Telerate Access Service
(page 8003 or the relevant page at the date of determination indicating such
yields) (or, if such data ceases to be available, any publicly available
sources of similar market data) at approximately 11:00 a.m. (New York City
time) on the Make-Whole Premium Determination Date.
"Remaining Dollar Years" means the sum of the amounts obtained by
multiplying: (i) the amount of each remaining scheduled payment of principal
of the Fixed Rate Notes (without giving effect to such Redemption) by (ii) the
number of years (rounded to the nearest one-twelfth) which will elapse between
the Redemption Date and the Payment Date for such scheduled principal amount.
"Weighted Average Life to Final Maturity" means the number of years
(rounded up to the nearest one-twelfth of a year) obtained by dividing: (i) the
then Remaining Dollar Years by (ii) the
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<PAGE> 7
total amount of the then remaining aggregate unpaid principal amount of such
Fixed Rate Notes (without giving effect to the subject Redemption).
All other capitalized terms used herein have the meanings set forth in
Schedule A to the Indenture.
ARTICLE SECOND
The Indenture shall be amended as follows:
Section 2.01 The Obligations. Article Second (a) of the Special
Provisions of the Indenture is restated in its entirety as follows:
(a) The Obligations issued hereunder shall be designated "United
States Government Guaranteed Ship Financing Obligations, GORILLA V Series,"
and shall be in the forms of Exhibits 2 and 3 to this Indenture; and, the
aggregate 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.
Section 2.02 Certain Redemptions. Article Fourth of the Special
Provisions of the Indenture is restated in its entirety as follows:
(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 of the Floating Rate Note on the earlier of (i) July
1, 2000, or (ii) two (2) years after the Delivery Date, and a final
redemption of the remaining outstanding principal of the Fixed Rate Notes
on July 1, 2010.
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 in the case of the Floating Rate Note and July 1, 2010 in the case of
Fixed Rate Note(s) (subject to such increase as shall be necessary so that
the total principal amount of Obligations to be redeemed on any such
Redemption
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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 in the case of the Floating Rate Note and July 1,
2010 in the case of each Fixed Rate Note. 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 Floating Rate Note, 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 Floating Rate Note, in whole or in part,
on a Redemption Date designated by the Shipowner, from the proceeds from
the issuance of the Fixed Rate Notes.
(c) Optional Redemptions of Obligations at Make-Whole Premium. At its
option, the Shipowner may prepay on any Interest Payment Date the Fixed
Rate Notes, 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 plus
the Make-Whole Premium, if any. Prepayments shall be applied pro rata
against each Fixed Rate Note and applied against the scheduled principal
payments in the inverse order of scheduled maturity.
(d) Optional Redemptions. 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 (1) 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, and (2) at least
35 days prior to the date fixed for redemption in the case of the Fixed
Rate Notes, deliver to the Indenture Trustee an amount equal to the Make
Whole Premium estimated by the Indenture Trustee to be paid on the
Redemption Date. The Indenture Trustee shall give an estimate of the Make
Whole Premium to the Shipowner within two (2) business days of the delivery
of the Shipowner's Request. In the event the amount of the Make Whole
Premium deposited by the Shipowner with the Indenture Trustee pursuant to
this section (and interest, if any, accrued thereon, less any losses
incurred on the investment thereof) is insufficient to pay the amount of
the Make Whole Premium, the Shipowner shall pay the amount of the shortfall
to the Indenture Trustee in immediately available funds upon one (1) day's
notice. In the event the amount of the Make Whole Premium deposited by the
Shipowner pursuant to this section (and interest, if any, accrued thereon,
less any losses incurred on the investment thereof) exceeds the Make Whole
Premium, the excess amount shall be refunded to the
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<PAGE> 9
Shipowner by the Indenture Trustee in immediately available funds on the
Redemption Date.
Section 2.03 Concerning Section 2.04. Article Sixth (e) of the Special
Provisions of the Indenture is restated in its entirety as follows:
(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 Floating Rate Note, provided
however, that the Shipowner and Indenture Trustee have obtained the prior
written consent of the Secretary and further provided, that (a) except for
the final disbursement, each issuance of a Fixed Rate Note must be in a
minimum aggregate principal amount of $50,000,000, and (b) the proceeds
from the issuance of Fixed Rate Notes shall be used to pay off, satisfy and
cancel the Floating Rate Note, provided, however, that during the
Construction Period, the Floating Rate Note need not be paid off in its
entirety and need only be reduced by the net proceeds from the issuance of
the Fixed Rate Notes.
Section 2.04 Concerning Section 3.03. Article Sixth (k) of the Special
Provisions of the Indenture is restated in its entirety as follows:
(k) Concerning Section 3.03. The date required by Section 3.03 of
Exhibit 1 hereto for the Floating Rate Note is the earlier of July 1, 2000,
or (ii) two (2) years from the Delivery Date. The date required by Section
3.03 of Exhibit 1 hereto for the Fixed Rate Notes is July 1, 2010.
Section 2.05 Concerning Section 3.07. Article Sixth (m) of the Special
Provisions of the Indenture is restated in its entirety as follows:
(m) Concerning Section 3.07. (i) Section 3.07(a) of Exhibit 1 to
this Indenture is revised to delete the phrase "or 3.05."
(ii) Notwithstanding the provisions of Section 3.07(b) of Exhibit 1
to this Indenture, if less than all of the Obligations are to be redeemed
under any of the provisions contained or referred to in Article Fourth
hereof (excluding Article Fourth (c) or Article III of said Exhibit 1, the
Indenture Trustee shall select such Obligations to be redeemed on the
Redemption Date by allocating the principal amount to be redeemed first
between each maturity of Obligations in proportion to the Outstanding
Obligations and second among the holders of each maturity of Obligations in
proportion to the aggregate principal amount of such maturity of
Obligations registered in their respective names; provided that, the
Indenture Trustee may select for redemption portions of the principal
amount of the Obligations of a denomination larger than $1,000; but the
portions of the principal amount of the Obligations so selected shall be
equal to $1,000 or an integral multiple thereof.
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Section 2.06 Concerning Section 3.09. Article Sixth (n) of the Special
Provisions of the Indenture is restated in its entirety as follows:
(n) Concerning Section 3.09. Section 3.09 of Exhibit 1 to this
Indenture 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) or Article Fourth (d) of the Special
Provisions, 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.
Section 2.07 Concerning Section 6.09. Article Sixth (t) of the Special
Provisions of the Indenture is restated in its entirety as follows:
(t) Concerning Section 6.09. The reference to "Exhibit 4" in Section
6.09 is revised to read "Exhibit 5," and the following paragraph is added
at the end of Section 6.09:
In the event that the Obligations are registered in the name of The
Depository Trust Company ("DTC"), Cede & Co. ("Cede") or another nominee of
DTC or Cede pursuant to a Letter of Representations ("LOR") which is
executed among the Shipowner, the Indenture Trustee and DTC, and (i) if the
Secretary assumes the Obligations pursuant to Section 6.09(a) hereof, or
(ii) if the Secretary instructs the Shipowner and the Indenture Trustee to
terminate the LOR, the Shipowner and the Indenture Trustee, immediately
upon receipt of notice of such assumption or upon receipt of notice of such
termination, shall terminate or cause the termination of the LOR in
accordance with Section 11 thereof. The Indenture Trustee shall within 30
days from receipt of either such notice from the Secretary also instruct
DTC to notify its direct and indirect participants of the need to re-
register the Obligations in the names of the beneficial owners. Upon
surrender by DTC of the Obligations issued in its name, the name of Cede or
another nominee, the Shipowner shall issue at its sole expense, and the
Indenture Trustee shall authenticate Obligations in the names provided to
the Indenture Trustee by DTC.
Section 2.8 Concerning Registered and Beneficial Ownership of the
Obligations; Legends. Article Sixth of the Special Provisions of the Indenture
is amended by adding the following as paragraph (cc):
(cc) Concerning Registered and Beneficial Ownership of the
Obligations; Legends.
(i) The Fixed Rate Notes may be issued initially in the form of
one or more permanent global Notes in definitive, fully registered form
without interest coupons (each, a "Global Obligation"). Except as provided
in paragraph (iii) below, owners of beneficial interests in Global
Obligations ("Obligation Owners") will not be entitled to
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receive separate certificated Notes ("Definitive Obligation") and will not
be considered the holders thereof. Each such Global Obligation shall be
deposited with the Depository Trust Company (the "DTC") or the Indenture
Trustee, as custodian for DTC, registered in the name of DTC or a nominee
of DTC, and duly executed by the Shipowner and authenticated by the
Indenture Trustee as provided in the Indenture. Each Global Obligation
shall bear such legend as DTC may require.
(ii) Members of, or participants in, DTC shall have no rights
under the Indenture with respect to any Global Obligation held on their
behalf by DTC or by the Indenture Trustee as the custodian of DTC or under
such Global Obligation, and DTC may be treated by the Shipowner, the
Indenture Trustee and any agent of the Shipowner or the Indenture Trustee
as the absolute owner of such Global Obligation for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Shipowner, the Indenture Trustee or any agent of the Shipowner or the
Indenture Trustee from giving effect to any written certification, proxy or
other authorization furnished by DTC or impair, as between DTC and its
members and participants, the operation of customary practices of DTC
governing the exercise of the rights of an owner of a beneficial interest
in any Global Obligation.
(iii) (1) The transfer and exchange of Global Obligations or
beneficial interests therein shall be effected through DTC or the Indenture
Trustee, as the custodian for DTC, in accordance with the Indenture and the
procedures of DTC therefor.
(2) A Global Obligation shall be exchangeable for
Definitive Obligations registered in the names of persons owning beneficial
interest in such Global Obligation only if any of the following events
shall have occurred: (1) DTC notifies the Shipowner that it is unwilling
or unable to continue as depositary for such Global Obligation or DTC
ceases to be a clearing agency registered under the Securities Exchange Act
of 1934, as amended, at a time when DTC is required to be so registered in
order to act as depositary, and a successor depositary is not appointed by
the Shipowner within 90 days thereafter, (2) the Shipowner or the Indenture
Trustee elects to terminate DTC's services or the book entry system, (3)
the Secretary assumes the Obligations or (4) the Secretary instructs the
Shipowner and Indenture Trustee to terminate the Letter of Representations.
(3) Any Global Obligation that is exchangeable for
Definitive Obligations registered in the name of the owners of beneficial
interests therein pursuant to this paragraph (iii) shall be surrendered by
DTC to the Indenture Trustee to be so exchanged, without charge, and the
Shipowner shall execute and the Indenture Trustee shall authenticate and
deliver, upon such exchange of such Global Obligation, an equal aggregate
principal amount of Definitive Obligations of authorized denominations.
Definitive Obligations issued in exchange for a beneficial interest in a
Global Obligation pursuant hereto shall be registered in such names and in
such authorized denominations as DTC, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Indenture
Trustee in writing. The Indenture Trustee shall deliver such Definitive
Obligations to the Obligation Owners in whose names such Obligations are so
registered in accordance with the instructions of DTC.
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(4) The registered holder of a Global Obligation may
grant proxies and otherwise authorize any Obligation Owner, including DTC's
members and participants and Obligation Owners that may hold interest
through such members and participants, to take any action which a Holder is
entitled to take under the Indenture or the Obligations.
(5) In the event of the occurrence of any of the events
specified in paragraph (iii)(2), the Shipowner will promptly make available
to the Indenture Trustee a reasonable supply of Definitive Obligations.
(6) Notwithstanding any other provision of the Indenture,
a Global Obligation may not be transferred except as a whole by DTC for
such Global Obligation to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC.
(iv) At such time as all beneficial interests in a Global
Obligations have either been exchanged for Definitive Obligations,
redeemed, repurchased or canceled, such Global Obligation shall be returned
to the Indenture Trustee for cancellation or retained and canceled by the
Indenture Trustee.
(v) The Indenture Trustee shall have no responsibility or
obligation to any owner of a beneficial interest in a Global Obligation, a
member of, or a participant in DTC or any other Obligation Owner with
respect to the accuracy of the records of DTC or its nominee or of any
participant or member thereof, with respect to any ownership interest in
the Obligations or with respect to the delivery to any participant, member,
beneficial owner or other Obligation Owner (other than DTC) of any notice
(including any notice of redemption) or the payment of any amount or
delivery of any Obligations (or other security or property) under or with
respect to such Obligations. All notices and communications to be given to
the Holders and all payments to be made to Holders in respect to the
Obligations shall be given or made only to or upon the order of the
registered Holders (which shall be DTC or its nominee in the case of a
Global Obligation). The rights of owners of beneficial interests in any
Global Obligation shall be exercised only through DTC subject to the
applicable rules and procedures of DTC. The Indenture Trustee may rely and
shall be fully protected in relying upon information furnished by DTC with
respect to its members, participants and any beneficial owners.
Section 2.9 Form of Floating Rate Note. The Form of Floating Rate Note
attached as Exhibit 2 to the Indenture is deleted and the Form of Floating Rate
Note attached as Exhibit 2 to this Amendment is substituted in lieu thereof.
Section 2.10 Substitution of Floating Rate Note. On the Effective Date,
the Floating Rate Note issued on the Closing Date shall be surrendered by the
Holder to the Shipowner and a new Floating Rate Note in the Form of Exhibit 2
to this Amendment shall be issued by the Shipowner and delivered to the Holder
thereof.
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Section 2.11 Form of Fixed Rate Note. The Form of Fixed Rate Note
attached as Exhibit 3 to the Indenture is deleted and the Form of Fixed Rate
Note attached as Exhibit 3 to this Amendment is substituted in lieu thereof.
Section 2.12 Issuance of Fixed Rate Notes. On and after the Effective
Date, the Shipowner shall issue and deliver to the Holders thereof Fixed Rate
Note(s) in accordance with the Indenture in the form of Exhibit 3 to this
Amendment.
Section 2.13 Secretary's Supplemental Indenture. Article III, Section
2.01 of the Secretary's Supplemental Indenture, attached as Exhibit 5 to the
Indenture, is amended to read as follows:
The Secretary hereby assumes payment of the principal of and interest on
the Obligations in accordance with the terms of the Obligations and of the
Indenture, and hereby assumes all liability to perform and observe all the
covenants, agreements and conditions of the Indenture and the Obligations
which, by the terms thereof, are to be performed by the Shipowner; provided
that, the Secretary assumes no liabilities or obligations of the Shipowner
under the Indenture or the Obligations which accrued or arose prior to the
date hereof and assumes no liability for the Make-Whole Premium.
Except as so amended, the provisions of the Indenture are hereby confirmed,
and shall remain in full force and effect.
This Supplement No. 1 to the Indenture may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Supplement No. 1 to the Indenture has been
duly executed by the Parties as of the day and year first above written.
(SEAL) ROWAN COMPANIES, INC.
ATTEST:
By:
-------------------------------
Senior Vice President
- ------------------------
Secretary
CITIBANK, N.A.
(SEAL) Indenture Trustee
ATTEST:
By:
-------------------------------
Title:
- ------------------------
CONSENT:
Pursuant to Section 10.05 of the General Provisions Incorporated into the
Trust Indenture by Reference attached as Exhibit 1 to the Trust Indenture, the
Secretary hereby consents to this Supplement No. 1 to the Trust Indenture.
ATTEST: UNITED STATES OF AMERICA,
SECRETARY OF TRANSPORTATION
BY: MARITIME ADMINISTRATION
- --------------------
By:
-------------------------------
Secretary
11
<PAGE> 1
EXHIBIT 10s
REVOLVING CREDIT AGREEMENT
DATED AS OF OCTOBER 30, 1997
AMONG
ROWAN COMPANIES, INC.
AS BORROWER,
CITIBANK, N.A.,
AS AGENT,
AND
THE LENDERS SIGNATORY HERETO
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . -1-
Section 1.02 Accounting Terms and Determinations . . . . . . . . . . -13-
ARTICLE II
COMMITMENTS
Section 2.01 Loans . . . . . . . . . . . . . . . . . . . . . . . . . -14-
Section 2.02 Borrowings, Continuations and Conversions. . . . . . . . -14-
Section 2.03 Changes of Commitments . . . . . . . . . . . . . . . . . -15-
Section 2.04 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
Section 2.05 Several Obligations . . . . . . . . . . . . . . . . . . -16-
Section 2.06 Notes . . . . . . . . . . . . . . . . . . . . . . . . . -16-
Section 2.07 Prepayments . . . . . . . . . . . . . . . . . . . . . . -16-
Section 2.08 Lending Offices . . . . . . . . . . . . . . . . . . . . -17-
Section 2.09 Extension of Termination Date . . . . . . . . . . . . . -17-
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans . . . . . . . . . . . . . . . . . . . -17-
Section 3.02 Interest . . . . . . . . . . . . . . . . . . . . . . . . -17-
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . -18-
Section 4.02 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . -19-
Section 4.03 Computations . . . . . . . . . . . . . . . . . . . . . . -19-
Section 4.04 Non-receipt of Funds by the Agent . . . . . . . . . . . -19-
Section 4.05 Set-off, Sharing of Payments, Etc. . . . . . . . . . . . -20-
Section 4.06 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . -20-
</TABLE>
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<TABLE>
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ARTICLE V
CAPITAL ADEQUACY
Section 5.01 Capital Adequacy; Additional Costs . . . . . . . . . . . -23-
Section 5.02 Limitation on Eurodollar Loans . . . . . . . . . . . . . -25-
Section 5.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . -25-
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03. -25-
Section 5.05 Compensation . . . . . . . . . . . . . . . . . . . . . . -26-
Section 5.06 Replacement Lenders. . . . . . . . . . . . . . . . . . . -26-
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding . . . . . . . . . . . . . . . . . . . . -27-
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 Existence. . . . . . . . . . . . . . . . . . . . . . . . -29-
Section 7.02 Power and Authorization . . . . . . . . . . . . . . . . -29-
Section 7.03 No Conflict or Resultant Lien . . . . . . . . . . . . . -29-
Section 7.04 Compliance with Other Agreements . . . . . . . . . . . . -29-
Section 7.05 No Consent . . . . . . . . . . . . . . . . . . . . . . . -29-
Section 7.06 Binding Obligations . . . . . . . . . . . . . . . . . . -29-
Section 7.07 Financial Condition . . . . . . . . . . . . . . . . . . -30-
Section 7.08 Litigation . . . . . . . . . . . . . . . . . . . . . . . -30-
Section 7.09 Use of Proceeds; Margin Stock . . . . . . . . . . . . . -30-
Section 7.10 Taxes; Governmental Charges . . . . . . . . . . . . . . -30-
Section 7.11 Titles . . . . . . . . . . . . . . . . . . . . . . . . . -31-
Section 7.12 Full Disclosure . . . . . . . . . . . . . . . . . . . . -31-
Section 7.13 Investment Company Act . . . . . . . . . . . . . . . . . -31-
Section 7.14 Environmental Matters . . . . . . . . . . . . . . . . . -31-
Section 7.15 Compliance with Law . . . . . . . . . . . . . . . . . . -32-
Section 7.16 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . -32-
Section 7.17 Public Utility Holding Company Act . . . . . . . . . . . -33-
Section 7.18 Survival of Representations and Warranties . . . . . . . -33-
Section 7.19 Delivery of Information . . . . . . . . . . . . . . . . -34-
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01 Compliance with Laws, Etc. . . . . . . . . . . . . . . . -34-
Section 8.02 Reporting and Notice Requirements . . . . . . . . . . . -34-
Section 8.03 Taxes and Liens . . . . . . . . . . . . . . . . . . . . -37-
Section 8.04 Maintenance and Insurance . . . . . . . . . . . . . . . -37-
Section 8.05 Right of Inspection . . . . . . . . . . . . . . . . . . -37-
Section 8.06 Performance of Obligations . . . . . . . . . . . . . . . -37-
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 8.07 Environmental Compliance . . . . . . . . . . . . . . . . -37-
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01 Liens, Etc . . . . . . . . . . . . . . . . . . . . . . . -39-
Section 9.02 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
Section 9.03 Limitation on Sale and Leaseback . . . . . . . . . . . . -41-
Section 9.04 Restricted Payments . . . . . . . . . . . . . . . . . . -41-
Section 9.05 Mergers; Acquisitions . . . . . . . . . . . . . . . . . -42-
Section 9.06 Investments, Loans, and Advances . . . . . . . . . . . . -42-
Section 9.07 Use of Proceeds . . . . . . . . . . . . . . . . . . . . -43-
Section 9.08 Transactions with Affiliates . . . . . . . . . . . . . . -43-
Section 9.09 Change of Business . . . . . . . . . . . . . . . . . . . -43-
Section 9.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . -43-
Section 9.11 Certain Financial Tests . . . . . . . . . . . . . . . . -45-
Section 9.12 Sale or Other Disposition of Assets . . . . . . . . . . -45-
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . . -46-
Section 10.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . -47-
ARTICLE XI
THE AGENT
Section 11.01 Appointment, Powers and Immunities . . . . . . . . . . -48-
Section 11.02 Reliance by Agent . . . . . . . . . . . . . . . . . . . -48-
Section 11.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . -48-
Section 11.04 Rights as a Lender . . . . . . . . . . . . . . . . . . -48-
Section 11.05 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . -49-
Section 11.06 Non-Reliance on Agent and other Lenders . . . . . . . . -49-
Section 11.07 Action by Agent . . . . . . . . . . . . . . . . . . . . -50-
Section 11.08 Resignation or Removal of Agent . . . . . . . . . . . . -50-
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . -50-
Section 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . -51-
Section 12.03 Payment of Expenses, Indemnities, etc . . . . . . . . . -51-
Section 12.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . -53-
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Section 12.05 Successors and Assigns . . . . . . . . . . . . . . . . -54-
Section 12.06 Assignments and Participations . . . . . . . . . . . . -54-
Section 12.07 Invalidity . . . . . . . . . . . . . . . . . . . . . . -55-
Section 12.08 Counterparts . . . . . . . . . . . . . . . . . . . . . -55-
Section 12.09 References . . . . . . . . . . . . . . . . . . . . . . -55-
Section 12.10 Survival . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 12.11 Captions . . . . . . . . . . . . . . . . . . . . . . . -56-
Section 12.12 NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . . -56-
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . . . -56-
Section 12.14 Interest . . . . . . . . . . . . . . . . . . . . . . . -57-
Section 12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . -58-
ARTICLE 1
General Terms
Section 1 Terms Defined Above . . . . . . . . . . . . . . . . . D-1
Section 1.2 Certain Definitions . . . . . . . . . . . . . . . . . D-1
Section 1.3 Credit Agreement Definitions . . . . . . . . . . . . D-2
ARTICLE 2
The Guaranty
Section 2.1 Liabilities Guaranteed . . . . . . . . . . . . . . . D-2
Section 2.2 Nature of Guaranty . . . . . . . . . . . . . . . . . D-2
Section 2.3 Agent's Rights . . . . . . . . . . . . . . . . . . . D-3
Section 2.4 Guarantor's Waivers . . . . . . . . . . . . . . . . . D-3
Section 2.5 Maturity of Liabilities; Payment . . . . . . . . . . D-3
Section 2.6 Agent's Expenses . . . . . . . . . . . . . . . . . . D-3
Section 2.7 Liability . . . . . . . . . . . . . . . . . . . . . . D-4
Section 2.8 Events and Circumstances Not Reducing or Discharging
Guarantor's Obligations. . . . . . . . . . . . . . . . D-4
ARTICLE 3
Representations and Warranties
Section 3.1 By Guarantor . . . . . . . . . . . . . . . . . . . . . D-5
Section 3.2 No Representation by Agent . . . . . . . . . . . . . . D-6
ARTICLE 4
Subordination of Indebtedness
Section 4.1 Subordination of All Guarantor Claims . . . . . . . . . D-7
Section 4.2 Claims in Bankruptcy . . . . . . . . . . . . . . . . . D-7
Section 4.3 Payments Held in Trust . . . . . . . . . . . . . . . . D-7
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
ARTICLE 5
Miscellaneous
Section 5.1 Successors and Assigns . . . . . . . . . . . . . . . . D-7
Section 5.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . D-8
Section 5.3 Business and Financial Information . . . . . . . . . . D-8
Section 5.4 Construction . . . . . . . . . . . . . . . . . . . . . D-8
Section 5.5 Invalidity . . . . . . . . . . . . . . . . . . . . . . D-8
Section 5.6 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . D-8
</TABLE>
Annex I - List of Maximum Credit Amounts
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Guaranty
Exhibit E - Form of Assignment Agreement
Schedule I - Pricing Grid for Rowan Companies, Inc.
Annex I - Maximum Credit Amount
Schedule 7.14 - Environmental Matters
Schedule 9.06 - Investments, Loans and Advances
<PAGE> 7
THIS REVOLVING CREDIT AGREEMENT dated as of October 30, 1997 is among:
ROWAN COMPANIES, INC., a corporation formed under the laws of the State of
Delaware (the "Borrower"); each of the lenders that is a signatory hereto or
which becomes a signatory hereto as provided in Section 12.06 (individually,
together with its successors and assigns, a "Lender" and, collectively, the
"Lenders"); and Citibank, N.A., a national banking association (in its
individual capacity, "Citibank"), as administrative agent for the Lenders (in
such capacity, together with its successors in such capacity, the "Agent").
R E C I T A L S
A. The Borrower has requested that the Lenders provide certain loans to
the Borrower.
B. The Lenders have agreed to make such loans subject to the terms and
conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans and commitments hereinafter referred to, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Article I or
in other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Additional Costs" shall have the meaning assigned such term in
Section 5.01(a).
"Affected Loans" shall have the meaning assigned such term in Section
5.04.
"Affiliate" means any Person which, directly or indirectly, controls
or is controlled by or is under common control with another Person. For
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as
used with respect to any Person, means the power to direct or cause the
direction of the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities or by
contract or otherwise.
"Agent" shall have the meaning indicated in the introductory paragraph
of this Agreement.
<PAGE> 8
"Agreement" shall mean this Credit Agreement, as the same may from
time to time be amended or supplemented.
"Aggregate Commitments" at any time shall equal the amount calculated
in accordance with Section 2.03 hereof.
"Aggregate Maximum Credit Amounts" at any time shall equal the sum of
the Maximum Revolving Credit Amounts of the Lenders ($155,000,000.00), as
the same may be reduced pursuant to Section 2.03(b).
"Anniversary Date" means that date that is one year after the Closing
Date, and each date that is one year thereafter, up to but not including
the Termination Date.
"Applicable Lending Office" shall mean, for each Lender and for each
Type of Loan, the lending office of such Lender (or an Affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or
such other offices of such Lender (or of an Affiliate of such Lender) as
such Lender may from time to time specify to the Agent and the Borrower as
the office by which its Loans of such Type are to be made and maintained.
"Applicable Margin" means, for any Loan, the percentage per annum
applicable to such Interest Period for such Loan as shown in Schedule I
and being based on (a) the Type of Loan to which such Interest Period
relates (i.e., Base Rate Loans or Eurodollar Loans), and (b) the Rating
Level, which for the purposes of determining the Applicable Margin for
Eurodollar Loans shall be the Rating Level in effect on the first day of
such Interest Period.
"Assignment" shall have the meaning assigned such term in Section
12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan, for any
day, the highest 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; and
(b) the sum (adjusted to the nearest 1/16 of 1% or, if there is no
nearest 1/16 of 1%, to the next higher 1/16 of 1%) of (i) 1/2 of 1% per
annum, plus (ii) the rate obtained by dividing (A) 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 (adjusted to the
<PAGE> 9
basis of a year of 360 days) being determined weekly on each Monday (or, if
such date 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., by (B) a
percentage equal to 100% minus the average of the daily percentages
specified during such three-week period by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) for Citibank, N.A. with
respect to liabilities consisting of or including (among other liabilities)
three-month U.S. dollar non-personal time deposits in the United States,
plus (iii) the average during such three-week period of the annual
assessment rates estimated by Citibank, N.A. for determining the then
current annual assessment payable by Citibank, N.A. to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S. dollar deposits
of Citibank, N.A. in the United States; and
(c) 1/2 of one percent per annum above the Federal Funds Rate.
Each change in any interest rate provided for herein based upon the Base
Rate resulting from a change in the Base Rate shall take effect as of the
opening of business on the date of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Benefit Plan" shall mean any employee pension benefit plan, as
defined in section 3(2) of ERISA (other than a Multiemployer Plan), which
(i) is currently or hereafter sponsored, maintained, or contributed to by
the Borrower, any Subsidiary or an ERISA Affiliate or (ii) was at any time
during the preceding six calendar years sponsored, maintained or
contributed to by the Borrower, any Subsidiary, or an ERISA Affiliate.
"Borrower" shall have the meaning indicated in the introductory
paragraph of this Agreement.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in New York and, where such term
is used in the definition of "Quarterly Date" or if such day relates to a
borrowing or continuation of, a payment or prepayment of principal of or
interest on, or a conversion of or into, or the Interest Period for, a
Eurodollar Loan or a notice by the Borrower with respect to any
<PAGE> 10
such borrowing or continuation, payment, prepayment, conversion or Interest
Period, any day which is also a day on which dealings in Dollar deposits
are carried out in the London interbank market.
"Capital Lease" means a lease which should, in accordance with GAAP,
be recorded as a capital lease on the balance sheet of the lessee.
"Change of Control" means either (A) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), is or
becomes the "beneficial owner" (as such term is used in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of more than 50% of
the total voting power of the voting interests in the Borrower (including
all shares that such person or group has the right to acquire, whether such
right is exercisable immediately or only after a passage of time) or (B)
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Borrower
(together with any new directors whose election by the Board of Directors
or whose nomination for election by the stockholders of the Borrower was
approved by a vote of a majority of the directors of the Borrower then
still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved)
cease for any reason to constitute 66 2/3% of the Borrower's Board of
Directors then in office.
"Citibank" shall have the meaning indicated in the introductory
paragraph of this Agreement.
"Closing Date" shall mean October 30, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued
thereunder.
"Commitment" shall mean, for any Lender, its obligation to make Loans
up to such Lender's Maximum Credit Amount.
"Consolidated Net Income" shall mean with respect to the Borrower and
its Consolidated Subsidiaries, for any period, the aggregate of the net
income (or loss) of the Borrower and its Consolidated Subsidiaries after
allowances for taxes for such period, determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such net
income (to the extent otherwise included therein) the following: (i) the
net income of any Person in which the Borrower or any Consolidated
Subsidiary has an interest (which interest does not cause the net income of
such other Person to be consolidated with the net income of the Borrower
and its Consolidated Subsidiaries in accordance with GAAP), except to the
extent of the amount of dividends or distributions
<PAGE> 11
actually paid in such period by such other Person to the Borrower or to a
Consolidated Subsidiary, as the case may be; (ii) the net income (but not
loss) of any Consolidated Subsidiary to the extent that the declaration or
payment of dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the
terms of its charter or any agreement, instrument or Governmental
Requirement applicable to such Consolidated Subsidiary, or is otherwise
restricted or prohibited in each case determined in accordance with GAAP;
(iii) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (iv) any extraordinary gains or losses, including gains or
losses attributable to Property sales not in the ordinary course of
business; and (v) the cumulative effect of a change in accounting
principles and any gains or losses attributable to writeups or writedowns
of assets.
"Consolidated Net Tangible Assets" means total assets of the Borrower
and its Subsidiaries less (a) total current liabilities (excluding Debt due
within 12 months) of the Borrower and its Subsidiaries and (b) goodwill,
patents, trademarks, unamortized debt discount and similar intangibles all
as reflected in the most recent consolidated balance sheet of the Borrower
and its Subsidiaries preceding the date of a determination.
"Consolidated Subsidiaries" shall mean each Subsidiary of the Borrower
(whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated with the
financial statements of the Borrower in accordance with GAAP.
"Debt" means (without duplication), for any Person:
(i) the principal of, interest on and premium (if any) in respect of
(A) indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable (but excluding sight
drafts that evidence trade account payables arising in the ordinary course
of business);
(ii) all obligations of such Person under a Capital Lease;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
obligations under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit or
similar credit transactions securing obligations (other than obligations
<PAGE> 12
described in (i) through (iii) above) entered into in the ordinary course
of business of such Person, such as performance bonds or guarantees, to the
extent such letters of credit or similar credit transactions are not drawn
upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following receipt by such Person of a
demand for reimbursement following payment on such letter of credit or with
respect to such similar credit transaction);
(v) all obligations of the type referred to in Subsections (i)
through (iv) of other Persons and all dividends of other Persons the
payment of which, in either case, such Person is responsible or liable for
as obligor, guarantor or otherwise;
(vi) all obligations of the type referred to in Subsections (i)
through (v) of other Persons secured by any Lien on any property or asset
of such Person (whether or not such obligation is assumed by such Person),
the amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured;
(vii) any capital stock of such Person in which such Person has a
mandatory obligation to redeem such stock; and
(viii) any Debt of a subsidiary or any other Person for which such
Person is liable either by agreement or because of a Governmental
Requirement.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum of Consolidated Net
Income for such period plus the following expenses or charges to the extent
deducted from Consolidated Net Income in such period: interest, taxes based
on income or profits (to the extent included in calculating Consolidated
Net Income), depreciation, depletion and amortization.
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect that are binding on the
Borrower or any Subsidiary in any and all jurisdictions in which the
Borrower or any Subsidiary is conducting or at any time has conducted
business, or where any Property of the Borrower or any Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990
("OPA"), the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended,
the Federal Water Pollution Control Act, as
<PAGE> 13
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall have
the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the
terms "solid waste" and "disposal" (or "disposed") have the meanings
specified in RCRA; provided, however, that (i) in the event either OPA,
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date
of such amendment and (ii) to the extent the laws of the state in which any
Property of the Borrower or any Subsidiary is located establish a meaning
for "oil," "hazardous substance," "release," "solid waste" or "disposal"
which is broader than that specified in either OPA, CERCLA or RCRA, such
broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be
deemed to be a "single employer" within the meaning of section 4001(b)(1)
of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, other than those
events for which notice is waived pursuant to the regulations, (ii) the
withdrawal of the Borrower, any Subsidiary or any ERISA Affiliate from a
Plan during a plan year in which it was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA, (iii) the filing of a notice of intent to
terminate a Plan or the treatment of a Plan amendment as a termination
under Section 4041(c) of ERISA, (iv) the institution of proceedings to
terminate a Plan by the PBGC, (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan, or (vi) the complete
or partial withdrawal of the Borrower, a Subsidiary, or any ERISA Affiliate
from a Multiemployer Plan.
"Eurodollar Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of
"Eurodollar Rate".
<PAGE> 14
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan, the
rate per annum (rounded upwards, if necessary, to the nearest 1/32 of 1%)
shown on page 3750 of the Telerate screen, or if not shown thereon, then
quoted by the Agent, at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) two (2) Business Days prior to the first day of
the Interest Period for such Loan for the offering by the Agent to leading
banks in the London interbank market of Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the
principal amount of the Eurodollar Loan to be made by the Lenders for such
Interest Period.
"Event of Default" shall have the meaning assigned such term in
Section 10.01.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three federal funds brokers of recognized standing selected by
it.
"Fee Letter" shall mean that certain letter agreement from Citicorp
Securities, Inc. to the Borrower and agreed to by Citibank dated of even
date with this Agreement concerning certain fees in connection with this
Agreement and any agreements or instruments executed in connection
therewith, as the same may be amended or replaced from time to time.
"Financial Statements" shall mean the financial statement or
statements of the Borrower and its Consolidated Subsidiaries described or
referred to in Section 8.02.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" means any (domestic or foreign) federal,
state, county, municipal, parish, provincial, or other government, or any
department, commission, board, court, agency (including, without
limitation, the Environmental Protection Agency), or any other
instrumentality of any of them or any other political subdivision thereof,
and any entity exercising executive, legislative, judicial, regulatory, or
administrative functions of, or pertaining to, government, including,
without limitation, any arbitration panel, any court, or any commission.
<PAGE> 15
"Governmental Requirement" means any order, permit, law, statute
(including, without limitation, any Environmental Protection Statute),
code, ordinance, rule, regulation, certificate, or other enforceable
direction or requirement of any Governmental Authority.
"Guaranty" shall have the meaning assigned to such term in Section
9.02(c).
"Hazardous Materials" means (a) any "hazardous waste" as defined by
RCRA; (b) any "hazardous substance" as defined by CERCLA; (c) asbestos; (d)
polychlorinated biphenyls; (e) any substance the presence of which on any
of the Borrower's or any Subsidiary's Properties is prohibited by any
Governmental Authority; (f) petroleum, including crude oil and any fraction
thereof, natural gas liquids, liquefied natural gas, and synthetic gas
useable for fuel (or mixtures of natural gas and such synthetic gas); (g)
drilling fluids, produced waters and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or
geothermal energy; and (h) any other substance which, pursuant to any
Governmental Requirement, requires special handling in its collection,
storage, treatment, or disposal.
"Highest Lawful Rate" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Notes or on other Indebtedness under laws applicable to such Lender which
are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
"Indebtedness" shall mean any and all amounts owing or to be owing by
the Borrower to the Agent and/or Lenders in connection with the Loan
Documents now or hereafter arising between the Borrower and any Lender and
permitted by the terms of this Agreement and all renewals, extensions
and/or rearrangements of any of the above.
"Indemnified Parties" shall have the meaning assigned such term in
Section 12.03(b).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands
and causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or
nature whatsoever incurred by such Person whether caused by the sole or
concurrent negligence of such Person seeking indemnification, but excluding
gross negligence or willful misconduct.
<PAGE> 16
"Initial Funding" shall mean the funding of the initial Loans pursuant
to Section 6.01 hereof.
"Interest Coverage Ratio" shall have the meaning assigned to such term
in Section 9.11.
"Interest Period" shall mean, with respect to any Eurodollar Loan, the
period commencing on the date such Eurodollar Loan is made and ending on
the numerically corresponding day in the first, second, third or sixth
calendar month thereafter, as the Borrower may select as provided in
Section 2.02 (or such longer period as may be requested by the Borrower and
agreed to by the Majority Lenders), except that each Interest Period which
commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may end after
the Termination Date; (ii) each Interest Period which would otherwise end
on a day which is not a Business Day shall end on the next succeeding
Business Day (or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); and (iii)
no Interest Period shall have a duration of less than one month and, if the
Interest Period for any Eurodollar Loans would otherwise be for a shorter
period, such Loans shall not be available hereunder.
"Investment" of any Person means any investment so classified under
GAAP, and, whether or not so classified, includes (a) any direct or
indirect loan or advance made by it to any other Person, whether by means
of stock purchase, loan, advance, installment sale or otherwise; (b) any
capital contribution to any other Person; and (c) any ownership or similar
interest in any other Person.
"Lenders" shall have the meaning indicated in the introductory
paragraph of this Agreement.
"Lien" means any claim, mortgage, deed of trust, pledge, security
interest, encumbrance, lien, or charge of any kind (including, without
limitation, any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature thereof),
or the interest of the lessor under any Capital Lease.
"Loan Documents" shall mean this Agreement, the Notes, each Guaranty
and any document or instrument executed in connection with the foregoing.
<PAGE> 17
"Loans" shall mean the loans as provided for by Section 2.01(a) and
(b).
"Majority Lenders" shall mean, at any time while no Loans are
outstanding, Lenders having at least sixty-six and two-thirds percent (66-
2/3%) of the Aggregate Commitments and, at any time while Loans are
outstanding, Lenders holding at least sixty-six and two-thirds percent (66-
2/3%) of the outstanding aggregate principal amount of the Loans (without
regard to any sale by a Lender of a participation in any Loan under Section
12.06(c)).
"Material Adverse Effect" shall mean any material and adverse effect
on (i) the assets, financial condition, business, operations or affairs of
the Borrower and its Subsidiaries taken as a whole, or (ii) the ability of
the Borrower and its Subsidiaries taken as a whole to meet their
obligations under the Loan Documents on a timely basis.
"Maximum Credit Amount" shall mean, as to each Lender, the amount set
forth opposite such Lender's name on Annex I under the caption "Maximum
Credit Amounts" (as the same may be reduced pursuant to Section 2.03(b)
hereof pro rata to each Lender based on its Percentage Share) as modified
from time to time to reflect any assignments permitted by Section 12.06(b).
"Multiemployer Plan" shall mean a multiemployer plan as defined as
such in Section 3(37) or 4001(a)(3) of ERISA which is, or which the
preceding six calendar years was, contributed to by the Borrower, any
Subsidiary or an ERISA Affiliate.
"Notes" shall mean the Notes provided for by Section 2.06, together
with any and all renewals, extensions for any period, increases,
rearrangements, substitutions or modifications thereof.
"Other Taxes" shall have the meaning assigned such term in Section
4.06(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
Annex I hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b).
<PAGE> 18
"Permitted Liens" means:
(a) easements, rights-of-way, restrictions, and other similar Liens
or imperfections to title which do not materially interfere with the
occupation, use, and enjoyment by the Borrower or any Subsidiary of the
Property encumbered thereby or materially impair the value of such Property
subject thereto;
(b) deposits for workers' compensation and unemployment insurance;
(c) Liens arising out of or in connection with any litigation or
other legal proceeding which is being contested in good faith by
appropriate proceedings; provided however, that any right to seizure, levy,
attachment, sequestration, foreclosure, or garnishment with respect to
Property of the Borrower or any Subsidiary by reason of such Lien has not
matured or has been, and continues to be, effectively enjoined or stayed;
(d) leases to other Persons of equipment and inventory in the
ordinary course of business; and
(e) Liens on the Gorilla V drilling rig (or components or raw
materials to be incorporated therein) securing Debt up to an amount equal
to 87.5% of the total cost of construction of the Gorilla V drilling rig.
"Permitted Preferred Stock" means any preferred stock of Borrower
issued after the date of this agreement provided that the Borrower is not
required to redeem, purchase or otherwise acquire or retire such preferred
stock or to provide for any sinking fund with respect thereto until in each
case at least one year following the Termination Date.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"Plan" shall mean each Benefit Plan and Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan or any other amount payable by the Borrower under this Agreement or
any Note, a rate per annum during the period commencing on the date of an
Event of Default until such amount is paid in full or all Events of Default
are cured or waived equal to 2% per annum above the Base Rate as in effect
from time to time plus the Applicable Margin (if any), but in no event to
exceed the Highest Lawful Rate provided that, for a Eurodollar Loan, the
"Post-Default Rate" for such principal shall be, for the period commencing
on the date of the Event of Default and ending on the earlier
<PAGE> 19
to occur of the last day of the Interest Period therefor or the date all
Events of Default are cured or waived, 2% per annum above the interest rate
for such Loan as provided in Section 3.02(ii), but in no event to exceed
the Highest Lawful Rate.
"Principal Office" shall mean the principal office of the Agent,
presently located at 153 East 53rd Street, Floor 27, Zone 7, New York, New
York 10043, or such other location as designated by the Agent from time to
time.
"Property" means any interest or right in any kind of property or
asset, whether real, personal, or mixed, owned or leased, tangible or
intangible, and whether now held or hereafter acquired.
"Quarterly Dates" shall mean the last day of each March, June,
September, and December in each year, the first of which shall be December
31, 1997; provided, however, that if any such day is not a Business Day,
such Quarterly Date shall be the next succeeding Business Day.
"Rating Level" means the applicable category of rating level contained
in Schedule I hereto which is based on the rating of the Borrower's senior
unsecured long-term debt as classified by Moody's Investors Service, Inc.
and/or Standard & Poor's Rating Services and which shall be the highest
applicable Rating Level I, Rating Level II, Rating Level III, Rating Level
IV, Rating Level V or Rating Level VI, as the case may be, as set forth in
Schedule I, or, if no such rating is provided by Moody's Investors Services
or Standard & Poor's Rating Services, then the applicable rating level
based on the calculations of the ratio of Total Debt to Total
Capitalization in accordance with Section 9.11(a).
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as the same may be amended
or supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including
Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of lenders
(including such Lender or its Applicable Lending Office) of or under any
Governmental Requirement (whether or not having the force of law) by any
Governmental Authority charged with the interpretation or administration
thereof.
"Required Payment" shall have the meaning assigned such term in
Section 4.04.
<PAGE> 20
"Responsible Officer" shall mean, as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person and,
with respect to financial matters, the term "Responsible Officer" shall
include the Chief Financial Officer of such Person. Unless otherwise
specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of the Borrower.
"Restricted Payments" shall have the meaning assigned to such term in
Section 9.04.
"Sale-Leaseback Transaction" means an arrangement relation to Property
now owned or hereafter acquired whereby the Borrower or a Subsidiary
transfers such Property to a Person and leases it back from such Person.
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"Subsidiary" shall mean (i) any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and
(ii) any joint venture, limited liability company or partnership, general
or limited partnership or any other type of partnership or company other
than a corporation in which the Borrower or one or more of its other
Subsidiaries is a member, owner, partner or joint venturer and owns,
directly or indirectly, at least a majority of the equity of such entity or
controls such entity, but excluding any tax partnerships that are not
classified as partnerships under state law. For purposes of this
definition, any Person which owns directly or indirectly an equity
investment in another Person which allows the first Person to manage or
elect managers who manage the normal activities of such second Person will
be deemed to "control" such second Person (e.g. a sole general partner
controls a limited partnership). Unless otherwise indicated herein, each
reference to the term "Subsidiary" shall mean a Subsidiary of the Borrower.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Termination Date" shall mean, unless the Commitments are sooner
terminated pursuant to Sections 2.03(b) or 10.02 hereof, or extended
pursuant to Section 2.09, October 29, 2000.
<PAGE> 21
"Total Capitalization" shall have the meaning assigned to such term in
Section 9.11.
"Total Debt" shall have the meaning assigned to such term in Section
9.11.
"Transfer" shall have the meaning assigned to such term in Section
9.12.
"Type" shall mean, with respect to any Loan, a Base Rate Loan or a
Eurodollar Loan.
Section 1.02 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
audited financial statements of the Borrower referred to in Section 7.07
(except for changes concurred with by the Borrower's independent public
accountants).
ARTICLE II
COMMITMENTS
Section 2.01 Loans.
(a) Loans. Each Lender severally agrees, on the terms of this
Agreement, to make Loans to the Borrower during the period from and
including (i) the Closing Date or (ii) such later date that such Lender
becomes a party to this Agreement as provided in Section 12.06(b) to, but
excluding, the Termination Date in an aggregate principal amount at any one
time outstanding up to but not exceeding the amount of such Lender's
Commitment as then in effect; provided, however, that the aggregate
principal amount of all such Loans by all Lenders hereunder at any one time
outstanding shall not exceed the Aggregate Commitments. Subject to the
terms of this Agreement, during the period from the Closing Date to, but
excluding, the Termination Date the Borrower may borrow, repay and reborrow
the amount described in this Section 2.01(a).
(b) Limitation on Types of Loans. Subject to the other terms and
provisions of this Agreement, at the option of the Borrower, the Loans may
be Base Rate Loans or Eurodollar Loans; provided that, without the prior
written consent of the Majority Lenders, no more than nine (9) Eurodollar
Loans may be outstanding at any time.
<PAGE> 22
Section 2.02 Borrowings, Continuations and Conversions.
(a) Borrowings. The Borrower shall give the Agent (which shall
promptly notify the Lenders) advance notice as hereinafter provided of each
borrowing hereunder, which shall specify the aggregate amount of such
borrowing, the Type and the date (which shall be a Business Day) of the
Loans to be borrowed and (in the case of Eurodollar Loans) the duration of
the Interest Period therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings shall be in
amounts of at least $2,000,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $1,000,000 in excess
thereof, and all Eurodollar Loans shall be in amounts of at least
$5,000,000 or any whole multiple of $1,000,000 in excess thereof.
(c) Notices. All borrowings, continuations and conversions shall
require advance written notice to the Agent (which shall promptly notify
the Lenders) in the form of Exhibit B hereto (or telephonic notice promptly
confirmed by such a written notice), which in each case shall be
irrevocable, from the Borrower to be received by the Agent not later than
11:00 a.m. New York time on the date of each Base Rate Loan borrowing and
three Business Days prior to the date of each Eurodollar Loan borrowing,
continuation or conversion. Without in any way limiting the Borrower's
obligation to confirm in writing any telephonic notice, the Agent may act
without liability upon the basis of telephonic notice believed by the Agent
in good faith to be from the Borrower prior to receipt of written
confirmation.
(d) Continuation Options. Subject to the provisions of this Section
2.02(d), the Borrower may elect to continue all or any part of any
Eurodollar Loan beyond the expiration of the then current Interest Period
relating thereto by giving advance notice as provided in Section 2.02(c) to
the Agent (which shall promptly notify the Lenders) of such election,
specifying the amount of such Loan to be continued and the Interest Period
therefor. In the absence of such a timely and proper election, the
Borrower shall be deemed to have elected to convert such Eurodollar Loan to
a Base Rate Loan pursuant to Section 2.02(e). All or any part of any
Eurodollar Loan may be continued as provided herein, provided that (i) any
continuation of any such Loan shall be (as to each Loan as continued for an
applicable Interest Period) in amounts of at least $5,000,000 or any whole
multiple of $1,000,000 in excess thereof and (ii) no Default shall have
occurred and be continuing. If a Default shall have occurred and be
continuing, each Eurodollar Loan may (i) be converted to a Base Rate Loan
on the last day of the Interest Period applicable thereto or, if such
Default is not an Event of Default (ii) continued as a Eurodollar Loan with
an Interest Period of one month.
(e) Conversion Options. The Borrower may elect to convert all or
any part of any Eurodollar Loan on the last day of the then current
Interest Period relating thereto to a Base Rate Loan by giving advance
notice to the Agent (which shall promptly notify the Lenders) of such
election. Subject to the provisions
<PAGE> 23
made in this Section 2.02(e), the Borrower may elect to convert all or any
part of any Loan at any time and from time to time to a Eurodollar Loan by
giving advance notice as provided in Section 2.02(c) to the Agent (which
shall promptly notify the Lenders) of such election. All or any part of
any outstanding Loan may be converted as provided herein, provided that (i)
any conversion of any Loan into a Eurodollar Loan shall be (as to each
such Loan into which there is a conversion for an applicable Interest
Period) in amounts of at least $5,000,000 or any whole multiple of
$1,000,000 in excess thereof and (ii) no Default shall have occurred and be
continuing. If a Default shall have occurred and be continuing, no Base
Rate Loan may be converted into a Eurodollar Loan.
(f) Advances. Not later than 11:00 a.m. New York time on the date
specified for each borrowing hereunder, each Lender shall make available
the amount of the Loan to be made by it on such date to the Agent, to an
account which the Agent shall specify, in immediately available funds, for
the account of the Borrower. The amounts so received by the Agent shall,
subject to the terms and conditions of this Agreement, be made available to
the Borrower by depositing the same, in immediately available funds, in an
account of the Borrower, designated by the Borrower and maintained at the
Principal Office.
Section 2.03 Changes of Commitments.
(a) The Aggregate Commitments shall at all times be equal to the
Aggregate Maximum Credit Amounts after adjustments resulting from
reductions pursuant to Section 2.03(b) hereof.
(b) The Borrower shall have the right to terminate or to reduce the
amount of the Aggregate Maximum Credit Amounts at any time or from time to
time upon not less than three (3) Business Days' prior notice to the Agent
(which shall promptly notify the Lenders) of each such termination or
reduction, which notice shall specify the effective date thereof and the
amount of any such reduction (which shall not be less than $5,000,000 or
any whole multiple of $1,000,000 in excess thereof) and shall be
irrevocable and effective only upon receipt by the Agent.
(c) The Aggregate Maximum Credit Amounts once terminated or reduced
may not be reinstated.
Section 2.04 Fees.
(a) The Borrower shall pay to the Agent for the account of each
Lender a facility fee on the daily average amount of the Aggregate
Commitments (whether such commitments are used or not used) for the period
from and including the Closing Date up to but excluding the earlier of the
date the Aggregate Commitments are terminated or the Termination Date. The
rate per annum of the facility fee shall be determined as provided on
Schedule I based on the Rating Level in effect on the Closing Date and for
each calendar quarter thereafter shall
<PAGE> 24
be determined as provided in Schedule I based on the Rating Level in effect
on the first day of such quarter. Accrued facility fees shall be payable
quarterly in arrears on each Quarterly Date and on the earlier of the date
the Aggregate Commitments are terminated or the Termination Date.
(b) The Borrower shall pay to the Agent for its account (or the
account of Citibank Securities) such other fees as are set forth in the Fee
Letter on the dates specified therein to the extent not paid prior to the
Closing Date.
Section 2.05 Several Obligations. The failure of any Lender to make
any Loan to be made by it on the date specified therefor shall not relieve any
other Lender of its obligation to make its Loan on such date, but no Lender
shall be responsible for the failure of any other Lender to make a Loan to be
made by such other Lender.
Section 2.06 Notes. The Loans made by each Lender shall be evidenced
by a single promissory note of the Borrower in substantially the form of
Exhibit A hereto, dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Section 12.06(b), payable to the order of such Lender in
a principal amount equal to its Maximum Credit Amount as in effect and
otherwise duly completed and such substitute Notes as required by Section
12.06(b). The date, amount, Type, interest rate and Interest Period of each
Loan made by each Lender, and all payments made on account of the principal
thereof, shall be recorded by such Lender on its books for its Notes, and,
prior to any transfer, may be endorsed by such Lender on a schedule attached to
such Notes or any continuation thereof or on any separate record maintained by
such Lender. Failure to make any such notation or to attach a schedule shall
not affect any Lender's or the Borrower's rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of its Note.
Section 2.07 Prepayments.
(a) The Borrower may prepay the Base Rate Loans upon not less than
one (1) Business Day's prior notice to the Agent (which shall promptly
notify the Lenders), which notice shall specify the prepayment date (which
shall be a Business Day) and the amount of the prepayment (which shall be
at least $1,000,000 or the remaining aggregate principal balance
outstanding on the Notes) and shall be irrevocable and effective only upon
receipt by the Agent, provided that interest on the principal prepaid,
accrued to the prepayment date, shall be paid on the prepayment date. The
Borrower may prepay Eurodollar Loans on the same condition as for Base Rate
Loans and in addition such prepayments of Eurodollar Loans shall be subject
to the terms of Section 5.05 and shall be in an amount equal to all of the
Eurodollar Loans for the Interest Period prepaid.
(b) If, after giving effect to any termination or reduction of the
Aggregate Maximum Credit Amounts pursuant to Section 2.03(b), the
outstanding aggregate principal amount of the Loans exceeds the Aggregate
Maximum Credit Amounts, the Borrower shall prepay the Loans on the date of
<PAGE> 25
such termination or reduction in an aggregate principal amount equal to the
excess, together with interest on the principal amount paid accrued to the
date of such prepayment.
(c) Prepayments permitted or required under this Section 2.07 shall
be without premium or penalty, except as required under Section 5.05 for
prepayment of Eurodollar Loans. Any prepayment may be reborrowed subject
to the then effective Aggregate Commitments.
Section 2.08 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
Section 2.09 Extension of Termination Date.
(a) The Borrower may, if there is no Default in existence, from time
to time, by written notice delivered no more than 90 days and no less than
30 days prior to any Anniversary Date, request a one year extension of the
Termination Date.
(b) Upon receipt by the Agent of a written request in accordance
with Section 2.09(a) together with such information, certificates and
opinions (including opinions of counsel) as the Agent may request and the
written consent of all of the Lenders, the Termination Date shall be
extended for a period of one year; provided, however, that the decision of
the Agent and Lenders to extend the Termination Date may be made at their
sole and absolute discretion.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans. The Borrower will pay to the Agent,
for the account of each Lender, the principal payments required by this Section
3.01. On the Termination Date, the Borrower shall repay the outstanding
aggregate principal and accrued and unpaid interest under the Notes.
Section 3.02 Interest. The Borrower will pay to the Agent, for the
account of each Lender, interest on the unpaid principal amount of each Loan
made by such Lender for the period commencing on the date such Loan is made to
but excluding the date such Loan shall be paid in full, at the following rates
per annum:
(i) if such a Loan is a Base Rate Loan, the Base Rate (as in effect
from time to time) plus the Applicable Margin (as in effect from time to
time), but in no event to exceed the Highest Lawful Rate; and
<PAGE> 26
(ii) if such a Loan is a Eurodollar Loan, for each Interest Period
relating thereto, the Eurodollar Rate for such Loan plus the Applicable
Margin (as in effect from time to time), but in no event to exceed the
Highest Lawful Rate.
Notwithstanding the foregoing, the Borrower will pay to the Agent, for the
account of each Lender, interest at the applicable Post-Default Rate on any
principal of any Loan made by such Lender and (to the fullest extent permitted
by law) on any other amount payable by the Borrower hereunder, under any Loan
Document or under any Note held by such Lender to or for account of such
Lender, which shall not be paid in full when due (whether at stated maturity,
by acceleration or otherwise), for the period commencing on the due date
thereof until the same is paid in full.
Accrued interest on Base Rate Loans shall be payable on each Quarterly Date
commencing on December 31, 1997, and accrued interest on each Eurodollar Loan
shall be payable on the last day of the Interest Period therefor and, if such
Interest Period is longer than three months at three-month intervals following
the first day of such Interest Period, except that interest payable at the
Post-Default Rate shall be payable from time to time on demand and interest on
any Eurodollar Loan that is converted into a Base Rate Loan (pursuant to
Section 5.04) shall be payable on the date of conversion (but only to the
extent so converted).
Promptly after the determination of any interest rate provided for herein
or any change therein, the Agent shall notify the Lenders to which such
interest is payable and the Borrower thereof. Each determination by the Agent
of an interest rate or fee hereunder shall, except in cases of manifest error,
be final, conclusive and binding on the parties.
<PAGE> 27
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Borrower under the Loan Documents shall be made in Dollars, in immediately
available funds, to the Agent at such account as the Agent shall specify by
notice to the Borrower from time to time, not later than 11:00 a.m. New York
time on the date on which such payments shall become due (each such payment
made after such time on such due date to be deemed to have been made on the
next succeeding Business Day). Such payments shall be made without (to the
fullest extent permitted by applicable law) defense, set-off or counterclaim.
Each payment received by the Agent under this Agreement or any Note for account
of a Lender shall be paid promptly to such Lender in immediately available
funds. Except as provided in clause (iii) of the definition of "Interest
Period", if the due date of any payment under this Agreement or any Note would
otherwise fall on a day which is not a Business Day such date shall be extended
to the next succeeding Business Day and interest shall be payable for any
principal so extended for the period of such extension. At the time of each
payment to the Agent of any principal of or interest on any borrowing, the
Borrower shall notify the Agent of the Loans to which such payment shall apply.
In the absence of such notice the Agent may specify the Loans to which such
payment shall apply, but payment or prepayment will be applied first to the
Loans comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein each Lender agrees that: (i) each borrowing from the Lenders
under Section 2.01 and each continuation and conversion under Section 2.02
shall be made from the Lenders pro rata in accordance with their Percentage
Share, each payment of commitment fee or other fees under Section 2.04(a) (but
not (b)) shall be made for account of the Lenders pro rata in accordance with
their Percentage Share, and each termination or reduction of the amount of the
Aggregate Maximum Credit Amounts under Section 2.03(b) shall be applied to the
Commitment of each Lender, pro rata according to the amounts of its respective
Commitment; (ii) each payment of principal of Loans by the Borrower shall be
made for account of the Lenders pro rata in accordance with the respective
unpaid principal amount of the Loans held by the Lenders; and (iii) each
payment of interest on Loans by the Borrower shall be made for account of the
Lenders pro rata in accordance with the amounts of interest due and payable to
the respective Lenders.
Section 4.03 Computations. Interest on Eurodollar Loans and fees
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period
for which such interest is payable, unless such calculation would exceed the
Highest Lawful Rate, in which case interest shall be calculated on the per
annum basis of a year of 365 or 366 days, as the case may be. Interest on Base
Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but excluding the
last day) occurring in the period for which such interest is payable.
<PAGE> 28
Section 4.04 Non-receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Lender or the Borrower prior to the date on which
such notifying party is scheduled to make payment to the Agent (in the case of
a Lender) of the proceeds of a Loan to be made by it hereunder or (in the case
of the Borrower) a payment to the Agent for account of one or more of the
Lenders hereunder (such payment being herein called the "Required Payment"),
which notice shall be effective upon receipt, that it does not intend to make
the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date and, if such Lender or the Borrower (as the case may be) has not
in fact made the Required Payment to the Agent, the recipient(s) of such
payment shall, on demand, repay to the Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date such amount was so made available by the Agent until but
excluding the date the Agent recovers such amount at a rate per annum which,
for any Lender as recipient, will be equal to the Federal Funds Rate, and for
the Borrower as recipient, will be equal to the Base Rate plus Applicable
Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Lender may
otherwise have, each Lender shall have the right and be entitled (after
consultation with the Agent), at its option, to offset balances held by it
or by any of its Affiliates for account of the Borrower (or any Subsidiary
which has executed a Guaranty) at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such
Lender's Loans, or any other amount payable to such Lender hereunder, which
is not paid to the Agent when due (regardless of whether such balances are
then due to the Borrower), in which case it shall promptly notify the
Borrower and the Agent thereof, provided that such Lender's failure to give
such notice shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to the Borrower under this Agreement
through the exercise of any right of set-off, banker's lien or counterclaim
or similar right or otherwise, and, as a result of such payment, such
Lender shall have received a greater percentage of the principal or
interest then due hereunder by the Borrower to such Lender than the
percentage received by any other Lenders, it shall promptly (i) notify the
Agent and each other Lender thereof and (ii) purchase from such other
Lenders participations in (or, if and to the extent specified by such
Lender, direct interests in) the Loans made by such other Lenders (or in
interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that
all the Lenders shall share the benefit of such excess payment (net of any
expenses which may be incurred by such Lender in obtaining or preserving
such excess payment) pro rata in accordance with the unpaid principal
and/or interest on the Loans held by each of the Lenders. To such end all
the Lenders shall make appropriate adjustments
<PAGE> 29
among themselves (by the resale of participations sold or otherwise) if
such payment is rescinded or must otherwise be restored. The Borrower
agrees that any Lender so purchasing a participation (or direct interest)
in the Loans made by other Lenders (or in interest due thereon, as the case
may be) may exercise all rights of set-off, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such
Lender were a direct holder of Loans in the amount of such participation.
Nothing contained herein shall require any Lender to exercise any such
right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Borrower. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a set-off to which this Section 4.05 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders
entitled under this Section 4.05 to share the benefits of any recovery on
such secured claim.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 4.01, free and clear of
and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, taxes
imposed on its income, and franchise or similar taxes imposed on it, by (i)
any jurisdiction (or political subdivision thereof) of which the Agent or
such Lender, as the case may be, is a citizen or resident or in which such
Lender has an Applicable Lending Office, (ii) the jurisdiction (or any
political subdivision thereof) in which the Agent or such Lender is
organized, or (iii) any jurisdiction (or political subdivision thereof) in
which such Lender or the Agent is presently doing business in which taxes
are imposed solely as a result of doing business in such jurisdiction (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Lenders or the Agent (i) the sum payable shall be
increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section 4.06) such Lender or the Agent (as the case may be)
shall receive an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
taxing authority or other Governmental Authority in accordance with
applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted by
applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or
<PAGE> 30
registration of, or otherwise with respect to, this Agreement, any
Assignment (hereinafter referred to as "Other Taxes").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE AGENT FOR THE FULL
AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES
OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE
UNDER THIS SECTION 4.06) PAID BY SUCH LENDER OR THE AGENT (ON THEIR BEHALF
OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH
RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR
LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR
LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS
THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT
PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS
AFTER THE DATE ANY LENDER OR THE AGENT, AS THE CASE MAY BE, MAKES WRITTEN
DEMAND THEREFOR. IF ANY LENDER OR THE AGENT RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER OR THE AGENT HAS
RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF
SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS
CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE
BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER HAS REQUESTED
APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL
TO SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT INTEREST (BUT WITH ANY
INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT THE BORROWER, UPON THE
REQUEST OF SUCH LENDER OR THE AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT
(PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE AGENT IN
THE EVENT SUCH LENDER OR THE AGENT IS REQUIRED TO REPAY SUCH REFUND OR
CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (1) a corporation
or banking association organized under the laws of the United States
of America or any state thereof or (2) it is entitled to complete
exemption from United States withholding tax imposed on or with
respect to any payments, including fees, to be made to it pursuant to
this Agreement (A) under an applicable provision of a tax convention
to which the United States of America is a party or (B) because it is
acting through a branch, agency or office in the United States of
America and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States of America.
Each Lender that is not a corporation or banking association organized
under the laws of the United States of America or any state thereof
agrees to provide to the Borrower and the
<PAGE> 31
Agent on the Closing Date, or on the date of its delivery of the
Assignment pursuant to which it becomes a Lender, and at such other
times as required by United States law or as the Borrower or the Agent
shall reasonably request, two accurate and complete original signed
copies of either (A) Internal Revenue Service Form 4224 (or successor
form) certifying that all payments to be made to it hereunder will be
effectively connected to a United States trade or business (the "Form
4224 Certification") or (B) Internal Revenue Service Form 1001 (or
successor form) certifying that it is entitled to the benefit of a
provision of a tax convention to which the United States of America is
a party which completely exempts from United States withholding tax
all payments to be made to it hereunder (the "Form 1001
Certification"). In addition, each Lender agrees that if it
previously filed a Form 4224 Certification, it will deliver to the
Borrower and the Agent a new Form 4224 Certification prior to the
first payment date occurring in each of its subsequent taxable years;
and if it previously filed a Form 1001 Certification, it will deliver
to the Borrower and the Agent a new certification prior to the first
payment date falling in the third year following the previous filing
of such certification. Each Lender also agrees to deliver to the
Borrower and the Agent such other or supplemental forms as may at any
time be required as a result of changes in applicable law or
regulation in order to confirm or maintain in effect its entitlement
to exemption from United States withholding tax on any payments
hereunder, provided that the circumstances of such Lender at the
relevant time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to submit any
form or certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any such
form or certificate previously submitted, it shall promptly notify the
Borrower and the Agent of such fact. If a Lender is organized under
the laws of a jurisdiction outside the United States of America,
unless the Borrower and the Agent have received a Form 1001
Certification or Form 4224 Certification satisfactory to them
indicating that all payments to be made to such Lender hereunder are
not subject to United States withholding tax, the Borrower shall
withhold taxes from such payments at the applicable statutory rate.
Each Lender agrees to indemnify and hold harmless the Borrower or
Agent, as applicable, from any United States taxes, penalties,
interest and other expenses, costs and losses incurred or payable by
(i) the Agent as a result of such Lender's failure to submit any form
or certificate that it is required to provide pursuant to this Section
4.06 or (ii) the Borrower or the Agent as a result of their reliance
on any such form or certificate which such Lender has provided to them
pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender has failed
to provide the Borrower with the form required pursuant to this Section
4.06, if any, (other than if such failure is due to a change in a
<PAGE> 32
Governmental Requirement occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under this Section 4.06 with respect to
taxes imposed by the United States which taxes would not have been
imposed but for such failure to provide such forms; provided, however,
that should a Lender, which is otherwise exempt from or subject to a
reduced rate of withholding tax becomes subject to taxes because of its
failure to deliver a form required hereunder, the Borrower shall take
such steps as such Lender shall reasonably request to assist such
Lender to recover such taxes.
(iii) Any Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or
document requested by the Borrower or the Agent or to change the
jurisdiction of its Applicable Lending Office or to contest any tax
imposed if the making of such a filing or change or contesting such
tax would avoid the need for or reduce the amount of any such
additional amounts that may thereafter accrue and would not, in the
sole determination of such Lender, be otherwise disadvantageous to
such Lender.
<PAGE> 33
ARTICLE V
CAPITAL ADEQUACY
Section 5.01 Capital Adequacy; Additional Costs.
(a) Eurodollar Regulations, etc. Upon receipt of the notice
described below, the Borrower shall pay directly to each Lender from time
to time such amounts as such Lender may determine to be necessary to
compensate such Lender for any costs which it determines are attributable
to its making or maintaining of any Eurodollar Loans hereunder or its
obligation to make any Eurodollar Loans hereunder, or any reduction in any
amount receivable by such Lender hereunder in respect of any of such
Eurodollar Loans or such obligation (such increases in costs and reductions
in amounts receivable being herein called "Additional Costs"), in all such
cases which result from any Regulatory Change which: (i) changes the basis
of taxation of any amounts payable to such Lender under this Agreement or
any Note in respect of any of such Eurodollar Loans (other than taxes
imposed on the overall net income of such Lender or of its Applicable
Lending Office for any of such Eurodollar Loans by the jurisdiction in
which such Lender has its principal office or Applicable Lending Office);
or (ii) imposes or modifies any reserve, special deposit, minimum capital,
capital ratio or similar requirements relating to any extensions of credit
or other assets of, or any deposits with or other liabilities of such
Lender, or the Commitment or Loans of such Lender or the Eurodollar
interbank market; or (iii) imposes any other condition affecting this
Agreement or any Note (or any of such extensions of credit or liabilities)
or such Lender's Commitment or Loans. Each Lender will notify the Agent
and the Borrower in writing of any event occurring after the Closing Date
which will entitle such Lender to compensation pursuant to this Section
5.01(a) as promptly as practicable and in any event within 120 days after
it obtains knowledge thereof, and will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, provided that such Lender shall have no
obligation to so designate an Applicable Lending Office located in the
United States. If any Lender requests compensation from the Borrower under
this Section 5.01(a), the Borrower may, by notice to such Lender, suspend
the obligation of such Lender to make additional Loans of the Type with
respect to which such compensation is requested until the Regulatory Change
giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.04 shall be applicable).
(b) Regulatory Change. Without limiting the effect of the
provisions of Section 5.01(a), in the event that, by reason of any
Regulatory Change or any other circumstances arising after the Closing Date
affecting such Lender, the Eurodollar interbank market or such Lender's
position in such market, any Lender either (i) incurs Additional Costs
based on or measured by the excess above a specified level of the amount of
a category of deposits or other liabilities of such
<PAGE> 34
Lender which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category
of extensions of credit or other assets of such Lender which includes
Eurodollar Loans or (ii) becomes subject to restrictions on the amount of
such a category of liabilities or assets which it may hold, then, if such
Lender so elects by written notice to the Borrower, the obligation of such
Lender to make additional Eurodollar Loans shall be suspended until such
Regulatory Change or other circumstances ceases to be in effect (in which
case the provisions of Section 5.04 shall be applicable).
(c) Capital Adequacy. Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Borrower
shall pay directly to any Lender from time to time on written notice such
amounts as such Lender may reasonably determine to be necessary to
compensate such Lender or its parent or holding company for any costs which
it determines are attributable to the maintenance by such Lender or its
parent or holding company (or any Applicable Lending Office), pursuant to
any Governmental Requirement following any Regulatory Change, of capital in
respect of its Commitment, its Note or its Loans, such compensation to
include, without limitation, an amount equal to any reduction of the rate
of return on assets or equity of such Lender or its parent or holding
company (or any Applicable Lending Office) to a level below that which such
Lender or its parent or holding company (or any Applicable Lending Office)
could have achieved but for such Governmental Requirement. Such Lender
will notify the Borrower in writing that it is entitled to compensation
pursuant to this Section 5.01(c) as promptly as practicable after it
determines to request such compensation but in all events within 120 days
of the effective date of such Regulatory Change.
(d) Compensation Procedure. Any Lender notifying the Borrower of
the incurrence of Additional Costs under this Section 5.01 shall in such
written notice to the Borrower and the Agent set forth in reasonable detail
the basis and amount of its request for compensation and indicate that such
compensation is generally being charged to other similarly situated
customers as permitted pursuant to their loan documents. Determinations
and allocations by each Lender for purposes of this Section 5.01 of the
effect of any Regulatory Change pursuant to Section 5.01(a) or (b), or of
the effect of capital maintained pursuant to Section 5.01(c), on its costs
or rate of return of maintaining Loans or its obligation to make Loans, or
on amounts receivable by it in respect of Loans and of the amounts required
to compensate such Lender under this Section 5.01, shall be made on a
reasonable basis. Any request for additional compensation under this
Section 5.01 shall be paid by the Borrower within thirty (30) days of the
receipt by the Borrower of the notice described in this Section 5.01(d).
Section 5.02 Limitation on Eurodollar Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate for any Interest Period:
<PAGE> 35
(i) the Agent determines (which determination shall be conclusive,
absent manifest error) that quotations of interest rates for the relevant
deposits referred to in the definition of "Eurodollar Rate" in Section 1.02
are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(ii) the Agent determines (which determination shall be conclusive,
absent manifest error) that the relevant rates of interest referred to in
the definition of "Eurodollar Rate" in Section 1.02 upon the basis of which
the rate of interest for Eurodollar Loans for such Interest Period is to be
determined are not sufficient to adequately cover the cost to the Lenders
of making or maintaining Eurodollar Loans;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Loans.
Section 5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain
Eurodollar Loans hereunder, then such Lender shall promptly notify the Borrower
thereof and such Lender's obligation to make Eurodollar Loans shall be
suspended until such time as such Lender may again make and maintain Eurodollar
Loans (in which case the provisions of Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and
5.03. If the obligation of any Lender to make Eurodollar Loans shall be
suspended pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all
Affected Loans which would otherwise be made by such Lender shall be made
instead as Base Rate Loans (and, if an event referred to in Section 5.01(b) or
Section 5.03 has occurred and such Lender so requests by written notice to the
Borrower, all Affected Loans of such Lender then outstanding shall be
automatically converted into Base Rate Loans on the date specified by such
Lender in such notice) and, to the extent that Affected Loans are so made as
(or converted into) Base Rate Loans, all payments of principal which would
otherwise be applied to such Lender's Affected Loans shall be applied instead
to its Base Rate Loans. Each Lender agrees to use reasonable commercial
efforts to minimize any Additional Costs incurred in connection with the
conversion of any Affected Loans to Base Rate Loans.
Section 5.05 Compensation. The Borrower shall pay to each Lender
within thirty (30) days of receipt of written request of such Lender (which
request shall set forth, in reasonable detail, the basis for requesting such
amounts and which shall be conclusive and binding for all purposes provided
that such determinations are made on a reasonable basis), such amount or
amounts as shall compensate it for any loss, cost, expense or liability which
such Lender determines are attributable to:
<PAGE> 36
(i) any payment, prepayment or conversion of a Eurodollar Loan
properly made by such Lender or the Borrower for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section
10.02) on a date other than the last day of the Interest Period for such
Loan; or
(ii) any failure by the Borrower for any reason other than a reason
within the control of any Lender (including but not limited to, the failure
of any of the conditions precedent specified in Article VI to be satisfied)
to borrow, continue or convert a Eurodollar Loan from such Lender on the
date for such borrowing, continuation or conversion specified in the
relevant notice given pursuant to Section 2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Eurodollar Loan (or, in the case of a failure to borrow, the Interest Period
for such Loan which would have commenced on the date specified for such
borrowing) at the applicable rate of interest for such Eurodollar Loan provided
for herein over (ii) the interest component of the amount such Lender would
have bid in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Lender).
Section 5.06 Replacement Lenders.
(a) If any Lender has notified the Borrower and the Agent under
Section 5.01 hereof or has required the Borrower to make payments for Taxes
under Section 4.06 hereof, then the Borrower may, unless such Lender has
notified the Borrower and the Agent that the circumstances giving rise to
such notice no longer apply, terminate, in whole but not in part, the
Commitment of any Lender (other than the Agent) (the "Terminated Lender")
at any time upon five (5) Business Days' prior written notice to the
Terminated Lender and the Agent (such notice referred to herein as a
"Notice of Termination").
(b) In order to effect the termination of the Commitment of the
Terminated Lender, the Borrower shall: (i) obtain an agreement with one or
more Lenders to increase their Commitment or Commitments and/or (ii)
request any one or more other banking institutions to become parties to
this Agreement in place and instead of such Terminated Lender and agree to
accept a Commitment or Commitments; provided, however, that such one or
more other banking institutions are reasonably acceptable to the Agent and
become parties by executing an Assignment (the Lenders or other banking
institutions that agree to accept in whole or in part the Commitment of the
Terminated Lender being referred to herein as the "Replacement Lenders"),
such that the aggregate
<PAGE> 37
increased and/or accepted Commitments of the Replacement Lenders under
clauses (i) and (ii) above equal the Commitment of the Terminated Lender.
(c) The Notice of Termination shall include the name of the
Terminated Lender, the date the termination will occur (the "Termination
Date"), and the Replacement Lender or Replacement Lenders to which the
Terminated Lender will assign its Commitment and, if there will be more
than one Replacement Lender, the portion of the Terminated Lender's
Commitment to be assigned to each Replacement Lender.
(d) On the Termination Date, (i) the Terminated Lender shall by
execution and delivery of an Assignment assign its Commitment to the
Replacement Lender or Replacement Lenders (pro rata, if there is more than
one Replacement Lender, in proportion to the portion of the Terminated
Lender's Commitment to be assigned to each Replacement Lender) indicated in
the Notice of Termination and shall assign to the Replacement Lender or
Replacement Lenders each of its Loans (if any) then outstanding pro rata as
aforesaid), (ii) the Terminated Lender shall endorse its Note[s], payable
without recourse, representation or warranty to the order of the
Replacement Lender or Replacement Lenders (pro rata as aforesaid), (iii)
the Replacement Lender or Replacement Lenders shall purchase the Note[s]
held by the Terminated Lender (pro rata as aforesaid) at a price equal to
the unpaid principal amount thereof plus interest and facility and other
fees accrued and unpaid to the Termination Date, and (iv) the Replacement
Lender or Replacement Lenders will thereupon (pro rata as aforesaid)
succeed to and be substituted in all respects for the Terminated Lender
with like effect as if becoming a Lender pursuant to the terms of Section
12.06(b), and the Terminated Lender will have the rights and benefits of an
assignor under Section 12.06(b). To the extent not in conflict, the terms
of Section 12.06(b) shall supplement the provisions of this Section
5.06(d). For each assignment made under this Section 5.06, the Replacement
Lender shall pay to the Agent the processing fee provided for in Section
12.06(b). The Borrower will be responsible for the payment of any breakage
costs associated with termination and Replacement Lenders, as set forth in
Section 5.05.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding.
The obligation of the Lenders to make the Initial Funding is subject
to the receipt by the Agent and the Lenders of all fees payable pursuant to
Section 2.04 on or before the Closing Date and the receipt by the Agent of the
following documents and satisfaction of the other conditions provided in this
Section 6.01, each of which shall be satisfactory to the Agent in form and
substance:
<PAGE> 38
(a) A certificate of the Secretary or an Assistant Secretary of the
Borrower setting forth (i) resolutions of its board of directors with
respect to the authorization of the Borrower to execute and deliver the
Loan Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of the Borrower (y) who
are authorized to sign the Loan Documents to which Borrower is a party and
(z) who will, until replaced by another officer or officers duly authorized
for that purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the certificate of
incorporation and bylaws of the Borrower, certified as being true and
complete. The Agent and the Lenders may conclusively rely on such
certificate until the Agent receives notice in writing from the Borrower to
the contrary.
(b) Certificates of the appropriate state agencies with respect to
the existence, qualification and good standing of the Borrower.
(c) A compliance certificate which shall be substantially in the
form of Exhibit C, duly and properly executed by a Responsible Officer and
dated as of the Closing Date.
(d) The Credit Agreement and the Notes, duly completed and executed.
(e) An opinion of Andrews & Kurth L.L.P., special counsel to the
Borrower.
(f) Payment by the Borrower of the fees provided in Section 2.04.
(g) Such other documents as the Agent or any Lender or special
counsel to the Agent may reasonably request.
Section 6.02 Initial and Subsequent Loans. The obligation of the
Lenders to make Loans to the Borrower upon the occasion of each borrowing
hereunder (including the Initial Funding) is subject to the further conditions
precedent that, as of the date of such Loans and after giving effect thereto:
(i) no Default shall have occurred and be continuing; (ii) no Material Adverse
Effect shall have occurred; and (iii) the representations and warranties made
by the Borrower in Article VII and in the compliance certificates shall be true
on and as of the date of the making of such Loans with the same force and
effect as if made on and as of such date and following such new borrowing,
except to the extent such representations and warranties are expressly limited
to an earlier date or the Majority Lenders may expressly consent in writing to
the contrary. Each request for a borrowing by the Borrower hereunder shall
constitute a certification by the Borrower to the effect set forth in the
preceding sentence (both as of the date of such notice and, unless the Borrower
otherwise notifies the Agent prior to the date of such borrowing and
immediately following such borrowing as of the date thereof).
<PAGE> 39
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders that
(each representation and warranty herein is given as of the Closing Date and
shall be deemed repeated and reaffirmed on the dates of each borrowing as
provided in Section 6.02):
Section 7.01 Existence. Each of the Borrower and each Subsidiary is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction in which it is organized and is duly qualified or licensed to do
business in all jurisdictions where the Property owned or the business
transacted by it makes such qualification necessary and where the failure to be
so qualified would have a Material Adverse Effect.
Section 7.02 Power and Authorization. The Borrower is duly authorized and
empowered to execute, deliver, and perform its obligations under the Loan
Documents, and all corporate or other action on the Borrower's part requisite
for the due execution, delivery, and performance of each Loan Document has been
duly and effectively taken. The Borrower is duly authorized and empowered to
borrow under this Agreement and the Notes and all corporate action on the
Borrower's part requisite for borrowing by the Borrower hereunder has been duly
and effectively taken.
Section 7.03 No Conflict or Resultant Lien. The execution, delivery, and
performance by the Borrower of each Loan Document, the Loans hereunder by the
Borrower as contemplated herein, and the effectuation of the transactions
contemplated by any Loan Document, do not and will not violate any provision
of, or result in a default under, the Borrower's Certificate of Incorporation
or other charter documents or by-laws or any material agreement or Governmental
Requirement or any agreement or instrument to which the Borrower is a party or
by which it is bound or to which it or its Properties are subject, or
constitute a default under any such agreement or instrument or result in the
creation or imposition of any Lien upon any Property of the Borrower. No
Default or Event of Default has occurred and is continuing.
Section 7.04 Compliance with Other Agreements. Neither the Borrower nor
any Subsidiary is in default under the provisions of any instrument evidencing
any Debt or any other liability contingent or otherwise, or of any agreement
relating thereto or under any Governmental Requirement, which default could
have a Material Adverse Effect.
Section 7.05 No Consent. Except for those that are not material, no
authorization or approval or other action by, and no notice to or filing with,
any Person or any Governmental Authority is required for the due execution,
delivery, and performance by the Borrower of any Loan Document, the Loans
hereunder as contemplated herein, or the effectuation of the transactions
contemplated under any Loan Document.
Section 7.06 Binding Obligations. Each Loan Document will constitute,
when delivered hereunder, the legal, valid, and binding obligation of such
Person enforceable against such Person in accordance with its respective terms,
except as such enforceability
<PAGE> 40
may be (a) limited by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
enforcement of creditor's rights generally, and (b) subject to the effect of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at equity or at law).
Section 7.07 Financial Condition. The certified consolidated audited
balance sheet of the Borrower and its Consolidated Subsidiaries as at December
31, 1996, and the related consolidated statements of income and stockholder's
equity and cash flow statements of the Borrower and its Subsidiaries for the
fiscal quarterly periods ending March 31, 1997, and June 30, 1997, in each case
certified by a Responsible Officer of the Borrower, copies of which have been
furnished to each of the Lenders, have been prepared in accordance with GAAP
and in accordance with the Borrower's and each Consolidated Subsidiary's
accounting practices consistently applied and fairly present the financial
condition of the Borrower and its Consolidated Subsidiaries as at such date and
the results of the operations of the Borrower and its Consolidated Subsidiaries
for the period ended on such date, all in accordance with GAAP. Since
December 31, 1996, there has been no material adverse change in the financial
condition, business, Properties or operations of Borrower and its Consolidated
Subsidiaries, taken as a whole. There are no obligations, liabilities, or
Debts (including, without limitation, contingent and indirect liabilities and
obligations) of the Borrower which (separately or in the aggregate) have not
been disclosed in writing to the Lenders and which could have a Material
Adverse Effect.
Section 7.08 Litigation. There are no actions, suits, or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Subsidiary, or the Properties of the Borrower or any
Subsidiary, which if adversely determined, are reasonably likely, in the
judgment of the Borrower, to have a Material Adverse Effect or which question
the validity of any Loan Document.
Section 7.09 Use of Proceeds; Margin Stock. The proceeds of the Loans
will be used by the Borrower to refinance existing indebtedness and for general
corporate purposes consistent with Borrower's requirements and obligations
under this Agreement. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock, and no proceeds
of any Loan will be used (a) to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock;
(b) to reduce or retire any Debt which was originally incurred to purchase or
carry any such margin stock; (c) for any other purpose which might constitute
this transaction a "purpose credit" within the meaning of Regulation G, T, U,
or X of the Board of Governors of the Federal Reserve System; or (d) to acquire
any security of any Person who is subject to Sections 13 and 14 of the
Securities Exchange Act. Neither the Borrower nor any Subsidiary, nor any
Person acting on behalf of the Borrower, has taken or will take any action
which might cause any Loan Document to violate Regulation G, T, U, or X or any
other regulation of the Board of Governors of the Federal Reserve System.
Section 7.10 Taxes; Governmental Charges. The Borrower and each
Subsidiary has filed or caused to be filed all federal, state, and foreign
income tax returns which are required to be filed, and has paid or caused to be
paid all taxes as shown on such returns
<PAGE> 41
or on any assessment received by it to the extent that such taxes have become
due and which, if unpaid, might become a Lien upon any Property of the
Borrower or any Subsidiary, except for such taxes and assessments as are being
contested in good faith and reserved for in accordance with GAAP in the manner
required by Section 8.03.
Section 7.11 Titles. Each of the Borrower and each Subsidiary has good
and indefeasible title to its Properties, a defect in which would have a
Material Adverse Effect, free and clear of all Liens, except Liens permitted by
Section 9.01.
Section 7.12 Full Disclosure. All projections delivered in connection
with this Agreement have been prepared in good faith and based upon reasonable
assumptions and all other information heretofore or contemporaneously furnished
by or on behalf of the Borrower or any Subsidiary in writing to the Lenders for
purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all other such information hereafter furnished by
or on behalf of the Borrower or any Subsidiary in writing to the Lender will
be, (i) true and accurate in all material respects on the date as of which such
information is dated or certified and (ii) not incomplete by omitting to state
any material fact necessary to make such information not misleading in light of
the circumstances under which such information was provided. There is no fact
known to the Borrower which is reasonably likely to have a Material Adverse
Effect, which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Lenders for use in connection with
the transactions contemplated hereby.
Section 7.13 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.14 Environmental Matters. Except (i) as provided in Schedule
7.14 or (ii) as would not have a Material Adverse Effect (or with respect to
(c), (d) and (e) below, where the failure to take such actions would not have a
Material Adverse Effect):
(a) Neither any Property of the Borrower or any Subsidiary nor the
operations conducted thereon violate any order or requirement of any court
or Governmental Authority or any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of the
Borrower or any Subsidiary nor the operations currently conducted thereon
or, to the knowledge of the Borrower, by any prior owner or operator of
such Property or operation, are in violation of or subject to any existing,
pending or threatened action, suit, investigation, inquiry or proceeding by
or before any court or Governmental Authority or to any remedial
obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed in connection with the operation or
use of any and all Property of the Borrower and each Subsidiary, including
without limitation past, to the knowledge of Borrower, or present
treatment, storage, disposal or release of a hazardous substance or solid
waste into the environment, have been
<PAGE> 42
duly obtained or filed, and the Borrower and each Subsidiary are in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated by Borrower or its
Subsidiaries at any and all Property of the Borrower or any Subsidiary have
in the past, to the knowledge of Borrower, been transported, treated and
disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the knowledge of the Borrower, all such transport
carriers and treatment and disposal facilities have been and are operating
in compliance with Environmental Laws and to the knowledge of the Borrower
so as not to pose an imminent and substantial endangerment to public health
or welfare or the environment, and are not the subject of any existing,
pending or to the knowledge of the Borrower threatened action,
investigation or inquiry by any Governmental Authority in connection with
any Environmental Laws;
(e) The Borrower has investigated and to the extent of such
investigation, has determined that no hazardous substances, solid waste, or
oil and gas exploration and production wastes, have been disposed of or
otherwise released, and there has been no threatened release of any
hazardous substances, on or to any Property of the Borrower or any
Subsidiary except in compliance with Environmental Laws and so as not to
pose an imminent and substantial endangerment to public health or welfare
or the environment;
(f) To the extent applicable, all Property of the Borrower and each
Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA or scheduled as of the Closing Date to be
imposed by OPA during the term of this Agreement, and the Borrower does not
have any reason to believe that such Property, to the extent subject to
OPA, will not be able to maintain compliance with the OPA requirements
during the term of this Agreement; and
(g) Neither the Borrower nor any Subsidiary has any known contingent
liability in connection with any release or threatened release of any
Hazardous Material into the environment, nor is Borrower aware of any
exposure of any Person or property to any Hazardous Material in connection
with the Borrower's or any Subsidiary's operations or activities that could
reasonably be expected to give rise to a material claim for damages or
compensation.
Section 7.15 Compliance with Law. The business and operations of the
Borrower and each Subsidiary as conducted at all times have been and are in
compliance in all respects with all applicable Governmental Requirements the
noncompliance with which would have a Material Adverse Effect.
<PAGE> 43
Section 7.16 ERISA.
(a) The Borrower, each Subsidiary and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could result
in imposition on the Borrower, any Subsidiary or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed
pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty
liability damages under section 409 of ERISA, which could reasonably be
expected to result in a Material Adverse Effect.
(d) None of the Borrower, any Subsidiary, or any ERISA Affiliate has
any unsatisfied liability with respect to a Plan that has been terminated.
No liability to the PBGC (other than for the payment of current premiums
which are not past due) by the Borrower, any Subsidiary or any ERISA
Affiliate exists or is expected by the Borrower, any Subsidiary or any
ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event
with respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which the
Borrower, any Subsidiary or any ERISA Affiliate is required under the terms
of each Plan or applicable law to have paid as contributions to such Plan,
and no accumulated funding deficiency (as defined in section 302 of ERISA
and section 412 of the Code), whether or not waived, exists with respect to
any Plan.
(f) The actuarial present value of the benefit liabilities under
each Plan which is subject to Title IV of ERISA does not in the aggregate,
as of the end of the Borrower's most recently ended fiscal year, exceed the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities by a material amount. The term "actuarial present value of the
benefit liabilities" shall have the meaning specified in section 4041 of
ERISA.
(g) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such
plan maintained to provide benefits to former employees of such entities,
but excluding any such plan that is maintained pursuant to a collective
bargaining agreement, that may not be terminated by the Borrower, a
Subsidiary or any ERISA Affiliate in its sole discretion at any time
without any liability that could reasonably be expected to have a Material
Adverse Effect.
<PAGE> 44
(h) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the preceding
six calendar years sponsored, maintained or contributed to, any
Multiemployer Plan.
(i) None of the Borrower, any Subsidiary or any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the
Plan.
Section 7.17 Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 7.18 Survival of Representations and Warranties. All
representations and warranties in each Loan Document shall survive the delivery
of the Notes and the making of any Loan, and any investigation at any time made
by or on behalf of the Agent or any Lender shall not diminish the Agent or any
Lender's right to rely thereon.
Section 7.19 Delivery of Information. On or before the Closing Date, the
Borrower has delivered a schedule of all material insurance policies covering
the Property of the Borrower and its Subsidiaries on such Date. Such schedule
is true, accurate and complete in all material respects.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of all Indebtedness hereunder, all
interest thereon and all other amounts payable by the Borrower hereunder:
Section 8.01 Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders of any Governmental Authority.
Section 8.02 Reporting and Notice Requirements. The Borrower will furnish
to the Agent, with sufficient copies for each of the Lenders:
(a) Quarterly Financial Statements. As soon as available and in any
event within sixty (60) days after the end of each fiscal quarter of the
Borrower (including the fourth quarter), consolidated balance sheets of the
Borrower and its Consolidated Subsidiaries as of the end of such quarter
and consolidated statements of income and cash flow statements of the
Borrower and its Consolidated Subsidiaries for the period commencing at the
end of the previous fiscal year of the Borrower and ending with the end of
such quarter setting forth in
<PAGE> 45
each case in comparative form corresponding consolidated figures for the
corresponding period in the immediately preceding fiscal year of the
Borrower, all in reasonable detail and certified by a Responsible Officer
of the Borrower as presenting fairly the consolidated financial position
of the Borrower and its Consolidated Subsidiaries as of the date indicated
and the results of their operations for the period indicated in conformity
with GAAP, consistently applied, subject to normal year-end adjustments.
(b) Annual Financial Statements. As soon as available and in any
event within one hundred and twenty (120) days after the end of each fiscal
year of the Borrower, audited consolidated statements of income and
stockholder's equity and cash flow statements of the Borrower and its
Consolidated Subsidiaries for such fiscal year, and audited consolidated
balance sheets of the Borrower and its Consolidated Subsidiaries as of the
end of such fiscal year, setting forth in each case in comparative form
corresponding consolidated figures from the immediately preceding fiscal
year of the Borrower, all in reasonable detail and satisfactory in form,
substance, and scope to the Agent, together with the unqualified opinion of
independent certified public accountants of recognized national standing as
are selected by the Borrower and acceptable to the Agent, stating that such
financial statements fairly present the consolidated financial position of
the Borrower and its Consolidated Subsidiaries as of the date indicated and
the consolidated results of their operations and changes in financial
position for the period indicated in conformity with GAAP, consistently
applied (except for such inconsistencies which may be disclosed in such
report), and such opinion shall not contain a "going concern" or like
qualification or exception, and that the audit by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards.
(c) Default Certificate. Together with the delivery of any
information required by Subsection (a) and Subsection (b) of this Section
8.02, a certificate of the Borrower substantially in the form of Exhibit C
signed by a Responsible Officer, (i) stating that there exists no Event of
Default or Default, or if any Event of Default or Default exists,
specifying the nature thereof, the period of existence thereof, and what
action the Borrower proposes to take with respect thereto; and (ii) setting
forth such schedules, computations and other information as may be required
to demonstrate that the Borrower is in compliance with its covenants in
Section 9.11.
(d) Accountants' Certificates. Together with the delivery of any
information required by Subsection (b) of this Section 8.02, a certificate
of the accountants who render an opinion with respect to the financial
statements of the Borrower and its Consolidated Subsidiaries, (i) stating
that they have reviewed the Loan Documents and stating further whether, in
making their audit, such accountants have become aware of any condition or
event which would constitute a Default or an Event of Default with respect
to any of the terms or provisions of any Loan Document and, if any such
condition or event then exists specifying the
<PAGE> 46
nature and period of existence thereof, and (ii) confirming the
calculations set forth in the compliance certificate delivered
simultaneously therewith pursuant to Section 8.02(c)(ii).
(e) Notice of Default. Immediately after the Borrower knows or has
reason to know that any Default or Material Adverse Effect has occurred, a
notice setting forth the details of such Default or Material Adverse Effect
and the action which the Borrower has taken or proposes to take with
respect thereto.
(f) Environmental Reports and Notices. Promptly upon the Borrower's
or any Subsidiary's receiving thereof, copies of any summons, citation,
directive, material letter, notice, or other form of material communication
received by the Borrower or any Subsidiary from any Governmental Authority
and relating to any claim, demand, action, event, condition, report, or
investigation with respect to any potential or actual liability arising in
connection with (A) the Borrower's or any Subsidiary's non-compliance with,
or violation of, the requirements of any Environmental Law which
individually, or in the aggregate, would reasonably be expected to have a
Material Adverse Effect; (B) the Borrower's or any Subsidiary's liability
or potential liability for any release, or threatened release, of any
Hazardous Materials which individually, or in the aggregate, would
reasonably be expected to have a Material Adverse Effect; or (C) the
existence of any environmental Lien on any Property of the Borrower or any
Subsidiary which individually, or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
(g) Notice of Litigation. Promptly after the Borrower or any
Subsidiary obtains knowledge of the commencement thereof, notice of any
litigation, legal, administrative, or arbitral proceeding, investigation,
or other action of any nature which involves the reasonable possibility of
any judgment or liability which could reasonably be expected to have a
Material Adverse Effect, and upon request by Agent or any Lender, details
regarding such litigation which are satisfactory to the Agent or any
Lender.
(h) Additional Information. Promptly after any request therefor,
such other information respecting the Properties, condition, or operations,
financial or otherwise, of the Borrower or any Subsidiary as the Agent or
any Lender may from time to time reasonably request.
(i) Securities Filings. Promptly after the sending or filing
thereof, copies of all reports which the Borrower sends to any of its
securityholders, and copies of all reports and definitive registration
statements which the Borrower or any Subsidiary files with the Securities
and Exchange Commission or any national securities exchange.
(j) ERISA Notices and Compliance. Promptly upon becoming aware of
the occurrence of any (a) "reportable event", as such term is defined in
Section 4043 of ERISA in connection with any Benefit Plan or trust created
<PAGE> 47
thereunder with respect to which the notice requirement is not waived under
applicable PBGC regulations, (b) non-exempt "prohibited transaction", as
such term is defined in Section 4975 of the Code, which prohibited
transaction could result in material liability of the Borrower, any
Subsidiary, or any ERISA Affiliate, (c) expressed intention by the PBGC,
the Borrower, any Subsidiary, or any ERISA Affiliate to terminate any
Benefit Plan under ERISA Section 4041(c) or expressed intention by the PBGC
to impose liability (other than for premiums) in respect of any Benefit
Plan, (d) complete or partial withdrawal by the Borrower, a Subsidiary, or
an ERISA Affiliate from any Multiemployer Plan or reorganization,
insolvency or termination of a Multiemployer Plan, (e) failure of the
Borrower, a Subsidiary, or an ERISA Affiliate to make a payment required
under Section 412 of the Code or Section 302 of ERISA on or before the due
date or filing of an application for a waiver from either or both of such
requirements, or (f) receipt of notice from the Internal Revenue Service
that a Plan that is intended to comply with the requirements of Section
401(a) of the Code is not a qualified plan, a written notice specifying the
nature thereof, what action the Borrower, Subsidiary, ERISA Affiliate has
taken, is taking or proposes to take with respect thereto, and, when known,
any action taken or threatened by the Internal Revenue Service, the
Department of Labor, or the PBGC with respect thereto. With respect to
each Benefit Plan, the Borrower will, and will cause each Subsidiary and
ERISA Affiliate to, (i) satisfy in full and in a timely manner, without
incurring any material late payment or underpayment charge or penalty and
without giving rise to any lien, all of the contribution and funding
requirements of Section 412 of the Code (determined without regard to
subsections (d), (e), (f) and (k) thereof) and of Section 302 of ERISA
(determined without regard to Sections 303, 304 and 306 of ERISA), and (ii)
pay, or cause to be paid, to the PBGC in a timely manner, without incurring
any material late payment or underpayment charge or penalty, all premiums
required pursuant to Sections 4006 and 4007 of ERISA.
Section 8.03 Taxes and Liens. The Borrower will, and will cause each
Subsidiary to, pay and discharge, or will cause to be paid and discharged,
promptly all taxes, assessments, and governmental charges or levies imposed
upon the Borrower or any Subsidiary or upon the income of any Property of the
Borrower or any Subsidiary as well as all material claims of any kind
(including, without limitation, claims for labor, materials, supplies, and
rent) which, if unpaid, might become a Lien upon any Property of the Borrower
or any Subsidiary; provided however, that neither the Borrower nor any
Subsidiary shall be required to pay any such tax, assessment, charge, levy, or
claim if the amount, applicability, or validity thereof shall currently be
contested in good faith by appropriate proceedings diligently conducted by or
on behalf of the Borrower or any such Subsidiary and, if required under
generally accepted accounting principles, the Borrower or any such Subsidiary
shall have established adequate reserves therefor.
Section 8.04 Maintenance and Insurance. The Borrower will, and will cause
each Subsidiary to, at all times maintain, preserve, protect, and keep, or
cause to be maintained, preserved, protected, and kept, its Property in good
repair, working order, and condition in all material respects (ordinary wear
and tear excepted) and, from time to
<PAGE> 48
time, will make, or cause to be made, all repairs, renewals, replacements,
extensions, additions, betterments, and improvements to its Property as are
appropriate, so that the business carried on in connection therewith may be
conducted properly and efficiently at all times. The Borrower shall and shall
cause each Subsidiary to preserve and maintain its corporate existence and all
of its material rights, privileges and franchises; keep books of record and
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; comply with all
Governmental Requirements if failure to comply with such requirements will have
a Material Adverse Effect; and keep, or cause to be kept, insured by
financially sound and reputable insurers all Property of a character currently
insured against by the Borrower and its Subsidiaries against loss or damage of
the kinds and in the amounts insured against by such Persons in accordance with
the schedules delivered to the Agent in accordance with Section 7.19.
Section 8.05 Right of Inspection. The Borrower will, and will cause each
Subsidiary to, permit any officer, or employee of, or agent designated by, the
Agent to visit and inspect during reasonable business hours any of the
Properties of the Borrower or any Subsidiary, examine the Borrower's or such
Subsidiary's corporate books or financial records, and with the consent of the
Borrower, take copies and abstracts therefrom, provided that, such consent
shall not be unreasonably withheld, and discuss the affairs, finances, and
accounts of the Borrower and any Subsidiary with the Borrower's or such
Subsidiary's officers or certified public accountants, all at such reasonable
times and as often as the Agent may reasonably desire.
Section 8.06 Performance of Obligations. The Borrower will pay the Notes
according to the reading, tenor and effect thereof; and the Borrower will do
and perform every act and discharge all of the obligations to be performed and
discharged by it under this Agreement, at the time or times and in the manner
specified.
Section 8.07 Environmental Compliance.
(a) Borrower will not cause or permit any of its Property or any other
property used or impacted by Borrower's operations to be in violation of any
Environmental Law, or do anything or permit anything to be done which will
subject any such property to any remedial obligations under any Environmental
Law, assuming disclosure to the applicable Governmental Authority of all
relevant facts, conditions, and circumstances, if any, pertaining to such
property.
(b) Borrower will establish and implement such procedures as may be
necessary to continuously determine and assure that:
i) no solid wastes are disposed of on any of its Property or any
other property used or impacted by Borrower's operations in quantities or
locations that would require remedial action under any Environmental Law,
ii) no Hazardous Material will be released on or to any such
property in quantities or locations that would require remedial action under
any Environmental Law.
<PAGE> 49
iii) no Hazardous Material is released on or to any such property so
as to pose an imminent and substantial endangerment to public health or welfare
or to the environment or in any manner that could reasonably be expected to
give rise to a claim for damages or compensation by or on behalf of any
affected Person, and
iv) no oil is released or threatened to be released in violation of
the OPA, as amended.
(c) Borrower will not and will not permit any of its Property or any other
property used by Borrower or otherwise under Borrower's control to be used in a
manner which will result in:
i) the disposal of solid waste on or to any such property in
quantities or locations that would require remedial action under any
Environmental Law,
ii) a release of a Hazardous Material on or to any such property in
quantities or location that would require remedial action under any
Environmental Law, or
iii) the release of any Hazardous Material on or to any such property
so as to pose an imminent and substantial endangerment to public health or
welfare or to the environment or in any manner that could reasonably be
expected to give rise to a claim for damages or compensation by or on behalf of
any affected Person.
(d) Borrower shall require all subcontractors, affiliates, invitees, and
any other Person acting under Borrower's authority or control to comply with
all applicable Environmental Laws in connection with any activity or operation
conducted under Borrower's authority or control.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of Loans hereunder, all interest
thereon and all other amounts payable by the Borrower hereunder, without the
prior written consent of the Majority Lenders:
Section 9.01 Liens, Etc. The Borrower shall not, and it shall not cause
any Subsidiary to, create, incur or suffer to exist a Lien on its property
unless at least one of the following conditions is satisfied:
(a) the Lien equally and ratably secures the Notes and the obligations of
the Borrower under this Agreement;
<PAGE> 50
(b) the Lien is on Property at the time the Borrower or Subsidiary
acquires such Property or the Lien is on shares of stock of a corporation at
the time such corporation becomes a Subsidiary. The lien may not extend to any
other Property owned by the Borrower or a Subsidiary;
(c) the Lien is on Property acquired hereafter at the time the Borrower or
a Subsidiary acquires the Property, including any acquisition by means of a
merger or consolidation with or into the Borrower or a Subsidiary. The Lien
may not extend to any other Property owned by the Borrower or a Subsidiary;
(d) the Lien secures Debt incurred after the date hereof to finance all or
some of the purchase price of, or cost of construction, repair or improvement
of or additions to, Property or assets of any kind, real or personal, of the
Borrower or a Subsidiary. The Lien may not extend to any other Property owned
by the Borrower or a Subsidiary at the time the Lien is incurred. The Debt
secured by the Lien may not be incurred more than 180 days after the later of
the acquisition, completion of construction, repair, improvement, addition or
commencement of full operation of the Property subject to the Lien;
(e) the Lien secures Debt of a Subsidiary owing to the Borrower or another
Subsidiary;
(f) the Lien secures taxes, assessments or governmental charges not yet
delinquent or being contested in good faith by appropriate proceedings,
provided that appropriate provision, if any, as shall be required by GAAP shall
have been made therefor;
(g) the Lien secures non-consensual liens imposed by operation of law,
including without limitation, obligations owing to landlords, mechanics,
warehousemen or materialmen, or is a maritime or other similar Lien, in each
case incurred in the ordinary course of business for sums not yet due or being
contested in good faith by appropriate proceedings provided that appropriate
provisions, if any, as shall be required by generally accepted accounting
principles shall have been made therefor;
(h) the Lien or an agreement providing for the creation of the Lien is in
existence on the date of this Agreement;
(i) the Lien is created by statute, including any right of setoff, refund
or chargeback available to any bank, or is the result of a court judgment as to
which all rights of appeal have not terminated and as to which rights to
enforcement have been effectively stayed;
(j) the Lien extends, renews or replaces in whole or in part a Lien
("Existing Lien") permitted by any of Subsections (a) through (i). The Lien
may not extend beyond (i) the Property subject to the Existing Lien and (ii)
improvements and construction on such Property. The principal amount of the
Debt secured by the Lien may not exceed the principal amount of the Debt
secured at the time by the Existing Lien;
<PAGE> 51
(k) the Debt secured by the Lien, plus all other Debt secured by Liens on
Property at the time of determination, excluding Debt secured by a Lien
permitted by any of Subsections (a) through (j), does not exceed 10% of
Consolidated Net Tangible Assets. The aggregate value of Sale-Leaseback
Transactions permitted by Subsection (c) of Section 9.03 shall be included in
the determination and treated as Debt secured by a Lien on Property not
otherwise permitted by any of Subsections (a) through (j);
(l) the Lien constitutes a Permitted Lien; or
(m) the Lien is on the interest of the Borrower or Subsidiary in a
partnership or joint venture, or on the assets of the partnership or joint
venture, to secure the obligations of the Borrower or Subsidiary under the
applicable partnership agreement or joint venture agreement, for the benefit of
the other partners in such partnership or members of such joint venture.
Section 9.02 Debt. (a) The Borrower shall not and shall not cause a
Subsidiary to create, incur or suffer to exist, any Debt of Borrower or any
Subsidiary except as set forth below, all of which shall be "Permitted Debt":
(i) Debt of the Borrower to the Lenders evidenced by the Notes;
(ii) secured Debt of the Borrower or any Subsidiary secured by Liens
only as permitted by Section 9.01 hereof; or
(iii) other unsecured Debt;
provided that after giving effect to the incurrence of such Debt under this
Section 9.02(a), no Default or Event of Default hereunder shall have occurred
or be continuing.
(b) If such Debt is of the type described in clause (i) of the definition
of "Debt", then in order to be Permitted Debt (i) if the outstanding principal
of such Debt is greater than $10,000,000 the Debt may not have a maturity prior
to the Termination Date, and (ii) the documents evidencing, securing or
otherwise relating to the Debt must not contain any covenant or condition that
is (or has the effect of being) more restrictive or onerous on Borrower or any
Subsidiary than those contained in this Agreement.
(c) Notwithstanding any other provision to the contrary, except for Debt
secured by Liens permitted by Sections 9.01(b), (c), (d) or (k), the Borrower
shall not allow any wholly-owned Subsidiary to create or incur any Debt of such
Subsidiary in excess of $5,000,000 in the aggregate after the date hereof (or
allow all wholly-owned Subsidiaries to create or incur any Debt in excess of
$25,000,000 in the aggregate after the date hereof) without the prior written
consent of the Majority Lenders; provided however that such consent shall be
granted upon the receipt by the Majority Lenders of (i) a Guaranty in the form
of Exhibit D, ( a "Guaranty") executed by each Subsidiary that has created or
intends to create or incur such Debt (other than Debt existing on the date
hereof) along with (ii) if required by the Agent, a legal opinion reasonably
acceptable to
<PAGE> 52
the Agent as to the due authorization, execution and delivery and the
enforceability of each such Guaranty, and such other matters as the Agent may
reasonably request.
Section 9.03 Limitation on Sale and Leaseback. The Borrower shall not,
and it shall not permit any Subsidiary to, enter into a Sale-Leaseback
Transaction unless at least one of the following conditions is satisfied:
(a) the lease is between the Borrower and a Subsidiary or between
Subsidiaries;
(b) the Borrower or a Subsidiary under Subsections (b) through (j) of
Section 9.01 could create a Lien on the Property to secure Debt;
(c) the Borrower or a Subsidiary under Subsection (k) of Section 9.01
could create a Lien on the property to secure Debt at least equal in amount to
the value of the Sale-Leaseback Transaction; or
(d) (i) the Borrower or a Subsidiary makes an optional prepayment in cash
of any of its Debt (which by its terms matures more than 12 months after the
date of determination) at least equal in amount to the value of the Sale-
Leaseback Transaction, (ii) the prepayment is made within 90 days of the
effective date of the Sale-Leaseback Transaction, (iii) the Debt prepaid is not
owned by the Borrower or a Subsidiary, and (iv) the Debt prepaid, if Debt of
the Borrower, is not subordinated to the Notes.
Section 9.04 Restricted Payments. In any quarter, the Borrower shall not,
and shall not permit any Subsidiary, directly or indirectly, to declare or pay
any dividend on or make any distribution on or purchase, redeem or otherwise
acquire or retire for value, or transfer assets to a third party for a sinking
fund with respect to, any shares of the Borrower's capital stock ("Restricted
Payments") except (i) dividends or other distributions payable in shares of
capital stock of the Borrower (or rights or warrants to purchase capital stock
or other securities of the Borrower or any Person controlling the Borrower); or
(ii) other Restricted Payments, provided that the total of such other
Restricted Payments (not including any Restricted Payments made pursuant to (i)
above) does not equal or exceed the sum of (w) $20,000,000, plus (x) 50% of
Consolidated Net Income, subsequent to December 31, 1996, plus (y) the net cash
proceeds of the sale after December 31, 1996, of any class of capital stock of
the Borrower (other than sales to a Subsidiary or an employee stock ownership
plan), less (z) 100% of Consolidated Net Income for any quarter, if negative,
subsequent to December 31, 1996, provided, however, that notwithstanding the
foregoing, the Borrower may make Restricted Payments consisting of cash
dividends on any Permitted Preferred Stock of the Borrower so long as the
aggregate amount of such dividends does not exceed (A) the net cash proceeds of
the sale of such Permitted Preferred Stock and (B) the amount of all other
Restricted Payments made pursuant to this Section 9.04 and permitted only as a
result of the sale of such Permitted Preferred Stock (it being understood that
the amount of such dividends will be applied in calculating the amount of such
Restricted Payments permitted to be made pursuant to this Section 9.04).
Nothing contained in the foregoing provisions of this Section 9.04 shall
prevent any Restricted Payment made within 30 days
<PAGE> 53
after the date of declaration (or other formal determination, if not a
dividend) thereof, if at the date of such declaration (or other formal
determination) no Default or Event of Default had occurred or was continuing
and such declaration (or other formal determination) complied with the
provisions hereof. In the case of any Restricted Payment made other than in
cash, the amount thereof for the purposes hereof shall be deemed to be the fair
value thereof as reasonably determined by the Board of Directors of the
Borrower.
Section 9.05 Mergers; Acquisitions. The Borrower will not, and will not
permit any Subsidiary to, merge or consolidate with or into, or acquire all or
substantially all of the assets or capital stock of, any Person; provided that:
(a) any Subsidiary may merge or consolidate with or into, any other
Person, provided that after giving effect to such event, the surviving entity
is a Subsidiary;
(b) any Subsidiary may acquire all or substantially all of the assets or
capital stock of any other Person;
(c) any Subsidiary may merge into the Borrower; and
(d) the Borrower may merge or consolidate with or into any Person,
provided that the Borrower shall be the surviving entity, or acquire all or
substantially all of the assets or capital stock of any Person;
further provided that, immediately prior to, and after giving effect to the
events described in Subsections (a) through (d) of this Section 9.05, no
Default or Event of Default shall have occurred or be continuing.
Section 9.06 Investments, Loans, and Advances.
Neither the Borrower nor any Subsidiary will make or permit to remain
outstanding any Investments in any Person, except that the foregoing
restriction shall not apply to:
(a) Investments reflected in the Financial Statements dated December
31, 1996, or which are disclosed to the Lenders in Schedule 9.06;
(b) accounts receivable arising in the ordinary course of business;
(c) direct obligations of the United States or any agency thereof,
or obligations guaranteed by the United States or any agency thereof, in
each case maturing within one year from the date of creation thereof;
(d) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by Standard & Poors Rating
Services or Moody's Investors Service, Inc.;
<PAGE> 54
(e) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or
any office located in the United States of any other bank or trust company
which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least
$100,000,000.00 (as of the date of such Lender's or bank or trust company's
most recent financial reports) and has a short term deposit rating of no
lower than A2 or P2, (or if such Lender does not have a short term deposit
rating, a long term rating of no lower than BBB-) as such rating is set
forth from time to time, by Standard & Poors Rating Services or Moody's
Investors Service, Inc., respectively;
(f) deposits in money market funds investing exclusively in
investments described in Section 9.06(c), 9.06(d) or 9.06(e);
(g) Investments made by the Borrower after the date hereof in or to
its less than wholly owned Subsidiaries (or in Subsidiaries where there is
a limitation, contractually, by statute or charter on such Subsidiaries
ability to pay a dividend), not to exceed at any one time outstanding
$50,000,000 in the aggregate;
(h) Investments made by the Borrower in or to its wholly owned
Subsidiaries;
(i) Investments allowed in Section 9.05; and
(j) other Investments not to exceed $10,000,000 in the aggregate at
any time.
Section 9.07 Use of Proceeds. The Borrower will not use, nor permit the
use of, all or any portion of any Advance for any purpose not permitted by
Section 7.09 hereof.
Section 9.08 Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, enter into any
transaction with any Affiliate (including, without limitation, any transaction
involving the payment of management fees or director's fees to any Affiliate),
except for transactions (i) (including any loans or advances by or to any
Affiliate), the terms of which have been determined in good faith by the
Borrower to be fair and reasonable and on arms length terms to the Borrower or
such Subsidiary in light of the economic circumstances of the transaction as a
whole or (ii) constituting Transfers permitted by Section 9.12.
Section 9.09 Change of Business. The Borrower will not, and will not
permit any Subsidiary to, make any material change in the nature of the
business conducted by the Borrower, or by the Borrower and its Subsidiaries
taken as a whole.
Section 9.10 ERISA. The Borrower and the Subsidiaries will not, and will
not permit any ERISA Affiliate to do any of the following at any time:
<PAGE> 55
(a) engage in any transaction in connection with which the Borrower,
a Subsidiary or an ERISA Affiliate could be subject to either a civil
penalty assessed pursuant to Subsections (c), (i) or (l) of Section 502 of
ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code that could
reasonably be expected to have a Material Adverse Effect;
(b) terminate or permit the termination of any Benefit Plan, or take
any other action with respect to any Benefit Plan, which could result in
any liability of the Borrower, a Subsidiary, or any ERISA Affiliate to the
PBGC;
(c) fail to make full payment when due of all amounts which, under
the provisions of any Plan, agreement relating thereto excluding any such
failure resulting from an administrative error and involving an amount that
is not material, or applicable law, the Borrower, a Subsidiary, or an ERISA
Affiliate is required to pay as contributions thereto or permit to exist
any accumulated funding deficiency within the meaning of Section 302 of
ERISA or Section 412 of the Code, whether or not waived, with respect to
any Plan;
(d) fail to make any required payments when due to any Multiemployer
Plan excluding any such failure resulting from an administrative error and
involving an amount that is not material;
(e) amend a Benefit Plan resulting in an increase in current
liability such that either the Borrower, a Subsidiary or any ERISA
Affiliate is required to provide security to such Benefit Plan under
Section 401(a)(29) of the Code;
(f) permit the actuarial present value of the benefit liabilities
under any Benefit Plan maintained by the Borrower, a Subsidiary or any
ERISA Affiliate which is regulated under Title IV of ERISA to exceed the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Benefit Plan allocable to such
benefit liabilities by an amount that could reasonably be expected to
result in a Material Adverse Effect. The term "actuarial present value of
the benefit liabilities" shall have the meaning specified in Section 4041
of ERISA;
(g) contribute to or assume an obligation to contribute to any
Multiemployer Plan other than those listed on Schedule 7.16 attached hereto
and those with respect to which the potential withdrawal liability could
reasonably be expected to result in a Material Adverse Effect;
(h) acquire an interest in any Person that causes such Person to
become an ERISA Affiliate with respect to the Borrower or a Subsidiary or
with respect to any ERISA Affiliate of the Borrower or a Subsidiary if such
Person sponsors, maintains or contributes to, or at any time in the
six-year period preceding such acquisition has sponsored, maintained, or
contributed to, (1) any Multiemployer Plan with respect to which the
potential withdrawal liability could reasonably be expected to result in a
Material Adverse Effect, or (2) any other
<PAGE> 56
Benefit Plan that is subject to Title IV of ERISA under which the actuarial
present value of the benefit liabilities under such Benefit Plan exceeds
the current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities by an amount that could reasonably be expected to result in a
Material Adverse Effect;
(i) incur a liability to or on account of a Plan under Sections 515,
4062, 4063, 4064, 4201 or 4204 of ERISA that could reasonably be expected
to result in a Material Adverse Effect;
(j) contribute to or assume an obligation to contribute to any
employee welfare benefit plan, as defined in Section 3(1) of ERISA,
including, without limitation, any such plan maintained to provide benefits
to former employees of such entities, that may not be terminated by such
entities in their sole discretion at any time without any liability which
could reasonably be expected to have a Material Adverse Effect; or
(k) permit the aggregate potential withdrawal liability payments
with respect to all Multiemployer Plans to exceed an amount that could
reasonably be expected to result in a Material Adverse Effect in the event
that the Borrower, the Subsidiaries, and the ERISA Affiliates as the case
may be, were to completely withdraw from such Multiemployer Plans.
Section 9.11 Certain Financial Tests.
(a) The Borrower will not permit the ratio of (i) Total Debt to (ii)
Total Capitalization, to exceed 50%. "Total Capitalization" shall mean, at
any time, the sum (without duplication) of (i) Total Debt, and (ii) the
consolidated stockholder's equity of the Borrower and its Consolidated
Subsidiaries, less any amount therefore attributable to "minority
interests" as it appears on the Consolidated Balance Sheet of the Borrower
and "Total Debt" shall mean the consolidated Debt of the Borrower and its
consolidated Subsidiaries;
(b) The Borrower will not permit its Interest Coverage Ratio as of
the end of any fiscal quarter of the Borrower (calculated quarterly at the
end of each fiscal quarter) to be less than 2.5 to 1.00 on or before
December 31, 1997 and 3.5 to 1.00 thereafter. For the purposes of this
Section 9.11, "Interest Coverage Ratio" shall mean the ratio of (i) EBITDA
for the four fiscal quarters ending on such date to (ii) cash interest
payments made for such four fiscal quarters of the Borrower and its
Consolidated Subsidiaries.
Section 9.12 Sale or Other Disposition of Assets. The Borrower will not,
and will not permit any Subsidiary to, sell, assign, lease or otherwise dispose
of (a "Transfer") (whether in one transaction or in a series of transactions)
all or any part of its Property, provided that:
<PAGE> 57
(a) any Subsidiary may Transfer all or substantially all of its Property
to the Borrower or to any other Subsidiary;
(b) any Subsidiary may Transfer all or any part of its Property to any
Person so long as after giving effect to such transfer, a Material Adverse
Effect shall not have occurred; and
(c) the Borrower may Transfer any part (but not all or substantially all)
of its Property to any Person, so long as after giving effect to such Transfer,
such transfer shall not have caused a Material Adverse Effect and in the
opinion of the Borrower fair value shall have been exchanged.
Notwithstanding any other provision to the contrary contained herein, and
in addition to the limitations set forth in Sections 9.12(b) and (c), neither
the Borrower nor any Subsidiary will Transfer all or any part of its Property
in accordance with Section 9.12(b) or (c) except for (i) Transfers of Property
in the ordinary course of business, or (ii) Transfers of Property which shall
not (taken in the aggregate with all prior Transfers made after June 30, 1997
and made other than in the ordinary course of business) exceed twenty percent
(20%) of the aggregate book value of the assets of the Borrower, as measured as
of the then most recent Quarterly Date in accordance with GAAP. For purposes
of this Section 9.12, a Transfer which complies with (ii) of the preceding
sentence shall not be deemed to have caused a Material Adverse Effect.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events
shall constitute an "Event of Default":
(a) the Borrower shall (i) default in the payment when due of any
principal of any Loan, or (ii) default in the payment when due of any
interest on any Loan, which default shall continue unremedied for 3
Business Days or any fees or other amount payable by it hereunder and such
default, other than a default of a payment of principal or interest (which
shall have no cure period), shall continue unremedied for a period of 15
Business Days; or
(b) the Borrower or any Subsidiary shall default (i) in the payment
when due of any principal of or interest on any of its other Debt where the
aggregate amount of Principal plus accrued interest is $10,000,000 or more,
or (ii) any event specified in any note, agreement, indenture or other
document evidencing or relating to any such Debt shall occur if the effect
of such event is to cause or to permit (after the expiration of any
applicable cure period) the holder or holders of such Debt (or a trustee or
agent on behalf of such holder or holders) to cause such Debt to become due
prior to its stated maturity; or
<PAGE> 58
(c) any representation, warranty or certification made or deemed
made herein by the Borrower or any Subsidiary, or any certificate furnished
to any Lender or the Agent pursuant to the provisions hereof shall prove to
have been false or misleading as of the time made or furnished in any
material respect; or
(d) the Borrower shall default in the performance of any of its
obligations under this Agreement (other than the payment of amounts due
which shall be governed by Section 10.01(a)) and such default shall
continue unremedied for a period of thirty (30) days after the earlier to
occur of (i) notice thereof to the Borrower by the Agent or any Lender
(through the Agent), or (ii) the Borrower otherwise becoming aware of such
default; or
(e) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Federal Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up,
liquidation or composition or readjustment of debts, (v) fail to controvert
in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the Federal
Bankruptcy Code, or (vi) take any corporate action for the purpose of
effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application
or consent of the Borrower, in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower of all
or any substantial part of its assets, or (iii) similar relief in respect
of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 days; or (iv) an order
for relief against the Borrower shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess of
$10,000,000 in the aggregate in excess of any insurance coverage shall be
rendered by a court against the Borrower or any Subsidiary and the same
shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within
thirty (30) days from the date of entry thereof and the Borrower or such
Subsidiary shall not, within said period of 30 days, or such longer period
during which execution of the same shall have
<PAGE> 59
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(i) the Borrower discontinues its usual business or suffers to exist
any Change in Control.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one referred to in
clauses (e), (f) or (g) of Section 10.01, the Agent, upon request of the
Majority Lenders, shall, by notice to the Borrower, cancel the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Borrower
hereunder and under the Notes to be forthwith due and payable, whereupon
such amounts shall be immediately due and payable without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or
other formalities of any kind, all of which are hereby expressly waived by
the Borrower.
(b) In the case of the occurrence of an Event of Default referred to
in clauses (e), (f) or (g) of Section 10.01, the Commitments shall be
automatically cancelled and the principal amount then outstanding of, and
the accrued interest on, the Loans and all other amounts payable by the
Borrower hereunder and under the Notes shall become automatically
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other formalities of any
kind, all of which are hereby expressly waived by the Borrower.
(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in this Agreement; second to accrued
interest on the Notes; third to fees; fourth pro rata to principal
outstanding on the Notes and other Indebtedness; and any excess shall be
paid to the Borrower or as otherwise required by any Governmental
Requirement.
<PAGE> 60
ARTICLE XI
THE AGENT
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder
with such powers as are specifically delegated to the Agent by the terms of
this Agreement, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in Section 11.05
and the first sentence of Section 11.06 shall include reference to its
Affiliates and its Affiliates' officers, directors, employees, attorneys,
accountants, experts and agents): (i) shall have no duties or responsibilities
except those expressly set forth in the Loan Documents, and shall not by reason
of the Loan Documents be a trustee or fiduciary for any Lender; (ii) makes no
representation or warranty to any Lender and shall not be responsible to the
Lenders for any recitals, statements, representations or warranties contained
in this Agreement, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement, or for the
value, validity, effectiveness, genuineness, execution, effectiveness,
legality, enforceability or sufficiency of this Agreement, any Note or any
other document referred to or provided for herein or for any failure by the
Borrower or any other Person (other than the Agent) to perform any of its
obligations hereunder or thereunder or the financial or other condition of the
Borrower or its Subsidiaries; (iii) except pursuant to Section 11.07 shall not
be required to initiate or conduct any litigation or collection proceedings
hereunder; and (iv) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith including its own ordinary
negligence, except for its own gross negligence or willful misconduct. The
Agent may employ agents, accountants, attorneys and experts and shall not be
responsible for the negligence or misconduct of any such agents, accountants,
attorneys or experts selected by it in good faith or any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
agents, accountants, attorneys or experts. The Agent may deem and treat the
payee of any Note as the holder thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof permitted
hereunder shall have been filed with the Agent.
Section 11.02 Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telecopier, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent.
Section 11.03 Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees unless the Agent has received
notice from a Lender or the Borrower specifying such Default and stating that
such notice is a "Notice of Default"). In the event that the Agent receives
such a notice of the occurrence of a Default, the
<PAGE> 61
Agent shall give prompt notice thereof to the Lenders. In the event of a
payment Default, the Agent shall give each Lender prompt notice of each such
payment Default.
Section 11.04 Rights as a Lender. With respect to its Commitments
and the Loans made by it, Citicorp (and any successor acting as Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
the Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. Citicorp
(and any successor acting as Agent) and its Affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with the
Borrower (and any of its Affiliates) as if it were not acting as the Agent, and
Citicorp and its Affiliates may accept fees and other consideration from the
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE
AGENT RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE INDEMNITY
MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR
REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE
OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH
MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY
RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT, THE NOTES OR ANY OTHER
DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS
CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE
PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF
THE TERMS OF THIS AGREEMENT, ANY LOAN DOCUMENT OR OF ANY SUCH OTHER DOCUMENTS;
WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM
THE SOLE OR CONCURRENT NEGLIGENCE OF THE AGENT, PROVIDED THAT NO LENDER SHALL
BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT.
Section 11.06 Non-Reliance on Agent and other Lenders. Each Lender
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Borrower and its
decision to enter into this Agreement, and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement. The Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower of this Agreement, the Notes, or any
other document referred to or provided for herein or to inspect the properties
or books of the Borrower. Except for notices, reports and other documents and
<PAGE> 62
information expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Borrower (or any of its Affiliates) which may come
into the possession of the Agent or any of its Affiliates. In this regard,
each Lender acknowledges that Vinson & Elkins L.L.P. is acting in this
transaction as special counsel to the Agent only, except to the extent
otherwise expressly stated in any legal opinion or any Loan Document. Each
Lender will consult with its own legal counsel to the extent that it deems
necessary in connection with the Loan Documents and the matters contemplated
therein.
Section 11.07 Action by Agent. Except for action or other matters
expressly required of the Agent hereunder, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall (i)
receive written instructions from the Majority Lenders (or all of the Lenders
as expressly required by Section 12.04) specifying the action to be taken, and
(ii) be indemnified to its satisfaction by the Lenders against any and all
liability and expenses which may be incurred by it by reason of taking or
continuing to take any such action. The instructions of the Majority Lenders
(or all of the Lenders as expressly required by Section 12.04) and any action
taken or failure to act pursuant thereto by the Agent shall be binding on all
of the Lenders. If a Default has occurred and is continuing, the Agent shall
take such action with respect to such Default as shall be directed by the
Majority Lenders (or all of the Lenders as required by Section 12.04) in the
written instructions (with indemnities) described in this Section 11.07,
provided that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders. In no event, however, shall the Agent be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or applicable law.
Section 11.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent
may resign at any time by giving notice thereof to the Lenders and the
Borrower, and the Agent may be removed at any time with or without cause by the
Majority Lenders. Upon any such resignation or removal, the Majority Lenders
shall have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Majority Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation or the Majority Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Upon
the acceptance of such appointment hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article XI and Section 12.03 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Agent.
<PAGE> 63
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law. Unless otherwise expressly provided, any place
in the Loan Documents where the consent or approval of Agent or one or more of
the Lenders is required, such consent or approval may be withheld or granted in
its sole discretion.
Section 12.02 Notices. All notices and other communications provided
for herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other
Loan Documents) shall be given or made by telecopy, courier or U.S. Mail or in
writing and telecopied, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof or
in the Loan Documents or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. local time on a Business Day (otherwise on the
next succeeding Business Day) by telecopier and evidence or confirmation of
receipt is obtained, or personally delivered or, in the case of a mailed
notice, three (3) Business Days after the date deposited in the mails, postage
prepaid, in each case given or addressed as aforesaid.
<PAGE> 64
Section 12.03 Payment of Expenses, Indemnities, etc. The Borrower
agrees:
(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable expenses of the Agent in the administration
(both before and after the execution hereof and including advice of counsel
as to the rights and duties of the Agent and the Lenders with respect
thereto) of, and in connection with the negotiation, syndication,
investigation, preparation, execution and delivery of, recording or filing
of, preservation of rights under, enforcement of, and refinancing,
renegotiation or restructuring of, the Loan Documents and any amendment,
waiver or consent relating thereto (including, without limitation, travel,
photocopy, mailing, courier, telephone and other similar expenses of the
Agent, the cost of environmental audits, surveys and appraisals at
reasonable intervals incurred by the Agent, if reasonably determined by the
Agent to be necessary, the reasonable fees and disbursements of counsel and
other outside consultants for the Agent and, in the case of enforcement,
the reasonable fees and disbursements of counsel for the Agent); and
promptly reimburse the Agent for all amounts expended, advanced or incurred
by the Agent or the Lenders to satisfy any obligation of the Borrower under
this Agreement, including without limitation, all costs and expenses of
foreclosure (Notwithstanding the foregoing, the obligation of Borrower to
pay Agent's legal fees prior to the Closing Date shall be subject to the
terms of the letters dated April 7, 1997 from Agent's counsel, Vinson &
Elkins L.L.P., to Borrower);
(b) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED
PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND
PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE
INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY
OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN
ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE
PROCEEDS OF ANY OF THE LOANS, (II) THE EXECUTION, DELIVERY AND PERFORMANCE
OF THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF THE BORROWER
AND ITS SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER TO COMPLY WITH THE
TERMS OF THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE
BORROWER SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) ANY ASSERTION THAT
THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO
THE NOTES OR (VII) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING,
WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND
ALL OTHER REASONABLE EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING,
DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING
(INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND
INCLUDING ALL INDEMNITY MATTERS ARISING BY
<PAGE> 65
REASON OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING
ALL INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS
OR ANY LENDER AND THE AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE AGENT OR
LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE
PART OF THE INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED
PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY
SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE
TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING
WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH OR NONCOMPLIANCE BY
THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE
BORROWER OR ANY SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OR
ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE
PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY, OR (V) ANY
OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS
SECTION 12.03(C) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM
THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER DURING THE PERIOD AFTER
WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION
OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS
MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be unreasonably
withheld; provided, that the indemnitor may not reasonably withhold consent
to any settlement that an Indemnified Party proposes, solely for the reason
that the indemnitor does not have the financial ability to pay all its
obligations outstanding and asserted against the indemnitor at that time,
including the maximum potential claims against the Indemnified Party to be
indemnified pursuant to this Section 12.03.
(e) In the case of any indemnification hereunder, the Agent or
Lender, as appropriate shall give notice to the Borrower of any such claim
or demand being made against the Indemnified Party and the Borrower shall
have the non-exclusive right to join in the defense against any such claim
or demand provided that if the Borrower provides a defense, the Indemnified
Party shall bear
<PAGE> 66
its own cost of defense unless there is a conflict between the Borrower and
such Indemnified Party.
(f) Notwithstanding anything set forth herein to the contrary, the
Borrower shall not, in connection with any one legal proceeding or claim,
or separate but related proceedings or claims arising out of the same
general allegations of circumstances, in which the interest of the
Indemnified Parties (in the reasonable judgment of such Indemnified
Parties) does not differ in any material respect, be liable to the
Indemnified Parties (or any of them) under any of the provisions set forth
herein for the fees or expenses of more than one separate firm of attorneys
in each jurisdiction in which legal action is being taken or may be taken
at any time, which firm shall be selected by the Agent (of, if the Agent
fails to so select after notice from the Indemnified Parties involved, such
firm shall be selected by such Indemnified Parties), except for any
additional firms reasonably recommended by such firm in good faith for
purposes of obtaining special expertise in any area of law or for purposes
of having local counsel in each court in which such proceeding or
proceedings are pending.
(g) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT
OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT
CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF
THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN
INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL
CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED
TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
(h) The Borrower's obligations under this Section 12.03 shall
survive any termination of this Agreement and the payment of the Notes and
shall continue thereafter in full force and effect.
(i) The Borrower shall pay any amounts due under this Section 12.03
within thirty (30) days of the receipt by the Borrower of notice of the
amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement or
any other Loan Document may be amended, modified or waived with the Borrower's,
Agent's and the Majority Lenders' prior written consent; provided that (i) no
amendment, modification or waiver which extends the final maturity of the
Loans, increases the Aggregate Maximum Credit Amounts, forgives the principal
amount of any Indebtedness outstanding under this Agreement, reduces the
interest rate applicable to the Loans or the fees payable to the Lenders
generally, affects Section 2.03(a), this Section 12.04 or
<PAGE> 67
Section 12.06(a) or modifies the definition of "Majority Lenders" shall be
effective without consent of all Lenders; (ii) no amendment, modification or
waiver which increases the Maximum Credit Amount of any Lender shall be
effective without the consent of such Lender; and (iii) no amendment,
modification or waiver which modifies the rights, duties or obligations of the
Agent shall be effective without the consent of the Agent.
Section 12.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 12.06 Assignments and Participations.
(a) The Borrower may not assign its rights or obligations hereunder
or under the Notes without the prior consent of all of the Lenders and the
Agent.
(b) Any Lender may, upon the written consent of the Agent and the
Borrower (which consent will not be unreasonably withheld), assign to one
or more assignees all or a portion of its rights and obligations under this
Agreement pursuant to an Assignment Agreement substantially in the form of
Exhibit E (an "Assignment") provided, however, that (i) any such assignment
shall be in the amount of at least $5,000,000 or such lesser amount to
which the Borrower has consented, (ii) such assignee shall be a financial
institution with assets in excess of $250,000,000 and (iii) the assignee or
assignor shall pay to the Agent a processing and recordation fee of $2,500
for each assignment. Any such assignment will become effective upon the
execution and delivery to the Agent of the Assignment and the consent of
the Agent. Promptly after receipt of an executed Assignment, the Agent
shall send to the Borrower a copy of such executed Assignment. Upon
receipt of such executed Assignment, the Borrower, will, at its own
expense, execute and deliver new Notes to the assignor and/or assignee, as
appropriate, in accordance with their respective interests as they appear.
Upon the effectiveness of any assignment pursuant to this Section 12.06(b),
the assignee will become a "Lender," if not already a "Lender," for all
purposes of this Agreement. The assignor shall be relieved of its
obligations hereunder to the extent of such assignment (and if the
assigning Lender no longer holds any rights or obligations under this
Agreement, such assigning Lender shall cease to be a "Lender" hereunder
except that its rights under Sections 4.06, 5.01, 5.05 and 12.03 shall not
be affected). The Agent will prepare on the last Business Day of each
month during which an assignment has become effective pursuant to this
Section 12.06(b), a new Annex I giving effect to all such assignments
effected during such month, and will promptly provide the same to the
Borrower and each of the Lenders.
(c) Each Lender may transfer, grant or assign participations in all
or any part of such Lender's interests hereunder pursuant to this Section
12.06(c) to any Person, provided that: (i) such Person shall have assets in
excess of $250,000,000; (ii) such Lender shall remain a "Lender" for all
purposes of this
<PAGE> 68
Agreement and the transferee of such participation shall not constitute a
"Lender" hereunder; and (iii) no participant under any such participation
shall have rights to approve any amendment to or waiver of any of the Loan
Documents except to the extent such amendment or waiver would (x) forgive
any principal owing on any Indebtedness or extend the final maturity of the
Loans, or (y) reduce the interest rate (other than as a result of waiving
the applicability of any post-default increases in interest rates) or fees
applicable to any of the Commitments or Loans in which such participant is
participating, or postpone the payment of any thereof. In the case of any
such participation, the participant shall not have any rights under this
Agreement (the participant's rights against the granting Lender in respect
of such participation to be those set forth in the agreement with such
Lender creating such participation), and all amounts payable by the
Borrower hereunder shall be determined as if such Lender had not sold such
participation, provided that such participant shall be entitled to receive
additional amounts under Article V on the same basis as the Lender granting
it participation and be indemnified under Section 12.03 to the extent that
a Lender is entitled thereunder. In addition, each agreement creating any
participation must include an agreement by the participant to be bound by
the provisions of Section 12.15.
(d) The Lenders may furnish any information concerning the Borrower
in the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided
that, such Persons agree to be bound by the provisions of Section 12.15
hereof.
(e) Notwithstanding anything in this Section 12.06 to the contrary,
any Lender may assign and pledge all or any of its Notes to any Federal
Reserve Bank or the United States Treasury as collateral security pursuant
to Regulation A of the Board of Governors of the Federal Reserve System and
any operating circular issued by such Federal Reserve System and/or such
Federal Reserve Bank. No such assignment and/or pledge shall release the
assigning and/or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of
any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents shall, for any reason, be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of the
Notes, this Agreement or any Loan Document.
Section 12.08 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
<PAGE> 69
Section 12.09 References. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 Survival. The obligations of the parties under Section
4.06, Article V, and Sections 11.05 and 12.03 shall survive the repayment of
the Loans and the termination of the Commitments. To the extent that any
payments on the Indebtedness or proceeds of any collateral are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, debtor in possession, receiver or other Person under
any bankruptcy law, common law or equitable cause, then to such extent, the
Indebtedness so satisfied shall be revived and continue as if such payment or
proceeds had not been received and the Agent's and the Lenders' rights, powers
and remedies under this Agreement shall continue in full force and effect. In
such event, each Loan Document shall be automatically reinstated and the
Borrower shall take such action as may be reasonably requested by the Agent and
the Lenders to effect such reinstatement.
Section 12.11 Captions. Captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES (INCLUDING, BUT NOT LIMITED TO, THE
VALIDITY AND ENFORCEABILITY HEREOF AND THEREOF) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT
AND EACH LENDER HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY
LAW) IN RESPECT OF ITS PROPERTY,
<PAGE> 70
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
EACH OF THE BORROWER, THE AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE
AND DOES NOT PRECLUDE THE PARTIES FROM OBTAINING JURISDICTION OVER OTHER
PARTIES IN ANY COURT OTHERWISE HAVING JURISDICTION.
(c) THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION LOCATED
AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS THE DESIGNEE, APPOINTEE AND
AGENT OF THE BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE BORROWER,
SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS. IT IS UNDERSTOOD THAT A
COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY
OVERNIGHT COURIER TO THE BORROWER AT ITS ADDRESS SET FORTH UNDER ITS
SIGNATURE BELOW, BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL
NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS SAID
ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH
MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE BORROWER, THE AGENT
OR ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER IN ANY OTHER JURISDICTION, INCLUDING WITHOUT
LIMITATION, THE COMMENCEMENT OF ENFORCEMENT PROCEEDINGS UNDER THE LOAN
DOCUMENTS IN ALL APPLICABLE JURISDICTIONS.
(e) EACH OF THE BORROWER, THE AGENT AND EACH LENDER HEREBY (I)
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY
LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II)
IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV) ACKNOWLEDGE
THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND
<PAGE> 71
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties hereto
that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to
any Lender under laws applicable to it (including the laws of the United States
of America and the State of New York or any other jurisdiction whose laws may
be mandatorily applicable to such Lender notwithstanding the other provisions
of this Agreement), then, in that event, notwithstanding anything to the
contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under law applicable
to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in
connection with the Notes shall under no circumstances exceed the maximum
amount allowed by such applicable law, and any excess shall be cancelled
automatically and if theretofore paid shall be credited by such Lender on the
principal amount of the Indebtedness (or, to the extent that the principal
amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by such Lender to the Borrower); and (ii) in the event that the
maturity of the Notes is accelerated by reason of an election of the holder
thereof resulting from any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
cancelled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the Indebtedness (or, to the extent that the principal
amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by such Lender to the Borrower). All sums paid or agreed to be paid
to any Lender for the use, forbearance or detention of sums due hereunder
shall, to the extent permitted by law applicable to such Lender, be amortized,
prorated, allocated and spread throughout the full term of the Loans evidenced
by the Notes until payment in full so that the rate or amount of interest on
account of any Loans hereunder does not exceed the maximum amount allowed by
such applicable law. If at any time and from time to time (i) the amount of
interest payable to any Lender on any date shall be computed at the Highest
Lawful Rate applicable to such Lender pursuant to this Section 12.14 and (ii)
in respect of any subsequent interest computation period the amount of interest
otherwise payable to such Lender would be less than the amount of interest
payable to such Lender computed at the Highest Lawful Rate applicable to such
Lender, then the amount of interest payable to such Lender in respect of such
subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total amount of
interest payable to such Lender shall equal the total amount of interest which
would have been payable to such Lender if the total amount of interest had been
computed without giving effect to this Section 12.14.
Section 12.15 Confidentiality. In the event that the Borrower
provides to the Agent or the Lenders written information belonging to the
Borrower, if the Borrower
<PAGE> 72
shall denominate such information in writing as "confidential", the Agent and
the Lenders shall thereafter maintain such information in confidence in
accordance with the standards of care and diligence that each utilizes in
maintaining its own confidential information; provided, however, that except as
provided below, all information delivered to the Agent prior to the Closing
Date shall be deemed to be confidential. This obligation of confidence shall
not apply to such portions of the information which (i) are in the public
domain, (ii) hereafter become part of the public domain without the Agent or
the Lenders breaching their obligation of confidence to the Borrower, (iii) are
previously known by the Agent or the Lenders from some source other than the
Borrower, (iv) are hereafter developed by the Agent or the Lenders without
using the Borrower's information, (v) are hereafter obtained by or available to
the Agent or the Lenders from a third party who owes no obligation of
confidence to the Borrower with respect to such information or through any
other means other than through disclosure by the Borrower, (vi) are disclosed
with the Borrower's consent, (vii) must be disclosed either pursuant to any
Governmental Requirement or to Persons regulating the activities of the Agent
or the Lenders, or (viii) as may be required by law or regulation or order of
any Governmental Authority in any judicial, arbitration or governmental
proceeding. Further, the Agent or a Lender may disclose any such information
to any other Lender, any independent petroleum engineers or consultants, any
independent certified public accountants, any legal counsel employed by such
Person in connection with this Agreement or any Loan Document, including
without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective assignees and
participants) in the Loans; provided, however, that the Agent or the Lenders
shall receive a confidentiality agreement from the Person to whom such
information is disclosed such that said Person shall have the same obligation
to maintain the confidentiality of such information as is imposed upon the
Agent or the Lenders hereunder. Notwithstanding anything to the contrary
provided herein, this obligation of confidence shall cease three (3) years from
the date the information was furnished, unless the Borrower requests in writing
at least thirty (30) days prior to the expiration of such three year period, to
maintain the confidentiality of such information for an additional three year
period. The Borrower waives any and all other rights it may have to
confidentiality as against the Agent and the Lenders arising by contract,
agreement, statute or law except as expressly stated in this Section 12.15.
<PAGE> 73
The parties hereto have caused this Agreement to be duly executed as
of the day and year first above written.
BORROWER: ROWAN COMPANIES, INC.
By:
------------------------------
Name:
Title:
Address for Notices:
5450 Transco Tower
2800 Post Oak Blvd.
Houston, Texas 77056
Telecopier No.: (713) 960-7660
Telephone No.: (713) 960-7686
Attention: Chief Financial Officer
With a Copy to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: Mr. Douglas J. Dillon
Telecopier No.: (713) 220-4285
[Signature Page to Revolving Credit Agreement]
<PAGE> 74
LENDER AND AGENT: CITIBANK, N.A.
By:
------------------------------
Name:
Title:
Lending Office for Base Rate Loans:
1200 Smith Street
Suite 2000
Houston, Texas 77002
Attention: J. Chris Lyons
Telecopier No.: 713/654-2849
Lending Office for Eurodollar Loans:
1200 Smith Street
Suite 2000
Houston, Texas 77002
Attention: J. Chris Lyons
Telecopier No.: 713/654-2849
Address for Notices:
1200 Smith Street
Suite 2000
Houston, Texas 77002
Attention: J. Chris Lyons
Telecopier No.: 713/654-2849
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: Glenn L. Pinkerton
Telecopier No.: 713/615-5755
and with a copy to:
Tim White
Loan Administrator
2 Penn's Way
Suite 200
New Castle, Delaware 19720
[Signature Page to Revolving Credit Agreement]
<PAGE> 75
Telecopier No.: 302/894-6120
LENDER:
CHRISTIANIA BANK OG KREDITKASSE ASA,
NEW YORK BRANCH
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
Lending Office for Base Rate Loans:
Christiania Bank og Kreditkasse ASA,
New York Branch
11 West 42nd, 7th Floor
New York, New York 10036
Attention: Hans Kjelsrud
Telecopier No.: 212/827-4888
Lending Office for Eurodollar Loans:
Christiania Bank og Kreditkasse ASA,
New York Branch
11 West 42nd, 7th Floor
New York, New York 10036
Attention: Hans Kjelsrud
Telecopier No.: 212/827-4888
Address for Notices:
Christiania Bank og Kreditkasse ASA,
New York Branch
11 West 42nd, 7th Floor
New York, New York 10036
Attention: Hans Kjelsrud
Telecopier No.: 212/827-4888
<PAGE> 76
LENDER: ARAB BANKING CORPORATION (B.S.C.)
By:
------------------------------
Name: Stephen A. Plauche
Title: Vice President
Lending Office for Base Rate Loans:
277 Park Avenue, 32nd Floor
New York, New York 10172-3299
Attention: Loan Manager
Telephone: 212/583-4770 or 4771
Telecopier: 212/583-0932 or 0921
Lending Office for Eurodollar Loans:
277 Park Avenue, 32nd Floor
New York, New York 10172-3299
Attention: Loan Manager
Telephone: 212/583-4770 or 4771
Telecopier: 212/583-0932 or 0921
Address for Notices:
277 Park Avenue, 32nd Floor
New York, New York 10172-3299
Attention: Loan Manager
Telephone: 212/583-4770 or 4771
Telecopier: 212/583-0932 or 0921
with a copy to:
Arab Banking Corporation (B.S.C.)
600 Travis Street, Suite 1900
Houston, Texas 77002
Telephone: 713/227-8444
Telecopier: 713/227-6507
<PAGE> 77
LENDER: WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION
By:
------------------------------
Name:
Title:
Lending Office for Base Rate Loans:
Wells Fargo Bank (Texas) National Association
MAC 5002-031
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Attention: Frank W. Schageman
Telecopier No.: 713/250-7912
Lending Office for Eurodollar Loans:
Wells Fargo Bank (Texas) National Association
MAC 5002-031
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Attention: Frank W. Schageman
Telecopier No.: 713/250-7912
Address for Notices:
Wells Fargo Bank (Texas) National Association
MAC 5002-031
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Attention: Frank W. Schageman
Telecopier No.: 713/250-7912
<PAGE> 78
LENDER: CREDIT LYONNAIS NEW YORK BRANCH
By:
------------------------------
Name:
Title:
Lending Office for Base Rate Loans:
Credit Lyonnais New York Branch
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Page Dillehunt
Telecopier No.: 713/751-0307
Lending Office for Eurodollar Loans:
Credit Lyonnais New York Branch
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Page Dillehunt
Telecopier No.: 713/751-0307
Address for Notices:
Credit Lyonnais New York Branch
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Page Dillehunt
Telecopier No.: 713/751-0307
<PAGE> 79
LENDER: SUMITOMO BANK, LIMITED
By:
------------------------------
Name:
Title:
Lending Office for Base Rate Loans:
Sumitomo Bank, Limited
277 Park Avenue
New York, New York 10172
Attention: Energy Group
Lending Office for Eurodollar Loans:
Sumitomo Bank, Limited
277 Park Avenue
New York, New York 10172
Attention: Energy Group
Address for Notices:
Sumitomo Bank, Limited
277 Park Avenue
New York, New York 10172
Attention: Energy Group
with a copy to:
Sumitomo Bank, Limited
700 Louisiana Street
Suite 1750
Houston, Texas 77002
<PAGE> 80
ANNEX 1
LIST OF MAXIMUM CREDIT AMOUNTS
<TABLE>
<CAPTION>
NAME OF LENDER PERCENTAGE SHARE MAXIMUM CREDIT AMOUNT
- --------------------- ---------------- ---------------------
<S> <C> <C>
Citibank, N.A. 25.81% $40,000,000
Christiania Bank og
Kreditkasse ASA, New York Branch 19.35% $30,000,000
Credit Lyonnais New York Branch 19.35% $30,000,000
Arab Banking Corporation (B.S.C.) 16.13% $25,000,000
Sumitomo Bank 9.68% $15,000,000
Wells Fargo Bank (Texas) National
Association 9.68% $15,000,000
</TABLE>
<PAGE> 1
EXHIBIT 11
ROWAN COMPANIES, INC. AND SUBSIDIARIES
COMPUTATION OF BASIC AND
DILUTED EARNINGS (LOSS) PER SHARE
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended December 31
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Weighted average shares of common stock
outstanding 86,184 85,335 84,589
Stock options (treasury stock method) 1,803 1,580 787(A)
Shares issuable from assumed conversion of
floating rate subordinated debentures 1,236 1,186 567(A)
-------------------------------------
Weighted average shares for diluted
earnings (loss) per share calculation 89,223 88,101 85,943
=====================================
Income (loss) before extraordinary charges $ 156,425 $ 61,338 $ (18,436)
Extraordinary charges from early redemption of debt 9,766
-------------------------------------
Net income (loss) for basic calculation 146,659 61,338 (18,436)
Subordinated debenture interest 172 323 374(A)
-------------------------------------
Net income (loss) for diluted calculation $ 146,831 $ 61,661 $ (18,062)
=====================================
Basic earnings per share:
Income (loss) before extraordinary charges $ 1.82 $ .72 $ (.22)
Extraordinary charges .12
-------------------------------------
Net income (loss) $ 1.70 $ .72 $ (.22)
=====================================
Diluted earnings per share:
Income (loss) before extraordinary charges $ 1.76 $ .70 $ (.21)(B)
Extraordinary charges .11
-------------------------------------
Net income (loss) $ 1.65 $ .70 $ (.21)(B)
=====================================
</TABLE>
Note: Reference is made to Note 1 to Consolidated Financial Statements
regarding computation of per share amounts.
(A) Included in accordance with Regulation S-K Item 601(b)(11) although
not required to be provided for by Accounting Principles Board Opinion
No. 15 because the effect is insignificant.
(B) This calculation is submitted in accordance with regulation S-K Item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No.
15 because it produces an antidilutive result.
<PAGE> 1
EXHIBIT 13
1997 ANNUAL REPORT
Rowan Companies, Inc. and Subsidiaries
TEN-YEAR FINANCIAL REVIEW
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Revenues:
Drilling services $ 434,004 $ 316,123
Manufacturing sales and services 154,852 143,768
Aviation services 106,396 111,269
- --------------------------------------------------------------------------------
Total 695,252 571,160
- --------------------------------------------------------------------------------
Costs and expenses:
Drilling services 217,935 202,878
Manufacturing sales and services 134,422 131,665
Aviation services 96,390 93,473
Depreciation and amortization 47,078 47,882
General and administrative 16,971 16,591
- --------------------------------------------------------------------------------
Total 512,796 492,489
- --------------------------------------------------------------------------------
Income (loss) from operations 182,456 78,671
- --------------------------------------------------------------------------------
Other income (expense):
Interest expense (26,208) (27,547)
Less interest capitalized 9,966 2,516
Gain on disposals of property, plant
and equipment 1,541 2,359
Interest income 5,190 4,157
Other - net 343 374
- --------------------------------------------------------------------------------
Other income (expense) - net (9,168) (18,141)
- --------------------------------------------------------------------------------
Income (loss) before income taxes 173,288 60,530
Provision (credit) for income taxes 16,863 (808)
- --------------------------------------------------------------------------------
Income (loss) before extraordinary charges 156,425 61,338
Extraordinary charges from redemption of debt 9,766
- --------------------------------------------------------------------------------
Net income (loss) $ 146,659 $ 61,338
- --------------------------------------------------------------------------------
Per share of common stock:
Net income (loss):
Basic $ 1.70(1) $ .72
- --------------------------------------------------------------------------------
Diluted $ 1.65(1) $ .70
- --------------------------------------------------------------------------------
Cash dividends $ -- $ --
- --------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 330,852 $ 232,045
- --------------------------------------------------------------------------------
Property, plant and equipment - at cost:
Drilling equipment 965,292 954,249
Aircraft and related equipment 202,044 188,681
Manufacturing plant and equipment 60,902 37,377
Construction in progress 195,996 77,318
Other property and equipment 94,476 94,517
- --------------------------------------------------------------------------------
Total 1,518,710 1,352,142
- --------------------------------------------------------------------------------
Property, plant and equipment - net 677,160 546,200
Total assets 1,122,135 899,308
Capital expenditures 180,066 117,947
Long-term debt 256,150 267,321
Common stockholders' equity 653,098 496,219
- --------------------------------------------------------------------------------
STATISTICAL INFORMATION
Current ratio 5.06 3.72
Long-term debt/total capitalization .28 .35
Book value per share of common stock $ 7.53 $ 5.80
Price range of common stock 16 3/4-43 15/16 8 7/8-24 1/2
- --------------------------------------------------------------------------------
</TABLE>
(1) After extraordinary charges from early debt redemption of $.12 and $.11
per share, respectively.
(2) After extraordinary charge from early debt redemption of $.08 per share.
(3) 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.
<PAGE> 2
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 250,080 $ 245,917 $ 271,022 $ 162,121 $ 170,739 $ 180,118 $ 128,818 $ 144,018
133,755 96,664
87,462 95,578 82,174 87,877 101,433 111,992 97,446 72,667
- -----------------------------------------------------------------------------------------------------------------
471,297 438,159 353,196 249,998 272,172 292,110 226,264 216,685
- -----------------------------------------------------------------------------------------------------------------
207,934 207,577 211,095 162,816 147,853 130,845 119,182 126,288
120,378 87,382
79,993 79,955 68,882 74,347 82,364 88,182 75,943 62,571
50,555 50,790 51,918 51,367 52,954 50,702 52,062 60,324
14,692 13,862 13,940 12,092 11,739 9,549 7,690 7,313
- -----------------------------------------------------------------------------------------------------------------
473,552 439,566 345,835 300,622 294,910 279,278 254,877 256,496
- -----------------------------------------------------------------------------------------------------------------
(2,255) (1,407) 7,361 (50,624) (22,738) 12,832 (28,613) (39,811)
- -----------------------------------------------------------------------------------------------------------------
(27,702) (27,530) (25,361) (26,254) (21,379) (21,601) (23,682) (23,920)
237
6,598 1,344 1,955 731 1,660 3,996 2,320 27,578
5,209 4,813 2,348 2,658 4,763 8,635 12,709 4,002
468 260 150 165 127 178 161 345
- -----------------------------------------------------------------------------------------------------------------
(15,427) (21,113) (20,908) (22,700) (14,829) (8,792) (8,492) 8,242
- -----------------------------------------------------------------------------------------------------------------
(17,682) (22,520) (13,547) (73,324) (37,567) 4,040 (37,105) (31,569)
754 469 (288) 429 1,174 2,081 672 32
- -----------------------------------------------------------------------------------------------------------------
(18,436) (22,989) (13,259) (73,753) (38,741) 1,959 (37,777) (31,601)
5,627
- -----------------------------------------------------------------------------------------------------------------
$ (18,436) $ (22,989) $ (13,259) $ (73,753) $ (44,368) $ 1,959 $ (37,777) $ (31,601)
- -----------------------------------------------------------------------------------------------------------------
$ (.22) $ (.27) $ (.17) $ (1.01) $ (.61)(2)$ .03 $ (.52) $ (.44)
- -----------------------------------------------------------------------------------------------------------------
$ (.22) $ (.27) $ (.17) $ (1.01) $ (.61)(2)$ .03 $ (.52) $ (.44)
- -----------------------------------------------------------------------------------------------------------------
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
- -----------------------------------------------------------------------------------------------------------------
$ 200,588 $ 195,945 $ 172,117 $ 61,397 $ 125,996 $ 134,393 $ 143,963 $ 152,335
- -----------------------------------------------------------------------------------------------------------------
944,021 961,391 950,538 939,793 913,379 885,264 867,540 863,450
189,954 176,874 166,791 162,001 158,361 138,327 107,985 97,500
25,037 18,955
91,089 86,883 81,636 79,801 76,251 73,504 70,598 88,039
- -----------------------------------------------------------------------------------------------------------------
1,250,101 1,244,103 1,198,965 1,181,595 1,147,991 1,097,095 1,046,123 1,048,989
- -----------------------------------------------------------------------------------------------------------------
487,039 506,121 507,193 537,819 552,481 549,608 542,995 585,365
802,488 805,179 765,263 684,301 895,889 739,133 737,826 800,684
33,881 43,377 21,989 39,528 85,618 59,905 22,945 18,318
247,744 248,504 207,137 212,907 220,764 153,621 163,473 181,330
429,155 442,347 460,300 375,754 445,368 485,748 479,287 515,491
- -----------------------------------------------------------------------------------------------------------------
3.75 4.39 4.90 2.47 1.71(3) 4.00 4.55 4.07
.37 .36 .31 .36 .33 .24 .25 .26
$ 5.06 $ 5.25 $ 5.49 $ 5.13 $ 6.11 $ 6.69 $ 6.64 $ 7.16
5 3/8-10 5 3/4-9 1/4 6 5/8-10 3/4 4 5/8-9 3/8 4 3/4-11 3/8 9 7/8-15 7/8 5 5/8-11 7/8 4 1/2-8 5/8
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<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>
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Drilling $ 434.0 $ 316.1 $ 250.1
Manufacturing 154.9 143.8 133.7
Aviation 106.4 111.3 87.5
- --------------------------------------------------------------------------------
Total $ 695.3 $ 571.2 $ 471.3
- --------------------------------------------------------------------------------
Operating Profit (Loss)*:
Drilling $ 185.0 $ 79.3 $ 5.0
Manufacturing 16.3 9.5 11.7
Aviation (1.9) 6.5 (4.3)
- --------------------------------------------------------------------------------
Total $ 199.4 $ 95.3 $ 12.4
- --------------------------------------------------------------------------------
Net Income (Loss) $ 146.7 $ 61.3 $ (18.4)
- --------------------------------------------------------------------------------
</TABLE>
* Income (loss) from operations before deducting general and administrative
expenses.
Energy service economics continued to improve throughout 1997, enabling the
Company to achieve record levels of revenues, operating profit and net income.
For most of the past three years, worldwide demand for energy products has
continued to grow, the spread between oil and natural gas prices and the cost of
finding and recovering reserves has remained attractive and the availability of
capable equipment has continued to decline.
During this period, the Company has realized substantial growth in both volume
and profitability, primarily in its offshore drilling business. Since mid-1995,
virtually 100% utilization of the Company's offshore rig fleet has afforded
continual escalations in drilling day rates. At the same time, the Company has
made significant progress towards expansion of its revenue base through the
construction of additional offshore equipment and the reactivation of its
domestic land drilling business.
The Company's manufacturing division has continued to provide meaningful returns
while assuming a lead role in the Company's offshore drilling fleet expansion
program. During 1997, the manufacturing division completed its return to the
marine construction business as it reactivated its Vicksburg, Mississippi
facility, assembled a significant portion of the Company's Gorilla V jack-up,
began construction of Gorilla VI and was contracted by others to provide design
and major components for two new jack-up rigs.
During the past three years, the Company's aviation division has continued to
diversify its flight services and the variances in revenues and operating
results reflected above were largely due to fluctuating forest fire control
activities.
From late-1995 through early-1997, the Company's operations were impaired by
unfavorable results of turnkey drilling operations. In early-1997, the Company
ceased turnkey drilling activities and recognized a $20.2 million loss on its
one well in progress. Turnkey losses during 1996 and 1995 were $4.0 million and
$.6 million, respectively. The Company is not pursuing any turnkey work at this
time.
During 1997, the Company redeemed early its $200 million of 11 7/8% Senior Notes
and incurred $9.8 million of net extraordinary charges consisting primarily of
prepayment premiums.
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, the North Sea and eastern Canada.
Such rates and activity are primarily determined by the level of offshore
expenditures by energy companies and the availability of competitive equipment.
Market conditions in the offshore drilling industry have improved almost
continuously during the 1995-1997 period. For most of the past two years, the
demand for offshore drilling equipment has generally exceeded the supply,
particularly in the areas in which the Company operates. Beginning in the second
quarter of 1995, both the Gulf of Mexico and North Sea markets began to offer
improving returns primarily due to increasing worldwide demand for oil and gas.
Activity and day rates in the Gulf of Mexico were enhanced by strengthening
natural gas prices, while North Sea utilization approached 100% due to the
scarcity of harsh environment drilling equipment.
<PAGE> 4
Both markets continued to improve dramatically in 1996 primarily due to
consistently high energy prices and technological advances such as horizontal
drilling and production techniques and 3-D seismic, which together substantially
enhanced the economics of oil and gas exploration and production. As a result,
deep-water prospects in the Gulf of Mexico became economically viable, budding
drilling markets such as west Africa, southeast Asia and The Netherlands
strengthened and drilling assignments began to lengthen.
This tightening of drilling markets worldwide continued throughout 1997 and the
Company's operations, featuring long-legged jack-ups, have directly or
indirectly benefited. In particular, the Company's Gulf of Mexico fleet, with
nearly 40% of the exclusive 350' jack-up market, was 99% utilized in 1997 and
achieved a 52% increase in average day rates compared to 1996. The Company's
five North Sea rigs were 98% utilized in 1997 and averaged a 49% increase in day
rates over 1996.
The Company's worldwide fleet of 20 jack-ups (two of which are leased) was
utilized 99%, 97% and 90% in 1997, 1996 and 1995, respectively, while the
Company's semi-submersible achieved 99%, 100% and 85%, respectively. The Company
considers only revenue-producing days in computing rig utilization. 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>
- --------------------------------------------------------------------------------
1996 to 1997 1995 to 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Utilization $ 11.7 $ 24.0
Drilling rates 124.5 79.4
- --------------------------------------------------------------------------------
</TABLE>
These fluctuations, net of a decline in turnkey drilling, yielded a $117.9
million or 37% increase in 1997 drilling revenues compared to 1996, which was
26% higher than 1995. Drilling operations expenses were only 7% higher in 1997
compared to 1996, which was 2% lower than 1995.
Four of the Company's deep-well land rigs were under contract in Texas and
Louisiana for most of 1997 and one other rig was reactivated during the third
quarter and worked almost all of the fourth in Mississippi. Two other deep-well
land rigs were returned from Argentina during the second quarter of 1997 and
were extensively utilized in Louisiana and Texas thereafter. The Company sold
its Argentina operations in November 1996 including its three trailer-mounted
rigs.
During 1997, the Company's actively marketed land rig fleet was 84% utilized and
achieved a 31% increase in average day rates over 1996. The Company expects to
complete the reactivation of two additional rigs by the end of the first quarter
of 1998. The Company's other five land rigs were idle during 1997. 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.
Recently, oil prices have fallen significantly from their average levels of
1997. In the past, when low oil prices have prevailed for a prolonged period of
time, energy companies have postponed or canceled portions of their drilling
programs and reduced their drilling budgets accordingly. Thus far, the Company
has not seen any indications that energy companies intend to suspend drilling
programs in the markets in which it participates, but there can be no assurance
that the Company's operations will not be adversely affected by lower price
levels if they persist. Provided current operating conditions and the
perceptible trends noted above prevail, the Company should experience increased
profitability in 1998.
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.
Aviation revenues declined by 4% in 1997 compared to 1996, which was 27% higher
than 1995. Aviation division expenses in 1997 were up by 3% over 1996, which was
17% higher than 1995. During 1997, the Company endured the effects of a
relatively mild forest fire season and higher than normal aircraft maintenance
costs, which combined to more than offset increased flying for energy companies
in the Gulf of Mexico and in connection with Alaska tourism. Forest fire control
revenues were lower in 1997 than 1996 by $ 9.5 million or 62% while 1997 oil and
gas-related revenues were $4.4 million or 12% higher than 1996. Effective
October 1, 1997, the aviation division implemented an 18-20% increase in its
Gulf of Mexico flying rates.
<PAGE> 5
The number of aircraft operated by the Company at the end of each of the last
three years and the revenue hours for each of those years are reflected in the
following table:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Twin engine helicopters:
Number 63 62 62
Revenue hours 32,504 34,848 29,129
Single engine helicopters:
Number 31 26 25
Revenue hours 14,652 11,466 9,563
Fixed-wing aircraft:
Number 21 21 19
Revenue hours 22,042 20,669 20,430
- --------------------------------------------------------------------------------
</TABLE>
Excluded from the preceding table are 15 twin engine helicopters owned by KLM
ERA Helicopters, the Company's Dutch affiliate, which recorded revenue hours of
10,846, 10,378 and 8,907 in 1997, 1996 and 1995, respectively. On January 30,
1998, the Company agreed to terminate its ownership in KLM ERA in return for
cash and equipment approximating the carrying value of its 49% interest. See
Note 12 of the Notes to Consolidated Financial Statements.
Perceptible trends existing in the aviation markets in which the Company
continues to operate are shown below:
- --------------------------------------------------------------------------------
Alaska - Moderately improving market conditions
Gulf of Mexico - Moderately improving market conditions
- --------------------------------------------------------------------------------
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 improved operating results in
1998.
Manufacturing Operations. The Company's manufacturing division generated an 8%
increase in revenues in 1997 compared to 1996, which was 7% higher than 1995,
and a 72% increase in profitability while devoting substantial efforts towards
the reactivation of its marine rig construction capability and the design and
construction of the Company's Gorilla V and Gorilla VI jack-up rigs.
The heavy equipment product line produced 37 new mining, timber and
transportation loaders, stackers and cranes during 1997, compared to 47 units in
1996, and sold 10% more in parts than in the prior year. During the third
quarter, the marine product line began shipping components for the first of two
Super 116-C jack-up rig kits sold earlier in the year.
Consolidated manufacturing operations exclude approximately $83 million of
products and services provided to the Company's drilling division in 1997, most
of which was attributable to construction progress on Gorillas V and VI,
compared to $40 million in 1996.
External manufacturing backlog at December 31, 1997 was approximately $58
million, or 32% higher than a year ago, and included more than $30 million
related to the marine product line.
The Company's manufacturing operations are considerably less volatile than its
drilling and aviation operations and, barring unforeseen circumstances, should
continue to contribute positive operating results during 1998.
LIQUIDITY AND CAPITAL RESOURCES
Key balance sheet amounts and ratios for 1997 and 1996 were as follows (dollars
in millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31, 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 108.3 $ 97.2
Current assets $ 412.4 $ 317.3
Current liabilities $ 81.5 $ 85.3
Current ratio 5.06 3.72
Current maturities of long-term debt $ 3.9
Long-term debt $ 256.2 $ 267.3
Stockholders' equity $ 653.1 $ 496.2
Long-term debt/total capitalization .28 .35
- --------------------------------------------------------------------------------
</TABLE>
Reflected in the comparisons above are the effects of net cash provided by
operations of $205.7 million, capital expenditures of $180.1 million, proceeds
from borrowings of $191.0 million and debt repayments and related premiums
totaling $211.5 million.
Capital expenditures for 1997 included $86.8 million toward the construction of
Rowan Gorilla V, an enhanced version of the Company's Gorilla Class jack-ups
featuring a combination drilling and production capability. The rig is being
constructed at the Company's Vicksburg, Mississippi shipyard and should be
completed during the third quarter of 1998. The Company is financing up to 87.5%
of the cost of 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.
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 and principal will be
<PAGE> 6
repaid in semi-annual installments commencing January 1, 1999. Gorilla V and
a Company guarantee are pledged as security for the government guarantee. At
December 31, 1997, the Company had drawn down about $110 million of the
$153 million total credit facility, $67 million of which bears a fixed interest
rate of 6.94% until July 2010. The remaining advances bore interest rates
averaging 6.3% at year-end.
During 1997, the Company completed the rebuilding of its Vicksburg shipyard and
the reactivation of its marine construction capability.
In late-1996, the Company announced plans for the construction of Rowan Gorilla
VI and Rowan Gorilla VII at its Vicksburg facility for a combined cost of
approximately $380 million. Each rig will be a combination drilling and
production unit, capable of operating in hostile environments like the North Sea
in water depths of up to 400 feet. The Company expects delivery of the rigs
during the second quarter of 1999 and the third quarter of 2000. Capital
expenditures during 1997 included $36.6 million for Gorilla VI and $2.5 million
for Gorilla VII. The Company believes that if operating conditions continue to
improve as expected, internally generated working capital may continue to 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
throughout the period required to complete construction or that outside
financing will be available.
Capital expenditures encompass new assets or enhancements to existing assets as
expenditures for routine maintenance and major repairs are charged to operations
as incurred. The remainder of 1997 capital expenditures was primarily for major
enhancements to existing rigs and manufacturing facilities and for purchases of
aircraft and components. The Company estimates 1998 capital expenditures will be
between $210 and $225 million, including $175-185 million for Gorillas V, VI and
VII. The Company may also spend amounts to acquire additional aircraft as market
conditions justify or to upgrade existing offshore rigs.
On April 1, 1997, the Company redeemed $50 million of its 11 7/8% Senior Notes
due 2001 and paid a 6% prepayment premium, each from existing funds. On December
3, 1997, using $110 million from a newly established three-year, $155 million
bank revolving credit facility and existing funds, the Company redeemed the
remaining $150 million of Senior Notes and paid a 4% prepayment premium. During
1997, the Company recorded extraordinary charges totaling $9.8 million, net of
income taxes, on such transactions. Advances under the credit line bore interest
at 6.37% at December 31, 1997.
Based on current operating levels and the previously discussed market trends,
management believes that 1998 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 1998.
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
during 1996.
In February 1994, in connection with its acquisition of the net manufacturing
assets of Marathon LeTourneau Company, the Company issued $41.7 million of 7%,
five-year notes. 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 Note 1 of the Notes to Consolidated Financial Statements.
The Company did not pay any dividends on its common stock during the 1995-1997
period. At December 31, 1997, approximately $93 million of the Company's
retained earnings was available for distribution under the most restrictive
provisions of the Company's debt agreements. See Note 5 of the Notes to
Consolidated Financial Statements.
The Company's adoption, effective January 1, 1996, of Statement of Financial
Accounting Standards No. 121 regarding impairment of long-lived assets did not
materially affect the Company's financial position or results of operations.
The Company follows the provisions of Accounting Principles Board Opinion No. 25
for measurement and recognition of employee stock-based compensation. The
Company estimates that the alternative accounting provisions of Statement of
Financial Accounting Standards No. 123, if adopted, would not have materially
affected reported amounts of net income and earnings per share in 1997, 1996 and
1995. See Note 3 of the Notes to Consolidated Financial Statements.
Effective December 15, 1997, the Company adopted Statements of Financial
Accounting Standards No. 128, "Earnings per Share," No. 129, "Disclosure of
Information about Capital Structure" and No. 131, "Disclosures about Segments of
an Enterprise and Related Information." In accordance with the provisions of
Statements 128 and 131, the Company has restated its earnings (loss) per share
and segment information for all periods presented. See Notes 1 and 10 of the
Notes to Consolidated Financial Statements. The provisions of Statement 129 did
not materially affect the form or content of the Company's financial statements.
The Company's adoption, effective January 1, 1998, of Statements of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," and No. 132,
"Employers' Disclosures about Pension and Other Postretirement Benefits," will
not materially affect its financial statement disclosure.
The Company believes that its exposure to potential year 2000 software problems
is limited and the costs associated with readying its information systems will
not materially impact its financial position or results of operations. The
Company expects to complete modifications to its information systems during 1998
and will expense such costs as they are incurred.
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.
<PAGE> 7
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
(In thousands except share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
December 31, 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 108,332 $ 97,225
Receivables - trade and other 133,627 112,836
Inventories:
Raw materials and supplies 69,621 65,734
Work-in-progress 25,974 21,181
Finished goods 6,321 1,758
Prepaid expenses 7,694 8,750
Deferred tax assets (Note 7) 60,809
Cost of turnkey drilling contracts in progress 9,835
- --------------------------------------------------------------------------------------------------------------
Total current assets 412,378 317,319
- --------------------------------------------------------------------------------------------------------------
Investment in and advances to 49% owned companies (Note 12) 25,737 28,049
- --------------------------------------------------------------------------------------------------------------
Property, plant and equipment - at cost:
Drilling equipment 965,292 954,249
Aircraft and related equipment 202,044 188,681
Manufacturing plant and equipment 60,902 37,377
Construction in progress 195,996 77,318
Other property and equipment 94,476 94,517
- --------------------------------------------------------------------------------------------------------------
Total 1,518,710 1,352,142
Less accumulated depreciation and amortization 841,550 805,942
- --------------------------------------------------------------------------------------------------------------
Property, plant and equipment - net 677,160 546,200
- --------------------------------------------------------------------------------------------------------------
Other assets and deferred charges 6,860 7,740
- --------------------------------------------------------------------------------------------------------------
Total $1,122,135 $ 899,308
- --------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 2) $ 3,932
Accounts payable - trade $ 22,839 28,106
Other current liabilities (Note 4) 58,687 53,236
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 81,526 85,274
- --------------------------------------------------------------------------------------------------------------
Long-term Debt - less current maturities (Note 2) 256,150 267,321
- --------------------------------------------------------------------------------------------------------------
Other liabilities (Notes 6 and 9) 50,457 39,573
- --------------------------------------------------------------------------------------------------------------
Deferred credits:
Income taxes (Note 7) 74,956 1,774
Gain on sale/leaseback transactions (Note 9) 5,948 9,147
- --------------------------------------------------------------------------------------------------------------
Total deferred credits 80,904 10,921
- --------------------------------------------------------------------------------------------------------------
Commitments and contingent liabilities (Note 9)
- --------------------------------------------------------------------------------------------------------------
Stockholders' equity (Notes 3 and 5):
Preferred stock, $1.00 par value:
Authorized 5,000,000 shares issuable in series:
Series III Preferred Stock, authorized
10,300 shares, none outstanding
Series A Junior Preferred Stock, authorized
1,500,000 shares, none issued
Common stock, $.125 par value; authorized 150,000,000 shares; issued
88,162,101 shares at December 31, 1997
and 87,054,028 shares at December 31, 1996 11,020 10,882
Additional paid-in capital 411,812 401,730
Retained earnings 232,751 86,092
Less cost of treasury stock - 1,457,919 shares 2,485 2,485
- --------------------------------------------------------------------------------------------------------------
Total stockholders' equity 653,098 496,219
- --------------------------------------------------------------------------------------------------------------
Total $1,122,135 $ 899,308
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 8
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Drilling services $ 434,004 $ 316,123 $ 250,080
Manufacturing sales and services 154,852 143,768 133,755
Aviation services 106,396 111,269 87,462
- --------------------------------------------------------------------------------------------------------------
Total 695,252 571,160 471,297
- --------------------------------------------------------------------------------------------------------------
Costs and expenses:
Drilling services 217,935 202,878 207,934
Manufacturing sales and services 134,422 131,665 120,378
Aviation services 96,390 93,473 79,993
Depreciation and amortization 47,078 47,882 50,555
General and administrative 16,971 16,591 14,692
- --------------------------------------------------------------------------------------------------------------
Total 512,796 492,489 473,552
- --------------------------------------------------------------------------------------------------------------
Income (loss) from operations 182,456 78,671 (2,255)
- --------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (26,208) (27,547) (27,702)
Less interest capitalized 9,966 2,516
Gain on disposals of property, plant and equipment 1,541 2,359 6,598
Interest income 5,190 4,157 5,209
Other - net 343 374 468
- --------------------------------------------------------------------------------------------------------------
Other income (expense) - net (9,168) (18,141) (15,427)
- --------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 173,288 60,530 (17,682)
Provision (credit) for income taxes (Note 7) 16,863 (808) 754
- --------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary charges 156,425 61,338 (18,436)
Extraordinary charges from early redemption
of debt (net of income taxes of $1,207) (Note 2) 9,766
- --------------------------------------------------------------------------------------------------------------
Net income (loss) $ 146,659 $ 61,338 $ (18,436)
- --------------------------------------------------------------------------------------------------------------
Per share of common stock (Note 1):
Basic:
Income (loss) before extraordinary charges $ 1.82 $ .72 $ (.22)
Extraordinary charges from early redemption of debt .12
- --------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.70 $ .72 $ (.22)
- --------------------------------------------------------------------------------------------------------------
Diluted:
Income (loss) before extraordinary charges $ 1.76 $ .70 $ (.22)
Extraordinary charges from early redemption of debt .11
- --------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.65 $ .70 $ (.22)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 9
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock
-------------------------------------------------------
Issued In Treasury Additional
For the years ended ------------------------------------------------------- Paid-in Retained
December 31, 1997, 1996 and 1995 Shares Amount Shares Amount Capital Earnings
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 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
Exercise of stock options 623 78 1,247
Value of services rendered
by participants in the
Nonqualified Stock
Option Plans (Note 3) 4,720
Conversion of subordinated
debentures 485 60 4,115
Net income 146,659
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 88,162 $ 11,020 1,458 $ 2,485 $ 411,812 $ 232,751
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 10
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used in):
Operations:
Net income (loss) $ 146,659 $ 61,338 $ (18,436)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operations:
Depreciation and amortization 47,078 47,882 50,555
Gain on disposals of property, plant
and equipment (1,541) (2,359) (6,598)
Compensation expense 4,720 4,600 4,255
Change in sale/leaseback payable (4,796) (1,232) (1,460)
Amortization of sale/leaseback gain (3,198) (3,198) (3,198)
Provision for pension and
postretirement benefits 5,922 1,217 7,402
Deferred income taxes 12,373 (2,372) (322)
Extraordinary charges from
early redemption of debt 10,973
Other - net 2,370 2,162 1,483
Changes in current assets and liabilities:
Receivables - trade and other (20,791) (28,658) (9,494)
Inventories (13,243) (13,052) (16,235)
Other current assets 10,891 2,713 (17,718)
Current liabilities 10,165 11,033 3,148
Net changes in other noncurrent
assets and liabilities (1,881) 3,673 (171)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations 205,701 83,747 (6,789)
- --------------------------------------------------------------------------------------------------------------
Investing activities:
Property, plant and equipment additions (180,066) (117,947) (33,881)
Proceeds from disposals of property,
plant and equipment 3,846 6,829 16,013
Repayments from affiliates 229 32 3,676
Proceeds from sale of a subsidiary 6,946
- --------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (175,991) (104,140) (14,192)
- --------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from borrowings 190,985 29,009
Repayments of borrowings (202,488) (2,355) (290)
Premiums on redemption of debt (9,000)
Other - net 1,900 626 539
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (18,603) 27,280 249
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 11,107 6,887 (20,732)
Cash and cash equivalents, beginning of year 97,225 90,338 110,070
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 108,332 $ 97,225 $ 90,338
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 11
Rowan Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 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, hereinafter referred to as "the Company."
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 30-year period. At December
31, 1997, the unamortized excess cost was $2,412,000.
Intercompany balances and 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 has also operated under turnkey drilling contracts where revenues and
expenses are recognized on a completed contract basis.
The Company's aviation services generally are provided under master service
agreements calling 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
$148,348,000 and $110,476,000, $134,929,000 and $111,973,000, and $119,640,000
and $97,324,000 in 1997, 1996 and 1995, respectively. Revenues from longer-term
manufacturing projects such as rig kits are recognized on a
percentage-of-completion basis using costs incurred relative to total estimated
costs.
Full provision is made for any anticipated losses on turnkey drilling or
manufacturing projects.
Earnings (Loss) Per Common Share. Effective December 15, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128, "Earnings per
Share," which governs the computation and presentation of per share operating
results, and, in accordance with the requirements thereof, has restated all
prior periods. Under Statement 128, "basic" earnings (loss) per share is
determined as income available to common stockholders divided by the
weighted-average number of common shares outstanding during the period, while
"diluted" earnings (loss) per share reflects the issuance of additional shares
in connection with the assumed conversion of stock options and other convertible
securities, and corresponding adjustments to income for any charges related to
such securities.
The computation of basic and diluted earnings (loss) per share under Statement
128 for each of the past three years is as follows (in thousands except per
share amounts):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Income (loss) before Per Share
Year ended December 31, extraordinary charges Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1997:
Basic income per share $ 156,425 86,184 $ 1.82
Effect of dilutive securities:
Convertible debentures 172 1,236
Stock options 1,803
- ---------------------------------------------------------------------
Diluted income per share $ 156,597 89,223 $ 1.76
- --------------------------------------------------------------------------------
1996:
Basic income per share $ 61,338 85,335 $ .72
Effect of dilutive securities:
Convertible debentures 323 1,186
Stock options 1,580
- ---------------------------------------------------------------------
Diluted income per share $ 61,661 88,101 $ .70
- --------------------------------------------------------------------------------
1995:
Basic loss per share $ (18,436) 84,589 $ (.22)
Effect of dilutive securities:
Convertible debentures - (a) - (a)
Stock options - (a) - (a)
- ---------------------------------------------------------------------
Diluted loss per share $ (18,436) 84,589 $ (.22)
- --------------------------------------------------------------------------------
</TABLE>
(a) Excludes the following securities which produce an antidilutive result:
<TABLE>
<CAPTION>
Income Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
Convertible debentures $ 374 567
Stock options - 787
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
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 excluded from the Company's Consolidated Statement
of Cash Flows were as follows: the conversion in 1997 of the remaining
$3,600,000 of the Series II Floating-Rate Convertible Subordinated Debenture
into 400,000 shares of common stock; the retirement in 1996 of $4,684,000 of
debt through the disposition of aviation equipment; a $5,500,000 reduction in
debt in 1996 in exchange for the assumption of certain environmental
obligations; the issuance in 1995 of a $6,972,000 noninterest-bearing promissory
note in connection with the purchase of certain aviation assets; and the
conversion in 1995 of $450,000 of Series I Floating Rate Convertible
Subordinated Debentures into 78,261 shares of common stock. See Notes 2, 3 and 9
for further information.
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.
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:
Super Gorilla jack-ups 25 20%
Semi-submersible 15 20%
Gorilla and other 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 into service until
the equipment is sold or becomes fully depreciated.
The Company capitalizes, during the construction period, 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 for further information.
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 for further information.
Income Taxes. The Company accounts for income taxes under an asset and liability
approach that recognizes deferred income tax assets and liabilities for the
estimated future tax consequences of differences between the financial statement
and tax bases of assets and liabilities. See Note 7 for further information.
Comprehensive Income (Loss). The Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," effective
January 1, 1998. The statement essentially requires prominent disclosure of all
non-shareholder changes in equity during a period. The Company believes the
adoption of Statement 130 will not materially affect the form or content of its
financial statements.
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 1996 and 1995
amounts to conform with the 1997 presentations.
<PAGE> 13
- --------------------------------------------------------------------------------
NOTE 2 LONG-TERM DEBT
- --------------------------------------------------------------------------------
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
December 31, 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
11 7/8% Senior Notes due 2001 $200,000
$155 million bank revolving credit facility maturing in 2000 $110,000
7% notes payable due 1999 36,156 36,156
Floating-rate note payable issued under U.S. Department of
Transportation Title XI; secured by drilling rig Rowan Gorilla V 42,994 29,009
6.94% Title XI note payable due 2010; secured by Gorilla V 67,000
Nonrecourse notes payable 2,488
Series II subordinated convertible debenture 3,600
- ------------------------------------------------------------------------------------------------
Total 256,150 271,253
Less current maturities -- 3,932
- ------------------------------------------------------------------------------------------------
Remainder $256,150 $267,321
- ------------------------------------------------------------------------------------------------
</TABLE>
Maturities of long-term debt for the five years ending December 31, 2002 are as
follows: 1998-$0, 1999-$45,322,000, 2000-$119,166,000, 2001-$9,166 and
2002-$9,166.
During April and December 1997, the Company redeemed $50,000,000 and
$150,000,000, respectively, of its 11 7/8% Senior Notes due 2001. These
transactions resulted in extraordinary charges of $9,766,000, or $.11 per
diluted share, comprised of $9,000,000 of prepayment premiums and $1,973,000 of
unamortized issue costs, net of $1,207,000 of income tax benefits.
In anticipation of the December 1997 redemption of Senior Notes, the Company
obtained, in October 1997, a $155,000,000 unsecured revolving credit facility
maturing in October 2000. Advances under the facility currently bear interest at
either .40% above a short-term LIBOR rate or the higher of a prime commercial
lending rate or .50% above a three-month certificate of deposit rate, depending
upon the Company's election. The facility currently requires a commitment fee of
.325% on the average daily amount of the commitment. Interest and the commitment
fee are generally payable quarterly. Outstanding advances at December 31, 1997
totaled $110,000,000 and bore interest at 6.37%. See Note 5 for further
information.
In February 1994, in connection with the acquisition of its manufacturing
operations, 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 initially 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 by the
earlier of July 1, 2000 or two years following completion of construction.
Interest is payable semi-annually and the principal will be repaid in
semi-annual installments commencing January 1, 1999. Rowan Gorilla V and a
Company guarantee are pledged as security for the government guarantee. On July
1, 1997, the Company fixed $67,000,000 of outstanding borrowings at 6.94% until
July 2010. At December 31, 1997, the Company had borrowed about $109,994,000, of
which $42,994,000 bore interest at floating-rates ranging from 6.075% to 6.388%.
At December 31, 1997, the Company had $8,625,000 principal amount of Series III
Floating-Rate Convertible Subordinated Debentures outstanding. The outstanding
debentures are convertible into $8,625,000 of Series III Preferred Stock, which
may be converted into an aggregate of 1,277,778 shares of the Company's common
stock. The debentures were originally 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.
During 1997, the Company repaid the balance of $2,488,000 of notes payable
originally issued in January 1993 in connection with the purchase of two
aircraft. Also during 1997, the $3,600,000 principal amount of the outstanding
Series II debenture was converted into 400,000 shares of the Company's common
stock. See Note 3 for further information.
Interest payments for 1997, 1996 and 1995 were $24,188,000, $27,073,000 and
$27,433,000, respectively.
The Company's debt agreements contain provisions that require an excess of
current assets over current liabilities, an excess of stockholders' equity over
consolidated debt and minimum levels of stockholders' equity and earnings, and
restrict investments, sale/leaseback transactions, mergers, consolidations,
sales of assets, borrowings, creation of liens, purchases of the Company's
capital stock and common stock dividend payments. See Note 5 for further
information.
<PAGE> 14
- --------------------------------------------------------------------------------
NOTE 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.
Under the terms of the 1988 Nonqualified Stock Option Plan, as amended, 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, 1997, options for 7,268,504 shares had been granted at exercise
prices ranging from $1.00 to $19.63 per share, and 338 active, key employees had
been granted options. Options become exercisable over a four-year service period
to the extent of 25% per year, and all options not exercised expire ten years
after the date of grant.
The Company determines compensation expense for each option pursuant to
Accounting Principles Board 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 recognized as expense and additional paid-in capital over the
period in which the employee performs services to earn the right to exercise the
option. The Company estimates that the accounting provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which provides an alternative method for measuring compensation
cost, would have reduced reported amounts of net income (loss) by approximately
$627,000 in 1997, $341,000 in 1996 and $11,000 in 1995, or less than $.01 per
share in each of 1997, 1996 and 1995.
Stock option activity for the last three years was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Number of Shares
--------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stock options outstanding, January 1 2,498,288 2,499,700 2,182,650
Changes during the year:
Granted:
at $1.00 per share 928,000
at $7.63 per share 525,000
at $8.00 per share 25,000
at $15.25 per share 177,000
at $9.81 per share 619,000
at $19.63 per share 196,000
Exercised:
at $1.00 per share (522,013) (626,162) (537,950)
at $7.63 per share (95,500)
at $15.25 per share (5,375)
Forfeited (124,375) (102,250) (73,000)
- --------------------------------------------------------------------------------------------
Stock options outstanding, December 31 2,566,025 2,498,288 2,499,700
- --------------------------------------------------------------------------------------------
Stock options exercisable, December 31 690,400 564,476 494,513
- --------------------------------------------------------------------------------------------
Stock options available for grant, December 31 1,293,446 1,984,071 2,608,821
- --------------------------------------------------------------------------------------------
</TABLE>
The Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan provided 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.
Under the plan, debentures in the aggregate principal amount of $19,925,000 have
been issued by the Company. At December 31, 1997, all $5,125,000 principal
amount of Series I debentures issued in 1986 had been converted into common
stock at $5.75 per share and all $4,500,000 principal amount of the Series II
debenture issued in 1987 had been converted into common stock at $9.00 per
share. At December 31, 1997, Series III debentures in the principal amount of
$8,625,000 were outstanding. 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: $6,125,000 through November 29, 1998 and
$8,625,000 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, as amended, 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 $75. In addition, under certain
circumstances, each Right will entitle the holder to purchase securities of the
Company or an acquiring entity at 1/2 market value. The Rights are exercisable
only if a person or group acquires 15% or more of the Company's outstanding
common stock or makes a tender offer for 30% or more of the Company's
outstanding common stock. The Rights will expire on February 25, 2002. The
Company may generally redeem the Rights at a price of $.01 per Right at any time
until the 10th business day following public announcement that a 15% position
has been acquired.
<PAGE> 15
- --------------------------------------------------------------------------------
NOTE 4 OTHER CURRENT LIABILITIES
- --------------------------------------------------------------------------------
Other current liabilities consisted of (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31, 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Gain on sale/leaseback transactions $ 3,198 $ 3,198
Customer deposits 14,927 969
Accrued liabilities:
Income taxes 425 1,009
Compensation and related employee costs 22,027 29,084
Interest 3,765 2,033
Taxes and other 14,345 16,943
- --------------------------------------------------------------------------------
Total $ 58,687 $ 53,236
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 5 RESTRICTIONS ON RETAINED EARNINGS
- --------------------------------------------------------------------------------
Under the terms of its three-year revolving credit facility entered into during
October 1997, the Company's ability to declare dividends or make any
distribution on its common stock in any quarter is limited to the sum of a)
$20,000,000, plus b) 50% of cumulative consolidated net income, if positive,
subsequent to December 31, 1996, plus c) the net proceeds from the sale of any
class of capital stock after December 31, 1996, less d) 100% of cumulative
consolidated net income, if negative, subsequent to December 31, 1996. Under
this restriction, approximately $93,330,000 of the Company's retained earnings
was available for distribution at December 31, 1997. Subject to this and other
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.
- --------------------------------------------------------------------------------
NOTE 6 BENEFIT PLANS
- --------------------------------------------------------------------------------
Since 1952, the Company has sponsored defined benefit pension plans covering
substantially all of its 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 last ten years of service. The Company's policy is to fund the minimum
amount required by the Internal Revenue Code.
The funded status of the plans was as follows (in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
December 31, 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested benefits $ 130,168 $ 113,833
- -----------------------------------------------------------------------------------------------
Total benefits $ 137,256 $ 121,455
- -----------------------------------------------------------------------------------------------
Plan assets at fair value $ 168,699 $ 141,997
Projected benefit obligation for service rendered to date 155,935 136,721
- -----------------------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 12,764 5,276
Unrecognized net gain (26,087) (16,013)
Unrecognized net benefits being recognized over 15 years (2,422) (3,634)
Unrecognized prior service cost 324 440
- -----------------------------------------------------------------------------------------------
Accrued pension cost included in current and
other liabilities $ (15,421) $ (13,931)
- -----------------------------------------------------------------------------------------------
</TABLE>
The plans' assets consist primarily of equity securities and U.S. Treasury bonds
and notes and, at December 31, 1997, included 1,500,000 shares of the Company's
common stock at an average cost of $4.81 per share. At December 31, 1997,
$11,593,000 of the plans' assets were invested in a dedicated bond fund. The
plans had a basis in these assets of $8,406,000 yielding approximately 5.2% to
maturity.
Net pension cost included the following components (in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Year ended December 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 5,471 $ 5,757 $ 4,335
Interest cost on projected benefit obligation 10,340 9,477 8,580
Actual return on plan assets - gain (32,769) (31,607) (24,166)
Net amortization and deferral 18,448 20,692 15,280
- -----------------------------------------------------------------------------------------------
Net periodic pension cost $ 1,490 $ 4,319 $ 4,029
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 16
Assumptions used in actuarial calculations were:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 7.5% 7.25%
Rate of compensation increase 4.0% 4.0% 4.0%
Expected rate of return on plan assets 9.5% 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, 1997 and 1996 of $3,791,000 and $3,317,000,
respectively. The net pension liabilities included in the Company's consolidated
balance sheet were $3,191,000 and $2,615,000 at December 31, 1997 and 1996,
respectively. Net pension cost was $530,000 in 1997, $508,000 in 1996 and
$473,000 in 1995.
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 funded status of the plan was as follows (in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
December 31, 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $ 13,793 $ 12,322
Fully eligible active plan participants 10,118 8,933
Other active plan participants 12,164 12,257
- -----------------------------------------------------------------------------------------------
Total benefits 36,075 33,512
Unrecognized transition obligation being recognized
over 20 years (11,347) (12,103)
Unrecognized net loss (7,182) (7,803)
- -----------------------------------------------------------------------------------------------
Accrued postretirement benefit cost
included in current and other liabilities $ 17,546 $ 13,606
- -----------------------------------------------------------------------------------------------
</TABLE>
The actuarially determined accumulated postretirement benefit obligation
reflects health care cost trend rates of 9% for 1997 and decreasing by .50% to
.75% annually through 2003 and a discount rate of 7.25%. A one percentage point
increase in the assumed health care cost trend rate would increase net periodic
postretirement benefit cost by approximately $537,000 and increase the
accumulated postretirement benefit obligation by approximately $2,782,000.
Net postretirement benefit cost included the following components (in
thousands):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Year ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 1,666 $ 1,686 $ 1,157
Interest cost 2,528 2,269 1,998
Net amortization and deferral 1,053 1,129 797
- ---------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 5,247 $ 5,084 $ 3,952
- ---------------------------------------------------------------------------------------
</TABLE>
Postretirement benefits paid in 1997, 1996 and 1995 were approximately
$1,307,000, $1,076,000 and $1,052,000, 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 $1,475,000 in 1997, $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 $754,000, $637,000 and $620,000 in 1997, 1996 and
1995, respectively.
- --------------------------------------------------------------------------------
NOTE 7 INCOME TAXES
- --------------------------------------------------------------------------------
The detail of income tax provisions (credits) is presented below (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Year ended December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 3,296 $ 1,236 $ 87
Foreign 78 141 787
State 128 187 202
- ----------------------------------------------------------------------------------------
Total current provision 3,502 1,564 1,076
Deferred 13,361 (2,372) (322)
- ----------------------------------------------------------------------------------------
Total provision (credit) $ 16,863 $ (808) $ 754
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
The Company's provision (credit) for income taxes differs from that determined
simply by applying the federal income tax rate (statutory rate) to income before
extraordinary charges, as follows (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Year ended December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35% 35% 35%
Tax at statutory rate $ 60,651 $ 21,186 $ (6,189)
Increase (decrease) in taxes resulting from:
Change in valuation allowance (38,415) (30,863) 247
Foreign companies' operations (10,443) (2,761) 1,527
Expiration of tax credits 9,593 12,772 6,955
Other - net (4,523) (1,142) (1,786)
- ----------------------------------------------------------------------------------------
Total provision (credit) $ 16,863 $ (808) $ 754
- ----------------------------------------------------------------------------------------
</TABLE>
Temporary differences and carryforwards which gave rise to deferred tax assets
and liabilities at December 31, 1997 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
December 31, 1997 1996
- ----------------------------------------------------------------------------------------
Current Noncurrent Noncurrent
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Sale/leaseback gain $ 1,119 $ 2,086 $ 4,324
Accrued employee benefit plan costs 315 12,295 10,574
Alternative minimum tax 5,580 2,176
Net operating losses 26,036 77,912
Investment tax credits 27,130 36,723
Other 718 5,375 5,095
- ----------------------------------------------------------------------------------------
60,898 19,756 136,804
Valuation allowance (38,415)
- ----------------------------------------------------------------------------------------
60,898 19,756 98,389
- ----------------------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment 94,511 97,062
Foreign income taxes 393
Other 89 201 2,708
- ----------------------------------------------------------------------------------------
89 94,712 100,163
- ----------------------------------------------------------------------------------------
Deferred tax asset (liability) $ 60,809 $ (74,956) $ (1,774)
- ----------------------------------------------------------------------------------------
</TABLE>
The valuation allowance consisted primarily of tax credit and operating loss
carryforwards that were projected to expire. During 1997, approximately
$9,593,000 of investment tax credit expired. The Company currently believes all
remaining carryforwards will be utilized during 1998, and has decreased the
valuation allowance accordingly.
At December 31, 1997, the Company had $24,752,000 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: 1998 - $9,291,000, 1999 - $10,095,000,
2000 - $2,006,000, 2001 - $5,510,000 and 2002 - $228,000.
At December 31, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $74,388,000 which will expire, if
not utilized, as follows: 2002 - $8,140,000, 2006 - $1,860,000, 2007 -
$54,011,000, 2008 - $3,002,000, 2009 - $1,465,000 and 2010 - $5,910,000.
Deferred income taxes not provided on undistributed earnings of foreign
subsidiaries, because such earnings are considered permanently invested abroad,
amounted to approximately $16,422,000 at December 31, 1997.
Income (loss) before income taxes consisted of $154,313,000, $58,573,000 and
$(17,292,000) of domestic earnings (losses), and $18,975,000, $1,957,000 and
$(390,000) of foreign earnings (losses) in 1997, 1996 and 1995, respectively.
Income tax payments exceeded refunds by $3,781,000 in 1997, $1,747,000 in 1996
and $338,000 in 1995.
- --------------------------------------------------------------------------------
NOTE 8 FAIR VALUES OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
At December 31, 1997, 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. The carrying amount of the
Company's long-term debt was estimated to approximate its fair value at December
31, 1997 based upon quoted market prices for similar issues.
<PAGE> 18
- --------------------------------------------------------------------------------
NOTE 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 operating leases at effective interest rates of 9.3% and 8.0%,
respectively. At the conclusion of each basic lease term in 2000, the Company
can purchase each rig at its existing fair market value or renew each lease at
the lesser of a) 50% of the weighted average 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 basic lease term.
Total payments to be made under the sale/leaseback agreements are being expensed
on a straight-line basis. Current and other liabilities at December 31, 1997 and
1996 included the excess of inception-to-date sale/leaseback expenses over
related payments of $8,061,000 and $12,857,000, respectively.
The Company has operating leases covering aircraft hangars, offices and computer
equipment and the sale/leaseback rigs. Net rental expense under all operating
leases was $21,619,000 in 1997, $20,820,000 in 1996 and $20,365,000 in 1995.
As of December 31, 1997, the future minimum payments to be made under
noncancelable operating leases were (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
1998 $ 21,260
1999 23,126
2000 18,095
2001 289
2002 241
Later years 1,135
- --------------------------------------------------------------------------------
Total $ 64,146
- --------------------------------------------------------------------------------
</TABLE>
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, 1997 and 1996 included $8,650,000 and
$8,763,000, respectively, related to environmental matters. The Company believes
that it has adequately accrued for environmental liabilities.
In the Company's opinion, at December 31, 1997, 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.
The Company estimates 1998 capital expenditures at between $210,000,000 and
$225,000,000, including $175,000,000 to $185,000,000 toward construction of the
offshore rigs Gorillas V, VI and VII.
- --------------------------------------------------------------------------------
NOTE 10 SEGMENTS OF BUSINESS
- --------------------------------------------------------------------------------
The following information is presented in accordance with Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The Company's adoption of Statement 131, effective
December 15, 1997, did not alter the composition of its reportable operating
segments.
The Company has three principal operating segments: contract drilling of oil and
gas wells, both onshore and offshore ("Drilling"), charter helicopter and
fixed-wing aircraft services ("Aviation") and the manufacture and sale of heavy
equipment for the mining, timber and transportation industries, alloy steel and
steel plate and marine drilling equipment ("Manufacturing"). The Company's
reportable segments reflect separately managed, strategic business units that
provide different products and services, and for which financial information is
separately prepared and monitored. The accounting policies of each segment are
as described in the Company's summary of significant accounting policies. See
Note 1 for further information.
Drilling services are provided both onshore and offshore in 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 and
Vicksburg, Mississippi, though products are shipped throughout the United States
and to many foreign locations.
Assets are ascribed to a segment based upon their direct use. The Company
classifies its drilling rigs as domestic or foreign based upon the rig's
operating location. Accordingly, drilling rigs operating in or offshore the
United States are considered domestic assets and rigs operating in other areas
are deemed foreign assets.
<PAGE> 19
The Company's total assets are identified by operating segment and its fixed
assets are shown geographically as follows (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated assets:
Drilling $ 803,747 $ 618,441 $ 539,431
Manufacturing 163,113 135,750 108,798
Aviation 155,275 145,117 154,259
- ----------------------------------------------------------------------------------------
Total $ 1,122,135 $ 899,308 $ 802,488
- ----------------------------------------------------------------------------------------
Property, plant and equipment - net:
Domestic $ 551,853 $ 411,408 $ 341,857
Foreign 125,307 134,792 145,182
- ----------------------------------------------------------------------------------------
Total $ 677,160 $ 546,200 $ 487,039
- ----------------------------------------------------------------------------------------
</TABLE>
At December 31, 1997, 29 drilling rigs, including 15 offshore rigs, were located
in domestic areas and six offshore rigs were operating in foreign locations.
Aviation services assets include the Company's investment in KLM ERA
Helicopters. See Note 12 for further information. Information regarding revenues
and profitability by operating segment is as follows (in thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Year ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Drilling services $ 434,004 $ 316,123 $ 250,080
Manufacturing sales and services 154,852 143,768 133,755
Aviation services 106,396 111,269 87,462
- -------------------------------------------------------------------------------------
Consolidated $ 695,252 $ 571,160 $ 471,297
- -------------------------------------------------------------------------------------
Operating profit (loss):*
Drilling services $ 185,037 $ 79,247 $ 5,019
Manufacturing sales and services 16,294 9,468 11,737
Aviation services (1,904) 6,547 (4,319)
- -------------------------------------------------------------------------------------
Consolidated $ 199,427 $ 95,262 $ 12,437
- -------------------------------------------------------------------------------------
</TABLE>
*Income (loss) from operations before deducting general and administrative
expenses.
Excluded from the preceding table are the effects of transactions between
segments. During 1997, 1996 and 1995 the Company's manufacturing division billed
approximately $82,707,000, $39,804,000 and $4,658,000, respectively, for
products and services provided to the drilling division and the Company's
aviation division provided approximately $2,859,000, $2,749,000 and $3,231,000,
respectively, of flight services to the drilling division.
Foreign-source revenues were as follows (in thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Year ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Drilling services $ 127,479 $ 105,010 $ 82,453
Manufacturing sales and services 2,124 1,968 1,942
Aviation services 5,027 4,109 2,026
- -------------------------------------------------------------------------------------
Total $ 134,630 $ 111,087 $ 86,421
- -------------------------------------------------------------------------------------
</TABLE>
The Company had revenues, primarily from drilling operations, in excess of 10%
of consolidated revenues from one customer in 1995 (11%). In 1997 and 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.
<PAGE> 20
Certain other financial information for each of the Company's principal
operating segments is summarized as follows (in thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Year ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization:
Drilling $ 31,032 $ 33,998 $ 37,127
Aviation 11,910 11,248 11,788
Manufacturing 4,136 2,636 1,640
Capital expenditures:
Drilling 146,760 87,927 14,846
Aviation 16,977 8,913 12,897
Manufacturing 16,329 21,107 6,138
Maintenance and repairs:
Drilling 29,643 32,125 25,870
Aviation 21,293 18,248 13,911
Manufacturing 13,865 9,389 9,071
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 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 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.
- --------------------------------------------------------------------------------
NOTE 12 SUBSEQUENT EVENT
- --------------------------------------------------------------------------------
On January 30, 1998, the Company agreed to terminate its North Sea helicopter
joint venture, KLM ERA Helicopters. The Company received a distribution of KLM
ERA's assets approximating the carrying value of its 49% interest, including
$19.6 million in cash, two Sikorsky S-61N helicopters, spare engines and parts.
<PAGE> 21
Rowan Companies, Inc. and Subsidiaries
I N D E P E N D E N T A U D I T O R S' R E P O R T
- --------------------------------------------------------------------------------
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, 1997 and 1996, 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,
1997. 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,
1997 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
March 2, 1998
<PAGE> 22
Rowan Companies, Inc. and Subsidiaries
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
The following unaudited information for the quarters ended March 31, June 30,
September 30 and December 31, 1996 and 1997 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 Quarter Second Quarter Third Quarter Fourth Quarter
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
Net income per common share:
Basic .03 .15 .27 .28
Diluted .03 .15 .26 .27
- -----------------------------------------------------------------------------------------------
1997:
Revenues $ 144,765 $ 164,785 $ 195,456 $ 190,246
Operating profit 15,278 51,327 67,775 65,047
Income before
extraordinary charges 7,631 40,580 54,287 53,927
Net income 4,153 40,580 54,287 47,639
Per common share:
Basic:
Income before
extraordinary charges .09 .47 .63 .62
Net income .05 .47 .63 .55
Diluted:
Income before
extraordinary charges .09 .46 .61 .60
Net income .05 .46 .61 .53
- -----------------------------------------------------------------------------------------------
</TABLE>
During the first and fourth quarters of 1997, the Company redeemed early its
11 7/8% Senior Notes due 2001 and recognized extraordinary charges on each
transaction comprised primarily of prepayment premiums.
The sum of the per share amounts for the quarters may not equal the per share
amounts for the full year 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, 1998 there were approximately 3,000 holders
of record.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Quarter 1997 1996
- -----------------------------------------------------------------------------------------------
High Low High Low
--------------------------------------------------------------
<S> <C> <C> <C> <C>
First $ 29.00 $ 18.63 $ 13.13 $ 8.88
Second 28.63 16.75 16.75 12.75
Third 36.88 28.19 19.13 14.00
Fourth 43.94 26.50 24.50 18.50
- -----------------------------------------------------------------------------------------------
</TABLE>
The Company did not pay any dividends on its common stock during 1997 and
1996. 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.
<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, Registration Statement No. 333-25041 and Registration Statement No.
333-25125, 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 2, 1998 incorporated by reference in this Annual Report
on Form 10-K of Rowan Companies, Inc., for the year ended December 31, 1997. 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 27, 1998
<PAGE> 1
EXHIBIT 24
Form 10-K for the Year Ended December 31, 1997
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, 1997 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, 1997 or amendment has been
signed below by the following persons in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
--------------------------- President, Chairman of the
(C. R. Palmer) Board and Chief Executive Officer
RALPH E. BAILEY Director March 27, 1998
(Ralph E. Bailey)
HENRY O. BOSWELL Director March 27, 1998
(Henry O. Boswell)
R. G. CROYLE Director March 27, 1998
(R. G. Croyle)
H. E. LENTZ Director March 27, 1998
(H. E. Lentz)
D. F. MCNEASE Director March 27, 1998
(D. F. McNease)
LORD MOYNIHAN Director March 27, 1998
(Lord Moynihan)
--------------------------- Director
(Wilfred P. Schmoe)
CHARLES P. SIESS, JR. Director March 27, 1998
(Charles P. Siess, Jr.)
C. W. YEARGAIN Director March 27, 1998
(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, 1997 INCLUDED IN ITS 1997 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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 180,332
<SECURITIES> 0
<RECEIVABLES> 133,627
<ALLOWANCES> 0
<INVENTORY> 101,916
<CURRENT-ASSETS> 412,378
<PP&E> 1,518,710
<DEPRECIATION> 841,550
<TOTAL-ASSETS> 1,122,135
<CURRENT-LIABILITIES> 81,526
<BONDS> 256,150
0
0
<COMMON> 11,020
<OTHER-SE> 642,078
<TOTAL-LIABILITY-AND-EQUITY> 1,122,135
<SALES> 148,348
<TOTAL-REVENUES> 695,252
<CGS> 110,476
<TOTAL-COSTS> 512,796
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (16,242)
<INCOME-PRETAX> 173,288
<INCOME-TAX> 16,863
<INCOME-CONTINUING> 156,425
<DISCONTINUED> 0
<EXTRAORDINARY> (9,766)
<CHANGES> 0
<NET-INCOME> 146,659
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.65
</TABLE>
