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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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Rowan Companies, Inc.
Incorporated in Delaware Commission File I. R. S. Employer
Number 1-5491 Identification:
75-0759420
2800 Post Oak Boulevard
Suite 5450
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 Exchange - Stock & Options
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Exchange - Stock & Options
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 .
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The aggregate market value as of March 3, 2000 of the Common Stock held
by non-affiliates of the registrant was approximately $2,424,000,000.
The number of shares of Common Stock, $.125 par value, outstanding at
March 3, 2000 was 92,387,446.
DOCUMENTS INCORPORATED BY REFERENCE
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Document Part of Form 10-K
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Annual Report to Stockholders for
fiscal year ended December 31, 1999 Parts I, II and IV
Proxy Statement for the 2000 Annual
Meeting of Stockholders Part III
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TABLE OF CONTENTS
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Page
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PART I
Item 1. Business .................................................... 1
Drilling Operations................................................. 1
Offshore Operations ............................................. 1
Onshore Operations .............................................. 3
Contracts ....................................................... 3
Competition ..................................................... 4
Regulations and Hazards ......................................... 4
Manufacturing Operations............................................ 6
Raw Materials.................................................... 7
Competition...................................................... 7
Regulations and Hazards.......................................... 8
Aviation Operations ................................................ 9
Contracts ....................................................... 10
Competition ..................................................... 10
Regulations and Hazards ......................................... 10
Employees .......................................................... 10
Item 2. Properties .................................................. 11
Drilling Rigs ...................................................... 11
Manufacturing Facilities............................................ 15
Aircraft ........................................................... 15
Item 3. Legal Proceedings ........................................... 16
Item 4. Submission of Matters to a Vote of Security Holders ......... 16
Additional Item. Executive Officers of the Registrant ................ 17
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters ....................................... 18
Item 6. Selected Financial Data ..................................... 18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 18
Item 7A. Quantitative and Qualitative Disclosures about Market Risks.. 18
Item 8. Financial Statements and Supplementary Data ................. 18
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ....................... 18
PART III
Item 10. Directors and Executive Officers of the Registrant .......... 19
Item 11. Executive Compensation ...................................... 19
Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................................ 19
Item 13. Certain Relationships and Related Transactions .............. 19
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ...................................... 20
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PART I
ITEM 1. BUSINESS
Rowan Companies, Inc. (the "Company") is a major provider of international and
domestic contract drilling and aviation services. The Company also operates a
mini-steel mill, a manufacturing facility that produces heavy equipment for the
mining, timber and transportation industries and a marine construction division
that has designed and built over one-third of all mobile offshore jack-up
drilling rigs. The Company was 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.
Information regarding each of the Company's industry segments, including
revenues, operating profit (loss), assets and foreign sales for 1997, 1998 and
1999, is incorporated herein by reference to Footnote 10 of the Notes to
Consolidated Financial Statements on pages 28 and 29 of the Company's 1999
Annual Report to Stockholders ("Annual Report"), incorporated portions of which
are filed as Exhibit 13 hereto.
DRILLING OPERATIONS
The Company provides contract drilling services utilizing a fleet of 21
self-elevating mobile offshore drilling platforms ("jack-up rigs"), one mobile
offshore floating platform ("semi-submersible rig") and 14 land drilling rigs.
The Company's drilling operations are conducted primarily in the Gulf of Mexico,
the North Sea, offshore eastern Canada and in Texas and Louisiana. In 1999,
drilling operations generated an operating profit (income from operations before
deducting general and administrative expenses) of $11.8 million.
Offshore Operations
Since 1970, the Company's drilling operations have featured jack-up rigs
performing both exploratory and development drilling and, in certain areas, 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 550 feet, depending on the size of the rig and its location.
A jack-up rig is a floating hull with three independently elevating legs,
drilling equipment, supplies, crew quarters, loading and unloading facilities, a
helicopter landing deck and other related equipment. Drilling equipment includes
engines, drawworks or hoist, derrick, pumps to circulate the drilling fluid,
drill pipe and drilling bits. 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 hull is jacked-up on the legs to the
desired elevation above the water. The hull then serves as a drilling platform
until the well is completed at which time the hull is lowered into the water,
the legs are elevated and the rig is towed to the next drilling site.
The Company's cantilever jack-ups can extend that portion of the hull containing
the drilling equipment over fixed production platforms so that development or
workover operations on the platforms can be carried out with a minimum of
interruption to production. In 1989, the Company acquired and developed "skid
base" technology enabling its conventional jack-up rigs to work over wells on a
production platform that previously required a cantilever jack-up or platform
rig.
At December 31, 1999, the Company's offshore drilling fleet included 14
cantilever jack-up rigs, featuring three harsh environment "Gorilla Class rigs"
and one enhanced "Super Gorilla Class rig", seven conventional jack-up rigs,
including four rigs with skid base capability, and one semi-submersible rig. The
Company operates two of the cantilever jack-up rigs under sale/leaseback
arrangements expiring during 2008.
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The Company's Gorilla Class rigs, Gorillas II, III and IV, are a heavier-duty
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).
During the fourth quarter of 1998, the Company completed construction of the
first of three Super Gorilla Class rigs, Rowan Gorilla V, which is an enhanced
version of the Company's Gorilla Class rigs and the world's largest bottom
supported mobile offshore drilling unit. Gorilla V is a combination drilling and
production unit capable of operating year-round in 400 feet of water south of
the 61st parallel in the North Sea, within the worst case combination of
100-year storm criteria for waves, wave periods, winds and currents. The Company
financed $153.1 million of the cost of Gorilla V through bank loans guaranteed
by the U.S. Department of Transportation's Maritime Administration under its
Title XI Program.
In October 1996, the Company announced plans for the construction of two
additional Super Gorilla Class rigs, Rowan Gorilla VI and Rowan Gorilla VII. To
date, the Company has assembled a significant portion of Gorilla VI and begun
construction of Gorilla VII. The Company has secured Title XI bank financing for
up to $171.0 million of the cost of Gorilla VI and up to $185.4 million of the
cost of Gorilla VII on terms and conditions similar to those obtained for
Gorilla V. Gorilla VI should be completed by mid-2000 and Gorilla VII by
year-end 2001.
This fleet expansion program began in 1995 and represents the Company's first
new construction since the mid-1980s. Since that time, the Company's capital
expenditures have been primarily for enhancements to existing drilling rigs and
manufacturing facilities and for the purchase of aircraft. Of the Company's 17
remaining jack-up rigs, six cantilever rigs and one conventional rig have been
modified to provide a degree of hostile environment operating capability, while
six cantilever rigs and three conventional rigs can operate in water depths up
to 350 feet.
The Company takes advantage of lulls in drilling activity, as was recently
experienced, to perform needed maintenance and make certain enhancements to its
drilling fleet. During 1998 and 1999, the Company completed the following
enhancements: upgrading solids control mud systems on all nine of the Company's
Class 116-C jack-up rigs and its Class 52-C rig; adding one to two engines to
six of the Class 116-C rigs, each such rig now being equipped with six engines;
installing new generation top-drives on four of the Class 116-C rigs and one of
the Gorilla Class Rigs; upgrading the electrical systems on one of the Class 84
rigs; converting one of the Class 52 rigs to a cantilever; adding leg length to
three of the Class 116-C rigs and reconditioning the subsea equipment on the
Company's semi-submersible rig.
For a further discussion of the Company's availability of funds in 2000 to
sustain operations, debt service and planned capital expenditures, including
those related to construction of Gorillas VI and VII, see "Liquidity and Capital
Resources" under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 15, 16 and 17 of the Annual Report, which
information is incorporated herein by reference. Also, see ITEM 2. PROPERTIES on
page 11 of this Form 10-K for additional information with respect to the
capabilities and operating status of the Company's rigs.
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 and submerged beneath the water surface, in which
position the rig is anchored during drilling operations. The drilling platform
contains the same type of equipment found on a jack-up rig. After completion of
the well, the submerged hull is deballasted to reduce vessel draft and
facilitate towing to another drilling location.
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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, three in Texas, four in
Louisiana, one in Pennsylvania and four in Alaska, which are winterized.
Two of the Company's deep-well land rigs were under contract for most of 1999
and five other rigs worked sporadically in Louisiana, Texas and Mississippi
throughout the year. The Company's seven other land rigs were idle during 1999.
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 drilling contracts generally provide for compensation on a day
rate basis and are usually obtained either through competitive bidding or
individual negotiations. 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. Profitability may
also be dependent upon receiving adequate compensation for the cost of moving
equipment to drilling locations.
When weak market conditions characterized by declining drilling day rates
prevail, the Company generally accepts lower rate contracts in an attempt to
maintain its competitive position and to offset the substantial costs of
maintaining and reactivating stacked rigs. When drilling markets are strong and
increasing rates prevail, the Company generally pursues short rather than
long-term contracts for its offshore rigs to maximize its ability to obtain rate
increases and pass through any cost increases to customers.
The Company's drilling contracts are either "well-to-well", "multiple well" or
for a fixed term generally ranging from four to twelve months. Well-to-well
contracts are cancelable by either party upon completion of drilling at any one
site, and fixed-term contracts usually provide for termination by either party
if drilling operations are suspended for extended periods by events of force
majeure. While most 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. Many offshore contracts contain
renewal or extension provisions exercisable at the option of the customer at
prices agreeable to the Company and most require additional payments for
mobilization and demobilization costs. The Company's 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 pursued work on a turnkey basis where
the Company's entire compensation was contingent upon it successfully drilling a
well to a specified depth for a fixed price. In the event operational problems
occurred that prevented the Company from reaching 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. 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.
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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 11 of this Form 10-K for the contract status of the Company's rigs as of
March 28, 2000.
Competition
The Company competes with approximately 21 offshore drilling contractors having
available to operate more than 500 mobile rigs, approximately 25 domestic
drilling contractors having available about 150 deep-well land rigs, and five
domestic drilling contractors having available about 19 winterized land rigs on
the Alaskan North Slope. Some of the Company's competitors have greater
financial and other resources and may be more able to make technological
improvements to existing equipment or replace equipment that becomes obsolete.
Technological advances can create competitive advantages and eventually cause
older, less capable equipment to be less suitable for certain drilling
operations. As a result, during the 1980-1986 period, the Company carried out a
drilling rig expansion program, culminating with the development of a heavier
jack-up rig class known as the Gorilla rig. Since that time, the Company has
employed a drilling rig modification and enhancement program designed to provide
a fleet of jack-up rigs reflecting the latest technological advancements. In
1995, the Company began a drilling rig expansion program featuring the
development of an enhanced version of the Gorilla Class rig.
The offshore markets in which the Company competes are characterized by their
economic viability and political stability. At March 28, 2000, the Company had
18 jack-ups and its semi-submersible located in the Gulf of Mexico and three
jack-ups offshore eastern Canada. Relocation of equipment from one geographic
location to another is dependent upon changing market dynamics, with moves
occurring only when the likelihood of higher returns makes such action
economical. During 1999 and early 2000, the Company relocated its six rigs from
the North Sea to the Gulf of Mexico (five rigs) and offshore eastern Canada (one
rig) due to inadequate market conditions which the Company believes will persist
at least until late in the third quarter of this year, and possibly well into
2001.
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. Since 1992, with the many restructurings, downsizings and, more
recently, mergers by major energy companies, followed by significant reductions
in their domestic budgets, the Company has increased its marketing emphasis on
independent operators.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 12 through 17 of the Company's 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 Company's drilling operations are subject to many hazards, including
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 are also subject to marine hazards, either while on site or
under tow, such as vessel 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 into high-pressure formations is a complex process and
problems can frequently occur.
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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 the Company's operations. 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 often subject to political, economic and other
uncertainties not encountered in domestic operations, such as arbitrary taxation
policies, onerous customs restrictions, unstable currencies and the risk of
asset expropriation due to foreign sovereignty over operating areas. As noted
previously, the Company attempts to minimize the risk of currency rate
fluctuations by generally contracting for payment in United States dollars.
Many aspects of the Company's operations are subject to government regulation,
as in the areas of equipping and operating vessels, drilling practices and
methods and taxation. In addition, various countries (including the United
States) have regulations relating to environmental protection and pollution
control. Recent events have also increased the sensitivity of the oil and gas
industry to environmental matters. The Company could become 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 its drilling contracts for 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.
Under turnkey contracts, the Company assumed responsibility for certain risks
that would customarily be assumed by the customer under a day rate contract,
such as pollution resulting from a blowout or uncontrolled flow from the well
bore, an underground blowout and the expense to redrill a well which has blown
out. The Company carried insurance to cover such risks and generally obtained an
indemnity from its customers for any liabilities exceeding the coverage amount.
The Company believes that it complies with all material legislation and
regulations affecting the drilling of oil and gas wells and the discharge of
wastes. To date, the Company has made significant modifications to its Gulf of
Mexico rigs to reduce waste and rain water discharge and believes that it could
operate those rigs at "zero discharge" without material additional expenditures.
Otherwise, regulatory compliance has not materially affected the capital
expenditures, earnings or competitive position of the Company to date, although
such measures do increase drilling costs and may reduce drilling activity.
Further regulations may reasonably be anticipated, but any effects thereof on
the Company's drilling operations cannot be accurately predicted.
The Company is subject to the requirements of the Federal Occupational Safety
and Health Act ("OSHA") and comparable state statutes. OSHA's hazard
communication standard, the Environmental Protection Agency's "community
right-to-know" regulations 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.
Since the exploration activities of the Company's present and potential
customers are directly 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 also affected.
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MANUFACTURING OPERATIONS
In 1994, LeTourneau, Inc. ("LeTourneau"), a wholly owned subsidiary of the
Company, acquired the net assets of Marathon LeTourneau Company, headquartered
in Longview, Texas. LeTourneau operates a mini-steel mill that recycles scrap
and produces steel plate; a manufacturing facility that produces heavy equipment
such as front-end loaders with a 50-ton capacity; and a marine group that has
designed and built over one-third of all mobile offshore jack-up drilling rigs,
including all 21 operated by the Company. In 1999, the manufacturing division
generated an operating profit of $0.7 million. External manufacturing backlog
for all product lines was approximately $20 million at February 29, 2000, all of
which should be realized in 2000, compared with $15 million one year earlier.
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 features front-end loaders with bucket
capacities of 17, 22, 28 and 33 cubic yards and off-road trucks with capacities
of 190 and 200 tons. LeTourneau's loaders and trucks are generally used in coal,
gold, copper and iron ore mines and utilize LeTourneau's patented diesel
electric-drive system with solid state controls. This system allows 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 350-ton range. LeTourneau's mining equipment
and parts are distributed through a worldwide network of independent
distributors and a Company-owned distribution network serving the western United
States.
The timber equipment product line features diesel electric powered log stackers
with either two or four wheel drive configurations and load capacities ranging
from 35 to 65 tons. LeTourneau is one of two manufacturers that sell
electrically powered jib cranes rated from 25,000 to 52,000 lbs. at a reach of
100 to 150 feet and with a 360-degree rotation. LeTourneau's timber equipment is
marketed primarily in North America through independent dealers and one
Company-owned dealer in the northwestern United States.
LeTourneau's transportation equipment line produces several different types of
material handling equipment, such as 50-ton capacity, diesel electric, gantry
cranes used for lifting, transporting and stacking large shipping containers and
trailers at ports and rail yards. Gantry cranes can span up to seven container
rows plus a truck aisle and stack 9 1/2-feet tall containers up to five high.
Gantry cranes equipped with a spreader can lift containers from the top and have
retractable arms for loading and unloading piggyback trailers. LeTourneau's
transportation equipment is marketed primarily in North America through
independent dealers and one Company-owned dealer in the northwestern United
States.
LeTourneau also sells parts and components to repair and maintain mining, timber
and transportation equipment. Equipment parts are marketed through two
independent dealers and one Company-owned dealer in the United States with 16
parts-stocking locations, one dealer in Canada with 21 parts-stocking locations,
and 31 other international dealers with 36 parts-stocking locations.
LeTourneau's Longview, Texas mini-steel mill produces carbon, alloy and
specialty steel plate products. LeTourneau concentrates on "niche" markets that
require alloy, specialty steel grades, or "exotic" versions of carbon steel
products, including mold steels, tool steels, aircraft quality steels, 400
series stainless steel and hydrogen-induced, crack-resistant steels. External
steel sales, which are garnered through a direct sales force, 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.
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LeTourneau's Vicksburg, Mississippi shipyard was reactivated during 1995-1996
following the Company's announcement of the planned construction of Rowan
Gorilla V and is dedicated to providing equipment, spare parts and engineering
support to the offshore drilling industry. The yard currently employs about 780,
most of whom have been hired since 1995. Some rig component manufacturing and
marine repair services, as well as marine design engineering, continue to be
performed at the Company's Longview, Texas facility.
As noted previously, the marine group delivered Rowan Gorilla V in late-1998 and
is currently constructing for the Company two additional Super Gorilla Class
jack-up rigs. Also in 1998, the marine group completed two Super 116-C Class
drilling rig kits for others.
LeTourneau engages in a limited amount of research and product development,
primarily to increase the capacity of and provide innovative improvements to its
product lines. The Company evaluates on an ongoing basis the LeTourneau product
and service lines with the intention of making enhancements.
On January 31, 2000, LeTourneau completed the purchase of The Ellis Williams
Company, Inc. and EWCO, Inc. dba Traitex Machine Co., which collectively design
and manufacture mud pumps ranging in capacity from 350 to 2,200 horsepower. The
purchase price was approximately $9 million, with $6 million in cash and the
balance in promissory notes due over a three-year period.
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 to meet its
manufacturing needs through purchases in the open market. LeTourneau does not
believe that it is dependent on any single supplier.
Competition
LeTourneau's mining equipment competes 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 190-ton to 240-ton class. Three competitors
have models in the 260-ton to 350-ton class.
The market for LeTourneau's timber and transportation equipment is also
characterized by vigorous competition. Though LeTourneau's jib crane is unique,
it does encounter competition from other equipment manufacturers that offer
alternative methods for meeting customer requirements. The number of major
competitors by type of equipment is as follows: log stackers - four, jib cranes
- - three 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 direct
competitors. Vendors supplying parts directly to end-users and well-fitters who
obtain and copy parts for cheaper and lower quality substitutes provide more
intense competition than LeTourneau's direct competitors.
To be competitive in the mining and timber equipment markets, LeTourneau offers
warranties at the time of purchase and parts guarantees. The warranties extend
for stipulated periods of ownership or hours of usage, whichever occurs first.
Parts consumption guaranties and maintenance and repair contracts are made on
the same basis. LeTourneau's parts return policy provides that returned parts
must be in new, usable condition, in current production and readily resalable.
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At present, LeTourneau has a limited number of competitors in the marine rig
construction and support industry. However, if demand for marine rigs increases,
new competitors can be expected to enter the market.
LeTourneau's two principal competitors in the mud pump business have a combined
market share approaching 90%.
Historically, LeTourneau's customer base has been diverse, such that none of its
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, Texas plant in
association with the steel making process. Industrial wastewater generated at
the mini-steel mill facility for cooling purposes is recirculated and quality
tests are conducted regularly. The facility has permits for wastewater
discharges, solid waste disposal and air emissions. Waste products considered
hazardous by the EPA are disposed of by shipment to an EPA or state approved
waste disposal facility.
During the Company's 1994 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 remediation obligations 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 approval by various
agencies, depending upon the geographic areas where the rig will be qualified
for drilling. The rules vary by location and are subject to frequent change, and
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 2000. Further regulations may reasonably be anticipated, but any effects
thereof on the Company'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 product use,
business interruption and necessary legal expenses to defend LeTourneau against
such claims. LeTourneau carries insurance that it believes adequately covers
such risks. LeTourneau did not assume certain liabilities of Marathon LeTourneau
Company, such as product liability and tort claims, associated with all products
manufactured, produced, marketed or distributed prior to the date of the
acquisition.
LeTourneau anticipates incurring expenses associated with the warranty of its
products. In the equipment business, dealers of LeTourneau's products perform
the warranty work while in the marine business, LeTourneau generally performs
warranty work directly.
-8-
<PAGE> 11
AVIATION OPERATIONS
The Company's wholly-owned subsidiary, Era Aviation, Inc. ("Era"), provides
contract and charter helicopter and fixed-wing aviation services principally in
Alaska, the coastal areas of Louisiana and Texas, and the western United States,
with its fleet consisting on March 28, 2000 of 95 helicopters and 18 fixed-wing
aircraft. In 1999, the aviation division incurred an operating loss of $3.7
million.
The Company's helicopter services in recent years have featured flightseeing,
forest fire control and support for oil and gas related operations from Era's
primary bases in Alaska, Louisiana and Nevada. Services provided offshore
Louisiana and Texas are primarily oil and gas-related while the majority of
helicopter services in the western United States are provided to governmental
agencies in support of forest fire control, construction, and onshore and
offshore oil field support.
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. Era
currently serves Valdez, Kenai, Homer, Kodiak, Iliamna and Cordova, with
seasonal service to Whitehorse from its base hub in Anchorage. In addition, it
services 20 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
and the Texas cities of Houston, Corpus Christi, Bay City and Sabine Pass. Based
on the number of helicopters operating, the Company is the third largest
helicopter operator in the Gulf of Mexico.
Since 1987, the Company has manufactured and marketed, from its Gulf Coast
Division facility at Lake Charles, Louisiana, a composite external auxiliary
fuel tank for use on several helicopters, including the Bell 205, 212 and 412,
the military "Huey" and the Eurocopter BK-117. The tank system provides enhanced
flight range with nominal drag while increasing the passenger capacity. 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.
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. ("KLM ERA"), 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. In January
-9-
<PAGE> 12
1998, the Company agreed to terminate its ownership in KLM ERA in return for
cash and equipment approximating the carrying value of its investment.
Contracts
Era's flight services generally are provided through master service agreements,
term contracts or day-to-day charter arrangements. Master service agreements
require incremental payments based on usage, usually have fixed terms ranging
from one month to one year and generally are cancelable upon notice by either
party in 30 days or less. Term contracts generally are noncancelable and require
payments, depending upon their duration, as follows: up to one month - either
incremental payments based on usage or incremental payments plus a base daily
rental; and one month to one year - incremental payments based on usage plus a
base monthly rental. Day-to-day charters have the same compensation arrangements
as up to one-month term contracts. Because master service agreements and
day-to-day charters are Era's most prevalent contracts, 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.
Era aircraft available for operation on March 28, 2000 consisted of 95
helicopters (including 49 based in Alaska and 46 in the Gulf of Mexico area) and
18 fixed-wing aircraft (based in Alaska). The fleet contract status at that date
included 48 term contracts. The remaining aircraft were either being operated
under day-to-day charters or one or more of 86 master service agreements, or
were available for operation under day-to-day charter or other contract
arrangements.
Competition
Approximately six other operators compete directly with the Company in Alaska on
a contract or charter basis. Era 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 Era in the west and northwest regions of the United
States and in overseas locations.
Regulations and Hazards
The operation of a scheduled airline 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 demonstration 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 Era'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 training and safety programs to minimize these
hazards. The Company believes that it is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment, but carries no insurance against loss of earnings.
EMPLOYEES
The total numbers of employees of the Company at February 17, 2000 and at
December 31, 1999, 1998 and 1997 were as follows: 4,742, 4,741, 4,978 and 5,004,
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.
-10-
<PAGE> 13
ITEM 2. PROPERTIES
The Company leases as its corporate headquarters 59,600 square feet of space in
an office tower located at 2800 Post Oak Boulevard in Houston, Texas.
DRILLING RIGS
The following is a summary of the principal drilling equipment owned or operated
by the Company and in service at March 28, 2000. See "Liquidity and Capital
Resources" under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 15 through 17 in the Annual Report, which
pages are incorporated herein by reference.
OFFSHORE
<TABLE>
<CAPTION>
(b)
Depth: Year Contracting Party/
Water/ in (m) Type of Contract
Name/Class (a) Drilling Service Location (n) Estimated Release Date
- -------------- -------- ------- -------- --------------------------
<S> <C> <C> <C> <C>
Cantilever Jack-up Rigs:
Rowan Gorilla II 328'/30,000' 1984 Eastern Canada Mobil Oil Canadian Properties
200-C (d)(f)(g) (m) Term (n) May 2000
Rowan Gorilla III 328'/30,000' 1984 Eastern Canada PanCanadian Petroleum Limited
200-C (d)(f)(g) (m) Well-to-well (n) September 2000
Rowan Gorilla IV 450'/30,000' 1986 Gulf of Mexico Not Committed
200-C (d)(f)(g)(j)
Rowan Gorilla V 400'/30,000' 1998 Eastern Canada PanCanadian Petroleum Limited
219-C (e)(f)(h) (m) Multiple well (n) August 2000
Rowan-California 300'/30,000' 1983 Gulf of Mexico BP Amoco Corporation
116-C (c)(f) (m) Term (n) July 2000
Rowan-Halifax 350'/30,000' 1982 Gulf of Mexico Coastal Oil & Gas Corporation
116-C (c)(f)(j)(k) (m) Term (n) May 2000
Cecil Provine 300'/30,000' 1982 Gulf of Mexico Coastal Oil & Gas Corporation
116-C (c)(f)(l) (m) Well-to-well (n) December 2000
Arch Rowan 350'/30,000' 1981 Gulf of Mexico Chevron U.S.A.
116-C (c)(f)(g)(j) (m) Well-to-well (n) August 2000
Gilbert Rowe 350'/30,000' 1981 Gulf of Mexico Murphy Exploration & Production Co.
116-C (c)(f)(g)(j) (m) Well-to-well (n) March 2000
Chevron U.S.A.
(m) Well-to-well (n) May 2000
</TABLE>
-11-
<PAGE> 14
ITEM 2. PROPERTIES
OFFSHORE (Continued)
<TABLE>
<CAPTION>
(b)
Depth: Year Contracting Party/
Water/ in (m) Type of Contract
Name/Class (a) Drilling Service Location (n) Estimated Release Date
- -------------- -------- ------- -------- --------------------------
<S> <C> <C> <C> <C>
Cantilever Jack-up Rigs:
Charles Rowan 350'/30,000' 1981 Gulf of Mexico Union Pacific Resources Co.
116-C (c)(f)(g)(j) (m) Multiple well (n) July 2000
Rowan-Paris 350'/30,000' 1980 Gulf of Mexico Vastar Resources, Inc.
116-C (f)(g)(j) (m) Multiple well (n) April 2000
Rowan-Middletown 350'/30,000' 1980 Gulf of Mexico Samedan Oil Corporation
116-C (f)(g)(j) (m) Well-to-well (n) April 2000
Rowan-Fort Worth 350'/30,000' 1978 Gulf of Mexico Coastal Oil & Gas Corporation
116-C (f)(g)(j) (m) Term (n) April 2000
Rowan-Houston 250'/20,000' 1970 Gulf of Mexico PennzEnergy Expl. & Production
52-C (f) (m) Multiple well (n) June 2000
Conventional Jack-up Rigs:
Rowan-Juneau 300'/30,000' 1977 Gulf of Mexico CXY Energy Inc.
116 (c)(f)(i) (m) Multiple well (n) May 2000
Rowan-Odessa 350'/30,000' 1977 Gulf of Mexico Walter Oil & Gas Corporation
116 (f)(i)(j) (m) Well-to-well (n) April 2000
Rowan-Louisiana 350'/30,000' 1975 Gulf of Mexico LLOG Exploration Offshore Inc.
84 (f)(i)(j) (m) Well-to-well (n) April 2000
Rowan-Alaska 350'/30,000' 1975 Gulf of Mexico Coastal Oil & Gas Corporation
84 (f)(i)(j) (m) Multiple well (n) July 2000
Rowan-Texas 250'/20,000' 1973 Gulf of Mexico Union Pacific Resources Co.
52 (f) (m) Multiple well (n) July 2000
Rowan-Anchorage 250'/20,000' 1972 Gulf of Mexico Vastar Resources, Inc.
52 (f) (m) Multiple well (n) June 2000
Rowan-New Orleans 250'/20,000' 1971 Gulf of Mexico LLOG Exploration Offshore Inc.
52 (f) (m) Multiple well (n) May 2000
</TABLE>
-12-
<PAGE> 15
ITEM 2. PROPERTIES
OFFSHORE (Continued)
<TABLE>
<CAPTION>
(b)
Depth: Year Contracting Party/
Water/ in (m) Type of Contract
Name/Class (a) Drilling Service Location (n) Estimated Release Date
- -------------- -------- ------- -------- --------------------------
<S> <C> <C> <C> <C>
Semi-Submersible Rig:
Rowan-Midland (f) 1,200'/25,000' 1976 Gulf of Mexico Applied Drilling Technology, Inc.
(m) Well-to-well (n) March 2000
</TABLE>
(a) Classes 219-C ("Super Gorilla"), 200-C ("Gorilla"), 116-C, 116, 84,
52-C 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) Super Gorilla Class Unit (an enhanced version of the Gorilla Class)
designed for extreme hostile environment capability.
(f) Unit equipped with a "top-drive" drilling system.
(g) Unit equipped with three mud pumps.
(h) Unit equipped with four mud pumps.
(i) Unit equipped with a "skid base" unit.
(j) Unit equipped or being fitted with leg extensions.
(k) Rig sold in December 1984 and leased back through March 2008.
(l) Rig sold in December 1985 and leased back through June 2008.
(m) Refer to "Contracts" on pages 3 and 4 of this Form 10-K for a
definition of types of contracts.
(n) Indicates estimated completion date of work to be performed.
-13-
<PAGE> 16
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 Samson Resources Company
(b) Multiple well (c) April 2000
Rig 9 25,000' Louisiana Anadarko Petroleum Company
(b) Well-to-well (c) April 2000
Rig 12 20,000' Texas Not Committed
Rig 14 30,000' Louisiana Not Committed
Rig 15 30,000' Oklahoma Not Committed
Rig 18 30,000' Oklahoma Not Committed
Rig 26 25,000' Louisiana PetroQuest Energy, Inc.
(b) Well-to-well (c) March 2000
Denbury Management
(b) Well-to-well (c) June 2000
Rig 30 20,000' Texas CXY Energy Inc.
(b) Well-to-well (c) April 2000
Rig 31 30,000' Texas Chesapeake Operating, Inc.
(b) Multiple well (c) September 2000
Rig 41 20,000' Pennsylvania N. E. Hub Partners
(b) Well-to-well (c) July 2000
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 rigs have been substantially rebuilt subsequent to their respective
dates of construction.
(b) Refer to "Contracts" on pages 3 and 4 of this Form 10-K for a
definition of types of contracts.
(c) Indicates estimated completion date of work to be performed.
-14-
<PAGE> 17
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
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
of covered working area. The facility contains:
o a mini-steel mill with 330,000 square feet of covered working
area; the mill has two 25-ton electric arc furnaces capable of
producing 120,000 tons per year;
o a fabrication shop with 300,000 square feet of covered working
area; the shop has a 3,000 ton vertical bender for making
roll-ups or flattening materials down to 2 1/2 inches thick by
11 feet wide;
o a machine shop with 140,000 square feet of covered working
area;
o an assembly shop with 124,000 square feet of covered working
area.
The marine group's facility is located in Vicksburg, Mississippi on 1,850 acres
of land and has approximately 560,000 square feet of covered work area. The
marine group's service and repair operation is carried out primarily at the
Company's Sabine Pass, Texas facility.
LeTourneau's mud pumps are currently machined, fabricated and assembled at
separate leased facilities in Houston, Texas, with consolidation into a
Company-owned facility planned for the third quarter of 2000.
The Company-owned distributor of 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 distributor of LeTourneau's mining equipment products in the
western United States is located in a 20,000 square foot leased facility in
Tucson, Arizona.
AIRCRAFT
At March 28, 2000, the Company's aviation division owned a fleet of 95
helicopters and 18 fixed-wing aircraft, consisting of the following:
o 64 twin-engine turbine aircraft, including:
o 3 Sikorsky S-61Ns (26 passengers)
o 2 Eurocopter AS-332L Super Pumas (19 passengers)
o 16 Bell 212s (14 passengers)
o 14 Bell 412s (14 passengers)
o 2 Sikorsky S-76A+s (13 passengers)
o 27 Eurocopter BO-105CBSs (5 passengers)
o 31 single-engine turbine aircraft, including:
o 5 Bell 206LRs (6 passengers)
o 26 Eurocopter AS350B-2 AStars (6 passengers)
o 18 fixed-wing aircraft, including:
o 5 Convair 580s (50 passengers)
o 9 DeHavilland Twin Otters (9-19 passengers)
o 2 DeHavilland Dash 8s (37 passengers)
o 2 Douglas DC-3s (28 passengers)
-15-
<PAGE> 18
Era'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.
Era's principal base for its Gulf of Mexico operations is located on leased
property at Lake Charles Regional Airport. The facility has 63,000 square feet
of space, including helicopter hangars, a repair facility and an operations and
administrative building. The Company also operates a helicopter base (20,700
square feet of hangar, repair and office facilities) located on leased property
at the Terrebonne Airport in Houma, Louisiana, a helicopter base (5,700 square
feet of hangar, repair and office facilities) located on leased property in New
Iberia, Louisiana and a helicopter base (12,500 square feet of hangar, repair
and office facilities) located on leased property in Fourchon, Louisiana.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising in the normal
course of the Company's business and other matters, not all of the potential
liabilities from which are covered by the terms of the Company's insurance
policies. While the Company is unable to predict the ultimate liabilities which
may result from such litigation, the Company believes that no such litigation in
which the Company was involved as of March 28, 2000 will have a material adverse
effect on its financial position or results of operations.
The Company continues to pursue all legal remedies in connection with the
wrongful termination of its one-year North Sea drilling contract for Gorilla V.
In January 1999, the Company received notification from Amoco (UK) Exploration
Company (BP Amoco) that the $67 million contract was being terminated for an
alleged performance breach relating to certain equipment problems. The Company
believes it did not breach the contract and will continue to vigorously pursue
enforcement of its rights under the contract. A trial on the merits is scheduled
to be heard in London starting on January 22, 2001. A trial on the tort issues
will be held in state court in Harris County, Texas, starting on December 11,
2000.
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, 1999.
-16-
<PAGE> 19
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions, years of credited service and ages of the officers of the
Company as of March 28, 2000 are listed below. Officers are normally appointed
annually by the Board of Directors at the bylaws-prescribed meeting 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 40 65
and Chief Executive Officer
R. G. Croyle Executive Vice President and Director 26 57
D. F. McNease Executive Vice President, President of 25 48
Drilling subsidiaries and Director
E. E. Thiele Senior Vice President, Finance, 30 60
Administration and Treasurer
Paul L. Kelly Senior Vice President, Special Projects 17 60
D. C. Eckermann(1) Vice President, Manufacturing 13 52
C. W. Johnson(2) Vice President, Aviation 22 56
John L. Buvens Vice President, Legal 19 44
Mark A. Keller Vice President, Marketing - 7 47
North American Drilling
Bill S. Person Vice President, Industrial Relations 32 52
William C. Provine Vice President, Investor Relations 13 53
OTHER OFFICERS:
William H. Wells Controller 6 37
Mark H. Hay Secretary and Assistant Treasurer 20 55
P. G. Wheeler Assistant Treasurer and 25 52
Corporate Tax Director
Lynda A. Aycock Assistant Treasurer and 28 53
Assistant Secretary
</TABLE>
(1) Also serves as President and Chief Executive Officer of LeTourneau,
Inc., a subsidiary of the Company.
(2) Also serves as President and Chief Operating Officer of Era Aviation,
Inc., a subsidiary of the Company.
Each of the officers listed above continuously served in the position shown
above for more than the past five years except as noted in the following
paragraphs.
Mr. Croyle was first elected to the Board of Directors in April 1998.
Since April 1999, Mr. McNease's principal occupation has been in the position
set forth. For more than five years prior to that time, Mr. McNease served as
Senior Vice President, Drilling. Mr. McNease was first elected to the Board of
Directors in April 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 April 1999, Mr. Eckermann's principal occupation has been in the position
set forth. From September 1996 to April 1999, Mr. Eckermann served as President
and Chief Executive Officer of LeTourneau, Inc., a subsidiary of the Company.
From February 1994 to September 1996, Mr. Eckermann served as President of
LeTourneau Marine Group and Vice President, Operations of LeTourneau, Inc.
-17-
<PAGE> 20
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 1999 and 1998 and the number of holders of Common
Stock is set forth on page 30 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 ninth
full paragraph appearing on page 16 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 Exchange - Stock & Options.
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 1994,
1993, 1992, 1991 and 1990.
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 17 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company believes that its exposure to risk of earnings loss due to changes
in market interest rates is not significant. The Company did not enter into
derivative financial instruments in 1997, 1998 or 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K on pages 20 through 24 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
-18-
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information in the table spanning pages 2 and 3, in footnotes (1) and (2) on
page 3 and in the paragraph under the caption, "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 15 of the Proxy Statement for the
Company's 2000 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 page 17 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" on page 4 of the Proxy Statement and the information
appearing under the titles "Summary Compensation Table", "Aggregated Option
Exercises in Last Fiscal Year and Fiscal Year-End Option Values", "Debentures
Offered in Last Fiscal Year" and "Pension Plans" on pages 10 through 12 of the
Proxy Statement are incorporated herein by reference. In accordance with the
instructions to Item 402 of Regulation S-K, the information contained in the
Proxy Statement under the titles "Board Compensation Committee Report on
Executive Compensation" and "Stock Performance Graphs" 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 management of the Company set
forth under the heading "Director and Officer Stock Ownership" appearing on page
6 and the information appearing under the title "Principal Stockholders"
appearing on page 15 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 14 of the Proxy Statement is incorporated herein
by reference.
-19-
<PAGE> 22
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 1999
Annual Report
-------------
<S> <C>
Consolidated Balance Sheet, December 31, 1999 and 1998 ........ 18
Consolidated Statement of Operations for the Years
Ended December 31, 1999, 1998 and 1997 .................... 19
Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended December 31, 1999,
1998 and 1997 ............................................. 20
Consolidated Statement of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997 .................... 21
Notes to Consolidated Financial Statements .................... 22
Independent Auditors' Report .................................. 30
Selected Quarterly Financial Data (Unaudited) for the
Quarters Ended March 31, June 30, September 30
and December 31, 1999 and 1998 ............................ 30
</TABLE>
2. Financial Statement Schedules
Financial Statement Schedules I, II, III, IV, and V are not included in
this Form 10-K because such schedules are not required, not significant
or because the required information is shown in Notes to the
Consolidated Financial Statements of the Company's Annual Report.
3. Exhibits:
Unless otherwise indicated below as being incorporated by reference to
another filing of the Company with the Securities and Exchange
Commission, each of the following exhibits is filed herewith:
3a Restated Certificate of Incorporation of the Company, dated
February 17, 1984, incorporated by reference to: Exhibit 3a to
the Company's Form 10-K for the fiscal year ended December 31,
1983 (File No. 1-5491); Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (Registration No. 33-13544); and Exhibits
4a, 4b, 4c, 4d and 4e below.
3b Bylaws of the Company amended as of July 14, 1998, incorporated
by reference to Exhibit 3 to the Company's Form 10-Q for the
fiscal quarter ended June 30, 1998 (File No. 1-5491).
4a Certificate of Designation of the Company's Series III Preferred
Stock dated November 30, 1994, 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 Certificate of Designation of (and Certificate of Correction
related thereto) the Company's Series A Preferred Stock dated
August 5, 1998 and January 28, 1999, respectively, incorporated
by reference to Exhibit 4c to the Company's Form 10-K for the
fiscal year ended December 31, 1998 (File No. 1-5491).
-20-
<PAGE> 23
4d Certificate of Designation of the Company's Series B Preferred
Stock dated June 24, 1999.
4e Certificate of Elimination related to the Company's $2.125
Convertible Exchangeable Preferred Stock, Series I Preferred
Stock and Series II Preferred Stock, incorporated by reference to
Exhibit 4d to the Company's Form 10-K for the fiscal year ended
December 31, 1998 (File No. 1-5491).
4f Rights Agreement as amended between the Company and Citibank,
N.A. as Rights Agent, incorporated by reference to Exhibit 4d to
the Company's Form 10-K for the fiscal year ended December 31,
1997 (File No. 1-5491).
4g 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).
4h 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).
4i Form of Promissory Note date April 24, 1998 between the
purchasers of Series A Floating Rate Subordinated Convertible
Debentures due 2008 and the Company, incorporated by reference to
Exhibit 4j to the Company's Form 10-K for the fiscal year ended
December 31, 1998 (File No. 1-5491).
4j Form of Promissory Note date April 22, 1999 between the
purchasers of Series B Floating Rate Subordinated Convertible
Debentures due 2009 and the Company.
10a 1980 Nonqualified Stock Option Plan of the Company,
incorporated by reference to Exhibit 5.10 to the Company's
Registration Statement on Form S-7 (Registration No. 2-68622).
10b Restated 1988 Nonqualified Stock Option Plan of the Company,
incorporated by reference to Exhibit 10a of the Company's Form
10-Q for the fiscal quarter ended March 31, 1998 (File No.
1-5491).
10c 1998 Nonemployee Director Stock Option Plan of the Company,
incorporated by reference to Exhibit 10b of the Company's Form
10-Q for the fiscal quarter ended March 31, 1998 (File No.
1-5491).
10d 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).
10e 1998 Convertible Debenture Incentive Plan of the Company,
incorporated by reference to Exhibit 10c to the Company's Form
10-Q for the fiscal quarter ended March 31, 1998 (File No.
1-5491).
10f 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).
10g 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).
-21-
<PAGE> 24
10h 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).
10i 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).
10j Election and acceptance letters with respect to the exercise of
the Fixed Rate Renewal Option set forth in the Bareboat Charter
dated December 1, 1984 between the Company and Textron Financial
Corporation et al.
10k Election and acceptance letters with respect to the exercise of
the Fixed Rate Renewal Option set forth in the Bareboat Charter
dated December 1, 1985 between the Company and Eaton Leasing
Corporation et. al.
10l Consulting Agreement as amended as of January 1, 1998 between
the Company and C. W. Yeargain, incorporated by reference to
Exhibit 10k to the Company's Form 10-K for the fiscal year
ended December 31, 1998 (File No. 1-5491).
10m Consulting Agreement dated January 1, 1990 and Amendment No. 1
thereto dated August 30, 1994, but effective January 1, 1994,
between Rowan Energy Investments Inc., wholly owned subsidiary of
the Company, and Hans M. Brinkhorst, incorporated by reference to
Exhibit 10l to the Company's Form 10-K for the fiscal year ended
December 31, 1998 (File No. 1-5491).
10n Commitment to Guarantee Obligations dated December 17, 1996 and
First Preferred Ship Mortgage 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).
10o 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,
incorporated by reference to Exhibit 10p to the Company's 10-K
for the fiscal year ended December 31, 1997 (File No. 1-5491).
10p Amendment No. 2 dated July 1, 1998 to Commitment to Guarantee
Obligations between the Company and the Maritime
Administration of the U.S. Department of Transportation,
incorporated by reference to Exhibit 10o to the Company's Form
10-K for the fiscal year ended December 31, 1998
(File No. 1-5491).
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., incorporated by reference to Exhibit 10r
to the Company's Form 10-K for the fiscal year ended
December 31, 1997 (File No. 1-5491).
10s Supplement No. 2 to Trust Indenture dated July 1, 1998 between
the Company and Citibank, N.A., incorporated by reference to
Exhibit 10r to the Company's Form 10-K for the fiscal year
ended December 31, 1998 (File No. 1-5491).
-22-
<PAGE> 25
10t Commitment to Guarantee Obligations dated September 29, 1998 and
First Preferred Ship Mortgage between the Company and the
Maritime Administration of the U.S. Department of
Transportation, incorporated by reference to Exhibit 10a to
the Company's Form 10-Q for fiscal quarter ended September 30,
1998 (File No. 1-5491).
10u Credit Agreement and Trust Indenture both dated September 30,
1998 between the Company and Citibank, N.A., incorporated by
reference to Exhibit 10b to the Company's Form 10-Q for the
fiscal quarter ended September 30, 1998 (File No. 1-5491).
10v Commitment to Guarantee Obligations dated October 29, 1999 and
First Preferred Ship Mortgage between the Company and the
Maritime Administration of the U.S. Department of Transportation.
10w Credit Agreement and Trust Indenture both dated October 29, 1999
between the Company and Citibank, N.A.
11 Computation of Basic and Diluted Earnings (Loss) Per Share for
the years ended December 31, 1999, 1998 and 1997 appearing on
page 26 in this Form 10-K.
13* Annual Report to Stockholders for fiscal year ended
December 31, 1999.
21 Subsidiaries of the Registrant as of March 24, 2000.
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, 1999.
27 Financial Data Schedule for the year ended December 31, 1999.
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 incorporated by
reference to Exhibit 5.10 to the Company's Registration Statement on Form
S-7 (Registration No. 2-68622).
o Restated 1988 Nonqualified Stock Option Plan of the Company incorporated by
reference to Exhibit 10a to the Company's Form 10-Q for the fiscal year
ended March 31, 1998 (File No. 1-5491).
o 1998 Nonemployee Director Stock Option Plan of the Company incorporated by
reference to Exhibit 10b of the Company's Form 10Q for the fiscal quarter
ended March 31, 1998 (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).
-23-
<PAGE> 26
o 1998 Convertible Debenture Incentive Plan of the Company incorporated by
reference to Exhibit 10c to the Company's Form 10-Q for the fiscal quarter
ended March 31, 1998 (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).
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the fourth
quarter of fiscal year 1999.
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), 333-25125 (filed April 14, 1997), 333-84369 (filed August 3, 1999)
and 333-84405 (filed August 3, 1999):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the act and will be
governed by the final adjudication of such issue.
-24-
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ROWAN COMPANIES, INC.
By: C. R. PALMER
(C. R. Palmer, Chairman of
the Board, President and
Chief Executive Officer)
Date: March 28, 2000
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 28, 2000
------------------------- President and Chief
(C.R. Palmer) Executive Officer
E. E. THIELE Principal Financial Officer March 28, 2000
-------------------------
(E. E. Thiele)
WILLIAM H. WELLS Principal Accounting Officer March 28, 2000
-------------------------
(William H. Wells)
*RALPH E. BAILEY Director March 28, 2000
-------------------------
(Ralph E. Bailey)
*HENRY O. BOSWELL Director March 28, 2000
-------------------------
(Henry O. Boswell)
*HANS M. BRINKHORST Director March 28, 2000
-------------------------
(Hans M. Brinkhorst)
*R. G. CROYLE Director March 28, 2000
-------------------------
(R. G. Croyle)
*H. E. LENTZ Director March 28, 2000
-------------------------
(H. E. Lentz)
*D. F. MCNEASE Director March 28, 2000
-------------------------
(D. F. McNease)
*LORD MOYNIHAN Director March 28, 2000
-------------------------
(Lord Moynihan)
*WILFRED P. SCHMOE Director March 28, 2000
-------------------------
(Wilfred P. Schmoe)
*CHARLES P. SIESS, JR. Director March 28, 2000
-------------------------
(Charles P. Siess, Jr.)
*C. W. YEARGAIN Director March 28, 2000
-------------------------
(C. W. Yeargain)
*BY C. R. PALMER
--------------------------------
(C. R. Palmer, Attorney-in-fact)
</TABLE>
-25-
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- --------- ------- -----------------------------------------------------------------
<S> <C> <C>
(1) 3a Restated Certificate of Incorporation of the Company, dated
February 17, 1984, incorporated by reference to: Exhibit 3a to
the Company's Form 10-K for the fiscal year ended December 31,
1983 (File No. 1-5491); Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (Registration No. 33-13544); and Exhibits
4a, 4b, 4c, 4d and 4e below.
(1) 3b Bylaws of the Company amended as of July 14, 1998, incorporated
by reference to Exhibit 3 to the Company's Form 10-Q for the
fiscal quarter ended June 30, 1998 (File No. 1-5491).
(1) 4a Certificate of Designation of the Company's Series III Preferred
Stock dated November 30, 1994, 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).
(1) 4c Certificate of Designation of (and Certificate of Correction
related thereto) the Company's Series A Preferred Stock dated
August 5, 1998 and January 28, 1999, respectively, incorporated
by reference to Exhibit 4c to the Company's Form 10-K for the
fiscal year ended December 31, 1998 (File No. 1-5491).
(2) 4d Certificate of Designation of the Company's Series B Preferred
Stock dated June 24, 1999.
(1) 4e Certificate of Elimination related to the Company's $2.125
Convertible Exchangeable Preferred Stock, Series I Preferred
Stock and Series II Preferred Stock, incorporated by reference to
Exhibit 4d to the Company's Form 10-K for the fiscal year ended
December 31, 1998 (File No. 1-5491).
(1) 4f Rights Agreement as amended between the Company and Citibank,
N.A. as Rights Agent, incorporated by reference to Exhibit 4d to
the Company's Form 10-K for the fiscal year ended December 31,
1997 (File No. 1-5491).
(1) 4g 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).
(1) 4h 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).
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- --------- ------- -----------------------------------------------------------------
<S> <C> <C>
(1) 4i Form of Promissory Note date April 24, 1998 between the
purchasers of Series A Floating Rate Subordinated Convertible
Debentures due 2008 and the Company, incorporated by reference to
Exhibit 4j to the Company's Form 10-K for the fiscal year ended
December 31, 1998 (File No. 1-5491).
(2) 4j Form of Promissory Note date April 22, 1999 between the
purchasers of Series B Floating Rate Subordinated Convertible
Debentures due 2009 and the Company.
(1) 10a 1980 Nonqualified Stock Option Plan of the Company,
incorporated by reference to Exhibit 5.10 to the Company's
Registration Statement on Form S-7 (Registration No. 2-68622).
(1) 10b Restated 1988 Nonqualified Stock Option Plan of the Company,
incorporated by reference to Exhibit 10a of the Company's Form
10-Q for the fiscal quarter ended March 31, 1998 (File No.
1-5491).
(1) 10c 1998 Nonemployee Director Stock Option Plan of the Company,
incorporated by reference to Exhibit 10b of the Company's Form
10-Q for the fiscal quarter ended March 31, 1998 (File No.
1-5491).
(1) 10d 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) 10e 1998 Convertible Debenture Incentive Plan of the Company,
incorporated by reference to Exhibit 10c to the Company's Form
10-Q for the fiscal quarter ended March 31, 1998 (File No.
1-5491).
(1) 10f 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) 10g 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).
(1) 10h 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).
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- --------- ------- -----------------------------------------------------------------
<S> <C> <C>
(1) 10i 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) 10j Election and acceptance letters with respect to the exercise of
the Fixed Rate Renewal Option set forth in the Bareboat Charter
dated December 1, 1984 between the Company and Textron Financial
Corporation et al.
(2) 10k Election and acceptance letters with respect to the exercise of
the Fixed Rate Renewal Option set forth in the Bareboat Charter
dated December 1, 1985 between the Company and Eaton Leasing
Corporation et. al.
(1) 10l Consulting Agreement as amended as of January 1, 1998 between
the Company and C. W. Yeargain, incorporated by reference to
Exhibit 10k to the Company's Form 10-K for the fiscal year
ended December 31, 1998 (File No. 1-5491).
(1) 10m Consulting Agreement dated January 1, 1990 and Amendment No. 1
thereto dated August 30, 1994, but effective January 1, 1994,
between Rowan Energy Investments Inc., wholly owned subsidiary of
the Company, and Hans M. Brinkhorst, incorporated by reference to
Exhibit 10l to the Company's Form 10-K for the fiscal year ended
December 31, 1998 (File No. 1-5491).
(1) 10n Commitment to Guarantee Obligations dated December 17, 1996 and
First Preferred Ship Mortgage 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).
(1) 10o 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,
incorporated by reference to Exhibit 10p to the Company's 10-K
for the fiscal year ended December 31, 1997 (File No. 1-5491).
(1) 10p Amendment No. 2 dated July 1, 1998 to Commitment to Guarantee
Obligations between the Company and the Maritime
Administration of the U.S. Department of Transportation,
incorporated by reference to Exhibit 10o to the Company's Form
10-K for the fiscal year ended December 31, 1998
(File No. 1-5491).
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- --------- ------- -----------------------------------------------------------------
<S> <C> <C>
(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).
(1) 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., incorporated by reference to Exhibit 10r
to the Company's Form 10-K for the fiscal year ended
December 31, 1997 (File No. 1-5491).
(1) 10s Supplement No. 2 to Trust Indenture dated July 1, 1998 between
the Company and Citibank, N.A., incorporated by reference to
Exhibit 10r to the Company's Form 10-K for the fiscal year
ended December 31, 1998 (File No. 1-5491).
(1) 10t Commitment to Guarantee Obligations dated September 29, 1998 and
First Preferred Ship Mortgage between the Company and the
Maritime Administration of the U.S. Department of
Transportation, incorporated by reference to Exhibit 10a to
the Company's Form 10-Q for fiscal quarter ended September 30,
1998 (File No. 1-5491).
(1) 10u Credit Agreement and Trust Indenture both dated September 30,
1998 between the Company and Citibank, N.A., incorporated by
reference to Exhibit 10b to the Company's Form 10-Q for the
fiscal quarter ended September 30, 1998 (File No. 1-5491).
(2) 10v Commitment to Guarantee Obligations dated October 29, 1999 and
First Preferred Ship Mortgage between the Company and the
Maritime Administration of the U.S. Department of Transportation.
(2) 10w Credit Agreement and Trust Indenture both dated October 29, 1999
between the Company and Citibank, N.A.
(3) 11 Computation of Basic and Diluted Earnings (Loss) Per Share for
the years ended December 31, 1999, 1998 and 1997 appearing on
page 26 in this Form 10-K.
(4) 13 Annual Report to Stockholders for fiscal year ended
December 31, 1999.
(2) 21 Subsidiaries of the Registrant as of March 24, 2000.
(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, 1999.
(2) 27 Financial Data Schedule for the year ended December 31, 1999.
</TABLE>
- ---------------
(1) Incorporated herein by reference to another filing of the Company with the
Securities and Exchange Commission as indicated.
(2) Included herein.
(3) Included in Form 10-K on page 26.
(4) Included herein. See ITEM 1, ITEMS 5-8 and Subpart (a)1. of ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K on page 20
on Form 10-K for specific portions incorporated herein by reference.
<PAGE> 1
EXHIBIT 4d
ROWAN COMPANIES, INC.
CERTIFICATE OF DESIGNATIONS
Providing for an Issue of Series B Preferred Stock
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
ROWAN COMPANIES, INC., a Delaware corporation (the "Corporation"),
certifies that, pursuant to the authority contained In Article Fourth of its
Certificate of Incorporation and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, the 1998 Debenture
Plan Committee of the Board of Directors duly approved at its April 22, 1999
meeting (at which a quorum was present), and the Board of Directors duly
ratified and approved at its April 23, 1999 meeting (at which a quorum was
present), the empowerment of and the issuance of a directive to the proper
officers of the Corporation for the purpose of having such officers take the
appropriate actions which, in their opinion, may be necessary or proper to
create and provide for the issuance of a series of shares of Preferred Stock as
described below, and further providing for the voting powers, designations,
preferences and relative, participating, optional or other rights thereof, and
the qualifications, limitations or restrictions thereof, in addition to those
set forth in said Certificate of Incorporation, all in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, and that the approval creating such empowerment and establishing such
directive has at all times since remained in effect and is now in effect and
unamended:
(1) Pursuant to Paragraph A of Article Fourth of the Certificate of
Incorporation of the Corporation, as amended (which creates and
authorizes 5,000,000 shares of preferred stock, par value of $1.00 per
share, hereinafter called the "Preferred Stock"), the Board of
Directors empowered the proper officers to establish and provide for
the issue of a series of 4,800 shares of Preferred Stock, designated
as Series B Preferred Stock (the "Series Stock"), which shares shall
be issuable only upon conversion of the Series B Floating Rate
Subordinated Convertible Debentures (the "Related Debentures") of the
Corporation and shall be convertible into shares of common stock,
$.125 par value, of the Corporation (the "Common Stock"), pursuant to
the terms and conditions hereinafter set forth.
(2) The voting powers, preferences and relative, participating, optional,
conversion, and other rights of the shares of the Series Stock, and
the qualifications, limitations or restrictions thereof, in addition
to those set forth in said Article Fourth, are as follows:
Section 1. Dividends. The holders of shares of Series Stock shall not
be entitled to receive cash dividends on such shares.
<PAGE> 2
Section 2. Liquidation Preference. (A) Upon the complete liquidation,
dissolution, or winding-up of the Corporation, whether voluntarily or
involuntarily, the Series Stock shall be entitled, before any
distribution is made to the holders of Common Stock and of any other
capital stock of the Corporation which ranks junior to the Series
Stock in respect of distributions of assets on liquidation,
dissolution or winding-up of the Corporation, to be paid $1.00 per
share, and shall not be entitled to any further payment.
(B) In case the net assets of the Corporation are insufficient to
pay all outstanding shares of Series Stock, and any other class
of stock of the Corporation ranking in parity upon a liquidation,
dissolution, or winding-up with the Series Stock ("Parity
Stock"), the liquidation preferences to which all such shares are
entitled, then the entire net assets of the Corporation shall be
distributed ratably to all outstanding shares of the Series Stock
and Parity Stock, if any, in proportion to the total amounts to
which the holders of all such shares are entitled upon such
liquidation, dissolution, or winding-up.
(C) The merger or consolidation of the Corporation into or with
another corporation or the merger or consolidation of any other
corporation into or with the Corporation, or the sale, lease or
conveyance of all or substantially all the assets, property or
business of the Corporation shall not be deemed to be a
liquidation, dissolution, or winding-up of the Corporation within
the meaning of this Section 2.
Section 3. Certain Restrictions. Without the consent of the holders of
at least two-thirds of the total number of shares of Series Stock
outstanding, given in person or by proxy, either in writing or by vote
at a meeting called for the purpose, the Corporation shall not create
or authorize any additional shares of Series Stock or amend, alter or
repeal any of the rights, preferences or powers of the holders of
Series Stock so as to affect adversely any such rights, preferences or
powers; provided, however, that without the consent of the holders of
all outstanding shares of Series Stock, the Corporation shall not
amend the Series Stock to adversely affect the Conversion Ratio
thereof.
Section 4. Conversion. Each share of the Series Stock may be converted
at any time within thirty days of the issuance thereof, at the option
of the holder thereof, into shares of Common Stock of the Corporation,
on the terms and conditions set forth below in this Section 4.
(A) Subject to the provisions for adjustment hereinafter set
forth, the number of shares of Common Stock which shall be
deliverable upon conversion of a share of Series Stock shall not
exceed the face value of the Related Debenture which was
converted into such share of Series Stock divided by the mean of
the high and low sales price of the Company's Common Stock on the
date of sale of such Related Debenture. For the
2
<PAGE> 3
purpose of this subparagraph (A) of this Section 4, the terms
"closing price" and "Trading Date" shall have the meanings
attributed to them in subparagraph (B)(6) of this Section 4.
(B) The number of shares of Common Stock which shall be
deliverable upon conversion of a share of Series Stock (the
"Conversion Ratio") shall be adjusted from time to time as
follows:
(1) In case the Corporation at any time or from time to time
following the date of issuance of the Related Debentures
which may be converted into shares of Series Stock shall pay
or make a dividend or other distribution on any class of
capital stock of the Corporation in Common Stock, the
Conversion Ratio in effect at the opening of business on the
day following the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution shall be increased by multiplying such
Conversion Ratio by a fraction of which the numerator shall
be the sum of the number of shares of Common Stock
outstanding at the close of business on the date fixed for
such determination and the total number of shares of Common
Stock constituting such dividend or other distribution, and
the denominator shall be the total number of shares of
Common Stock outstanding at the close of business on the
date fixed for such determination, such increase to become
effective immediately after the opening of business on the
day following the date fixed for such determination. For the
purposes of this subparagraph (13)(1), the number of shares
of Common Stock at any time outstanding shall not include
shares held in the treasury of the Corporation but shall
include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The
Corporation will not pay any dividend on shares of Common
Stock held in the treasury of the Company.
(2) In case the Corporation shall issue rights or warrants
to all holders of its Common Stock entitling them (for
periods ending within 180 days) to subscribe for or purchase
shares of Common Stock at a price per share less than the
current market price per share (determined as provided in
subparagraph (B)(6) of this Section) of the Common Stock on
the date fixed for the determination of stockholders
entitled to receive such rights or warrants, the Conversion
Ratio in effect at the opening of business on the day
following the date fixed for such determination shall be
increased by multiplying such Conversion Ratio by a fraction
of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of
3
<PAGE> 4
shares of Common Stock so offered for subscription or
purchase, and the denominator shall be the number of shares
of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of
the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current
market price, such increase to become effective immediately
after the opening of business on the day following the date
fixed for such determination. For the purposes of this
subparagraph (B)(2), the number of shares of Common Stock at
any time outstanding shall not include shares held in the
treasury of the Corporation but shall include shares
issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Corporation will
not issue any rights or warrants in respect of shares of
Common Stock held in the treasury of the Corporation.
(3) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock,
the Conversion Ratio in effect at the opening of business on
the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and,
conversely, in case outstanding shares of Common Stock shall
each be combined into a smaller number of shares of Common
Stock, the Conversion Ratio in effect at the opening of
business on the day following the day upon which such
combination becomes effective shall be proportionately
decreased, such increase or reduction, as the case may be,
to become effective immediately after the opening of
business on the day following the day upon which such
subdivision or combination becomes effective.
(4) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of
its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in subparagraph
(B)(2) of this Section, any dividend or distribution paid in
cash out of the earned surplus of the Company and any
dividend or distribution referred to in subparagraph (B)(1)
of this Section), the Conversion Ratio shall be adjusted so
that the same shall equal that number determined by
multiplying the Conversion Ratio in effect immediately prior
to the close of business on the date fixed for the
determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be
the current market price per share (determined as provided
In subparagraph (B)(6) of this Section) of the Common Stock
on the date fixed for such determination and the denominator
shall be such current market price per share of the Common
Stock less the then fair market value (as determined by the
Board of Directors, whose determination shall be conclusive
and described in a resolution of such Board of Directors) of
the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock, such
adjustment to become effective immediately prior to the
opening of business on the day following the
4
<PAGE> 5
date fixed the determination of stockholders entitled to
receive such distribution.
(5) The reclassification (including any reclassification
upon a consolidation or merger in which the Corporation is
the continuing corporation) of Common Stock into securities
including other than Common Stock shall be deemed to involve
(a) a distribution of such securities other than Common
Stock to all holders of Common Stock (and the effective date
of such reclassification shall be deemed to be "the date
fixed for the determination of stockholders entitled to
receive such distribution" and "the date fixed for such
determination" within the meaning of subparagraph (B)(4) of
this Section), and (b) a subdivision or combination, as the
case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into
the number of shares of Common Stock outstanding immediately
thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination
becomes effective," as the case may be, and "the day upon
which such subdivision or combination becomes effective"
within the meaning of subparagraph (B(3) of this Section).
(6) For the purpose of any computation under subparagraphs
(B)(2) and (B)(4) of this Section, the current market price
per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices for the 15
consecutive "Trading Days" selected by the Company
commencing not less than 20 nor more than 30 Trading Days
before the day in question, The closing price for each day
shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular
way, in either case on the New York Stock Exchange or, if
the Common Stock is not listed or admitted to trading on
such Exchange, on the principal national securities exchange
on which the Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and
asked prices as furnished by any New York Stock Exchange
member firm selected from time to time by the Corporation
for that purpose. The term "Trading Date" shall mean a day
on which the principal national securities exchange on which
shares of the Common Stock are listed or admitted to trading
is open for the transaction of business or, if not listed or
admitted to trading on any national securities exchange, a
Monday, Tuesday, Wednesday, Thursday or Friday on which
banking institutions in the City of Houston, Texas are not
authorized or obligated by law or executive order to close.
5
<PAGE> 6
(7) The Corporation may make such increases in the
Conversion Ratio, in addition to those required by
subparagraphs (B)(1), (B)(2), (B)(3) and (B)(4) of this
Section. as it considers to be advisable in order that any
event treated for Federal Income tax purposes as a dividend
of stock or stock rights shall not be taxable to the
recipients.
(8) No adjustment in the Conversion Ratio shall be required
unless such adjustment would require an increase or decrease
of at least one percent in such Conversion Ratio; provided,
however, that any adjustment which by reason of this
subparagraph (B)(8) is not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this Article shall be
made to the nearest 1/100 of a share.
(C) The holder of any shares of the Series Stock may exercise his
option to convert such shares into shares of Common Stock by
surrendering for such purpose to the Corporation, at its
principal office or at such other office or agency maintained by
the Corporation for that purpose, a certificate or certificates
representing the shares of Series Stock to be converted
accompanied by a written notice stating that such holder elects
to convert all or a specified whole number of such shares in
accordance with the provisions of this Section 4. As promptly as
practicable, and in any event within five business days after the
surrender of such certificates and the receipt of such notice
relating thereto, the Corporation shall deliver or cause to be
delivered (i) certificates representing the number of validly
issued, fully paid and nonassessable shares of Common Stock of
the Corporation to which the holder of the Series Stock so
converted shall be entitled and (ii) If less than the full number
of shares of the Series Stock evidenced by the surrendered
certificate or certificates are being converted, a new
certificate or certificates, of like tenor, for the number of
shares evidenced by such surrendered certificate or certificates
less the number of shares converted. Conversions shall be deemed
to have been made at the close of business on the date of giving
of such notice and of such surrender of the certificate or
certificates representing the shares of the Series Stock to be
converted so that the rights of the holder shall cease with
respect to such surrendered certificates except for the right to
receive Common Stock of the Corporation in accordance herewith,
and the converting holder shall be treated for all purposes as
having become the record holder of such Common Stock of the
Corporation at such time.
(D) In connection with the conversion of any shares of the Series
Stock, no fractions of shares or Common Stock shall be issued,
but the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to the market value
of such fractional interest. In such event, the market value of a
share of Common Stock of the Corporation shall be the current
market price per share (as defined in subparagraph (B)(6) of
6
<PAGE> 7
this Section 4) of such shares on the last Trading Date on which
such shares were traded immediately preceding the date upon which
such shares of Series Stock are deemed to have been converted.
(E) The Corporation shall at all times reserve and keep available
out of its authorized Common Stock the full number of shares of
Common Stock of the Corporation issuable upon (a) the conversion
of all outstanding shares of the Series Stock, and (b) the
conversion or exercise of any other outstanding securities or
rights convertible or exercisable into Common Stock, including
outstanding Related Debentures.
Section 5. Adjustments for Certain Corporate Transactions. In case of
any consolidation of the Corporation with, or merger of the
Corporation into, any other corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and in
which no change is made in the outstanding Common Stock), or in case
of any sale or transfer of all or substantially all of the assets of
the Corporation, the corporation formed by such consolidation or the
corporation resulting from such merger or the person which shall have
acquired such assets, as the case may be, shall make adequate
provision providing that the holder of each share of Series Stock then
outstanding shall have the right thereafter to convert such Series
Stock into the kind and amount of stock or other securities and
property receivable upon such consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock into which such
Series Stock might have been converted immediately prior to such
consolidation, merger, sale or transfer. Adequate provision shall also
be made to provide for adjustments which, for events subsequent to
such consolidation, merger, sale or transfer, shall be as nearly
equivalent as may be practicable to the adjustments provided for in
Section 4. The above provisions of this Section 5 shall similarly
apply to successive consolidations, mergers, sales or transfers.
Section 6. Reports Of Adjustments. Whenever the Conversion Ratio is
adjusted as provided in Sections 4 and 5, the Corporation shall
promptly compute such adjustment and promptly mail to each registered
holder of the Series Stock and the Related Debentures a certificate,
signed by the chief financial officer of the Corporation, setting
forth the number of shares of Common Stock into which each share of
the Series Stock is convertible as a result of such adjustment, a
brief statement of the facts requiring such adjustment and the
computation thereof and when such adjustment will become effective.
Section 7. Voting. Except as otherwise provided elsewhere in the
Certificate of Incorporation of the Corporation or required by law,
the holders of Series Stock shall have no voting power in the election
of directors or for any other purposes.
(3) Before the Corporation shall issue any shares of the Series Stock,
a certificate of designations pursuant to Section 151 of the General
Corporation Law of the State
7
<PAGE> 8
of Delaware shall be made, executed, acknowledged, filed and recorded
in accordance with the provisions of said Section 151; and the proper
officers of the Corporation are hereby authorized and directed to do
all acts and things which may be necessary or proper in their opinion
to carry into effect the purposes and intent of this and the other
actions required to be taken to create and provide for the issuance of
a series of shares of Preferred Stock as described above.
IN WITNESS WHEREOF, ROWAN COMPANIES, INC. has caused this Certificate to be
duly executed by its Senior Vice President and attested to by its Secretary and
has caused its corporate seal to be affixed hereto, this 24th day of June, 1999.
ROWAN COMPANIES, INC.
By:
---------------------------
Senior Vice President
[Corporate Seal]
ATTEST:
- ----------------------
Secretary
8
<PAGE> 9
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, a Notary Public, on this day personally appeared E. E. Thiele,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of Rowan
Companies, Inc., a Delaware corporation, that he has executed the same as the
act of such corporation for the purposes and consideration therein expressed,
and that the facts stated therein are true.
Given under my hand and seal of office this 24th day of June, 1999.
--------------------
Notary Public, in and for
the State of Texas
My Commission Expires:
- ----------------------
9
<PAGE> 1
EXHIBIT 4j
PROMISSORY NOTE
Houston, Texas April 22, 1999
___________________, for value received, promises and agrees to pay on
or before April 22, 2009 unto the order of Rowan Companies, Inc. (hereinafter
called "Payee"), at the offices of the Payee in Houston, Texas in lawful money
of the United States of America, the principal sum of _____________________and
No/100 Dollars ($_______________), together with interest thereon, from and
after the date hereof, on March 31, June 30, September 30 and December 31 of
each year unless such day is not a business day, in which case it shall mean the
immediately succeeding business day, the first such interest payment for the
period beginning on and including the date hereof and ending on and excluding
June 30, 1999, at the per annum interest rate announced publicly by Citibank,
N.A. in New York, New York from time to time as its Base Rate plus 1/2% per
annum; provided, that if any such interest rate shall be lower than the
applicable interest rate for such period determined under Sections 483 and 1274
(d) of the Internal Revenue Code of 1954, as amended (the "Federal Rate"), such
Federal Rate shall apply. The amount of interest payable for any such period is
computed by multiplying the decimal equivalent of the applicable interest rate
for such period by the actual number of days in such period, dividing by 360 and
multiplying the resulting quotient by the principal amount hereof. If the
principal of this Note is prepaid in whole or in part, all accrued and unpaid
interest with respect to such principal amount prepaid is due and payable on the
date of such prepayment.
Payment of this Note when due is secured by a pledge of and lien on the
Series B Floating Rate Subordinated Convertible Debenture due 2009 of the Payee
dated April 22, 1999 in the principal amount of $______________, issued in the
name of the undersigned, which Debenture, accompanied by an executed transfer
power for such Debenture and in proper form for transfer, has been delivered to
the Payee.
In the event of the non-payment when due of any liability of the
undersigned to the Payee hereunder, then, or at any time after the happening of
such event, the holder of this Note may, without demand upon or notice to the
undersigned (both of which are expressly waived by the undersigned), declare all
sums owing hereon to be, and such sums shall become, due and payable. Upon such
declaration, the Payee will, to the extent practicable, set off any amounts
owing hereon by the undersigned with amounts owing by the Payee pursuant to the
Series B Floating Rate Subordinated Debenture due 2009. This Note shall be
construed according to and governed by the laws of the State of Texas.
<PAGE> 2
By its acceptance hereof, the Payee of this promissory note, hereby
acknowledges and agrees that if (i) Rowan Companies, Inc., a Delaware
corporation (the "Company") fails, at any time, to fulfill its payment
obligations owing in respect of its Series B Floating Rate Subordinated
Convertible Debentures due 2009 (collectively, the "Debentures") or (ii) an
Event of Default (as such term is defined in the Debentures) has occurred and is
continuing, the payment obligations (with respect to principal and interest) of
the undersigned maker of this promissory note under the terms hereof will,
automatically be suspended and terminated until such time, if any, that the
Company has fulfilled all of its payment obligations then due and owing in
respect of the Debentures or such Event of Default no longer exists, as the case
may be.
-----------------------------
<PAGE> 1
EXHIBIT 10j
ROWAN COMPANIES, INC.
2800 POST OAK BOULEVARD, SUITE 5450
HOUSTON, TEXAS 77056-6196
Fax: 401 / 752-4827
September 14, 1999
Ms. Jane Levoie
Textron Financial Corporation
40 Westminster St.
Providence, RI 02903
Re: Bareboat Charter dated December 1, 1984 for the Rowan-Halifax
Dear Ms. Levoie:
Reference is made to the Bareboat Charter dated as of December 1, 1984
between Rowan Companies, Inc., as Charterer, and Wilmington Trust Company, as
Owner Trustee for Textron Financial Corporation, relating to the Rowan-Halifax
drilling rig.
Rowan hereby serves notice of its election to renew the Bareboat
Charter after the Basic Term for an additional 7.5 years as specified under
Section 18(a). Attached are Rowan's weighted average calculations in order to
determine the Fixed Rental Renewal rate during such Renewal Term.
Sincerely,
ROWAN COMPANIES, INC.
/s/ E. E. THIELE
E. E. Thiele
Senior Vice President
EET:sg
cc: Mr. Michael Oller, Jr. 302 / 651-8282
Corporate Trust Administrator 302 / 651-8882 Fax
Wilmington Trust Company
1100 North Market St.
Rodney Square North
Wilmington, Delaware 19890
<PAGE> 2
EXHIBIT 10j
[TFC TEXTRON LETTERHEAD]
The First Choice
September 27, 1999
E. E. Thiele
Senior Vice President
Rowan Companies, Inc.
5450 Transco Tower
2800 Post Oak Boulevard
Houston, TX 77056-6196
Re: Bareboat Charter dated December, 1984 for the Rowan-Halifax
Dear Ed:
TFC acknowledges receipt of your letter dated September 14, 1999 wherein you
give notice of your election under Section 18 of the Bareboat Charter to renew
the Bareboat Charter after the Basic Term for an additional 7.5 years for a
semiannual fixed rental renewal of $2,617,489.13, payable in arrears on March 15
and September 15 of each year. The renewal term will commence on September 16,
2000 and end on March 15, 2008. The first semi-annual rental of $2,617,489.13
will be due on March 15, 2001.
Very truly yours,
/s/ JANE M. LAVOIE
Jane M. Lavoie
Assistant Vice President
<PAGE> 1
EXHIBIT 10k
ROWAN COMPANIES, INC.
2800 POST OAK BOULEVARD, SUITE 5450
HOUSTON, TEXAS 77056-6196
Via Fax 216 / 479-7154
December 20, 1999
Mr. Patrick X. Donovan
President, Eaton Leasing Corporation
c/o of Eaton Corporation
Eaton Center
Cleveland, Ohio 44114-2584
Re: Bareboat Charter (Exhibit B) To
Participation Agreement dated
December 1, 1985 for the Cecil Provine
Dear Mr. Donovan:
Reference is made to the Bareboat Charter dated as of December 1, 1985
between Rowan Companies, Inc., as Charterer, and Wilmington Trust Company, as
Owner Trustee for Eaton Leasing Corporation, relating to the Cecil Provine
drilling rig.
Rowan hereby serves notice of its election to renew the Bareboat
Charter after the Basic Term for an additional 7.5 years as specified under
Section 18.(a), the "Fixed Rental Renewal Option". As the charter hire payable
(Basic Hire) during such Fixed Rental Renewal Term, we agree to the calculation
of Basic Hire as submitted with your letter dated December 6, 1999, setting the
semi-annual installment of $2,445,150.23.
Sincerely,
ROWAN COMPANIES, INC.
/s/ E. E. THIELE
E. E. Thiele
Senior Vice President
EET:sg
cc: Mr. Michael Oller, Jr. 302 / 651-8282
Corporate Trust Administrator 302 / 651-8882 Fax
Wilmington Trust Company
1100 North Market St.
Rodney Square North
Wilmington, Delaware 19890
<PAGE> 2
EXHIBIT 10k
[EATON CORPORATION LETTERHEAD]
December 22, 1999
Mr. E. E. Thiele VIA FACSIMILE & COURIER MAIL
Senior Vice President
Rowan Companies, Inc.
5450 Transco Tower
2800 Post Oak Boulevard
Houston, Texas 77056-6196
Dear Mr. Thiele:
SUBJECT: BAREBOAT CHARTER (EXHIBIT B TO
PARTICIPATION AGREEMENT
DATED AS OF DECEMBER 1, 1985
RE "CECIL PROVINE"
This letter and the attachment will serve to acknowledge Eaton Leasing's receipt
of your December 20, 1999 letter on the subject, conveying Rowan Companies'
election, as of that date, to renew the Bareboat Charter of the Cecil Provine,
under the "Fixed Rental Renewal Option", for the maximum term of seven and
one-half years.
Eaton Leasing acknowledges and confirms its acceptance of that election by the
Rowan Companies, which will extend the lease from December 24, 2000 through June
23, 2008, at semi-annual payments of Charter Hire in the amount of $2,445,150.23
each.
For purposes of confirming this election, and for our mutual convenience, the
attached Schedule A shows the remaining lease payments under the "Basic Term"
lease, payable from today through December 23, 2000. That summation is followed
by a detailed schedule which shows the amounts and due dates of the fifteen
semi-annual installments of $2,445,150.23 in Charter Hire which will be due
during the "Fixed Rental Renewal: term.
If you or your associates have any questions about the dates or amounts of these
payment schedules, please let me know. Otherwise, we will assume that you are in
agreement with the schedule.
<PAGE> 3
Mr. E. E. Thiele
December 22, 1999
Page 2
We are also forwarding a copy of this correspondence and the payment schedule to
Mr. Oller at Wilmington Trust so that he can update the Owner Trustee records.
Yours very truly,
/s/ PATRICK X. DONOVAN
Patrick X. Donovan
President - Eaton Leasing
cc: Mr. Michael Oller, Jr.
Wilmington Trust Company
Attachment (1) - Schedule A
<PAGE> 1
EXHIBIT 10 (v)
Document 1
COMMITMENT TO GUARANTEE OBLIGATIONS
BY
THE UNITED STATES OF AMERICA
Accepted by
ROWAN COMPANIES, INC.
Shipowner
(Under Title XI, Merchant Marine Act, 1936,
as amended, and in effect on the
date of this Guarantee Commitment)
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Doc.
No. Document
- --- --------
<S> <C>
1 Commitment to Guarantee Obligations
2 Schedule One -- Form of Opinion of Counsel
3 Appendix I -- Form of Credit Agreement
4 Appendix II -- Form of Trust Indenture
5 Schedule A -- Schedule of Definitions to Trust Indenture
6 Exhibit 1 -- General Provisions Incorporated into the Trust Indenture
by Reference
7 Exhibit 2 -- Form of Floating Rate Note
8 Exhibit 3 - Form of Fixed Rate Note
9 Exhibit 4 -- Form of Authorization Agreement
10 Appendix III -- Form of Security Agreement
11 Exhibit 1 -- General Provisions Incorporated into the Security
Agreement by Reference
12 Schedule X -- Schedule of Definitions
13 Exhibit 2 -- Form of Secretary's Note
14 Exhibit 3 -- Form of First Preferred Ship Mortgage
15 Exhibit 4 -- Form of Amendment No. 3 to Financial Agreement
16 Exhibit 5 -- Form of Consent of Shipyard
17 Exhibit 6 -- Construction Contract
18 Exhibit 7 -- Form of Amendment No. 2 to Depository Agreement
</TABLE>
<PAGE> 2
Contract No. MA-13538
COMMITMENT TO GUARANTEE OBLIGATIONS
BY
THE UNITED STATES OF AMERICA
Accepted by
ROWAN COMPANIES, INC.
SHIPOWNER
THIS COMMITMENT TO GUARANTEE OBLIGATIONS, dated as of October 29, 1999
(the "Guarantee Commitment"), is made and entered into by the UNITED STATES OF
AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION,
acting by and through the MARITIME ADMINISTRATOR (the "Secretary"), and accepted
on said date by ROWAN COMPANIES, INC., a Delaware corporation (the "Shipowner").
RECITALS:
A. The Shipowner will be the sole owner of the mobile, self-contained
and elevating drilling platform to be named the GORILLA VII ("the Vessel") built
pursuant to the Construction Contract with LETOURNEAU, INC., a Texas corporation
(the "Shipyard").
B. To aid in financing the construction of the Vessel, the Shipowner
will borrow an aggregate principal amount equal to 87-1/2% of the Actual Cost of
the Vessel, as of the Closing Date. To accomplish such financing, the Shipowner
has accepted this Guarantee Commitment subject to the terms and conditions set
forth herein.
C. The Shipowner has entered into the Credit Agreement providing for
the sale and delivery, on the Closing Date, of obligations in the aggregate
principal amount of $185,398,000 to be designated "United States Government
Guaranteed Ship Financing Obligations, GORILLA VII Series" (the "Obligations")
having the maturity date and interest rate set forth herein.
D. As security for the Guarantees and the Secretary's Note, the
Shipowner will execute and deliver the Security Agreement, Contract No.
MA-13540, and the following agreements shall be executed and delivered: the
Indenture, the Authorization Agreement, Contract No. MA-13539, the Secretary's
Note, the Mortgage, Contract No. MA-13541, Amendment No. 3 to the Financial
Agreement, Contract MA-13261, and Amendment No. 2 to the Depository Agreement,
Contract No. MA-13445.
1
<PAGE> 3
W I T N E S S E T H:
-------------------
That under the provisions of Title XI of the Merchant Marine Act, 1936,
as amended and in consideration of (i) the covenants of the Shipowner contained
herein and (ii) other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Secretary hereby commits
itself as herein provided.
ARTICLE I
FINDINGS AND DETERMINATIONS OF SECRETARY
Pursuant to Section 1104A(b)(1) of Title XI, the Secretary has approved
the Shipowner as responsible and possessing the ability, experience, financial
resources and other qualifications necessary to the adequate operation and
maintenance of the Vessel.
Pursuant to Section 1104A(b)(2) of Title XI, the Secretary has
determined that the aggregate of the Actual Cost of the Vessel is $211,883,822.
Prior to the Closing Date, the Secretary, in its discretion, may redetermine the
Actual Cost of the Vessel.
On the Closing Date, the aggregate principal amount of the Obligations
will not exceed 87-1/2% of the Actual Cost.
Pursuant to Sections 1104A(b)(3), 1104A(b)(4) and 1104A(b)(5) of Title
XI, the Secretary has determined that: (1) the maturity date of the Obligations
is satisfactory, (2) payments of principal required by the Obligations are
satisfactory, and (3) the interest rate to be borne by the Obligations to be
issued on the Closing Date is reasonable.
Pursuant to Section 1104A(d) of Title XI, the Secretary has found that
the Shipowner's proposed use of the Vessel will be economically sound.
ARTICLE II
COMMITMENT TO GUARANTEE OBLIGATIONS
The United States, represented by the Secretary, HEREBY COMMITS ITSELF
TO GUARANTEE the payment of the unpaid interest on, and the unpaid balance of
the principal of, the Obligations, including interest accruing between the date
of default under the Obligations and the payment in full of the Guarantees, and,
to effect this Guarantee Commitment, hereby commits itself to execute and
deliver the Authorization Agreement, Security Agreement, Amendment No. 3 to
Financial Agreement, and Amendment No. 2 to the Depository Agreement on the
Closing Date, and the Mortgage on the Delivery Date pursuant to the terms of the
Guarantee Commitment.
2
<PAGE> 4
ARTICLE III
THE OBLIGATIONS
The Obligations shall be as provided in the Indenture and in the form
of the Obligations annexed as Exhibits 2 and 3 to the Indenture. The Obligations
shall be subject to all of the terms and conditions set forth in the Indenture.
ARTICLE IV
CONDITIONS TO EXECUTION AND DELIVERY OF THE GUARANTEE
The obligation of the Secretary to execute and deliver the Guarantee on
the Closing Date shall be subject to the following conditions unless waived in
writing by the Secretary:
(a) the Closing Date shall occur on or prior to April 20, 2000;
(b) the Shipowner and the Shipyard shall have executed and delivered to
the Secretary a copy of the Construction Contract, as amended, and the Shipyard
shall have executed the Consent of Shipyard;
(c) the Shipowner shall have executed and delivered the following
documents in the form attached hereto: the Security Agreement, Amendment No. 3
to Financial Agreement, Trust Indenture, Secretary's Note, Obligations, Credit
Agreement, and Amendment No. 2 to the Depository Agreement;
(d) the Indenture Trustee shall have executed, in the form attached
hereto, the Authorization Agreement and Indenture, the Depository shall have
executed the Depository Agreement; and the Lender shall have executed the Credit
Agreement;
(e) the following documents shall have been delivered to the
Secretary: (i) one executed counterpart and one copy of the Credit Agreement ;
(ii) two executed counterparts of the Indenture, (iii) two specimen copies of
the Obligations; (iv) two executed originals of the legal opinion issued under
section (k) of this Article; (v) two copies of the legal opinion delivered to
the Lender pursuant to the Credit Agreement, and (vi) two originals of all other
documents delivered by the Shipowner, Indenture Trustee or the Depository in
connection with this Closing;
(f) if the Shipowner intends to operate the Vessel in the U.S. domestic
trade, the Shipowner and any bareboat charterers of such Vessel shall have
furnished to the Secretary on the Closing Date an affidavit complying with the
requirements of 46 C.F.R. 355, demonstrating U.S. citizenship;
(g) the Shipowner shall have executed an Officer's Certificate
representing and warranting the truth of the following statements as of the
Closing Date:
3
<PAGE> 5
(i) each of the representations and warranties set out at
Section 2.01 of the General Provisions of the Security Agreement in
Appendix III; and
(ii) the Shipowner is not in violation of any Federal laws
having a substantial adverse effect on the interests of the United
States of America and that the consummation of the Commitment complies
with non-Title XI Federal law.
(h) the Secretary shall have received the Guarantee Fee payable under
Section 1104A (e) of Title XI and the Investigation Fee due under Section 1104A
(f) of Title XI;
(i) the Shipowner shall have complied in all material respects with its
agreements under this Guarantee Commitment;
(j) there shall not have occurred any event which constitutes (or after
any period of time or any notice, or both, would constitute) a "Default" under
the Security Agreement;
(k) there shall have been delivered to the Secretary by the Shipowner
an opinion of counsel acceptable to the Secretary, in the form annexed hereto as
Schedule 1 which shall include, among other things, an opinion to the effect
that: (i) by the terms of the Security Agreement, the Shipowner has granted to
the Secretary a fully perfected, first priority security interest in each of the
assets which constitutes the Security; and (ii) all filings, recordings, notices
and other actions required to perfect the Secretary's interests in the Security
and to render such security interests valid and enforceable under applicable
State law have been duly effected;
(l) the Secretary shall have received a letter agreement from the
Shipowner to provide the Secretary within a reasonable time after the Closing
Date, with eight conformed copies of the Guarantee Commitment and each of the
Appendices and Exhibits thereto executed on or prior to such date;
(m) on the Closing Date, the qualifying requirements set forth in
Section 15 of the Financial Agreement shall have been complied with and
certified to as required therein; and
(n) at least ten (10) days prior to the Closing Date, there shall have
been delivered to the Secretary, pro forma balance sheets for the Shipowner as
of the Closing Date, certified by an officer of the Shipowner showing, among
other things, all non-Title XI debt of the Shipowner;
(o) on the Closing Date, the Shipowner shall certify that all non-Title
XI debt to the Shipowner relating to the Vessel have been discharged or
subordinated satisfactorily to the Secretary; and
(p) at least ten (10) days prior to the Closing Date, the Shipowner
shall have provided the Secretary with satisfactory evidence of marine insurance
as required by the Security Agreement.
4
<PAGE> 6
ARTICLE V
VARIATION OF GUARANTEE COMMITMENT
No variation from the terms and conditions hereof shall be permitted
except pursuant to an amendment executed by the Secretary and the Shipowner.
ARTICLE VI
TERMINATION OR ASSIGNMENT OF GUARANTEE COMMITMENT
This Guarantee Commitment may be terminated and the parties hereto
shall have no further rights or obligations hereunder, upon written notice by
the Secretary of the termination of the obligations of the United States
pursuant to the Shipowner's failure to satisfy one or more conditions set forth
in Article V hereof or upon the Secretary's determination, at or before the
Closing Date, that (i) the Shipowner is in violation of Federal law and such
violation would have a substantial, adverse effect on the interests of the
United States of America, or (ii) the consummation of the Commitment would
violate non-Title XI Federal law. The Shipowner's warranties and representations
shall survive the termination of this Guarantee Commitment and the Secretary's
issuance of the Guarantees. This Guarantee Commitment may not be assigned by the
Shipowner without the prior written approval of the Secretary and any attempt to
do so shall be null and void ab initio.
ARTICLE VII
MISCELLANEOUS
(a) The table of contents and the titles of the Articles are inserted
as a matter of convenient reference and shall not be construed as a part of this
Guarantee Commitment. This Guarantee Commitment may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
(b) For all purposes of this Guarantee Commitment, unless otherwise
expressly provided or unless the context shall otherwise require, capitalized
terms used herein shall have the meaning given in Schedule X to the Security
Agreement.
5
<PAGE> 7
IN WITNESS WHEREOF, this Commitment to Guarantee Obligations has been
executed by the United States and accepted by the Shipowner, all as of the day
and year first above written.
UNITED STATES OF AMERICA,
SECRETARY OF TRANSPORTATION
BY: MARITIME ADMINISTRATION
(SEAL)
BY: Joel C. Richard
---------------------------
Secretary
Maritime Administration
Attest:
Sarah J. Washington
- ---------------------------------
Assistant Secretary
Maritime Administration
ACCEPTED BY:
ROWAN COMPANIES, INC.
as Shipowner
BY: E.E. Thiele
--------------------------
Senior Vice President
(SEAL)
Attest:
BY: Mark H. Hay
------------------------------
6
<PAGE> 8
EXHIBIT 3 TO THE SECURITY AGREEMENT DOCUMENT 14
Contract No. MA-13541
FIRST PREFERRED SHIP MORTGAGE
THIS FIRST PREFERRED SHIP MORTGAGE, dated __________________ 2002, is
made by ROWAN COMPANIES, INC., a Delaware corporation (the "Shipowner" and
"Mortgagor") located at Suite 5450, 2800 Post Oak Blvd., Houston, Texas
77056-6196 to the UNITED STATES OF AMERICA (the "United States"), represented by
the Secretary of Transportation, acting by and through the Maritime
Administrator (the "Secretary" and "Mortgagee") located at the U.S. Department
of Transportation, 400 Seventh Street, S.W., Washington, D.C. 20590.
WHEREAS, pursuant to understandings set forth in the Recitals to the
Security Agreement executed this date, the Shipowner has authorized the issuance
of Obligations designated "United States Government Guaranteed Ship Financing
Obligations, GORILLA VII Series" in an aggregate principal amount not to exceed
$185,398,000 to finance the construction of the GORILLA VII, Official Number
(the "Vessel");
WHEREAS, the Shipowner is the sole owner of the whole of the Vessel;
NOW, THEREFORE, THIS MORTGAGE WITNESSETH:
That, in consideration of the premises and of the additional covenants
herein contained and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and as security for the Guarantees
and in order to secure the payment of the above-mentioned interest on and
principal of the Secretary's Note and all other sums that may be secured by the
Mortgage and the Security Agreement, and to secure the due performance and
observance of all the agreements and covenants in the Secretary's Note and
herein contained, the Shipowner has granted, conveyed, mortgaged, pledged,
confirmed, assigned, transferred and set over, and by these presents does grant,
convey, mortgage, pledge, confirm, assign, transfer and set over unto the
Mortgagee a hundred percent interest in the whole of the Vessel which is more
fully described in its certificates of documentation, together with all of its
boilers, engines, machinery, masts, spares, rigging, boats, anchors, cables,
chains, tackle, tools, pumps and pumping equipment,
<PAGE> 9
apparel, furniture, fittings and equipment, spare parts and all other
appurtenances to said Vessel appertaining or belonging, whether now owned or
hereafter acquired whether on board or not and all additions, improvements,
renewals and replacements hereafter made in or to said Vessel or said
appurtenances.
TO HAVE AND TO HOLD, all and singular, the above mortgaged and
described property unto the Mortgagee, to its own use, benefit and behoof
forever;
PROVIDED, HOWEVER, and these presents are upon the condition that, if
the above-mentioned principal of and interest on the Secretary's Note are paid
or satisfied in accordance with the terms thereof, the Security Agreement and
this Mortgage, and all other obligations and liabilities that may be secured by
the Security Agreement and this Mortgage are paid in accordance with their
terms, then this Mortgage and the estate and rights hereunder shall cease,
determine and be void, otherwise to remain in full force and effect.
The Shipowner hereby agrees with the Mortgagee that the Vessel now or
at any time subject to the lien of this mortgage is to be held by the Mortgagee
subject to the further agreements and conditions hereinafter set forth.
ARTICLE FIRST
SECTION 1. All of the Shipowner's covenants and agreements including,
without limitation, those relating to: maintenance of United States citizenship;
organization and existence of the Shipowner; title to and possession of the
Vessel; sale, transfer or charter of the Vessel; taxes; liens; documentation of
the Vessel; material changes in the Vessel; compliance with applicable laws;
maintenance of marine insurance; requisition of title; and compliance with
Chapter 313 of Title 46 of the United States Code, set forth in, and all of the
Secretary's rights, immunities, powers and remedies provided for in the Security
Agreement, except for the Granting Clause thereof, together with all other
provisions of the Security Agreement, are incorporated herein by reference with
the same force and effect as though set forth at length in this Mortgage, and a
true copy of the form of the Security Agreement are annexed hereto.
SECTION 2. A Default pursuant to the provisions of the Security
Agreement shall constitute a default hereunder, and shall give the Mortgagee the
rights and remedies established by Chapter 313 of Title 46 of the United States
Code, and as provided in the Security Agreement.
<PAGE> 10
ARTICLE SECOND
SECTION 1. This Mortgage may be executed in any number of counterparts
and all such counterparts executed and delivered each as an original shall
constitute but one and the same instruments.
SECTION 2. All of the Shipowner's covenants, promises, stipulations and
agreements in this Mortgage shall bind the Shipowner and its successors and
assigns, and shall inure to the benefit of the Mortgagee and its successors and
assigns, and all of the Mortgagee's covenants, promises, stipulations and
agreements in this Mortgage, shall bind the Mortgagee and its successors and
assigns, and shall inure to the benefit of the Shipowner and its successors and
assigns, whether so expressed or not.
SECTION 3. All capitalized terms used herein shall have the meaning
specified in Schedule X to the Security Agreement, unless the context otherwise
requires.
SECTION 4. No provision of this Mortgage or of the Security Agreement
shall be deemed to constitute a waiver by the Mortgagee of the preferred status
of the Mortgage given by 46 U.S.C. ss.31305, and any provision of this Mortgage
or of the Security Agreement which would otherwise constitute such a waiver,
shall to such extent be of no force and effect.
SECTION 5. Once the Mortgage shall have become null and void, the
Secretary, on request of the Shipowner and at the Shipowner's cost and expense,
shall forthwith cause satisfaction and discharge of this Mortgage to be entered
upon its and other appropriate records, and shall execute and deliver to the
Shipowner such instruments as may be necessary, duly acknowledging the
satisfaction and discharge of this Mortgage.
ARTICLE THIRD
The total principal amount of the obligations that is secured by this
First Preferred Ship Mortgage is One Hundred Eighty-Five Million Three Hundred
Ninety-Eight Thousand Dollars and NO/100's ($185,398,000) excluding interest,
expenses, and fees. The date of discharge for the Vessel is as follows: October
20, 2013.
<PAGE> 11
IN WITNESS WHEREOF, this instrument has been executed on the date below
indicated, and effective as of the day and year first above written.
ROWAN COMPANIES, INC.,
as Shipowner
(SEAL) BY:
------------------------------------
Senior Vice President
Date Signed:
------------------------
Attest:
- ------------------------
Secretary
CONSENTED TO: UNITED STATES OF AMERICA
SECRETARY OF
TRANSPORTATION
acting by and through the
MARITIME ADMINISTRATOR
BY:
---------------------------------
Secretary
Maritime Administration
<PAGE> 12
ACKNOWLEDGMENT
DISTRICT OF COLUMBIA )
) ss:
CITY OF WASHINGTON )
On this ____ day of ___________, ____, before me, ______________, a
Notary Public in and for the District of Columbia, personally appeared Edward E.
Thiele, duly known to me to be the Senior Vice President of ROWAN COMPANIES,
INC., a Delaware corporation, the corporation described in and that executed the
instrument hereto annexed and acknowledged to me that the seal affixed to said
instrument is such corporation's seal, that it was so affixed by authority set
forth in the By-laws of said corporation, and that he/she signed his/her name
thereto by like authority.
(NOTARIAL SEAL)
------------------------------
NOTARY PUBLIC
My Commission Expires:
DISTRICT OF COLUMBIA )
) ss:
CITY OF WASHINGTON )
I, the undersigned, a Notary Public in and for the District of
Columbia, do hereby certify that __________________ , Secretary of the Maritime
Administration, personally appeared before me in said District, the aforesaid
officer being personally well known to me as the person who executed the
Mortgage hereto annexed, and acknowledged the same to be his/her act and deed as
said officer.
Given under my hand and seal this __________ day of ________, ______.
------------------------------
NOTARY PUBLIC
My Commission Expires:
(NOTARIAL STAMP AND SEAL)
<PAGE> 1
EXHIBIT 10 (w)
CREDIT AGREEMENT
dated as of October 29, 1999
among
ROWAN COMPANIES, INC.
as Shipowner
GOVCO INCORPORATED
as Primary Lender
CITIBANK, N.A.
as Alternate Lender
CITIBANK INTERNATIONAL plc,
as Facility Agent
and
CITICORP NORTH AMERICA, INC.
as Administrative Agent for the Primary Lender and
the commercial paper holders of the Primary Lender.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION...................................................2
1.01 Defined Terms...............................................................................2
1.02 Principles of Construction..................................................................2
SECTION 2. THE CREDIT FACILITY..........................................................................2
2.01 Amount......................................................................................2
2.02 Availability................................................................................3
2.03 Disbursements and Minimum Amount of Utilizations............................................3
2.04 Relationship of Floating Rate Note and Fixed Rate Note......................................3
2.05 Trigger Event...............................................................................3
SECTION 3. DISBURSEMENT REQUIREMENTS....................................................................4
3.01 Disbursement Procedures.....................................................................4
SECTION 4. TERMS OF THE CREDIT..........................................................................4
4.01 Principal Repayment.........................................................................4
4.02 Interest Payment............................................................................4
4.03 Prepayment..................................................................................6
4.04 Recapture...................................................................................7
4.05 Evidence of Debt............................................................................8
4.06 Limit of United States Guarantee............................................................8
SECTION 5. CONDITIONS PRECEDENT..........................................................................8
5.01 Conditions Precedent to Lenders' Obligations Under this Agreement...........................8
5.02 Conditions Precedent to Each Disbursement..................................................10
SECTION 6. FEES AND EXPENSES............................................................................10
6.01 Fees.......................................................................................10
6.02 Taxes......................................................................................10
6.03 Expenses...................................................................................11
6.04 Additional or Increased Costs..............................................................12
SECTION 7. PAYMENTS....................................................................................13
7.01 Method of Payment...........................................................................13
7.02 Application of Payments....................................................................14
SECTION 8. REPRESENTATIONS AND WARRANTIES BY THE SHIPOWNER.............................................14
8.01 Representations and Warranties of the Shipowner............................................14
8.02 Agreements of the Shipowner................................................................17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 9. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT..............................................18
9.01 Cancellation...............................................................................18
9.02 Events of Default..........................................................................18
SECTION 10. GOVERNING LAW AND JURISDICTION.............................................................19
10.01 Governing Law..............................................................................19
10.02 Submission to Jurisdiction.................................................................19
10.03 Waiver of Security Requirements............................................................20
10.04 No Limitation..............................................................................20
SECTION 11. MISCELLANEOUS..............................................................................20
11.01 Computations...............................................................................20
11.02 Notices....................................................................................20
11.03 Disposition of Indebtedness................................................................22
11.04 Disclaimer.................................................................................22
11.05 No Waiver; Remedies Cumulative.............................................................22
11.06 Currency...................................................................................23
11.07 Severability...............................................................................23
11.08 Amendment or Waiver........................................................................23
11.09 Indemnification............................................................................23
11.10 Benefit of Agreement.......................................................................24
11.11 Waiver of Jury Trial.......................................................................24
11.12 Execution in Counterparts..................................................................24
11.13 Shipowner Documents........................................................................24
11.14 Entire Agreement...........................................................................25
11.15 No Proceedings.............................................................................25
SECTION 12. ARRANGEMENTS AMONG THE AGENTS AND THE LENDERS..............................................25
12.01 Appointment................................................................................25
12.02 Rights of Facility Agent...................................................................25
12.03 Duties.....................................................................................26
12.04 Limitation on Obligations of Facility Agent................................................26
12.05 Indemnification by Lenders.................................................................27
12.06 Limitation on Responsibility...............................................................27
12.07 No Claims on Employees of Facility Agent...................................................27
12.08 Banking Business...........................................................................27
12.09 Resignation or Termination of Facility Agent...............................................28
12.10 Successor to Facility Agent................................................................28
12.11 Discharge of Obligations...................................................................28
12.12 Responsibilities of Lenders................................................................28
12.13 Agency Division............................................................................29
12.14 Administrative Agent.......................................................................29
12.15 Facility Agent Only Agent for the Lenders..................................................29
</TABLE>
ii
<PAGE> 4
Exhibits
Exhibit 1 Schedule of Definitions
Annexes
Annex A Form of Disbursement Requests
iii
<PAGE> 5
THIS CREDIT AGREEMENT, dated as of October 29, 1999 is made by and
among ROWAN COMPANIES, INC., a Delaware corporation (the "Shipowner"), GOVCO
INCORPORATED, a Delaware corporation (the "Primary Lender"), CITIBANK, N.A., a
national banking association (the "Alternate Lender"), CITIBANK INTERNATIONAL
plc, a bank organized and existing under the laws of England, as facility agent
for both the Primary Lender and the Alternate Lender (and their respective
successors and assigns) with respect to the Floating Rate Note, and its
permitted successors and assigns (in such capacity, the "Facility Agent"), and
CITICORP NORTH AMERICA, INC., a Delaware corporation, as administrative agent
for the Primary Lender and the commercial paper holders of the Primary Lender
(and their respective successors and assigns) (in such capacity, together with
its permitted successors and assigns, the "Administrative Agent," and together
with the Facility Agent, the "Agents"). As used herein, the term "Lender" shall
mean either the Primary Lender or the Alternate Lender, as the case may be,
depending on which of the two parties made or will make the relevant
disbursement of funds under this Agreement; provided, however, that if the
Primary Lender assigns its rights under this Agreement to the Alternate Lender,
the term "Lender," as used herein, shall mean only the Alternate Lender. The
term "Lenders," as used herein, shall mean collectively the Primary Lender and
the Alternate Lender.
BACKGROUND
WHEREAS:
(A) by this Agreement, the Lenders have established a credit facility
(the "Credit Facility") in the amount of $185,398,000, pursuant to which the
Primary Lender may, in its discretion, subject to the terms and conditions
hereof, extend financing to the Shipowner (i) for the manufacture, construction,
fabrication, financing and purchase by the Shipowner of the Vessel; (ii) for the
payment of the related Construction Period Interest; and (iii) for the payment
of the Guarantee Fees; and if the Primary Lender chooses at any time not to
extend, or continue to extend, any such financing, then the Alternate Lender
shall, subject to the terms and conditions hereof, extend the undisbursed
portion of such financing;
(B) the establishment of the Credit Facility is in reliance upon the
commitment of the United States to guarantee the payment of the unpaid interest
on, and the unpaid balance of the principal of, the Floating Rate Note,
including interest accruing between the date of an Indenture Default under the
Floating Rate Note and the payment in full of the Guarantee;
(C) a condition to the Lenders' extension of the Credit Facility under
this Agreement is the Facility Agent's timely receipt of Certificates
Authorizing Disbursement and issuance of the Guarantee of the Floating Rate
Note;
<PAGE> 6
(D) the Facility Agent will serve as facility agent for the benefit,
and on behalf, of each of the Lenders in connection with the Credit Facility,
this Agreement and the other related documents and the Administrative Agent will
act as an administrative agent for the Primary Lender and the Primary Lender's
commercial paper holders; and
(E) the Credit Facility may be utilized by the Shipowner in accordance
with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.01 Defined Terms. For the purposes of this Agreement, unless
otherwise defined herein, defined terms shall have the meanings specified in
Exhibit 1 hereto.
1.02 Principles of Construction.
(a) The meanings set forth for defined terms in this Agreement shall be
equally applicable to both the singular and plural forms of the terms defined.
(b) Unless otherwise specified, all references in this Agreement to
Annexes or Exhibits are to Annexes or Exhibits in or to this Agreement.
(c) The headings of the Sections in this Agreement are included for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.
SECTION 2. THE CREDIT FACILITY
2.01 Amount. The Lenders hereby establish the Credit Facility, upon the
terms and conditions set forth in this Agreement, in favor of the Shipowner in
the maximum amount of $185,398,000 (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 Primary Lender intends (but is not obligated) to fund the
Credit Facility through the issuance and sale of Commercial Paper to investors
which is exempt from the registration requirements of the United States
Securities Act of 1933, as amended. The Primary Lender may, at its option, elect
at any time not to fund the Credit Facility or the undisbursed portion thereof,
in which case the Alternate 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").
2
<PAGE> 7
2.02 Availability. Disbursements under the Credit Facility may be made
once a calendar month and up to and including the Final Disbursement Date.
"Final Disbursement Date" shall mean the earliest of (x) April 20, 2002, (y)
upon the request of the Secretary, the date upon which the Trigger Event (as
defined in Section 2.05) shall occur or, (z) the date on which the Available
Amount under the Credit Facility is canceled in accordance with Section 9.01 or
reduced to zero.
2.03 Disbursements and Minimum Amount of Utilizations. Upon
satisfaction of Sections 3.01, 5.01 and 5.02, disbursements shall be made by
advances from the Primary Lender or the Alternate Lender to the Shipowner
("Disbursements") in accordance with Section 3.01. Notwithstanding anything in
this Agreement to the contrary, the Shipowner may not request a Disbursement
under the Credit Facility for an amount (a) less than the smaller of (i)
$1,000,000 or (ii) the Available Amount or (b) more than the Available Amount.
2.04 Relationship of Floating Rate Note and Fixed Rate Note.
Disbursements from the Credit Facility shall become the indebtedness of the
Shipowner to the Lenders 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 earliest of (i) two years from the
Delivery Date, (ii) April 20, 2004, or (iii) at the request of the Secretary,
within fifteen (15) Business Days from the date upon which the Trigger Event
shall occur. 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 later than the earliest of (i) two years after the
Delivery Date, (ii) April 20, 2004 or (iii) at the request of the Secretary,
within fifteen (15) Business Days from the date upon which the Trigger Event
shall occur, and except for the final conversion or in the case of the Trigger
Event, 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.
2.05 Trigger Event. (a) The Shipowner shall, without prior notice or
demand from the Secretary, convert the outstanding indebtedness under the
Floating Rate Note to indebtedness under a fixed rate obligation with a Maturity
date of October 20, 2013 whenever the Treasury constant maturities rate (5-year)
as reported by the Federal Reserve Board in statistical release H.15 (519) (the
"Treasury Rate") equals or exceeds nine percent (9.0%) per annum (the "Trigger
Event"). If a Trigger Event should occur, the Shipowner shall convert the
Floating Rate Note to a fixed rate obligation, at the request of the Secretary,
within fifteen (15) Business Days of the Trigger Event.
(b) The failure of the Shipowner to convert the Floating Rate Note and
Available Amount to a fixed-rate obligation within fifteen (15) Business Days
pursuant to this Section 2.05, unless subsequently waived in writing by the
Secretary, shall constitute an Indenture Default without further notice to the
3
<PAGE> 8
Shipowner or the Lenders being required under the Indenture or this Agreement.
(c) The Shipowner covenants for the benefit of the Secretary that it
shall arrange for an independent reporting service or bank acceptable to the
Secretary to send the Secretary, the Facility Agent, and the Shipowner a written
interest rate report once a month on the first business day of every month
(until such time as the Floating Rate Note is converted to a fixed rate
obligation). This interest rate report shall specify the Treasury Rate as of the
date of the report.
SECTION 3. DISBURSEMENT REQUIREMENTS
3.01 Disbursement Procedures. Upon receipt by the Facility Agent of
each Certificate Authorizing Disbursement at least five (5) Business Days prior
to the proposed disbursement date, the Primary Lender may, and if the Primary
Lender elects not to, the Alternate Lender shall, disburse funds in accordance
with the terms of such Certificate Authorizing Disbursement to the Shipowner, or
the Shipowner's designee, subject to the terms of this Agreement and such
Certificate Authorizing Disbursement; provided that, if the Certificate
Authorizing Disbursement and the request for disbursement referred to therein do
not specify a disbursement date, then the disbursement date shall be the fifth
Business Day (or such earlier or later Business Day as is requested by the
Shipowner and is acceptable to the disbursing Lender) following the Facility
Agent's receipt of such Certificate Authorizing Disbursement. Promptly following
each Disbursement, the Facility Agent shall transmit to the Indenture Trustee a
copy of the Certificate Authorizing Disbursement, a confirmation that the
Disbursement was made, and a copy of Exhibit A to the Floating Rate Note,
updated to reflect such Disbursement and other intervening, related events.
SECTION 4. TERMS OF THE CREDIT
4.01 Principal Repayment. The Shipowner shall repay all Outstanding
Principal in twenty-four (24) approximately equal, successive semi-annual
installments, with each such installment to be payable on a Payment Date;
provided that, on the last Payment Date, the Shipowner shall repay in full the
remaining Outstanding Principal.
4.02 Interest Payment.
(a) On each Interest Payment Date, the Shipowner shall pay to the
Indenture Trustee, on behalf of the Person(s) entitled thereto, interest on the
Outstanding Principal, calculated at an interest rate per annum equal to the
Applicable Interest Rate therefor, as determined for each successive Interest
Period. The Indenture Trustee shall calculate the Applicable Interest Rate based
on information provided (i) by the Administrative Agent to the Facility Agent if
the Primary Lender is the Lender, or (ii) by the Facility Agent if the Alternate
Lender is the Lender. From time to time, the Administrative Agent or Facility
Agent will confirm CP Rate, LIBOR, Base Rate, and Applicable Interest Rate to
the Indenture Trustee. In the event that the Primary Lender assigns
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the financing of all or any portion of the amount outstanding under the Credit
Facility (whether or not evidenced by a Note) to the Alternate Lender or other
party, the interest rate on such amount shall be determined by the Facility
Agent (and the Facility Agent shall notify the Indenture Trustee thereof)
pursuant to clause (i) of the definition of Applicable Interest Rate for the
period prior to the effective date of such assignment and pursuant to clause
(ii) of such definition for all periods after such date.
(b) The Shipowner shall pay to the Facility Agent, on behalf of the
Person(s) entitled to any Unpaid Amount, on demand, interest on such Unpaid
Amount (to the extent permitted by applicable law) for each Post Maturity Period
at an interest rate per annum equal to the sum (the "Post Maturity Interest
Rate") of (1) two percent (2%), plus (2) the Post Maturity Applicable Interest
Rate. With respect to any Unpaid Amounts, the "Post Maturity Applicable Interest
Rate" shall mean either (i) LIBOR on the Quotation Date therefor plus three
tenths of one percent (0.30%) per annum, or (ii) for any such Post Maturity
Period LIBOR cannot be determined the rate per annum reasonably determined by
the Person to whom such Unpaid Amount is owed before the last day of such Post
Maturity Period to be that which expresses as a percentage rate per annum the
cost which such Person would incur in funding such Unpaid Amount from whatever
source it reasonably deems appropriate for such Post Maturity Period plus three
tenths of one percent (0.30%) per annum, or (iii) if any such Unpaid Amount is
an Accelerated Repayment, then during the first Post Maturity Period the rate
which would have been applicable to such Unpaid Amount had it not so fallen due.
In the absence of an Indenture Default, any interest which shall have accrued
under this Section 4.02(b) in respect of an Unpaid Amount shall be due and
payable and shall be paid by the Shipowner on demand on such dates as the Person
to whom such Unpaid Amount is owed may specify by written notice to the
Shipowner, or if there is an Indenture Default, any interest which shall have
accrued under this Section 4.02(b) in respect of an Unpaid Amount shall be due
and payable immediately and shall be paid by the Shipowner without demand and
any payment by, or on behalf of, the Shipowner hereunder shall be governed by
Section 7.02 and the provisions of the last paragraph of Section 9.02.
As used herein, "Unpaid Amount" means all or any part of principal,
accrued interest, fees or other amounts owing to the Lenders under this
Agreement or the Floating Rate Note which is not paid in full when and as due
and payable, whether at Stated Maturity, by acceleration or otherwise, or any
sum due and payable by the Shipowner to the Lenders under any judgment of any
court or arbitral tribunal in connection with this Agreement which is not paid
on the date of such judgment; provided, however, that it is agreed that Unpaid
Amount shall not include any part of the principal and interest on the Floating
Rate Note, except that Unpaid Amount shall include all such amounts thereof as
are not paid by the Shipowner as and when they are due but are paid by the
Shipowner prior to payment thereof by the Secretary. "LIBOR" shall mean, in
relation to any Post Maturity Period (other than the first Post Maturity Period
contemplated by clause (iii) of Section 4.02(b)), the rate of interest per annum
(rounded upward, if necessary, to the nearest 1/16 of 1%)
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last quoted by the principal London office of CITIBANK, N.A., prior to the close
of business at such London office on the Quotation Date for the offering to
leading banks in the London interbank market of U.S. Dollar deposits on an
overnight basis and in an amount comparable to the Unpaid Amount to which LIBOR
is to apply. "Accelerated Repayment" shall mean any part of the principal of the
Floating Rate Note that became due and payable on a day other than its Payment
Date. "Post Maturity Period" shall mean with respect to the period from the date
an Unpaid Amount was due until such amount shall have been paid in full, each
successive period, the first of which shall start on the date such Unpaid Amount
was due (or the date of any such judgment or arbitral award, if earlier) and
each other of which shall start on the last day of the preceding such period,
and the duration of each of which shall be one day, or if LIBOR applies, then
from and including the Quotation Date for such Post Maturity Period to but
excluding the next Quotation Date or such other duration selected by the Person
to whom such Unpaid Amount is due; provided, however, that in the case of any
Accelerated Repayment, the first such Post Maturity Period applicable thereto
shall be of a duration equal to the unexpired portion of its then applicable
Interest Period. "Quotation Date" in relation to any Post Maturity Period means
the day on which quotations would ordinarily be given by CITIBANK, N.A. in the
London interbank market for dollar deposits for delivery on the first day of
that period; provided, however, that if, for any such Post Maturity Period,
quotations would ordinarily be given on more than one date, the Quotation Date
for that period shall be the last of those dates.
4.03 Prepayment. (a) The Shipowner may from time to time prepay on any
Interest Payment Date all or any part of the Outstanding Principal evidenced by
the Floating Rate Note, provided that: (i) any partial prepayment shall be in a
minimum principal amount of $10,000,000, unless otherwise required by the
Indenture; (ii) the Shipowner shall have given the Facility Agent and the
Indenture Trustee prior written notice of such prepayment (which shall be not
less than 40 nor more than 60 days); (iii) the Shipowner shall have paid in full
all amounts due under this Agreement as of the date of such prepayment,
including, without limitation, interest which has accrued to the date of
prepayment on the amount prepaid and all other amounts payable hereunder
relating to such prepayment; (iv) any amount prepaid hereunder (other than the
Outstanding Principal amount thereof prepaid through the issuance of Fixed Rate
Notes, the Outstanding Principal amount of which is subtracted from the Credit
Facility pursuant to the last sentence of Section 2.01) shall not be considered
part of the Available Amount; and (v) subject to Section 4.03(c), if the Lender
is the Primary Lender, the Shipowner shall pay to the Facility Agent, for the
benefit of the Primary Lender an amount equal to (x) the amount of yield that
the Primary Lender is required to pay to holders of its Commercial Paper during
the Liquidation Period (as defined below) on an amount of Commercial Paper
having an aggregate issue price equal to the amount of the Shipowner's
prepayment less (y) the amount of the estimated investment earnings, as
determined by the Facility Agent, on the prepayment amount during the
Liquidation Period. The "Liquidation Period" means the period from the date on
which a prepayment is made to the earliest date on which the Primary Lender's
total amount of Commercial Paper related to the
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funding of the Disbursements can be reduced (without prepayment thereof) by an
amount equal to the amount of the Shipowner's prepayment. Prepayments shall be
applied to the installments of principal of the Credit Facility in the inverse
order of their maturity, and, in cases where more than one Note is outstanding,
pro rata to each Note.
(b) Upon delivery to the Shipowner and the Secretary of the instrument
satisfying and discharging the Indenture contemplated by Section 12.01 of the
Exhibit 1 to the Indenture, all of the Shipowner's indebtedness, liabilities and
obligations under this Agreement and the Fee Letter shall become immediately due
and payable without demand upon, or notice to, the Shipowner.
(c) Notwithstanding any other provision to the contrary herein, the
Shipowner or the Secretary (after the Secretary's assumption of the Floating
Rate Note pursuant to Section 6.09 of Exhibit 1 to the Indenture) may from time
to time prepay all or any part of the principal amount of the Floating Rate Note
without any prepayment penalty or premium in accordance with Article III of
Exhibit 1 to the Indenture.
(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.
4.04 Recapture. (a) Upon the written request of the Facility Agent, the
Shipowner shall pay to the applicable Lender, such amounts as shall be
sufficient (in the reasonable judgment of such Lender) to compensate such Lender
for any loss, expense or liability (including, without limitation, any loss,
expense or liability incurred by reason of the liquidation or redeployment of
deposits from third parties or in connection with obtaining funds to make or
maintain any Disbursement) which such Lender reasonably determines is
attributable to:
(i) any failure to make scheduled payments on a Payment Date or any
payment due in connection with any Redemption; or
(ii) any failure by the Shipowner to borrow any advance for which a
Certificate Authorizing Disbursement has been issued; or
(iii) any revocation of a notice of prepayment given pursuant to
Section 4.03(a); or
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(iv) subject to the provisions of Section 4.03(c), any prepayment of
the Floating Rate Note (including, without limitation, due to the issuance of
any fixed rate notes) other than on an Interest Payment Date after giving five
Business Days prior written notice to such Lender, the Facility Agent, and the
Indenture Trustee.
(b) Without prejudice to any other provision hereof (and at the
Shipowner's expense), such Lender shall use such reasonable efforts as it shall
determine in its sole discretion to minimize any loss, expense or liability to
the extent possible.
4.05 Evidence of Debt. The Shipowner agrees that to evidence further
its obligation to repay all amounts disbursed under the Credit Facility, with
interest accrued thereon, it shall issue and deliver to the Facility Agent, in
accordance with the written instructions of the Facility Agent, the Floating
Rate Note. The Floating Rate Note shall (i) be in the form of Exhibit 2 to the
Indenture; (ii) bear the Secretary's Guarantee, and (iii) be valid and
enforceable as to its principal amount at any time only to the extent of the
aggregate amounts then disbursed and outstanding thereunder, and, as to
interest, only to the extent of the interest accrued thereon at the rate
guaranteed by the Secretary, with any interest in excess thereof being evidenced
by this Agreement.
4.06 Limit of United States Guarantee. None of the interest, fees, and
expenses arising under Sections 4.03, 4.04 and 6 and none of the Indemnified
Amounts, commissions, Taxes, Other Taxes, Post Maturity Interest Rate, interest
in excess of 10.25% (or such higher rate as may be agreed from time to time by
the Secretary) (the "Cap Rate") under the Floating Rate Note, the costs of
obtaining any interest rate protection, or any other charges, costs, expenses,
or indebtedness owed by the Shipowner under this Agreement to any Person is
guaranteed by the United States. The Guarantee of the United States extends only
to the principal and interest owed under the Obligations and only to the extent
specified therein. The Cap Rate shall not apply to fixed-rate obligations.
SECTION 5. CONDITIONS PRECEDENT
5.01 Conditions Precedent to Lenders' Obligations Under this Agreement.
The obligations of the Lenders under this Agreement shall be subject to the
delivery to the Facility Agent of the documents indicated below on or before the
Closing Date:
(a) This Agreement, the Floating Rate Note and the Fee Letter. This
Agreement and the Fee Letter, each fully executed by the parties thereto in form
and substance satisfactory to the Lenders, which shall be in full force and
effect and the Floating Rate Note shall have been fully executed by the
Shipowner, endorsed by, or on behalf of, the United States, and delivered to the
Facility Agent, and all amounts then payable under the Fee Letter shall have
been paid to the Person entitled thereto.
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(b) Existence. Evidence in form and substance satisfactory to the
Lenders, that the Shipowner is duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full power, authority and
legal right to own its property and to carry on its business as now conducted.
(c) Authority. Evidence in form and substance satisfactory to the
Lenders, of the authority of the Shipowner to execute, deliver, perform and
observe the terms and conditions of this Agreement, the Floating Rate Note, the
Fee Letter, and the Indenture and evidence of authority (including specimen
signatures) for each Person who, on behalf of the Shipowner, signed this
Agreement, the Floating Rate Note, the Fee Letter, and the Indenture, or will
otherwise act as representatives of the Shipowner in the operation of the Credit
Facility.
(d) Governmental and Other Authorizations. Copies, certified as true
copies by a duly authorized officer of the Shipowner, of each consent, license,
authorization or approval of, and exemption by, any Governmental Authority and
any governmental authorities within the United States or elsewhere, which are
necessary or advisable (i) for the execution, delivery, performance and
observance by the Shipowner of this Agreement, the Floating Rate Note, the Fee
Letter, and the Indenture; and (ii) for the validity, binding effect and
enforceability of this Agreement, the Floating Rate Note, the Fee Letter, and
the Indenture, or if none is necessary, a written certification from the
Shipowner that none is necessary.
(e) Legal Opinions. (1) Opinion of legal counsel for the Shipowner
concerning this Agreement, the Floating Rate Note, the Fee Letter, and the
Indenture; (2) Opinion of the Chief Counsel of the Maritime Administration dated
the Closing Date, signed by or on behalf of such Chief Counsel, addressed to the
Lenders and the Agents to the effect that the Guarantees and the Authorization
Agreement have been or will be duly authorized, executed and delivered by the
United States of America, and constitute legal, valid, and binding obligations
of the United States of America enforceable in accordance with their respective
terms; and (3) Opinion of Mayer, Brown & Platt addressed to the Lenders, the
Agents, and the Indenture Trustee concerning this Agreement, the Fee Letter, the
Indenture and the Floating Rate Note.
(f) Guarantee Commitment. A copy of the fully executed Guarantee
Commitment, which shall be in full force and effect until completion of the
Closing.
(g) Authorization Agreement. The fully executed Authorization
Agreement, which shall be in full force and effect.
(h) Indenture. The fully executed Indenture, which shall be in full
force and effect.
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5.02 Conditions Precedent to Each Disbursement. The agreement of the
Primary Lender to fund any Disbursement under this Agreement and any obligations
of the Alternate Lender to fund any Disbursement under this Agreement shall be
subject only to the Facility Agent's receipt of a Certificate Authorizing
Disbursement, upon which each such Lender may conclusively rely.
SECTION 6. FEES AND EXPENSES
6.01 Fees. The Shipowner shall pay or cause to be paid to the Person
entitled thereto such fees and other amounts as are set forth in that certain
Fee Letter (as amended, restated or otherwise modified from time to time with
the prior written consent of the Secretary, the "Fee Letter") dated as of
October 29, 1999 between the Shipowner and the Agents, in each case when and as
due.
6.02 Taxes.
(a) The Shipowner agrees to pay all amounts owing by it under this
Agreement or the Floating Rate Note free and clear of and without deduction for
any and all present and future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding in the case of
each Lender, taxes imposed on its income, and franchise taxes imposed on it in
lieu of income taxes, by either (i) the jurisdiction under the laws of which
such Lender is organized or any political subdivision thereof, or (ii) the
jurisdiction of such Lender's applicable lending office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes"). In addition, the Shipowner agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Floating Rate
Note or from the execution, delivery, or registration of, or otherwise with
respect to, this Agreement or the Floating Rate Note (hereinafter referred to as
"Other Taxes").
(b) The Shipowner further agrees:
(i) that, if the Shipowner is prevented by operation of law from paying
any such Taxes or Other Taxes, or if any such Taxes or Other Taxes are required
to be deducted or withheld, then the fees or expenses required to be paid under
this Agreement shall, on an after-tax basis, be increased by the amount
necessary to yield to the Lenders fees or expenses in the amounts provided for
in this Agreement after the provision for the payment of all such Taxes and
Other Taxes;
(ii) that the Shipowner shall, at the request of any Lender or any
Agent, execute and deliver to such Lender or Agent, as the case may be, such
further instruments as may be necessary or desirable to effect the payment of
the increased amounts as provided for in subsection (i) above; provided,
however, that the Shipowner may not amend the Floating Rate Note without the
prior written consent of the Secretary;
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(iii) that the Shipowner shall hold the Lenders harmless from and
against the full amount of Taxes and Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under
this Section 6.02) and any and all liabilities (including, without limitation,
penalties, interest and expenses) arising from, or with respect to, any Taxes or
Other Taxes (whether or not properly or legally asserted) and whether paid, or
payable, by the Shipowner, the Lenders, or any other Person;
(iv) that, at the request of any Lender or any Agent, the Shipowner
shall provide such Lender or Agent within the later of thirty (30) calendar days
after such request or thirty (30) calendar days after the payment of such Taxes
or Other Taxes, a copy evidencing the payment of any Taxes or Other Taxes by the
Shipowner; and
(v) that each payment under this Section 6.02 shall be made within
thirty (30) days from the date the Facility Agent on behalf of the applicable
Lender makes written demand therefor. Each demand for payment by such Lender
under Section 6.02(b)(v) for amounts paid or incurred by the Lenders or itself
shall be accompanied by a certificate (with accompanying documentation
supporting the demand) showing in reasonable detail the basis for the
calculation of the amounts demanded, which certificate, in the absence of
manifest error, shall be conclusive and binding for all purposes.
Notwithstanding anything to the contrary contained herein, the
agreements in this Section 6.02 shall survive the termination of this Agreement
and the payment of the Floating Rate Note and all other amounts due hereunder.
6.03 Expenses. The Shipowner agrees, whether or not the transactions
hereby contemplated shall be consummated, to pay, or reimburse the Agents and
the Lenders, respectively, promptly upon demand for the payment of all
reasonable and duly documented costs and expenses arising in connection with the
preparation, printing, execution, delivery, registration, implementation,
modification of or waiver or consent under this Agreement, the Floating Rate
Note or the Indenture, including, without limitation, the reasonable and duly
documented out-of-pocket expenses of the Agents and the Lenders (incurred in
respect of telecommunications, mail or courier service, travel and the like),
and the fees and expenses of counsel for the Agents and the Lenders. The
Shipowner shall also pay all of the costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by or charged to the
Agents or the Lenders in connection with the amendment or enforcement of this
Agreement, the Floating Rate Note or the Indenture or the protection or
preservation of any right or claim of the Agents or the Lenders arising out of
this Agreement, the Floating Rate Note or the Indenture.
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6.04 Additional or Increased Costs.
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation, or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to any Lender of agreeing to make or making, funding or maintaining the
Disbursements or the Credit Facility, then the Shipowner shall from time to
time, upon demand by such Lender, pay to such Lender additional amounts
sufficient to compensate such Lender for such increased cost.
(b) If any Lender determines that compliance with any law or regulation
or any guideline or request from any central bank or other governmental
authority (whether or not having the force of law) affects or would affect the
amount of capital required to be maintained by such Lender or any corporation
controlling such Lender and that the amount of such capital is increased by or
based upon the existence of such Lender's commitment to lend hereunder and other
commitments of this type, then, upon demand by such Lender, the Shipowner shall
immediately pay to the Facility Agent (for the benefit of such Lender), from
time to time as specified by the Facility Agent (on behalf of such Lender),
additional amounts sufficient to compensate such Lender or such corporation in
the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of its
commitment to lend hereunder.
(c) Each Lender shall take such reasonable steps as it shall determine
to minimize amounts demanded under this Section 6.04; provided that no Lender
shall be obligated to take any actions under this Section 6.04 if such Lender
has determined, that such actions would cause it to incur any material costs or
expenses or would otherwise be disadvantageous to it in any material respect. In
the event that a Lender transfers the booking office of the Credit Facility or
the Floating Rate Note to minimize amounts demanded under this Section 6.04, any
costs and expenses incurred in such transfer shall be paid by the Shipowner on
demand by such Lender.
(d) Each demand for payment by the Facility Agent (on behalf of any
Lender) under this Section 6.04 shall be accompanied by a certificate showing in
reasonable detail the basis for the calculation of the amounts demanded, which
certificate, in the absence of manifest error, shall be conclusive and binding
for all purposes.
(e) The Facility Agent on behalf of each Lender shall notify the
Shipowner of any event occurring after the date of this Agreement which entitles
such Lender to compensation pursuant to this Section 6.04, as promptly as
practicable, and in any event within ninety (90) days after it has knowledge of
such event and has determined that a request for compensation hereunder shall be
made. The Shipowner shall not be obligated to reimburse any Lender for any loss
or cost incurred more than ninety (90) days prior to delivery of notice to the
Shipowner by the Lender requesting compensation under this Section 6.04.
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SECTION 7. PAYMENTS
7.01 Method of Payment.
(a) (i) All payments to be made by the Shipowner under this Agreement
and the Floating Rate Note shall be made without set-off or counterclaim in
Dollars in immediately available and freely transferable funds no later than
11:00 A.M. (New York City time) on the date on which due. Except as provided in
Section 7.01(a)(ii), all payments to be made by the Shipowner or the Agents
hereunder shall be made to (A) the Primary Lender (for the account of Govco
Incorporated, its successors and assigns), (B) the Alternate Lender (for the
account of Citibank, N.A., its successors and assigns), (C) the Facility Agent
(for the account of Citibank International plc, its successors and assigns), (D)
the Administrative Agent (for the account of Citicorp North America, Inc., its
successors and assigns), or (E) any other Lender (for the account of such
Lender, its successors and assigns), in each case to the Facility Agent (for the
account of Citibank International plc, its successors and assigns) at Citibank,
N.A., 399 Park Avenue, New York, New York 10043, DDA. Account No. 10963054,
Attn: Loans Agency. Upon receipt thereof by the Facility Agent, the Facility
Agent shall forthwith forward such funds to the party entitled thereto pursuant
to the written instructions provided by such party to the Facility Agent in
accordance with Section 11.02.
(ii) The Shipowner shall pay the principal and the guaranteed
amount of the Applicable Interest Rate on the Floating Rate Note to the
Indenture Trustee and all other amounts due under this Agreement directly to the
Person entitled thereto, in each case, by wire transfer in same day and
immediately available and freely transferable funds. Wire transfer instructions
shall be provided to the Shipowner. Until further notice, wire instructions for
the Indenture Trustee are as follows: Allfirst Trust Company, National
Association, ABA #052000113, Credit Trust Receipts, A/C #090-02-764, Re: Rowan
Companies. Inc., Attention Donald Hargadon, extension 4224.
(b) Except as otherwise provided herein, whenever any payment would
otherwise fall due on a day that is not a Business Day, the due date for payment
shall be the immediately succeeding Business Day, and interest and fees shall be
computed in accordance with Section 11.01.
(c) Whenever a sum is required to be paid to the Facility Agent under
this Agreement for the account of another Person, the Facility Agent shall not
be obligated to make such sum available to such other Person unless and until
the Facility Agent shall have established to its satisfaction that is has
actually received payment of such sum. Notwithstanding the foregoing, unless it
has received actual notice to the contrary, the Facility Agent may (but shall
not be obligated to) assume on the date of any Disbursement or any other payment
required to be made by any Lender hereunder that such Lender has made available
to the Facility Agent such Disbursement or other payment and the Facility Agent
may (but shall not be required to) make available to the Shipowner on such date
a corresponding amount in reliance upon such
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assumption. Additionally, the Facility Agent may (but shall not be obligated to)
assume on the date of any payment required to be made by the Shipowner hereunder
that the Shipowner has made available to the Facility Agent such payment and the
Facility Agent may (but shall not be required to) make available to the Lenders
on such date a corresponding amount in reliance upon such assumption. If and to
the extent that either (i) the Lender shall not in fact have made such
Disbursement or other payment available to the Facility Agent and the Facility
Agent has made available a corresponding amount to the Shipowner in reliance on
the above-described assumptions or (ii) the Shipowner has not in fact made such
payment and the Facility Agent has made available a corresponding amount to the
Lender in reliance on the above-described assumptions, then, in either such
case, such Lender agrees to repay to the Facility Agent forthwith on demand such
corresponding amount together with an amount sufficient to indemnify the
Facility Agent against any cost or loss it may have suffered or incurred by
reason of its having paid out such sum prior to receipt thereof.
7.02 Application of Payments. In the absence of an Indenture Default,
the Lenders shall each apply payments received by them under this Agreement and
the Floating Rate Note (whether at Stated Maturity, by reason of acceleration,
prepayment or otherwise), in the following order of priority: (i) interest due
pursuant to Section 4.02(a); (ii) installments of principal due; (iii) interest
due pursuant to Section 4.02(b) other than the amount described in clause (i)
above; (iv) all amounts due under the Fee Letter; and (v) all other amounts due
under this Agreement and not otherwise provided for in this Section 7.02. Upon
the occurrence of an Indenture Default, the Lenders shall each hold any payments
they receive after an Indenture Default from, or on behalf of, the Shipowner
under this Agreement, the Fee Letter and any related agreement (excluding the
Floating Rate Note) and shall promptly deliver such payments to the Secretary if
the Secretary has been required to honor a Guarantee as a result of said
Indenture Default. All such amounts received during an Indenture Default and
delivered to the Secretary in accordance with the preceding sentence shall be
applied first to pay, satisfy and discharge all amounts owed by the Shipowner to
the Secretary under the Secretary's Note and the Mortgage and then to pay,
satisfy and discharge any and all amounts owed to the Lenders or the Agents.
SECTION 8. REPRESENTATIONS AND WARRANTIES BY THE SHIPOWNER
8.01 Representations and Warranties of the Shipowner. The Shipowner
represents and warrants to the Agents and the Lenders that, as of the Closing
Date:
(a) Existence and Authority. The Shipowner is duly organized, validly
existing under the laws of the State of Delaware, is in good standing under the
laws of the State of Delaware, has been duly qualified to do business in, and is
in good standing as a foreign corporation in each jurisdiction in which the
conduct of its business or the ownership of its properties requires it to be so
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qualified, and has full power, authority and legal right to own its properties
and conduct its business as it is presently now conducted.
The Shipowner has full power, authority and legal right (i) to execute
and deliver this Agreement, the Floating Rate Note and the Indenture, (ii) to
perform and observe the terms and provisions of each of said documents to be
performed or observed by it, (iii) to consummate the transactions contemplated
thereby and (iv) to own its properties (including, without limitation, the
Vessel owned or to be owned by it) and conduct its business as presently
conducted.
(b) Government and Other Authorizations. All consents, licenses,
authorizations and approvals of, and exemptions by, any Governmental Authority
and any governmental authorities within the United States or elsewhere and any
other Persons that are necessary or advisable: (i) for the execution, delivery,
performance and observance by the Shipowner of this Agreement, the Floating Rate
Note, and the Indenture; and (ii) for the validity, binding effect and
enforceability of this Agreement, the Floating Rate Note, and the Indenture have
been obtained and are in full force and effect.
(c) Restrictions. The execution, delivery and performance or observance
by the Shipowner of the terms of, and consummation by the Shipowner of the
transactions contemplated by, this Agreement, the Floating Rate Note, and the
Indenture do not and will not conflict with or result in a breach or violation
of: (i) the charter, by-laws or other organizational documents of the Shipowner;
(ii) any federal or state law of the United States or any other ordinance,
decree, constitutional provision, regulation or other requirement of any
Governmental Authority (including, without limitation, any restriction on
interest that may be paid by the Shipowner); or (iii) any order, writ,
injunction, judgment or decree of any court or other tribunal. Further, the
execution, delivery and performance or observance by the Shipowner of the terms
of, and consummation by the Shipowner of the transactions contemplated by, this
Agreement, the Floating Rate Note, and the Indenture does not and will not
conflict with or result in a breach of any agreement or instrument to which the
Shipowner is a party, or by which it or any of its revenues, properties or
assets may be subject, or result in the creation or imposition of any Lien upon
any of the revenues, properties or assets of the Shipowner pursuant to any such
agreement or instrument. "Lien" shall mean any lien, lease, mortgage, pledge,
hypothecation, preferential arrangement relating to payments, or other
encumbrance or security interest.
(d) Binding Effect. This Agreement, the Floating Rate Note, and the
Indenture, which have been executed on or before the date hereof, have been duly
executed and delivered by the Shipowner. Each of the Agreement, the Floating
Rate Note, and the Indenture constitutes, and each of the Agreement, the
Floating Rate Note, and the Indenture as it may hereafter be amended will
constitute, a direct, general and unconditional obligation of the Shipowner
which is legal, valid and binding upon the Shipowner and enforceable against the
Shipowner in accordance with its respective terms. All obligations evidenced by
the Floating Rate Note will be entitled to the benefits of the Guarantees and
the Authorization Agreement.
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(e) Choice of Law. Under applicable conflict of laws principles, the
choice of law provisions of this Agreement, the Floating Rate Note and the
Indenture are valid, binding and not subject to revocation by the Shipowner. In
any proceedings brought for enforcement of this Agreement, the Indenture or the
Floating Rate Note, the choice of the law of the State of New York as the
governing law of such documents will be recognized and such law will be applied.
(f) Legal Proceedings. No legal proceedings are pending or, to the best
of the Shipowner's knowledge, threatened before any court or governmental agency
which might: (i) materially and adversely affect the Shipowner's financial
condition, business or operations; (ii) restrain or enjoin or have the effect of
restraining or enjoining the performance or observance of the terms and
conditions of any of this Agreement, the Indenture or the Floating Rate Note; or
(iii) in any other manner question the validity, binding effect or
enforceability of any of the provisions of this Agreement, the Indenture or the
Floating Rate Note.
(g) Use of the Vessel. The Vessel will be used for lawful purposes.
(h) Shipowner Financial Statements. The Shipowner Financial Statements
present fairly the financial condition of the Shipowner at the date of such
statements and the results of the operations of the Shipowner for such fiscal
year. The Shipowner Financial Statements have been prepared in accordance with
generally accepted accounting principles in the United States consistently
applied. Except as fully reflected in the Shipowner Financial Statements, there
are no liabilities or obligations with respect to the Shipowner of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due) for the period to which the Shipowner Financial Statements relate that,
either individually or in the aggregate, would be material to the Shipowner.
Since the date of the most recent audited Shipowner Financial Statements, there
has been no material adverse change in the financial condition, business
prospects or operations of the Shipowner. "Shipowner Financial Statements" shall
mean the financial statements of the Shipowner furnished to the Facility Agent
prior to the date of this Agreement.
(i) No Taxes. There is no Tax imposed on or in connection with: (i) the
execution, delivery or performance of this Agreement, the Indenture or the
Floating Rate Note; (ii) the enforcement of this Agreement, the Indenture or the
Floating Rate Note; or (iii) on any payment to be made to any Lender under this
Agreement or the Floating Rate Note.
(j) Laws. None of this Agreement, the Indenture, the Floating Rate
Note, the transactions contemplated thereunder nor any Person party to this
Agreement, the Indenture or the Floating Rate Note is required to qualify under
the Trust Indenture Act or register or qualify under any securities law.
(k) Defaults. No Event of Default has occurred and is continuing and no
event or circumstance has occurred and is continuing which with the
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passage of time, the giving of notice or both would constitute an Event of
Default.
8.02 Agreements of the Shipowner. The Shipowner agrees that until all
amounts owing under this Agreement and the Floating Rate Note have been paid in
full, the Shipowner will, unless the Agents and the Lenders shall have consented
in writing:
(a) Interest Rate Protection. At all times that (1) a Floating Rate
Note exists and (2) the Applicable Interest Rate is equal to or greater
than the Cap Rate less 0.5%, the Shipowner (at its expense) within ten (10)
Business Days thereafter, shall (A) enter into, and thereafter maintain in
full force and effect, an amortizing interest rate cap agreement with a
strike price providing for a cap based on the Applicable Interest Rate not
in excess of the Cap Rate per annum and otherwise acceptable to the
Lenders, with a counterparty rated "AA" or better by any of the rating
agencies that rate the Commercial Paper issued by the Primary Lender or
such other counterparty reasonably acceptable to the Lenders, covering the
Floating Rate Note and based on the expected amortization schedule of such
Note, and (B) execute such documents and instruments as may be necessary,
or in the opinion of the Facility Agent desirable, to effect the assignment
of its rights thereunder to the Facility Agent for the benefit of the
Lenders and, if any payments are made under any Guarantee, the Secretary,
in every case with such terms as are reasonably acceptable to the Facility
Agent for the protection of the Lenders. If the Shipowner fails to satisfy
the requirements of this Section 8.02(a) within the ten (10) Business Days
set forth above, the Facility Agent may (in its sole discretion) and if the
Facility Agent so elects, the Shipowner hereby authorizes and directs the
Facility Agent to, satisfy the requirements of this Section 8.02(a), all at
the expense of the Shipowner, due on demand.
(b) Notice of Defaults. Promptly, but in no event later than ten (10)
days after the occurrence of an Indenture Default or an Event of Default of
which the Shipowner has knowledge, notify the Facility Agent and the
Indenture Trustee of any report required by the Shipowner Documents (or any
other document entered into by the Shipowner in connection therewith), and
send a copy thereof to the Facility Agent, in each case by facsimile or
hand delivery.
(c) Financial Reports. Beginning with the fiscal year in which this
Agreement is executed and continuing until all amounts owing under this
Agreement and the Floating Rate Note have been paid in full, the Shipowner
shall furnish to the Facility Agent (and the Facility Agent, upon receipt
thereof, shall furnish to each Lender and the Administrative Agent) a copy
of all financial reports furnished to the Secretary pursuant to the Title
XI Reserve Fund and Financial Agreement.
(d) Other Acts. From time to time, do and perform any and all acts and
execute any and all documents as may be necessary or as reasonably
requested by the Facility Agent or the Indenture Trustee in order to effect
the purposes of this Agreement and to protect the interests of the
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Lenders in the Floating Rate Note and the interests of the Lenders in the
Guarantees.
(e) Use of Proceeds. Use proceeds from each Disbursement solely to
finance: (i) the manufacture, construction, fabrication, financing and
purchase of the Vessel; (ii) Construction Period Interest; and (iii) the
Guarantee Fees. Use the proceeds from the issuance of any Fixed Rate Notes
to repay amounts owed under the Floating Rate Note or to finance: (i) the
manufacture, construction, fabrication, financing and purchase of the
Vessel; (ii) Construction Period Interest; and (iii) the Guarantee Fees.
(f) Successors. Require that any successor to all or substantially all
of its business as a result of any merger or consolidation with any other
entity, dissolution or termination of legal existence, sale, lease,
transfer or other disposal of any substantial part of its properties or any
of its properties essential to the conduct of its business or operations,
as now or hereafter conducted, any change in control, any agreement to do
any of, or any combination of, the foregoing, to assume all of the
Shipowner's indebtedness, liabilities and obligations under this Agreement,
the Indenture and the Floating Rate Note.
SECTION 9. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT
9.01 Cancellation. The Shipowner may cancel at any time all or any part
of the Available Amount of the Credit Facility, provided that (i) thirty (30)
days' prior irrevocable written notice is given to the Agents, the Indenture
Trustee, and the Secretary and (ii) the Shipowner shall have paid to the Lenders
any commitment fees accrued and unpaid under Section 6.01 and all other amounts
due and payable under this Agreement and the Floating Rate Note as of the
proposed date of cancellation. In the absence of an Indenture Default, the
Lenders may not for any reason cancel at any time any part of the Available
Amount of the Credit Facility.
9.02 Events of Default. Upon the occurrence of any of the following
events or conditions (each, an "Event of Default"):
(a) any failure by the Shipowner to pay when and as due any amount
owing under this Agreement, but which is not guaranteed by the Secretary;
or
(b) any failure by the Shipowner to comply with its obligations under
Section 8.02(b) or 8.02(e); or any failure by the Shipowner to perform or
comply with any of its agreements set forth in this Agreement (exclusive of
any events specified as an Event of Default in any other subsection of this
Section 9.02 and exclusive of Section 8.02(a)), which failure, if capable
of being cured, remains uncured for a period of thirty (30) days after
written notice thereof has been given to the Shipowner by the Facility
Agent; or
(c) the Shipowner shall be unable to pay its debts when and as they
fall due or shall admit in writing its inability to pay its debts as they
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fall due or shall become insolvent; or the Shipowner shall apply for or
consent to the appointment of any liquidator, receiver, trustee or
administrator for all or a substantial part of its business, properties,
assets or revenues; or a liquidator, receiver, trustee or administrator
shall be appointed for the Shipowner and such appointment shall continue
undismissed, undischarged or unstayed for a period of thirty (30) days, or
the Shipowner shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, arrangement, readjustment of debt, dissolution,
liquidation or similar executory or judicial proceeding; or a bankruptcy,
arrangement, readjustment of debt, dissolution, liquidation or similar
executory or judicial proceeding shall be instituted against the Shipowner
and shall remain undismissed, undischarged or unstayed for a period of
thirty (30) days; or
(d) an Indenture Default has occurred;
then, and in any such event, and at any time thereafter, if such event is
continuing, and if there is no Indenture Default (or if there is an
Indenture Default, only after the Secretary has received all payments due
under the Secretary's Note and the Mortgage), any Agent or any Lender (by
written notice to the Shipowner), shall have the right to institute any
judicial or other proceedings under this Agreement to recover all amounts
owing under this Agreement. The Lenders agree that so long as an Indenture
Default exists, all amounts received during such period from, or on behalf
of, the Shipowner shall be applied in the manner set forth in Section 7.02.
Notwithstanding an Event of Default, the Lenders may not terminate the
Available Amount of the Credit Facility without the Secretary's consent;
provided, however, that the Shipowner's use of the Available Amount of the
Credit Facility shall remain subject to the requirements of Sections 2.02,
3.01, and 5.02. Except as expressly provided above in this Section 9.02,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived. Notwithstanding any other provision of this Agreement, if
Section 9.02(c) is applicable, the Lender may file appropriate claims in
connection therewith, but shall apply any funds collected as a consequence
of said filings in accordance with the provisions of Section 7.02 of this
Agreement.
SECTION 10. GOVERNING LAW AND JURISDICTION
10.01 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.02 Submission to Jurisdiction. Each of the Shipowner and the Lenders
hereby irrevocably agrees that any legal suit, action or proceeding arising out
of or relating to this Agreement, or any of the transactions contemplated
hereby, may be instituted by the other parties hereto in the Courts of the State
of New York or the Federal Courts sitting in the Borough of Manhattan, City of
New York, State of New York. Each of the Shipowner and the Lenders hereby
irrevocably waives, to the fullest extent permitted by law,
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<PAGE> 24
any objection which it may have now or hereafter to the laying of the venue or
any objection based on forum non conveniens, or based on the grounds of
jurisdiction with respect to any such legal suit, action or proceeding and
irrevocably submits generally and unconditionally to the jurisdiction of any
such court in any such suit, action or proceeding. Each of the Shipowner and the
Lenders agrees that a judgment, after exhaustion of all available appeals, in
any such action or proceeding shall be conclusive and binding upon it and may be
enforced in any other jurisdiction by suit upon such judgment, a certified copy
of which shall be conclusive evidence of the judgment. Each of the Shipowner and
the Lenders waives personal service of any summons, complaint, or other process,
which service may be made by such or any other means permitted by New York law.
10.03 Waiver of Security Requirements. To the extent the Shipowner may,
in any action or proceeding arising out of or relating to this Agreement be
entitled under applicable law to require or claim that the Agents or the Lenders
post security for costs or take similar action, the Shipowner hereby irrevocably
waives and agrees not to claim the benefit of such entitlement.
10.04 No Limitation. Nothing in this Section 10 shall affect the right
of the Agents or any Lender to serve process in any manner permitted by law or
to commence legal proceedings or otherwise proceed against the Shipowner in any
jurisdiction; provided, however, that except as provided in Section 9.02, in the
event of an Indenture Default, the Agents and the Lenders may not proceed
against the Shipowner without the Secretary's consent unless the Secretary has
received full payment under the Secretary's Note.
SECTION 11. MISCELLANEOUS
11.01 Computations. Each determination of an interest rate by the
Administrative Agent or the Facility Agent, or any other Person pursuant to any
provision of this Agreement, the Fee Letter or the Floating Rate Note, in the
absence of error, shall be conclusive and binding on the Shipowner. Each
determination of a fee or other amounts (excluding interest rates) by the
Facility Agent, any Lender, or any other Person pursuant to any provision of
this Agreement, the Fee Letter or the Floating Rate Note, in the absence of
manifest error, shall be conclusive and binding on the Shipowner. All
computations of interest and fees hereunder and under the Floating Rate Note
shall be made on the basis of a year of three hundred sixty-five (365) days and
actual days elapsed; provided, however, that the CP Rate and LIBOR shall be
determined on the basis of a year of 360 days and actual days elapsed. The
Secretary and Indenture Trustee may request supporting documentation for the
information provided by the Facility Agent or the Administrative Agent to the
Indenture Trustee.
11.02 Notices. Except as otherwise specified, all notices given
hereunder shall be in writing, and shall be given by mail, facsimile, telex or
personal delivery and shall be deemed to be given for the purposes of this
Agreement on the day that such notice is received by the intended recipient
thereof. Unless otherwise specified in a notice delivered in accordance with
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this Section 11.02, all notices shall be delivered to the parties hereto and to
the Indenture Trustee and the Secretary at their respective addresses indicated
below:
To the Facility Agent and the Lenders:
Address: Citibank International plc, as Facility Agent
P.O. Box 242
336 Strand
London, England WC2R 1HB
Attention: Loans Agency
Telephone: 01144171500 4242/1415
Facsimile: 01144171500 4482/4484
With a copy to:
Citibank, N.A., as the Alternate Lender
399 Park Avenue
New York, New York 10043
Attention: Structured Trade Finance
Facsimile: (212) 793-2330
Telephone: (212) 559-6787
With a copy to the Administrative Agent
To the Administrative Agent
Address: Citicorp North America, Inc.
399 Park Avenue
New York, New York 10043
Attention: Structured Trade Finance
Facsimile: (212) 793-2330
Telephone: (212) 559-6787
To the Shipowner
Address: ROWAN COMPANIES, INC.
Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Attention: Chief Financial Officer
Telephone: (713) 960-7686
Facsimile: (713) 960-7660
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To the Secretary
Address: SECRETARY OF TRANSPORTATION
c/o Maritime Administrator
400 Seventh Street, S.W.
Washington, D.C. 20590
Attention: Office of Ship Finance
Telephone: (202) 366-5744
Facsimile: (202) 366-7901
To the Indenture Trustee
Address: Allfirst Trust Company, National Association
Mail Code 101-591
25 South Charles Street
Baltimore, Maryland 21201
Attention: Mr. Donald Hargadon
Telephone: (410) 244-4224
Facsimile: (410) 244-4236
11.03 Disposition of Indebtedness. Once the Shipowner has completely
drawn down on the Credit Facility and the Available Amount is zero, each Lender
may sell, assign, transfer, negotiate, or otherwise dispose of all or any part
of its interest in all or any part of the Shipowner's indebtedness under this
Agreement and the Floating Rate Note to any party (collectively, a "Disposition
of Indebtedness"), and any such party shall enjoy all the rights and privileges
of such Lender under this Agreement and the Floating Rate Note; provided,
however, that each Disposition of Indebtedness to any Person other than a
domestic Affiliate of a Lender shall require the prior written consent of the
Shipowner (which consent shall not be unreasonably withheld or delayed);
provided, further, however, that each Lender may pledge or grant participation
in all or any part of its interest in all or any part of the Shipowner's
indebtedness under this Agreement and the Floating Rate Note to any party at any
time so long as such Lender's commitment to lend the Available Amount under this
Agreement is not affected thereby. The Shipowner shall, at the request of the
Facility Agent, execute and deliver to the Facility Agent or to any party that
the Facility Agent may designate, any such further instruments as may be
necessary or desirable to give full force and effect to a Disposition of
Indebtedness by the applicable Lender.
11.04 Disclaimer. Neither the Agents nor the Lenders shall be
responsible in any way for the performance of the Construction Contract or any
other Shipowner Document, and no claim against the Shipbuilder or any other
Person with respect to the performance of the Construction Contract will affect
the obligations of the Shipowner under this Agreement or the Floating Rate Note.
11.05 No Waiver; Remedies Cumulative. No failure or delay on the part
of any Agent or any Lender in exercising any right, power or privilege under
this Agreement, the Floating Rate Note or the Indenture and no course of
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dealing between or among the Shipowner and any Agent or any Lender shall operate
as a waiver of the rights of the Shipowner and such Lenders against each other
under this Agreement; nor shall any single or partial exercise of any right,
power or privilege hereunder or under the Floating Rate Note or the Indenture
preclude the Shipowner, the Agents, or the Lenders from exercising against each
other any other right, power or privilege hereunder. The rights and remedies
expressly provided herein are cumulative and not exclusive of any rights or
remedies that the Agents or the Lenders would otherwise have. No notice to or
demand on the Shipowner in any case shall entitle the Shipowner to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Agent or any Lender under this Agreement to any
other or further action in any circumstances without notice or demand.
Notwithstanding any other provision to the contrary herein, no provision in this
Agreement or any other related agreement preserves any rights in favor of the
parties against the Secretary in the event that either party fails or delays to
exercise any rights, powers, or privileges under this Agreement, the Floating
Rate Note or the Indenture or engages in any particular course of dealing.
11.06 Currency. All payments of principal, interest, fees or other
amounts due hereunder and under the Floating Rate Note shall be made in Dollars,
regardless of any law, rule, regulation or statute, whether now or hereafter in
existence or in effect in any jurisdiction, which affects or purports to affect
such obligations.
11.07 Severability. To the extent permitted by applicable law, the
illegality or unenforceability of any provision of this Agreement shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement.
11.08 Amendment or Waiver. This Agreement may not be changed,
discharged or terminated without the written consent of the parties hereto, and
no provision hereof may be waived without the written consent of the party to be
bound thereby. There may be no change, discharge, termination or claim of waiver
of the terms of this Agreement without the prior written consent of the
Secretary, who is entitled to enforce his rights under this Agreement as an
intended third party beneficiary to this Agreement. The parties hereto
acknowledge, however, that nothing in this Agreement creates in either the
Shipowner or the Lenders any right whatsoever against the Secretary.
11.09 Indemnification. Without limiting any other rights that any Agent
or any Lender may have hereunder or under applicable law, the Shipowner hereby
agrees to indemnify each of the Agents and the Lenders (each, an "Indemnified
Party") from and against any and all damages, losses, claims, liabilities and
related costs and expenses, including reasonable attorneys' fees and
disbursements (all the foregoing being collectively referred to as "Indemnified
Amounts") awarded against or incurred by such Indemnified Party arising out of
or as a result of this Agreement or the Floating Rate Note excluding, however,
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party. In the
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event of an Indenture Default, all amounts received by such Indemnified Party
pursuant to such indemnification after an Indenture Default shall be held and
paid in the manner required by Section 7.02.
11.10 Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that the Shipowner may not
assign any of its rights or obligations hereunder without the prior written
consent of the Lenders, and, to the extent set forth in paragraph 11.03 hereof,
the Secretary.
11.11 Waiver of Jury Trial. Each of the Shipowner and the Lenders
waives its respective rights to a trial by jury of any claim or cause of action
based upon or arising out of or related to this Agreement, any assignment or the
transactions contemplated hereby, in any action, proceeding or other litigation
of any type brought by any party against the other parties, whether with respect
to contract claims, tort claims, or otherwise. Each of the Shipowner and the
Lenders agrees that any such claim or cause of action shall be tried by a court
trial without a jury. Without limiting the foregoing, the parties further agree
that their respective right to a trial by jury is waived by operation of this
section as to any action, counterclaim or other proceeding which seeks, in whole
or in part, to challenge the validity or enforceability of this Agreement, any
assignment or any provision hereof or thereof. This waiver shall apply to any
subsequent amendments, renewals, supplements or modifications to this Agreement
or any assignment.
11.12 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement.
11.13 Shipowner Documents. Notwithstanding the provisions of this
Agreement, in any conflict between this Agreement and the provisions of the
Shipowner Documents, the Shipowner Documents shall govern the agreement between
the parties hereto, but only with respect to the subject matter thereof.
Notwithstanding the previous sentence, any provision in the Indenture (or any
other agreement the Shipowner has entered into with any other Person) purporting
to release the Shipowner of any indebtedness, liability or obligation shall not
apply to any indebtedness, liability or obligation of the Shipowner hereunder
and no termination of the Indenture (or any other agreement the Shipowner has
entered into with any other Person) shall affect the continued effectiveness of
this Agreement, which shall continue in full force and effect until the Credit
Facility has been terminated and all indebtedness, liabilities and obligations
of the Shipowner have been fully discharged and satisfied, the Floating Rate
Note have been paid, satisfied and discharged in full, and there has elapsed a
year and a day from the last payment received from, or on behalf, of the
Shipowner. However, this Section 11.13 shall have no affect on the relationships
established and the agreements entered into by the parties to the
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Shipowner Documents (and such other agreements the Shipowner has entered into
with any other Person), in each case to which the Lenders are not parties in
their capacities as the Lenders hereunder.
11.14 Entire Agreement. This Agreement, the Fee Letter and the Floating
Rate Note contain the entire agreement among the parties hereto regarding the
Credit Facility.
11.15 No Proceedings. Each of the Shipowner, the Alternate Lender and
the Agents hereby agrees that it will not institute against, or join any other
Person in instituting against, the Primary Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or any other
proceeding under any federal or state bankruptcy or similar law, so long as any
Commercial Paper issued by the Primary Lender shall be outstanding or there
shall not have elapsed one year plus one day since the last day on which any
such Commercial Paper shall have been outstanding.
SECTION 12. ARRANGEMENTS AMONG THE AGENTS AND THE LENDERS
12.01 Appointment. Each Lender hereby appoints the Facility Agent to
act as its agent in connection herewith and in connection with the Floating Rate
Note and the Indenture and authorizes the Facility Agent to exercise such
rights, powers and discretions as are specifically delegated to the Facility
Agent by the terms hereof and thereof, together with all such rights, powers and
discretions as are reasonably incidental thereto. Without limiting the
foregoing, all notices to be delivered to, and approvals to be given by, a
Lender under the disbursement procedures described in Section 3.01 hereof shall
be delivered to and given by the Facility Agent on behalf of such Lender.
12.02 Rights of Facility Agent. The Lenders and the Facility Agent
agree that the Facility Agent may:
(i) assume that (a) any representation made by the Shipowner in
connection herewith is true; (b) no event which is or may become an Event of
Default has occurred; (c) the Shipowner is not in breach of or default under its
obligations hereunder; (d) any right, power, authority or discretion vested
herein upon the Lenders or any other person or group of persons has not been
exercised; unless it has, in its capacity as Facility Agent, notice or actual
knowledge to the contrary;
(ii) engage and pay for the advice or services of any lawyers,
accountants, surveyors or other experts whose advice or services may to it seem
necessary, expedient or desirable and rely upon any advice so obtained;
(iii) rely as to any matters of fact which might reasonably be expected
to be within the knowledge of the Shipowner upon a certificate signed by or on
behalf of the Shipowner;
(iv) rely upon any communication or document believed by it to be
genuine;
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(v) refrain from exercising any right, power or discretion vested in it
as facility agent hereunder unless and until instructed by a Lender as to
whether or not such right, power or discretion is to be exercised and, if it is
to be exercised, as to the manner in which it should be exercised; and
(vi) refrain from acting in accordance with any instructions of any
Lender to begin any legal action or proceeding arising out of or in connection
with this Agreement until it shall have received such security as it may require
(whether by way of payment in advance or otherwise) for all costs, claims,
expenses (including legal fees) and liabilities which it will or may expend or
incur in complying with such instructions.
12.03 Duties. The Facility Agent shall:
(i) promptly inform each Lender of the contents of any notice or
document received by it from the Shipowner hereunder;
(ii) promptly notify each Lender of the occurrence of any Event of
Default or any default by the Shipowner in the due performance
of or compliance with its obligations under this Agreement of
which the Facility Agent has notice from any other party
hereto;
(iii) save as otherwise provided herein, act as facility agent
hereunder in accordance with any instructions given to it by
any Lender, which instructions shall be binding on all of the
Lenders; and
(iv) if so instructed by any Lender, refrain from exercising any
right, power or discretion vested in it as facility agent
hereunder.
12.04 Limitation on Obligations of Facility Agent. Notwithstanding
anything to the contrary expressed or implied herein, the Lenders and the
Facility Agent agree that the Facility Agent shall not:
(i) be bound to inquire as to:
(a) whether or not any representation made by the
Shipowner in connection herewith is true;
(b) the occurrence or otherwise of any event which is or
may become an Event of Default;
(c) the performance by the Shipowner of its obligations
hereunder; or
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(d) any breach of or default by the Shipowner or under
its obligations hereunder;
(ii) be bound to account to any Lender for any sum or the profit
element of any sum received by it for its own account;
(iii) be bound to disclose to any other person any information relating
to the Shipowner or any of its agencies if such disclosure would or might in its
opinion constitute a breach of any law or regulation or be otherwise actionable
at the suit of any person; or
(iv) be under any obligations other than those for which express
provision is made herein.
12.05 Indemnification by Lenders. The Alternate Lender shall, from time
to time on demand by the Facility Agent, indemnify the Facility Agent, against
any and all costs, claims, expenses (including legal fees) and liabilities
(collectively, "Liabilities") together with any tax thereon which the Facility
Agent may incur, otherwise than by reason of its own gross negligence or willful
misconduct, in acting in its capacity as facility agent hereunder (including,
without limitation, any Liabilities in anyway relating to or arising out of
certifications made with respect to either (a) the due authorization, execution
or delivery of a Floating Rate Note, or (b) laws and/or regulations of any
Governmental Authority, in each case in connection with any request by the
Facility Agent to the Indenture Trustee or the Secretary for the Secretary to
endorse its guarantee on a Floating Rate Note or for the Indenture Trustee to
authenticate a Floating Rate Note).
12.06 Limitation on Responsibility. The Facility Agent accepts no
responsibility to the Lenders for the accuracy and/or completeness of any
information supplied by the Shipowner in connection herewith or for the
legality, validity, effectiveness, adequacy or enforceability of this Agreement,
and the Facility Agent shall be under no liability to the Lenders (nor to the
Shipowner, Indenture Trustee or the Secretary with respect to calculations of
the Applicable Interest Rate) as a result of taking or omitting to take any
action in relation to this Agreement, save in the case of its own negligence or
willful misconduct.
12.07 No Claims on Employees of Facility Agent. Each Lender agrees that
it will not assert or seek to assert against any director, officer or employee
of the Facility Agent any claim that it might have against it in respect of the
matters referred to in Clause 12.06.
12.08 Banking Business. The Lenders agree that the Facility Agent may
accept deposits from, lend money to and generally engage in any kind of banking
or other business with the Shipowner.
12.09 Resignation or Termination of Facility Agent.
27
<PAGE> 32
(i) The Facility Agent may (after consultation with the Shipowner and
the Lenders) resign its appointment hereunder at any time without assigning any
reason therefor by giving not less than thirty (30) days' prior written notice
to that effect to each of the other parties hereto; provided, that no such
resignation shall be effective until a successor for the Facility Agent is
appointed in accordance with the succeeding provisions of this Section 12;
(ii) The Lenders and the Shipowner may jointly seek the termination of
the appointment of the Facility Agent hereunder at any time by giving not less
than thirty (30) days prior written notice to that effect to the Facility Agent;
provided that no such termination shall be effective until a successor for the
Facility Agent is appointed in accordance with the succeeding provisions of this
Section 12; provided further that any such notice of termination must be signed
by all of the Lenders and the Shipowner; and
(iii) For the avoidance of doubt, the parties hereto agree that the
provisions of this Section 12.09 shall at no time apply to or restrict the
ability of the Administrative Agent to resign its position of Administrative
Agent.
12.10 Successor to Facility Agent. If the Facility Agent gives notice
of its resignation pursuant to Section 12.09(i) or receives notice of
termination pursuant to Section 12.09(ii), then any reputable and experienced
bank or other financial institution may be appointed as a successor to the
Facility Agent by the Lenders with the consent of the Secretary and Shipowner
(which consent of the Shipowner shall not be unreasonably withheld or delayed)
during the period of such notice but, if no such successor is so appointed, the
Facility Agent may appoint such a successor itself with the consent of the
Secretary and Shipowner (which consent of the Shipowner shall not be
unreasonably withheld or delayed).
12.11 Discharge of Obligations. If a successor to the Facility Agent is
appointed under the provisions of Section 12.10, then (i) the retiring Facility
Agent shall be discharged from any further obligation hereunder but shall remain
entitled to the benefits of the provisions of this Section 12 and (ii) its
successor and each of the other parties hereto shall have the same rights and
obligations amongst themselves as they would have had if such successor had been
a party hereto.
12.12 Responsibilities of Lenders. It is understood and agreed by each
Lender that it is, and will continue to be, solely responsible for making its
own independent appraisal of and investigations into the financial condition,
creditworthiness, condition, affairs, status and nature of the Shipowner, the
Secretary and the United States of America and, accordingly, each Lender
warrants to the Facility Agent that it has not relied and will not hereafter
rely on the Facility Agent:
(i) to check or inquire on its behalf into the adequacy, accuracy
or completeness of any information provided by
28
<PAGE> 33
the Shipowner in connection with this Agreement or the
transaction herein contemplated (whether or not such
information has been or is hereafter circulated to such Lender
by the Facility Agent); or
(ii) to assess or keep under review on its behalf the financial
condition, creditworthiness, condition, affairs, status or
nature of the Shipowner.
12.13 Agency Division. In acting as Facility Agent for the Lenders, the
Facility Agent's agency division shall be treated as a separate entity from any
other of its divisions or departments and, notwithstanding the foregoing
provisions of this Section 12, in the event that the Facility Agent should act
for the Shipowner in any capacity in relation to any other matter, any
information given by the Shipowner to the Facility Agent in such other capacity
may be treated as confidential by the Facility Agent.
12.14 Administrative Agent. Each party hereto (other than the
Administrative Agent) acknowledges that the Administrative Agent is a party
hereto only in its capacity as administrative agent of the Primary Lender and
the Primary Lender's commercial paper holders.
12.15 Facility Agent Only Agent for the Lenders. The Facility Agent is
not authorized to, nor shall it, act as the agent for the Secretary, the
Indenture Trustee, the Shipowner or any of their successors in interest or
assigns in any of the capacities provided for herein.
29
<PAGE> 34
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered as of the date first above written.
ROWAN COMPANIES, INC., as the GOVCO INCORPORATED, as the
Shipowner Primary Lender, by Citicorp
North America, Inc., its
attorney-in-fact.
By: E. E. Thiele
-----------------------------
(Signature) By: P.A. Botticelli
-----------------------------
Name: E. E. Thiele (Signature)
---------------------------
(Print) Name: P. A. Botticelli
---------------------------
Title: Senior Vice President (Print)
--------------------------
Title: Vice President
--------------------------
(Print)
CITIBANK INTERNATIONAL plc,
as Facility Agent CITIBANK, N.A., as the Alternate
Lender
By: P.A. Botticelli
----------------------------- By: Ae Kyong Chung
(Signature) -----------------------------
(Signature)
Name: P. A. Botticelli
--------------------------- Name: Ae Kyong Chung
(Print) ---------------------------
(Print)
Title: Vice President
-------------------------- Title: Vice President
(Print) --------------------------
(Print)
CITICORP NORTH AMERICA, INC., as
the Administrative Agent
By: P.A. Botticelli
-----------------------------
(Signature)
Name: P. A. Botticelli
---------------------------
(Print)
Title: Vice President
--------------------------
(Print)
30
<PAGE> 35
EXHIBIT 1 TO
CREDIT AGREEMENT
Schedule of Definitions to Credit Agreement
Dated as of October 29, 1999
"Accelerated Repayment" shall have the meaning set forth in Section
4.02(b) of the Credit Agreement.
"Act" means the Merchant Marine Act, 1936, as amended, and in effect on
the Closing Date.
"Administrative Agent" means CITICORP NORTH AMERICA, INC., a Delaware
corporation, as administrative agent for the Primary Lender and the commercial
paper holders of the Primary Lender (and their respective successors and
assigns), and its permitted successors and assigns.
"Affiliate" or "Affiliated" means any Person directly or indirectly
controlling, controlled by, or under common control with, another Person.
"Agent" means each of the Administrative Agent and the Facility Agent,
individually, and "Agents" means the Administrative Agent and the Facility
Agent, collectively.
"Alternate Lender" shall have the meaning set forth in the preamble to
the Credit Agreement.
"Applicable Interest Rate" shall mean
(i) with respect to any Disbursement or portion thereof that is funded
by the Primary Lender through its issuance of commercial paper notes and so long
as the Primary Lender is the holder of the indebtedness related to such funded
portion, a rate (the "CP Rate") equal to the sum of (A) the Primary Lender's
weighted average cost (defined below) related to the issuance of commercial
paper notes and other short-term borrowings or the sale of participation
interests (collectively, "Commercial Paper"), which in each case have been
allocated by the Primary Lender to the Credit Facility, which rate includes
related issuance costs incurred by the Primary Lender, plus (B) three-tenths of
one percent (.30%) as calculated by the Administrative Agent for each
<PAGE> 36
Interest Period and specified in a notice sent by the Administrative Agent to
the Facility Agent and by the Facility Agent to the Shipowner and the Indenture
Trustee at least five (5) Business Days prior to each Interest Payment Date on
which the interest so calculated is payable (For purposes of the foregoing, the
Primary Lender's "weighted average cost" of Commercial Paper shall consist of
(I) the actual interest rate paid to purchasers of Commercial Paper, (II) the
costs associated with the issuance of the Commercial Paper and (III) other
borrowings the Primary Lender may incur, including the amount to fund small or
odd dollar amounts that are not easily accommodated in the commercial paper
market); and
(ii) with respect to any Disbursement funded by the Alternate Lender or
to the extent that a Disbursement held by the Primary Lender is assigned to the
Alternate Lender or to any other assignee, then, from and after the applicable
Disbursement Date or the effective date of such assignment, as the case may be,
a rate per annum equal to LIBOR plus three tenths of one percent (0.30%) per
annum; provided, however, that, if the Alternate Lender shall have determined,
prior to the commencement of any Interest Period that: (A) Dollar deposits of
sufficient amount and maturity for funding a Disbursement are not available to
such Lender in the London interbank market in the ordinary course of business;
or (B) by reason of circumstances affecting the relevant market, adequate and
fair means do not exist for ascertaining the rate of interest to be applicable
to a Disbursement; or (C) the relevant rate of interest referred to in the
definition of LIBOR which is to be used to determine the rate of interest for a
Disbursement does not cover the funding cost to the Lender of making or
maintaining the Disbursement, then the Lender shall so notify the Indenture
Trustee, who shall give notice to the Shipowner of such condition and interest
shall, effective as of the date of such notice and so long as such condition
shall exist, accrue during each applicable Interest Period at the Base Rate;
provided, further, however that if, in the Lender's reasonable judgment, it
becomes unlawful at any time for such Lender to make or maintain Disbursements
based upon LIBOR, the Lender shall so notify the Indenture Trustee, who shall
give notice to the Shipowner of such determination and, effective as of the date
of such notice and so long as such condition shall exist, interest shall
thereafter accrue during each applicable Interest Period at the Base Rate.
"Authorization Agreement" means the Authorization Agreement, Contract
No. MA-13539, dated the Closing Date, between the Secretary and the Indenture
Trustee, whereby the Secretary authorizes the
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<PAGE> 37
Guarantee of the United States of America to be endorsed on the Floating Rate
Note, as the same is originally executed, or as modified, amended or
supplemented in accordance with the applicable provisions thereof.
"Available Amount" shall have the meaning set forth in Section 2.01 of
the Credit Agreement.
"Base Rate" means, for any Interest Period or any other period, a
fluctuating interest rate per annum as shall be in effect from time to time
which rate per annum shall at all times be equal to the higher of:
(a) the rate of interest announced publicly by Citibank, N.A.
in New York, New York, from time to time, as Citibank, N.A.'s base
rate; or
(b) One-half of one percent (0.50%) per annum above the latest
three-week moving average of secondary market morning offering rates in
the United States for three-month certificates of deposit of major
United States money market banks, such three-week moving average being
determined weekly on each Monday (or, if any such day is not a Business
Day, on the next succeeding Business Day) for the three-week period
ending on the previous Friday by Citibank, N.A. on the basis of such
rates reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York, or, if such publication shall be
suspended or terminated, on the basis of quotations for such rates
received by Citibank, N.A. from three New York certificate of deposit
dealers of recognized standing selected by Citibank, N.A., in either
case adjusted to the nearest one-fourth of one percent (0.25%) or, if
there is no nearest one-fourth of one percent, to the next higher
one-fourth of one percent.
"Business Day" shall mean any day on which dealings in Dollar deposits
are carried on in the London interbank market and on which commercial banks in
London and New York City are open for domestic and foreign exchange business.
"Certificate Authorizing Disbursement" shall mean, with respect to a
Disbursement, the United States Certificate Authorizing Disbursement
substantially in the form set forth in Annex A to the Credit Agreement.
"Closing Date" means October 29, 1999.
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<PAGE> 38
"Commercial Paper" shall have the meaning set forth in clause (a)(i)of
the definition of Applicable Interest Rate herein.
"Construction Contract" means that certain Mobile Platform Construction
Agreement (LeTourneau Hull No. 221), dated December 18, 1996, by and between the
Shipowner and the Shipyard, as the same may be amended, modified or supplemented
in accordance with the applicable provisions thereof.
"Construction Period" shall mean the period from the date hereof to the
Delivery Date.
"Construction Period Interest" shall mean all interest that accrues on
the Outstanding Principal during the Construction Period.
"CP Rate" shall have the meaning set forth in clause (a)(i) of the
definition of Applicable Interest Rate herein.
"Credit Agreement" or "Agreement" shall mean the Credit Agreement,
dated as of the Closing Date, among the Shipowner, the Lenders, and the Agents,
including any Exhibit, Annex, or other attachment thereto, as the same may be
amended, modified or supplemented in accordance with the applicable provisions
thereof.
"Credit Facility" shall have the meaning set forth in Whereas Clause
(A) of the Credit Agreement.
"Credit Facility Amount" shall have the meaning set forth in Section
2.01 of the Credit Agreement.
"Delivery Date" means the date on which the Vessel is delivered to and
accepted by the Shipowner.
"Depository Agreement" means the Depository Agreement, Contract No.
MA-13445, dated September 29, 1998, between the Shipowner, CITIBANK, N.A., as
Depository, and the Secretary, as the same is originally executed, or amended,
modified or supplemented in accordance with the applicable provisions thereof.
"Disbursements" shall have the meaning set forth in Section 2.03 of the
Credit Agreement.
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<PAGE> 39
"Disbursement Date" shall mean, in relation to any Disbursement, the
Business Day on which the Lender shall make such Disbursement.
"Disposition of Indebtedness" shall have the meaning set forth in
Section 11.03 of the Credit Agreement.
"Dollars", "U.S. Dollars", "U.S.D.", "U.S. $" or "$" shall mean the
lawful currency of the United States of America.
"Event of Default" shall have the meaning set forth in Section 9.02 of
the Credit Agreement.
"Facility Agent" means CITIBANK INTERNATIONAL plc, a bank organized and
existing under the laws of England, as facility agent for both the Primary
Lender and the Alternate Lender (and their respective successors and assigns),
and its permitted successors and assigns.
"Fee Letter" shall have the meaning set forth in Section 6.01 of the
Credit Agreement.
"Final Disbursement Date" shall have the meaning set forth in Section
2.02 of the Credit Agreement.
"Fixed Rate Note" shall mean the Note substantially identical to the
form of Exhibit 3 to the Indenture, appropriately completed.
"Floating Rate Note" shall mean the Note substantially identical to the
form of Exhibit 2 to the Indenture, appropriately completed.
"Governmental Authority" shall mean the government of any country, any
agency, department or other administrative authority or instrumentality thereof,
and any local or other governmental authority within any such country.
"Guarantee" or "Guarantees" means the guarantee of the Floating Rate
Note by the United States of America pursuant to Title XI of the Act, as
provided in the Authorization Agreement.
"Guarantee Commitment" means the Commitment to Guarantee Obligations,
Contract No. MA-13538, dated as of the Closing Date, executed by the Secretary
and accepted by the Shipowner with respect to the Guarantees, as originally
executed or as modified, amended or supplemented in accordance with the
applicable provisions thereof.
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<PAGE> 40
"Guarantee Fees" shall mean the amounts described in the Guarantee
Commitment payable in consideration for the commitment therein described and
payable as provided in such Guarantee Commitment.
"Holder" means each holder of the Floating Rate Note.
"Indemnified Amounts" shall have the meaning set forth in Section 11.09
of the Credit Agreement.
"Indemnified Party" shall have the meaning set forth in Section 11.09
of the Credit Agreement.
"Indenture" means the Trust Indenture dated as of the Closing Date,
between the Shipowner and the Indenture Trustee, as the same is originally
executed, or as modified, amended or supplemented in accordance with the
applicable provisions thereof.
"Indenture Default" has the meaning specified in Article VI of Exhibit
1 to the Indenture.
"Indenture Trustee" means ALLFIRST TRUST COMPANY, NATIONAL ASSOCIATION,
a national banking association, and any successor trustee permitted under the
Indenture.
"Interest Payment Date" means, with respect to the Floating Rate Note,
the date when any installment of interest on such Note is due and payable, which
are April 20 and October 20 of each year, beginning on April 20, 2000, and the
date of any prepayment of the Floating Rate Note.
"Interest Period" shall mean, with respect to any Disbursement, (i) the
period commencing on the Disbursement Date and extending up to, but not
including, the next Interest Payment Date; and (ii) thereafter the period
commencing on each Interest Payment Date and extending up to, but not including,
the next Interest Payment Date.
"Lender" shall have the meaning set forth in the preamble to the Credit
Agreement.
"Lenders" means collectively the Primary Lender and the Alternate
Lender.
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<PAGE> 41
"Liabilities" shall have the meaning set forth in Section 12.05 of the
Credit Agreement.
"LIBOR" (a) in relation to any Interest Period, shall mean the rate of
interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%)
quoted by the principal London office of CITIBANK, N. A., at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for the offering to leading banks in the London interbank market of U.S.
Dollar deposits for a period and in an amount comparable to such Interest Period
and the principal amount upon which interest is to be paid during such Interest
Period; and (b) in relation to any Post Maturity Period, shall have the meaning
as set forth in Section 4.02(b) of the Credit Agreement.
"Lien" shall have the meaning set forth in Section 8.01(c) of the
Credit Agreement.
"Liquidation Period" shall have the meaning set forth in Section
4.03(a) of the Credit Agreement.
"Maturity" when used with respect to any Obligation, means the date on
which the principal of, or interest on, such Obligation becomes due and payable
as therein provided, whether on a Payment Date, at the Stated Maturity or by
prepayment, repayment, redemption or declaration of acceleration or otherwise.
"Mortgage" means the first preferred ship mortgage on the Vessel,
Contract No. MA-13541, between the Shipowner and the Secretary, as originally
executed or as modified, amended or supplemented in accordance with the
applicable provisions thereof.
"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.
"Other Taxes" shall have the meaning set forth in Section 6.02(a) of
the Credit Agreement.
"Outstanding Principal" shall have the meaning set forth in Section
2.01 of the Credit Agreement.
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<PAGE> 42
"Payment Date" shall mean April 20 and October 20 of each year,
beginning on April 20, 2002.
"Payment Default" has the meaning specified in Section 6.01(a) of
Exhibit 1 to the Indenture.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Post Maturity Applicable Interest Rate" shall have the meaning set
forth in Section 4.02(b) of the Credit Agreement.
"Post Maturity Interest Rate" shall have the meaning set forth in
Section 4.02(b) of the Credit Agreement.
"Post Maturity Period" shall have the meaning set forth in Section
4.02(b) of the Credit Agreement.
"Primary Lender" shall have the meaning set forth in the preamble to
the Credit Agreement.
"Quotation Date" shall have the meaning set forth in Section 4.02(b) of
the Credit Agreement.
"Redemption" means with respect to the redemption of the Floating Rate
Note, the repayment or prepayment of the Floating Rate Note as applicable.
"Redemption Date" means, with respect to the Floating Rate Note, a date
fixed for the prepayment, repayment or redemption of such Note by or pursuant to
Section 4 of the Credit Agreement, Article Fourth of the Indenture, or Article
III of Exhibit 1 to the Indenture.
"Redemption Price" means, with respect to the Floating Rate Note, the
price at which the Floating Rate Note is to be prepaid, repaid, or redeemed
pursuant to Section 4 of the Credit Agreement, Article Fourth of the Indenture,
or Article III of Exhibit 1 to the Indenture.
"Secretary" means the Secretary of Transportation or any official or
official body from time to time duly authorized to perform the duties and
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<PAGE> 43
functions of the Secretary of Transportation under Title XI of the Act
(including the Maritime Administrator, the Acting Maritime Administrator, and to
the extent so authorized, the Deputy Maritime Administrator and other officials
of the Maritime Administration).
"Secretary's Note" means a promissory note or promissory notes issued
and delivered by the Shipowner to the Secretary described in Article Third of
the Special Provisions of the Security Agreement and shall also mean any
promissory note issued in substitution for and replacement thereof pursuant to
the Security Agreement.
"Security Agreement" shall mean that certain security agreement,
Contract No. MA-13540 dated as of the Closing Date, with respect to the Vessel,
executed by the Shipowner and the Secretary relating to the security in respect
to the Guarantees, as originally executed or as modified, amended or
supplemented in accordance with the applicable provisions thereof.
"Shipowner" means ROWAN COMPANIES, INC., a Delaware corporation, and
for purposes of the Indenture and the Floating Rate Note, subject to the
provisions of Sections 6.09, 8.01 and 8.02 of Exhibit 1 to the Indenture, shall
also include its successors and assigns; provided, however, that for purposes of
the Credit Agreement, the term Shipowner shall also include the Shipowner's
permitted successors and assigns under the Credit Agreement.
"Shipowner's Documents" means the Security Agreement, the Mortgage, the
Title XI Reserve Fund and Financial Agreement, the Depository Agreement, and the
Secretary's Note.
"Shipowner Financial Statements" shall have the meaning set forth in
Section 8.01(h) of the Credit Agreement.
"Shipyard" or "Shipbuilder" means LETOURNEAU, INC., a Texas
corporation.
"Stated Maturity," when used with respect to the Floating Rate Note,
means the date determinable as set forth in such Note as the final date on which
the principal of such Note is due and payable, which shall include, without
limitation, each of the Payment Dates.
"Taxes" shall have the meaning set forth in Section 6.02(a) of the
Credit Agreement.
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<PAGE> 44
"Title XI Reserve Fund and Financial Agreement" means that certain
Title XI Reserve Fund and Financial Agreement, Contract No. MA-13261, dated as
of December 17, 1996, executed by the Shipowner and the Secretary, as amended,
modified or supplemented in accordance with the applicable provisions thereof.
"United States" means the United States of America.
"Unpaid Amount" shall have the meaning set forth in Section 4.02(b) of
the Credit Agreement.
"Vessel" means the Shipowner's self-elevating mobile offshore drilling
unit to be named the GORILLA VII and constructed by LETOURNEAU, INC. in
accordance with the Construction Contract, including all work and material
heretofore or hereafter performed upon or installed in or placed on board such
Vessel, together with related appurtenances, additions, improvements, and
replacements.
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<PAGE> 45
ANNEX A TO CREDIT AGREEMENT
ROWAN COMPANIES, INC.
SUITE 5450
2800 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
__________, 1999
Secretary of Transportation
c/o Maritime Administrator
Department of Transportation
400 Seventh Street, S.W.
Washington, D.C. 20590
Ladies and Gentlemen:
We are enclosing herewith our Disbursement Request No. ___ and
Certificate plus the following documents for disbursement from the Credit
Facility that has been established for LeTourneau, Inc., Hull No. 221:
1. Shipyard's Certificate of No Liens pursuant to Section 2.02(d) of
Exhibit 1 to the Security Agreement.
2. Wire transfer instructions for Shipyard, Shipowner, or Lender.
3. Request for Actual Cost Approval and Reimbursement (___________) with
Supplemental Schedules Nos. ___ and ___.
4. Certificate Authorizing Disbursements
The amount requested, U.S. $__________ represents:
Progress Payment No. __ for LeTourneau, Inc. Hull No. 221.
Very truly yours,
ROWAN COMPANIES, INC.
By:
--------------------------
Title:
-----------------------
A-1
<PAGE> 46
ROWAN COMPANIES, INC.
DISBURSEMENT REQUEST NO. __
AND CERTIFICATE
TO ACCOMPANY DISBURSEMENT
FROM CREDIT FACILITY FOR
HULL 221
__________, 1999
Secretary of Transportation
c/o Maritime Administration
Department of Transportation
400 Seventh Street, S.W.
Washington, D.C. 20590
ROWAN COMPANIES, INC. (the "Shipowner") hereby requests the
Secretary of Transportation, acting by and through the Maritime Administrator
(the "Secretary") to approve disbursement from the Credit Facility for Hull No.
221 under the Credit Agreement dated October ___, 1999, (the "Agreement"), in
accordance with the accompanying wire transfer instructions. In support of said
request and in order to induce the Secretary to approve said disbursement, the
Shipowner hereby certifies:
I. (A) That the Final Disbursement Date of the Credit Facility
has not occurred and that there is no default under the Security Agreement dated
October __, 1999, Contract No. MA-13540 (the "Security Agreement") or the
Construction Contract; (B) there have been no occurrences which have or would
adversely and materially affect the condition of the Vessel, its hull or any of
its component parts; (C) the amounts of the Request is in accordance with the
Construction Contract including the approved disbursement schedule and each item
in these amounts is properly included in the Secretary's approved estimate of
Actual Cost; (D) with respect to the Request, once the Shipyard is paid there
will be no liens or encumbrances on the Vessel, its hull or component parts for
which the withdrawal is being requested except for those already approved by the
Secretary; and (E) if the Vessel has already been delivered, it is in class and
is being maintained in the highest and best condition.
II. That the requested Disbursement is properly due and
payable to the following payee(s), in the following amount(s) and in respect of
the following items(s):
A-2
<PAGE> 47
Payee Amount Item
-------------- $----------- ----------------------------
III. That all prior Disbursements (if any) from the Credit
Facility have been used for the purposes stated in prior certificates furnished
to the Secretary.
IV. That the requested Disbursement is not to be used to pay,
or to reimburse the Shipowner for the payment of, any item(s) or amount(s) paid
or reimbursed from any prior Disbursement(s) from the Credit Facility.
V. That the amount (if any) stated in II above to be paid to
the _____________ for the payment of interest, is the amount of interest on the
Obligations equal to the interest payable on ________________, 199___.
VI. That the amount(s) (if any) stated in II above to be paid
to the Lenders, Shipyard or other persons entitled thereto, or to the Shipowner
as reimbursement for amounts which it shall have paid or have caused to be paid
to said parties, is (are) properly payable from the Credit Facility because:
A. The total amount paid by or for the account of the
Shipowner on account of the items, amounts and increases set
forth or referred to in Table A of the Security Agreement from
sources other than the proceeds of the Obligations equals at
least 12-1/2% of the Actual Cost of the Vessel stated in the
Security Agreement.(1)
B. The amount(s) (if any) stated in II above to be
paid to the Shipowner would not have the effect of reducing
the total amount paid referred to in A above, below the
minimum set forth in A above;
All terms used herein shall have the same meaning as they have
in the Security Agreement.
ROWAN COMPANIES, INC.
By:
---------------------------
Title:
------------------------
- ----------
(1) If such Actual Cost has been redetermined by the Secretary, add: "as
the same was redetermined by the Secretary on _________, 199__."
A-3
<PAGE> 48
CERTIFICATE AUTHORIZING DISBURSEMENT
Date ___________________
CITIBANK INTERNATIONAL plc, as Facility Agent
Attention: Gillian Barnfather
GOVCO INCORPORATED, as Primary Lender
CITIBANK, N.A., as Alternate Lender
New York, New York
Subject: Credit Agreement dated October __, 1999
ROWAN COMPANIES, INC.
Certificate Authorizing Disbursement No. ____
Ladies and Gentlemen:
In accordance with the terms and conditions of the Security
Agreement between ROWAN COMPANIES, INC., a Delaware corporation (the "Shipowner"
or "Borrower") and the Secretary and with respect to the Shipowner's Request for
Disbursement pursuant to the Credit Agreement ("Agreement"), dated as of October
___, 1999, by and among, the Shipowner, GOVCO INCORPORATED, a Delaware
corporation (the "Primary Lender"), CITIBANK, N.A., a national banking
association (the "Alternate Lender" and, together with the Primary Lender, the
"Lenders"), CITIBANK INTERNATIONAL PLC, a bank organized and existing under the
laws of England (the "Facility Agent"), and CITICORP NORTH AMERICA, INC., a
Delaware corporation (the "Administrative Agent"), we hereby authorize the
Primary Lender or the Alternate Lender, as determined in accordance with Section
2.01 of the Agreement, to make a Disbursement under the Credit Facility in the
amount of U.S. $________ on or after ___________ , 199_, by paying to such
Lender from the proceeds of the Disbursement the Construction Period Interest
payable to such Lender in the amount of U.S. $___________________, and then
paying the balance of the proceeds of the Disbursement to the account of
[identify the Shipowner's, Shipyard's account as it is carried on the books of
the payee bank] at [complete name and address of the payee bank].
The defined terms in this Certificate shall have the
respective meanings specified in the Credit Agreement.
(Seal) UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
ATTEST: By: Maritime Administration
By:
- -------------------------- -------------------------
Assistant Secretary Secretary
Maritime Administration Maritime Administration
A-4
<PAGE> 49
CERTIFICATE OF NO LIENS
LeTourneau, Inc., a Texas corporation (the "Shipyard"), does
hereby certify that, on the date hereof, the Vessel being constructed pursuant
to that certain construction contract dated December 18, 1996, as amended (the
"Construction Contract"), between the Shipyard and ROWAN COMPANIES, INC., a
Delaware corporation (the "Shipowner"), which Vessel is identified as Le
Tourneau Hull No. 221, and its component parts are free of any liens and rights
in rem.
IN WITNESS WHEREOF, the Shipyard has caused this Certificate
to be duly executed and delivered this _____ day of ---------------.
LeTourneau, Inc.,
a Texas corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
A-5
<PAGE> 50
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUMMARY SHEET
<TABLE>
<S> <C>
Shipowner's Name ROWAN COMPANIES, INC.
Shipowner's Address Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P.O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA VII Shipyard Hull No. 221
Type of Vessel Mobile self-contained and elevating drilling platform
LOA LBP BEAM DEPTH SHP
Submittal No. DATE:
++
Period Covered From: _______________________ to: _____________________ Final Cost Submittal ++
Date of Last Previous Submittal:
--------------------
</TABLE>
A-6
<PAGE> 51
INSTRUCTIONS TO SHIPOWNER
Requests for actual cost approvals and remittances must be submitted on this
form and on the supplemental schedules listed below as applicable. Specific
instructions are included on each supplemental schedule.
<TABLE>
<CAPTION>
================================================= ================ ================ ================= ==================
Remittances to Shipyard Cumulative
Supplemental Previous Actual Cost Actual Cost
Schedule No. Cumulative This Submittal to Date
Total
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Contract Base Cost 1
---------------- ---------------- ----------------- ------------------
Escalation 1
---------------- ---------------- ----------------- ------------------
Changes & Extras 2 & 2A
---------------- ---------------- ----------------- ------------------
Other Items 3
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
1. Subtotal-Actual Construction Cost
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
Owner Furnished Items 4
Design, Engineering and Inspection
at Owner's Cost
---------------- ---------------- ----------------- ------------------
2. Subtotal-Actual Owner's Cost 5
---------------- ---------------- ----------------- ------------------
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
TOTAL (1&2) ACTUAL CONSTRUCTION
& OUTFITTING COST:
---------------- ---------------- ----------------- ------------------
Less: Items of Foreign Cost 6
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
3. Subtotal-Actual Construction and
Owner's Outfitting Cost
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
Financing Costs: Commitment Fees 7
---------------- ---------------- ----------------- ------------------
Interest Fees
---------------- ---------------- ----------------- ------------------
Interest Income
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
4. Subtotal-Financing Costs
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
TOTAL-ACTUAL COST
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
5. Source of Payments
- ------------------------------------------------- ---------------- ---------------- ----------------- ------------------
Credit Facility
---------------- ---------------- ----------------- ------------------
Shipowner
---------------- ---------------- ----------------- ------------------
General Fund
---------------- ---------------- ----------------- ------------------
TOTAL
================================================= ================ ================ ================= ==================
Notes, Comments, Etc.
</TABLE>
A-7
<PAGE> 52
CERTIFICATION OF PAYMENT
The undersigned has examined the records of N/A and certifies the above cost
figures and the supplemental schedules to accurately state the actual costs,
both paid and to be paid, of ______ in accordance with generally accepted
accounting practices.
DATE:
A-8
<PAGE> 53
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 1
CONTRACT BASE COST AND ESCALATION
<TABLE>
<S> <C>
Shipowner's Name ROWAN COMPANIES, INC.
Shipowner's Address Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P.O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA VII Shipyard Hull No. 221
Type of Vessel Mobile self-contained and elevating drilling platform
LOA LBP BEAM DEPTH SHP
Submittal No. DATE
</TABLE>
INSTRUCTIONS TO SHIPOWNER
List all remittances made to the shipyard for the construction of the vessel as
shown in the contract specifications. Include escalation, if applicable, as
defined in the contract. Do not include the cost of subsequent amendments to the
contract or changes and extras which are to be listed on Schedules 2 and 2A.
<TABLE>
<S> <C> <C> <C> <C>
DATE OF NOTES OR COMMENTS CONTRACT
PAYMENT (IF REQUIRED) BASE COST ESCALATION TOTAL
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
A-9
<PAGE> 54
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 2
INDEX OF CHANGES AND EXTRAS
<TABLE>
<S> <C>
Shipowner's Name ROWAN COMPANIES, INC.
Shipowner's Address Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P.O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA VII Shipyard Hull No. 221
Type of Vessel Mobile self-contained and elevating drilling platform
LOA LBP BEAM DEPTH SHP
Submittal No. DATE
</TABLE>
INSTRUCTIONS TO SHIPOWNER
List all changes and extras in numerical order as indicated below. Fill in all
information requested. Show total cost claimed at the end of the list. Attach
Schedule 2A with information requested arranged in the same sequence.
If preferred, the Applicant may request the shipyard to forward this schedule
and Schedule 2A directly to Chief, Division of Cost Estimates and Analysis,
Maritime Administration, Code MAR-722, Room 2122, 400 Seventh Street, S.W.,
Washington, D.C. 20590.
<TABLE>
<S> <C> <C> <C>
CHANGE NO. DESCRIPTION OR IDENTIFICATION SUBCONTRACTOR (IF APPLIC.) COST PER SHIP
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
A-10
<PAGE> 55
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 2A
CHANGE AND EXTRA DETAILS
<TABLE>
<S> <C>
Shipowner's Name ROWAN COMPANIES, INC.
Shipowner's Address Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P.O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA VII Shipyard Hull No. 221
Type of Vessel Mobile self-contained and elevating drilling platform
LOA LBP BEAM DEPTH SHP
Submittal No. DATE
</TABLE>
INSTRUCTIONS TO SHIPOWNER
Enter below the details requested for each change order in the same sequence as
listed in Schedule 2. The scope of work for each change should be briefly
described. Major items of material and/or labor should be set forth
individually-whether added or deleted. Sufficient detail should be included to
justify the cost added or deleted for each change. Include as many changes as
possible on each sheet.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
TITLE OR CHANGE/SCOPE OF
CHANGE WORK BY PHASES/MATERIAL MATERIAL COST LABOR NET COST
NO. DESCRIPTION/LABOR DESCRIPTION UNIT TOTAL HOURS COST (+)OR(-) OF CHANGE
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-11
<PAGE> 56
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 3
OTHER ITEMS
<TABLE>
<S> <C>
Shipowner's Name ROWAN COMPANIES, INC.
Shipowner's Address Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P.O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA VII Shipyard Hull No. 221
Type of Vessel Mobile self-contained and elevating drilling platform
LOA LBP BEAM DEPTH SHP
Submittal No. DATE
</TABLE>
INSTRUCTIONS TO SHIPOWNER
List below all items paid directly to the shipyard which qualify as construction
cost, but do not belong in the categories of basic contract cost, changes,
extras, and escalation. Example: insurance, storage of owner furnished items,
performance bond; if such items are not provided for in construction contract.
<TABLE>
<S> <C> <C>
ITEM NO. DESCRIPTION COST
- ------------------------------------------------------------------------------------
</TABLE>
A-12
<PAGE> 57
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 4
OTHER FURNISHED ITEMS
<TABLE>
<S> <C>
Shipowner's Name ROWAN COMPANIES, INC.
Shipowner's Address Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P.O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA VII Shipyard Hull No. 221
Type of Vessel Mobile self-contained and elevating drilling platform
LOA LBP BEAM DEPTH SHP
Submittal No. DATE
</TABLE>
INSTRUCTIONS TO SHIPOWNER
List below all furnished materials, equipment and services where the total cost
per invoice exceeds $2,500. At the end of the list include all invoices costing
less than $2,500 in a lump sum opposite the description "Miscellaneous Owner
Items." Description of individual items listed should include quantity, material
specification, model No., horse power, capacity, etc., as applicable to allow
review for reasonability of cost and eligibility as Title XI actual cost.
Invoices containing the above information may be submitted in lieu of filling
this form out provided a summary of all such invoices is provided with each
submittal.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
ITEM DESCRIPTION OR MANUFACTURE'S NAME VENDOR'S COST PER
NO. QUANTITY IDENTIFICATION CITY AND COUNTY INVOICE NO. SHIPSET
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-13
<PAGE> 58
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 5
DESIGN, INSPECTION AND ENGINEERING AT OWNER'S COST
<TABLE>
<S> <C>
Shipowner's Name ROWAN COMPANIES, INC.
Shipowner's Address Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P.O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA VII Shipyard Hull No. 221
Type of Vessel Mobile self-contained and elevating drilling platform
LOA LBP BEAM DEPTH SHP
Submittal No. DATE
</TABLE>
INSTRUCTIONS TO SHIPOWNER
List below expenditures paid by the Applicant for design, inspection and
engineering in sufficient detail to permit review for Title XI eligibility and
reasonability of cost.
<TABLE>
<S> <C> <C> <C> <C>
NAMES OF APPLICANT'S EMPLOYEES AND/OR INVOICE NO.
ITEM NAMES OF SUBCONTRACTORS NO. OR
NO. NATURE OF WORK PERFORMED HOURS RATE/HOUR COST
- ------------------------------------------------------------------------------------------------------
</TABLE>
A-14
<PAGE> 59
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 6
ITEMS OF FOREIGN MANUFACTURE, GROWTH OR ORIGIN
<TABLE>
<S> <C>
Shipowner's Name ROWAN COMPANIES, INC.
Shipowner's Address Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P.O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA VII Shipyard Hull No. 221
Type of Vessel Mobile self-contained and elevating drilling platform
LOA LBP BEAM DEPTH SHP
Submittal No. DATE
</TABLE>
INSTRUCTIONS TO SHIPOWNER
Under Maritime Administration policy all items of foreign manufacture, growth or
origin are ineligible as Title XI actual cost. It is the responsibility of the
Applicant to furnish the information listed below for each such item. This
includes both goods and services. The total cost of the items listed will be
deducted from the total actual cost eligible for Title XI Guarantee unless a
waiver has been requested by letter from Maritime and granted by Maritime by
letter.
<TABLE>
<S> <C> <C> <C> <C> <C>
ITEM DESCRIPTION OR VENDOR'S NAME VENDOR'S COST PER
NO. QUANTITY IDENTIFICATION CITY AND COUNTRY INVOICE NO. SHIP
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-15
<PAGE> 60
U.S. DEPARTMENT OF TRANSPORTATION
MARITIME ADMINISTRATION
TITLE XI
REQUEST FOR ACTUAL COST APPROVAL AND REIMBURSEMENT
SUPPLEMENTAL SCHEDULE NO. 7
INTEREST AND COMMITMENT FEES
<TABLE>
<S> <C>
Shipowner's Name ROWAN COMPANIES, INC.
Shipowner's Address Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056
Shipyard's Name LeTourneau, Inc.
Shipyard's Address P.O. Box 2307-75606, Longview, Texas 75606
Name of Vessel GORILLA VII Shipyard Hull No. 221
Type of Vessel Mobile self-contained and elevating drilling platform
LOA LBP BEAM DEPTH SHP
Submittal No. DATE
</TABLE>
INSTRUCTIONS TO SHIPOWNER
Fill out the information requested below concerning the commitment fees for
which you are requesting reimbursement in the submittal.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
PERIOD CHECK WHICH PAID PRINCIPAL INTEREST AMOUNT
COVERED INT. FEE TO AMOUNT RATE PAID
- -------------------------------------------------------------------------------------------------------------
</TABLE>
A-16
<PAGE> 61
APPENDIX II TO GUARANTEE COMMITMENT DOCUMENT 4
TRUST INDENTURE
SPECIAL PROVISIONS
THIS TRUST INDENTURE, dated October 29, 1999 (the "Indenture" or the
"Agreement"), is between (i) ROWAN COMPANIES, INC., a Delaware corporation (the
"Shipowner"), and (ii) ALLFIRST TRUST COMPANY, NATIONAL ASSOCIATION, a national
banking association (the "Indenture Trustee").
RECITALS:
WHEREAS, to aid in financing the construction of the Vessel, the Shipowner
has entered into a credit agreement (the "Credit Agreement") with GOVCO
INCORPORATED a Delaware corporation (the "Primary Lender"), CITIBANK, N.A., a
national banking association (the "Alternate Lender'), CITIBANK INTERNATIONAL
PLC, a bank organized and existing under the laws of England (the "Facility
Agent") and CITICORP NORTH AMERICA, INC., a Delaware corporation (the
"Administrative Agent") providing for the delivery of no more than $185,398,000
principal amount of notes designated "United States Government Guaranteed Ship
Financing Obligations, GORILLA VII Series";
WHEREAS, the Secretary, on behalf of the United States, has agreed to
Guarantee the payment of the unpaid interest to the date of such payment on, and
the unpaid balance of the principal of, such Obligations under the provisions of
Title XI of the Act, and has authorized the Indenture Trustee to cause the
Guarantees to be imprinted on the Obligations pursuant to the Authorization
Agreement.
NOW THEREFORE, in consideration of the premises, of the mutual covenants
herein contained, of the purchase of the Obligations by the Holders thereof, and
of other good and valuable consideration, the receipt and adequacy of which the
parties hereby acknowledge, and for the equal and proportionate benefit of all
the present and future Holders of the Obligations, the parties hereto agree as
follows:
1
<PAGE> 62
1. INCORPORATION OF GENERAL PROVISIONS. This Indenture shall consist of two
parts: the Special Provisions and the General Provisions attached hereto as
Exhibit 1, and they shall be treated as one instrument. In the event of a
conflict, the terms of the Special Provisions shall prevail.
2. THE OBLIGATIONS.
(a) The Obligations issued hereunder shall be designated "United States
Government Guaranteed Ship Financing Obligations, GORILLA VII 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 $185,398,000.
(b) The denominations of the Obligations shall be in integral multiples of
$1,000.
(c) The Shipowner shall at all times cause to be maintained in the City of
Baltimore, State of Maryland, an office or agency for the purposes specified in
Section 5.03 of Exhibit 1 to this Indenture.
(d) The Indenture Trustee shall at all times have its Corporate Trust
Office in the City of Baltimore, State of Maryland.
3. INTEREST RATE CALCULATION. Upon the terms and subject to the conditions
contained in the Obligations, and based on information received from the
Facility Agent (but only in connection with the Floating Rate Note), the
Indenture Trustee shall calculate the Applicable Interest Rate on the
Obligations in the manner and at the times provided in the Obligations and shall
communicate the same to the Shipowner, the Secretary and any paying agent
identified to it in writing as soon as practicable after each determination. The
Indenture Trustee, based on information received from the Facility Agent (but
only in connection with the Floating Rate Note), shall, upon the request of the
Holder of the Obligations, determine the Applicable Interest Rate then in effect
with respect to the Obligations.
4. CERTAIN REDEMPTIONS
(A) SCHEDULED MANDATORY REDEMPTION. The Obligations are subject to
redemption at a Redemption Price equal to 100% of the principal amount thereof,
together with interest accrued thereon to the applicable Redemption Date,
through the operation of scheduled repayment providing for the semi-annual
redemption on
2
<PAGE> 63
April 20 and October 20 of each year, commencing April 20, 2002 of $7,725,000 of
principal amount of Obligations, 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 earliest of (i) April 20, 2004, (ii) two (2) years after the Delivery Date,
or (iii) at the request of the Secretary, within fifteen (15) Business Days from
the date upon which the Trigger Event (as hereinafter defined) shall occur, and
a final redemption of the remaining outstanding principal of the Fixed Rate
Notes on October 20, 2013.
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 Sections 3.04 or 3.06 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 Sections 3.04 or 3.06 of Exhibit 1 hereto divided by
the number of Redemption Dates (including the Stated Maturity of such
Obligations) scheduled thereafter to April 20, 2004 in the case of the Floating
Rate Note and October 20, 2013 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 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 April 20, 2004 in the case
of the Floating Rate Note and October 20, 2013 in the case of each Fixed Rate
Note. The Shipowner shall, in accordance with Section 3.02(e) of Exhibit 1
hereto, promptly after each redemption pursuant to said Sections 3.04 or 3.06,
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.
3
<PAGE> 64
(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, based on information received from the Holder or a calculation agent,
to be paid on the Redemption Date. The Indenture Trustee, based on information
received from the Holder or a calculation agent, 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 Shipowner by the Indenture Trustee in immediately available
funds on the Redemption Date.
(E) FIXED RATE NOTE INTEREST RATE PROTECTION. (1) The Shipowner shall,
without prior notice or demand from the Secretary, convert the outstanding
indebtedness under the Floating Rate Note to indebtedness under a fixed rate
obligation with a maturity equal to October 20, 2013, whenever: the Treasury
constant maturities rate (5-year) as reported by the Federal Reserve Board in
statistical release H.15 (519) (the "Treasury Rate") equals or exceeds nine
percent (9.0%) per annum (the "Trigger Event"). If the Trigger Event should
occur, the Shipowner shall convert the Floating Rate Note to a
4
<PAGE> 65
fixed-rate obligation, at the request of the Secretary, within fifteen (15)
Business Days from the date of the Trigger Event.
(2) The failure of the Shipowner to covert the Floating Rate Note to a
fixed-rate obligation, at the request of the Secretary, within fifteen (15)
Business Days, unless subsequently waived in writing by the Secretary, shall
constitute an Indenture Default without further notice to the Shipowner or the
Holders being required under the Indenture.
5. ADDITIONS, DELETIONS AND AMENDMENTS TO EXHIBIT 1 The following
additions, deletions and amendments are hereby made to Exhibit 1 to this
Indenture.
(A) CONCERNING IMMEDIATELY AVAILABLE FUNDS. Notwithstanding any provision
in Exhibit 1 to this Indenture to the contrary, all payments are to be made in
immediately available funds.
(B) CONCERNING MANDATORY SCHEDULED REDEMPTIONS. The terms "sinking fund
payment" and "sinking fund redemption" in Exhibit 1 to this Indenture refer to
the mandatory scheduled redemption.
(C) INTEREST RATES. Interest at the Applicable Interest Rate shall be due
on each Disbursement at the end of each Interest Period. The Indenture Trustee,
based on information received from the Facility Agent (but only in connection
with the Floating Rate Note), shall determine the Applicable Interest Rate for
each Interest Period.
(D) CONCERNING DISBURSEMENT NOTATIONS. Upon receipt from the Lender of
documents confirming Disbursements, the Indenture Trustee shall review Exhibit A
of the Floating Rate Note (the "Grid"), and calculate principal and applicable
interest thereon, from time to time. If the Indenture Trustee's calculations are
not consistent with those of the Lender, the calculations of the former shall
prevail. The Indenture Trustee shall promptly thereafter send a copy of the Grid
bearing its calculations to the Holder, who shall endorse the Indenture
Trustee's calculations on the original Exhibit A to the Floating Rate Note, and
send a copy thereof, so noted, to the Indenture Trustee, who, in turn, shall
promptly send a copy thereof to the Secretary.
(E) CONCERNING SECTION 2.01. Section 2.01(c) and (e) are revised to read as
follows:
5
<PAGE> 66
(c) The principal and interest and any premium due on the Obligations shall
be paid by (i) the Indenture Trustee or (ii) a Paying Agent, out of funds
it receives from the Shipowner, by (x) certified or official bank check
mailed by first class postage prepaid to the addresses of the Obligees
appearing on the Obligation Register or (y) at the request of an Obligee,
received by the Indenture Trustee at least three (3) Business Days prior to
the date of payment, by wire transfer to a commercial bank in the United
States or by credit to an account maintained by the Obligee with the
Indenture Trustee without presentment of the Obligation. Prior to any sale,
assignment or transfer of such Obligation, the Holder is required to
present the Obligation to the Indenture Trustee so that a proper notation
of all principal payments under subparagraph (y) above are made on the
Obligation.
(e) If the Maturity of any Obligation or an Interest Payment Date for any
Obligation shall be a day other than a Business Day, then such payment may
be made on the next succeeding Business Day, with the same force and effect
as if made on the Interest Payment Date for such payment; provided,
however, that interest shall accrue thereon for the period after said
Interest Payment Date (whether or not such next succeeding Business Day
occurs in a succeeding month).
(F) CONCERNING SECTION 2.02. Prior to the earliest of (i) April 20, 2004,
(ii) two (2) years from the Delivery Date, or (iii) at the request of the
Secretary, fifteen (15) Business Days from the date the Trigger Event shall
occur, 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 2.02 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 and/or
financing an amount equal to the Available Amount (which amount shall be
deposited into the Escrow Fund established by the Security Agreement); 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 issuance or in the case of the Trigger Event, 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 in the
absence of the Trigger Event 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.
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(G) CONCERNING SECTION 2.07.
(i) The first sentence of Section 2.07(c) is revised to read as follows:
(c) The Shipowner or the Indenture Trustee shall not be required to
register transfers or make exchanges of (1) Obligations for a period of
15 days immediately prior to (A) an Interest Payment Date or (B) any
selection of Obligations to be redeemed, (2) Obligations after demand
for payment of the Guarantees and prior to the payment thereof or
rescission of such demand pursuant to Section 6.02(a), or (3) any
Obligation which has been selected for redemption in whole or in part,
except as to the unredeemed portion of any Obligation being redeemed in
part.
(ii) Section 2.07(e) is revised to read as follows:
(e) As a condition precedent to any transfer or exchange of
Obligations, the Shipowner and the Indenture Trustee may require the
payment of a sum sufficient to reimburse it for any taxes or other
governmental charges that may be imposed with respect thereto and a sum
not exceeding $2.00 for each Obligation delivered upon any such
transfer or exchange.
(H) CONCERNING SECTION 2.09. With respect to clause (1) of the proviso to
Section 2.09 of Exhibit 1 to the Indenture, a written agreement of indemnity
which is satisfactory in form and substance to the Secretary, the Shipowner, and
the Indenture Trustee, executed and delivered by an institutional Holder having
a capital and surplus of at least $100,000,000 shall be considered sufficient
indemnity to the Secretary, the Shipowner, and the Indenture Trustee in
connection with the execution, authentication and delivery of any new
Obligations or the making of any payment as contemplated by said Section 2.09.
(I) CONCERNING PAYMENT OF THE OBLIGATIONS. Notwithstanding anything to the
contrary in Exhibit 1 hereto, the Obligations to be issued hereunder shall be
payable as to principal, premium (if any), and interest, at an office or agency
maintained by the Shipowner for such purpose at the Corporate Trust Office of
the Indenture Trustee, or at the option of the Shipowner, as to payments of
principal, premium (if any), or interest by wire, in immediately available
funds, by such Corporate Trust Office to the Obligees as appear in the
Obligation Register, subject to the Indenture Trustee's receipt, by not later
than 11:00 am on the due date thereof, of funds sufficient for the payment of
principal, premium (if any) or interest by wire or other immediately
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available funds. The Indenture Trustee shall have no obligation to determine
whether such wires or payments were received by the Obligees.
(J) CONCERNING SECTION 3.02. Section 3.02(c) and (e) are revised to read as
follows:
(c) Scheduled Redemptions. If the Obligations of any series and Stated
Maturity or the Special Provisions hereof or the Supplemental Indenture
establishing such series shall so provide, such Obligations shall be
subject to (i) scheduled redemption through the operation of a
mandatory redemption schedule, in such amounts, at such times and
subject to such credits (if any) as may be specified therein, and (ii)
redemption at the option of the Shipowner, in connection with the
operation of any such mandatory redemption schedule, in such additional
amounts and subject to such conditions as may be specified therein.
(e) Adjustments of Redemption Payments. If the Obligations of any
series and Stated Maturity or the Special Provisions hereof or of the
Supplemental Indenture establishing such series provide for an
adjustment in scheduled redemption payments as a result of any
redemption or cancellation of Obligations, the Shipowner shall
recompute the remaining scheduled redemption payments pursuant to such
provisions and shall, at least 60 days prior to the next Interest
Payment Date which occurs at least 60 days following any such
redemption or cancellation of Obligations of such series requiring such
recomputation, submit to the Secretary for his review such
recomputation to ascertain compliance with the provisions of such
Obligations or the Special Provisions hereof or such Supplemental
Indenture, and table of revised mandatory redemption schedule payments
on the Obligations of such series reflecting the adjustments made
pursuant to such provisions as a result of such redemption or
cancellation. Upon advice by the Secretary that he finds such
recomputation to comply with such provisions, the Shipowner shall
submit said table to the Indenture Trustee and the Indenture Trustee
shall promptly send a copy thereof to each Holder of an Obligation of
such series.
(K) CONCERNING SECTION 3.04. Section 3.04 is revised to read as follows:
SECTION 3.04. Redemptions to Comply with Section 1104A(b)(2) of
the Act. The Shipowner and the Secretary may Request a Redemption
Date,
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at least forty (40) days but not more than sixty (60) days from the
Indenture Trustee's receipt of the Request, for the redemption of
certain Obligations because the principal amount of the Outstanding
Obligations are in excess of the amount eligible for guarantee by the
United States under Section 1104A(b)(2) of the Act. Upon receipt, the
Indenture Trustee shall promptly give notice to the Holders of the
Redemption Date as provided in Section 3.08 and on that date shall
redeem, out of funds it receives from the Shipowner, the principal
amount of Obligations specified in the instruction together with the
interest accrued thereon.
(L) CONCERNING SECTION 3.05. Section 3.05 is revised to read as follows:
SECTION 3.05. Redemption after Total Loss, Requisition of Title,
Seizure or Forfeiture of a Vessel or Termination of Certain Contracts.
The Shipowner and the Secretary may Request a Redemption Date, at
least forty (40) days but not more than sixty (60) days from the
Indenture Trustee's receipt of the Request, for the redemption of
certain Obligations because of (1) an actual, constructive, agreed or
compromised total loss of a Vessel, (2) requisition of title to, or
seizure or forfeiture of a Vessel or (3) termination of a primary
Construction Contract. Upon receipt, the Indenture Trustee shall
promptly give notice to the Holders of the Redemption Date as provided
in Section 3.08 and on that date shall redeem, out of funds it
receives from the Shipowner, such principal amount of Obligations
together with the interest accrued thereon.
(M) CONCERNING SECTION 3.06. Section 3.06 is revised to read as follows:
SECTION 3.06. Redemption After Assumption by the Secretary. At
any time after the Secretary has assumed the Obligations under Section
6.09 of the Indenture, the Secretary may Request a Redemption Date, at
least forty (40) days but not more than sixty (60) days from the
Indenture Trustee's receipt of the Request, for the redemption of all
or part of the Obligations. Upon receipt, the Indenture Trustee shall
promptly give notice to the Holders of the Redemption Date as provided
in Section 3.08 and on that date shall redeem, out of funds it
receives from the Shipowner, such principal amount of Obligations
together with the interest accrued thereon.
(N) CONCERNING SECTION 3.07. Notwithstanding the provisions of Section 3.07
of Exhibit 1 to this Indenture, if less than all of the Obligations are to be
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redeemed under any of the provisions contained or referred to in Article Fourth
hereof (excluding Section 4 (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.
(O) CONCERNING SECTION 3.09. The second sentence of Section 3.09 is revised
to read as follows:
Failure to so deposit the amounts with the Indenture Trustee or the
Paying Agent shall render any notice to redeem of no effect, and the
Indenture Trustee shall so advise the Holders.
(P) CONCERNING SECTION 4.01. Section 4.01(b) of Exhibit 1 hereto is hereby
amended in its entirety to read as follows:
"(b) Cash held by the Indenture Trustee or any Paying Agent (other than
the Shipowner) under this Indenture -
(i) need not be segregated;
(ii) shall not be invested except as permitted by clause (iv) of
this Section 4.01(b);
(iii) shall not bear interest except as the Shipowner and the
Indenture Trustee (or such Paying Agent) may agree in writing;
and
(iv) if the Shipowner shall have deposited or caused to be
deposited with the Indenture Trustee funds sufficient for the
payment of the Obligations at their Maturity, including interest
to the date of Maturity, and the date of Maturity is more than
one (1) Business Day after the deposit of such funds (or the next
Business Day if the deposit of such funds is made by 11:00 a.m.
on the Business Day prior to the date
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of Maturity), the Indenture Trustee upon the Request of the
Shipowner shall invest such funds, as directed by the Shipowner
in writing, in direct obligations of the United States Government
maturing at or prior to the date of Maturity of such Obligations
and having a principal amount equal to not less than the amount
of the funds so invested. Such investments shall be held in trust
for the purpose for which the funds so invested were held. After
the Obligations in respect of which the funds were deposited have
been paid in full (except as to unclaimed amounts as referred to
in Section 4.03) any of such funds (including interest received
in respect of such investments and gain on matured investments
purchased at a discount) held by the Indenture Trustee in excess
of amounts to which Holders of such Obligations are entitled
shall upon the Request of the Shipowner be paid by the Indenture
Trustee to the Shipowner but only in the absence of an Indenture
Default hereunder."
(Q) CONCERNING SECTION 4.02. (i) The appointment of a Paying Agent by the
Shipowner is subject to the prior written consent of the Secretary and Indenture
Trustee, which consent shall not be unreasonably withheld.
(ii) Section 4.02(a)(3) is revised to read as follows:
(3) promptly, and in no event later than five (5) days after any
payment made by it hereunder, give written notice to a Responsible Officer
in the Corporate Trust Office of all payments of Obligations made by it,
including and identifying all endorsements of payment made on Obligations
by it, signed and containing the specified information as provided in
subparagraph (2) above, and deliver for cancellation to the Indenture
Trustee all Obligations surrendered to the Paying Agent.
(R) CONCERNING SECTION 4.03. Section 4.03 is revised to read as follows:
SECTION 4.03. Unclaimed Amounts. Any moneys received by the Indenture
Trustee or a Paying Agent, for the payment of Obligations or Guarantees and
remaining unclaimed by the Holders thereof for six (6) years after the date
of the Maturity of said Obligations or the date of payment by the Secretary
of the Guarantees shall, upon delivery to the
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Indenture Trustee of a Request by the Shipowner, be paid to the Shipowner
(unless the Secretary has previously paid the Guarantees, in which case it
shall be paid only upon a request by the Secretary); provided that, not
less than thirty (30) days prior to such payment, the Shipowner shall
publish notice thereof to the Obligees at least once in the Authorized
Newspapers and provide the Indenture Trustee with a copy thereof. In such
event, such Holders shall thereafter be entitled to look only to the
Shipowner (and the settlor or settlors of any trust for which the Shipowner
is trustee, to the extent paid over to it or them) for the payment thereof,
and the Indenture Trustee or such Paying Agent, as the case may be, shall
thereupon be relieved from all responsibility to such Holders therefor. No
such Request, publication or payment shall be construed to extend any
statutory period of limitations which would have been applicable in the
absence of such Request, publication or payment.
(S) CONCERNING SECTION 5.02. Section 5.02 is revised to read as follows:
SECTION 5.02. Payment and Procedure for Payment of Obligations. The
Shipowner shall duly and punctually pay the principal of (and premium, if
any) and interest on the Obligations according to the terms thereof and of
this Indenture. The Shipowner shall deposit with the Indenture Trustee or
(subject to Section 3.09) a Paying Agent no later than 11:00 a.m. in
Baltimore, Maryland on each date fixed for such payment or as otherwise
provided by the Special Provisions hereof an amount in immediately
available funds sufficient for such payment (after taking into account any
amounts then held by the Indenture Trustee or such Paying Agent and
available for such payment) with irrevocable directions to it to so apply
the same;
(T) CONCERNING SECTION 6.05. Section 6.05 is revised to read as follows:
SECTION 6.05. Rights of Indenture Trustee after Indenture Default. During
the continuance of any Indenture Default, the Indenture Trustee shall have
the right to demand and to receive payment of the Guarantees and shall
have, with the consent of the Secretary as to matters other than the
enforcement of the Guarantees (unless all the Guarantees shall have
terminated as provided herein):
(a) the right (in its name, as the trustee of an express trust, or
as agent and attorney-in-fact for each Holder of the Obligations as a
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class) to take all action to enforce its rights and remedies (including the
institution and prosecution of all judicial and other proceedings and the
filings of proofs of claim and debt in connection therewith), and to
enforce all existing rights of the Holders of the Obligations as a class;
and
(b) all other rights and remedies granted to the Indenture Trustee
by this Indenture, or the Authorization Agreement, or by law.
In addition, during the continuance of an Indenture Default and if all
the Guarantees shall have terminated, except by payment of the Guarantees,
as provided herein, the Indenture Trustee shall have the right, by written
notice to the Shipowner, to declare the entire unpaid principal amount of
the Outstanding Obligations and all unpaid interest to be immediately due
and payable.
In the event the Shipowner shall be unable to pay its debts when and
as they fall due or shall admit in writing its inability to pay its debts
as they fall due or shall become insolvent; or the Shipowner shall apply
for or consent to the appointment of any liquidator, receiver, trustee or
administrator for all or a substantial part of its business, properties,
assets or revenues; or a liquidator, receiver, trustee or administrator
shall be appointed for the Shipowner and such appointment shall continue
undismissed, undischarged or unstayed for a period of thirty (30) days, or
the Shipowner shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, arrangement, readjustment of debt, dissolution,
liquidation or similar executory or judicial proceeding; or a bankruptcy,
arrangement, readjustment of debt, dissolution, liquidation or similar
executory or judicial proceeding shall be instituted against the Shipowner
and shall remain undismissed, undischarged or unstayed for a period of
thirty (30) days, the entire unpaid principal amount of the Outstanding
Obligations and all unpaid interest shall be automatically due and payable.
(U) CONCERNING SECTION 6.06. Section 6.06 is revised to read as follows:
SECTION 6.06. (a) Obligees' Right to Direct Indenture Trustee after
Indenture Default. During the continuance of any Indenture Default, the
Holders of a majority in principal amount of the Outstanding Obligations
shall have the right, by an Act of Obligees, to direct the Indenture
Trustee:
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(1) to exercise or to refrain from exercising any right or to
enforce any remedy granted to it by this Indenture; and
(2) to direct the time, method and place of the exercise of any
such right or the enforcement of any such remedy;
provided that, subject to Section 7.03, the Indenture Trustee shall have
the right not to take any such action if it shall determine in good faith
that the action would involve it in personal liability, would subject it to
expense and liability against which it had not been offered sufficient
indemnity, or would be unjustly prejudicial to the Obligees not parties to
such direction.
Anything in this Section 6.06(a) to the contrary notwithstanding, the
Indenture Trustee shall be obligated to demand payment of the Guarantees as
provided in Section 6.02(a) unless the Holders of all Outstanding
Obligations shall have elected to terminate the Guarantees as provided in
Section 6.04(a)(2), in which case the Indenture Trustee shall be obligated
to refrain from making such demand.
(b) Limitations on Obligees' Right to Sue. No Obligee shall have the right
to institute any judicial or other proceedings under this Indenture unless:
(1) the Indenture Trustee shall have been directed to institute such
proceeding by the Holders of at least 25% in aggregate principal
amount of the Obligations then Outstanding;
(2) the Indenture Trustee shall have been offered sufficient
indemnity and security against the costs, expenses and
liabilities to be incurred by compliance with such direction;
(3) the Indenture Trustee shall not have instituted such proceeding
within sixty (60) days after the receipt of both such direction
and such offer of security and indemnity;
(4) no direction inconsistent with such request shall have been given
to the Indenture Trustee during such 60-day period by the Holders
of a majority in principal amount of the Outstanding Obligations;
and
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(5) the institution and prosecution of such proceeding would not
result in an impairment of the rights of any other Obligee, it
being understood and intended that no one or more Obligees shall
have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other Obligees or to obtain or to
seek to obtain priority or preference over any other Obligees or
to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the
Obligees.
(c) Unconditional Right of Obligees to Sue for Principal (and
Premium, if any) and Interest. Nothing in paragraph (b) shall (i)
affect the obligation of the Shipowner to pay the principal of (and
premium, if any) and interest on the Obligations in accordance with
their terms or affect the right of any Obligee to institute any
judicial or other proceeding to enforce the payment of his
Obligations, or (ii) limit the right of any Obligee to demand payment
of the Guarantees pursuant to Section 6.02(b) or to institute any
judicial or other proceeding to enforce the payment of the Guarantee
of any Obligation of which he is the Holder.
(V) CONCERNING SECTION 6.07
SECTION 6.07. Attorneys' Fees and Costs. In any proceeding for the
enforcement of any right or remedy under this Indenture, or in any
proceeding against the Indenture Trustee for any action taken or omitted by
it as Indenture Trustee, the court may in its discretion assess reasonable
costs, including reasonable attorneys' fees, against any party litigant,
having due regard to the merits and good faith of the claims or defense
made by such party litigant. The provisions of this Section shall not apply
to any proceeding instituted by the Indenture Trustee or any proceeding
instituted by any Obligee against the Secretary for the payment of the
principal of (and premium, if any) and interest on the Obligations.
(W) CONCERNING SECTION 6.09. 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
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(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.
(X) CONCERNING SECTION 7.03. Section 7.03(h) and (n) are revised to read as
follows:
(h) In all cases where this Indenture does not make express provision as to
the evidence on which the Indenture Trustee may act or refrain from acting,
the Indenture Trustee shall be entitled to receive and shall be protected
(subject to paragraph (c) of this Section) in acting or refraining from
acting hereunder in reliance upon an Officer's Certificate as to the
existence or non-existence of any fact.
(n) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers.
(Y) CONCERNING SECTION 7.04. Section 7.04 is revised to read as follows:
SECTION 7.04. Compensation, Expenses and Indemnification of Indenture
Trustee. The Shipowner shall (1) pay such compensation to the Indenture
Trustee as they may agree upon in writing from time to time and reimburse
it for its reasonable expenses and disbursements (including counsel fees
and expenses), and (2) indemnify the Indenture Trustee for, and hold it
harmless against, any loss, liability or expense which it may incur or
suffer without negligence or bad faith in acting under this Indenture or
the Authorization Agreement. The compensation of the Indenture Trustee
shall not be limited to the compensation provided by law for a trustee
acting under an express trust. The obligations of the Shipowner under this
Section 7.04 shall survive the
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termination of the Indenture and resignation or removal of the Indenture
Trustee.
(Z) CONCERNING SECTION 7.07. Section 7.07 is revised to read as follows:
SECTION 7.07. Effect of Appointment of Successor Indenture Trustee.
Each successor Indenture Trustee shall forthwith, without further act or
deed, succeed to all the rights and duties of its predecessor in trust
under this Indenture and the Authorization Agreement. Upon the written
request of the successor Indenture Trustee or the Shipowner and upon
payment by the Shipowner of all amounts due to such predecessor Indenture
Trustee under this Indenture, such predecessor Indenture Trustee shall
promptly deliver to such successor Indenture Trustee all sums held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the
successor Indenture Trustee under this Indenture and shall transfer, assign
and confirm to the successor Indenture Trustee all its rights under this
Indenture in such manner as deemed by such successor Indenture Trustee or
the Shipowner to be necessary or appropriate in connection therewith and
the predecessor Indenture Trustee shall have no liability for any actions
taken by the successor Indenture Trustee.
(AA) CONCERNING SECTION 9.01. Section 9.01(a) is revised to read as
follows:
(a) Except as herein otherwise expressly provided, an Act of Obligees shall
become effective when it is delivered to the Indenture Trustee and, where
it is expressly required, to the Shipowner and the Secretary. Proof of
execution of any instrument appointing an agent or attorney to execute an
Act of Obligees made in the manner of subsection (b) below shall be
sufficient and conclusive for any purpose of this Indenture.
(BB) CONCERNING SECTION 12.01. Section 12.01(a) is revised to read as
follows:
SECTION 12.01. Satisfaction and Discharge of Indenture. Whenever all
Outstanding Obligations authenticated and delivered hereunder shall have
been Retired or Paid the Indenture Trustee shall forthwith deliver to the
Shipowner and the Secretary a duly executed instrument, in form submitted
to it by the Shipowner and reasonably satisfactory to the Secretary and the
Indenture Trustee, satisfying and discharging this
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Indenture and, at the time such form of instrument is submitted to the
Indenture Trustee the Shipowner shall deliver to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that all
conditions precedent herein provided relating to the satisfaction and
discharge of this Indenture have been complied with. Notwithstanding the
satisfaction and discharge of this Indenture, the Obligations of the
Shipowner to the Indenture Trustee under Section 7.04 shall survive.
(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") shall not be entitled to receive separate
certificated Notes ("Definitive Obligation") and shall 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
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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, with a copy to the Indenture
Trustee, 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.
(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 shall promptly make
available to the Indenture Trustee a reasonable supply of Definitive
Obligations.
19
<PAGE> 80
(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.
6. MISCELLANEOUS.
(A) CONCERNING NOTICES. Subject to the provisions of Section 13.01 of
Exhibit 1 to this Indenture, any notice, request, demand, direction, consent,
waiver, approval or other communication to be given to a party hereto or the
Secretary, shall be deemed to have been sufficiently given or made when
addressed to:
20
<PAGE> 81
The Indenture Trustee as: ALLFIRST TRUST COMPANY,
NATIONAL ASSOCIATION
25 South Charles St.
16th Floor
(Mail Code 101-591)
Baltimore, MD 21201
The Shipowner as: ROWAN COMPANIES, INC.
Suite 5450
2800 Post Oak Boulevard
Houston, Texas 77056-6196
Attn: Chief Financial Officer
The Secretary as: SECRETARY OF TRANSPORTATION
c/o Maritime Administrator
U.S. Department of Transportation
400 Seventh Street, SW
Washington, D.C. 20590
(B) CONCERNING APPLICABLE LAW. This Indenture and each Obligation shall be
governed by the federal laws of the United State of America, but to the extent
that they are inapplicable by the laws of the State of New York.
(C) EXECUTION OF COUNTERPARTS. This Indenture may be executed in any number
of counterparts. All such counterparts shall be deemed to be originals, and
shall constitute but one and the same instrument.
21
<PAGE> 82
IN WITNESS WHEREOF, this Trust Indenture has been duly executed by the
parties hereto as of the day and year first above written.
(SEAL) ROWAN COMPANIES, INC.
Shipowner
ATTEST:
Mark H. Hay By: E.E. Thiele
- --------------------------- --------------------
Senior Vice President
ALLFIRST TRUST COMPANY
NATIONAL ASSOCIATION
Indenture Trustee
ATTEST:
Donald C. Hargadon By: Robert D. Brown
- --------------------------------- --------------------
Assistant Vice President Vice President
22
<PAGE> 83
SCHEDULE A TO THE INDENTURE DOCUMENT 5
SCHEDULE OF DEFINITIONS
"Act" means the Merchant Marine Act, 1936, as amended and in effect on
the Closing Date.
"Act of Obligees" means any request, demand, authorization, direction,
notice, consent, waiver or other action to be given or taken by the Obligees
and embodied in one or more documents as required by the Indenture.
"Actual Knowledge" means actual knowledge of a Responsible Officer of
a Person.
"Administrative Agent" means CITICORP NORTH AMERICA, INC., a Delaware
corporation, as administrative agent for the Primary Lender and the commercial
paper holders of the Primary Lender (and their respective successors and
assigns), and its permitted successors and assigns.
"Agent" means each of the Administrative Agent and the Facility Agent,
individually, and "Agents" means the Administrative Agent and the Facility
Agent, collectively.
"Alternate Lender" means CITIBANK, N.A., a national banking
association and its successors and assigns.
"Applicable Interest Rate" shall mean
(a)(i) with respect to any Disbursement or portion thereof that is
funded by the Primary Lender through its issuance of commercial paper notes and
so long as the Primary Lender is the holder of the indebtedness related to such
funded portion, a rate (the "CP Rate") equal to the sum of (A) the Primary
Lender's weighted average cost (defined below) related to the issuance of
commercial paper notes and other short-term borrowings or the sale of
participation interests (collectively, "Commercial Paper"), which in each case
have been allocated by the Primary Lender to the Credit Facility, which rate
includes related issuance costs incurred by the Primary Lender, plus (B)
three-tenths of one percent (.30%), as calculated by the Administrative Agent
for each Interest Period and specified in a notice sent by the Administrative
Agent to the Facility Agent and by the Facility
<PAGE> 84
Agent to the Shipowner and the Indenture Trustee at least five (5) Business
Days prior to each Interest Payment Date on which the interest so calculated is
payable (For purposes of the foregoing, the Primary Lender's "weighted average
cost" of Commercial Paper shall consist of (I) the actual interest rate paid to
purchasers of Commercial Paper, (II) the costs associated with the issuance of
the Commercial Paper and (III) other borrowings the Primary Lender may incur,
including the amount to fund small or odd dollar amounts that are not easily
accommodated in the commercial paper market); and
(ii) with respect to any Disbursement funded by the Alternate
Lender or to the extent that a Disbursement held by the Primary Lender is
assigned to the Alternate Lender or to any other assignee, then, from and after
the applicable Disbursement Date or the effective date of such assignment, as
the case may be, a rate per annum equal to LIBOR plus three tenths of one
percent (0.30%) per annum; provided, however, that, if the Alternate Lender
shall have determined, prior to the commencement of any Interest Period that:
(A) Dollar deposits of sufficient amount and maturity for funding a
Disbursement are not available to such Lender in the London interbank market in
the ordinary course of business; or (B) by reason of circumstances affecting
the relevant market, adequate and fair means do not exist for ascertaining the
rate of interest to be applicable to a Disbursement; or (C) the relevant rate
of interest referred to in the definition of LIBOR which is to be used to
determine the rate of interest for a Disbursement does not cover the funding
cost to the Lender of making or maintaining the Disbursement, then the Lender
shall so notify the Indenture Trustee, who shall give notice to the Shipowner
of such condition and interest shall, effective as of the date of such notice
and so long as such condition shall exist, accrue during each applicable
Interest Period at the Base Rate; provided, further, however that if, in the
Lender's reasonable judgment, it becomes unlawful at any time for such Lender
to make or maintain Disbursements based upon LIBOR, the Lender shall so notify
the Indenture Trustee, who shall give notice to the Shipowner of such
determination and, effective as of the date of such notice and so long as such
condition shall exist, interest shall thereafter accrue during each applicable
Interest Period at the Base Rate.
(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.
2
<PAGE> 85
"Authorization Agreement" means the Authorization Agreement, Contract
No. MA-13539, between the Secretary and the Indenture Trustee, whereby the
Secretary authorizes the Guarantee of the United States to be endorsed on each
of the Obligations, as the same is originally executed, or as modified, amended
or supplemented therein.
"Authorized Newspapers" means The Wall Street Journal and The Journal
of Commerce or if they cease to exist, then in such other newspapers as the
Secretary may designate.
"Available Amount" shall have the meaning set forth in Section 2.01 of
the Credit Agreement.
"Base Rate" means, for any Interest Period or any other period, a
fluctuating interest rate per annum as shall be in effect from time to time
which rate per annum shall at all times be equal to the higher of:
(a) the rate of interest announced publicly by Citibank, N.A.
in New York, New York, from time to time, as Citibank, N.A.'s
base rate; or
(b) one-half of one percent (0.50%) per annum above the
latest three-week moving average of secondary market morning
offering rates in the United States for three-month
certificates of deposit of major United States money market
banks, such three-week moving average being determined weekly
on each Monday (or, if any such day is not a Business Day, on
the next succeeding Business Day) for the three-week period
ending on the previous Friday by Citibank, N.A. on the basis
of such rates reported by certificate of deposit dealers to
and published by the Federal Reserve Bank of New York, or, if
such publication shall be suspended or terminated, on the
basis of quotations for such rates received by Citibank, N.A.
from three New York certificate of deposit dealers of
recognized standing selected by Citibank, N.A., in either
case adjusted to the nearest one-fourth of one percent
(0.25%) or, if there is no nearest one-fourth of one percent,
to the next higher one-fourth of one percent.
"Borrower" means the Shipowner.
3
<PAGE> 86
"Business Day" shall mean any day on which dealings in Dollar deposits
are carried on in the London interbank market and on which commercial banks in
London and New York City are open for domestic and foreign exchange business.
"Cede" means Cede & Company.
"Certificate Authorizing Disbursement" shall mean, with respect to a
Disbursement, the United States Certificate Authorizing Disbursement
substantially in the form set forth in Annex A to the Credit Agreement.
"Commercial Paper" shall have the meaning set forth in clause (a)(i)of the
definition of Applicable Interest Rate herein.
"Construction Contract" means that certain Mobile Platform
Construction Agreement (LeTourneau Hull No. 221), dated December 18, 1996, by
and between the Shipowner and the Shipyard, as the same may be amended,
modified or supplemented in accordance with the applicable provisions thereof.
"Construction Period" shall mean the period from the date hereof to
the Delivery Date.
"Construction Period Interest" shall mean all interest that accrues on
the Outstanding Principal during the Construction Period.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which, at any time, its corporate trust business is principally
administered, which office is currently located at 25 South Charles Street,
16th Floor, Mail Code 101-591, Baltimore, Maryland 21201.
"CP Rate" shall have the meaning set forth in clause (a)(i) of the
definition of Applicable Interest Rate herein.
"Credit Agreement" or "Agreement" shall mean the Credit Agreement,
dated as of the Closing Date, among the Shipowner, the Lenders, and the Agents,
including any Exhibit, Annex, or other attachment thereto, as the same may be
amended, modified or supplemented.
"Credit Facility" shall have the meaning set forth in Whereas Clause
(A) of the Credit Agreement.
4
<PAGE> 87
"DTC" means The Depository Trust Company.
"Definitive Obligation" has the meaning specified in Section 5(cc) of
the Special Provisions of the Indenture.
"Delivery Date" means the date on which the Vessel is delivered to and
accepted by the Shipowner.
"Disbursement" shall have the meaning set forth in Section 2.03 of the
Credit Agreement.
"Disbursement Date" shall mean, in relation to any Disbursement, the
Business Day on which the Lender shall make such Disbursement.
"Facility Agent" means CITIBANK INTERNATIONAL plc, a bank organized
and existing under the laws of England, as facility agent for both the Primary
Lender and the Alternate Lender (and their respective successors and assigns),
and its permitted successors and assigns.
"Final Disbursement Date" shall have the meaning set forth in Section
2.02 of the Credit Agreement.
"Fixed Rate Note" shall mean an Obligation substantially in the form
of Exhibit 3 to the Indenture, appropriately completed.
"Floating Rate Note" shall mean the Obligation substantially in the
form of Exhibit 2 to the Indenture, appropriately completed.
"Global Obligation" has the meaning specified in Section 5(cc) of the
Special Provisions of the Indenture.
"Guarantee" means each, and the "Guarantees" means every, guarantee of
an Obligation by the United States pursuant to Title XI of the Act, as provided
in the Authorization Agreement.
"Holder" means each, and "Holders" means every, registered holder of
an Obligation.
"Indenture" means the Trust Indenture dated as of the Closing Date
between the Shipowner and the Indenture Trustee, as originally executed, or as
modified, amended or supplemented.
5
<PAGE> 88
"Indenture Default" has the meaning specified in Article VI of the
Indenture.
"Indenture Trustee" means ALLFIRST TRUST COMPANY, NATIONAL
ASSOCIATION, a national banking association, and any successor trustee under
the Indenture.
"Interest Payment Date" means with respect to any Obligation, the date
when any installment of interest on such Obligation is due and payable.
"Interest Period" shall mean, with respect to any Disbursement, (i)
the period commencing on the Disbursement Date and extending up to, but not
including, the next Interest Payment Date; and (ii) thereafter the period
commencing on each Interest Payment Date and extending up to, but not
including, the next Interest Payment Date.
"Lender" shall mean either the Primary Lender or the Alternate Lender,
as the case may be, depending on which of the two parties made or will make the
relevant disbursement of funds under the Credit Agreement; provided, however,
that if the Primary Lender assigns its rights under the Credit Agreement to the
Alternate Lender, the term "Lender," shall mean only the Alternate Lender,
CITIBANK, N.A., a national banking association, and its successors and assigns.
"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.
"LIBOR" shall mean, in relation to any Interest Period, the rate of
interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%)
quoted by the principal London office of CITIBANK, N. A., at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for the offering to leading banks in the London interbank
market of U.S. Dollar deposits for a period and in an amount comparable to such
Interest Period and the principal amount upon which interest is to be paid
during such Interest Period.
"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.
6
<PAGE> 89
"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 such Obligation becomes due and payable as therein
provided, whether at the Stated Maturity or by redemption or declaration of
acceleration or otherwise.
"Mortgage" means the first preferred ship mortgage on the Vessel,
Contract No. MA-13541, by the Shipowner to the Secretary, as originally
executed, modified, amended or supplemented.
"Note" shall mean a Floating Rate Note or a Fixed Rate Note (as the
case may be).
"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 Section 5(cc) of the
Special Provisions of the Indenture.
"Obligation Register" has the meaning specified in Section 2.07 of
Exhibit 1 to the Indenture.
"Obligee" means each, and "Obligees" means every, Holder of an
Obligation.
"Officer's Certificate" means a certificate conforming to Section 1.02
of the Indenture.
"Original Issue Date" means a date on which an Obligation was
initially authenticated by the Indenture Trustee even if the Obligation is
subsequently given a later date by reason of transfer, exchange or
substitution.
"Outstanding" when used with reference to the Obligations, shall mean
all Obligations theretofore issued under the Indenture, except: (1) Obligations
Retired or Paid; and (2) Obligations in lieu of which other Obligations have
been issued under the Indenture. Obligations which are not Outstanding shall
not be entitled
7
<PAGE> 90
to any rights or benefits provided in the Indenture. For the purposes of
Articles VI and X of the Indenture, and also in determining whether the Holders
of a stated percentage of the principal amount of Outstanding Obligations have
made an Act of Obligees required or permitted by the Indenture, Obligations
owned by the Shipowner or by any Affiliate of the Shipowner shall be
disregarded and deemed not to be Outstanding; provided that, for the purpose of
determining whether the Indenture Trustee shall be protected in relying on any
such Act of Obligees, only Obligations of which the Indenture Trustee has
Actual Knowledge are so owned shall be so disregarded and deemed not to be
Outstanding.
"Paying Agent" means any bank or trust company meeting the
qualifications in Sections 7.02(a) of the Indenture and appointed by the
Shipowner under Section 4.02 of the Indenture to pay the principal of (and
premium if any) or interest on the Obligations on behalf of the Shipowner.
"Payment Default" has the meaning specified in Section 6.01 of the
Indenture.
"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
"Person" or "Persons" means any individual, corporation, partnership,
joint venture, association, limited liability company, joint-stock company,
trust, unincorporated organization, government, or any agency or political
subdivision thereof.
"Primary Lender" means GOVCO INCORPORATED, a Delaware corporation, and
its successors and assigns.
"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.
"Redemption Date" means a date fixed for the redemption of an
Obligation by the Indenture.
"Redemption Price" means the price at which an Obligation is redeemed
under the Indenture.
8
<PAGE> 91
"Reinvestment Rate" means the yield determined by the Indenture
Trustee, based on information received from the Holder or calculation agent, 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.
"Request" means a written request to a Person for the action therein
specified, signed by a Responsible Officer of the Person making such request.
"Responsible Officer" means (1) in the case of any business entity,
the chairman of the board of directors, the president, any executive or senior
vice president, the secretary, the treasurer, member or partner, (2) in the
case of any commercial bank or trust company, the chairman or vice-chairman of
the executive committee of the board of directors or trustees, the president,
any executive or senior vice president, any vice president, the secretary, the
treasurer, or any trust officer, and (3) with respect to the signing or
authentication of Obligations and Guarantees by the Indenture Trustee, any
person specifically authorized by the Indenture Trustee to sign or authenticate
Obligations.
"Retired or Paid," as applied to Obligations and the indebtedness
evidenced thereby, means that such Obligations shall be deemed to have been so
retired or paid and shall no longer be entitled to any rights or benefits
provided in the Indenture if: (1) such Obligations shall have been paid in
full; (2) such
9
<PAGE> 92
Obligations shall have been canceled by the Indenture Trustee and shall have
been delivered to the Indenture Trustee for cancellation; or (3) such
Obligations shall have become due and payable at Maturity and funds sufficient
for the payment of such Obligations (including interest to the date of
Maturity, or in the case of a payment after Maturity, to the date of payment,
together with any premium thereon) and available for such payment (whether as a
result of payment pursuant to the Guarantees or otherwise) shall be held by the
Indenture Trustee or any Paying Agent in trust for the purpose, or with
irrevocable directions, to apply the same; provided that, the foregoing
definition is subject to Section 6.08 of the Indenture.
"Secretary" means the Secretary of Transportation.
"Secretary's Notice" means a notice from the Secretary to the
Indenture Trustee that a Default, within the meaning of Section 6.01(b) of the
Security Agreement has occurred.
"Secretary's Supplemental Indenture" means a Supplemental Indenture,
pursuant to Section 6.09 of the Indenture, evidencing the succession of the
Secretary to the Shipowner, and the Secretary's assumption of the Shipowner's
obligations under the Indenture.
"Security Agreement" means the security agreement, Contract No.
MA-13540, dated as of the Closing Date, consisting of the special provisions,
the general provisions and Schedule X thereto, executed by the Shipowner as
security for the Secretary, as originally executed or as modified, amended or
supplemented.
"Shipowner" means ROWAN COMPANIES, INC., a Delaware corporation, and
shall include its successors and assigns.
"Stated Maturity" means the date determinable as set forth in any
Obligation as the final date on which the principal of such Obligation is due
and payable.
"Title XI" means Title XI of the Act.
"Vessel" means the Shipowner's self-elevating mobile offshore drilling
unit to be named the GORILLA VII and constructed by LETOURNEAU, INC. in
accordance with the Construction Contract, including all work and material
10
<PAGE> 93
heretofore or hereafter performed upon or installed in or placed on board such
Vessel, together with related appurtenances, additions, improvements, and
replacements.
"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 total amount of the then remaining
aggregate unpaid principal amount of such Fixed Rate Notes (without giving
effect to the subject Redemption).
11
<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
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Weighted average shares of common stock
outstanding 83,176 85,641 86,184
Stock options (treasury stock method) 541 804 1,803
Shares issuable from assumed conversion of
floating rate subordinated debentures 738 844 1,236
-------- -------- --------
Weighted average shares for diluted
earnings (loss) per share calculation 84,455 87,289 89,223
======== ======== ========
Income (loss) before extraordinary charges $ (9,666) $124,460 $156,425
Extraordinary charges from early redemption of debt 9,766
-------- -------- --------
Net income (loss) for basic calculation (9,666) 124,460 146,659
Subordinated debenture interest 172
-------- -------- --------
Net income (loss) for diluted calculation $ (9,666) $124,460 $146,831
======== ======== ========
Basic earnings (loss) per share:
Income (loss) before extraordinary charges $ (.12) $ 1.45 $ 1.82
Extraordinary charges .12
-------- -------- --------
Net income (loss) $ (.12) $ 1.45 $ 1.70
======== ======== ========
Diluted earnings (loss) per share:
Income (loss) before extraordinary charges $ (.11)(A) $ 1.43 $ 1.76
Extraordinary charges .11
-------- -------- --------
Net income (loss) $ (.11)(A) $ 1.43 $ 1.65
======== ======== ========
</TABLE>
Note: Reference is made to Note 1 to Consolidated Financial Statements regarding
computation of per share amounts.
(A) This calculation is submitted in accordance with regulation S-K Item
601(b)(11) although it is contrary to Statement of Financial Accounting
Standards No. 123 because it produces an antidilutive result.
<PAGE> 1
EXHIBIT 13
- --------------------------------------------------------------------------------
TEN-YEAR FINANCIAL REVIEW
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands except per share amounts and ratios) 1999 1998 1997
-------------- ----------- ----------------
<S> <C> <C> <C>
OPERATIONS
Revenues:
Drilling services $ 260,939 $ 431,664 $ 434,004
Manufacturing sales and services 95,545 158,913 154,852
Aviation services 104,078 115,773 106,396
--------------- ----------- ----------------
Total 460,562 706,350 695,252
--------------- ----------- ----------------
Costs and expenses:
Drilling services 214,230 219,628 217,935
Manufacturing sales and services 88,431 134,542 134,422
Aviation services 94,413 101,899 96,390
Depreciation and amortization 54,699 49,703 47,078
General and administrative 18,399 18,366 16,971
--------------- ----------- ----------------
Total 470,172 524,138 512,796
--------------- ----------- ----------------
Income (loss) from operations (9,610) 182,212 182,456
--------------- ----------- ----------------
Other income (expense):
Interest expense (22,755) (17,500) (26,208)
Less interest capitalized 11,238 16,264 9,966
Gain on disposals of property,
plant and equipment 1,482 5,125 1,541
Interest income 4,583 7,205 5,190
Other - net 526 395 343
--------------- ----------- ----------------
Other income (expense) - net (4,926) 11,489 (9,168)
--------------- ----------- ----------------
Income (loss) before income taxes (14,536) 193,701 173,288
Provision (credit) for income taxes (4,870) 69,241 16,863
--------------- ----------- ----------------
Income (loss) before extraordinary charges (9,666) 124,460 156,425
Extraordinary charges from redemption of debt 9,766
--------------- ----------- ----------------
Net income (loss) $ (9,666) $ 124,460 $ 146,659
--------------- ----------- ----------------
Per share of common stock:
Net income (loss):
Basic $ (.12) $ 1.45 $ 1.70(2)
--------------- ----------- ----------------
Diluted $ (.12) $ 1.43 $ 1.65(2)
--------------- ----------- ----------------
Cash dividends $ -- $ -- $ --
--------------- ----------- ----------------
FINANCIAL POSITION
Working capital $ 122,792(1) $ 286,059 $ 330,852
Property, plant and equipment - at cost:
Drilling equipment 1,268,704 1,238,361 965,292
Aircraft and related equipment 221,776 211,313 202,044
Manufacturing plant and equipment 83,835 75,949 60,902
Construction in progress 248,567 127,075 195,996
Other property and equipment 113,008 108,353 94,476
--------------- ----------- ----------------
Total 1,935,890 1,761,051 1,518,710
--------------- ----------- ----------------
Property, plant and equipment - net 1,025,739 877,197 677,160
Total assets 1,356,067 1,249,108 1,122,135
Capital expenditures 204,689 247,747 180,066
Long-term debt 296,677 310,250 256,150
Common stockholders' equity 723,724 729,996 653,098
--------------- ----------- ----------------
STATISTICAL INFORMATION
Current ratio 1.61(1) 4.59 5.06
Long-term debt/total capitalization .29 .30 .28
Book value per share of common stock $ 8.69 $ 8.77 $ 7.53
Price range of common stock $8 1/2-21 11/16 $ 9-32 1/2 $16 3/4-43 15/16
=============== =========== ================
</TABLE>
(1) Amounts reflect advances of $110 million outstanding under the Company's
$155 million bank revolving credit facility expiring in October 2000. The
Company repaid such advances during February 2000 from the approximately
$247 million net proceeds of a stock offering and cancelled the facility.
Giving effect to these transactions at December 31, 1999, the Company's
Working capital and Current ratio would have been approximately $369,592
and 5.00, respectively.
(2) After extraordinary charges from early debt redemption of $.12 and $.11 per
share, respectively
(3) After extraordinary charge from early debt redemption of $.08 per share
(4) At December 31, 1991, the $125,000,000 principal amount of the Company's
13 3/4% Senior Notes had been called for redemption and appeared as a
current liability. If redemption had occurred prior to year end, the
current ratio would have been 3.61.
10
<PAGE> 2
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 316,123 $ 250,080 $ 245,917 $ 271,022 $ 162,121 $ 170,739 $ 180,118
143,768 133,755 96,664
111,269 87,462 95,578 82,174 87,877 101,433 111,992
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
571,160 471,297 438,159 353,196 249,998 272,172 292,110
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
202,878 207,934 207,577 211,095 162,816 147,853 130,845
131,665 120,378 87,382
93,473 79,993 79,955 68,882 74,347 82,364 88,182
47,882 50,555 50,790 51,918 51,367 52,954 50,702
16,591 14,692 13,862 13,940 12,092 11,739 9,549
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
492,489 473,552 439,566 345,835 300,622 294,910 279,278
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
78,671 (2,255) (1,407) 7,361 (50,624) (22,738) 12,832
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(27,547) (27,702) (27,530) (25,361) (26,254) (21,379) (21,601)
2,516
2,359 6,598 1,344 1,955 731 1,660 3,996
4,157 5,209 4,813 2,348 2,658 4,763 8,635
374 468 260 150 165 127 178
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
(18,141) (15,427) (21,113) (20,908) (22,700) (14,829) (8,792)
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
60,530 (17,682) (22,520) (13,547) (73,324) (37,567) 4,040
(808) 754 469 (288) 429 1,174 2,081
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
61,338 (18,436) (22,989) (13,259) (73,753) (38,741) 1,959
5,627
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 61,338 $ (18,436) $ (22,989) $ (13,259) $ (73,753) $ (44,368) $ 1,959
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ .72 $ (.22) $ (.27) $ (.17) $ (1.01) $ (.61)(3) $ .03
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ .70 $ (.22) $ (.27) $ (.17) $ (1.01) $ (.61)(3) $ .03
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ -- $ -- $ -- $ -- $ -- $ -- $ --
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 232,045 $ 200,588 $ 195,945 $ 172,117 $ 61,397 $ 125,996 $ 134,393
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
954,249 944,021 961,391 950,538 939,793 913,379 885,264
188,681 189,954 176,874 166,791 162,001 158,361 138,327
37,377 25,037 18,955
77,318
94,517 91,089 86,883 81,636 79,801 76,251 73,504
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
1,352,142 1,250,101 1,244,103 1,198,965 1,181,595 1,147,991 1,097,095
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
546,200 487,039 506,121 507,193 537,819 552,481 549,608
899,308 802,488 805,179 765,263 684,301 895,889 739,133
117,947 33,881 43,377 21,989 39,528 85,618 59,905
267,321 247,744 248,504 207,137 212,907 220,764 153,621
496,219 429,155 442,347 460,300 375,754 445,368 485,748
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
3.72 3.75 4.39 4.90 2.47 1.71(4) 4.00
.35 .37 .36 .31 .36 .33 .24
$ 5.80 $ 5.06 $ 5.25 $ 5.49 $ 5.13 $ 6.11 $ 6.69
$ 8 7/8-24 1/2 $ 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
============== ============== ============== ============== ============== ============== ==============
</TABLE>
11
<PAGE> 3
- --------------------------------------------------------------------------------
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>
1999 1998 1997
------------ ------------ ------------
Revenues:
<S> <C> <C> <C>
Drilling $ 260.9 $ 431.7 $ 434.0
Manufacturing 95.6 158.9 154.9
Aviation 104.1 115.8 106.4
------------ ------------ ------------
Total $ 460.6 $ 706.4 $ 695.3
============ ============ ============
Operating Profit (Loss)*:
Drilling $ 11.8 $ 180.1 $ 185.0
Manufacturing 0.7 18.9 16.3
Aviation (3.7) 1.6 (1.9)
------------ ------------ ------------
Total $ 8.8 $ 200.6 $ 199.4
============ ============ ============
Net Income (Loss) $ (9.7) $ 124.5 $ 146.7
============ ============ ============
</TABLE>
* Income (loss) from operations before deducting general and administrative
expenses
The doubling of world oil prices during 1999 did not reverse the effects of
their collapse during the previous year, and drilling activity, which began
slumping in mid-1998, has only recently begun to recover, and then only in
certain locations. As a result, while current and expected market conditions are
generally much improved over this time one year ago, 1999 proved to be one of
the worst years in the history of the contract drilling business, and, as
illustrated above, the Company's 1999 financial results were severely impacted.
Nineteen ninety-seven marked the third consecutive year of increasingly
favorable economic conditions in the contract drilling business. In particular,
growing worldwide demand for energy products, stable energy prices coupled with
reduced finding and recovery costs and the declining supply of capable equipment
prompted a surge in drilling activity throughout the world. With its existing
offshore drilling fleet virtually 100% utilized from mid-1995 through mid-1998,
and at continually increasing drilling day rates, the Company implemented during
this period a strategic plan aimed at significantly expanding its revenue base
primarily through the construction of newer and more capable offshore drilling
equipment.
Nineteen ninety-eight began with oil prices in decline, but still at
traditionally profitable levels. However, months of increased worldwide
production coupled with stagnant oil demand, particularly in Asia, kept downward
pressure on oil prices. When per barrel prices approached $15.00 during the
second quarter, market conditions began to measurably weaken. At that point,
energy companies began suspending portions of their drilling programs and
reducing their 1998 drilling budgets. By mid-year, the Company began
experiencing curtailed drilling assignments in its most prominent market, the
Gulf of Mexico, and was forced to offer significantly reduced day rates. During
the latter part of 1998, with oil prices at historical lows, the Company's
domestic day rates were at levels less than half of that obtained earlier in the
year, and its fleet utilization suffered dramatically. Though the Company's 1998
drilling operations yielded revenues and results comparable to the record levels
attained in 1997, the trend over the last half of the year was decidedly
unfavorable.
Nineteen ninety-nine brought serious oil production discipline on the part of
OPEC and certain non-OPEC nations. The restriction of oil supply, together with
a resurgence of growing demand, caused oil prices to more than double during the
year to levels not seen since the 1991 Gulf War. However, this extreme price
volatility over the past two years has most energy companies proceeding with
caution, and significantly higher oil prices have only recently increased
drilling activity. After the significant reduction in exploration and production
expenditures in 1999, most surveys of energy company budgets indicate
expenditures should be higher in 2000, especially in domestic markets like the
Gulf of Mexico.
The Company's manufacturing division has continued to provide meaningful returns
while playing a lead role in the Company's offshore drilling fleet expansion
program, though 1999 results were impaired by the effects of weak commodity
prices. During 1999, the manufacturing division achieved significant progress on
Gorilla VI and began construction of Gorilla VII. During 1998, the division
delivered the Company's Gorilla V jack-up and completed for others the design
and major components comprising a "kit" 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 and, in 1999, reduced energy-related flying activity.
Results for 1998 included higher provisions for income taxes due primarily to
the availability, in prior years, of offsetting tax credit and loss
carryforwards.
From late 1995 through early 1997, the Company's results were impaired by
unsuccessful 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. 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
redemption premiums.
12
<PAGE> 4
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 offshore eastern
Canada. Such rates and activity are primarily determined by the level of
offshore expenditures by energy companies and the availability of competitive
equipment.
For most of the 1996 - 1997 period, the demand for offshore drilling equipment
effectively equaled or exceeded the supply, particularly in the areas in which
the Company operates, largely due to the effects of growing worldwide demand for
oil and natural gas. Activity and day rates in the Gulf of Mexico were enhanced
by strong natural gas prices, while North Sea utilization held at virtually 100%
due to the scarcity of harsh environment drilling equipment.
During this period, technological advances such as horizontal drilling and
production techniques and 3-D seismic took hold and 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 into early 1998 and the Company's operations, featuring
long-legged jack-ups designed for harsh environments, yielded record results.
In 1998, the collapse of oil and natural gas prices caused a substantial decline
in offshore drilling, especially in the highly competitive Gulf of Mexico
market. Energy companies were quick to reduce their drilling commitments: first
they allowed options on the primarily short-term contracts to lapse and then
they cancelled planned drilling projects altogether. The announcements of
several energy company mergers further impaired drilling activity due to the
uncertainty created within the merging companies' drilling staffs, plans and
budgets. The more exclusive markets like the North Sea, with premium equipment
and generally longer-term contracts, were more resilient, though by year end,
indications of future deterioration, such as the early cancellation of term
contracts, were apparent. As a result, the Company's Gulf of Mexico fleet
suffered a 20% decline to 79% utilization in 1998 while its six North Sea rigs
were 90% utilized. The Company's efforts to maintain Gulf of Mexico day rates
provided a nominal increase in average day rates in 1998 compared to 1997,
though average rates still declined by as much as 50% during 1998, while the
North Sea fleet averaged a 44% increase in day rates between years.
Market conditions in the Gulf of Mexico continued deteriorating in early 1999 as
oil prices averaged around $13.00 per barrel and natural gas remained below
$2.00 per mcf during the first quarter. Most energy companies had announced and
begun carrying out a significant reduction in domestic expenditures from their
already reduced 1998 levels, though enough independents took advantage of
bargain drilling day rates to afford an increase in drilling activity beginning
in the second quarter. They were emboldened by recovering oil prices, brought
about primarily through supply restrictions on the part of major oil-producing
nations, and strengthening natural gas prices. Gulf of Mexico activity continued
improving throughout the latter half of the year and day rates, which bottomed
in the third quarter, began improving dramatically during the fourth quarter.
The Company's Gulf of Mexico fleet was 69% utilized during 1999 and suffered a
56% decline in average day rates from 1998.
In the North Sea, demand for jack-ups continued declining throughout 1999. As
rigs fulfilled their contractual commitments, they quickly became idle with
little prospects for immediate work. Accordingly, during the latter half of
1999, the Company relocated three cantilever jack-ups from the North Sea to the
improving Gulf of Mexico market. Gorilla V, idle due to a contract dispute, was
relocated to the promising eastern Canada market during the fourth quarter. The
Company's North Sea fleet was only 52% utilized during 1999, though average day
rates, due to the increased weighting of Gorilla IV operations, increased by 17%
over 1998. While confident in the market's long-term viability, particularly for
its Super Gorilla jack-ups, the Company believes that North Sea jack-up drilling
activity may not begin recovering until late in the third quarter of 2000, and
recently elected to relocate its remaining two rigs from the area to the Gulf of
Mexico during the first quarter of 2000. The addition of Gorilla IV and the Arch
Rowan will increase the Company's Gulf of Mexico fleet to 18 jack-up rigs, ten
of which will be capable of operating in 350 feet of water and one capable of
operating in up to 450 feet of water.
Gorilla III has been 100% utilized since 1991 as a combination
drilling/production unit offshore eastern Canada. The Company expanded its
Canadian presence during early 1998 with the relocation of Gorilla II and added
Gorilla V during the fourth quarter of 1999.
Overall, the Company's worldwide fleet of 21 jack-ups (two of which are leased
through early 2008) was utilized 68%, 85% and 99% in 1999, 1998 and 1997,
respectively, while the Company's semi-submersible achieved utilization of 60%,
62% and 99%, respectively. The Company considers only revenue-producing days in
computing rig utilization.
13
<PAGE> 5
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>
1998 to 1999 1997 to 1998
------------ ------------
<S> <C> <C>
Utilization $ (59.9) $ (54.4)
Drilling rates (110.9) 52.1
--------- -----------
</TABLE>
These fluctuations caused a $170.8 million or 40% decrease in 1999 drilling
revenues compared to 1998, which was about 1% lower than 1997. Contract drilling
expenses were about 2% lower in 1999 compared to 1998, which was 11% higher than
1997.
The Company's land drilling operations experienced a 12% decline in activity and
a 17% decrease in average day rates in 1999 for the reasons noted previously.
Two of the Company's deep-well land rigs were under contract for most of 1999
and five other rigs worked sporadically in Louisiana, Texas and Mississippi
throughout the year. The Company's seven other land rigs were idle during 1999.
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 generally operates are shown below:
GULF OF MEXICO - Moderately improving exploration and development activity
NORTH SEA - Reduced levels of jack-up drilling activity in the near-term
EASTERN CANADA - Generally stable demand for harsh environment equipment
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. At current levels, the Company's drilling operations are
profitable, but there can be no assurance that existing and anticipated market
conditions will be sustained. The Company's operations will be adversely
affected should market conditions deteriorate.
The Company continues to pursue all legal remedies in connection with the
wrongful termination of its one-year North Sea drilling contract for Gorilla V.
In January 1999, the Company received notification from a customer that the $67
million contract was being terminated for an alleged performance breach relating
to certain equipment problems. The Company believes it did not breach the
contract and will continue to vigorously pursue enforcement of its rights under
the contract.
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 and
flightseeing, and has developed and sold auxiliary fuel tanks for helicopters.
Aviation revenues declined by 10% in 1999 compared to 1998, which was 9% higher
than 1997. Aviation division expenses in 1999 were down by 7% from 1998, which
was 6% higher than 1997. During 1999, the Company experienced a 17% decrease in
forest fire control revenues, which was partially offset by a 7% increase in
tourism-related revenues. Flying for energy companies primarily in the Gulf of
Mexico declined by about 11% in 1999 due to the effects of the aforementioned
decline in offshore drilling activity.
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>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Twin-engine helicopters:
Number 64 64 63
Revenue hours 26,436 30,124 32,504
Single-engine helicopters:
Number 31 26 31
Revenue hours 12,542 14,422 14,652
Fixed-wing aircraft:
Number 18 21 21
Revenue hours 21,003 22,465 22,042
========== ========== ==========
</TABLE>
On January 30, 1998, the Company agreed to terminate its ownership in KLM ERA
Helicopters, its Dutch affiliate, in return for cash and equipment approximating
the carrying value of its 49% interest.
14
<PAGE> 6
Perceptible trends existing in the aviation markets in which the Company
continues to operate are shown below:
ALASKA - Generally stable 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 positive operating results in
2000.
MANUFACTURING OPERATIONS. The Company's manufacturing division suffered a $63.3
million or 40% decline in revenues in 1999 compared to 1998, which was 3% higher
than 1997, and a 96% decrease in profitability between periods.
The manufacturing division experienced a $20.1 million or 22% decrease in
equipment group revenues, as weak commodities prices limited the group to sales
of 18 new mining loaders, log stackers and container stackers during 1999,
compared to 30 units in 1998, and contributed to a 17% reduction in parts sales
from the prior year. The $35.7 million or 81% decrease in marine group sales
primarily reflects the completion of two Super 116-C jack-up rig kits in late
1998. The steel group experienced a 34% decline in revenues on a 35% reduction
in external steel shipments.
Consolidated manufacturing operations exclude approximately $125 million of
products and services provided to the Company's drilling division in 1999, most
of which was attributable to construction progress on Gorillas VI and VII,
compared to $109 million in 1998. The marine group completed and delivered
Gorilla V during the fourth quarter of 1998.
Though considerably less volatile than its drilling and aviation operations, the
Company's manufacturing operations have also been adversely impacted by
depressed world commodities prices; in particular, prices for copper, iron ore,
coal, gold and diamonds. Although prices for some of these commodities have
recently improved, the Company's external manufacturing backlog remains at a
depressed level. As a result, the Company cannot accurately predict whether or
not its manufacturing operations will be profitable in 2000.
On January 31, 2000, the Company completed the acquisition of the two companies
that manufacture Ellis Williams (EWCO) mud pumps. These pumps range in size from
350 to 2,200 horsepower and have wide acceptance in both oilfield and
non-oilfield applications. The Company believes this acquisition will both
complement and help diversify its manufacturing operations, and expects revenues
in 2000 to be in the range of $9 to $12 million.
LIQUIDITY AND CAPITAL RESOURCES
Key balance sheet amounts and ratios for 1999 and 1998 were as follows (dollars
in millions):
<TABLE>
<CAPTION>
1999
----------------------
December 31, Actual Pro forma* 1998
- ------------------------------------ -------- --------- --------
<S> <C> <C> <C>
Cash and cash equivalents $ 87.1 $ 223.9 $ 148.8
Current assets $ 325.1 $ 461.9 $ 365.7
Current liabilities $ 202.3 $ 92.3 $ 79.6
Current ratio 1.61 5.00 4.59
Current maturities of long-term debt $ 129.1 $ 19.1 $ 12.8
Long-term debt $ 296.7 $ 296.7 $ 310.3
Stockholders' equity $ 723.7 $ 970.5 $ 730.0
Long-term debt/total capitalization .29 .23 .30
======== ======== ========
</TABLE>
* As adjusted for early 2000 stock sale and debt repayment
Reflected in the comparisons above are the effects of the following 1999
transactions: net cash provided by operations of $37.9 million; capital
expenditures of $204.7 million; proceeds from borrowings of $115.6 million; debt
repayments of $12.8 million; and the scheduled October 2000 maturity of the
Company's revolving credit facility. Pro forma 1999 amounts give effect to the
Company's sale, in early 2000, of 10.3 million shares of its common stock and
repayment, from the approximately $247 million of net proceeds, of the $110
million outstanding under the revolving credit facility, as if such transactions
had been completed at December 31, 1999.
Capital expenditures for 1999 included $90 million for Rowan Gorilla VI, an
enhanced version of the Company's Gorilla Class jack-ups featuring a combination
drilling and production capability for harsh environments, like the North Sea or
offshore eastern Canada, in water depths of up to 400 feet. Gorilla VI was
recently relocated from the Company's Vicksburg, Mississippi facility to Sabine
Pass, Texas for final outfitting and should be completed by mid-2000.
In 1998, the Company obtained financing for up to 87.5% of the cost of Gorilla
VI through a bank loan guaranteed by the U. S. Department of Transportation's
Maritime administration under its Title XI Program. Under the Title XI Program,
the Company obtains funding for Gorilla VI as construction progress is achieved
and outstanding borrowings initially bear interest at .30% 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 by the earlier of September 15, 2002
or two years following completion of construction.
15
<PAGE> 7
Interest is payable semi-annually on each March 15 and September 15 and the
principal will be repaid in 24 semi-annual installments commencing September 15,
2000. Gorilla VI is pledged as security for the government guarantee. At
December 31, 1999, the Company had drawn down about $153 million of the $171
million total credit facility, with interest rates averaging about 6.3% at year
end.
Capital expenditures during 1999 also included $31.4 million towards
construction of Rowan Gorilla VII, a harsh environment drilling and production
unit like Gorillas V and VI. Construction of Gorilla VII is proceeding at the
Company's Vicksburg facility and should be completed by year-end 2001. The
Company has secured Title XI bank financing for up to 87.5% of the cost of
Gorilla VII on terms and conditions similar to those obtained for Gorilla VI.
Outstanding borrowings initially bear interest at .30% above a short-term
commercial paper rate. The Company may fix the interest rate at any time and
must fix the rate on all outstanding principal amounts by the earlier of April
20, 2004 or two years following completion of construction. Interest is payable
semi-annually beginning April 20, 2000 and the principal will be repaid in 24
semi-annual installments commencing April 20, 2002. Gorilla VII is pledged as
security for the government guarantee. At December 31, 1999, the Company had
drawn down about $23 million of the $185 million total credit facility, with
interest rates averaging about 6.3% at year end.
Construction of Rowan Gorilla V, completed in late 1998, was substantially
financed through two government-guaranteed bank notes totaling $153.1 million
issued under the Title XI Program in 1997 and 1998. Gorilla V is pledged as
security for the government guarantee. The outstanding notes require semi-annual
payments on each January 1 and July 1 through 2010 and bear fixed interest rates
as follows: $61.4 million at 6.94% and $78.9 million at 6.15%.
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 1999 capital expenditures was primarily for major
enhancements to existing rigs and manufacturing facilities and purchases of
aircraft and components. The Company estimates 2000 capital expenditures will be
between $150 and $175 million, including $100 - 125 million for Gorillas VI and
VII. The Company expects the combined construction cost of Gorillas V, VI and
VII to be about $650 million. The Company may also spend amounts to acquire
additional aircraft as market conditions justify or to upgrade existing offshore
rigs.
In early 2000, the Company completed the sale of 10.3 million shares of its
common stock, consisting of approximately 5.8 million shares of treasury stock
and 4.5 million newly issued shares. The net proceeds of approximately $247
million were first applied to repayment of the $110 million outstanding under
the Company's $155 million bank revolving credit facility, which was
subsequently cancelled. Advances under the facility bore interest at rates
averaging about 5.7% during 1999, including 7.1% at December 31, 1999. Remaining
offering proceeds will be retained for working capital and general corporate
purposes. The Company currently has no other available credit facilities.
On January 31, 2000, in connection with the Ellis Williams acquisition, the
Company issued $3 million in 7.5% promissory notes that are repayable in equal
annual installments through January 31, 2003.
Based on current operating levels and the previously discussed market trends,
management believes that 2000 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 2000.
In March 1998, the Company repaid the balance of $36.2 million of promissory
notes originally issued in February 1994 in connection with the acquisition of
its manufacturing operations.
In April 1997, the Company redeemed $50 million of its 11 7/8% Senior Notes due
2001 and paid a 6% prepayment premium from existing funds. In December 1997,
using proceeds from a newly established revolving credit facility and existing
funds, the Company redeemed the remaining $150 million of Senior Notes and paid
a 4% prepayment premium. As a result of such transactions, the Company recorded
extraordinary charges totaling $9.8 million, net of income taxes, in 1997.
The Company did not pay any dividends on its common stock during the 1997 - 1999
period. At December 31, 1999, approximately $151 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.
During 1998 and early 1999, the Company repurchased in the open market 4,301,400
shares or almost 5% of its outstanding common stock under its Share Repurchase
Program begun in June 1998. The Company's 5,759,319 shares held in treasury at
December 31, 1999 had an average cost of $10.65 per share and were included
within the sale of 10.3 million shares of common stock in early 2000 at a net
price of $24.00 per share.
16
<PAGE> 8
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 have reduced amounts
of net income (loss) and earnings (loss) per share by $1.8 million, or $.02 per
share, in 1999, $1.2 million, or $.02 per share, in 1998 and $0.6 million, or
$.01 per share in 1997. See Note 3 of the Notes to Consolidated 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," did
not materially affect its financial statement disclosure. See Notes 1 and 6 of
the Notes to Consolidated Financial Statements.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Statement No. 133 generally requires
recognition of derivative financial instruments as assets or liabilities,
measured at fair value. In June 1999, through the issuance of Statement No. 137,
the FASB delayed the effective date of Statement No. 133 to fiscal years
beginning after June 15, 2000. The Company held no derivatives in 1999, 1998 or
1997 and believes the adoption of Statement No. 133, effective January 1, 2001,
will not materially impact its financial position or results of operations.
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.
17
<PAGE> 9
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
(In thousands except share amounts)
<TABLE>
<CAPTION>
December 31, 1999 1998
- ------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 87,055 $ 148,834
Receivables - trade and other 93,083 81,097
Inventories:
Raw materials and supplies 87,568 84,797
Work-in-progress 30,748 26,494
Finished goods 2,140 2,625
Prepaid expenses 5,877 10,478
Deferred tax assets - net (Note 7) 18,604 11,327
---------- ----------
Total current assets 325,075 365,652
---------- ----------
Property, plant and equipment - at cost:
Drilling equipment 1,268,704 1,238,361
Aircraft and related equipment 221,776 211,313
Manufacturing plant and equipment 83,835 75,949
Construction in progress 248,567 127,075
Other property and equipment 113,008 108,353
---------- ----------
Total 1,935,890 1,761,051
Less accumulated depreciation and amortization 910,151 883,854
---------- ----------
Property, plant and equipment - net 1,025,739 877,197
---------- ----------
Other assets and deferred charges 5,253 6,259
---------- ----------
Total $1,356,067 $1,249,108
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Notes 2 and 12) $ 129,123 $ 12,756
Accounts payable - trade 22,742 17,744
Other current liabilities (Note 4) 50,418 49,093
---------- ----------
Total current liabilities 202,283 79,593
---------- ----------
Long-term debt - less current maturities (Note 2) 296,677 310,250
---------- ----------
Other liabilities (Notes 6 and 9) 55,270 51,264
---------- ----------
Deferred credits:
Income taxes - net (Note 7) 78,113 75,255
Gain on sale/leaseback transactions (Note 9) 2,750
---------- ----------
Total deferred credits 78,113 78,005
---------- ----------
Commitments and contingent liabilities (Note 9)
---------- ----------
Stockholders' equity (Notes 3, 5 and 12):
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 Preferred Stock, authorized 4,800 shares, none outstanding
Series B Preferred Stock, authorized 4,800 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 89,061,665 shares at December 31, 1999
and 88,752,976 shares at December 31, 1998 11,133 11,094
Additional paid-in capital 426,380 420,767
Retained earnings 347,545 357,211
Less cost of 5,759,319 and 5,509,319 treasury shares, respectively 61,334 59,076
---------- ----------
Total stockholders' equity 723,724 729,996
---------- ----------
Total $1,356,067 $1,249,108
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
18
<PAGE> 10
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
(In thousands except per share amounts)
<TABLE>
<CAPTION>
For the years ended December 31, 1999 1998 1997
- ------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Revenues:
Drilling services $ 260,939 $ 431,664 $ 434,004
Manufacturing sales and services 95,545 158,913 154,852
Aviation services 104,078 115,773 106,396
--------- --------- ---------
Total 460,562 706,350 695,252
--------- --------- ---------
Costs and expenses:
Drilling services 214,230 219,628 217,935
Manufacturing sales and services 88,431 134,542 134,422
Aviation services 94,413 101,899 96,390
Depreciation and amortization 54,699 49,703 47,078
General and administrative 18,399 18,366 16,971
--------- --------- ---------
Total 470,172 524,138 512,796
--------- --------- ---------
Income (loss) from operations (9,610) 182,212 182,456
--------- --------- ---------
Other income (expense):
Interest expense (22,755) (17,500) (26,208)
Less interest capitalized 11,238 16,264 9,966
Gain on disposals of property, plant and equipment 1,482 5,125 1,541
Interest income 4,583 7,205 5,190
Other - net 526 395 343
--------- --------- ---------
Other income (expense) - net (4,926) 11,489 (9,168)
--------- --------- ---------
Income (loss) before income taxes (14,536) 193,701 173,288
Provision (credit) for income taxes (Note 7) (4,870) 69,241 16,863
--------- --------- ---------
Income (loss) before extraordinary charges (9,666) 124,460 156,425
Extraordinary charges from early redemption of debt
(net of income taxes of $1,207) (Note 2) 9,766
--------- --------- ---------
Net income (loss) $ (9,666) $ 124,460 $ 146,659
========= ========= =========
Per share of common stock (Note 1):
Basic:
Income (loss) before extraordinary charges $ (.12) $ 1.45 $ 1.82
Extraordinary charges from early redemption of debt .12
--------- --------- ---------
Net income (loss) $ (.12) $ 1.45 $ 1.70
========= ========= =========
Diluted:
Income (loss) before extraordinary charges $ (.12) $ 1.43 $ 1.76
Extraordinary charges from early redemption of debt .11
--------- --------- ---------
Net income (loss) $ (.12) $ 1.43 $ 1.65
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
19
<PAGE> 11
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands) Common Stock
----------------------------------------------------------
Issued In Treasury
For the years ended --------------------------- ----------------------------- Additional Retained
December 31, 1999, 1998 and 1997 Shares Amount Shares Amount Paid-in Capital Earnings
- --------------------------------------- ------------ ------------ ------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 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 plan (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
Exercise of stock options 591 74 1,624
Value of services rendered
by participants in the nonqualified
stock option plan (Note 3) 7,331
Treasury stock purchases 4,051 56,591
Net income 124,460
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 88,753 11,094 5,509 59,076 420,767 357,211
Exercise of stock options 294 37 1,171
Value of services rendered
by participants in the nonqualified
stock option plan (Note 3) 4,344
Conversion of subordinated debenture 15 2 98
Treasury stock purchases 250 2,258
Net loss (9,666)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 89,062 $ 11,133 5,759 $ 61,334 $ 426,380 $ 347,545
============ ============ ============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
20
<PAGE> 12
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
For the years ended December 31, 1999 1998 1997
- ---------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Cash provided by (used in):
Operations:
Net income (loss) $ (9,666) $ 124,460 $ 146,659
Adjustments to reconcile net income (loss) to net cash
provided by operations:
Depreciation and amortization 54,699 49,703 47,078
Gain on disposals of property, plant and equipment (1,482) (5,125) (1,541)
Compensation expense 5,485 5,028 4,720
Change in sale/leaseback payable (3,739) (1,131) (4,796)
Amortization of sale/leaseback gain (3,198) (3,198) (3,198)
Provision for pension and postretirement benefits 7,217 4,517 5,922
Deferred income taxes (4,419) 49,781 12,373
Extraordinary charges from early redemption of debt 10,973
Other - net 144 144 2,370
Changes in current assets and liabilities:
Receivables - trade and other (11,986) 52,530 (20,791)
Inventories (6,540) (10,541) (13,243)
Other current assets 4,601 (2,784) 10,891
Current liabilities 6,134 (15,953) 10,165
Net changes in other noncurrent assets and liabilities 656 262 (1,881)
--------- --------- ---------
Net cash provided by operations 37,906 247,693 205,701
--------- --------- ---------
Investing activities:
Property, plant and equipment additions (204,689) (247,747) (180,066)
Proceeds from disposals of property, plant and equipment 3,160 8,090 3,846
Proceeds from disposition of investment in 49% owned company 19,550
Repayments from affiliates 229
--------- --------- ---------
Net cash used in investing activities (201,529) (220,107) (175,991)
--------- --------- ---------
Financing activities:
Proceeds from borrowings 115,550 103,012 190,985
Repayments of borrowings (12,756) (36,156) (202,488)
Payments to acquire treasury stock (2,258) (55,638)
Premiums on redemption of debt (9,000)
Other - net 1,308 1,698 1,900
--------- --------- ---------
Net cash provided by (used in) financing activities 101,844 12,916 (18,603)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents (61,779) 40,502 11,107
Cash and cash equivalents, beginning of year 148,834 108,332 97,225
--------- --------- ---------
Cash and cash equivalents, end of year $ 87,055 $ 148,834 $ 108,332
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
21
<PAGE> 13
- --------------------------------------------------------------------------------
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 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, 1999, the
unamortized excess cost was $1,953,000.
Intercompany balances and transactions are eliminated in consolidation.
In early 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 valued at $4.7 million and spare
engines and parts valued at $1.4 million.
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
$90,085,000 and $69,509,000, $152,992,000 and $110,550,000, and $148,348,000 and
$110,476,000 in 1999, 1998 and 1997, 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. "Basic" earnings (loss) per share is
determined as income (loss) available to common stockholders divided by the
weighted-average number of common shares outstanding during the period.
"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 for each of the
past three years is as follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
Income (Loss) Before
Extraordinary Per Share
Year ended December 31, Charges Shares Amount
------------ ------------ ------------
<S> <C> <C> <C>
1999:
Basic income (loss) per share $ (9,666) 83,176 $ (.12)
Effect of dilutive securities:
Convertible debentures
Stock options
------------ ------------
Diluted income (loss) per share $ (9,666) 83,176 $ (.12)
============ ============ ============
1998:
Basic income per share $ 124,460 85,641 $ 1.45
Effect of dilutive securities:
Convertible debentures 844
Stock options 804
------------ ------------
Diluted income per share $ 124,460 87,289 $ 1.43
============ ============ ============
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
============ ============ ============
</TABLE>
Excluded from the 1999 computation of Diluted income (loss) per share are
incremental shares of 738,000 related to convertible debentures and 541,000
related to stock options as their inclusion would have had the effect of
decreasing the per share amount of loss for the year. The 1999 presentation also
excludes any effects of the Company's sale, in early 2000, of 10.3 million
shares of its common stock. See Note 12 for further information.
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 addition in 1999 of $1,141,000 of tax
benefits related to employee stock options; the conversion in 1999 of $100,000
of a Series III Floating Rate Subordinated Convertible Debenture into 14,814
shares of common stock; the reduction in 1998 of $2,303,000 of tax benefits
related to employee stock options; the purchase in 1998 of $953,000 of treasury
stock which was unsettled at year end; and the conversion in 1997 of the
remaining $3,600,000 of the Series II Floating Rate Subordinated Convertible
Debenture into 400,000 shares of common stock. See Notes 2 and 3 for further
information.
INVENTORIES. Manufacturing inventories are stated principally at the lower of
average cost or market. Drilling and aviation materials and supplies are carried
at average cost.
22
<PAGE> 14
PROPERTY AND DEPRECIATION. The Company provides depreciation under the
straight-line method from the date an asset is placed into service until it is
sold or becomes fully depreciated based on the following estimated lives and
salvage values:
<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>
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. The Company
capitalizes, during the construction period, interest cost incurred during the
period required to complete the asset. The Company's long-lived assets are
reviewed for impairment whenever circumstances indicate their carrying amounts
may not be recoverable.
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. Valuation allowances are provided
against deferred tax assets which are not likely to be realized. See Note 7 for
further information.
COMPREHENSIVE INCOME. The Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," effective January 1, 1998.
Statement No. 130 essentially requires prominent disclosure of all
non-shareholder changes in equity during a period. The Company had no items of
"other comprehensive income," as defined in Statement No. 130, during 1999, 1998
or 1997.
DERIVATIVES. Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," issued in June 1998,
requires recognition of derivative financial instruments as assets or
liabilities, measured at fair value, and is effective for fiscal years beginning
after June 15, 2000. The Company held no derivatives in 1999, 1998 or 1997 and
believes the adoption of Statement No. 133, effective January 1, 2001, will not
materially impact its financial position or results of operations.
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 1998 and 1997
amounts to conform with the 1999 presentations.
NOTE 2 LONG-TERM DEBT
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 1998
-------- --------
<S> <C> <C>
$155 million bank revolving credit
facility maturing in 2000 $110,000 $110,000
6.94% Title XI note payable due 2010;
secured by Gorilla V 61,418 67,000
6.15% Title XI note payable due 2010;
secured by Gorilla V 78,917 86,091
Floating-rate Title XI note payable;
secured by Gorilla VI 152,818 59,915
Floating-rate Title XI note payable;
secured by Gorilla VII 22,647
-------- --------
Total 425,800 323,006
Less current maturities 129,123 12,756
-------- --------
Remainder $296,677 $310,250
======== ========
</TABLE>
Maturities of long-term debt for the five years ending December 31, 2004 are as
follows: 2000 - $129,123,000, 2001 - $25,491,000, 2002 - $27,378,000, 2003 -
$27,378,000 and 2004 - $27,378,000.
At December 31, 1999, the Company had available $45,000,000 under a $155,000,000
unsecured bank revolving credit facility maturing in October 2000. Advances
under the facility bear interest at either .625% 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
requires a commitment fee of .375% on the average daily amount of the
commitment. Interest and the commitment fee are generally payable quarterly.
Outstanding advances at December 31, 1999 totaled $110,000,000 and bore interest
at 7.09%. In February 2000, the Company repaid the outstanding advances and
cancelled the credit facility. See Notes 5 and 12 for further information.
23
<PAGE> 15
The Company has financed $153,091,000 of the cost of Rowan Gorilla V through two
fixed-rate bank notes guaranteed by the U.S. Department of Transportation's
Maritime Administration ("MARAD") under its Title XI Program. On July 1, 1997,
the Company fixed $67,000,000 of outstanding borrowings at 6.94% until July
2010. On July 1, 1998, the Company fixed the remaining $86,091,000 principal
amount at 6.15% until July 2010. Principal and accrued interest are payable
semi-annually on each January 1 and July 1. Rowan Gorilla V is pledged as
security for the government guarantee.
In September 1998, the Company obtained financing for up to $171,007,000 of the
cost of designing and constructing Rowan Gorilla VI through a 12-year bank loan
guaranteed by MARAD under its Title XI Program. The Company obtains funding as
construction progress is achieved and outstanding borrowings initially bear
interest at .30% 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 September 15, 2002 or two years following completion of construction.
Interest is payable semi-annually on each March 15 and September 15 and the
principal will be repaid in semi-annual installments commencing September 15,
2000. Rowan Gorilla VI is pledged as security for the government guarantee. At
December 31, 1999, the Company had borrowed about $152,818,000, which bore
interest at floating rates ranging from 6.30% to 6.49%.
In October 1999, the Company obtained financing for up to $185,398,000 of the
cost of designing and constructing Rowan Gorilla VII through a 12-year bank loan
guaranteed by MARAD under its Title XI Program. The Company obtains funding as
construction progress is achieved and outstanding borrowings initially bear
interest at .30% above a short-term commercial paper rate. The Company may fix
the interest rate at any time and must fix the rate on all outstanding principal
by the earlier of April 20, 2004 or two years following completion of
construction. Interest is payable semi-annually beginning April 20, 2000 and the
principal will be repaid in semi-annual installments commencing April 20, 2002.
Rowan Gorilla VII is pledged as security for the government guarantee. At
December 31, 1999, the Company had borrowed about $22,647,000, which bore
interest at floating rates ranging from 6.27% to 6.30%.
In April 1999, the Company issued $4,800,000 of Series B Floating Rate
Subordinated Convertible Debentures. The debentures are ultimately convertible
into common stock at the rate of $14.06 per share for each $1,000 principal
amount of debenture through April 22, 2009 as follows, unless earlier redeemed
or the conversion privilege is terminated: $1,200,000 on or after April 22,
2000, $2,400,000 on or after April 22, 2001, $3,600,000 on or after April 22,
2002 and $4,800,000 on or after April 22, 2003. At December 31, 1999, the
Company also had $4,800,000 principal amount of Series A Floating Rate
Subordinated Convertible Debentures outstanding which are ultimately convertible
into common stock at the rate of $29.75 per share for each $1,000 principal
amount of debenture through April 24, 2008 as follows, unless earlier redeemed
or the conversion privilege is terminated: $1,200,000 through April 23, 2000,
$2,400,000 on or after April 24, 2000, $3,600,000 on or after April 24, 2001 and
$4,800,000 on or after April 24, 2002. At December 31, 1999, the Company also
had $8,525,000 principal amount of Series III Floating Rate Subordinated
Convertible Debentures outstanding which are ultimately convertible into common
stock at the rate of $6.75 per share for each $1,000 principal amount of
debenture through November 30, 2004. The Series A, Series B and Series III
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 regarding the Company's convertible debenture
incentive plans.
In March 1998, the Company repaid the balance of $36,156,000 of 7% promissory
notes originally issued in February 1994 in connection with the acquisition of
its manufacturing operations.
During April and December 1997, the Company redeemed $50,000,000 and
$150,000,000, respectively, of its 117?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.
Interest payments exceeded interest capitalized by $9,335,000 in 1999 and
$14,222,000 in 1997 and were less than interest capitalized by $1,088,000 in
1998.
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 a minimum level of stockholders' equity, and restrict
investments, sale/leaseback transactions, mergers, consolidations, sales of
assets, borrowings, creation of liens, purchases of the Company's capital stock
and common stock dividend payments. The Company believes it was in compliance
with each of its debt covenants at December 31, 1999. See Note 5 for further
information.
24
<PAGE> 16
NOTE 3 STOCKHOLDERS' EQUITY
The Company's 1988 Nonqualified Stock Option Plan, as amended, authorizes the
Board of Directors to grant, before January 21, 2008, options to purchase a
total of 10,000,000 shares of the Company's common stock. At December 31, 1999,
options for 7,164,779 shares had been granted under the plan at exercise prices
ranging from $1.00 to $19.75 per share and 412 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's 1998 Nonemployee Directors Stock Option Plan provides for the
issuance to nonemployee Directors of the Company of nonqualified options to
purchase up to 200,000 shares of the Company's common stock. At December 31,
1999, 64,000 shares had been granted under the plan at exercise prices ranging
from $14.53 to $29.75. Options are 100% exercisable after one year and all
options not exercised expire five years after the date of grant.
Stock option activity for the last three years was as follows:
<TABLE>
<CAPTION>
Weighted
average
Number of exercise
Options price
----------- ------------
<S> <C> <C>
Outstanding at January 1, 1997 2,498,288 $ 3.39
Granted 817,000 12.17
Exercised (622,888) 2.14
Forfeited (124,375) 5.52
----------- ------------
Outstanding at December 31, 1997 2,568,025 6.38
Granted 774,200 20.19
Exercised (590,875) 2.86
Forfeited (79,525) 11.73
----------- ------------
Outstanding at December 31, 1998 2,671,825 11.00
Granted 909,900 4.34
Exercised (293,875) 4.11
Forfeited (85,100) 9.96
----------- ------------
Outstanding at December 31, 1999 3,202,750 $ 9.77
=========== ============
Exercisable at December 31, 1997 690,400 $ 2.12
=========== ============
Exercisable at December 31, 1998 847,525 $ 4.84
=========== ============
Exercisable at December 31, 1999 1,283,625 $ 8.86
=========== ============
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1999.
<TABLE>
<CAPTION>
Weighted Weighted
average average
Exercise Number of exercise remaining
Price Options price life (years)
--------- -------- ------------
<S> <C> <C> <C>
Outstanding:
$1.00 554,150 $ 1.00 4.8
$4.06 877,200 4.06 9.3
$5.00 to $9.99 677,000 8.95 6.9
$10.00 to $29.75 1,094,400 19.28 7.9
--------- ------ ---
3,202,750 $ 9.77 7.5
========= ====== ===
Exercisable:
$1.00 554,150 $ 1.00
$4.06 -- --
$5.00 to $9.99 307,750 8.72
$10.00 to $29.75 421,725 19.30
--------- ------
1,283,625 $ 8.86
========= ======
</TABLE>
The weighted average fair values at date of grant for options granted during
1999, 1998 and 1997 were estimated to be $10.60, $14.56 and $10.22,
respectively, using the Black-Scholes option valuation model with the following
assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Expected life in years 2.7 2.5 2.5
Interest rate 6.2% 4.5% 5.3%
Volatility 55.5% 52.7% 45.8%
---------- ---------- ----------
</TABLE>
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) and earnings
(loss) per share by $1.8 million, or $.02 per share, in 1999, $1.2 million, or
$.02 per share, in 1998 and $.6 million, or $.01 per share, in 1997.
The Rowan Companies, Inc. 1998 Convertible Debenture Incentive Plan provides for
the issuance to key employees of up to $30,000,000 in floating rate subordinated
convertible 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. At December 31, 1999, all
$4,800,000 principal amount of Series A debentures issued in 1998 and all
$4,800,000 principal amount of Series B debentures issued in 1999 were
outstanding. The outstanding Series A and B debentures are collectively
convertible into 502,678 shares of the Company's common stock.
Under the Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan,
floating rate subordinated convertible debentures in the aggregate principal
amount of $19,925,000 were issued by the Company. 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. At
December 31, 1999, all $5,125,000 of Series I debentures issued in 1986 and the
$4,500,000 Series II debenture issued in 1987 had been converted into an
aggregate 1,391,304 shares of the Company's common stock at $5.75 per share and
$9.00 per share, respectively. Of the $10,300,000 principal amount of Series III
debentures issued in 1994, $8,525,000 was outstanding at December 31, 1999 and
is ultimately convertible into 1,262,964 shares of the Company's common stock.
25
<PAGE> 17
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.
NOTE 4 OTHER CURRENT LIABILITIES
Other current liabilities consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 1998
---------- ----------
<S> <C> <C>
Gain on sale/leaseback transactions $ 2,750 $ 3,198
Customer deposits 9,249 2,784
Accrued liabilities:
Income taxes 1,499 839
Compensation and related employee costs 16,978 21,106
Interest 7,982 5,944
Taxes and other 11,960 15,222
---------- ----------
Total $ 50,418 $ 49,093
========== ==========
</TABLE>
NOTE 5 RESTRICTIONS ON RETAINED EARNINGS
Under the terms of its revolving credit facility maturing in October 2000, the
Company's ability to declare dividends or make any distribution on its common
stock in any quarter was 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
$150,727,000 of the Company's retained earnings was available for distribution
at December 31, 1999. In February 2000, the Company repaid the outstanding
advances and cancelled the credit facility. 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. In addition, the Company provides certain
health care and life insurance benefits for retired drilling and aviation
employees.
During 1998, the Company adopted Statement of Financial Accounting Standards No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,"
which essentially standardizes and simplifies disclosures required about pension
and other postretirement benefit plans. Changes in plan assets and obligations
during 1999 and 1998 and the funded status of the plans at December 31, 1999 and
1998 were as follows (in thousands):
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BENEFIT OBLIGATIONS:
Balance, January 1 $ 186,953 $ 155,935 $ 38,775 $ 36,075
Service cost 7,890 6,423 1,742 1,542
Interest cost 12,819 11,599 2,690 2,416
Plan changes (5,067)
Actuarial (gain) loss (26,368) 19,523 (4,596) 4,750
Benefits paid (6,622) (6,527) (839) (941)
--------- --------- --------- ---------
Balance, December 31 174,672 186,953 37,772 38,775
--------- --------- --------- ---------
PLAN ASSETS:
Fair value, January 1 148,564 168,699
Actual return 34,432 (14,232)
Employer contributions 2,408 624
Benefits paid (6,622) (6,527)
--------- --------- --------- ---------
Fair value, December 31 178,782 148,564
--------- --------- --------- ---------
Funded status 4,110 (38,389) (37,772) (38,775)
Unrecognized amounts:
Actuarial (gain) loss (21,892) 23,748 6,717 11,711
Transition (asset)
obligation (1,211) 9,833 10,590
Prior service cost 93 209 (4,442) (4,755)
--------- --------- --------- ---------
Accrued benefit cost $ (17,689) $ (15,643) $ (25,664) $ (21,229)
========= ========= ========= =========
</TABLE>
The plans' assets consist primarily of equity securities and U.S. Treasury bonds
and notes and, at December 31, 1999, included 1,595,000 shares of the Company's
common stock at an average cost of $5.32 per share. At December 31, 1999,
$9,656,000 of the plans' assets were invested in a dedicated bond fund. The
plans had a basis in these assets of $7,033,000 yielding approximately 5.04% to
maturity.
Net periodic pension cost included the following components (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost $ 7,890 $ 6,423 $ 5,471
Interest cost 12,819 11,599 10,340
Expected return on plan assets (15,159) (15,734) (13,225)
Recognized actuarial gain (347)
Amortization:
Prior service cost 115 115 115
Transition asset (1,211) (1,211) (1,211)
-------- -------- --------
Total $ 4,454 $ 845 $ 1,490
======== ======== ========
</TABLE>
26
<PAGE> 18
Other benefits cost included the following components (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Service cost $ 1,742 $ 1,542 $ 1,666
Interest cost 2,690 2,416 2,528
Recognized actuarial loss 398 220 297
Amortization:
Transition obligation 756 756 756
Prior service cost (312) (312)
------- ------- -------
Total $ 5,274 $ 4,622 $ 5,247
======= ======= =======
</TABLE>
Assumptions used in actuarial calculations were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Discount rate 8.0% 6.75% 7.25%
Expected return on plan assets 9.5% 9.5% 9.5%
Rate of compensation increase 4.0% 4.0% 4.0%
===== ===== =====
</TABLE>
The assumed increase in per capita health care costs ranged from 7.5% in 1999 to
5.0% in 2003 and thereafter. To demonstrate the significance of this assumption,
a one-percentage-point change in assumed health care cost trend rates would
change reported amounts as follows (in thousands):
<TABLE>
<CAPTION>
1-Percentage-point Change
----------------------------
Increase Decrease
-------- --------
<S> <C> <C>
Increase (decrease) in:
Service and interest cost $ 656 $ (540)
Postretirement benefit obligation 4,547 (3,841)
======== ========
</TABLE>
The Company 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, 1999 and 1998 of $3,801,000 and $4,278,000,
respectively. The net pension liabilities included in the Company's consolidated
balance sheet were $4,197,000 and $3,462,000 at December 31, 1999 and 1998,
respectively. Net pension cost was $774,000 in 1999, $652,000 in 1998 and
$530,000 in 1997.
The Company also sponsors defined contribution 401(k) plans covering all
employees. The Company contributed to the plans about $2,533,000 in 1999,
$2,621,000 in 1998 and $2,207,000 in 1997.
NOTE 7 INCOME TAXES
The detail of income tax provisions (credits) is presented below (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $(2,320) $17,915 $ 3,296
Foreign 1,837 1,285 78
State 32 260 128
------- ------- -------
Total current provision (451) 19,460 3,502
Deferred (4,419) 49,781 13,361
------- ------- -------
Total $(4,870) $69,241 $16,863
======= ======= =======
</TABLE>
The Company's provision (credit) for income taxes differs from that determined
simply by applying the federal income tax rate (statutory rate) to income (loss)
before extraordinary charges, as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory rate 35% 35% 35%
Tax at statutory rate $ (5,088) $ 67,795 $ 60,651
Increase (decrease) due to:
Change in valuation allowance (38,415)
Foreign companies' operations (618) 41 (10,443)
Expiration of tax credits 9,593
Other - net 836 1,405 (4,523)
-------- -------- --------
Total provision (credit) $ (4,870) $ 69,241 $ 16,863
======== ======== ========
</TABLE>
Temporary differences and carryforwards which gave rise to deferred tax assets
and liabilities at December 31, 1999 and 1998, were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
December 31, Current Noncurrent Current Noncurrent
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Deferred tax assets:
Sale/leaseback gain $ 963 $ 1,119 $ 967
Accrued employee
benefit plan costs 315 $ 15,432 315 13,997
Alternative minimum tax 5,042 5,017
Net operating losses 7,144
Investment tax credits 3,554 2,862
Other 1,586 5,765 2,014 4,539
-------- -------- -------- --------
18,604 21,197 11,327 19,503
-------- -------- -------- --------
Deferred tax liabilities:
Property, plant and
equipment 99,212 93,818
Other 98 940
-------- -------- -------- --------
99,310 94,758
-------- -------- -------- --------
Deferred tax asset
(liability) - net $ 18,604 $(78,113) $ 11,327 $(75,255)
======== ======== ======== ========
</TABLE>
The Company did not deem necessary a valuation allowance against its deferred
tax assets at December 31, 1999 and 1998.
At December 31, 1999, the Company had $3,089,000 of regular investment tax
credits and $465,000 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: 2001 - $3,326,000 and 2002 - $228,000.
In addition, the Company had net operating loss carryforwards for federal income
tax purposes of approximately $20,412,000, the majority of which will expire, if
not utilized, in 2019.
Deferred income taxes not provided on undistributed earnings of foreign
subsidiaries, because such earnings are considered permanently invested abroad,
amounted to approximately $10,555,000 at December 31, 1999.
Income (loss) before income taxes consisted of $(5,349,000), $189,207,000 and
$154,313,000 of domestic earnings (losses), and $(9,187,000), $4,494,000 and
$18,975,000 of foreign earnings (losses) in 1999, 1998 and 1997, respectively.
Income tax payments exceeded refunds by $1,405,000 in 1999, $16,743,000 in 1998
and $3,781,000 in 1997.
27
<PAGE> 19
NOTE 8 FAIR VALUES OF FINANCIAL INSTRUMENTS
At December 31, 1999, 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 floating-rate debt approximated its fair value at December 31, 1999 as
such instruments bear short-term, market-based interest rates. The fair value of
the Company's fixed-rate debt at December 31, 1999 was estimated to be
approximately $136 million, or a $4 million discount to carrying value, based
upon quoted market prices for similar issues.
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 with effective interest rates of 9.3% and 8.0%,
respectively. Each sale resulted in a gain which is being recognized over the
respective basic lease term expiring in 2000. The Company has exercised its
option to extend each lease for a period of seven and one-half years with lease
rates equal to 50% of the weighted average semi-annual lease payments during
each 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, 1999 and
1998 included the excess of inception-to-date sale/leaseback expenses over
related payments of $3,186,000 and $6,930,000, respectively.
The Company has operating leases covering aircraft hangars, offices and computer
equipment, marine vessels and the sale/leaseback rigs. Net rental expense under
all operating leases was $22,854,000 in 1999, $26,524,000 in 1998 and
$21,619,000 in 1997.
As of December 31, 1999, the future minimum payments to be made under
noncancelable operating leases were (in thousands):
<TABLE>
<S> <C>
2000 $ 24,973
2001 16,764
2002 16,209
2003 15,325
2004 13,179
Later years 36,051
--------
Total $122,501
========
</TABLE>
The Company has certain environmental liabilities related to its manufacturing
facilities. 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. The Company believes that it has
adequately accrued for environmental liabilities.
The Company is involved in various legal proceedings incidental to its business.
The Company is vigorously defending its position in such matters and is of the
opinion that there are no contingencies, claims or lawsuits against the Company
that will have a material adverse effect on its financial position, results of
operations or cash flows.
The Company estimates 2000 capital expenditures will be between $150,000,000 and
$175,000,000, including $100,000,000 to $125,000,000 toward construction of the
offshore rigs Gorillas VI and VII.
NOTE 10 SEGMENTS OF BUSINESS
The Company has three principal operating segments: contract drilling of oil and
gas wells, both onshore and offshore ("Drilling"), 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 commuter 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
location. Accordingly, drilling rigs located in or offshore the United States
are considered domestic assets and rigs located in other areas are deemed
foreign assets.
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, 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Consolidated assets:
Drilling $1,038,433 $ 942,158 $ 803,747
Manufacturing 180,120 176,145 163,113
Aviation 137,514 130,805 155,275
---------- ---------- ----------
Total $1,356,067 $1,249,108 $1,122,135
========== ========== ==========
Property, plant and
equipment - net:
Domestic $ 685,829 $ 480,005 $ 551,853
Foreign 339,910 397,192 125,307
---------- ---------- ----------
Total $1,025,739 $ 877,197 $ 677,160
========== ========== ==========
</TABLE>
28
<PAGE> 20
At December 31, 1999, 31 drilling rigs, including 17 offshore rigs, were located
in domestic areas and five offshore rigs were located in foreign areas. Aviation
services assets included the Company's investment in KLM ERA Helicopters in
1997.
Information regarding revenues and profitability by operating segment is as
follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Drilling services $ 260,939 $ 431,664 $ 434,004
Manufacturing
and services 95,545 158,913 154,852
Aviation services 104,078 115,773 106,396
--------- --------- ---------
Consolidated $ 460,562 $ 706,350 $ 695,252
========= ========= =========
Operating profit (loss):*
Drilling services $ 11,818 $ 180,091 $ 185,037
Manufacturing sales
and services 667 18,902 16,294
Aviation services (3,696) 1,585 (1,904)
--------- --------- ---------
Consolidated $ 8,789 $ 200,578 $ 199,427
========= ========= =========
</TABLE>
* Income (loss) from operations before deducting general and administrative
expenses.
Excluded from the preceding table are the effects of transactions between
segments. During 1999, 1998 and 1997 the Company's manufacturing division
provided approximately $125,256,000, $108,981,000 and $82,707,000, respectively,
of products and services to the drilling division and the Company's aviation
division provided approximately $1,228,000, $1,313,000 and $2,859,000,
respectively, of flight services to the drilling division.
Foreign-source revenues were as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31, 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Drilling services $156,772 $194,839 $127,479
Manufacturing sales
and services 1,954 1,129 2,124
Aviation services 1,060 2,406 5,027
-------- -------- --------
Total $159,786 $198,374 $134,630
======== ======== ========
</TABLE>
The Company did not have any customers which accounted for 10% or more of
consolidated revenues during 1999, 1998 or 1997.
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.
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, 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Depreciation and amortization:
Drilling $ 34,891 $ 31,945 $ 31,032
Aviation 13,361 12,289 11,910
Manufacturing 6,447 5,469 4,136
Capital expenditures:
Drilling 180,641 217,725 146,760
Aviation 16,046 16,256 16,977
Manufacturing 8,002 13,766 16,329
Maintenance and repairs:
Drilling 29,717 33,083 29,643
Aviation 18,404 23,408 21,293
Manufacturing 8,922 12,241 13,865
-------- -------- --------
</TABLE>
NOTE 11 RELATED PARTY TRANSACTIONS
Two members of the Company's Board of Directors served in similar capacities for
one of the Company's drilling customers during 1998. Transactions with this
customer were on terms and conditions, and involved day rates and operating
costs, which were comparable to those experienced by the Company in connection
with third party contracts for similar rigs. Because of the aforementioned
relationships, the contracts between the Company and this customer were reviewed
and ratified by the full Board of Directors of the Company. Related 1998
revenues were approximately $968,000.
NOTE 12 SUBSEQUENT EVENTS
On January 31, 2000, the Company completed the purchase of The Ellis Williams
Company, Inc. and EWCO, Inc. dba Traitex Machine Co., which collectively design
and manufacture mud pumps ranging in capacity from 350 to 2,200 horsepower. The
purchase price was approximately $9 million, with $6 million in cash and the
balance in promissory notes due over a three-year period.
During February and March 2000, the Company completed the sale of 10.3 million
shares of its common stock, consisting of approximately 5.8 million shares of
treasury stock and 4.5 million newly issued shares. The net proceeds of
approximately $247 million were first applied to repayment of the $110 million
outstanding under the Company's $155 million bank revolving credit facility
which was subsequently cancelled. Remaining offering proceeds will be retained
for working capital and general corporate purposes.
29
<PAGE> 21
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
ROWAN COMPANIES, INC. AND SUBSIDIARIES:
We have audited the accompanying consolidated balance sheet of Rowan Companies,
Inc. and Subsidiaries (the "Company") as of December 31, 1999 and 1998, 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,
1999. 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, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
March 3, 2000
- --------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
The following unaudited information for the quarters ended March 31, June 30,
September 30 and December 31, 1998 and 1999 includes, in the Company's opinion,
all adjustments (which comprise only normal recurring accruals) necessary for a
fair presentation of such amounts (in thousands except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1998:
Revenues $ 183,914 $ 204,240 $ 183,470 $ 134,726
Operating profit 69,020 71,001 51,865 8,692
Net income 42,759 44,389 32,495 4,817
Net income per
common share:
Basic .49 .51 .38 .06
Diluted .48 .50 .38 .06
========= ========= ========= =========
1999:
Revenues $ 100,053 $ 119,169 $ 119,923 $ 121,417
Operating profit (loss) (9,360) 2,129 6,905 9,115
Net income (loss) (10,002) (2,622) 601 2,357
Net income (loss) per
common share:
Basic (.12) (.03) .01 .03
Diluted (.12) (.03) .01 .03
========= ========= ========= =========
</TABLE>
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 March 3, 2000, there were approximately 2,900 holders of
record.
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
Quarter High Low High Low
-------- -------- -------- --------
<S> <C> <C> <C> <C>
First $ 14.19 $ 8.50 $ 32.00 $ 22.44
Second 19.94 11.38 32.50 18.75
Third 20.94 15.81 20.63 9.00
Fourth 21.69 13.75 15.94 9.13
======== ======== ======== ========
</TABLE>
The Company did not pay any dividends on its common stock during 1999 and 1998.
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.
30
<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
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, Registration Statement No.
33-51109, Registration Statement No. 333-25041, Registration Statement No.
333-25125, Registration Statement No. 333-84369 and Registration Statement No.
333-84405, 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,
Amendment No. 1 to Registration Statement No. 33-62885, Registration Statement
No. 333-84407, Registration Statement No. 333-84423 and Amendment No. 1 to
Registration Statement No. 333-88855, each on Form S-3, of Rowan Companies,
Inc., of our report dated March 3, 2000, incorporated by reference in this
Annual Report on Form 10-K of Rowan Companies, Inc., for the year ended December
31, 1999, and to the reference to us under the heading "Experts" in the
Amendment No. 1 to Registration Statement No. 333-88855.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Houston, Texas
March 24, 2000
<PAGE> 1
EXHIBIT 24
Form 10-K for the Year Ended December 31, 1999
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, 1999 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, 1999 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 28, 2000
---------------------------
(Ralph E. Bailey)
HENRY O. BOSWELL Director March 28, 2000
---------------------------
(Henry O. Boswell)
HANS M. BRINKHORST Director March 28, 2000
---------------------------
(Hans M. Brinkhorst)
R. G. CROYLE Director March 28, 2000
---------------------------
(R. G. Croyle)
H. E. LENTZ Director March 28, 2000
---------------------------
(H. E. Lentz)
D. F. MCNEASE Director March 28, 2000
---------------------------
(D. F. McNease)
LORD MOYNIHAN Director March 28, 2000
---------------------------
(Lord Moynihan)
WILFRED P. SCHMOE Director March 28, 2000
---------------------------
(Wilfred P. Schmoe)
CHARLES P. SIESS, JR. Director March 28, 2000
---------------------------
(Charles P. Siess, Jr.)
C. W. YEARGAIN Director March 28, 2000
---------------------------
(C. W. Yeargain)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF ROWAN COMPANIES, INC. FOR THE YEAR ENDED DECEMBER 31,
1999 INCLUDED IN ITS 1999 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-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 87,055
<SECURITIES> 0
<RECEIVABLES> 93,083
<ALLOWANCES> 0
<INVENTORY> 120,456
<CURRENT-ASSETS> 325,075
<PP&E> 1,935,890
<DEPRECIATION> 910,151
<TOTAL-ASSETS> 1,356,067
<CURRENT-LIABILITIES> 202,283
<BONDS> 296,677
0
0
<COMMON> 11,133
<OTHER-SE> 723,724
<TOTAL-LIABILITY-AND-EQUITY> 1,356,067
<SALES> 90,085
<TOTAL-REVENUES> 460,562
<CGS> 69,509
<TOTAL-COSTS> 470,172
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (11,517)
<INCOME-PRETAX> (14,536)
<INCOME-TAX> (4,870)
<INCOME-CONTINUING> (9,666)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,666)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
