10-K 1 ROWAN COMPANY 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___ ROWAN COMPANIES, INC. Incorporated in Delaware Commission File I. R. S. Employer Number 1-5491 Identification: 75-0759420 5450 Transco Tower 2800 Post Oak Boulevard, Houston, Texas 77056-6196 Registrant's telephone number, including area code: (713) 621-7800 Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ------------------------------ --------------------- Common Stock, $.125 Par Value New York Stock Exchange Pacific Stock Exchange 11-7/8% Senior Notes due 2001 New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___. The aggregate market value as of March 1, 1995 of the Common Stock held by non-affiliates of the registrant was approximately $500 million. The number of shares of Common Stock, $.125 par value, outstanding at March 1, 1995 was 84,310,787. DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K -------- ----------------- Annual Report to Stockholders for fiscal year ended December 31, 1994 Parts I, II and IV Proxy Statement for the 1995 Annual Meeting of Stockholders Part III
2 TABLE OF CONTENTS
Page PART I Item 1. Business .................................................... 1 Contract Drilling .................................................. 1 Offshore Operations ............................................. 1 Onshore Operations .............................................. 3 Contracts ....................................................... 3 Competition ..................................................... 4 Regulations and Hazards ......................................... 5 Aircraft Operations ................................................ 7 Contracts ....................................................... 8 Competition ..................................................... 8 Regulations and Hazards ......................................... 9 Manufacturing Operations............................................ 9 Raw Materials.................................................... 10 Competition...................................................... 10 Regulations and Hazards.......................................... 11 Employees .......................................................... 12 Item 2. Properties .................................................. 13 Drilling Rigs ...................................................... 13 Aircraft ........................................................... 16 Manufacturing Facilities............................................ 16 Item 3. Legal Proceedings ........................................... 16 Item 4. Submission of Matters to a Vote of Security Holders ......... 17 Additional Item. Executive Officers of the Registrant ................ 17 PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters ....................................... 19 Item 6. Selected Financial Data ..................................... 19 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................... 19 Item 8. Financial Statements and Supplementary Data ................. 19 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ....................... 19 PART III Item 10. Directors and Executive Officers of the Registrant .......... 19 Item 11. Executive Compensation ...................................... 19 Item 12. Security Ownership of Certain Beneficial Owners and Management ............................................ 20 Item 13. Certain Relationships and Related Transactions .............. 20 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ....................................... 20
3 PART I ITEM 1. BUSINESS Rowan Companies, Inc. (the "Company"), organized in 1947 as a Delaware corporation and a successor to a contract drilling business conducted since 1923 under the name Rowan Drilling Company, Inc., is engaged principally in the contract drilling of oil and gas wells in domestic and foreign areas. As noted below, it also provides aircraft services and, since February 1994, has operated a mini-steel mill, a heavy equipment manufacturing plant and a marine rig construction yard through the purchase of the net assets of Marathon LeTourneau Company. Offshore operations of the Company consist primarily of contract drilling services utilizing mobile rigs, principally a fleet of 20 self-elevating drilling platforms ("jack-up rigs"), including three heavy duty cantilever jack-up rigs ("Gorilla Class rigs"). Beginning in 1992, the Company moved towards Total Project Management, an approach to drilling operations which emphasizes drilling and completing wells on a turnkey basis. In that same year it began providing offshore platform installation and removal services. The Company provides contract and charter helicopter and fixed-wing aircraft services, with its fleet consisting on March 31, 1995 of 89 helicopters and 17 fixed-wing aircraft. The Company's aircraft services include flightseeing, medivac transportation, forest fire control and support for oil and gas related operations out of its two primary bases in Alaska and Louisiana. In addition, the Company provides airline services in Alaska using its fixed-wing aircraft. Since 1991, the Company has owned a 49% interest in a Dutch-based joint venture company, KLM ERA Helicopters B.V. ("KLM ERA"), which owns a fleet consisting of 10 helicopters in the Dutch and British sectors of the North Sea. In February 1994, the Company purchased through its wholly-owned subsidiary, LeTourneau, Inc., the net assets of Marathon LeTourneau Company. LeTourneau, Inc. operates a mini-steel mill that recycles scrap and produces alloy steel and steel plate; a manufacturing facility that produces heavy equipment for the mining, timber and transportation industries including, among other things, front-end loaders up to 50 ton capacity and trucks up to 240 ton capacity; and a marine group that has built over one-third of all mobile offshore jack-up drilling rigs, including all 20 operated by Rowan. Information regarding revenues, operating profit, identifiable assets and export sales of the Company's industry segments and foreign and domestic operations for each of the three years in the period ended December 31, 1994, is incorporated by reference herein and provided in Footnote 10 of the Notes to Consolidated Financial Statements on pages 25 and 26 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1994 ("Annual Report"), incorporated portions of which are filed as Exhibit 13 hereto. In the years 1992, 1993 and 1994, the Company had revenues from individual customers representing 10% or more of consolidated revenues as follows: Conoco - 11% for 1992; Phillips Petroleum Company - 17% for 1993 and AMOCO Corp. - 10% for 1994. Such revenues were primarily from drilling operations. For a discussion of the Company's availability of funds for future operations and estimated capital expenditures for 1995, see "Liquidity and Capital Resources" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 14 of the Annual Report, which information is incorporated herein by reference. CONTRACT DRILLING In 1994, drilling operations generated an operating profit (income from operations before deducting general and administrative expenses) of $174,000. Offshore Operations At December 31, 1994, the Company's drilling fleet consisted of 20 deep-water jack-up rigs (eight conventional and twelve cantilever, including three Gorilla Class rigs in the latter category), one semi-submersible rig and three submersible barge -1- 4 rigs. The Company owns all of the rigs comprising its fleet except for two cantilever jack-up rigs leased under sale/leaseback arrangements expiring in 1999 and 2000. Since completing a major drilling rig expansion program conducted in the early to mid-1980s, the Company's capital expenditures have been primarily for improvements to existing drilling rigs and the purchase of aircraft. Adding to these capital expenditures were the purchases of the 49% interest in KLM ERA and the net assets of Marathon LeTourneau in 1991 and 1994, respectively. See ITEM 2. PROPERTIES on page 13 of this Form 10-K for additional information with respect to the operating status of the Company's rigs. The Gorilla Class rigs are a heavier class of jack-up rig, intended to drill up to 30,000 feet in water depths up to 328 feet in extreme hostile environments (winds up to 100 miles per hour and seas up to 90 feet). Each Gorilla Class rig is equipped with a "top-drive", a drilling system costing approximately $1.25 million which assists in faster drilling while reducing the hazard of the drill string sticking, and is particularly advantageous in the case of horizontal drilling. Of the Company's other jack-up rigs, six Class 116-C rigs and one Class 116 rig have been modified to provide (but to a lesser extent than Gorilla Class rigs) the capability of operating in hostile environments. The Company's nine Class 116-C jack-up rigs, two Class 116 jack-up rigs, two Class 84 jack-up rigs and two of its four Class 52 jack-up rigs have been equipped with top-drive drilling systems. In 1989, the Company acquired a patent (U. S. Patent No. 4,103,503) applicable to the transfer of a drilling rig substructure from a jack-up type drilling unit to a fixed platform. In conjunction with technology contained in the patent, the Company has developed additional substructure transfer or "skid base" technology which has allowed the Company's conventional jack-up rigs to work over wells on a production platform that heretofore required a cantilever jack-up or platform rig. At March 31, 1995, two Class 116 jack-up rigs, two Class 84 jack-up rigs and one of its Class 52 jack-up rigs have been equipped with skid base units. In 1992, the Company purchased a 550-ton ABS certified crane and formed a new subsidiary for conducting offshore platform installation and removal services. Utilizing the skid base technology discussed above, the drilling package on a jack-up rig can be skidded off to allow the heavy-lift crane to be skidded on, thereby transforming the unit into a crane barge or, reversing the process, transforming the unit back into a drilling rig. The Company has a patent (U.S. Patent No. 5,388,930) to cover such technology. At March 31, 1995, one Class 52 jack-up rig had been modified to provide this dual purpose capability and is able to operate in water depths up to 225 feet. In the last three years, the Company's rigs located in the North Sea have undergone modifications in order to meet new offshore safety standards being implemented in the United Kingdom. The Company's four Class 116-C jack-up rigs presently in the North Sea are subject to undergoing more modifications pending the finalization of the safety standards being negotiated for each rig. Some of the safety standards under government consideration, many of which the Company has already modified its North Sea rigs to meet, are as follows: a minimum of two independent sources of sea water for firefighting; a temporary safe refuge for personnel near the escape capsules which will provide a high degree of protection from fire, smoke and gas inhalation and will contain additional safety, communication and survival gear; additional enclosed motorized escape capsules; and expanded smoke and gas protection in the crew quarters. Because of continued market weakness in the North Sea, the Company moved drilling rigs to other markets as follows: one Gorilla Class jack-up in 1992 and another in 1994, one Class 116-C jack-up in 1992 and one Class 116 jack-up in 1992. Since 1970, the Company has pursued a policy of concentrating on jack-up rigs. Jack-ups are utilized for both offshore exploratory and development drilling and, in certain areas, for well workover operations. The Company operates larger deep-water type jack-up rigs capable of drilling to depths of 20,000 to 30,000 feet in maximum water depths ranging from 225 to 450 feet, depending on the size of the rig and its location. A jack-up rig consists of a floating hull with three independent elevating legs. The Company's rigs are equipped with propulsion thrusters to assist in towing. The entire drilling unit, consisting of the drilling rig, supplies, crew quarters, loading and unloading facilities, helicopter landing deck and other related equipment, -2- 5 is mounted on the hull. At the drilling site, the legs are lowered until they penetrate the ocean floor, and the platform hull is jacked up on the legs to the desired elevation above the water. The platform hull then serves as a drilling platform until the well is completed and the operation is reversed by lowering the platform hull into the water and towing it to the next drilling site. The cantilever feature contained on the Company's newer jack-ups provides for the extension of the portion of the drilling platform containing the drilling rig over fixed production platforms so that the drilling rig may be utilized to perform development or workover operations on the platforms with a minimum of interruption to production. The Company's semi-submersible rig is utilized principally for offshore exploratory drilling from a floating position in waters to depths of 1,000 feet. A semi-submersible drilling rig consists of a drilling platform raised above multiple hulls by columns. The hulls are flooded so as to be submerged beneath the surface, in which position the rig is anchored during drilling operations. The same type of equipment which is contained on a jack-up rig is mounted on the drilling platform. After completion of the well, the submerged hull is deballasted to reduce vessel draft and facilitate towing, assisted by its own thrusters, to another drilling location. The Company's submersible barge rigs are used in shallow coastal and inland waters in depths up to 26 feet for exploratory, development and workover drilling. A submersible barge rig consists of a drilling rig with crew quarters mounted on an elevated platform on top of a floating hull. At the drilling site the hull is flooded so that it rests on the bottom and the elevated platform protruding above the water serves as a stationary drilling platform. Onshore Operations The Company has drilling equipment, personnel and camps available on a contract basis for exploration and development of onshore areas. It currently owns 17 land rigs located as follows: deep-well rigs - eight in the Anadarko and Permian basins of Oklahoma and Texas and one in Mississippi; winterized rigs - five in Alaska; and trailer-mounted rigs - three in Argentina. In the first half of 1994, five of the Company's land rigs completed a three-year drilling contract in Venezuela and all were returned to the United States where three of the five had sporadic work in the second half of 1994. Subsequently, three of these rigs have been moved to Argentina to perform a two-year drilling contract that commenced in late March 1995. Two of the rigs presently located in Oklahoma are scheduled to be moved to Argentina to perform multiple well drilling contracts. Except for one deep-well rig that worked most of the last two and a half quarters of 1994 in Texas and one winterized land rig in Alaska that worked in the first quarter of 1992, another that worked in the first quarter of 1993 and another that worked for most of the first four months of 1994, the deep-well land rigs based in Texas, Oklahoma and Alaska have been idle since mid-1988 due to inadequate rates. Accordingly, seven of the Company's land rigs remained "mothballed" at March 31, 1995. The cost of maintaining these rigs is modest and the remaining investment in the rigs is not significant. The drilling equipment comprising an onshore rig consists basically of engines, drawworks or hoist, derrick, pumps to circulate the drilling fluid, drill pipe and drilling bits. The type of rig required by a customer depends upon the anticipated well depth, terrain and conditions in the drilling area. Contracts The Company's policy with regard to day rates and contract durations depends upon the prevailing strength or weakness of the market. During periods when the offshore rig markets are weak and declining rates prevail, the Company generally pursues a policy of entering into lower rate contracts to remain in a competitive position and to offset the substantial cost of maintaining and reactivating stacked rigs. During those times when the markets are strong and increasing rates prevail, the Company's policy is generally one of negotiating short rather than long-term contracts for its offshore rigs because such policy allows the Company to maximize its ability to obtain the benefit of rate increases and to pass through cost increases to customers. -3- 6 The Company's drilling contracts are obtained either through competitive bidding or individual negotiations. Rates obtained depend upon the type of equipment used, its availability and its location, as well as the type of operations involved. Both offshore and onshore contracts for use of the Company's drilling equipment are "well-to-well", "multiple well" or, except for work done on a turnkey basis, for a fixed term generally ranging from four to twelve months. Well-to-well contracts are cancelable at the option of either party upon completion of drilling at any one site, and fixed-term contracts customarily provide for termination by either party if drilling operations are suspended for extended periods by events of force majeure. While most current fixed-term contracts are for relatively short periods, some fixed-term and well-to-well contracts continue for a longer period than the original term or for a specific series of wells. Contracts, particularly those for offshore operations, generally contain renewal or extension provisions exercisable at the option of the customer at prices mutually agreeable to the Company and the customer and, in many cases, provide for additional payments for mobilization and demobilization. Most of the Company's drilling contracts in the North Sea are well-to-well contracts or short-term contracts of similar duration lasting 60-120 days, while most of the company's current contracts in the gulf of Mexico are well-to-well contracts lasting 30-45 days. The Company's drilling contracts, other than those for work done on a turnkey basis, provide for drilling compensation on a day rate basis. In the case of contracts for work done on a turnkey basis, the Company's compensation is contingent on the Company successfully drilling a well to a specified depth for a fixed price. In the event certain operational problems occur which cause the Company to be unable to reach the specified turnkey depth, the Company may not be entitled to any portion of the turnkey price thereby causing it to absorb substantial out-of-pocket expenses. For this reason, wells drilled on a turnkey basis generally involve greater economic risk to the Company than wells drilled on a day rate basis. Contracts for work in foreign countries generally provide for payment in United States dollars except for minimal amounts required to meet local expenses. Contracts for platform installation and removal services typically contain the same types of provisions and features described herein for drilling contracts. The Company believes that the contract status of its onshore and offshore rigs is more informative than backlog calculations, and that backlog information is neither calculable nor meaningful given the cancellation options contained in, and the short duration of, fixed-term contracts and the indeterminable duration of well-to-well and multiple well contracts. See ITEM 2. PROPERTIES on page 13 of this Form 10-K for the contract status of rigs as of March 31, 1995. Competition The Company encounters continual competition in securing domestic and foreign drilling contracts from approximately 40 offshore drilling contractors operating or having available to operate about 530 mobile rigs, approximately 13 major domestic drilling contractors operating or having available to operate 43 land rigs in the deep-well market in the Permian and Anadarko Basins, and five domestic drilling contractors operating or having available to operate about 21 winterized land rigs on the Alaskan North Slope. The Argentina land rig market is currently in a state of expansion, thereby causing the number of contractors and rigs to be indeterminable. Some of the Company's competitors with greater financial and other resources may be in a better position than the Company to make the continuous capital investments required to make technological improvements to existing equipment or to replace equipment that becomes obsolete. Furthermore, a few of the Company's competitors have been substantially relieved of debt burdens by bankruptcy proceedings. Technological advances in equipment, particularly offshore equipment, may cause older equipment having lower capital costs to be less suitable for some proposed drilling operations. As a result, the Company carried out over the 1980-1986 period a drilling rig expansion program and since 1987 a drilling rig modification program, both designed to provide the Company's fleet with jack-ups reflecting recent technological advancements and which generally meet known government-imposed safety and pollution control requirements. -4- 7 The offshore markets in which the Company competes are chosen on the basis of those which offer the greatest market potential and are generally located in the more politically stable areas of the world. Accordingly, since 1989 the Company has moved drilling rigs from one offshore market to another as follows: one Class 116-C jack-up rig from the North Sea to Southeast Asia in 1990 and then to Alaska in 1993; one Gorilla Class rig from the Gulf of Mexico to offshore eastern Canada in 1990; one submersible barge rig from the Gulf of Mexico to Gabon, West Africa in 1991 and back to the Gulf of Mexico in 1992; one Class 116 jack-up rig from the Gulf of Mexico to the North Sea and back to the Gulf of Mexico, both in 1992; one Class 116-C jack-up rig from the North Sea to the Gulf of Mexico in 1992; one Gorilla Class rig from the North Sea to Trinidad in 1992; one Class 52 jack-up rig from the Gulf of Mexico to Colombia in 1992 and back to the Gulf of Mexico in 1993; two submersible barges from Southeast Asia to the Gulf of Mexico in 1993; one class 116-C rig from Alaska to the Gulf of Mexico in 1994; and one Gorilla Class rig from the North Sea to the Gulf of Mexico in 1994. Relocation of drilling rigs from one geographic location to another is dependent upon changing market dynamics with moves occurring only when the likelihood of higher returns make such action economical. At March 31, 1995, 14 jack-ups were located in the Gulf of Mexico, four jack-ups were located in the North Sea, one jack-up was located offshore eastern Canada, one jack-up was located offshore Trinidad, one semi-submersible rig was located in the Gulf of Mexico and three submersible barges were located in the Gulf of Mexico. A number of factors affect a drilling contractor's ability both onshore and offshore to obtain contracts at a profitable rate within an area. Such factors include the location and availability of equipment, its suitability for the project, the comparative cost of the equipment, the competence of personnel and the reputation of the contractor. The ability to obtain a profitable rate of return is also dependent upon receiving adequate rates to compensate for the added cost of moving equipment to drilling locations. See "Contracts" beginning on page 3 of this Form 10-K concerning the pricing policies pursued by the Company under various market conditions. The Company markets its drilling services by directly contacting present and potential customers, including large international energy companies, many smaller energy companies and foreign government-owned or controlled energy companies. Downsizings by major energy companies, coupled with the significant reductions of exploration by such companies in offshore U.S. waters, have resulted in the Company adapting its marketing efforts such that increasing emphasis is placed on targeting small independent operators. Because the exploration activities of the Company's present and potential customers are impacted by state, federal and foreign regulations associated with the production and transportation of oil and gas, the demand for the Company's drilling services is impacted accordingly. In the case of offshore platform installation and removal services, the Company competes against approximately 12 contractors operating or having available to operate about 19 mobile derrick barges in the Gulf of Mexico market. Because the Company is a relatively new entrant in this field, many of the Company's competitors have the advantage of having offered these services for a longer period of time, including the benefits of established technological know-how and more extensive customer bases. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 12 through 14 of the Annual Report, the information under which caption is incorporated herein by reference, for a discussion of current industry conditions and their impact on operations. Regulations and Hazards The offshore and onshore operations of the Company are subject to many hazards. In the drilling business, inherent hazards include blowouts and well fires, which could cause personal injury, suspend drilling operations, seriously damage or destroy the equipment involved and cause substantial damage to producing formations and the surrounding areas. Offshore drilling operations and platform installation and removal operations are also subject to the hazards incident to marine operations, either on site or while under tow, such as capsizing, collision or grounding. Raising and lowering the legs of jack-up rigs into the ocean bottom and ballasting semi-submersible units require skillful handling to avoid capsizing or other serious damage. Drilling deviated holes into high pressure formations is a complex process and problems frequently occur. The process of removing platforms and caissons using underwater -5- 8 explosives involves substantial risks and requires a significant amount of skill in order to confine the resulting destruction to the intended areas. The Company believes that it is adequately insured for physical damage to its rigs, and for marine liabilities, workers compensation, Maritime Employees Liability, automobile liability and for various other types of exposures customarily encountered in providing the Company's services. Certain of the Company's liability insurance policies specifically exclude coverage for fines, penalties and punitive or exemplary damages. Under current conditions, the Company anticipates that its present insurance coverage will be maintained, but no assurance can be given that insurance coverage will continue to be available at rates considered reasonable, that self-insured amounts or deductibles will not increase or that certain types of coverage will be available at any cost. Foreign operations are subject to certain political, economic and other uncertainties not encountered in domestic operations, including risks of expropriation of equipment as well as expropriation of a particular energy company operator's property and drilling rights, taxation policies, customs restrictions, currency rate fluctuations and the general hazards associated with foreign sovereignty over certain areas in which operations are conducted. The Company attempts to minimize the risk of currency rate fluctuations by generally denominating contract payment terms in United States dollars. Many aspects of the operations of the Company are subject to government regulation, including those relating to equipping and operating vessels, drilling practices and methods and the level of taxation. In addition, various countries (including the United States) have regulations relating to environmental protection and pollution control affecting drilling operations. Recent events have also increased the sensitivity of the oil and gas industry to environmental matters. The Company may be liable for damages resulting from pollution of offshore waters and, under United States regulations, must establish financial responsibility. Generally, the Company is substantially indemnified under drilling contracts compensated on a day rate basis from pollution damages, except in certain cases of pollution emanating above the surface of land or water from spills of pollutants, or in the case of pollutants emanating from the Company's drilling rigs, but no assurance can be given regarding the enforceability of such indemnification provisions. In performing a contract for work done on a turnkey basis, the Company is normally responsible for certain risks that would customarily be assumed by the customer under a contract compensated on a day rate basis. These risks include liability for pollution resulting from a blowout or uncontrolled flow from the well bore, an underground blowout, the cost of controlling a wild well and the expense to redrill a well which has blown out. The Company carries insurance to cover such risks and generally obtains an indemnity from its customers with respect to liabilities exceeding the amount of insurance carried by the Company. The Company believes that it complies with all material legislation and regulations affecting its operations in the drilling of oil and gas wells, and in controlling the discharge of wastes. To date the Company has made significant modifications to its rigs located in the Gulf of Mexico in order to reduce waste and rain water discharge from such rigs and believes that it could operate those rigs at "zero discharge" without material additional expenditures. Other than these expenditures and those relating to the previously discussed United Kingdom safety standards, compliance has not, to date, materially affected the capital expenditures, earnings or competitive position of the Company, although these measures add to the costs of operating drilling equipment in some instances, and in others they may operate to reduce drilling activity. Further legislation or regulation may reasonably be anticipated, but the effects thereof on operations cannot be predicted. The Company is subject to the requirements of the federal Occupational Safety and Health Act ("OSHA") and comparable state statutes. The OSHA hazard communication standard, the Environmental Protection Agency "community right-to-know" regulations under Title III of the Federal Superfund Amendment and Reauthorization Act and comparable state statutes require the Company to organize and report certain information about the hazardous materials used in its operations to employees, state and local government authorities, and local citizens. -6- 9 AIRCRAFT OPERATIONS The Company provides charter and contract helicopter and fixed-wing aircraft services principally in Alaska, the coastal areas of Louisiana and Texas, and the western United States. In Alaska, a diversified range of services has been developed to include tourism, commercial fishing support and medical evacuation as well as support for forest fire control, mining operations and seismic testing. Additionally, the fixed-wing division of the Company conducts scheduled airline service between six cities from a hub in Anchorage and to 18 villages from a hub in Bethel, Alaska. Services provided offshore Louisiana and Texas are primarily to oil and gas related industries. In the western United States, the majority of helicopter services are provided to governmental agencies in support of forest fire control and to a lesser extent support of construction, seismic testing and onshore and offshore oil field support. The Company also provides airborne environmental survey services. In 1991, the Company acquired a 49% interest in KLM Helikopters B.V., a wholly-owned subsidiary of KLM Royal Dutch Airlines, as a means of gaining access to the North Sea aviation market. The joint venture company, renamed KLM ERA Helicopters B.V., currently owns 10 helicopters and leases two others. Operating locations and the numbers of helicopters deployed at March 31, 1995 were as follows: eight in the Dutch sector of the North Sea, two in Croatia, and two in the British sector of the North Sea, which helicopters are leased by a wholly-owned subsidiary of KLM ERA. KLM ERA serves principally the offshore oil and gas drilling, production and service companies operating in the Dutch Sector of the North Sea. Based on the number of helicopters operating, the Company is the largest helicopter operator in Alaska. It provides charter services from bases at Anchorage, Deadhorse (on the North Slope), Fairbanks, Juneau, Kenai and Valdez. The Company's charter and contract services are provided throughout Alaska with particular emphasis in the oil, mining and high density tourist regions within the state. Helicopters are usually operated on a seasonal basis in Alaska because of the prevalent climatic conditions. The peak utilization period in Alaska is May through September, with the winter months comprising the least active period. The seasonal nature of the Alaska business has been ameliorated in prior years by moving helicopters on a limited basis to the Gulf of Mexico area and, more recently, moving helicopters to the West and Northwest regions of the United States and various overseas locations, the most recent being Trinidad and China. Since 1983, the Company has operated a scheduled commuter airline service in Alaska encompassing the transportation of passengers, mail and cargo. The Company currently serves Valdez, Kenai, Homer, Kodiak, Iliamna and Cordova from its base hub in Anchorage. In addition, it services 18 remote villages from its hub in Bethel, Alaska. The Company operates under a code sharing agreement with Alaska Airlines which is the largest carrier of passengers from the contiguous United States to Alaska. The Company's commuter airline is the largest airline operation of that type within the state of Alaska and is the 4th largest carrier of passengers into and out of the Anchorage International Airport, including the large jet carriers. Since 1979, the Company has been providing charter and contract helicopter services in the Gulf of Mexico area primarily to the offshore oil and gas industry. Operations are conducted from the division office in Lake Charles, Louisiana and from bases in the Louisiana cities of Morgan City, Cameron, New Iberia, Intracoastal City, Venice, Fourchon and Houma and the Texas cities of Sabine Pass and Houston. Based upon the number of helicopters operating, the Company is the third largest helicopter operator in the Gulf of Mexico. In 1987, upon receiving FAA certification, the Company began manufacturing and marketing, from its Gulf Coast Division facility at Lake Charles, Louisiana, a composite external auxiliary fuel tank for use on Bell 205, 212 and 412 helicopters and the military "Huey" helicopter. The tank system provides enhanced range with nominal drag while increasing the passenger seats available. Sales to date have been to both military and civilian customers. Other aircraft accessories are also manufactured at the facility. -7- 10 In June 1990, the Company expanded its airborne environmental service capabilities by acquiring the patents, rights and equipment relating to two unique airborne remote sensing technologies - an Airborne Ground Penetrating Radar ("AGPR") and an Airborne Cathodic Monitoring System ("ACMS"). The AGPR system is used primarily for the detection of subsurface contaminants, including free hydrocarbons. In addition, the system can be used for finding subsurface coal veins, water tables and tunnels, drums, tanks and other man-made objects. The ACMS system is used to provide an early warning of potential corrosion failure of underground pipelines. Mounted on a helicopter, this system can survey up to 300 miles of pipeline per day and provides a substantial cost savings compared to conventional techniques. Both services are now marketed from the Company's Reno, Nevada facility following the closing of the Company's Santa Maria facility in early 1995. As previously noted, the Company has operated helicopters in various overseas locations, including Croatia and Macedonia where the Company had as many as six owned and two 49%-owned helicopters working for the United Nations at various times in 1994. In 1994, aviation operations generated an operating profit (income from operations before deducting general and administrative expenses) of $4.6 million. Contracts The Company's flight services generally are engaged by customers by entering into master service agreements, term contracts or day-to-day charter arrangements. Master service agreements provide for incremental payments based on usage, in some instances with fixed terms ranging from one month to one year, and are cancelable upon notice by either party in 30 days or less. Some contracts are not cancelable by either party and generally provide for payments, depending upon the term, as follows: less than one month - either incremental payments based on usage or incremental payments based on usage plus a base daily rental; and one month to one year - incremental payments based on usage plus a base monthly rental. Under day-to-day charters, the compensation arrangement is the same as that of term contracts having a term of less than one month. Payment, duration and cancellation features of the agreements, contracts and charter arrangements used by KLM ERA are similar in nature and in principle to those used in the Company's domestic operations. Because master service agreements and day-to-day charters are the most common types of engagements for its flight services, the Company believes that the contract status of its aircraft as discussed in the following paragraph is more informative than backlog information, which it believes is neither calculable nor meaningful. Company owned aircraft available for contract use and day charters on March 31, 1995 consisted of 89 helicopters (of which 49 were based in Alaska and 40 in the Gulf of Mexico area) and 17 fixed-wing aircraft that were based in Alaska. The contract status as of March 31, 1995 consisted of: 27 master helicopter service agreements and 28 aircraft term contracts (24 helicopters and 4 fixed-wing aircraft). The remaining aircraft were being operated under day charters or were available for operation under day charter or contract arrangements. KLM ERA owned aircraft available for contract use and day charters on March 31, 1995 consisted of 8 helicopters based in The Netherlands and two in Great Britain. The contract status of such aircraft as of March 31, 1995 consisted of: five master service agreements and five term contracts. Competition Although the Company maintains the largest helicopter operation in Alaska in terms of numbers of aircraft and revenues, it encounters intense competition from several other companies which furnish similar services. Approximately six other operators compete directly with the Company in Alaska on a contract or charter basis. The Company competes over its scheduled airline routes with up to four other carriers. In the Gulf of Mexico area, the Company competes directly with five other operators and ranks third in the number of helicopters operating with approximately 6% of the market. A number of other helicopter operators compete with the Company in the West and Northwest regions of the United States and in overseas locations. At present, KLM ERA has only one competitor in the Dutch sector of the North Sea. KLM ERA's share of this helicopter market is estimated to be in excess of 65%. -8- 11 Regulations and Hazards The operation of scheduled airline services in the United States requires a certificate under the Federal Aviation Act of 1958, as presently administered by the Department of Transportation. The granting of a certificate is conditioned upon a showing of financial ability and operational expertise. A similar certificate authorizing the right to operate a charter service is not required by any jurisdiction in the Company's operating areas. KLM ERA holds the necessary certificates for operating aircraft in The Netherlands and, since June 1993, in the U.K sector of the North Sea. Other operating certificates will be obtained on a case by case basis depending upon the contracts to be awarded. Operation of helicopters and fixed-wing aircraft, particularly under weather conditions prevailing in Alaska, is considered potentially hazardous, although the Company conducts rigorous safety training programs to minimize these hazards. The Company believes that it is adequately protected by public liability and property damage insurance, including hull insurance against loss of equipment, but carries no insurance against loss of earnings. Although the area of Croatia in which the Company's helicopters are flying for the United Nations is not a combat area at present, the region is highly unstable. The Company believes that KLM ERA is adequately protected by public liability and property damage insurance, including hull insurance against loss of equipment. MANUFACTURING OPERATIONS In 1994, LeTourneau, Inc. ("LeTourneau"), a wholly-owned subsidiary of the Company, acquired the net assets of Marathon LeTourneau Company, which is headquartered in Longview, Texas. As more fully detailed below, LeTourneau operates a manufacturing facility that produces heavy equipment, a mini-steel mill that recycles scrap and produces steel plate and forging ingots and a marine group that has built over one-third of all mobile offshore jack-up drilling rigs, including all 20 operated by the Company. The Company holds a number of patents on its inventions and the "LeTourneau" name is considered to be significant to its manufacturing operation. The mining equipment product line of LeTourneau includes off-road trucks with capacities of 190, 200 and 240 tons and loaders with bucket capacities of 17, 22, 28 and 33 cubic yards. LeTourneau's loaders and trucks are generally used in coal, gold, copper, iron ore and other mines. Both the loaders and the trucks utilize the LeTourneau diesel electric-drive systems with solid state controls. The primary benefit of the diesel electric-drive system is to allow large, mobile equipment to stop, start and reverse without gear shifting and high maintenance braking. LeTourneau loaders can load LeTourneau rear-dump trucks and competitive trucks in the 85 ton to 240 ton size range. LeTourneau's mining equipment and parts are distributed through a world-wide network of independent distributors and a captive distribution company serving the Western United States. The forestry equipment product line includes diesel electric powered log stackers having either two or four wheel drive configurations with load capacities ranging from 40 to 65 tons. LeTourneau is the only manufacturer that sells electrically powered jib cranes with ratings from 25,000 to 52,000 lbs. at a reach of 100 to 150 feet and having a 360 degree rotation. The forestry equipment is marketed primarily in North America through independent distributors and a captive distribution network in the Northwestern United States. LeTourneau's material handling equipment line includes the manufacture and sale of several different types of equipment called intermodals. These include 50 ton capacity, diesel electric, gantry cranes and large forklift type vehicles, called side porters, used for lifting, transporting and stacking large shipping containers and trailers at ports and rail yards. Gantry Cranes equipped with a spreader can lift containers from the top and also have retractable arms which are used in loading and unloading piggyback trailers. Gantry cranes not having a spreader can span up to -9- 12 seven rows plus a truck aisle and stack 9 ft. 6 inch containers up to five high. The intermodal equipment is marketed primarily in North America through independent distributors and a captive distribution network in the Northwestern United States. LeTourneau also sells parts and components to repair and maintain mining, forestry and intermodal equipment. Equipment parts are marketed through one dealer and a captive distribution company in the United States with 17 parts stocking branches, one dealer in Canada with over 19 parts stocking branches, and 31 international dealers with over 50 parts stocking locations. LeTourneau's mini-steel mill located in Longview, Texas produces carbon and alloy plate products and specialty steel. LeTourneau concentrates on "niche" markets that require alloy, specialty steel grades, or "exotic" versions of carbon steel products including mold steels, tool steels, aircraft quality steels, stainless steel and Hydrogen Induced Cracking steels. External steel sales, which are garnered through a direct sales force of LeTourneau employees, consist primarily of steel plate, but also include forging ingots and value-added fabrication of steel products. Steel products are generally sold to steel service centers, fabricators, manufacturers, forge shops and brokers. The market for carbon steel plate products and fabricated products is regional and encompasses Texas, Oklahoma, Louisiana, Mississippi and Arkansas. The Steel Group ships alloy and specialty grades of plate products nationally and exports quantities to Mexico and Canada. The forging ingot market is concentrated in the Gulf Coast region of Texas. Carbon and alloy plate products are also used internally in the production of heavy equipment and parts. LeTourneau's marine group has a shipyard in Vicksburg, Mississippi for the construction of mobile self-elevating offshore drilling platforms. LeTourneau has built over one-third of all mobile offshore jack-up drilling rigs, including all 20 operated by the Company utilizing this and other shipyards. The marine group has the capability of providing engineering support and spare parts to the drilling industry. This facility is currently closed, and the ongoing rig component manufacturing and marine repair service businesses, as well as a marine design engineering business, are now located at the Company's Longview, Texas facility. In 1994, manufacturing operations generated an operating profit (income from operations before deducting general and administrative expenses) of $7.7 million and had a firm backlog for all of its product lines at March 1, 1995 of $27 million. LeTourneau, engages in a limited amount of research and product development, primarily to develop larger capacity trucks and loaders used in the mining industry. The Company evaluates on an ongoing basis the LeTourneau product and service lines with the intention of making enhancements. Raw Materials The principal raw material utilized in LeTourneau's manufacturing operations is steel plate, most of which is supplied by LeTourneau's mini-steel mill. Other required materials are generally available in sufficient quantities through purchases in the open market to meet its manufacturing needs. LeTourneau does not believe that it is dependent on any single supplier. Competition LeTourneau's large trucks and loaders compete worldwide with several competitors. The company believes it is the third or fourth largest supplier of this size and type of equipment in the world. The loader market also includes vigorous competition from smaller-sized equipment. Large loaders compete against four manufacturers of loaders and the electric mining shovels and LeTourneau trucks compete against three manufacturers. The market for LeTourneau forestry and intermodal equipment is also characterized by vigorous competition. Even though the company's jib crane is unique, it does encounter competition from other equipment manufacturers that offer alternate methods for meeting the requirements. The number of major competitors by type of equipment are as follows: log stackers - four, jib cranes - three, side porters - six, and gantry cranes - more than ten. -10- 13 LeTourneau's mini-steel mill encounters competition from a total of eight major competitors, with the breakdown by product line being as follows: plate products - four; fabricated products - two and forging ingots - two. The competition LeTourneau encounters in the parts business is extremely fragmented with only three other companies being considered to be competitors. Vendors supplying parts directly to end-users and well-fitters who obtain parts and copy them to supply less expensive and lower quality substitutes represent more intense competition than that of direct competitors. In order to be competitive in the mining and forestry heavy equipment markets, LeTourneau offers warranties at the time of purchase as well as parts guarantees. Warranties, which are based upon stipulated years of ownership or hours of usage, whichever occurs first, generally cover the drive train and, in the case of LeTourneau trucks, cover the frame. Parts consumption guaranties and maintenance and repair contracts are also made on the same basis. LeTourneau pursues a parts return policy, which provides that returned parts must be in new, usable condition, be in current production and be readily resalable. There are no other significantly active competitors in the marine rig construction and support industry due to the current low demand. However, if demand for marine rigs increases, new competitors could be expected to enter the market. Historically, the make up of LeTourneau's customer base has been such that none of the product lines have been dependent upon any one customer or small group of customers. Regulations and Hazards LeTourneau's manufacturing operations and facilities are subject to regulation by a variety of local, state and federal agencies which regulate safety and the discharge of materials into the environment, including the Environmental Protection Agency (EPA), the Texas Natural Resources Conservation Commission (TNRCC) and the Mississippi Department of Environmental Quality. LeTourneau's manufacturing facilities are also subject to the requirements of the Occupational Safety Health Act and comparable state statutes. Hazardous materials are generated at LeTourneau's Longview plant in association with the steel making process. Industrial waste water generated at the mini-steel mill facility for cooling operations is recirculated and quality tests are conducted regularly. The facility has permits for waste water discharges, solid waste disposal and air emissions. Waste products considered hazardous by the EPA are disposed of by shipment to an EPA or state permitted waste disposal facility. As a part of the acquisition of the net assets of Marathon LeTourneau Company, the sellers agreed to remediate certain environmental conditions at the Longview, Texas and Vicksburg, Mississippi sites. This work will be performed over the next 25 years. The remediation efforts include, among other things, post-closure care for a landfill at the Longview facility closed by Marathon LeTourneau Company prior to LeTourneau's acquisition. LeTourneau jack-up designs are subject to regulatory approvals by various agencies depending upon the customer's selection of geographic areas where the rig will qualify for drilling. The rules vary by location and are subject to frequent change. These rules primarily relate to safety and environmental issues in addition to those which classify the jack-up as a vessel. LeTourneau may be liable for damages resulting from pollution of air, land and inland waters associated with its manufacturing operations. LeTourneau believes that compliance with environmental protection laws and regulations will have no material effect on its capital expenditures, earnings or competitive position during 1995. Although further legislation or regulation pertaining to the protection of the environment may reasonably be anticipated, the effects thereof on LeTourneau's manufacturing operations cannot be accurately predicted. As a manufacturing company, LeTourneau may be responsible for certain risks associated with the use of its products. These risks include product liability claims -11- 14 for personal injury and/or death, property damage, loss of use of product, business interruption and necessary legal expenses to defend LeTourneau against such claims. LeTourneau carries insurance which it believes adequately covers such risks. LeTourneau did not assume certain liabilities of Marathon LeTourneau Company, such as product liability and tort claims, associated with all products manufactured, produced, marketed or distributed prior to the date of the acquisition. LeTourneau anticipates incurring expenses associated with the warranty of its products, including those existing at the date of the acquisition. In the non-marine business segments, dealers of LeTourneau's products perform the warranty work for the manufacturer, and in the marine segment, LeTourneau generally performs warranty work directly. Employees The total number of employees of the Company at March 15, 1995 and at December 31, 1994, 1993 and 1992 were as follows: 3,507, 3,484, 2,560 and 2,333, respectively. Some of the employees included in these numbers are not United States citizens. None of the Company's employees are covered by collective bargaining agreements with labor unions. The Company considers relations with its employees to be satisfactory. -12- 15 ITEM 2. PROPERTIES The Company leases as its corporate headquarters 57,800 square feet of space in an office tower located at 2800 Post Oak Boulevard in Houston, Texas. DRILLING RIGS The following is a summary of the principal drilling equipment owned or operated by the Company and in service at March 31, 1995. See "Liquidity and Capital Resources" as appearing in "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 14 in the Annual Report which page is incorporated herein by reference. OFFSHORE
(b) Depth: Year Contracting Party/ Water/ in (l) Type of Contract Name/Class (a) Drilling Service Location (m) Estimated Release Date -------------- ------------- ------- ------------- -------------------------- Cantilever Jack-up Rigs: Rowan Gorilla II 450'/30,000' 1984 Gulf of Mexico Kerr McGee Corporation 200-C (d) (e) (h) (l) Multiple Well (m) June 1995 Rowan Gorilla III 328'/30,000' 1984 Eastern Canada LASMO Nova Scotia Limited 200-C (d) (e) (l) Term (m) January 1997 Rowan Gorilla IV 328'/30,000' 1986 Trinidad Amoco Trinidad Oil Company 200-C (d) (e) (l) Multiple Well (m) April 1995 Rowan-California 225'/30,000' 1983 North Sea Phillips Petroleum U.K. Limited 116-C (c) (e) (l) Multiple Well (m) November 1995 Rowan-Halifax 225'/30,000' 1982 North Sea Mobil North Sea Limited 116-C (c) (e) (i) (l) Multiple Well (m) October 1995 Cecil Provine 225'/30,000' 1982 North Sea Amoco (U.K.) Exploration Company 116-C (c) (e) (j) (l) Multiple Well (m) December 1995 Arch Rowan 225'/30,000' 1981 North Sea Amoco (U.K.) Exploration Company 116-C (c) (e) (l) Multiple Well (m) December 1995 Gilbert Rowe 350'/30,000' 1981 Gulf of Mexico Samedan Oil Company 116-C (c) (e) (h) (l) Multiple Well (m) June 1995 Charles Rowan 350'/30,000' 1981 Gulf of Mexico Amoco Production Company 116-C (c) (e) (h) (l) Multiple Well (m) October 1995 Rowan-Paris 350'/30,000' 1980 Gulf of Mexico Amoco Production Company 116-C (e) (h) (l) Multiple Well (m) May 1995 Rowan-Middletown 350'/30,000' 1980 Gulf of Mexico Amoco Production Company 116-C (e) (h) (l) Multiple Well (m) November 1995 Rowan-Fort Worth 350'/30,000' 1978 Gulf of Mexico Walter Oil & Gas Corporation 116-C (e) (h) (l) Multiple Well (m) August 1995
-13- 16 ITEM 2. PROPERTIES OFFSHORE(Continued)
(b) Depth: Year Contracting Party/ Water/ in (l) Type of Contract Name/Class (a) Drilling Service Location (m) Estimated Release Date -------------- ------------- ------- ------------- -------------------------- Conventional Jack-up Rigs: Rowan-Juneau 300'/30,000' 1977 Gulf of Mexico Shell Offshore, Inc. 116 (c) (e) (f) (l) Single Well (Turnkey) (m) May 1995 Rowan-Odessa 350'/30,000' 1977 Gulf of Mexico Not Committed 116 (e) (f) (h) Rowan-Louisiana 350'/30,000' 1975 Gulf of Mexico King Ranch Oil & Gas, Inc. 84 (e) (f) (h) (l) Multiple Well (m) April 1995 Rowan-Alaska 350'/30,000' 1975 Gulf of Mexico Forcenergy Gas Exploration, Inc. 84 (e) (f) (h) (l) Multiple Well (m) July 1995 Rowan-Texas 250'/20,000' 1973 Gulf of Mexico Not Committed 52 Rowan-Anchorage 250'/20,000' 1972 Gulf of Mexico Sonat Exploration Company 52 (e) (l) Single Well (m) April 1995 Rowan-New Orleans 250'/20,000' 1971 Gulf of Mexico American Exploration Company 52 (f) (g) (l) Crane operation (m) April 1995 Rowan-Houston 250'/20,000' 1970 Gulf of Mexico Forcenergy Gas Exploration, Inc. 52 (e) (l) Multiple Well (m) May 1995 Semi-Submersible Rig: Rowan-Midland 1,000'/25,000' 1976 Gulf of Mexico Ashland Exploration, Inc. (l) Multiple Well (m) August 1995 Submersible Barges: Rowan-Fourchon 24'/30,000' 1970 Gulf of Mexico Flores & Rucks (l) Multiple Well (m) July 1995 Rowan-Fairbanks 26'/25,000' 1975 Gulf of Mexico Cold Stacked Rowan-Morgan City 26'/25,000' 1973 Gulf of Mexico Kerr McGee Corporation (l) Multiple Well (m) July 1995
-14- 17 ITEM 2. PROPERTIES (Continued) ONSHORE (k)
Contracting Party/ Maximum (l) Type of Contract Description Drilling Depth Location (m) Estimated Release Date ------------ ---------------- --------- ------------------------------- One rig 18,000'-30,000' Oklahoma Davis Petroleum (l) Single Well(Turnkey)(m) March 1995 Argentina (n) Triton Energy, Inc. (l) Multiple Well (m) December 1995 One rig 18,000'-30,000' Oklahoma Davis Petroleum (l) Single Well(Turnkey)(m) May 1995 Argentina (o) Argentina Hunt Oil Company (l) Multiple Well (m) December 1995 One rig 18,000'-30,000' Texas Phillips Petroleum (l) Multiple Well (m) August 1995 One rig 18,000'-30,000' Mississippi Amerada Hess (l) Multiple Well (m) May 1995 Five rigs 18,000'-30,000' Oklahoma & Texas Not committed Three rigs 10,000' Argentina YPF S.A. (l) Term (m) August 1996 Five rigs 20,000' Alaska Not Committed
---------- (a) Classes 200-C ("Gorilla"), 116-C, 116, 84 and 52 are nomenclature assigned by LeTourneau, Inc. to jack-ups of its design and construction. (b) Indicates rated water depth in current location and rated drilling depth, respectively. (c) Unit modified to increase operating capability in hostile environments. (d) Gorilla Class unit designed for extreme hostile environment capability. (e) Unit equipped with a "top-drive" drilling system. (f) Unit equipped with a "skid base" unit. (g) Unit equipped with drilling/heavy-lift crane option. (h) Unit equipped with leg extensions. (i) Rig sold December 1984 and leased back for 15 years. (j) Rig sold December 1985 and leased back for 15 years. (k) Onshore rigs, including the three used rigs purchased in 1991, were constructed at various dates between 1960 and 1982, utilizing, in some instances, new as well as used equipment. Most of the older rigs have been substantially rebuilt subsequent to their respective dates of construction. (l) Refer to "Contracts" on page 3 of this Form 10-K for definition of types of contracts. (m) Indicates estimated completion date of work to be performed. (n) Rig scheduled for shipment to Argentina in May 1995. (o) Rig scheduled for shipment to Argentina in June 1995. The Company's drilling division leases and, in some cases, owns various operating and administrative facilities generally consisting of office, maintenance and storage space in the states of Alaska, Texas and Louisiana and, on a foreign basis, in the countries of Canada, Argentina, England, Scotland, The Netherlands, and Trinidad. -15- 18 AIRCRAFT At March 31, 1995 the U.S.-based Company-owned helicopter fleet consisted of 14 twin-engine turbine IFR rated Bell 212 helicopters (14 passenger), 16 twin-engine turbine IFR rated Bell 412 helicopters (14 passenger), 30 twin-engine turbine MBB BO-105CBS helicopters (five passenger), two Aerospatiale 332L Super Puma helicopters (19 passenger) and 27 various single-engine turbine helicopters (four to six passenger). The U.S.-based fixed-wing fleet of Company-owned aircraft consisted of four Convair 580s (50 passenger), nine DeHavilland Twin Otters (9-19 passenger), two DeHavilland Dash 8s (37 passenger), one Lear Jet 35A (six passenger) and one Beechcraft King Air 200C (six passenger). Helicopters owned by KLM ERA on March 31, 1995 consisted of five twin-engine turbine IFR rated Sikorsky S-61N helicopters (26 passenger) and five twin-engine turbine IFR rated Sikorsky S-76B helicopters (13 passenger). The Company's principal aircraft bases in Alaska, all located on leased property, are a fixed-wing air service center (57,000 square feet of hangar, repair and office facilities) at Anchorage International Airport, with an adjacent helicopter hangar facility (14,800 square feet) and hangar, office and repair facilities at Fairbanks International Airport (13,000 square feet). The Company also maintains similar, smaller helicopter facilities in Alaska at Deadhorse, Juneau, Valdez and Yakutat. The Company's principal facilities to accommodate its Gulf of Mexico operations are located on leased property at Lake Charles Regional Airport.The facilities, comprising 53,000 square feet, include helicopter hangars, a repair facility and an operations and administrative building. The Company also operates a helicopter facility (20,700 square feet of hangar, repair and office facilities) located on leased property at the Terrebonne Airport in Houma, Louisiana and a helicopter facility (5,700 square feet of hangar, repair and office facilities) located on leased property in New Iberia, Louisiana. KLM ERA's principal facility to accommodate its operations in the Dutch sector of the North Sea is a base located in Den Helder. The facility, comprising 35,000 square feet, includes a helicopter hangar, a repair facility and an operations and administrative building. A facility located in Amsterdam was shutdown and consolidated with the Den Helder operations in March 1995. Manufacturing Facilities LeTourneau's principal manufacturing facility and headquarters are located in Longview, Texas on approximately 2,400 acres with about 1.2 million square feet under roof. Included within the facility are: A mini-steel mill having approximately 330,000 square feet of covered work space and housing two 25-ton electric arc furnaces having an aggregate 120,000 tons per year capacity; a fabrication shop having approximately 300,000 square feet of covered work space and housing a 3,000 ton vertical bender for making roll-ups or flattening materials up to 2 1/2 inches thick by 11 feet wide; a machine shop having approximately 140,000 square feet of covered work space and housing various types of machinery; and an assembly shop having approximately 124,000 square feet and housing various types of machinery. The marine group's facility located in Vicksburg, Mississippi is located on 1,850 acres of land and has approximately 476,000 square feet of covered work space. This facility is currently closed and the businesses formerly carried on at this location have been relocated to the Longview, Texas facility. The LeTourneau Portland Division's distributor for forest products in the Northwestern United States, is located on a six acre site in Troutdale, Oregon with approximately 22,000 square feet of building space. The Western Mining Division of LeTourneau headquartered in Tucson, Arizona is housed in a 20,000 square foot leased facility. It functions as the distributor for LeTourneau's mining equipment products in the Western United States. ITEM 3. LEGAL PROCEEDINGS The Company is involved from time to time in litigation arising out of the conduct of the Company's operations and other matters, not all the potential liabilities with respect to which are covered by the terms of the Company's insurance policies. While the Company -16- 19 is unable to predict the ultimate liabilities which may result from such litigation, the Company believes that no such litigation in which the Company was involved as of March 31, 1995 will have a material adverse effect on the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the Company's common stockholders during the fourth quarter of the fiscal year ended December 31, 1994. ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT The names, positions, years of accredited service and ages of the officers of the Company and certain officers of the Company's wholly-owned subsidiaries, Era Aviation, Inc. and LeTourneau Inc., as of March 31, 1995 are listed below. Officers of all three entities are normally appointed annually by the entities' Board of Directors at the bylaws-prescribed meetings held in the spring and serve at the discretion of the Board of Directors. There are no family relationships among these officers, nor any arrangements or understandings between any officer and any other person pursuant to which the officer was selected.
Years of Accredited Name Position Service Age -------------------- -------------------------------- ---------- ----- Executive Officers of the Registrant: C. R. Palmer Chairman of the Board, President 34 60 and Chief Executive Officer R. G. Croyle Executive Vice President 21 52 D. F. McNease Senior Vice President, Drilling 21 43 E. E. Thiele Senior Vice President, Finance, 25 55 Administration and Treasurer J. Earl Beckman(1) Vice President, Manufacturing 1 57 John L. Buvens Vice President, Legal 14 39 James B. Davis Vice President, Engineering 21 44 C. W. Johnson(2) Vice President, Aviation 17 51 Mark A. Keller Vice President, Marketing - 3 42 North American Drilling Paul L. Kelly Vice President, Special Projects 12 55 Bill S. Person Vice President, Industrial Relations 27 46 William C. Provine Vice President, Investor Relations 8 48 Other Officers of the Registrant: William H. Wells Controller 1 33 Mark H. Hay Secretary and Assistant Treasurer 16 50 P. G. Wheeler Assistant Treasurer 20 47 Lynda A. Aycock Assistant Treasurer and 23 48 Assistant Secretary Certain Officer of Era Aviation, Inc.: James Vande Voorde Vice President 21 55
(1) Also serves as President and Chief Executive Officer of LeTourneau, Inc. (2) Also serves as President and Chief Operating Officer of Era Aviation, Inc. Each of the executive officers and other officers of the Company as well as the officers of Era Aviation, Inc. and LeTourneau, Inc. listed above continuously served in the position shown above for more than the past five years except as noted in the following paragraphs. -17- 20 Since October 1993, Mr. Croyle's principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Croyle served as Vice President, Legal of the Company. Since October 1993, Mr. McNease's principal occupation has been in the position set forth. From April 1991 to October 1993, Mr. McNease served as Vice President, Drilling of the Company. For more than five years prior to that time, he served as Vice President of Rowandrill, Inc., a subsidiary of the Company. Since April 1994, Mr. Thiele's principal occupation has been in the position set forth. From January 1994 to April 1994, Mr. Thiele served in the position of Vice President, Finance, Administration and Treasurer. From February 1989 to January 1994, he served as Vice President, Finance and Administration. Since April 1994, Mr. Beckman's principal occupation has been in the position set forth. From February 1994 to present, Mr. Beckman has also served in the position of President and Chief Executive Officer of LeTourneau, Inc, a subsidiary of the Company. For more than five years prior to that time, he served as President of Marathon LeTourneau Company, a company whose net assets were purchased by LeTourneau, Inc. in February 1994. Marathon LeTourneau was not, and is not now, a parent, subsidiary or affiliate of the Company. Since October 1993, Mr. Buvens' principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Buvens served as an Attorney for the Company. Since October 1993, Mr. Davis' principal occupation has been in the position set forth. From January 1990 to October 1993, Mr. Davis served as Manager of Engineering/Purchasing & Chief Engineer of the Company. From June 1989 to January 1990, he served as an Engineer for the Company. For more than five years prior to that time, he served as a Tool Pusher for the Company. Since April 1994, Mr. Johnson's principal occupation has been in the position set forth. From December 1993 to present, Mr. Johnson has also served in the position of President and Chief Operating Officer of Era Aviation, Inc., a subsidiary of the Company. For more that five years prior to that time, he served as Executive Vice President of Era. Since April 1994, Mr. Keller's principal occupation has been in the position set forth. From July 1992 to present and April 1993 to present, Mr. Keller has also served in the positions of Vice President of Terminator, Inc. and Rowandrill, Inc., respectively, both subsidiaries of the Company. From April 1992 to July 1992, Mr. Keller served as Marketing Coordinator for Terminator, Inc. For more than five years prior to April 1992, he served as Senior Vice President of Chiles Offshore Corp. Chiles is not a parent, subsidiary or affiliate of the Company. Since October 1993, Mr. Person's principal occupation has been in the position set forth. From April 1990 to October 1993, Mr. Person served as Director of British American Offshore Limited, a subsidiary of the Company. For more than five years prior to that time, he served as Manager of Industrial Relations of the Company. Since October 1993, Mr. Provine's principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Provine served as Vice President of Rowandrill, Inc., a subsidiary of the Company. Since joining the Company in March 1994, Mr. Wells' occupation has been in the position set forth. For more than five years prior to that time, Mr. Wells served in various positions with the independent accounting firm of Deloitte & Touche LLP, including Audit Manager and, most recently, Senior Audit Manager. Deloitte & Touche is not a parent, subsidiary or affiliate of the Company but does serve as the Company's independent auditors. Since April 1994, Ms. Aycock's principal occupation has been in the position set forth. From October 1993 to April 1994, Ms. Aycock served in the position of Assistant Treasurer. For more than five years prior to that time, Ms. Aycock served as an Accountant for the Company. In addition to serving in the position shown above, Mr. Wheeler has also served as Corporate Tax Director of the Company for more than five years. -18- 21 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information required hereunder regarding the Common Stock price range and cash dividend information for 1994 and 1993 and the number of holders of Common Stock is set forth on page 27 of the Company's Annual Report under the title "Common Stock Price Range, Cash Dividends and Stock Splits", and is incorporated herein by reference, except for the final two paragraphs under such title. Also incorporated herein by reference to the Annual Report is the fifth paragraph in the right hand column appearing on page 14 within "Management's Discussion and Analysis of Financial Condition and Results of Operations", such paragraph provides information pertinent to the Company's ability to pay cash dividends subject to certain restrictions. The Company's Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange. ITEM 6. SELECTED FINANCIAL DATA The information required hereunder is set forth on page 10 of the Company's Annual Report under the title "Financial Review" and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required hereunder is set forth on pages 12, 13 and 14 under the title "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Refer to ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K on page 20 of this Form 10-K for a listing of financial statements of the registrant and its subsidiaries, all of which financial statements are incorporated by reference under this item. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information provided under the columns entitled Name, Principal Occupation for the Past Five Years, Age and Year First Became Director in the table on pages 5 and 6, in footnotes (1) and (3) on page 6 and in the paragraph following footnote (5) on page 4 of the Proxy Statement for the Company's 1995 Annual Meeting of Stockholders (the "Proxy Statement") is incorporated herein by reference. There are no family relationships among the directors or nominees for directors and the executive officers of the Company, nor any arrangements or understandings between any director or nominee for director and any other person pursuant to which such director or nominee for director was selected. Except as otherwise indicated, each director or nominee for director of the Company has been employed or engaged for the past five years in the principal occupation set forth opposite his name in the information incorporated by reference. See ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT on pages 17 and 18 of this Form 10-K for information relating to executive officers. ITEM 11. EXECUTIVE COMPENSATION The standard arrangement for compensating directors described under the title, "Director Compensation" at the bottom of page 11 of the Proxy Statement and the information appearing under the titles "Summary Compensation Table", "Option Grants in Last Fiscal Year", "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values", "Option Plans", "Convertible Debenture Incentive Plan" and "Pension Plan" on pages 7 through 11 of the Proxy Statement are incorporated herein by reference. In accordance with -19- 22 the instructions to Item 402 of Regulation S-K, the information contained in the Proxy Statement under the titles "Board Compensation Committee Report on Executive Compensation" and "Stockholder Return Performance Presentation" shall not be deemed to be filed as part of this Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information regarding security ownership of certain beneficial owners and management of the Company set forth under the headings "Voting Securities Outstanding" appearing on page 2 and "Security Ownership of Management and Principal Stockholders" appearing on pages 2 through 4 of the Proxy Statement is incorporated herein by reference. The business address of all directors is the principal executive offices of the Company as set forth on the facing page of this Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain business relationships and transactions between the Company and certain of the directors of the Company under the heading "Certain Transactions" appearing on page 15 of the Proxy Statement is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)1. Financial Statements The following financial statements and independent auditors' report, included in the Annual Report, are incorporated herein by reference:
Page of 1994 Annual Report ------------- Independent Auditors' Report............................. 15 Consolidated Balance Sheet, December 31, 1994 and 1993.............................. 16 Consolidated Statement of Operations for the Years Ended December 31, 1994, 1993 and 1992 ........... 17 Consolidated Statement of Changes in Stockholders' Equity for the Years Ended December 31, 1994, 1993 and 1992 ................................................... 18 Consolidated Statement of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992........ 19 Notes to Consolidated Financial Statements............... 20 Selected Quarterly Financial Data (Unaudited) for the Quarters Ended March 31, June 30, September 30 and December 31, 1994 and 1993.......................... 27
2. Financial Statement Schedules Financial Statement Schedules I, II, III, IV, and V are not included in this Form 10-K because such schedules are not required, not significant or because the required information is shown in Notes to the Consolidated Financial Statements of the Company's Annual Report. 3. Exhibits: Unless otherwise indicated below as being incorporated by reference to another filing of the Company with the Securities and Exchange Commission, each of the following exhibits is filed herewith: -20- 23 3a Restated Certificate of Incorporation of the Company, dated February 17, 1984, incorporated by reference to: Exhibit 3a to the Company's Form 10-K for the fiscal year ended December 31, 1983 (File No. 1-5491); Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-13544); and Exhibits 4a, 4b, 4c and 4d below. 3b Bylaws of the Company amended as of April 23, 1993, incorporated by reference to Exhibit 3 to the Company's Form 10-Q for the quarter ended March 31, 1993 (File No. 1-5491). 4a Certificate of Designation of the Company's $2.125 Convertible Exchangeable Preferred Stock incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-6476). 4b Certificate of Designation of the Company's Series I Preferred Stock incorporated by reference to Exhibit 4b to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File No.1-5491). 4c Certificate of Designation of the Company's Series II Preferred Stock incorporated by reference to Exhibit 4c to the Company's Form 10-K for the fiscal year ended December 31, 1987 (File No.1-5491). 4d Certificate of Designation of the Companies Series III Preferred Stock. 4e Certificate of Designation of the Company's Series A Junior Preferred Stock dated March 2, 1992 incorporated by reference to Exhibit 4d to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). 4f Amendment Nos. 1 and 2 dated September 19, 1994 and September 26, 1994, respectively, to the Rights Agreement dated as of February 25, 1992 between the Company and Citibank, N.A. as Rights Agent. 4g Rights Agreement as amended dated as of February 25, 1992 between the Company and Citibank, N.A. as Rights Agent. 4h Indenture dated December 1, 1991 between the Company and Bankers Trust Company, as Trustee, relating to the Company's 11-7/8% Senior Notes due 2001 incorporated by reference to Exhibit 28.1 to the Company's Current Report on Form 8-K dated December 12, 1991 (File No. 1-5491). 4i Specimen Common Stock certificate, incorporated by reference to Exhibit 4g to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491). 4j Form of Promissory Note dated November 30, 1994 between the purchasers of Series III Floating Rate Subordinated Convertible Debentures due 2004 and the Company. 10a 1980 Nonqualified Stock Option Plan of the Company together with form of Stock Option Agreement related thereto incorporated by reference to Exhibit 5.10 to the Company's Registration Statement on Form S-7 (Registration No. 2-68622). 10b 1988 Nonqualified Stock Option Plan of the Company as amended together with form of Stock Option Agreement related thereto incorporated by reference to Exhibit 10b of the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491). 10c Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1980 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491). 10d Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1980 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). 10e Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1988 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491).
-21- 24 10f Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1988 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10f to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). 10g Amendment Nos. 1 and 2 dated June 12, 1986 and October 21, 1994, respectively, to the 1986 Convertible Debenture Incentive Plan of the Company. 10h 1986 Convertible Debenture Incentive Plan of the Company as amended. 10i Pension Restoration Plan of the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491). 10j Pension Restoration Plan of LeTourneau, Inc. 10k Credit Agreement dated September 22, 1986 (including amendatory letter dated March 25, 1987) and First Preferred Ship Mortgage dated November 7, 1986 between the Company and Marathon LeTourneau Company incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1986 and amendatory letter dated February 21, 1992 incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). 10L Participation Agreement dated December 1, 1984 between the Company and Textron Financial Corporation et al. and Bareboat Charter dated December 1, 1984 between the Company and Textron Financial Corporation et al. incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No. 1-5491). 10M Participation Agreement dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. and Bareboat Charter dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No.1-5491). 10n Corporate Continuing Guaranty dated December 31, 1986 between Shearson Lehman Brothers Holdings Inc. and the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File No.1-5491). 10o Corporate Continuing Guaranty dated September 10, 1987 between Shearson Lehman Brothers Holdings Inc. and the Company incorporated by reference to Exhibit 10i to the Company's Form 10-K for the fiscal year ended December 31, 1987 (File No.1-5491). 10p Cross-Border Corporate Continuing Guaranty dated May 29, 1991 between Citicorp and the Company's wholly-owned subsidiary, Rowan International, Inc. incorporated by reference to Exhibit 10o to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). 10q Amendment No. 1 dated April 1, 1994 to the Consulting Agreement dated March 1, 1991 between the Company and C. W. Yeargain. 10r Consulting Agreement as amended dated March 1, 1991 between the Company and C. W. Yeargain. 10s Acquisition Agreement dated as of November 7, 1991, among KLM Royal Dutch Airlines, Blue Yonder I B.V., KLM Helikopters B.V. and Rowan Aviation (Netherlands) B.V. incorporated by reference to Exhibit 28.1 to the Company's Current Report on Form 8-K dated November 7, 1991 (File No. 1-5491). 10t Business Loan Agreement dated January 27, 1993 between Key Bank of Alaska and the Company's wholly-owned subsidiary, Era Aviation, Inc. incorporated by reference to Exhibit 10s to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491).
-22- 25 10u Asset Purchase Agreement dated as of November 12, 1993, among Rowan Companies, Inc., Rowan Equipment, Inc., General Cable Corporation, Marathon LeTourneau Company, Marathon LeTourneau Sales & Service Company and Marathon LeTourneau Australia Pty. Ltd. incorporated by reference to the Company's Current Report on Form 8-K dated February 11, 1994 (File No. 1-5491). 11 Computation of Primary and Fully Diluted Earnings (Loss) Per Share for the years ended December 31, 1994, 1993 and 1992 appearing on page 26 in this Form 10-K. *13 Annual Report to Stockholders for fiscal year ended December 31, 1994. 21 Subsidiaries of the Registrant as of March 31, 1995. 23 Independent Auditors' Consent. 24 Powers of Attorney pursuant to which names were affixed to this Form 10-K for the fiscal year ended December 31, 1994. 27 Financial Data Schedule for the year ended December 31, 1994.
The Company agrees to furnish to the Commission upon request a copy of all instruments defining the rights of holders of long-term debt of the Company and its subsidiaries. ___________ * Only portions specifically incorporated herein are deemed to be filed. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS Compensatory plans in which directors and executive officers of the Company participate are listed as follows: o 1980 Nonqualified Stock Option Plan of the Company together with form of Stock Option Agreement related thereto incorporated by reference to Exhibit 5.10 to the Company's Registration Statement on Form S-7 (Registration No. 2-68622); Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to such Plan incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491); and Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to such Plan incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). o 1988 Nonqualified Stock Option Plan of the Company as amended together with form of Stock Option Agreement related thereto incorporated by reference to Exhibit 10b to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491; Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to such Plan incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491); and Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to such Plan incorporated by reference to Exhibit 10f to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). o 1986 Convertible Debenture Incentive Plan of the Company as amended included as Exhibit 10h to this Form 10K. o Pension Restoration Plan of the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File 1-5491). o Pension Restoration Plan of LeTourneau, Inc. included as Exhibit 10j to this Form 10k. (b) Reports on Form 8-K: No reports on Form 8-K were filed by the Registrant during the fourth quarter of fiscal year 1994. -23- 26 For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant Registration Statements on Form S-8 Nos. 2-67866 (filed May 22, 1980), 2-58700, as amended by Post-Effective Amendment No. 4 (filed June 11, 1980), 33-33755, as amended by Amendment No. 1 (filed March 29, 1990),33-61444 (filed April 23, 1993), 33-51103 (filed November 18, 1993) 33-51105 (filed November 18, 1993) and 33-51109 (filed November 18, 1993): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the act and will be governed by the final adjudication of such issue. -24- 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROWAN COMPANIES, INC. By: C. R. PALMER (C. R. Palmer, Chairman of the Board, President and Chief Executive Officer) Date: March 31, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- C. R. PALMER Chairman of the Board, President March 31, 1995 (C. R. Palmer) and Chief Executive Officer E. E. THIELE Principal Financial Officer March 31, 1995 (E. E. Thiele) WILLIAM H. WELLS Principal Accounting Officer March 31, 1995 (William H. Wells) *RALPH E. BAILEY Director March 31, 1995 (Ralph E. Bailey) *HENRY O. BOSWELL Director March 31, 1995 (Henry O. Boswell) *H. E. LENTZ Director March 31, 1995 (H. E. Lentz) *WILFRED P. SCHMOE Director March 31, 1995 (Wilfred P. Schmoe) *CHARLES P. SIESS, JR. Director March 31, 1995 (Charles P. Siess, Jr.) *PETER SIMONIS Director March 31, 1995 (Peter Simonis) *C. W. YEARGAIN Director March 31, 1995 (C. W. Yeargain) * BY C. R. PALMER (C. R. Palmer, Attorney-in-fact)
-25- 28 EXHIBIT 11 ROWAN COMPANIES, INC. AND SUBSIDIARIES COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER SHARE (in thousands except per share amounts)
For the Year Ended December 31 ----------------------------------------------------- 1994 1993 1992 -------- -------- -------- Weighted average shares of common stock outstanding 84,092 78,924 73,021 Stock options (treasury stock method) 1,436 (A) 1,377 (A) 1,305 (A) ------------------------------------------------------- Weighted average shares for primary earnings (loss) per share calculation 85,528 80,301 74,326 Stock options (treasury stock method) 30 (A) Shares issuable from assumed conversion of floating rate subordinated convertible debentures 612 (A) 516 (A) 652 (A) ------------------------------------------------------- Weighted average shares for fully diluted earnings (loss) per share calculation 86,140 80,817 75,008 ======================================================= Net income (loss) for primary calculation $ (22,989) $ (13,259) $ (73,753) Subordinated debenture interest 301 282 353 ------------------------------------------------------- Net income (loss) for fully diluted calculation $ (22,688) $ (12,977) $ (73,400) ======================================================= Primary earnings (loss) per share $ (0.27) $ (0.17) $ (0.99) ======================================================= Fully diluted earnings (loss) per share $ (0.26)(B) $ (0.16)(B) $ (0.98)(B) =======================================================
Note: Reference is made to Note 1 to Consolidated Financial Statements regarding computation of per share amounts. (A) Included in accordance with Regulation S-K Item 601(b)(11) although not required to be provided for by Accounting Principles Board Opinion No. 15 because the effect is insignificant. (B) This calculation is submitted in accordance with regulation S-K Item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an antidilutive result. 29 EXHIBIT INDEX Page 1 Of 4
Footnote Exhibit Reference Number Exhibit Description ------------- ----------- -------------------------------------------------- (1) 3a Restated Certificate of Incorporation of the Company, dated February 17, 1984, incorporated by reference to: Exhibit 3a to the Company's Form 10-K for the fiscal year ended December 31, 1983 (File No. 1-5491); Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-13544); and Exhibits 4a, 4b, 4c and 4d below. (1) 3b Bylaws of the Company amended as of April 23, 1993, incorporated by reference to Exhibit 3 to the Company's Form 10-Q for the quarter ended March 31, 1993 (File No. 1-5491). (1) 4a Certificate of Designation of the Company's $2.125 Convertible Exchangeable Preferred Stock incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-6476). (1) 4b Certificate of Designation of the Company's Series I Preferred Stock incorporated by reference to Exhibit 4b to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File No.1-5491). (1) 4c Certificate of Designation of the Company's Series II Preferred Stock incorporated by reference to Exhibit 4c to the Company's Form 10-K for the fiscal year ended December 31, 1987 (File No.1-5491). (2) 4d Certificate of Designation of the Companies Series III Preferred Stock. (1) 4e Certificate of Designation of the Company's Series A Junior Preferred Stock dated March 2, 1992 incorporated by reference to Exhibit 4d to the Company's Form 10-k for the fiscal year ended December 31, 1991 (File No. 1-5491). (2) 4f Amendment Nos. 1 and 2 dated September 19, 1994 and September 26, 1995, respectively, to the Rights Agreement dated as of February 25, 1992 between the Company and Citibank, N.A. as Rights Agent. (2) 4g Rights Agreement as Amended dated as of February 25, 1992 between the Company and Citibank, N.A. as Rights Agent. (1) 4h Indenture dated December 1, 1991 between the Company and Bankers Trust Company, as Trustee, relating to the Company's 11-7/8% Senior Notes due 2001 incorporated by reference to Exhibit 28.1 to the Company's Current Report on Form 8-k dated December 12, 1991 (File No. 1-5491). (1) 4i Specimen Common Stock Certificate, incorporated by reference to Exhibit 4g to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491).
30 EXHIBIT INDEX Page 2 Of 4
Footnote Exhibit Reference Number Exhibit Description ------------- --------- -------------------------------------------------- (2) 4j Form of Promissory Note dated November 30, 1994 between the purchasers of Series III Floating Rate Subordinated Convertible Debentures due 2004 and the Company. (1) 10a 1980 Nonqualified Stock Option Plan of the Company together with Form of Stock Option Agreement related thereto incorporated by reference to Exhibit 5.10 to the Company's Registration Statement on Form S-7 (Registration No. 2-68622). (1) 10b 1988 Nonqualified Stock Option Plan of the Company as amended together with form of Stock Option Agreement related thereto incorporated by reference to Exhibit 10b of the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491). (1) 10c Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1980 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491). (1) 10d Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1980 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). (1) 10e Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1988 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491). (1) 10f Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1988 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10f to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). (2) 10g Amendment Nos. 1 and 2 Dated June 12, 1986 and October 21, 1994, respectively, to the 1986 Convertible Debenture Incentive Plan of the Company. (2) 10h 1986 Convertible Debenture Incentive Plan of the Company as amended. (1) 10i Pension Restoration Plan of the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491). (2) 10j Pension Restoration Plan of LeTourneau, Inc.
31 EXHIBIT INDEX Page 3 Of 4
Footnote Exhibit Reference Number Exhibit Description ------------- ----------- ----------------------------------------------- (1) 10k Credit Agreement dated September 22, 1986 (including amendatory letter dated March 25, 1987) and First Preferred Ship Mortgage dated November 7, 1986 between the Company and Marathon LeTourneau Company incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1986 and amendatory letter dated February 21, 1992 incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). (1) 10l Participation Agreement dated December 1, 1984 between the Company and Textron Financial Corporation et. al. and Bareboat Charter dated December 1, 1984 between the Company and Textron Financial Corporation et. al. incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No. 1-5491). (1) 10m Participation Agreement dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. and Bareboat Charter dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No. 1-5491). (1) 10n Corporate Continuing Guaranty dated December 31, 1986 between Shearson Lehman Brothers Holdings Inc. and the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File No. 1-5491). (1) 10o Corporate Continuing Guaranty dated September 10, 1987 between Shearson Lehman Brothers Holdings Inc. and the Company incorporated by reference to Exhibit 10i to the Company's Form 10-K for the fiscal year ended December 31, 1987 (File No. 1-5491). (1) 10p Cross-Border Corporate Continuing Guaranty dated May 29, 1991 between Citicorp and the Company's wholly-owned subsidiary, Rowan International, Inc. incorporated by reference to Exhibit 10o to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491). (2) 10q Amendment No. 1 dated April 1, 1994 to the Consulting Agreement dated March 1, 1991 between the Company and C. W. Yeargain. (2) 10r Consulting Agreement as amended dated March 1, 1991 between the Company and C. W. Yeargain. (1) 10s Acquisition Agreement dated as of November 7, 1991, among KLM Royal Dutch Airlines, Blue Yonder I B.V., KLM Helikopters B.V. and Rowan Aviation (Netherlands) B.V. incorporated by reference to Exhibit 28.1 to the Company's Current Report on Form 8-K dated November 7, 1991 (File No. 1-5491).
32 EXHIBIT INDEX Page 4 Of 4
Footnote Exhibit Reference Number Exhibit Description --------- ----------- -------------------------------------------- (1) 10t Business Loan Agreement dated January 27, 1993 between Key Bank of Alaska and the Company's wholly-owned subsidiary, Era Aviation, Inc. incorporated by reference to Exhibit 10s to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491). (1) 10u Asset Purchase Agreement dated as of November 12, 1993, among Rowan Companies, Inc., Rowan Equipment, Inc., General Cable Corporation, Marathon LeTourneau Company, Marathon LeTourneau Sales & Service Company and Marathon LeTourneau Australia Pty. Ltd. incorporated by reference to the Company's Current Report on Form 8-k dated February 11, 1994 (File No. 1-5491). (3) 11 Computation of Primary and Fully Diluted Earnings (Loss) Per Share for the years ended December 31, 1994, 1993 and 1992 appearing on page 26 in this Form 10-K. (4) 13 Annual Report to Stockholders for fiscal year ended December 31, 1994. (2) 21 Subsidiaries of the Registrant as of March 31, 1995. (2) 23 Independent Auditors' Consent. (2) 24 Powers of Attorney pursuant to which names were affixed to this Form 10-K for the fiscal year ended December 31, 1994. (2) 27 Financial Data Schedule for the year ended December 31, 1994.
__________________________________________ (1) Incorporated herein by reference to another filing of the company with the Securities and Exchange Commission as indicated. (2) Included herein. (3) Included in Form 10-K on page 26. (4) Included herein. See ITEM 1, ITEMS 5-8 and Subpart (a)1. of ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K on pages 20 through 23 on Form 10-K for specific portions incorporated herein by reference.
EX-4.D 2 CERTIFICATE OF DESIGNATION OF SERIES III 1 EXHIBIT 4d ROWAN COMPANIES, INC. CERTIFICATE OF DESIGNATIONS Providing for an Issue of Series III Preferred Stock Pursuant to Section 151 of the General Corporation Law of the State of Delaware ROWAN COMPANIES, INC., a Delaware corporation (the "Corporation"), certifies that pursuant to the authority contained in Article Fourth of its Certificate of Incorporation, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, its Board of Directors has duly adopted, at a meeting held on April 25, 1986, and at meetings of the 1986 Debenture Plan Committee of the Board of Directors held on August 25, 1987 and October 21, 1994, the following resolutions creating and providing for the issuance of a series of shares of Preferred Stock as hereinafter described, and further providing for the voting powers, designations, preferences and relative, participating, optional or other rights thereof, and the qualifications, limitations or restrictions thereof, in addition to those set forth in said Certificate of Incorporation, all in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, and that such resolutions have at all times since remained in effect and are now in effect, unamended: "RESOLVED, that pursuant to Paragraph A of Article Fourth of the Certificate of Incorporation of the Corporation, as amended (which creates and authorizes 5,000,000 shares of preferred stock, par value of $1.00 per share, hereinafter called the "Preferred Stock"), the Board of Directors hereby establishes and provides for the issue of a series of 10,300 shares of Preferred Stock, designated as Series III Preferred Stock (the "Series Stock"), which shares shall be issuable only upon conversion of the Series III Floating Rate Subordinated Convertible Debentures (the "Related Debentures") of the Corporation and shall be convertible into shares of common stock, $.125 par value, of the Corporation (the "Common Stock"), pursuant to the terms and conditions hereinafter set forth. RESOLVED, that the voting powers, preferences and relative, participating, optional, conversion, and other rights of the shares of the Series Stock, and the qualifications, limitations or restrictions thereof, in addition to those set forth in said Article Fourth, are as follows: Section 1. Dividends. The holders of shares of Series Stock shall not be entitled to receive cash dividends on such shares. Section 2. Liquidation Preference. (A) Upon the complete liquidation, dissolution, or winding-up of the Corporation, whether voluntarily or involuntarily, the Series Stock shall be entitled, before any distribution is made to the holders of Common Stock and of any other capital stock of the Corporation which ranks junior to the Series Stock in respect of distributions of 2 assets on liquidation, dissolution or winding-up of the Corporation, to be paid $1.00 per share, and shall not be entitled to any further payment. (B) In case the net assets of the Corporation are insufficient to pay all outstanding shares of Series Stock, and any other class of stock of the Corporation ranking in parity upon a liquidation, dissolution, or winding-up) with the Series Stock ("Parity Stock"), the liquidation preferences to which all such shares are entitled, then the entire net assets of the Corporation shall be distributed ratably to all outstanding shares of the Series Stock and Parity Stock, if any, in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution, or winding-up. (C) The merger or consolidation of the Corporation into or with another corporation or the merger or consolidation of any other corporation into or with the Corporation, or the sale, lease or conveyance of all or substantially all the assets, property or business of the Corporation shall not be deemed to be a liquidation, dissolution, or winding-up of the Corporation within the meaning of this Section 2. Section 3. Certain Restrictions. Without the consent of the holders of at least two-thirds of the total number of shares of Series Stock outstanding, given in person or by proxy, either in writing or by vote at a meeting called for the purpose, the Corporation shall not create or authorize any additional shares of Series Stock or amend, alter or repeal any of the rights, preferences or powers of the holders of Series Stock so as to affect adversely any such rights, preferences or powers; provided, however, that without the consent of the holders of all outstanding shares of Series Stock, the corporation shall not amend the Series Stock to adversely affect the Conversion Ratio thereof. Section 4. Conversion. Each share of the Series Stock may be converted at any time within thirty days of the issuance thereof, at the option of the holder thereof, into shares of Common Stock of the Corporation, on the terms and conditions set forth below in this Section 4: (A) Subject to the provisions for adjustment hereinafter set forth, the number of shares of Common Stock which shall be deliverable upon conversion of a share of Series Stock shall equal the face value of the Related Debenture which was converted into such shares of Series Stock, divided by the closing price of the Common Stock on the Trading Date prior to the date of sale of such Related Debenture. For the purpose of this subparagraph (A) of this Section 4, the terms "closing price" and "Trading Date" shall have the meanings attributed to them in subparagraph (B)(6) of this Section 4. (B) The number of shares of Common Stock which shall be deliverable upon conversion of a share of Series Stock (the "Conversion Ratio") shall be adjusted from time to time as follows: (1) In case the Corporation at any time or from time to time following the date of issuance of the Related Debentures -2- 3 which may be converted into shares of Series Stock shall pay or make a dividend or other distribution on any class of capital stock of the Corporation in Common Stock, the Conversion Ratio in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be increased by multiplying such Conversion Ratio by a fraction of which the numerator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the total number of shares of Common Stock constituting such dividend or other distribution, and the denominator shall be the total number of shares of Common Stock outstanding at the close of business on the date fixed for such determination, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (B)(1), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (2) In case the Corporation shall issue rights or warrants to all holders of its Common Stock entitling them (for periods ending within 180 days) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in subparagraph (B)(6) of this Section) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Ratio in effect at the opening of business on the day following the date fixed for such determination shall be increased by multiplying such Conversion Ratio by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this subparagraph (B)(2), the number of shares of -3- 4 Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation will not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation. (3) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Ratio in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common Stock, the Conversion Ratio in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately decreased, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (4) In case the Corporation shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding any rights or warrants referred to in subparagraph (B)(2) of this Section, any dividend or distribution paid in cash out of the earned surplus of the Company and any dividend or distribution referred to in subparagraph (B)(1) of this Section), the Conversion Ratio shall be adjusted so that the same shall equal that number determined by multiplying the Conversion Ratio in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in subparagraph (B)(6) of this Section) of the Common Stock on the date fixed for such determination and the denominator shall be such current market price per share of the Common Stock less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of such Board of Directors) of the portion of the assets or evidences of indebtedness so distributed applicable to one share of Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed the determination of stockholders entitled to receive such distribution. -4- 5 (5) The reclassification (including any reclassification upon a consolidation or merger in which the Corporation is the continuing corporation) of Common Stock into securities including other than Common Stock shall be deemed to involve (a) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and "the date fixed for such determination" within the meaning of subparagraph (B)(4) of this Section), and (b) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective" or "the day upon which such combination becomes effective," as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of subparagraph (B)(3) of this Section). (6) For the purpose of any computation under subparagraphs (B)(2) and (B)(4) of this Section, the current market price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the 15 consecutive "Trading Days" selected by the Company commencing not less than 20 nor more than 30 Trading Days before the day in question. The closing price for each day shall be the last reported sales price regular way or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation for that purpose. The term "Trading Date" shall mean a day on which the principal national securities exchange on which shares of the Common Stock are listed or admitted to trading is open for the transaction of business or, if not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the City of Houston, Texas are not authorized or obligated by law or executive order to close. -5- 6 (7) The Corporation may make such increases in the Conversion Ratio, in addition to those required by subparagraphs (B)(1), (B)(2), (B)(3) and (B)(4) of this Section, as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (8) No adjustment in the Conversion Ratio shall be required unless such adjustment would require an increase or decrease of at least one percent in such Conversion Ratio; provided, however, that any adjustment which by reason of this subparagraph (B)(8) is not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article shall be made to the nearest 1/100 of a share. (C) The holder of any shares of the Series Stock may exercise his option to convert such shares into shares of Common Stock by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series Stock to be converted accompanied by a written notice stating that such holder elects to convert all or a specified whole number of such shares in accordance with the provisions of this Section 4. As promptly as practicable, and in any event within five business days after the surrender of such certificates and the receipt of such notice relating thereto, the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which the holder of the Series Stock so converted shall be entitled and (ii) if less than the full number of shares of the Series Stock evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Conversions shall be deemed to have been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing the shares of the Series Stock to be converted so that the rights of the holder shall cease with respect to such surrendered certificates except for the right to receive Common Stock of the Corporation in accordance herewith, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. (D) In connection with the conversion of any shares of the Series Stock, no fractions of shares or Common Stock shall be issued, but the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to the market value of such fractional interest. In such event, the market value of a share of Common Stock of the Corporation shall be the current market price per share (as defined in subparagraph (B)(6) of this Section 4) of such shares on the last Trading Date on which such shares were -6- 7 traded immediately preceding the date upon which such shares of Series Stock are deemed to have been converted. (E) The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon (a) the conversion of all outstanding shares of the Series Stock, and (b) the conversion or exercise of any other outstanding securities or rights convertible or exercisable into Common Stock, including outstanding Related Debentures. Section 5. Adjustments for Certain Corporate Transactions. In case of any consolidation of the Corporation with, or merger of the Corporation into, any other corporation (other than a consolidation or merger in which the Corporation is the continuing corporation and in which no change is made in the outstanding Common Stock), or in case of any sale or transfer of all or substantially all of the assets of the Corporation, the corporation formed by such consolidation or the corporation resulting from such merger or the person which shall have acquired such assets, as the case may be, shall make adequate provision providing that the holder of each share of Series Stock then outstanding shall have the right thereafter to convert such Series Stock into the kind and amount of stock or other securities and property receivable upon such consolidation, merger, sale or transfer by a holder of the number of shares of Common Stock into which such Series Stock might have been converted immediately prior to such consolidation, merger, sale or transfer. Adequate provision shall also be made to provide for adjustments which, for events subsequent to such consolidation, merger, sale or transfer, shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 4. The above provisions of this Section 5 shall similarly apply to successive consolidations, mergers, sales or transfers. Section 6. Reports of Adjustments. Whenever the Conversion Ratio is adjusted as provided in Sections 4 and 5, the Corporation shall promptly compute such adjustment and promptly mail to each registered holder of the Series Stock and the Related Debentures a certificate, signed by the chief financial officer of the Corporation, setting forth the number of shares of Common Stock into which each share of the Series Stock is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective. Section 7. Voting. Except as otherwise provided elsewhere in the Certificate of Incorporation of the Corporation or required by law, the holders of Series Stock shall have no voting power in the election of directors or for any other purposes. RESOLVED, that, before the Corporation shall issue any shares of the Series Stock, a certificate of designations pursuant to Section 151 of the General Corporation Law of the State of Delaware shall be made, executed, acknowledged, filed and recorded in accordance with the provisions of said -7- 8 Section 151; and the proper officers of the Corporation are hereby authorized and directed to do all acts and things which may be necessary or proper in their opinion to carry into effect the purposes and intent of this and the foregoing resolutions." IN WITNESS WHEREOF, said ROWAN COMPANIES, INC. has caused this Certificate to be duly executed by the Chairman of its Board of Directors, its President or a Vice President and attested to by its Secretary or Assistant Secretary and has caused its corporate seal to be affixed hereto, this 30th day of November, 1994 ROWAN COMPANIES, INC. By: /s/ E. E. THIELE ------------------------------- Senior Vice President [Corporate Seal] ATTEST: /s/ MARK H. HAY -------------------------------------- Secretary -8- 9 THE STATE OF TEXAS } } COUNTY OF HARRIS } Before me, a Notary Public, on this day personally appeared E. E. Thiele, known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of the said Rowan Companies, Inc., a Delaware corporation, that he has executed the same as the act of such corporation for the purposes and consideration therein expressed, and that the facts stated therein are true. Given under my hand and seal of office this 30th day of November, 1994 /s/ MARCIA BRIDGES ------------------------------ Notary Public, in and for the State of Texas My Commission Expires: 7-18-98 ------------------------------- -9- EX-4.G 3 RIGHTS AGREEMENT AS AMENDED 02/25/92 1 EXHIBIT 4g ================================================================================ ROWAN COMPANIES, INC. and CITIBANK, N.A., Rights Agent _______________ Rights Agreement As Amended Dated as of February 25, 1992 ================================================================================ 2 Table of Contents
Section Page ------- ---- 1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3 Issue of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4 Form of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5 Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 6 Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7 Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . . . . . . . . . 13 8 Cancellation and Destruction of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . 16 9 Reservation and Availability of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 17 10 Junior Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 11 Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12 Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . . . . . . . . . . 34 13 Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 14 Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 15 Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 16 Agreement of Rights Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 17 Rights Certificate Holder Not Deemed a Shareholder . . . . . . . . . . . . . . . . . . . . . . . 43 18 Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 19 Merger or Consolidation or Change of Name of Rights Agent . . . . . . . . . . . . . . . . . . . . 45 20 Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
-i- 3 21 Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 22 Issuance of New Rights Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 23 Redemption and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 24 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 25 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 26 Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 27 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 28 Determinations and Actions by the Board of Directors, etc. . . . . . . . . . . . . . . . . . . . 56 29 Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 30 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 31 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 32 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 33 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Exhibit A -- Form of Rights Certificate Exhibit B -- Form of Summary of Rights Exhibit C -- Certificate of Designation -ii- 4 RIGHTS AGREEMENT RIGHTS AGREEMENT ("Agreement"), dated as of February 25, 1992 (the "Agreement"), between Rowan Companies, Inc., a Delaware corporation (the "Company"), and Citibank, N.A., a national banking association (the "Rights Agent"). WHEREAS, on February 25, 1992 (the "Rights Dividend Declaration Date"), the Board of Directors of the Company authorized and declared a distribution of one Right for each share of common stock, par value $.125 per share, of the Company (the "Company Common Stock") outstanding at the Close of Business on March 11, 1992 (the "Record Date"), and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant hereto) for each share of Company Common Stock issued between the Record Date (whether originally issued or delivered from the Company's treasury) and, except as otherwise provided in Section 22, the Distribution Date, each Right initially representing the right to purchase upon the terms and subject to the conditions hereinafter set forth one Unit of Series A Junior Preferred Stock (the "Rights"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (other than the Company, any Subsidiaries of the Company, any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity) which shall be the Beneficial Owner of 15% or more of the shares of Company Common Stock then outstanding. 5 (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof. (c) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own", any securities: (i) of which such Person or any of such Person's Affiliates or Associates is considered to be a "beneficial owner" under Rule 13d-3 of the General Rules and Regulations under the Exchange Act (the "Exchange Act Regulations") as in effect on the date hereof, provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own", any securities under this subparagraph (i) as a result of an agreement, arrangement or understanding to vote such securities if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the Exchange Act Regulations, and (B) is not reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); (ii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate of such other Person) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (i) of this paragraph (c)) or disposing of such securities; provided, however, that in no case shall an officer or director of -2- 6 the Company be deemed (x) the Beneficial Owner of any securities beneficially owned by another officer or director of the Company solely by reason of actions undertaken by such persons in their capacity as officers and directors of the Company or (y) the Beneficial Owner of securities held of record by the trustee of any employee benefit plan of the Company or any Subsidiary of the Company for the benefit of any employee of the Company or any Subsidiary of the Company, other than the officer or director, by reason of any influence that such officer or director may have over the voting of the securities held in the plan; (iii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right or obligation to acquire (whether such right or obligation is exercisable immediately or only after the passage of time or upon the satisfaction of conditions) pursuant to any agreement, arrangement or understanding (whether or not in writing) (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; or (iv) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right or obligation to vote pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that under this paragraph (c) a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own", (A) securities tendered pursuant to a tender or exchange offer made in accordance with Exchange Act Regulations by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (B) securities that may be issued upon exercise of Rights at any time prior to the occurrence of a Triggering Event, or (C) securities that may be issued upon exercise of Rights from and after the occurrence of a -3- 7 Triggering Event, which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(c) or Section 22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights. (d) "Board Approval" shall mean the adoption by the Board of Directors of the Company of a resolution or resolutions authorizing or approving the action or determination (A) by the unanimous written consent of all of the members of the Board of Directors of the Company or (B) by the affirmative vote of not less than a majority of the members of the Board of Directors of the Company (including not less than a majority of Continuing Directors) at a meeting duly called and held at which a quorum was present and acting throughout, provided, that at the time of adoption by the Board of Directors of any such resolution or resolutions (x) there are not less than three Continuing Directors and (y) a majority of the members of the Board of Directors of the Company are Continuing Directors. (e) "Board of Directors" shall mean the Board of Directors of the Company. (f) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the states of New York or Texas are authorized or obligated by law or executive order to close. (g) "Close of Business" on any given date shall mean 5:00 P.M., New York, New York time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York, New York time, on the next succeeding Business Day. (h) "Common Stock" of any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or, if such Person shall have no capital stock, the equity securities or other equity interest having power to control or direct the management of such Person. -4- 8 (i) "common stock equivalents" has the meaning set forth in Section 11(a)(iii). (j) "Company Common Stock" has the meaning set forth in the Whereas Clause. (k) "Continuing Director" shall mean, as of the time a determination is made, a member of the Board of Directors of the Company who is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person or a director, officer or agent of an Acquiring Person or of any such Affiliate or Associate, and who either (i) was a member of the Board of Directors of the Company on February 25, 1992 or (ii) subsequently becomes a director of the Company and whose election or nomination for election by the Company's stockholders, received Board Approval. (l) "current market price" has the meaning set forth in Section 11(d). (m) "Current Value" has the meaning set forth in Section 11(a)(iii). (n) "Distribution Date" has the meaning set forth in Section 3(a). (o) "equivalent preferred stock" has the meaning set forth in Section 11(b). (p) "Expiration Date" has the meaning set forth in Section 7(a). (q) "Final Expiration Date" has the meaning set forth in Section 7(a). (r) "Junior Preferred Stock" shall mean the Series A Junior Preferred Stock, $1.00 par value, of the Company having the voting powers, designation, preferences and relative, participating, optional or other special rights and qualifications, limitations and restrictions set forth in the form of Certificate of Designation attached to this Agreement as Exhibit C. (s) "Person" shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act. (t) "Principal Party" has the meaning set forth in Section 13(b). -5- 9 (u) "Purchase Price" has the meaning set forth in Section 7(b). (v) "Record Date" has the meaning set forth in the Whereas Clause. (w) "Redemption Price" has the meaning set forth in Section 23. (x) "Right" has the meaning set forth in the Whereas Clause. (y) "Rights Certificate" has the meaning set forth in Section 3(a). (z) "Rights Dividend Declaration Date" has the meaning set forth in the Whereas Clause. (aa) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii)(A), (B) or (C) hereof. (bb) "Section 13 Event" shall mean any event described in clause (x), (y) or (z) of Section 13(a) hereof. (cc) "Stock Acquisition Date" shall mean the earlier of (i) the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such and (ii) the first date on which the Company has actual knowledge of a filing with the Securities and Exchange Commission of a report pursuant to Section 13(d) or 13(f) of the Exchange Act (which shall include, without limitation, reports on Schedule 13D, Schedule 13G and Form 13F) by an Acquiring Person reflecting that an Acquiring Person has become such. (dd) "Subsidiary" shall mean, with reference to any Person, any other Person of which an amount of voting securities or equity interests sufficient to elect at least a majority of the directors or equivalent governing body of such other Person is beneficially owned, directly or indirectly, by such Person, or otherwise controlled by such first-mentioned Person. (ee) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. (ff) "Unit" has the meaning set forth in Section 7(b). SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3, shall prior to the Distribution Date also be holders of the Common Stock) in accordance with the terms and conditions hereof, -6- 10 and the Rights Agent hereby accepts such appointment. With the consent of the Rights Agent, the Company may from time to time appoint such Co-Rights Agents ("Co-Rights Agents") as it may deem necessary or desirable. In the event the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights Agents shall be as the Company shall determine. SECTION 3. ISSUE OF RIGHTS CERTIFICATES. (a) Until the earlier of (i) the Close of Business on the tenth day after the Stock Acquisition Date, and (ii) the Close of Business on the tenth day after the date of the commencement of, or first public announcement of the intention of any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity) to commence (which intention to commence remains in effect for five business days after such announcement), a tender or exchange offer, if upon consummation thereof such Person would be the Beneficial Owner of 30% or more of the shares of Company Common Stock then outstanding (the earlier of (i) and (ii) above being the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for shares of Company Common Stock registered in the names of the holders of shares of Company Common Stock as of and subsequent to the Record Date (which certificates for shares of Company Common Stock shall be deemed also to be certificates for Rights) and not be separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Company Common Stock (including a transfer to the Company). As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign and the Company will send or cause to be sent (and the Rights Agent will, if requested by the Company, send) by first-class, insured, postage prepaid mail, to each record holder of shares of Company Common Stock as of the Close of Business on the Distribution -7- 11 Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the form of Exhibit A hereto (the "Rights Certificates"), evidencing one Right for each share of Company Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Company Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company may make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. (b) As promptly as practicable following the Record Date, the Company will send a copy of a Summary of Rights to Purchase Junior Preferred Stock, in a form which may be appended to certificates that represent shares of Company Common Stock, in substantially the form attached hereto as Exhibit B (the "Summary of Rights"), by first-class, postage prepaid mail, to each record holder of shares of Company Common Stock as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company. (c) Rights shall, without any further action, be issued in respect of all shares of Company Common Stock which are issued (including any shares of Company Common Stock held in treasury) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date. Certificates, representing such shares of Company Common Stock, issued after the Record Date shall bear the following legend: "This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Rowan Companies, Inc. (the "Company") and Citibank, N.A. (the "Rights Agent") dated as of February 25, 1992 (the "Rights Agreement"), the terms of -8- 12 which are hereby incorporated herein by reference and a copy of which is on file at the principal office of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may expire, or may be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void." With respect to certificates representing shares of Company Common Stock (whether or not such certificates include the foregoing legend or have appended to them the Summary of Rights), until the earlier of the Distribution Date and the Expiration Date, the Rights associated with the shares of Company Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of the shares of Company Common Stock shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the shares of Company Common Stock represented by such certificates. SECTION 4. FORM OF RIGHTS CERTIFICATE. (a) The Rights Certificates (and the forms of election to purchase, assignment and certificate to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or any rule or regulation thereunder or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of -9- 13 the Record Date and on their face shall entitle the holders thereof to purchase such number of Units of Junior Preferred Stock as shall be set forth therein at the price set forth therein, but the amount and type of securities, cash or other assets that may be acquired upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (b) Any Rights Certificate issued pursuant hereto that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) which becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) which becomes a transferee prior to or concurrently with the Acquiring Person becoming such and which receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or such Associate or Affiliate) or to any Person with whom such Acquiring Person (or such Associate or Affiliate) has any continuing agreement, arrangement or understanding regarding either the transferred Rights, shares of Company Common Stock or the Company or (B) a transfer which the Board of Directors by Board Approval has determined to be part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e) hereof shall, upon the written direction of the Board of Directors, contain (to the extent feasible), the following legend: The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement. -10- 14 The Company shall notify the Rights Agent and, if such notification is given orally, the Company shall confirm same in writing on or prior to the Business Day next following, at such time as the Company has notice that any Person constitutes an Acquiring Person or an Affiliate or Associate of an Acquiring Person, and until such notice is received by the Rights Agent, the Rights Agent may conclusively presume for all purposes that the foregoing legend need be imprinted only on Rights Certificates beneficially owned by Persons that the Company has previously identified to the Rights Agent as constituting an Acquiring Person or an Affiliate or Associate of an Acquiring Person and transferees of any such Persons. The provisions of Section 7(e) shall be operative whether or not the foregoing legend is contained on any such Rights Certificate. SECTION 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Rights Certificate may be manual or facsimile. Rights Certificates bearing the manual or facsimile signatures of the individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the countersignature of such Rights Certificates or did not hold such offices at the date of such Rights Certificates. No Rights Certificate shall be entitled to any benefit under this Agreement or be valid for any purpose unless there appears on such Rights Certificate a countersignature, for purposes of authentication only, duly executed by the Rights Agent by manual signature of an authorized signatory, and such countersignature upon any Rights Certificate shall be conclusive evidence, and the only evidence, that such Rights Certificates has been duly countersigned as -11- 15 required hereunder. It shall not be necessary for the same signatory of the Rights Agent to countersign all of the Rights Certificates issued hereunder. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder and shall keep such books until three years following the first to occur of (i) the Expiration Date or (ii) the effective date of redemption of the Rights pursuant to Section 23. Such books shall show the name and address of each holder of the Rights Certificates, the number of Rights evidenced on its face by each Rights Certificate, the Certificate number and the date of each Rights Certificate. SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES. (a) Subject to the provisions of Sections 4(b), 7(e) and 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of Units of Junior Preferred Stock (or, following a Triggering Event, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and executed the certificate set forth in the form of assignment on the reverse side of such -12- 16 Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) of the Rights represented by such Rights Certificate or Associates or Affiliates thereof as the Company shall reasonably request; whereupon the Rights Agent shall, subject to the provisions of Section 4(b), Section 7(e) and Section 14, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of a Rights Certificate or Rights Certificates. (b) If a Rights Certificate shall be mutilated, lost, stolen or destroyed, upon request by the registered holder of the Rights represented thereby and upon payment to the Company and the Rights Agent of all reasonable expenses incident thereto, there shall be issued, in exchange for and upon cancellation of the mutilated Rights Certificate, or in substitution for the lost, stolen or destroyed Rights Certificate, a new Rights Certificate, in substantially the form of the prior Rights Certificate, of like tenor and representing the equivalent number of Rights, but, in the case of loss, theft or destruction, only upon receipt of evidence satisfactory to the Company and the Rights Agent of such loss, theft or destruction of such Rights Certificates and, if requested by the Company or the Rights Agent, indemnity also satisfactory to it. SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS. (a) Prior to the earlier of (i) the Close of Business on February 25, 2002 (the "Final Expiration Date"), or (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the earlier of (i) and (ii) being the "Expiration Date"), the registered holder of any Rights Certificate may, subject to the provisions of Sections 7(e) and 9(c), exercise the Rights evidenced thereby in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with -13- 17 the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price (as hereinafter defined for the number of Units of Junior Preferred Stock (or, following a Triggering Event, other securities, cash or other assets, as the case may be) for which such surrendered Rights are then exercisable. (b) The purchase price for each one one-hundredth of a share (each such one one-hundredth of a share being a "Unit") of Junior Preferred Stock upon exercise of Rights shall be $30.00, subject to adjustment from time to time as provided in Sections 11 and 13(a) hereof (such purchase price, as so adjusted, being the "Purchase Price"), and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price for the Units of Junior Preferred Stock (or, following a Triggering Event, other securities, cash or other assets, as the case may be) to be purchased thereby as set forth below and an amount equal to any applicable transfer tax or evidence satisfactory to the Company of payment of such tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) requisition from any transfer agent of the Junior Preferred Stock or Company Common Stock, as the case may be (or make available, if the Rights Agent is the transfer agent) certificates for the number of Units of Junior Preferred Stock or Company Common Stock, as the case may be, to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests,(ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates, cause the same to be delivered to or upon the order of the registered -14- 18 holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. In the event that the Company is obligated to issue Company Common Stock, other securities of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such Company Common Stock, other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in cash or by certified or bank check or money order payable to the order of the Company. (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) which becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) which becomes a transferee prior to or concurrently with the Acquiring Person becoming such and which receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or any such Associate or -15- 19 Affiliate) or to any Person with whom the Acquiring Person (or such Associate or Affiliate) has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights, shares of Company Common Stock or the Company or (B) a transfer which the Board of Directors by Board of Approval has determined to be part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall be null and void without any further action, and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights or any other Person as a result of its failure to make any determination under this Section 7(e) or such Section 4(b) with respect to an Acquiring Person or its Affiliates, Associates or transferees. (f) Notwithstanding anything in this Agreement or any Rights Certificate to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise by such registered holder unless such registered holder shall have (i) completed and executed the certificate following the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) of the Rights represented by such Rights Certificate or Associates or Affiliates thereof as the Company shall reasonably request. SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATE. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered -16- 20 to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any Rights Certificates acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. (a) The Company shall at all times prior to the Expiration Date cause to be reserved and kept available out of its authorized and unissued shares of Junior Preferred Stock, the number of shares of Junior Preferred Stock that, as provided in this Agreement, will be sufficient to permit the exercise in full of all outstanding Rights. Upon the occurrence of any events resulting in an increase in the aggregate number of shares of Junior Preferred Stock (or other equity securities of the Company) issued upon exercise of all outstanding Rights above the number then reserved, the Company shall make appropriate increases in the number of shares so reserved, (b) So long as the shares of Junior Preferred Stock to be issued and delivered upon the exercise of the Rights may be listed on any national securities exchange, the Company shall during the period from the Distribution Date through the Expiration Date use its best efforts to cause all securities reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company shall use its best efforts (i) as soon as practicable following the occurrence of a Section 11(a)(ii) Event and a determination by the Company in accordance with Section 11(a)(iii) hereof of the consideration to be delivered by the Company upon exercise of the Rights or, if so required by law, as -17- 21 soon as practicable following the Distribution Date (such date being the "Registration Date"), to file a registration statement on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities that may be acquired upon exercise of the Rights (the "Registration Statement"), (ii) to cause the Registration Statement to become effective as soon as practicable after such filing, (iii) to cause the Registration Statement to continue to be effective (and to include a prospectus complying with the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for the securities covered by the Registration Statement, and (B) the Expiration Date and (iv) to take as soon as practicable following the Registration Date such action as may be required to ensure that any acquisition of securities upon exercise of the Rights complies with any applicable state securities or "blue sky" laws. (d) The Company shall take such action as may be necessary to ensure that all shares of Junior Preferred Stock (and, following the occurrence of a Triggering Event, any other securities that may be delivered upon exercise of Rights) shall be, at the time of delivery of the certificates or depositary receipts for such securities, duly and validly authorized and issued and fully paid and non-assessable. (e) The Company shall pay any documentary, stamp or transfer tax imposed in connection with the issuance or delivery of the Rights Certificates or upon the exercise of Rights; provided, however, the Company shall not be required to pay any such tax imposed in connection with the issuance or delivery of Units of Junior Preferred Stock, or any certificates or depositary receipts for such Units of Junior Preferred Stock (or, following the occurrence of a Triggering Event, any other securities, cash or assets, as the case may be) to any Person other than the registered holder of the Rights Certificates evidencing the Rights surrendered for exercise. The Company shall not be required to issue or deliver any certificates or depositary -18- 22 receipts for Units of Junior Preferred Stock (or, following the occurrence of a Triggering Event, any other securities, cash or assets, as the case may be) to, or in a name other than that of, the registered holder upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. SECTION 10. JUNIOR PREFERRED STOCK RECORD DATE. Each Person in whose name any certificate for Units of Junior Preferred Stock (or, following the occurrence of a Triggering Event, other securities) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Units of Junior Preferred Stock (or, following the occurrence of a Triggering Event, other securities) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Junior Preferred Stock (or following the occurrence of a Triggering Event, other securities) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such securities on, and such certificate shall be dated, the next succeeding Business Day on which the Junior Preferred Stock (or, following the occurrence of a Triggering Event, other securities) transfer books of the Company are open and, further provided, however, that if delivery of Units of Junior Preferred Stock is delayed pursuant to Section 9(c) hereof, such Persons shall be deemed to have become the record holders of such Units of Junior Preferred Stock only when such Units first become deliverable. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificates shall not be entitled to any rights of a stockholder of the Company with respect to securities for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive -19- 23 dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as and to the extent provided herein. SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of securities covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Junior Preferred Stock payable in shares of Junior Preferred Stock, (B) subdivide the outstanding Junior Preferred Stock, (C) combine the outstanding Junior Preferred Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Junior Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Junior Preferred Stock or capital stock, as the case may be, issuable on such date upon exercise of the Rights, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Junior Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the -20- 24 adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11 (a)(ii) hereof. (ii) In the event: (A) Any Acquiring Person or any Associate or Affiliate of any Acquiring Person, at any time after the date of this Agreement, directly or indirectly, (1) shall merge into the Company or otherwise combine with the Company and the Company shall be the continuing or surviving corporation of such merger or combination and the Company Common Stock shall remain outstanding and unchanged, (2) shall, in one transaction or a series of transactions, transfer any assets to the Company or to any of its Subsidiaries in exchange (in whole or in part) for shares of Company Common Stock, for other equity securities of the Company or any such Subsidiary, or for securities exercisable for or convertible into shares of equity securities of the Company or any of its Subsidiaries (whether Company Common Stock or otherwise) or otherwise obtain from the Company or any of its Subsidiaries, with or without consideration, any additional shares of such equity securities or securities exercisable for or convertible into such equity securities (other than pursuant to a pro rata distribution to all holders of Company Common Stock), (3) shall sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one transaction or a series of transactions, to, from or with (as the case may be) the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity, assets (including securities) on terms and conditions less favorable to the Company or such Subsidiary or plan than those that could have been obtained in arm's-length negotiations with an unaffiliated third party, other than pursuant to a transaction set forth in Section 13(a) hereof, (4) shall sell, purchase, lease, -21- 25 exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one transaction or a series of transactions, to, from or with the Company or any of the Company's Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity, assets (including securities) having an aggregate fair market value of more than $5,000,000, other than pursuant to a transaction set forth in Section 13(a) hereof, (5) shall receive, or any designee, agent or representative of such Acquiring Person or any Associate or Affiliate of such Acquiring Person shall receive, any compensation from the Company or any of its Subsidiaries other than compensation for full-time employment as a regular employee at rates in accordance with the Company's (or its Subsidiaries') past practices, or (6) shall receive the benefit, directly or indirectly (except proportionately as a holder of Company Common Stock or as required by law or governmental regulation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantage provided by the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity; or (B) any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity) shall become the Beneficial Owner of 15% or more of the shares of Company Common Stock then outstanding, other than pursuant to any transaction set forth in Section 13(a) hereof, or (C) during such time as there is an Acquiring Person, there shall be any reclassification of securities (including any reverse stock split) or recapitalization of the Company, or any merger or consolidation of the Company -22- 26 with any of its Subsidiaries or any other transaction or series of transactions involving the Company or any of its Subsidiaries, other than a transaction or transactions to which the provisions of Section 13(a) apply (whether or not with or into or otherwise involving an Acquiring Person), which has the effect, directly or indirectly, of increasing by more than 1% the proportionate share of the outstanding shares of any class of equity securities of the Company or any of its Subsidiaries which is directly or indirectly beneficially owned by any Acquiring Person or any Associate or Affiliate of any Acquiring Person; then, immediately upon the date of the occurrence of an event described in Section 11(a)(ii)(A)-(C) hereof (a "Section 11(a)(ii) Event"), proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of the number of Units of Junior Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, such number of shares of Company Common Stock as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of Units of Junior Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event (such product thereafter being, for all purposes of this Agreement other than Section 13 hereof, the "Purchase Price"), and (y) dividing that product by 50% of the then current market price (determined pursuant to Section 11(d) hereof) per share of Company Common Stock on the date of such first occurrence (such number of shares of Company Common Stock being the "Adjustment Shares"). (iii) In the event that, upon the occurrence of a Section 11(a)(ii) Event, the number of shares of Company Common Stock which are treasury shares or are authorized by the Company's Certificate of Incorporation and are not issued or -23- 27 reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company, by Board Approval, shall: (a) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over (2) the Purchase Price (such excess being the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for such Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) a number of shares, or units of shares, or other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock (such other shares being "common stock equivalents")), (4) debt securities of the Company, (5) other assets or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board of Directors by Board Approval, after receiving advice from a nationally recognized investment banking firm; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within 90 days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the "Section 11(a)(iii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Company Common Stock (to the extent available) and then, if necessary, cash, which shares of Company Common Stock and/or cash shall have an aggregate value equal to the Spread. To the extent that the Company determines that some action need be taken pursuant to the first sentence of this Section 11(a)(iii), the Company shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights. For purposes of this Section 11(a)(iii), the value of a share of Company Common Stock -24- 28 shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of Company Common Stock on the Section 11(a)(iii) Trigger Date and the value of any common stock equivalent shall be deemed to have the same value as the Company Common Stock on such date. (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Junior Preferred Stock entitling them to subscribe for or purchase (for a period expiring within 45 calendar days after such record date) shares of Junior Preferred Stock (or shares having substantially the same rights, privileges and preferences as shares of Junior Preferred Stock ("equivalent preferred stock")) or securities convertible into Junior Preferred Stock or equivalent preferred stock at a price per share of Junior Preferred Stock or per share of equivalent preferred stock (or having a conversion price per share, if a security convertible into Junior Preferred Stock or equivalent preferred stock) less than the current market price (as determined pursuant to Section 11(d) hereof) per share of Junior Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the sum of the number of shares of Junior Preferred Stock outstanding on such record date plus the number of shares of Junior Preferred Stock which the aggregate offering price of the total number of shares of Junior Preferred Stock and/or equivalent preferred stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of shares of Junior Preferred Stock outstanding on such record date plus the number of additional shares of Junior Preferred Stock and/or equivalent preferred stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of -25- 29 consideration part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors by Board Approval, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Shares of Junior Preferred Stock owned by or held for the account of the Company or any Subsidiary shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for a distribution to all holders of shares of Junior Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in shares of Junior Preferred Stock, but including any dividend payable in stock other than Junior Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of Junior Preferred Stock on such record date less the fair market value (as determined in good faith by the Board of Directors by Board Approval, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holder of the Rights) of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants distributable in respect of a share of Junior Preferred Stock and the -26- 30 denominator of which shall be such current market price (as determined pursuant to Section 11(d) hereof) per share of Junior Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, the "current market price" per share of Company Common Stock or Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such shares for the ten consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, if prior to the expiration of such requisite ten Trading Day period the issuer announces either (A) a dividend or distribution on such shares payable in such shares or securities convertible into such shares (other than the Rights), or (B) any subdivision, combination or reclassification of such shares, then, following the ex-dividend date for such dividend or the record date for such subdivision, as the case may be, the "current market price" shall be properly adjusted to take into account such event. The closing price for each date shall be, if the shares are listed and admitted to trading on a national securities exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such shares are listed or admitted to trading or, if such shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date such shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such shares selected by the Board of Directors by Board Approval. If on -27- 31 any such date no market maker is making a market in such shares, the fair value of such shares on such date as determined in good faith by the Board of Directors by Board Approval shall be used. If such shares are not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share as determined in good faith by the Board of Directors by Board Approval, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. The term "Trading Day" shall mean, if such shares are listed or admitted to trading on any national securities exchange, a day on which the principal national securities exchange on which such shares are listed or admitted to trading is open for the transaction of business or, if such shares are not so listed or admitted, a Business Day. (ii) For the purpose of any computation hereunder, the "current market price" per share of Junior Preferred Stock shall be determined in the same manner as set forth above for Company Common Stock in clause (i) of this Section 11(d) (other than the fourth sentence thereof). If the current market price per share of Junior Preferred Stock cannot be determined in the manner provided above or if the Junior Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of Section 11(d), the "current market price" per share of Junior Preferred Stock shall be conclusively deemed to be an amount equal to 100 (as such amount may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to Company Common Stock occurring after the date of this Agreement) multiplied by the current market price per share of Company Common Stock. If neither Company Common Stock nor Junior Preferred Stock is publicly held or so listed or traded, "current market price" per share of the Junior Preferred Stock shall mean the fair value per share as determined in good faith by the Board of Directors by Board Approval whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and -28- 32 the holders of the Rights. For all purposes of this Agreement, the "current market price" of a Unit of Junior Preferred Stock shall be equal to the "current market price" of one share of Junior Preferred Stock divided by 100. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Company Common Stock or Common Stock or other share or one-millionth of a share of Junior Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates such adjustment or (ii) the Expiration Date. (f) If as a result of any provision of Sections 11(a)(ii) or 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Junior Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Junior Preferred Stock contained in Sections 11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), (l) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Junior Preferred Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted, Purchase Price, the number of Units of Junior Preferred Stock (or other securities or amount of cash or combination thereof) that may be -29- 33 acquired from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of Units of Junior Preferred Stock (calculated to the nearest one-ten thousandth of a Unit) obtained by (i) multiplying (x) the number of Units of Junior Preferred Stock covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of Units of Junior Preferred Stock that may be acquired upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of Units of Junior Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effective immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have -30- 34 been issued, shall be at least ten days later than the date of such public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates to be so distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of Units of Junior Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per Unit and the number of Units of Junior Preferred Stock which was expressed in the initial Rights Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value of the number of Units of Junior Preferred Stock issuable upon exercise of the Rights, or below the then par value of the shares of Company Common Stock if then issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such fully paid and non-assessable number of Units of Junior Preferred Stock or, if applicable, shares -31- 35 of Company Common Stock at such adjusted Purchase Price. If upon any exercise of the Rights, a holder is to receive a combination of Units of Junior Preferred Stock and preferred stock equivalents or Company Common Stock and common stock equivalents, a portion of the consideration paid upon such exercise, equal to at least the then par value of a share of Junior Preferred Stock or Company Common Stock, as the case may be, shall be allocated as payment for each share of Junior Preferred Stock or Company Common Stock so received. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date of that number of Units of Junior Preferred Stock and shares of other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of Units of Junior Preferred Stock and shares of other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors by Board Approval shall determine to be advisable in order that any (i) consolidation or subdivision of the Junior Preferred Stock, (ii) issuance wholly for cash of any shares of Junior Preferred Stock at less than the current market price, (iii) issuance wholly for cash of shares of Junior Preferred Stock or securities which by their terms are convertible into or -32- 36 exchangeable for shares of Junior Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Junior Preferred Stock, shall not be taxable to such holders or shall reduce the taxes payable by such holders. (n) The Company shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the Person which constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have distributed or otherwise transferred (or will distribute or otherwise transfer) to its stockholders, or other persons holding an equity interest in such Person, Rights previously owned by such Person or any of its Affiliates and Associates; provided, however, this Section 11(n) shall not affect the ability of any Subsidiary of the Company to consolidate with, merge with or into, or sell or transfer assets or earning power to, any other Subsidiary of the Company. (o) After the Distribution Date, the Company shall not, except as permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary to take) -33- 37 any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. (p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Company Common Stock payable in shares of Company Common Stock, (ii) subdivide the outstanding shares of Company Common Stock, (iii) combine the outstanding shares of Company Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of Company Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), the number of Rights associated with each share of Company Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Company Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Company Common Stock immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Company Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Company Common Stock outstanding immediately following the occurrence of such event. SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever an adjustment is made as provided in Section 11 or Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Junior -34- 38 Preferred Stock and the Company Common Stock, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Company Common Stock) in accordance with Section 25 hereof; provided, however, that the failure of the Company to make such a certificate or give such notice shall not affect the validity or the force or effect of the requirement for such an adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such certificate. SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER. (a) In the event that, following the Stock Acquisition Date, directly or indirectly, either (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Company Common Stock shall be converted into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer) to any Person or Persons (other than the Company or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) (any such event being a "Section 13 Event"), then, and in each such case, proper provision -35- 39 shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price, such number of validly authorized and issued, fully paid, and non-assessable shares of Common Stock of the Principal Party (as such term is hereinafter defined), which shares shall not be subject to any liens, encumbrances, rights of call or first refusal, transfer restrictions or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of Units of Junior Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11 (a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such Units for which a Right would be exercisable hereunder but for the occurrence of such Section 11(a)(ii) Event by the Purchase Price which would be in effect hereunder but for such first occurrence) and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be the "Purchase Price" for all purposes of this Agreement) by 50% of the current market price (determined pursuant to Section 11(d) hereof) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to ensure that the provisions of this Agreement shall thereafter be applicable to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the -36- 40 provisions of Section 11(a)(ii) hereof shall be of no further effect following the first occurrence of any Section 13 Event. (b) "Principal Party" shall mean: (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), (A) the Person that is the issuer of any securities into which shares of Company Common Stock are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer of Common Stock that has the highest aggregate current market price (determined pursuant to Section 11(d) hereof) and (B) if no securities are so issued, the Person that is the other party to such merger or consolidation, or, if there is more than one such Person, the Person the Common Stock of which has the highest aggregate current market price (determined pursuant to Section 11(d) hereof); and (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the largest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if each Person that is a party to such transaction or transactions received the same portion of the assets or earning power transferred pursuant to such transaction or transactions or if the Person receiving the largest portion of the assets or earning power cannot be determined, whichever Person the Common Stock of which has the highest aggregate current market price (determined pursuant to Section 11(d) hereof); provided, however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve-month period registered under Section 12 of the Exchange Act ("Registered Common Stock"), or such Person is not a corporation, and such Person is a direct or indirect Subsidiary of another Person that has Registered Common Stock outstanding, -37- 41 "Principal Party" shall refer to such other Person; (2) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is a direct or indirect Subsidiary or another Person but is not a direct or indirect Subsidiary of another Person which has Registered Common Stock outstanding, "Principal Party" shall refer to the ultimate parent entity of such firstmentioned Person; (3) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and one or more of such other Persons has Registered Common Stock outstanding, "Principal Party" shall refer to whichever of such other Persons is the issuer of the Registered Common Stock having the highest aggregate current market price (determined pursuant to Section 11(d) hereof); and (4) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and none of such other Persons have Registered Common Stock outstanding, "Principal Party" shall refer to whichever ultimate parent entity is the corporation having the greatest shareholders equity or, if no such ultimate parent entity is a corporation, shall refer to whichever ultimate parent entity is the entity having the greatest net assets. (c) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13, and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that the Principal Party will: -38- 42 (i) (A) prepare and file on an appropriate form, as soon as practicable following the execution of such agreement and at its own expense, a registration statement under the Securities Act with respect to the Common Stock that may be acquired upon exercise of the Rights, (B) use its best efforts to cause such registration statement to become and remain effective (and to include a prospectus complying with the requirements of the Securities Act) until the Expiration Date, and (C) as soon as practicable following the execution of such agreement, take such action as may be required to ensure that any acquisition of such Common Stock upon the exercise of the Rights complies with any applicable state security or "blue sky" laws; and (ii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. (d) In case the Principal Party which is to be a party to a transaction referred to in this Section 13 has a provision in any of its authorized securities or in its Certificate of Incorporation or By-laws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Stock of such Principal Party at less than the then current market price per share (determined pursuant to Section 11(d) hereof) or securities exercisable for, or convertible into, Common Stock of such Principal Party at less than such than current market price (other than, in each case, to holders of Rights pursuant to this Section 13) or (ii) providing for any special payment, tax or similar provisions in connection with the issuance of the Common Stock of such Principal Party pursuant to the provisions of this Section 13; then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and -39- 43 delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been cancelled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction. (e) The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a). SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the Persons to which such fractional Rights would otherwise be issuable, an amount in cash equal to such fraction of the market value of a whole Right. For purposes of this Section 14(a), the market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be, if the Rights are listed or admitted to trading on a national securities exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making -40- 44 a market in the Rights selected by the Board of Directors by Board Approval. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors by Board Approval shall be used and such determination shall be described in a statement filed with the Rights Agent and the holders of the Rights. (b) The Company shall not be required to issue fractions of shares of Junior Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share of Junior Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence such fractional shares of Junior Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share of Junior Preferred Stock). Fractions of shares of Junior Preferred Stock in integral multiples of one one-hundredth of a share of Junior Preferred Stock may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the fractions of shares of Junior Preferred Stock represented by such depositary receipts. In lieu of such fractional shares of Junior Preferred Stock that are not integral multiples of one one-hundredth of a share, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the then current market price of a share of Junior Preferred Stock on the day of exercise, determined in accordance with Section 11(d) hereof. (c) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14. -41- 45 SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement, other than rights of action vested in the Rights Agent pursuant to Section 18, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of certificates representing shares of Company Common Stock); and any registered holder of a Rights Certificate (or, prior to the Distribution Date, of a certificate representing shares of Company Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of a certificate representing shares of Company Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company or any other Person to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Holders of Rights shall be entitled to recover the reasonable costs and expenses, including attorneys' fees, incurred by them in any contested action to enforce the provisions of this Agreement where that action is terminated and the relief requested by the holders is granted. SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Company Common Stock; -42- 46 (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates duly executed; (c) subject to Section 6(a) and Section 7(f), the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Company Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Company Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e), shall be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or any other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as promptly as practicable. SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Rights Certificate shall be entitled to vote, receive -43- 47 dividends or be deemed for any purpose the holder of the number of shares of Junior Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or, except as provided in Section 24 hereof, to receive notice of meetings or other actions affecting stockholders, or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions thereof. SECTION 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses, including reasonable fees and disbursements of its counsel, incurred in connection with the execution and administration of this Agreement and the exercise and performance of its duties hereunder. The Company shall indemnify the Rights Agent for, and hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly, or prosecuting any action to determine the rights or obligations of the parties hereunder. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate for Junior Preferred Stock or Company Common Stock or for other -44- 48 securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, instruction, direction, consent, certificate, statement or other paper or document believed by it to be genuine and to have been signed, executed and, where necessary, verified or acknowledged by the proper Person or Persons. SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or shareholder services businesses of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any document or any further act on the part of any of the parties hereto; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name -45- 49 and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of "current market price") be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be specified herein) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; provided, however, that so long as any Person is an Acquiring Person hereunder, such certificate shall be signed and delivered by a majority of the Continuing Directors; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. -46- 50 (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not have any responsibility for the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or for the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or failure by the Company to satisfy conditions contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or Section 13 hereof or for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt by the Rights Agent of the certificate describing any such adjustment contemplated by Section 12); nor shall it be responsible for any determination by the Board of Directors by Board Approval of Current Value or Spread pursuant to the provisions of Section 11(a)(iii) or the current market price of the Junior Preferred Stock, Company Common Stock or any other security pursuant to the provisions of Section 11(d); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Junior Preferred Stock or any other securities to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Junior Preferred Stock or any other securities will, when so issued, be validly authorized and issued, fully paid and non-assessable; nor shall it be liable for -47- 51 any federal or state transfer taxes or charges that may be due upon the issuance or transfer of any shares of Junior Preferred Stock, Company Common Stock or other securities or any Rights Certificate. (f) The Company shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further acts, instruments and assurances as may reasonably be required by the Rights Agent for the performance by the Rights Agent of its duties under this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer; provided, however, that so long as any Person is an Acquiring Person hereunder, the Rights Agent shall accept such instructions and advice only from a majority of the Continuing Directors and shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with such instructions of the majority of the Continuing Directors. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any such officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, -48- 52 prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties or in the exercise of its rights hereunder if the Rights Agent shall have reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed, not signed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. If such certificate has been completed and signed and shows a negative response to clauses 1 and 2 of such certificate, unless previously instructed otherwise in writing by the Company (which -49- 53 instructions may impose on the Rights Agent additional ministerial responsibilities, but no discretionary responsibilities), the Rights Agent may assume without further inquiry that the Rights Certificate is not owned by a person described in Section 4(b) or Section 7(e) hereof and shall not be charged with any knowledge to the contrary. SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' prior notice in writing mailed to the Company, and to each transfer agent of the Junior Preferred Stock and the Company Common Stock, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days'prior notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Junior Preferred Stock and the Company Common Stock, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or the States of Texas or New York in good standing, shall be authorized to do business as a banking institution in the State of New York, shall be authorized under such laws to exercise corporate trust or stock transfer powers, shall be subject to supervision or examination by -50- 54 federal or state authorities and shall have at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an Affiliate of a corporation described in clause (a). After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Junior Preferred Stock and the Company Common Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the provisions of this Agreement or the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board of Directors by Board Approval to reflect any adjustment or change made in accordance with the provisions of this Agreement in the Purchase Price or the number or kind or class of shares or other securities or property that may be acquired under the Rights Certificates. In addition, in connection with the issuance or sale of shares of Company Common Stock following the Distribution Date and prior to the Expiration Date, the Company (a) shall, with respect to shares of Company Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and -51- 55 (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors by Board Approval, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. SECTION 23. REDEMPTION AND TERMINATION. (a) Subject to Section 30 hereof, the Company may, at its option, by the Board of Directors acting by Board Approval, at any time prior to the earlier of (i) the Close of Business on the tenth day following the Stock Acquisition Date, or (ii) the Close of Business on the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $.Ol per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"), and the Company may, at its option, by the Board of Directors acting by Board Approval, pay the Redemption Price either in cash, shares of Company Common Stock (based on the "current market price", as defined in Section 11(d) hereof, of the shares of Company Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors by Board Approval. (b) Immediately upon the action of the Board of Directors by Board Approval ordering the redemption of the Rights, evidence of which shall be filed with the Rights Agent, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of -52- 56 Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board of Directors by Board Approval ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder's last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for Company Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23, and other than in connection with the purchase or acquisition of Company Common Stock prior to the Distribution Date. SECTION 24. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Junior Preferred Stock or to make any other distribution to the holders of Junior Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), (ii) to offer to the holders of Junior Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Junior Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Junior Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Junior Preferred Stock), (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other -53- 57 transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Junior Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 20 days prior to the record date for determining holders of the shares of Junior Preferred Stock for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Junior Preferred Stock whichever shall be the earlier; provided, however, no such notice shall be required pursuant to this Section 24, if any Subsidiary of the Company effects a consolidation or merger with or into, or effects a sale or other transfer of assets or earning power to, any other Subsidiary of the Company. (b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof. -54- 58 SECTION 25. NOTICES. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including any telex, telegram or cable) and mailed or sent or delivered, if to the Company, at its address at: Rowan Companies, Inc. 5450 Transco Tower 2800 Post Oak Boulevard Houston, Texas 77056-6196 Attention: Secretary And if to the Rights Agent, at its address at: Citibank, N.A. 111 Wall Street 5th Floor, Equity Administration New York, New York 10043 Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Company Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company or the Rights Agent, as the case may be. SECTION 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing shares of Company Common Stock. From and after the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time -55- 59 period hereunder, or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, however, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) subject to Section 30 hereof, a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Company or, so long as any Person is an Acquiring Person hereunder, from the majority of the Continuing Directors which states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price, the Purchase Price, the Expiration Date or the number of Units of Junior Preferred Stock for which a Right is exercisable without the approval of a majority of the Continuing Directors. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Company Common Stock. SECTION 27. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all purposes of this Agreement, any calculation of the number of shares of Company Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Company -56- 60 Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in effect on the date hereof. Except as otherwise specifically provided herein, the Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power (i) to interpret the provisions of this Agreement, and (ii) to make all determinations deemed necessary or advisable for the administration of this Agreement. All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board or by a majority of the Continuing Directors in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board or any member thereof to any liability to the holders of the Rights. SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of shares of Company Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of shares of Company Common Stock). SECTION 30. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and -57- 61 restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors by Board Approval determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement and the Rights shall not then be redeemable, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the Close of Business on the tenth day following the date of such determination by a majority of the Continuing Directors. SECTION 31. GOVERNING LAW. THIS AGREEMENT, EACH RIGHT AND EACH RIGHTS CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED ENTIRELY IN SUCH STATE. SECTION 32. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. SECTION 33. DESCRIPTIVE HEADINGS. The headings contained in this Agreement are for descriptive purposes only and shall not affect in any way the meaning or interpretation of this Agreement. -58- 62 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be daily executed, all as of the date first above written. ATTEST: ROWAN COMPANIES, INC. By: /s/ MARK H. HAY By: /s/ E.E. THIELE Name: Mark H. Hay Name: E.E. Thiele Title: Corporate Secretary Title: Vice President ATTEST: CITIBANK, N.A. By: /s/ JOHN W. REASOR By: /s/ P. DEFELICE Name: John W. Reasor Name: P. Defelice Title: Assistant Vice President Title: Vice President -59-
EX-4.J 4 FORM OF PROMISSORY NOTE DATED 11/30/94 1 EXHIBIT 4j PROMISSORY NOTE Houston, Texas December ____, 1994 _____________, for value received, promises and agrees to pay on or before December ___, 2004 unto the order of Rowan Companies, Inc. (hereinafter called "Payee"), at the offices of the Payee in Houston, Texas in lawful money of the United States of America, the principal sum of_____________________________________________, together with interest thereon, from and after the date hereof, on March 31, June 30, September 30 and December 31 of each year unless such day is not a business day, in which case it shall mean the immediately succeeding business day, the first such interest payment for the period beginning on and including the date hereof and ending on and excluding December 31, 1994, at the per annum interest rate announced publicly by Citibank, N.A. in New York, New York from time to time as its Base Rate plus 1/2% per annum; provided, that if any such interest rate shall be lower than the applicable interest rate for such period determined under Sections 483 and 1274 (d) of the Internal Revenue Code of 1954, as amended (the "Federal Rate"), such Federal Rate shall apply. The amount of interest payable for any such period is computed by multiplying the decimal equivalent of the applicable interest rate for such period by the actual number of days in such period, dividing by 360 and multiplying the resulting quotient by the principal amount hereof. If the principal of this Note is prepaid in whole or in part, all accrued and unpaid interest with respect to such principal amount prepaid is due and payable on the date of such prepayment. Payment of this Note when due is secured by a pledge of and lien on the Series III Floating Rate Subordinated Convertible Debenture due 2004 of the Payee dated _______________ in the principal amount of $___________, issued in the name of the undersigned, which Debenture, accompanied by an executed transfer power for such Debenture and in proper form for transfer, has been delivered to the Payee. In the event of the non-payment when due of any liability of the undersigned to the Payee hereunder, then, or at any time after the happening of such event, the holder of this Note may, without demand upon or notice to the undersigned (both of which are expressly waived by the undersigned), declare all sums owing hereon to be, and such sums shall become, due and payable. Upon such declaration, the Payee will, to the extent practicable, set off any amounts owing hereon by the undersigned with amounts owing by the Payee pursuant to the Series III Floating Rate Subordinated Debenture due 2004. This Note shall be construed according to and governed by the laws of the State of Texas. By its acceptance hereof, the Payee of this promissory note, hereby acknowledges and agrees that if (i) Rowan Companies, Inc., a Delaware corporation (the "Company") fails, at any time, to fulfill its payment obligations owing in respect of its Series III Floating Rate Subordinated Convertible 2 Debentures due 2004 (collectively, the "Debentures") or (ii) an Event of Default (as such term is defined in the Debentures) has occurred and is continuing, the payment obligations (with respect to principal and interest) of the undersigned maker of this promissory note under the terms hereof will automatically be suspended and terminated until such time, if any, that the Company has fulfilled all of its payment obligations then due and owing in respect of the Debentures or such Event of Default no longer exists, as the case may be. _____________________________ EX-10.G 5 AMENDED CONVERTIBLE DEBENTURE INCENTIVE PLAN 1 EXHIBIT 10g ROWAN COMPANIES, INC. Amendment Nos. 1 and 2 to the 1986 Convertible Debenture Incentive Plan. AMENDMENT NO. 1: Resolution adopted by the registrant's Board of Directors on June 12, 1986: RESOLVED, pursuant to the provision of Section 10 of the Company's 1986 Convertible Debenture Incentive Plan (the "Plan"), in order to allow the Company to make the loans referred to in the above resolution on a non-recourse basis, that Section 8 of the Plan is hereby amended by adding the phrase "(or, in the case of an aggregate of $5,125,000 in principal amount of loans made by the Company to Purchasers on June 13, 1986, non-recourse)" after the word "recourse" and before the word "loans" in the first sentence of such Section 8. AMENDMENT NO. 2: Resolution adopted by the registrant's Board of Directors on October 21, 1994: RESOLVED, that pursuant to the provisions of Section 10 of the Company's 1986 Convertible Debenture Incentive Plan, the following amendment is hereby adopted: Section 3.03 Conversion of the Debentures: delete "after one year from date of issuance" and insert the words "in quantities and after time periods determined by the Committee, which in no event will be less than one year after the date of issuance." EX-10.H 6 1986 CONVERTIBLE DEBENTURE INCENTIVE PLAN 1 EXHIBIT 10h ROWAN COMPANIES, INC. 1986 CONVERTIBLE DEBENTURE INCENTIVE PLAN AS AMENDED 1. Purpose. The Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan (the "Plan") is intended to promote the interests of Rowan Companies, Inc. (the "Company") and its stockholders by allowing officers and other key personnel of the Company and its subsidiaries the opportunity to invest in corporate debt in the form of the Company's floating interest rate subordinated debentures (the "Debentures") which are convertible into shares of Preferred stock, $1 par value, of the Company (the "Preferred Stock"), which shares of Preferred Stock are convertible into shares of common stock, $.125 par value, of the Company (the "Common Stock"), thereby giving key personnel added incentive to work toward the continued growth and success of the Company. The Company's Board of Directors also contemplates that the Plan will enable the Company and its subsidiaries to compete more effectively for the services of management personnel needed for the continued growth and success of the Company. 2. Issuance of the Debentures. The Company shall have authority to issue Debentures in such amounts and to such of the key employees of the Company and its subsidiaries (as defined by Section 425 of the Internal Revenue Code of 1954, as amended) as the Committee (as defined in Section 9) shall from time to time determine. Such employees purchasing Debentures are designated herein as "Purchasers". 3. General Terms and Conditions of the Debentures. Section 3.01. General. The Committee shall from time to time determine with respect to each series of Debentures to be issued the interest rate thereof, the conversion price applicable thereto (including the conversion ratio of the Preferred Stock), and such other terms and conditions of the Debentures, all to the extent not inconsistent with the provisions of this Plan. Section 3.02. Form and Term of Debentures. Debentures will be issued in series the terms and conditions of which may differ among series and shall be in such form and in such denominations as the Committee may approve. Each series will be due not earlier than five years, or later than ten years, from the date of issuance, or on such earlier date as the Company redeems any Debenture, which date is referred to herein as the "Due Date". Section 3.03. Conversion of the Debentures. Subject to the provisions of this Section 3.03, the Debentures will be convertible at the conversion price in effect at the time of conversion into fully paid and non-assessable shares of Preferred Stock, which will be immediately convertible into fully paid and nonassessable shares of Common Stock of the Company, at any time in quantities and after time periods determined by the Committee, which in no event will be less than one year after the date of issuance until the close of business on the Due Date. Each series of Debentures shall be convertible into a separate series of Preferred Stock. The conversion privilege with respect to any Debenture may be exercised only by the Purchaser thereof or by the estate of a deceased Purchaser or a beneficiary under such estate. Upon termination of a Purchaser's employment, the conversion privilege will terminate with respect to each Debenture issued to such Purchaser on the earlier of the Due Date or a date determined as follows: 2 (a) Three years after the date of termination of employment as a result of retirement or disability; (b) Two years after the date of termination of employment as a result of death; (c) Prior to the date of termination of employment as a result of discharge for cause (as determined in the sole discretion of the Committee); or (d) Three months after the date of termination of employment for any other reason. The conversion privilege with respect to any Debenture (i) will terminate if the Purchaser, without the Company's consent, sells, assigns, transfers, pledges, hypothecates or otherwise disposes of a Debenture except as permitted by Section 3.04 and (ii) will not be exercisable during such time as the Debenture is pledged to secure loans as permitted by Section 3.04. In no event may any Purchaser or the estate of a deceased Purchaser or a beneficiary under such estate exercise the conversion privilege associated with a Debenture prior to one year from the date of issuance of such Debenture or after the Due Date. Section 3.04. Transfer and Pledge of Debentures. A Purchaser may not sell, assign, transfer, pledge, hypothecate or otherwise dispose of a Debenture except by (i) will or the laws of descent and distribution or (ii) a pledge ("Permitted Pledge") of Debentures to a lender (which may be the Company if a loan is made pursuant to Section 8 hereof) as security for loans to provide all or part of the financing to purchase the Debentures. If such loan shall be made by other than the Company, the Purchaser shall give advance written notice to the Company prior to making any Permitted Pledge and the Purchaser and such Lender shall give notice of discharge of any Debenture from a Permitted Pledge, which notice shall be conclusive evidence that the conversion privilege with respect to such Debenture will again be exercisable subject to the provisions of Section 3.03. Section 3.05. Redemption of Debentures. Subject to the provisions of this Section 3.05, the Company may, upon at least thirty days prior written notice to all Debenture holders, redeem as a class, on any interest payment date, all of the Debentures issued under this Plan. The Company (i) shall redeem on the next interest payment date after termination of the conversion privilege with respect thereto any Debenture with respect to which the conversion privilege has terminated pursuant to clauses (a), (b) or (d) of Section 3.03, (ii) may redeem any Debenture pledged pursuant to Section 3.04 on the next interest payment date following notice received by the Company from a lender (other than the Company) that a loan for which such Debenture is pledged is in default, provided such default has not been cured, and (iii) may at its option redeem, on any interest payment date, any Debenture with respect to which the conversion privilege has terminated for any other reason provided in Section 3.03. The holder of any Debenture redeemed pursuant to this Section 3.05 shall be entitled to receive only the face amount of the Debenture plus accrued interest thereof to the Due Date. 4. Authorized Amount of Debentures. The Company may issue up to $20,000,000 in aggregate principal amount of all Debentures. 5. Effective Date. The Plan shall become effective upon approval thereof by the vote of the holders of a majority of the shares of Common Stock of the Company voting at the 1986 Annual Meeting of Stockholders, and shall expire when all of the Company's obligations with respect to all of the 3 outstanding Debentures have been discharged; provided, however, that no Debenture shall be issued after April 1, 1995. 6. Offers and Sales Price of Debentures. The Debentures shall be sold by the Company to Purchasers at a price equal to the higher of (a) face value plus any accrued interest to the date of sale or (b) the fair market value of the Debentures as of the date the Purchaser elects to purchase the Debentures, as determined by an independent investment banking firm. If the Internal Revenue Service determines that the value of a Debenture at the time of sale exceeded its sale price and if (a) the Company receives a federal income tax benefit as a result of such determination and (b) the Purchaser has contested such determination in a manner which the Company determines to be appropriate under the circumstances, then the Company will pay to the Purchaser or his estate or a beneficiary under his estate the lesser of (x) the federal income tax benefit derived by the Company as a result of the sale of the Debenture to the Purchaser or (y) the amount estimated by the Company (based on the highest marginal federal income tax rate applicable with respect to compensation income for the year in which the sale occurred and the amount determined by the Internal Revenue Service to be taxable income to the Purchaser as a result of his purchase of the Debenture) to be Purchaser's federal income tax liability resulting from his purchase of the Debenture. The Debentures may be offered only on April 15, May 30, August 30 and November 30 of each year (any such date is referred to herein as an "Offering Date"). An employee may elect to purchase all or none of the Debentures offered to him on an Offering Date by giving written notice to the Company of his election within 10 business days of such Offering Date. Payment for such Debentures shall be in cash or in Common Stock (valued at the reported last sales price of Common Stock prior to the date of such payment, as shown on the Composite Tape for securities listed on the New York Stock Exchange) and shall be made within 20 business days of such Offering Date. 7. Conversion Price. The price (the "Conversion Price") at which shares of Preferred Stock shall be delivered upon conversion of a series of Debentures shall be set at a price at least equal to the reported last sales price of the Company's Common Stock prior to the date of sale of such series of Debentures, as shown on the Composite Tape for securities listed on the New York Stock Exchange. The number of shares of Common Stock which shall be delivered upon conversion of any shares of a series of Preferred Stock (the "Conversion Ratio") shall not exceed the face value of the related Debentures which were converted into such Preferred Stock divided by the reported last sales price of the Company's Common Stock prior to the date of sale of such Debentures as shown on the composite tape for securities listed on the New York Stock Exchange. Upon any change in the capital stock of the Company, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, spin-off, split up, dividend in kind or other change in the corporate structure or distribution to stockholders, appropriate adjustments to the Conversion Price and Conversion Ratio and the kind of shares delivered upon conversion of the Debentures and Preferred Stock may be made by the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) with respect to both outstanding and unissued Debentures and Preferred Stock. If the Internal Revenue Service determines that the conversion of Debentures into Preferred Stock or that the subsequent conversion of Preferred Stock into Common Stock is a taxable transaction and if (a) the Company receives a federal income tax benefit as a result of such determination and (b) the Purchaser has contested such determination in a manner which the Company deems to be appropriate under the circumstances, then the Company will pay to the Purchaser or his estate or a beneficiary under his estate the lesser of (x) the federal income tax benefit derived by the Company with respect to such conversion or (y) the amount estimated by the Company (based on the highest marginal federal income tax rate applicable with respect to compensation income for the year in which the conversion occurred and the 4 amount determined by the Internal Revenue Service to be taxable income to the Purchaser as a result of such conversion) to be Purchaser's federal income tax liability resulting from such conversion. 8. Company Loans. The Company may, from time to time, make full recourse (or, in the case of an aggregate of $5,125,000 in principal amount of loans made by the Company to Purchasers on June 13, 1986, non-recourse) loans ("Company Loans") to Purchasers for the purpose of providing all or part of the financing necessary to purchase any Debenture; provided, however, that the maximum amount of the Company Loan shall not exceed the purchase price of the Debentures. Subject to the foregoing, Company Loans may be made to such Purchasers in such amounts bearing interest at such rates (not less than the higher of the interest rate on the Debenture or a floating rate determined under Sections 483 and 1274(d) of the Internal Revenue Code of 1954, as amended), shall be secured by a pledge of and lien on the Debenture (which may be inferior to the pledge and lien securing the Bank Loan) and on such other terms and conditions as the Committee may from time to time approve. 9. Administration. The Plan shall be administered by a committee of the Board of Directors (the "Committee") which shall consist of three or more persons. No Debentures may be sold to any member of the Committee during the term of his membership on the Committee. No person shall be eligible to serve on the Committee unless he is a "disinterested person" within the meaning of Paragraph (d)(3) of Rule 16b-3, under the Securities Exchange Act of 1934 or any successor thereto as then in effect ("Rule 16b-3"). The members of the Committee shall be appointed by the Board of Directors, and any vacancy on the Committee shall be filled by the Board of Directors. Subject to the foregoing paragraphs, the Committee shall interpret the Plan and the Debentures sold under the Plan, shall make such rules as it deems necessary for the proper administration of the Plan, shall make all other determinations necessary or advisable for the administration of the Plan and shall correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Debenture in the manner and to the extent the Committee deems desirable to administer the Plan or the Debentures. The Committee's determination of any matter within its authority shall be conclusive and binding upon the Company and all other persons. 10. Amendment and Discontinuance. Subject to the provisions of this Section 10, the Committee may amend, suspend or terminate the Plan. No amendment, suspension or termination of the Plan may: (a) Without the consent of the holder of a Debenture, terminate his Debenture or adversely affect his rights under the Debenture in any material respect; (b) Without the consent of a majority of the shares of voting stock of the Company voting at any meeting of Stockholders (i) increase the amount of Debentures available under the Plan, (ii) change materially the persons eligible to purchase Debentures under the Plan, (iii) increase materially the benefits under the Plan, or (iv) extend the termination date of the Plan; or (c) Cause the plan to fail to meet the requirements of Rule 16b-3. 11. Other Provisions. (a) The Purchaser of a Debenture shall not be entitled to any rights as a stockholder of the Company until such Purchaser has exercised the conversion privilege contained in the Debenture. 5 (b) No Debenture shall be construed as limiting any right which the Company or any subsidiary of the Company may have to terminate at any time, with or without cause, the employment of a Purchaser to whom a Debenture has been sold. (c) Notwithstanding any provision of the Plan or the terms of any Debenture sold pursuant to the Plan, (i) the Company shall not be required to issue any Debentures hereunder if such issuance would, in the judgment of the Committee, constitute a violation of any state or Federal law, or of the rules or regulations of any governmental regulatory body, and (ii) any amount of interest paid or payable on a Debenture which exceeds the amount legally payable to a Purchaser under the applicable usury laws will be paid by the Company as compensation to the Purchaser. EX-10.J 7 PENSION RESTORATION PLAN OF LETOURNEAU, INC. 1 EXHIBIT 10j PENSION BENEFIT RESTORATION PLAN OF LETOURNEAU, INC. SECTION 1. PURPOSE The purpose of the Pension Benefit Restoration Plan of LeTourneau, Inc. ("Plan") is to provide a select group of management or highly compensated employees ("Key Employees") who are members of the LeTourneau Retirement Income Plan ("Pension Plan") all benefits otherwise payable in accordance with the terms of the Pension Plan but for the limitations on maximum benefits and annual compensation for qualified plans set forth in Section 415 and/or 401 (a)(17), respectively, of the Internal Revenue Code of 1986, as amended (the "Code"), and as the Pension Pension Plan's definition of compensation is modified for purposes of the Plan, as provided in 3(b) below. SECTION 2. ADMINISTRATION (a) The Plan shall be administered by the "administrator" of the Pension Plan ("Committee") or by any other person or persons designated by the Committee. (b) The Committee shall have the power to interpret the Plan, establish rules for the administration of the Plan and make all other determinations necessary or desirable for the Plan's administration, including, without limitation a person's entitlement to, and the amount of, any benefit under the Plan. (c) The decision of the Committee on any question concerning or involving the interpretation or administration of the Plan shall be final and conclusive. SECTION 3. ELIGIBILITY FOR BENEFITS AND AMOUNT OF BENEFITS (a) The Board of Directors of LeTourneau, Inc. (the "Board of Directors"), in its sole discretion, shall select the Key Employees eligible to receive benefits under the Plan, and any question concerning or involving eligibility shall be made by the Board of Directors. (b) All participants in the Plan as selected by the Board of Directors ("Participants"), who would otherwise be entitled to benefits from the Pension Plan in accordance with the terms thereof, but for the limitations on maximum benefits set forth in Section 415 of the Code and the annual compensation limit specified in Section 401(a) (17) of the Code, shall be paid benefits pursuant to this Plan to the extent such benefits exceed the limitations. The differences between the amount of pension benefit which would have been payable but for the limitations imposed by Sections 415 and 401 (a)(17) of the Code and calculated, for purposes of this Plan, based solely on the 2 participants' base compensation, excluding, without limitation any bonuses or other items of compensation and, the amount of the benefit actually payable under the Pension Plan is hereinafter referred to as the "Pension Benefit Restoration Amount." SECTION 4. PAYMENT OF BENEFITS (a) This Plan shall be an unfunded plan and payments of benefits pursuant to this Plan shall be made from the general assets of LeTourneau, Inc. ("Company"). No special or separate fund need to be established and no segregation of assets need be made to assure the payment of such benefits. No Participant shall have any interest in any particular asset of the Company by virtue of his rights under this Plan. Any person entitled to a payment under this Plan shall be a general unsecured creditor of the Company with respect to such payment. (b) The payment of the Pension Benefit Restoration Amount under this Plan shall be deemed to be compensation for services, and shall constitute a liability to the Company in accordance with the terms hereof. (c) The Company shall pay a Participant's Pension Benefit Restoration Amount to such Participant or the Participant's designated beneficiary in such manner and at the same time as benefits are paid under the Pension Plan; provided, however, the Company may convert the payment of the Pension Benefit Restoration Amount into any actuarially equivalent form of payment as determined by the Committee at it's sole discretion with the advice of the actuary for the Pension Plan. In determining the actuarially equivalent form of payment hereunder, the Committee and actuary for the Pension Plan shall use the factors and assumptions set forth in the definition of "Actuarial Equivalent" as found in the Pension Plan. SECTION 5. BENEFICIARIES (a) Beneficiaries under this Plan shall be the persons who are the Participant's beneficiaries under the Pension Plan. (b) Notwithstanding anything to the contrary contained herein or in the Pension Plan, a Participant or the Participant's beneficiary named to receive benefits under this Plan may, until death, change the beneficiary designated to receive benefits under this Plan subsequent to their respective deaths. (c) In no event shall any change in beneficiary pursuant to Section 5(b) affect the amount of benefits payable under this Plan. SECTION 6. AMENDMENT, SUSPENSION, TERMINATION (a) The Board of Directors may at any time amend, suspend or terminate this Plan. 3 (b) No amendment to this Plan or termination of the Plan by the Board of Directors shall divest a Participant of any benefit payable to such Participant under this Plan, unless the Participant agrees in writing to such divestment. Upon the termination of the Plan, the difference between (x) the amount of pension benefit which would have been accrued under the Pension Plan as of the date of termination of the Plan, but for the limitations, and (y) the Participant's accrued benefit under the Pension Plan as of such date shall be the Pension Benefit Restoration Amount. A lump sum equal to the Actuarial Equivalent of such Pension Benefit Restoration Amount shall be immediately paid to the Participant. SECTION 7. NON-ALIENATION OF BENEFITS The interest of a Participant or the Participant's designated beneficiary to any benefit under this Plan may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the benefits hereunder be liable or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds are payable, nor shall they be subject to the garnishment, attachment, or other legal or equitable process, nor shall they be an asset in bankruptcy, except that no amount shall be payable hereunder until and unless any and all amounts representing debts or other obligations owed to the Company or any affiliate of the Company by the Participant with respect to whom such amount would otherwise be payable shall have been fully paid and satisfied. SECTION 8. TAX WITHHOLDING The Company shall withhold from all payments hereunder all applicable taxes that it is required to withhold. SECTION 9. JURISDICTION The situs of the Plan hereby created is Texas. All provisions of the Plan shall be construed in accordance with the laws of Texas except to the extent preempted by federal law. SECTION 10. EFFECTIVE DATE The Plan shall become effective as of January 1, 1994. SECTION 11. CLAIMS PROCEDURE All Participants shall have all the rights and remedies as set forth in the Pension Plan. 4 IN WITNESS WHEREOF, the undersigned duly authorized officer of the Company has executed this Plan on behalf of the Company this 9th day of December, 1994. LeTOURNEAU, INC. ATTEST: By: /s/ E. E. THIELE -------------------------------- E. E. Thiele Vice President Print Name & Title /s/ MARK H. HAY -------------------------------- Corporate Secretary EX-10.Q 8 CONSULTING AGREEMENT WITH C. W. YEARGAIN 1 EXHIBIT 10q ROWAN COMPANIES, INC. Amendment No. 1 to the Consultancy Agreement Dated March 1, 1991 Between Rowan Companies, Inc. and C. W. Yeargain Effective April 1, 1994: Section 2 of the Agreement, Duties of the Consultant, is amended by adding an additional paragraph as follows: (B) The Consultant also shall serve as a Director of LeTourneau, Inc. and as Chairman of the Board of Directors of LeTourneau, Inc. and shall provide such services as may be required, from time to time, in connection with serving in such capacities. Section 4 of the Agreement, Consideration and Expenses, is hereby deleted and the following is substituted therefor: (A) The Company shall pay $50,000 annually (payable quarterly) plus the per diem rate of US $500.00 for services rendered. Further, the Company shall reimburse to the Consultant all proper and reasonable out-of-pocket expenses (including, but not limited to, all travel and accommodation expenses). 2 EXHIBIT 10r DATED MARCH 1, 1991 ROWAN COMPANIES, INC. (1) -AND- C. W. YEARGAIN (2) AGREEMENT FOR THE PROVISION OF CONSULTANCY SERVICES, AS AMENDED 3 Page 1 THIS AGREEMENT is dated March 1, 1991 and is entered into BY and BETWEEN: (1) ROWAN COMPANIES, INC. OF 5450 Transco Tower Building, Houston, Texas 77056-6196 ("the Company"); and (2) C. W. YEARGAIN ("the Consultant") of #8 Tokeneke Trail, Houston, Texas 77024 NOW IT IS HEREBY AGREED as follows: 1. Appointment (A) The Company hereby engages the Consultant and the Consultant hereby agrees to act as consultant to the Company including any of its incorporated affiliates (hereafter referred to as "the Group") pursuant to the terms of this Agreement. B) The said engagement, which shall be deemed to have commenced on March 1, 1991, shall continue hereafter unless and until terminated (i) by either party by not less than three (3) months' prior notice in writing given to the other party or (ii) pursuant to the provisions of clause 6. 2. Duties of the Consultant (A) The Consultant shall advise the Group on a when-requested basis in connection with matters pertaining to the Group's existing and prospective worldwide business operations. (B) The Consultant also shall serve as a Director of LeTourneau, Inc. and as Chairman of the Board of Directors of LeTourneau, Inc. and shall provide such services as may be required, from time to time, in connection with serving in such capacities. 3. Conflict of Interest (A) The Consultant hereby undertakes at all times to perform his obligations hereunder with the utmost good faith and shall not deliberately do or omit to do anything whereby a conflict is likely to arise between the interests of the Group and the Consultant's own interests or the interests of any other person or organization on whose behalf the Consultant is so employed. (B) The Consultant shall not at any time knowingly make or cause or permit to be made any untrue or misleading statement in relation to the Group nor in particular after the termination of this Agreement represent or cause or permit any representation to be made that he is connected with the Group. 4 Page 2 4. Consideration and Expenses (A) The Company shall pay $50,000 annually (payable quarterly) plus the per diem rate of US $500.00 for services rendered. Further, the Company shall reimburse to the Consultant all proper and reasonable out-of-pocket expenses (including, but not limited to, all travel and accommodation expenses). (B) All payments to be made pursuant to this agreement shall be made by the Company upon receipt of an invoice from the Consultant specifying the amount payable. 5. Confidentiality (A) The Consultant undertakes that he shall not, either during or after the termination of this Agreement without limit in point of time: (i) divulge or communicate or cause or permit to be divulged or communicated whether directly or indirectly to any other person or persons (except to those of the officials of the Group whose province it is to know the same); or (ii) use for his own purposes or for any purpose other than those of the Group any secret, confidential or other information: (a) relating to the private affairs of the Group; or (b) which the Group has obtained from any third party on terms restricting its disclosure or use but these restrictions shall cease to apply to any information or knowledge which may come into the public domain (otherwise than through the default of the Consultant). (B) All notes, memoranda, records and other documents made or created in relation to the performance by the Consultant of his duties hereunder shall be and remain the property of the Company and shall be handed over by the Consultant to the Company from time to time on demand and in any event on the termination of this Agreement. 6. Events of Termination The Company only on the occurrence of the events specified in (B) below and either party on the occurrence of the events specified in (A) below shall have the right at any time by giving notice in writing to the other party to terminate this Agreement forthwith: (A) if the other party commits a material breach of any of the terms of this Agreement and fails to remedy the same within 30 days of being required in writing to do so by the party not in breach (if such breach shall be capable of remedy); 5 Page 3 (B) upon the demise or incapacity of the Consultant; (C) upon the termination of the engagement by not less than the period of notice provided for in clause 1 or upon the proper termination as provided in this clause 6, the Consultant shall not have any claims for damages or compensation of any nature whatsoever other than to any outstanding fees and properly documented expenses due pursuant to clause 4 hereof. 7. Status of Agreement Nothing herein contained shall be deemed to constitute a partnership between the parties hereto and the Consultant shall have no power to bind the Group or pledge its credit. Consultant agrees that he is an independent contractor and is solely responsible for the performance of any duties required under this Agreement. The Consultant agrees that he shall solely be responsible for any income tax liability asserted by any taxing jurisdiction upon payments of consideration received under this Agreement. 8. Assignment Neither party shall be entitled to assign its rights hereunder without the prior written consent of the other. 9. Notice All notices to be given under this Agreement shall be in writing and shall either be delivered personally or sent by first class registered post to the address of the party to be served given at the head of this Agreement or such other address as shall from time to time be notified to the other party and shall be deemed duly served (i) in the case of a notice delivered personally, at the time of delivery, and (ii) in the case of a notice sent by post, five clear business days after the date of dispatch. 10. Entire Agreement This Agreement constitutes the entire Agreement between the parties hereto with respect to its subject matter and shall have effect to the exclusion of any other memorandum, agreement or understanding of any kind between the parties hereto preceding the date of this Agreement and touching and concerning its subject matter. 11. Amendments in Writing This Agreement may be amended, superseded, cancelled or any of its terms and conditions waived only by written instrument signed by or on behalf of the Company and Consultant or, in the case of waiver, by the party which is waiving compliance. 6 Page 4 12. Governing Law This Agreement shall be governed by and construed in accordance with the Laws of the State of Texas and each of the parties hereto hereby agrees to submit to the non-exclusive jurisdiction of the courts of Texas in connection with any matter arising out of this Agreement. IN WITNESS whereof this Agreement has been entered into the day and year first above written. ) /s/ C. R. Palmer SIGNED BY )----------------------------- duly authorized signatory ) C. R. Palmer for and on behalf of ROWAN COMPANIES, INC. President in the presence of: ----------------------------- /s/ Kitty Lindley ----------------------------- SIGNED BY ) /s/ C. W. Yeargain C. W. Yeargain )----------------------------- ) C. W. Yeargain In the presence of: /s/ Mary H. Cocca ----------------------------- EX-13 9 1994 ANNUAL REPORT 1 EXHIBIT 13 Rowan Companies, Inc. and Subsidiaries FINANCIAL REVIEW
(In thousands except per share amounts and ratios) 1994 1993 1992 1991 1990 -------------------------------------------------------------------------------------------------------------------------- OPERATIONS Revenues: Drilling services $ 245,917 $ 271,022 $ 162,121 $ 170,739 $ 180,118 Aircraft services 95,578 82,174 87,877 101,433 111,992 Manufacturing sales and services 96,664 -------------------------------------------------------------------------------------------------------------------------- Total 438,159 353,196 249,998 272,172 292,110 -------------------------------------------------------------------------------------------------------------------------- Costs and expenses: Drilling services 207,577 211,095 162,816 147,853 130,845 Aircraft services 79,955 68,882 74,347 82,364 88,182 Manufacturing sales and services 87,382 Depreciation and amortization 50,790 51,918 51,367 52,954 50,702 General and administrative 13,862 13,940 12,092 11,739 9,549 -------------------------------------------------------------------------------------------------------------------------- Total 439,566 345,835 300,622 294,910 279,278 -------------------------------------------------------------------------------------------------------------------------- Income (loss) from operations (1,407) 7,361 (50,624) (22,738) 12,832 -------------------------------------------------------------------------------------------------------------------------- Other income (expense): Interest expense (27,530) (25,361) (26,254) (21,379) (21,601) Gain on disposals of property, plant and equipment 1,344 1,955 731 1,660 3,996 Interest income 4,813 2,348 2,658 4,763 8,635 Other -- net 260 150 165 127 178 -------------------------------------------------------------------------------------------------------------------------- Other income (expense) -- net (21,113) (20,908) (22,700) (14,829) (8,792) -------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes (22,520) (13,547) (73,324) (37,567) 4,040 Provision (credit) for income taxes 469 (288) 429 1,174 2,081 -------------------------------------------------------------------------------------------------------------------------- Income (loss) before extraordinary charge (22,989) (13,259) (73,753) (38,741) 1,959 Extraordinary charge from redemption of debt (5,627) -------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ (22,989) $ (13,259) $ (73,753) $ (44,368) $ 1,959 -------------------------------------------------------------------------------------------------------------------------- Per share of common stock: Net income (loss): Primary $ (.27) $ (.17) $ (1.01) $ (.61)* $ .03 -------------------------------------------------------------------------------------------------------------------------- Fully diluted $ (.27) $ (.17) $ (1.01) $ (.61)* $ .03 -------------------------------------------------------------------------------------------------------------------------- Cash dividends $ -- $ -- $ -- $ -- $ -- -------------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Working capital $ 195,945 $ 172,117 $ 61,397 $ 125,996 $ 134,393 -------------------------------------------------------------------------------------------------------------------------- Property, plant and equipment -- at cost: Drilling equipment 961,391 950,538 939,793 913,379 885,264 Aircraft and related equipment 176,874 166,791 162,001 158,361 138,327 Manufacturing plant and equipment 18,955 Other property and equipment 86,883 81,636 79,801 76,251 73,504 -------------------------------------------------------------------------------------------------------------------------- Total 1,244,103 1,198,965 1,181,595 1,147,991 1,097,095 -------------------------------------------------------------------------------------------------------------------------- Property, plant and equipment -- net 506,121 507,193 537,819 552,481 549,608 Total assets 805,179 765,263 684,301 895,889 739,133 Capital expenditures 43,377 21,989 39,528 85,618 59,905 Long-term debt 248,504 207,137 212,907 220,764 153,621 Common stockholders' equity 442,347 460,300 375,754 445,368 485,748 -------------------------------------------------------------------------------------------------------------------------- STATISTICAL INFORMATION Current ratio 4.39 4.90 2.47 1.71** 4.00 Long-term debt/total capitalization .36 .31 .36 .33 .24 Book value per share of common stock $ 5.25 $ 5.49 $ 5.13 $ 6.11 $ 6.69 --------------------------------------------------------------------------------------------------------------------------
* Includes $.08 per share effect of extraordinary charge. ** At December 31, 1991, the $125,000,000 principal amount of the Company's 13 3/4% Senior Notes had been called for redemption and appeared as a current liability. If redemption had occurred prior to year-end, the current ratio would have been 3.61. 10 2 Rowan Companies, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following analysis highlights the Company's operating results for the years indicated (in millions):
1994 1993 1992 -------------------------------------------------------------------------- Revenues: Drilling $ 245.9 $ 271.0 $ 162.1 Aviation 95.6 82.2 87.9 Manufacturing 96.7 -------------------------------------------------------------------------- Total $ 438.2 $ 353.2 $ 250.0 ========================================================================== Operating Profit (Loss)*: Drilling $ 0.2 $ 19.1 $ (40.4) Aviation 4.6 2.2 1.9 Manufacturing 7.7 -------------------------------------------------------------------------- Total $ 12.5 $ 21.3 $ (38.5) ========================================================================== Net Income (Loss) $ (23.0) $ (13.3) $ (73.8) ==========================================================================
* Income (loss) from operations before deducting general and administrative expenses. Continued volatility in energy prices and in the resulting demand for drilling and aviation services, has pervaded the principal markets in which the Company has operated during the past several years. As shown above, the Company's results have been directly impacted. Faced with reorganizations and downsizings by major energy companies, domestic drilling moratoriums and increasing governmental regulations, the Company has taken several steps during this period to broaden its revenue base and maintain or enhance its operating results, including: o the introduction of Total Project Management drilling services in mid-1992, which has to date contributed $169.0 million in turnkey revenues and a 9% incremental return o the continued diversification of aircraft services toward non-energy markets o the acquisition, completed in early 1994, of substantially all of the net manufacturing assets of Marathon LeTourneau Company, including a mini-steel mill, a manufacturing facility that produces heavy equipment for the mining, timber and transportation industries, and a marine division that has built over one-third of all mobile offshore jack-up drilling rigs, including all 20 operated by the Company. The increase in the Company's net loss in 1994 in comparison to 1993 resulted primarily from a decrease in turnkey drilling revenues and a softening of drilling day rates, which more than offset the improved results of aviation operations and the addition of profitable manufacturing operations. The Company's results in 1993 were improved over 1992 as a result of strong natural gas prices and the growth of Total Project Management, principally turnkey drilling. DRILLING OPERATIONS. The Company's drilling operating results are dependent upon rig rates and the level of rig utilization achieved in its offshore drilling business conducted primarily in the Gulf of Mexico and the North Sea. In turn, the rates obtained and the utilization of the Company's offshore rigs are influenced by the level of offshore expenditures by energy companies. The offshore drilling industry has fluctuated throughout the 1992-1994 period but overall, has continued to experience weak market conditions since the early 1980's. Throughout much of 1992, low natural gas prices curtailed drilling activity in the Gulf of Mexico and depressed drilling day rates. In the North Sea, energy prices remained more stable and, as a result, utilization and day rates were not as affected. In late 1992, conditions in the two markets moved in opposite directions. An improvement in natural gas prices strengthened utilization and day rates in the Gulf of Mexico throughout 1993 and most of 1994, while North Sea drilling activity and rates weakened due to energy companies downsizing their drilling programs in the face of impending changes in United Kingdom energy policies. In response, the Company relocated the Rowan-Gorilla II from the North Sea to the Gulf of Mexico during the first half of 1994. In late 1994, Gulf of Mexico utilization and day rates were again forced to lower levels by the downward trend of natural gas prices. The North Sea market appears to have stabilized and shows prospects for improvement in 1995. The effects of fluctuations in activity and day rates are shown in the following analysis of changes in the Company's contract drilling revenues (in millions):
1993 1992 to 1994 to 1993 ------------------------------------------------------------------ Utilization $ 22.1 $ 25.4 Drilling Rates (20.7) 9.3 ==================================================================
12 3 These fluctuations, combined with the impact of Total Project Management, resulted in a 9% decrease in 1994 drilling revenues compared to 1993, which was 67% improved over 1992. Drilling operations expenses decreased 2% in 1994 compared to 1993, which was 30% higher than 1992. The expense variations do not correlate with the revenue fluctuations primarily due to the effects of Total Project Management operations. The number of marine rigs operated by the Company at the end of each year in the 1992-1994 period and the rig utilization percentages (number of days producing revenue as a percent of days the rig was available for service) for each of those years are reflected in the following table:
1994 1993 1992 -------------------------------------------------------------- Jack-ups: Number 20 20 20 Utilization 86% 85% 70% Semi-submersible: Number 1 1 1 Utilization 73% 94% 37% Submersible Barges: Number 3 3 3 Utilization 52% 30% 22% ==============================================================
In the Gulf of Mexico drilling market, where the Company currently has 18 of its 24 marine rigs, three notable changes occurring in recent years continue to affect the market. First, the Gulf of Mexico is now the only domestic market in which large scale drilling activity is occurring, because the U.S. government has imposed moratoriums on drilling in most other domestic offshore areas. Second, many major energy companies have downsized their domestic drilling organizations and have generally abandoned the United States market. Third, a growing number of independent energy companies have become operators in this market, in part because the Minerals Management Service of the U.S. government has modified the process by which such companies are permitted to farm-in on existing leases. These changes have led the Company to move towards Total Project Management, which emphasizes drilling and completing wells on a turnkey basis. Perceptible trends existing in the offshore drilling markets in which the Company operates are shown below: -------------------------------------------------------------------------------- GULF OF MEXICO - Weak market demand due to depressed natural gas prices in the near term NORTH SEA - Moderately improving drilling activity for jack-up rigs used in the exploration and development of natural gas EASTERN CANADA - Generally stable demand TRINIDAD - Decreasing demand in 1995, increasing in 1996 ================================================================================ The drilling markets in which the Company competes frequently experience significant changes in supply and demand. Drilling utilization and day rates achievable in offshore markets are affected by changes in overall exploration and development expenditures, as well as shifts in such expenditures between markets. These expenditures, in turn, are influenced by discoveries of oil and natural gas reserves, shifts in the political climate, regulatory changes, seasonal weather patterns, contractual requirements under leases or concessions and, perhaps most disruptive, changes in oil and natural gas prices. The Company can, as it did on two separate occasions in 1994, relocate its drilling rigs from one geographic area to another, but only when such moves are economically justified. The volatile nature of the various factors affecting the level of offshore expenditures by energy companies and shifts of such expenditures between domestic and international markets prevent the Company from being able to predict whether the perceptible market trends reflected in the preceding table will continue, or their impact on the results of drilling operations in 1995. Five of the Company's land rigs were under contract in Texas, Oklahoma, Mississippi and New Mexico at year end and one of the Company's arctic land rigs worked most of the first quarter in Alaska. The Company's three trailer-mounted rigs recently arrived in Argentina to commence a two year assignment. The Company's remaining four arctic land rigs and four rigs in western Texas and Oklahoma were idle in 1994. The cost of maintaining the idle rigs is modest and the remaining investment in the rigs is not significant. AVIATION OPERATIONS. Although the aviation division's operating results are still heavily influenced by oil and natural gas exploration and production, principally in the Gulf of Mexico, and seasonal weather conditions, primarily in Alaska, the division has continued to diversify its flight services. The Company offers forest fire control, commuter airline services, flightseeing, medivac services, airborne environmental surveys and other services. The Company further broadened its aviation operations in 1994 to include China and Trinidad. Aviation revenues increased by $13.4 million or 16% in 1994 compared to 1993, which was 6% below 1992. Comparable period fluctuations in aviation division expenses were a 16% increase and a 7% decrease, respectively. The increase in 1994 was primarily due to significant forest fire control services provided during much of the third and fourth quarters throughout the western United States. The Company had as many as 25 aircraft involved in fighting fires at one time. In addition, the Company's commuter airline services grew by 15% in 1994, maintaining its 28% share of total division revenues. The number of aircraft operated by the Company at the end of each year in the 1992-1994 period and the revenue hours for each of those years are reflected in the following table:
1994 1993 1992 --------------------------------------------------------------------------- Twin Engine Helicopters: Number 63 63 64 Revenue Hours 33,330 29,715 31,370 Single Engine Helicopters: Number 27 31 30 Revenue Hours 11,574 10,150 10,700 Fixed-wing Aircraft: Number 17 15 13 Revenue Hours 23,136 22,728 21,426 ===========================================================================
13 4 Excluded from the preceding table are eleven twin engine helicopters owned by the Company's Dutch affiliate which recorded revenue hours of 8,134, 8,420 and 9,800 in 1994, 1993 and 1992, respectively. Perceptible trends existing in the aviation markets in which the Company operates are shown below: -------------------------------------------------------------------------------- ALASKA -- Generally stable market conditions GULF OF MEXICO -- Generally stable market conditions in the near term NORTH SEA -- Moderately improving flight support activity CHINA -- Generally stable demand in 1995, possibly improving in 1996 TRINIDAD -- Generally stable demand ================================================================================ The Company cannot predict whether these market trends will continue. Changes in energy company exploration and production activities, seasonal weather patterns and other factors can affect the demand for flight services in the aviation markets in which the Company competes. The Company can, as it has done in the past, move aircraft from one market to another, but only when the likelihood of higher returns makes such action economical. MANUFACTURING OPERATIONS. In February 1994, the Company completed the acquisition of the net assets of Marathon LeTourneau Company for $52.1 million with $10.4 million cash paid at the time of closing and the balance being financed by nonrecourse promissory notes bearing interest at 7% and payable at the end of five years. The manufacturing division generated $96.7 million in revenues and an 8% operating profit in 1994. LIQUIDITY AND CAPITAL RESOURCES Key balance sheet amounts and ratios for 1994 and 1993 were as follows (dollars in millions):
December 31, 1994 1993 -------------------------------------------------------------------------- Cash and cash equivalents $111.1 $116.8 Current assets $253.7 $216.3 Current liabilities $ 57.8 $ 44.2 Current ratio 4.39 4.90 Current maturities of long-term debt $ 0.3 $ 8.1 Long-term debt $248.5 $207.1 Stockholders' equity $442.3 $460.3 Long-term debt/total capitalization .36 .31 ==========================================================================
Reflected in the comparison above is the acquisition of the net assets of Marathon LeTourneau Company discussed previously, as well as the effects of net cash provided by operations of $42.8 million, property, plant and equipment additions of $33.0 million, and repayments of borrowings totaling $8.1 million. Capital expenditures included acquisitions of four aircraft ($9.3 million), major rig enhancements ($7.1 million) and the purchase of a marine yard ($3.1 million). The remainder reflects new assets or enhancements to existing assets as expenditures for routine maintenance and major repairs are charged to operations as incurred. The Company estimates 1995 capital expenditures to be between $30 million and $35 million. The Company may also spend amounts to acquire additional aircraft as market conditions justify and to upgrade existing offshore rigs. In 1993, the Company sold 10 million shares of common stock using the $92 million net proceeds to expand the Company's turnkey drilling operations and increase working capital. Also during 1993, the Company repaid $10 million outstanding under its $35 million unsecured revolving line of credit, canceling the line at the time of repayment, and entered into a $3.6 million nonrecourse bank loan agreement to finance the purchase of two fixed-wing aircraft in conjunction with a five-year medivac service contract. Cash flow from operations improved to $42.8 million in 1994, more than double the amount generated in 1993, which was a $48.3 million improvement over 1992. Based on current operating levels and the previously discussed market trends, management believes that cash provided by operations and existing working capital will be adequate to sustain planned capital expenditures and debt service requirements for the foreseeable future. At December 31, 1994, the provisions of the Company's existing indebtedness would allow the Company to enter into sale/leaseback transactions with a maximum value of approximately $74 million. In 1992 and through the first five months of 1993, the Company was prohibited from paying dividends on its common stock under the terms of its Senior Notes. With the addition of the proceeds from the June 1993 public offering, the Company's ability to pay cash dividends was restored, although no dividends were paid. Furthermore, the Company does not intend to pay dividends on its common stock until it achieves and sustains a suitable level of profitability. See Note 5 of the Notes to Consolidated Financial Statements. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employer's Accounting for Postretirement Benefits Other Than Pensions." The effect of adopting the statement for the year ended December 31, 1993 was to increase net periodic postretirement benefit cost and the net loss by approximately $3 million. See Note 6 of the Notes to Consolidated Financial Statements. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The effect of adopting the statement on the Company's 1993 consolidated financial statements was not significant due to the expected realization of sufficient tax loss carryforwards and other future deductible amounts to offset future taxable amounts, based on the projected reversal of such differences. See Note 7 of the Notes to Consolidated Financial Statements. 14 5 INDEPENDENT AUDITORS' REPORT Rowan Companies, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheet of Rowan Companies, Inc. and Subsidiaries (the "Company") as of December 31, 1994 and 1993, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. As described in Notes 1 and 6 to the Consolidated Financial Statements, the Company changed its methods of accounting for income taxes and the cost of retiree health care effective January 1, 1993 to conform with the provisions of Statements of Financial Accounting Standards Nos. 109 and 106, respectively. /s/ DELOITTE & TOUCHE LLP Houston, Texas March 3, 1995 15 6 Rowan Companies, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEET
December 31, ------------------------------- (In thousands except share amounts) 1994 1993 ------------------------------------------------------------------------------------------------------------------------ ASSETS Current Assets: Cash and cash equivalents $ 111,070 $ 116,778 Receivables -- trade and other 78,317 83,429 Inventories: Raw materials and supplies 42,364 14,002 Work-in-progress 14,238 Finished goods 2,784 Prepaid expenses 3,290 1,312 Cost of turnkey drilling contracts in progress 1,642 785 ------------------------------------------------------------------------------------------------------------------------ Total current assets 253,705 216,306 ------------------------------------------------------------------------------------------------------------------------ Investment In and Advances To 49% Owned Companies 34,476 33,569 ------------------------------------------------------------------------------------------------------------------------ Property, Plant and Equipment -- at cost: Drilling equipment 961,391 950,538 Aircraft and related equipment 176,874 166,791 Manufacturing plant and equipment 18,955 Other property and equipment 86,883 81,636 ------------------------------------------------------------------------------------------------------------------------ Total 1,244,103 1,198,965 Less accumulated depreciation and amortization 737,982 691,772 ------------------------------------------------------------------------------------------------------------------------ Property, plant and equipment -- net 506,121 507,193 ------------------------------------------------------------------------------------------------------------------------ Other Assets and Deferred Charges 10,877 8,195 ------------------------------------------------------------------------------------------------------------------------ Total $ 805,179 $ 765,263 ======================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt (Note 2) $ 289 $ 8,127 Accounts payable -- trade 20,513 15,887 Other current liabilities (Note 4) 36,958 20,175 ------------------------------------------------------------------------------------------------------------------------ Total current liabilities 57,760 44,189 ------------------------------------------------------------------------------------------------------------------------ Long-Term Debt -- less current maturities (Note 2) 248,504 207,137 ------------------------------------------------------------------------------------------------------------------------ Other Liabilities (Notes 6 and 9) 36,557 30,409 ------------------------------------------------------------------------------------------------------------------------ Deferred Credits: Income taxes (Note 7) 4,468 4,314 Gain on sale/leaseback transactions (Note 9) 15,543 18,742 Other 172 ------------------------------------------------------------------------------------------------------------------------ Total deferred credits 20,011 23,228 ------------------------------------------------------------------------------------------------------------------------ Commitments and Contingent Liabilities (Note 9) ------------------------------------------------------------------------------------------------------------------------ Stockholders' Equity: Preferred stock, $1.00 par value: Authorized 5,000,000 shares issuable in series: Series I Preferred Stock, authorized 6,500 shares, none issued Series II Preferred Stock, authorized 6,000 shares, none issued Series III Preferred Stock, authorized 10,300 shares, none issued Series A Junior Preferred Stock, authorized 1,500,000 shares, none issued Common stock, $.125 par value; authorized 150,000,000 shares; issued 85,737,581 shares at December 31, 1994 and 85,349,906 shares at December 31, 1993 (Note 3) 10,717 10,669 Additional paid-in capital 390,925 385,937 Retained earnings (Note 5) 43,190 66,179 Less cost of treasury stock -- 1,457,919 shares 2,485 2,485 ------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 442,347 460,300 ------------------------------------------------------------------------------------------------------------------------ Total $ 805,179 $ 765,263 ========================================================================================================================
See Notes to Consolidated Financial Statements. 16 7 Rowan Companies, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF OPERATIONS
For the Years Ended December 31, -------------------------------------- (In thousands except per share amounts) 1994 1993 1992 ---------------------------------------------------------------------------------------------------------- Revenues: Drilling services $245,917 $271,022 $162,121 Aircraft services 95,578 82,174 87,877 Manufacturing sales and services 96,664 ---------------------------------------------------------------------------------------------------------- Total 438,159 353,196 249,998 ---------------------------------------------------------------------------------------------------------- Costs and Expenses: Drilling services 207,577 211,095 162,816 Aircraft services 79,955 68,882 74,347 Manufacturing sales and services 87,382 Depreciation and amortization 50,790 51,918 51,367 General and administrative 13,862 13,940 12,092 ---------------------------------------------------------------------------------------------------------- Total 439,566 345,835 300,622 ---------------------------------------------------------------------------------------------------------- Income (Loss) From Operations (1,407) 7,361 (50,624) ---------------------------------------------------------------------------------------------------------- Other Income (Expense): Interest expense (27,530) (25,361) (26,254) Gain on disposals of property, plant and equipment 1,344 1,955 731 Interest income 4,813 2,348 2,658 Other -- net 260 150 165 ---------------------------------------------------------------------------------------------------------- Other income (expense) -- net (21,113) (20,908) (22,700) ---------------------------------------------------------------------------------------------------------- Income (Loss) Before Income Taxes (22,520) (13,547) (73,324) Provision (credit) for income taxes (Note 7) 469 (288) 429 ---------------------------------------------------------------------------------------------------------- Net Income (Loss) $(22,989) $(13,259) $(73,753) ---------------------------------------------------------------------------------------------------------- Earnings (Loss) Per Share of Common Stock (Note 1) $ (.27) $ (.17) $ (1.01) ========================================================================================================== See Notes to Consolidated Financial Statements. 17
8 Rowan Companies, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1994, 1993 and 1992 ------------------------------------------------------------ Common Stock ------------------------------------ Issued In Treasury Additional ----------------- ---------------- Paid-in Retained (In thousands) Shares Amount Shares Amount Capital Earnings ----------------------------------------------------------------------------------------------------------------- Balance, January 1, 1992 74,327 $ 9,291 1,458 $2,485 $285,371 $153,191 Exercise of stock options 318 40 279 Value of services rendered by participants in the Nonqualified Stock Option Plans (Note 3) 3,820 Net loss (73,753) ----------------------------------------------------------------------------------------------------------------- Balance, December 31, 1992 74,645 9,331 1,458 2,485 289,470 79,438 Exercise of stock options 531 66 464 Value of services rendered by participants in the Nonqualified Stock Option Plans (Note 3) 4,282 Conversion of subordinated debentures 174 22 978 Sale of common stock (Note 3) 10,000 1,250 90,743 Net loss (13,259) ----------------------------------------------------------------------------------------------------------------- Balance, December 31, 1993 85,350 10,669 1,458 2,485 385,937 66,179 Exercise of stock options 388 48 340 Value of services rendered by participants in the Nonqualified Stock Option Plans (Note 3) 4,648 Net loss (22,989) ----------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 85,738 $10,717 1,458 $2,485 $390,925 $ 43,190 =================================================================================================================
See Notes to Consolidated Financial Statements. 18 9 Rowan Companies, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31, ----------------------------------------- (In thousands) 1994 1993 1992 ------------------------------------------------------------------------------------------------------------ Cash Provided By (Used In): Operations: Net income (loss) $(22,989) $ (13,259) $ (73,753) Noncash charges (credits) to net income (loss): Depreciation and amortization 50,790 51,918 51,367 Gain on disposals of property, plant and equipment (1,344) (1,955) (731) Compensation expense 4,648 4,282 3,820 Change in sale/leaseback payable (1,405) (273) 1,668 Amortization of sale/leaseback gain (3,198) (3,198) (3,207) Provision for pension and postretirement benefits 7,536 6,123 2,881 Other -- net (503) (1,271) (1,936) Changes in current assets and liabilities: Receivables -- trade and other 18,080 (28,867) (3,815) Inventories (9,205) 670 1,212 Other current assets (2,464) 2,257 (2,622) Current liabilities 6,064 774 (6,457) Net changes in other noncurrent assets and liabilities (3,205) 1,165 1,628 ------------------------------------------------------------------------------------------------------------ Net cash provided by (used in) operations 42,805 18,366 (29,945) ------------------------------------------------------------------------------------------------------------ Investing activities: Capital expenditures: Property, plant and equipment additions (32,963) (21,989) (39,528) Acquisition of net manufacturing assets (10,414) Advances to affiliates (100) (1,956) Proceeds from disposal of property, plant and equipment 2,604 2,929 2,686 ------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (40,773) (19,160) (38,798) ------------------------------------------------------------------------------------------------------------ Financing activities: Proceeds from common stock offering, net of issue costs 91,993 Proceeds from revolving credit arrangements 10,000 Payments on revolving credit arrangements (10,000) Proceeds from other borrowings 3,560 Repayments of other borrowings (8,127) (8,061) (132,857) Premium on redemption of debt (3,750) Other -- net 387 530 319 ------------------------------------------------------------------------------------------------------------ Net cash provided by (used in) financing activities (7,740) 88,022 (136,288) ------------------------------------------------------------------------------------------------------------ Increase (Decrease) in Cash and Cash Equivalents (5,708) 87,228 (205,031) Cash and Cash Equivalents, Beginning of Year 116,778 29,550 234,581 ------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents, End of Year $111,070 $116,778 $ 29,550 ============================================================================================================ See Notes to Consolidated Financial Statements. 19
10 Rowan Companies, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------------------------------------------- PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of Rowan Companies, Inc. and all of its wholly and majority owned subsidiaries (the "Company"). On February 11, 1994, the Company completed the acquisition of substantially all of the assets, and assumed certain related liabilities, of Marathon LeTourneau Company for $52,070,000 pursuant to an agreement with General Cable Corporation dated November 12, 1993. The acquisition was financed with $10,414,000 in cash and $41,656,000 in 7% promissory notes due in 1999 and has been recorded using the purchase method of accounting. The accompanying consolidated financial statements give effect to the acquisition as of January 1, 1994 and include the financial position, results of operations and cash flows associated with the acquired net assets from that date. Had the acquisition been completed effective January 1, 1993, the Company's unaudited pro forma operating results for 1993 would have been as follows: revenues -- $449,400,000, net loss -- $10,300,000 and net loss per share of common stock -- $.13. The Company accounts for its investment in 49% owned companies using the equity method. The excess of cost over the net assets of subsidiaries at dates of acquisitions ($8,452,000) is being amortized over a thirty-year period. At December 31, 1994, the unamortized excess cost was $3,244,000. Intercompany transactions are eliminated in consolidation. REVENUE RECOGNITION. Most drilling contracts are on a day rate basis, and revenues and expenses are recognized as the work progresses. The Company also utilizes turnkey contracts for certain of its drilling operations. Under these short-term, fixed price arrangements, revenues and expenses are recognized on a completed contract basis. The Company's aviation services generally are provided under master service agreements (which provide for incremental payments based on usage), term contracts, or day-to-day charter arrangements. Aviation revenues and expenses are recognized as services are rendered. Manufacturing sales and related costs are generally recognized as products are shipped. Revenues and costs and expenses in 1994 included sales and costs of sales of $90,460,000 and $72,717,000, respectively. INVENTORIES. Manufacturing inventories are stated principally at lower of first-in, first-out cost or market. Drilling and aviation materials and supplies are carried at average cost. STATEMENT OF CASH FLOWS. The Company generally considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Noncash financing activities consisted of the issuance of $41,656,000 7% promissory notes in connection with the acquisition of the net assets of Marathon LeTourneau Company in 1994, the issuance of $10,300,000 Series III Floating Rate Convertible Subordinated Debentures in 1994 and the conversion of $1,000,000 principal amount of Series I Floating Rate Convertible Subordinated Debentures into 173,913 shares of common stock in 1993. See Notes 2 and 3. PROPERTY AND DEPRECIATION. For financial reporting purposes, the Company computes depreciation using the straight-line method over the estimated useful lives of the related assets as follows:
Salvage Years Value ------------------------------------------------------------------------------- Marine drilling equipment: Semi-submersible 15 20% Cantilever jack-ups 15 20% Conventional jack-ups 12 20% Barges 12 20% Land drilling equipment 8 to 12 20% Drill pipe and tubular equipment 4 10% Aviation equipment: Aircraft 7 to 10 15% to 25% Other 2 to 10 various Manufacturing plant and equipment: Buildings and improvements 10 to 25 10% to 20% Other 2 to 12 various Other property and equipment 3 to 40 various ================================================================================
The Company depreciates its equipment from the date placed in service until the equipment is sold or becomes fully depreciated. The Company capitalizes, during the construction period, an allocation of the interest cost incurred during the period required to complete the asset. Engineering salaries and other expenses related to the construction of drilling equipment are also capitalized. Expenditures for new property or enhancements to existing property are capitalized. Expenditures for routine maintenance and major repairs are charged to operations as incurred. See Note 10. INCOME TAXES. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109") 20 11 under which deferred income tax assets and liabilities reflect the future tax consequences of differences between the financial statement and tax bases of assets and liabilities. The cumulative effect of adopting SFAS 109 on the Company's 1993 consolidated financial statements was not significant. In 1992, the Company provided for income taxes under Accounting Principles Board Opinion No. 11, which was superseded by SFAS 109. EARNINGS (LOSS) PER COMMON SHARE. Earnings (loss) per share amounts are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Shares issuable upon conversion of the Series I, Series II and Series III Floating Rate Convertible Subordinated Debentures are excluded from the computation because their effect is antidilutive. Additionally, shares issuable upon the exercise of stock options are excluded because their effect is insignificant. RECLASSIFICATIONS. Certain reclassifications have been made in the 1993 and 1992 amounts to conform with the 1994 presentations. 2. LONG-TERM DEBT -------------------------------------------------------------------------------- Long-term debt consisted of (in thousands):
December 31, 1994 1993 -------------------------------------------------------------------------------- 11 7/8% Senior Notes due 2001 $200,000 $200,000 Nonrecourse note payable in quarterly installments through 1994 at various rates 7,857 Nonrecourse notes payable in quarterly installments through 1998 with a final balloon payment due at maturity; bearing interest at 7% and collateralized by two aircraft costing approximately $3,600,000 3,087 3,357 Nonrecourse notes payable due 1999 bearing interest at 7% 41,656 Series I subordinated convertible debentures due 1996 bearing interest at 1/2% above prime rate 450 450 Series II subordinated convertible debenture due 1997 bearing interest at 1/2% above prime rate 3,600 3,600 -------------------------------------------------------------------------------- Total 248,793 215,264 Less current maturities 289 8,127 -------------------------------------------------------------------------------- Remainder $248,504 $207,137 ================================================================================
Maturities of long-term debt for the five years ending December 31, 1999 are as follows: 1995 -- $289,000, 1996 -- $759,000, 1997 -- $3,932,000, 1998 -- $2,157,000 and 1999 -- $41,656,000. The 11 7/8% Senior Notes due 2001 may be redeemed early, in whole or in part from time to time at the Company's option, beginning December 1, 1996, upon payment of a premium of 6% and descending 2% annually from that date to December 1, 1999, when the Company may redeem them at the principal amount. In January 1993, the Company entered into a five-year nonrecourse loan agreement with a bank to finance the purchase of two fixed-wing aircraft for $3,560,000. The resulting notes payable are collateralized by the aircraft and bear a fixed interest rate of 7%. The notes will be repaid in quarterly installments through 1998, with a final balloon payment due at maturity. In February 1994, in connection with the acquisition of net manufacturing assets, the Company issued $41,656,000 in 7% promissory notes due in 1999. See Note 1 for further information. The $450,000 principal amount of Series I Floating Rate Convertible Subordinated Debentures is convertible into $450,000 Series I Preferred Stock, which may be converted into an aggregate of 78,261 shares of the Company's common stock. At December 31, 1994, the interest rate was 9%. See Note 3 for further information. The $3,600,000 principal amount of the Series II Floating Rate Convertible Subordinated Debenture is convertible into $3,600,000 Series II Preferred Stock, which may be converted into an aggregate of 400,000 shares of the Company's common stock. At December 31, 1994, the interest rate was 9%. See Note 3 for further information. In November 1994, the Company issued $10,300,000 principal amount of Series III Floating Rate Convertible Subordinated Debentures. The debentures are convertible into $10,300,000 Series III Preferred Stock, which may be converted into an aggregate of 1,525,926 shares of the Company's common stock. The debentures were issued in exchange for promissory notes containing provisions for setoff. Accordingly, the debentures and notes, and the related interest amounts, have been offset in the consolidated financial statements pursuant to Financial Accounting Standards Board Interpretation No. 39. See Note 3 for further information. Interest payments for 1994, 1993 and 1992 were $26,900,000, $24,867,000 and $32,965,000, respectively. Certain debt agreements of the Company contain provisions that require an excess of current assets over current liabilities, require an excess of stockholders' equity over consolidated funded indebtedness, and restrict investments, sale/leaseback transactions, mergers, consolidations, sales of assets, borrowings, creation of liens, purchases of the Company's capital stock, and present and future common stock dividend payments. See Note 5 for further information. 3. STOCKHOLDERS' EQUITY -------------------------------------------------------------------------------- The Company has two nonqualified stock option plans through which options have been granted to certain key employees. Under the terms of the Company's 1980 Nonqualified Stock Option Plan (the "1980 Plan"), the Board of Directors granted options to purchase a total of 1,000,000 shares of the Company's common stock. The Board of Director's authority to grant additional options under the 1980 Plan expired on January 25, 1990. Under the original terms of the 1988 Nonqualified Stock Option Plan (the "1988 Plan"), the Board of Directors could grant before January 21, 1998 options to purchase a total of 2,000,000 shares of the Company's common stock. Subsequently, at its April 1992 annual meeting, the stockholders of the Company approved an 21 12 amendment to extend the term of the 1988 Plan to January 21, 2003 and to increase to 7,000,000 the number of shares of common stock that could be issued pursuant to options granted thereunder. At December 31, 1994, options for 4,798,504 shares had been granted at an exercise price of $1.00 per share and 301 active, key employees had been granted options. Options are exercisable to the extent of 25% after one year from date of grant, 50% after two years, 75% after three years and 100% after four years. All options not exercised expire ten years after the date of grant. For financial accounting purposes, the Company recognizes compensation expense with respect to any nonqualified option in an amount equal to the difference between the market price per share and the option price per share on the date of grant. The compensation is recorded as expense over the period of time during which the employee performs services to earn the right to exercise the option and an equal amount is credited to additional paid-in capital. Stock option activity was as follows:
Number of Shares ----------------------------------------------- 1994 1993 1992 -------------------------------------------------------------------------------- Stock options outstanding, January 1 1,616,325 1,490,475 1,492,900 Changes during the year: Granted, at $1.00 per share 982,000 707,250 344,750 Exercised (387,675) (530,650) (318,675) Forfeited (28,000) (50,750) (28,500) -------------------------------------------------------------------------------- Stock options outstanding, December 31 2,182,650 1,616,325 1,490,475 ================================================================================ Stock options exercisable, December 31 440,338 317,137 389,975 ================================================================================ Stock options available for grant, December 31: 1988 Plan 3,463,821 4,417,821 5,074,321 ================================================================================
The Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan (the "Plan") provides for the issuance to key employees of up to $20,000,000 in aggregate principal amount of the Company's floating rate convertible subordinated debentures. The debentures are initially convertible into preferred stock which has no voting rights (except as required by law or the Company's charter), no dividend and a nominal liquidation preference. The preferred stock is immediately convertible into common stock. Since the inception of the plan, debentures in the aggregate principal amount of $19,925,000 have been issued by the Company. Out of the initial issue of $5,125,000 principal amount of debentures in 1986, $450,000 were outstanding at December 31, 1994 and are ultimately convertible into common stock at $5.75 per share for each $1,000 principal amount of debenture at any time through June 13, 1996, unless earlier redeemed or the conversion privilege is terminated. In 1987, the Company issued a debenture in the principal amount of $4,500,000, of which $3,600,000 was outstanding at December 31, 1994. This residual amount is ultimately convertible into common stock at $9.00 per share for each $1,000 principal amount of debenture at any time through September 10, 1997, unless earlier redeemed or the conversion privilege is terminated. In November 1994, the Company issued debentures in the principal amount of $10,300,000 which are ultimately convertible into common stock at $6.75 per share for each $1,000 principal amount of debenture through November 30, 2004, as follows, unless earlier redeemed or the conversion privilege is terminated: $2,350,000 on or after November 30, 1995; $4,800,000 on or after November 30, 1996; $7,500,000 on or after November 30, 1997 and $10,300,000 on or after November 30, 1998. On February 25, 1992, the Company adopted a Stockholder Rights Agreement to protect against coercive takeover tactics. The agreement provides for the distribution to the Company's stockholders of one Right for each outstanding share of common stock. Each Right entitles the holder to purchase from the Company one one-hundredth of a share of Series A Junior Preferred Stock of the Company at an exercise price of $30. In addition, under certain circumstances, each Right will entitle the holder to purchase securities of the Company or an acquiring entity at 1/2 market value. The Rights are exercisable only if a person or group acquires 15% or more of the Company's outstanding common stock or makes a tender offer for 30% or more of the Company's outstanding common stock. The Rights will expire on February 25, 2002. The Company may generally redeem the Rights at a price of $.01 per Right at any time until the 10th day following public announcement that a 15% position has been acquired. In June 1993, the Company sold 10,000,000 shares of its common stock in a public offering. Net proceeds of the sale were $91,993,000 after deducting underwriting commissions and direct offering costs totaling $4,257,000. 4. OTHER CURRENT LIABILITIES Other current liabilities consisted of (in thousands):
December 31, 1994 1993 -------------------------------------------------------------------------------- Gain on sale/leaseback transactions $ 3,198 $ 3,198 Accrued liabilities: Income taxes 577 596 Compensation and related employee costs 15,803 9,082 Interest 2,195 2,018 Taxes and other 15,185 5,281 -------------------------------------------------------------------------------- Total $36,958 $20,175 ================================================================================
5. RESTRICTIONS ON RETAINED EARNINGS -------------------------------------------------------------------------------- Under the terms of certain debt agreements, the Company has agreed not to declare dividends or make any distribution on its common stock unless the total dividends or distributions subsequent to December 31, 1991 are less than the sum of a) $20,000,000, plus b) 50% of cumulative consolidated net income, if positive, subsequent to December 31, 22 13 1991, plus c) the net proceeds from the sale of any class of capital stock after December 31, 1991, less d) 100% of cumulative consolidated net income, if negative, subsequent to December 31, 1991. Under this dividend restriction, the Company had a computed positive balance of $1,992,000 at December 31, 1994. Subject to these restrictions, the Board of Directors will determine payment, if any, of future dividends or distributions in light of conditions then existing, including the Company's earnings, financial condition and requirements, opportunities for reinvesting earnings, business conditions and other factors. 6. BENEFIT PLANS -------------------------------------------------------------------------------- Since 1952, the Company has sponsored defined benefit pension plans covering substantially all of its employees. The benefits are based on an employee's years of service and average earnings for the five highest consecutive calendar years of compensation during the ten years immediately preceding retirement. The Company's policy is to fund the minimum amount required by the Internal Revenue Code. The following table sets forth the plans' funded status and the amounts recognized in the Company's consolidated balance sheet and includes, at December 31, 1994, amounts related to a separate plan covering manufacturing employees that was assumed in the acquisition of net manufacturing assets (in thousands):
December 31, 1994 1993 -------------------------------------------------------------------------------- Actuarial present value of benefit obligations: Accumulated benefit obligation, Vested benefits $ 80,539 $ 76,974 ================================================================================ Total benefits $ 87,380 $ 83,960 ================================================================================ Plan assets at fair value $ 88,650 $ 89,843 Projected benefit obligation for service rendered to date 99,275 98,263 -------------------------------------------------------------------------------- Plan assets less than projected benefit obligation (10,625) (8,420) Unrecognized net loss 2,941 4,091 Unrecognized net benefits being recognized over 15 years (6,057) (7,268) Unrecognized prior service cost 671 892 -------------------------------------------------------------------------------- Accrued pension cost included in Other Liabilities $(13,070) $(10,705) ================================================================================
The plans' assets consist primarily of equity securities and U.S. Treasury bonds and notes and, at December 31, 1994, included 1,500,000 shares of the Company's common stock at an average cost of $4.81 per share. At December 31, 1994, $12,120,000 of the plans' assets were invested in a dedicated bond fund. The plans had a basis in these assets of $10,757,000 yielding approximately 6.4% to maturity. Net pension costs included the following components (in thousands):
1994 1993 1992 -------------------------------------------------------------------------------- Service cost-benefits earned during the period $ 4,784 $ 3,982 $ 3,632 Interest cost on projected benefit obligation 7,879 6,796 6,334 Actual return on plan assets 7,264 (8,580) (9,590) Net amortization and deferral (17,105) (5) 1,948 -------------------------------------------------------------------------------- Net periodic pension cost $ 2,822 $ 2,193 $ 2,324 ================================================================================
Assumptions used in calculations were:
1994 1993 1992 -------------------------------------------------------------------------------- Discount rate 8.75% 7.5% 8.5% Rate of compensation increase 4.0% 4.5% 4.5% Expected rate of return on plan assets 9.0% 9.0% 9.0% ================================================================================
The Company also sponsors pension restoration plans to supplement the benefits for certain key executives that would otherwise be limited by section 415 of the Internal Revenue Code. The plans are unfunded and had projected benefit obligations at December 31, 1994 and 1993 of $2,404,000 and $2,246,000, respectively. The net pension liabilities included in the Company's consolidated balance sheet were $1,497,000 and $1,118,000 at December 31, 1994 and 1993, respectively. Net pension cost was $437,000 in 1994, $408,000 in 1993 and $557,000 in 1992. In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees. Substantially all of the Company's drilling and aviation employees may become eligible for those benefits if they reach normal retirement age while working for the Company. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 "Employer's Accounting for Postretirement Benefits Other Than Pensions," which requires accrual of the cost of retiree health care and other postretirement benefits during the years an employee provides services. Prior to 1993, the Company recognized the cost of these benefits as they were paid. The effect of adopting the statement for the year ended December 31, 1993 was to increase net periodic postretirement benefit cost and the net loss by approximately $3,000,000 ($.04 per share). 23 14 The following table sets forth the plan's status and the amounts recognized in the Company's consolidated balance sheet (in thousands):
December 31, 1994 1993 -------------------------------------------------------------------------------- Accumulated postretirement benefit obligations: Retirees $ 8,081 $ 8,980 Fully eligible active plan participants 5,388 5,880 Other active plan participants 9,057 9,464 -------------------------------------------------------------------------------- Total benefits 22,526 24,324 Unrecognized transition obligation being recognized over 20 years (17,022) (17,967) Unrecognized net gain (loss) 1,195 (3,321) -------------------------------------------------------------------------------- Accrued postretirement benefit cost included in Other Liabilities $ 6,699 $ 3,036 ================================================================================
The actuarially determined accumulated postretirement benefit obligation reflects health care cost trend rates of 13% for 1994 and decreasing by 1% annually through 2001 and a discount rate of 8.75%. A one percentage point increase in the assumed health care cost trend rate would increase net periodic postretirement benefit cost by approximately $729,000 and increase the accumulated postretirement benefit obligation by approximately $3,837,000. Net postretirement benefit cost included the following components (in thousands):
1994 1993 -------------------------------------------------------------------------------- Service cost $ 1,475 $ 1,039 Interest cost 1,799 1,537 Net amortization and deferral 1,003 946 -------------------------------------------------------------------------------- Net periodic postretirement benefit cost $ 4,277 $ 3,522 ================================================================================
Cash payments for postretirement benefits in 1994, 1993 and 1992 were approximately $614,000, $500,000 and $856,000, respectively. In October 1994, the Board of Directors approved the Rowan Companies, Inc. Savings and Investment Plan in conformity with section 401(k) of the Internal Revenue Code. The plan will commence on or about April 1, 1995 and cover all drilling and aviation employees. Manufacturing employees are covered by a separate plan to which the Company contributed approximately $397,000 in 1994. 7. INCOME TAXES -------------------------------------------------------------------------------- The detail of income tax provisions (credits) is presented below (in thousands):
1994 1993 1992 -------------------------------------------------------------------------------- Current: Federal $ (98) $ 123 $ (82) Foreign 145 501 707 State 268 7 -------------------------------------------------------------------------------- Total current provision 315 624 632 Deferred -- foreign and other 154 (912) (203) -------------------------------------------------------------------------------- Total income tax provision (credit) $ 469 $(288) $ 429 ================================================================================
Total income tax expense (credit) shown in the consolidated statement of operations differs from the amount that would be computed if the income (loss) before income taxes was multiplied by the federal income tax rate (statutory rate) applicable in each year. The reasons for this difference are as follows (in thousands):
1994 1993 1992 -------------------------------------------------------------------------------- Statutory rate 35% 35% 34% Tax at statutory rate $(7,883) $(4,742) $(24,930) Increase (decrease) in taxes resulting from: Limitation on utilization of tax benefits 7,663 3,679 24,214 Additional taxes on foreign source income 753 551 505 Nondeductible compensation expense 28 609 Alternative minimum tax (98) 123 Other -- net 34 73 31 -------------------------------------------------------------------------------- Total income tax provision (credit) $ 469 $ (288) $ 429 ================================================================================
Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities at December 31, 1994 and 1993 were as follows (in thousands):
1994 1993 -------------------------------------------------------------------------------- Deferred tax asset: Deferred sale/leaseback gain $ 6,563 $ 7,682 Accrued pension and postretirement benefit costs 7,454 5,109 ESOP/PAYSOP contributions 1,753 1,836 Net operating loss carryforward 95,352 91,869 Investment tax credit carryforward 56,450 58,256 Other 3,256 1,629 -------------------------------------------------------------------------------- 170,828 166,381 Valuation allowance (69,031) (61,665) -------------------------------------------------------------------------------- 101,797 104,716 -------------------------------------------------------------------------------- Deferred tax liability: Property, plant and equipment 102,113 104,974 Foreign income taxes 3,030 2,644 Other 1,122 1,412 -------------------------------------------------------------------------------- 106,265 109,030 -------------------------------------------------------------------------------- Deferred tax liability - net $ 4,468 $ 4,314 ================================================================================
The valuation allowance consists of investment tax credit carryforwards and a portion of the net operating loss carryforwards which are forecast as not being utilized prior to their statutory expiration dates. The valuation allowance increased by $7,366,000 in 1994 primarily as a result of the Company's loss in the current year. At December 31, 1994, the Company had $51,441,000 of regular investment tax credits and $5,009,000 of ESOP (Employee Stock Ownership Plan) tax credits available for application against future federal taxes payable. Total credits, if not utilized, will expire as follows: 1995 -- $6,954,000, 1996 -- $12,772,000, 1997 -- $11,069,000, 24 15 1998 -- $8,027,000, 1999 -- $10,110,000, 2000 -- $2,017,000 and 2001 -- $5,501,000. At December 31, 1994, the Company had net operating loss carryforwards for federal income tax purposes of approximately $272,434,000 which will expire, if not utilized, as follows: 2001 -- $88,977,000, 2002 -- $129,123,000, 2007 -- $49,047,000, 2008 -- $3,003,000 and 2009 -- $2,284,000. Deferred income taxes not provided for undistributed earnings of foreign subsidiaries, because such earnings are considered to be permanently invested abroad, amounted to approximately $3,500,000 at December 31, 1994. Loss before income taxes consisted of $(21,640,000), $(10,346,000) and $(64,158,000) of domestic losses, and $(880,000), $(3,201,000) and $(9,166,000) of foreign losses for 1994, 1993 and 1992, respectively. Income tax payments exceeded refunds by $393,000 in 1994, $248,000 in 1993 and $1,493,000 in 1992. 8. FAIR VALUES OF FINANCIAL INSTRUMENTS -------------------------------------------------------------------------------- At December 31, 1994, the carrying amount of the Company's cash and cash equivalents approximated fair value due to the short maturity of the instruments. Except for the 11 7/8% Senior Notes discussed below, the carrying amount of the Company's long-term debt was estimated to approximate its fair value at December 31, 1994 based upon quoted market prices for similar issues. The 11 7/8% Senior Notes had a fair value of $210,000,000 at December 31, 1994, or a $10,000,000 premium to carrying value, based upon the closing price quoted on the New York Stock Exchange. 9. COMMITMENTS AND CONTINGENT LIABILITIES -------------------------------------------------------------------------------- During 1984, the Company entered into a sale/leaseback transaction whereby the Company sold the Rowan-Halifax, a cantilever jack-up, for $66,500,000 in cash and leased the rig back under a 15-year operating lease at an effective interest rate of 9.3%. In 1985, the Company sold a similar jack-up, the Cecil Provine, for $60,000,000 in cash and entered into a 15-year operating lease at an effective interest rate of 8.0%. Under each lease agreement, at the end of the basic 15-year lease, the Company has an option to purchase the rig at the then fair market value, terminate the lease, or renew the lease at the lesser of a) a fixed rental renewal of 50% of the weighted average amount of the semi- annual installments during the basic term, or b) a fair market rental renewal. Each transaction has resulted in a gain which has been deferred for financial statement purposes and is being recognized over its respective lease term. Total payments to be made under the sale/leaseback agreements are being expensed on a straight-line basis though the payments themselves are variable. The excess of inception-to-date sale/leaseback expenses over related payments was $14,089,000 and $15,549,000 at December 31, 1994 and 1993, respectively. The Company has operating leases covering aircraft hangars, offices and computer equipment and the sale/leaseback rigs. Net rental expense under all operating leases was $20,756,000 in 1994, $17,633,000 in 1993 and $18,746,000 in 1992. As of December 31, 1994, the future minimum payments to be made under noncancelable operating leases were (in thousands): 1995 $ 21,907 1996 20,499 1997 22,653 1998 18,549 1999 21,007 Later Years 18,254 ---------------------------------------------------------- Total $122,869 ==========================================================
The Company estimates 1995 capital expenditures at between $30,000,000 and $35,000,000. In management's opinion, at December 31, 1994, there were no contingencies, claims or lawsuits against the Company which are expected to have a material adverse effect on its financial position or results of operations. 10. SEGMENTS OF BUSINESS -------------------------------------------------------------------------------- The Company has three principal segments of business: contract and turnkey drilling of oil and gas wells, both onshore and offshore ("Drilling"), charter helicopter and fixed-wing aircraft services ("Aviation") and, beginning in 1994, the manufacture of heavy equipment for the mining, timber and transportation industries, alloy steel and steel plate and marine drilling equipment ("Manufacturing"). Drilling services are provided in both domestic and foreign areas. Aviation services include charter airline, flightseeing and forest fire control services in Alaska as well as oil and gas related services in the Gulf of Mexico. Manufacturing operations are conducted in Longview, Texas, but sales and services are carried out throughout the United States and in many foreign locations. Total revenues reported by industry segments consist principally of revenues from unaffiliated customers. The Company had revenues, primarily from drilling operations, of 10% or more of consolidated revenues from one customer in each of 1994 (10%), 1993 (17%) and 1992 (11%). The Company believes that it has no significant concentrations of credit risk. The Company has never experienced any significant credit losses and its drilling and aviation services customers have heretofore primarily been large energy companies and government entities. The addition of manufacturing operations in 1994 has diversified the Company's operations and attendant credit risk. Further, the Company has the ability to relocate its major drilling and aviation assets over significant distances on a timely basis in response to changing market conditions. Assets are identified to a segment by their direct use. The Company classifies its drilling rigs for segment purposes as domestic or foreign based upon the drilling rig's country of registry. Accordingly, drilling rigs registered in the United States are classified with domestic operations and revenues generated from foreign operations of these rigs are considered export revenues. Revenues generated by foreign-registered drilling rigs from operations offshore the United States are classified as foreign revenues. Assuming revenues derived from all drilling operations within the United States, both onshore and offshore, were treated as domestic revenues and export revenues were treated as foreign revenues, revenues from foreign drilling operations would have been $84,343,000 in 1994. 25 16 Domestic drilling operations included export revenues of $84,025,000 in 1994, $79,697,000 in 1993 and $91,563,000 in 1992. Except for $34,533,000 in 1994, $38,005,000 in 1993 and $30,552,000 in 1992, from other foreign areas, such export revenues were generated from North Sea operations. Manufacturing operations in 1994 included export sales of $34,543,000. At December 31, 1994, 35 drilling rigs, 18 of which were marine rigs, with a carrying value of $213,454,000 were located in the United States and 6 marine drilling rigs having a carrying value of $164,175,000 were located in foreign jurisdictions. Information concerning the Company's operations is summarized by segment as follows (in thousands):
1994 1993 1992 ----------------------------------------------------------------------------------------------- Revenues: Drilling services: Domestic $217,395 $243,993 $143,818 Foreign 28,522 27,029 18,303 Aviation services 95,578 82,174 87,877 Manufacturing sales and services 96,664 ----------------------------------------------------------------------------------------------- Consolidated $438,159 $353,196 $249,998 =============================================================================================== Operating profit (loss): Drilling services: Domestic $ 4,771 $ 22,856 $(36,726) Foreign (4,597) (3,803) (3,688) Aviation services 4,614 2,248 1,882 Manufacturing sales and services 7,667 ----------------------------------------------------------------------------------------------- Consolidated 12,455 21,301 (38,532) Gain on disposals of property, plant and equipment 1,344 1,955 731 Interest and other income 5,073 2,498 2,823 General and administrative (13,862) (13,940) (12,092) Interest expense (27,530) (25,361) (26,254) ----------------------------------------------------------------------------------------------- Income (loss) before income taxes $(22,520) $(13,547) $(73,324) =============================================================================================== Identifiable assets at December 31: Drilling services: Domestic $531,990 $584,583 $491,456 Foreign 40,863 41,687 50,061 Aviation services 148,710 138,993 142,784 Manufacturing sales and services 83,616 ----------------------------------------------------------------------------------------------- Total assets at December 31 $805,179 $765,263 $684,301 ===============================================================================================
Certain other financial information for each of the Company's principal business segments is summarized as follows (in thousands):
1994 1993 1992 ----------------------------------------------------------------------------------------------- Depreciation and amortization: Drilling $38,166 $40,874 $39,719 Aviation 11,009 11,044 11,648 Manufacturing 1,615 Capital expenditures: Drilling 17,033 12,741 31,014 Aviation 14,657 9,248 8,514 Manufacturing 11,687 Maintenance and repairs: Drilling 26,499 22,129 19,515 Aviation 16,138 10,197 13,718 Manufacturing 7,836 ==============================================================================================
11. RELATED PARTY TRANSACTIONS The chairman of the board of one of the Company's drilling customers served as a director of the Company until 1993. Transactions with this customer involved day rates and operating costs which were comparable to those experienced by the Company in connection with third party contracts for similar rigs. Because of the aforementioned relationship, each drilling contract between the Company and the customer was reviewed and ratified by the Board of Directors of the Company during his tenure as a board member. Related revenues were $3,469,000 in 1993 and $5,284,000 in 1992 and trade receivables at December 31, 1993 included $216,000 from this customer. In 1993, a director of the Company was an investment banker with one of the underwriters of the Company's 10,000,000 share common stock offering. That underwriter received $2,876,000 in commissions from the offering. 26 17 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) -------------------------------------------------------------------------------- The following unaudited information for the quarters ended March 31, June 30, September 30 and December 31, 1993 and 1994 includes, in the Company's opinion, all adjustments (which comprise only normal recurring accruals) necessary for a fair presentation of such amounts (in thousands except per share amounts):
First Second Third Fourth Quarter Quarter Quarter Quarter -------------------------------------------------------------------------------- 1993: Revenues $ 73,540 $ 82,093 $106,629 $ 90,934 Operating profit (loss) (4,093) 1,195 16,385 7,814 Net income (loss) (13,509) (8,197) 8,175 272 Earnings (loss) per common share (.18) (.11) .10 .00 -------------------------------------------------------------------------------- 1994: Revenues $100,704 $105,380 $129,219 $102,856 Operating profit (loss) 3,432 3,596 13,859 (8,432) Net income (loss) (5,958) (5,862) 5,646 (16,815) Earnings (loss) per common share (.07) (.07) .07 (.20) ================================================================================
The sum of the per share amounts for the quarters may not equal the per share amounts for the full years since the quarterly and full year per share computations are made independently. COMMON STOCK PRICE RANGE, CASH DIVIDENDS AND STOCK SPLITS -------------------------------------------------------------------------------- The price range below is as reported by the New York Stock Exchange on the Composite Tape. On March 1, 1995 there were approximately 3,800 holders of record.
Quarter 1994 1993 -------------------------------------------------------------------------------- High Low High Low -------------------------------------------------------- First $9.13 $6.88 $10.00 $6.63 Second 8.75 6.63 10.75 8.63 Third 9.25 7.00 10.38 7.63 Fourth 7.88 5.75 10.63 7.50 ================================================================================
The Company did not pay any dividends on its common stock during 1994 and 1993. See Note 5 of the Notes to the Consolidated Financial Statements for restrictions on dividends. Stock splits and stock dividends since the Company became publicly owned in 1967 have been as follows: 2 for 1 stock splits on January 25, 1973, December 16, 1976 and May 13, 1980; 2 for 1 stock splits effected in the form of a stock dividend on February 6, 1978 and January 20, 1981; and a 5% stock dividend on May 21, 1975. On the basis of these splits and dividends, each share acquired prior to January 25, 1973 would be represented by 33.6 shares if still owned at present. 27
EX-21 10 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT The following is a list of subsidiaries of the Registrant: Registrant and Parent: Rowan Companies, Inc. Wholly-Owned Subsidiaries of Registrant: Era Aviation, Inc., a Washington corporation Rowan International, Inc., a Panamanian corporation Rowandrill, Inc., a Texas corporation Rowan Drilling Company, Inc., a Texas corporation Atlantic Maritime Services, Inc., a Texas corporation Rowan Petroleum, Inc., a Texas corporation LeTourneau, Inc., a Texas corporation Note: Certain subsidiaries have been omitted from this listing because such subsidiaries, when considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. EX-23 11 INDEPENDENT AUDITORS' CONSENT 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT Rowan Companies, Inc.: We consent to the incorporation by reference in Post-Effective Amendment No. 4 to Registration Statement No. 2-58700, Amendment No. 1 to Registration Statement No. 33-33755, Registration Statement No. 33-61444, Registration Statement No. 33-51103, Registration Statement No. 33-51105 and Registration Statement No. 33-51109, each on Form S-8, and to the incorporation by reference in Amendment No. 1 to Registration Statement No 33-15721, Amendment No. 2 to Registration Statement No. 33-30057 and Amendment No. 2 to Registration Statement No. 33-61696, each on Form S-3, of our report dated March 3, 1995, incorporated by reference in this Annual Report on Form 10-K of Rowan Companies, Inc., for the year ended December 31, 1994. DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Houston, Texas March 31, 1995 EX-24 12 POWERS OF ATTORNEY 1 EXHIBIT 24 Form 10-K for the Year Ended December 31, 1994 The Exchange Act of 1934 ____________________ Power of Attorney KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints C. R. Palmer or E. E. Thiele, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign to the Company's Form 10-K for the year ended December 31, 1994 and any or all amendments, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. ____________________ Pursuant to the requirement of the Exchange Act of 1934, the Company's Form 10-K for the year ended December 31, 1994 or amendment has been signed below by the following persons in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- ------------------------------- President, Chairman of the (C. R. Palmer) Board and Chief Executive Officer RALPH E. BAILEY Director March 31, 1995 (Ralph E. Bailey) HENRY O. BOSWELL Director March 31, 1995 (Henry O. Boswell) H. E. LENTZ Director March 31, 1995 (H. E. Lentz) WILFRED P. SCHMOE Director March 31, 1995 (Wilfred P. Schmoe) CHARLES P. SIESS, JR. Director March 31, 1995 (Charles P. Siess, Jr.) PETER SIMONIS Director March 31, 1995 (Peter Simonis) C. W. YEARGAIN Director March 31, 1995 (C. W. Yeargain)
EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF ROWAN COMPANIES, INC. FOR THE YEAR ENDED DECEMBER 31, 1994 INCLUDED IN ITS 1994 ANNUAL REPORT TO STOCKHOLDERS AND INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1994 DEC-31-1994 $ 111,070 0 78,317 0 59,386 253,705 1,244,103 737,982 805,179 57,760 248,504 10,717 0 0 431,630 805,179 90,460 438,159 72,717 439,566 0 0 27,530 (22,520) 469 (22,989) 0 0 0 (22,989) (0.27) (0.27)