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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of April, 1999
SANTA FE INTERNATIONAL CORPORATION
(Translation of registrant's name into English)
5420 LBJ Freeway, Suite 1100, Dallas, Texas 75240
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
--- ---
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PROXY STATEMENT
Enclosed herewith as Exhibit 1 is a copy of the Registrant's Proxy
Statement dated April 16, 1999 for the 1999 Annual General Meeting of
Shareholders of Santa Fe International Corporation.
EXHIBITS
1 Proxy Statement dated April 16, 1999.
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SIGNATURES
Pursuant to the requirements 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.
SANTA FE INTERNATIONAL
CORPORATION
(Registrant)
Date: April 20, 1999 By: /s/ Cary A. Moomjian, Jr.
---------------------------------
Cary A. Moomjian, Jr.
Vice President, Secretary and
General Counsel
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EXHIBITS
<TABLE>
<CAPTION>
Exhibit Document Page
- ------- -------- ----
<S> <C> <C>
1 Proxy Statement dated April 20, 1999.
</TABLE>
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EXHIBIT 1
[LOGO]
SANTA FE INTERNATIONAL CORPORATION
Two Lincoln Centre
5420 LBJ Freeway, Suite 1100
Dallas, Texas 75240-2648 U.S.A.
Telephone: (972) 701-7300
Dear Shareholder:
You are cordially invited to attend the Annual General Meeting of
Shareholders of Santa Fe International Corporation on Tuesday, June 8, 1999, at
2:00 p.m., Central Daylight Time. The meeting will be held at Four Seasons
Resort and Club, Dallas at Las Colinas, 4150 N. MacArthur Blvd., Irving, Texas
75038 U.S.A. Your Board of Directors and management look forward to greeting
those shareholders able to attend in person.
At the meeting, you will be asked to consider and elect three Class II
Directors to serve until the Annual General Meeting of Shareholders to be held
in 2002. Your Board of Directors has unanimously nominated these persons for
election as Directors. You also are being asked to ratify the appointment of
Ernst & Young LLP as the Company's independent auditors for the Company's fiscal
year ending December 31, 1999. Information about the business to be conducted at
the meeting is set forth in the accompanying Proxy Statement, which you are
urged to read carefully. During the meeting, management will review the business
affairs and progress of the Company during the fiscal year ended December 31,
1998. Officers of the Company will be present to respond to questions from
shareholders.
The vote of every shareholder is important. The Board of Directors
appreciates and encourages shareholder participation in the Company's affairs.
Whether or not you plan to attend the meeting, please sign, date and return the
enclosed proxy promptly in the envelope provided or otherwise deliver same to
the address therein. Your shares will then be represented at the meeting. If you
attend the meeting, you may, at your discretion, withdraw the proxy and vote in
person.
On behalf of the Board of Directors, I thank you for your anticipated
cooperation and continued support.
Sincerely,
/s/ GORDON M. ANDERSON
Gordon M. Anderson
April 16, 1999 Chairman of the Board
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SANTA FE INTERNATIONAL CORPORATION
Two Lincoln Centre
5420 LBJ Freeway, Suite 1100
Dallas, Texas 75240-2648 U.S.A.
Telephone: (972) 701-7300
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 8, 1999
The Annual General Meeting of Shareholders of Santa Fe International
Corporation, a company incorporated under the laws of the Cayman Islands (the
"Company"), will be held at Four Seasons Resort and Club, Dallas at Las Colinas,
4150 N. MacArthur Blvd., Irving, Texas 75038 U.S.A., on June 8, 1999, at 2:00
p.m., Central Daylight Time, for the following purposes:
(1) To elect three Class II Directors to hold office until the
Annual General Meeting of Shareholders to be held in 2002 or until
their successors have been duly qualified and elected;
(2) To consider and act upon a proposal to ratify the
appointment of Ernst & Young LLP as the independent auditors of the
Company to audit the accounts of the Company for the fiscal year ending
December 31, 1999; and
(3) To transact such other business as may properly come
before the meeting or any adjournments thereof.
Only holders of the Company's ordinary shares, par value $0.01 per
share, of record at the close of business on April 12, 1999 are entitled to
notice of, and to vote at, the meeting or any adjournment or adjournments
thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED
TO FILL OUT, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. PROXIES
FORWARDED BY OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY
THEM. THE PROMPT RETURN OF PROXIES WILL SAVE THE EXPENSE INVOLVED IN FURTHER
COMMUNICATION.
By Order of the Board of Directors,
/s/ CARY A. MOOMJIAN, JR.
Cary A. Moomjian, Jr.
April 16, 1999 Vice President, General Counsel and Secretary
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SANTA FE INTERNATIONAL CORPORATION
Two Lincoln Centre
5420 LBJ Freeway, Suite 1100
Dallas, Texas 75240-2648 U.S.A.
Telephone: (972) 701-7300
PROXY STATEMENT
FOR
ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 8, 1999
This Proxy Statement is furnished to holders of the ordinary shares,
par value $0.01 per share (the "Ordinary Shares"), in connection with the
solicitation of proxies by the Board of Directors of Santa Fe International
Corporation, a company incorporated under the laws of the Cayman Islands (herein
referred to individually and, where the context so requires, collectively with
its subsidiaries and predecessors, as the "Company"), with a registered office
at P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman,
Cayman Islands, BWI, for use at the Annual General Meeting of Shareholders of
the Company to be held at Four Seasons Resort and Club, Dallas at Las Colinas,
4150 N. MacArthur Blvd., Irving, Texas 75038 U.S.A., on June 8, 1999, at 2:00
p.m., Central Daylight Time, and at any and all postponements or adjournments
thereof (the "Annual Meeting" or "Meeting") for the purposes of:
(1) electing three Class II Directors to hold office until the
Annual General Meeting of Shareholders to be held in 2002 or until
their successors have been duly elected and qualified;
(2) considering and acting upon a proposal to ratify the
appointment of Ernst & Young LLP as the independent auditors of the
Company to audit the accounts of the Company for the fiscal year ending
December 31, 1999; and
(3) transacting such other business as may properly come
before the meeting or any adjournments or postponements thereof.
The approximate date on which this Proxy Statement and accompanying proxy card
are first being sent or given to Shareholders is April 21, 1999.
Ordinary Shares represented by each proxy, if properly executed and
returned to the Company prior to the Meeting, will be voted as directed, but if
not otherwise specified, will be voted for the election of the three nominees
for Class II Director and to ratify the appointment of Ernst & Young LLP as
independent auditors, all as recommended by the Board of Directors. Pursuant to
the Company's Amended and Restated Articles of Association (the "Articles of
Association" or "Articles") and Cayman Islands law, holders of Ordinary Shares
may appoint their own proxy, who need not be a holder of Ordinary Shares, by
written instrument in any usual or common form.
If the Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Annual Meeting all proxies will be voted in the
same manner as such proxies would have been voted at the
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original convening of the Annual Meeting (except for proxies which have
theretofore effectively been revoked or withdrawn), notwithstanding that they
may have been effectively voted on the same or any other matter at a previous
meeting.
The Board of Directors knows of no other business to be presented at
the Annual Meeting. If any other business is properly presented, the persons
named in the enclosed proxy have authority to vote on such matters in accordance
with such persons' discretion. A shareholder executing the proxy may revoke it
at any time before it is voted by giving written notice to the Secretary of the
Company.
The solicitation of proxies in the enclosed form is made on behalf of
the Company's Board of Directors. The entire cost of soliciting these proxies,
including the costs of preparing, printing and mailing this Proxy Statement and
accompanying materials to shareholders, will be borne by the Company. In
addition to use of the mails, proxies may be solicited personally or by
telephone or otherwise by officers, Directors and employees of the Company, who
will receive no additional compensation for such activities. Arrangements will
also be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of shares
held of record by such brokerage houses, custodians, nominees and fiduciaries.
Such parties will be reimbursed for their reasonable expenses incurred in
forwarding the proxy materials.
VOTE REQUIRED FOR APPROVAL;
SHARES ENTITLED TO VOTE; RECORD DATE
The affirmative vote of the holders of a majority of the outstanding
Ordinary Shares present or represented by proxy and entitled to vote at the
Annual Meeting at which a quorum is present is required to elect each of the
three Class II Directors nominated for reelection to the Company's Board of
Directors and to ratify the appointment of Ernst & Young LLP as auditors of the
Company for the fiscal year ending December 31, 1999. The Company's Directors
and executive officers, and their affiliates (including the Company's principal
shareholder, SFIC Holdings (Cayman), Inc.), had, as of February 28, 1999, a
beneficial interest in an aggregate of 74,682,840 Ordinary Shares, representing
approximately 65% of the Ordinary Shares outstanding at the close of business on
April 12, 1999 (the "Record Date") and entitled to vote on all proposals to be
presented at the Annual Meeting. The presence at the Annual Meeting, whether in
person or by proxy, of the holders of at least a majority of the outstanding
Ordinary Shares entitled to vote thereat constitutes a quorum for the
transaction of business.
At the Record Date, there were outstanding 114,953,498 Ordinary Shares.
Only holders of record of Ordinary Shares at the Record Date will be entitled to
notice of, and to vote at, the Annual Meeting. Each Ordinary Share is entitled
to one vote for each Director to be elected and upon all other matters to be
brought to a vote by the shareholders at the forthcoming Annual Meeting.
In the election of Directors, votes may be cast in favor of or withheld
with respect to each nominee. Votes that are withheld and broker non-votes with
respect to the election of Directors will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all proposals, except for
the election of Directors. Abstentions and broker non-votes will be counted as
present for purposes of determining the existence of a quorum. Abstentions on
the proposal to ratify the appointment of Ernst & Young LLP will have
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the effect of a negative vote because approval requires the affirmative vote of
the majority of the Ordinary Shares present or represented at the Annual
Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table is furnished as of February 28, 1999 to indicate
beneficial ownership of the Company's Ordinary Shares by (i) each person who is
known by the Company to be a beneficial owner of more than 5% of the Company's
Ordinary Shares and (ii) all executive officers and Directors of the Company as
a group. The information in the following table was provided by such persons.
<TABLE>
<CAPTION>
TITLE OF CLASS IDENTIFY OF PERSON OR GROUP AMOUNT OWNED PERCENT OF CLASS
- ------------------------- ------------------------------------------- ------------------------- -----------------------
<S> <C> <C> <C>
Ordinary Shares SFIC Holdings (Cayman), Inc.(1) 74,500,000 64.9%
Ordinary Shares Directors and Executive Officers as a group 182,840(2) 0.2%
(17 persons)
</TABLE>
- -------------------
(1) SFIC Holdings (Cayman), Inc. ("Holdings") is a wholly-owned subsidiary of
Kuwait Petroleum Corporation ("KPC"), which is wholly-owned by the
Government of Kuwait.
(2) Does not include 67,100 unvested restricted shares or 788,025 options that
are not exercisable within 60 days. Includes 13,945 shares held in the
Company's Investment Savings and Profit Sharing Plan and 250 shares held
by a spouse in a custodial account for the benefit of a minor child. Does
not include 800 shares held of record by the spouse of Mr. Ferdinand A.
Berger, a Director of the Company. Mr. Berger disclaims beneficial
ownership of such 800 shares. Does not include 74,500,000 shares over
which Mr. Nader Hamad Sultan has the authority to cast votes on behalf of
Holdings at the Company's 1999 Annual General Meeting of Shareholders. Mr.
Sultan disclaims beneficial ownership of such 74,500,000 shares.
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PROPOSALS FOR CONSIDERATION AND VOTING
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors of the Company currently has nine members. The
Company's Articles of Association divide the Board of Directors into three
classes having staggered terms of three years each, with Classes II, III and I
having initial terms expiring at the Annual General Meeting of Shareholders in
1999, 2000 and 2001, respectively. The Articles also require the number of
Directors to be not less than nine nor more than 15 and provide that the Board
is to determine, from time to time, the number of Directors to be on the Board.
Pursuant to the Articles, three Class II Directors are to be elected at
the Annual Meeting. Unless otherwise instructed, the proxy holders intend to
vote the proxies received by them FOR the three nominees below.
Ferdinand A. Berger
Stephen J. Solarz
Nader H. Sultan
Set forth below in "Directors and Executive Officers" is biographical
information about each of the Company's nominees for Directors.
Each nominee has consented to being named in this Proxy Statement and
to serve if elected. If any nominee becomes unavailable for any reason or if a
vacancy should occur before the election, the shares represented by the proxies
will be voted for such person, if any, as may be designated by the Board of
Directors. However, management of the Company has no reason to believe that any
nominee will be unavailable or that any vacancy on the Board of Directors will
occur. The three nominees will serve until the Annual General Meeting of
Shareholders to be held in 2002 and until their successors are elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES FOR DIRECTOR NAMED ABOVE.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee,
has appointed Ernst & Young LLP ("E&Y") as the independent auditors of the
Company for the fiscal year ending December 31, 1999. Shareholders are being
asked to ratify this appointment. The Company has been informed that neither E&Y
nor any of its partners have any direct financial interest or any material
indirect financial interest in the Company nor have had any connection during
the past three years with the Company in the capacity of promoter, underwriter,
voting trustee, Director, officer or employee.
Representatives of E&Y are expected to be present at the Meeting with
the opportunity to make a statement if they so desire and to be available to
respond to appropriate questions.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1999.
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DIRECTORS AND EXECUTIVE OFFICERS
The following is a list of the persons who will constitute the
Company's Board of Directors following the Annual General Meeting (assuming
re-election of the nominees named above) and the persons who were serving as
executive officers of the Company as of February 28, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- --------------------------------------------------
<S> <C> <C>
Gordon M. Anderson................ 66 Chairman of the Board and Class I Director
C. Stedman Garber, Jr............. 55 President, Chief Executive Officer and Class III
Director
Richard N. Haass.................. 47 Class I Director
Khaled R. Al-Haroon............... 49 Class I Director
Ferdinand Anton Berger............ 60 Class II Director
Stephen J. Solarz................. 58 Class II Director
Nader Hamad Sultan................ 50 Class II Director
Sami Fahed Al-Rushaid............. 44 Class III Director
Robert E. Wycoff.................. 68 Class III Director
Donald G. Barber.................. 64 Senior Vice President and Chief Financial Officer
Gordon W. McCullough.............. 64 Senior Vice President, Drilling Operations
Roger B. Hunt..................... 49 Senior Vice President, Commercial Manager
Ali Awad.......................... 58 Vice President and Regional Manager
James A. Blue..................... 53 Vice President and Regional Manager
Seals M. McCarty.................. 52 Vice President and Controller
Cary A. Moomjian, Jr.............. 51 Vice President, General Counsel and Secretary
Tom L. Seeliger................... 55 Vice President and Area Manager
</TABLE>
The officers of the Company generally are elected each year immediately
following the Company's Annual General Meeting of Shareholders to serve a term
of one year or until their successors are duly elected and qualified.
Set forth below is biographical information about each of the Company's
Directors and executive officers.
Gordon M. Anderson has served as a Director of the Company since 1969. Mr.
Anderson was appointed President and Chief Executive Officer in 1991 and became
Chairman of the Board of Directors in 1993. Mr. Anderson has worked with the
Company since June 1954. Following several international assignments, he was
appointed President of Santa Fe Drilling Company in 1972. Mr. Anderson retired
as Chief Executive Officer in December 1997 and currently serves as a
non-employee Director and Chairman of the Board. Mr. Anderson also serves as a
Trustee of the American University in Cairo.
C. Stedman Garber, Jr. has served as a Director of the Company since 1989.
Mr. Garber was employed by Getty Oil Company between 1977 and 1984. Mr. Garber
joined the Company in 1984 as Vice President of Planning and Acquisition and in
1989 was appointed President of Santa Fe Minerals, Inc., a former subsidiary of
the Company. Mr. Garber was named Executive Vice President and Chief Operating
Officer of
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the Company in 1991, was appointed President and Chief Operating Officer in
December 1995 and was appointed Chief Executive Officer effective January 1,
1998. Mr. Garber also serves as a Director of the American Petroleum Institute.
Richard N. Haass has served as a Director of the Company since November
1998. Dr. Haass is Director of Foreign Policy Studies at the Brookings
Institution. A widely quoted expert on contemporary American foreign policy, Dr.
Haass also consults for NBC News, is a frequent contributor to foreign affairs
journals and major newspapers and is an author of several books. Dr. Haass has
extensive government experience and served as Special Assistant to President
George Bush and Senior Director on the staff of the National Security Council.
He was awarded the Presidential Citizens Medal for his contribution to the
development of U.S. policy during Operations Desert Shield and Desert Storm, has
held various posts in the Departments of State and Defense, and was a
legislative aide in the U.S. Senate.
Khaled R. Al-Haroon has served as a Director of the Company since November
1998. Mr. Al-Haroon serves on the Board of KPC and as Managing Director of
International Operations. He also serves as the Chairman-Oils Sector Loss
Assessment Committee and is the Deputy Chairman of KPC's Higher Tender
Committee. His career began in 1974 with the International Marketing Group of
the Kuwait National Petroleum Company. Since 1980, Mr. Al-Haroon has held
various management positions at KPC. Mr. Al-Haroon also serves as a Director of
Holdings.
Ferdinand A. Berger has served as a Director of the Company since September
1997. Mr. Berger retired from the Shell Group of Companies at the end of 1996,
having served in various management positions in South America, the Middle East
and Europe since 1965. He was appointed Senior Vice President of Shell
International Trading Company in 1987 and served as a Director of Shell
International Petroleum Company Limited, with responsibility for overall Shell
Group activities in the Middle East, Africa and South Asia from 1992 until his
retirement. He is also a Director of Xpronet Inc., a privately owned oil and gas
exploration and production company.
Stephen J. Solarz has served as a Director of the Company since November
1998. Mr. Solarz is President of Solarz Associates, an international consulting
firm. He also is a Director of the George Washington University Foreign Policy
Forum, Vice Chairman of the International Crisis Group, and a Senior Counselor
at APCO Associates. Mr. Solarz serves on the Board of several corporations
including Samsonite, IRI International and the First Philippine Fund, and is a
Director of the National Endowment for Democracy, the International Rescue
Committee, the National Democratic Institute and the Balkan Action Council
Steering Committee. Mr. Solarz has served in public office for twenty-four
years, both in the New York Assembly and in the U.S. House of Representatives.
As a Congressman, Mr. Solarz served on various committees, including the House
Foreign Affairs Committee where he chaired the Subcommittee on Africa and the
Subcommittee on Asian and Pacific Affairs. He was appointed by President Clinton
as Chairman of the Board of the Central Asian-American Enterprise Fund, served
as President Clinton's special envoy to Cambodia and co-chaired the National
Democratic Institute's election observer delegation.
Nader Hamad Sultan has served as a Director of the Company since January
1995. Since 1993, he has served as Deputy Chairman and Managing Director,
Planning and International Operations, of KPC and was appointed Chief Executive
Officer of KPC in 1998. Mr. Sultan also serves as a Director of KPC and
Holdings.
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Sami Fahed Al-Rushaid has served as a Director of the Company since
September 1997. Mr. Al-Rushaid joined the Kuwait National Petroleum Company
("KNPC"), a subsidiary of KPC, in 1978. He held various positions in the KNPC
Corporate Planning Department until 1995, when he assumed his current position
as KNPC's Executive Assistant Managing Director of Planning and Finance. Mr.
Al-Rushaid also serves as a Director of Holdings.
Robert E. Wycoff has served as a Director of the Company since September
1997. Mr. Wycoff retired from the Atlantic Richfield Company ("ARCO") in 1993,
having served with ARCO since 1953. After holding various engineering and
management positions, he was named Vice President and Resident Manager of ARCO's
Alaska Region in 1973. Mr. Wycoff served as a Director, President and Chief
Operations Officer of ARCO from 1986 until his retirement. He is also a Director
of MagneTek, Inc., a publicly traded company engaged in electronic equipment and
controls.
Donald G. Barber joined the Company in 1985 as Senior Vice President of
Santa Fe Minerals, Inc., a former subsidiary of the Company, and has served as
Senior Vice President and Chief Financial Officer of the Company since December
1986. Mr. Barber previously served as Chief Financial Officer of Aminoil, Inc.
and in senior financial positions with Exxon U.S.A.
Gordon W. McCullough joined the Company in 1962. He has worked in
progressively more senior management positions, primarily internationally,
including assignments in the United Kingdom, Holland, Norway, Nigeria, Brazil,
Libya and Angola. In 1982, Mr. McCullough was appointed Managing Director of the
Company's North Sea operations. In January 1994, Mr. McCullough was named the
Company's Senior Vice President, Drilling Operations.
Roger B. Hunt joined the Company in 1970. During the period 1977 through
1982, he was assigned to Venezuela as Assistant Zone Manager. In 1983, he was
named Vice President and Manager of International Sales and in 1988 was assigned
regional operations responsibilities as Vice President and Regional Manager for
Asia, Australia, Venezuela, Azerbaijan, West Africa and the Gulf of Mexico. He
assumed his current responsibilities as Senior Vice President, Commercial
Manager, during September 1997.
Ali Awad joined the Company in 1974 following a distinguished career with
major oil companies operating locally in Egypt. He has held several managerial
positions in Egypt, including Zone Manager from 1979 to 1993 and Vice President
and Area Manager responsible for Egypt and the Mediterranean area until 1999. In
March 1999, he was promoted to his current position as Vice President and
Regional Manager with responsibility for the Middle East and North Africa.
James A. Blue joined the Company in 1965. He initially served in various
assignments in England, Egypt, Libya, Scotland and Venezuela. He was named Vice
President and Regional Operations Manager in 1989. In 1997, he assumed his
current position of Vice President and Regional Manager with responsibility for
operations in Azerbaijan, the Gulf of Mexico, Venezuela and West Africa.
Seals M. McCarty joined the Company in 1985 concurrently with the purchase
of Keydril Company from Gulf/Chevron. He had served as Vice President of Finance
for Keydril since 1982. Mr. McCarty has held various financial positions with
the Company including his present position as Vice President and Controller.
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Cary A. Moomjian, Jr. joined the Company in 1976. After two years as
Corporate Marine Counsel, Mr. Moomjian served as Santa Fe Drilling Company's
Senior Counsel and then Vice President, General Counsel. In 1983, Mr. Moomjian
was named Vice President, Contracts for Santa Fe Drilling Company. In January
1994, Mr. Moomjian was named Vice President, General Counsel and Secretary.
Tom L. Seeliger joined the Company in 1965. He has worked in progressively
more senior management positions, primarily internationally, including
assignments in Nigeria, the North Sea, Libya, Argentina, Trinidad, Venezuela and
London. In 1993, Mr. Seeliger assumed his current position as Vice President and
Area Manager for North Sea operations.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
BOARD OF DIRECTOR MEETINGS
During the year ended December 31, 1998, the Board of Directors met
four times. The Board of Directors also acted two times by unanimous written
consent and conducted its statutory meeting under Cayman Islands law by proxy.
All Directors (other than Mr. Sultan) attended at least 75% of the aggregate of
the meetings of the Board of Directors of the Company and of the committees of
the Board of Directors on which they served.
EXECUTIVE COMMITTEE
In September 1997, the Board of Directors established an Executive
Committee. The Executive Committee was granted all powers and authorities of the
Board of Directors in the management of the business and affairs of the Company,
except as may be limited by applicable law, the Intercompany Agreement (as
defined below) or the Company's Memorandum of Association and Articles of
Association. Further, the Executive Committee may not declare a dividend or
adopt an agreement of merger or consolidation and is not generally authorized to
approve transactions in excess of $10 million per transaction. The Executive
Committee did not meet during the year ended December 31, 1998. The members of
the Executive Committee are Messrs. Garber, Al-Haroon, Sultan and Wycoff. Mr.
Garber serves as Chairman of the Executive Committee.
AUDIT COMMITTEE
Pursuant to the Company's Articles of Association, the Audit Committee
reviews and reports to the Board of Directors on the scope and results of audits
by the Company's auditing firm and internal auditing staff. The Audit Committee
periodically recommends a firm of certified public accountants to serve as
auditors for the Company and reviews such information as is necessary to ensure
the independence and integrity of the auditors. The Audit Committee is also
responsible for overseeing the Company's Business Conduct Policy. During the
year ended December 31, 1998, there were two meetings of the Audit Committee.
The members of the Audit Committee are Messrs. Berger, Al-Haroon, Al-Rushaid and
Solarz. Mr. Berger serves as Chairman of the Audit Committee.
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COMPENSATION COMMITTEE
Pursuant to the Company's Articles of Association, the Compensation
Committee reviews, approves and oversees the Company's compensation and benefit
policies and programs. For the year ended December 31, 1998, there were six
meetings of the Compensation Committee. The members of the Compensation
Committee are Messrs. Berger, Haass, Sultan and Wycoff. Mr. Wycoff serves as
Chairman of the Compensation Committee.
NOMINATING AND GOVERNANCE COMMITTEE (FORMERLY NOMINATING COMMITTEE)
In September 1997, the Board of Directors established a Nominating
Committee. During March 1999, the Board changed the name of the Committee to the
Nominating and Governance Committee. The Committee has been designated to make
recommendations to the Board of Directors concerning the composition and
compensation of the Board of Directors, the nominees to fill vacancies or new
positions and nominees of the Board of Directors for election by the Company's
shareholders at the Annual General Meeting. The Committee's charter is being
revised to include its new responsibilities in the area of corporate governance.
The Nominating Committee met one time during the year ended December 31, 1998.
The Nominating Committee also acted one time by unanimous written consent during
said year. The members of the Nominating and Governance Committee are Messrs.
Anderson, Haass, Al-Rushaid and Solarz. Mr. Anderson serves as Chairman of the
Nominating and Governance Committee.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS AND OFFICERS
For the calendar year ended December 31, 1998, the aggregate
remuneration paid by the Company (which includes salary and other cash payments
under the Company's benefit plans and policies) to all Directors and executive
officers of the Company as a group (17 persons) for services in all capacities
was $9,811,481.
The Company and Gordon M. Anderson, a Director of the Company, entered
into a Consulting Agreement dated December 10, 1997 pursuant to which Mr.
Anderson receives certain compensation. See "Certain Relationships and Related
Transactions -- Consulting Agreement".
DIRECTOR FEES AND STOCK OPTIONS
Effective July 1, 1997, the Board adopted a policy whereby each non-employee
Director is paid an annual retainer fee of $20,000 plus meeting fees of $2,000
for each Board and committee meeting (other than telephonic meetings) attended
by that Director. Each non-employee Director also is paid a meeting fee of $500
for any Board or committee telephonic meeting of one hour or longer and an
additional $1,000 for each Board meeting such Director attends outside his or
her country of residence. Each non-employee Director who serves as a committee
chairman receives an additional meeting fee of $1,000. The Company also
reimburses its Directors for travel, lodging and related expenses they may incur
attending Board and committee meetings. The Company has also adopted a stock
option plan for non-employee Directors. See "-- Long Term Incentive Plans
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- -- 1997 Non-Employee Director Stock Option Plan." Effective January 1, 1999,
non-employee Directors are permitted to defer receipt of cash compensation for
Director service pursuant to a Deferred Compensation Plan adopted by the Company
in December 1998.
INVESTMENT SAVINGS AND PROFIT SHARING (401(k)) PLAN
The Company maintains an Investment Savings and Profit Sharing Plan, a
defined contribution 401(k) plan that allows dollar payroll employees to make
both pre-tax and after-tax employee contributions. The Company matches these
employee contributions up to a maximum of 5% of a participant's base salary
subject to the limitations of eligible salary. Employees are vested in all
contributions made. Additionally, although it has not done so since 1984 and
does not currently expect to do so in the future, the Company has the option to
make additional employer contributions any year out of profits.
ANNUAL INCENTIVE COMPENSATION PLAN
The Company also maintains an Annual Incentive Compensation Plan ("AIP").
The AIP provides for payment of additional compensation to participating
employees, including executive officers, based on individual contributions and
overall performance of the Company and its key operating business units during
the fiscal year. The AIP is administered by the Compensation Committee.
Employees of the Company and its subsidiaries eligible for awards under the AIP
are executive officers, officers and other key management personnel of the
Company and its subsidiaries, whose performance, in the judgment of the
Compensation Committee, can have a significant effect on the success of the
Company. During the term of the AIP, an aggregate of 286,250 Ordinary Shares
will be available for awards granted wholly or partly in Ordinary Shares under
the AIP.
In general, the Compensation Committee will establish a target incentive
award for each participant based on performance measures (and performance scales
for the measures) and individual objectives. The maximum target incentive award
shall not exceed 100% of the participant's base salary in effect at the
beginning of the plan year. The current performance measures are (i) cash flow
from operations and (ii) return on average capital employed as compared to
certain peer group companies set forth in the AIP. In general, except for
"covered employees," as defined in Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code") (relating to deduction limits for compensation
over $1 million), the Compensation Committee has discretion to vary these
measures and the relative weight to assign to the various objectives. With
respect to covered employees, the individual objectives must be capable of
determination by a third party and all of the objectives must be established
during the first 90 days of the plan year.
In the event of a Change in Control (as defined below), (i) if the various
objectives have not yet been determined during the plan year, then the
objectives and participants shall generally be based on the same rules as set
forth in the preceding plan year and (ii) in general, participants are eligible
for full unprorated target incentives for that year.
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PENSION PLANS
The Company maintains a tax-qualified pension plan for employees of the
Company and participating subsidiaries who are residing in or are citizens of
the United States and who have completed one year of service, and a "mirror"
non-qualified pension plan for selected non-U.S. management and other employees
of the Company and participating subsidiaries which provides substantially
similar benefits (hereafter referred to collectively as the "Pension Plans"). In
addition, the Company maintains two non-qualified pension plans that provide
certain additional pension benefits.
The Pension Plans provide for monthly retirement benefits upon normal
retirement at age 62 based on the number of credited years of service and the
average of the highest 60 months of salary covered by the Pension Plans. The
Pension Plans permit retirement as early as age 55 with reduced benefits. The
Equity Restoration Plan restores to Pension Plan participants any benefits
otherwise lost as a result of the benefit limitations contained in Section 415
of the Code and limitations contained in Section 401(a)(17) of the Code on the
amount of compensation includable in determining benefits provided by
tax-qualified trusts. The Company's Supplemental Executive Retirement Plan
("SERP") provides additional benefits for a select group of management employees
as a means to attract and retain employees of exceptional ability who are
critical to the Company's success.
For employees who participate only in the Pension Plans and the Company's
Equity Restoration Plan, the annual retirement income benefit is equal to 1.525%
of the participant's average annual base salary in the highest 60 consecutive
months during the final 10 years of service multiplied by years of credited
service, plus 0.475% of this same base salary amount less the participant's
Social Security Covered Compensation (as defined), multiplied by years of
credited service not exceeding 35 years. For employees who also participate in
the SERP, the benefit so calculated will not be less than 60% of the
participant's average annual salary and bonus in the highest consecutive 36
months during the final five years of service, reduced ratably for service under
15 years.
LONG TERM INCENTIVE PLANS
Performance Unit Plan
On June 28, 1995, the Company adopted the Santa Fe International Corporation
Performance Unit Plan ("Performance Unit Plan") to provide incentive via
performance share units to foster and promote the long-term financial success of
the Company and materially increase the value of the equity interests of the
shareholder.
Each unit awarded under the Performance Unit Plan represents the right to
receive an amount in cash on the date of payout, the amount of which depends
upon the Company's targeted three-year total cash flow from operations and a
return on fixed assets (three-year average of the annual cash flow from
operations divided by fixed assets) compared to a comparative group of peer
companies. The minimum (threshold) is $20 per unit, which is payable if the
Company's cash flow from operations equals 80% of targeted cash flow from
operations and the Company's return on fixed assets equals the 40th percentile
of its peer companies. If the results are less than threshold for any of the two
performance criteria, no awards are earned. The target amount of $100 per unit
is payable if the Company meets targeted total cash flow from operations and
return on fixed assets equals the 60th percentile of its peer companies. The
maximum amount of $300 per unit is payable if the Company's
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cash flow from operations equals or exceeds 150% of targeted cash flow from
operations and return on fixed assets equals or exceeds the 90th percentile of
peer companies. As of December 31, 1998, there were 14 participants in the
Performance Unit Plan.
The last awards under the Performance Unit Plan were granted in December
1996. No further awards will be made under the Performance Unit Plan. The
Performance Unit Plan will remain in existence until the last performance cycle
has elapsed and payouts, if any, have been made to participants. It is expected
that the Performance Unit Plan will terminate shortly after the results have
been finalized for the third plan year ending June 30, 1999. In the event of a
Change in Control (as defined below) the performance share units granted would
become fully vested.
1997 Long Term Incentive Plan
The Company has adopted the 1997 Long Term Incentive Plan (the "LTIP"),
which is designed to retain key executives and other selected employees by
rewarding them for making major contributions to the success of the Company and
to provide participants with a proprietary interest in the growth and
performance of the Company.
Employees of the Company eligible for awards under the LTIP are executive
officers, other officers and key management personnel selected by the
Compensation Committee (including employees who are Directors), and whose
performance, in the judgment of the Compensation Committee, can have a
significant effect on the success of the Company. As of December 31, 1998, there
were 427 persons who participated in the LTIP. Awards under the LTIP may consist
of the grant of stock options, share appreciation rights, restricted and/or
performance-based share awards and/or restricted and/or performance-based cash
awards, granted singly, in combination or in tandem. The exercise price for
stock options shall not be less than 85% of the fair market value of the stock
on the date of the option grant (100% in the case of incentive stock options).
The Compensation Committee can also award supplemental payments up to the amount
necessary to pay the federal income tax payable with respect to the exercise of
non-qualified stock options, share appreciation rights, restricted shares and
performance units. If approved by the Compensation Committee, the Company may
also make loans to participants to purchase shares pursuant to the exercise of
an award. During the term of the LTIP, an aggregate of 5,725,000 Ordinary Shares
will be available for awards granted wholly or partly in Ordinary Shares under
the LTIP. No participant may receive during a fiscal year incentive awards
covering an aggregate of more than 150,000 Ordinary Shares.
The Compensation Committee is responsible for administration and
interpretation of the LTIP. When a participant's employment with the Company is
terminated, any unexercised, deferred or unpaid awards will be treated as
provided in the specific agreement evidencing the award. If a participant
terminates for "good reason" (as defined in the LTIP) within two years after a
Change in Control (as defined below), all outstanding stock options shall become
vested and immediately exercisable and will remain exercisable until the earlier
of the expiration of their term or the first anniversary of the termination of
employment, all shares of restricted stock will immediately cease to be
forfeitable and all conditions relating to realization of any other stock-based
or non-stock award will immediately terminate. In addition, upon a Change in
Control (as defined below), the Company will have the right to cash out all
incentive awards (and all non-vested awards will vest) based on their fair
market value; for this purpose, their market value will be the average fair
market value per share on each of the five trading days immediately following a
Change in Control or the highest price per share, if any,
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offered in connection with a Change in Control, whichever is higher. This cash
out is automatic if the stock of the surviving entity in a Change in Control is
not publicly traded.
As of February 28, 1999, an aggregate of 810,325 options to purchase the
Company's Ordinary Shares (net of canceled or expired options) had been granted
under the LTIP to all Directors and executive officers as a group (17 persons).
Such options were granted at exercise prices ranging from $12.25 to $45.00 per
Ordinary Share and expire ten years from date of grant or earlier. In addition,
the Company has granted restricted share awards for an aggregate of 107,600
Ordinary Shares to all Directors and executive officers as a group (17 persons).
1997 Non-Employee Director Stock Option Plan
The 1997 Non-Employee Director Stock Option Plan (the "Director Plan") has
been adopted by the Company. The Director Plan is designed to attract and retain
the services of experienced and knowledgeable non-employee Directors and to
provide non-employee Directors with a proprietary interest in the growth and
performance of the Company. Awards under the Director Plan consist of a grant of
stock options. The purchase price for the shares as to which the option is
exercised will be payable in full upon exercise, in cash or, if permitted by the
Compensation Committee, by tender of Ordinary Shares, valued at "fair market
value." During the term of the Director Plan, an aggregate of 286,250 Ordinary
Shares will be available for awards granted wholly or partly in Ordinary Shares.
No option will be granted under the Director Plan after June 2007. The
Compensation Committee is responsible for administration and interpretation of
the Director Plan.
As of February 28, 1999, an aggregate of 58,000 options to purchase the
Company's Ordinary Shares (net of canceled or expired options) had been granted
under the Director Plan to eight non-employee Directors who participated in the
Director Plan. Such options were granted at exercise prices ranging from $12.25
to $45.50 per Ordinary Share. Any new non-employee Director will be granted a
one-time award of a right to purchase 10,000 Ordinary Shares (increased from
4,000 by amendment of the Director Plan in March 1999) upon their election to
the Board at the fair market stock price/value on the date of their election.
Each non-employee Director who continues in office immediately following the
Annual General Shareholders Meeting in any year (commencing in 1998) will
automatically be granted an option to acquire 5,000 shares of Ordinary Shares
(increased from 2,000 by amendment of the Director Plan in March 1999). The
Board may increase the number of options granted, provided that a non-employee
Director cannot receive more than 22,000 options (increased from 10,000 by
amendment of the Director Plan in December 1998) in any year. The price of
shares that may be purchased upon exercise of an option is the fair market value
of the Ordinary Shares on the date of the grant. Options granted pursuant to the
Director Plan are exercisable in installments of 33 1/3% upon each anniversary
of the date of grant. The term of each option is for a period not exceeding 10
years from the date of grant.
In the event of a Change in Control of the Company (as defined below), all
outstanding stock options will become vested and immediately exercisable and
will remain exercisable until the earlier of the expiration of their term or the
first anniversary of the Change in Control. In addition, the Company may cash
out options upon a Change in Control; these provisions are substantially the
same as set forth in the LTIP.
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1997 Employee Share Purchase Plan
The Company has adopted the 1997 Employee Share Purchase Plan (the "Share
Purchase Plan"), which is designed to furnish eligible employees of the Company
and designated subsidiaries of the Company an incentive to advance the best
interests of the Company by providing a formal program whereby they may
voluntarily purchase Ordinary Shares of the Company at a favorable price and
upon favorable terms. Generally, all covered employees of a participating
company who are scheduled to work an average of at least 20 hours per week are
eligible to participate in the Plan.
Once a year, participants in the Share Purchase Plan are granted options to
purchase Ordinary Shares with a fair market value equal to the lesser of 10% of
the participant's eligible compensation (as defined in the Share Purchase Plan)
and the amount specified in Section 423(b) of the Code (currently $25,000). The
exercise price of the options is 85% of the fair market value of the Ordinary
Shares on the date of grant or the date of exercise, whichever is less. Options
granted under the Share Purchase Plan are exercisable on the date one year after
the date of grant. Generally speaking, participants pay option exercise prices
through payroll deductions. An aggregate of 572,500 Ordinary Shares are
available for grants of options under the Share Purchase Plan. The Share
Purchase Plan, which became effective January 1, 1998, is administered by the
Compensation Committee.
1997 Employee Severance Protection Plan
The Company maintains the 1997 Employee Severance Protection Plan (the
"Severance Protection Plan") to retain the services of its employees in the
event of an unsolicited takeover of the Company or in the event of a threat of a
Change in Control of the Company. The Severance Protection Plan is intended to
ensure the continued dedication and efforts of the Company's employees in such
events without undue concern for their personal financial and employment
security. The Severance Protection Plan covers all full-time U.S.-based payroll
employees as defined therein. Severance is only payable in the event of a
termination of employment by the Company other than for "cause" or voluntary
termination by the Employee for "good reason," each as defined in the Severance
Protection Plan, within a specified period following a Change in Control. A
participant will also receive severance if the employee is terminated by the
Company without "cause" or for "good reason" at the request or direction of the
third party involved in the Change in Control or otherwise in connection with or
in anticipation of a Change in Control.
DEFINITION OF CHANGE IN CONTROL
A "Change in Control" for all of the Company's benefit plans described above
is generally deemed to occur (a) if any person (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities; (b) if, during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof, unless the election or nomination for the election by the Company's
shareholders of each new Director was approved by a vote of at least two-thirds
of the Directors then still in office who were Directors at the beginning of the
period; or (c) upon consummation of a merger, consolidation or similar event, if
the equity holders of the Company prior to the transaction have beneficial
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ownership of less than 50% of the combined voting power of the surviving entity;
(d) upon any sale, disposition or similar transaction of 50% or more of the
assets or earning power of the Company or business operations which generate a
majority of the consolidated revenues; or (e) upon a liquidation of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of February 28, 1999, SFIC Holdings (Cayman), Inc. ("Holdings"), a
wholly owned subsidiary of Kuwait Petroleum Corporation ("KPC"), beneficially
owns approximately 64.9% of the outstanding Ordinary Shares. KPC is wholly owned
by the Government of Kuwait. Accordingly, KPC through Holdings is able to elect
the Board of Directors of the Company and effectively control the outcome of the
vote on certain matters submitted to a vote of the Company's shareholders. The
Company, Holdings and KPC have entered into agreements with respect to the
approval by Holdings of certain future corporate actions by the Company, the
management and allocation of certain liabilities relating to former non-drilling
activities of the Company, registration rights for the Ordinary Shares owned by
Holdings, and various other matters. This section describes certain transactions
among KPC, Holdings and the Company that occurred prior to the Company's initial
public offering of Ordinary Shares in June 1997 (the "Offering") and certain
arrangements that are now in effect. Because the Company is controlled by KPC,
these transactions and arrangements were not the result of arms-length
negotiations. See also "Directors and Executive Officers."
CONTRACT DRILLING SERVICES
The Company provides contract drilling and associated services in Kuwait to
the Kuwait Oil Company K.S.C. ("KOC"), a subsidiary of KPC, and also provides
contract drilling services to a partially owned affiliate of the Kuwait Oil
Company in the Kuwait-Saudi Arabia Partitioned Neutral Zone. Such services are
performed pursuant to drilling contracts which contain terms and conditions and
rates of compensation which materially approximate those which are customarily
included in the Company's arms-length contracts of a similar nature. In
connection therewith, KOC provides the Company rent-free use of certain land and
maintenance facilities and has committed to continue providing same, subject to
availability of the maintenance facilities, through the current February 2001
term of the drilling contracts. In relation to its drilling business in Kuwait,
the Company has an agency agreement with a subsidiary of KPC which obligates the
Company to pay an agency fee based upon a percentage of revenues. The Company
believes the terms of this agreement are more favorable than those which could
be obtained with an unrelated third party in an arms-length negotiation, but the
value of such terms is currently immaterial to the Company's results of
operations.
The Company earned revenues from KPC affiliated companies in the ordinary
course of business of $44.8 million for the calendar year ended December 31,
1998. The Company paid agency fees to a subsidiary of KPC of $0.6 million during
the calendar year ended December 31, 1998. The Company had accounts receivable
from KPC affiliated companies of $6.1 million at December 31, 1998.
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RELATED PARTY AGREEMENTS
The following summary description of the agreements among the Company,
Holdings and KPC and of the Articles is qualified in its entirety by reference
to the forms of Intercompany Agreement and Management Services Agreement and the
Articles filed.
Intercompany Agreement
In connection with the Offering, the Company, Holdings and KPC entered into
an Intercompany Agreement (the "Intercompany Agreement"), certain provisions of
which are summarized below. As used herein, "KPC Affiliated Group" means KPC and
its affiliates, including Holdings, other than the Company and its subsidiaries.
Indemnification. As of December 31, 1998, the consolidated financial
statements of Holdings contained liabilities to third parties, including tax
liabilities, aggregating approximately $61 million incurred by certain
subsidiaries which conducted the Company's former non-drilling operations and
services on or before March 31, 1997. Holdings maintains cash and cash
equivalents (the "Liability Payment Fund") which will be used to satisfy those
liabilities remaining after such date. The Company, Holdings and KPC have agreed
in the Intercompany Agreement that all amounts paid to claimants to satisfy
those liabilities, whether by settlement, judgment or award (including
claimants' attorneys' fees), will be paid by Holdings from the Liability Payment
Fund. The Company will pay all internal and external costs and fees (including
the Company's and Holdings' attorneys' fees) associated with management and
resolution of those liabilities, and believes such costs and fees will not be
material. If any amount remains in the Liability Payment Fund at March 31, 2002,
Holdings will pay the Company the first $10 million of such amount and 50% of
any amount in excess of $10 million. Thereafter, or if the resolution of those
liabilities earlier exhausts the Liability Payment Fund, Holdings will have no
further responsibility for those liabilities, and the Company will be
responsible for all costs, fees and amounts paid to resolve those liabilities
and will indemnify the KPC Affiliated Group in respect of such costs and fees
and those liabilities. The Company believes that the Liability Payment Fund is
adequate to provide for such costs and fees and those liabilities. Accordingly,
the Company believes that the indemnification costs, if any, will not be
material and no additional reserves have been established by the Company in
respect of such costs and fees and those liabilities or the Company's obligation
under the Intercompany Agreement relating to such costs and fees and those
liabilities. See "-- Management Services Agreement."
The Intercompany Agreement also provides that, except as may be provided in
a separate agreement, the Company will indemnify the KPC Affiliated Group
against losses based on, or taxes arising from, the following: (i) the ownership
of the assets or the operation of the business of the Company or its
subsidiaries, (ii) any other activities of the Company or its subsidiaries,
(iii) any guaranty or similar agreement by the KPC Affiliated Group provided to
any person with respect to any obligation of the Company or its subsidiaries,
and (iv) certain other matters. In addition, the Company has agreed to indemnify
the KPC Affiliated Group against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities Act"),
relating to misstatements in or omissions from the Registration Statement filed
in respect of the Offering and any other registration statement or report that
the Company files under the Securities Act. Holdings has also agreed to
indemnify the Company and its subsidiaries against losses based on the ownership
or operation of the assets or properties or the operation or conduct of the
business of Holdings and its subsidiaries on or after March 31, 1997.
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Consent of Holdings to Certain Events. The Intercompany Agreement provides
that until members of the KPC Affiliated Group cease to own the lesser of at
least 25% of the outstanding Ordinary Shares or 25% of the Company's outstanding
voting shares, the prior consent of Holdings generally will be required for: (i)
any disposition by the Company of assets involving consideration in excess of
$50 million; (ii) any issuance by the Company or any subsidiary of the Company
of any equity securities; (iii) the incurrence of any indebtedness or guaranty
in a consolidated amount in excess of $250 million at any time outstanding; and
(iv) a change in corporate domicile of the Company or any of its subsidiaries.
Analogous provisions are contained in the Articles. Under this arrangement,
consents may be requested from time to time. In the event Holdings does not
respond within 30 days after receipt of written notice from the Company
requesting consent to a proposed action, then the consent will be deemed to have
been given by Holdings to the Company.
Registration Rights. The Company has granted to the KPC Affiliated Group
certain demand and "piggyback" registration rights with respect to equity
securities owned by it. Pursuant to the demand registration rights, the KPC
Affiliated Group may, at any time, request the Company to register under the
Securities Act any or all Ordinary Shares held by the KPC Affiliated Group
whenever it wishes to sell Ordinary Shares in a transaction it reasonably
expects will yield gross proceeds of at least $250 million. The Company has
agreed to use its best efforts to effect any demand registrations requested by
the KPC Affiliated Group and has also agreed to register under the Securities
Act a certain amount of Ordinary Shares held by the KPC Affiliated Group when
the Company initiates certain other registrations of equity securities of the
Company on its own behalf or on behalf of any shareholder of the Company. Such
registration rights are transferable by the KPC Affiliated Group. The Company
has agreed to pay all costs and expenses in connection with each such
registration, except underwriting discounts and commissions applicable to the
equity securities sold by the KPC Affiliated Group and its transferees. The
Intercompany Agreement also contains specified restrictions on the ability of
the KPC Affiliated Group to exercise its demand and piggyback registration
rights and also contains customary terms and provisions with respect to, among
other things, registration procedures and certain rights to indemnification
granted by parties thereunder in connection with the registration of Ordinary
Shares on behalf of the KPC Affiliated Group under the Securities Act and
otherwise.
Other Provisions. Until the end of the first fiscal year of KPC in which the
KPC Affiliated Group owns the lesser of at least 25% of the outstanding Ordinary
Shares or 25% of the Company's outstanding voting shares, the Company has agreed
to furnish extensive financial information to Holdings, including certain
information before it becomes publicly available. So long as the KPC Affiliated
Group owns at least 10% of the outstanding Ordinary Shares or 10% of the
Company's outstanding voting shares, the Company has agreed to discuss its
affairs, finances and accounts with Holdings and to permit Holdings to inspect
its properties, corporate books, and financial and other records.
Management Services Agreement
The Company has also entered into a Management Services Agreement with
Holdings (the "Management Services Agreement") for the purpose of providing
asset (primarily real estate) management services, general and administrative
services and liability management and resolution services to Holdings, the Non-
Drilling Subsidiaries and inactive subsidiaries of Holdings. The Management
Services Agreement authorizes the Company to resolve the liabilities of the
Non-Drilling Subsidiaries described under "Intercompany Agreement" using the
Liability Payment Fund. Although Holdings retains the right to reduce or expand
the scope of services
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to be performed by the Company pursuant to the Management Services Agreement,
the Company's liability management and resolution services may not be reduced or
terminated. The Management Services Agreement also provides for payment of an
initial asset management fee to the Company of $173,000 per year as well as
reimbursement of out-of-pocket costs in respect of asset management services,
and stipulates that the fees are subject to negotiation on an annual basis and
upon any reduction in or expansion of the scope of services provided by the
Company. The Company will pay all internal and external costs and fees
(including the Company's and Holdings' attorneys' fees) associated with the
Company's liability management and resolution services and all internal and
external costs and fees associated with the provision of general and
administrative services pursuant to the Management Services Agreement. The
Company believes such costs and fees will not be material.
Charter Provisions Relating to Corporate Opportunities and Interested Directors
The Company's Board of Directors currently includes persons who are also
Directors or officers of Holdings or KPC. As a consequence, Directors of the
Company who are also Directors or officers of KPC or Holdings charged with
granting or withholding consent for certain of the Company's actions may be
faced with conflicts of interest. In addition, potential conflicts of interest
exist or could arise in the future for such Directors with respect to a number
of areas, including the Company's contract drilling activities in Kuwait and its
other business relationships with KPC subsidiaries.
In order to address certain potential conflicts of interest between the
Company and the KPC Affiliated Group, the Articles contain provisions regulating
and defining the conduct of certain affairs of the Company as they may involve
the KPC Affiliated Group and their Directors and officers, and the powers,
rights, duties and liabilities of the Company and its officers, Directors and
shareholders in connection therewith. In general, these provisions recognize
that the Company and the KPC Affiliated Group may engage in the same line of
business and have an interest in the same areas of corporate opportunities and
that the Company and the KPC Affiliated Group will continue to have certain
contractual and business relations with each other (including service of
Directors and officers of the KPC Affiliated Group as Directors of the Company).
The Articles provide that the KPC Affiliated Group shall have no duty to
refrain from (i) engaging in the same line of business as the Company, (ii)
doing business with any customer of the Company or (iii) employing any employee
of the Company. The Articles also provide that the KPC Affiliated Group is not
under any duty to present any corporate opportunity to the Company which may be
a corporate opportunity for both the KPC Affiliated Group and the Company.
When corporate opportunities are offered to persons who are Directors or
officers of the Company and the KPC Affiliated Group, the Articles provide that
such Directors or officers of the Company shall not be liable to the Company or
its shareholders by reason of the fact that such members of the KPC Affiliated
Group pursue such corporate opportunities for themselves or do not present such
corporate opportunities to the Company, except in the case of wilful default or
fraud of such Directors or officers, if such Directors or officers act in a
manner consistent with a policy that provides for allocation based principally
on the capacities in which the individual Director or officer is offered the
opportunity.
The Articles also provide that no arrangement between the Company and the
KPC Affiliated Group or another related party shall be voidable, and no
liability shall be imposed, solely because a member of the KPC
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Affiliated Group is a party thereto, or solely because any Directors or officers
who are related parties are present at, participate in or vote with respect to,
the authorization of the arrangement, except in the case of wilful default or
fraud on the part of the Directors or officers, if the material facts as to the
arrangement are disclosed to the Company's Board of Directors or the holders of
the Ordinary Shares who approve the arrangement.
The affirmative vote of a two-thirds majority of the shares entitled to vote
thereon and voting at a meeting of shareholders is required to amend the
Articles, including the provisions concerning corporate opportunity and
interested Directors described above and the provisions requiring the consent of
Holdings to certain actions described in "-- Intercompany Agreement -- Consent
of Holdings to Certain Events." Accordingly, so long as the KPC Affiliated Group
controls more than one third of such voting power, it can prevent any such
amendment.
CONSULTING AGREEMENT
On December 10, 1997, Gordon M. Anderson, a Director of the Company, and the
Company entered into a Consulting Agreement pursuant to which Mr. Anderson shall
serve as an independent consultant to the Company with respect to matters
relating to or affecting the operations of the Company. The term of the
Consulting Agreement was one year, terminating on January 1, 1999. Pursuant to
the Consulting Agreement, the Company has compensated Mr. Anderson by issuing to
Mr. Anderson 4,000 restricted Ordinary Shares under the Company's LTIP. In
addition, on the 25th month anniversary from the date of the grant of restricted
Ordinary Shares, the Company will further compensate Mr. Anderson under the
Consulting Agreement by paying Mr. Anderson cash in an amount equal to the
federal income tax payable with respect to the vesting of the 4,000 Ordinary
Shares and the federal income tax payable with respect to the cash payment to
Mr. Anderson. The Consulting Agreement also provides that Mr. Anderson will be
entitled to the standard Directors' cash and noncash compensation that all other
non-employee Directors are entitled to receive. Mr. Anderson has fulfilled his
obligations under the Consulting Agreement, which was not renewed for 1999.
GENERAL
The Annual Report to Shareholders for the year ended December 31, 1998
is enclosed herewith. The Annual Report does not form any part of the material
for the solicitation of proxies.
A proposal or Director nomination to be presented by a shareholder at
the Company's 2000 Annual General Meeting of Shareholders must be received by
the Company at its principal executive offices no later than December 22, 1999
to be considered for inclusion in the Company's proxy statement for that
meeting. Pursuant to the Company's Articles of Association, if a shareholder
desires to submit a proposal or nominate persons for election as Directors at
the Company's 2000 Annual General Meeting of Shareholders, the Secretary of the
Company must receive written notice of such intent (which notice must set forth
the information required by the Articles of Association) not later than April
19, 2000.
20
<PAGE> 23
OTHER BUSINESS
Management knows of no other matter that will come before the Annual
Meeting. However, if other matters do come before the Meeting, the proxy holders
will vote in accordance with their best judgment.
April 16, 1999 By Order of the Board of Directors,
/s/ GORDON M. ANDERSON
Gordon M. Anderson
Chairman of the Board
/s/ C. STEDMAN GARBER, JR.
C. Stedman Garber, Jr.
President and Chief Executive Officer
21
<PAGE> 24
APPENDIX A
PROXY
SANTA FE INTERNATIONAL CORPORATION
Two Lincoln Centre
5420 LBJ Freeway, Suite 1100
Dallas, Texas 75240-2648 U.S.A.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints C. Stedman Garber, Jr., Donald G. Barber and
Cary A. Moomjian, Jr. as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated below, all
the Ordinary Shares held of record by the undersigned as of the close of
business on April 12, 1999 at the Annual General Meeting of Shareholders (the
"Meeting") to be held at Four Seasons Resort and Club, Dallas at Las Colinas,
4150 N. MacArthur Blvd., Irving, Texas 75038 U.S.A., on June 8, 1999, at 2:00
p.m., Central Daylight Time, or any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF THE
PROPOSALS. PLEASE REVIEW CAREFULLY THE PROXY STATEMENT DELIVERED WITH THIS
PROXY.
1. Proposal to elect Ferdinand A. Berger, Stephen J. Solarz and Nader H.
Sultan as Class II Directors until the Annual General Meeting of
Shareholders to be held in 2002 or until their successors have been duly
qualified and elected.
<TABLE>
<S> <C> <C>
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed above
----------------------------------------------------------------------------------------------------------------------------
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED ABOVE)
2. Proposal to ratify the appointment of Ernst & Young LLP as the independent auditors of the Company to audit the
accounts of the Company for the fiscal year ending December 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
The proxies are authorized to vote, in their discretion, upon such other
business as may properly come before the Meeting.
-------------------------------------
Signature
Dated: , 1999
-------------- -------------------------------------
Signature, if held jointly
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
