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SCHEDULE 14A
(Rule 14a-6(m))
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
R&B Falcon Corporation
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[R&B Falcon Logo]
R&B FALCON CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 19, 1999
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
R&B Falcon Corporation, a Delaware corporation (the "Company"), will be
held on Wednesday, May 19, 1999, at 9:00 a.m., Houston, Texas time, at the
Luxury Collection Hotel - Houston, 1919 Briar Oaks Lane, Houston, Texas,
for the following purposes:
1. To elect three directors.
2. To approve the adoption of the Company's 1999 Employee Long-Term
Incentive Plan.
3. To approve the adoption of the Company's 1999 Director Long-Term
Incentive Plan.
4. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for its 1999 fiscal year.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice.
Only stockholders of record at the close of business on March 24,
1999 are entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof.
All stockholders are cordially invited to attend the meeting in
person. However, to assure your representation at the meeting, please sign
and return the enclosed proxy as promptly as possible in the postage-
prepaid envelope enclosed for that purpose. Any stockholder attending the
meeting may vote in person even though such stockholder has returned a
proxy.
Wayne K. Hillin
Secretary
By order of the Board of Directors
Houston, Texas
April 13, 1999
IMPORTANT: Whether or not you plan to attend the meeting, you are requested
to complete and promptly return the enclosed proxy in the envelope provided.
============================================================================
R&B FALCON CORPORATION
901 Threadneedle
Houston, Texas 77079
________________
PROXY STATEMENT
______________________
Annual Meeting of Stockholders
May 19, 1999
The enclosed Proxy is solicited on behalf of the Board of Directors
of R&B Falcon Corporation (the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Wednesday, May 19, 1999,
at 9:00 a.m. Houston, Texas time, or at any adjournment thereof. The Annual
Meeting will be held at the Luxury Collection Hotel - Houston, 1919 Briar
Oaks Lane, Houston, Texas. It is anticipated that this Proxy Statement and
the enclosed proxy card will be mailed beginning on or about April 14, 1999
to all stockholders of record on March 24, 1999.
At the Annual Meeting, stockholders will be asked to elect three
Class II directors for terms expiring in 2002 and to consider and vote upon
the following proposals (the "Proposals"):
(1) a proposal (the "Employee Plan Proposal") to approve the Company's
1999 Employee Long-Term Incentive Plan (the "Employee Plan");
(2) a proposal (the "Director Plan Proposal") to approve the Company's
1999 Director Long-Term Incentive Plan (the "Director Plan");
(3) a proposal (the "Accountant Proposal") to ratify the appointment of
Arthur Andersen LLP as the Company's independent auditors for its 1999
fiscal year.
____________________
The Board of Directors of the Company believes that election of its
director nominees and approval of each of the Proposals is advisable and in
the best interests of the Company and its stockholders and recommends to
the stockholders of the Company the approval of such nominees and each of
the Proposals.
____________________
The date of this Proxy Statement is April 13, 1999.
============================================================================
THE COMPANY
The Company is a Delaware corporation that was organized in July
1997 for the purpose of effecting the business combination (the "Merger")
of Falcon Drilling Company, Inc. (now named R&B Falcon Holdings, Inc.,
herein "Falcon") and Reading & Bates Corporation (now named R&B Falcon
Drilling (International & Deepwater), Inc., herein "R&B"). The Merger
became effective on December 31, 1997, with the result that Falcon and R&B
became wholly-owned subsidiaries of the Company, and the former
stockholders of Falcon and R&B became stockholders of the Company.
INFORMATION CONCERNING SOLICITATION AND VOTING
At the Annual Meeting, the holders of shares of common stock, par
value $.01 per share, of the Company (the "Common Stock") will be asked to
(i) vote upon the election of three persons to serve as Class II Directors
on the Board of Directors of the Company, (ii) approve the Employee Plan
Proposal, (iii) approve the Director Plan Proposal, (iv) approve the
Accountant Proposal, and (v) take action upon such other matters as may
properly come before the Annual Meeting.
All shares of Common Stock represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting, and
not revoked, will be voted (or withheld) at the Annual Meeting in
accordance with the instructions indicated on such proxies. If no
instructions are indicated with respect to any shares for which properly
executed proxies have been received, such proxies will be voted FOR the
Board of Directors' nominees for directors, FOR the Employee Plan Proposal,
FOR the Director Plan Proposal, and FOR the Accountant Proposal. If any
other matters are properly presented at the Annual Meeting for action, the
persons named in the proxies and acting thereunder will have discretion to
vote on such matters in accordance with their best judgment as to the best
interests of the Company. The Board of Directors of the Company does not
know of any other matters to be brought before the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by
any of the following actions: (i) filing with the Secretary of the
Company, at or before the Annual Meeting, but in any event prior to the
vote on the matter as to which revocation is sought, a written notice of
revocation bearing a later date than the proxy; (ii) duly executing and
submitting a subsequent proxy relating to the Annual Meeting; or (iii)
voting in person at the Annual Meeting (although attendance at the Annual
Meeting will not, in and of itself, constitute a revocation of a proxy).
Any written notice revoking a proxy should be sent to the Secretary of the
Company at the Company's principal executive office at 901 Threadneedle,
Houston, Texas 77079.
The close of business on March 24, 1999 is the date fixed for the
determination of stockholders of record entitled to notice of and to vote
at the Annual Meeting and any adjournment thereof. On March 24, 1999, the
Company had 193,384,776 outstanding shares of Common Stock, constituting
the only class of stock outstanding.
The holders of a majority of the outstanding shares of Common Stock
as of March 24, 1999, present in person or represented by proxy, will
constitute a quorum at the Annual Meeting. A list of such stockholders
will be available for examination by any stockholder, for any purpose
germane to the meeting, at the Company's principal executive office at 901
Threadneedle, Houston, Texas 77079, during ordinary business hours during
the ten days preceding the meeting, and at the time and place of the
meeting.
Each share of Common Stock is entitled to one vote at the Annual
Meeting with respect to each matter to be voted upon.
With regard to the election of directors, votes may be cast in favor
of or withheld from each nominee. Cumulative voting is not permitted.
Directors shall be elected by a plurality of the votes cast. "Plurality"
means that the three individuals who receive the largest number of the
votes shall be elected as directors. Consequently, any shares not voted
(whether by abstention, broker non-vote or otherwise) have no impact in the
election of directors except to the extent that the failure to vote for an
individual results in another individual receiving a larger number of
votes.
The approval of each of the Employee Plan Proposal, the Director
Plan Proposal, and the Accountant Proposal requires the affirmative vote of
a majority of shares represented at the Annual Meeting and entitled to
vote. Any shares represented at the Annual Meeting but which abstain from
voting with respect to any such proposal will have the same effect as a
vote against such proposal. Any shares held in street name for which the
broker or nominee receives no instructions from the beneficial owner and as
to which such broker or nominee does not have discretionary voting
authority under applicable New York Stock Exchange rules ("broker non-
votes"), will be considered as shares not entitled to vote, and will
therefore not be considered in the tabulation of the votes.
The Company will appoint one or more inspectors to act at the
meeting and to make a written report thereof. Prior to the meeting, the
inspectors will sign an oath to perform their duties in an impartial manner
and according to the best of their ability. The inspectors will ascertain
the number of shares outstanding and the voting power of each, determine
the shares represented at the meeting and the validity of proxies and
ballots, count all votes and ballots, and perform certain other duties as
required by law.
The Company's Annual Report to Shareholders for the 1998 fiscal
year, which includes financial statements, is being mailed with this Proxy
Statement.
The expense of soliciting proxies will be borne by the Company.
Proxies may be solicited personally by directors, officers, and other
regular employees of the Company in the ordinary course of business and at
nominal cost. The Company has employed Georgeson & Co., New York, New York,
to assist in the solicitation of proxies for a fee of $12,500, plus
reasonable expenses. In connection with its engagement of such firm, the
Company has also agreed to indemnify Georgeson & Co. against certain
liabilities arising from its engagement by the Company. Solicitation is
being made by the use of the mails, but may also be made by telephone,
electronic transmission and personal interviews. The Company will be
assisted in distributing, gathering and tabulating proxies by its stock
transfer agent, American Stock Transfer and Trust Company. Proxy materials
will be provided for distribution through brokers, custodians, and other
nominees or fiduciaries to beneficial holders of the Common Stock. The
Company expects to reimburse such parties for their reasonable out-of-
pocket expenses incurred in connection therewith.
ELECTION OF DIRECTORS
Composition of the Board and Nominees
Three Class II directors are to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by
them for the Company's three nominees named below, all of whom are
presently directors of the Company. If any nominee of the Company is
unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for the nominee designated by the Board
of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. The term of office of
each person elected as a director at the Annual Meeting will continue until
the Company's annual meeting of stockholders in the year 2002, or until a
successor has been elected and qualified.
The Company's Certificate of Incorporation and Bylaws provide that the
Board is divided into three classes of directors, with the number of
directors in each class to be as nearly equal as possible. The directors
are elected for staggered three-year terms. The Class I Directors, whose
terms expire in 2001, are Douglas A.P. Hamilton, Michael E. Porter, Robert
L. Sandmeyer, and Douglas E. Swanson. The Class II Directors, whose terms
expire in 1999, are Arnold L. Chavkin, Macko A.E. Laqueur, and William R.
Ziegler. Their positions are the ones to be filled at the Annual Meeting.
The Class III Directors, whose terms expire in 2000, are Purnendu
Chatterjee, Charles A. Donabedian, Paul B. Loyd, Jr., and Steven A.
Webster.
Class II Director Nominees - terms would expire in 2002 if elected
Arnold L. Chavkin, age 47, has been a director of the Company since
December 1997 and was a director of R&B from August 1991 until the Merger.
Mr. Chavkin has been general partner of Chase Capital Partners, a general
partnership which invests in leveraged buyouts, recapitalizations, growth
equities and venture situations, since January 1992, and President of
Chemical Investments, Inc., an affiliate of Chase Capital Partners, since
March 1991. Chase Capital Partners and Chemical Investments, Inc. are
affiliates of Chase Manhattan Corporation. Chemical Investments, Inc. is a
stockholder of the Company. Mr. Chavkin is a director of American Radio
Systems, Bell Sports Corporation, and Wireless One, Inc.
Macko A.E. Laqueur, age 53, has been a director of the Company since
December 1997 and was a director of R&B from April 1995 until the Merger.
Since 1980, Mr. Laqueur has been a senior partner and one of the two
founders of Venture Capital Investors, a private investment company located
in Amsterdam, The Netherlands. Mr. Laqueur holds board positions with
Thermae Holding, a large resort owner and operator, and with Sanadome
Holding N.V., a medical spa facility. Mr. Laqueur and Venture Capital
Investors have interests in a large number of companies involved in the
offshore industry owning service, supply and heavy lift vessels. Mr.
Laqueur is one of the controlling persons of Workships Intermediaries,
N.V., a stockholder of the Company.
William R. Ziegler, age 56, has been a director of the Company since
December 1997 and was a director of Falcon from 1991 until the Merger. Mr.
Ziegler is a partner of the law firm of Parson & Brown, LLP, which acts as
counsel to the Company. Prior to joining Parson & Brown, LLP, in May 1994,
Mr. Ziegler was a partner in the law firm of Whitman Breed Abbott & Morgan
and a predecessor firm for more than the preceding five years, which firms
acted as counsel to the Company. Mr. Ziegler is a director of Grey Wolf,
Inc.; Geokinetics, Inc.; Ponder Industries, Inc.; and Flotek Industries,
Inc.
The Board of Directors recommends that the stockholders vote "FOR" the
nominees listed above.
Information with respect to directors whose terms do not expire at the
Annual Meeting is presented below.
Continuing Directors - terms expire in 2000 (Class III Directors):
Purnendu Chatterjee, age 48, has been a director of the Company since
December 1997 and was a director of Falcon from 1993 until the Merger. Dr.
Chatterjee is an investor in public and private companies and has been
associated with the George Soros organization for more than the past five
years. A corporation controlled by Dr. Chatterjee is the general partner
of a limited partnership that is the Company's largest stockholder. Dr.
Chatterjee is a director of Indigo N.V. and Geotek Communications, Inc.
Charles A. Donabedian, age 56, has been a director of the Company since
December 1997 and was a director of R&B from 1989 until the Merger. Since
May 1992, Mr. Donabedian has been Chairman and Chief Executive Officer of
both Winston Financial Incorporated which provides product development,
marketing and sales consulting and services to the financial services
industry and Winston Advisors, Inc. (of which Mr. Donabedian is also a
director) which provides financial advice for individuals and small
companies.
Paul B. Loyd, Jr., age 52, has been a director of the Company since July
1997 and Chairman of the Board since January 6, 1998. Mr. Loyd was Chief
Executive Officer and Chairman of the Board of R&B from 1991 until the
Merger. Mr. Loyd has been President of Loyd & Associates, Inc., a financial
consulting firm, since 1989. Mr. Loyd is a director of Wainoco Oil
Corporation.
Steven A. Webster, age 47, has been Chief Executive Officer and a
director of the Company since its organization in July 1997. Mr. Webster
has served as Chief Executive Officer and Chairman of the Board of Falcon
since its formation in 1991. He serves as a director of Grey Wolf, Inc.;
Carrizo Oil & Gas, Inc.; Ponder Industries, Inc.; Geokinetics, Inc.; and
Crown Resources Corporation. Mr. Webster also serves as a trust manager of
Camden Property Trust.
Continuing Directors - terms expire in 2001 (Class I Directors):
Douglas A.P. Hamilton, age 52, has been a director of the Company since
December 1997. Mr. Hamilton was a director of Falcon from 1992 until the
Merger. For more than the past five years, he has been a private investor.
Mr. Hamilton was one of Falcon's original investors. Mr. Hamilton is a
director of Carrizo Oil & Gas, Inc.
Michael E. Porter, age 51, has been a director of the Company since
December 1997. Dr. Porter was a director of Falcon from January 1, 1997
until the Merger. Dr. Porter is the C. Roland Christensen Professor of
Business Administration at the Harvard Business School, a position he has
held since 1973. Dr. Porter is a director of Parametric Technology
Corporation and ThermoQuest Corporation.
Robert L. Sandmeyer, age 69, has been a director of the Company since
December 1997. Dr. Sandmeyer was a director of R&B from 1988 until the
Merger. Dr. Sandmeyer has been Dean Emeritus of the College of Business
Administration at Oklahoma State University since 1994, and for more than
five years prior to that, was Dean and Professor of Economics at such
institution. Dr. Sandmeyer is the principal of SC2 International, which
specializes in assisting foreign business schools in their efforts to meet
international standards.
Douglas E. Swanson, age 60 is President and Chief Executive Officer of
Cliffs Drilling Company, which became a wholly-owned subsidiary of the
Company on December 1, 1998. Mr. Swanson became a director on December 2,
1998 in accordance with the merger agreement pursuant to which the Company
acquired all of the outstanding stock of Cliffs Drilling Company. Mr.
Swanson joined Cliffs Drilling Company in 1978 as Executive Vice President
and served in that office until his election as President, effective
January 1, 1992. Mr. Swanson currently serves as a director of Tuboscope,
Inc.
Company Board Meetings and Committees
During 1998, the Board of Directors of the Company held ten meetings, and
executed three unanimous written consents. During 1998, all directors of
the Company attended at least 75% of the meetings of the Board, except for
Mr. Laqueur, who attended five meetings.
The Board has established an Audit Committee and a Compensation
Committee. During 1998, Messrs. Chavkin, Hamilton and Ziegler (Chairman)
served on the Audit Committee. The Audit Committee reviews the Company's
internal financial reporting systems and controls with the Company's
management and independent auditors. The Audit Committee would recommend
resolutions for any dispute between the Company's management and its
auditors, and reviews other matters relating to the relationship of the
Company with its auditors. During 1998, the Audit Committee met three
times (including teleconference meetings). Each member of the Audit
Committee attended all meetings held by such committee during his tenure on
the committee, except for Mr. Hamilton, who missed one meeting.
During 1998, Messrs. Chatterjee, Donabedian (Chairman), Sandmeyer and
Hamilton (commencing May 19, 1998) served on the Compensation Committee.
The Compensation Committee makes recommendations to the Board of Directors
regarding the Company's executive compensation policies, administers the
Company's stock option plans, and administers the Company's pension and
ERISA plans. During 1998, the Compensation Committee met fifteen times
(including teleconference meetings), and each member of the Compensation
Committee attended at least 75% of the meetings held by such committee
during his tenure on the committee.
The Board of Directors currently has no nominating committee or committee
performing a similar function.
Compensation of Directors
Each non-employee director of the Company is paid a fee of $9,000 per
calendar quarter, plus $2,500 for each meeting attended by that director.
Each director who was a member of a committee of the board received $3,000
for each committee on which he served, and $4,000 for each committee of
which he was chairman. The Company reimburses its directors for travel,
lodging and related expenses incurred in attending board and committee
meetings. Each member of the Audit Committee receives $1,000 for each
meeting of such committee attended by him in excess of four meetings during
any year. Each member of the Compensation Committee receives $1,000 for
each meeting of such committee attended by him in excess of four meetings
during any year.
The aggregate fees earned by each non-employee director for attendance at
Board and Committee meetings during 1998 were: Dr. Chatterjee - $70,500;
Mr. Chavkin - $56,500; Mr. Donabedian - $82,000; Mr. Hamilton - $67,750;
Mr. Laqueur - $51,000; Dr. Porter - $56,000; Dr. Sandmeyer - $76,500; and
Mr. Ziegler - $65,500. A portion of these fees were paid in 1999.
Messrs. Donabedian ($9,000), Sandmeyer ($3,000) and Hamilton ($1,000)
were also paid for work performed by them in formulating proposed
employment contracts for executive officers of the Company.
The Company retained Dr. Porter to provide advice and to design and
present lectures in Houston, Texas and London, England, to which the
Company invited energy industry executives and analysts. Dr. Porter was
paid $400,000 for these services.
See "Compensation Committee Interlocks and Insider Participation" for a
description of consulting payments made to a company affiliated with Mr.
Donabedian.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
shares of Common Stock (the only class of outstanding capital stock of the
Company) owned of record and beneficially as of March 24, 1999, by (i) all
persons who own of record or are known by the Company to own beneficially
more than 5% of the outstanding shares of such class of stock, (ii) each
current director of the Company, (iii) each executive officer of the
Company named in the Summary Compensation Tables included elsewhere herein,
and (iv) all directors and executive officers of the Company as a group:
Shares
Beneficially Owned
-----------------------------
Number
of
Name Shares Percent(1)
- ---- ------------- ----------
Andrew Bakonyi . . . . . . . . . . . . . . 97,899(2) *
Purnendu Chatterjee . . . . . . . . . . . . 14,740,941(3) 7.6%
888 Seventh Avenue
Suite 3000
New York, NY 10106
Arnold L. Chavkin . . . . . . . . . . . . . 28,320(4) *
Charles A. Donabedian . . . . . . . . . . . 15,285(5) *
Douglas A.P. Hamilton . . . . . . . . . . . 315,740 *
Macko A.E. Laqueur. . . . . . . . . . . . . 386,058(6) *
Paul B. Loyd, Jr. . . . . . . . . . . . . . 1,364,488(7) *
Tim W. Nagle . . . . . . . . . . . . . . . 252,331(8) *
Michael E. Porter . . . . . . . . . . . . . 29,750(9) *
Robert L. Sandmeyer . . . . . . . . . . . . 9,555 *
S-C Rig Investments, L.P. . . . . . . . . . 12,749,176 6.6%
888 Seventh Avenue, Suite 3000
New York, NY 10106
Douglas E. Swanson . . . . . . . . . . . . 202,335(10) *
Steven A. Webster . . . . . . . . . . . . . 5,454,920(11) 2.8%
William R. Ziegler . . . . . . . . . . . . 3,784,280(12) 2.0%
All Executive Officers and Directors
as a group (18 persons) . . . . . . . . . 24,181,729(13) 12.3%
_________________
* Less than one percent.
(1) Based upon a total of 193,384,776 shares of Common Stock outstanding,
plus, with respect to the person whose percentage is stated, any
shares which such person has an option to acquire within 60 days.
Certain shares are deemed beneficially owned by more than one person
or entity listed in the table.
(2) Includes vested options to acquire 97,899 shares.
(3) Includes (i) 745,484 shares held for his account, (ii) 12,749,176
shares held by S-C Rig Investments, L.P., the sole general partner of
which is S-C Rig Co., a company owned and controlled by Dr. Chatterjee,
(iii) 250,000 shares held by the Chatterjee Charitable Foundation, of
which Dr. Chatterjee is a trustee, (iv) 76,698 shares held by S-C Rig
Co., (v) 742,783 shares held by Chatterjee Fund Management, L.P., a
limited partnership of which Dr. Chatterjee is the sole general
partner, and (vi) 176,800 shares owned by Furzedown Trading Limited.
(4) Mr. Chavkin is President of Chemical Investments, Inc. ("Chemical"),
an affiliate of Chase Capital Partners and Chase Manhattan
Corporation. Chemical held 656,444 shares of Common Stock as of March
24, 1999. No beneficial ownership amount is included in the table for
Mr. Chavkin with respect to Chemical's ownership of the Common Stock
and beneficial ownership is disclaimed by Mr. Chavkin. Also includes
vested options held by Mr. Chavkin to acquire 17,700 shares.
(5) Includes vested options to acquire 5,900 shares.
(6) The shares listed for Mr. Laqueur include those beneficially owned
by him through his control of Workships Intermediaries N.B., a
stockholder of the Company, and also include vested options to
acquire 17,700 shares.
(7) Includes (i) 1,891 shares owned by Greenwing Investments, Inc., which
is controlled by Mr. Loyd and as to which Mr. Loyd may be deemed to
have voting and dispositive power and (ii) vested options to acquire
1,246,121 shares.
(8) Includes vested options to acquire 251,339 shares.
(9) Includes 1,750 shares held by the Agnes Porter Trust.
(10) Includes 16,655 shares owned by the Cliffs Drilling 401(k) Plan for
the benefit of Mr. Swanson. Includes vested options to acquire
166,600 shares. Does not include unvested options to acquire 300,000
shares.
(11) Includes (i) 885,000 shares in the name of Mr. Webster as voting
trustee for Linda M. Webster, his spouse, (ii) 1,838,600 shares owned
by FDI Marine, Inc., of which Mr. Webster is an officer and director
and of which Linda Webster is a principal stockholder, (iii)
1,089,600 shares owned by Falcon Drilling Services, Inc., of which
Mr. Webster is an officer and director and of which Linda Webster is
a principal stockholder, (iv) 559,800 shares owned by NFM Gulf
Enterprises, Inc., of which Mr. Webster is an officer, director and
principal stockholder, (v) 70,650 shares owned by Cerrito Partners,
23,600 shares owned by Cerrito Investments Limited Partnership, 57,360
shares owned by Cerrito Investments I-A, L.P., and 11,880 shares
owned by Webster Family Investors, all of which are investment
partnerships of which Mr. Webster is the general partner or an officer
of the general partner, and (vi) 430,147 shares issuable upon exercise
of vested stock options.
(12) Includes (i) 1,838,600 shares owned by FDI Marine, Inc., of which Mr.
Ziegler is an officer, director and principal stockholder, (ii)
1,089,600 shares owned by Falcon Drilling Services, Inc., of which Mr.
Ziegler is an officer, director and principal stockholder, (iii)
559,800 shares owned by NFM Gulf Enterprises, Inc., of which Mr.
Ziegler is an officer, director and principal stockholder, and (iv)
63,000 shares issuable upon exercise of vested stock options.
(13) See preceding notes. Includes 102,567 shares, and options to acquire
579,260 shares, held by executive officers who are not named in the
foregoing tables.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
executive officers of the Company as of March 24, 1999:
Name Age Position
---- --- --------
Paul B. Loyd, Jr. 52 Chairman of the Board
Steven A. Webster 47 Chief Executive Officer and President
Douglas E. Swanson 60 President of Cliffs Drilling Company
Andrew Bakonyi 45 President of R&B
Bernie W. Stewart 54 President of Falcon
Robert F. Fulton 47 Executive Vice President
Tim W. Nagle 48 Executive Vice President
Wayne K. Hillin 57 Senior Vice President and Co-Counsel
Leighton E. Moss 48 Senior Vice President and Co-Counsel
Charles R. Ofner 53 Vice President
_____________
Mr. Loyd has been a director of the Company since its organization in
July 1997, and has been Chairman of the Board of the Company since January
6, 1998. From 1991 until the Merger, Mr. Loyd was Chief Executive Officer
and Chairman of the Board of R&B.
Mr. Webster has been Chief Executive Officer, President and a director of
the Company since its organization in July 1997. Since 1991, Mr. Webster
has been Chairman of the Board and Chief Executive Officer of Falcon.
Mr. Swanson is President and Chief Executive Officer of Cliffs Drilling
Company. Mr. Swanson joined Cliffs Drilling Company in 1978 as Executive
Vice President and served in that office until his election as President,
effective January 1, 1992. Mr. Swanson became a director of the Company on
December 2, 1998.
Mr. Bakonyi has been President of R&B since January 1998. From December
1996 to December 1997, he was President of Reading & Bates Drilling Co.
For more than five years prior to that, Mr. Bakonyi was a Vice President of
Reading & Bates Drilling Co.
Mr. Stewart has been Chief Operating Officer of Falcon since April 1,
1996 and President of Falcon since January 1998. From 1993 until joining
Falcon, Mr. Stewart was Chief Operating Officer for Hornbeck Offshore
Services, Inc., an offshore supply boat operator, where he was responsible
for overall supervision of that company's operations. From 1986 until
1993, he was President of Western Oceanics, Inc., an offshore drilling
contractor.
Mr. Fulton has been Executive Vice President of the Company since January
1998. Mr. Fulton has been Executive Vice President of Falcon since January
1, 1995. From 1991 until joining Falcon in 1995, Mr. Fulton served as an
executive officer of Chiles Offshore Corporation, most recently as Senior
Vice President and Chief Financial Officer.
Mr. Nagle has been Executive Vice President of the Company since January
1998. Mr. Nagle was Chief Financial Officer of R&B for more than five
years prior to that.
Mr. Hillin has been Senior Vice President of the Company since January
1998. Mr. Hillin was Senior Vice President and General Counsel of R&B for
more than five years prior to that.
Mr. Moss has been Senior Vice President of the Company since January
1998. Mr. Moss has been Vice President and General Counsel of Falcon since
January 1, 1996. From October 1995 until joining the Company, Mr. Moss was
a member of the law firm of Gardere Wynne Sewell & Riggs, L.L.P. For five
years prior to October 1995, Mr. Moss was a member of the law firm of
Sewell & Riggs, P.C.
Mr. Ofner has been Vice President of the Company since January 1998. Mr.
Ofner was Vice President - Business Development of R&B for more than five
years prior to that.
Employment Contracts
R&B Falcon Corporation
Each officer of the Company may be removed from office at any time by the
Board of Directors, subject to his rights under any applicable employment
agreement. The Company entered into employment agreements dated March 25,
1998 with each of its executive officers except for Mr. Swanson (who is
employed pursuant to a contract with Cliffs Drilling Company, as described
below). The agreements provide for a three year term of employment, with
an automatic one year extension implemented whenever the remaining term is
two years. The contracts provide for such officers to receive a minimum
annual base salary (Mr. Webster - $600,000; Mr. Loyd - $520,000; Mr. Nagle
- - $275,000; Mr. Fulton - $240,000; Mr. Bakonyi - $240,000; Mr. Stewart -
$240,000; Mr. Hillin - $225,000; Mr. Ofner - $212,000; Mr. Moss -
$180,000), and to participate in the benefit plans and programs of the
Company. The base salary is subject to increase in the discretion of the
Company's Board, and may be decreased by the Board as part of a Company-
wide salary reduction program. Each of such agreements provides that if
the officer terminates his employment for good reason or during the 180-day
period following a change of control of the Company, the Company will (a)
make a lump sum payment to him of salary earned through the date of
termination and a bonus based on the highest annual bonus paid to him
during the preceding three-year period prorated in accordance with the
period in the current year prior to the termination, (b) make a lump sum
payment to him equal to the sum of the highest annual base salary and
highest annual bonus paid to the officer during the three-year period
ending on the date of termination, times 3.75 (times five in the case of
Mr. Loyd and times six in the case of Mr. Webster), and (c) continue to
provide certain welfare plan and other benefits for the unexpired term of
the agreement.
For purposes of the employment agreements, "good-reason" includes (i) a
change in the officer's position, authority, duties or responsibilities,
(ii) changes in the office or location at which he is based without his
consent (such consent not to be unreasonably withheld), and (iii) certain
breaches of the agreement. A "change of control" for purposes of the
agreements would occur if a person or group (other than (i) such officer,
(ii) the Company or any of its subsidiaries or affiliates, (iii) any person
subject as of the date of the agreement to the reporting or filing
requirements of Section 13(d) of the Exchange Act with respect to the
securities of the company or any affiliates, (iv) any trustee or other
fiduciary holding or owning securities under an employee benefit plan of
the Company, (v) any underwriter temporarily holding or owning securities
of the Company, or (vi) any corporation owned directly or indirectly by the
current stockholders of the Company in substantially the same proportion as
their then ownership of stock of the Company) becomes the beneficial owner,
directly or indirectly, of securities of the Company representing forty
percent (40%) or more of the combined voting power of the Company's then
outstanding securities. A "change of control" for purposes of each
agreement also occurs if a majority of the Company's Board of Directors
ceases to be comprised of "Continuing Directors", defined as persons who
were directors on March 25, 1998, or were nominated by a majority of the
Board, where such majority was comprised only of Continuing Directors.
The same benefits payable to each officer under the agreement if he
terminates his employment for good reason or following a change of control
would also be payable to him if the Company terminates his employment other
than for cause (as defined in the agreement) or if he dies or becomes
disabled under the terms of the agreement. "Cause" for purposes of the
agreements includes (i) chronic alcoholism or substance abuse, (ii) a
deliberate act of proven fraud by the executive having a material adverse
impact on the Company, (iii) a deliberate and continuing failure by the
executive to comply with laws and regulations having a material adverse
impact on the Company, or (iv) conviction of the executive of a felony.
The agreements provide that if any payment to one of the covered officers
will be subject to any excise tax under Section 4999 of the Internal
Revenue Code (the "Code"), a "gross-up" payment would be made to place the
officer in the same net after-tax position as would have been the case if
no excise tax had been payable.
Cliffs Drilling Company
On December 1, 1998, R&B Falcon Corporation acquired all of the
outstanding shares of stock of Cliffs Drilling Company pursuant to an
agreement (the "Cliffs Acquisition Agreement") between R&B Falcon
Corporation and Cliffs Drilling Company. Pursuant to the Cliffs
Acquisition Agreement, Cliffs Drilling entered into an employment agreement
with Douglas E. Swanson providing for Mr. Swanson to remain as President of
Cliffs Drilling for a term of three years commencing December 1, 1998, at
an annual base salary equal to his then current base salary of $450,000.
In the event Mr. Swanson's employment with Cliffs Drilling is terminated
other than for cause, prior to the expiration of the three year term, Mr.
Swanson is entitled to a lump sum payment equal to (i) the annual base
salary that would have been received for the remainder of the employment
plus (ii) the highest annual bonus awarded to Mr. Swanson during the
previous three year period multiplied by a fraction, the numerator of which
is the number of days since the most recent bonus payment date through the
date of termination plus the number of days remaining in the employment
period, and the denominator of which is 365. Mr. Swanson's employment
agreement further provides that if any such payment is subject to excise
tax under Section 4999 of the Internal Revenue Code, a "gross up" payment
will be made to place Mr. Swanson in the same net after tax position as
would have been the case if no excise tax had been payable. Additionally,
the Employment Agreement provides for continuation of certain benefits to
Mr. Swanson from the date of termination to the end of the employment
period.
As of August 21, 1998, the date of execution of the Cliffs Acquisition
Agreement, Mr. Swanson held unvested options to acquire 74,000 shares of
Cliffs Drilling. All of Mr. Swanson's unvested options became fully vested
upon execution of the Cliffs Acquisition Agreement. Under the Cliffs
Acquisition Agreement, each unexercised option to acquire a share of Cliffs
Drilling was converted to an option to acquire 1.7 shares of R&B Falcon
common stock at a price per share equal to the exercise price per share for
the shares of Cliffs Drilling common stock divided by 1.7
Pursuant to the terms of the Cliffs Acquisition Agreement, on December
1, 1998, the date the acquisition of Cliffs Drilling became effective, Mr.
Swanson was granted options to acquire 300,000 shares of R&B Falcon common
stock at a price of $9.125 per share, which was the closing price of R&B
Falcon common stock on the date of the Cliffs acquisition. These options
vest over a three year period, with 50% becoming exercisable on December 1,
1999, and 25% becoming exercisable on each December 1 thereafter.
Contract Termination Payments
R&B
At the time the Merger was agreed to (July 1997) R&B was party to
employment agreements with Messrs. Loyd, Nagle, Hillin and Ofner. The
agreements provided that for a continuing three-year employment period such
persons would receive annual base salaries of not less than $520,000
(Loyd), 275,000 (Nagle), $225,000 (Hillin) and $212,000 (Ofner),
respectively, and would participate in other benefit plans and programs of
the Company. Each of such agreements provided that if the officer
terminates his employment for good reason or during the 180-day period
following a change of control of R&B, R&B would (a) make a lump sum payment
to him of salary earned through the date of termination and a bonus based
on the highest annual bonus paid him during the preceding three-year period
prorated in accordance with the period in the current year prior to the
termination, (b) make a lump sum payment to him of 3.75 times the sum of
the highest aggregate annual base salary and annual bonus (or equal to such
salary and bonus if such termination occurs after October 31, 1997) paid to
the officer with respect to any one fiscal year ending within the three-
year period ending on the date of termination, (c) in the case of Mr. Loyd,
deliver to such executive the shares under the R&B 1992 Long-Term Incentive
Plan and the R&B 1995 Long-Term Incentive Plan free of restrictions, and
(d) continue to provide certain welfare plan and other benefits for a
period of three years or as long as such plan or benefits allow.
The agreements provided that if any payment to one of the covered
officers will be subject to any excise tax under Code Section 4999, a
"gross-up" payment would be made to place the officer in the same net after-
tax position as would have been the case if no excise tax had been payable.
R&B terminated the employment agreements effective December 31, 1997, and
in connection therewith made termination payments to Messrs. Loyd
($5,850,000), Nagle ($2,165,625), Hillin ($1,771,875) and Ofner
($1,669,500).
Cliffs Drilling
Douglas E. Swanson has been president of Cliffs Drilling Company since
1992. Cliffs Drilling was acquired by R&B Falcon on December 1, 1998. At
the time Cliffs Drilling and R&B Falcon entered into the agreement for R&B
Falcon to acquire Cliffs Drilling, Cliffs Drilling and Mr. Swanson were
parties to an executive agreement. Pursuant to this executive agreement,
the acquisition of Cliffs Drilling by R&B Falcon would trigger the
commencement of a three year employment period and the right to receive
severance payments and certain other benefits following any voluntary or
involuntary termination of Mr. Swanson's employment during the three year
term.
Mr. Swanson's executive agreement provided that upon termination of
his employment other than for cause he would be entitled to receive a lump
sum severance payment equal to all compensation and benefits he would have
received for the remainder of the employment period, as though no
termination had occurred. The executive agreement further provided that if
any payment to Mr. Swanson was subject to excise tax under Section 4999 of
the Internal Revenue Code, a gross up payment would be made to place him in
the same net after tax position as would have been the case if no excise
tax had been payable.
The Cliffs Acquisition Agreement provided that Cliffs Drilling would
obtain a waiver and release by Mr. Swanson of any rights under the
executive agreement. As provided for in the Cliffs Acquisition Agreement,
Mr. Swanson was paid $6,167,838 in consideration for the release and waiver
of his rights under his executive agreement, which amount included an
excise tax gross up payment of $1,667,838.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following tables set forth the compensation paid for the periods
indicated to the chief executive officer and the other four most highly
compensated executive officers of the Company (the "Named Officers").
Summary Compensation Table
Long-Term
Compensation
-----------------------------
LTIP
Annual Compensation Awards Payouts($)
----------------------- ----------------- ----------
Stock
Restricted Option All
Stock Grants Other
Name and Principal Salary Bonus Awards # of Compensation
Position Year ($) ($)(1) ($) Shares ($)(2)
-------- ---- ------- --------- --------- ------- ------------
Paul B. Loyd, Jr. 1998 533,808 (3) 0 0 0 32,585
Chairman of 1997 520,000 1,040,000 0 0 0 5,926,281
the Board 1996 450,000 450,000 2,123,437 0 0 27,716
Steven A. Webster 1998 639,000 (3) 0 0 0 1,653
Chief Executive 1997 579,191 500,000 0 0 0 3,700
Officer 1996 350,000 300,000 0 200,000 0 1,646
Douglas E.
Swanson(4) 1998 431,250 0 0 385,000(4) 0 6,187,576
President of 1997 366,667 500,000 0 20,000(4) 269,325 16,574
Cliffs Drilling 1996 295,000 130,000 254,812 56,000(4) 0 17,927
Company
Tim W. Nagle 1998 282,302 (3) 0 0 0 8,341
Executive Vice 1997 275,000 302,500 0 0 0 2,197,407
President 1996 240,000 120,000 0 177,000(5) 0 4,750
Andrew Bakonyi 1998 237,273 (3) 0 0 0 7,966
President of R&B 1997 174,173 242,000 0 0 0 1,739,530
1996 162,000 65,000 0 0 0 0
______________________
(1) Represents annual bonus earned for the fiscal year noted, even if such
bonus was paid in the following fiscal year.
(2) The All Other Compensation column includes (i) 401(k) plan Company
matching contributions, (ii) life insurance premiums paid by the
Company, (iii) vacation pay, (iv) termination benefits paid to Mr.
Loyd ($5,850,000), Mr. Nagle ($2,165,625), and Mr. Bakonyi
($1,732,500) in 1997 and Mr. Swanson ($6,167,838) in 1998, (See
"Contract Termination Payments" at page 13), and (v) in the case of
Mr. Loyd, NOK 150,000 per annum for serving as Chairman and a
member of the board of directors of Arcade Drilling AS, a majority-
owned subsidiary of the Company.
(3) As bonuses for 1998, the Company granted to Messrs. Loyd, Webster,
Nagle, and Bakonyi, options to acquire shares at an exercise price of
$6.25 per share, the average of the high and low prices of the
Company's stock on February 11, 1999, the date of grant. The options
have a ten year term and are fully vested but are not exercisable
until August 11, 1999. The number of options granted were: Mr. Loyd
- 184,121; Mr. Webster - 212,447; Mr. Nagle - 74,339; and Mr. Bakonyi
- 90,819. The options are not transferable and do not have a readily
ascertainable fair market value. Based upon an application of the
Black-Scholes Model, the value of the grants on the grant date were:
Mr. Loyd - $492,524; Mr. Webster - $568,295; Mr. Nagle - $198,856; and
Mr. Bakonyi - $242,940. The Black-Scholes Model is a mathematical
formula used to value options on stocks of publicly traded companies.
This formula considers a number of factors to estimate the option's
theoretical value, including the stock's historical volatility or, if
appropriate, an average of peer companies' volatility, dividend rate,
exercise period of the option and interest rates. The grant date
theoretical values above assume a volatility of 34.6%, a dividend
yield of 0%, a 4.94% risk free rate of return and a six-year option
exercise period.
(4) Mr. Swanson has served as President of Cliffs Drilling since 1992.
Cliffs Drilling became a wholly owned subsidiary of R&B Falcon
Corporation on December 1, 1998. Mr. Swanson's options for 1996 and
1997 were awarded under the Cliffs Drilling Incentive Equity plan,
but are expressed as the number of shares of R&B Falcon for which they
became exercisable as a result of the Cliffs Drilling acquisition. Mr.
Swanson's stock options for 1998 include (i) 85,000 options granted
by Cliffs Drilling prior to its acquisition by R&B Falcon (expressed
in shares of R&B Falcon) and (ii) 300,000 options granted by R&B
Falcon under the agreement pursuant to which R&B Falcon acquired
Cliffs Drilling. See "Employment Contracts - Cliffs Drilling" at
page 12.
(5) The stock options awarded in 1996 to Mr. Nagle represent stock options
awarded pursuant to the R&B 1995 Long-Term Incentive Plan. As a result
of the Merger, the options granted to Mr. Nagle were converted to
options to acquire 177,000 shares of Common Stock of the Company at a
price of $23.729 per share, and such options became fully vested.
Options Granted and Options Exercised in the Last Fiscal Year
The following tables set forth information regarding stock options
granted to and exercised by the Named Officers during 1998, as well as
options held by such persons as of December 31, 1998, the last day of the
Company's last fiscal year.
Option Grants in Last Fiscal Year
% of Total Potential Realizable
Options Values at Assumed Annual
Granted Rates of Stock Price
Number of to Appreciation for
Securities Employees Option Term(1)
Underlying in Exercise ---------------------
Options Fiscal Price Expiration
Name Granted Year ($/sh) Date 5% 10%
---- ------- ---- ------ ---- -- ---
Paul B. Loyd, Jr. . . 0 0 -- -- 0 0
Steven A. Webster . . . 0 0 -- -- 0 0
Douglas E. Swanson(2) . 85,000 16%(2) $29.71 05/12/08 $1,588,179 $4,024,758
300,000 1%(2) $9.125 11/30/08 $1,721,599 $4,362,870
Tim W. Nagle . . . . . 0 0 -- -- 0 0
Andrew Bakonyi . . . . 0 0 -- -- 0 0
____________________
(1) The columns present hypothetical future values of the stock obtainable
upon exercise of the options net of the option's exercise price,
assuming that the market price of the Company's common stock
appreciates at a five and ten percent compound annual rate over the
ten-year term of the options. The five and ten percent rates of stock
price appreciation are presented as examples pursuant to the Proxy
Rules and do not necessarily reflect management's assessment of the
Company's future stock price performance. The potential realizable
values presented are not intended to indicate the value of the options.
The gains ultimately realized by an option holder are dependent on the
actual performance of the Common Stock, and there is no assurance that
the amounts set forth in this table reflect the gains, if any, that
will ultimately be achieved.
(2) In May 1998, Mr. Swanson was granted options to acquire 50,000 shares
of Cliffs Drilling at a price of $50.50 per share, constituting 16% of
the total options granted by Cliffs Drilling to employees of Cliffs
Drilling in 1998. These options were to vest 50% on May 12, 1999, 25%
on May 12, 2000, and 25% on May 12, 2001. On December 1, 1998, when
Cliffs Drilling was acquired by R&B Falcon, these were converted into
options to acquire 85,000 shares of the Company at $29.71 per share
and became fully vested. On December 1, 1998, the Company granted
Mr. Swanson options to acquire 300,000 shares of the Company at $9.125
per share, constituting 1.02% of the total options granted by the
Company to R&B Falcon employees in 1998. These options vest 50% on
December 1, 1999 and 25% each December 1 thereafter. See "Employment
Contracts - Cliffs Drilling" at page 12.
Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Value of
Number of Unexercised
Securities Underlying in-the-
Unexercised Options Money Options
at Fiscal at Fiscal
Acquired Year End Year End($)(1)
on Value -------------- --------------
Exercise Realized Exercisable Exercisable
Name (#) ($) /Unexercisable /unexercisable
- ---- -------- -------- ----------------- --------------
Paul B. Loyd, Jr. .. . . . 0 -- 1,062,000 / 0 0 / 0
Steven A. Webster . . . 0 -- 217,700 / 0 323,234 / 0
Douglas E. Swanson . . . 0 -- 166,600 / 300,000 0 / 0
Tim W. Nagle . . . . . . . 0 -- 177,000 / 0 0 / 0
Andrew Bakonyi . . . . . . 0 -- 7,080 / 0 0 / 0
_____________
(1) These values were computed based on the difference between the
exercise price and an assumed common stock value of $7.5625 per share,
which was the closing price of our common stock on the NYSE on
December 31, 1998.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during 1998 were Mr.
Donabedian, Dr. Chatterjee, Dr. Sandmeyer and Mr. Hamilton (since May 19,
1998). Each member of the Compensation Committee was a non-employee
director. No member of the Compensation Committee was an employee or
compensated officer of the Company or any of its subsidiaries. During
1998, no executive officer of the Company served as a member of (i) the
compensation committee of another entity in which one of the executive
officers of such entity served on the Compensation Committee, (ii) the
board of directors of another entity, one of whose executive officers
served on the Compensation Committee or (iii) the compensation committee of
another entity in which one of the executive officers of such entity served
as a member of the Company's board of directors.
Mr. Donabedian was appointed chairman of the Company's Compensation
Committee in January 1998. During 1998, a company affiliated with Mr.
Donabedian provided consulting services to the Company regarding employee
compensation matters and was paid an aggregate of $43,441 for these
services. It is expected such company will provide similar services to the
Company in 1999. It is not known what amounts will be paid by the Company
for these services in 1999.
Transactions with Related Parties
See "Compensation Committee Interlocks and Insider Participation"
regarding payments made by the Company in 1998, and anticipated to be made
by the Company in 1999, to an entity affiliated with Mr. Donabedian, a
director of the Company. In addition, the Company engaged Dr. Porter, a
director of the Company, to provide advice and to design and present two
lectures during 1998 to which energy industry executives and industry
analysts were invited. The Company made aggregate payments of $400,000 to
Dr. Porter for these services.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933 or
the Securities Exchange Act of 1934 that might incorporate this Proxy
Statement or future filings with the Securities and Exchange Commission, in
whole or in part, the following Report and the Performance Graph which
follows shall not be deemed to be incorporated by reference into any such
filings.
During 1998 the Compensation Committee of the Board of Directors (the
"Committee") consisted of Charles A. Donabedian, Purnendu Chatterjee,
Robert L. Sandmeyer and Douglas Hamilton (since May 19, 1998).
Compensation Philosophy and Overall Objectives of Executive Compensation
Programs
It was the philosophy of the Company to ensure that executive
compensation be directly linked to continuous improvements in corporate
performance and increases in stockholder value. The following objectives
were adopted by the Committee as guidelines for compensation decisions:
- - Provide a competitive total compensation package to enable the Company to
attract and retain key executives.
- - Integrate all pay programs with the Company's annual and long-term
business objectives and strategy, and focus executive behavior on the
fulfillment of these objectives.
- - Provide variable compensation opportunities that are directly linked with
the performance of the Company.
Cash compensation
Cash compensation includes base salary and typically includes annual
incentive award programs. The base salary of each of the Company's
executive officers was determined by an evaluation of the responsibilities
of that position and by comparison to the average of salaries paid in the
competitive market in which the Company competed for comparable executive
ability and experience, both made in light of their compensation levels
prior to the Merger. To assist in its deliberations, the Committee was
provided a report from Towers Perrin, a recognized independent compensation
consultant, setting out comparable salary and incentive compensation
information for a number of representative companies in the offshore
drilling industry selected by Towers Perrin.
The Company normally pays an annual cash bonus to its executives.
However, with respect to bonus awards for 1998 performance, the Committee
determined it was appropriate to award bonuses in the form of stock
options. This was done in part to make the executive officers' bonus
compensation contingent upon increases in the Company's stock price, and in
part to enhance the Company's liquidity. The options were issued February
11, 1999, and have an exercise price of $6.25 per share (which was the
average of the high and low prices of the Company's stock on February 11,
1999), are fully vested, and are exercisable over a period of ten years.
The stock option bonuses granted to Named Officers were: Mr. Loyd - 184,121
shares; Mr. Webster - 212,447 shares; Mr. Nagle - 74,339 shares; and Mr.
Bakonyi - 90,819 shares. In addition to the options granted to the Named
Officers, the Company granted an aggregate of 240,960 options to other
executive officers who are not Named Officers.
Stock-Based Incentives
The Committee believes that it is essential to align the interests of the
executives and other management personnel responsible for the growth of the
Company with the interest of the Company's stockholders. The Committee
believes this alignment is furthered through the provision of stock-based
incentives.
During 1998, no executive officers were awarded stock options except for
Mr. Swanson, who was awarded options in accordance with the terms of the
merger agreement between the Company and Cliffs Drilling Company. See
"Employment Contracts - Cliffs Drilling Company." However, the Committee
recommended, and the Board approved awards of stock options as bonuses for
1998 performance, as described above. The Committee is evaluating the
award of stock based incentives, such as restricted stock awards and stock
options. Prior to the Merger, both Falcon and R&B had used stock options
as part of their incentive compensation plans, and R&B had also used
restricted stock awards as part of its incentive compensation plans. The
Committee recommended and the Board granted both stock options and
restricted stock awards during 1998 to non-executive personnel. The
Company expects in the future to recommend the grant of stock options,
restricted stock awards, or both, to executive officers.
Chief Executive Officer Compensation and Corporate Performance for Fiscal
Year 1998
In determining the compensation of Mr. Steven A. Webster, the Chief
Executive Officer of the Company, the Committee considered anticipated
operating and financial results for 1998 and the compensation received by
chief executive officers of comparable companies in the drilling industry.
Based on that review and assessment, the Committee recommended and Board
approved (with Mr. Webster not participating), Mr. Webster's salary of
$639,000 for 1998. The Board also approved a bonus to Mr. Webster for 1998
consisting of stock options, as described above.
Summary
The Committee believes that the total compensation program for executive
officers of the Company is competitive with the compensation programs
provided by other corporations with which the Company competes. The
Committee also believes that the stock-based incentives provide
opportunities to participants that are consistent with the returns that are
generated on the behalf of the Company's stockholders.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986, as amended generally
disallows a corporation's deduction for remuneration paid to its chief
executive officer and its four other highest compensated officers in excess
of $1,000,000 per person effective January 1, 1994. In connection with its
policies relating to executive compensation, the Compensation Committee
considered the implications of Section 162(m) along with the various other
factors described elsewhere in this report in making its executive
compensation determinations in 1998.
PURNENDU CHATTERJEE
CHARLES A. DONABEDIAN
DOUGLAS A.P. HAMILTON
ROBERT L. SANDMEYER
Performance Graph
The following graph sets forth the Company's total cumulative stockholder
return as compared to the S&P 500 index (the "S&P Index") and the composite
peer index (the "Peer Index"), for the period January 1, 1998 (the date the
Company became publicly traded) through March 31, 1999.
The Peer Index is comprised of Atwood Oceanics, Inc.; Diamond Offshore
Company; Ensco International, Inc.; Global Marine, Inc.; Marine Drilling
Co., Inc.; Noble Drilling Corporation; Pride International Inc.; Rowan
Companies, Inc.; and Transocean Offshore, Inc.
Total stockholder return assumes $100 unvested at the beginning of the
period in the common stock of the Company, the stocks represented in the
S&P Index and the stocks represented in the Peer Index, respectively.
Total return also assumes reinvestment of dividends; the Company did not
pay dividends on its common stock during the period covered by the graph.
[R&B Falcon's performance graph appears here. See table below for data.]
Historical stock price performance should not be relied upon as
indicative of future stock price performance.
The following table shows the values that are displayed on the graph:
01/01/98 03/31/98 06/30/98 09/30/98 12/31/98 03/31/99
-------- -------- -------- -------- -------- --------
The Company $100 $83 $64 $34 $21 $24
S&P Index $100 $114 $118 $106 $129 $135
Peer Index $100 $97 $76 $49 $42 $53
(nine stocks)
Pension Plan Table
R&B had a defined benefit pension plan prior to the Merger; Falcon did
not. The Company adopted the R&B pension plan for R&B Falcon effective
January 1, 1999. The following is a description of the R&B Falcon U.S.
Pension Plan.
Assuming that an employee is entitled to an annual social security
benefit of $16,092 at normal retirement date and has an annual social
security covered compensation amount of $31,128, the Pension Plan Table
illustrates the amount of annual pension benefits payable by R&B Falcon
under a Five Year Certain & Life annuity basis to a person in specified
average compensation and years-of-service classifications.
Years of Service
36-Month Average -----------------------------------------------
Remuneration 15 20 25 30 35
------------ -- -- -- -- --
$50,000 11,965 15,953 19,942 23,930 27,918
100,000 26,965 35,953 44,942 53,930 62,918
150,000 41,965 55,953 69,942 83,930 97,918
200,000 56,965 75,953 94,942 113,930 132,918
250,000 71,965 95,953 119,942 143,930 167,918
300,000 86,965 115,953 144,942 173,930 202,918
350,000 101,965 135,953 169,942 203,930 237,918
400,000 116,965 155,953 194,942 233,930 272,918
450,000 131,965 175,953 219,942 263,930 307,918
500,000 146,965 195,953 244,942 293,930 342,918
Retirement benefits under the R&B Falcon U.S. Pension Plan ("U.S. Plan")
are based on an employee's highest average monthly base compensation for 36
consecutive months of credited service, integrating a portion of the
primary social security benefit payable to the employee. The benefit is
based on the higher of three formulas, A, B and C, as outlined below.
Formula A is based on pay, service and primary social security benefit
frozen at December 31, 1988, while Formulas B and C are based on pay,
service and social security covered compensation as of the date of
termination of employment. Formula A is as follows: 2.75% of an employee's
average monthly compensation multiplied by the number of years of credited
service for the first 20 years; plus 2% of an employee's average monthly
compensation multiplied by the number of years of credited service from 21
through 25 years; plus 1.50% of an employee's average monthly compensation
multiplied by the number of years of credited service from 26 through 30
years; plus 1% of an employee's average monthly compensation multiplied by
the number of years of credited service from 31 through 35 years; plus .50%
of an employee's average monthly compensation multiplied by the number of
years of credited service from 36 through 40 years; minus 50% of an
employee's primary social security benefit. Formula B is as follows: 2.4%
of an employee's average monthly compensation multiplied by the number of
years of credited service through December 31, 1991 (up to a maximum of 35
years); minus .65% of an employee's social security covered compensation
multiplied by the number of years of credited service through December 31,
1991 (up to a maximum of 35 years); plus an amount determined under Formula
C based solely on the number of years credited service which accrued after
December 31, 1991. Formula C is as follows: 2.0% of an employee's average
monthly compensation multiplied by the number of years of credited service
for the first 35 years; minus .65% of an employee's social security covered
compensation multiplied by the number of years of credited service for the
first 35 years. This benefit structure is the result of a plan amendment
effective January 1, 1989. The formula in effect prior to this date was
Formula A, based on pay, service and primary social security benefit at
date of retirement. Compensation covered by the U.S. Plan consists of base
wages to the maximum extent allowed under current laws but not to exceed
$170,000 (or an amount equal to the difference between $200,000 for 1989
and succeeding years (as adjusted at the same time and manner provided
under Code Section 415(d) and $100,000, or the maximum annual compensation
limit provided for in Code Section 401(a)(17)). Messrs. Loyd, and Nagle
had approximately seven and 23 years, respectively of credited service
under the U.S. Plan. Mr. Bakonyi had approximately 21 total years of
credited service under the U.S. and Non-U.S. Plans. These three officers
will be entitled to receive the estimated annual benefits based upon their
1998 salary amounts set forth under "Salary" in the Summary Compensation
Table. Messrs. Webster and Swanson did not have any credited service as of
12/31/98.
Assuming that an employee is entitled to an annual social security
benefit of $16,092 at normal retirement date and has an annual social
security covered compensation amount of $31,128, the Pension Plan Table
illustrates the amount of annual pension benefits payable by the Company
under the U.S. Plan and the Retirement Benefit Replacement Plan (described
below) under Formula C on a Five Year Certain & Life annuity basis to a
person in specified average compensation and years-of-service
classifications.
The maximum pension benefit allowable under current laws for person who
retired at age 65 in 1998 is $130,000. The U.S. Plan limits the annual
compensation that is considered for plan purposes to $160,000 for 1998.
Retirement benefits based on pay in excess of the foregoing limitations
will be paid pursuant to the Reading & Bates Retirement Benefit Replacement
Plan is designed to restore to affected employees the dollar amount of
pension and pension-related benefits which could no longer be provided
under the U.S. Plan as a result of the compensation limitation contained in
the U.S. Plan and benefits payable under both the U.S. Plan and the
Retirement Benefit Replacement Plan.
Retirement benefits under the R&B Falcon Non-U.S. Pension Plan ("Non-U.S.
Plan") are determined under formulas similar to those detailed above as the
U.S. Plan's Formulas A and C. Formula A under the Non-U.S. Plan is
identical to Formula A under the U.S. Plan except that pay, service and
primary social security benefit are frozen at December 31, 1990; plus an
amount determined under Formula C based solely on the number of years of
credited service which accrued after December 31, 1990 is added to the
benefit determined. Formula C for the Non-U.S. Plan is identical to
Formula C under the U.S. Plan. Compensation covered under the Non-U.S.
Plan is the same as that covered by the U.S. Plan without the monetary
limits. The Pension Plan Table can also be used to illustrate the amount
of annual pension benefits payable by the Company under Formula C of the
Non-U.S. Plan.
Section 16 Compliance
The Company believes that during 1998 all filing requirements under
Section 16(a) of the Securities Exchange Act of 1934 were met with respect
to the Company except for the following:
Dr. Porter, a director, was approximately one month late filing a Form 4
for September 1998, reporting the purchase of an aggregate of 4,750 shares
of the Company.
THE EMPLOYEE PLAN PROPOSAL
The Employee Plan is designed to help the Company attract and retain
key executives and other selected employees and reward them for making
major contributions to the success of the Company and its subsidiaries.
These objectives are to be accomplished by making awards under the Employee
Plan and thereby providing participants with a proprietary interest in the
growth and performance of the Company and its subsidiaries. The Board of
Directors has adopted the Employee Plan effective April 7, 1999, subject to
the approval by the holders of a majority of shares of Common Stock present
or represented, and entitled to vote at a meeting of the Company's
stockholders. If the Employee Plan is not so approved by the stockholders
of the Company prior to June 30, 1999, the Employee Plan will terminate.
At March 24, 1999, there were available for awards under existing plans
approximately 3,379,518 shares of Common Stock which shares will remain
available for award.
The following is a summary of the principal features of the Employee
Plan. This summary is qualified in its entirety by reference to the
complete text of the Employee Plan, which is set forth in Exhibit 99.A
hereto.
Eligible Employees
Employees of the Company and its subsidiaries eligible for an award
under the Employee Plan are those whose performance, in the judgment of the
committee administering the Employee Plan, can have a significant effect on
the success of the Company and its subsidiaries.
Shares Subject to Plan
There shall be available for awards granted wholly or partly in
Common Stock (including rights or options which may be exercised for or
settled in Common Stock) during the term of the Employee Plan an aggregate
of 6,500,000 shares of Common Stock. Common Stock related to awards that
are forfeited or terminated, expire unexercised, are settled in cash in
lieu of stock or in a manner such that all or some of the shares covered by
an award are not issued to a participant, or are exchanged for awards that
do not involve Common Stock, shall immediately become available for awards
hereunder.
Administration of the Employee Plan
The Employee Plan shall be administered by a committee designated by
the Board of Directors to administer the Employee Plan (as used under the
heading "The Employee Plan Proposal," the "Committee", which committee may
be the Compensation Committee), which shall have full and exclusive power
to interpret the Employee Plan, to grant waivers of the restrictions set
forth in the Employee Plan and to adopt such rules, regulations and
guidelines for carrying out the Employee Plan as it may deem necessary or
proper. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Employee Plan or in any award in the
manner and to the extent the Committee deems necessary or desirable to
carry it into effect.
The Committee may delegate to senior officers of the Company its
duties under the Employee Plan, except that the Committee may not delegate
to any person the authority to grant awards to, or take other action with
respect to, participants who are subject to Section 16 of the Exchange Act.
Types of Awards
The Committee shall determine the type or types of awards to be made
to each participant under the Employee Plan. Each award made thereunder
shall be embodied in an award agreement, which shall contain such terms,
conditions and limitations as shall be determined by the Committee in its
sole discretion. Awards may consist of those listed in this paragraph and
may be granted singly or in combination.
Stock Option. An award may consist of a right to purchase a specified
number of shares of Common Stock at a specified price that is not less than
the greater of the par value of the Common Stock, or the fair market value
of the Common Stock on the date of grant of the option. A stock option may
be in the form of an incentive stock option ("ISO") which, in addition to
being subject to applicable terms, conditions and limitations established
by the Committee, complies with Section 422 of the Code.
Stock Appreciation Right. An award may consist of a right to receive a
payment, in cash or Common Stock, equal to the excess of the fair market
value or other specified valuation of a specified number of shares of
Common Stock on the date the stock appreciation right ("SAR") is exercised
over a specified strike price as set forth in the applicable award
agreement.
Stock Award. An award may consist of Common Stock or may be denominated in
units of Common Stock. All or part of any stock award may be subject to
conditions established by the Committee, and set forth in the award
agreement, which may include, but are not limited to, continuous service
with the Company and its subsidiaries, achievement of specific business
objectives, increases in specified indices, attaining growth rates and
other comparable measurements of performance.
Cash Award. An award may be denominated in cash with the amount of the
eventual payment subject to future service and such other restrictions and
conditions as may be established by the Committee, and set forth in the
award agreement.
Payment of Awards
Payment of awards may be made in the form of cash or Common Stock or
combinations thereof and may include such restrictions as the Committee
shall determine, including in the case of Common Stock, restrictions on
transfer and forfeiture provisions. With the approval of the Committee,
payments may be deferred, either in the form of installments or a future
lump sum payment. The Committee may permit selected participants to elect
to defer payments of some or all types of awards in accordance with
procedures established by the Committee. Dividends or dividend equivalent
rights may be extended to and made part of any award denominated in Common
Stock or units of Common Stock. At the discretion of the Committee, a
participant may be offered an election to substitute an award for another
award or awards of the same or different type. However, no award of stock
options shall be repriced without stockholder approval if at the effective
date of such repricing the exercise price is greater than the fair market
value of the stock.
The price at which shares of Common Stock may be purchased under a
stock option shall be paid in full at the time of exercise in cash or, if
permitted by the Committee, by means of tendering Common Stock or
surrendering another award, including restricted stock, valued at fair
market value on the date of exercise, or any combination thereof. The
Committee shall determine acceptable methods for tendering Common Stock or
other awards to exercise a stock option as it deems appropriate. The
Committee may provide for loans from the Company to permit the exercise or
purchase of awards and may provide for procedures to permit the exercise or
purchase of awards by use of the proceeds to be received from the sale of
Common Stock issuable pursuant to an award. Unless otherwise provided in
the applicable award agreement, in the event shares of restricted stock are
tendered as consideration for the exercise of a stock option, a number of
the shares issued upon the exercise of the stock option, equal to the
number of shares of restricted stock used as consideration therefor, shall
be subject to the same restrictions as the restricted stock so submitted as
well as any additional restrictions that may be imposed by the Committee.
Tax Withholding
The Company shall have the right to deduct applicable taxes from any
award payment and withhold, at the time of delivery or vesting of shares of
Common Stock under the Employee Plan, an appropriate number of shares of
Common Stock for payment of taxes required by law or to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for withholding of such taxes. The Committee may also permit
withholding to be satisfied by the transfer to the Company of shares of
Common Stock theretofore owned by the holder of the award with respect to
which withholding is required. If shares of Common Stock are used to
satisfy tax withholding, such shares shall be valued based on the fair
market value when the tax withholding is required to be made.
Amendment or Termination
The Board of Directors may amend or terminate the Employee Plan for
any other purpose permitted by law except that (i) no amendment or
alteration that would impair the rights of any participant under any award
granted to such participant shall be made without such participant's
consent and (ii) no amendment or alteration shall be effective prior to
approval by the Company's stockholders to the extent such approval is then
required pursuant to Rule 16b-3 in order to preserve the applicability of
any exemption provided by such rule to any award then outstanding (unless
the holder of such award consents) or to the extent stockholder approval is
otherwise required by applicable legal requirements.
Assignability
No award or any other benefit under the Employee Plan constituting a
stock option or other derivative security within the meaning of Rule 16b-3
shall be assignable or otherwise transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. However, an officer or director may
designate a beneficiary for any award made to such officer or director.
Adjustments
In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of
Common Stock or capital reorganization or reclassification or other
transaction involving an increase or reduction in the number of outstanding
shares of Common Stock, the Committee may adjust proportionally (i) the
number of shares of Common Stock reserved under the Employee Plan and
covered by outstanding awards denominated in Common Stock or units of
Common Stock, (ii) the exercise or other price in respect of such awards,
and (iii) the appropriate fair market value and other price determinations
of such awards. In the event of any consolidation or merger of the Company
or the adoption by the Company of a plan of exchange affecting the Common
Stock or any distribution to holders of Common Stock of securities or
property (other than normal cash dividends or dividends payable in Common
Stock), the Committee shall make such adjustments in respect of the Plan or
any outstanding awards as it may deem equitable, including adjustments to
avoid fractional shares, to give proper effect to such event. In the event
the Company is involved in a merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation, the Committee shall be
authorized to issue or assume stock options, regardless of whether in a
transaction to which Section 425(a) of the Code applies, by means of
substitution of new options for previously issued options or an assumption
of previously issued options, or to make provision for the acceleration of
the exercisability of, or lapse of restrictions with respect to, awards and
the termination of unexercised options in connection with such transaction.
Unfunded Plan
The Employee Plan will be unfunded. Although bookkeeping accounts
may be established with respect to participants who are entitled to cash,
Common Stock or rights thereto under the Employee Plan, any such accounts
shall be used merely as a bookkeeping convenience. The Company shall not be
required to segregate any assets that may at any time be represented by
cash, Common Stock or rights thereto, nor shall the Employee Plan be
construed as providing for such segregation.
Federal Income Tax Consequences
This description of certain Federal income tax consequences of
options under the Employee Plan is based on Federal tax laws currently in
effect and does not purport to be a complete description of such Federal
tax consequences under all circumstances.
There are no Federal income tax consequences either to the optionee
or to the Company upon the grant of an ISO or a nonqualified stock option
("NQSO"). On the exercise of an ISO, the optionee will not recognize any
income and the Company will not be entitled to a deduction (although such
exercise may give rise to alternative minimum tax liability for the
optionee). Generally, if the optionee disposes of shares acquired upon
exercise of an ISO within two years of the date of grant or one year of the
date of exercise, the optionee will recognize ordinary income, and the
Company will be entitled to a deduction, equal to the excess of the fair
market value of the shares on the date of exercise over the option price
(limited generally to the gain on the sale). The balance of any gain, and
any loss, will be generally treated as a capital gain or loss to the
optionee. If the shares are disposed of after the foregoing holding
requirements are met, the Company will not be entitled to any deduction,
and the entire gain or loss for the optionee will be treated as a capital
gain or loss.
On exercise of an NQSO, the excess of the date-of-exercise fair
market value of the shares acquired over the option price will generally be
taxable to the optionee as ordinary income and deductible by the Company.
The disposition of shares acquired upon exercise of a NQSO will generally
result in a capital gain or loss for the optionee, but will have no tax
consequences for the Company.
No income will be recognized by a participant in connection with the
grant of an SAR. When the SAR is exercised, the participant normally will
be required to include as taxable ordinary income in the year of exercise
an amount equal to the amount of any cash and the fair market value of any
shares of Common Stock received pursuant to the exercise.
A recipient of restricted stock generally will be subject to tax at
ordinary income rates on the fair market value of the restricted stock
reduced by any amount paid by the recipient at such time as the shares are
no longer subject to a risk of forfeiture or restrictions on transfer for
purposes of Section 83 of the Code. Further, any dividends received with
respect to restricted stock that are subject at that time to a risk of
forfeiture or restrictions on transfer generally will be treated as
compensation that is taxable as ordinary income to the recipient. However,
a recipient who so elects under Section 83(b) of the Code within 30 days of
the date of transfer of shares will have taxable ordinary income on the
date of transfer of the shares equal to the excess of the fair market value
of the shares (determined without regard to the risk of forfeiture or
restriction on transfer) over any purchase price paid for the shares and
any dividend received while the shares are subject to a substantial risk of
forfeiture or restrictions will be treated as dividend income to the
recipient.
The recipient of an unrestricted stock grant generally will be
subject to tax at ordinary income rates on the fair market value of
nonrestricted shares of Common Stock on the date that such shares are
transferred to the recipient reduced by any amount paid by the recipient,
and the capital gain or loss holding period for such shares will also
commence on that date.
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction
for federal income tax purposes provided that, among other things, (i) the
income meets the test of reasonableness, is an ordinary and necessary
business expense and is properly reported by the Company, (ii) is not an
"excess parachute payment" within the meaning of Section 280G of the Code
and (iii) if the $1.0 million limitation of Section 162(m) of the Code is
exceeded, the compensation qualifies as "performance based" under such
section.
Board Recommendation
The Board of Directors has unanimously approved the 1999 Employee
Long-Term Incentive Plan and recommends that the stockholders vote "FOR"
the Employee Plan Proposal.
THE DIRECTOR PLAN PROPOSAL
The Director Plan is designed to help the Company attract and retain non-
employee directors by rewarding them for making major contributions to the
success of the Company and its subsidiaries. The Board of Directors has
adopted the Director Plan effective March 15, 1999, subject to the approval
by the holders of a majority of shares of Common Stock present, or
represented, and entitled to vote at a meeting of the Company's
stockholders. If the Director Plan is not so approved by the stockholders
of the Company prior to June 30, 1999, the Director Plan will terminate.
The following is a summary of the principal features of the Director
Plan. This summary is qualified in its entirety by reference to the
complete text of the Director Plan, which is set forth in Exhibit 99.B
hereto.
General
Only non-employee directors are eligible for awards under the
Director Plan. There are currently eight non-employee directors of the
Company. There shall be available for awards granted wholly or partly in
Common Stock (including rights or options which may be exercised for or
settled in Common Stock) during the term of the Director Plan an aggregate
of 300,000 shares of Common Stock. Common Stock related to awards that are
forfeited or terminated, expire unexercised, are settled in cash in lieu of
stock or in a manner such that all or some of the shares covered by an
award are not issued to a participant, or are exchanged for awards that do
not involve Common Stock, shall immediately become available for awards
hereunder. There are currently 344,400 shares available for grant under
prior director long-term incentive plans.
Administration of the Director Plan
The Director Plan shall be administered by a committee comprised of
non-employee directors (as used under the heading "The Director Plan
Proposal," the "Committee"), which shall have full and exclusive power to
interpret the Director Plan, to grant waivers of the restrictions set forth
in the Director Plan and to adopt such rules, regulations and guidelines
for carrying out the Director Plan as it may deem necessary or proper. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Director Plan or in any award in the manner and to the
extent the Committee deems desirable to carry it into effect.
Types of Awards
The Committee shall determine the type or types of awards to be made
to each participant under the Director Plan. Each award made thereunder
shall be embodied in an award agreement, which shall contain such terms,
conditions and limitations as shall be determined by the Committee in its
sole discretion. Awards may consist of those listed in this paragraph and
may be granted singly or in combination.
Stock Option. An award may consist of a right to purchase a specified
number of shares of Common Stock at a specified price that is not less than
the greater of the par value of the Common Stock, or the fair market value
of the Common Stock on the date of grant of the option.
Stock Award. An award may consist of Common Stock or may be denominated in
units of Common Stock. All or part of any stock award may be subject to
conditions established by the Committee, and set forth in the award
agreement, which may include, but are not limited to, continuous service
with the Company and its subsidiaries, achievement of specific business
objectives, increases in specified indices, attaining growth rates and
other comparable measurements of performance.
Payment of Awards
Payment of awards may include such restrictions as the Committee
shall determine, including in the case of Common Stock, restrictions on
transfer and forfeiture provisions. Dividends or dividend equivalent rights
may be extended to and made part of any award denominated in Common Stock
or units of Common Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred
cash payments and dividend equivalents for deferred payment denominated in
Common Stock or units of Common Stock. At the discretion of the Committee,
a participant may be offered an election to substitute an award for another
award or awards of the same or different type. However, no award of stock
options shall be repriced without stockholder approval if at the effective
date of such repricing the exercise price is greater than the fair market
value of the stock.
The price at which shares of Common Stock may be purchased under a
stock option shall be paid in full at the time of exercise in cash or, if
permitted by the Committee, by means of tendering Common Stock or
surrendering another award, including restricted stock, valued at fair
market value on the date of exercise, or any combination thereof. The
Committee shall determine acceptable methods for tendering Common Stock or
other awards to exercise a stock option as it deems appropriate. The
Committee may provide for loans from the Company to permit the exercise or
purchase of awards and may provide for procedures to permit the exercise or
purchase of awards by use of the proceeds to be received from the sale of
Common Stock issuable pursuant to an award. Unless otherwise provided in
the applicable award agreement, in the event shares of restricted stock are
tendered as consideration for the exercise of a stock option, a number of
the shares issued upon the exercise of the stock option, equal to the
number of shares of restricted stock used as consideration therefor, shall
be subject to the same restrictions as the restricted stock so submitted as
well as any additional restrictions that may be imposed by the Committee.
Tax Withholding
To the extent required by applicable law, the Company shall have the
right to deduct applicable taxes from any award payment and withhold, at
the time of delivery or vesting of shares of Common Stock under the
Director Plan, an appropriate number of shares of Common Stock for payment
of taxes required by law or to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for withholding of
such taxes. The Committee may also permit withholding to be satisfied by
the transfer to the Company of shares of Common Stock theretofore owned by
the holder of the award with respect to which withholding is required. If
shares of Common Stock are used to satisfy tax withholding, such shares
shall be valued based on the fair market value when the tax withholding is
required to be made.
Amendment or Termination
The non-employee members of Board of Directors may amend or
terminate the Director Plan for any purpose permitted by law except that
(i) no amendment or alteration that would impair the rights of any
participant under any award granted to such participant shall be made
without such participant's consent and (ii) no amendment or alteration
shall be effective prior to approval by the Company's stockholders to the
extent stockholder approval is required by applicable legal requirements.
Assignability
No award or any other benefit under the Director Plan constituting a
stock option or other derivative security within the meaning of Rule 16b-3
shall be assignable or otherwise transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. However, a director may designate a
beneficiary for any award made to such director.
Adjustments
In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of
Common Stock or capital reorganization or reclassification or other
transaction involving an increase or reduction in the number of outstanding
shares of Common Stock, the Committee may adjust proportionally (i) the
number of shares of Common Stock reserved under the Employee Plan and
covered by outstanding awards denominated in Common Stock or units of
Common Stock, (ii) the exercise or other price in respect of such awards
and (iii) the appropriate fair market value and other price determinations
of such awards. In the event of any consolidation or merger of the Company
or the adoption by the Company of a plan of exchange affecting the Common
Stock or any distribution to holders of Common Stock of securities or
property (other than normal cash dividends or dividends payable in Common
Stock), the Committee shall make such adjustments in respect of the Plan or
any outstanding awards as it may deem equitable, including adjustments to
avoid fractional shares, to give proper effect to such event. In the event
the Company is involved in a merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation, the Committee shall be
authorized to issue or assume stock options, regardless of whether in a
transaction to which Section 425(a) of the Code applies, by means of
substitution of new options for previously issued options or an assumption
of previously issued options, or to make provision for the acceleration of
the exercisability of, or lapse of restrictions with respect to, awards and
the termination of unexercised options in connection with such transaction.
Unfunded Plan
The Director Plan will be unfunded. Although bookkeeping accounts
may be established with respect to participants who are entitled to Common
Stock or rights thereto under the Director Plan, any such accounts shall be
used merely as a bookkeeping convenience. The Company shall not be required
to segregate any assets that may at any time be represented by Common Stock
or rights thereto, nor shall the Director Plan be construed as providing
for such segregation.
Federal Income Tax Consequences
See discussion under "Federal Income Tax Consequences" under "The
Employee Plan Proposal." No option grant under the Director Plan will
qualify as an ISO.
Recommendation of Board of Directors
The Board of Directors has unanimously approved the 1999 Director Long-
Term Incentive Plan and recommends that the stockholders vote "FOR" the
Director Plan Proposal.
THE ACCOUNTANT PROPOSAL
The Board of Directors has selected Arthur Andersen LLP, independent
auditors, to audit the financial statements of the Company for the 1999
fiscal year. The nomination is being presented to the stockholders for
ratification at the Annual Meeting. Arthur Andersen LLP audited the
Company's financial statements for the 1998 and 1997 fiscal years and were
the auditors for both Falcon and R&B for the 1996 fiscal year of each of
them. A representative of Arthur Andersen LLP is expected to be present at
the Annual Meeting, will have the opportunity to make a statement if he so
desires, and is expected to be available to respond to appropriate
questions.
Recommendation of Board of Directors
The Board of Directors has unanimously approved the appointment of Arthur
Andersen LLP as the Company's auditors for fiscal year 1999 and recommends
that the stockholders vote "FOR" the Accountant Proposal.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The Company's bylaws require written notice to the Company of a
nomination for election as a director (other than a nomination by the
Board) and of the submission of a proposal (other than a proposal by the
Board) for consideration at an annual meeting of shareholders. The notice
must contain certain information concerning the nominating or proposing
shareholder, and the nominee or the proposal, as the case may be, and be
furnished to the Company not less than 60 days or more than 90 days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders. A copy of the applicable bylaw provisions may be obtained,
without charge, upon written request to the Secretary of the company at its
principal executive offices.
In addition, any stockholder who desires to have a proposal included in
the Company's proxy soliciting material related to the Company's 2000
Annual Meeting of Stockholders must so notify the Company in writing no
later than December 26, 1999. Such notice must comply with the
requirements of the Rules and Regulations promulgated by the Securities and
Exchange Commission applicable to such stockholder proposals.
ADDITIONAL INFORMATION
The Company undertakes to provide without charge to each recipient of
this Proxy Statement, upon request of such person, a copy of the Company's
annual report on Form 10-K (including the financial statements and
financial statement schedules) for the year ended December 31, 1998. Such
request should be made to Charles R. Ofner, Vice President, c/o R&B Falcon
Corporation, 901 Threadneedle, Houston, Texas 77079. A copy of any exhibit
to the annual report on Form 10-K will be furnished to any such person upon
request and the payment of the Company's reasonable expenses in furnishing
such exhibit.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy card to vote the
shares they represent as the Board of Directors of the Company may
recommend.
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FORM OF PROXY CARD
R&B FALCON CORPORATION
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints STEVEN A. WEBSTER and ROBERT F. FULTON
(with full power to act without the other and with the power to appoint his
substitute) as the undersigned's proxies to vote, as specified on the
reverse side hereof, all shares of Common Stock of R&B FALCON CORPORATION
(the "Company"), a Delaware corporation, which the undersigned would be
entitled to vote at the Annual Meeting of Stockholders of the Company to be
held at the Luxury Collection Hotel - Houston, 1919 Briar Oaks Lane,
Houston, Texas on Wednesday, May 19, 1999 at 9:00 a.m., local time, and at
any and all adjournments thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED AND DELIVERED, AND NOT PROPERLY
REVOKED, THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED
IN THE MANNER DIRECTED ON THE REVERSE SIDE. IF NO DIRECTION IS MADE, SUCH
SHARES WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED IN ITEM 1 AND
FOR THE PROPOSALS IN ITEMS 2, 3 AND 4.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE
1. ELECTION OF DIRECTORS
[] FOR all nominees [] WITHHOLD NOMINEES: Arnold L. Chavkin
listed at right AUTHORITY to Macko A.E. Laqueur
(except as vote for all William R. Ziegler
indicated to the nominees listed
contrary below) listed at right.
The above persons have been
nominated by the Company.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
__________________________________
2. Proposal by the Company to approve the adoption of the 1999 Employee
Long-Term Incentive Plan.
[] FOR [] AGAINST [] ABSTAIN
3. Proposal by the Company to approve the adoption of the 1999 Director
Long-Term Incentive Plan.
[] FOR [] AGAINST [] ABSTAIN
4. Proposal by the Company to ratify the selection of Arthur Andersen LLP
as the Company's independent auditors for the year ending December 31,
1999.
[] FOR [] AGAINST [] ABSTAIN
5. In their discretion, the Proxies will vote upon such other business as
may properly come before the meeting and any and all adjournments
thereof.
The undersigned hereby revokes any proxy to vote shares of Common Stock of
the Company heretofore given by the undersigned.
Please sign, date and return the proxy card promptly using the enclosed
envelope.
Signature___________________Signature___________________ Dated: _____, 1999
(AND TITLE, IF APPLICABLE) (AND TITLE, IF APPLICABLE)
NOTE: Please date, sign exactly as name appears on this proxy, and
promptly return in the enclosed envelope. When signing as guardian,
executor, administrator, attorney, trustee, custodian, officer, partner or
in any other similar capacity, please give full title. In the case of
joint ownership, each joint owner must sign.
============================================================================
Exhibit 99.A
1999 EMPLOYEE LONG-TERM INCENTIVE PLAN
of
R&B FALCON CORPORATION
1. Objectives. The R&B Falcon Corporation 1999 Employee Long-Term
Incentive Plan (the "Plan") is designed to attract and retain key
executives and other selected employees and reward them for making major
contributions to the success of R&B Falcon Corporation, a Delaware
corporation (the "Company"), and its Subsidiaries (as hereinafter defined).
These objectives are to be accomplished by making awards under the Plan and
thereby providing Participants (as hereinafter defined) with a proprietary
interest in the growth and performance of the Company and its Subsidiaries.
2. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
"Award" means the grant of any form of stock option, stock
appreciation right, stock award or cash award, whether granted singly, in
combination or in tandem, to a Participant pursuant to any applicable
terms, conditions and limitations as the Committee may establish in order
to fulfill the objectives of the Plan.
"Award Agreement" means a written agreement between the Company
and a Participant that sets forth the terms, conditions and limitations
applicable to an Award.
"Board" means the Board of Directors of the Company.
"Common Stock" means the Common Stock, par value $0.01 per share,
of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" means such committee of the Board as is designated by
the Board to administer the Plan. The Committee shall be constituted to
permit the Plan to comply with Rule 16b-3 and shall initially consist of
not less than two members of the Board who are "disinterested persons"
within the meaning of such Rule.
"Director" means an individual serving as a member of the Board.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Fair Market Value" means, as of a particular date, (i) if the
shares of Common Stock are listed on the New York Stock Exchange, the mean
between the highest and lowest sales price per share of Common Stock on
such national securities exchange on such date, or if there shall have been
no such sale so reported on that date, on the last preceding date on which
such sale was so reported, (ii) if the shares of Common Stock are not so
listed but are quoted in the NASDAQ National Market System, the mean
between the highest and lowest sales price per share of Common Stock on the
NASDAQ National Market System on that date, or, if there shall have been no
such sale so reported on that date, on the last preceding date on which
such a sale was so reported or (iii) if the Common Stock is not so listed
or quoted, the mean between the closing bid and asked price on that date,
or, if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as reported by
NASDAQ, or, if not reported by NASDAQ, by the National Quotation Bureau,
Inc.
"Participant" means an employee of the Company or any of its
Subsidiaries to whom an Award has been made under this Plan.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
or any successor rule.
"Subsidiary" means any corporation of which the Company directly
or indirectly owns shares representing more than 50% of the voting power of
all classes or series of capital stock of such corporation which have the
right to vote generally on matters submitted to a vote of the stockholders
of such corporation.
3. Eligibility. Employees of the Company and its Subsidiaries
eligible for an Award under this Plan are those who hold positions of
responsibility and whose performance, in the judgment of the Committee, can
have a significant effect on the success of the Company and its
Subsidiaries.
4. Common Stock Available for Awards. There shall be available for
Awards granted wholly or partly in Common Stock (including rights or
options which may be exercised for or settled in Common Stock) during the
term of this Plan an aggregate of 6,500,000 shares of Common Stock. Awards
the value of which is related to the market value of Common Stock but which
are not granted or payable in Common Stock shall be treated as payable in
Common Stock solely for purposes of the foregoing amount limitation. The
Board of Directors and the appropriate officers of the Company shall from
time to time take whatever actions are necessary to file required documents
with governmental authorities and stock exchanges and transaction reporting
systems to make shares of Common Stock available for issuance pursuant to
Awards. Common Stock related to Awards that are forfeited or terminated,
expire unexercised, are settled in cash in lieu of Stock or in a manner
such that all or some of the shares covered by an Award are not issued to a
Participant, or are exchanged for Awards that do not involve Common Stock,
shall immediately become available for Awards hereunder.
5. Administration. This Plan shall be administered by the
Committee, which shall have full and exclusive power to interpret this
Plan, to grant waivers of the restrictions set forth in this Plan and to
adopt such rule, regulations and guidelines for carrying out this Plan as
it may deem necessary or proper, all of which powers shall be exercised in
the best interests of the Company and in keeping with the objectives of
this Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any Award in the manner and
to the extent the Committee deems necessary or desirable to carry it into
effect. Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute
discretion and shall be final, conclusive and binding on all parties
concerned. No member of the Committee or officer of the Company to whom it
has delegated authority in accordance with the provisions of Paragraph 6 of
this Plan shall be liable for anything done or omitted to be done by him or
her, by any member of the Committee or by any officer of the Company in
connection with the performance of any duties under this Plan, except for
his or her own willful misconduct or as expressly provided by statute.
6. Delegation of Authority. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties
under this Plan pursuant to such conditions or limitations as the Committee
may establish, except that the Committee may not delegate to any person the
authority to grant Awards to, or take other action with respect to,
Participants who are subject to Section 16 of the Exchange Act.
7. Awards. The Committee shall determine the type or types of
Awards to be made to each Participant under this Plan. Each Award made
hereunder shall be embodied in an Award Agreement, which shall contain such
terms, conditions and limitations as shall be determined by the Committee
in its sole discretion and shall be signed by the Participant and by the
Chief Executive Officer or any Vice President of the Company for and on
behalf of the Company. Awards may consist of those listed in this
Paragraph 7 and may be granted singly, in combination or in tandem. Awards
may also be made in combination or in tandem with, in replacement of, or as
alternatives to, grants or rights under this Plan or any other employee
plan of the Company or any of its Subsidiaries, including the plan of any
acquired entity. An Award may provide for the granting or issuance of
additional, replacement or alternative Awards upon the occurrence of
specified events, including the exercise of the original Award.
Notwithstanding anything to the contrary in the Plan or any Award
Agreement, any shares of Common Stock received by a Participant who is an
officer or director of the Company pursuant to an Award hereunder (other
than shares of Common Stock received in connection with the Participant's
death, disability, retirement or termination of employment or as required
to be made pursuant to a provision of the Code) must be held by such
officer or director for a period of six months following such acquisition
[such condition may be satisfied with respect to a derivative security (as
defined in Rule 16b-3) if at least six months elapse from the date of
acquisition of the derivative security to the date of disposition of the
derivative security (other than upon exercise or conversion) or its
underlying security].
(a) Stock Option. An Award may consist of a right to purchase a
specified number of shares of Common Stock at a specified price that is not
less than the greater of the par value of the Common Stock, or the Fair
Market Value, on the date of grant of the option. A stock option may be in
the form of an incentive stock option ("ISO") which, in addition to being
subject to applicable terms, conditions and limitations established by the
Committee, complies with Section 422 of the Code.
(b) Stock Appreciation Right. An Award may consist of a right to
receive a payment, in cash or Common Stock, equal to the excess of the Fair
Market Value or other specified valuation of a specified number of shares
of Common Stock on the date the stock appreciation right ("SAR") is
exercised over a specified strike price as set forth in the applicable
Award Agreement.
(c) Stock Award. An Award may consist of Common Stock or may be
denominated in units of Common Stock. All or part of any stock award may
be subject to conditions established by the Committee, and set forth in the
Award Agreement, which may include, but are not limited to, continuous
service with the Company and its Subsidiaries, achievement of specific
business objectives, increases in specified indices, attaining growth rates
and other comparable measurements of performance. Such Awards may be based
on Fair Market Value or other specified valuations. The certificates
evidencing shares of Common Stock issued in connection with a stock award
shall contain appropriate legends and restrictions describing the terms and
conditions of the restrictions applicable thereto.
(d) Cash Award. An Award may be denominated in cash with the amount
of the eventual payment subject to future service and such other
restrictions and conditions as may be established by the Committee, and set
forth in the Award Agreement, including, but not limited to, continuous
service with the Company and its Subsidiaries, achievement of specific
business objectives, increases in specified indices, attaining growth rates
and other comparable measurements of performance.
8. Payment of Awards.
(a) General. Payment of Awards may be made in the form of cash or
Common Stock or combinations thereof and may include such restrictions as
the Committee shall determine, including in the case of Common Stock,
restrictions on transfer and forfeiture provisions. As used herein,
"Restricted Stock" means Common Stock that is restricted or subject to
forfeiture provisions.
(b) Deferral. With the approval of the Committee, payments may be
deferred, either in the form of installments or a future lump sum payment.
The Committee my permit selected Participants to elect to defer payments of
some or all types of Awards in accordance with procedures established by
the Committee. Any deferred payment, whether elected by the Participant or
specified by the Award Agreement or by the Committee, may be forfeited if
and to the extent that the Award Agreement so provides.
(c) Dividends and Interest. Dividends or dividend equivalent rights
may be extended to and made part of any Award denominated in Common Stock
or units of Common Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred
cash payments and dividend equivalents for deferred payment denominated in
Common Stock or units of Common Stock.
(d) Substitution of Awards. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another
Award or Awards of the same or different type. No Award of stock options
shall be repriced without stockholder approval if at the effective date of
such repricing the exercise price is greater than the Fair Market Value.
9. Stock Option Exercise. The price at which shares of Common Stock
may be purchased under a stock option shall be paid in full at the time of
exercise in cash or, if permitted by the Committee, by means of tendering
Common Stock or surrendering another Award, including Restricted Stock,
valued at Fair Market Value on the date of exercise, or any combination
thereof. The Committee shall determine acceptable methods for tendering
Common Stock or other Awards to exercise a stock option as it deems
appropriate. The Committee may provide for loans from the Company to
permit the exercise or purchase of Awards and may provide for procedures to
permit the exercise or purchase of Awards by use of the proceeds to be
received from the sale of Common Stock issuable pursuant to an Award.
Unless otherwise provided in the applicable Award Agreement, in the event
shares of Restricted Stock are tendered as consideration for the exercise
of a stock option, a number of the shares issued upon the exercise of the
stock option, equal to the number of shares of Restricted Stock used as
consideration therefor, shall be subject to the same restrictions as the
Restricted Stock so submitted as well as any additional restrictions that
may be imposed by the Committee.
10. Tax Withholding. The Company shall have the right to deduct
applicable taxes from any Award payment and withhold, at the time of
delivery or vesting of shares of Common Stock under this Plan, an
appropriate number of shares of Common Stock for payment of taxes required
by law or to take such other action as may be necessary in the opinion of
the Company to satisfy all obligations for withholding of such taxes. The
Committee may also permit withholding to be satisfied by the transfer to
the Company of shares of Common Stock theretofore owned by the holder of
the Award with respect to which withholding is required. If shares of
Common Stock are used to satisfy tax withholding, such shares shall be
valued based on the Fair Market Value when the tax withholding is required
to be made.
11. Amendment, Modification, Suspension or Termination. The Board
may amend, modify, suspend or terminate this Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other
purpose permitted by law except that (i) no amendment or alteration that
would impair the rights of any Participant under any Award granted to such
Participant shall be made without such Participant's consent and (ii) no
amendment or alteration shall be effective prior to approval by the
Company's stockholders to the extent such approval is then required
pursuant to Rule 16b-3 in order to preserve the applicability of any
exemption provided by such rule to any Award then outstanding (unless the
holder of such Award consents) or to the extent stockholder approval is
otherwise required by applicable legal requirements.
12. Termination of Employment. Upon the termination of employment by
a Participant, any unexercised, deferred or unpaid Awards shall be treated
as provided in the specific Award Agreement evidencing the Award. In the
event of such a termination, the Committee may, in its discretion, provide
for the extension of the exercisability of an Award, accelerate the vesting
of an Award, eliminate or make less restrictive any restrictions contained
in an Award or otherwise amend or modify the Award in any manner not
adverse to such Participant.
13. Assignability. No Award or any other benefit under this Plan
constituting a stock option or other derivative security within the meaning
of Rule 16b-3 shall be assignable or otherwise transferable except by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. However, an
officer or director may designate a beneficiary for any Award made to such
officer or director.
14. Adjustments.
(a) The existence of outstanding Awards shall not affect in any
manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the capital stock of the Company or its business or any
merger or consolidation of the Company, or any issue of bonds, debentures,
preferred to prior preference stock (whether or not such issue is prior to,
on a parity with or junior to the Common Stock) or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding of any
kind, whether or not of a character similar to that of the acts or
proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of
Common Stock or capital reorganization or reclassification or other
transaction involving an increase or reduction in the number of outstanding
shares of Common Stock, the Committee may adjust proportionally (i) the
number of shares of Common Stock reserved under this Plan and covered by
outstanding Awards denominated in Common Stock or units of Common Stock;
(ii) the exercise or other price in respect of such Awards; and (iii) the
appropriate Fair Market Value and other price determinations of such
Awards. In the event of any consolidation or merger of the Company with
another corporation or entity or the adoption by the Company of a plan of
exchange affecting the Common Stock or any distribution to holders of
Common Stock of securities or property (other than normal cash dividends or
dividends payable in Common Stock), the Committee shall make such
adjustments or other provisions as it may deem equitable, including
adjustments to avoid fractional shares, to give proper effect to such
event. In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Committee
shall be authorized to issue or assume stock options, regardless of whether
in a transaction to which Section 425(a) of the Code applies, by means of
substitution of new options for previously issued options or an assumption
of previously issued options, or to make provision for the acceleration of
the exercisability of, or lapse of restrictions with respect to, Awards and
the termination of unexercised options in connection with such transaction.
15. Restrictions. No Common Stock or other form of payment shall be
issued with respect to any Award unless the Company shall be satisfied
based on the advice of its counsel that such issuance will be in compliance
with applicable federal and state securities laws. It is the intent of the
Company that this Plan comply in all respects with Rule 16b-3, that any
ambiguities or inconsistencies in the construction of this Plan be
interpreted to give effect to such intention, and that if any provision of
this Plan is found not to be in compliance with Rule 16b-3, such provision
shall be null and void to the extent required to permit this Plan to comply
with Rule 16b-3. Certificates evidencing shares of Common Stock delivered
under this Plan may be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange
Commission, any securities exchange or transaction reporting system upon
which the Common Stock is then listed and any applicable federal and state
securities law. The Committee may cause a legend or legends to be placed
upon any such certificates to make appropriate reference to such
restrictions.
16. Unfunded Plan. Insofar as it provides for Awards of cash, Common
Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping
accounts may be established with respect to Participants who are entitled
to cash, Common Stock or rights thereto under this Plan, any such accounts
shall be used merely as a bookkeeping convenience. The Company shall not
be required to segregate any assets that may at any time be represented by
cash, Common Stock or rights thereto, nor shall this Plan be construed as
providing for such segregation, nor shall the Company nor the Board nor the
Committee be deemed to be a trustee of any cash, Common Stock or rights
thereto to be granted under this Plan. Any liability or obligation of the
Company to any Participant with respect to a grant of cash, Common Stock or
rights thereto under this Plan shall be based solely upon any contractual
obligations that may be created by this Plan and any Award Agreement, and
no such liability or obligation of the Company shall be deemed to be
secured by any pledge or other encumbrance on any property of the Company.
Neither the Company nor the Board nor the Committee shall be required to
give any security or bond for the performance of any obligation that may be
created by this Plan.
17. Governing Law. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall
be governed by and construed in accordance with the laws of the State of
Delaware.
18. Effective Date of Plan. The adoption of this Plan is expressly
conditioned upon the approval by the holders of a majority of shares of
Common Stock present, or represented, and entitled to vote at a meeting of
the Company's stockholders held on or before June 30, 1999. The date of
approval of the adoption of the Plan shall be the "Effective Date" of the
Plan. If the stockholders of the Company should fail so to approve this
Plan prior to such date, this Plan shall terminate and cease to be of any
further force or effect.
Exhibit 99.B
1999 DIRECTOR LONG-TERM INCENTIVE PLAN
of
R&B FALCON CORPORATION
1. Objectives. The R&B Falcon Corporation 1999 Director Long-Term
Incentive Plan (the "Plan") is designed to enable the Company to attract
and retain non-employee directors and reward them for making major
contributions to the success of R&B Falcon Corporation, a Delaware
corporation (the "Company"), and its Subsidiaries (as hereinafter defined).
These objectives are to be accomplished by making awards under the Plan and
thereby providing Participants (as hereinafter defined) with a proprietary
interest in the growth and performance of the Company and its Subsidiaries.
2. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
"Award" means the grant of any form of stock option, stock
appreciation right, stock award or cash award, whether granted singly, in
combination or in tandem, to a Participant pursuant to any applicable
terms, conditions and limitations as the Committee may establish in order
to fulfill the objectives of the Plan.
"Award Agreement" means a written agreement between the Company
and a Participant that sets forth the terms, conditions and limitations
applicable to an Award.
"Board" means the members of the Board of Directors of the
Company not eligible to participate in this Plan.
"Common Stock" means the Common Stock, par value $0.01 per share,
of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" means such committee of the Board as is designated by
the Board to administer the Plan.
"Director" means an individual serving as a member of the Board.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Fair Market Value" means, as of a particular date, (i) if the
shares of Common Stock are listed on the New York StockExchange, the mean
between the highest and lowest sales price per share of Common Stock on
such exchange on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such sale was so
reported, (ii) if the shares of Common Stock are not so listed but are
quoted in the NASDAQ National Market System, the mean between the highest
and lowest sales price per share of Common Stock on the NASDAQ National
Market System on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was
so reported or (iii) if the Common Stock is not so listed or quoted, the
mean between the closing bid and asked price on that date, or, if there are
no quotations available for such date, on the last preceding date on which
such quotations shall be available, as reported by NASDAQ, or, if not
reported by NASDAQ, by the National Quotation Bureau, Inc.
"Participant" means a non-employee member of the board of
directors of the Company to whom an Award is made under this Plan.
"Subsidiary" means any corporation of which the Company directly
or indirectly owns shares representing more than 50% of the voting power of
all classes or series of capital stock of such corporation which have the
right to vote generally on matters submitted to a vote of the stockholders
of such corporation.
3. Eligibility. Awards under this Plan may only be made to non-
employee members of the board of directors of the Company.
4. Common Stock Available for Awards. There shall be available for
Awards granted wholly or partly in Common Stock (including rights or
options which may be exercised for or settled in Common Stock) during the
term of this Plan an aggregate of 300,000 shares of Common Stock. Awards
the value of which is related to the market value of Common Stock but which
are not granted or payable in Common Stock shall be treated as payable in
Common Stock solely for purposes of the foregoing amount limitation. The
board of directors and the appropriate officers of the Company shall from
time to time take whatever actions are necessary to file required documents
with governmental authorities and stock exchanges and transaction reporting
systems to make shares of Common Stock available for issuance pursuant to
Awards. Common Stock related to Awards that are forfeited or terminated,
expire unexercised, are settled in cash in lieu of Stock or in a manner
such that all or some of the shares covered by an Award are not issued to a
Participant, or are exchanged for Awards that do not involve Common Stock,
shall immediately become available for Awards hereunder.
5. Administration. This Plan shall be administered by the
Committee, which shall have full and exclusive power to interpret this
Plan, to grant waivers of the restrictions set forth in this Plan and to
adopt such rules, regulations and guidelines for carrying out this Plan as
it may deem necessary or proper, all of which powers shall be exercised in
the best interests of the Company and in keeping with the objectives of
this Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any Award in the manner and
to the extent the Committee deems necessary or desirable to carry it into
effect. Any decision of the Committee in the interpretation and
administration of this Plan shall lie within its sole and absolute
discretion and shall be final, conclusive and binding on all parties
concerned.
6. Awards. The Committee shall determine the type or types of
Awards to be made to each Participant under this Plan. Each Award made
hereunder shall be embodied in an Award Agreement, which shall contain such
terms, conditions and limitations as shall be determined by the Committee
in its sole discretion and shall be signed by the Participant and by the
Chief Executive Officer or any Vice President of the Company for and on
behalf of the Company. Awards may consist of those listed in this
Paragraph 6 and may be granted singly, in combination or in tandem. Awards
may also be made in combination or in tandem with, in replacement of, or as
alternatives to, grants or rights under this Plan or any other director
plan of the Company or any of its Subsidiaries, including the plan of any
acquired entity. An Award may provide for the granting or issuance of
additional, replacement or alternative Awards upon the occurrence of
specified events, including the exercise of the original Award.
Notwithstanding anything to the contrary in the Plan or any Award
Agreement, any shares of Common Stock received by a Participant pursuant to
an Award hereunder (other than shares of Common Stock received in
connection with the Participant's death, disability, retirement or
termination of employment or as required to be made pursuant to a provision
of the Code) must be held by such Participant for a period of six months
following such acquisition if at least six months elapse from the date of
acquisition of the derivative security to the date of disposition of the
derivative security (other than upon exercise or conversion) or its
underlying security.
(a) Stock Option. An Award may consist of a right to purchase a
specified number of shares of Common Stock at a specified price that is not
less than the greater of the par value of the Common Stock, or the Fair
Market Value of the Common Stock, on the date of grant of the option.
(b) Stock Award. An Award may consist of Common Stock or may be
denominated in units of Common Stock. All or part of any stock award may
be subject to conditions established by the Committee, and set forth in the
Award Agreement, which may include, but are not limited to, continuous
service with the Company and its Subsidiaries, achievement of specific
business objectives, increases in specified indices, attaining growth rates
and other comparable measurements of performance. Such Awards may be based
on Fair Market Value or other specified valuations. The certificates
evidencing shares of Common Stock issued in connection with a stock award
shall contain appropriate legends and restrictions describing the terms and
conditions of the restrictions applicable thereto.
7. Payment of Awards.
(a) General. Payment of Awards may include such restrictions as the
Committee shall determine, including in the case of Common Stock,
restrictions on transfer and forfeiture provisions. As used herein,
"Restricted Stock" means Common Stock that is restricted or subject to
forfeiture provisions.
(b) Dividends. Dividends or dividend equivalent rights may be
extended to and made part of any Award denominated in Common Stock or units
of Common Stock, subject to such terms, conditions and restrictions as the
Committee may establish.
(c) Substitution of Awards. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another
Award or Awards of the same or different type. No Award of stock options
shall be repriced without stockholder approval if at the effective date of
such repricing the exercise price is greater than the Fair Market Value.
8. Stock Option Exercise. The price at which shares of Common Stock
may be purchased under a stock option shall be paid in full at the time of
exercise in cash or, if permitted by the Committee, by means of tendering
Common Stock or surrendering another Award, including Restricted Stock,
valued at Fair Market Value on the date of exercise, or any combination
thereof. The Committee shall determine acceptable methods for tendering
Common Stock or other Awards to exercise a stock option as it deems
appropriate. The Committee may provide for loans from the Company to
permit the exercise or purchase of Awards and may provide for procedures to
permit the exercise or purchase of Awards by use of the proceeds to be
received from the sale of Common Stock issuable pursuant to an Award.
Unless otherwise provided in the applicable Award Agreement, in the event
shares of Restricted Stock are tendered as consideration for the exercise
of a stock option, a number of the shares issued upon the exercise of the
stock option, equal to the number of shares of Restricted Stock used as
consideration therefor, shall be subject to the same restrictions as the
Restricted Stock so submitted as well as any additional restrictions that
may be imposed by the Committee.
9. Tax Withholding. To the extent required by applicable law, the
Company shall have the right to deduct applicable taxes from any Award
payment and withhold, at the time of delivery or vesting of shares of
Common Stock under this Plan, an appropriate number of shares of Common
Stock for payment of taxes required by law or to take such other action as
may be necessary in the opinion of the Company to satisfy all obligations
for withholding of such taxes. The Committee may also permit any such
withholding to be satisfied, to the extent permitted byapplicable law, by
the transfer to the Company of shares of Common Stock theretofore owned by
the holder of the Award with respect to which withholding is required. If
shares of Common Stock are used to satisfy tax withholding, such shares
shall be valued based on the Fair Market Value when the tax withholding is
required to be made.
10. Amendment, Modification, Suspension or Termination. The Board
may amend, modify, suspend or terminate this Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other
purpose permitted by law except that (i) no amendment or alteration that
would impair the rights of any Participant under any Award granted to such
Participant shall be made without such Participant's consent and (ii) no
amendment or alteration shall be effective prior to approval by the
Company's stockholders to the extent such approval is then required
pursuant to Rule 16b-3 in order to preserve the applicability of any
exemption provided by such rule to any Award then outstanding (unless the
holder of such Award consents) or to the extent stockholder approval is
otherwise required by applicable legal requirements.
11. Termination of Service. Upon the termination of service by a
Participant as a member of the board of directors of the Company, any
unexercised, deferred or unpaid Awards shall be treated as provided in the
specific Award Agreement evidencing the Award. In the event of such a
termination, the Committee may, in its discretion, provide for the
extension of the exercisability of an Award, accelerate the vesting of an
Award, eliminate or make less restrictive any restrictions contained in an
Award or otherwise amend or modify the Award in any manner not adverse to
such Participant.
12. Assignability. No Award or any other benefit under this Plan
constituting a stock option or other derivative security within the meaning
of Rule 16b-3 shall be assignable or otherwise transferable except by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. However, a
Participant may designate a beneficiary for any Award made to such
director.
13. Adjustments.
(a) The existence of outstanding Awards shall not affect in any
manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the capital stock of the Company or its business or any
merger or consolidation of the Company, or any issue of bonds, debentures,
preferred to prior preference stock (whether or not such issue is prior to,
on a parity with or junior to the Common Stock) or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding of any
kind, whether or not of a character similar to that of the acts or
proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of
Common Stock or capital reorganization or reclassification or other
transaction involving an increase or reduction in the number of outstanding
shares of Common Stock, the Committee may adjust proportionally (i) the
number of shares of Common Stock reserved under this Plan and covered by
outstanding Awards denominated in Common Stock or units of Common Stock;
(ii) the exercise or other price in respect of such Awards; and (iii) the
appropriate Fair Market Value and other price determinations of such
Awards. In the event of any consolidation or merger of the Company with
another corporation or entity or the adoption by the Company of a plan of
exchange affecting the Common Stock or any distribution to holders of
Common Stock of securities or property (other than normal cash dividends or
dividends payable in Common Stock), the Committee shall make such
adjustments or other provisions as it may deem equitable, including
adjustments to avoid fractional shares, to give proper effect to such
event. In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Committee
shall be authorized to issue or assume stock options, regardless of whether
in a transaction to which Section 425(a) of the Code applies, by means of
substitution of new options for previously issued options or an assumption
of previously issued options, or to make provision for the acceleration of
the exercisability of, or lapse of restrictions with respect to, Awards and
the termination of unexercised options in connection with such transaction.
14. Restrictions. No Common Stock or other form of payment shall be
issued with respect to any Award unless the Company shall be satisfied
based on the advice of its counsel that such issuance will be in compliance
with applicable federal and state securities laws. Certificates
evidencing shares of Common Stock delivered under this Plan may be subject
to such stop transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any securities exchange or transaction
reporting system upon which the Common Stock is then listed and any
applicable federal and state securities law. The Committee may cause a
legend or legends to be placed upon any such certificates to make
appropriate reference to such restrictions.
15. Unfunded Plan. Insofar as it provides for Awards of cash, Common
Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping
accounts may be established with respect to Participants who are entitled
to cash, Common Stock or rights thereto under this Plan, any such accounts
shall be used merely as a bookkeeping convenience. The Company shall not
be required to segregate any assets that may at any time be represented by
cash, Common Stock or rights thereto, nor shall this Plan be construed as
providing for such segregation, nor shall the Company nor the Board nor the
Committee be deemed to be a trustee of any cash, Common Stock or rights
thereto to be granted under this Plan. Any liability or obligation of the
Company to any Participant with respect to a grant of cash, Common Stock or
rights thereto under this Plan shall be based solely upon any contractual
obligations that may be created by this Plan and any Award Agreement, and
no such liability or obligation of the Company shall be deemed to be
secured by any pledge or other encumbrance on any property of the Company.
Neither the Company nor the Board nor the Committee shall be required to
give any security or bond for the performance of any obligation that may be
created by this Plan.
16. Governing Law. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securitieslaws of the United States, shall be
governed by and construed in accordance with the laws of the State of
Delaware.
17. Effective Date of Plan. The adoption of this Plan is expressly
conditioned upon the approval by the holders of a majority of shares of
Common Stock present, or represented, and entitled to vote at a meeting of
the Company's stockholders held on or before June 30, 1999. The date of
approval of the adoption of the Plan shall be the "Effective Date" of the
Plan. If the stockholders of the Company should fail so to approve this
Plan prior to such date, this Plan shall terminate and cease to be of any
further force or effect.
