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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 17, 2000
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 17, 2000, at 9:00 a.m., Houston, Texas time, at the
Omni Houston Hotel, Four Riverway, Houston, Texas 77056, for the following
purposes:
1. To elect four Class III directors for terms expiring in 2003;
2. To act upon a proposal to approve the Company's 2000 Employee
Long-Term Incentive Plan;
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for its 2000 fiscal year; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on March 24,
2000 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 24, 2000
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.
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R&B FALCON CORPORATION
901 Threadneedle
Houston, Texas 77079
_______________
PROXY STATEMENT
_______________
Annual Meeting of Stockholders
May 17, 2000
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 17, 2000,
at 9:00 a.m. Houston, Texas time, or at any adjournment thereof. The Annual
Meeting will be held at the Omni Houston Hotel, Four Riverway, Houston,
Texas 77056. It is anticipated that this Proxy Statement and the enclosed
proxy card will be mailed beginning on or about April 25, 2000 to all
stockholders of record on March 24, 2000.
At the Annual Meeting, stockholders will be asked to elect four Class
III directors for terms expiring in 2003 and to consider and vote upon the
following proposals (the "Proposals"):
(1) a proposal (the "Employee Plan Proposal") to approve the Company's
2000 Employee Long-Term Incentive Plan (the "Employee Plan");
(2) a proposal (the "Accountant Proposal") to ratify the appointment of
Arthur Andersen LLP as the Company's independent auditors for its 2000
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 24, 2000.
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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 four persons to serve as Class III Directors
on the Board of Directors of the Company, (ii) approve the Employee Plan
Proposal, (iii) approve the Accountant Proposal, and (iv) 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, 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, 2000 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, 2000, the
Company had 194,042,927 outstanding shares of Common Stock, constituting
the only class of stock outstanding and entitled to vote at the Annual
Meeting.
The holders of a majority of the outstanding shares of Common Stock as
of March 24, 2000, 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 four 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 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 stockholders of the Company have no dissenters' rights or appraisal
rights in connection with any of the Proposals.
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 1999 fiscal year,
which includes financial statements, was previously mailed to stockholders
of record as of the close of business on March 24, 2000.
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
Four Class III 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 four 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 2003, 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 2002, are Arnold L. Chavkin, Macko A.E. Laqueur, Richard A.
Pattarozzi and William R. Ziegler. The Class III Directors, whose terms
expire in 2000, are Purnendu Chatterjee, Charles A. Donabedian, Paul B.
Loyd, Jr., and Steven A. Webster, and their positions are the ones to be
filled at the Annual Meeting.
Class III Director Nominees - terms would expire in 2003 if elected
Purnendu Chatterjee, age 49, 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 57, 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 53, has been a director of the Company since July
1997, Chairman of the Board since January 6, 1998 and Chief Executive
Officer since April 7, 1999. 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 a director of the Company since its
organization in July 1997. He previously served as President and Chief
Executive Officer of the Company from January 6, 1998 until May 31, 1999.
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.
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 2001 (Class I Directors):
Douglas A.P. Hamilton, age 53, 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 52, 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 70, 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 61 has been a director of the Company since
December 2, 1998 in accordance with the merger agreement pursuant to which
the Company acquired all of the outstanding stock of Cliffs Drilling
Company. He also served as President of Cliffs Drilling Company from
December 1, 1998 until July 31, 1999. 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.
Continuing Directors - terms expire in 2002 (Class II Directors):
Arnold L. Chavkin, age 48, 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 54, 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.
Richard A. Pattarrozzi, age 53, has been a director of the Company since
February 2000. From January 1, 1995 until December 31, 1999 Mr.
Pattarrozzi was employed by Shell Oil Company. He also served as
President and Chief Executive Officer of Shell Deepwater Development Inc.
and Shell Deepwater Production Inc. Mr. Pattarrozzi is a director of Stone
Energy Company.
William R. Ziegler, age 58, 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 Satterlee Stephens Burke & Burke
LLP following its business combination with Parsons & Brown LLP in July
1999 where Mr. Ziegler was previously a partner. Satterlee Stephens Burke
& Burke LLP 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.
Company Board Meetings and Committees
During 1999, the Board of Directors of the Company held ten meetings.
During 1999, all directors of the Company attended at least 75% of the
meetings of the Board, except for Mr. Chavkin who attended six meetings and
Mr. Laqueur, who attended seven meetings.
The Board has established an Audit Committee, a Compensation Committee
and an Executive Advisory Committee (effective April 7, 1999).
During 1999, 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 1999, 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 1999, Messrs. Chatterjee, Donabedian (Chairman), Sandmeyer and
Hamilton 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 1999,
the Compensation Committee met twelve 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, except for Dr. Chatterjee who missed four meetings.
During 1999 Messrs. Loyd, Webster and Donabedian served on the Executive
Advisory Committee since its formation on April 7, 1999. The Executive
Committee acts in an advisory capacity to the Board of Directors regarding
business strategy and other matters. During 1999, the Executive Advisory
Committee met one time, and each member of the Executive Advisory Committee
attended that meeting.
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 1999 were: Dr. Chatterjee - $65,500;
Mr. Chavkin - $54,000; Mr. Donabedian - $77,500; Mr. Hamilton - $75,500;
Mr. Laqueur - $53,500; Mr. Pattarrozzi - $0; Dr. Porter - $56,000; Dr.
Sandmeyer - $72,000; Mr. Swanson - $20,000; Mr. Webster - $29,500; and
Mr. Ziegler - $68,000.
Messrs. Chatterjee ($2,000), Donabedian ($11,000), Sandmeyer ($2,000) and
Hamilton ($2,000) were also paid for work performed by them in formulating
proposed employment contracts for executive officers of the Company.
In 1999, each of the non-employee directors were awarded stock options
with respect to 47,000 shares of Common Stock at an exercise price of
$7.031 per share and 13,000 shares at an exercise price of $10.062 per
share, the exercise price being the average of the high and low price for
the stock on the date of award (April 7 and May 19, 1999, respectively).
The options are fully vested, subject to a six month restriction on
exercise or transfer, and are exercisable over a ten year period.
Effective April 1, 1999, non-employee directors received awards of
restricted stock of Reading & Bates Development Co. ("Devco"), a majority-
owned indirect subsidiary of the Company, aggregating 455,000 shares and
amounting to approximately 3.8% of the outstanding shares of Devco
following an increase in Devco's authorized capital. Each non-employee
director received an amount of 15,000 shares except for Mr. Webster -
120,000 shares, Mr. Donabedian - 60,000 shares, and Messrs. Chavkin,
Kalborg, Laqueur, McLean and Sandmeyer each 40,000 shares.
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 voting capital stock
of the Company) owned of record and beneficially as of March 24, 2000, 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 Table 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 . . . . . . . . . . . . . 352,174 (2) *
Purnendu Chatterjee . . . . . . . . . . 14,780,941 (3) 7.6%
888 Seventh Avenue, Suite 3000
New York, NY 10106
Arnold L. Chavkin . . . . . . . . . . . 714,144 (4) *
Charles A. Donabedian . . . . . . . . . 55,286 (5) *
Douglas A.P. Hamilton . . . . . . . . . 555,740 (6) *
Wayne K. Hillin . . . . . . . . . . . 258,295 (7) *
Macko A.E. Laqueur . . . . . . . . . . . 367,858 (8) *
Paul B. Loyd, Jr. . . . . . . . . . . . 2,229,740 (9) 1.1%
Tim W. Nagle . . . . . . . . . . . . . . 530,068 (10) *
Michael E. Porter . . . . . . . . . . . 69,750 (11) *
Robert L. Sandmeyer . . . . . . . . . . 35,279 (12) *
S-C Rig Investments, L.P. . . . . . . . 12,749,176 6.6%
888 Seventh Avenue, Suite 3000
New York, NY 10106
Bernie W. Stewart . . . . . . . . . . . 399,875 (13) *
Douglas E. Swanson . . . . . . . . . . . 502,779 (14) *
Steven A. Webster . . . . . . . . . . . 6,752,620 (15) 3.5%
William R. Ziegler . . . . . . . . . . . 3,408,365 (16) 1.8%
All Executive Officers and Directors
as a group (17 persons) . . . . . . . 31,503,983 (17) 16.2%
_________________
* Less than one percent.
(1) Based upon a total of 194,042,927 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 331,363 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, (vi) 176,800 shares owned by Furzedown
Trading Limited and (vii) vested options held by Dr. Chaterjee to
acquire 40,000 shares.
(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 9, 2000. Also includes vested options held by Mr. Chavkin to
acquire 57,700 shares.
(5) Includes vested options to acquire 45,900 shares.
(6) Includes vested options to acquire 40,000 shares.
(7) Includes vested options to acquire 219,909 shares.
(8) 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 57,700 shares.
(9) Includes vested options to acquire 2,047,040 shares.
(10) Includes vested options to acquire 479,076 shares.
(11) Includes 1,750 shares held by the Agnes Porter Trust and vested
options to acquire 40,000 shares.
(12) Includes vested options to acquire 25,700 shares.
(13) Includes vested options to acquire 377,375 shares.
(14) Includes 17,099 shares owned by the R&B Falcon U.S. Savings Plan for
the benefit of Mr. Swanson and vested options to acquire 466,600
shares.
(15) 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) 1,510,147
shares issuable upon exercise of vested stock options.
(16) Includes (i) 1,590,600 shares owned by FDI Marine, Inc., of which Mr.
Ziegler is an officer, director and principal stockholder, (ii)
950,372 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)
103,000 shares issuable upon exercise of vested stock options.
(17) See preceding notes. Includes 42,911 shares and options to acquire
448,158 shares held by executive officers who are not named in the
foregoing table.
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, 2000:
Name Age Position
---- --- --------
Paul B. Loyd, Jr. 53 Chairman of the Board and Chief Executive Officer
Andrew Bakonyi 46 President and Chief Operating Officer
Tim W. Nagle 49 Executive Vice President and Chief Financial
Officer
Wayne K. Hillin 58 Senior Vice President and General Counsel
Charles R. Ofner 54 Senior Vice President
Bernie W. Stewart 54 Senior Vice President, Operations - Shallow Water
and Transition Zone Division
Imran Toufeeq 43 Senior Vice President, Operations - International
and Deepwater Division
_____________
Mr. Loyd has been a director of the Company since its organization in
July 1997, has been Chairman of the Board of the Company since January 6,
1998 and has been Chief Executive Officer since May 19, 1999. From 1991
until the Merger, Mr. Loyd was Chief Executive Officer and Chairman of the
Board of R&B.
Mr. Bakonyi has been President of the Company since May 19, 1999. He
previously served as 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. Nagle has been Executive Vice President of the Company since January
1998, and on May 19, 1999 he was also made Chief Financial Officer of the
Company. Mr. Nagle served as Chief Financial Officer of R&B for more than
five years prior to 1998.
Mr. Hillin has been Senior Vice President of the Company since January
1998 and on May 19, 1999 was also made General Counsel of the Company. Mr.
Hillin was Senior Vice President and General Counsel of R&B for more than
five years prior to 1998.
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.
Mr. Stewart has been Senior Vice President, Operations since May 19,
1999. He previously served as 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. Toufeeq has been Senior Vice President, Operations since May 19,
1999. He previously served as Senior Vice President of R&B since January
1998 and was Vice President of R&B Falcon Drilling Co. for more than five
years prior to 1998.
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
August 25, 1999 with each of its executive officers. The agreements
provide for a three year term of employment, with an automatic one year
extension implemented whenever the remaining term is one year (two years in
the case of Mr. Loyd). The contracts provide for such officers to receive
an annual base salary (as of March 24, 2000 the current salaries are: Mr.
Loyd - $639,025; Mr. Bakonyi - $320,012; Mr. Nagle - $292,886; Mr. Hillin
- - $239,625; Mr. Ofner - $225,789; Mr. Stewart - $255,610; and Mr. Toufeeq -
$300,000), 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 salary
reduction program which is applicable to all executives of the Company and
determined by the Board to be necessary and appropriate due to the
Company's then existing financial condition. Each of such agreements
provides that if the officer is terminated by the Board during the
employment term and outside the window period for reasons other than a
suspension for disability or termination for cause, the Company will pay
the officer a lump sum equal to the sum of his base salary for the balance
of the employment term and a bonus equal to the highest annual bonus paid
to the officer since January 1, 1998 (or if higher, his targeted annual
bonus for year in which he is terminated), all long-term incentive awards
shall vest, the Company will continue to provide at its cost all health and
welfare benefits for his spouse and dependents for the remaining employment
term and the Company will pay or reimburse such officer for certain
outplacement services not to exceed 15% of the officer's then current base
salary. For purposes of the employment agreement, "cause" means a
deliberate act of proven fraud having a material adverse impact on the
business or consolidated financial condition or results of operations of
the Company and its subsidiaries, the deliberate and continuing failure to
comply with applicable laws and regulations having a material adverse
impact on the business or consolidated financial condition or results of
operations of the Company and its subsidiaries or conviction of a criminal
offense constituting a felony.
Each of the agreements further provides that each officer has the right
during the employment period to terminate the agreement for good reason or
during a window period. For that purpose "good reason" means the
occurrence of one or more of the following without the officer's written
consent including the assignment of duties materially inconsistent with the
authorities, duties, responsibilities and status as an officer of the
Company or a reduction in same from those in effect the preceding year, the
required relocation of an officer more than 50 miles than the officer's
current primary residence is from the Company's current headquarters, a
reduction in the officer's base salary (except as otherwise permitted by
the agreement), a material reduction in the officer's participation in the
Company's long-term incentive, employee benefit or retirement plans,
policies or arrangements (other than those substantially consistent with
the average level of participation of other executives having position
commensurate with the officer's position) or failure of the Company to
obtain a satisfactory agreement from any successor to the Company to assume
and perform this agreement. A window period for purposes of the agreements
means 12 months prior to the effective date of a change of control that
occurs during the initial three-year term of the employment period (or 6
months with respect to any effective date of change of control occurring
thereafter) and 24 months following the effective date of a change in
control. Upon termination by an officer for good reason during a window
period or by the Company (other than for cause or suspension for
disabilities), the Company will pay three times the officer's then base
salary and highest annual bonus since January 1, 1998 (or the targeted
higher bonus, if higher), unpaid salary and accrued vacation pay through
the date of termination, prorated annual bonus (at highest annual bonus)
for the year of termination, continuation of welfare benefits for three
years, lump sum cash payment of the actuarial present value benefit of all
supplemental retirement plans in which the officer participates,
reimbursement of outplacement costs (limited as per above) and vesting of
all long-term incentive awards.
Under the employment agreements, a change in control is deemed to occur
as of the date when one or more of the following conditions is satisfied:
(i) an individual or entity or any group of persons acting in concert
becomes the beneficial owner, as defined in Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934, of
securities of the Company possessing 25% or more of the voting power for
the election of directors of the Company; (ii) any consolidation, merger or
business combination involving the Company or any securities of the Company
occurs in which the holder of voting securities of the Company prior to
such consolidation, merger or business combination do not hold 60% or more
of the total voting power in an election of directors of the Company (or
other surviving corporation) following such consolidation , merger or
business combination; (iii) during any two-year consecutive period,
individuals constituting directors of the Company at the beginning of the
period cease to constitute a majority thereof unless the election or
nomination of each new director was approved by at least two-thirds of the
directors still in office who were directors of the Company at the
beginning of such period; or (iv) a sale, lease, exchange or other transfer
of all or substantially all of the assets of the Company to a party which
is not controlled by or under common control with the Company.
In the event of the death of an officer during the employment term or
window period, the Company will pay to the officer's surviving spouse or
other designated beneficiary the officer's base salary and highest annual
bonus for the remaining employment term, plus a pro-rata portion of the
highest annual bonus for the year in which death occurs, all long-term
incentive awards shall vest, and the Company will provide at the Company's
cost all health and welfare benefits for the officer's spouse and
dependents for the remaining term of the employment agreement.
In the event of an officer's inability to perform his duties for 180
days during the employment term or window period, the Board may after 30
days written notice suspend their employment and place them on disability
in which then the Company will provide all health and welfare benefits
(including, but not limited to, short and long-term disability benefits and
retirement benefits), plus pay base salary through the date of suspension,
pro-rata portion of the highest annual bonus for the year in which
suspension occurs and all long-term incentive awards will vest (unless the
disability relates to alcohol or drug dependence in which case any long-
term incentive awards will vest ratably).
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.
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, Bakonyi, Nagle and Hillin. 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), Bakonyi ($1,732,500), Nagle ($2,165,625) and Hillin
($1,771,875).
Cliffs Drilling
Douglas E. Swanson had been president of Cliffs Drilling Company since
1992. 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. 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.
Also 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. Under the terms of such employment
agreement, in the event Mr. Swanson's employment with Cliffs Drilling was
terminated other than for cause, prior to the expiration of the three-year
term, Mr. Swanson was 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 provided 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 provided 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 Drilling acquisition. These
options were to vest over a three-year period, with 50% becoming
exercisable on December 1, 1999, and 25% becoming exercisable on each
December 1 thereafter.
Effective July 31, 1999, Mr. Swanson's employment with the Cliffs
Drilling was terminated, and Mr. Swanson received a lump sum payment of
$2,587,500 less deductions required by law in exchange for a three-year non-
competition agreement, vesting of stock options with respect to 300,000
shares and extension of time within which such options can be exercised, as
well as options with respect to an additional 166,600 shares, to the full
term of such options.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following tables set forth the compensation paid for the periods
indicated to the chief executive officer and the other four most highly
compensated executive officers of the Company (the "Named Officers").
Summary Compensation Table
Long-Term
Compensation
-------------------
Stock
Annual Compensation Restricted Option
--------------------------- Stock Grants All Other
Name and Principal Awards # of Compensation
Position Year Salary($) Bonus($)(1) ($)(2) Shares ($)(3)
- ------------------ ---- --------- ----------- ------- --------- ------------
Paul B. Loyd, Jr. 1999 606,549(4) (4) 395,501 1,000,000 30,755
Chairman of the 1998 533,808 (5) 0 0 32,585
Board and Chief 1997 520,000 1,040,000 0 0 5,926,281
Executive Officer
Andrew Bakonyi 1999 294,170(4) (4) 56,500 400,000 10,863
President and 1998 237,273 (5) 0 0 7,966
Chief Operating 1997 174,173 242,000 0 0 1,739,530
Officer
Tim W. Nagle 1999 292,878(4) (4) 113,000 225,000 10,936
Executive Vice 1998 282,302 (5) 0 0 8,341
President and 1997 275,000 302,500 0 0 2,197,407
Chief Financial
Officer
Bernie W. Stewart 1999 255,602(4) (4) 0 262,500 10,765
Senior Vice 1998 255,600 (5) 0 0 9,309
President, 1997 236,705 120,000 0 0 6,677
Operations
Wayne K. Hillin 1999 239,627(4) (4) 28,250 207,000 10,695
Senior Vice 1998 230,975 (5) 0 0 10,102
President and 1997 225,000 247,500 0 0 1,798,929
General Counsel
______________________
(1) Represents annual bonus earned for the fiscal year noted, even if such
bonus was paid in the following fiscal year.
(2) Effective April 1, 1999, Messrs. Loyd, Bakonyi, Nagle and Hillin
received awards of restricted stock of Reading & Bates Development Co.
("Devco"), a wholly-owned indirect subsidiary of the Company,
aggregating 630,000 shares and amounting to approximately 5.3% of the
outstanding shares of Devco following an increase in Devco's
authorized capital. The number of shares of restricted stock awarded
were: Mr. Loyd - 420,000; Mr. Bakonyi - 60,000; Mr. Nagle - 120,000;
and Mr. Hillin - 30,000.
(3) 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 in 1997
to Mr. Loyd ($5,850,000), Mr. Bakonyi ($1,732,500), Mr. Nagle
($2,165,625), and Mr. Hillin ($1,771,875) (See "Contract Termination
Payments" at page 14), 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.
(4) In lieu of salary increases and cash bonuses for 1999, the Company
granted to Messrs. Loyd, Bakonyi, Nagle, Stewart and Hillin, options
to acquire shares at an exercise price of $12.656 per share, the
average of the high and low prices of the Company's stock on January
28, 2000, the date of grant. The options have a ten-year term and
fully vest on July 28, 2000. The number of salary increase and
cash bonus stock options granted were, respectively: Mr. Loyd -
16,653 and 117,600 shares; Mr. Bakonyi - 4,898 and 53,900 shares; Mr.
Nagle - 23,837 and 53,900 shares; Mr. Stewart - 14,824 and 27,800
shares; and Mr. Hillin - 8,612 and 27,800 shares. 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, respectively: Mr. Loyd
- $105,380 and $744,173; Mr. Bakonyi - $30,995 and $341,079; Mr.
Nagle - $150,841 and $341,079; Mr. Stewart - $93,806 and $175,918;
and Mr. Hillin - $54,497 and $175,918. The Black-Scholes Model is a
mathematical formula used to value options on stocks of publicly
traded companies. The grant date theoretical values above assume a
Black-Scholes Model ratio of .5.
(5) In lieu of cash bonuses for 1998, the Company granted to Messrs. Loyd,
Bakonyi, Nagle, Stewart and Hillin, 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 became fully vested on August 11,
1999. The number of options granted were: Mr. Loyd - 184,121; Mr.
Bakonyi - 90,819; Mr. Nagle - 74,339; Mr. Stewart - 62,251; and Mr.
Hillin - 45,497. 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. Bakonyi - $242,940; Mr. Nagle -
$198,856; Mr. Stewart - $166,521; and Mr. Hillin - $121,704. The
Black-Scholes Model is a mathematical formula used to value options
on stocks of publicly traded companies. This formula considers a
number of factors to estimate the option's theoretical value,
including the stock's historical volatility or, if appropriate, an
average of peer companies' volatility, dividend rate, exercise period
of the option and interest rates. The grant date theoretical values
above assume a volatility of 34.6%, a dividend yield of 0%, a 4.94%
risk free rate of return and a six-year option exercise period.
Options Granted and Options Exercised in the Last Fiscal Year
The following tables set forth information regarding stock options
granted to and exercised by the Named Officers during 1999, as well as
options held by such persons as of December 31, 1999, the last day of the
Company's last fiscal year.
Option Grants in Last Fiscal Year
Potential Realizable
Values at Assumed
% of Total Annual Rates of
Number of Options Stock Price
Securities Granted to Appreciation for
Underlying Employees Exercise Option Term($)(1)
Options in Price Expiration --------------------
Name Granted(#) Fiscal Year ($/sh) Date 5% 10%
---- ---------- ----------- ------ -------- --------- ----------
Paul B. Loyd, Jr. 184,121(2) 2.4% 6.250 02/10/09 723,704 1,834,009
920,000 11.7% 7.031 04/06/09 4,068,017 10,309,155
80,000 1.0% 10.062 05/18/09 506,235 1,282,899
Andrew Bakonyi 90,819(2) 1.2% 6.250 02/10/09 356,972 904,638
276,000 3.5% 7.031 04/06/09 1,220,405 3,092,746
124,000 1.6% 10.062 05/18/09 784,664 1,988,493
Tim W. Nagle 74,339(2) .9% 6.250 02/10/09 292,196 740,483
207,000 2.6% 7.031 04/06/09 915,304 2,319,560
18,000 .2% 10.062 05/18/09 113,903 288,652
Bernie W. Stewart 62,251(2) .8% 6.250 02/10/09 244,683 620,075
241,500 3.1% 7.031 04/06/09 1,067,855 2,706,153
21,000 .3% 10.062 05/18/09 132,887 336,761
Wayne K. Hillin 45,497(2) .6% 6.250 02/10/09 178,830 453,191
190,440 2.4% 7.031 04/06/09 842,080 2,133,995
16,560 .2% 10.062 05/18/09 104,791 265,560
___________________
(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) Represents stock options granted on February 11, 1999 in lieu of cash
bonuses for 1998. (See Note (5) to Summary Compensation Table above.)
Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Number of Value of
Securities Underlying Unexercised in-the-
Unexercised Options Money Options
Shares at Fiscal at Fiscal
Acquired on Value Year End(#) Year End($)(1)
Exercise Realized Exercisable Exercisable
Name (#) ($) /Unexercisable /Unexercisable
- ---- ----------- -------- ------------------- ---------------------
Paul B. Loyd, Jr. 0 -- 1,579,453 / 666,668 4,864,456 / 3,984,353
Andrew Bakonyi 0 -- 231,232 / 266,667 1,379,461 / 1,407,838
Tim W. Nagle 0 -- 326,339 / 150,000 968,612 / 896,748
Bernie W. Stewart 0 -- 217,251 / 235,000 1,196,978 / 1,257,691
Wayne K. Hillin 0 -- 114,497 / 138,000 730,859 / 824,760
___________
(1) These values were computed based on the difference between the
exercise price and an assumed common stock value of $13.25 per share,
which was the closing price of the Company's Common Stock on the NYSE
on December 31, 1999.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during 1999 were Mr.
Donabedian, Dr. Chatterjee, Dr. Sandmeyer and Mr. Hamilton. 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 1999, 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 1999, a company affiliated with Mr.
Donabedian provided consulting services to the Company regarding employee
compensation matters and was paid an aggregate of $9,600 for these
services. It is expected such company will provide similar services to the
Company in 2000. It is not known what amounts will be paid by the Company
for these services in 2000.
Transactions with Related Parties
See "Compensation Committee Interlocks and Insider Participation"
regarding payments made by the Company in 1999, and anticipated to be made
by the Company in 2000, to an entity affiliated with Mr. Donabedian, a
director of the Company.
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 1999 the Compensation Committee of the Board of Directors (the
"Committee") consisted of Charles A. Donabedian, Purnendu Chatterjee,
Robert L. Sandmeyer and Douglas Hamilton.
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 is 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 competes for comparable executive
ability and experience. 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 considers payment of salary increases and annual
cash bonus to its executives. However, with respect to 1999 performance,
the Committee determined it was appropriate to award stock options in lieu
of salary increases and cash bonuses. This was done in part to make the
executive officers' salary increases and bonus compensation contingent upon
increases in the Company's stock price, and in part to enhance the
Company's liquidity. The options were issued January 28, 2000, have an
exercise price of $12.656 per share (which was the average of the high and
low prices of the Company's stock on January 28, 2000), fully vest on July
28, 2000, and are exercisable over a period of ten years. The salary
increase and cash bonus stock option awards granted to Named Officers were:
Mr. Loyd - 16,653 and 117,600 shares; Mr. Bakonyi- 4,898 and 53,900 shares;
Mr. Nagle - 23,837 and 53,900 shares; Mr. Stewart - 14,824 and 27,800
shares and Mr. Hillin - 8,612 and 27,800 shares. In addition to the
options granted to the Named Officers, the Company granted an aggregate of
options with respect to salary increases and cash bonuses of 34,357 and
55,600 shares, respectively, to other executive officers who are not Named
Officers.
Stock-Based Long Term 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 award of stock-based long-
term incentives.
During 1999, the Committee recommended and the Board of Directors
approved the following stock option awards to the Named Officers:
Paul B. Loyd, Jr. 1,000,000
Andrew Bakonyi 400,000
Tim W. Nagle 225,000
Bernie W. Stewart 262,500
Wayne K. Hillin 207,000
Options with respect to an additional 312,000 shares were awarded to other
executive officers who are not Named Officers. Approximately 82.4% of
each of the awards were issued on April 7, 1999 and the remainder were
issued on May 19, 1999. The April options have an exercise price of $7.031
per share (which was the average of the high and low prices of the
Company's stock on April 7, 1999), and the May options have an exercise
price of $10.062 per share (which was the average of the high and low
prices of the Company's stock on May 19, 1999). The options as to one-
third of the shares vest over three years from the date of award and are
thereafter exercisable over a period of ten years.
On January 28, 2000, the Committee recommended and the Board of Directors
approved the following stock option awards to the Named Officers:
Paul B. Loyd, Jr. 425,000
Andrew Bakonyi 180,000
Tim W. Nagle 180,000
Bernie W. Stewart 80,000
Wayne K. Hillin 75,000
Options with respect to an additional 155,000 shares were awarded to other
executive officers who are not Named Officers. The January 2000 options
have an exercise price of $12.656 per share (which was the average of the
high and low prices of the Company's stock on January 28, 2000). The
options as to one-third of the shares vest on each of January 1, 2001,
January 1, 2002 and January 1, 2003 and are thereafter exercisable over a
period of ten years.
In addition, on January 28, 2000, Mr. Nagle was granted a special
incentive award of stock options, based in part on 1999 performance, with
respect to an additional 125,000 shares, and Mr. Toufeeq with respect to an
additional 75,000 shares, with an exercise price of $12.656 per share,
vesting as to one-third of the shares on each of June 1, 2000, June 1,
2001 and June 1, 2002.
Chief Executive Officer Compensation and Corporate Performance for Fiscal
Year 1999
In determining the compensation of Mr. Paul B. Loyd, Jr., the Chief
Executive Officer of the Company, the Committee considered anticipated
operating and financial results for 1999 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. Loyd not participating), Mr. Loyd's salary of $639,000
effective June 1, 1999. The Board also approved an award of stock options
to Mr. Loyd in lieu of a salary increase and cash bonus for 1999, 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 1999.
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 2, 1998 (the first
trading day after the Company became publicly traded) through December 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 Sedco Forex 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.]
*Source: Research Data Group
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:
01/02/98 06/30/98 12/31/98 06/30/99 12/31/99
-------- -------- -------- -------- --------
The Company $100 $65 $22 $27 $38
S&P Index $100 $117 $128 $144 $155
Peer Index (nine stocks) $100 $77 $43 $61 $76
Pension Plan Table
R&B Falcon adopted the Reading & Bates Domestic and Offshore Pension
plans effective January 1, 1999 (as amended and restated) and renamed them
the R&B Falcon U.S. Pension Plan ("U.S. Plan") and the R&B Falcon Non-U.S.
Pension Plan ("Non-U.S. Plan"), respectively. Effective January 1, 1998,
substantially all eligible Falcon Drilling employees paid from a U.S.
payroll began accruing benefit service although they were not eligible to
participate in the plans until January 1, 1999. Effective April 1, 1999,
substantially all eligible Cliffs Drilling employees became eligible to
participate in the plans. Effective July 1, 1999, future accruals in the
U.S. Plan and the Non-U.S. Plan were suspended.
The Company can elect to terminate the plans or reactivate the plans at
any point in the future. The suspension impacts participants as follows:
- - Vesting service will continue to accrue;
- - Benefit service will not accrue (suspended);
- - Compensation earned during the suspension will not be considered, thus
all compensation determinations in calculating benefits will be based
on periods prior to July 1, 1999;
- - New participants will not be allowed to enter the plans during the
suspension;
- - All funding of the plans required by ERISA continues;
- - Benefits that have already accrued by active employees or deferred
vested participants continue to be payable upon request (in accordance
with normal plan provisions - generally as early as age 55);
- - Current retiree benefit payments continue unchanged; and
- - Required audits, valuations and other plan administration continue.
With the understanding that no additional benefit service or
compensation will accrue while the plan is suspended (effective July 1,
1999), the following is a description of the U.S. Plan.
Effective January 1, 1999, the retirement benefits under the U.S. Plan
were changed and based on an employee's highest average monthly base
compensation for 60 consecutive months of credited service over the last
ten years.
Prior to January 1, 1999, benefits were based on the 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 1.5%
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 .5% 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% 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 $180,000
(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)). As of July 1, 1999 (the
suspension date) Messrs. Hillin, Loyd, Nagle, and Stewart had approximately
27 1/2, 7 1/2, 23 1/2 and 1 1/2 years, respectively of credited service
under the U.S. Plan. Mr. Bakonyi had approximately 22 total years of
credited service under the U.S. Plan and Non-U.S. Plan. These five officers
will be entitled to receive the estimated annual benefits based upon their
1999 salary amounts set forth under "Salary" in the Summary Compensation
Table.
Assuming that an employee is entitled to an annual social security
benefit of $16,476 at normal retirement date and has an annual social
security covered compensation amount of $33,060, the Pension Plan Table
illustrates the amount of annual pension benefits payable by the Company
under the U.S. Plan and the R&B Falcon 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.
60-Month
Average
Remuneration Years of Service
------------ -------------------------------------------------
15 20 25 30 35
$ 50,000 11,777 15,702 19,628 23,553 27,479
100,000 26,777 35,702 44,628 53,553 62,479
150,000 41,777 55,702 69,628 83,553 97,479
200,000 56,777 75,702 94,628 113,553 132,479
250,000 71,777 95,702 119,628 143,553 167,479
300,000 86,777 115,702 144,628 173,553 202,479
350,000 101,777 135,702 169,628 203,553 237,479
400,000 116,777 155,702 194,628 233,553 272,479
450,000 131,777 175,702 219,628 263,553 307,479
500,000 146,777 195,702 244,628 293,553 342,479
The maximum pension benefit allowable under current laws for a person
who retired at age 65 in 1999 is $130,000. The U.S. Plan limits the annual
compensation that is considered for plan purposes to $160,000 for 1999.
Retirement benefits based on pay in excess of the foregoing limitations
will be paid pursuant to the R&B Falcon 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 R&B Falcon
Retirement Benefit Replacement Plan. Effective July 1, 1999, future
accruals in the R&B Falcon Retirement Benefit Replacement Plan were also
suspended.
Retirement benefits under the 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 1999 all filing requirements under
Section 16(a) of the Securities Exchange Act were met with respect to the
Company, except for the following: Dr. Chatterjee filed a late Form 4 for
each of April and May, 1999, Mr. Chavkin filed a late Form 4 for May 1999,
Mr. Donabedian filed a late Form 4 for May 1999, Mr. Hamilton filed a late
Form 4 for May 1999, Mr. Laqueur filed a late Form 4 for May 1999, Mr. Loyd
filed a late Form 4 for each of February, May, June and December, 1999 ,
Mr. Porter filed a late Form 4 for May 1999, Dr. Sandmeyer filed a late
Form 4 for May 1999, Mr. Ziegler filed a late Form 4 for each of April and
May, 1999, Mr. Bakonyi filed a late Form 4 for each of April and May, 1999,
Mr. Hillin filed a late Form 4 for May 1999, Mr. Nagle filed a late Form 4
for May 1999, Mr. Ofner filed a late Form 4 for May 1999, Mr. Stewart filed
a late Form 4 for May 1999 and Mr. Toufeeq filed a late Form 3 for May
1999.
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 14, 2000, 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, 2000, there were available for awards under existing plans
approximately 1,136,185 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 5,000,000 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. No award may be made to any participant under the plan for more
than 5,000,000 shares.
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, up to, but not in excess
of 2,500,000 shares, or may be denominated in units of Common Stock under
the Plan. 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 2000 Employee
Long-Term Incentive Plan and recommends that the stockholders vote "FOR"
the Employee 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 2000
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 1999 and 1998 fiscal years and were
the auditors for both Falcon and R&B for the 1997 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 2000 and
recommends that the stockholders vote "FOR" the Accountant Proposal.
STOCKHOLDER PROPOSALS FOR 2001 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 2001
Annual Meeting of Stockholders must so notify the Company in writing no
later than December 15, 2000. 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, 1999. 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.
===========================================================================
FORM OF PROXY CARD
R&B FALCON CORPORATION
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints PAUL B. LOYD, JR. ANDREW BAKONYI and
TIM W. NAGLE (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 Omni Houston Hotel, Four Riverway,
Houston, Texas 77056 on Wednesday, May 17, 2000 at 9:00 a.m., Houston 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 AND 3.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE
1. ELECTION OF DIRECTORS
[ ] FOR all nominees [ ] WITHHOLD NOMINEES: Purnendu Chatterjee
listed at right authority to Charles A. Donabedian
(except as vote for all Paul B. Loyd, Jr.
indicated to nominees Steven A. Webster
the contrary listed at
below) 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 2000 Employee
Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal by the Company to ratify the selection of Arthur Andersen LLP
as the Company's independent auditors for the year ending December 31,
2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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(s)______________________________ Dated: __________, 2000
(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
2000 EMPLOYEE LONG-TERM INCENTIVE PLAN
of
R&B FALCON CORPORATION
1. Objectives. The R&B Falcon Corporation 2000 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 5,000,000 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. An Award or Awards of
stock options under the Plan to any Participant shall not exceed options
with respect to a maximum of 5,000,000 shares in the aggregate, during any
consecutive three-year period.
(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. Awards of Common Stock
under the Plan shall not in the aggregate exceed 2,500,000 shares of the
Common Stock available under the Plan.
(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. This Plan shall be effective as of April
14, 2000 (the "Effective Date"). Notwithstanding the foregoing, 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, 2000. 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 and all grants of Awards hereunder
shall be null and void.
