<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _________________________
Commission file number 1-7746
---------
SONAT OFFSHORE DRILLING INC.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 72-0464968
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4 Greenway Plaza, Houston, Texas 77046
-------------------------------- -----
(Address of principal executive offices) (Zip Code)
(713) 871-7500
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $.01 par value,
28,474,838 shares outstanding as of May 1, 1996.
<PAGE>
SONAT OFFSHORE DRILLING INC.
INDEX TO FORM 10-Q
QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1996 and 1995.............. 2
Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995.................... 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995.............. 5
Notes to Condensed Consolidated Financial Statements....... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 7
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K................... 11
SIGNATURES................................................. 12
</TABLE>
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SONAT OFFSHORE DRILLING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Operating Revenues $81,220 $70,726
- - ---------------------------------------------------- ------- -------
Costs and Expenses
Operating and maintenance 56,155 48,652
Depreciation 6,058 6,278
General and administrative 5,056 5,088
- - ---------------------------------------------------- ------- -------
67,269 60,018
- - ---------------------------------------------------- ------- -------
Operating Income 13,951 10,708
- - ---------------------------------------------------- ------- -------
Other Income (Expense), Net
Equity in earnings of joint ventures 1,180 259
Interest income 1,522 658
Interest expense (442) (573)
Interest income related to settlement of tax case 983 -
Other, net 969 289
- - ---------------------------------------------------- ------- -------
4,212 633
- - ---------------------------------------------------- ------- -------
Income Before Income Taxes 18,163 11,341
Income Taxes 6,338 4,065
- - ---------------------------------------------------- ------- -------
Net Income $11,825 $ 7,276
==================================================== ======= =======
Earnings Per Share of Common Stock $0.42 $0.26
==================================================== ======= =======
Weighted Average Shares Outstanding 28,435 28,372
- - ---------------------------------------------------- ------- -------
Dividends Paid Per Share $0.06 $0.06
==================================================== ======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
2
<PAGE>
SONAT OFFSHORE DRILLING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $106,385 $112,972
Accounts Receivable 58,364 52,833
Deferred Income Taxes 6,643 9,336
Costs Incurred on Turnkey Drilling Projects in Progress 9,684 1,002
Materials and Supplies 9,924 10,195
Prepayments 6,070 8,693
- - --------------------------------------------------------- -------- --------
Total Current Assets 197,070 195,031
- - --------------------------------------------------------- -------- --------
Investments in and Advances to Joint Ventures 29,508 31,891
Property and Equipment 694,374 666,526
Less Accumulated Depreciation 368,798 363,057
- - --------------------------------------------------------- -------- --------
Property and Equipment, net 325,576 303,469
- - --------------------------------------------------------- -------- --------
Other Assets 9,628 11,873
- - --------------------------------------------------------- -------- --------
Total Assets $561,782 $542,264
========================================================= ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
SONAT OFFSHORE DRILLING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable
Trade $ 19,748 $ 14,213
Affiliates 6,608 6,480
Accrued Income Taxes 17,325 11,272
Income Taxes Payable to Affiliate 3,028 3,028
Other Current Liabilities 21,656 27,151
- - --------------------------------------------- -------- --------
Total Current Liabilities 68,365 62,144
- - --------------------------------------------- -------- --------
Notes Payable 30,000 30,000
Deferred Income Taxes 63,483 66,405
Other Long-Term Liabilities 26,283 20,142
- - --------------------------------------------- -------- --------
Total Long-Term Liabilities 119,766 116,547
- - --------------------------------------------- -------- --------
Preferred Stock, $0.10 par value;
50,000,000 shares authorized,
none issued and outstanding - -
Common Stock, $0.01 par value;
55,000,000 shares authorized,
28,466,489 and 28,414,753 shares
issued and outstanding at March 31, 1996
and December 31, 1995, respectively 285 284
Additional Paid-in Capital 307,051 307,093
Retained Earnings 66,315 56,196
- - --------------------------------------------- -------- --------
Total Stockholders' Equity 373,651 363,573
- - --------------------------------------------- -------- --------
Total Liabilities and Stockholders' Equity $561,782 $542,264
============================================= ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
SONAT OFFSHORE DRILLING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 11,825 $ 7,276
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 6,058 6,278
Deferred income taxes 78 3,027
Equity in earnings of joint ventures (1,180) (259)
Gain on disposal of assets (1,061) (179)
Other, net 6,442 (581)
Changes in operating assets and liabilities
Accounts receivable (5,531) (4,043)
Turnkey work in progress (8,682) (5,923)
Accounts payable 5,663 (1,548)
Income taxes receivable/payable, net 6,053 1,245
Other current assets 1,895 34
Other current liabilities (5,495) 421
- - ------------------------------------------------------ -------- -------
Net cash provided by operating activities 16,065 5,748
- - ------------------------------------------------------ -------- -------
Cash Flows from Investing Activities
Capital expenditures (26,230) (1,597)
Proceeds from disposal of assets 1,247 287
Joint ventures and other investments 3,563 (9)
- - ------------------------------------------------------ -------- -------
Net cash used in investing activities (21,420) (1,319)
- - ------------------------------------------------------ -------- -------
Cash Flows from Financing Activities
Changes in minority interest 27 (573)
Exercise of stock options 458 -
Other (11) -
Dividends paid (1,706) (1,702)
- - ------------------------------------------------------ -------- -------
Net cash used in financing activities (1,232) (2,275)
- - ------------------------------------------------------ -------- -------
Net Increase (Decrease) in Cash and Cash Equivalents (6,587) 2,154
- - ------------------------------------------------------ -------- -------
Cash and Cash Equivalents at Beginning of Period 112,972 46,830
- - ------------------------------------------------------ -------- -------
Cash and Cash Equivalents at End of Period $106,385 $48,984
====================================================== ======== =======
Supplemental Disclosures of Cash Flow Information
Cash paid for
Interest $ 1,068 $ 1,066
Income taxes, net 208 46
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
SONAT OFFSHORE DRILLING INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 1 - GENERAL
The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all disclosures required by
generally accepted accounting principles for complete financial statements.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's 1995 annual report on
Form 10-K.
The financial statements reflect all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods. Such adjustments are considered to be of a normal recurring nature
unless otherwise identified.
NOTE 2 - PURCHASE AND CONVERSION OF DRILLING RIG
In February 1996 the Company entered into an agreement with Far East Levingston
Shipbuilding Limited ("FELS") for the purchase of a multi service vessel, the
MSV P.Portia, and its conversion to a deep-water drilling unit. The Company
anticipates spending approximately $100.0 million in 1996 and $58.0 million in
1997 in connection with the purchase and conversion of this vessel. The Company
spent $21.0 million in the first quarter of 1996, with a total of $23.0 million
spent cumulatively in connection with this purchase and conversion.
NOTE 3 - SUBSEQUENT EVENT
On May 2, 1996, the Company announced that it had reached an agreement in
principle with Transocean ASA ("Transocean"), a Norwegian offshore drilling
company, for the combination of the Company and Transocean. Under the
contemplated transaction, a newly formed U.S. holding company to be called
Transocean Offshore would own the Company and Transocean. Each Company share
would be converted into one share of Transocean Offshore stock, or a total of
approximately 28.5 million shares. Each share of Transocean would be
exchangeable for .412 shares of Transocean Offshore stock and $5.45 in cash, or
a total of approximately 22.3 million shares and $295 million in cash.
Consummation of the transaction is subject to a variety of conditions, including
negotiation of a definitive agreement, approval by the shareholders of both
companies, and receipt of necessary government approvals.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Sonat Offshore Drilling Inc. and its consolidated subsidiaries (the "Company")
provide contract drilling services for oil and gas wells located in offshore
areas throughout the world. A broad array of integrated services are provided to
customers on either a dayrate or turnkey basis. The Company's fleet of mobile
offshore drilling rigs includes some of the industry's most technically advanced
rigs. The Company plans to continue to invest in its existing fleet and to
continually review opportunities for fleet additions to meet increasing customer
demands. The Company regularly reviews possible acquisitions of businesses and
drilling units, and may from time to time in the future, make significant
capital commitments for such purposes.
In February 1996 the Company entered into an agreement for the purchase of a
multi-service vessel, the MSV P.Portia, and its conversion to a deep-water
drilling unit. Capital upgrades are planned for six of the Company's rigs
during 1996 to fulfill obligations under existing contracts or to improve the
marketability of certain of the Company's drilling units.
On May 2, 1996, the Company announced that it had reached an agreement in
principle with Transocean ASA ("Transocean"), a Norwegian offshore drilling
company, for the combination of the Company and Transocean. Under the
contemplated transaction, a newly formed U.S. holding company to be called
Transocean Offshore would own the Company and Transocean. Each Company share
would be converted into one share of Transocean Offshore stock, or a total of
approximately 28.5 million shares. Each share of Transocean would be
exchangeable for .412 shares of Transocean Offshore stock and $5.45 in cash, or
a total of approximately 22.3 million shares and $295 million in cash.
Consummation of the transaction is subject to a variety of conditions, including
negotiation of a definitive agreement, approval by the shareholders of both
companies, and receipt of necessary government approvals.
OPERATING RESULTS
Summary
Net income for the quarter ended March 31, 1996 was $11.8 million compared to
net income of $7.3 million in 1995. This increase of $4.5 million was due to
increases in both operating income and other income, slightly offset by the
related increase in income taxes.
7
<PAGE>
Comparative data relating to the Company's revenues and operating income by
segment and geographic area is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1996 1995
--------- -------------
(In thousands)
<S> <C> <C>
REVENUES
Dayrate Operations
U.S. Gulf of Mexico $28,445 $24,874
Europe 27,334 26,311
Other Western Hemisphere 6,141 6,047
Middle East/Africa 13,421 7,061
- - ------------------------------- ------- -------
75,341 64,293
------- -------
Turnkey Operations
U.S. Gulf of Mexico 4,012 6,927
Other Western Hemisphere 1,867 -
- - ------------------------------- ------- -------
5,879 6,927
------- -------
Intersegment Eliminations (A) - (494)
- - ------------------------------- ------- -------
Total Revenues $81,220 $70,726
=============================== ======= =======
OPERATING INCOME (LOSS)
Dayrate Operations
U.S. Gulf of Mexico $ 8,250 $ 5,502
Europe 6,569 7,142
Other Western Hemisphere 1,284 1,069
Middle East/Africa 3,205 2,587
Other (435) (117)
- - ------------------------------- ------- -------
18,873 16,183
------- -------
Turnkey Operations
U.S. Gulf of Mexico 99 592
Other Western Hemisphere 294 (935)
Other (105) -
- - ------------------------------- ------- -------
288 (343)
------- -------
Corporate expenses (5,210) (5,132)
- - ------------------------------- ------- -------
Operating Income $13,951 $10,708
=============================== ======= =======
</TABLE>
(A) Intersegment eliminations reflect the elimination of the dayrate revenues
earned when the Company's rigs are utilized in its turnkey operations.
Quarter ended March 31, 1996, compared to Quarter ended March 31,1995
Revenues increased to $81.2 million for the quarter ended March 31, 1996 from
$70.7 million for the prior year quarter, an increase of $10.5 million or 15
percent. Operating income increased by $3.2 million or 30 percent, up from $10.7
million in the first quarter of 1995 to $13.9 million in the same quarter of
1996. The increase in revenues was primarily attributable to improved dayrates
during the current quarter. Since operating expenses do not necessarily
increase with higher dayrates, the increase in operating income for the first
quarter of 1996 compared to the first quarter of 1995 is attributable to higher
revenues without a corresponding increase in expenses.
Revenues and operating income from dayrate operations increased in the first
quarter of 1996 compared to the same quarter of 1995.The increases in the U.S.
Gulf of Mexico reflect a shift in the operations of one rig to the area from
offshore Italy (included in Europe), where it worked during the first quarter of
1995. The increases in the U.S. Gulf of Mexico also resulted from dayrate
increases which were offset by decreased utilization of one of the drillships in
drydock for a scheduled survey and water depth upgrade during part of the 1996
quarter. While in drydock, additional maintenance costs were incurred on
special projects. The 1995 quarter includes revenues and operating income of
$5.8 million and $.6 million, respectively, for five bottom supported rigs
located in the U.S. Gulf of Mexico that were sold in the third quarter of 1995.
8
<PAGE>
Revenues and operating income from the Middle East/Africa increased primarily
due to integrated services provided in Qatar in the first quarter of 1996. No
such services were provided during the prior year's first quarter. In Europe,
the increases resulted primarily from significantly higher dayrates earned in
the first quarter of 1996 over the prior year quarter, partially offset by the
shift in operations of one of the rigs from Europe to the U.S. Gulf of Mexico.
Revenues from turnkey operations were $5.9 million for the 1996 quarter as
compared to $6.9 million for the prior year quarter. In the first quarter of
1996, one turnkey well was completed in the U.S. Gulf of Mexico versus two
completed turnkey wells in the U.S. Gulf of Mexico in the first quarter of 1995.
Turnkey operations in 1995 included an estimated loss of $1.7 million for the
first well in a five-well Pemex project, resulting in turnkey operating loss of
$.3 million for the 1995 quarter.
Other income increased to $4.2 million in the first quarter of 1996, up from
$0.6 million in the prior year quarter, an increase of $3.6 million. Equity in
earnings of joint ventures increased by $0.9 million primarily as a result of
higher dayrates earned by the two rigs owned by Arcade Drilling as. Interest
income increased due to higher cash balances during the first quarter 1996
compared to the first quarter 1995. Interest income also included $1.0 million
related to the finalization of the interest component on a previously settled
tax case. Other income included a gain of $0.8 million on the sale of Sonat Inc.
stock owned by the Company.
Income tax expense increased $2.3 million in the first quarter of 1996 due to
increased pre-tax income.
MARKET OUTLOOK
The Company achieved an average fleet utilization of 88 percent in the first
quarter of 1996 compared to 90 percent (excluding the six bottom supported rigs
sold in the third quarter of 1995) in the comparable 1995 quarter. Utilization
of the floating drilling equipment, which in 1996 included seven
semisubmersibles and two deep-water drillships, was 96 percent compared to 95
percent in 1995.
The improved demand and higher dayrates in the deep-water and harsh environment
markets that began in 1995 continued into the first quarter of 1996. The
improvement in the markets was due to increased interest by major operators in
harsh environment and deep-water locations.
The demand for floating drilling rigs in the U.S. Gulf of Mexico remains strong.
After the completion of its current contract in Brazil, expected to be in late
1996, the Discoverer Seven Seas is committed to begin work with Exxon which will
keep the rig utilized for up to two years. The Discoverer 534 is under contract
with Shell Offshore and Amoco at higher dayrates than it earned in 1995. These
contracts are expected to keep the drilling unit utilized until October 1998.
The Sonat Rather and Sonat Richardson are operating for Shell Offshore under
contracts which are at higher dayrates than earned in 1995 and which will keep
both rigs occupied into 1998.
The North Sea market continues to strengthen. The John Shaw is operating for
Amerada Hess through November 1996 at rates significantly higher than those
earned in 1995. The Henry Goodrich, a fourth-generation semisubmersible owned
by Arcade Drilling as. and managed by the Company, is operating for Shell U.K.
through September 1996. The contract with Shell U.K. may be extended, at the
client's election, through September 1997. Offshore Norway, the Polar Pioneer
is under contract with Norsk Hydro through mid-1997. Contract options with
Norsk Hydro could keep the rig operating for an additional four years.
In April 1996, turnkey operations were successfully completed on the fourth well
of the multi-well program offshore Mexico for Pemex. A fifth well is expected
to begin immediately after the completion of certain work on the fourth well
being performed on a daywork basis. In the U.S. Gulf of Mexico, turnkey
operations were completed on one well during the first quarter of 1996 and were
in progress on a second well at the end of the quarter. Two additional wells
in the U.S. Gulf of Mexico are expected to begin in the second quarter of 1996.
A one-well project offshore Senegal is expected to begin in the second quarter
of 1996.
Historically, the contract drilling market has been highly competitive and
cyclical, and the Company cannot predict the extent to which the current market
conditions will continue.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operations for the three months ended March 31, 1996
increased $10.3 million from $5.7 million in 1995 to $16.0 million in 1996. The
higher level of cash provided by operations during the current year quarter
resulted in part from an increase in operating income earned in 1996 versus 1995
as discussed above. In addition, a $6.0 million increase in cash provided by
operations (included in Other net cash provided by operating activities)
resulted from capital upgrade fees received from a client which will be
recognized as revenue over the term of the contract beginning in the second
quarter of 1996.
Cash used in investing activities increased by $20.1 million, primarily as a
result of progress payments made for the purchase and conversion of the multi-
service vessel, the MSV P.Portia. This purchase, together with additions and
improvements to existing rigs, is expected to result in capital spending of
approximately $150.0 million during 1996.
The Company's current turnkey projects scheduled for 1996 are expected to
require a working capital commitment of $10.0 million to $14.0 million. These
amounts should be recovered from payments received upon completion of turnkey
contracts. Additional working capital commitments could be required if the
Company is successful in obtaining additional turnkey projects.
The Company tendered the Offshore Bahram, which sank in January 1996 while in
tow offshore Egypt, to the insurance company as a total constructive loss and is
awaiting a response from the insurance company. The rig is insured for more than
the net book value of the unit.
The Company plans to fund the cash requirements of the conversion of the MSV
P.Portia, other capital expenditures and the proposed Transocean Offshore
transaction with existing cash balances, borrowings under its credit facility
and issuance of additional long-term debt. The Company has no definitive
arrangements relating to the issuance of such long-term debt, but has entered
into discussions with its bank group regarding its financing alternatives and is
confident of its ability to finalize necessary financing absent significant
changes in the capital markets.
The Company believes that its cash and cash equivalents, cash generated from
operations, borrowings available under its credit facility and access to other
financing sources will be adequate to meet its anticipated short-term and long-
term liquidity requirements.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995 the Financial Accounting Standards Board (FASB) issued the
Statement of Financial Accounting Standard (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
This statement provides authoritative guidance on when an impairment loss should
be recognized and how the amount of that loss should be calculated. The Company
adopted SFAS No. 121 in the first quarter of 1996. Its adoption had no effect
on the financial statements.
In October 1995 the FASB issued SFAS No. 123, Accounting and Disclosure of
Stock-Based Compensation. SFAS No. 123 establishes an alternative method of
accounting for stock-based compensation to the method outlined in the Accounting
Principles Board Opinion No. 25. This new computation is based on the fair
value of stock options and similar instruments. SFAS No. 123 encourages, but
does not require, adoption of that method. The Company adopted the disclosure
provisions of SFAS No. 123 in the first quarter of 1996 with no disclosures
required before the 1996 annual report.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed in connection with this Report (for conveninece
of reference, exhibits are listed according to numbers assigned in the exhibit
tables of Item 601 of Regulation S-K under the Securities Exchange Act of 1934
and compensatory plans are indicated by an asterisk):
EXHIBIT NUMBER DESCRIPTION METHOD OF FILING
-------------- ----------- ----------------
10-(1) Long-Term Incentive Plan Filed herewith.
of Sonat Offshore Drilling Inc.
as amended and restated as of
April 26, 1996.*
27-(1) Financial Data Schedule. Filed with EDGAR
filing only.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the first quarter of
1996.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SONAT OFFSHORE DRILLING INC.
(Registrant)
Date: May 13, 1996 /s/ Robert L. Long
-------------------------------------
Robert L. Long
Senior Vice President
Date: May 13, 1996 /s/ Barbara S. Koucouthakis
-------------------------------------
Barbara S. Koucouthakis
Vice President and Controller
12
<PAGE>
EXHIBIT 10-(1)
LONG-TERM INCENTIVE PLAN
OF
SONAT OFFSHORE DRILLING INC.
(AS AMENDED AND RESTATED AS OF APRIL 26, 1996)
I. GENERAL
1.1 PURPOSE OF THE PLAN
The Long-Term Incentive Plan (the "Plan") of Sonat Offshore Drilling Inc.
(the "Company") is intended to advance the best interests of the Company and its
subsidiaries by providing Directors and employees with additional incentives
through the grant of options ("Options") to purchase shares of Common Stock of
the Company ("Common Stock") and through the award of shares of restricted
Common Stock ("Restricted Stock"), thereby increasing the personal stake of such
Directors and employees in the continued success and growth of the Company.
1.2 ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Executive Compensation Committee
or other designated committee (the "Committee") of the Board of Directors of the
Company (the "Board of Directors") which shall consist of at least three
Directors all of whom (i) are not eligible for awards under Articles II and III
of the Plan, (ii) are "disinterested" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, and (iii) are outside directors satisfying the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended,
or any successor thereto ("the Code"). The Committee shall have authority to
interpret conclusively the provisions of the Plan, to adopt such rules and
regulations for carrying out the Plan as it may deem advisable, to decide
conclusively all questions of fact arising in the application of the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. Notwithstanding the foregoing, the Committee shall have no power or
discretion to vary the amount or terms of awards under Article IV of the Plan,
except as provided in Section 5.2. All decisions and acts of the Committee shall
be final and binding upon all affected Plan participants.
(b) The Committee shall designate the eligible employees, if any, to be
granted awards under Articles II and III and the type and amount of such awards
and the time when awards will be granted. All awards granted under the Plan
shall be on the terms and subject to the conditions hereinafter provided.
1.3 ELIGIBLE PARTICIPANTS
Employees, including officers, of the Company and its subsidiaries, and
of partnerships or joint ventures in which the Company and its subsidiaries have
a significant ownership interest as determined by the Committee (all of such
subsidiaries, partnerships and joint ventures being referred to as
"Subsidiaries") shall be eligible for awards under Articles II and III of the
Plan. Directors who are not employees of the Company or its Subsidiaries shall
not be eligible for awards under Articles II and III.
Each Director of the Company who is not an officer or employee of the
Company or any of its subsidiaries (an "Eligible Director") shall automatically
be granted awards under Article IV of the Plan. Each Eligible Director to whom
Options are granted under Article IV is hereinafter referred
to as a "Participant."
1.4 AWARDS UNDER THE PLAN
Awards to employees under Articles II and III bay be in the form of (i)
Options to purchase shares of Common Stock, (ii) Stock Appreciation Rights which
may be issued in tandem with such Options, (iii) shares of Restricted Stock
<PAGE>
(iv) Supplemental Payments which may be awarded with respect to Options, Stock
Appreciation Rights and Restricted Stock, or (v) any combination of the
foregoing.
Awards to Eligible Directors under Article IV shall be in the form of
Options to purchase shares of Common Stock and Supplemental Payments with
respect thereto.
1.5 SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Common Stock which may be issued with
respect to awards of Options or Restricted Stock (including Stock Appreciation
Rights and Supplemental Payments related thereto) made under Articles II and III
shall not exceed (i) 1,000,000 shares plus (ii) the number of shares previously
authorized for use under such Articles which have not been issued or have again
become available for grants pursuant to the following paragraph. In addition,
the aggregate number of shares of Common Stock which may be issued with respect
to awards made under Article IV shall not exceed 50,000 (which is the number of
shares previously authorized for use under such Article) reduced by the
number of shares which have been issued pursuant to such Article prior to the
date of this Amendment and Restatement. At no time shall the number of shares
issued plus the number of shares estimated by the Committee to be ultimately
issued with respect to outstanding awards under the Plan exceed the number of
shares that may be issued under the Plan. No employee shall be granted Stock
Options or Restricted Stock, or any combination of the foregoing, with respect
to more than 300,000 shares of Common Stock in any fiscal year (subject to
adjustment as provided in Section 5.2). No employee shall be granted a
Supplemental Payment in any fiscal year with respect to more than the number of
shares of Common Stock covered by Stock Options or Restricted Stock awards
granted to such employee in such fiscal year. Shares distributed pursuant to
the Plan may consist of authorized but unissued shares or treasury shares of the
Company, as shall be determined from time to time by the Board of Directors.
If any Option under the Plan shall expire, terminate or be canceled
(including cancellation upon the holder's exercise of a related Stock
Appreciation Right) for any reason without having been exercised in full, or if
any shares of Restricted Stock shall be forfeited to the Company, the
unexercised Options and forfeited shares of Restricted Stock shall not count
against the above limit and shall again become available for grants under the
Plan (regardless of whether the holder of such Options or shares received
dividends or other economic benefits with respect to such Options or shares).
Shares of Common Stock equal in number to the shares surrendered in payment of
the option price, and shares of Common Stock which are withheld in order to
satisfy federal, state or local tax liability, shall not count against the above
limit and shall again become available for grants under the Plan. Only the
number of shares of Common Stock actually issued upon exercise of a Stock
Appreciation Right or payment of a Supplemental Payment shall count against the
above limit, and any shares which were estimated to be used for such purposes
and were not in fact so used shall again become available for grants under the
Plan.
1.6 OTHER COMPENSATION PROGRAMS
The existence and terms of the Plan shall not limit the authority of the
Board of Directors in compensating Directors and employees of the Company and
its subsidiaries in such other forms and amounts, including compensation
pursuant to any other plans as may be currently in effect or adopted in the
future, as it may determine from time to time.
II. STOCK OPTIONS
2.1 TERMS AND CONDITIONS OF OPTIONS
Subject to the following provisions, all Options granted under the Plan to
employees of the Company and its Subsidiaries shall be in such form and shall
have such terms and conditions as the Committee, in its discretion, may from
time to time determine.
(a) Option Price. The option price per share shall not be less than the
fair market value of the Common Stock (as determined by the Committee) on the
date the Option is granted. Notwithstanding the foregoing, the option price per
share with respect to any Option granted by the Committee within 90 days of the
closing of the initial public offering of the Company's Common Stock shall be at
the initial public offering price for such Stock.
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<PAGE>
(b) Term of Option. The term of any Option shall not exceed ten years
from the date of grant, and, except as provided pursuant to Section 2.1(g) with
respect to the death of an optionee, no Option shall be exercised after the
expiration of its term.
(c) Exercise of Options. Options shall be exercisable at such time or
times and subject to such terms and conditions as the Committee shall specify in
the Option grant. The Committee shall have discretion to at any time declare all
or any portion of the Options held by any optionee to be immediately
exercisable. An Option may be exercised in accordance with its terms as to any
or all shares purchasable thereunder.
(d) Payment for Shares. The Committee may authorize payment for shares as
to which an Option is exercised to be made in cash, shares of Common Stock, by
"cashless exercise" or in such other manner as the Committee in its discretion
may provide.
(e) Nontransferability of Options. No Option or any interest therein shall
be transferable by the optionee other than by will or by the laws of descent and
distribution. During an optionee's lifetime, all Options shall be exercisable
only by such optionee or by the guardian or legal representative of the
optionee.
(f) Shareholder Rights. The holder of an Option shall, as such, have none
of the rights of a shareholder.
(g) Termination of Employment. The Committee shall have discretion to
specify in the Option grant or an amendment thereof, provisions with respect to
the period during which the Option may be exercised following the optionee's
termination of employment. Notwithstanding the foregoing, the Committee shall
not permit any Option to be exercised beyond the term of the Option established
pursuant to Section 2.1(b), except that the Committee may provide that,
notwithstanding such Option term, an Option which is outstanding on the date of
an optionee's death shall remain outstanding and exercisable for up to one year
after the optionee's death.
(h) Change of Control. Notwithstanding the exercisability schedule
governing any Option, upon the occurrence of a Change of Control (as defined in
Section 5.10) all Options outstanding at the time of such Change of Control and
held by optionees who are employees of the Company or its Subsidiaries at the
time of such Change of Control shall become immediately exercisable and, unless
the optionee agrees otherwise in writing, shall remain exercisable for the
remainder of the Option term.
2.2 STOCK APPRECIATION RIGHTS IN TANDEM WITH OPTIONS
(a) The Committee may, either at the time of grant of an Option or at any
time during the term of the Option, grant Stock Appreciation Rights with respect
to all or any portion of the shares of Common Stock covered by such Option. A
Stock Appreciation Right may be exercised at any time the Option to which it
relates is then exercisable, but only to the extent the Option to which it
relates is exercisable, and shall be subject to the conditions applicable to
such Option. When a Stock Appreciation Right is exercised, the Option to which
it relates shall cease to be exercisable to the extent of the number of shares
with respect to which the Stock Appreciation Right is exercised. Similarly, when
an Option is exercised, the Stock Appreciation Rights relating to the shares
covered by such Option exercise shall terminate. Any Stock Appreciation Right
which is outstanding on the last day of the term of the related Option (as
determined pursuant to Section 2.1(b)) shall be automatically exercised on such
date for cash without any action by the optionee.
(b) Upon exercise of a Stock Appreciation Right, the holder shall receive,
for each share with respect to which the Stock Appreciation Right is exercised,
an amount (the "Appreciation") equal to the difference between the option price
per share of the Option to which the Stock Appreciation Right relates and the
fair market value (as determined by the Committee) of a share of Common Stock on
the date of exercise of the Stock Appreciation Right. The Appreciation shall be
payable in cash, Common Stock, or a combination of both, at the option of the
Committee, and shall be paid within 30 days of the exercise of the Stock
Appreciation Right.
(c) Notwithstanding the foregoing, if a Stock Appreciation Right is
exercised within 60 days of the occurrence of a Change of Control, (i) the
Appreciation and any Supplemental Payment (as defined in Section 2.3) to which
the holder is entitled shall be payable solely in cash if the Stock
Appreciation Right has been outstanding at least six months and solely in Common
Stock in all other cases, and (ii) in addition to the Appreciation and the
Supplemental
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<PAGE>
Payment (if any), the holder shall receive (in cash, if the Stock Appreciation
Right has been outstanding for at least six months, and in Common Stock in all
other cases) (1) the amount by which the greater of (a) the highest market price
per share of Common Stock during the 60-day period preceding exercise of the
Stock Appreciation Right or (b) the highest price per share of Common Stock (or
the cash-equivalent thereof as determined by the Board of Directors) paid by an
acquiring person during the 60-day period preceding a Change of Control, exceeds
the fair market value of a share of Common Stock on the date of exercise of the
Stock Appreciation Right, plus (2) if the holder is entitled to a Supplemental
Payment, an additional payment, calculated under the same formula as used for
calculating such holder's Supplemental Payment, with respect to the amount
referred to in clause (1) of this sentence.
2.3 SUPPLEMENTAL PAYMENT ON EXERCISE OF OPTIONS OR STOCK APPRECIATION RIGHTS
The Committee, either at the time of grant or at the time of exercise of
any Option or related Stock Appreciation Right, may provide for a supplemental
payment (the "Supplemental Payment") by the Company to the optionee with respect
to the exercise of any Option or related Stock Appreciation Right. The
Supplemental Payment shall be in the amount specified by the Committee, which
shall not exceed the amount necessary to pay the federal income tax payable with
respect to both exercise of the Option or related Stock Appreciation Right and
receipt of the Supplemental Payment, assuming the optionee is taxed at the
maximum effective federal income tax rate applicable thereto. The Committee
shall have the discretion to grant Supplemental Payments that are payable solely
in cash or Supplemental Payments that are payable in cash, Common Stock, or a
combination of both, as determined by the Committee at the time of payment. The
Supplemental Payment shall be paid within 30 days of the date of exercise of an
Option or Stock Appreciation Right (or, if later, within 30 days of the date on
which income is recognized for federal income tax purposes with respect to such
exercise).
2.4 STATUTORY OPTIONS
Subject to the limitations on Option terms set forth in Section 2.1, the
Committee shall have the authority to grant (i) incentive stock options within
the meaning of Section 422 of the Code and (ii) Options containing such terms
and conditions as shall be required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant. Options granted
pursuant to this Section 2.4 may contain such other terms and conditions
permitted by Article II of this Plan as the Committee, in its discretion, may
from time to time determine (including, without limitation, provision for Stock
Appreciation Rights and Supplemental Payments), to the extent that such terms
and conditions do not cause the Options to lose their preferential tax
treatment. To the extent the Code and Regulations promulgated thereunder require
a plan to contain specified provisions in order to qualify options for
preferential tax treatment, such provisions shall be deemed to be stated in this
Plan.
III. RESTRICTED STOCK
3.1 TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS
Subject to the following provisions, all awards of Restricted Stock under
the Plan to employees of the Company and its Subsidiaries shall be in such form
and shall have such terms and conditions as the Committee, in its discretion,
may from time to time determine.
(a) The Restricted Stock award shall specify the number of shares of
Restricted Stock to be awarded, the price, if any, to be paid by the
recipient of the Restricted Stock, and the date or dates on which the
Restricted Stock will vest. The vesting of Restricted Stock may be
conditioned upon the completion of a specified period of service with the
Company or its Subsidiaries, upon the attainment of specified performance
goals, or upon such other criteria as the Committee may determine in its
sole discretion.
(b) Stock certificates representing the Restricted Stock granted to an
employee shall be registered in the employee's name. Such certificates
shall either be held by the Company on behalf of the employee, or delivered
to the employee bearing a legend to restrict transfer of the certificate
until the Restricted Stock has vested, as determined by the Committee. The
Committee shall determine whether the employee shall have the right to vote
and/or receive dividends on the Restricted Stock before it has vested. No
share of Restricted Stock may be sold, transferred, assigned, or pledged by
the employee until such share has vested in accordance with
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<PAGE>
the terms of the Restricted Stock award. In the event of an employee's
termination of employment before all of his Restricted Stock has vested, or
in the event other conditions to the vesting of Restricted Stock have not
been satisfied prior to any deadline for the satisfaction of such
conditions set forth in the award, the shares of Restricted Stock which
have not vested shall be forfeited and any purchase price paid by the
employee shall be returned to the employee. At the time Restricted Stock
vests (and, if the employee has been issued legended certificates of
Restricted Stock, upon the return of such certificates to the Company), a
certificate for such vested shares shall be delivered to the employee (or
the Beneficiary designated by the employee in the event of death), free of
all restrictions.
(c) Notwithstanding the vesting conditions set forth in the Restricted
Stock award, (i) the Committee may in its discretion accelerate the vesting
of Restricted Stock at any time, and (ii) all shares of Restricted Stock
shall vest upon a Change of Control of the Company.
3.2 PERFORMANCE AWARDS UNDER SECTION 162(M) OF THE CODE
The Committee shall have the right to designate awards of Restricted Stock
as "Performance Awards." Notwithstanding any other provisions of this Article
III, awards so designated shall be granted and administered in a manner
designed to preserve the deductibility of the compensation resulting from such
awards in accordance with Section 162(m) of the Code. The grant or vesting of a
Performance Award shall be subject to the achievement of performance objectives
(the "Performance Objectives") established by the Committee based on one or more
of the following criteria, in each case applied to the Company on a consolidated
basis and/or to a business unit, and either as an absolute measure or as a
measure of comparative performance relative to a peer group of companies: sales,
operating profits, operating profits before interest expense and taxes, net
earnings, earnings per share, return on equity, return on assets, return on
invested capital, total shareholder return, cash flow, debt to equity ratio,
market share, stock price, economic value added, and market value added.
The Performance Objectives for a particular Performance Award relative to a
particular fiscal year shall be established by the Committee in writing no later
than 90 days after the beginning of such year. The Committee shall have the
authority to determine whether the Performance Objectives and other terms and
conditions of the award are satisfied, and the Committee's determination as to
the achievement of Performance Objectives relating to a Performance Award shall
be made in writing. The Committee shall have discretion to modify or waive the
Performance Objectives or conditions to the grant or vesting of a Performance
Award only to the extent that the exercise of such discretion would not cause
the Performance Award to fail to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code.
3.3 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK
The Committee, either at the time of grant or at the time of vesting of
Restricted Stock, may provide for a Supplemental Payment by the Company to the
employee in an amount specified by the Committee which shall not exceed the
amount necessary to pay the federal income tax payable with respect to both the
vesting of the Restricted Stock and receipt of the Supplemental Payment,
assuming the employee is taxed at the maximum effective federal income tax rate
applicable thereto and has not elected to recognize income with respect to the
Restricted Stock before the date such Restricted Stock vests. The Supplemental
Payment shall be paid within 30 days of each date that Restricted Stock vests.
The Committee shall have the discretion to grant Supplemental Payments that are
payable solely in cash or Supplemental Payments that are payable in cash, Common
Stock, or a combination of both, as determined by the Committee at the time of
payment.
IV. STOCK OPTIONS FOR DIRECTORS
4.1 GRANT OF OPTIONS
Each person who is an Eligible Director on, or becomes an Eligible Director
within 10 days after, the closing of the initial public offering of the
Company's Common Stock, shall be granted an Option to purchase 1,000 shares of
Common Stock, effective as of the date of such closing. Each person who becomes
an Eligible Director thereafter (other than a person who first becomes an
Eligible Director on the date of an annual meeting of the Company's
stockholders) shall be granted an Option to purchase 1,000 shares of Common
Stock, effective as of the date such person becomes an
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<PAGE>
Eligible Director. Each person who is or becomes an Eligible Director on the
date of an annual meeting of the Company's stockholders and whose service on the
Board of Directors will continue after such meeting shall be granted an Option
to purchase 1,000 shares of Common Stock, effective as of the date of such
meeting.
4.2 TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Article shall have the following terms and
conditions:
(a) Option Price. The option price per share shall be the closing sales
price of a share of Common Stock on the date the Option is granted (or, if the
Common Stock is not traded on such date, on the immediately preceding date on
which the Common Stock is traded). Notwithstanding the foregoing, the option
price per share for Options granted pursuant to the first sentence of Section
4.1 shall be the initial public offering price of a share of Common Stock.
(b) Term of Option. Each Option shall expire ten years from the date of
grant, and, except as provided in Section 4.2(c) with respect to the death of an
optionee, no Option shall be exercised after the expiration of its term.
(c) Exercise of Options. Subject to Section 4.2(g) and the remainder of
this paragraph, each Option shall become exercisable in installments as follows:
(1) a total of 333 shares of Common Stock may be purchased through exercise of
the Option on or after the first anniversary of the date of grant; (2) a total
of 666 shares of Common Stock may be purchased through exercise of the Option on
or after the second anniversary of the date of grant; and (3) a total of 1,000
shares of Common Stock may be purchased through exercise of the Option on or
after the third anniversary of the date of grant. If a Participant ceases to be
a Director of the Company as a result of death, disability, or retirement from
the Board of Directors on his Retirement Date (as defined in Section 4.2(i)),
each Option shall immediately become fully exercisable and shall remain
exercisable for the remainder of its term, except that, notwithstanding the term
of the Option, an Option which is outstanding on the date of an optionee's death
shall remain outstanding and exercisable for one year after the optionee's
death. If a Participant ceases to be a Director of the Company for any reason
not set forth in the preceding sentence, no additional portions of the Option
will become exercisable, and the portion of the Option that is then exercisable
shall expire if not exercised within 60 days after cessation of service as a
Director.
An Option may be exercised in accordance with its terms as to any or all
shares purchasable thereunder.
(d) Payment for Shares. Payment for shares as to which an Option is
exercised shall be made in cash, Common Stock, by "cashless exercise," or a
combination thereof, in the discretion of the Participant. Shares of Common
Stock delivered in payment of the Option price shall be valued at the average of
the high and low prices of such Stock on the date of exercise (or, if the Common
Stock is not traded on such date, at the weighted average of the high and low
prices on the nearest trading dates before and after such date).
(e) Nontransferability of Options. No Option or any interest therein shall
be transferable by the Participant other than by will or by the laws of descent
and distribution. During a Participant's lifetime, all Options shall be
exercisable only by such Participant or by the guardian or legal representative
of the Participant.
(f) Shareholder Rights. The holder of an Option shall, as such, have none
of the rights of a shareholder.
(g) Change of Control. Notwithstanding any other provisions of the Plan,
upon the occurrence of a Change of Control (as defined in Section 5.10) all
Options outstanding at the time of such Change of Control shall become
immediately exercisable and shall remain exercisable for the remainder of their
term.
(h) Tax Status. The Options granted under this Article shall be
"non-qualified" options, and shall not be incentive stock options as defined in
Section 422 of the Code.
(i) Retirement Date. For purposes of this Article, a Participant's
Retirement Date shall mean the date on which the Participant shall be required
to retire from the Board of Directors under the retirement policies of the
Board of Directors as in effect on the date of the Participant's retirement.
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<PAGE>
4.3 SUPPLEMENTAL PAYMENT ON EXERCISE OF OPTIONS
Within 30 days of each date that an Option is exercised, a Supplemental
Payment shall be paid to the Participant (or to the Participant's Beneficiary in
the event of death), in cash, in an amount equal to the amount necessary to pay
the federal income tax payable with respect to both the exercise of the Option
and receipt of the Supplemental Payment, assuming the Participant is taxed at
the maximum effective federal income tax rate applicable thereto.
V. ADDITIONAL PROVISIONS
5.1 GENERAL RESTRICTIONS
Each award under the Plan shall be subject to the requirement that, if at
any time the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the
recipient of an award with respect to the disposition of shares of Common Stock
is necessary or desirable (in connection with any requirement or interpretation
of any federal or state securities law, rule or regulation) as a condition of,
or in connection with, the granting of such award or the issuance, purchase or
delivery of shares of Common Stock thereunder, such award may not be consummated
in whole or in part unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
5.2 ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, rights offer, liquidation, dissolution, merger,
consolidation, spin-off, sale of assets, payment of an extraordinary cash
dividend, or any other change in or affecting the corporate structure or
capitalization of the Company, the Committee shall make appropriate adjustment
in the number and kind of shares authorized by the Plan (including any
limitations on individual awards), in the number, price or kind of shares
covered by the awards and in any outstanding awards under the Plan; provided,
however, that no such adjustment shall increase the aggregate value of any
outstanding award.
5.3 AMENDMENTS
(a) The Board of Directors may amend the Plan from time to time. No such
amendment shall require approval by the stockholders unless stockholder approval
is required to satisfy Rule 16b-3 under the Securities Exchange Act of 1934 or
Section 162(m) of the Code, or by applicable law or stock exchange requirements.
The provisions of Article IV shall not be amended more than once every six
months other than to comport with changes in the Internal Revenue Code or the
Employee Retirement Income Security Act or the rules thereunder.
(b) The Committee shall have the authority to amend any grant to include
any provision which, at the time of such amendment, is authorized under the
terms of the Plan; however, no outstanding award may be revoked or altered in a
manner unfavorable to the holder without the written consent of the holder.
5.4 CANCELLATION OF AWARDS
Any award granted under Articles II and III of the Plan may be canceled at
any time with the consent of the holder and a new award may be granted to such
holder in lieu thereof, which award may, in the discretion of the Committee, be
on more favorable terms and conditions than the canceled award; provided,
however, that the Committee may not reduce the exercise price of outstanding
Options where the existing exercise price is higher than the then current market
price of the Common Stock.
5.5 BENEFICIARY
An employee or Participant may file with the Company a written designation
of Beneficiary, on such form as may be prescribed by the Committee, to receive
any Options, SARs, Restricted Shares, Common Stock and Supplemental Payments
that become deliverable to the employee or Participant pursuant to the Plan
after the employee's or Participant's death. An employee or Participant may,
from time to time, amend or revoke a designation of Beneficiary. If no
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<PAGE>
designated Beneficiary survives the employee or Participant, the executor or
administrator of the employee's or Participant's estate shall be deemed to be
the employee's or Participant's Beneficiary.
5.6 WITHHOLDING
(a) Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the right to
require the holder to remit to the Company an amount sufficient to satisfy any
federal, state or local withholding tax liability prior to the delivery of any
certificate for such shares. Whenever under the Plan payments are to be made in
cash, such payments shall be net of an amount sufficient to satisfy any federal,
state or local withholding tax liability.
(b) An employee entitled to receive Common Stock under the Plan who has not
received a cash Supplemental Payment may elect to have the federal, state and
local tax liability (or a specified portion thereof) with respect to such Common
Stock satisfied by having the Company withhold from the shares otherwise
deliverable to the employee shares of Common Stock having a value equal to the
amount of the tax liability to be satisfied with respect to the Common Stock. An
election to have all or a portion of the tax liability satisfied using Common
Stock shall comply with such requirements as may be imposed by the Committee and
shall be subject to the disapproval of the Committee (expressed either prior to
or within two days after the making of such election).
5.7 NON-ASSIGNABILITY
Except as expressly provided in the Plan, no award under the Plan shall be
assignable or transferable by the holder thereof except by will or by the laws
of descent and distribution. During the life of the holder, awards under the
Plan shall be exercisable only by such holder or by the guardian or legal
representative of such holder.
5.8 NON-UNIFORM DETERMINATIONS
Determinations by the Committee under the Plan (including, without
limitation, determinations of the persons to receive awards under Articles II
and III; the form, amount and timing of such awards; the terms and provisions of
such awards and the agreements evidencing same; and provisions with respect to
termination of employment) need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, awards under the Plan,
whether or not such persons are similarly situated.
5.9 NO GUARANTEE OF EMPLOYMENT OR DIRECTORSHIP
The grant of an award under the Plan shall not constitute an assurance of
continued employment for any period or any obligation of the Board of Directors
to nominate any Director for re-election by the Company's shareholders.
5.10 CHANGE OF CONTROL
A "Change of Control" mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 5.10; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved
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<PAGE>
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
5.11 DURATION AND TERMINATION
(a) The Plan shall be of unlimited duration. Notwithstanding the foregoing,
no incentive stock option (within the meaning of Section 422 of the Code) shall
be granted under the Plan, and no Options shall be granted under the Plan to
Eligible Directors under Article IV, after May 1, 2003, but awards granted prior
to such dates may extend beyond such dates, and the terms of this Plan shall
continue to apply to all awards granted hereunder.
(b) The Board of Directors may discontinue or terminate the Plan at any
time. Such action shall not impair any of the rights of any holder of any award
outstanding on the date of the Plan's discontinuance or termination without the
holder's written consent.
5.12 EFFECTIVE DATE
The original effective date of the Plan was May 1, 1993. This amendment and
restatement of the Plan shall be effective April 26, 1996 upon approval by
shareholders of the Company.
IN WITNESS WHEREOF, this document has been executed as of April 26, 1996.
SONAT OFFSHORE DRILLING INC.
by: /s/ ERIC B. BROWN
________________________________
-9-
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> $106,385
<SECURITIES> 0
<RECEIVABLES> 58,364
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 197,070
<PP&E> 694,374
<DEPRECIATION> 368,798
<TOTAL-ASSETS> 561,782
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0
0
<COMMON> 285
<OTHER-SE> 373,366
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<CGS> 0
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<INCOME-TAX> 6,338
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<EPS-PRIMARY> .42
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</TABLE>
