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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 Section 240.14a-11(c) or Section 240.14a-12
TRANSOCEAN OFFSHORE INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF TRANSOCEAN APPEARS HERE]
March 31, 1997
To Our Stockholders:
The 1997 Annual Meeting of Stockholders of Transocean Offshore Inc. will be
held on Thursday, May 8, 1997 at 9:00 a.m., at the Stouffer Renaissance Hotel,
6 Greenway Plaza East, Houston, Texas. The Secretary's Notice of Annual
Meeting, the Proxy Statement and a Proxy Card are enclosed and describe the
matters to be acted upon at the Meeting.
It is important that your shares be represented and voted at the meeting.
Please read the enclosed Notice of Annual Meeting and Proxy Statement and
date, sign and promptly return the Proxy Card in the enclosed self-addressed
envelope.
Very truly yours,
/s/ J. MICHAEL TALBERT
J. Michael Talbert
Chairman of the Board
and Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
The Annual Meeting of Stockholders of Transocean Offshore Inc., a Delaware
corporation, will be held at the Stouffer Renaissance Hotel, 6 Greenway Plaza
East, Houston, Texas at 9:00 a.m., local time, on Thursday, May 8, 1997 for
the following purposes:
1. To elect three Directors as members of the Board of Directors of the
Company to serve until the 2000 Annual Meeting of Stockholders and until
their respective successors have been duly elected and qualified.
2. To transact such other business as may properly be brought before the
meeting.
Only holders of Common Stock of record at the close of business on March 19,
1997 will be entitled to vote at the meeting.
The meeting may be adjourned from time to time without other notice than by
announcement at the meeting, or any adjournment thereof, and any and all
business for which the meeting is hereby noticed may be transacted at any such
adjournment.
By order of the Board of Directors,
/s/ ERIC B. BROWN
Eric B. Brown
Secretary
Houston, Texas
March 31, 1997
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YOUR VOTE IS IMPORTANT
Please complete, sign and return your Proxy Card in the enclosed return
envelope.
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS MAY 8, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by Transocean Offshore Inc. on behalf of the Board of Directors of the
Company, to be voted at the Annual Meeting of Stockholders, called to be held
on Thursday, May 8, 1997 at 9:00 a.m. at the Stouffer Renaissance Hotel, 6
Greenway Plaza East, Houston, Texas. Mailing of the Proxy Statement and the
accompanying Proxy Card to the stockholders is expected to commence on or
about April 1, 1997.
VOTING SECURITIES
As of February 28, 1997, the Company had outstanding 50,638,548 shares of
common stock, par value $.01 per share ("Common Stock"), which are its only
voting securities. Holders of Common Stock are entitled to one vote for each
share held. The Board of Directors has fixed March 19, 1997 as the record date
for the determination of stockholders entitled to notice of, and to vote at,
the Annual Meeting.
THE PROXY
If a Proxy Card is executed properly by a stockholder and is not revoked, it
will be voted at the Annual Meeting in the manner specified on the Proxy Card,
or if no manner is specified, it will be voted "FOR" the election of the three
nominees for Director. The submission of an executed Proxy Card will not
affect a stockholder's right to attend, and to vote in person at, the Annual
Meeting. A stockholder who executes a Proxy Card may revoke it at any time
before it is voted by filing a written revocation with the Secretary of the
Company, executing a Proxy Card bearing a later date or attending and voting
in person at the Annual Meeting.
THE BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND
RETURN YOUR PROXY CARD IN THE ENCLOSED RETURN ENVELOPE.
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ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for the
classification of the Board of Directors into three classes (Class I, Class II
and Class III). Three Class I Directors are to be elected at the Annual
Meeting of Stockholders to serve for three-year terms and until the election
and qualification of their respective successors in office.
The three nominees for election as Class I Directors are Ronald L. Kuehn,
Jr., Richard D. Kinder and Kristian Siem. Mr. Kuehn was elected as a Director
effective June 4, 1993 in connection with the Company's initial public
offering of Common Stock, Mr. Kinder was elected in November 1994 and Mr. Siem
was elected in September 1996 in connection with the Company's business
combination with Transocean ASA. In the event that any of the nominees becomes
unavailable for any reason, which is not anticipated, the Board of Directors
in its discretion may, unless it has taken appropriate action to provide for a
lesser number of Directors, designate a substitute nominee, in which event,
pursuant to the accompanying Proxy Card, votes will be cast for such
substitute nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RICHARD D. KINDER, RONALD L.
KUEHN, JR. AND KRISTIAN SIEM AS CLASS I DIRECTORS.
NOMINEES FOR DIRECTOR--CLASS I--TERMS EXPIRING 2000
RICHARD D. KINDER, age 52, is Chairman of the Board and
Chief Executive Officer of Kinder Morgan Energy Partners
L.P., a master limited partnership which owns and
operates diversified energy assets. He was elected as a
Director of the Company in 1994. Mr. Kinder is also a
Director of Baker Hughes Incorporated. During the past
five years prior to assuming his present position, Mr.
Kinder served as an executive officer of Enron
Corporation and certain of its subsidiaries.
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RONALD L. KUEHN, JR., age 61, is Chairman of the Board,
President and Chief Executive Officer of Sonat Inc., a
diversified natural gas company. He has served as a
Director of the Company since 1975. Mr. Kuehn is also a
Director of AmSouth Bancorporation, The Dun & Bradstreet
Corporation, Praxair, Inc., Protective Life Corporation
and Union Carbide Corporation, and is a member of the
Board of Trustees of Birmingham-Southern College and
Tuskegee University. During the past five years, Mr.
Kuehn has served as an executive officer of Sonat Inc.
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KRISTIAN SIEM, age 48, is Chairman and Chief Executive
Officer of Norex Industries, Inc., an industrial holding
company which includes offshore and onshore oil and gas
drilling, sub-sea construction services, and passenger
cruise line business through subsidiaries in Bermuda,
U.K., Norway and the U.S.A. Mr. Siem was elected as a
Director in September 1996. During the past five years,
Mr. Siem has served as an executive officer with Norex
Industries and as Chairman of Wilrig AS and Transocean
ASA which subsequently combined with the Company. Mr.
Siem also serves on the boards of Norwegian Cruise Line,
DSND ASA, Ivar Holderig ASA, Invesco Blue Chip Trust PLC,
and Lambert, Fenchurch Group Holdings plc.
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CONTINUING DIRECTORS--CLASS II--TERMS EXPIRING 1998
MARTIN B. MCNAMARA, age 49, is Partner-in-Charge of the
Dallas, Texas, office of the law firm of Gibson, Dunn and
Crutcher and a member of the firm's executive and
planning committees. He was elected as a Director of the
Company in 1994. During the past five years, Mr. McNamara
has been in the private practice of law.
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J. MICHAEL TALBERT, age 50, is Chairman of the Board and
Chief Executive Officer of the Company. He was elected as
a Director of the Company in 1994. Mr. Talbert is also a
Director of Equitable Resources, Inc. During the past
five years prior to assuming his current position with
the Company, Mr. Talbert served as an executive officer
of Lone Star Gas Company, a natural gas distribution
company, and Texas Oil and Gas Corporation.
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FRIDTJOF LORENTZEN, age 67, is presently Chairman of
Lorentzen Skibs AS, a Norwegian ship owning company. Mr.
Lorentzen was elected a Director of the Company in
September 1996. During the past five years, Mr. Lorentzen
has been Chairman of Lorentzen Skibs AS.
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CONTINUING DIRECTORS--CLASS III--TERMS EXPIRING 1999
ROBERT J. LANIGAN, age 68, is Chairman Emeritus of the
Board of Directors of Owens-Illinois, Inc., the principal
business of which is the manufacture and sale of
packaging products. He has served as a Director of the
Company since 1993. Mr. Lanigan is also a Director of
Chrysler Corporation, Owens-Illinois, Inc., Sonat Inc.,
The Dun & Bradstreet Corporation, Cognizant Corporation
and The Coleman Company, Inc. During the past five years
prior to appointment to his current position, Mr. Lanigan
served as an executive officer of Owens-Illinois, Inc.
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MAX L. LUKENS, age 48, is Chairman of the Board,
President and Chief Executive Officer of Baker Hughes
Incorporated, the principal business of which is the
manufacture and sale of oil and gas related drilling and
process products. He has served as a Director of the
Company since 1993. Mr. Lukens is also a Director of
Sonat Inc. During the past five years, Mr. Lukens has
served as an executive officer of Baker Hughes
Incorporated and certain of its subsidiaries.
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EINAR KLOSTER, age 59, is currently President of Eki A/S,
a real estate development and investment firm in Oslo,
Norway. Mr. Kloster was elected to the Board in September
1996. During the past five years prior to assuming his
present position, Mr. Kloster was Chairman and Chief
Executive Officer of Phillips Lighting Holding, Holland.
Mr. Kloster serves on the boards of A/S Backe, Norsk
Hydro AS, Leif Hoegh & Co., Scancoll AS, Schibsted ASA
and Stormbull A/S.
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REIDAR LUND, age 56, is presently President and Chief
Executive Officer of Transocean ASA, a major subsidiary
of the Company. Mr. Lund was elected as a Director of the
Company in September 1996. During the past five years,
Mr. Lund has been the President of Transocean ASA.
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BOARD MEETINGS AND COMMITTEES
During 1996, the Board of Directors held thirteen regular and special
meetings.
The Board has standing Audit, Executive Compensation, Finance/Benefits and
Corporate Governance Committees, which assist the Board in the discharge of
its responsibilities. In addition, the Board may from time to time form
special committees to consider particular matters that arise.
Audit Committee. The Audit Committee reviews and reports to the Board the
scope and results of audits by the Company's outside auditor (the "Auditor")
and the Company's internal auditing staff, and reviews with the
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Auditor the adequacy of the Company's system of internal controls. It reviews
transactions between the Company and its Directors and officers and Company
policies with respect thereto and compliance with the Company's business
ethics and conflict of interest policies. The Committee also recommends to the
Board of Directors a firm of certified public accountants to serve as the
Auditor of the Company, reviews the audit and other professional services
rendered by the Auditor and periodically reviews the independence of the
Auditor.
Membership on the Audit Committee is restricted to those Directors who are
not active or retired officers or employees of the Company. The Company's
policy on Audit Committee membership complies with the Audit Committee Policy
Statement adopted by the New York Stock Exchange, Inc. The current members of
the Committee are Mr. Siem, Chairman, and Messrs. Lukens, McNamara and
Lorentzen. The Committee met three times during 1996.
Executive Compensation Committee. The Executive Compensation Committee
reviews and approves the compensation of the officers of the Company,
administers the Company's executive compensation programs and makes awards
under the Long-Term Incentive Plan and the Performance Award and Cash Bonus
Plan. The current members of the Committee are Mr. Kuehn, Chairman, and
Messrs. Kinder, Lanigan, Kloster and Lukens. The Committee met four times
during 1996.
Finance/Benefits Committee. The Finance/Benefits Committee approves long-
term financial policies and annual financial plans, significant capital
expenditures, insurance programs and investment policies of the Company. It
also makes recommendations to the Board concerning dividend policy, the
issuance and terms of debt and equity securities and the establishment of bank
lines of credit. In addition, the Committee approves the creation, termination
and amendment of the Company's employee benefit programs and periodically
reviews the status of such programs and the performance of the managers of the
funded programs. The current members of the Committee are Mr. Lukens,
Chairman, and Messrs. Lanigan, McNamara and Siem. The Committee met four times
during 1996.
Corporate Governance Committee. The Corporate Governance Committee makes
recommendations to the Board with respect to the selection and compensation of
the Board, how the Board functions and how the Board should interact with
stockholders and management. It reviews the qualifications of potential
candidates for the Board of Directors, evaluates the performance of incumbent
Directors and recommends to the Board nominees to be elected at the Annual
Meeting of Stockholders. The current members of the Committee are Mr. Lanigan,
Chairman, and Messrs. Kinder, Kuehn, Kloster and Lorentzen. The Committee met
one time during 1996.
The Corporate Governance Committee will consider nominees for Director
recommended by stockholders. Such recommendations should be submitted in
writing, accompanied by a resume of the nominee's qualifications and business
experience and a signed statement of the proposed candidate consenting to be
named as a candidate and, if nominated and elected, to serve as a Director,
and addressed to the offices of the Company to the attention of Eric B. Brown,
Secretary.
COMPENSATION OF OUTSIDE DIRECTORS
Fees and Retainers. Each Director of the Company who is not an officer or
employee of the Company or any of its subsidiaries ("Outside Director")
receives an annual retainer of $30,000 ($35,000 for committee chairmen) and a
fee of $1,000 for each Board and each Board committee meeting attended, plus
incurred expenses where appropriate.
Stock Options. The Company's Long-Term Incentive Plan (the "Incentive Plan")
provides for the automatic grant of stock options to Outside Directors. Upon
his or her election to the Board, each Outside Director is granted an option
to purchase 1,000 shares of Common Stock at the fair market value of such
stock on the date of such election. Following such initial grant, on the date
of each annual meeting of stockholders of the Company, each Outside Director
whose service on the Board will continue after such meeting will be granted an
option to purchase 1,000 shares of Common Stock at the fair market value of
such stock on such date. Mr.
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Kloster and Mr. Lorentzen declined the receipt of any options in 1996 because
of unfavorable tax treatment of options under Norwegian law. In March 1997,
the Board amended the Incentive Plan to permit directors residing in Norway to
receive 1,000 Stock Appreciation Rights ("SARs") based upon the fair market
value of the Common Stock on the date of his or her election to the Board.
Following such initial grant, on the date of each annual meeting of
stockholders of the Company, each Outside Director residing in Norway whose
service will continue after such meeting will be granted 1,000 SARs based upon
the fair market value of the Common Stock on such date. At the time of the
amendment, Mr. Kloster and Mr. Lorentzen were each granted 1,000 SARs with a
base price equal to the closing sales price of the Common Stock on the date of
their initial election as Outside Directors, with exercise and expiration
dates determined as if such rights had been granted on the date of their
initial election.
Each stock option granted to an Outside Director is exercisable using cash,
Common Stock, "cashless exercise" or a combination thereof. Upon exercise of
an SAR the director receives a cash payment equal to the excess of the fair
market value of the Common Stock on exercise over the base price. Each stock
option and SAR has a ten-year term and becomes exercisable in three equal
annual installments assuming continued service on the Board. In the event of
an Outside Director's retirement (in accordance with the Board's retirement
policy), death or disability, or in the event of a change of control of the
Company (as described under "--Compensation Upon Change of Control"), options
and SARs will become immediately exercisable, and will remain exercisable for
the remainder of their ten-year term. Options and SARs will terminate 60 days
after an Outside Director leaves the Board for any other reason.
Upon the exercise of an option or SAR, the exercising Outside Director will
receive a cash tax-offset "supplemental payment" in an amount equal to the
amount necessary to pay the income tax payable with respect to both the option
or SAR exercise and receipt of the supplemental payment, assuming the Outside
Director is taxed at the maximum effective income tax rate.
An aggregate of 50,000 shares of Common Stock have been reserved for
issuance to Outside Directors under the Incentive Plan. The provisions of the
Incentive Plan relating to grants to Outside Directors will terminate on July
1, 2003 unless terminated earlier by the Board of Directors.
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OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the amount and nature of beneficial ownership of
(i) options to purchase Common Stock and (ii) shares of Common Stock
beneficially owned by each of the Directors and certain executive officers of
the Company, and by all Directors and executive officers of the Company as a
group, as of January 31, 1997:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER STOCK OPTIONS (1) COMMON STOCK(2)
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<S> <C> <C>
Jon C. Cole................................ 127,230 142,199(3)
W. Dennis Heagney.......................... 163,760 178,065(3)(4)
Richard D. Kinder.......................... 3,000 9,999
Ronald L. Kuehn, Jr........................ 4,000 1,999
Robert J. Lanigan.......................... 4,000 2,999
Robert L. Long............................. 78,924 88,011(3)(8)
Max L. Lukens.............................. 4,000 1,999
Martin B. McNamara......................... 3,000 999
Reidar Lund................................ 0 10,953
Donald R. Ray.............................. 78,770 89,846(3)(5)
J. Michael Talbert......................... 206,230 208,931(3)(6)
Fridtjof Lorentzen......................... 0 178,926
Kristian Siem.............................. 1,000 57,977
Einar Kloster.............................. 0 463
All Directors and Executive Officers as a
Group (21 Persons)........................ 766,091 1,062,167(7)
</TABLE>
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(1) The options shown consist of grants made under the Incentive Plan and
represent all options to purchase Common Stock, whether exercisable or
not, held by the named individual as of January 31, 1997. Options that are
exercisable within 60 days after January 31, 1997 are included under both
the "Stock Options" and "Common Stock" columns above, as well as in the
percentages set forth in Note 2 below.
(2) Each Director and executive officer has sole voting power and sole
investment power with respect to all shares beneficially owned by him,
unless otherwise indicated. As of January 31, 1997, each such individual
beneficially owned less than 0.41% of the outstanding shares of Common
Stock and all present Directors and executive officers of the Company as a
group, consisting of 21 persons, beneficially owned less than 2.1% of the
outstanding shares of Common Stock.
(3) The number of shares shown for Messrs. Cole, Heagney, Long, Ray and
Talbert includes 14,620 shares, 24,060 shares, 14,270 shares, 12,880
shares and 14,730 shares, respectively, of restricted stock granted under
the Incentive Plan that had not vested as of January 31, 1997. Such
persons have the right to vote and receive dividends on such shares, but
do not have the power to dispose of, or to direct the disposition of, such
shares until they vest pursuant to the terms of the Incentive Plan. The
number of shares shown for Messrs. Cole, Heagney, Long, Ray and Talbert
also includes (i) 113,854 shares, 144,807 shares, 66,394 shares, 69,379
shares, and 171,753 shares, respectively, that may be acquired within 60
days after January 31, 1997 upon exercise of stock options granted under
the Incentive Plan; and (ii) 2,731 shares, 1,075 shares, 956 shares, 928
shares, and 283 shares, respectively, held by the trustee under the
Company's 401(K) Savings Plan (the "Savings Plan") as of January 31, 1997.
(4) The number of shares shown for Mr. Heagney includes 10 shares held by each
of two of his children.
(5) The number of shares shown for Mr. Ray includes 6,659 shares held in a
joint trust account with his wife.
(6) The number of shares shown for Mr. Talbert includes 1,000 shares held in a
joint account with his wife.
(7) The number of shares shown includes 101,687 shares of restricted stock
granted under the Incentive Plan that had not vested as of January 31,
1997; 637,307 that may be acquired within 60 days after January 31, 1997
upon exercise of stock options granted under the Incentive Plan; and 8,776
shares held by the trustee under the Savings Plan.
(8) The number of shares shown for Mr. Long includes 6,391 shares held in a
joint account with his wife.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Mr. Kinder's Form 4 filing for the month of May was two days late. Mr. Paul
King's initial Form 3 filing was thirteen days late.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
In February 1997, the Company entered into an agreement with Reidar Lund, a
Director and executive officer of the Company, pursuant to which Mr. Lund will
lead the Company's efforts to sell or dispose of certain designated assets of
Transocean ASA, a subsidiary of the Company. In the event that the assets are
spun off in an initial public offering in Norway, Mr. Lund is to receive a
cash payment of $500,000, and a small percentage of the capital shares of the
new company will be reserved for him and his management team. If the assets
are sold in a private transaction, Mr. Lund will receive a cash payment equal
to thirty-six times his current monthly salary. These payments would be in
lieu of what he would otherwise receive under his Employment Agreement. See
"Compensation of Executive Officers--Employment Agreements." Mr. Lund will
leave the Company and resign from the Board of Directors when the assets are
sold or disposed of and, if not sold, by no later than December 31, 1997.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee (the "Committee") of the Board of
Directors of the Company, which is composed solely of non-employee Directors,
administers the Company's executive compensation program. The Committee's
primary responsibility is to ensure that the executive compensation program
furthers the interests of the Company and its stockholders.
The Company's executive compensation program has three principal objectives:
(1) to attract and retain a highly qualified and motivated management team;
(2) to appropriately reward individual executives for their contributions to
the attainment of the Company's key strategic goals; and (3) to link the
interests of executives and stockholders through stock-based plans and
performance measures.
The Committee meets with outside consultants at least annually to review and
compare the level of compensation paid or awarded to key executives to the
compensation practices of a peer group of companies. The primary peer group
used for determining compensation for key executives consists of 17 publicly
held companies of comparable size in the contract drilling, related oilfield
services and oil and gas industry (the "Corporate Peer Group"). In comparing
the level of the Company's compensation to that of the Corporate Peer Group,
the Committee takes into account the relative size of companies as measured by
revenues. The Simmons and Company International Oil Service Industry Index
(the "Simmons Index") used in the total stockholder return comparison (see "--
Performance Graph") is also used for compensation purposes, but only for
comparing the Company's total stockholder return to that of the index and
basing awards of stock options and restricted shares on such comparison.
The key components of the Company's executive compensation program are base
salary, annual cash bonus incentives and long-term stock incentives. The
Committee's policies with respect to each component of the program, including
the bases for the compensation of the Chief Executive Officer of the Company,
are described below. The Committee consults with the Chief Executive Officer
in reviewing the individual performance and compensation of key executives of
the Company (other than the Chief Executive Officer). The Committee reviews
the Chief Executive Officer's performance and compensation in executive
session at least annually.
Base Salaries. The Committee reviews the base salaries of key executive
officers of the Company and determines whether salaries should be adjusted,
based primarily on the executive's individual performance, responsibilities
and experience and salary survey information. In general, the Committee's
objective is to maintain executive salaries at the size-adjusted median of the
salaries for comparable executives in the Corporate
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Peer Group. Executive salaries for 1995, including Mr. Talbert's salary, were
all below the median level as compared to the Corporate Peer Group.
Accordingly, at its salary review meeting on January 26, 1996, the Committee
increased Mr. Talbert's salary for 1996 (as of April 1, 1996) to $470,000.
Annual Cash Bonus Incentives. Annual cash bonus incentive opportunities are
awarded each year under the Company's Performance Award and Cash Bonus Plan.
The amount of an executive's bonus opportunity (which is expressed as a
percentage of base salary) is dependent primarily upon such individual's
position and responsibilities and bonus opportunities provided to comparable
positions within the Corporate Peer Group. At the beginning of each year, the
Committee reviews and approves annual performance goals. Shortly after the end
of the year, the Committee determines the appropriate bonus payout levels
based on the degree to which these goals have been achieved. The annual
incentive program is designed to pay total annual cash compensation (salary
plus bonus) above the median of the Corporate Peer Group when the Company
meets substantially all of the goals established for an executive's bonus
opportunity. Similarly, when the goals are not achieved, the program is
intended to result in total annual cash compensation below the median of the
Corporate Peer Group.
The payout of an executive's 1996 bonus opportunity was based on the level
of achievement of a Company financial goal, certain corporate goals and
individual goals, as described below. The financial goal was weighted at 50
percent, the corporate goals at 35 percent and the individual goals at 15
percent. The Committee also has discretion to make additional cash bonus
awards beyond the bonus opportunity to recognize exceptional individual
performance.
The financial goal included in the 1996 bonus opportunities for senior
executive officers was the Company's 1996 earnings per share ("EPS") as
compared to the Company's budgeted EPS. Payout of the EPS goal was based on
minimum, target and maximum levels of achievement. The corporate goals
included in the 1996 bonus opportunities included operating, marketing and
strategic goals and annual goals relating to safety and customer focus
programs.
The Committee met in February 1997 to review in detail the extent to which
the 1996 performance goals had been achieved. The Company's EPS reached the
budgeted EPS level, resulting in payout at the 100 percent level for the
financial goal. The Company also achieved many of its key corporate goals,
resulting in a payout of 81 percent of the bonus opportunity for such
corporate goals. The range of payouts for the four most highly compensated
executive officers other than Mr. Talbert was between 90 percent and 101
percent of their bonus opportunities. Mr. Talbert's performance entitled him
to 101 percent of his bonus opportunity, which resulted in a bonus payment of
$325,000. In addition, in recognition of the efforts by Mr. Talbert in
achieving the business combination with Transocean ASA, the Committee granted
him a special one-time cash bonus of $100,000.
Long-term Stock Incentives. The long-term stock incentives component of the
Company's executive compensation program is designed to align executive and
stockholder interests by rewarding executives for the attainment of stock
price appreciation and total stockholder return.
As a general rule, the Committee administers the long-term stock incentive
program through annual grants of stock options and restricted stock to certain
executive officers and other key employees of the Company. In addition, the
Committee may make special awards to individual executives and other key
employees during the year on a discretionary basis. On February 23, 1996, the
Committee made stock option grants and awards of restricted stock to
executives, including Mr. Talbert, and stock option grants to other key
employees in order to further the goal of aligning the executives' and key
employees interests with those of the stockholders and to encourage management
continuity at the Company.
The number of stock options and restricted shares granted to each executive
officer was determined in accordance with a formula established by the
Committee in prior years. Each executive officer is given a grant opportunity
based on the executive's individual position and compensation survey data of
the Corporate Peer Group. The extent to which the grant opportunity is earned
is determined by comparing the Company's weighted average total shareholder
return ("TSR"), which is calculated by considering stock price appreciation
and
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<PAGE>
dividends, over a multi-year period to the weighted-average TSR of the
companies in the Simmons Index having total capitalization of at least $200
million at the end of each year in the period. Since the Company was not
publicly traded before June 1993, the Committee considered only the TSR for
1994 and 1995, with the TSR for 1995 being given the most weight, for purposes
of grants made in February 1996. The Committee expects that subsequent grants
will be based on a three-year weighted-average TSR, with the most weight being
given to the most recent year. In general, if the Company's weighted-average
TSR for the applicable period places it in a particular percentile of
companies in the Simmons Index ranked by weighted-average TSR, the long-term
incentive grants will be made at a level which places the Company's long-term
awards at the same percentile in reference to long-term awards by the
Corporate Peer Group to executives in comparable positions. The formula used
by the Committee has additional conditions: (a) awards will not exceed the
50th percentile if the Company's weighted-average TSR is negative, (b) awards
will not be made if the Company's weighted-average TSR is below the 25th
percentile and (c) the Committee may reduce awards to the 75th percentile
level if performance exceeds the 75th percentile level.
Accordingly, on February 23, 1996, Mr. Talbert was granted options to
purchase 32,200 shares Common Stock at an exercise price of $46.00 per share
and 6,500 shares of restricted stock. The weighted-average TSR on which the
award was based placed the Company above the 90th percentile of the companies
in the Simmons Index, and Mr. Talbert's award was based upon the 85th
percentile level in reference to awards in the Corporate Peer Group.
Stock Ownership Guidelines. In 1993, the Committee established guidelines
designed to encourage key executives of the Company to attain specified levels
of stock ownership over a five-year period. Stock ownership goals are based on
the value of the Common Stock and are expressed as a multiple of the
executive's base salary. During 1996, the Committee reviewed the guidelines
and determined that the stock ownership goals were appropriate and that
executive officers were in compliance with these guidelines.
Policy with Respect to Section 162(m). Section 162(m) of the Internal
Revenue Code limits the tax deduction that the Company or its subsidiaries can
take with respect to the compensation of certain executive officers, unless
the compensation is "performance based." The Committee expects that all income
recognized by executive officers upon the exercise of stock options granted
under the Incentive Plan will qualify as performance based compensation and
further believes that all restricted stock which it has awarded to date also
qualifies as "performance based". In order to enable the Committee to make
future grants of restricted stock which qualify as "performance based", the
Incentive Plan as amended and restated was submitted and approved by the
stockholders at the 1996 Annual Meeting.
The Committee has decided not to submit the Company's Performance Award and
Cash Bonus Plan for stockholder approval at the 1997 Annual Meeting, which
approval is required in order to qualify certain bonus payments under that
plan as performance-based for purposes of Section 162(m), because the Company
expects that its salaries and bonuses for 1997 will not exceed the deduction
limits of Section 162(m) for 1997. The Committee will continue to monitor this
issue and may determine to submit the plan to stockholders at a future date.
The Committee currently intends to continue to make cash bonus payments that
are based not only on quantifiable financial and operating goals but also on
the achievement of subjective, non-quantifiable goals that may not qualify as
performance-based compensation. The Committee believes that these subjective
goals, while not properly measurable by the kind of quantifiable targets that
are required to qualify compensation as performance-based, are important to
the long-term financial success of the Company and to its stockholders.
Conclusion. The Committee believes that the executive compensation
philosophy that it has adopted effectively serves the interests of the
stockholders and the Company. It is the Committee's intention that the pay
delivered to executives be commensurate with Company performance.
Ronald L. Kuehn, Jr. Robert J. Lanigan Max L. Lukens Richard D. Kinder
Einar Kloster
9
<PAGE>
EXECUTIVE COMPENSATION
The table below sets forth information concerning compensation of J. Michael
Talbert, the Company's Chief Executive Officer, and the Company's four other
most highly compensated executive officers (the "named executive officers")
for service in all capacities to the Company and its subsidiaries during 1994,
1995 and 1996. The table includes, where applicable, compensation paid by
Sonat Inc. for services to Sonat Inc. and its subsidiaries (including the
Company) prior to the public offering of the Common Stock in June 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ ----------------------------
NAME AND PRINCIPAL RESTRICTED
POSITION WITH THE OTHER ANNUAL STOCK NUMBER OF ALL OTHER
COMPANY YEAR SALARY BONUS(1) COMPENSATION AWARDS(2) OPTIONS/SARS(3) COMPENSATION(4)
------------------ ---- ------ -------- ------------ ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Michael Talbert...... 1996 $459,000 $425,000 $ 0 $304,688(6) 32,200 $ 49,368
Chairman of the Board 1995 425,004 350,000 0 172,830(7) 39,030 564,997
and Chief Executive 1994 141,668 276,250 0 555,000(8) 175,000 37,173
Officer and Director
W. Dennis Heagney....... 1996 283,000 152,042 0 173,438(6) 18,100 24,960
President and Chief 1995 260,004 180,000 313,674(5) 91,560(7) 20,660 22,531
Operating Officer 1994 250,008 84,560 0 240,097(8) 125,000 21,827
Jon C. Cole............. 1996 225,000 111,872 70,010(5) 121,875(6) 12,900 18,022
Senior Vice President 1995 210,000 120,000 0 63,420(7) 14,330 16,453
1994 195,000 43,000 0 279,735(8) 90,000 15,409
Robert L. Long.......... 1996 210,000 124,756 73,110(5) 112,500(6) 12,000 19,127
Senior Vice President 1995 195,000 100,000 0 60,270(7) 13,590 17,600
1994 185,004 39,820 0 190,991(8) 70,000 17,053
Donald R. Ray........... 1996 192,000 70,886 36,684(5) 89,063(6) 9,400 16,546
Vice President-- 1995 177,000 80,000 0 41,580(7) 9,370 14,218
Technical Services 1994 170,004 36,590 0 200,875(8) 50,000 15,125
</TABLE>
- --------
(1) The amount shown as "Bonus" for a given year includes amounts earned with
respect to such year but paid in the first quarter of the following year.
All amounts shown as "Bonus" were paid under the Company's Performance
Award and Cash Bonus Plan.
(2) The amount shown represents the dollar value of restricted stock awards
made during the indicated year, calculated by multiplying the closing
price of the Common Stock as reported on the New York Stock Exchange (the
"NYSE") Composite Tape on the date of grant by the number of shares
awarded. Dividends are paid on all shares of restricted stock.
The number of shares of restricted stock of the Company held by the named
executive officers as of December 31, 1996, and the aggregate value of such
shares (calculated by multiplying the closing price of the Common Stock as
reported on the NYSE Composite Tape on December 31, 1996 by the number of
shares held on such date) are as follows: Mr. Talbert, 14,730 shares,
$922,466; Mr. Heagney, 24,060 shares, $1,506,758; Mr. Cole, 14,620 shares,
$915,578; Mr. Long, 14,270 shares, $893,659; and Mr. Ray, 12,880 shares,
$806,610.
(3) Stock option grants reported for 1996, 1995 and 1994 were made under the
Incentive Plan and represent options to purchase shares of Common Stock.
(4) With respect to 1996, the amounts shown as "All Other Compensation"
represent the following for each of Messrs. Talbert, Heagney, Cole, Long
and Ray, respectively: (1) matching contributions to the trust established
under the Savings Plan -- $6,750, $6,750, $6,750, $6,750 and $6,750; (2)
contributions credited to the Savings Plan under the Company's
Supplemental Benefit Plan -- $14,672, $7,115, $3,947, $3,139 and $2,060;
and (3) with respect to premiums under the Company's "split-dollar"
Executive Life Insurance
10
<PAGE>
Program, the sum of (a) the value of the premium payment used to purchase
term life insurance and (b) the value of the benefit to the executive
officer of the remainder of the premium payment -- $26,109, $9,971, $6,715,
$8,336 and $6,971.
(5) The amount shown represents the amount of tax-offset "supplemental
payments" paid upon the exercise of stock options (or tandem SARs) granted
under the Sonat Inc. Executive Award Plan.
(6) Includes the value of 6,500 shares, 3,700 shares, 2,600 shares, 2,400
shares and 1,900 shares granted on February 23, 1996 to Messrs. Talbert,
Heagney, Cole, Long and Ray, respectively. Such shares will vest in three
equal installments on each anniversary of the date of the grant commencing
on the third anniversary of the date of grant.
(7) Includes the value of 8,230 shares, 4,360 shares, 3,020 shares, 2,870
shares and 1,980 shares granted on February 24, 1995 to Messrs. Talbert,
Heagney, Cole, Long and Ray, respectively. Such shares will vest in three
equal installments on each anniversary of the date of the grant commencing
on the third anniversary of the date of grant.
(8) Includes the value of 3,000 shares, 2,000 shares, 2,000 shares and 1,500
shares of restricted stock granted on January 28, 1994 to Messrs. Heagney,
Cole, Long and Ray, respectively. These shares vested as scheduled on July
28, 1995. Also includes the value of 30,000 shares, 10,262 shares, 13,310
shares, 8,513 shares and 9,500 shares granted to Messrs. Talbert, Heagney,
Cole, Long and Ray, respectively, on August 11, 1994. These shares were
scheduled to vest on the earlier of death, disability, termination of
employment for the convenience of the Company, the day following any
period of 10 consecutive business days for which the average closing price
of the Common Stock was $30 per share or more or in equal installments on
each of the first three anniversaries of September 1, 1996. These shares
vested June 21, 1995 because the Common Stock had closed at a price of $30
per share or more for the 10 prior consecutive business days.
OPTIONS GRANTED
The table below contains certain information with respect to stock options
granted to the named executive officers in 1996. All of such options were
granted under the Incentive Plan.
OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
COMPANY STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (10 YEARS)
------------------------------------------------ ------------------------------
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO
UNDERLYING COMPANY EXERCISE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED 1996 ($/SHARE) DATE(1) 5%(2) 10%(2)
---- ------------ ------------ -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders........ 51,522,985 -- -- -- 1,518,895,598(3) 3,849,282,209(3)
J. Michael Talbert...... 32,200(4) 11% 46.875 2/22/06 949,256 2,405,662
W. Dennis Heagney....... 18,100(4) 6% 46.875 2/22/06 533,588 1,352,251
Jon C. Cole............. 12,900(4) 4% 46.875 2/22/06 380,292 963,759
Robert L. Long.......... 12,000(4) 4% 46.875 2/22/06 353,760 896,520
Donald R. Ray........... 9,400(4) 3% 46.875 2/22/06 277,112 702,274
</TABLE>
- --------
(1) The stock options are subject to termination prior to their expiration
date in the event termination of employment occurs under certain
conditions.
(2) For each named executive officer, the potential realizable values shown
represent the difference between the Resulting Company Stock Price of the
option (as described below) and the exercise price of the option,
multiplied by the number of options granted to such executive officer. The
Resulting Company Stock Price for an option equals the price the Common
Stock would attain at the end of the option's 10-year term if the price of
the Common Stock appreciated from the effective date of the option at a
rate of 5% or 10% per year (as the case may be). The Resulting Company
Stock Price for the options granted on February 23,
11
<PAGE>
1996 with an exercise price of $46.875 is $76.354 (at 5% annual stock price
appreciation) and $121.582 (at 10% annual stock price appreciation).
(3) The potential realizable values shown for all stockholders represents the
difference between the Resulting Company Stock Price for the options
granted on February 23, 1996 and the exercise price of such options,
multiplied by the number of outstanding shares of Common Stock as of
December 31, 1996.
(4) The stock options shown were granted on February 23, 1996 and have an
exercise price equal to the fair market value of the Common Stock on such
date. The options become exercisable in equal installments over a three-
year period. Stock options that have not previously become exercisable are
generally forfeited upon termination of employment, unless such
termination occurs by reason of death or disability or for the convenience
of the Company (as determined by the Committee). The stock options become
fully exercisable upon a Change of Control (as defined in the Incentive
Plan).
AGGREGATE OPTION EXERCISES
The following table shows certain information with respect to the named
executive officers concerning stock options exercised during 1996 and
unexercised stock options held as of December 31, 1996:
AGGREGATED OPTION EXERCISES IN 1996 AND 1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED, IN-THE-
UNEXERCISED OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
SHARES YEAR END YEAR END
ACQUIRED ON VALUE ------------------------------- -------------------------------
NAME EXERCISE(1) REALIZED EXERCISABLE(2) UNEXERCISABLE(3) EXERCISABLE(4) UNEXERCISABLE(5)
---- ----------- ---------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J. Michael Talbert...... 40,000 $1,782,500 148,010 58,220 $6,498,416 $2,118,764
W. Dennis Heagney....... 64,000 1,832,656 131,887 31,873 5,900,296 1,138,161
Jon C. Cole............. 6,000 101,625 120,777 22,453 5,170,843 794,884
Robert L. Long.......... 32,666 1,179,432 65,864 21,060 2,773,259 750,154
Donald R. Ray........... 22,000 307,750 63,123 15,647 2,791,495 534,953
</TABLE>
- --------
(1) The options in this column as to Mr. Talbert are options to purchase
Common Stock. The options as to Messrs. Ray and Cole are Sonat Inc. common
stock. The options as to Messrs. Heagney and Long are options to purchase
Common Stock and Sonat Inc. common stock. The options to purchase Sonat
Inc. common stock reflect the two-for-one split of Sonat Inc. common stock
that became effective on September 14, 1993.
(2) As to Messrs. Cole and Long consists of options to purchase 104,777 shares
and 57,864 shares of Company common stock and options to purchase 16,000
shares and 8,000 shares of Sonat Inc. common stock. As to the others
consists entirely of options to purchase Common Stock.
(3) All options in this column are options to purchase Common Stock.
(4) The value of each unexercised in-the-money stock option (or tandem SAR) is
equal to the difference between $62.625 (the closing price of the Common
Stock on December 31, 1996) or $51.50 (the closing price of Sonat Inc.
common stock on December 31, 1996) and the exercise price of the Company
stock option or Sonat Inc. option as the case may be. Such value does not
include the value of any tax-offset supplemental payments that are payable
upon the exercise of the stock options. The only options subject to tax-
offset supplemental payments are certain options granted by Sonat Inc.
prior to December 1991.
Of the amounts shown for Messrs. Cole and Long respectively, $4,646,343 and
$2,530,259 reflect the value attributable to options to purchase Common
Stock, and $524,500 and $243,000 reflect the value attributable to options
to purchase Sonat Inc. common stock. The entire amount shown for the others
reflects the value attributable to options to purchase Common Stock.
(5) Reflects the value of unexercisable in-the-money options to purchase
Common Stock. At December 31, 1996, there were no unexercisable options to
purchase Sonat Inc. common stock.
12
<PAGE>
DEFINED BENEFIT PLANS
Employees and officers of the Company and participating subsidiaries are
participants in the Company's Retirement Plan. In general, annual retirement
benefits are based on average covered compensation for the highest five
consecutive years of the final ten years of employment. Covered compensation
under the Company's Retirement Plan currently includes salaries and bonuses
(reported in the Summary Compensation Table) and certain personal benefits;
covered compensation does not include (i) amounts relating to the grant or
vesting of restricted stock, the exercise of stock options and SARs, and
receipt of tax-offset supplemental payments with respect to stock options,
SARs or restricted stock, or (ii) employer contributions under the Savings
Plan or the Company's Supplemental Benefit Plan.
The maximum annual retirement benefit under the Company's Retirement Plan is
50% of the participant's average covered compensation minus 22.5% of his
covered social security earnings (based on 30 or more years of service with
the Company or Sonat Inc.), provided that the participant's benefit will be no
less than the sum of (a) the benefit he would have been entitled to from the
Sonat Inc. Retirement Plan had he terminated employment on the date of
consummation of the Company's initial public offering in 1993, plus (b) the
benefit he accrued under the Company's Retirement Plan (considering only years
of service with the Company after such date). The Company's executive officers
(other than Mr. Talbert) and certain other employees accrued benefits under
the Sonat Inc. Retirement Plan under the following formula: (a) 2.4% of
average covered compensation (calculated as described above) minus 2.0% of
primary social security benefits for each year of service prior to January 1,
1992; plus (b) 2.0% of average covered compensation minus 1.667% of primary
social security benefits for each year of service after January 1, 1992; plus
(c) when the total of (a) plus (b) above equals 60% of average covered
compensation minus 50% of primary social security benefits, 1% of average
covered compensation for each year of service after January 1, 1992, not
included in the calculation in (b) above, up to five such additional years of
service. The eligible survivors of a deceased Retirement Plan participant are
entitled to a survivor's benefit, which usually equals 50% of the
participant's retirement benefit, or, if greater, 75% of the participant's
retirement benefit accrued under the Sonat Inc. Retirement Plan plus 50% of
the retirement benefit accrued after the Company's public offering. Assets and
liabilities relating to benefits accrued by employees of the Company were
transferred from the Sonat Inc. Retirement Plan to the Company's Retirement
Plan. As a result, no benefits are payable to such employees from the Sonat
Inc. Retirement Plan. Benefits under the Company's Retirement Plan are
generally paid as life annuities.
The Company and Sonat Inc. each has a Supplemental Benefit Plan that
provides eligible participants and their eligible survivors with retirement
and survivors benefits that would have been payable under the applicable
Retirement Plan but for the fact that benefits payable under funded pension
plans are limited by federal tax laws. As a general rule, during 1996 the
federal tax laws limited annual benefits under tax-qualified retirement plans
to $120,000 (subject to reduction in certain circumstances), and required such
plans to disregard any portion of the participant's 1996 compensation in
excess of $150,000. Benefits accrued by employees of the Company under the
Sonat Inc. Supplemental Benefit Plan as of the closing of the Company's 1993
initial public offering will continue to be paid under such plan; any
additional supplemental benefits to which an employee becomes entitled will be
paid under the Company's Supplemental Benefit Plan. A participant may choose
to have benefits under each Supplemental Benefit Plan paid either as a life
annuity or in a cash lump sum upon termination of employment with the Company.
13
<PAGE>
The following table sets forth information with respect to the named
executive officers concerning the benefits payable under the Company's
Retirement Plan and Supplemental Benefit Plan and the Sonat Inc. Supplemental
Benefit Plan:
DEFINED BENEFIT PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
CURRENT RETIREMENT
YEARS OF BENEFIT AT
NAME SERVICE(1) AGE 65(2)
---- ---------- ----------
<S> <C> <C>
J. Michael Talbert........................................ 2.3 $235,913
W. Dennis Heagney......................................... 27.5 231,251
Jon C. Cole............................................... 19.2 172,500
Robert L. Long............................................ 20.5 155,000
Donald R. Ray............................................. 24.8 136,000
</TABLE>
- --------
(1) The number of years of credited service under the Company's Retirement
Plan as of December 31, 1996, which where applicable includes years of
service with Sonat Inc.
(2) The retirement benefit shown for each named executive officer is the
estimated annual retirement benefit payable under the Company's Retirement
Plan and Supplemental Benefit Plan and the Sonat Inc. Supplemental Benefit
Plan as a single life annuity at age 65 (based on the assumptions that
such officer retires from employment with the Company at age 65 with
average covered compensation at his retirement date equal to his 1996
covered compensation) and calculated prior to the offset for covered
social security earnings.
14
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return of (1) the
Common Stock, (2) the Standard & Poor's 500 Stock Index and (3) the Simmons
Index over the period in which the Common Stock has been publicly traded. The
graph assumes that $100 was invested in the Common Stock and each of the other
two indices on June 4, 1993 (the date of consummation of the Company's initial
public offering), and that all dividends were reinvested at date of payment.
CUMULATIVE TOTAL STOCKHOLDER RETURN
INDEXED TOTAL STOCKHOLDER RETURN
JUNE 4, 1993--DECEMBER 31, 1996
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
JUNE 4, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1993 1994 1995 1996
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Company............ $100 $ 71 $ 80 $203 $285
S&P 500............ 100 106 107 147 181
Simmons............ 100 94 98 141 225
</TABLE>
COMPENSATION UPON CHANGE OF CONTROL
Certain of the Company's benefit plans provide for the acceleration of
certain benefits in the event of a "Change of Control" of the Company. A
"Change of Control" is deemed to occur if (1) any person or group acquires
beneficial ownership of 20% or more of the Common Stock or total voting power
(except as a result of acquisitions by or from the Company or pursuant to a
transaction excluded from the definition of "Change of Control" pursuant to
clause 3 below); (2) individuals who constitute the "Incumbent Board" (as
defined in the Plan, and generally including members of the Board as of
December 1995 and directors whose nomination or election was approved by a
majority of the directors then comprising the Incumbent Board) fail to
constitute at least a majority of the Board of Directors; (3) a merger,
consolidation, reorganization, or sale of substantially all of the Company's
assets occurs, unless following such transaction (i) the beneficial owners of
the Common Stock before the transaction own more than 50% of the common stock
and total voting power of the Company resulting
15
<PAGE>
from the transaction, (ii) no person or entity owns 20% or more of the common
stock or voting power of the company resulting from the transaction unless
such ownership existed before the transaction, and (iii) at least a majority
of members of the board of directors of the company resulting from the
transaction were members of the "Incumbent Board" at the time the Board
approved the transaction, or (4) the stockholders of the Company approve a
complete liquidation or dissolution of the Company.
Upon the occurrence of a Change of Control, (1) all outstanding shares of
restricted stock granted under the Incentive Plan will immediately vest, (2)
all stock options and SARs granted to Outside Directors under the Incentive
Plan will become immediately exercisable and will remain exercisable for the
remainder of their term, and (3) all outstanding stock options (and SARs)
under the Incentive Plan held by then-current employees will become
immediately exercisable and will remain exercisable for the remainder of their
term. If an SAR is exercised within 60 days of the occurrence of a Change of
Control, the holder will receive, in addition to the amount otherwise due on
exercise, a payment equal to the excess over the amount otherwise due of the
highest price per share of common stock paid during the 60-day period prior to
exercise of the SAR, plus, if the holder is entitled to a supplemental
payment, a supplemental payment on such excess. Also, upon the occurrence of a
Change of Control, the participant will become vested in 100% of the maximum
performance award he could have earned under the Company's Performance Award
and Cash Bonus Plan for the proportionate part of the performance period prior
to the Change of Control, and will retain the right to earn out any additional
portion of his award if he remains in the employ of the Company.
EMPLOYMENT AGREEMENTS
The Company is a party to Employment Agreements with certain executive
officers including the named executive officers. The agreements provide that
if the executive officer's employment is terminated within three years after a
Change of Control as defined in the agreements (and described above) or prior
to but in anticipation of a Change of Control, either (a) by the Company for
reasons other than death, disability or "cause" (as defined) or (b) by the
executive officer for "good reason" (which term includes a diminution of
responsibilities or compensation, or a determination by the executive officer
to leave during the thirty day period immediately following the first
anniversary of the Change of Control), the executive officer will receive: (1)
any unpaid portion of his current salary and prorated portion of his highest
bonus paid either in the last three years before the Change of Control or for
the last completed fiscal year after the Change of Control (the "Highest
Bonus"); (2) a lump sum payment equal to three times the sum of his annual
base salary (based on the highest monthly salary paid in the twelve months
prior to the Change of Control) and his Highest Bonus; (3) benefits to him and
his family at least equal to those which would have been provided had the
employment not been terminated for a three-year period; and (4) a lump sum
amount equal to the excess of (i) the actuarial equivalent of the benefit
under the Company's Retirement Plan and Supplemental Retirement Plan had the
executive's employment contained for three years after termination over (ii)
the actuarial equivalent of the executive's actual benefit under such plans.
The agreements also provide that in the event the payments called for under
the agreement would subject the executive to an excise tax under Section 4999
of the Internal Revenue Code, the executive will be entitled to receive an
additional "gross-up" payment equal to the amount that would leave him with
the amount he would have received, on an after-tax basis, if the payments
under the agreement did not give rise to an excise tax; provided, however,
that if the payments called for under the agreement do not exceed 100% of the
amount that could be paid to the executive without triggering an excise tax,
no "gross-up payment" will be made and payments under the agreement will be
reduced to such lesser amount. Assuming that the named executive officers
terminated employment on January 31, 1997 in a manner entitling them to
benefits under the Employment Agreements, the respective executive officers
would receive the following lump sum cash payments pursuant to items (1), (2)
and (4) above: Mr. Talbert $2,659,277, (based on his annualized base salary
for 1996 plus the bonus paid to him with respect to 1996); Mr. Heagney
$1,538,088, Mr. Cole $1,143,988, Mr. Long $1,114,433, and Mr. Ray $976,557.
The Company's Transocean ASA subsidiary is a party to an Employment
Agreement with Reidar Lund, the President and Chief Executive Officer of that
subsidiary and a Director of the Company. The agreement provides,
16
<PAGE>
among other items, that if Mr. Lund's working tasks or areas of responsibility
are considerably changed due to or in connection with the Company's
acquisition of Transocean ASA, then at the time of his resignation or
dismissal he will be entitled to thirty-six times his monthly salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Executive Compensation Committee of the Company's Board
of Directors are Ronald L. Kuehn, Jr., Chairman, Richard D. Kinder, Robert J.
Lanigan, Einar Kloster and Max L. Lukens. There are no matters relating to
interlocks or insider participation required to be reported.
SELECTION OF AUDITOR
Ernst & Young LLP has been selected as Auditor of the Company for the 1997
calendar year. Ernst & Young LLP served as Auditor of the Company for the 1996
calendar year. A representative of Ernst & Young LLP is expected to be present
at the Annual Meeting with the opportunity to make a statement if so desired
and to respond to appropriate questions.
OTHER MATTERS
PROPOSALS OF STOCKHOLDERS
Stockholder Proposals in the Company's Proxy Statement. In order for
proposals by stockholders to be considered for inclusion in the proxy
statement and proxy card relating to the 1998 Annual Meeting of Stockholders,
such proposals must be received at the principal executive offices of the
Company, 4 Greenway Plaza, Houston, Texas, 77046 by no later than February 6,
1998.
Stockholder Proposals and Nominations for Directors to be Presented at
Meetings. A stockholder who desires to propose any business at an annual
meeting of stockholders must give the Company written notice not less than 90
days prior to the anniversary of the date of the immediately preceding annual
meeting that was specified in the initial formal notice of such meeting or, if
the date of the forthcoming annual meeting is more than 30 days before or
after such anniversary date, by the close of business on the tenth day
following public disclosure by the Company of the meeting date. The
stockholder's notice must set forth (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (b) the name and address of the stockholder who
intends to propose such business; (c) a representation that the stockholder is
a holder of record of stock of the Company entitled to vote at such meeting
(or if the record date for such meeting is subsequent to the date required for
such stockholder notice, a representation that the stockholder is a holder of
record at the time of such notice and intends to be a holder of record on the
date of such meeting) and intends to appear in person or by proxy at such
meeting to propose such business; and (d) any material interest of the
stockholder in such business.
A stockholder who desires to nominate Directors at an annual meeting of
stockholders must give the Company written notice within the time period
described in the preceding paragraph. A stockholder who desires to nominate
Directors at a special meeting at which the Board of Directors has determined
that Directors will be elected must give the Company written notice by the
close of business on the tenth day following public disclosure by the Company
of the meeting date. The stockholder's notice must set forth (a) the name and
address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the stockholder
is a holder of record of stock of the Company entitled to vote at such meeting
(or if the record date for such meeting is subsequent to the date required for
such stockholder notice, a representation that the stockholder is a holder of
record at the time of such notice and intends to be a holder of record on the
date of such meeting) and setting forth the class and number of shares so held
(including shares held beneficially); (c) a representation that such
stockholder intends to appear in person or by proxy as a holder
17
<PAGE>
of record at the meeting to nominate the person or persons specified in the
notice; (d) a description of all arrangements or understandings between the
stockholder and each nominee proposed by the stockholder and any other person
or persons (identifying such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (e) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (f) the consent of each nominee
to serve as a Director of the Company if so elected.
The chairman of the meeting may refuse to transact any business or to
acknowledge the nomination of any person if a stockholder has failed to comply
with the foregoing procedures.
A copy of the Company's By-Laws, in which these procedures are set forth,
may be obtained from the Company upon written request to the Secretary of the
Company at its principal place of business.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to each
person or entity known by the Company to be the beneficial owner of more than
5% of the Common Stock as of February 28, 1997 (based upon Schedule 13G
filings with the Securities and Exchange Commission):
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------- ------------------ --------
<S> <C> <C>
FMR Corp.(1).................................. 3,612,513 7.02%
82 Devonshire Street
Boston, MA. 02109
</TABLE>
- --------
(1) FMR Corp. reported in its Schedule 13G filed February 13, 1997 that it
and/or certain of its affiliates have sole voting power as to 54,975
shares and sole dispositive power as to 3,612,513 shares of Common Stock.
VOTING AT THE ANNUAL MEETING
The presence, in person or by proxy, of the holders of a majority of the
Common Stock is necessary to constitute a quorum at the Annual Meeting or any
adjournment thereof.
The vote required for the election of Directors and the approval of any
other matters scheduled for a vote at the Annual Meeting is controlled by the
provisions of the Company's Restated Certificate of Incorporation and By-Laws
and the Delaware General Corporation Law. Directors are elected by a plurality
vote. Abstentions and broker "non-votes" (shares not voted on a matter because
a nominee holding shares for a beneficial owner neither receives voting
instructions from such beneficial owner nor has discretionary voting power
with respect thereto) will not have an effect on the vote for Directors at the
Annual Meeting. The vote will be tabulated by an independent tabulator and the
results of such vote will be certified by independent inspectors of election.
18
<PAGE>
SOLICITATION OF PROXIES
The Company will bear the costs of solicitation of proxies. Officers and
regular employees of the Company may solicit proxies by mail, telephone,
telegraph and personal interview. Arrangements will be made with brokerage
houses and with other custodians, nominees and fiduciaries to forward proxy
soliciting material to beneficial owners. The Company will reimburse persons
holding stock for others in their names or in those of their nominees for
their reasonable out-of-pocket expenses in sending proxy material to their
principals and obtaining their proxies.
----------------
The information provided under the headings "Report of the Executive
Compensation Committee" and "Performance Graphs" above shall not be deemed to
be "soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to Regulations 14A or 14C, other than as provided in
Item 402 of Regulation S-K, or to the liabilities of Section 18 of the
Securities Exchange Act of 1934 and, unless specific reference is made therein
to such headings, shall not be incorporated by reference into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934.
The Company is not aware that any matters other than those mentioned above
will be presented for action at the 1997 Annual Meeting, but if any other
matters do properly come before the meeting, the persons named as proxies will
vote upon such matters in their discretion.
Please complete, sign, date and return the enclosed proxy card promptly.
TRANSOCEAN OFFSHORE INC.
/s/ ERIC B. BROWN
Eric B. Brown
Secretary
Houston, Texas
March 31, 1997
19
<PAGE>
PROXY TRANSOCEAN OFFSHORE INC.
4 GREENWAY PLAZA
HOUSTON, TEXAS 77046
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints J. Michael Talbert, Robert L. Long and Eric
B. Brown, and each of them, proxies, with full powers of substitution, to
represent the undersigned at the Annual Meeting of Stockholders of Transocean
Offshore Inc. to be held on May 8, 1997 and at any adjournment thereof, and to
vote all shares of stock which the undersigned would be entitled to vote if
personally present as follows:
THE BOARD RECOMMENDS A VOTE "FOR ALL NOMINEES."
1. ELECTION OF FOR all nominees [_] WITHHOLD AUTHORITY [_]
DIRECTORS Nominees (except those whose to vote for all
for the Board of names are inserted nominees
Directors: Richard D. on the line below)
Kinder, Ronald L.
Kuehn, Jr. and
Kristian Siem
- --------------------------------------------------------------------------------
2. In their discretion upon such other matters as may properly come before
the meeting; all as set forth in the Proxy Statement for the meeting, the
receipt of which is hereby acknowledged.
(Continued, and to be signed and dated, on the reverse side)
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO VOTE IS SPECIFIED, THIS
PROXY WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1.
Dated: ____________________, 1997
Signature _______________________
Signature _______________________
Sign here as name(s) appear
hereon.
(If shares are held by joint
tenants, both should sign. If
signing as Attorney, Executor,
Administrator, Trustee or
Guardian, please give your title
as such. If the signer is a
corporation, please sign the
full corporate name by duly
authorized officer.)
--------------
PLEASE SIGN, DATE AND MAIL PROXY PROMPTLY
