==============================================================================
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only (as
[x] Definitive Proxy Statement permitted by Rule 14a-6
(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Reading & Bates Corporation
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
==============================================================================
READING & BATES CORPORATION
901 Threadneedle, Suite 200
Houston, Texas 77079
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 1995
The Annual Meeting of Stockholders of Reading & Bates Corporation, a
Delaware corporation (the "Company"), will be held in the Colonnade
Salon, Omni Houston Hotel, Four Riverway, Houston, Texas 77056 on
Tuesday, May 2, 1995 at 11:00 a.m., for the following purposes:
(1) To elect three Class I directors for terms expiring in 1998;
(2) To act upon a proposal to approve the Company's 1995 Long-
Term Incentive Plan;
(3) To act upon a proposal to approve the Company's 1995 Director
Stock Option Plan;
(4) To act upon a proposal to ratify and approve the reappointment
of Arthur Andersen LLP as independent public accountants for
the Company for its fiscal year 1995; and
(5) To transact such other business as may properly be brought be-
fore the meeting or any postponement or adjournment thereof,
including, if duly presented at the meeting, taking action upon
the resolution which is quoted under the heading "Stockholder
Proposal" in the accompanying Proxy Statement.
Only holders of record of the Common Stock and Class A Stock at the
close of business on March 15, 1995 are entitled to notice of and to vote
at the meeting, or any postponement or adjournment thereof.
Please mark, sign, date and return the enclosed proxy card promptly,
whether or not you expect to attend the meeting. A return envelope is en-
closed for your convenience and requires no postage for mailing in the
United States.
By Order of the Board of Directors
Houston, Texas Wayne K. Hillin
March 29, 1995 Secretary
PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY CARD AND MAIL IT AT
YOUR EARLIEST CONVENIENCE
==============================================================================
READING & BATES CORPORATION
901 Threadneedle, Suite 200
Houston, Texas 77079
PROXY STATEMENT
Annual Meeting of Stockholders
May 2, 1995
The enclosed form of proxy is solicited by the Board of
Directors of Reading & Bates Corporation (the "Company") for
use at the Annual Meeting of Stockholders to be held on
Tuesday, May 2, 1995 at 11:00 a.m. in the Colonnade Salon,
Omni Houston Hotel, Four Riverway, Houston, Texas 77056.
This Proxy Statement and form of Proxy are being mailed to
stockholders on or about March 30, 1995.
At the Annual Meeting, stockholders will be asked to
elect three Class I directors for terms expiring in 1998 and
to consider and vote upon the following proposals
(collectively, the "Proposals"):
(i) a proposal to approve the Company's 1995 Long-Term
Incentive Plan (the "Incentive Plan Proposal");
(ii) a proposal to approve the Company's 1995 Director
Stock Option Plan (the "Director Plan Proposal");
(iii) a proposal of a certain stockholder relating
to dividend policy, if such proposal should be
duly presented at the meeting (the
"Stockholder Proposal"); and
(iv) a proposal to ratify and approve the reappointment
of Arthur Andersen LLP as independent public
accountants for the Company for its fiscal year
1995 (the "Auditors Proposal").
__________________
The Board of Directors of the Company believes that
election of its director nominees and approval of each of the
Incentive Plan Proposal, the Director Plan Proposal and the
Auditors Proposal is advisable and in the best interests of
the Company and its stockholders and recommends to the
stockholders of the Company the approval of each of the
nominees and these proposals. The Board of Directors of the
Company also believes that the approval of the Stockholder
Proposal is not advisable and is not in the best interests of
the Company and its stockholders and recommends that the
stockholders of the Company vote against the Stockholder
Proposal.
____________________
The date of this Proxy Statement is March 29, 1995.
=======================================================================
TABLE OF CONTENTS
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . .
VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vote Required . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP . . . . . . .
Principal Stockholders . . . . . . . . . . . . . . . . . .
Class A Stock . . . . . . . . . . . . . . . . . . . . .
Preferred Stock . . . . . . . . . . . . . . . . . . . .
Common Stock . . . . . . . . . . . . . . . . . . . . . .
Management Ownership . . . . . . . . . . . . . . . . . . .
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . .
CLASS I DIRECTOR NOMINEES - TERMS EXPIRING IN 1998 . . . .
CLASS III CONTINUING DIRECTORS - TERMS EXPIRING IN 1997 .
CLASS II CONTINUING DIRECTORS - TERMS EXPIRING IN 1996 . .
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD . . . . . . .
The Audit Committee . . . . . . . . . . . . . . . . . . .
The Compensation Committee . . . . . . . . . . . . . . . .
The Executive Committee . . . . . . . . . . . . . . . . .
The Pension (ERISA) Committee . . . . . . . . . . . . . .
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS . . . . . .
Compensation Committee Report on Executive Compensation .
Compensation Philosophy and Overall Objectives of
Executive Compensation Programs . . . . . . . . . .
Chief Executive Officer's Compensation and Corporate
Performance for Fiscal Year 1994 . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . .
Section 162(m) of the Internal Revenue Code . . . . . .
Compensation Committee Interlocks and Insider
Participation . . . . . . . . . . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . . . . . . .
Performance Graph . . . . . . . . . . . . . . . . . . . .
Pension Plan Table . . . . . . . . . . . . . . . . . . . .
Director Compensation . . . . . . . . . . . . . . . . . .
Employment Contracts and Change-in-Control Arrangements .
Officer Agreements . . . . . . . . . . . . . . . . . . .
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT . . . . . .
THE INCENTIVE PLAN PROPOSAL . . . . . . . . . . . . . . . . .
Description of the Incentive Plan . . . . . . . . . . . .
Awards under the Incentive Plan . . . . . . . . . . . .
Common Stock Available for Awards . . . . . . . . . . .
Eligibility for Awards . . . . . . . . . . . . . . . . .
Administration of the Incentive Plan . . . . . . . . . .
Amendment and Termination . . . . . . . . . . . . . . .
Other Provisions . . . . . . . . . . . . . . . . . . . .
Tax Withholding . . . . . . . . . . . . . . . . . . . .
Federal Income Tax Consequences . . . . . . . . . . . . .
Board Recommendation . . . . . . . . . . . . . . . . . . .
THE DIRECTOR PLAN PROPOSAL . . . . . . . . . . . . . . . . .
Description of the Director Plan . . . . . . . . . . . . .
Awards under the Director Plan . . . . . . . . . . . . .
Common Stock Available for Awards . . . . . . . . . . .
Eligibility for Awards . . . . . . . . . . . . . . . . .
Administration of the Director Plan . . . . . . . . . .
Amendment and Termination . . . . . . . . . . . . . . .
Other Provisions . . . . . . . . . . . . . . . . . . . .
Tax Withholding . . . . . . . . . . . . . . . . . . . .
Federal Income Tax Consequences . . . . . . . . . . . . .
Board Recommendation . . . . . . . . . . . . . . . . . . .
NEW PLAN BENEFITS TABLE . . . . . . . . . . . . . . . . . . .
THE STOCKHOLDER PROPOSAL . . . . . . . . . . . . . . . . . .
The Stockholder Proposal and Supporting Statement . . . .
Company Statement . . . . . . . . . . . . . . . . . . . .
Board Recommendation . . . . . . . . . . . . . . . . . . .
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . .
Board Recommendation . . . . . . . . . . . . . . . . . . .
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . .
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING . . . . . . .
<PAGE>
THE COMPANY
Reading & Bates Corporation is a Delaware corporation engaged in the
business of offshore contract oil drilling and providing floating
production and project management services to the upstream offshore oil
and gas industry worldwide, with principal executive offices located at
901 Threadneedle, Suite 200, Houston, Texas 77079, telephone (713) 496-
5000.
VOTING
Shares represented by duly executed and unrevoked proxies in the
enclosed form received by the Board of Directors will be voted at the
Annual Meeting in accordance with the specifications made therein by the
stockholders, unless authority to do so is withheld. If no specification
is made, shares represented by duly executed and unrevoked proxies in the
enclosed form will be voted for the election as directors of the nominees
listed herein, for each of the Incentive Plan Proposal, the Director Plan
Proposal, and the Auditors Proposal and against the Stockholder Proposal,
and with respect to any other matter that may properly come before the
meeting, in the discretion of the persons voting the respective proxies.
Any stockholder giving a proxy may revoke it at any time before it is
voted by filing with the Secretary of the Company an instrument revoking
it, by executing and returning a proxy bearing a later date or by voting
in person at the meeting. The Company has employed Georgeson & Co., New
York, New York, to assist in the solicitation of proxies for a fee
expected to be approximately $10,000, plus reasonable expenses. In
connection with its engagement of such firm, the Company has also agreed
to indemnify Georgeson & Co. against certain liabilities arising from its
engagement by the Company. The cost of this solicitation will be borne
by the Company. Solicitation is being made by the use of the mails, but
may also be made by telephone, electronic transmission and personal
interviews.
Only holders of record of the Common Stock and Class A Stock at the
close of business on March 15, 1995 (the "Record Date") will be entitled
to vote at the Annual Meeting. On the Record Date, there were
outstanding 59,711,023 shares of Common Stock and 60 shares of Class A
Stock.
Each share of Common Stock is entitled to one vote, and each share of
Class A Stock is entitled to four votes. Each holder of Class A Stock
has cumulative voting rights in the election of directors so that such
holder has four votes per share multiplied by the number of directors to
be elected and may cast all such votes for a single nominee or distribute
them among as many nominees as such holder may see fit.
Vote Required
The election of the director nominees requires a plurality of the
votes cast in respect of shares of Common Stock and Class A Stock that
are present in person or represented by proxy at the Annual Meeting,
voting together as a class (with the Common Stock having one vote per
share per nominee, and with the Class A Stock having cumulative voting
rights consisting of four votes per share multiplied by the number of
nominees which votes may be cast all for a single nominee or distributed
among the nominees at the holder's discretion). Under Delaware law and
the Company's Restated Certificate of Incorporation (the "Charter") and
By-laws, shares as to which a stockholder withholds authority to vote on
the election of directors ("abstentions"), and shares as to which a
broker indicates that it does not have discretionary authority to vote
("broker non-votes") on the election of directors, will not be counted as
voting thereon and therefore will not affect the election of the nominees
receiving a plurality of the votes cast.
The approval of each of the Incentive Plan Proposal, the Director Plan
Proposal and the Stockholder Proposal requires the affirmative vote of
the holders of a majority in voting power of the outstanding shares of
Common Stock and Class A Stock present, or represented, and entitled to
vote at a meeting of the Company's stockholders, voting together as a
class (with the Common Stock having one vote per share and the Class A
Stock having four votes per share). Under Delaware law and the Charter
and By-laws, abstentions and broker non-votes on the Incentive Plan
Proposal, the Director Plan Proposal and the Stockholder Proposal have
the same legal effect on the outcome of the vote as a vote "against" such
Incentive Plan Proposal, the Director Plan Proposal and the Stockholder
Proposal even though the stockholder or interested parties analyzing the
results of the voting may interpret such a vote differently.
The stockholders of the Company have no dissenters' or appraisal
rights in connection with the Proposals.
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
Principal Stockholders
The table below sets forth certain information as to those persons
known to the Company to be beneficial owners (as determined in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of more than 5% of the outstanding Common Stock as
of the Record Date (except where otherwise indicated). The percentage
ownership figures set forth in the table are calculated on the basis of
the number of shares of Common Stock outstanding as of the Record Date.
Unless otherwise indicated, the entities named are believed to have sole
voting and investment power with respect to the shares listed.
Class A Stock
Substantially all of the original shares of the Company's Class A
Stock have been converted by the holders thereof at their option into
Common Stock in accordance with the terms of the Class A Stock. All
cumulative dividends payable on the Class A Stock have been declared and
paid by the Company through the first quarter of 1995. On the Record
Date, there remained outstanding 60 shares of Class A Stock convertible
in the aggregate into 81 shares of Common Stock. The record holders of
the Class A Stock are James K. Boak and Robert J. Richmond, holding 50
and 10 shares, respectively.
Preferred Stock
There are currently outstanding 2,990,000 shares of $1.625 Convertible
Preferred Stock, par value $1.00 per share (the "Preferred Stock"),
issued in a public offering in July 1993. The Preferred Stock is
convertible at the option of the holder at any time into shares of the
Company's Common Stock at a conversion rate of 2.899 shares of Common
Stock for each share of Preferred Stock (equivalent to a conversion price
of $8.625 per share of Common Stock), subject to adjustment in certain
events. Annual dividends are $1.625 per share and are cumulative and are
payable quarterly commencing September 30, 1993. All cumulative
dividends payable on the Preferred Stock have been declared and paid by
the Company through the first quarter of 1995. The Preferred Stock is
redeemable at any time on and after September 30, 1996, at the option of
the Company, in whole or in part, at a redemption price of $26.1375 per
share, and thereafter at prices decreasing ratably annually to $25.00 per
share on and after September 30, 2003, plus accrued and unpaid dividends.
The holders of the Preferred Stock do not have any voting rights, except
as required by applicable law, and except that, among other things,
whenever accrued and unpaid dividends on the Preferred Stock are equal to
or exceed the equivalent of six quarterly dividends payable on the
Preferred Stock, the holders of the Preferred Stock will be entitled to
elect two directors to the Board until the dividend arrearage has been
paid in full. The term of office of all directors so elected will
terminate immediately upon such payment. The Preferred Stock has a
liquidation preference of $25.00 per share, plus accrued and unpaid
dividends.
<TABLE>
<CAPTION>
Common Stock
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Owner Percent of Class
------------------------------------ -------------------- ----------------
<S> <C> <C>
FMR Corp., Edward C. Johnson 3d; 5,619,763(1) 9.4%
Fidelity Management & Research
Company; Fidelity Magellan Fund and
Fidelity Management Trust Company,
82 Devonshire Street, Boston,
Massachusetts 02109
R&B Investment Partnership, L.P., 3,896,180(2) 6.5%
R&B Investment Partnership II,
L.P. and Whitman Heffernan &
Rhein Workout Fund, L.P. by WHR
Management Company, L.P., as
general partner, 2 Park Place,
Bronxville, New York 10708; and
C. Kirk Rhein, Jr., Martin J.
Whitman, and James P. Heffernan,
c/o Whitman Heffernan Rhein &
Co., Inc., 767 Third Avenue, New
York, New York 10017
AXA Assurances I.A.R.D. Mutuelle, 3,531,200(3) 5.9%
La Grande Arche, Pardi Nord,
92044 Paris La Defense France;
AXA Assurances Vie Mutuelle,
La Grande Arche, Pardi Nord,
92044 Paris La Defense France;
Alpha Assurances I.A.R.D. Mutuelle,
101-100 Terrasse Boieldieu,
92042 Paris La Defense France;
Alpha Assurances Vie Mutuelle,
101-100 Terrasse Boieldieu,
92042 Paris La Defense France;
Uni Europe Assurance Mutuelle,
24 Rue Drouot, 75009 Paris France;
AXA, 23, Avenue Matignon,
75008 Paris France; and
The Equitable Companies Incorporated,
787 Seventh Avenue, New York,
New York 10019
Incomare Holdings, Inc., 3,453,424(4) 5.8%
Torre Banco Germanico
Colle 50 y 55 Este, 8th Floor
Panama 5 R. P.;
Workships Intermediaries N.V.,
Anthony Veder Building
Erieweg, Willemstad
Curacao, Netherlands Antilles;
Dr. Willem Cordia,
Kasteel Withof
Bredabaan 906
B-2930 Brasschaat
Belgium; and
Dr. Macko Laquer
Venture Capital Investors
Herengracht 468
1017 CA Amsterdam
The Netherlands
Sasco Capital, Incorporated 3,424,900(5) 5.7%
10 Sasco Hill Road
Fairfield, Connecticut 06430
Attention: Daniel L. Leary,
Corporate Secretary
John Hancock Mutual 3,097,924(6) 5.2%
Life Insurance Company,
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Attention: Bill Kinsley
_______________________________
(1) Based upon information contained in a Schedule 13G, as amended
as of February 13, 1995, filed by FMR Corp. Such Schedule 13G
sets forth the following information: FMR Corp., a
Massachusetts corporation, is the beneficial owner of 5,619,763
shares of Common Stock. Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp. and an
investment adviser registered under the Investment Advisers Act
of 1940, is the beneficial owner of 5,304,170 shares of the
Common Stock as a result of acting as investment adviser to
several investment companies (the "Funds") registered under the
Investment Company Act of 1940. The number of shares of Common
Stock set forth in the table includes shares of Common Stock
beneficially owned in the form of 246,300 shares of Preferred
Stock. One of the Funds, Fidelity Magellan Fund, beneficially
owns 4,590,393 shares of Common Stock. The Chairman of FMR
Corp., Edward C. Johnson 3d, FMR Corp., through its control of
Fidelity, and the Funds have power to dispose of 5,304,170
shares of Common Stock listed in the table. Neither FMR Corp.
nor Mr. Johnson has the sole power to vote or direct the voting
of the shares owned directly by the Funds, which power resides
with the Funds' respective Boards of Trustees. Fidelity carries
out the voting of the shares under written guidelines
established by the Funds' Boards of Trustees. Fidelity
Management Trust Company, a wholly-owned subsidiary of FMR Corp.
and a bank as defined in Section 3(a)(6) of the Exchange Act, is
the beneficial owner of 315,592 shares of the Common Stock
listed in the table as a result of its serving as investment
manager of several institutional accounts. The number of shares
of Common Stock owned by such institutional accounts set forth
in the table includes shares of Common Stock beneficially owned
in the form of 108,900 shares of Preferred Stock. Mr. Johnson
and FMR Corp., through its control of Fidelity Management Trust
Company, each has sole dispositive power over 315,592 shares of
Common Stock listed in the table and sole power to vote or to
direct the voting of 213,872 of such shares, and no power to
vote or to direct the voting of 101,720 of such shares. Mr.
Johnson and Abigail P. Johnson each owns 24.9% of the
outstanding voting common stock of FMR Corp. Various Johnson
family members and trusts for the benefit of Johnson family
members own FMR Corp. voting common stock. These Johnson family
members, through their ownership of such common stock and a
voting agreement, form a controlling group with respect to FMR
Corp.
(2) Based upon information contained in a Schedule 13D, as amended
as of February 14, 1994, as filed by WHR Management Company,
L.P. ("WHR"), as general partner of R&B Investment Partnership,
L.P. ("RBIP I"), R&B Investment Partnership II, L.P. ("RBIP II")
and Whitman Heffernan & Rhein Workout Fund, L.P. ("Workout") and
upon certain other information available to the Company. Martin
J. Whitman, James P. Heffernan and C. Kirk Rhein, Jr. are
general partners of WHR. Mr. Rhein serves as Vice Chairman and
director of the Company. Each of Messrs. Whitman, Heffernan and
Rhein disclaims beneficial ownership of the Common Stock held by
RBIP I, RBIP II and Workout. Pursuant to an agreement between
the Company and RBIP I, certain compensation and benefits
(including an award of 90,000 shares of restricted Common Stock
to Mr. Rhein under the Company's 1992 Long-Term Incentive Plan
(the "1992 Plan")) are payable to WHR. Such restricted stock
award shares are included in the shares listed for such firm in
the table above, and Mr. Rhein disclaims beneficial ownership of
such shares. See footnotes (5) and (9) to the table under
"Management Ownership" below and "COMPENSATION OF EXECUTIVE
OFFICERS AND DIRECTORS -- Compensation Committee Report on
Executive Compensation".
(3) Based upon information contained in a Schedule 13G dated
February 10, 1995, filed by Alpha Assurances I.A.R.D. Mutuelle,
Alpha Assurances Vie Mutuelle, AXA Assurances I.A.R.D. Mutuelle,
AXA Assurances Vie Mutuelle, and Uni Europe Assurance Mutuelle,
as a group (collectively, the "Mutuelles AXA"), AXA and the
Equitable Companies Incorporated (the "Equitable Companies") in
the Equitable Companies, capacity as a parent holding company
with respect to the holdings of its subsidiaries The Equitable
Life Assurance Society of the United States ("Life"), an
insurance company, a broker-dealer registered under Section 15
of the Exchange Act and an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, and Alliance
Capital Management L.P. ("Alliance"), an investment adviser
registered under Section 203 of the Investment Advisers Act of
1940. The Schedule 13G indicates that the Mutuelles AXA, AXA
and the Equitable Companies have the sole power to direct the
disposition of such 3,531,200 shares of Common Stock (1,871,800
of which are held by Life and 1,659,400 of which are held by
Alliance) and the sole power to vote 3,516,700 shares of such
Common Stock (1,871,800 of which are held by Life and 1,644,900
of which are held by Alliance). Each of the Mutuelles AXA, as a
group, and AXA expressly declares that the filing of the
Schedule 13G shall not be construed as an admission that it is,
for purposes of Section 13(d) of the Exchange Act, the
beneficial owner of any securities covered by the Schedule 13G.
(4) Based upon information contained in a Schedule 13D, as amended
as of March 7, 1995, which was filed by BCL Investment Partners,
L.P. ("BCL") and the other reporting persons (the "Reporting
Persons") named therein, and upon certain other information
available to the Company, effective November 15, 1994, the
partners of BCL voted to dissolve BCL, and BCL distributed to
its partners substantially all of its assets, including 60,250
shares of Common Stock held by it. In addition, BCL conveyed
20,000 shares of Common Stock of the Company to Greenwing
Investments, Inc. ("Greenwing"), to be held in trust to satisfy
liabilities of BCL. To the extent any such shares remain after
Greenwing determines that all liabilities of BCL have been
discharged or provided for, such remaining shares will be
distributed to the former partners of BCL in proportion to their
ownership interests in BCL. The Schedule 13D states that as a
result of such distribution and dissolution, BCL no longer holds
any shares of Common Stock in its name and the Reporting Persons
ceased to constitute or act as a group with respect to their
ownership of shares of Common Stock. The Schedule 13D indicates
that the Reporting Persons held Common Stock as follows:
Greenwing beneficially owns 1,352,491 shares of Common Stock,
Workships Intermediaries, N.V. ("Workships") beneficially owns
1,842,425 shares of Common Stock, Incomare Holdings, Inc.
("Incomare") beneficially owns 1,610,999 shares of Common Stock,
Torarica N.V. beneficially owns 146,454 shares of Common Stock,
Forreal Ltd. beneficially owns 73,227 shares of Common Stock,
and RBY, Ltd. ("RBY") beneficially owns 2,517,409 shares of
Common Stock. Based upon the Schedule 13D and other information
available to the Company, the Company believes that Dr. Willem
Cordia (a director of the Company) and Dr. Macko Laqueur control
Workships, Dr. Cordia and his family control Incomare, and Paul
B. Loyd, Jr., the Company's chairman and chief executive
officer, controls Greenwing Ltd. ("Ltd.") and Greenwing. RBY is
an indirect wholly-owned subsidiary of Chemical Banking
Corporation. The Company has been informed that N&M Holding
N.V., Life Line Investments Ltd., Dedicated Holdings Ltd. and
Financial Investments Ltd. have disposed of all of their Common
Stock. Workships and Ltd. have each entered into agreements
pledging all of their respective holdings of Common Stock to ING
Bank.
(5) Based upon information contained in a Schedule 13G dated
February 3, 1995, filed by Sasco Capital, Incorporated
("Sasco"). The Schedule 13G indicates that Sasco has the power
to direct the disposition of such 3,424,900 shares of Common
Stock and the sole power to vote 1,775,800 of such shares of
Common Stock.
(6) Based upon information contained in a Schedule 13G dated January
27, 1995, filed by John Hancock Mutual Life Insurance Company
("Hancock"). The Schedule 13G indicates that Hancock has the
sole power to direct the disposition of such 3,097,924 shares of
Common Stock and the sole power to vote such 3,097,924 shares of
Common Stock.
</TABLE>
Management Ownership
The following table indicates the total number of shares of Common
Stock and Preferred Stock beneficially owned as of the Record Date by
each continuing director, director nominee and Named Executive (as
hereinafter defined), and by directors and executive officers as a group.
Unless otherwise indicated, all shares are owned directly and the owner
has sole voting and investment power with respect thereto.
<TABLE>
<CAPTION>
Common Stock and Preferred Stock
Shares of Percent of Shares of Percent of
Individual or Common Stock Common Stock Preferred Stock Preferred Stock
Number of Owned Owned Owned Owned
Persons in Group Beneficially Beneficially Beneficially Beneficially
---------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
A.L. Chavkin (1)
W. Cordia 3,453,424 (2) 5.8%
C.A. Donabedian 5,760 (3) *
T. Kalborg 2,126,795 (4) 3.6%
P.B. Loyd, Jr. 1,459,573 (5)(6) 2.5% 900 (7) *
J.W. McLean 7,400 (3)(8) *
C.K. Rhein, Jr. 3,902,100 (5)(9) 6.5%
R.L. Sandmeyer 5,020 (3) *
S.A. Webster 14,000 (3)(8) * 1,000 (7) *
L.E. Voss, Jr. 71,558 (10)(11) * 1,000 (7) *
W.K. Hillin 74,521 (8)(10)(11) *
T.W. Nagle 65,123 (10)(11) * 4,000 (7) *
Directors and
Executive Officers
as a group
(including those
listed above -
14 persons) 11,191,493 (11) 18.8% 7,900 (7) *
_____________
* Less than 1 percent.
(1) Chemical Investment, Inc. ("Chemical"), of which Mr. Chavkin is
President, is a stockholder of the Company through Chemical's
wholly-owned subsidiary RBY, which owns 2,517,409 shares of Common
Stock. No beneficial ownership amount is included in the table
for Mr. Chavkin with respect to RBY's ownership of the Common
Stock and beneficial ownership is disclaimed by Mr. Chavkin. See
footnote (4) to the table under "Principal Stockholders."
(2) The shares listed for Dr. Cordia are those reported as
beneficially owned by Dr. Cordia in the Schedule 13D referred to
in footnote (4) to the table under "Principal Stockholders" above.
Dr. Cordia is one of the reporting persons named in that Schedule
13D.
(3) The number set forth in the table includes options to purchase
5,000 shares of Common Stock at a price of $8.50 per share held by
each of Mr. Donabedian, Mr. McLean, Mr. Sandmeyer and Mr. Webster.
(4) As a result of a distribution from RBIP I in February 1994, Melton
Shipping Ltd. and International Shipping Investment Company Ltd.,
entities in which Mr. Kalborg and other parties have interests,
acquired 1,197,255 and 929,540 shares of Common Stock,
respectively, which are included in the above table. In both
instances, the Company believes that Mr. Kalborg does not have
sole power to dispose of the shares nor to direct the voting of
the shares. See footnote (2) to the table under "Principal
Stockholders."
(5) The Company has granted Restricted Stock Awards under the 1992
Plan to each of Messrs. Loyd and Rhein, of 120,000 shares and
90,000 shares of Common Stock, respectively. Such shares awarded
are restricted as to transfer until vested pursuant to a schedule
whereby 1/24th of the total number of shares is vested per
calendar quarter through March 31, 1998 (subject to certain
conditions including the occurrence of a change of control of the
Company and/or continued employment). The shares listed for Mr.
Loyd include such 120,000 shares, net of 19,350 shares that Mr.
Loyd surrendered to the Company to satisfy certain tax withholding
obligations. As stated in footnote (2) to the table under
"Principal Stockholders" above, pursuant to an agreement between
the Company and RBIP I, such 90,000 shares awarded to Mr. Rhein
included in the above table are payable to and beneficially owned
by WHR, and Mr. Rhein disclaims beneficial ownership of such
shares. See "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS --
Compensation Committee Report on Executive Compensation".
(6) The shares of Common Stock listed for Mr. Loyd include those
reported as beneficially owned by Mr. Loyd in the Schedule 13D
referred to in footnote (4) to the table under "Principal
Stockholders" above. Mr. Loyd controls Greenwing and Ltd. and may
be deemed to have voting and dispositive power with respect to the
shares beneficially owned by Greenwing and Ltd.
(7) Each share of Preferred Stock is currently convertible into 2.899
shares of Common Stock. The shares of Common Stock listed in the
table do not include shares of Common Stock beneficially owned in
the form of Preferred Stock. Mr. Loyd disclaims beneficial
ownership of 200 of the 900 shares of Preferred Stock owned
directly by his son and daughter, which are included in the above
table.
(8) The shares listed for Mr. McLean and Mr. Webster include 1,200 and
4,000 shares, respectively, directly owned by their spouses. The
shares listed for Mr. Hillin include 44 shares directly owned by
his spouse and 16 shares directly owned by his son and daughter.
Mr. Hillin disclaims beneficial ownership of such 16 shares.
(9) The shares listed for Mr. Rhein include those reported as
beneficially owned by RBIP I, RBIP II, Workout, WHR and the other
persons named in footnote (2) to the table under "Principal
Stockholders". Mr. Rhein is one of three general partners of WHR,
the general partner of RBIP I, RBIP II and Workout, and may be
deemed to share voting and dispositive power with respect to the
shares beneficially owned by WHR, RBIP I, RBIP II and Workout,
although beneficial ownership is disclaimed. See footnote (2) to
the table under "Principal Stockholders". The shares listed for
Mr. Rhein also include 5,920 shares of Common Stock owned by a
trust for the benefit of Mr. Rhein's children. Mr. Rhein
disclaims beneficial ownership of such 5,920 shares.
(10) The shares listed for Mr. Voss, Mr. Hillin and Mr. Nagle include
approximately 1,164 shares, 2,315 shares and 282 shares,
respectively, held by a trustee under the Company's savings plan.
(11) The Company has granted options to purchase Common Stock to
certain key employees pursuant to its 1990 Stock Option Plan (the
"1990 Plan"). The shares listed for Mr. Voss, Mr. Hillin and Mr.
Nagle each include 64,000 shares, the beneficial ownership of
which each such officer has the right to acquire pursuant to
currently exercisable options granted under such plan. The shares
listed for Directors and Executive Officers as a group include a
total of 296,000 shares, the beneficial ownership of which such
directors and officers as a group have the right to acquire
pursuant to currently exercisable options granted under such plan.
</TABLE>
ELECTION OF DIRECTORS
The Charter requires the division of the Board of Directors into
three classes having staggered terms of three years each and provides
that the Board is to determine, from time to time, the number of
directors to be on the Board at not less than three nor more than
eighteen. The Company's By-laws currently require the number of
directors to be between three and thirteen. The number of directors is
currently established at nine. At the Annual Meeting, three Class I
directors are to be elected. Messrs. Charles A. Donabedian, C. Kirk
Rhein, Jr. and Robert L. Sandmeyer are nominees for Class I director.
Each of Messrs. Donabedian, Rhein and Sandmeyer is currently a Class I
director whose term expires in 1995.
It is the intention of the persons designated as proxies in the
enclosed proxy card, unless the proxy card is marked with contrary
instructions, to vote for the election of Messrs. Donabedian, Rhein and
Sandmeyer as Class I directors to serve until the 1998 Annual Meeting of
Stockholders and until their successors have been duly elected and
qualified. The persons designated as proxies will have discretion to
cast votes for other persons in the event that any nominee for Class I
director is unable to serve. At present, it is not anticipated that any
of the nominees will be unable to serve.
The following table and accompanying footnotes set forth certain
information concerning each Class I director nominee and the continuing
Class II and Class III directors. Unless otherwise indicated, each
nominee and continuing director has served in the positions set forth for
more than five years.
<TABLE>
<CAPTION>
CLASS I DIRECTOR NOMINEES - TERMS EXPIRING IN 1998
-------------------------------------------------------------------------
<S> <C>
CHARLES A. DONABEDIAN, 52 Director of the Company since 1989. Since
1990, Mr. Donabedian has been Chairman and
Chief Executive Officer of Triad Partners,
Inc., which provides product development,
marketing and sales consulting and services
to the financial service industry. Since
May 1992, Mr. Donabedian has also been
President of Winston Financial Incorporated
(formerly Winston Midwest Marketing, Inc.),
which provides product development,
marketing and sales consulting and services
to the financial services industry. Prior
to October 1990, he was President and Chief
Executive Officer of USF&G Marketing
Services Company, Inc., a subsidiary of
USF&G Corporation, an insurance company,
since at least 1987.
C. KIRK RHEIN, JR., 42 Vice Chairman of the Company since May 1991
and Director of the Company since March
1991. Mr. Rhein has also been President,
Chief Executive Officer and Director of
Danielson Holding Corporation, a financial
services holding company, since 1990, and a
director of National American Insurance
Company of California, an insurance
company, since 1987. Since 1987 he has
been a Managing Director of Whitman
Heffernan Rhein & Co., Inc. Since 1989 he
has been a general partner of WHR, which
manages RBIP I, RBIP II and Workout (see
"PRINCIPAL STOCKHOLDERS AND MANAGEMENT
OWNERSHIP"). Prior to April 1, 1987, he
was a partner in the law firm of Anderson
Kill Olick & Oshinsky, P.C.(1)
ROBERT L. SANDMEYER, 65 Director of the Company since September
1988. Dr. Sandmeyer has been Dean of the
College of Business Administration at
Oklahoma State University and Professor of
Economics since at least 1987.
CLASS III CONTINUING DIRECTORS - TERMS EXPIRING IN 1997
ARNOLD L. CHAVKIN, 43 Director of the Company since August 1991;
general partner of Chemical Venture
Partners, a general partnership which
invests in leveraged buyouts,
recapitalizations, growth equities and
venture situations, since January 1992
and President of Chemical, an affiliate
of Chemical Venture Partners, since March
1991. Chemical Venture Partners and
Chemical are affiliates of Chemical
Banking Corporation. Chemical is a
stockholder of the Company through RBY
(see footnote (4) to the table under
"MANAGEMENT OWNERSHIP"). Mr. Chavkin is
also a director of RHI Entertainment,
Inc., a television and film company,
Morningstar Foods, Inc., a specialty food
producer, American Radio Systems,
Forcenergy and American Recreation
Company. Previously for six years, Mr.
Chavkin was a specialist in investment
and merchant banking at Chemical Bank.
PAUL B. LOYD, JR., 48 Chairman and Chief Executive Officer of
the Company since June 1991, Director of
the Company since April 1991 and
President of the Company since October
1993. Mr. Loyd controls Greenwing, a
stockholder of the Company (see
"PRINCIPAL STOCKHOLDERS AND MANAGEMENT
OWNERSHIP"), and has been President of
Loyd & Associates, Inc., a financial
consulting firm, since 1989. Mr. Loyd
was Chief Executive Officer and a
director of Chiles-Alexander
International, Inc. from 1987 to 1989,
President and a director of Griffin-
Alexander Drilling Company, from 1984 to
1987, and prior to that, a director and
Chief Financial Officer of Houston
Offshore International, all of which are
companies in the offshore drilling
industry.(1)
STEVEN A. WEBSTER, 43 Director of the Company since August
1991; Chairman and Chief Executive
Officer of Falcon Drilling Company Inc.,
a domestic-based drilling company, since
1988. Since 1984, Mr. Webster has also
been a general partner of Cerrito
Partners and Cerrito Investments Limited
Partnership, both investment funds with a
portfolio of private company investments
in various industries, and a general
partner of Equipment Asset Recovery Fund,
an investment fund that owns and operates
a heavy crane rental company. Mr.
Webster is also a director of Crown
Resources Corporation, which is in the
business of mining precious metals, and
Camden Property Trust, a real estate
investment trust.
CLASS II CONTINUING DIRECTORS - TERMS EXPIRING IN 1996
WILLEM CORDIA, 54 Director of the Company since April 1991.
Dr. Cordia is an investor with interests
in shipping and offshore services
companies, industrial and trading
companies and oil and gas exploration
companies in the United States and Europe.
Dr. Cordia is one of the controlling
persons of Workships and Incomare
Holdings, Inc., stockholders of the
Company, and has been a board member of
some twenty commercial enterprises world-
wide and two colleges in The Netherlands
since at least 1987. (1)
TED KALBORG, 44 Director of the Company since April 1991.
Mr. Kalborg is an investor and investment
banker specializing in international
asset-intensive acquisitions and other
transactions. He is Chairman and
Managing Director of Tufton Oceanic Ltd.,
a private merchant banking group in
London and a director of North Sea Assets,
a small public company in London which
provides energy related services.(1)
J. W. McLEAN, 72 Director of the Company from 1956 to 1987
and since February 1988. Mr. McLean is a
director of Devon Energy Corporation, an
energy company, and was formerly Chairman
and Chief Executive Officer of Banks of
Mid-America, Inc. and Liberty National
Bank & Trust Company prior to his
retirement in April 1987.
_______________
(1) Dr. Cordia and Mr. Loyd were appointed directors of the Company on
April 8, 1991 pursuant to an agreement dated as of March 27, 1991
between the Company and BCL. Messrs. Kalborg and Rhein were
appointed directors of the Company on April 8, 1991 pursuant to an
agreement dated as of March 27, 1991 between the Company and RBIP
I. These agreements (the "Agreements") were entered into in
connection with the recapitalization of the Company consummated on
March 29, 1991. The Agreements were terminated effective as of
September 14, 1993.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors met nine times (including telephonic
meetings) during 1994 and each director attended at least 75% of the
total number of meetings of the Board of Directors and all of the
committees of the Board of Directors on which such director served
(except for Dr. Cordia).
The Board of Directors has standing Audit, Compensation, Executive
and Pension (ERISA) Committees. There is no nominating committee.
The Audit Committee
The members of the Audit Committee are Arnold L. Chavkin, Willem
Cordia, Charles A. Donabedian, Ted Kalborg, J.W. McLean and Robert L.
Sandmeyer. The Audit Committee held four meetings in 1994.
The Audit Committee meets with the Company's independent public
accountants and internal auditor to review the Company's accounting
policies, internal controls and other accounting and auditing matters;
makes recommendations to the Board as to the engagement of independent
public accountants; and reviews the letter of engagement and statement of
fees relating to the scope of the annual audit and special audit work
which may be recommended or required by the independent public
accountants.
The Compensation Committee
The members of the Compensation Committee are J. W. McLean, Robert
L. Sandmeyer and Steven A. Webster. The Compensation Committee held
three meetings in 1994.
The Compensation Committee reviews the nature and amount of
compensation of officers of the Company and its subsidiaries and
recommends changes thereto.
The Executive Committee
The members of the Executive Committee are Paul B. Loyd, Jr. and
C. Kirk Rhein, Jr. The Executive Committee held four meetings in 1994.
The Executive Committee reviews and develops strategies and
policies of the Company and recommends changes thereto.
The Pension (ERISA) Committee
The members of the Pension (ERISA) Committee are Charles A.
Donabedian, J. W. McLean and R. L. Sandmeyer. The Pension (ERISA)
Committee held four meetings in 1994.
The Pension (ERISA) Committee is responsible for monitoring the
Company's compliance with the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), in connection with its employee benefit
plans; for supervising the administration of the Company's Pension Plan,
including selection of investment managers, determination of the
investment guidelines within which they operate, review of performance
and amending the Pension Plan; and for supervising the administration of
the Company's Savings Plan.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors of the
Company (the "Committee") has furnished the following report on executive
compensation. The Committee report documents the components of the
Company's executive officer compensation programs and describes the basis
on which 1994 compensation determinations were made by the Committee with
respect to the executive officers of the Company, including the Chief
Executive Officer and the four other executive officers that are named in
the compensation tables who are currently employed by the Company (the
"Current Executives").
Compensation Philosophy and Overall Objectives of Executive Compensation
Programs
It is the philosophy of the Company to ensure that executive
compensation be directly linked to continuous improvements in corporate
performance and increases in stockholder value. The following objectives
have been adopted by the Committee as guidelines for compensation
decisions:
- Provide a competitive total compensation package that enables the
Company to attract and retain key executives.
- Integrate all pay programs with the Company's annual and long-term
business objectives and strategy, and focus executive behavior on
the fulfillment of these objectives.
- Provide variable compensation opportunities that are directly
linked with the performance of the Company.
Cash Compensation - cash compensation includes base salary and annual
incentive award programs. The base salary of each of the Company's
executive officers is determined by an evaluation of the responsibilities
of that position and by comparison to the median level of salaries paid
in the competitive market in which the Company competes for comparable
executive ability and experience. Annually, the performance of each
executive officer is reviewed by the Committee in the case of the
Company's Chief Executive Officer and Vice Chairman (with the officer
whose performance is being evaluated not participating), and by the Chief
Executive Officer in the case of the other executive officers, taking
into account the Company's operating and financial results for that year,
the contribution of each executive officer to such results, the
achievement of goals established for each such executive officer at the
beginning of each year, and competitive salary levels for persons in
those positions in the markets in which the Company competes. To assist
in its deliberations, the Committee is provided a report from William M.
Mercer, Incorporated ("Mercer"), a recognized independent compensation
consultant, setting out comparable salary and incentive compensation
information for a number of representative companies in the offshore
drilling industry selected by Mercer, including Global Marine, Rowan
Companies, Sonat Offshore Drilling, Energy Service Co., Nabors
Industries, Pool Energy Services, Noble Drilling and Dual Drilling, for
comparison purposes. Following its review of the performance of the
Company's executive officers, the Committee reports its recommendations
for salary increases and incentive awards to the Board of Directors. In
1994 annual base salary increases were recommended by the Committee and
approved by the Board of Directors for all of the executive officers
(other than the Vice Chairman) and incentive compensation awards were
approved for all of the executive officers (other than the Vice
Chairman). See "Summary Compensation Table" and "Chief Executive
Officer's Compensation and Corporate Performance for Fiscal Year 1994".
The Committee believes the recommended salary increases and incentive
awards were warranted and consistent with the performance of such
executives during 1994 based on the Committee's evaluation of each
individual's overall contribution to accomplishing the Company's 1994
corporate goals and of each individual's achievement of individual goals
during the year. Such goals related to ongoing operational and business
matters, such as maintaining high utilization of the Company's fleet,
improvement of the Company's customer and investor relationships,
improvement of the Company's safety and operations programs and
development of new business opportunities, as well as strategic and
financial matters, such as strengthening the Company's capital structure
and increasing the Company's ownership interest in Arcade Drilling AS to
approximately 73.9%.
Stock-Based Incentives - The Committee believes that it is essential to
align the interests of the executives and other management personnel
responsible for the growth of the Company with the interests of the
Company's stockholders. The Committee believes this alignment is best
accomplished through the provision of stock-based incentives. Therefore,
pursuant to the recommendation of the disinterested members of the
Committee, the Company's Board of Directors and stockholders: (i)
approved the 1990 Plan on November 29, 1990, and at a special meeting on
March 26, 1991, respectively, and (ii) approved the 1992 Plan on March
19, 1992 and May 20, 1992, respectively. The 1990 Plan authorized
options with respect to 1,966,00 shares of Common Stock (restated for the
October 1992 one-for-five reverse stock split) to be granted during the
180-day period following the Company's recapitalization consummated on
March 29, 1991 to key employees of the Company at an option price of
$9.65625 per share (based on the average market price for the ten days
preceding the closing of such recapitalization and restated for the
October 1992 one-for-five reverse stock split). On September 25, 1991,
options with respect to all 1,966,000 shares were granted to 162
employees allocated by the Board of Directors upon recommendation of the
Compensation Committee. The options become exercisable in installments
over a four-year period, with 20% of the options being exercisable six
months following March 29, 1991 (the effective date of grant) and an
additional 20% becoming exercisable on each of the four succeeding
anniversaries of March 29, 1991, and are fully exercisable thereafter for
a term of ten years from the effective date of grant. A reserve of
1,966,000 shares of Common Stock has been established to cover such
options. Pursuant to a delegation of authority by the Board of
Directors, the Executive Committee approved and the Board of Directors
ratified the adjustment of the exercise price of all of the existing
options under the 1990 Plan from the then current exercise price of
$9.65625 to $7.375, which was the last reported sale price of the Common
Stock on the New York Stock Exchange Composite Transactions Tape on March
31, 1993 (as reported in The Wall Street Journal). The Company's
stockholders approved the repricing of options under the 1990 Plan at the
Company's Annual Meeting on May 18, 1993. Under the 1992 Plan 1,000,000
shares of the Company's Common Stock (restated for the October 1992 one-
for-five reverse stock split) were available for award to executive
officers and other employees. During 1992, 120,000 shares, 90,000 shares
and 90,000 shares of restricted Common Stock were awarded to each of Mr.
Loyd, Mr. J. T. Angel (who resigned as President of the Company in 1993)
and Mr. Rhein, respectively. Restrictions as to one/twenty-fourth
(1/24th) of the shares lapse on each June 30, September 30, December 31
and March 31 beginning in 1992 and ending March 31, 1998. During 1993
and 1994, no further awards were made under the 1992 Plan; however,
restrictions on shares previously awarded to such current Executive
lapsed in accordance with the foregoing schedule. The Committee
continues to review stock-based incentives and make recommendations,
where it deems appropriate, to the Company's Board of Directors, from
time to time, to assure the Company's executive officers and other key
employees are appropriately motivated and rewarded by stock-based
incentives. See "PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP - -
Management Ownership".
Chief Executive Officer's Compensation and Corporate Performance for
Fiscal Year 1994
In determining the compensation of Mr. Paul B. Loyd, Jr., the
Chairman, President and Chief Executive Officer, the Committee (with Mr.
Loyd not participating) considered the Company's operating and financial
results for fiscal year 1994, evaluated his individual performance and
substantial contribution to those results (including, among other things,
the Company's entries into the floating production system and the turnkey
drilling markets, completion of the acquisition of outstanding secured
lease debt and interests associated with three 300' jackup rigs at
attractive prices, and increasing the Company's ownership interest in
Arcade Drilling AS to approximately 73.9%) and considered the
compensation range for other chief executive officers of companies in the
energy service sector. Based on that review and assessment, the
Committee (with Mr. Loyd not participating) recommended, and the
Company's Board of Directors approved (with Mr. Loyd abstaining), an
increase in Mr. Loyd's salary of $100,000 per year effective January 1,
1995 and an incentive award to Mr. Loyd of $125,000, which represented
41.67% of his base salary for 1994.
Summary
Based on its review of all existing programs, the Committee
believes that the total compensation program for executive officers of
the Company is competitive with the compensation programs provided by
other corporations with which the Company competes. The Committee also
believes that the stock-based incentives provide opportunities to
participants that are consistent with the returns that are generated on
the behalf of the Company's stockholders.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") disallows a corporation's deduction for renumeration paid to
its chief executive officer and its four other highest compensated
officers in excess of $1 million per person effective January 1, 1994.
As neither the Company's Chief Executive Officer nor any of its four
other highest compensated officers has received renumeration in excess of
such limitation in 1994 or is anticipated to receive renumeration in
excess of such limitation in 1995, the Committee has deferred making any
recommendation to the Company's Board of Directors as to what policy the
Company should adopt with respect to renumeration of the Current
Executives in excess of such limitation, until such time as it appears
reasonably foreseeable that such limitation may be exceeded.
Compensation Committee
of the Board of Directors
J.W. McLean
Robert L. Sandmeyer
Steven A. Webster
Compensation Committee Interlocks and Insider Participation
Mr. Webster is Chairman and Chief Executive Officer of Falcon
Drilling Company, Inc. During 1994, Mr. Loyd served as a director of
Falcon Drilling Company, Inc., but did not serve on such company's
compensation committee.
Summary Compensation Table
There is shown below information concerning the annual and long-
term compensation for services in all capacities to the Company for the
years ended December 31, 1994, 1993 and 1992, of (i) the chief executive
officer during 1994 and (ii) the other four most highly compensated
executive officers of the Company who were serving as executive officers
at December 31, 1994 (collectively, the "Named Executives"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual
Compensation Long Term Compensation
---------------- -----------------------------------
Name and Restricted Securities All Other
Principal Stock Underlying Compensation
Position Year Salary Bonus Award(s)(1) Options(2) (3)
--------- ---- -------- ------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
P.B. Loyd, Jr. 1994 $300,000 $125,000 $ 0 0 $25,998
Chairman, President 1993 300,000 150,000 0 0 25,578
and Chief Executive 1992 300,000 0 900,000 0 25,563
Officer
C.K. Rhein, Jr.(4) 1994 220,000 0 0 0 0
Vice Chairman 1993 220,000 0 0 0 0
1992 220,000 0 675,000 0 0
L.E. Voss, Jr. 1994 220,000 32,560 0 0 4,620
Vice President 1993 180,000 44,180 0 80,000 4,497
Operations 1992 163,833 0 0 0 4,139
W.K. Hillin 1994 180,000 16,560 0 0 4,620
Senior Vice 1993 167,000 21,870 0 80,000 4,497
President, 1992 157,000 0 0 0 4,078
General Counsel
Secretary
T.W. Nagle 1994 175,000 34,040 0 0 4,620
Vice President & 1993 150,000 37,400 0 80,000 4,497
Chief Financial 1992 138,452 0 0 0 4,114
Officer
____________
(1) 300,000 shares of Common Stock (restated for the October 1992 one-
for-five reverse stock split of the Common Stock) were issued under
the 1992 Plan as of April 1, 1992, the date of grant, at a price of
$7.50 per share (adjusted for such reverse stock split).
Restrictions as to one/twenty-fourth (1/24th) of the Common Stock
lapse on each June 30, September 30, December 31 and March 31 in
each of 1992, 1993, 1994, 1995, 1996, 1997 and through March 31,
1998. The stock awards entitle the beneficiaries to all rights as a
stockholder from the date of grant (including the right to receive
dividends when, as and if declared). The total number of shares of
Restricted Common Stock as to which restrictions have not lapsed,
and related value, as of December 30, 1994, held by Messrs. Loyd and
Rhein were as follows:
Shares Value
------ --------
Mr. Loyd 65,000 $390,000
Mr. Rhein 48,750 $292,500
(2) The stock options awarded in 1991 pursuant to the 1990 Plan have
been restated to reflect the October 1992 one-for-five reverse stock
split of the Common Stock. In addition, the stock options included
for 1993 represent such stock options awarded pursuant to the 1990
Plan which were repriced pursuant to the repricing proposal approved
by the Company's stockholders at the 1993 Annual Meeting.
(3) For 1992, 1993 and 1994, the All Other Compensation column includes
the amount of the Company's contribution for each Named Executive
under the Reading & Bates Savings Plan, except Mr. Rhein who has
waived his right to participate in such Plan, and includes in the
case of Mr. Loyd NOK 150,000 per annum for serving as Chairman and a
member of the board of directors of Arcade Drilling AS, a majority-
owned subsidiary of the Company (amounts shown in the table reflect
exchange rates prevailing during each such year).
(4) Pursuant to the agreement referred to in footnote 2 to the table
under "PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP -- Principal
Stockholders" above, the compensation payable to Mr. Rhein is paid
to and beneficially owned by WHR.
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year-End (1) at Fiscal Year-End (1)
----------------------- -----------------------
Shares
Acquired
on Value Un- Un-
Name Exercise Realized Exercisable exercisable Exercisable exercisable
-------------- -------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
P.B. Loyd, Jr. 0 0 0 0 0 0
C.K. Rhein, Jr. 0 0 0 0 0 0
L.E. Voss, Jr. 0 0 64,000 16,000 0 0
W.K. Hillin 0 0 64,000 16,000 0 0
T.W. Nagle 0 0 64,000 16,000 0 0
________________________
(1) The stock options granted during 1991 pursuant to the 1990 Plan
were granted at an option price of $1.93125 per share; after the
October 1992 one-for-five reverse stock split of the Common Stock
the option price was adjusted to $9.65625. On May 18, 1993, the
option price was further adjusted to $7.375. The number of
unexercised stock options at December 31, 1993 reflects such
reverse stock split. At December 31, 1994 the stock options were
not "in-the-money".
</TABLE>
Performance Graph
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER
RETURN AMONG READING & BATES CORPORATION,
S&P 500 INDEX AND A PEER GROUP INDEX
[Graph appears here. A copy of the graph
has been couriered to Letty G. Lynn,
Branch Chief.]
The above graph assumes $100 invested on December 31, 1989
in the stock of the indexes and shows the value of such
investment, assuming reinvestment of dividends on December
31 of the year indicated. The new peer group reflects
certain changes, as described below, from the old peer group
used in the Company's 1994 Proxy Statement and is comprised
of the following companies: Arethusa (Off-Shore) Ltd.,
Atwood Oceanics Inc., Dual Drilling Company, Energy Services
Inc., Global Marine Inc., Noble Drilling Corporation, Rowan
Companies Inc., Sonat Offshore Drilling Inc., and the
Western Company of North America (through September 1993).
Dual Drilling Company was added to the new peer group as
this company is in the same line of business as the Company
and had their initial public offering in August 1993.
Chiles Offshore Corporation was dropped and Noble Drilling
Corporation was added as these two companies merged during
1994. Consequently, peer weightings were adjusted to
account for the two new group members. Moreover, the
Western Company of North America sold its offshore drilling
assets in October 1993 and therefore that company was
removed from the peer group indexes as of September 30,
1993. The following table shows the values that are
displayed on the graph:
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Reading & Bates $100 $70 $57 $30 $49 $42
S&P 500 $100 $97 $126 $136 $150 $152
Old Peer
Group (8 Stocks) $100 $90 $46 $51 $89 $79
New Peer
Group (9 Stocks) $100 $90 $46 $54 $89 $77
</TABLE>
Pension Plan Table
Assuming that an employee is entitled to an annual social
security benefit of $13,764 at normal retirement date and has an
annual social security covered compensation amount of $24,312,
the Pension Plan Table illustrates the amount of annual pension
benefits payable by the Company under a single-life annuity basis
to a person in specified average compensation and years-of-service
classifications.
<TABLE>
<CAPTION>
36-Month
Average
Remuneration Years of Service
------------------------------------------------------
15 20 25 30 35
-- -- -- -- --
<S> <C> <C> <C> <C> <C>
$50,000 12,985 17,314 21,642 25,970 30,299
100,000 28,408 37,877 47,346 56,815 66,284
150,000 43,830 58,440 73,050 87,660 102,270
200,000 59,252 79,003 98,754 118,505 138,256
250,000 74,675 99,566 124,458 149,350 174,241
300,000 90,097 120,130 150,162 180,194 210,227
350,000 105,520 140,693 175,866 211,039 246,212
400,000 120,942 161,256 201,570 241,884 282,198
450,000 136,364 181,819 227,274 272,729 318,184
500,000 151,787 202,382 252,978 303,574 354,169
</TABLE>
Retirement benefits under the Reading & Bates Pension Plan (the
"Domestic Plan") are based on an employee's highest average monthly base
compensation for 36 consecutive months of credited service, integrating a
portion of the primary social security benefit payable to the employee.
The benefit is based on the higher of three formulas, A, B and C, as
outlined below. Formula A is based on pay, service and primary social
security benefit frozen at December 31, 1988, while Formulas B and C are
based on pay, service and social security covered compensation as of the
date of termination of employment. Formula A is as follows: 2.75% of an
employee's average monthly compensation multiplied by the number of years
of credited service for the first 20 years; plus 2% of an employee's
average monthly compensation multiplied by the number of years of credited
service from 21 through 25 years; plus 1.50% of an employee's average
monthly compensation multiplied by the number of years of credited service
from 26 through 30 years; plus 1% of an employee's average monthly
compensation multiplied by the number of years of credited service from 31
through 35 years; plus .50% of an employee's average monthly compensation
multiplied by the number of years of credited service from 36 through 40
years; minus 50% of an employee's primary social security benefit.
Formula B is as follows: 2.4% of an employee's average monthly
compensation multiplied by the number of years of credited service through
December 31, 1991 (up to a maximum of 35 years); minus .65% of an
employee's social security covered compensation multiplied by the number
of years of credited service through December 31, 1991 (up to a maximum of
35 years); plus an amount determined under Formula C based solely on the
number of years credited service which accrued after December 31, 1991.
Formula C is as follows: 2.0% of an employee's average monthly
compensation multiplied by the number of years of credited service for the
first 35 years; minus .65% of an employee's social security covered
compensation multiplied by the number of years of credited service for the
first 35 years. This benefit structure is the result of a plan amendment
effective January 1, 1989. The formula in effect prior to this date was
Formula A, based on pay, service and primary social security benefit at
date of retirement. Compensation covered by the Domestic Pension Plan
consists of base wages to the maximum extent allowed under current laws
but not to exceed $142,280 (or an amount equal to the difference between
$200,000 for 1989 and succeeding years (as adjusted at the same time an
manner provided under Code Section 415(d)) and $100,000, or the maximum
annual compensation limit provided for in Code Section 401(a)(17)).
Messrs. Loyd, Voss, Hillin and Nagle respectively, have 3, 27, 22 and 18
years of credited service under the Domestic Plan. Mr. Rhein has waived
his right to participate in the Pension Plan. The Named Executives,
except Mr. Rhein, will be entitled to receive the estimated annual
benefits based upon their 1994 salary amounts set forth under "Salary" in
the Summary Compensation Table.
Assuming that an employee is entitled to an annual social security
benefit of $13,764 at normal retirement date and has an annual social
security covered compensation amount of $24,312, the Pension Plan Table
illustrates the amount of annual pension benefits payable by the Company
under the Domestic Plan and the Retirement Benefit Replacement Plan
(described below) under Formula C on a single life annuity basis to a
person in specified average compensation and years-of-service
classifications.
The maximum pension benefit allowable under current laws for persons
who retired at age 65 in 1995, is $120,000. The Domestic Plan limits the
annual compensation that is considered for plan purposes to $145,000 for
1995. Retirement benefits based on pay in excess of the foregoing
limitations will be paid pursuant to the Reading & Bates Retirement
Benefit Replacement Plan, which was adopted by the Company's Board of
Directors in 1978. The Retirement Benefit Replacement Plan is designed to
restore to affected employees the dollar amount of pension and pension-
related benefits which could no longer be provided under the Domestic Plan
as a result of the compensation limitation contained in the Domestic Plan
and benefit limitations imposed on the Domestic Plan by ERISA. The
Pension Plan Table includes aggregate benefits payable under both the
Domestic Plan and the Retirement Benefit Replacement Plan.
Retirement benefits under the Reading & Bates Offshore Pension Plan
(the "Offshore Plan") are determined under formulas similar to those
detailed above as the Domestic Plan's Formulas A and C. Formula A under
the Offshore Plan is identical to Formula A under the Domestic Plan except
that pay, service and primary social security benefit are frozen at
December 31, 1990; plus an amount determined under Formula C based solely
on the number of years of credited service which accrued after December
31, 1990 is added to the benefit determined. Formula C for the Offshore
Plan is identical to Formula C under the Domestic Plan. Compensation
covered under the Offshore Plan is the same as that covered by the
Domestic Plan without the monetary limits. The Pension Plan Table can
also be used to illustrate the amount of annual pension benefits payable
by the Company under Formula C of the Offshore Plan.
Director Compensation
Each nonemployee director is paid a fee of $18,000 per year ($4,500
per quarter). Mr. Loyd is paid a fee of NOK 150,000 per annum ($21,378 at
exchange rates prevailing during 1994) for serving as Chairman and a
member of the board of directors of Arcade Drilling AS, a majority-owned
subsidiary of the Company. The Company pays each director an additional
fee of $500 for each meeting (other than telephonic meetings) attended by
that director. In addition, each nonemployee director is paid for
attending each committee meeting at the rate of $700 for committee
chairmen and $500 for other committee members. The Company also
reimburses its directors for travel, lodging and related expenses they may
incur attending board and committee meetings. Nonemployee directors who
are not executive officers of the Company are provided life insurance
coverage. No other benefits under the Company's employee benefit plans
are payable to or on behalf of these directors.
Employment Contracts and Change-in-Control Arrangements
Officer Agreements. The Company has entered into employment
agreements with Messrs. Loyd, Rhein, Voss, Hillin and Nagle. The
agreements with Messrs. Loyd, Rhein, Voss, Hillin and Nagle provide that
for a continuing three-year employment period (ending currently on March
31, 1997) the officers will receive annual base salaries of not less than
$400,000, $220,000, $240,000, $190,000 and $200,000, respectively, and,
except in the case of Mr. Rhein, will participate in other benefit plans
and programs of the Company.
Each of such employment agreements was amended effective as of
October 1, 1993 by agreement between the Company and each executive. As
amended, each of such agreements provides that if the officer terminates
his employment for good reason or during the 180-day period following a
change of control of the Company, the Company will (a) make a lump sum
payment to him of salary earned through the date of termination and a
bonus based on the highest annual bonus paid him during the preceding
three-year period prorated in accordance with the period in the current
year prior to the termination, (b) make a lump sum payment to him of the
amount determined by multiplying 1.25 times the sum of the highest
aggregate annual base salary and annual bonus (or equal to such salary and
bonus if such termination occurs after October 31, 1997) paid to the
officer with respect to any one fiscal year ending within the three-year
period ending on the date of termination times three, (c) in the case of
Messrs. Loyd and Rhein, deliver to such executive the shares under the
1992 Plan free of restrictions and (d) except in the case of Mr. Rhein,
continue to provide certain welfare plan and other benefits for a period
of three years or as long as such plan or benefits allow.
For purposes of the employment agreements, "good reason" includes
(i) a change in the officer's position, authority, duties or
responsibilities, (ii) changes in the office or location at which he is
based without his consent (such consent not to be unreasonably withheld),
(iii) certain breaches of the agreement and (iv) in the case of Messrs.
Loyd and Rhein, (x) any determination by such executive that termination
of his employment with the Company is, in his sole opinion, in the best
interests of the Company or Messrs. Loyd or Rhein and in such event (A)
the date of termination is not less than 180 days (or such shorter period
as may be mutually agreed between such executive and the Company)
following the giving of notice of termination as provided in the
employment agreements and (B) Greenwing and Workout, respectively, shall
have disposed of (including, without limitation, by means of a
distribution to its stockholders) not less than 50% of the Company's
Common Stock beneficially owned, directly or indirectly, by such entity as
of October 11, 1993 and (y) the occurrence of October 11, 2003. A "change
of control" for purposes of the agreements with Messrs. Voss, Hillin and
Nagle would occur if a person or group (other than (i) such officer, (ii)
the Company or any of its subsidiaries or affiliates, (iii) any person
subject as of the date of the agreement to the reporting or filing
requirements of Section 13(d) of the Exchange Act with respect to the
securities of the Company or any affiliates, (iv) any trustee or other
fiduciary holding or owning securities under an employee benefit plan of
the Company, (v) any underwriter temporarily holding or owning securities
of the Company, or (vi) any corporation owned directly or indirectly by
the current stockholders of the company in substantially the same
proportion as their then ownership of stock of the Company) becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities. A "change of control" for
purposes of the agreements with Messrs. Loyd and Rhein would occur if any
person or group (subject to the same exceptions described in the change of
control provisions above for the agreements with Messrs. Voss, Hillin and
Nagle) becomes the beneficial owner, directly or indirectly, of securities
of the Company representing twenty-two and one-half percent (22.5%) or
more of the combined voting power of the Company's then outstanding
securities.
The same benefits payable to each officer under the agreement if he
terminates his employment for good reason or following a change of control
would also be payable to him if the Company terminates his employment
other than for cause (as defined in the agreement) or if he dies or
becomes disabled under the terms of the agreement. "Cause" for purposes
of the agreements with Messrs. Loyd and Rhein includes (i) dishonesty by
such executive which results in substantial personal enrichment at the
expense of the Company or (ii) demonstratively willful repeated violations
of such executive's obligations under the employment agreements which are
intended to result in material injury to the Company. "Cause" for
purposes of the agreements with Messrs. Voss, Hillin and Nagle includes
(i) dishonesty by such executive which results in substantial personal
enrichment at the expense of the Company, (ii) such executive's willful
engagement in conduct which is materially injurious to the business or
reputation of the Company, or (iii) such executive's failure substantially
to perform his duties with the Company in a reasonably satisfactory
manner, in each case as determined in good faith by the affirmative vote
of at least two-thirds of the members of the Board. For purposes of the
employment agreements with Messrs. Loyd, Rhein, Voss, Hillin and Nagle, no
act or failure to act on the part of such executives shall be deemed
"willful" unless done or admitted to be done by such executive not in good
faith and without reasonable belief that his action or omission was in the
best interests of the Company.
The agreements provide that if any payment to one of the covered
officers will be subject to any excise tax under Code Section 4999, a
"gross-up" payment would be made to place the officer in the same net
after-tax position as would have been the case if no excise tax had been
payable. Based on their current compensation levels, the amount of income
which the officers could recognize under the agreements (together with any
other compensation payable by reason of a change of control) before
payment of an excise tax would be required and such a tax gross-up payment
would be payable by the Company would be approximately $1,573,000 in the
case of Mr. Loyd, $1,001,000 in the case of Mr. Rhein, $531,000 in the
case of Mr. Voss, $516,000 in the case of Mr. Hillin, and $445,000 in the
case of Mr. Nagle. The aggregate present value of the benefits payable
under the respective agreements in the event their provisions became
operative is approximately $1,763,000 in the case of Mr. Loyd, $816,000 in
the case of Mr. Rhein, $999,000 in the case of Mr. Voss, $758,000 in the
case of Mr. Hillin, and $811,000 in the case of Mr. Nagle, assuming that
such provisions became operative on April 1, 1995 and based solely on the
provisions of the agreements relating to payments respecting salary and
bonus. Provisions of the agreements relating to payments respecting other
benefits would increase the amounts payable. Based on these assumptions,
20% excise tax payments would be imposed under Code Section 4999 with
respect to the present value of all benefits payable by reason of a change
of control in excess of $324,000 in the case of Mr. Loyd, $153,000 in the
case of Mr. Rhein, $166,000 in the case of Mr. Voss, $119,000 in the case
of Mr. Hillin and $134,000 in the case of Mr. Nagle, and the Company would
be required to make gross-up payments so as to place the officers in the
same respective net after-tax positions as would have been the case if no
excise tax had been payable.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors
and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Directors, officers and
greater than ten percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, during the fiscal year ended December 31,
1994 all reports required by Section 16(a) to be filed by its directors,
officers and greater than ten percent beneficial owners were filed on a
timely basis except that: Mr. Rhein filed late one Form 4 with respect to
a single transaction and Mr. Webster filed late two Form 4's each with
respect to a single transaction.
THE INCENTIVE PLAN PROPOSAL
The 1995 Long-Term Incentive Plan (the "Incentive Plan") is designed
to retain key executives and other selected employees by rewarding them
for making major contributions to the success of the Company and its
subsidiaries. By making awards under the Incentive Plan, the Company will
provide plan participants with a proprietary interest in the growth and
performance of the Company and its subsidiaries.
The Board of Directors has adopted the Incentive Plan, subject to
the approval by the holders of a majority of shares of Common Stock
present, or represented, and entitled to vote at a meeting of the
Company's stockholders held on or before June 30, 1995. The Board
recommends a vote in favor of the Incentive Plan. If the Incentive Plan is
not so approved by the stockholders prior to June 30, 1995, the Incentive
Plan will terminate. If approved by stockholders, the Incentive Plan will
be implemented even if none of the other Proposals is adopted.
The following is a summary of the principal features of the
Incentive Plan. This summary is qualified in its entirety by reference to
the complete text of the Incentive Plan, which is set forth in Exhibit
99.A hereto.
Description of the Incentive Plan
Awards under the Incentive Plan
Awards under the Incentive Plan may consist of the grant of stock
options, stock appreciation rights, restricted and/or performance-based
stock awards and/or restricted and/or performance-based cash awards,
granted singly, in combination or in tandem. Stock options may be granted
in the form of "incentive stock options" which comply with Section 422 of
the Code. In the case of a stock option, the purchase price for the shares
as to which the option is exercised will be payable in full upon exercise,
in cash or, if permitted by the Committee, by tender of Common Stock or by
surrender of another award, valued at "fair market value" (defined for a
particular date as (i) if the shares of Common Stock are listed on a
national securities exchange, the mean between the highest and lowest
sales price per share of Common Stock on the principal national securities
exchange on which the Common Stock is listed (assuming such listing), or
if no such sale was reported on that date, on the last preceding date on
which such sale was so reported, (ii) if the shares of Common Stock are
not so listed but are quoted in the NASDAQ National Market System, the
mean between the highest and lowest sales price per share of Common Stock
on the NASDAQ National Market System on that date, or, if there shall been
no such sale so reported on that date, on the last preceding date on which
such a sale was so reported or (iii) if the Common Stock is not so listed
or quoted, the mean between the closing bid and asked price on that date,
or, if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as reported by
NASDAQ, or, if not reported by NASDAQ, by the National Quotation Bureau,
Inc.). The Committee may provide for loans from the Company to permit the
exercise or purchase of awards and may provide for procedures to permit
the exercise or purchase of awards by use of the proceeds to be received
from the sale of Common Stock issuable pursuant to an award. The exercise
price may not be less than the par value of the Common Stock and, in the
case of "incentive stock options", not less than the "fair market value"
of the underlying Common Stock, on the date of grant of the option. Stock
appreciation rights may be paid in cash or Common Stock, based on the
excess "fair market value" of the Common Stock or other specified
valuation of a specified number of shares of Common Stock on the date the
stock appreciation right is exercised over a specified strike price as set
forth in each award. Stock awards may consist of Common Stock or units of
Common Stock, and may be based on "fair market value" or other specified
valuations. Cash awards and stock awards may be subject to future service
and other restrictions and conditions, including performance-based
objectives, as set forth in each award. With the approval of the
Committee, payments of awards may be deferred, either in the form of
installments or a future lump sum payment and any deferred payment may be
forfeited if and to the extent that the award agreement so provides.
Dividends or dividend equivalent rights may be extended to and made part
of any award denominated in Common Stock or units of Common Stock. At the
discretion of the Committee, a participant may be offered an election to
substitute an award for another award or awards of the same or different
type.
Common Stock Available for Awards
During the term of the Incentive Plan, an aggregate of 2,500,000
shares of Common Stock will be available for awards granted wholly or
partly in Common Stock. The market value of the Common Stock was $7.75 per
share as of the Record Date.
Eligibility for Awards
Employees of the Company and its subsidiaries eligible for awards
under the Incentive Plan are those who hold positions of responsibility in
the Company and its subsidiaries, and whose performance, in the judgement
of the committee of the Board of Directors designated to administer the
Incentive Plan (the "Committee"), can have a significant effect on the
success of the Company and its subsidiaries. There are approximately 200
persons who will be eligible to participate in the Incentive Plan.
Administration of the Incentive Plan
The Committee is responsible for administration and interpretation
of the Incentive Plan, and may correct any defect, supply any omission or
reconcile any inconsistency in the Incentive Plan or any award in its
discretion. The Committee will be constituted so as to comply with Rule
16b-3 under the Exchange Act ("Rule 16b-3") and will consist initially of
not less than two directors who are "disinterested persons" within the
meaning of Rule 16b-3. The Committee may delegate to the Chief Executive
Officer and other senior officers of the Company its duties under the
Incentive Plan pursuant to such conditions or limitations as the Committee
may establish, except that the Committee may not delegate to any person
the authority to grant awards to, or take other action with respect to,
participants who are subject to Section 16 of the Exchange Act.
Amendment and Termination
The Board of Directors may amend, modify, suspend or terminate the
Incentive Plan for the purpose of meeting or addressing any changes in
legal requirements or for any other purpose permitted by law except that
(i) no amendment or alteration that would impair the rights of any
participant under any award granted to such participant will be made
without such participant's consent and (ii) no amendment or alteration
will be effective prior to approval by the Company's stockholders to the
extent such approval is then required pursuant to Rule 16b-3, in order to
preserve the applicability of any exemption provided by such rule to any
award then outstanding (unless the holder of such award consents) or to
the extent stockholder approval is otherwise required by applicable legal
requirements.
Other Provisions
The Incentive Plan will be unfunded insofar as the Incentive Plan
provides for awards of cash, Common Stock or rights thereto.
When a participant's employment with the Company is terminated, any
unexercised, deferred or unpaid awards will be treated as provided in the
specific agreement evidencing the award. The Committee may provide for an
extension of the exercisability of the award, accelerate the vesting of an
award, eliminate or make less restrictive any restrictions contained in an
award or otherwise amend or modify the award in any manner not adverse to
such participant.
An award or other benefit under the Incentive Plan constituting a
stock option or other derivative security (within the meaning of Rule 16b-
3) will not be assignable or transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined under the Code or ERISA. However, an officer or director
may designate a beneficiary for any award made to such officer or
director.
In the event of any subdivision or consolidation of outstanding
shares of Common Stock, declaration of a dividend payable in Common Stock
or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of
Common Stock, the Committee may adjust proportionally the number of shares
of Common Stock covered by outstanding awards under the Incentive Plan and
the applicable exercise price, the appropriate "fair market value" or
other price determination of such awards. The Committee may make equitable
adjustments to give proper effect to any consolidation or merger of the
Company with another corporation or entity or the adoption of a plan of
exchange affecting the Common Stock or any distributions to holders of
Common Stock. In the event of a corporate merger, consolidation,
acquisition, separation, reorganization or liquidation, the Committee may
issue or assume stock options, or provide for the acceleration of
exercisability of or lapse of restrictions with respect to awards, and the
termination of unexercised options in connection with such transaction.
Tax Withholding
The Company shall have the right to deduct applicable taxes from any
award payment and withhold, at the time of delivery or vesting of shares
of Common Stock under the Incentive Plan, an appropriate number of shares
of Common Stock for payment of taxes required by law or to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for withholding of such taxes. The Company may also permit
withholding to be satisfied by the transfer to the Company of shares of
Common Stock theretofore owned by the holder of the award with respect to
which withholding is required. If shares of Common Stock are used to
satisfy tax withholding, such shares shall be valued based on the "fair
market value" when the tax withholding is required to be made.
Federal Income Tax Consequences
Upon the grant of an incentive stock option, a participant will not
recognize any income. No income will be recognized by a participant upon
the exercise of an incentive stock option if the applicable requirements
of the Incentive Plan and the Code are met, including the requirement that
the participant remain an employee of the Company (or a subsidiary
thereof) during the period beginning on the date of the grant of the
incentive stock option and ending on the day three months (one year if the
optionee becomes disabled) before the date the incentive stock option is
exercised.
The federal income tax consequences of a subsequent disposition of
Common Stock acquired upon the exercise of an incentive stock option will
depend upon when the disposition occurs. If such shares are disposed of by
the participant more than two years after the date of grant of the
incentive stock option, and more than one year after such shares are
transferred to the participant, any gain or loss realized upon such
disposition will be a long-term capital gain or loss. In this case, the
Company (or a subsidiary) will not be entitled to any income tax deduction
in respect of the grant of the incentive stock option or its exercise.
If such shares are disposed of by the participant within two years
after the date of grant of the incentive stock option, or within one year
after such shares are transferred to the participant (a "Disqualifying
Disposition"), and such Disqualifying Disposition is a taxable
disposition, the excess, if any, of the amount realized (up to the fair
market value of such shares on the exercise date) over the option exercise
price will be compensation taxable to the participant as ordinary income,
and the Company (or a subsidiary) will be entitled to a deduction equal to
the amount of ordinary income recognized by the participant. If the amount
realized by the participant upon such Disqualifying Disposition exceeds
the fair market value of such shares on the exercise date, such excess
will be short-term or long-term capital gain, depending upon the holding
period of such shares for capital gain or loss purposes. If the option
price exceeds the amount realized upon such Disqualifying Disposition, the
difference will be short-term or long-term capital loss, depending upon
the holding period of such shares for capital gain or loss purposes.
Upon the grant of a non-qualified stock option, a participant will
not recognize any income (unless the exercise price of the option is
nominal compared to the fair market value of the underlying Common Stock
on such grant date). At the time a non-qualified stock option is
exercised, the participant will recognize compensation taxable as ordinary
income, and the Company (or a subsidiary) will be entitled to a
compensation expense deduction, in an amount equal to the difference
between the fair market value on the exercise date of the Common Stock
acquired pursuant to such exercise and the aggregate option exercise price
paid. Upon a subsequent disposition of such shares, the participant will
realize long-term or short-term capital gain or loss, depending upon the
holding period of such shares. For purposes of determining the amount of
such gain or loss, the participant's tax basis in such shares will be the
amount paid for such shares on the exercise date, plus the amount of
ordinary income recognized upon exercise.
If a participant elects to tender shares of Common Stock in partial
or full payment of the option exercise price for shares to be acquired
upon the exercise of a non-qualified stock option, the participant will
not recognize any gain or loss on such tendered shares. The number of
shares of Common Stock received by the participant upon any such exercise
that are equal in number to the number of tendered shares will retain the
tax basis and the holding period of the tendered shares. The participant
will recognize compensation taxable as ordinary income, and the Company
(or a subsidiary) will be entitled to a deduction, in an amount equal to
the fair market value of the number of shares of Common Stock received by
the participant upon such exercise that is in excess of the number of
tendered shares, less any cash paid by the participant. The fair market
value of such excess number of shares would then become the tax basis for
those shares and the holding period of such shares for capital gain
purposes will begin on the exercise date. If the tendered shares were
previously acquired upon the exercise of an incentive stock option, the
shares of Common Stock received by the participant upon the exercise of
the non-qualified stock option that are equal in number to the number of
tendered shares will be treated as shares of Common Stock acquired upon
the exercise of such incentive stock option.
Except as discussed in the following paragraph, if a participant
elects to tender shares of Common Stock in partial or full payment of the
option exercise price for shares to be acquired upon the exercise of an
incentive stock option, the participant will not recognize any gain or
loss on such tendered shares. No income will be recognized by the
participant in respect of the shares received by the participant upon the
exercise of the incentive stock option if, as previously stated, the
requirements of the Incentive Plan and the Code are met. The Internal
Revenue Service has not yet issued final regulations with respect to the
determination of the basis and the holding period of the shares acquired
upon such an exercise. Regulations proposed by the Internal Revenue
Service provide that for all shares of Common Stock acquired upon such an
exercise, the requisite two year and one year holding periods for stock
acquired upon exercise of an incentive stock option must be satisfied,
regardless of the holding period applicable to the tendered shares.
However, the tax basis (and holding period for all other federal income
tax purposes) of the tendered shares will carry over to the same number of
shares acquired upon the exercise. The number of shares acquired which is
in excess of the number of tendered shares will have a tax basis equal to
zero and a holding period for all purposes beginning on the date of
exercise. Any subsequent disqualifying disposition will be deemed first
to have been a disposition of the shares with a tax basis equal to zero,
and then to have been a disposition of the shares with a carry over tax
basis. For purposes of determining the amount of compensation taxable to
the participant upon a subsequent disqualifying disposition, the option
exercise price of the shares with a tax basis equal to zero will be deemed
to be zero, and the option exercise price of the shares with a carry over
basis will be deemed to be the fair market value of the shares on the
exercise date.
If a participant elects to tender shares of Common Stock that were
previously acquired upon the exercise of an incentive stock option in
partial or full payment of the option price for shares to be acquired upon
the exercise of another incentive stock option, and such exercise occurs
within two years of the date of grant of such incentive stock option, or
within one year after such tendered shares were transferred to the
participant, the tender of such shares will be a taxable disqualifying
disposition with the tax consequences described above regarding the
disposition within two years of the date of grant of an incentive stock
option, or within one year after shares were acquired upon the exercise of
an incentive stock option. The shares of Common Stock acquired upon such
exercise will be treated as shares of Common Stock acquired upon the
exercise of an incentive stock option and the holding period of such
shares for all purposes will begin on the exercise date.
Currently, under Section 83(c)(3) of the Code, an employee who is an
officer of the Company (or a subsidiary) subject to Section 16(b) of the
Exchange Act and Rule 16b-3 thereunder (a "Section 16 Employee") will not
recognize any income upon the exercise of a non-qualified stock option, if
such exercise occurs within six months after the grant of such option
(unless an election under Section 83(b) of the Code is made with respect
thereto) and so long as the sale of the shares received could subject such
individual to suit under Section 16(b). In such case, the Section 16
Employee will recognize ordinary income six months after such exercise, or
upon an earlier taxable disposition of the shares of Common Stock acquired
upon any such exercise, and the Company (or a subsidiary) will be entitled
to a deduction, in an amount equal to the fair market value at that time
of the shares received upon such exercise or the amounts realized upon the
earlier disposition of such shares, as the case may be, less any amount
paid by the Section 16 Employee for such shares. In 1991, the Securities
and Exchange Commission adopted a new Rule 16b-3 which is scheduled to
become applicable to Section 16 Employees in the near future. In respect
of awards granted after such new Rule 16b-3 becomes applicable, a Section
16 Employee will similarly not recognize any income upon the exercise of a
non-qualified stock option (unless an election under Section 83(b) of the
Code is made with respect thereto) if the exercise occurs within six
months after the grant of such option. In such case, however, the Section
16 Employee will recognize ordinary income six months after the grant of
such option, or upon an earlier taxable disposition of the shares of
Common Stock acquired upon any such exercise, and the Company (or a
subsidiary) will be entitled to a deduction, in an amount equal to the
fair market value at that time of the shares received upon such exercise
or the amount realized upon the earlier disposition of such shares, as the
case may be, less any amount paid by the Section 16 Employee for such
shares.
Upon the exercise of an incentive stock option, Section 56 of the
Code includes in a participant's alternative minimum taxable income an
amount equal to the income the participant would have recognized if the
option had not been an incentive stock option, with such inclusion
occurring in the year in which such income would have been so recognized.
As a result, a participant may incur, or increase his or her, alternative
minimum tax as a result of the exercise of an incentive stock option under
the Incentive Plan.
A participant's compensation income with respect to a grant or an
award under the Incentive Plan will be subject to withholding for federal,
state and local income and employment tax purposes. If a participant, to
the extent permitted by the terms of the Incentive Plan, uses shares of
Common Stock to satisfy the federal income and employment tax withholding
obligation, and any similar withholding obligation for state and local tax
obligations, the participant will realize a capital gain or loss, short-
term or long-term, depending on the tax basis and holding period for such
shares of Common Stock.
If the "golden parachute tax" provisions of Section 280G of the Code
become applicable, certain compensation payments or other benefits
received by "disqualified individuals" (as defined in Section 280G(c) of
the Code) under the Incentive Plan or otherwise may cause or result in
"excess parachute payments" (as defined in Section 280G(b)(1) of the
Code). Section 4999 of the Code generally imposes a 20% excise tax on the
amount of any such "excess parachute payment" received by such a
"disqualified individual" and any such "excess parachute payment" will not
be deductible by the Company (or a subsidiary).
Board Recommendation
The Board recommends a vote FOR the approval of the Incentive Plan
Proposal.
THE DIRECTOR PLAN PROPOSAL
The 1995 Director Stock Option Plan (the "Director Plan") is
designed to obtain and retain non-employee members of the Board of
Directors by rewarding them for making major contributions to the success
of the Company and its subsidiaries. By making awards under the Director
Plan, the Company will provide plan participants with a proprietary
interest in the growth and performance of the Company and its
subsidiaries.
The Board of Directors has adopted the Director Plan, subject to the
approval by the holders of a majority of shares of Common Stock present,
or represented, and entitled to vote at a meeting of the Company's
stockholders held on or before June 30, 1995. The Board recommends a vote
in favor of the Director Plan. If the Director Plan is not so approved by
the stockholders prior to June 30, 1995, the Director Plan will terminate.
If approved by stockholders, the Director Plan will be implemented even if
none of the other Proposals is adopted.
The following is a summary of the principal features of the Director
Plan. This summary is qualified in its entirety by reference to the
complete text of the Director Plan, which is set forth in Exhibit 99.B
hereto.
Description of the Director Plan
Awards under the Director Plan
Awards under the Director Plan consist of a grant of stock options.
The purchase price for the shares as to which the option is exercised will
be payable in full upon exercise, in cash or, if permitted by the
Committee, by tender of Common Stock, valued at "fair market value"
(defined for a particular date as (i) if the shares of Common Stock are
listed on a national securities exchange, the mean between the highest and
lowest sales price per share of Common Stock on the principal national
securities exchange on which the Common Stock is listed (assuming such
listing), or if no such sale was reported on that date, on the last
preceding date on which such sale was so reported, (ii) if the shares of
Common Stock are not so listed but are quoted in the NASDAQ National
Market System, the mean between the highest and lowest sales price per
share of Common Stock on the NASDAQ National Market System on that date,
or, if there shall been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported or (iii) if the Common
Stock is not so listed or quoted, the mean between the closing bid and
asked price on that date, or, if there are no quotations available for
such date, on the last preceding date on which such quotations shall be
available, as reported by NASDAQ, or, if not reported by NASDAQ, by the
National Quotation Bureau, Inc.). The Committee may provide for loans from
the Company to permit the exercise or purchase of awards and may provide
for procedures to permit the exercise or purchase of awards by use of the
proceeds to be received from the sale of Common Stock issuable pursuant to
an award. The exercise price may not be less than the par value of the
Common Stock.
Common Stock Available for Awards
During the term of the Director Plan, an aggregate of 200,000 shares
of Common Stock will be available for awards granted wholly or partly in
Common Stock. The market value of the Common Stock was $7.75 per share as
of the Record Date.
Eligibility for Awards
Current and future members of the Board of Directors of the Company
who are not employees of the Company or any of its subsidiaries and have
not previously received any stock options from the Company (or having
received same, surrenders such previously granted stock options in
exchange for an award under the Director Plan) shall be granted a one-time
award of a right to purchase 15,000 shares of Common Stock at the price of
$7.375 per share for a period of 10 years. It is currently expected that
Messrs. Donabedian, Sandmeyer, Chavkin, Webster, Cordia, Kalborg and
McLean will each receive a one-time award of a right to purchase 15,000
shares of Common Stock. Awards made to future members of the Board of
Directors shall vest 33-1/3% on each of the three succeeding anniversaries
of the date of grant and thereafter be exercisable in full. There are
currently 7 persons who will be eligible to participate in the Director
Plan.
Administration of the Director Plan
The Committee is responsible for administration and interpretation
of the Director Plan, and may correct any defect, supply any omission or
reconcile any inconsistency in the Director Plan or any award in its
discretion. The Committee will be constituted so as to comply with Rule
16b-3 under the Exchange Act ("Rule 16b-3") and will consist initially of
not less than two directors who are "disinterested persons" within the
meaning of Rule 16b-3. The Committee may delegate to the Chief Executive
Officer and other senior officers of the Company its duties under the
Director Plan pursuant to such conditions or limitations as the Committee
may establish, except that the Committee may not delegate to any person
the authority to grant awards to, or take other action with respect to,
participants who are subject to Section 16 of the Exchange Act.
Amendment and Termination
The Board of Directors may amend, modify, suspend or terminate the
Director Plan for the purpose of meeting or addressing any changes in
legal requirements or for any other purpose permitted by law except that
(i) no amendment or alteration that would impair the rights of any
participant under any award granted to such participant will be made
without such participant's consent and (ii) no amendment or alteration
will be effective prior to approval by the Company's stockholders to the
extent such approval is then required pursuant to Rule 16b-3, in order to
preserve the applicability of any exemption provided by such rule to any
award then outstanding (unless the holder of such award consents) or to
the extent stockholder approval is otherwise required by applicable legal
requirements. Notwithstanding the foregoing, the Director Plan shall not
be amended more than once every six months, other than to comport with
changes in the Code, ERISA or the rules thereunder.
Other Provisions
The Director Plan will be unfunded insofar as the Director Plan
provides for awards of cash, Common Stock or rights thereto.
When a participant's employment with the Company is terminated, any
unexercised, deferred or unpaid awards will be treated as provided in the
specific agreement evidencing the award. The Committee may provide for an
extension of the exercisability of the award, accelerate the vesting of an
award, eliminate or make less restrictive any restrictions contained in an
award or otherwise amend or modify the award in any manner not adverse to
such participant.
An award or other benefit under the Director Plan constituting a
stock option or other derivative security (within the meaning of Rule 16b-
3) will not be assignable or transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined under the Code or ERISA. However, an officer or director
may designate a beneficiary for any award made to such officer or
director.
In the event of any subdivision or consolidation of outstanding
shares of Common Stock, declaration of a dividend payable in Common Stock
or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of
Common Stock, the number of shares of Common Stock covered by outstanding
awards under the Director Plan and the applicable exercise price, the
appropriate "fair market value" or other price determination of such
awards shall be adjusted. Equitable adjustments shall also be made to give
proper effect to any consolidation or merger of the Company with another
unaffiliated corporation or entity or the adoption of a plan of exchange
affecting the Common Stock or any distributions to holders of Common
Stock. In the event of a corporate merger, consolidation, acquisition,
separation, reorganization or liquidation, all restrictions with respect
to awards shall lapse.
Tax Withholding
The Company shall have the right to deduct applicable taxes from any
award payment and withhold, at the time of delivery or vesting of shares
of Common Stock under the Director Plan, an appropriate number of shares
of Common Stock for payment of taxes required by law or to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for withholding of such taxes. The Company may also permit
withholding to be satisfied by the transfer to the Company of shares of
Common Stock theretofore owned by the holder of the award with respect to
which withholding is required. If shares of Common Stock are used to
satisfy tax withholding, such shares shall be valued based on the "fair
market value" when the tax withholding is required to be made.
Federal Income Tax Consequences
Upon the grant of a non-qualified stock option, a participant will
not recognize any income (unless the exercise price of the option is
nominal compared to the fair market value of the underlying Common Stock
on such grant date). At the time a non-qualified stock option is
exercised, the participant will recognize compensation taxable as ordinary
income, and the Company (or a subsidiary) will be entitled to a
compensation expense deduction, in an amount equal to the difference
between the fair market value on the exercise date of the Common Stock
acquired pursuant to such exercise and the aggregate option exercise price
paid. Upon a subsequent disposition of such shares, the participant will
realize long-term or short-term capital gain or loss, depending upon the
holding period of such shares. For purposes of determining the amount of
such gain or loss, the participant's tax basis in such shares will be the
amount paid for such shares on the exercise date, plus the amount of
ordinary income recognized upon exercise.
If a participant elects to tender shares of Common Stock in partial
or full payment of the option exercise price for shares to be acquired
upon the exercise of a non-qualified stock option, the participant will
not recognize any gain or loss on such tendered shares. The number of
shares of Common Stock received by the participant upon any such exercise
that are equal in number to the number of tendered shares will retain the
tax basis and the holding period of the tendered shares. The participant
will recognize compensation taxable as ordinary income, and the Company
(or a subsidiary) will be entitled to a deduction, in an amount equal to
the fair market value of the number of shares of Common Stock received by
the participant upon such exercise that is in excess of the number of
tendered shares, less any cash paid by the participant. The fair market
value of such excess number of shares would then become the tax basis for
those shares and the holding period of such shares for capital gain
purposes will begin on the exercise date.
Currently, under Section 83(c)(3) of the Code, a non-employee
director of the Company (or a subsidiary) subject to Section 16(b) of the
Exchange Act and Rule 16b-3 thereunder will not recognize any income upon
the exercise of a non-qualified stock option, if such exercise occurs
within six months after the grant of such option (unless an election under
Section 83(b) of the Code is made with respect thereto) and so long as the
sale of the shares received could subject such individual to suit under
Section 16(b). In such case, such director will recognize ordinary income
six months after such exercise, or upon an earlier taxable disposition of
the shares of Common Stock acquired upon any such exercise, and the
Company (or a subsidiary) will be entitled to a deduction, in an amount
equal to the fair market value at that time of the shares received upon
such exercise or the amounts realized upon the earlier disposition of such
shares, as the case may be, less any amount paid by such director for such
shares. In 1991, the Securities and Exchange Commission adopted a new Rule
16b-3 which is scheduled to become applicable to such directors in the
near future. In respect of awards granted after such new Rule 16b-3
becomes applicable, a non-employee director will similarly not recognize
any income upon the exercise of a non-qualified stock option (unless an
election under Section 83(b) of the Code is made with respect thereto) if
the exercise occurs within six months after the grant of such option. In
such case, however, such director will recognize ordinary income six
months after the grant of such option, or upon an earlier taxable
disposition of the shares of Common Stock acquired upon any such exercise,
and the Company (or a subsidiary) will be entitled to a deduction, in an
amount equal to the fair market value at that time of the shares received
upon such exercise or the amount realized upon the earlier disposition of
such shares, as the case may be, less any amount paid by such director for
such shares.
Board Recommendation
The Board recommends a vote FOR the approval of the Director Plan Proposal.
NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
Incentive Plan Director Plan
------------------------------ ---------------------
Name and Position Dollar Number of Dollar Number of
or Group Value($)(1) Options(Shares)(1) Value($)(2) Options
--------------------- ----------- ------------------ ----------- ---------
<S> <C> <C> <C> <C>
P.B. Loyd, Jr. - - N/A N/A
Chairman, President
and Chief Executive
Officer
C.K. Rhein, Jr. - - N/A N/A
Vice Chairman
L.E. Voss, Jr. - - N/A N/A
Vice President
Operations
W.K. Hillin - - N/A N/A
Senior Vice President,
General Counsel and
Secretary
T.W. Nagle - - N/A N/A
Vice President &
Chief Financial Officer
Executive Officer
Group (3) - - N/A N/A
Non-Executive
Director Group (4) - - $39,375 105,000
Non-Executive Officer
Employee Group (5) - - N/A N/A
________________________
(1) Not determinable because no awards have yet been made under the
Incentive Plan.
(2) The market value of the Common Stock was $7.75 per share as of
the Record Date.
(3) Includes all current executive officers as a group. Executive
officers are eligible for the Incentive Plan, but are not
eligible for the Director Plan.
(4) Includes all current directors who are not executive officers as
a group. Non-employees are not eligible for the Incentive Plan.
(5) Includes all employees, including all current officers who are
not executive officers, as a group.
</TABLE>
THE STOCKHOLDER PROPOSAL
The Company has been informed by Edward S. George (the
"Proponent") of 89 Corning Hill, Glenmont, New York 12077 that he
intends to present a proposal (the "Stockholder Proposal") pursuant to
Rule 14a-8 under the Exchange Act at the Annual Meeting. The Proponent
has further informed the Company that the Proponent holds 200 shares of
Common Stock.
The Stockholder Proposal and Supporting Statement
The Stockholder Proposal and statement in support thereof
furnished by the Proponent reads as follows:
Whereas the dividend is the first casualty in any economic
downturn and the stockholder is the first casualty and the last
to benefit from an upturn, be it
Resolved: That when a dividend is cut, no salaries will be
increased or any stock options allowed until the dividend is
restored to its original amount before the cut.
The bullet must be large enough to enable the executives
and employees as well as the stockholders to get their teeth on
it.
Company Statement
The Company believes that approval of the Stockholder Proposal
would be inadvisable and damaging to the Company's ability to conduct
its business operations and to retain competent and committed
executives and employees.
In the Company's view, decisions as to employee compensation
should not be shackled by decisions as to the proper level of
dividends, since the two are determined by different factors.
The board's decision as to dividends is based on the anticipated
needs of the business for capital and the most efficient means of
enhancing stockholder values, whereas the level of employee
compensation depends in large part on market forces and competitive
conditions in the Company's industry. The Company might choose to
reduce dividends in light of such needs even in a period of growth and
outstanding corporate performance. The Company recognizes that
stockholders should not bear the sole cost of adverse developments
concerning the Company's business. However, adoption of a rigid,
inflexible rule like the Stockholder Proposal could harm the
stockholders by making retention of qualified executives and employees
difficult if not impossible. The Company prides itself on the quality
and experience of its executives and employees and its ability over the
years to attract and retain highly qualified and experienced executives
and employees. Compensation, however, is a key factor in attracting
such highly-qualified individuals to manage and work for the Company.
The Company believes that stock options are desirable compensation
tools because they help align the interest of the managers closely with
those of the stockholders. In short, approval of the Stockholder
Proposal could severely restrict the Company's ability to compete with
other companies in attracting and retaining highly-qualified executives
and employees, and, consequently, its ability to compete within its
highly competitive industry.
Moreover, the Stockholder Proposal is of limited relevance to the
Company. The Company has not paid a cash dividend on its Common Stock
since 1986, and in fact is currently prohibited from paying such
dividends on its Common Stock under existing bank credit agreements.
The Company does not anticipate payment of cash dividends on the Common
Stock for the foreseeable future. Accordingly, it is highly unlikely
that any "cut" will occur in such dividends. The Company is current on
all cash dividends due and payable on the Preferred Stock and the Class
A Stock, and Company management currently expects that all cash
dividends payable on such stock will be declared and paid as accrued in
accordance with the terms of the Charter relating to such stock. Also,
increases in compensation may in certain circumstances be mandated by
law, as, for example, in the event of an increase in the minimum wage,
making the Stockholder Proposal illegal.
Board Recommendation
The Board recommends a vote AGAINST the approval of the
Stockholder Proposal.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has approved the Auditors Proposal which
involves reappointment of Arthur Andersen LLP as the independent public
accountants for the Company for its fiscal year 1995.
The Board of Directors selected and the stockholders voted to
ratify and approve the appointment of Arthur Andersen LLP as
independent public accountants for the Company for its 1993 and 1994
fiscal years.
Representatives of Arthur Andersen LLP will attend the Annual
Meeting, will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
Board Recommendation
The Board recommends a vote FOR the approval of the Auditors
Proposal.
STOCKHOLDER PROPOSALS
The date by which proposals of stockholders intended to be
presented at the 1996 Annual Meeting of Stockholders must be received
by the Company for inclusion in the Company's Proxy Statement and form
of Proxy relating to that meeting is November 30, 1995.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
Management does not intend to bring any other matters before the
Annual Meeting nor does it know of any matters which other persons
intend to bring before the Annual Meeting. However, if any other
matters properly come before the Annual Meeting, the persons named in
the accompanying Proxy will be authorized to vote thereon pursuant to
discretionary authority.
This Proxy Statement is accompanied by a copy of the Company's
Annual Report with respect to the 1994 fiscal year.
=============================================================================
PROXY CARD
READING & BATES CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS -- MAY 2, 1995
The undersigned hereby appoints Paul B. Loyd, Jr., C. Kirk
Rhein, Jr. and T. W. Nagle, or any of them, as proxies and attorneys
with several powers of substitution, hereby revoking any prior Proxy,
and hereby authorizes them to represent the undersigned and to vote as
designated below all the shares of Common Stock and all of the shares
of Class A (Cumulative Convertible) Capital Stock of Reading & Bates
Corporation (the "Company") held of record by the undersigned on March
15, 1995 at the Annual Meeting of Stockholders to be held on May 2,
1995, or any postponement or adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
IN THE ENCLOSED ENVELOPE
(continued on reverse side)
[x] Please mark your votes as in this example.
The Board of Directors recommends a vote FOR:
1. Election of the following nominees as Class I directors for terms
expiring in 1998: Charles A. Donabedian, C. Kirk Rhein, Jr. and
Robert L. Sandmeyer.
[ ] FOR [ ] WITHHOLD FOR, except withhold from:
__________________________
2. Approval and adoption of the Company's Incentive Plan Proposal,
as set forth in the Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval and adoption of the Company's Director Plan Proposal, as
set forth in the Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval and adoption of the Company's Auditors Proposal, as set
forth in the Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion on any other matter that may properly come
before the meeting.
The Board of Directors recommends a vote AGAINST:
1. Approval and adoption of a proposal by a certain stockholder, if
duly presented at the meeting, to approve the Stockholder
Proposal, as set forth in the Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
You may specify your votes by marking the appropriate boxes above. You
need not mark any boxes, however, if you wish to vote all items in
accordance with the Board of Directors' recommendations. If your votes
are not specified, your shares will be voted FOR the election of the
nominees for directors, FOR the approval and adoption of the Incentive
Plan Proposal, FOR the approval and adoption of the Director Plan
Proposal and FOR the approval and adoption of the Auditors Proposal.
If your votes are not specified, your shares will be voted AGAINST the
approval and adoption of the Stockholder Proposal.
SIGNATURE(S):______________________________DATE:_________________, 1995
SIGNATURE(S):______________________________DATE:_________________, 1995
(NOTE: in the case of a joint ownership, each such owner should
sign. Executors, Administrators, guardians, trustees, etc. should
add their title as such, and where more than one executor, etc. is
named, a majority must sign. If the signer is a corporation, please
sign the full corporation name by a duly authorized officer.)
EXHIBIT 99.A
1995 LONG-TERM INCENTIVE PLAN
of
READING & BATES CORPORATION
1. Objectives. The Reading & Bates Corporation 1995 Long-Term
Incentive Plan (the "Plan") is designed to retain key executives and
other selected employees and reward them for making major contributions
to the success of Reading & Bates Corporation, a Delaware corporation
(the "Company"), and its Subsidiaries (as hereinafter defined). These
objectives are to be accomplished by making awards under the Plan and
thereby providing Participants (as hereinafter defined) with a
proprietary interest in the growth and performance of the Company and
its Subsidiaries.
2. Definitions. As used herein, the terms set forth below
shall have the following respective meanings:
"Award" means the grant of any form of stock option, stock
appreciation right, stock award or cash award, whether granted singly,
in combination or in tandem, to a Participant pursuant to any applicable
terms, conditions and limitations as the Committee may establish in
order to fulfill the objectives of the Plan.
"Award Agreement" means a written agreement between the
Company and a Participant that sets forth the terms, conditions and
limitations applicable to an Award.
"Board" means the Board of Directors of the Company.
"Common Stock" means the Common Stock, par value $0.05 per
share, of the Company.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means such committee of the Board as is
designated by the Board to administer the Plan. The Committee shall be
constituted to permit the Plan to comply with Rule 16b-3 and shall
initially consist of not less than two members of the Board who are
"disinterested persons" within the meaning of such Rule.
"Director" means an individual serving as a member of the
Board.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Fair Market Value" means, as of a particular date, (i) if
the shares of Common Stock are listed on a national securities exchange,
the mean between the highest and lowest sales price per share of Common
Stock on the principal such national securities exchange on that date,
or, if there shall have been no such sale so reported on that date, on
the last preceding date on which such sale was so reported, (ii) if the
shares of Common Stock are not so listed but are quoted in the NASDAQ
National Market System, the mean between the highest and lowest sales
price per share of Common Stock on the NASDAQ National Market System on
that date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported or
(iii) if the Common Stock is not so listed or quoted, the mean between
the closing bid and asked price on that date, or, if there are no
quotations available for such date, on the last preceding date on which
such quotations shall be available, as reported by NASDAQ, or, if not
reported by NASDAQ, by the National Quotation Bureau, Inc.
"Participant" means an employee of the Company or any of its
Subsidiaries to whom an Award has been made under this Plan.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, or any successor rule.
"Subsidiary" means any corporation of which the Company
directly or indirectly owns shares representing more than 50% of the
voting power of all classes or series of capital stock of such
corporation which have the right to vote generally on matters submitted
to a vote of the stockholders of such corporation.
3. Eligibility. Employees of the Company and its Subsidiaries
eligible for an Award under this Plan are those who hold positions of
responsibility and whose performance, in the judgment of the Committee,
can have a significant effect on the success of the Company and its
Subsidiaries.
4. Common Stock Available for Awards. There shall be available
for Awards granted wholly or partly in Common Stock (including rights or
options which may be exercised for or settled in Common Stock) during
the term of this Plan an aggregate of 2,500,000 shares of Common Stock.
Awards the value of which is related to the market value of Common Stock
but which are not granted or payable in Common Stock shall be treated as
payable in Common Stock solely for purposes of the foregoing amount
limitation. The Board of Directors and the appropriate officers of the
Company shall from time to time take whatever actions are necessary to
file required documents with governmental authorities and stock
exchanges and transaction reporting systems to make shares of Common
Stock available for issuance pursuant to Awards. Common Stock related
to Awards that are forfeited or terminated, expire unexercised, are
settled in cash in lieu of Stock or in a manner such that all or some of
the shares covered by an Award are not issued to a Participant, or are
exchanged for Awards that do not involve Common Stock, shall immediately
become available for Awards hereunder.
5. Administration. This Plan shall be administered by the
Committee, which shall have full and exclusive power to interpret this
Plan, to grant waivers of the restrictions set forth in this Plan and to
adopt such rule, regulations and guidelines for carrying out this Plan
as it may deem necessary or proper, all of which powers shall be
exercised in the best interests of the Company and in keeping with the
objectives of this Plan. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in this Plan or in any Award
in the manner and to the extent the Committee deems necessary or
desirable to carry it into effect. Any decision of the Committee in the
interpretation and administration of this Plan shall lie within its sole
and absolute discretion and shall be final, conclusive and binding on
all parties concerned. No member of the Committee or officer of the
Company to whom it has delegated authority in accordance with the
provisions of Paragraph 6 of this Plan shall be liable for anything done
or omitted to be done by him or her, by any member of the Committee or
by any officer of the Company in connection with the performance of any
duties under this Plan, except for his or her own willful misconduct or
as expressly provided by statute.
6. Delegation of Authority. The Committee may delegate to the
Chief Executive Officer and to other senior officers of the Company its
duties under this Plan pursuant to such conditions or limitations as the
Committee may establish, except that the Committee may not delegate to
any person the authority to grant Awards to, or take other action with
respect to, Participants who are subject to Section 16 of the Exchange
Act.
7. Awards. The Committee shall determine the type or types of
Awards to be made to each Participant under this Plan. Each Award made
hereunder shall be embodied in an Award Agreement, which shall contain
such terms, conditions and limitations as shall be determined by the
Committee in its sole discretion and shall be signed by the Participant
and by the Chief Executive Officer, the Chief Operating Officer, or any
Vice President of the Company for and on behalf of the Company. Awards
may consist of those listed in this Paragraph 7 and may be granted
singly, in combination or in tandem. Awards may also be made in
combination or in tandem with, in replacement of, or as alternatives to,
grants or rights under this Plan or any other employee plan of the
Company or any of its Subsidiaries, including the plan of any acquired
entity. An Award may provide for the granting or issuance of
additional, replacement or alternative Awards upon the occurrence of
specified events, including the exercise of the original Award.
(a) Stock Option. An Award may consist of a right to purchase a
specified number of shares of Common Stock at a specified price that is
not less than the par value of the Common Stock on the date of grant of
the option. A stock option may be in the form of an incentive stock
option ("ISO") which, in addition to being subject to applicable terms,
conditions and limitations established by the Committee, complies with
Section 422 of the Code.
(b) Stock Appreciation Right. An Award may consist of a right
to receive a payment, in cash or Common Stock, equal to the excess of
the Fair Market Value or other specified valuation of a specified number
of shares of Common Stock on the date the stock appreciation right
("SAR") is exercised over a specified strike price as set forth in the
applicable Award Agreement.
(c) Stock Award. An Award may consist of Common Stock or may be
denominated in units of Common Stock. All or part of any stock award
may be subject to conditions established by the Committee, and set forth
in the Award Agreement, which may include, but are not limited to,
continuous service with the Company and its Subsidiaries, achievement of
specific business objectives, in-creases in specified indices, attaining
growth rates and other comparable measurements of performance. Such
Awards may be based on Fair Market Value or other specified valuations.
The certi-ficates evidencing shares of Common Stock issued in connection
with a stock award shall contain appropriate legends and restrictions
describing the terms and conditions of the restrictions applicable
thereto.
(d) Cash Award. An Award may be denominated in cash with the
amount of the eventual payment subject to future service and such other
restrictions and conditions as may be established by the Committee, and
set forth in the Award Agreement, including, but not limited to,
continuous service with the Company and its Subsidiaries, achievement of
specific business objectives, increases in specified indices, attaining
growth rates and other comparable measurements of performance.
8. Payment of Awards.
(a) General. Payment of Awards may be made in the form of cash
or Common Stock or combinations thereof and may include such
restrictions as the Committee shall determine, including in the case of
Common Stock, restrictions on transfer and forfeiture provisions. As
used herein, "Restricted Stock" means Common Stock that is restricted or
subject to forfeiture provisions.
(b) Deferral. With the approval of the Committee, payments may
be deferred, either in the form of installments or a future lump sum
payment. The Committee may permit selected Participants to elect to
defer payments of some or all types of Awards in accordance with
procedures established by the Committee. Any deferred payment, whether
elected by the Participant or specified by the Award Agreement or by the
Committee, may be forfeited if and to the extent that the Award
Agreement so provides.
(c) Dividends and Interest. Dividends or dividend equivalent
rights may be extended to and made part of any Award denominated in
Common Stock or units of Common Stock, subject to such terms, conditions
and restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred
cash payments and dividend equivalents for deferred payment denominated
in Common Stock or units of Common Stock.
(d) Substitution of Awards. At the discretion of the Committee,
a Participant may be offered an election to substitute an Award for
another Award or Awards of the same or different type.
9. Stock Option Exercise. The price at which shares of Common
Stock may be purchased under a stock option shall be paid in full at the
time of exercise in cash or, if permitted by the Committee, by means of
tendering Common Stock or surrendering another Award, including
Restricted Stock, valued at Fair Market Value on the date of exercise,
or any combination thereof. The Committee shall determine acceptable
methods for tendering Common Stock or other Awards to exercise a stock
option as it deems appropriate. The Committee may provide for loans
from the Company to permit the exercise or purchase of Awards and may
provide for procedures to permit the exercise or purchase of Awards by
use of the proceeds to be received from the sale of Common Stock
issuable pursuant to an Award. Unless otherwise provided in the
applicable Award Agreement, in the event shares of Restricted Stock are
tendered as consideration for the exercise of a stock option, a number
of the shares issued upon the exercise of the stock option, equal to the
number of shares of Restricted Stock used as consideration therefor,
shall be subject to the same restrictions as the Restricted Stock so
submitted as well as any additional restrictions that may be imposed by
the Committee.
10. Tax Withholding. The Company shall have the right to deduct
applicable taxes from any Award payment and withhold, at the time of
delivery or vesting of shares of Common Stock under this Plan, an
appropriate number of shares of Common Stock for payment of taxes
required by law or to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for withholding of
such taxes. The Committee may also permit withholding to be satisfied
by the transfer to the Company of shares of Common Stock theretofore
owned by the holder of the Award with respect to which withholding is
required. If shares of Common Stock are used to satisfy tax
withholding, such shares shall be valued based on the Fair Market Value
when the tax withholding is required to be made.
11. Amendment, Modification, Suspension or Termination. The
Board may amend, modify, suspend or terminate this Plan for the purpose
of meeting or addressing any changes in legal requirements or for any
other purpose permitted by law except that (i) no amendment or
alteration that would impair the rights of any Participant under any
Award granted to such Participant shall be made without such
Participant's consent and (ii) no amendment or alteration shall be
effective prior to approval by the Company's stockholders to the extent
such approval is then required pursuant to Rule 16b-3 in order to
preserve the applicability of any exemption provided by such rule to any
Award then outstanding (unless the holder of such Award consents) or to
the extent stockholder approval is otherwise required by applicable
legal requirements.
12. Termination of Employment. Upon the termination of
employment by a Participant, any unexercised, deferred or unpaid Awards
shall be treated as provided in the specific Award Agreement evidencing
the Award. In the event of such a termination, the Committee may, in
its discretion, provide for the extension of the exercisability of an
Award, accelerate the vesting of an Award, eliminate or make less
restrictive any restrictions contained in an Award or otherwise amend or
modify the Award in any manner not adverse to such Participant.
13. Assignability. No Award or any other benefit under this
Plan constituting a stock option or other derivative security within the
meaning of Rule 16b-3 shall be assignable or otherwise transferable
except by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of
the Employee Retirement Income Security Act, or the rules thereunder.
However, an officer or director may designate a beneficiary for any
Award made to such officer or director.
14. Adjustments.
(a) The existence of outstanding Awards shall not affect in any
manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the capital stock of the Company or its business or any
merger or consolidation of the Company, or any issue of bonds,
debentures, preferred to prior preference stock (whether or not such
issue is prior to, on a parity with or junior to the Common Stock) or
the dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other corporate act
or proceeding of any kind, whether or not of a character similar to that
of the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of
outstanding shares of Common Stock or declaration of a dividend payable
in shares of Common Stock or capital reorganization or reclassification
or other transaction involving an increase or reduction in the number of
outstanding shares of Common Stock, the Committee may adjust
proportionally (i) the number of shares of Common Stock reserved under
this Plan and covered by outstanding Awards denominated in Common Stock
or units of Common Stock; (ii) the exercise or other price in respect of
such Awards; and (iii) the appropriate Fair Market Value and other price
determinations of such Awards. In the event of any consolidation or
merger of the Company with another corporation or entity or the adoption
by the Company of a plan of exchange affecting the Common Stock or any
distribution to holders of Common Stock of securities or property (other
than normal cash dividends or dividends payable in Common Stock), the
Committee shall make such adjustments or other provisions as it may deem
equitable, including adjustments to avoid fractional shares, to give
proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Committee shall be authorized to
issue or assume stock options, regardless of whether in a transaction to
which Section 425(a) of the Code applies, by means of substitution of
new options for previously issued options or an assumption of previously
issued options, or to make provision for the acceleration of the
exercisability of, or lapse of restrictions with respect to, Awards and
the termination of unexercised options in connection with such
transaction.
15. Restrictions. No Common Stock or other form of payment
shall be issued with respect to any Award unless the Company shall be
satisfied based on the advice of its counsel that such issuance will be
in compliance with applicable federal and state securities laws. It is
the intent of the Company that this Plan comply in all respects with
Rule 16b-3, that any ambiguities or inconsistencies in the construction
of this Plan be interpreted to give effect to such intention, and that
if any provision of this Plan is found not to be in compliance with Rule
16b-3, such provision shall be null and void to the extent required to
permit this Plan to comply with Rule 16b-3. Certificates evidencing
shares of Common Stock delivered under this Plan may be subject to such
stop transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any securities exchange or
transaction reporting system upon which the Common Stock is then listed
and any applicable federal and state securities law. The Committee may
cause a legend or legends to be placed upon any such certificates to
make appropriate reference to such restrictions.
16. Unfunded Plan. Insofar as it provides for Awards of cash,
Common Stock or rights thereto, this Plan shall be unfunded. although
bookkeeping accounts may be established with respect to Participants who
are entitled to cash, Common Stock or rights thereto under this Plan,
any such accounts shall be used merely as a bookkeeping convenience.
The Company shall not be required to segregate any assets that may at
any time be represented by cash, Common Stock or rights thereto, nor
shall this Plan be construed as providing for such segregation, nor
shall the Company nor the Board nor the Committee be deemed to be a
trustee of any cash, Common Stock or rights thereto to be granted under
this Plan. Any liability or obligation of the Company to any
Participant with respect to a grant of cash, Common Stock or rights
thereto under this Plan shall be based solely upon any contractual
obligations that may be created by this Plan and any Award Agreement,
and no such liability or obligation of the Company shall be deemed to be
secured by any pledge or other encumbrance on any property of the
Company. Neither the Company nor the Board nor the Committee shall be
required to give any security or bond for the performance of any
obligation that may be created by this Plan.
17. Governing Law. This Plan and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by
mandatory provisions of the Code or the securities laws of the United
States, shall be governed by and construed in accordance with the laws
of the State of Delaware.
18. Effective Date of Plan. This Plan shall be effective as of
the date (the "Effective Date") it is approved by the Board of Directors
of the Company. Notwithstanding the foregoing, the adoption of this
Plan is expressly conditioned upon the approval by the holders of a
majority of shares of Common Stock present, or represented, and entitled
to vote at a meeting of the Company's stockholders held on or before
June 30, 1995. If the stockholders of the Company should fail so to
approve this Plan prior to such date, this Plan shall terminate and
cease to be of any further force or effect and all grants of Awards
hereunder shall be null and void.
EXHIBIT 99.B
1995 DIRECTOR STOCK OPTION PLAN
of
READING & BATES CORPORATION
1. Objectives. The Reading & Bates Corporation 1995 Director
Stock Option Plan (the "Plan") is designed to retain non-employee
members of the Board of Directors and reward them for making major
contributions to the success of Reading & Bates Corporation, a Delaware
corporation (the "Company"), and its Subsidiaries (as hereinafter
defined). These objectives are to be accomplished by making awards
under the Plan and thereby providing Participants (as hereinafter
defined) with a proprietary interest in the growth and performance of
the Company and its Subsidiaries.
2. Definitions. As used herein, the terms set forth below
shall have the following respective meanings:
"Award" means the grant of a stock option to a Participant
pursuant to this Plan and any applicable terms, conditions and
limitations as the Committee may establish in order to fulfill the
objectives of the Plan.
"Award Agreement" means a written agreement between the
Company and a Participant that sets forth the terms, conditions and
limitations applicable to an Award.
"Board" means the Board of Directors of the Company.
"Common Stock" means the Common Stock, par value $0.05 per
share, of the Company.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means such committee of the Board as is
designated by the Board to administer the Plan. The Committee shall be
constituted to permit the Plan to comply with Rule 16b-3 and shall
initially consist of not less than two members of the Board who are
"disinterested persons" within the meaning of such Rule.
"Director" means an individual serving as a member of the
Board.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Fair Market Value" means, as of a particular date, (i) if
the shares of Common Stock are listed on a national securities exchange,
the mean between the highest and lowest sales price per share of Common
Stock on the principal such national securities exchange on that date,
or, if there shall have been no such sale so reported on that date, on
the last preceding date on which such sale was so reported, (ii) if the
shares of Common Stock are not so listed but are quoted in the NASDAQ
National Market System, the mean between the highest and lowest sales
price per share of Common Stock on the NASDAQ National Market System on
that date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported or
(iii) if the Common Stock is not so listed or quoted, the mean between
the closing bid and asked price on that date, or, if there are no
quotations available for such date, on the last preceding date on which
such quotations shall be available, as reported by NASDAQ, or, if not
reported by NASDAQ, by the National Quotation Bureau, Inc.
"Participant" means a member of the Board who is not an
employee of the Company or any of its subsidiaries and to whom an Award
has been made under this Plan.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, or any successor rule.
"Subsidiary" means any corporation of which the Company
directly or indirectly owns shares representing more than 50% of the
voting power of all classes or series of capital stock of such
corporation which have the right to vote generally on matters submitted
to a vote of the stockholders of such corporation.
3. Common Stock Available for Awards. There shall be available
for Awards granted wholly or partly in Common Stock (including rights or
options which may be exercised for or settled in Common Stock) during
the term of this Plan an aggregate of 200,000 shares of Common Stock.
The Board of Directors and the appropriate officers of the Company shall
from time to time take whatever actions are necessary to file required
documents with governmental authorities and stock exchanges and
transaction reporting systems to make shares of Common Stock available
for issuance pursuant to Awards. Common Stock related to Awards that
are forfeited or terminated or expire unexercised, shall immediately
become available for Awards hereunder.
4. Administration. This Plan, with the exception of any and
all determinations concerning the pricing, granting, timing, or amount
of, or eligibility for, Awards under this Plan (which pricing, granting,
timing, amount and eligibility are automatic and determined on a fixed
basis under Section 6 of this Plan) shall be administered by the
Committee, which shall have full and exclusive power to interpret this
Plan and to adopt such rules, regulations and guidelines for carrying
out this Plan as it may deem necessary or proper, all of which powers
shall be exercised in the best interests of the Company and in keeping
with the objectives of this Plan. The Committee may correct any defect
or supply any omission or reconcile any inconsistency in this Plan or in
any Award in the manner and to the extent the Committee deems necessary
or desirable to carry it into effect. Any decision of the Committee in
the interpretation and administration of this Plan shall lie within its
sole and absolute discretion and shall be final, conclusive and binding
on all parties concerned. No member of the Committee or officer of the
Company to whom it has delegated authority in accordance with the
provisions of Paragraph 5 of this Plan shall be liable for anything done
or omitted to be done by him or her, by any member of the Committee or
by any officer of the Company in connection with the performance of any
duties under this Plan, except for his or her own willful misconduct or
as expressly provided by statute.
5. Delegation of Authority. Subject to Paragraph 4, the
Committee may delegate to the Chief Executive Officer and to other
senior officers of the Company its duties under this Plan pursuant to
such conditions or limitations as the Committee may establish, except
that the Committee may not delegate to any person the authority to price
or grant Awards to, or take other action with respect to, Participants.
6. Awards. Subject to the provisions of Paragraph 16 of this
Plan at the Effective Date each member of the Board who is not an
employee of the Company or any of its Subsidiaries and has not
previously received any stock options from the Company (or having
received same, surrenders such previously granted stock options prior to
the approval by the holders of Common Stock contemplated by Paragraph
16) shall be granted a one-time Award of a right to purchase 15,000
shares of Common Stock , and thereafter each such individual who becomes
a member of the Board and is not an employee the Company or any of its
Subsidiaries, shall be granted a one-time Award of a right to purchase
15,000 shares of Common Stock (which shall vest 33-1/3% on each of the
three succeeding anniversaries of the date of grant and thereafter be
exercisable in full), at the price of $7.375 per share for a period of
10 years. Each Award made hereunder shall be embodied in an Award
Agreement, which shall contain such terms, conditions and limitations as
shall be determined by the Committee in its sole discretion and shall be
signed by the Participant and by the Chief Executive Officer or any
Vice President of the Company for and on behalf of the Company.
7. Stock Option Exercise. The price at which shares of Common
Stock may be purchased under a stock option shall be paid in full at the
time of exercise in cash or, if permitted by the Committee pursuant to
rules affecting all Participants in the same manner, by means of
tendering Common Stock valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall determine
acceptable methods for tendering Common Stock to exercise a stock option
as it deems appropriate pursuant to rules affecting all Participants in
the same manner. The Committee may provide for loans from the Company
to permit the exercise or purchase of Awards and may provide for
procedures to permit the exercise or purchase of Awards by use of the
proceeds to be received from the sale of Common Stock issuable pursuant
to an Award pursuant to rules affecting all Participants in the same
manner.
8. Tax Withholding. The Company shall have the right to deduct
applicable taxes from any Award payment and withhold, at the time of
delivery of shares of Common Stock under this Plan, an appropriate
number of shares of Common Stock for payment of taxes required by law or
to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for withholding of such taxes. The
Committee may also permit withholding to be satisfied by the transfer to
the Company of shares of Common Stock theretofore owned by the holder of
the Award with respect to which withholding is required. If shares of
Common Stock are used to satisfy tax withholding, such shares shall be
valued based on the Fair Market Value when the tax withholding is
required to be made.
9. Amendment, Modification, Suspension or Termination. The
Board may amend, modify, suspend or terminate this Plan for the purpose
of meeting or addressing any changes in legal requirements or for any
other purpose permitted by law except that (i) no amendment or
alteration that would impair the rights of any Participant under any
Award granted to such Participant shall be made without such
Participant's consent and (ii) no amendment or alteration shall be
effective (a) if any such amendment would cause any Participant not to
be a "disinterested person" under Rule 16b-3, or (b) prior to approval
by the Company's stockholders to the extent such approval is then
required pursuant to Rule 16b-3 in order to preserve the applicability
of any exemption provided by such rule to any Award then outstanding
(unless the holder of such Award consents) or to the extent stockholder
approval is otherwise required by applicable legal requirements.
Notwithstanding the foregoing, this Plan shall not be amended more than
once every six months, other than to comport with changes in the Code,
ERISA or the rules thereunder.
10. Termination of Service. If a Participant's service as a
Director is terminated for any reason other than resignation or refusal
to serve after having been nominated to serve by the Board (unless such
resignation or refusal to serve is due to total and permanent physical
or mental disability of the Participant or to retirement of the
Participant after the age of 70), any portion of an Award not then
vested shall become 100% vested as of such time. If a Participant's
service is terminated by reason of resignation or refusal to serve after
having been nominated to serve by the Board (unless such resignation or
refusal to serve is due to total and permanent physical or mental
disability of the Participant or retirement of the Participant after the
age of 70), any portion of an Award not then vested shall be forfeited
effective as of such time.
11. Assignability. No Award or any other benefit under this
Plan constituting a stock option or other derivative security within the
meaning of Rule 16b-3 shall be assignable or otherwise transferable
except by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of
ERISA, or the rules thereunder. However, an officer or director may
designate a beneficiary for any Award made to such officer or director.
12. Adjustments.
(a) The existence of outstanding Awards shall not affect in any
manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the capital stock of the Company or its business or any
merger or consolidation of the Company, or any issue of bonds,
debentures, preferred to prior preference stock (whether or not such
issue is prior to, on a parity with or junior to the Common Stock) or
the dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other corporate act
or proceeding of any kind, whether or not of a character similar to that
of the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of
outstanding shares of Common Stock or declaration of a dividend payable
in shares of Common Stock or capital reorganization or reclassification
or other transaction involving an increase or reduction in the number of
outstanding shares of Common Stock, (i) the number of shares of Common
Stock reserved under this Plan and covered by outstanding Awards shall
be adjusted proportionately; (ii) the exercise or other price in
respect of such Awards; and (iii) the appropriate Fair Market Value and
other price determinations of such Awards. In the event of any
consolidation or merger of the Company with another unaffiliated
corporation or entity or the adoption by the Company of a plan of
exchange affecting the Common Stock or any distribution to holders of
Common Stock of securities or property (other than normal cash dividends
or dividends payable in Common Stock), adjustments or other provisions,
including adjustments to avoid fractional shares, shall be made to all
Awards to give proper effect to such event. In the event of a corporate
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, all restrictions with respect to Awards
shall lapse.
13. Restrictions. No Common Stock shall be issued with respect
to any Award unless the Company shall be satisfied based on the advice
of its counsel that such issuance will be in compliance with applicable
federal and state securities laws. It is the intent of the Company that
this Plan comply in all respects as a fixed or formula award under Rule
16b-3, that any ambiguities or inconsistencies in the construction of
this Plan be interpreted to give effect to such intention, and that if
any provision of this Plan is found not to be in compliance as a fixed
or formula award under Rule 16b-3, such provision shall be null and void
to the extent required to permit this Plan to comply as a fixed or
formula award under Rule 16b-3. Certificates evidencing shares of
Common Stock delivered under this Plan may be subject to such stop
transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any securities exchange or
transaction reporting system upon which the Common Stock is then listed
and any applicable federal and state securities law. The Committee may
cause a legend or legends to be placed upon any such certificates to
make appropriate reference to such restrictions.
14. Unfunded Plan. This Plan shall be unfunded. Any liability
or obligation of the Company to any Participant with respect to a grant
under this Plan shall be based solely upon any contractual obligations
that may be created by this Plan and any Award Agreement, and no such
liability or obligation of the Company shall be deemed to be secured by
any pledge or other encumbrance on any property of the Company. Neither
the Company nor the Board nor the Committee shall be required to give
any security or bond for the performance of any obligation that may be
created by this Plan.
15. Governing Law. This Plan and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by
mandatory provisions of the Code or the securities laws of the United
States, shall be governed by and construed in accordance with the laws
of the State of Delaware.
16. Effective Date of Plan. This Plan shall be effective as of
the date (the "Effective Date") it is approved by the Board of Directors
of the Company. Notwithstanding the foregoing, the adoption and
effectiveness of this Plan and any Awards granted hereunder is expressly
conditioned upon the approval by the holders of a majority of shares of
Common Stock present, or represented, and entitled to vote at a meeting
of the Company's stockholders held on or before June 30, 1995. If the
stockholders of the Company should fail so to approve this Plan prior to
such date, this Plan shall terminate and cease to be of any further
force or effect and all grants of Awards hereunder shall be null and
void.
