==============================================================================
SCHEDULE 14A
(Rule 14a-6(m))
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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READING & BATES CORPORATION
901 Threadneedle, Suite 200
Houston, Texas 77079
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1997
The Annual Meeting of Stockholders of Reading & Bates Corporation, a Delaware
corporation (the "Company"), will be held in the Essex Salon, Omni Houston
Hotel, Four Riverway, Houston, Texas 77056 on Tuesday, May 13, 1997 at 11:00
a.m., for the following purposes:
(1) To elect two Class III directors for terms expiring in 2000;
(2) To act upon a proposal to approve and adopt the Company's 1997
Long-Term Incentive Plan;
(3) To act upon a proposal to approve and adopt the Company's 1996
Director Restricted Stock Award 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 1997; and
(5) To transact such other business as may properly be brought before
the meeting or any postponement or adjournment thereof.
Only holders of record of the Common Stock and Class A Stock at the
close of business on March 27, 1997 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
enclosed 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 28, 1997 Secretary
PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY CARD AND MAIL IT AT
YOUR EARLIEST CONVENIENCE
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READING & BATES CORPORATION
901 Threadneedle, Suite 200
Houston, Texas 77079
__________________
PROXY STATEMENT
__________________
Annual Meeting of Stockholders
May 13, 1997
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 13, 1997 at 11:00 a.m. in the Essex
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 31, 1997.
At the Annual Meeting, stockholders will be asked to elect two Class
III directors for terms expiring in 2000 and to consider and vote upon the
following proposals (the "Proposals"):
(1) a proposal (the "Employee Stock Proposal") to approve and adopt the
Company s 1997 Long-Term Incentive Plan (the "1997 Plan");
(2) a proposal (the "Director Stock Proposal") to approve and adopt the
Company's 1996 Director Restricted Stock Award Plan (the "1996 Plan");
and
(3) a proposal (the "Accountants Proposal") to ratify and approve the
reappointment of Arthur Andersen LLP as independent public
accountants for the Company for its fiscal year 1997.
__________________
The Board of Directors of the Company believes that election of its
director nominees and approval of each of the Proposals is advisable and in
the best interests of the Company and its stockholders and recommends to the
stockholders of the Company the approval of such nominees and each of the
Proposals.
____________________
The date of this Proxy Statement is March 28, 1997.
==============================================================================
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 (281) 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 in such proxies 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 Proposals, 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 27, 1997 (the "Record Date") will be entitled to vote at
the Annual Meeting. On March 14, 1997 there were outstanding 72,053,517
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 the Employee Stock Proposal and the Director Stock
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 Employee
Stock Proposal and the Director Stock Proposal have the same legal effect on
the outcome of the vote as a vote "against" such Proposals even though a
stockholder or interested parties analyzing 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
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. Cumulative dividends
payable on the Class A Stock have not been declared or paid by the Company
since the third quarter of 1996. On March 14, 1997, 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 on such date
were James K. Boak and Robert J. Richmond, holding 50 and 10 shares,
respectively.
Common Stock
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 March 14, 1997
(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 such date. Unless otherwise indicated, the
entities named are believed to have sole voting and investment power with
respect to the shares listed.
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Owner Percent of Class
- ------------------------------------ -------------------- ----------------
Nicholas-Applegate Capital Management 4,947,867 (1) 6.9%
600 West Broadway, 29th Floor
San Diego, California 92101
FMR Corp., Edward C. Johnson 3d; 4,452,600 (2) 6.2%
Fidelity Management & Research
Company; Fidelity Magellan Fund and
Fidelity Management Trust Company,
82 Devonshire Street
Boston, Massachusetts 02109
_____________________________
(1) Based upon information contained in a Schedule 13G dated February 3,
1997, filed by Nicholas-Applegate Capital Management ("Nicholas-
Applegate"). The Schedule 13G indicates that Nicholas-Applegate has
the sole power to direct the disposition of 4,947,867 of such shares
of Common Stock and the sole power to vote 4,183,333 of such shares
of Common Stock.
(2) Based upon information contained in a Schedule 13G, as amended as of
February 14, 1997, filed by FMR Corp. Such Schedule 13G sets forth
the following information: FMR Corp., a Massachusetts corporation,
is the beneficial owner of 4,452,600 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
3,007,700 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 Chairman
of FMR Corp., Edward C. Johnson 3d, FMR Corp., through its control
of Fidelity, and the Funds have power to dispose of 2,935,400 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
1,444,900 shares of the Common Stock listed in the table as a result
of its serving as investment manager of several institutional
accounts. Mr. Johnson and FMR Corp., through its control of
Fidelity Management Trust Company, each has sole dispositive power
over 1,444,900 shares of Common Stock listed in the table and sole
power to vote or to direct the voting of 1,444,900 of such shares.
Mr. Johnson owns 12.0%, and Abigail P. Johnson owns 24.5%, 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.
Management Ownership
The following table indicates the total number of shares of Common
Stock beneficially owned as of March 14, 1997 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.
Individual or Shares of Percent of
Number of Common Stock Common Stock
Persons in Group Owned Beneficially Owned Beneficially
- ---------------- ------------------ ------------------
A.L. Chavkin 24,000 (1)(2) *
C.A. Donabedian 14,760 (2) *
T. Kalborg 9,000 (2) *
M.A.E. Laqueur 327,168 (2)(3) *
P.B. Loyd, Jr. 1,022,915 (4)(5)(8) 1.4%
J.W. McLean 11,400 (2)(6) *
C.K. Rhein, Jr. 5,920 (4)(7) *
R.L. Sandmeyer 9,020 (2) *
L.E. Voss, Jr. 24,000 (9) *
T.W. Nagle 170,847 (8) *
W.K. Hillin 36,146 (8) *
C.R. Ofner 91,679 (8) *
D.L. McIntire 17,218 (8) *
Directors and
Executive Officers
as a Group
(including those
listed above -
13 persons) 1,764,073 (8) 2.4%
_____________
* Less than 1 percent.
(1) Mr. Chavkin is President of Chemical Investments, Inc. ("Chemical"),
an affiliate of Chase Capital Partners and Chase Manhattan
Corporation. Chemical is a stockholder of the Company holding 547,309
shares of Common Stock as of March 14, 1997. No beneficial ownership
amount is included in the table for Mr. Chavkin with respect to
Chemical's ownership of the Common Stock and beneficial ownership is
disclaimed by Mr. Chavkin.
(2) The number set forth in the table includes options to purchase 15,000
shares of Common Stock granted to non-employee directors pursuant to
the Company's 1995 Director Stock Option Plan (the "Director Plan") at
a price of $7.375 per share held by each of Messrs. Chavkin and
Laqueur and 5,000 such options held by Donabedian. The number set
forth in the table also includes 9,000 shares of restricted stock
granted to each non-employee director (Messrs. Chavkin, Donabedian,
Kalborg, Laqueur, McLean and Sandmeyer) pursuant to the 1996 Plan.
See "THE DIRECTOR STOCK PROPOSAL".
(3) The shares listed for Mr. Laqueur include those beneficially owned by
him through his control of Workships Intermediaries N.V., a
stockholder of the Company.
(4) The Company granted restricted stock awards under the Company's 1992
Long-Term Incentive Plan (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 35,750 shares that Mr.
Loyd has surrendered to the Company to satisfy certain tax withholding
obligations. Pursuant to an agreement between the Company and R&B
Investment Partnership, L.P., such 90,000 shares awarded to Mr. Rhein
were payable to and beneficially owned by WHR Management Company,
L.P., and such shares are not included in the shares listed for Mr.
Rhein. Restrictions as to transfer with respect to such 90,000
shares granted to Mr. Rhein terminated, and the balance of such shares
became vested, upon Mr. Rhein's resignation as Vice Chairman of the
Company in May 1996. Mr. Rhein was killed in an aircraft accident in
July 1996. See Footnote (7) below, "COMPENSATION OF EXECUTIVE
OFFICERS AND DIRECTORS -- Compensation Committee Report on Executive
Compensation" and Footnote (4) to the "Summary Compensation Table".
(5) The shares of Common Stock listed for Mr. Loyd include those reported
as beneficially owned by Greenwing Investments, Inc. Mr. Loyd
controls Greenwing Investments, Inc. and may be deemed to have voting
and dispositive power with respect to the 1,733 shares of Common Stock
beneficially owned by Greenwing Investments, Inc. as of March 14,
1997.
(6) The shares listed for Mr. McLean include 1,200 shares directly owned
by his spouse.
(7) Mr. Rhein resigned as Vice Chairman of the Company in May 1996 and was
killed in an aircraft accident in July 1996. The shares listed for
Mr. Rhein include 5,920 shares of Common Stock owned by a trust for
the benefit of Mr. Rhein's children. See footnote (4) above and
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- Compensation
Committee Report on Executive Compensation".
(8) The Company has granted options to purchase and restricted shares of
Common Stock to certain key employees pursuant to its 1990 Stock
Option Plan (the "1990 Plan"), the 1992 Plan and its 1995 Long-Term
Incentive Plan (the 1995 Plan ) and options to purchase and
restricted shares of Common Stock to non-employee directors pursuant
to the Director Plan and the 1996 Plan (see Footnote (2) above). The
shares listed for Messrs. Loyd, Nagle and Ofner include 900,000,
150,000 and 60,000 shares, respectively, the beneficial ownership of
which each such officer has the right to acquire pursuant to currently
exercisable options granted under the 1990 Plan, the 1992 Plan and the
1995 Plan. The shares listed also include restricted stock awards of
75,000 to Mr. Loyd under the 1995 Plan which vest on December 3, 1999,
restricted stock awards to Messrs. Nagle, Hillin, Ofner and McIntire
of 20,000, 19,000, 17,000 and 12,000 shares, respectively, under the
1995 Plan which vest on December 5, 1998, and restricted stock awards
to Messrs. Hillin, Ofner and McIntire of 9,000, 9,000 and 5,200
shares, respectively, under the 1995 Plan which vest on December 3,
1999. See "Option Grants in Last Fiscal Year" and "COMPENSATION OF
EXECUTIVE OFFICERS AND DIRECTORS -- Compensation Committee Report on
Executive Compensation". The shares listed for directors and
executive officers as a group include a total of 1,145,000 shares, the
beneficial ownership of which such directors and officers have the
right to acquire pursuant to currently exercisable options granted
under the 1990 Plan, the 1992 Plan, the 1995 Plan and the Director
Plan.
(9) Mr. Voss resigned from the Company in November 1996. See Footnote (5)
to the "Summary Compensation Table".
ELECTION OF DIRECTORS
The Charter and By-laws of the Company currently require the number of
directors on the Board of Directors to be not less than three nor more than
eighteen (as fixed from time to time by resolution of a majority of the
Board) and require the division of the Board into three separate classes with
staggered terms of three years each. The number of directors constituting the
entire Board is currently fixed at seven. At the Annual Meeting, two Class
III directors are to be elected. Messrs. Chavkin and Loyd are nominees for
Class III director. Each of Messrs. Chavkin and Loyd is currently a Class
III director whose term expires in 1997.
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. Chavkin and Loyd as Class
III directors to serve until the 2000 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 III 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 III director nominee and the continuing
Class I and Class II directors. Unless otherwise indicated, each nominee and
continuing director has served in the positions set forth for more than five
years.
CLASS III DIRECTOR NOMINEES - TERMS EXPIRING IN 2000
ARNOLD L. CHAVKIN, 45 Director of the Company since August 1991; general
partner of Chase Capital Partners, a general
partnership which invests in leveraged buyouts,
recapitalizations, growth equities and venture
situations, since January 1992 and President of
Chemical, an affiliate of Chase Capital Partners,
since March 1991. Chase Capital Partners and
Chemical are affiliates of Chase Manhattan
Corporation. Chemical is a stockholder of the
Company (see footnote (1) to the table under the
caption "PRINCIPAL STOCKHOLDERS AND MANAGEMENT
OWNERSHIP--Management Ownership"). Mr. Chavkin is
also a director of American Radio Systems, Bell
Sports Corporation, and Wireless One, Inc.
Previously for six years, Mr. Chavkin was a
specialist in investment and merchant banking at
Chemical Bank.
PAUL B. LOYD, JR., 50 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 Investments, Inc., a
stockholder of the Company (see "PRINCIPAL
STOCKHOLDERS AND MANAGEMENT OWNERSHIP -- 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. Mr.
Loyd is also a director of Wainoco Oil Corporation.
CLASS II CONTINUING DIRECTORS - TERMS EXPIRING IN 1999
TED KALBORG, 46 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.
MACKO A.E. LAQUEUR, 51 Director of the Company since April 1995. Mr.
Laqueur is a senior partner and one of the two
founders of Venture Capital Investors, a private
investment company located in Amsterdam, The
Netherlands. Prior to starting Venture Capital
Investors in 1980, Mr. Laqueur was Managing Director
of Van Rietschoten Holding S.A., a private investment
company involved in venture capital investments in
both The Netherlands and the United States. Mr.
Laqueur received his Bachelors Degree in law at the
Erasmus University in Rotterdam and his MBA from the
Rotterdam School of Management in 1972. Mr. Laqueur
holds board positions with Thermae Holding, a large
resort owner and operator, with Van Heek-Ten Cate
N.V., a holding company of four textile manufacturers
in The Netherlands, and with Sanadome Holding N.V.,
a newly-established medical spa facility. Mr.
Laqueur and Venture Capital Investors have interests
in a large number of companies involved in the
offshore industry owning service, supply and heavy
lift vessels. Mr. Laqueur is one of the controlling
persons of Workships Intermediaries, N.V., a
stockholder of the Company. See "PRINCIPAL
STOCKHOLDERS AND MANAGEMENT OWNERSHIP -- Management
Ownership".
J. W. McLEAN, 74 Director of the Company from 1956 to 1986 and since
February 1988. Mr. McLean 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.
CLASS I CONTINUING DIRECTORS - TERMS EXPIRING IN 1998
CHARLES A.DONABEDIAN,54 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 Chairman and
Chief Executive Officer of: Winston Financial
Incorporated (formerly Winston Midwest Marketing,
Inc.), which provides product development, marketing
and sales consulting and services to the financial
services industry; Winston Advisors, Inc. (of which
Mr. Donabedian is also a director) which provides
financial advice for individuals and small companies;
and Winston Brokerage, Inc., a broker/dealer. 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.
ROBERT L. SANDMEYER, 67 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.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors met 13 times (including telephonic meetings)
during 1996 and each continuing 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 Ted Kalborg.
The Board of Directors has standing Audit, Compensation and Pension
(ERISA) Committees. There is no nominating committee.
The Audit Committee
The members of the Audit Committee are Arnold L. Chavkin, Macko A. E.
Laqueur, Charles A. Donabedian, Ted Kalborg, J.W. McLean and Robert L.
Sandmeyer. The Audit Committee held three meetings in 1996.
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 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 Charles A. Donabedian. The Compensation Committee held three
meetings in 1996.
The Compensation Committee reviews the nature and amount of
compensation of officers of the Company and its subsidiaries and recommends
changes thereto.
The Pension (ERISA) Committee
The members of the Pension (ERISA) Committee are Charles A. Donabedian,
J. W. McLean and Robert L. Sandmeyer. The Pension (ERISA) Committee held six
meetings in 1996.
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 1996
compensation determinations were made by the Committee with respect to the
executive officers of the Company, including the Chief Executive Officer and
the 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 average 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 (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 Towers Perrin, a recognized independent
compensation consultant, setting out comparable salary and incentive
compensation information for a number of representative companies in the
offshore drilling industry selected by Towers Perrin, including Global
Marine, Rowan Companies, Transocean Offshore Inc., 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 1996
annual base salary increases were recommended by the Committee and approved
by the Board of Directors for all of the executive officers and incentive
compensation awards were approved for all of the executive officers. See
"Summary Compensation Table" and "Chief Executive Officer's Compensation and
Corporate Performance for Fiscal Year 1996". The Committee believes the
recommended salary increases and incentive awards were warranted and
consistent with the performance of such executives during 1996 based on the
Committee's evaluation of each individual's overall contribution to
accomplishing the Company's 1996 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, development of new business opportunities and strengthening the
Company's capital structure.
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 Board of Directors and
stockholders: (i) approved the 1990 Plan on November 29, 1990, and at a
special meeting on March 26, 1991, respectively, (ii) approved the 1992 Plan
on March 19, 1992 and May 20, 1992, respectively and (iii) approved the 1995
Plan on February 7, 1995 and May 2, 1995, respectively. The 1990 Plan
authorized options with respect to 1,966,000 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 Committee.
The options became 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 an 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 Messrs. Loyd, Angel (who resigned in 1993) and
Rhein (who died in 1996), 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 of restricted Common Stock were made to Messrs. Loyd, Angel
or Rhein under the 1992 Plan; however, restrictions on shares previously
awarded to Mr. Rhein lapsed on May 14, 1996 (prior to his death) under the
terms of his employment agreement with the Company, and restrictions
applicable to Mr. Loyd lapsed in accordance with the schedule set out in the
preceding sentence. Under the 1995 Plan, 2,500,000 shares of the Company's
Common Stock were available for award to executive officers and other
employees. Awards under the 1995 Plan may include 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. During 1995 awards of options with respect to an
aggregate of 900,000 shares of Common Stock (300,000 shares under the 1992
Plan and 600,000 shares under the 1995 Plan) were made to Mr. Loyd. The
option exercise price for such shares is $13.875 per share, based on the
closing price appearing on the New York Stock Exchange Composite Transactions
List, as published in The Wall Street Journal on the date preceding the date
of grant of the awards. The options originally vested with respect to
300,000 shares on each of December 5 of 1996, 1997 and 1998; however, as
those options vested immediately upon Mr. Loyd's resignation under his
employment agreement with the Company, the Committee determined it was in the
best interests of the Company to amend the vesting provisions applicable to
such options to have same vest 100% on December 5, 1996, one year from the
date of original grant on December 5, 1995. During 1996 awards of options
with respect to an aggregate of 150,000 shares under the 1995 Plan were made
to Mr. Nagle. The option exercise price for such shares is $28.00 per share,
based on the closing price appearing on the New York Stock Exchange Composite
Transactions List, as published in The Wall Street Journal on the date of the
grant of the award. The options vest with respect to 50,000 shares on
December 3 of each of 1997, 1998 and 1999. The Committee continues to review
stock-based incentives and make recommendations, where it deems appropriate,
to the 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 1996
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 1996, evaluated his individual performance and substantial
contribution to those results (including, among others, the Company's
dramatic improvement in operating results for 1996) 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 Board of Directors
approved (with Mr. Loyd abstaining), an increase in Mr. Loyd's salary of
$70,000 per year effective January 1, 1997, an incentive award to Mr. Loyd of
$450,000, which represented 100% of his base salary for 1996 and a restricted
stock award of 75,000 shares which would vest on December 3, 1999.
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") generally disallows a corporation's deduction for remuneration paid
to its chief executive officer and its four other highest compensated
officers in excess of $1,000,000 per person effective January 1, 1994. The
Committee has considered the implications of Section 162(m) in connection
with its policies relating to executive compensation and intends to consider
the deductibility of the compensation paid to its executive officers as one
factor, along with the various other factors described elsewhere in this
report, to be considered in making executive compensation determinations.
Compensation Committee of the Board of Directors
J. W. McLean
Charles A. Donabedian
Robert L. Sandmeyer
Compensation Committee Interlocks and Insider Participation
Steven A. Webster, a former member of the Board of Directors and of the
Compensation Committee thereof who resigned from the Board of Directors in
June 1996, is Chairman and Chief Executive Officer of Falcon Drilling
Company, Inc. Mr. Loyd resigned as a director of Falcon Drilling Company,
Inc. in June 1996, and 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, 1996, 1995 and 1994, of (i) the chief executive officer
during 1996 and (ii) the other four most highly compensated executive
officers of the Company who were serving as executive officers at December
31, 1996 and two additional individuals (Messrs. Rhein and Voss) for whom
disclosure would have been provided but for the fact that they were not
serving as of the end of the fiscal year (collectively, the "Named
Executives"):
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
---------------------- ----------------------------------
Restricted Securities
Name and Stock Underlying All Other
Principal Award(s) Options Compensation
Position Year Salary Bonus (1) (2) (3)
- -------- ---- ------- ------- ---------- --------- ------------
P.B. Loyd, Jr. 1996 450,000 450,000 2,123,437 0 317,798
Chairman, President 1995 400,000 250,000 0 900,000 254,767
and Chief Executive 1994 300,000 125,000 0 0 223,084
Officer
C.K. Rhein, Jr.(4) 1996 55,000 0 0 0 851,370
Vice Chairman 1995 220,000 0 0 0 90,403
1994 220,000 0 0 0 100,900
L.E. Voss, Jr.(5) 1996 238,333 87,192 0 0 2,038,250
Vice President, 1995 240,000 95,000 333,000 0 4,620
Operations 1994 220,000 32,560 0 0 4,620
T.W. Nagle 1996 240,000 120,000 0 150,000 4,750
Executive Vice 1995 200,000 75,000 277,500 0 4,620
President, Finance 1994 175,000 34,040 0 0 4,620
and Administration
W.K. Hillin 1996 205,000 102,000 254,812 0 4,750
Senior Vice 1995 190,000 50,000 263,625 0 4,620
President, 1994 180,000 16,560 0 0 4,620
General Counsel
and Secretary
C.R. Ofner 1996 185,000 92,000 254,812 0 4,750
Vice President, 1995 170,000 50,000 235,875 0 4,620
Business 1994 160,000 13,680 0 0 4,620
Development
D.L. McIntire 1996 129,000 45,000 147,225 0 0
Vice President, 1995 120,000 20,000 166,500 0 0
Human Resources 1994 115,000 9,300 0 0 0
_____________________
(1) On December 3, 1996, the Company granted a Restricted Stock Award of
75,000, 9,000, 9,000 and 5,200 shares of Common Stock to Messrs. Loyd,
Hillin, Ofner and McIntire, respectively. The shares of Common Stock
were issued under the 1995 Plan and are restricted as to transfer until
fully vested three years from the date of grant. The amounts shown
reflect the value of the awards based on the market price of $28.3125 on
the date of grant. 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) other than the right to
transfer the shares. The total number of shares of Common Stock which
have not vested, and the value thereof, based on the closing price of the
Common Stock on the NYSE on December 31, 1996 (the final trading day of
1996), held by Messrs. Loyd, Hillin, Ofner and McIntire were as follows:
Shares Value
------ ----------
Mr. Loyd 75,000 $1,818,750
Mr. Hillin 9,000 $ 218,250
Mr. Ofner 9,000 $ 218,250
Mr. McIntire 5,200 $ 126,100
On December 5, 1995, the Company granted a Restricted Stock Award of
24,000, 20,000, 19,000, 17,000 and 12,000 shares of Common Stock to
Messrs. Voss, Nagle, Hillin, Ofner and McIntire, respectively. The
shares of Common Stock were issued under the 1995 Plan and are restricted
as to transfer until fully vested three years from the date of grant.
The amounts shown reflect the value of such awards based on the market
price of $13.875 on the date of grant. 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) other
than the right to transfer the shares. Restrictions on transfer of the
shares granted to Mr. Voss terminated in November 1996 in connection with
his resignation from the Company (see Footnote (5) below). The total
number of shares of Common Stock which have not vested, and the value
thereof, based on the closing price of the Common Stock on the NYSE on
December 31, 1996 (the final trading day of 1996), held by Messrs. Nagle,
Hillin, Ofner and McIntire were as follows:
Shares Value
------ --------
Mr. Nagle 20,000 $485,000
Mr. Hillin 19,000 $460,750
Mr. Ofner 17,000 $412,250
Mr. McIntire 12,000 $291,000
On April 1, 1992, the Company granted a Restricted Stock Award of 120,000
and 90,000 shares of the Company's Common Stock (restated for the October
1992 one-for-five reverse stock split of the Common Stock) to Mr. P.B.
Loyd, Jr. and Mr. C.K. Rhein, Jr., respectively. The shares of Common
Stock were issued under the 1992 Plan at a price of $7.50 per share (the
market price on the date of grant 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). Restrictions on transfer of the shares granted to Mr. Rhein
terminated in May 1996 in connection with his resignation as Vice
Chairman of the Company (see Footnote (4) below). The total number of
such shares of Common Stock as to which restrictions have not lapsed, and
the value thereof, based on the closing price of the Common Stock on the
NYSE on December 31, 1996 (the final trading day of 1996), held by Mr.
Loyd were 25,000 shares with a value of $606,250.
(2) The stock options awarded in 1995 to Mr. Loyd represent stock options
awarded pursuant to the 1995 Plan and 1992 Plan. The stock options
awarded in 1996 to Mr. Nagle represent stock options awarded pursuant to
the 1995 Plan. See "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS --
Compensation Committee Report on Executive Compensation" and Footnote (8)
to the table under "PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP --
Management Ownership".
(3) For 1994, 1995 and 1996, the All Other Compensation column includes (i)
the amount of the Company's contribution for each Named Executive under
the Reading & Bates Savings Plan, except Mr. Rhein and Mr. McIntire, who
previously waived their rights to participate in such Plan, (ii) accrued
termination benefits of $197,086, $226,338 and $290,082, respectively,
for Mr. Loyd and $100,900 and $90,403 for 1994 and 1995, respectively
for Mr. Rhein (see "Employment Contracts and Change-in-Control
Arrangements"), (iii) 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) and
(iv) termination and severance benefits in the case of Mr. Rhein and Mr.
Voss (see Footnotes (4) and (5) below.
(4) Mr. Rhein resigned as Vice Chairman of the Company in May 1996 and was
killed in an aircraft accident in July 1996. Pursuant to his employment
agreement Mr. Rhein, prior to his death, was paid $851,370 in cash and
received the remaining 30,000 shares of Common Stock from the
acceleration of his Restricted Stock Award he received in 1992. See
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- Compensation
Committee Report on Executive Compensation". Also, pursuant to the
agreement referred to in Footnote (7) to the table under "PRINCIPAL
STOCKHOLDERS AND MANAGEMENT OWNERSHIP -- Management Ownership" above, the
compensation payable to Mr. Rhein was paid to and beneficially owned by
WHR.
(5) Mr. Voss resigned from the Company in November 1996 and pursuant to his
employment agreement received $1,325,000 in cash and 24,000 shares of
Common Stock from the acceleration of his Restricted Stock Award on
December 5, 1995 (see Footnote (1) above).
Option Grants in Last Fiscal Year
Potential
Realizable
Individual Grants Value at Assumed
----------------------------------------- Annual Rates of
% of Total Stock Price
Number of Options Appreciation for
Securities Granted to Option Term (3)
Underlying Employees ---------------
Options in Fiscal Exercise Expiration
Name Granted (1) Year (2) Price Date 5% 10%
---------- -------- ------ ------ ----- -----
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 0 0 0 0
T. W. Nagle 150,000 100% $28.00 12/03/06 $2,641,357 $6,693,718
W. K. Hillin 0 0 0 0 0 0
C.R. Ofner 0 0 0 0 0 0
D.L. McIntire 0 0 0 0 0 0
(1) In 1996, the Company granted Mr. Nagle 150,000 stock options under the
1995 Plan. The option price is $28.00, the market price on the date
of grant. The options vest with respect to 50,000 shares on each
December 3 of 1997, 1998 and 1999 and expire on December 3, 2006.
(2) During 1996, Mr. Nagle was the only employee to whom options were
granted.
(3) The potential realizable value of the option grant was computed by
multiplying (a) the difference between: (i) the market price at the
time of grant times the sum of 1 plus the appreciation rate over the
term of ten years, and (ii) the exercise price of the option, and (b)
the number of options underlying the grant at yearend. The actual
value, if any, that may be realized will depend on the excess of the
stock price over the exercise price on the date the option is
exercised, so there can be no assurance that the value realized will
be at or near the value estimated.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
Number of Value of
Securities Underlying Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End at Fiscal Year-End(1)
Shares ------------------ ---------------------
Acquired Value Un- Un-
Name on Realized Exercisable exercisable Exercisable exercisable
- ---- Exercise -------- ----------- ----------- ----------- -----------
--------
P.B.Loyd, Jr. 0 0 900,000 0 $9,337,500 0
C.K.Rhein, Jr. 0 0 0 0 0 0
L.E.Voss, Jr. 50,000 $778,125 30,000 0 506,250 0
T.W.Nagle 80,000 1,583,125 0 150,000 0 0
W.K.Hillin 80,000 1,606,875 0 0 0 0
C.R.Ofner 20,000 442,500 60,000 0 1,012,500 0
D.L.McIntire 50,000 712,500 0 0 0 0
(1) The Value of Unexercised In-the-Money Options At Fiscal Year-End
reflects the difference between the option price and the closing price
of the Common Stock on the NYSE on December 31, 1996, the last trading
day of the year.
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 Roger Schwall, Assistant Director.]
The above graph assumes $100 invested on December 31, 1991 in the stock of
Reading & Bates, the S&P 500 index and the composite peer index and shows the
value of such investment, assuming reinvestment of dividends on December 31
of each year indicated. The Peer Group (10 stocks) is comprised of the
following companies: Arethusa (Off-Shore) Ltd. (through March 1996), Atwood
Oceanics Inc., Diamond Offshore, Dual Drilling Company (through March 1996),
ENSCO International Inc., Global Marine Inc., Noble Drilling Corporation,
Rowan Companies Inc., Transocean Offshore Inc., and the Western Company of
North America (through September 1993).
Peer weightings for the peer group have been adjusted for changes as follows:
Dual Drilling Company was added to the peer group index in August 1993 as
this company had its initial public offering in August 1993; Western Company
of North America was removed from the peer group index as of September 30,
1993 as that company sold its drilling assets in October 1993; Chiles
Offshore Corporation was dropped and Noble Drilling Corporation was added to
the peer group index in September 1994 as these two companies merged during
September 1994, Diamond Offshore was added to the peer group index in October
1995 as this company had its initial public offering in October 1995,
Arethusa (Off-Shore) Ltd. was removed from the peer group index as of March
31, 1996 as that company merged with Diamond Offshore, and Dual Drilling
Company was removed from the peer group index as of March 31, 1996 as that
company merged with ENSCO International Inc. The following table shows the
values that are displayed on the graph:
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Reading & Bates $100 $52 $86 $74 $185 $326
S&P 500 $100 $108 $118 $120 $165 $203
Peer Group (10 Stocks) $100 $116 $192 $166 $335 $657
Pension Plan Table
Assuming that an employee is entitled to an annual social security
benefit of $14,976 at normal retirement date and has an annual social
security covered compensation amount of $27,576, 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.
36-Month Average Years of Service
-------------------------------------------------
Remuneration 15 20 25 30 35
------------ ------- ------- ------- ------- -------
$50,000 12,658 16,878 21,097 25,316 29,536
100,000 28,081 37,441 46,801 56,162 65,522
150,000 43,503 58,004 72,505 87,007 101,508
200,000 58,926 78,568 98,210 117,852 137,494
250,000 74,348 99,131 123,914 148,697 173,480
300,000 89,771 119,695 149,618 179,542 209,466
350,000 105,194 140,258 175,323 210,387 245,452
400,000 120,616 160,822 201,027 241,232 281,438
450,000 136,039 181,385 226,731 272,078 317,424
500,000 151,461 201,949 252,436 302,923 353,410
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
$145,000 (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, Hillin, Nagle, Ofner
and McIntire, respectively, have 4.997, 24.935, 20.997, 25.278 and 28.384
years of credited service under the Domestic Plan. The Named Executives will
be entitled to receive the estimated annual benefits based upon their 1996
salary amounts set forth under "Salary" in the Summary Compensation Table.
Assuming that an employee is entitled to an annual social
security benefit of $14,976 at normal retirement date and has an annual
social security covered compensation amount of $27,576, 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 1997 is $125,000. The Domestic Plan
limits the annual compensation that is considered for plan purposes to
$160,000 for 1997. 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 non-employee 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 ($22,965.63 at
exchange rates prevailing at the time of payment) 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 ($400 for telephonic attendance) for each meeting attended by that
director. In addition, each non-employee director is paid for attending each
committee meeting at the rate of $700 ($600 for telephonic attendance) for
committee chairmen and $500 ($400 for telephonic attendance) for other
committee members. The Company also reimburses its directors for travel,
lodging and related expenses they may incur attending board and committee
meetings. Non-employee 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.
On February 7, 1995 each of the existing non-employee directors
received an award of stock options with respect to 15,000 shares of the
Company's Common Stock under the Director Plan. The options are exercisable
at $7.375 per share and expire ten years from the date of grant. On April
19, 1995 Mr. Macko A. E. Laqueur was appointed a director to replace Dr.
Willem Cordia (who resigned for health reasons) and automatically received a
similar award, except that under the terms of such plan, Mr. Laqueur's award
vests 33 1/3% on April 19, 1996, 33 1/3 % on April 19, 1997 and the remaining
33 1/3 % on April 19, 1998. The Director Plan was approved by the Company's
stockholders at the Annual Meeting of Stockholders held May 2, 1995. See
"THE DIRECTOR STOCK PROPOSAL".
Employment Contracts and Change-in-Control Arrangements
Officer Agreements. The Company has entered into employment agreements
with Messrs. Loyd, Nagle, Hillin, Ofner and McIntire. The agreements provide
that for a continuing three-year employment period (ending currently on March
31, 1999) the officers will receive annual base salaries of not less than
$520,000, $275,000,$225,000, $212,000 and $141,000, respectively, and 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 Mr. Loyd, deliver to such executive the shares
under the 1992 Plan free of restrictions and (d) continue to provide certain
welfare plan and other benefits for a period of three years or as long as
such plan or benefits allow.
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 Mr. Loyd, (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 Mr. Loyd 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 Investments, Inc. 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. Nagle, Hillin, Ofner and McIntire 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 agreement with Mr. Loyd 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. Nagle, Hillin, Ofner and McIntire) 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
agreement with Mr. Loyd 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. Nagle, Hillin, Ofner and McIntire 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, Nagle, Hillin,
Ofner and McIntire, 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 $2,297,000 in the case of
Mr. Loyd, $1,654,000 in the case of Mr. Nagle, $1,617,225 in the case of Mr.
Hillin, $861,000 in the case of Mr. Ofner, and $832,704 in the case of Mr.
McIntire. The aggregate present value of the benefits payable under the
respective agreements in the event their provisions became operative is
approximately $4,090,000 in the case of Mr. Loyd, $1,422,000 in the case of
Mr. Nagle, $1,162,000 in the case of Mr. Hillin, $801,000 in the case of Mr.
Ofner, and $677,000 in the case of Mr. McIntire, assuming that such
provisions became operative on April 1, 1997 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 $766,000 in the case of Mr. Loyd, $551,384 in the case of Mr.
Nagle, $539,075 in the case of Mr. Hillin, 287,000 in the case of Mr. Ofner,
and $278,000 in the case of Mr. McIntire, 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, 1996
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. Loyd filed one Form 4 late, Mr. Chavkin filed one Form 4
late, Mr. Donabedian filed three Form 4's late, Mr. Kalborg filed two Form
4's late, Mr. Laqueur filed three Form 4's late, Mr. McLean filed one Form 4
late, Dr. Sandmeyer filed one Form 4 late, Mr. Nagle filed three Form 4's
late, Mr. Hillin filed two Form 4's late, Mr. McIntire filed one Form 4 late
and Mr. Ofner filed two Form 4's late.
THE EMPLOYEE STOCK PROPOSAL
The 1997 Plan is designed to retain key executives and other selected
employees and reward them for making major contributions to the success of
the Company and its subsidiaries. These objectives are to be accomplished by
making awards under the 1997 Plan and thereby providing participants with a
proprietary interest in the growth and performance of the Company and its
subsidiaries. The Board of Directors has adopted the 1997 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, 1997. The Board of
Directors recommends a vote in favor of the Employee Stock Proposal. If the
1997 Plan is not so approved prior to June 30, 1997, the 1997 Plan will
terminate.
The following is a summary of the principal features of the 1996 Plan.
This summary is qualified in its entirety by reference to the complete text
of the 1997 Plan, which is set forth in Exhibit 99.A hereto.
Awards under the 1997 Plan; Eligibility
Employees of the Company and its subsidiaries eligible for an award
under the 1997 Plan are those who hold positions of responsibility and whose
performance, in the judgment of the Committee of the Board of Directors
administering the 1997 Plan, can have a significant effect on the success of
the Company and its subsidiaries. Approximately 200 persons will be eligible
for awards under the 1997 Plan.
There shall be available for awards granted wholly or partly in Common
Stock (including rights or options which may be exercised for or settled in
Common Stock) during the term of the 1997 Plan an aggregate of 2,500,000
shares of Common Stock. As of March 14, 1997, the market value of the Common
Stock was $25.00 per share. Awards value 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.
Awards under the 1997 Plan
The Committee shall determine the type or types of awards to be made to
each participant under the 1997 Plan. Each award made thereunder shall be
embodied in an award agreement, which shall contain such terms, conditions
and limitations as shall be determined by the Committee in its sole
discretion and shall be signed by the participant and by the chief executive
officer or any vice president of the Company for and on behalf of the
Company. Awards may consist of those listed in this paragraph 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 the 1997 Plan or any other employee plan of the
Company or any of its subsidiaries, including the plan of any acquired
entity. An award may provide for the granting or issuance of additional,
replacement or alternative awards upon the occurrence of specified events,
including the exercise of the original award. Notwithstanding anything to
the contrary in the 1997 Plan or any award agreement, any shares of Common
Stock received by a participant who is an officer or director of the Company
pursuant to an Award thereunder (other than shares of Common Stock received
in connection with the participant's death, disability, retirement or
termination of employment or as required to be made pursuant to a provision
of the Code) must be held by such officer or director for a period of six
months following such acquisition [such condition may be satisfied with
respect to a derivative security (as defined in Rule 16b-3 ( Rule 16b-3")) if
at least six months elapse from the date of acquisition of the derivative
security to the date of disposition of the derivative security (other than
upon exercise or conversion) or its underlying security].
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.
Stock Appreciation Right. An award may consist of a right to receive a
payment, in cash or Common Stock, equal to the excess of the fair market
value or other specified valuation of a specified number of shares of Common
Stock on the date the stock appreciation right ("SAR") is exercised over a
specified strike price as set forth in the applicable award agreement.
Stock Award. An award may consist of Common Stock or may be denominated in
units of Common Stock. All or part of any stock award may be subject to
conditions established by the Committee, and set forth in the award
agreement, which may include, but are not limited to, continuous service with
the Company and its subsidiaries, achievement of specific business
objectives, increases in specified indices, attaining growth rates and other
comparable measurements of performance. Such awards may be based on fair
market value or other specified valuations. The certificates evidencing
shares of Common Stock issued in connection with a stock award shall contain
appropriate legends and restrictions describing the terms and conditions of
the restrictions applicable thereto.
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.
Payment of Awards
Payment of Awards may be made in the form of cash or Common Stock or
combinations thereof and may include such restrictions as the Committee shall
determine, including in the case of Common Stock, restrictions on transfer
and forfeiture provisions. With the approval of the Committee, payments may
be deferred, either in the form of installments or a future lump sum payment.
The Committee my permit selected participants to elect to defer payments of
some or all types of awards in accordance with procedures established by the
Committee. Any deferred payment, whether elected by the participant or
specified by the award agreement or by the Committee, may be forfeited if and
to the extent that the award agreement so provides. Dividends or dividend
equivalent rights may be extended to and made part of any award denominated
in Common Stock or units of Common Stock, subject to such terms, conditions
and restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred cash
payments and dividend equivalents for deferred payment denominated in Common
Stock or units of Common Stock. At the discretion of the Committee, a
participant may be offered an election to substitute an award for another
award or awards of the same or different type.
The 1997 Plan shall be effective as of February 13, 1997 (the date it
was approved by the Board of Directors of the Company). Notwithstanding the
foregoing, the adoption of the 1997 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, 1997. If the stockholders of the Company should
fail so to approve the 1997 Plan prior to such date, the 1997 Plan shall
terminate and cease to be of any further force or effect and all grants of
awards thereunder shall be null and void.
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 the 1997 Plan
comply in all respects with Rule 16b-3, that any ambiguities or
inconsistencies in the construction of the 1997 Plan be interpreted to give
effect to such intention, and that if any provision of the 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 the 1997 Plan to comply with Rule 16b-3.
Certificates evidencing shares of Common Stock delivered under the 1997 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.
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.
Administration of the 1997 Plan
The 1997 Plan shall be administered by the committee designated by the
Board of Directors to administer the 1997 Plan (the Committee ), which shall
have full and exclusive power to interpret the 1997 Plan, to grant waivers of
the restrictions set forth in the 1997 Plan and to adopt such rule,
regulations and guidelines for carrying out the 1997 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 the 1997 Plan.
The Committee may correct any defect or supply any omission or reconcile any
inconsistency in the 1997 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 the
1997 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 the 1997 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 the 1997 Plan, except for his or her own willful misconduct or
as expressly provided by statute.
The Committee may delegate to the chief executive officer and to other
senior officers of the Company its duties under the 1997 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.
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 Plan, an appropriate number of shares of Common Stock
for payment of taxes required by law or to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes. The Committee may also permit withholding to be
satisfied by the transfer to the Company of shares of Common Stock
theretofore owned by the holder of the award with respect to which
withholding is required. If shares of Common Stock are used to satisfy tax
withholding, such shares shall be valued based on the fair market value when
the tax withholding is required to be made.
Amendment, Modification, Suspension or Termination
The Board of Directors may amend, modify, suspend or terminate the 1997
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.
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.
Assignability
No award or any other benefit under the 1997 Plan constituting a stock
option or other derivative security within the meaning of Rule 16b-3 shall be
assignable or otherwise transferable except by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security
Act, or the rules thereunder. However, an officer or director may designate
a beneficiary for any award made to such officer or director.
Adjustments
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 or 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.
In the event of any subdivision or consolidation of outstanding shares
of Common Stock or declaration of a dividend payable in shares of Common
Stock or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of
Common Stock, the Committee may adjust proportionally (i) the number of
shares of Common Stock reserved under the 1997 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.
Unfunded Plan
Insofar as it provides for awards of cash, Common Stock or rights
thereto, the 1997 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 the 1997 Plan, any such accounts shall be used
merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets that may at any time be represented by cash, Common
Stock or rights thereto, nor shall the 1997 Plan be construed as providing
for such segregation, nor shall the Company nor the Board of Directors nor
the Committee be deemed to be a trustee of any cash, Common Stock or rights
thereto to be granted under the 1997 Plan. Any liability or obligation of
the Company to any participant with respect to a grant of cash, Common Stock
or rights thereto under the 1997 Plan shall be based solely upon any
contractual obligations that may be created by the 1997 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 of Directors nor the Committee
shall be required to give any security or bond for the performance of any
obligation that may be created by the 1997 Plan.
Federal Income Tax Consequences
This description of certain Federal income tax consequences of options
under the 1997 Plan is based on Federal tax laws currently in effect and does
not purport to be a complete description of such Federal tax consequences
under all circumstances.
There are no Federal income tax consequences either to the optionee or
to the Company upon the grant of an ISO or a nonqualified stock option
("NQSO"). On the exercise of an ISO, the optionee will not recognize any
income and the Company will not be entitled to a deduction (although such
exercise may give rise to alternative minimum tax liability for the
optionee). Generally, if the optionee disposes of shares acquired upon
exercise of an ISO within two years of the date of grant or one year of the
date of exercise, the optionee will recognize ordinary income, and the
Company will be entitled to a deduction, equal to the excess of the fair
market value of the shares on the date of exercise over the option price
(limited generally to the gain on the sale). The balance of any gain, and
any loss, will be generally treated as a capital gain or loss to the
optionee. If the shares are disposed of after the foregoing holding
requirements are met, the Company will not be entitled to any deduction, and
the entire gain or loss for the optionee will be treated as a capital gain or
loss.
On exercise of a NQSO, the excess of the date-of-exercise fair market
value of the shares acquired over the option price will generally be
taxable to the optionee as ordinary income and deductible by the Company.
The disposition of shares acquired upon exercise of a NQSO will generally
result in a capital gain or loss for the optionee, but will have no tax
consequences for the Company.
Board Recommendation
The Board of Directors recommends a vote FOR the approval of the Employee
Stock Proposal.
THE DIRECTOR STOCK PROPOSAL
The 1996 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. The Board of Directors has
adopted the 1996 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,
1997. The Board of Directors recommends a vote in favor of the Director
Stock Proposal. If the 1996 Plan is not so approved prior to June 30, 1997,
the 1996 Plan will terminate.
The following is a summary of the principal features of the 1996 Plan.
This summary is qualified in its entirety by reference to the complete text
of the 1996 Plan, which is set forth in Exhibit 99.B hereto.
Awards under the 1996 Plan
Awards under the 1996 Plan consist of a grant of shares of Common
Stock. An aggregate of 54,000 shares of Common Stock will be available for
awards under the 1996 Plan. The market value of the Common Stock was $25.00
per share as of March 14, 1997.
Restricted Stock Awards
At the effective date of the 1996 Plan, each member of the Board of
Directors who is not an employee of the Company or any of its subsidiaries
is granted a one-time award of 9,000 shares of Common Stock (the Restricted
Stock ), subject to various conditions as set forth below and in the award
agreement. A total of six persons, including Messrs. Donabedian, Sandmeyer,
Chavkin, Laqueur, Kalborg and McLean, have received awards under the 1996
Plan, subject to the approval of the 1996 Plan by the stockholders of the
Company on or before June 30, 1997, as described below.
Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered from the date of grant until said shares
shall have become vested in the participant (and restrictions terminated
thereon). Thirty-three and one-third percent (33 1/3 % ) of the total
number of shares of Restricted Stock awarded under the 1996 Plan shall vest
on each of January 1, 1998, January 1, 1999 and January 1, 2000; provided,
however, that the participant shall not be vested in shares of Restricted
Stock which would be vested as of a given date if the participant has not
continuously remained a member of the Board of Directors from the effective
date of the 1996 Plan through such date (other than by reason of
participant's death, disability, retirement after the age of 65 or Change of
Control of the Company, as defined in the 1996 Plan), in which event all of
the participant's rights to such Restricted Stock shall terminate without any
payment of consideration by the Company, and such Restricted Stock shall be
returned to the Company and canceled. Each award made under the 1996 Plan
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.
The 1996 Plan shall be effective as of December 3, 1996.
Notwithstanding the foregoing, the adoption and effectiveness of the 1996
Plan and any awards granted thereunder 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, 1997. If the stockholders of the Company should
fail so to approve the 1996 Plan prior to such date, the 1996 Plan shall
terminate and cease to be of any further force or effect and all grants of
awards thereunder shall be null and void.
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 the 1996 Plan comply in all
respects as a fixed or formula award under Rule 16b-3, that any ambiguities
or inconsistencies in the construction of the 1996 Plan be interpreted to
give effect to such intention, and that if any provision of the 1996 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 the
1996 Plan to comply as a fixed or formula award under Rule 16b-3.
Certificates evidencing shares of Common Stock delivered under the 1996 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.
Administration of the 1996 Plan
The 1996 Plan, with the exception of any and all determinations
concerning the pricing, granting, timing, or amount of, or eligibility for,
awards thereunder (which pricing, granting, timing, amount and eligibility
are automatic and determined on a fixed basis) shall be administered by the
committee designated by the Board of Directors to administer the 1996 Plan
(the "Committee"), which shall have full and exclusive power to interpret the
1996 Plan and to adopt such rules, regulations and guidelines for carrying
out the 1996 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 the 1996 Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the 1996 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 the 1996 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 the 1996
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 the 1996 Plan, except for his or her
own willful misconduct or as expressly provided by statute.
Subject to the foregoing, the Committee may delegate to the chief
executive officer and to other senior officers of the Company its duties
under the 1996 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.
Amendment and Termination
The Board of Directors may amend, modify, suspend or terminate the 1996
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 if any such
amendment would cause any participant not to be a "disinterested person"
under Rule 16b-3 or 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 1996 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.
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 of Directors (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 65)], 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 of Directors
(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 65), any portion of an award not then vested
shall be forfeited effective as of such time.
Adjustments
The existence of outstanding awards under the 1996 Plan 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 or 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.
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 the
1996 Plan and covered by outstanding awards thereunder and (ii) the
appropriate fair market value and other price determinations of such awards
shall be adjusted proportionately. 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.
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 the 1996 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.
Unfunded Plan
The 1996 Plan shall be unfunded. Any liability or obligation of the
Company to any participant with respect to a grant under the 1996 Plan shall
be based solely upon any contractual obligations that may be created by the
1996 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 of Directors
nor the Committee shall be required to give any security or bond for the
performance of any obligation that may be created by the 1997 Plan.
Board Recommendation
The Board of Directors recommends a vote FOR the approval of the Director
Stock Proposal.
NEW PLAN BENEFITS TABLE
1996 Plan 1997 Plan
----------------------- ---------------------
Name and Position Dollar Number of Dollar Number of
or Group Value(1)(2) Shares(2) Value(2) Shares(2)
---------- -------- -------- ---------
P.B. Loyd, Jr. N/A N/A * *
Chairman, President
and Chief Executive
Officer
C.K. Rhein, Jr. N/A N/A * *
Vice Chairman (3)
L.E. Voss, Jr. N/A N/A * *
Vice President
Operations (4)
T.W. Nagle N/A N/A * *
Executive Vice President,
Finance and Administration
W.K. Hillin N/A N/A * *
Senior Vice President,
General Counsel and
Secretary
C.R. Ofner N/A N/A * *
Vice President,
Business Development
D.L. McIntire N/A N/A * *
Vice President,
Human Resources
Executive Officer
Group (5) N/A N/A * *
Non-Executive
Director Group (6) $1,350,000 54,000 N/A N/A
Non-Executive Officer
Employee Group (7) N/A N/A * *
(Footnotes on following page)
* Not determinable as no awards have yet been made under the 1997 Plan.
(1) Based on the market value of the Common Stock of $25.00 per share on
March 14, 1997.
(2) Officers and employees are not eligible for the 1996 Plan. Non-employee
directors are not eligible for the 1997 Plan.
(3) Mr. Rhein resigned as Vice Chairman of the Company in May 1996 and was
killed in an aircraft accident in July 1996.
(4) Mr. Voss resigned from the Company in November 1996.
(5) Includes all current executive officers as a group.
(6) Includes all current directors who are not officers or employees as a
group.
(7) Includes all employees, including all current officers who are not
executive officers, as a group.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has approved the Accountants Proposal which
involves the ratification and approval of the Board's reappointment of Arthur
Andersen LLP as the independent public accountants for the Company for its
fiscal year 1997.
The Board of Directors appointed Arthur Andersen LLP as independent
public accountants for the Company for its 1995 and 1996 fiscal years and the
stockholders voted to ratify and approve such appointments at the Company's
1995 and 1996 Annual Meetings.
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 of Directors recommends a vote FOR the approval of the
Accountants Proposal.
STOCKHOLDER PROPOSALS
The date by which proposals of stockholders intended to be presented at
the 1998 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 29, 1997.
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 1996 fiscal year.
==============================================================================
FORM OF PROXY CARD
READING & BATES CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS -- MAY 13, 1997
The undersigned hereby appoints Paul B. Loyd, Jr., T. W. Nagle,
and Wayne K. Hillin, or any of them, as proxies and attorneys with several
powers of substitution, hereby revoking any prior Proxy, and hereby
authorizes any of 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 27, 1997 at the Annual
Meeting of Stockholders to be held on May 13, 1997, or any postponement or
adjournment thereof.
The Board of Directors recommends a vote FOR:
1. Election of the following nominees as Class III directors for terms
expiring in 2000: Arnold L. Chavkin and Paul B. Loyd, Jr.
[ ] FOR [ ] WITHHOLD [ ] FOR, except withhold from: _________
2. Approval and adoption of the Company's Employee Stock Proposal, as set
forth in the Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval and adoption of the Company's Director Stock Proposal, as set
forth in the Proxy Statement:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval and adoption of the Company's Accountants 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.
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 director and
FOR the approval and adoption of each of the Proposals.
DATED: ____________________, 1997
_________________________________
(Signature)
(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.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
IN THE ENCLOSED ENVELOPE
==============================================================================
EXHIBIT 99.A
1997 LONG-TERM INCENTIVE PLAN
of
READING & BATES CORPORATION
1. Objectives. The Reading & Bates Corporation 1997 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 or any Vice President of the Company for and on behalf of
the Company. Awards may consist of those listed in this Paragraph 7 and may
be granted singly, in combination or in tandem. Awards may also be made in
combination or in tandem with, in replacement of, or as alternatives to,
grants or rights under this Plan or any other employee plan of the Company or
any of its Subsidiaries, including the plan of any acquired entity. An Award
may provide for the granting or issuance of additional, replacement or
alternative Awards upon the occurrence of specified events, including the
exercise of the original Award. Notwithstanding anything to the contrary in
the Plan or any Award Agreement, any shares of Common Stock received by a
Participant who is an officer or director of the Company pursuant to an Award
hereunder (other than shares of Common Stock received in connection with the
Participant's death, disability, retirement or termination of employment or
as required to be made pursuant to a provision of the Code) must be held by
such officer or director for a period of six months following such
acquisition [such condition may be satisfied with respect to a derivative
security (as defined in Rule 16b-3) if at least six months elapse from the
date of acquisition of the derivative security to the date of disposition of
the derivative security (other than upon exercise or conversion) or its
underlying security].
(a) Stock Option. An Award may consist of a right to purchase a
specified number of shares of Common Stock at a specified price that is not
less than the 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 certificates
evidencing shares of Common Stock issued in connection with a stock award
shall contain appropriate legends and restrictions describing the terms and
conditions of the restrictions applicable thereto.
(d) Cash Award. An Award may be denominated in cash with the amount
of the eventual payment subject to future service and such other restrictions
and conditions as may be established by the Committee, and set forth in the
Award Agreement, including, but not limited to, continuous service with the
Company and its Subsidiaries, achievement of specific business objectives,
increases in specified indices, attaining growth rates and other comparable
measurements of performance.
8. Payment of Awards.
(a) General. Payment of Awards may be made in the form of cash or
Common Stock or combinations thereof and may include such restrictions as the
Committee shall determine, including in the case of Common Stock,
restrictions on transfer and forfeiture provisions. As used herein,
"Restricted Stock" means Common Stock that is restricted or subject to
forfeiture provisions.
(b) Deferral. With the approval of the Committee, payments may be
deferred, either in the form of installments or a future lump sum payment.
The Committee my permit selected Participants to elect to defer payments of
some or all types of Awards in accordance with procedures established by the
Committee. Any deferred payment, whether elected by the Participant or
specified by the Award Agreement or by the Committee, may be forfeited if and
to the extent that the Award Agreement so provides.
(c) Dividends and Interest. Dividends or dividend equivalent rights
may be extended to and made part of any Award denominated in Common Stock or
units of Common Stock, subject to such terms, conditions and restrictions as
the Committee may establish. The Committee may also establish rules and
procedures for the crediting of interest on deferred cash payments and
dividend equivalents for deferred payment denominated in Common Stock or
units of Common Stock.
(d) Substitution of Awards. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another
Award or Awards of the same or different type.
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, 1997. 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
1996 DIRECTOR RESTRICTED STOCK AWARD PLAN
of
READING & BATES CORPORATION
1. Purposes. The purposes of Reading & Bates Corporation 1996
Director Restricted Stock Award Plan (the "Plan") are 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).
2. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
"Award" means the grant of a restricted stock award 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.
"Change of Control" means as defined in Paragraph 16 hereof.
"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, of, 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 have 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 during the term of this Plan
an aggregate of 54,000 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.
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. Restricted Stock Awards. Subject to the provisions of Paragraph
15 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 is granted a one-time
Award of 9,000 shares of Common Stock, subject to the conditions set forth
below and in the Award Agreement (the "Restricted Stock"). Shares of
Restricted Stock granted hereunder to the Participant may not be sold,
assigned, transferred, pledged or otherwise encumbered from the date of grant
until said shares shall have become vested in the Participant (and
restrictions terminated thereon). Thirty-three and one-third percent (33 1/3
% ) of the total number of shares of Restricted Stock awarded hereunder
shall vest on each of January 1, 1998, January 1, 1999 and January 1, 2000;
provided, however, that the Participant shall not be vested in shares of
Restricted Stock which would be vested as of a given date if the Participant
has not continuously remained a member of the Board of Directors of the
Company from the Effective Date through such date (other than by reason of
Participant's death, disability, retirement after the age of 65 or Change of
Control of the Company, as defined in Paragraph 16 hereof), in which event
all of the Participant's rights to such Restricted Stock shall terminate
without any payment of consideration by the Company, and such Restricted
Stock shall be returned to the Company and canceled. 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. 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.
8. 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 purposes
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.
9. 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 65)],
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 65), any portion of an Award not then vested shall be
forfeited effective as of such time.
10. 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.
11. 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 and (ii) the appropriate
Fair Market Value and other price determinations of such Awards shall be
adjusted proportionately. 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.
12. 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.
13. 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.
14. 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.
15. Effective Date of Plan. This Plan shall be effective as of
December 3, 1996 (the "Effective Date"). 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, 1997. 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.
16. Change of Control. For the purpose of this Agreement, a "Change
of Control" shall mean any "Person", as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than (i) the Executive, (ii) the Company or any of its
subsidiaries or Affiliates (as that term is defined in the Exchange Act),
(iii) any Person subject, as of the date of this Agreement or at any prior
time, to the reporting or filing requirements of Section 13(d) of the
Exchange Act with respect to the securities of the Company or any Affiliate,
(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,
after the date of this Agreement, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), 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.
