<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Rowan Companies, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
$125
- - --------------------------------------------------------------------------------
/ / 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:
- - --------------------------------------------------------------------------------
<PAGE> 2
ROWAN COMPANIES, INC.
5450 TRANSCO TOWER
2800 POST OAK BOULEVARD
HOUSTON, TEXAS 77056-6196
(713) 621-7800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, APRIL 26, 1996
To the Stockholders:
The Annual Meeting of the Stockholders of Rowan Companies, Inc., a Delaware
corporation (the "Company"), will be held in the Transco Auditorium located on
Level 2 of the Transco Tower, 2800 Post Oak Boulevard, Houston, Texas, on
Friday, April 26, 1996 at 9:00 A.M., Houston time, for the following purposes:
1. To elect three Class II Directors to serve until the third succeeding
annual meeting and until their respective successors are duly elected
and qualified.
2. To consider and vote upon Stockholder Proposal No. 1 pertinent to
declassifying the Company's Board of Directors.
3. To consider and vote upon Stockholder Proposal No. 2 pertinent to
matters associated with the Company's Stockholders Rights Agreement.
4. To transact such other business as may properly come before such
meeting or any adjournment thereof.
February 28, 1996 has been fixed as the date of record for determining
stockholders entitled to receive notice of and to vote at the Annual Meeting of
Stockholders. A list of all stockholders entitled to vote is on file at the
principal executive offices of the Company, 5450 Transco Tower, 2800 Post Oak
Boulevard, Houston, Texas, 77056-6196.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MARK H. HAY
Secretary
March 11, 1996
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND MAIL BACK THE
ACCOMPANYING PROXY IN THE ENCLOSED RETURN ENVELOPE AT YOUR EARLIEST CONVENIENCE.
<PAGE> 3
ROWAN COMPANIES, INC.
5450 TRANSCO TOWER
2800 POST OAK BOULEVARD
HOUSTON, TEXAS 77056-6196
---------------------------------------
PROXY STATEMENT
---------------------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Rowan Companies, Inc. for use at the Annual Meeting of Stockholders to be
held on April 26, 1996 in the Transco Auditorium located on Level 2 of the
Transco Tower, 2800 Post Oak Boulevard, Houston, Texas, or any adjournment
thereof. The cost of solicitation will be paid by the Company. In addition to
solicitation by mail, solicitation of proxies may be made personally or by
telephone or telecopy by the Company's employees, and arrangements may be made
with brokerage houses or other custodians, nominees and fiduciaries to send
proxies and proxy material to their principals.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by either (i) attending the meeting
and voting in person or (ii) giving written notice of such revocation to Mr.
Mark H. Hay, Secretary of the Company, at Rowan Companies, Inc., 5450 Transco
Tower, 2800 Post Oak Boulevard, Houston, Texas 77056-6196. The enclosed proxy
may also be revoked by a subsequently dated proxy received by the Company prior
to the voting of the previously dated proxy.
The Proxy Statement and the related form of proxy are being first mailed or
delivered to stockholders on or about March 11, 1996.
VOTING SECURITIES OUTSTANDING
At the close of business on February 28, 1996, the record date for
determining those stockholders entitled to notice of and to vote at the Annual
Meeting of Stockholders, there were outstanding 85,017,535 shares of $.125 par
value Common Stock of the Company ("Common Stock"), each share of which is
entitled to one vote on the matters to be presented at the meeting.
1
<PAGE> 4
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
MANAGEMENT
The table below sets forth the number of shares of Common Stock of the
Company owned as of February 28, 1996 by continuing directors (including Mr.
Palmer who is Chief Executive Officer), nominees for director, the four other
most highly compensated executive officers of the Company and all directors and
executive officers as a group:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME BENEFICIALLY OWNED(1)(2)
-------------------------------------------------------- ------------------------
<S> <C>
Directors:
Ralph E. Bailey 30,000
Henry O. Boswell 25,000(3)
H. E. Lentz 25,200(4)
C. R. Palmer 809,308
Wilfred P. Schmoe 5,000
Charles P. Siess, Jr. 6,000
Peter Simonis 5,000
C. W. Yeargain 253,202
Nominee for Director:
Hon. Colin B. Moynihan -0-
Executive Officers (not Directors):
R. G. Croyle 91,787(5)
D. F. McNease 63,042
E. E. Thiele 127,787
J. Earl Beckman 12,500
All Directors and Executive Officers as a group (23 in
number) 1,767,437
</TABLE>
- - ---------------
(1) Except as noted otherwise, the persons and the group listed have sole voting
and sole dispositive power with respect to the shares shown herein.
(2) All directors and executive officers as a group beneficially owned 2.08% of
the outstanding shares of Common Stock; no continuing director, nominee or
executive officer owned more than .95% of the Common Stock. Included herein
are shares of Common Stock that may be acquired prior to April 28, 1996
through the conversion of the Series II Floating Rate Convertible
Subordinated Debenture (the "Series II Debenture"), the Series III Floating
Rate Convertible Subordinated Debentures (the "Series III Debentures") and
the exercise of Nonqualified Stock Options (the "Options") as follows: C.
R. Palmer -- Series II Debenture, Series III Debentures and
Options -- 400,000 shares, 162,963 shares and 240,000 shares, respectively;
R. G. Croyle -- Series III Debentures and Options -- 37,037 shares and
53,750 shares, respectively; D. F. McNease -- Series III Debentures and
Options -- 37,037 and 25,000 shares, respectively; E. E. Thiele -- Series
III Debentures and Options -- 37,037 shares and 25,000 shares,
respectively; J. Earl Beckman -- Options -- 12,500 shares; and all
directors and executive officers as a group -- the Series II Debenture, the
Series III Debentures and Options -- 400,000 shares, 311,111 shares and
485,000 shares, respectively.
(3) Includes 11,000 shares owned by Mr. Boswell's wife. Mr. Boswell disclaims
beneficial ownership of such shares.
(4) Mr. Lentz's shares are owned jointly with his wife. The total includes 200
shares held in the names of Mr. Lentz's two minor children with respect to
which Mr. Lentz's wife serves as custodian. Mr. Lentz disclaims beneficial
ownership of such shares.
(5) Includes 1,000 shares owned by Mr. Croyle's children. Mr. Croyle disclaims
beneficial ownership of such shares.
2
<PAGE> 5
PRINCIPAL STOCKHOLDERS
The table below sets forth, as of February 28, 1996, certain information as
to those persons who, to the knowledge of the Company, beneficially owned more
than five percent of the Company's outstanding Common Stock:
<TABLE>
<CAPTION>
TITLE NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF CLASS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OF CLASS
--------------------- ------------------------------------- ------------------ --------
<S> <C> <C> <C>
Common Stock The Equitable Companies Incorporated 10,127,650(2) 11.9%(2)
787 Seventh Avenue
New York, New York 10019;
AXA
23, Avenue Matignon
75008 Paris, France;
The Mutuelles AXA Group
detailed in (2) below
Common Stock State of Wisconsin 5,430,900(3) 6.41%(3)
Investment Board
P.O. Box 7842
Madison, Wisconsin 53707
</TABLE>
- - ---------------
(1) To the knowledge of the Company, no other person owns more than 5% of the
outstanding shares of Common Stock.
(2) Based on information contained in the named stockholders' Amendment No. 5
dated February 9, 1996 to its Schedule 13G dated the same date, filed
pursuant to the Securities Exchange Act of 1934. Such amended Schedule 13G
also stated that The Equitable Companies Incorporated and the AXA Companies
described below as a group had sole voting power with respect to 10,072,050
shares and sole dispositive power with respect to 10,127,650 shares.
Furthermore, based on information also contained in that amended Schedule
13G, 3,828,400 shares and 6,299,250 shares of the shares shown above were
beneficially owned by The Equitable Companies Incorporated's subsidiaries,
The Equitable Life Assurance Society of the United States ("Equitable U.S.")
and Alliance Capital Management L.P. ("Alliance Capital"), respectively, and
that Equitable U.S. had sole voting power and sole dispositive power with
respect to 3,828,400 shares, while Alliance Capital had sole voting power
and sole dispositive power with respect to 6,243,650 shares and 6,299,250,
respectively. AXA and the five mutual insurance companies comprising The
Mutuelles Group, namely Alpha Assurances I.A.R.D. Mutuelle and Alpha
Assurances Vie Mutuelle, both located at 101-100 Terrasse Boieldieu, 92042
Paris La Defense France, and AXA Assurances I.A.R.D. Mutuelle and AXA
Assurances Vie Mutuelle, both located at La Grande Arche, Pardi Nord, 92044
Paris La Defense France, and Uni Europe Assurance Mutuelle, 24 Rue Drouot,
75009 Paris France, disclaim any beneficial interest in and disclaim any
deemed voting power or dispositive power with respect to any of the shares
shown above.
(3) Based on information contained in the named stockholder's Schedule 13G dated
February 1996, filed pursuant to the Securities Exchange Act of 1934. The
State of Wisconsin Investment Board is a government agency which manages
public pension funds.
All of the Company's directors, executive officers and any greater than ten
percent stockholders are required by Section 16(a) of the Securities Exchange
Act of 1934 to file with the Securities and Exchange Commission and the New York
Stock Exchange initial reports of ownership and reports of changes in ownership
of the Company's Common Stock and to furnish the Company with copies of such
reports. Based on a review of those reports and written representations that no
other reports were required, the Company believes that all applicable Section
16(a) filing requirements were complied with except that one executive officer,
Daniel F. McNease, a Senior Vice President, had one report covering one
transaction that he inadvertently failed to report on a timely basis.
3
<PAGE> 6
QUORUM AND OTHER MATTERS
The presence at the Annual Meeting of Stockholders, in person or by proxy,
of the holders of at least a majority of the outstanding shares of Common Stock
at the close of business on February 28, 1996 is necessary to constitute a
quorum. In accordance with Delaware law and pursuant to the provisions of the
Company's Bylaws, holders of shares shall be treated as being present at the
Annual Meeting of Stockholders if the holders of such shares are present in
person or are represented by valid proxies, whether the proxy cards granting
such proxies are marked as casting a vote or abstaining or are left blank.
If a quorum is present at the Annual Meeting of Stockholders, the election
of each nominee for Class II Director will be approved if the votes cast in
favor of the election of such nominee exceed the votes cast opposing the
election of such nominee. Unless otherwise directed thereon, a validly executed
proxy will be treated as a vote cast in favor of the election of the Class II
Director nominees on page 5.
The two stockholder proposals or actions on any other matters to come
before the Annual Meeting of Stockholders will be approved if a quorum is
present and the votes cast in favor of the proposals or matters exceed the votes
cast opposing same. Unless otherwise directed thereon, a validly executed proxy
will be treated as votes cast against the two stockholder proposals.
In determining the number of votes cast, shares abstaining from voting and
shares held in street name that are indicated as not being voted on by brokers
due to lack of discretionary authority will not be treated as votes cast.
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes.
Classes I and III consist of three directors each and Class II currently
consists of two directors. Each director holds office for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected. Class II Directors are to be elected at the 1996 Annual
Meeting of Stockholders.
After giving due consideration to the Board-approved policies governing the
designation of nominees for directorships, the Nominating Committee has
determined that it would be in the best interest of the stockholders and the
Company that both of the current Class II Directors, Mr. Ralph E. Bailey and Mr.
C. W. Yeargain, be selected to stand for re-election. Hon. Colin B. Moynihan,
who has not heretofore served on the Board, has also been selected to be a Class
II Director nominee. Accordingly, a Board-approved amendment to the Bylaws
increasing the number of directors from eight to nine (with the Board to be
comprised of three members in each class) will become effective on April 26,
1996, the date of the 1996 Annual Meeting of Stockholders.
The persons named in the enclosed proxy have been selected as a proxy
committee by the directors of the Company and valid proxies will be voted in the
manner directed thereon. If no direction is made, the proxies will be voted for
the election of the Class II Director nominees listed below. Although the Board
of Directors of the Company does not contemplate that any of the nominees will
be unable to serve, if such a situation arises prior to the meeting, the proxy
committee will vote for a replacement nominee in accordance with its best
judgment.
4
<PAGE> 7
The table below sets forth certain information regarding the nominees for
director and continuing directors as of February 28, 1996.
NOMINEES AND CONTINUING DIRECTORS
--------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION YEAR FIRST
FOR THE PAST BECAME
NAME(1)(2) FIVE YEARS AGE DIRECTOR
- - ------------------------- -------------------------------------------------- --- ----------
<S> <C> <C> <C>
NOMINEES CLASS II (TERM EXPIRES IN 1999)
- - ------------------------- --------------------------------------------------
Ralph E. Bailey Chairman of the Board and, until February 1996, 71 1993
(b)(e) Chairman of the Board and Chief Executive Officer
of American Bailey Corporation (manufacturing and
energy investments); and, until May 1995, Chairman
of the Board and, until February 1992, Chairman of
the Board and Chief Executive Officer of United
Meridian Corporation (oil and gas exploration and
production).
Hon. Colin B. Moynihan Senior Partner of London-based Colin Moynihan 40 --
Associates (CMA) (energy advisors) since 1993;
Member of Parliament in the United Kingdom (1983-
1992); additionally, Minister for Energy as
Parliamentary Undersecretary of State at the UK
Department of Energy (1990-1992).
C. W. Yeargain Chairman of the Board, LeTourneau, Inc.; Executive 70 1975
(c) Vice President of the Company until retiring in
March 1991.(3)
CONTINUING DIRECTORS CLASS III (TERM EXPIRES IN 1997)
- - ------------------------- --------------------------------------------------
Henry O. Boswell Retired; formerly President (1983-1987) of Amoco 66 1988
(a)(b)(c)(d)(e) Production Company (oil and gas production).
C. R. Palmer Chairman of the Board, President and Chief 61 1969
(c)(d) Executive Officer of the Company.(3)
Peter Simonis Chairman of the Board, British American Offshore 69 1985
(d) Limited (Company-owned U.K. drilling contractor)
since March 1987; Chairman of the Board
(1979-1987) of Haden Group plc (London-based
international engineering contractors).
CONTINUING DIRECTORS CLASS I (TERM EXPIRES IN 1998)
- - ------------------------- --------------------------------------------------
H. E. Lentz Managing Director, Lehman Brothers Inc. 51 1990
(d) (investment bankers) since March 1993; Investment
Banker, Wasserstein Perella & Co., Inc. (March
1988 through February 1993).
Wilfred P. Schmoe Retired; formerly Executive Vice President, 68 1992
(a)(b)(d)(e) Director and member of the Executive Committee
(May 1984 to November 1988) of E.I. DuPont de
Nemours & Co. (diversified chemical/energy
conglomerate).
</TABLE>
(Table continued on the following page)
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION YEAR FIRST
FOR THE PAST BECAME
NAME(1)(2) FIVE YEARS AGE DIRECTOR
- - ------------------------- -------------------------------------------------- --- ----------
<S> <C> <C> <C>
Charles P. Siess, Jr. Chairman of the Board and Chief Executive Officer, 69 1991
(a)(b)(c)(d)(e) Cabot Oil & Gas Corporation since May 1995 and
from January 1990 to December 1992; Vice Chairman
of the Board, Marathon Manufacturing Company
(August 1986 until retiring in February 1987).
</TABLE>
- - ---------------
(1) Directorships other than those listed in the table are as follows: Ralph E.
Bailey remains a director of United Meridian Corporation and is also a
director of General Signal Corporation and The Williams Companies, Inc.;
Henry O. Boswell is a director of Service Master Management Corporation,
the general partner of Service Master Limited Partnership, and Cabot Oil &
Gas Corporation; H. E. Lentz is a director of Imperial Holly Corporation;
and Charles P. Siess, Jr. is a director of Cabot Corporation and Camco,
Inc. Hon. Colin B. Moynihan, a nominee for Class II Director, is a director
of Ranger Oil Limited.
(2) Committee memberships are indicated by (a) for Audit Committee, (b) for
Compensation Committee, (c) for Executive Committee, (d) for Nominating
Committee and (e) for 1986 Debenture Plan Committee. See "Committees of the
Board of Directors" below for information on functions performed by the
Committees. The Board of Directors held five meetings during 1995. All
directors attended at least 75% of the 1995 meetings of the Board of
Directors and Committees on which they served.
(3) In addition to his Board membership, Mr. Yeargain continues to serve the
Company in a consulting capacity. See "Compensation Committee Interlocks
and Insider Participation; Certain Transactions" on page 19. Information
regarding Mr. Palmer's compensation is disclosed in the Summary
Compensation Table under "Executive Compensation" on page 7.
COMMITTEES OF THE
BOARD OF DIRECTORS
The functions performed by the committees of the Board of Directors are as
follows:
The Audit Committee has as its principal functions to recommend to the
Board of Directors each year the firm of independent auditors to be selected by
the Company and its subsidiaries, to review the reports to be rendered and the
fees to be charged by the independent auditors and to review with the
independent auditors the principal accounting policies of the Company and its
subsidiaries and other pertinent matters either at the initiative of the
Committee or at the request of the independent auditors. The Audit Committee
held one meeting in 1995.
The Compensation Committee recommends to the Board of Directors from time
to time the compensation to be paid to the executive and other officers of the
Company and its subsidiaries and any plan for additional compensation that it
deems appropriate. The Compensation Committee held one meeting in 1995.
The Nominating Committee generally designates, on behalf of the Board of
Directors, candidates for the directors of the class to be elected at the next
meeting of stockholders. The Nominating Committee will consider for election to
the Board qualified nominees recommended by stockholders. To make such a
recommendation, stockholders should submit to the Company's Secretary a
biographical sketch of the prospective candidate, which should include age,
principal occupation and business experience and other directorships, including
positions previously held or now held. The Nominating Committee held one meeting
in 1995.
The Executive Committee has, except for certain qualifications noted in the
Company's Bylaws, the authority to exercise all of the powers of the Board in
the management of the business and affairs of the Company. The Executive
Committee did not hold any meetings in 1995.
6
<PAGE> 9
The 1986 Debenture Plan Committee administers the Company's 1986
Convertible Debenture Incentive Plan. The 1986 Debenture Plan Committee has
broad authority to interpret, amend, suspend or terminate such Plan and to make
all determinations necessary or advisable for the administration of the Plan.
The 1986 Debenture Plan Committee held one meeting in 1995.
EXECUTIVE COMPENSATION
The following tabulation sets forth for the fiscal years ended December 31,
1995, 1994 and 1993 annual compensation of the Chief Executive Officer and the
other four most highly compensated executive officers of the Company (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------
ANNUAL COMPENSATION SHARES UNDERLYING
---------------------- DEBENTURES AND ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1) COMPENSATION($)
- - --------------------------------- ---- --------- -------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
C. R. Palmer 1995 $ 800,000 -0- 150,000 $ 3,375(3)
Chairman of the Board, 1994 766,667 -0- 791,111 -0-
President 1993 700,000 $900,000 -0- -0-
and Chief Executive Officer
R. G. Croyle 1995 216,667 -0- 30,000 3,375(3)
Executive Vice President 1994 200,000 -0- 187,963 -0-
1993 170,000 100,000 25,000 -0-
D. F. McNease 1995 191,667 -0- 25,000 1,687(3)
Senior Vice 1994 175,000 -0- 187,963 -0-
President -- Drilling 1993 153,333 100,000 25,000 -0-
E. E. Thiele 1995 181,667 -0- 25,000 3,375(3)
Senior Vice 1994 166,667 -0- 187,963 -0-
President -- Finance, 1993 145,000 75,000 25,000 -0-
Administration and Treasurer
J. Earl Beckman 1995 218,333 -0- 25,000 3,987(3)
Vice President -- Manufacturing; 1994 215,000(2) -0- 187,963 4,873(3)
President and Chief Executive 1993 N/A N/A N/A N/A
Officer of LeTourneau, Inc.
</TABLE>
- - ---------------
(1) The 1993 and 1995 amounts are shares of Common Stock that may be acquired
through the exercise of Options, which were granted on April 23, 1993 and
April 28, 1995, respectively. The 1994 amounts are comprised of shares of
Common Stock that may be acquired through the conversion of Series III
Floating Rate Convertible Subordinated Debentures (the "Series III
Debentures"), which were offered and issued on November 30, 1994, and the
exercise of Options, which were granted on April 22, 1994, as follows: C. R.
Palmer -- Series III Debentures and Options -- 711,111 shares and 80,000
shares, respectively; R. G. Croyle, D. F. McNease, E. E. Thiele and J. Earl
Beckman -- Series III Debentures and Options -- in each case, 162,963 and
25,000, respectively.
(2) Represents the base salary paid to Mr. Beckman in the calendar year that he
became an employee by way of the Company's purchase of the net assets of his
former employer, Marathon LeTourneau Company. Mr. Beckman was elected
President and Chief Executive Officer of LeTourneau, Inc. ("LeTourneau") and
Vice President of the Company on February 18, 1994 and April 22, 1994,
respectively.
(3) Represents the amount of the Company's contribution on behalf of the Named
Executive Officer to either of two 401(k) plans, specifically, the Rowan
Companies, Inc. Savings and Investment Plan in the case of Messrs. Palmer,
Croyle, McNease and Thiele, and the LeTourneau, Inc. Savings and Investment
Plan in the case of Mr. Beckman. The Rowan plan was approved in late 1994
and became operational in April 1995.
7
<PAGE> 10
No executive officer received any non-cash compensation during fiscal years
1995, 1994, and 1993 having an aggregate incremental cost to the Company in
excess of the lesser of $50,000 or 10% of his or her total annual salary and
bonus as reported in this table.
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information pertinent to stock options granted
under the Company's 1988 Nonqualified Stock Option Plan (the "1988 Plan") to the
Named Executive Officers during 1995:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------------------- REALIZABLE VALUE
PERCENT MARKET AT ASSUMED ANNUAL
NUMBER OF OF TOTAL PRICE OF RATES OF STOCK
SHARES OPTIONS STOCK ON PRICE APPRECIATION
UNDERLYING GRANTED TO DATE OF EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN GRANT(1) BASE PRICE EXPIRATION ----------------------------------
NAME GRANTED(#) FISCAL 1995 ($/SHARE) ($/SHARE) DATE(2) 0%(3) 5% 10%
- - ------------------- ---------- ------------ -------- ----------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. R. Palmer 150,000 16.2% $ 6.87 $1.00 4-28-05 $881,250 $1,435,464 2,285,736
R. G. Croyle 30,000 3.2% 6.87 1.00 4-28-05 176,250 287,093 457,147
D. F. McNease 25,000 2.7% 6.87 1.00 4-28-05 146,875 239,244 380,956
E. E. Thiele 25,000 2.7% 6.87 1.00 4-28-05 146,875 239,244 380,956
J. Earl Beckman 25,000 2.7% 6.87 1.00 4-28-05 146,875 239,244 380,956
</TABLE>
- - ---------------
(1) Last reported sales price of the Common Stock on the New York Stock Exchange
on April 28, 1995, the date of grant.
(2) Options become exercisable in 25% increments over a four-year period with
the options being 100% exercisable four years after the date of grant.
Exercisability may accelerate upon the occurrence of certain events such as
corporate reorganizations, death or disability (as set forth in the option
agreement or the plan).
(3) Value represents the difference between the per share market price (see
footnote (1) above) and the per share exercise price on the date of grant
times the number of underlying shares.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
For each of the Named Executive Officers, the information set forth below
reflects, for the fiscal year ended December 31, 1995, options under the
Company's 1980 Nonqualified Stock Option Plan (the "1980 Plan") and 1988 Plan
which were exercised and the value realized thereon as well as exercisable and
unexercisable options at year-end 1995 and the realizable value thereon at such
date:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(1)
EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. R. Palmer -0- -0- 182,500 210,000 $1,574,062 $1,811,250
R. G. Croyle 10,000 $ 61,250 27,500 67,500 237,187 582,188
D. F. McNease 18,750 113,281 12,500 62,500 107,812 539,062
E. E. Thiele 18,750 112,500 -0- 62,500 -0- 539,062
J. Earl Beckman 6,250 37,500 -0- 43,750 -0- 377,344
</TABLE>
- - ---------------
(1) Represents the difference between $9.63, which was the last reported per
share sales price of the Company's Common Stock on the New York Stock
Exchange in 1995, and the per share exercise price of $1.00 times the
number of underlying shares.
8
<PAGE> 11
OPTION PLANS
As amended by the stockholders at the Annual Meeting of Stockholders in
April 1992, the 1988 Plan permits the grant to key employees of the Company and
its subsidiaries prior to January 21, 2003 of options to purchase 7,000,000
shares, of which options to purchase 4,388,179 shares (net of forfeitures) of
the Company's Common Stock had been granted at an option exercise price of $1.00
per share as of February 28, 1996. Outstanding options under the 1988 Plan
expire between April 1999 and April 2005. Options granted under the 1988 Plan
are nonqualified options and expire ten years after the date of grant.
The authority of the Board of Directors to grant additional options under
the 1980 Plan expired on January 25, 1990. The 1980 Plan provided for the grant
of options to key employees of the Company and its subsidiaries, and the
exercise prices and terms of options granted under the 1980 Plan were determined
by the Compensation Committee. As of February 28, 1996, options to purchase a
total of 971,500 shares (net of forfeitures) of the Company's Common Stock had
been granted under the 1980 Plan at an option exercise price of $1.00 per share.
Outstanding options under the 1980 Plan are nonqualified options and expire
between April 1998 and April 1999.
Options granted under the 1980 and 1988 Plans become exercisable in 25%
increments over a four-year period with the options being 25% exercisable one
year after the date of grant and 100% exercisable four years after the date of
grant.
CONVERTIBLE DEBENTURE INCENTIVE PLAN
The Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan (the
"Plan") was approved at the Company's 1986 Annual Meeting of Stockholders. The
Plan provides for the issuance to key employees of the Company and its
subsidiaries of up to $20,000,000 in aggregate principal amount of the Company's
floating rate convertible subordinated debentures (the "Debentures"). The
Debentures are convertible into fully paid and nonassessable shares of preferred
stock, which are immediately convertible into fully paid and nonassessable
shares of Common Stock of the Company. The ultimate conversion price for each
issue is the closing price of the Company's Common Stock on the day prior to the
issuance of the Debentures.
The Plan is administered by the 1986 Debenture Plan Committee of the Board
of Directors (the "Debenture Committee"). The Debenture Committee has the
authority to select key employees of the Company or any subsidiary who may
purchase Debentures. The Debenture Committee also determines with respect to
each series of Debentures, the interest rate, conversion price and other terms
and conditions of the Debentures, all consistent with the provisions of the
Plan. After November 30, 1994, no more Debentures may be offered under the Plan.
The $5,125,000 aggregate principal amount of Series I Debentures issued in
June 1986 was ultimately convertible into 891,304 shares of Common Stock at
$5.75 per share until June 1996. In 1995, the remaining $450,000 aggregate
principal amount outstanding was converted into 78,261 shares of Common Stock.
The $4,500,000 aggregate principal amount of the Series II Debenture issued
in September 1987 is ultimately convertible into 500,000 shares of Common Stock
at $9.00 per share until September 1997. The one employee participating in the
Series II Debenture offering has borrowed the Debenture purchase price from an
unaffiliated third party. The promissory note bears interest at the same rate as
the Debenture and is secured by a pledge of the Debenture purchased. The Company
has guaranteed such outstanding employee's indebtedness. No conversions occurred
in 1995. The aggregate principal amount of the Debenture outstanding at February
28, 1996 was $3,600,000 which is convertible into 400,000 shares of Common
Stock.
The $10,300,000 aggregate principal amount of Series III Debentures issued
in November 1994 is ultimately convertible into 1,525,926 shares of Common Stock
at $6.75 per share in specified amounts and intervals until November 30, 2004 as
follows: beginning November 30, 1995 -- $2,350,000 convertible into 348,148
shares; beginning November 30, 1996 -- $2,450,000 convertible into 362,963
shares; beginning November 30, 1997 -- $2,700,000 convertible into 399,998
shares; and beginning November 30, 1998 -- $2,800,000 convertible into 414,817
shares. All employees participating in the Series III Debenture offering have
borrowed the Debenture purchase price from the Company. Promissory notes
evidencing the borrowings
9
<PAGE> 12
bear interest at the same rate as the Debentures and are secured by a pledge of
the Debentures purchased. No conversions occurred in 1995. Subsequent to
year-end 1995, a portion of a Debenture in the amount of $250,000 was converted
into 37,037 shares of Common Stock. The aggregate principal amount of Series III
Debentures outstanding at February 28, 1996 was $10,050,000 which is convertible
into 1,488,889 shares of Common Stock.
PENSION PLAN
The Company offers to eligible drilling and aviation employees
participation in a non-contributory, defined benefit pension plan. All salaried
and hourly employees (including executive officers but excluding non-US.
citizens) of the Company who have completed one year of employment (as defined
in the plan) are eligible to participate in the pension plan. Pursuant to the
terms of the pension plan, the cost of which is borne by the Company, an
eligible employee generally will receive a pension at age 60 pursuant to a
formula which is based upon the employee's number of years of credited service
and his average annual compensation during the highest five consecutive years of
his final ten years of service. Compensation for this purpose is based on
salary, excluding discretionary bonuses. Because applicable provisions of the
Internal Revenue Code, as amended, currently limit the annual benefits payable
to any individual from the pension plan to $120,000, the pension plan provides
that benefits of a plan retiree which are limited by the provisions of the
Internal Revenue Code shall be increased each year that adjustments to such
provisions permit a benefit increase. As of January 31, 1996, the Company had
approximately 1,800 employees eligible to participate in such pension plan.
The Company offers to eligible manufacturing employees participation in a
separate non-contributory, defined benefit pension plan. This plan is
substantially similar to the Company's drilling and aviation pension plan except
that: an eligible employee generally will receive a pension at age 65 rather
than at age 60; the benefits are subject to reduction for Social Security
benefits; and no provision has been made for increasing the annual benefits
payable to any individual under this plan for the purpose of tracking an upward
adjustment in the limitation imposed by the Internal Revenue Code. As of January
31, 1996, the Company had approximately 850 employees eligible to participate in
this pension plan.
The Company also sponsors pension restoration plans which provide for the
restoration of any retirement income that is lost under its pension plans
because of the previously mentioned Internal Revenue Code limitations on
benefits payable or the compensation level on which they are based. Both pension
restoration plans are unfunded and benefits thereunder are paid directly by the
Company. To date, three employees, C. R. Palmer, J. Earl Beckman and C. W.
Yeargain (now retired), have been selected to be participants under the pension
restoration plans.
10
<PAGE> 13
The following table illustrates, for representative average earnings and
years of credited service levels, the annual retirement benefit payable to
eligible drilling and aviation employees under the Company's pension and pension
restoration plans computed on the basis of a life annuity with 60 payments
guaranteed.
PENSION PLAN TABLE(1)
<TABLE>
<CAPTION>
YEARS OF SERVICE(2)
-------------------------------------------------------------------------
COMPENSATION(3) 15 20 25 30 35 40
- - --------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 125,000 $ 32,812 $ 43,750 $ 54,687 $ 65,625 $ 76,562 $ 87,500
150,000 39,375 52,500 65,625 78,750 91,875 105,000
175,000 45,937 61,250 76,562 91,875 107,187 122,500
200,000 52,500 70,000 87,500 105,000 122,500 140,000
225,000 59,062 78,750 98,437 118,125 137,812 157,500
250,000 65,625 87,500 109,375 131,250 153,125 175,000
300,000 78,750 105,000 131,250 157,500 183,750 210,000
400,000 105,000 140,000 175,000 210,000 245,000 280,000
500,000 131,250 175,000 218,750 262,500 306,250 350,000
600,000 157,500 210,000 262,500 315,000 367,500 420,000
700,000 183,750 245,000 306,250 367,500 428,750 490,000
800,000 210,000 280,000 350,000 420,000 490,000 560,000
900,000 236,250 315,000 393,750 472,500 551,250 630,000
1,000,000 262,500 350,000 437,500 525,000 612,500 700,000
</TABLE>
- - ---------------
(1) The benefits listed in the table are not subject to reduction for Social
Security benefits or other offset amounts.
(2) As of December 31, 1995, the Named Executive Officers (excluding J. Earl
Beckman) were credited under either or both the pension and pension
restoration plans for the drilling and aviation employees of the Company
with years of service as follows: C. R. Palmer -- 35; R. G. Croyle -- 22;
D. F. McNease -- 22; and E. E. Thiele -- 26.
(3) The annual benefit amount payable to Mr. C. W. Yeargain, who retired as an
executive officer in March 1991, is $161,599. The estimated annual benefit
amount payable upon retirement to Mr. C. R. Palmer is $450,232. The other
executive officers named in "Executive Compensation" above (but excluding
J. Earl Beckman) will basically be entitled to receive the annual benefits
amounts based upon their 1995 salary amount set forth under "Salary" in the
table on page 7 and their credited years of service under the pension plan
(see Footnote (2) above).
Based upon his 1995 salary as set forth under "Salary" in the table on page
7, the estimated annual benefit payable upon retirement to Mr. J. Earl Beckman
is approximately $46,215, such benefit being based upon 15 projected years of
service at age 65 under the pension and pension restoration plans covering the
Company's manufacturing employees and six years under a plan of a company
previously owning the assets of LeTourneau.
DIRECTOR COMPENSATION
Each director who is not a salaried officer of the Company or a subsidiary
receives $20,000 annually for serving as a director, $500 for attending a
regular or special Board meeting and $250 or $500 for attending a meeting of
each committee on which he serves, depending on the length of the meeting. In
addition, directors are reimbursed for reasonable travel expenses.
11
<PAGE> 14
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION POLICY FOR EXECUTIVE OFFICERS
Under the supervision of the Compensation Committee (the "Committee") of
the Board of Directors, the Company has developed and implemented compensation
policies and programs that seek to retain and motivate employees of the Company
and its subsidiaries whose performance contributes to the Company's goal of
maximizing stockholder value in an unstable industry that has suffered a
prolonged downturn. In addition, these compensation policies attempt to align
the executive officers' interests with those of the stockholders by providing
incentive compensation related to the value of the Company's Common Stock.
Compensation decisions are made by the Committee after reviewing recommendations
prepared by the Company's Chief Executive Officer, with the assistance of other
Company personnel. The Company has combined salaries with stock option grants,
convertible debenture offerings and selected cash bonuses to provide a
compensation balance. The balance established by the Committee is designed to
reward past performance, retain key employees and encourage future performance.
In approving and establishing compensation for an executive officer,
several factors are considered by the Committee. Performance criteria include
individual performance, overall Company performance versus that of its
competitors and performance of the price of the Company's Common Stock in
comparison to prior levels and to the relative stock prices of its competitors.
Since the contract drilling industry has been in a prolonged downturn, overall
corporate performance has included factors such as maintaining equipment and
personnel and protecting the strength of the Company's balance sheet during a
period of heightened instability. When evaluating individual performance,
particular emphasis has been placed on the executive officers' success in
enabling the Company to increase its market share, their ability to develop
innovative ways to obtain better returns on the Company's assets and their
maintenance of the Company's ability to respond to upturns in the drilling
industry. Emphasis is placed upon an individual's integrity, loyalty and
competence in his areas of responsibility. When evaluating the foregoing
performance criteria in setting executive compensation, the Committee gives
greatest weight to those factors it believes have or will contribute the most
towards maximizing stockholder value and increasing the Company's financial
viability. The factors that contribute the most towards these goals vary
depending on the state of the industry in which the Company operates.
Based upon the Committee's determination, all of the executives named
above, excluding Mr. Palmer (see "Chief Executive Officer Compensation" below),
received a salary increase in 1995. As discussed above, factors considered by
the Committee in setting compensation included each individual's past
contributions and performance, as well as the Company's operating results and
the performance of the Company's stock in comparison to its competitors,
management of its assets and debts and implementing and maintaining effective
cost controls. Additionally, setting salaries which are both externally
competitive relative to the industry and internally equitable when considering
performance and responsibility levels were pursued objectives. Competitor
comparisons for purposes of determining executive officer compensation consisted
of a comparison to the competitors in the Company's peer group described below
under "Stockholder Return Performance Presentation" along with comparison to
certain additional public companies in the energy service industry. Although no
specific target has been established, the Committee generally seeks to set
salaries at the median to high end of the range in comparison to peer group
companies. Measurement of each individual's performance is to some extent
subjective, and the Company does not make compensation awards based on the
degree to which an individual achieves predetermined objective criteria.
In addition to regular salary payments to executive officers in 1995, the
Committee determined to make stock option grants to all of the Company's
executive officers, including Mr. Palmer, at an exercise price of $1.00 per
share. The primary basis for these stock option grants was management's
performance in keeping the Company's organization intact and maintaining a
strong balance sheet under continuing unstable market conditions in its drilling
and aviation segments, as well as the positive earnings contributions by the
Company's manufacturing segment and the Committee's evaluation of the individual
performance of each officer. The criteria used in evaluating individual
performance for purposes of these grants were the same as the criteria discussed
above that are considered when setting regular compensation. Previous option
grants and debenture
12
<PAGE> 15
offerings to and held by executive officers were taken into account when
determining the amount of new option and convertible debenture awards.
Although the Committee chose to revise the compensation of the Named
Executive Officers for the fiscal year just ended, it attempts to avoid treating
salaries, stock option grants and debenture offerings as entitlements and
recommends compensation revisions only when it believes such changes are
warranted.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee's determination for establishing Mr. Palmer's remuneration
for 1995 was based on the facts that (i) the Company had survived a severe
industry downturn when many of its competitors had failed, merged or ceased to
exist, (ii) the Company had been able to maintain a relatively strong balance
sheet throughout the past five year period, which was a period of unprecedented
difficulty and instability, enabling it to maintain its employees and equipment
at competitive levels, and (iii) the Company had increased its market share,
leaving it well positioned to capitalize on any significant increase in offshore
drilling activity. No specific quantitative measure of the Company's performance
was used for this purpose. Emphasis was also placed on evaluating the Company's
performance versus the performance of the competitors in the Company's peer
group described below under "Stockholder Return Performance Presentation", as
well as certain additional public companies in the energy service industry. The
Committee believed, and believes, that the Company's relatively strong position
in the contract drilling industry has been in large part attributable to Mr.
Palmer's abilities and contributions.
In 1995, the Committee's deliberations with respect to Mr. Palmer's
remuneration centered on the ongoing strong position that the Company has
maintained in the contract drilling industry during a period of heightened
instability. Given this fact, and the Committee's continuing belief that tying a
significant portion of the chief executive officer's remuneration to the
interests of the Company's stockholders while foregoing on a selective year
basis the use of additional cash for salary increases and cash bonuses is a
prudent remuneration policy, it determined to grant to Mr. Palmer stock options
for 150,000 shares of Common Stock having a value on the date of grant of
$881,250. Such award was determined to be in lieu of an increase in salary or a
cash bonus award.
The Committee has also discussed and considered a recent amendment to the
tax code that will generally limit the Company's ability to deduct compensation
in excess of $1 million to a particular executive. The Committee intends to
consider the deductibility of the compensation paid to its executive officers in
the future. However, given the current level of the Company's net operating
losses and investment tax credit carryforwards, deductibility of compensation is
not an immediate concern.
This report has been provided by the following members of the Committee:
Charles P. Siess, Jr., Chairman
Ralph E. Bailey
Henry O. Boswell
Wilfred P. Schmoe
The foregoing report of the Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
13
<PAGE> 16
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparison of the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock, the
cumulative total return of the Standard & Poor's Composite 500 Stock Index and
the cumulative total return of a company-selected peer group for the period of
five calendar years commencing January 1, 1991 and ending December 31, 1995.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK, S&P 500 INDEX &
COMPANY-SELECTED PEER GROUP**
(ASSUMES $100 INVESTED
ON DECEMBER 31, 1990)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ROWAN S&P 500 PEER GROUP**
<S> <C> <C> <C>
1990 100 100 100
1991 51 130 56
1992 70 140 45
1993 80 155 91
1994 56 157 77
1995 86 215 159
</TABLE>
Fiscal Year Ended December 31
* Total return assumes reinvestment of dividends.
** ENSCO International Incorporated, Global Marine, Inc., Noble Drilling Corp.,
and Reading & Bates Corp.
14
<PAGE> 17
The previous line graph is presented pursuant to, and has been prepared in
accordance with, specific SEC rules which prescribe, among other
characteristics, a five-year measurement period. Such rules also require the
inclusion of a graph line reflecting a broad stock market benchmark, as
reflected in the Standard & Poor's Composite 500 Index. The Company believes the
contract drilling industry moves in very long cycles, significantly greater than
five years, and that such cycles encompass extended periods of growth as well as
extended periods of contraction and during much of the past thirteen-year
period, the Company and the industry as a whole have generally experienced
conditions more closely associated with the latter. For that reason, the Company
does not believe a five-year presentation of stockholder return is especially
meaningful, but rather believes a comparison covering the period since the
industry last peaked is more informative. Furthermore, the Company believes the
breadth of the S&P 500 Index yields an unsuitable barometer for measuring
stockholder return in an industry as volatile as that in which the Company
operates. A line graph comparison is set forth below which reflects the yearly
percentage change in the cumulative total stockholder return on the Company's
Common Stock and the cumulative total return of the same Company-selected peer
group for the period of thirteen calendar years commencing January 1, 1983 and
ending December 31, 1995.
COMPARISON OF THIRTEEN-YEAR CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK & COMPANY-SELECTED PEER GROUP**
(ASSUMES $100 INVESTED
ON DECEMBER 31, 1982)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ROWAN PEER GROUP**
<S> <C> <C>
1982 100 100
1983 112 89
1984 87 57
1985 76 29
1986 39 18
1987 51 31
1988 56 22
1989 109 46
1990 109 36
1991 56 20
1992 76 16
1993 87 33
1994 61 28
1995 93 58
</TABLE>
Fiscal Year Ended December 31
* Total return assumes reinvestment of dividends.
** ENSCO International Incorporated, Global Marine, Inc., Noble Drilling Corp.,
and Reading & Bates Corp.
15
<PAGE> 18
STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSAL NO. 1 PERTINENT
TO DECLASSIFYING THE COMPANY'S BOARD OF DIRECTORS
The New York City Employees' Retirement System ("NYCERS"), owner of 259,100
shares of the Company's Common Stock, has informed the Company through its
investment adviser and Trustee, Mr. Alan G. Hevesi, Comptroller of the City of
New York, of its intention to offer the following proposal which, along with its
supporting statement, are reprinted herein exactly as submitted.
BE IT RESOLVED, that the stockholders of Rowan Companies request that the
Board of Directors take the necessary steps to declassify the Board of Directors
and establish annual elections of directors, whereby directors would be elected
annually and not by classes. This policy would take effect immediately, and be
applicable to the re-election of any incumbent director whose term, under the
current classified system, subsequently expires.
SUPPORTING STATEMENT
We believe that the ability to elect directors is the single most important
use of the shareholder franchise. Accordingly, directors should be accountable
to shareholders on an annual basis. The election of directors by classes, for
three-year terms, in our opinion, minimizes accountability and precludes the
full exercise of the rights of shareholders to approve or disapprove annually
the performance of a director or directors.
In addition, since only one-third of the Board of Directors is elected
annually, we believe that classified boards could frustrate, to the detriment of
long-term shareholder interest, the efforts of a bidder to acquire control or a
challenger to engage successfully in a proxy contest.
We urge your support for the proposal which requests the Board of Directors
to take the necessary steps to repeal the classified board and establish that
all directors be elected annually.
STATEMENT OF THE BOARD OF DIRECTORS AND
MANAGEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL NO. 1
The proponent's proposal urges the Corporation's Board of Directors to
declassify the Board and establish annual elections for all directors. The Board
believes declassification of the Board of Directors would negatively affect the
continuity and stability of the Corporation's governance and have a negative
impact on its long term policies.
One of the more important attributes of corporate governance is its
continuity. The classification of the Board strengthens continuity by requiring
that a majority of the Board has some prior experience overseeing the
Corporation's operations.
In addition, the Board believes that the proposal might prevent it from
protecting the interests of all stockholders in a variety of situations,
especially in addressing proposals or actions by a substantial stockholder or
stockholder group interested solely in short term interests that may not be in
the best interest of the Corporation as a whole in the long run.
PURPOSE AND EFFECT OF THE CLASSIFIED BOARD
The classified Board is designed primarily to discourage in advance hostile
tender offers and to promote arms-length negotiations in connection with any
proposed business combination or takeover. This would be accomplished by
extending the time required to change a majority of the Board of Directors from
one to two annual elections (assuming no death, resignations or removals for
cause) and prohibiting the summary removal by a majority stockholder of all
directors elected by the public. The Board believes that the ability to delay an
outsider seizing control of the Board gives the Directors, at a minimum,
additional bargaining power to force negotiations. In addition, it serves as an
incentive for a possible tenderor to acquire eighty percent of
16
<PAGE> 19
the outstanding voting shares (rather than a controlling minority or a simple
majority) in order to eliminate the staggered board and obtain immediate control
of the Board.
By making it more difficult for a dissident stockholder to gain control of
the Board without its consent, the classified Board increases the likelihood of
continuity in the policies and business strategy of the Corporation and provides
the Board with sufficient time to review any proposal and appropriate
alternatives thereto to maximize stockholder value.
Under Delaware corporate law, members of the Board must perform their
duties in good faith, with due care and prudently in the best interest of the
Corporation and its stockholders. The classified structure does not alter the
Board's legal duties. Directors may be removed at any time for cause for
breaching their fiduciary duties.
ROWAN'S CLASSIFIED BOARD
Pursuant to the Corporation's Certificate of Incorporation, the
Corporation's Board of Directors is divided into three classes of directors to
serve three-year terms. Each class of directors is elected once every three
years by a majority of the stockholders.
The attributes of classified governance are recognized by Delaware
corporation law, which specifically set forth for Delaware corporations the
parameters for classification of the board into a maximum of three classes.
RECOMMENDATION OF THE BOARD
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST APPROVAL OF STOCKHOLDER
PROPOSAL NO. 1 ON REPEAL OF THE CLASSIFIED BOARD.
STOCKHOLDER PROPOSAL NO. 2 PERTINENT
TO MATTERS ASSOCIATED WITH THE STOCKHOLDER RIGHTS AGREEMENT
The State of Wisconsin Investment Board, owner of 5,430,900 shares of the
Company's Common Stock, has submitted the following proposal which, along with
its supporting statement, are reprinted herein exactly as submitted.
WHEREAS, the Rowan Companies Board (the "Board") unilaterally adopted a
shareholder rights plan commonly referred to as a "poison pill" which
discriminates against certain shareholders; and
WHEREAS, the Board has refused to voluntarily submit either the "pill"
itself, or any amendments, to a shareholder vote, and we believe that it is in
the shareholders' best interests that the Board refrain from unilaterally
adopting or amending such plans in the future;
NOW THEREFORE, BE IT RESOLVED, that the Board is hereby requested to amend
the Bylaws of the corporation by adding the following new section:
Prior to issuing or amending any rights plan, similar or identical to
that adopted in 1992, or any other type of rights plan, the Board shall
submit such plan or amendment to a binding vote of the shareholders. Any
such plan thereafter in effect shall be submitted to a binding vote
every three years.
SUPPORTING STATEMENT
Rowan's "pill" provides that, when triggered by anyone (or a group)
acquiring the applicable percentage of its common stock (the "Acquiring Person")
such shareholder's stock will be greatly diluted both in net asset value per
share and in voting rights by, in effect, multiplying the voting and economic
rights of all other shareholders. The plan gives the Board discretion to achieve
this dilution in a number of ways.
We believe that these discriminatory provisions, which permit the Board, in
its sole discretion, to discriminate against given shareholders, solely because
of their opposition to management or accumulated
17
<PAGE> 20
holdings, violate fundamental principles of fairness and classical principles of
corporate law requiring all shares of the same class to be treated identically.
We believe the ability of management, to unilaterally treat shareholders
unequally will inevitably undermine public confidence in the stock markets.
We do not oppose all "poison pills". However, we believe that Rowan's
"pill" so materially affects the rights of shareholders that further amendment
of it, or the creation of new "pills", should require shareholder consent.
Because Rowan's Board refuses to agree to any limitation on their discretion to
issue new versions of the "pill", no matter how egregious such versions may be,
we believe that a By-Law amendment requiring shareholder consent to the terms of
the "pill" is necessary.
STATEMENT OF THE BOARD OF DIRECTORS AND
MANAGEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL NO. 2
This proponent's proposal urges the Corporation's Board of Directors to
amend the Corporation's Bylaws to provide for (i) stockholder approval of any
amendment to Rowan's Rights Plan (the "Rights Plan") or a new issuance of any
rights plan and (ii) periodic reapproval of any stockholder rights plan by the
stockholders every three years. The Board believes such modifications to the
Bylaws of the Corporation could ultimately remove the Board's ability to
exercise an important protection -- the ability of the Board to timely and
definitively respond to and potentially maximize takeover bids -- that was
designed to protect the interest of stockholders. These modifications could
potentially deprive stockholders of substantial economic benefits in the future.
In addition, the Board believes that the proponent's assertions that the Rights
Plan discriminates against certain stockholders, that the Board refuses to limit
its discretion in adopting new versions of the plan and that the sole effect of
the plan is to dilute stockholder interest are incorrect and unsupported.
JUSTIFICATION FOR STOCKHOLDER RIGHTS PLANS
Approximately 70% of the 200 largest companies on the Fortune 500 list have
adopted stockholder rights plans, which were developed in the 1980s to counter a
wide range of coercive tactics which had become common in hostile takeovers. The
principal function of a rights plan is to encourage potential bidders to
negotiate with the board of a target corporation and to provide the board with
the ability to prevent abusive and coercive takeover tactics that may minimize
the value of stockholder interest in the corporation. Rights plans give boards
time to evaluate offers, investigate alternatives and take steps necessary to
maximize value for all stockholders.
A consensus has gradually emerged among major U.S. corporations that
stockholder rights plans do achieve their designed purpose and assist directors
in fulfilling their fiduciary duty to all stockholders. Many of these
corporations apparently found adoption of a stockholder rights plan to be a
prudent step to take to protect stockholder interests even though they were not
the subject of takeover bids. The Securities and Exchange Commission has also
stated in a 1988 release that one of the reasons corporations adopt stockholder
rights plans is to "encourage the development of an auction for the Corporation
resulting in shareholders receiving a higher price for their stock."
ADDRESSING IMPLICATIONS RAISED BY THE PROPONENT
Contrary to implications in the proponent's supporting statement, Rowan's
Rights Plan is typical of the plans adopted by U.S. corporations. The plan is
designed to deter a bidder from acquiring control of the Corporation without
first negotiating with the Board as well as to deter abusive takeover tactics
that do not treat all stockholders fairly and equally, such as market
accumulations that do not offer a premium to all stockholders and partial and
two-tier tender offers. A bidder who chooses to bypass the Board may be pursuing
its own interests and may not be concerned with the interests of the other
stockholders. The Rights Plan allows the Board an opportunity to assess the
adequacy and fairness of any offer and protect stockholders against potential
abuses during the takeover process. It is not intended to prevent a takeover of
the Corporation on terms that are fair and equitable to all stockholders. The
Board may, pursuant to the terms of the Rights Plan, redeem the rights to permit
an acquisition that it deems adequately reflects the value of the Corporation
and to be in the best interests of all stockholders. The Company believes that
requiring stockholder approval of any
18
<PAGE> 21
amendments to the Rights Plan (which would require several weeks to obtain)
would render the Board unable to react in time to the rapidly developing
challenges typical of hostile takeover attempts. The Board believes that to tie
its hands in this way would be very unwise in that it would deprive stockholders
of an important protection against unfair takeover attempts and, ultimately,
reduce the long-term value for all stockholders.
In conclusion, the Board believes that it has been proven in the
marketplace over and over again that Rights Plans are in the best interest of
stockholders. Rowan's Board believes the Rights Plan it has adopted is in the
best interest of Rowan's stockholders.
The Board of Directors believes that it has assembled a qualified and
competent management team that is responsive to stockholders' interests. The
Board of Directors further believes the existence of the Rights Plan has helped
encourage management to focus its energies on satisfactory long-term performance
to increase existing stockholder value in the Corporation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST APPROVAL OF STOCKHOLDER
PROPOSAL NO. 2 REGARDING STOCKHOLDER RIGHTS PLANS.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION; CERTAIN TRANSACTIONS
Between April and June 1995, the Company recorded revenues of approximately
$2,755,000 attributable principally to contract drilling services performed by
the Company in the Gulf of Mexico for a subsidiary of United Meridian
Corporation ("United Meridian"). Mr. Ralph E. Bailey who is a Class II Director
standing for re-election and who served on the Compensation Committee during
1995, currently serves on the boards of both United Meridian and such subsidiary
and, until May 1995, served as Chairman of the Board of United Meridian. The
Company's rig providing such service was under contract to drill a well operated
by and on behalf of the United Meridian subsidiary's exploration program. The
Company believes that the terms of such drilling contract provided for rates
comparable to those then being received by the Company from third parties for
similar rigs in the area.
Mr. Peter Simonis, a Class III Director of the Company, received in 1995
1,000 Pound Sterling for services as Chairman of the Board of British American
Offshore Limited. In addition, an annual fee of 14,000 Pound Sterling was paid
in 1995 by British American Offshore Limited to Kismire Limited, a management
consulting company of which Mr. Simonis is a director. British American is a
wholly owned subsidiary of the Company organized to perform contract drilling
services in the U.K. sector of the North Sea utilizing rigs owned by the Company
or others.
Mr. C. W. Yeargain, a Class II Director standing for re-election and an
Executive Vice President of the Company until his retirement in March 1991,
earned and was paid by the Company $87,500 in consulting fees in 1995.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has been selected as principal auditors
for the Company for the year ending December 31, 1995. A representative of
Deloitte & Touche is expected to be present at the Annual Meeting of
Stockholders on April 26, 1996 and will be offered the opportunity to make a
statement if he desires to do so. He will also be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the
1997 Annual Meeting of Stockholders must forward such proposal to the Secretary
of the Company, at the address indicated on the cover page of this proxy
statement, so that the Secretary receives it no later than November 11, 1996.
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FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
AND ANY FINANCIAL STATEMENT SCHEDULES THERETO. THE COMPANY WILL FURNISH TO ANY
SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING THE FORM 10-K, UPON
THE PAYMENT, IN ADVANCE, OF REASONABLE FEES RELATED TO THE COMPANY'S FURNISHING
SUCH EXHIBIT(S). REQUESTS FOR COPIES OF SUCH REPORT AND/OR EXHIBIT(S) SHOULD BE
DIRECTED TO MR. MARK H. HAY, SECRETARY OF THE COMPANY, AT THE COMPANY'S
PRINCIPAL ADDRESS AS SHOWN ON THE COVER PAGE HEREOF.
OTHER BUSINESS
Management of the Company does not know of any other matters which are to
be presented for action at the meeting. However, if any other matters properly
come before the meeting, it is intended that the enclosed proxy will be voted in
accordance with the discretion of the persons voting the proxy unless otherwise
designated thereon.
BY THE ORDER OF THE BOARD OF DIRECTORS
/s/ C.R. PALMER
Chairman
March 11, 1996
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[ROWAN COMPANIES, INC. LOGO]
<PAGE> 24
PROXY
ROWAN COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. R. Palmer and Mark H. Hay proxies, each
with power to act without the other and with full power of substitution, and
hereby authorizes each of them to represent and vote, as designated below, all
the shares of stock of Rowan Companies, Inc. ("Company") standing in the name of
the undersigned with all powers which the undersigned would possess if present
at the Annual Meeting of Stockholders of the Company to be held April 26, 1996
or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF CLASS II DIRECTORS
/ / FOR all nominees listed below / / AGAINST all nominees listed below / / ABSTAIN
(except as marked to the
contrary below)
</TABLE>
(INSTRUCTION: To vote against any individual nominee strike a line
through the nominee's name in the list below.)
Ralph E. Bailey Hon. Colin Moynihan C. W. Yeargain
2. SHAREHOLDER PROPOSAL NO. 1 PERTINENT TO DECLASSIFYING THE BOARD OF
DIRECTORS:
/ / FOR / / AGAINST / / ABSTAIN
3. SHAREHOLDER PROPOSAL NO. 2 PERTINENT TO THE SHAREHOLDER RIGHTS AGREEMENT:
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED, AND TO BE DATED AND SIGNED, ON THE OTHER SIDE)
<PAGE> 25
(CONTINUED FROM OTHER SIDE)
4. With discretionary authority on any other matter which may properly come
before the meeting.
IF CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED AS INDICATED. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES AND AGAINST BOTH
SHAREHOLDER PROPOSALS AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSONS
VOTING THE PROXY WITH RESPECT TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE MEETING. ALL PRIOR PROXIES ARE HEREBY REVOKED.
---------------------------------
SIGNATURE
---------------------------------
SIGNATURE
Dated , 1996
---------------------
Please complete, date, sign and return this proxy promptly in the enclosed
envelope. Sign exactly as name appears hereon. Executors, administrators,
trustees, etc. should so indicate when signing. If the signature is for a
corporation, please sign full corporate name by authorized officer. If shares
are registered in more than one name, all holders must sign.
