<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 sec. 240.14a-11(c) or sec. 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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:
- - --------------------------------------------------------------------------------
<PAGE> 2
ROWAN COMPANIES, INC.
5450 TRANSCO TOWER, 2800 POST OAK BOULEVARD
HOUSTON, TEXAS 77056-6196
C. R. PALMER
CHAIRMAN OF THE BOARD
March 13, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Rowan Companies, Inc., which will be held in the Transco Auditorium located on
Level 2 of the Transco Tower, 2800 Post Oak Boulevard, Houston, Texas, on
Friday, April 24, 1998 at 9:00 A.M., Houston time. Your Board of Directors and
management look forward to greeting personally those stockholders able to
attend.
At the meeting, stockholders will be asked to elect three Class I Directors
and to vote on three proposals submitted by the Board of Directors of the
Company. These proposals are more fully described in the accompanying proxy
statement, which you are urged to read carefully. Your Board of Directors
recommends a vote FOR the election of the three nominees for Class I Director
and FOR each of the three proposals.
Regardless of the number of shares you own or whether you plan to attend,
it is important that your shares be represented and voted at the meeting. You
are requested to sign, date and mail the enclosed proxy promptly.
Both your interest and participation in the affairs of the Company are most
appreciated.
Sincerely,
/s/ C. R. Palmer
C. R. Palmer
Chairman, President and
Chief Executive Officer
<PAGE> 3
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 24, 1998
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 24, 1998 at 9:00 A.M., Houston time, for the following purposes:
1. To elect three Class I 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 Proposal 1., the approval of the Rowan
Companies, Inc. 1998 Nonemployee Director Stock Option Plan, such
proposal being favored by the Board of Directors.
3. To consider and vote upon Proposal 2., the approval of the Rowan
Companies, Inc. 1998 Convertible Debenture Incentive Plan, such
proposal being favored by the Board of Directors.
4. To consider and vote upon Proposal 3., the approval of the amendment
and restatement of the Rowan Companies, Inc. 1988 Nonqualified Stock
Option Plan, such proposal being favored by the Board of Directors.
5. To transact such other business as may properly come before such
meeting or any adjournment thereof.
February 27, 1998 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
Mark H. Hay
Secretary
March 13, 1998
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND MAIL BACK THE
ACCOMPANYING PROXY IN THE ENCLOSED RETURN ENVELOPE AT YOUR EARLIEST CONVENIENCE.
<PAGE> 4
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 24, 1998 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. The Company has
retained D. F. King & Co., Inc. to solicit proxies at an estimated cost of
$7,500, plus reasonable expenses. 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 mailed or
delivered to stockholders on or about March 13, 1998.
VOTING SECURITIES OUTSTANDING
At the close of business on February 27, 1998, the record date for
determining those stockholders entitled to notice of and to vote at the Annual
Meeting of Stockholders, there were outstanding 86,864,282 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> 5
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 27, 1998, by the directors, the five 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 50,000
Henry O. Boswell 67,600(3)
R. G. Croyle 180,231(4)
H. E. Lentz 25,200(5)
D. F. McNease 148,162
Lord Moynihan 1,000
C. R. Palmer 1,121,514(6)
Wilfred P. Schmoe 7,000
Charles P. Siess, Jr. 7,000
C. W. Yeargain 233,202
Executive Officers (not Directors):
E. E. Thiele 230,518
Paul L. Kelly 59,375
All Directors and Executive Officers as a group (23 in
number) 2,517,534
</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 2.90% of
the outstanding shares of Common Stock; no continuing director, nominee or
executive officer owned more than 1.29% of the Common Stock. Included
herein are shares of Common Stock that may be acquired through April 28,
1998 through the conversion of 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 III Debentures and Options -- 518,519 and 248,750 shares,
respectively; R. G. Croyle -- Series III Debentures and Options -- 81,481
and 92,750 shares, respectively; D. F. McNease -- Series III Debentures and
Options -- 107,407 and 39,750 shares, respectively; E. E. Thiele -- Series
III Debentures and Options -- 118,518 and 41,250 shares, respectively; Paul
L. Kelly -- Options -- 19,375 shares; and all directors and executive
officers as a group -- the Series III Debentures and Options -- 907,406 and
562,875 shares, respectively.
(3) Includes 23,000 shares held by Dome Lake Investments, Ltd., in which Mr.
Boswell and his wife hold a 59% interest in the general partner's 99%
interest and a 60% interest in the limited partner's 1% interest. Mr.
Boswell disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest. Also included are 17,100 shares owned by Mr.
Boswell's wife. Mr. Boswell disclaims beneficial ownership of such shares.
(4) Includes 1,000 shares owned by Mr. Croyle's son. Mr. Croyle disclaims
beneficial ownership of such shares.
(5) 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.
(6) Includes 3,132 shares held in a charitable foundation for which Mr. Palmer
is one of three trustees. Mr. Palmer has no pecuniary interest in such
shares.
2
<PAGE> 6
PRINCIPAL STOCKHOLDERS
The table below sets forth, as of February 27, 1998, 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 11,275,254(2) 13.0%(2)
Incorporated
1290 Avenue of the Americas
New York, New York 10104;
AXA - UAP
23, Avenue Matignon
75008 Paris, France;
The Mutuelles AXA Group
detailed in (2) below
Common Stock Soros Fund Management LLC 7,796,000(3) 9.0%(3)
888 Seventh Avenue, 33rd Floor
New York, New York 10106;
George Soros
888 Seventh Avenue, 33rd Floor
New York, New York 10106;
Stanley F. Druckenmiller
888 Seventh Avenue, 33rd Floor
New York, New York 10106;
Duquesne Capital Management LLC
2579 Washington Road, Suite 322
Pittsburgh, Pennsylvania 15241
</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. 7
dated February 10, 1998 to its Schedule 13G, filed pursuant to the
Securities Exchange Act of 1934 (the "1934 Act"). Such amended Schedule 13G
also stated that The Equitable Companies Incorporated ("Equitable") and the
AXA-UAP Companies described below as a group had sole voting power and
shared voting power with respect to 4,986,234 shares and 6,217,000 shares,
respectively, and sole dispositive power and shared dispositive power with
respect to 11,275,060 shares and 194 shares, respectively. Furthermore,
based on information also contained in that amended Schedule 13G, 3,713,900
shares, 7,561,160 shares and 194 shares of the shares shown above were
beneficially owned by Equitable's subsidiaries, The Equitable Life
Assurance Society of the United States ("Equitable U.S."), Alliance Capital
Management L.P. ("Alliance Capital") and Donaldson, Lufkin & Jenrette
Securities Corporation ("Donaldson"), respectively, and that Equitable U.S.
had sole voting power and shared voting power with respect to 3,632,900
shares and 81,000 shares, respectively, and sole dispositive power with
respect to 3,713,900 shares; Alliance Capital had sole voting power and
shared voting power with respect to 1,353,334 shares and 6,136,000 shares,
respectively, and sole dispositive power with respect to 7,561,160 shares;
and Donaldson
3
<PAGE> 7
had shared dispositive power with respect to 194 shares. AXA-UAP and the
four mutual insurance companies comprising The Mutuelles AXA Group, namely
Alpha Assurances Vie Mutuelle located at 100-101 Terrasse Boieldieu, 92042
Paris La Defense France, and AXA Assurances I.A.R.D. Mutuelle and AXA
Assurances Vie Mutuelle, both located at 21, rue de Chateaudun, 75009 Paris
France and AXA Courtage Assurance Mutuelle located at 26, rue Louis le
Grand, 75002 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 stockholders' Schedule 13G dated
March 6, 1998, filed pursuant to the 1934 Act. Such Schedule 13G also stated
that Soros Fund Management LLC ("SFM LLC") beneficially owned 6,211,000
shares and had sole voting and sole dispositive power with respect to
6,094,000 shares. The principal business of SFM LLC is to serve as the
principal investment manager to several foreign investment companies
including Quantum Fund and Quantum Partners located at Kaya Flamboyan 9,
Willemstad, Curaco Netherlands Antilles ("Quantum"). Such 13G also stated
that George Soros beneficially owned 6,901,000 shares, had sole voting and
sole dispositive power with respect to 690,000 shares and had shared voting
and shared dispositive power with respect to 6,094,000 shares. The principal
occupation of Mr. Soros, a United States citizen, is to direct the
activities of SFM LLC in his capacity as its Chairman. Additionally, he
exercises, in his capacity as one of two general partners, voting and
dispositive power over the investment accounts of Lupa Family Partners
("Lupa"), a New York limited partnership located at 888 Seventh Avenue, 32nd
Floor, New York, New York. Such Schedule 13G also stated that Stanley F.
Druckenmiller beneficially owned 7,223,000 shares, had sole voting and sole
dispositive power with respect to 1,012,000 shares and had shared voting and
shared dispositive power with respect to 6,094,000 shares. The principal
occupation of Mr. Druckenmiller, a United States citizen, is to direct the
investment decisions of SFM LLC in his capacity as its Lead Portfolio
Manager. Such Schedule 13G also stated that Duquesne Capital Management LLC
("Duquesne") beneficially owned and had sole voting and sole dispositive
power with respect to 1,012,000 shares. The principal business of Duquesne
is to serve as discretionary investment advisor to a limited number of
institutional clients. Mr. Druckenmiller owns a 75% interest in, and is sole
managing member of, Duquesne. Included in the beneficially owned totals of
SFM LLC, Mr. Soros and Mr. Druckenmiller are 117,000 shares for which SFM
LLC, on behalf of Quantum, has contractually granted investment discretion
to Cambridge Investments Ltd. of California ("Cambridge"), with SFM LLC
having the ability to acquire voting and dispositive power over such shares
within 60 days. SFM LLC expressly disclaims beneficial ownership of any
shares held for the accounts of Lupa, Mr. Soros and Duquesne. Mr. Soros
expressly disclaims beneficial ownership of any shares held for the accounts
of Duquesne. Mr. Druckenmiller expressly disclaims beneficial ownership of
any shares held for the account of Lupa and Mr. Soros. Duquesne expressly
disclaims beneficial ownership of any shares held for the accounts of
Quantum, Lupa and Mr. Soros.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 during the year ended December 31,
1997.
4
<PAGE> 8
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 27, 1998 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 I 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 I Director
nominees identified on page 6.
The three Board of Director 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 a vote cast in favor of the three Board of Director
proposals.
In determining the number of votes cast, shares abstaining from voting on
such matters 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 II consist of three directors each and Class III consists of four
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 I Directors are to be elected at the 1998 Annual Meeting of Stockholders.
The Nominating Committee has determined that it would be in the best
interest of the stockholders and the Company that the three current Class I
Directors, H. E. Lentz, Wilfred P. Schmoe and Charles P. Siess, Jr., be selected
to be the Class I Director Nominees.
At their respective January 22, 1998 meetings, the Nominating Committee
recommended, and the Board of Directors approved effective as of that date,
increasing the number of Class III directors from two to four directors and the
size of the board from eight to ten members. In accordance with the Company's
Certificate of Incorporation and its bylaws, the remaining Class III Directors
made the necessary appointments to fill the newly created vacancies, with R. G.
Croyle -- Executive Vice President and D. F. McNease -- Senior Vice President,
Drilling being the individuals so appointed.
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 I Director nominees listed on page 6. 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 select a replacement nominee in accordance with its best
judgment.
5
<PAGE> 9
The table below sets forth certain information regarding the nominees for
director and continuing directors as of February 27, 1998.
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 I (TERM EXPIRES IN 2001)
- - ------------------------------- ----------------------------------------------------
<S> <C> <C> <C>
H. E. Lentz Managing Director of Lehman Brothers Inc. 53 1990
(investment bankers) since March 1993; Investment
Banker for Wasserstein Perella & Co., Inc. (March
1988 through February 1993).
Wilfred P. Schmoe Retired; formerly Executive Vice President, Director 70 1992
(a)(b)(e) and member of the Executive Committee (May 1984 to
November 1988) of E.I. DuPont de Nemours & Co.
(diversified chemical/energy conglomerate).
Charles P. Siess, Jr. Chairman of the Board and Chief Executive Officer of 71 1991
(a)(b)(c)(e) Cabot Oil & Gas Corporation since May 1995 and from
December 1989 to December 1992; Consultant and
Acting General Manager of Bridas S.A.P.I.C. Oil
Exploration (January 1993 to January 1994).
CONTINUING DIRECTORS CLASS II (TERM EXPIRES IN 1999)
- - ------------------------------- ----------------------------------------------------
Ralph E. Bailey Chairman of the Board and, until February 1996, 73 1993
(b)(d)(e) Chairman of the Board and Chief Executive Officer of
American Bailey Corporation (manufacturing and
energy investments); Chairman of the Board of Clean
Diesel Technologies, Inc. (diesel fuel additives)
since June 1996; until May 1995, Chairman of the
Board of United Meridian Corporation (oil and gas
exploration and production); and since March 1996,
Chairman of the Board and Chief Executive Officer of
XPRONET Inc. (oil and gas exploration).
Lord Moynihan Senior Partner of London-based Colin Moynihan 42 1996
(d) 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 of LeTourneau, Inc.; Executive 72 1975
(c)(d) Vice President of the Company until retiring in
March 1991(3).
CONTINUING DIRECTORS CLASS III (TERM EXPIRES IN 2000)
- - ------------------------------- ----------------------------------------------------
Henry O. Boswell Retired; formerly President (1983-1987) of Amoco 68 1988
(a)(b)(c)(d)(e) Production Company (oil and gas production).
R. G. Croyle Executive Vice President of the Company since 55 1998
October 1993; Vice President, Legal (1983-1993)(4).
D. F. McNease Senior Vice President of the Company since October 46 1998
1993; Vice President, Drilling (1991-1993)(4).
C. R. Palmer Chairman of the Board, President and Chief Executive 63 1969
(c)(d) Officer of the Company(4).
</TABLE>
(Table continued on the following page)
6
<PAGE> 10
(1) Directorships other than those listed in the table are as follows: Henry O.
Boswell is a director of Service Master Company and Cabot Oil & Gas
Corporation; H. E. Lentz is a director of Imperial Holly Corporation; Lord
Moynihan is a director of Ranger Oil Limited and Charles P. Siess, Jr. is a
director of Cabot Corporation and Camco, Inc.
(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 1997. All
directors attended at least 75% of the 1997 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 22.
(4) Information regarding the compensation of Messrs. Croyle, McNease and Palmer
is disclosed in the Summary Compensation Table under "Executive
Compensation" on page 14.
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 1997.
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 three meetings in 1997.
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. Any such stockholder recommendations must
be submitted not less than 60 days prior to the date of the anniversary of the
annual meeting held in the prior year and, in the case of a special meeting, not
more than ten days following the earlier of the date of the meeting notice or
the public announcement notice. The Nominating Committee held one meeting in
1997.
The Executive Committee has the authority to exercise all of the powers of
the Board in the management of the business and affairs of the Company, except
for certain qualifications noted in the Company's Bylaws. The Executive
Committee did not hold any meetings in 1997.
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 two meetings in 1997.
7
<PAGE> 11
PROPOSAL 1.
APPROVAL OF THE 1998 NONEMPLOYEE DIRECTORS
STOCK OPTION PLAN
YOUR BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE PROPOSED 1998 ROWAN
NONEMPLOYEE DIRECTORS STOCK OPTION PLAN (THE "DIRECTORS STOCK OPTION PLAN" OR
"PLAN").
The Board of Directors believes that the adoption of the Directors Stock
Option Plan will promote the interests of the Company and its stockholders by
providing a means by which directors of Rowan who are not employees of the
Company or its subsidiaries may develop a sense of proprietorship and personal
involvement in the development and financial success of the Company while more
closely aligning their economic interests with those of the stockholders. The
Board of Directors also contemplates that the Plan will enable the Company to
compete more effectively for highly qualified directors whose services will
promote the continued growth and success of the Company, thereby advancing the
interests of its stockholders.
PRINCIPAL FEATURES OF THE PLAN
The following summary of the principal features of the Directors Stock
Option Plan is qualified in its entirety by reference to Appendix A commencing
on page A-1.
(1) Term.
The Directors Stock Option Plan shall, subject to approval of the
stockholders at this meeting, be deemed to have commenced on April 24, 1998, the
date of its adoption by the Board of Directors, and shall remain in effect until
April 24, 2013, unless terminated by the Board of Directors at an earlier date.
(2) Stock Subject to the Plan.
The Plan provides for the issuance of up to 200,000 shares of Common Stock,
subject to adjustment to reflect any future changes in the capitalization of the
Company including, but not limited to, such changes as stock splits or stock
dividends, mergers, consolidations or other reorganizations. In the event of
such occurrence, adjustment in the number of shares subject to option and in the
option price will be made to give effect thereto as though such shares were
outstanding at and immediately prior to the occurrence of the event requiring an
adjustment.
(3) Administration.
The Directors Stock Option Plan will be administered by action of the full
Board of Directors of the Company. The directors to be granted options, the
number of options to be granted and the terms and conditions of each option
grant including the option price shall be determined by the Board of Directors.
All such determinations, decisions, interpretations and orders made by the Board
pursuant to the Directors Stock Option Plan shall be final, conclusive and
binding on all nonemployee directors and their estates and beneficiaries.
(4) Eligibility.
Option grants may be made only to individuals who are directors of Rowan
Companies, Inc. and who are not also employees of Rowan or its subsidiaries at
the time that the option is granted. Currently there are seven directors who
qualify to participate in the Directors Stock Option Plan.
(5) Grants of Options.
Each option grant will be evidenced by a written agreement between the
Company and the nonemployee director optionee, such agreement containing those
terms and conditions as may be approved by the Board.
Option grants will generally not be transferable other than by will or the
laws of descent and distribution. The Board may, in its discretion, provide an
option agreement which permits the transfer of the option, in
8
<PAGE> 12
whole or in part and subject to certain conditions and limitations, from the
nonemployee director optionee to his immediate family members, a trust or trusts
for the exclusive benefit of his immediate family members, to a partnership or
limited liability company in which he and his family members are the only
partners, shareholders or members or to a charitable organization exempt under
Section 501(c)(3) of the Internal Revenue Code.
Present plans contemplate granting options for a maximum term of five
years, such options being 100% exercisable after one year from the date of
grant. The exercise price of the options would equal the fair market value of
the Company's Common Stock determined by the mean of the high and low sales
prices reported on the New York Stock Exchange on the composite tape on the date
of grant.
(6) Federal Income Tax Consequences.
Options granted pursuant to the Directors Stock Option Plan are
nonstatuatory options and thereby do not qualify for special federal income tax
treatment. As a general rule, no tax is imposed on the nonemployee director
optionee upon the grant of a nonstatuatory option. Upon the exercise of a
nonstatuatory option, the nonemployee director optionee will be treated as
receiving compensation taxable as ordinary income in the year of exercise in an
amount equal to the excess of the fair market value of the shares at the time of
exercise over the option price paid for such shares. The Company may claim a
deduction at the time and in the same amount as compensation income is
recognized by the nonemployee director optionee.
(7) Amendment of the Plan.
The Directors Stock Option Plan or any part thereof may be amended from
time to time by the Board of Directors which, at its discretion, may also
terminate the Plan at any time with respect to any shares for which options have
not theretofore been granted. The Board may not, however, change any option
previously granted such that it would materially impair the rights of the
nonemployee director optionee without his consent. Furthermore, the Board may
not, without the consent of the stockholders, make any amendment or alteration
which would materially increase the benefits accruing to nonemployee director
participants, increase the number of shares issuable (other than an increase
reflecting a stock dividend or stock split) or extend the term of the Plan.
Approval of Proposal 1. will require the affirmative vote of a majority of
the shares of the Company's Common Stock present in person or by proxy and
voting at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL OF PROPOSAL 1.
PROPOSAL 2.
APPROVAL OF THE 1998 CONVERTIBLE DEBENTURE
INCENTIVE PLAN
YOUR BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE PROPOSED ROWAN 1998
CONVERTIBLE DEBENTURE INCENTIVE PLAN (THE "EMPLOYEE DEBENTURE PLAN" OR "PLAN").
The Board of Directors believes that the adoption of the Employee Debenture
Plan, as an adjunct to the Company's 1986 Convertible Debenture Incentive Plan
(the "1986 Plan") under which no additional offerings may be made, will permit
the Company to continue to offer to officers and other key personnel of the
Company and its subsidiaries the opportunity to invest in up to $30,000,000 in
aggregate principal amount of corporate debt in the form of the Company's
floating interest rate subordinated debentures (the "Debentures") which are
convertible into shares of Preferred Stock, $1.00 par value, of the Company
("Preferred Stock"), which shares of Preferred Stock are convertible into Common
Stock of the Company. The Board of Directors believes the Plan will enable the
Company and its subsidiaries to compete more effectively for the services of
highly qualified management personnel and will give officers and key personnel
added incentive to work for the continued growth and success of the Company,
thereby advancing the interests of its stockholders.
9
<PAGE> 13
PRINCIPAL FEATURES OF THE PLAN
The following summary of the principal features of the Employee Debenture
Plan is qualified in its entirety by reference to Appendix B commencing on page
B-1. In most material respects, the Employee Debenture Plan corresponds to the
Company's 1986 Convertible Debenture Incentive Plan.
(1) Term.
The Employee Debenture Plan shall become effective on April 24, 1998
subject to its approval by the Company's stockholders and shall expire when all
of the Company's obligations with respect to all outstanding Debentures have
been discharged. No Debenture may be issued after April 24, 2008.
(2) Administration of the Plan.
The Employee Debenture Plan provides for administration by a committee of
the Board of Directors (the "Committee") consisting of three or more persons,
each of whom is a "disinterested person" within the meaning of Rule 16b-3(d)(3)
under the Securities Exchange Act of 1934 (the "1934 Act"). The Company expects
that the members of the Committee will be selected by the Board of Directors at
the first meeting of the Board of Directors following approval of the Plan by
the stockholders of the Company.
Within the limitations of the Employee Debenture Plan, the Committee will
have broad authority to interpret, amend, suspend or terminate the Plan and to
make all determinations necessary or advisable for the administration of the
Plan. All such determinations, decisions, interpretations and orders made by the
Committee pursuant to the Employee Debenture Plan shall be final, conclusive and
binding on all Debenture holders and their estates and beneficiaries.
No determination has yet been made as to the officers and other key
employees who will be offered the opportunity to purchase Debentures, the
aggregate principal amount of Debentures or the terms and conditions of
Debentures to be offered pursuant to the Plan, other than as set forth in the
Plan. The Company currently expects that approximately 10 officers and key
employees may be selected by the Committee to receive offers to purchase
Debentures under the Plan.
(3) Offer and Sale of Debentures.
The Committee will select the key employees to whom the Debentures will be
offered and will determine the amount and terms of the Debentures to be offered
to each employee. Offers of Debentures may only be made on four dates during any
year, as set forth in the Plan. Payment for Debentures may be made in cash or in
Common Stock of the Company.
The Debentures will be sold to key employees at a price equal to the higher
of (a) face value plus accrued interest to the date of the sale or (b) the fair
market value of the Debentures as determined by an independent investment
banking firm. The Plan contains certain limited tax make-up provisions in the
event the Internal Revenue Service determines the value of a Debenture at the
time of sale exceeded the sale price thereof.
(4) Terms of Debentures.
Debentures shall be issued in series, the terms and conditions of which may
vary among series. Debentures shall bear a floating interest rate and shall be
in such form and denominations as determined by the Committee. Unless earlier
redeemed or converted, each series will be due not earlier than five years, or
later than ten years, from the date of issuance.
The price at which shares of Preferred Stock will be deliverable upon
conversion of a series of Debentures will be set at a price which would equal
the fair market value of the Company's Common Stock determined by the mean of
the high and low sales price reported on the New York Stock Exchange on the
Composite Tape on the date of sale of such series of Debentures, subject to
certain adjustments described in the Plan. The Company expects that the
Preferred Stock will have no voting rights except as required by law or the
Company's charter, will have a nominal dividend, if any, and will have a nominal
liquidation preference. The
10
<PAGE> 14
Company's charter requires that, so long as any shares of preferred stock of the
Company are outstanding, the Company shall not amend, alter or repeal any of the
provisions of its charter so as to adversely affect the rights, powers or
preferences of any one or more series of preferred stock or the holders thereof
without the consent of the holders of at least two-thirds of the total number of
outstanding shares of the several series so affected; provided that the consent
of the holders of only a majority of outstanding shares of preferred stock is
required for an amendment increasing the number of authorized shares of
preferred stock or which authorizes or creates shares of stock ranking on a
parity with the preferred stock as to dividends or as to distribution of assets.
The number of shares of Common Stock which shall be delivered upon conversion of
any shares of a series of Preferred Stock shall not exceed the face value of the
related Debentures which were converted into Preferred Stock, divided by the
mean of the high and low sales price reported on the New York Stock Exchange on
the Composite Tape on the date of sale of such Debentures, subject to certain
adjustments described in the Plan. The Plan provides a limited tax make-up
provision in the event the Internal Revenue Service determines that a conversion
is a taxable transaction. No additional stockholder approval is necessary to
authorize or issue either the Preferred Stock into which the Debentures are
convertible or the Common Stock into which the Preferred Stock is convertible.
The conversion privilege that the Committee may select for any one series
of Debentures offered under the Plan may vary from the conversion privilege for
any other series offered under the Plan. In the case of the first two of the
three series offered under the 1986 Plan, the conversion privilege associated
with those series provided that the Debentures could be exercised at any time
after one year from the date of issuance until the due date of the Debentures,
unless the conversion privilege had been terminated earlier or suspended under
to the terms of the Plan. In the case of the third series offered under the 1986
Plan, the conversion privilege associated with that series provided that the
Debentures could be exercised in somewhat equal portions at any time after one,
two, three and four years from the date of issuance until the Debenture due
date, unless the conversion privilege had been terminated or suspended. At
present, no determination has been made as to the nature of the conversion
privilege to be included in Debenture offerings to be made under the Plan.
With respect to the amounts of time allowed for conversion following the
occurrence of any of the various events constituting termination of employment
and the situation as to any accelerated vesting, the Plan provides for the
following: in the case of retirement, five years and no acceleration unless
specifically approved by the Committee; in the case of death during the five
year period following normal retirement, two years but no acceleration; in the
case of disability while employed, five years and acceleration; and, in the case
of death while employed or death during the five year period following
disability, two years and acceleration. In the event of any other type of
termination of employment, the conversion privilege shall terminate.
As in the case of conversion privilege, the transferability privilege for
one series may differ from that of another series. Series I and II Debentures
under the 1986 Plan were not transferable. After amendment to the 1986 Plan and
each currently outstanding Debenture, the Debenture holders who owned Series III
Debentures were then permitted to transfer the Debentures, in whole or in part
and subject to certain conditions and limitations, from the holder to the
holder's immediate family members, a trust or trusts for the exclusive benefit
of the holder's immediate family members, to a partnership or limited liability
company in which the holder and the holder's family members are the only
partners, shareholders or members, or to a charitable organization exempt under
Section 501(c)(3) of the Internal Revenue Code. No determination has been made
at present as to the nature of the transferability privilege to be included in
Debenture offerings to be made under the Plan.
Debentures may be pledged to a lender (which may be the Company) as
security for loans to provide all or part of the financing to purchase such
Debentures. The Company may make loans to key employees to provide all or part
of the financing to purchase Debentures, as set forth in the Employee Debenture
Plan. The Company currently anticipates that substantially all loans to provide
financing for the Debentures will be made by the Company as opposed to being
made by lending institutions.
The Company may redeem all the Debentures issued under the Plan on 30 days
prior written notice to Debenture holders. Debentures may also be redeemed upon
termination of the conversion privilege with
11
<PAGE> 15
respect thereto in accordance with the terms of the Plan, and upon notice that a
loan for which such Debentures are pledged is in default.
Cash proceeds from the sale of Debentures will constitute general funds of
the Company.
(5) Federal Income Tax Consequences.
Based upon what the Company believes is the current position of the
Internal Revenue Service the Company will not be entitled to a tax deduction at
the time that a Debenture holder acquires a Debenture (unless the fair market
value exceeds the purchase price), at any point in the conversion sequence or at
the time that a Debenture holder sells the Debenture.
(6) Amendment of the Plan.
The Employee Debenture Plan may be amended from time to time by the
Committee which, at its discretion, may also terminate the Plan. The Committee
may not, however, terminate a Debenture or otherwise do anything to adversely
affect the rights of the Debenture holder without the holder's consent.
Furthermore, the Committee may not, without the consent of the stockholders,
make any amendment or alteration which would materially increase the number of
shares issuable under the Plan (other than an increase reflecting a stock
dividend or stock split), change the persons eligible to purchase Debentures
under the Plan, change the benefits under the Plan, extend the term of the Plan
or cause the Plan to fail to meet the requirements of Rule 16b-3 of the 1934
Act.
Approval of Proposal 2. will require the affirmative vote of a majority of
the shares of the Company's Common Stock present in person or by proxy and
voting at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL OF PROPOSAL 2.
PROPOSAL 3.
APPROVAL OF AMENDMENT AND RESTATEMENT OF THE 1988
NONQUALIFIED STOCK OPTION PLAN
YOUR BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE PROPOSED AMENDMENT AND
RESTATEMENT OF THE ROWAN 1988 NONQUALIFIED STOCK OPTION PLAN (THE "EMPLOYEE
STOCK OPTION PLAN" OR THE "PLAN").
The Board of Directors believes that amending the Employee Stock Option
Plan will permit the Company to continue providing a means whereby certain
employees of the Company and its subsidiaries and affiliates can develop a sense
of proprietorship and personal involvement in the development and financial
success of the Company and, further, will encourage them to remain with and
devote their best efforts to the business of the Company, thereby advancing the
interests of the Company and its stockholders. Currently the Employee Stock
Option Plan would terminate on January 21, 2003 and is limited to granting
options to purchase 7,000,000 shares of the Company's Common Stock (of which
5,706,554 have been granted as of December 31, 1997).
Subject to approval by the stockholders at this Annual Meeting, the Board
of Directors, at a meeting held on January 22, 1998, approved amending and
restating the Employee Stock Option Plan so as to increase the number of shares
of Common Stock issuable under the Plan by 3,000,000 shares and to extend by
five years the period during which options may be granted. Accordingly, if
Proposal 3. is approved by the stockholders, the maximum number of shares of
Common Stock for which options could be granted under the Plan would be
10,000,000 shares (subject to adjustment to reflect any future changes in the
capitalization of the Company including, but not limited to, such changes as
stock splits or stock dividends, mergers, consolidations or other
reorganizations) and the latest date by which grants could be made would be
January 21, 2008. Except for certain technical updating revisions, no other
amendments or modifications to the Employee Stock Option Plan are being
recommended by the Board at this time.
12
<PAGE> 16
PRINCIPAL FEATURES OF THE PLAN
The following summary of the principal features of the Employee Stock
Option Plan is qualified in its entirety by reference to Appendix C commencing
on page C-1.
(1) Adjustments in Stock Subject to the Plan.
The Employee Stock Option Plan contains antidilution provisions for
appropriate adjustment in the number of options subject to the Plan and shares
reserved for issuance should certain events occur. In the event of a stock
split, adjustment in the number of shares subject to option and in the option
price will be made to give effect thereto as though such shares were outstanding
at and immediately prior to the occurrence of the event requiring an adjustment.
(2) Administration.
The Plan is administered by a committee of the Board (the "Committee"). The
Committee shall be constituted so as to permit the Plan to comply with Rule
16b-3 of the 1934 Act. See Proposal 1. beginning on page 8 herein with respect
to the Nonemployee Director Stock Option Plan which, if approved, would permit
nonemployee directors who might be members of the Committee to participate in a
Company stock option plan. The Committee has sole authority to select the
employees who are to be granted options from those eligible and to establish the
number of shares which may be issued under each option. All such determinations,
decisions, interpretations and orders made by the Committee pursuant to the
Employee Stock Option Plan shall be final, conclusive and binding on all
employee participants and their estates and beneficiaries.
(3) Grants of Options.
Options granted under the Plan expire ten years after the date of grant. It
has been the Committee's policy in setting the terms of Options granted under
the Plan that such options become exercisable in 25% increments over a four-year
service period with the options being 100% exercisable four years after the date
of grant. Option prices are also determined by the Committee and may be less
than the fair market value at the time the options are granted. Except for the
limitation that the option price may not be less than the par value of the
Company's Common Stock, no maximum or minimum price is specified in the Plan.
Each option grant is evidenced by a written agreement between the Company
and the employee optionee (the "Option Agreement") containing such terms and
conditions and are exercisable for such periods as may be approved by the
Committee subject to certain restrictions contained in the Employee Stock Option
Plan. The Option Agreement terms and conditions associated with grants made in
the past may differ from those associated with grants made in the future.
(4) Federal Income Tax Consequences.
Options granted pursuant to the Employee Stock Option Plan are nonqualified
and do not qualify for special federal income tax treatment. As a general rule,
no tax is imposed on the optionee upon the grant of a nonqualified option. Upon
the exercise of a nonqualified option, the employee optionee will be treated as
receiving compensation taxable as ordinary income in the year of exercise in an
amount equal to the excess of the fair market value of the shares at the time of
exercise over the option price paid for such shares, and the Company may claim a
deduction at the time and in the same amount as compensation income is
recognized by the optionee. Options granted under the Employee Stock Option Plan
are not intended to qualify as "performance based" compensation for purposes of
the compensation deduction limitation provisions of the Internal Revenue Code.
Accordingly, the Company's deduction may be eliminated by application of these
rules. In addition, the Employee Stock Option Plan includes provisions regarding
a Change of Control that could result in application of the "parachute payment
sanctions" with a resulting loss of deduction to the Company upon exercise of an
individuals Options.
13
<PAGE> 17
(5) Amendment of the Plan.
The Employee Stock Option Plan or any part thereof may be amended from time
to time by the Board of Directors which, at its discretion, may also terminate
the Plan at any time with respect to any shares for which options have not
theretofore been granted. The Board may not, however, change any option
previously granted such that it would materially impair the rights of the
optionee without his consent. Furthermore, the Board may not, without the
consent of the stockholders, make any amendment or alteration which would
materially increase the benefits accruing to the participants, increase the
number of shares issuable (other than an increase reflecting a stock dividend or
stock split) or extend the term of the Plan.
At present, no determination has been made as to the employees who will
receive grants or the terms and conditions thereof. As of February 27, 1998, 338
active, key employees had been granted options under the Employee Stock Option
Plan.
Approval of Proposal 3. will require the affirmative vote of a majority of
the shares of the Company's Common Stock present in person or by proxy and
voting at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL OF PROPOSAL 3.
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended December 31,
1997, 1996 and 1995 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($) OPTIONS(#) COMPENSATION($)(1)
--------------------------- ---- --------- -------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
C. R. Palmer 1997 $910,000 $450,000 75,000 $4,750
Chairman of the Board, President 1996 853,333 250,000 75,000 4,500
and Chief Executive Officer 1995 800,000 - 0 - 150,000 3,375
R. G. Croyle 1997 270,000 120,000 15,000 4,750
Executive Vice President 1996 241,667 50,000 15,000 4,203
1995 216,667 - 0 - 30,000 3,375
D. F. McNease 1997 241,667 100,000 15,000 4,750
Senior Vice President -- 1996 216,667 40,000 12,500 2,937
Drilling 1995 191,667 - 0 - 25,000 1,687
E. E. Thiele 1997 216,667 60,000 15,000 4,750
Senior Vice President -- Finance, 1996 195,000 30,000 12,500 4,182
Administration and Treasurer 1995 181,667 - 0 - 25,000 3,375
Paul L. Kelly 1997 186,667 50,000 15,000 4,750
Senior Vice President -- 1996 176,667 25,000 12,500 4,175
Special Projects 1995 166,667 - 0 - 25,000 3,375
</TABLE>
- - ---------------
(1) Represents the amount of the Company's contribution on behalf of the Named
Executive Officer to the Rowan Companies, Inc. Savings and Investment Plan
(401(k) Plan).
No executive officer received any non-cash compensation during fiscal years
1997, 1996 and 1995 having an aggregate incremental cost to the Company in
excess of the lesser of $50,000 or 10% of his or her total annual salary and
bonus as reported in this table.
14
<PAGE> 18
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information pertinent to stock options granted
under the Company's 1988 Nonqualified Stock Option Plan (the "1988 Plan") to the
Named Executive Officers during 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
----------------------------------------------------- REALIZABLE VALUE
PERCENT AT ASSUMED ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED(#) FISCAL 1997 ($/SHARE)(1) DATE(2) 0% 5% 10%
---- ---------- ------------ ------------ ---------- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
C. R. Palmer 75,000 9.2% $19.63 4-25-07 - 0 - $926,250 $2,346,750
R. G. Croyle 15,000 1.8 19.63 4-25-07 - 0 - 185,250 469,350
D. F. McNease 15,000 1.8 19.63 4-25-07 - 0 - 185,250 469,350
E. E. Thiele 15,000 1.8 19.63 4-25-07 - 0 - 185,250 469,350
Paul L. Kelly 15,000 1.8 19.63 4-25-07 - 0 - 185,250 469,350
</TABLE>
- - ---------------
(1) Last reported sales price of the Common Stock on the New York Stock
Exchange on April 25, 1997, the date of grant.
(2) Options expire ten years after the date of grant and become exercisable in
25% increments over a four-year service period with the options being 100%
exercisable four years after the date of grant. Exercisability may
accelerate upon the occurrence of certain events such as corporate
reorganizations, death or disability (as set forth in the option agreement
or the plan).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
For each of the Named Executive Officers, the information set forth below
reflects, for the fiscal year ended December 31, 1997, options under the
Company's 1988 Plan which were exercised and the value realized thereon as well
as exercisable and unexercisable options which were unexercised at year-end 1997
and the realizable value thereon at such date:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1997(#) DECEMBER 31, 1997($)(1)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. R. Palmer 12,500 $235,938 303,750 226,250 $8,693,437 $4,475,937
R. G. Croyle 6,000 130,813 71,500 47,500 2,055,812 961,562
D. F. McNease 15,500 334,125 20,375 43,125 556,531 859,219
E. E. Thiele 25,000 459,375 21,875 43,125 600,781 859,219
Paul L. Kelly 21,875 362,110 -0- 43,125 -0- 859,219
</TABLE>
- - ---------------
(1) Represents the difference between $30.50, which was the last reported per
share sales price of the Company's Common Stock on the New York Stock
Exchange on December 31, 1997, and the per share exercise price ($1.00,
$15.25 or $19.63 per share, depending upon the grant) times the number of
underlying shares.
OPTION PLANS
Options granted under the 1988 Plan detailed under Proposal 3. beginning on
page 12 are nonqualified options and expire ten years after the date of grant.
As of February 27, 1998, options to purchase shares (net of forfeitures) of the
Company's Common Stock had been granted at the following option exercise prices:
4,254,429 shares at $1.00 per share; 485,625 shares at $7.625 per share; 25,000
shares at $8.00 per share; 581,000 shares at $9.8125 per share; 164,500 at
$15.25 per share and $196,000 at $19.625 per share. Outstanding options under
the 1988 Plan expire between April 1999 and April 2007.
15
<PAGE> 19
In addition to the 1988 Plan, the Company has another stock option plan
entitled Rowan Companies, Inc. 1980 Nonqualified Stock Option Plan (the "1980
Plan"). 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. Options granted under the 1980 Plan become
exercisable in 25% increments over a four-year service period with the options
being 100% exercisable four years after the date of grant. As of February 27,
1998, 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.
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 provided 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. Effective November 30, 1994, no more Debentures could be offered under the
Plan.
With respect to Series I Debentures issued in June 1986 and the Series II
Debenture issued in September 1987, the $5,125,000 aggregate principal amount of
the former was converted into 891,304 shares of Common Stock at $5.75 per share
prior to the June 1996 expiration date and the $4,500,000 aggregate principal
amount of the latter was converted into 500,000 shares of Common Stock at $9.00
per share prior to the September 1997 expiration date.
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 bear interest at the same rate as the Debentures and
are secured by a pledge of the Debentures purchased. In 1997, Debentures in the
amount of $575,000 were converted into 85,185 shares of Common Stock. The
aggregate principal amount of Series III Debentures outstanding at February 27,
1998 (net of debentures cancelled) was $8,625,000, which is convertible into
1,277,778 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
16
<PAGE> 20
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, 1998, the Company had
approximately 1,900 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, 1998, the Company's manufacturing subsidiaries had approximately 1,400
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, two employees, C. R. Palmer and C. W. Yeargain, have been
selected to be participants under the plan of Rowan Companies, Inc. Mr. Yeargain
retired in March 1991.
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<PAGE> 21
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, 1997, the Named Executive Officers 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 -- 37; R. G. Croyle -- 24; D. F. McNease -- 24; E. E. Thiele -- 28
and Paul Kelly -- 15.
(3) The annual benefit amounts payable to Mr. Yeargain are $168,127. Mr.
Yeargain's benefit is based upon his 44 years of credited service under
pension and pension restoration plans covering the Company's drilling
employees. The estimated annual benefit amount payable upon retirement to
Mr. Palmer is $523,013. The other executive officers named in "Executive
Compensation" above will basically be entitled to receive the annual benefit
amounts based upon their 1997 salary amount set forth under "Salary" in the
table on page 14 and their years of credited service under the pension plan
(see Footnote (2) above).
DIRECTOR COMPENSATION
Each director who is not a salaried officer of the Company or a subsidiary
receives $30,000 annually for serving as a director, $750 for attending a
regular or special Board meeting and $500 for attending a meeting of each
committee on which he serves. In addition, directors are reimbursed for
reasonable travel expenses.
18
<PAGE> 22
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 a volatile industry that is recovering from 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 historically 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.
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 to respond to prevailing conditions in the drilling,
aviation and manufacturing industries. 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, including Mr. Palmer (see "Chief Executive Officer Compensation" below),
received a salary increase and a bonus in 1997 as the Company's operational and
financial performance (reflected in its revenues and earnings growth and its
stock price appreciation) continued to show significant improvement during 1997.
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 increasing
market share and profitability. 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 under "Stockholder Return Performance Presentation" on pages 21 and 22
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 1997, the
Committee determined to make stock option grants to all of the Company's
executive officers, including Mr. Palmer, at an exercise price equal to the
closing market price on the date of grant of $19.63 per share. The primary basis
for these stock option grants was management's performance in increasing market
share and profitability in an increasingly competitive environment resulting
from increased oil and gas exploration and development activities worldwide. The
Committee also took into account the successful design and implementation of the
Company's $555 million program to construct three Super Gorilla Class drilling
rigs and the Committee's evaluation of the individual performance of each
officer. The criteria used in evaluating individual performance for purposes
19
<PAGE> 23
of these grants were the same as the criteria discussed above that are
considered when setting regular compensation. Previous option grants and
debenture offerings to and held by executive officers were taken into account
when determining the amount of new option 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 1997 was based on the fact that after a period of unprecedented difficulty
and instability in the offshore drilling industry, the Company had increased its
market share and was able to capitalize on the significant increase in offshore
drilling activity to generate record profits and significant stock price
appreciation. 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 and the successful design and implementation
of the Company's Super Gorilla Class rig construction program has been in large
part attributable to Mr. Palmer's abilities and contributions.
In 1997, 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 increased
activity and profitability. During 1997, the Company's stock price increased 35%
(after increasing 135% in 1996) as the market for the Company's drilling
operations continued to improve. Given these facts, 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 is a
prudent remuneration policy, it determined to grant to Mr. Palmer stock options
for 75,000 shares of Common Stock with an exercise price equal to the market
value on the date of grant of $19.63 per share. In addition, the Committee
increased Mr. Palmer's annual salary by $45,000 and awarded a $450,000 bonus.
The Committee has also continued to discuss and consider a provision of 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. 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.
20
<PAGE> 24
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, 1993 and ending December 31, 1997.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK, S&P 500 INDEX &
COMPANY-SELECTED PEER GROUP**
(ASSUMES $100 INVESTED ON
DECEMBER 31, 1992)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ROWAN S&P 500 PEER GROUP**
<S> <C> <C> <C>
1992 100 100 100
1993 114 110 203
1994 79 112 173
1995 122 153 354
1996 287 188 757
1997 387 251 1046
</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.
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. During much of the past fifteen-year period,
the Company, and the industry as a whole, have generally experienced conditions
more closely associated with the latter; though the Company believes present and
anticipated conditions foretell of continued industry growth in the years ahead.
For that
21
<PAGE> 25
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 fifteen calendar years commencing
January 1, 1983 and ending December 31, 1997.
COMPARISON OF FIFTEEN-YEAR CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK & COMPANY-SELECTED PEER GROUP**
(ASSUMES $100 INVESTED ON
DECEMBER 31, 1982)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ROWAN PEER GROUP**
<S> <C> <C>
1982 100 100
1983 113 92
1984 88 61
1985 78 32
1986 40 21
1987 53 37
1988 58 25
1989 113 45
1990 113 36
1991 58 20
1992 79 16
1993 91 33
1994 63 28
1995 97 57
1996 228 122
1997 307 168
</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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION; CERTAIN TRANSACTIONS
Mr. C. W. Yeargain, a Class II Director and an Executive Vice President of
the Company until his retirement in March 1991, earned and was paid by the
Company $133,333 in consulting fees in 1997.
22
<PAGE> 26
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, 1998. A representative of
Deloitte & Touche is expected to be present at the Annual Meeting of
Stockholders on April 24, 1998 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
1999 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 15, 1998.
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, 1997, 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
C. R. Palmer
Chairman
March 13, 1998
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<PAGE> 27
APPENDIX A
ROWAN COMPANIES, INC.
1998 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
I. PURPOSE OF THE PLAN
The Rowan Companies, Inc. 1998 Nonemployee Directors Stock Option Plan (the
"Plan") is intended to provide a means whereby directors of Rowan Companies,
Inc., a Delaware corporation (the "Company"), who are not employees of the
Company or its subsidiaries may develop a sense of proprietorship and personal
involvement in the development and financial success of the Company and whereby
the economic interests of such directors may be more closely aligned with those
of the Company's shareholders, thereby advancing the interests of the Company
and its shareholders. Accordingly, the Company may grant to such directors
("Optionees") the option ("Option") to purchase shares of the common stock of
the Company ("Stock"), as hereinafter set forth. Options granted under the Plan
are not intended to be incentive stock options within the meaning of section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code").
II. ADMINISTRATION
The Plan shall be administered by the full Board of Directors of the
Company (the "Board"). Unless the Board determines otherwise, any and all
actions taken by the Board with respect to the Plan or in exercising its duties,
powers and responsibilities under the Plan shall be effected in a manner which
permits the Plan to comply with Rule 16b-3, as currently in effect or as
hereinafter modified or amended ("Rule 16b-3"), promulgated under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The Board shall have sole
authority to select the Optionees from among those individuals eligible
hereunder and to establish the number of shares which may be issued under each
Option. In selecting the Optionees from among individuals eligible hereunder and
in establishing the number of shares that may be issued under each Option, the
Board may take into account such factors as the Board in its discretion shall
deem relevant. The Board is authorized to interpret the Plan and may from time
to time adopt such rules and regulations, consistent with the provisions of the
Plan, as it may deem advisable to carry out the Plan. All decisions made by the
Board in selecting the Optionees, in establishing the number of shares which may
be issued under each Option and in construing the provisions of the Plan and any
Options shall be final.
III. OPTION AGREEMENTS
(a) Each Option shall be evidenced by a written agreement between the
Company and the Optionee ("Option Agreement") which shall contain such terms and
conditions as may be approved by the Board. The terms and conditions of the
respective Option Agreements need not be identical.
(b) For all purposes under the Plan, the fair market value of a share of
Stock on a particular date shall be equal to the mean of the high and low sales
prices of the Stock reported on the New York Stock Exchange on that date; or, if
no prices are reported on that date, on the last preceding date on which such
prices of the Stock are so reported. In the event Stock is not publicly traded
at the time a determination of its value is required to be made hereunder or the
foregoing methodology is not appropriate for determining the fair market value
of Stock as determined by the Board for any reason, the determination of its
fair market value shall be made by the Board in such manner as it deems
appropriate.
(c) Except as provided herein, each Option and all rights granted
thereunder shall not be transferable other than by will or the laws of descent
and distribution be exercisable during the Optionee's lifetime only by the
Optionee or, in the case of the Optionee's death or incapacity, by the
Optionee's guardian or legal
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<PAGE> 28
representative. The Board may, in its discretion, provide in an Option agreement
that the Option granted thereby to a director may be transferred in whole or in
part.
IV. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are directors of the Company
and who are not also employees of the Company or any parent or subsidiary
corporation (as defined in section 425 of the Code) of the Company at the time
the Option is granted. Options may be granted to the same individual on more
than one occasion.
V. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 200,000 shares of Stock. Such shares may consist
of authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Options at the termination of the Plan shall
cease to be subject to the Plan, but, until termination of the Plan, the Company
shall at all times make available a sufficient number of shares to meet the
requirements of the Plan. Should any Option hereunder expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted. The aggregate number of shares which may be
issued under the Plan shall be subject to adjustment in the same manner as
provided in Paragraph VIII hereof with respect to shares of Stock subject to
Options then outstanding. Exercise of an Option in any manner shall result in a
decrease in the number of shares of Stock which may thereafter be available for
purposes of the Plan by the number of shares as to which the Option is
exercised.
VI. OPTION PRICE
The purchase price of Stock issued under each Option shall be determined by
the Board, but such purchase price shall not be less than the fair market value
of the Stock subject to the Option on the date the Option is granted.
VII. TERM OF PLAN
The Plan shall be effective as of April 24, 1998, subject to its approval
by the stockholders of the Company. Except with respect to Options then
outstanding, if not sooner terminated under the provisions of Paragraph IX, the
Plan shall terminate upon and no further Options shall be granted after the
expiration of fifteen years from the effective date of the Plan. The expiration
of the Plan will not affect the validity of Options outstanding at that time.
VIII. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
(b) The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i) in the event
of an increase in the number of outstanding shares shall be
A-2
<PAGE> 29
proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the Optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the Optionee had been the holder of record of the number of
shares of Stock then covered by such Option. If (i) the Company shall not be the
surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity), (ii) the Company sells, leases or
exchanges all or substantially all of its assets to any other person or entity,
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the 1934 Act,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company's voting stock
(based upon voting power), or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board (each
such event is referred to herein as a "Corporate Change"), no later than (a) ten
days after the approval by the shareholders of the Company of such merger,
consolidation, reorganization, sale, lease or exchange of assets or dissolution
or such election of directors or (b) thirty days after a change of control of
the type described in Clause (iv), the Board, acting in its sole discretion
without the consent or approval of any Optionee, shall act to effect one or more
of the following alternatives, which may vary among individual Optionees and
which may vary among Options held by any individual Optionee: (1) accelerate the
time at which Options then outstanding may be exercised so that such Options may
be exercised in full for a limited period of time on or before a specified date
(before or after such Corporate Change) fixed by the Board, after which
specified date all unexercised Options and all rights of Optionees thereunder
shall terminate, (2) require the mandatory surrender to the Company by selected
Optionees of some or all of the outstanding Options held by such Optionees
(irrespective of whether such Options are then exercisable under the provisions
of the Plan) as of a date, before or after such Corporate Change, specified by
the Board, in which event the Board shall thereupon cancel such Options and the
Company shall pay to each Optionee an amount of cash per share equal to the
excess, if any, of the amount calculated in Subparagraph (d) below (the "Change
of Control Value") of the shares subject to such Option over the exercise
price(s) under such Options for such shares, (3) make such adjustments to
Options then outstanding as the Board deems appropriate to reflect such
Corporate Change (provided, however, that the Board may determine in its sole
discretion that no adjustment is necessary to Options then outstanding) or (4)
provide that the number and class of shares of Stock covered by an Option
theretofore granted shall be adjusted so that such Option shall thereafter cover
the number and class of shares of stock or other securities or property
(including, without limitation, cash) to which the Optionee would have been
entitled pursuant to the terms of the agreement of merger, consolidation or sale
of assets and dissolution if, immediately prior to such merger, consolidation or
sale of assets and dissolution, the Optionee had been the holder of record of
the number of shares of Stock then covered by such Option.
(d) For the purposes of clause (2) in Subparagraph (c) above, the "Change
of Control Value" shall equal the amount determined in clause (i), (ii) or
(iii), whichever is applicable, as follows: (i) the per share price offered to
shareholders of the Company in any such merger, consolidation, reorganization,
sale of assets or dissolution transaction, (ii) the price per share offered to
shareholders of the Company in any tender offer or exchange offer whereby a
Corporate Change takes place, or (iii) if such Corporate Change occurs other
than pursuant to a tender or exchange offer, the fair market value per share of
the shares into which such Options being surrendered are exercisable, as
determined by the Board as of the date determined by the Board to be the date of
cancellation and surrender of such Options. In the event that the consideration
offered to shareholders of the Company in any transaction described in this
Subparagraph (d) or Subparagraph (c) above consists of anything other than cash,
the Board shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash.
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<PAGE> 30
(e) Any adjustment provided for in Subparagraphs (b) or (c) above shall be
subject to any required shareholder action.
(f) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
IX. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Options have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided, that no change in any Option theretofore granted may be made
which would materially impair the rights of the Optionee without the consent of
such Optionee; and provided, further, that the Board may not make any alteration
or amendment which would materially increase the benefits accruing to
participants under the Plan, increase the aggregate number of shares which may
be issued pursuant to the provisions of the Plan or extend the term of the Plan,
without the approval of the shareholders of the Company.
X. SECURITIES LAWS
(a) The Company shall not be obligated to issue any Stock pursuant to any
Option granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of 1933
and such other state and federal laws, rules or regulations as the Company or
the Board deems applicable and, in the opinion of legal counsel for the Company,
there is no exemption from the registration requirements of such laws, rules or
regulations available for the offering and sale of such shares.
(b) It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of the 1934 Act meet all of the requirements of
Rule 16b-3. If any provision of the Plan or any such Option would disqualify the
Plan or such Option under, or would otherwise not comply with, Rule 16b-3, such
provision or Option shall be construed or deemed amended to conform to Rule
16b-3. Nevertheless, the Board shall have discretion to cause the Plan to be
administered or otherwise operated without complying with Rule 16b-3, and
neither the Board nor the Company shall be liable to any Optionee or other
person for failure of the Plan or any award under the Plan to comply with Rule
16b-3.
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APPENDIX B
ROWAN COMPANIES, INC.
1998 CONVERTIBLE DEBENTURE INCENTIVE PLAN
1. Purpose. The Rowan Companies, Inc. 1998 Convertible Debenture Incentive
Plan (the "Plan") is intended to promote the interests of Rowan Companies, Inc.
(the "Company") and its stockholders by allowing officers and other key
personnel of the Company and its subsidiaries the opportunity to invest in
corporate debt in the form of the Company's floating interest rate subordinated
debentures (the "Debentures") which are convertible into shares of Preferred
stock, $1 par value, of the Company (the "Preferred Stock"), which shares of
Preferred Stock are convertible into shares of common stock of the Company (the
"Common Stock"), thereby giving key personnel added incentive to work toward the
continued growth and success of the Company. The Company's Board of Directors
also contemplates that the Plan will enable the Company and its subsidiaries to
compete more effectively for the services of management personnel needed for the
continued growth and success of the Company.
2. Issuance of the Debentures. The Company shall have authority to issue
Debentures in such amounts and to such of the key employees of the Company and
its subsidiaries (as defined by Section 425 of the Internal Revenue Code of
1954, as amended) as the Committee (as defined in Section 9) shall from time to
time determine. Such employees purchasing Debentures are designated herein as
"Purchasers".
3. General Terms and Conditions of the Debentures.
Section 3.1. General. The Committee shall from time to time determine with
respect to each series of Debentures to be issued the interest rate thereof, the
conversion price applicable thereto (including the conversion ratio of the
Preferred Stock), and such other terms and conditions of the Debentures, all to
the extent not inconsistent with the provisions of this Plan.
Section 3.2. Form and Term of Debentures. Debentures will be issued in
series, the terms and conditions of which may differ among series and shall be
in such form and in such denominations as the Committee may approve. Each series
will be due not earlier than five years, or later than ten years, from the date
of issuance, or on such earlier date as the Company redeems any Debentures,
which date is referred to herein as the "Due Date".
Section 3.3. Conversion of the Debentures. Subject to the provisions of
this Section 3.3, the Debentures will be convertible at the conversion price in
effect at the time of conversion into fully paid and non-assessable shares of
Preferred Stock, which will immediately be convertible into fully paid and
non-assessable shares of Common Stock of the Company, at any time in portions
and after time periods determined by the Committee, which in no event will be
less than one year after the date of issuance until the close of business on the
Due Date. Each series of Debentures shall be convertible into a separate series
of Preferred Stock. The conversion privilege with respect to any Debenture may
be exercised only by a Purchaser thereof, by the estate of a deceased Purchaser
or a beneficiary under such estate, or by a transferee of the Debenture as
provided for therein.
Upon termination of a Purchaser's employment except as described in (a),
(b), (c) or (d) below, a Purchaser's conversion privilege shall terminate. Upon
termination of employment as described in any of (a), (b), (c) or (d) below, the
Purchaser may thereafter exercise his conversion privilege at any time prior to
the earlier of the Due Date or:
(a) If Employee's employment with the Company terminates by reason of
Retirement (as defined in Appendix A hereto), the date which is five years
following the date of such Retirement, but only as to the portion or
portions of the Debenture as provided for therein that Purchaser was
entitled to convert as of the date of such Retirement, plus such additional
portion or portions, if any, that the Committee, in its sole discretion,
determines to be convertible as of the date of such Retirement.
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(b) If Employee dies within the five-year period following the date of
Employee's termination of employment by reason of Retirement (in which case
conversion may be effected as applicable by Employee's estate, or the
person who acquires this Debenture by bequest or inheritance or otherwise
by reason of the death of Employee), the date which is two years following
the date of Employee's death, but only as to the portion or portions of the
Debenture as provided for therein that Purchaser was entitled to convert as
of the date Employee's employment terminated by reason of Retirement.
(c) If Employee's employment with the Company terminates by reason of
Disability (as defined in Appendix A hereto), Employee may convert this
Debenture in full at any time during the period of five years following the
date of such termination.
(d) If Employee dies while in the employ of the Company or within the
five-year period following the date of Employee's termination of employment
by reason of Disability, Employee's estate, or the person who acquires this
Debenture by bequest or inheritance or by reason of the death of Employee,
may convert this Debenture in full at any time during the period of two
years following the date of Employee's death.
In the case of (a), (b), (c) and (d), any and all questions as to whether
and when there has been a termination of a Purchaser's employment, and the cause
of such termination, shall be determined by the Committee using whatever
evidence as it may require, such determination or determinations being final and
controlling on all interested parties.
The conversion privilege with respect to any Debenture (i) will terminate
if the Purchaser, without the Company's consent, sells, assigns, transfers,
pledges, hypothecates or otherwise disposes of a Debenture except as permitted
by Section 3.4 and (ii) will not be exercisable during such time as the
Debenture is pledged to secure loans as permitted by Section 3.4.
In no event may any Purchaser or the estate of a deceased Purchaser or a
beneficiary under such estate exercise the conversion privilege associated with
a Debenture prior to one year from the date of issuance of such Debenture or
after the Due Date.
Notwithstanding the foregoing or any provision in the Plan to the contrary,
effective with the occurrence of a Corporate Change, as defined in the Company's
Restated 1988 Nonqualified Stock Option Plan, each Debenture that has been
issued and outstanding for more than one year as of the date of the Corporate
Change shall automatically be fully convertible on and after the date of such
Corporate Change.
Section 3.4. Transfer and Pledge of Debentures. A Purchaser may not sell,
assign, transfer, pledge, hypothecate or otherwise dispose of a Debenture except
by (i) will or the laws of descent and distribution or (ii) a pledge ("Permitted
Pledge") of Debentures to a lender (which may be the Company if a loan is made
pursuant to Section 8 hereof) as security for loans to provide all or part of
the financing to purchase the Debentures. If such loan shall be made by other
than the Company, the Purchaser shall give advance written notice to the Company
prior to making any Permitted Pledge and the Purchaser and such Lender shall
give notice of discharge of any Debenture from a Permitted Pledge, which notice
shall be conclusive evidence that the conversion privilege with respect to such
Debenture will again be exercisable subject to the provisions of Section 3.3.
Section 3.5. Redemption of Debentures. The Company may, upon at least
thirty days prior written notice to the affected Debenture holder or holders,
redeem on any interest payment date, any or all of the Debentures issued under
this Plan. The Company shall redeem on the next interest payment date after
termination of the conversion privilege with respect thereto any Debenture with
respect to which the conversion privilege has terminated pursuant to clauses
(a), (b), (c) or (d) of Section 3.3. The holder of any Debenture redeemed
pursuant to this Section 3.5 shall be entitled to receive only the face amount
of the Debenture plus accrued interest thereof to the Due Date.
4. Authorized Amount of Debentures. The Company may issue up to
$30,000,000.00 in aggregate principal amount of all Debentures.
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5. Effective Date. The Plan shall become effective upon approval thereof by
the vote of the holders of a majority of the shares of Common Stock of the
Company voting at the 1998 Annual Meeting of Stockholders, and shall expire when
all of the Company's obligations with respect to all of the outstanding
Debentures have been discharged; provided, however, that no Debenture shall be
issued after April 24, 2008.
6. Offers and Sales Price of Debentures. The Debentures shall be sold by
the Company to Purchasers at a price equal to the higher of (a) face value plus
any accrued interest to the date of sale or (b) the fair market value of the
Debentures as of the date the Purchaser elects to purchase the Debentures, as
determined by an independent investment banking firm. If the Internal Revenue
Service determines that the value of a Debenture at the time of sale exceeded
its sale price and if (a) the Company receives a federal income tax benefit as a
result of such determination and (b) the Purchaser has contested such
determination in a manner which the Company determines to be appropriate under
the circumstances, then the Company will pay to the Purchaser or his estate or a
beneficiary under his estate the lesser of (x) the federal income tax benefit
derived by the Company as a result of the sale of the Debenture to the Purchaser
or (y) the amount estimated by the Company (based on the highest marginal
federal income tax rate applicable with respect to compensation income for the
year in which the sale occurred and the amount determined by the Internal
Revenue Service to be taxable income to the Purchaser as a result of his
purchase of the Debenture) to be Purchaser's federal income tax liability
resulting from his purchase of the Debenture.
The Debentures may be offered only on the dates of regularly-scheduled
meetings of the Company's Board of Directors (any such date is referred to
herein as an "Offering Date"). An employee may elect to purchase all or none of
the Debentures offered to him on an Offering Date by giving written notice to
the Company of his election within 10 business days of such Offering Date.
Payment for such Debentures shall be in cash or in Common Stock (valued at the
mean of the high and low sales price of Common Stock prior to the date of such
payment, as shown on the Composite Tape for securities listed on the New York
Stock Exchange) and shall be made within 20 business days of such Offering Date.
7. Conversion Price. The price (the "Conversion Price") at which shares of
Preferred Stock shall be delivered upon conversion of a series of Debentures
shall be set at a price at least equal to the mean of the high and low sales
price of the Company's Common Stock on the date of sale of such series of
Debentures, as shown on the Composite Tape for securities listed on the New York
Stock Exchange. The number of shares of Common Stock which shall be delivered
upon conversion of any shares of a series of Preferred Stock (the "Conversion
Ratio") shall not exceed the face value of the related Debentures which were
converted into such Preferred Stock divided by the mean of the high and low
sales price of the Company's Common Stock on the date of sale of such series of
Debentures, as shown on the Composite Tape for securities listed on the New York
Stock Exchange. Upon any change in the capital stock of the Company, through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, spin-off, split up, dividend in kind or other change in the corporate
structure or distribution to stockholders, appropriate adjustments to the
Conversion Price and Conversion Ratio and the kind of shares delivered upon
conversion of the Debentures and Preferred Stock may be made by the Committee
(or, if the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation) with respect to both
outstanding and unissued Debentures and Preferred Stock. If the Internal Revenue
Service determines that the conversion of Debentures into Preferred Stock or
that the subsequent conversion of Preferred Stock into Common Stock is a taxable
transaction and if (a) the Company receives a federal income tax benefit as a
result of such determination and (b) the Purchaser has contested such
determination in a manner which the Company deems to be appropriate under the
circumstances, then the Company will pay the Purchaser or his estate or a
beneficiary under his estate the lesser of (x) the federal income tax benefit
derived by the Company with respect to such conversion or (y) the amount
estimated by the Company (based on the highest marginal federal income tax rate
applicable with respect to compensation income for the year in which the
conversion occurred and the amount determined by the Internal Revenue Service to
be taxable income to the Purchaser as a result of such conversion) to be
Purchaser's federal income tax liability resulting from such conversion.
8. Company Loans. The Company may, from time to time, make loans ("Company
Loans") to Purchasers for the purpose of providing all or part of the financing
necessary to purchase any Debenture; provided, however, that the maximum amount
of the Company Loan shall not exceed the purchase price of
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the Debentures. Subject to the foregoing, Company Loans may be made to such
Purchasers in such amounts bearing interest at such rates (not less than the
higher of the interest rate on the Debenture or a floating rate determined under
Sections 483 and 1274(d) of the Internal Revenue Code of 1986, as amended),
shall be secured by a pledge of and lien on the Debenture (which may be inferior
to the pledge and lien securing a bank loan) and on such other terms and
conditions as the Committee may from time to time approve.
9. Administration. The Plan shall be administered by a committee of the
Board of Directors (the "Committee"), which shall consist of three or more
persons. No Debentures may be sold to any member of the Committee during the
term of his membership on the Committee. No person shall be eligible to serve on
the Committee unless he is a "disinterested person" within the meaning of
Paragraph (d)(3) of Rule 16b-3, under the Securities Exchange Act of 1934 or any
successor thereto as then in effect ("Rule 16b-3"). The members of the Committee
shall be appointed by the Board of Directors, and any vacancy on the Committee
shall be filled by the Board of Directors.
Subject to the foregoing paragraphs, the Committee shall interpret the Plan
and the Debentures sold under the Plan, shall make such rules as it deems
necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defect or supply any omission or reconcile any inconsistency
in the Plan or in any Debenture in the manner and to the extent the Committee
deems desirable to administer the Plan or the Debentures. The Committee's
determination of any matter within its authority shall be conclusive and binding
upon the Company and all other persons.
10. Amendment and Discontinuance. Subject to the provisions of this Section
10, the Committee may amend, suspend or terminate the Plan. No amendment,
suspension or termination of the Plan may:
(a) Without the consent of the holder of a Debenture, terminate his
Debenture or adversely affect his rights under the Debenture in any
material respect;
(b) Without the consent of a majority of the shares of voting stock of
the Company voting at any meeting of Stockholders (i) increase the amount
of Debentures available under the Plan, (ii) change materially the persons
eligible to purchase Debentures under the Plan, (iii) increase materially
the benefits under the Plan, or (iv) extend the termination date of the
Plan; or
(c) Cause the plan to fail to meet the requirements of Rule 16b-3.
11. Other Provisions.
(a) The Purchaser of a Debenture shall not be entitled to any rights as a
stockholder of the Company until such Purchaser has exercised the conversion
privilege contained in the Debenture.
(b) No Debenture shall be construed as limiting any right which the Company
or any subsidiary of the Company may have to terminate at any time, with or
without cause, the employment of a Purchaser to whom a Debenture has been sold.
(c) Notwithstanding any provision of the Plan or the terms of any Debenture
sold pursuant to the Plan, (i) the Company shall not be required to issue any
Debentures hereunder if such issuance would, in the judgment of the Committee,
constitute a violation of any state or Federal law, or of the rules or
regulations of any governmental regulatory body, and (ii) any amount of interest
paid or payable on a Debenture which exceeds the amount legally payable to a
Purchaser under the applicable usury laws will be paid by the Company as
compensation to the Purchaser.
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APPENDIX A
TO
1998 CONVERTIBLE DEBENTURE INCENTIVE PLAN
Retirement. For purposes of the Plan, a Purchaser shall be deemed to have
terminated employment by reason of "Retirement" if such Purchaser voluntarily
terminates employment on or after having attained the age of 60 while employed
by the Company or an affiliate of the Company.
Disability. For purposes of the Plan, a Purchaser shall be deemed to have
terminated his employment with the Company or an affiliate of the Company by
reason of "Disability" if at the time of such termination of employment he has a
mental or physical condition which totally and presumably permanently prevents
him from engaging in any substantial gainful employment with the Company which
(i) did not arise while engaged in or as a result of being engaged in an illegal
act or enterprise, (ii) did not result from chronic alcoholism, addiction to
narcotics or the use of illegal or unauthorized drugs in any manner, (iii) did
not result from service in the Armed Forces of the United States which entitled
the Purchaser to a veteran's disability pension, and (iv) did not arise while
employed by an employer other than the Company or a subsidiary or affiliated
corporation of the Company. The existence of such Disability must be certified
by two duly licensed and practicing physicians selected, respectively, at the
direction of the Committee and at the direction of the Purchaser or his
representative. If they fail to agree, a third physician shall be selected at
the direction of the Committee, and the determination of any two of such three
physicians shall be final and controlling on all interested parties. The
determination of any such physicians shall be evidenced by appropriate written
certifications delivered to the Committee. Notwithstanding the foregoing, the
Committee may, in its discretion, waive the requirement for certification of
Disability by licensed physicians, and, in lieu of such certification, rely on
such other appropriate medical evidence of Disability as is deemed satisfactory
by the Committee.
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APPENDIX C
ROWAN COMPANIES, INC.
RESTATED 1988 NONQUALIFIED STOCK OPTION PLAN
I. PURPOSE OF THE PLAN
The Rowan Companies, Inc. Restated 1988 Nonqualified Stock Option Plan (the
"Plan") is intended to provide a means whereby certain employees of Rowan
Companies, Inc., a Delaware corporation (the "Company"), and its subsidiaries
may develop a sense of proprietorship and personal involvement in the
development and financial success of the Company, and to encourage them to
remain with and devote their best efforts to the business of the Company,
thereby advancing the interests of the Company and its shareholders.
Accordingly, the Company may grant to certain employees ("Optionees") the option
("Option") to purchase shares of the common stock of the Company ("Stock"), as
hereinafter set forth. Options granted under the Plan are not intended to be
incentive stock options within the meaning of section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Plan constitutes a
restatement and continuation without gap or interruption of the Rowan Companies,
Inc. 1988 Nonqualified Stock Option Plan. The effective date of the restatement
of the Plan is April 24, 1998. As restated, the Plan governs both Options
granted after April 24, 1998 and, unless otherwise specifically provided herein,
Options granted before April 24, 1998.
II. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of, and
appointed by, the Board of Directors of the Company (the "Board"). Unless the
Board determines otherwise, the Committee shall be constituted so as to permit
the Plan to comply with Rule 16b-3, as currently in effect or as hereinafter
modified or amended ("Rule 16b-3"), promulgated under the Securities Exchange
Act of 1934, as amended (the "1934 Act"). The Committee shall have sole
authority to select the Optionees from among those individuals eligible
hereunder and to establish the number of shares which may be issued under each
Option. In selecting the Optionees from among individuals eligible hereunder and
in establishing the number of shares that may be issued under each Option, the
Committee may take into account the nature of the services rendered by such
individuals, their present and potential contributions to the Company's success
and such other factors as the Committee in its discretion shall deem relevant.
The Committee is authorized to interpret the Plan and may from time to time
adopt such rules and regulations, consistent with the provisions of the Plan, as
it may deem advisable to carry out the Plan. All decisions made by the Committee
in selecting the Optionees, in establishing the number of shares which may be
issued under each Option and in construing the provisions of the Plan and any
Option shall be final.
III. OPTION AGREEMENTS
A. Each Option shall be evidenced by a written agreement between the
Company and the Optionee ("Option Agreement") which shall contain such terms and
conditions as may be approved by the Committee. The terms and conditions of the
respective Option Agreements need not be identical.
B. For all purposes under the Plan, the fair market value of a share of
Stock on a particular date shall be equal to the mean of the high and low sales
prices of the Stock as reported on the New York Stock Exchange; or, if no prices
are reported on that date, on the last preceding date on which such prices of
the Stock are so reported. In the event Stock is not publicly traded at the time
a determination of its value is required to be made hereunder or the foregoing
methodology is not appropriate for determining the fair market value of Stock as
determined by the Committee for any reason, the determination of its fair market
value shall be made by the Committee in such manner as it deems appropriate.
C. Except as provided herein, each Option and all rights granted thereunder
shall not be transferable other than by will or the laws of descent and
distribution and shall be exercisable during the Optionee's
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lifetime only by the Optionee or, in the case of the Optionee's death or
incapacity, by the Optionee's guardian or legal representative. The Committee
may, in its discretion, provide in an Option agreement that any Option may be
transferred in whole or in part.
IV. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are employees (including
officers and directors who are also employees) of the Company or any parent or
subsidiary corporation (as defined in section 425 of the Code) of the Company at
the time the Option is granted. Options may be granted to the same individual on
more than one occasion.
V. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 10,000,000 shares of Stock (which number
reflects an increase of 3,000,000 shares effective as of April 24, 1998). Such
shares may consist of authorized but unissued shares of Stock or previously
issued shares of Stock reacquired by the Company. Any of such shares which
remain unissued and which are not subject to outstanding Options at the
termination of the Plan shall cease to be subject to the Plan, but, until
termination of the Plan, the Company shall at all times make available a
sufficient number of shares to meet the requirements of the Plan. Should any
Option hereunder expire or terminate prior to its exercise in full, the shares
theretofore subject to such Option may again be subject to an Option granted
under the Plan. The aggregate number of shares which may be issued under the
Plan shall be subject to adjustment in the same manner as provided in Paragraph
VIII hereof with respect to shares of Stock subject to Options then outstanding.
Exercise of an Option in any manner shall result in a decrease in the number of
shares of Stock which may thereafter be available, both for purposes of the Plan
and for sale to any one individual, by the number of shares as to which the
Option is exercised.
VI. OPTION PRICE
The purchase price of Stock issued under each Option shall be determined by
the Committee, but such purchase price shall not be less than the par value of
Stock.
VII. TERM OF PLAN
Except with respect to Options then outstanding, if not sooner terminated
under the provisions of Paragraph IX, the Plan shall terminate upon and no
further Options shall be granted after January 21, 2008. The expiration of the
Plan will not affect the validity of Options outstanding at that time.
VIII. RECAPITALIZATION OR REORGANIZATION
A. The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
B. The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the
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event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per share shall be
proportionately increased.
C. If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the Optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the Optionee had been the holder of record of the number of
shares of Stock then covered by such Option. If (i) the Company shall not be the
surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity), (ii) the Company sells, leases or
exchanges all or substantially all of its assets to any other person or entity,
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the 1934 Act,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company's voting stock
(based upon voting power), or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board (each
such event is referred to herein as a "Corporate Change"), no later than (a) ten
days after the approval by the shareholders of the Company of such merger,
consolidation, reorganization, sale, lease or exchange of assets or dissolution
or such election of directors or (b) thirty days after a change of control of
the type described in Clause (iv), the Committee, acting in its sole discretion
without the consent or approval of any Optionee, shall act to effect one or more
of the following alternatives, which may vary among individual Optionees and
which may vary among Options held by any individual Optionee: (1) accelerate the
time at which Options then outstanding may be exercised so that such Options may
be exercised in full for a limited period of time on or before a specified date
(before or after such Corporate Change) fixed by the Committee, after which
specified date all unexercised Options and all rights of Optionees thereunder
shall terminate, (2) require the mandatory surrender to the Company by selected
Optionees of some or all of the outstanding Options held by such Optionees
(irrespective of whether such Options are then exercisable under the provisions
of the Plan) as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such Options
and the Company shall pay to each Optionee an amount of cash per share equal to
the excess, if any, of the amount calculated in Subparagraph (d) below (the
"Change of Control Value") of the shares subject to such Option over the
exercise price(s) under such Options for such shares, (3) make such adjustments
to Options then outstanding as the Committee deems appropriate to reflect such
Corporate Change (provided, however, that the Committee may determine in its
sole discretion that no adjustment is necessary to Options then outstanding) or
(4) provide that the number and class of shares of Stock covered by an Option
theretofore granted shall be adjusted so that such Option shall thereafter cover
the number and class of shares of stock or other securities or property
(including, without limitation, cash) to which the Optionee would have been
entitled pursuant to the terms of the agreement of merger, consolidation or sale
of assets and dissolution if, immediately prior to such merger, consolidation or
sale of assets and dissolution, the Optionee had been the holder of record of
the number of shares of Stock then covered by such Option.
D. For the purposes of clause (2) in Subparagraph (c) above, the "Change of
Control Value" shall equal the amount determined in clause (i), (ii) or (iii),
whichever is applicable, as follows: (i) the per share price offered to
shareholders of the Company in any such merger, consolidation, reorganization,
sale of assets or dissolution transaction, (ii) the price per share offered to
shareholders of the Company in any tender offer or exchange offer whereby a
Corporate Change takes place, or (iii) if such Corporate Change occurs other
than pursuant to a tender or exchange offer, the fair market value per share of
the shares into which such Options being surrendered are exercisable, as
determined by the Committee as of the date determined by the Committee to be the
date of cancellation and surrender of such Options. In the event that the
consideration offered to shareholders of the Company in any transaction
described in this Subparagraph (d) or Subparagraph (c) above consists of
anything other than cash, the Committee shall determine the fair cash equivalent
of the portion of the consideration offered which is other than cash.
E. Any adjustment provided for in Subparagraphs (b) or (c) above shall be
subject to any required shareholder action.
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F. Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
IX. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Options have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided, that no change in any Option theretofore granted may be made
which would materially impair the rights of the Optionee without the consent of
such Optionee; and provided, further, that the Board may not make any alteration
or amendment which would materially increase the benefits accruing to
participants under the Plan, increase the aggregate number of shares which may
be issued pursuant to the provisions of the Plan, or extend the term of the
Plan, without the approval of the shareholders of the Company.
X. SECURITIES LAWS
A. The Company shall not be obligated to issue any Stock pursuant to any
Option granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of 1933
and such other state and federal laws, rules or regulations as the Company or
the Committee deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
rules or regulations available for the offering and sale of such shares.
B. It is intended that the Plan and any grant of an Option made to a person
subject to Section 16 of the 1934 Act meet all of the requirements of Rule
16b-3. If any provision of the Plan or any such Option would disqualify the Plan
or such Option under, or would otherwise not comply with, Rule 16b-3, such
provision or Option shall be construed or deemed amended to conform to Rule
16b-3. Nevertheless, the Board shall have discretion to cause the Plan to be
administered or otherwise operated without complying with Rule 16b-3, and none
of the Board, the Committee, or the Company shall be liable to any Optionee or
other person for failure of the Plan or any award under the Plan to comply with
Rule 16b-3.
C-4
<PAGE> 40
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 on the reverse side
hereof, 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
24, 1998 or any adjournment thereof.
IF CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED AS INDICATED. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,2,3 AND 4 AND IN ACCORDANCE
WITH THE DISCRETION OF THE PERSONS VOTING THE PROXY WITH RESPECT TO ANY OTHER
MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING. ALL PRIOR PROXIES ARE HEREBY
REVOKED.
(Continued, and to be dated and signed, on the reverse side)
<PAGE> 41
ROWAN COMPANIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [ ]
[ ]
The Board of Directors unanimously recommends a vote FOR:
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1. The election of H. E. Lentz, Wilfred P. [ ] [ ] [ ]
Schmoe and Charles P. Siess, Jr. as
Class I Directors
________________________________________
(Except nominee(s) written above)
FOR AGAINST ABSTAIN
2. Approval of Rowan Companies, Inc. 1998 [ ] [ ] [ ]
Nonemployee Director Stock Option Plan
The Board of Directors unanimously recommends a vote FOR:
FOR AGAINST ABSTAIN
3. Approval of Rowan Companies, Inc. 1998 [ ] [ ] [ ]
Convertible Debenture Incentive Plan
FOR AGAINST ABSTAIN
4. Approval of amendment and restatement of [ ] [ ] [ ]
Rowan Companies, Inc. 1988 Nonqualified
Stock Option Plan
5. With discretionary authority on any other
matter which may properly come before
the meeting.
____________________________________________
Signature
____________________________________________
Signature if held jointly
Dated ________________________________, 1998
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.
