SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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 ss. 240.14a-11(c) or ss. 240.14a-12
MARINE DRILLING 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)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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>
MARINE DRILLING COMPANIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1998
To the Stockholders:
Notice is hereby given that the annual meeting of stockholders of
Marine Drilling Companies, Inc. ("the Company") will be held at Westchase
Hilton, 9999 Westheimer, Houston, Texas on Thursday, May 14, 1998 at 9:00 a.m.
for the following purposes:
1. To elect seven (7) directors.
2. To transact such other business as may properly be brought
before the meeting or any adjournment(s) thereof.
Stockholders of record of the Company's Common Stock at the close of
business on April 3, 1998 will be entitled to notice of and to vote at the
meeting or any adjournment(s) thereof. A list of such stockholders will be
available at the time and place of the meeting and at the Company's offices, One
Sugar Creek Center Blvd., Suite 600, Sugar Land, Texas 77478-3556, during the
ten days preceding the meeting.
By Order of the Board of Directors,
Joan R. Smith
Secretary
Sugar Land, Texas
April 9, 1998
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE MEETING,
WHETHER OR NOT YOU ARE ABLE TO ATTEND PERSONALLY. ACCORDINGLY, YOU ARE REQUESTED
TO SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXIES
This proxy statement is being furnished to the stockholders of Marine
Drilling Companies, Inc. (the "Company") in connection with the solicitation of
proxies by the Company's Board of Directors for use at the Annual Meeting of
Stockholders to be held at the Westchase Hilton, 9999 Westheimer, in Houston,
Texas on Thursday, May 14, 1998 at 9:00 a.m. CDT and any adjournment thereof.
The approximate date on which this proxy statement and the form of proxy are
first being sent or given to stockholders of the Company is April 9, 1998.
At the Annual Meeting, the holders of shares of common stock, par
value $.01 per share, of the Company (the "Common Stock") will be asked (i) to
consider and vote upon the election of seven persons to serve on the Board of
Directors of the Company; and (ii) to consider and take action upon such other
matters as may properly come before the Annual Meeting.
All shares of Common Stock represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting, and not
revoked, will be voted at the Annual Meeting in accordance with the instructions
indicated on such proxies. If no instructions are indicated with respect to any
shares for which properly executed proxies have been received and which are
eligible to vote, such proxies will be voted FOR the Board of Directors'
nominees for directors. If any other matters are properly presented at the
Annual Meeting for action, the persons named in the proxies and acting
thereunder will have discretion to vote on such matters in accordance with their
best judgment as to the best interests of the Company. The Board of Directors of
the Company does not know of any other matters to be brought before the Annual
Meeting.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by any
of the following actions: (i) filing with the Secretary of the Company, at or
before the Annual Meeting, but in any event prior to the vote on the matter as
to which revocation is sought, a written notice of revocation bearing a later
date than the proxy; (ii) duly executing and submitting a subsequent proxy
relating to the Annual Meeting; or (iii) voting in person at the Annual Meeting
(although attendance at the Annual Meeting will not, in and of itself,
constitute a revocation of a proxy). Any written notice revoking a proxy should
be sent to the Secretary of the Company at the Company's principal executive
offices, One Sugar Creek Center Blvd., Suite 600, Sugar Land, Texas 77478-3556.
The close of business on April 3, 1998 was the date fixed by the Board
of Directors for the determination of stockholders of record entitled to notice
of and to vote at the Annual Meeting and any adjournment thereof. On April 3,
1998, the Company had 52,226,237 outstanding shares of Common Stock,
constituting the only class of stock outstanding. The holders of a majority of
the outstanding shares of Common Stock as of April 3, 1998, present in person or
represented by proxy and eligible to vote, will constitute a quorum at the
Annual Meeting. A list of such stockholders will be available at the time and
place of the meeting and at the Company's offices, One Sugar Creek Center Blvd.,
Suite 600, Sugar Land, Texas 77478-3556, during the ten days preceding the
meeting.
Each share of Common Stock is entitled to one vote at the Annual
Meeting with respect to each matter to be voted upon. The persons named in the
accompanying proxy will vote for the nominees named herein unless specifically
instructed to the contrary.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the shares
of Common Stock (the only class of securities of the Company) owned of record
and beneficially as of April 3, 1998, by (i) all persons who own of record or
are known by the Company to own beneficially more than 5% of the outstanding
shares of such class of stock, (ii) each current director of the Company and
director nominee, (iii) each executive officer of the Company named in the
Summary Compensation Table included elsewhere herein and (iv) all directors and
executive officers of the Company as a group:
COMMON STOCK
-------------------------------
NUMBER PERCENTAGE
OF OF COMMON
STOCKHOLDER SHARES (1) STOCK OWNED
- ----------- ---------- -----------
FMR Corp. (2)................................. 4,167,838 8.0%
82 Devonshire Street
Boston, MA 02109
Nicholas-Applegate Capital Management (3)..... 3,481,135 6.7%
San Diego, CA 92101
AMVESCAP PLC (4).............................. 3,287,700 6.3%
11 Devonshire Square
London EC2M 4YR
England
Hugh L. Adkins (5)............................ 5,810 *
Robert L. Barbanell (6)....................... 33,253 *
V. G. "Buddy" Bounds (7)...................... 41,666 *
David A. B. Brown (8)......................... 15,941 *
Howard I. Bull (9)............................ 24,180 *
J. C. Burton ................................. -- *
Gerald T. Greak (10).......................... 5,028 *
Nathaniel A. Gregory (11)..................... 5,000 *
Christopher M. Linneman (12).................. 19,560 *
Jan Rask (13)................................. 192,361 *
David B. Robson .............................. -- *
Danny R. Richardson (14)...................... -- *
Robert C. Thomas (15)......................... 500 *
All executive officers and directors
as a group (12 persons) (16)................. 342,503 1.0%
* Less than one percent
FOOTNOTES:
(1) Includes shares of Common Stock held by the Marine Drilling Companies
401(k) Profit Sharing Plan for the accounts of the executive officers
as follows: Mr. Rask - 695 shares, Mr. Adkins - 5,286 shares and Mr.
Greak 5,028 shares.
(2) Based on a Schedule 13G dated as of February 14, 1998, FMR Corp. may
be deemed to be the beneficial owner of 4,167,838 shares of common
stock.
(NOTES CONTINUED ON FOLLOWING PAGE)
2
<PAGE>
(3) Based on Schedule 13G filed by Nicholas-Applegate Capital Management
on February 3, 1998. Such Schedule 13G indicates that
Nicholas-Applegate Capital Management is a California Limited
Partnership and is the beneficial owner of 3,481,135 shares with sole
power to vote 2,507,120 of these shares, shared power to vote 13,652
of these shares and sole dispositive power for all of these shares.
(4) Based on a Schedule 13G filed February 9, 1998, by AMVESCAP PLC and
certain of its affiliates. Such Schedule 13G indicates that AMVESCAP
PLC and its affiliates are the beneficial owners of 3,287,700 shares
with shared power to vote or dispose of all of those shares.
(5) Mr. Adkins is Executive Vice President and Chief Operating Officer of
the Company. Mr. Adkins holds options to purchase 118,750 shares of
Common Stock under the Company's 1992 Long-Term Incentive Plan. As of
April 3, 1998, no shares were exercisable within sixty (60) days.
(6) Mr. Barbanell has been a Director of the Company since June 23, 1995.
Mr. Barbanell holds options to purchase 12,500 shares of Common Stock
under the 1995 Non-Employee Directors' Plan, and as of April 3, 1998,
all shares were exercisable within sixty (60) days.
(7) Mr. Bounds is Senior Vice President - Projects of the Company. Mr.
Bounds holds options to purchase 200,000 shares of Common Stock under
the Company's 1992 Long-Term Incentive Plan, and as of April 3, 1998,
41,666 shares were exercisable within sixty (60) days.
(8) Mr.Brown has been a Director of the Company since June 23, 1995. Mr.
Brown holds options to purchase 5,000 shares of Common Stock under the
1995 Non-Employee Directors' Plan, and as of April 3, 1998, all shares
were exercisable within sixty (60) days.
(9) Mr.Bull has been a Director of the Company since June 23, 1995. Mr.
Bull holds options to purchase 15,000 shares of Common Stock under the
1995 Non-Employee Directors' Plan, and as of April 3, 1998, all shares
were exercisable within sixty (60) days.
(10) Mr. Greak was Senior Vice President - Engineering of the Company until
his resignation on January 24, 1998.
(11) Mr. Gregory has been a Director of the Company since June 23, 1995. All
of the shares indicated as owned by Mr. Gregory are owned directly by
The Gregory Family Foundation, a tax-exempt charitable foundation, of
which Mr. Gregory is President. Mr. Gregory holds options to purchase
5,000 shares of Common Stock under the 1995 Non-Employee Directors'
Plan, and as of April 3,1998, all shares were exercisable within sixty
(60) days.
(12) Mr. Linneman, a Managing Director of Chase Securities Inc., is a
Director of the Company. Mr. Linneman holds options to purchase 15,000
shares of Common Stock under the 1995 Non-Employee Directors' Plan, and
as of April 3, 1998, all shares were exercisable within sixty (60)
days.
(13) Mr. Rask is a Director, President and Chief Executive Officer of the
Company. Mr. Rask holds options to purchase 500,000 shares of Common
Stock under the Company's 1992 Long-Term Incentive Plan, and as of
April 3, 1998, 166,666 shares were exercisable within sixty (60) days.
(14) Mr. Richardson is Senior Vice President - Marketing of the Company. Mr.
Richardson holds options to purchase 141,667 shares of Common Stock
under the 1995 Non-Employee Directors' Plan, and as of April 3, 1998,
no shares were exercisable within sixty (60) days.
(15) Mr. Thomas became a Director on February 26, 1998. Mr. Thomas holds
options to purchase 10,000 shares of Common Stock under the 1995
Non-Employee Directors' Plan, and as of April 3, 1998, no shares were
exercisable within sixty (60) days.
(16) Included are 260,832 shares subject to options held by the executive
officers and directors which are exercisable within sixty (60) days of
the date of April 3, 1998.
3
<PAGE>
ITEM 1 - ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of seven
directors, two of which are not standing for re-election. Seven directors will
be elected at the 1998 Annual Meeting of Stockholders to serve until the next
Annual Meeting of Stockholders or until the election and qualification of their
respective successors.
It is intended that the proxies received from holders of the Company's
Common Stock, in the absence of contrary instructions, will be voted at the 1998
Annual Meeting for the election of the nominees for director whose names are set
forth below. Although the Company does not contemplate that any of the nominees
will be unable to serve, decline to serve, or otherwise be unavailable as a
nominee at the time of the Annual Meeting, in such event the proxies will be
voted in accordance with the authority granted in the proxies for such other
candidate or candidates as may be nominated by the Board of Directors. Each of
the nominees named below has consented to being named in this proxy statement
and to serve if elected.
The affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting is required
for the election of directors. Abstentions from voting and broker non-votes will
have the same legal effect as a vote against a director.
NOMINEES FOR DIRECTOR
The following table sets forth certain information as of April 3, 1998
for each nominee for director, including his name, age, position with the
Company, and the year he became a director of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
<S> <C> <C>
Robert L. Barbanell..................... 67 Director and Chairman of the Board 1995
David A. B. Brown....................... 54 Director 1995
Howard I. Bull.......................... 57 Director 1995
J. C. Burton............................ 59 Director Nominee -
Jan Rask................................ 42 President, Chief Executive Officer
and Director 1996
David B. Robson......................... 58 Director Nominee -
Robert C. Thomas........................ 69 Director 1998
</TABLE>
ROBERT L. BARBANELL has been a Director of the Company since June 1995
and served as its interim President from May 9, 1996 to July 18, 1996. Mr.
Barbanell has served as President of Robert L. Barbanell Associates, Inc., a
financial consulting firm since July 1994. Mr. Barbanell was employed by Bankers
Trust New York Corporation from June 1986 to June 1994 as Managing Director and
from December 1981 to June 1986 as Senior Vice President. He is also a Director
of Cantel Industries, Inc., Kaye Group, Inc. and Sentry Technology Corporation.
DAVID A. B. BROWN has been a Director of the Company since June 1995.
Mr. Brown has served as President of The Windsor Group, Inc., a strategy
consulting firm, since 1984. Prior thereto, Mr. Brown was Chairman of the Board
of the Comstock Group from 1988 to 1990. Mr. Brown is a Director of BTU
International Inc. and EMCOR Group, Inc.
4
<PAGE>
HOWARD I. BULL, a private investor, has been a Director of the Company
since June 1995. Mr. Bull served as President, Director and Chief Executive
Officer of Dal-Tile International Inc., a manufacturer and distributor of
ceramic tile, from April 1994 to June 1997. Prior thereto, Mr. Bull served as
President of the Air Conditioning Business Group of York International
Corporation ("York") from May 1992 to February 1993 and as the President of the
York Applied Systems Division of York from January 1990 to May 1992. From
February 1979 to November 1990, Mr. Bull was employed by Baker Hughes, Inc. in
several executive positions. Mr. Bull is a Director of National Oilwell, Inc.
and the Natco Group.
J. C. BURTON served in various engineering and managerial positions
with Amoco Corporation from 1963 until his retirement on March 31, 1998. Most
recently, he was Group Vice President, International Operations Group for Amoco
Exploration and Production Company. Mr. Burton is a Director nominee.
JAN RASK has been President, Chief Executive Officer and Director
since July 1996. Mr. Rask served as President and Chief Executive Officer of
Arethusa (Off-Shore) Limited from May 1993 until the acquisition of Arethusa by
Diamond Offshore Drilling, Inc. in April 1996. Mr. Rask joined Arethusa's
principal operating subsidiary in 1990 as its President and Chief Executive
Officer.
DAVID B. ROBSON has served as Chairman of the Board and Chief
Executive Officer of Veritas DGC Inc. since August 1996. Prior thereto, he held
similar positions with Veritas Energy Services, Inc. or its predecessors since
1974. Mr. Robson is a Director nominee.
ROBERT C. THOMAS has been a Director of the Company since February
1998. Mr. Thomas served as Senior Associate from June 1994 to December 1997 of
Cambridge Energy Research Associates. Prior thereto, he served as Chairman and
Chief Executive Officer of Tenneco Gas, a subsidiary of Tenneco, Inc., from June
1990 to March 1994. Mr. Thomas is a Director of PetroCorp Incorporated.
5
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors currently has seven members. During
1997, the Board of Directors held ten meetings. In addition, some decisions made
by the Board of Directors were formalized during 1997 through the execution of
one unanimous written consent. The Board has three standing committees which are
discussed below: (i) the Personnel and Compensation Committee, (ii) the Audit
Committee and (iii) the Executive Committee; however, the Board does not have a
nominating committee. Each director attended at least 92% of the meetings held
during 1997 by the Board.
PERSONNEL AND COMPENSATION COMMITTEE -- The Personnel and Compensation
Committee of the Board of Directors of the Company (the "Compensation
Committee") currently consists of two members: David A. B. Brown (Chairman) and
Howard I. Bull. The purpose of the Compensation Committee is to ensure that the
Company has a broad plan of executive compensation that is competitive and
motivating to the degree that it will attract, hold and inspire performance of
managerial and other key personnel, thereby enhancing the growth and
profitability of the Company. During 1997, the Compensation Committee held five
meetings.
AUDIT COMMITTEE -- The Company's Audit Committee currently consists of
three members: Robert L. Barbanell, Nathaniel A. Gregory and Christopher
Linneman (Chairman). The functions of the Audit Committee include recommending
the firm of independent auditors for each fiscal year, approving the nature of
the professional services provided by the independent auditors and reviewing the
independence of the auditors. The Audit Committee also confers with management
from time to time on financial reporting and internal control matters. During
1997, the Audit Committee held three meetings.
EXECUTIVE COMMITTEE -- The Company's Executive Committee currently
consists of three members: Robert L. Barbanell, David A. B. Brown and Jan Rask.
The Executive Committee was established to accelerate the process of reviewing
projects to be proposed to the full Board and to facilitate the consummation of
projects which have received prior Board approval. During 1997, the Executive
Committee held eight meetings.
DIRECTOR COMPENSATION AND EXPENSES
The Company's non-employee directors are paid a $24,000 annual
retainer with $12,000 being paid in cash and $12,000 being paid in Company
Common Stock. In addition, quarterly retainers are paid to certain non-employee
directors for additional responsibilities, including the Chairman of the Board
($10,000), members of the Executive Committee excluding the Chairman of the
Board ($5,000) and Chairman of the Audit and Compensation Committees ($500).
In addition, meeting fees of $500 are paid to non-employee directors
for each board meeting attended whether by teleconference or otherwise. Members
of the Compensation Committee and Audit Committee are also paid $500 for each
committee meeting attended unless the meetings are held the same day as a board
meeting, in which case the meeting fee is $250.
Pursuant to the Company's 1995 Non-Employee Directors' Plan (the
"Directors' Plan"), each non-employee director receives an option to purchase
10,000 shares of the Company's Common Stock upon his initial election or
appointment to the Board of Directors. Additionally, an option to purchase 2,500
shares of the Company's Common Stock is granted to each non-employee director
upon each successive election to the Board of Directors.
6
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company serve at the pleasure of the
Board of Directors and are subject to annual appointment by the Board of
Directors at its first meeting following the annual meeting of shareholders. The
Company's executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---------------------- ---------- -----------------------------------------------------
<S> <C>
Jan Rask 42 President, Chief Executive Officer and Director
Hugh L. Adkins 50 Executive Vice President and Chief Operating Officer
V. G. "Buddy" Bounds 61 Senior Vice President - Projects
T. Scott O'Keefe 42 Senior Vice President and Chief Financial Officer
Danny R. Richardson 51 Senior Vice President - Marketing
Joan R. Smith 42 Vice President, Controller and Secretary
</TABLE>
JAN RASK was appointed President, Chief Executive Officer and Director
of the Company in June 1996. Prior to joining the Company, he was President and
Chief Executive Officer of Arethusa (Off -Shore) Ltd. since 1993. He joined
Arethusa Off-Shore Company in 1990 as its President and Chief Executive Officer.
From 1985 to 1990, Mr. Rask was Executive Vice President of Frontline AB, a
Swedish shipping company.
HUGH L. ADKINS was appointed Executive Vice President and Chief
Operating Officer in January 1998. He served as Senior Vice President and
Operating Manager from March 1993 until January 1998. During the period of March
1992 until March 1993 he was Vice President and Operations Manager. Prior to
that time he was Safety Manager of the Company from August 1990 to March 1992.
V. G. "BUDDY'" BOUNDS was appointed Senior Vice President - Projects
of the Company in January 1998. Prior to that time he served as Director of
Deepwater Operations since joining the Company in October 1996. Prior to joining
the Company, he was Senior Vice President - Operations of Arethusa Off-Shore
Company since 1992, after serving in the same position with Zapata Offshore
Company from March 1990 to September 1992.
T. SCOTT O'KEEFE joined the Company in January 1998 as Senior Vice
President and Chief Financial Officer. Prior to joining the Company he was
Senior Vice President and Chief Financial Officer of Grey Wolf Inc. since
September 1996. From April 1996 through August 1996, Mr. O'Keefe provided
consulting services to Grey Wolf Inc. Prior to joining Grey Wolf Inc., he was
with Convest Energy Corporation and its affiliates for approximately ten years,
most recently as Vice President and Chief Financial Officer. Mr. O'Keefe is a
certified public accountant.
DANNY R. RICHARDSON was appointed Senior Vice President - Marketing in
January 1998. Prior to that time he served as Vice President - Marketing since
joining the Company in July 1996. Prior to joining the Company, he was Senior
Vice President Marketing and Contract Administration of Arethusa Off-Shore
Company since January 1994. He joined Arethusa Off-Shore Company as Vice
President - Marketing and Contract Administration in October 1992, after serving
in the same position with Zapata Offshore Company from July 1989 to September
1992.
JOAN R. SMITH was appointed Vice President, Controller and Secretary
of the Company in February 1993. Prior to that time she served as Controller and
Assistant Secretary since joining the Company in February 1991. Prior to 1991,
she worked for the U.S. Securities and Exchange Commission in the Division of
Corporation Finance and ENERCAP Corporation, an independent oil exploration
company as Controller and Secretary. Ms. Smith is a certified public accountant.
7
<PAGE>
EXECUTIVE COMPENSATION AND RELATED MATTERS
The following table sets forth information with respect to the
compensation of the Company's chief executive officer and each of the four other
most highly compensated executive officers who were serving as executive
officers as of December 31, 1997. These five individuals are the "Named
Executive Officers."
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------- ----------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND COMPEN- STOCK COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION OPTIONS(#) SATION(1)
- -------------------------------- ---------- ----------------- ---------------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Jan Rask (2) ............................... 1997 $300,000 $200,000 -- -- $19,838
Director, President ........................ 1996 136,538 98,269 -- 500,000 2,921
& CEO
Hugh L. Adkins ............................. 1997 141,486 70,884 -- -- 9,243
COO & EVP-Operations ....................... 1996 135,000 67,500 -- -- 11,357
1995 126,480 -- -- 75,000 8,332
V. G. "Buddy" Bounds(3) .................... 1997 135,000 67,500 -- -- 4,984
SVP - Projects ............................. 1996 24,577 -- -- 125,000 831
Gerald T. Greak(4) ......................... 1997 135,000 41,850 -- -- 9,943
SVP-Engineering ............................ 1996 133,200 39,960 -- -- 11,800
1995 126,432 -- -- 25,000 10,033
Danny R. Richardson(5) ..................... 1997 141,486 70,884 -- -- 2,155
SVP - Marketing ............................ 1996 62,494 31,197 -- 125,000 937
</TABLE>
FOOTNOTES:
(1) "All Other Compensation" includes the value of group life insurance
benefits provided on behalf of each respective executive officer,
benefits related to the Marine Drilling Companies 401(k) Profit
Sharing Plan (401k Plan") including the value of the Company's
matching contributions up to 5% of qualified compensation and accrued
benefits related to the Marine Drilling Companies, Inc. Executive
Deferred Compensation Plan effective December 31, 1994 including the
value of the Company's matching contributions up to 5% of qualified
compensation. For 1997, includes: for Mr. Rask: $8,000 contributed by
the Company to the 401(k) Plan, $10,920 accrued under the Executive
Deferred Compensation Plan and $918 relating to group life insurance
benefits; for Mr. Adkins $7,088 contributed by the Company to the
401(k) Plan and $2,155 relating to group life insurance benefits; for
Mr. Bounds $4,984 relating to group life insurance benefits; for Mr.
Greak $6,750 contributed by the Company to the 401(k) Plan and $3,193
relating to group life insurance benefits; for Mr.
Richardson $2,155 relating to group life insurance benefits.
(2) Mr. Rask became an officer of the Company on June 18, 1996.
(3) Mr. Bounds became an officer of the Company on October 28, 1996.
(4) Mr. Greak ceased to be an officer of the Company on January 24, 1998.
(5) Mr. Richardson became an officer of the Company on July 15, 1996.
8
<PAGE>
OTHER MATTERS
EMPLOYMENT AGREEMENTS -- The Company entered into an employment
agreement with Mr. Rask on June 18, 1996 and with Mr. O'Keefe on January 12,
1998. The initial term of each employment agreement is two years, but each term
will automatically extend for additional successive one year periods unless
terminated by the executive or the Company. Pursuant to the terms of the
employment agreements, Mr. Rask's and Mr. O'Keefe's annual base salary will not
be less than $300,000 and $210,000, respectively. If the executive's employment
terminates, he will generally be entitled to severance pay equal to the greater
of one year's then current base salary or the base salary payable during the
remainder of the initial two year term. However, if such termination occurs
during the two year period following a change in control as defined in the
Company's 1992 Long-Term Incentive Plan, the executive will generally be
entitled to severance pay equal to two year's then current base salary. The
employment agreements also provide for tax gross up payments under certain
circumstances. All of the stock options granted to such executives in connection
with the entering into of such employment agreements generally provide for
accelerated vesting in the event of termination of employment under
circumstances in which the executive would be entitled to severance payments.
SEVERANCE AGREEMENTS --The Company has entered into severance
agreements with Messrs. Adkins, Bounds and Richardson and with other officers
and key personnel. These agreements generally provide that the covered persons
will receive severance pay equal to 100% of their base salary and specified
medical and other employee benefits (depending on the person) in the event of an
involuntary termination as defined in the agreements. Certain of the severance
agreements, including those applicable to Messrs. Adkins, Bounds and Richardson,
provide that if the termination occurs after a change in control as defined in
the Company's 1992 Long-Term Incentive Plan, the officer will receive severance
pay equal to 200%, rather than 100%, of their base salary. The agreements also
generally provide for the accelerated vesting of stock options granted prior to
December 31, 1995 in the event of an involuntary termination and for the
accelerated vesting of all stock options in the event of a change in control.
DEFERRED COMPENSATION PLAN -- The Company adopted the Marine Drilling
Companies, Inc. Deferred Compensation Plan (the "Management Plan") effective
December 31, 1994. The Management Plan was amended and restated effective July
1, 1996. Eligibility for plan participation is determined by the plan's
administrative committee which consists of Mr. Adkins and Ms. Smith. At April 9,
1998, nine of the Company's management employees were eligible to participate in
the plan, of which six were actively participating. Under the Management Plan,
the participating employees may elect (i) to defer up to 80% of compensation
after reaching the annual deferral limitations applicable to the Company's
401(k) plan and (ii) to defer any excess Company matching contributions refunded
by the Company's 401(k) plan. The Company matches participants' contributions to
the Management Plan on a dollar-for-dollar basis up to 5% of their eligible
compensation. All participant deferrals and Company matching contributions are
deposited into a Rabbi trust established for the Management Plan and
administered by Merrill Lynch Trust Company of Texas who also serves as trustee.
As of December 31, 1997, the assets held by the Management Plan totaled
approximately $252,000. The assets held by the trust on behalf of the Management
Plan are subject to the claims of the Company's creditors.
9
<PAGE>
STOCK OPTIONS
No stock options were granted to any named executive officer in 1997.
The following table sets forth information with respect to each named
person concerning the exercise of options during the last fiscal year and the
number of shares covered by all exercisable and non-exercisable stock options
held by the named executive officers at the end of the fiscal year.
<TABLE>
<CAPTION>
AGGREGATED 1997 OPTION EXERCISES
AND YEAR-END OPTION VALUES
OPTIONS EXERCISED
-------------------------------- VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 12/31/97 AT 12/31/97
ACQUIRED VALUE -----------------------------------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Executive Officers --
Jan Rask ......................... -- $ -- 166,666 333,334 $1,968,742 $3,937,507
Hugh L. Adkins ................... 75,000 1,502,188 -- 37,500 -- 684,375
Vincent G. Bounds ................ -- -- 41,666 83,334 354,161 708,339
Danny R. Richardson .............. 58,333 678,120 -- 66,667 -- 691,670
Gerald T. Greak .................. -- -- 139,300 12,500 2,522,600 228,125
</TABLE>
(1) This valuation represents the difference between $20-3/4, the closing
price of the Common Stock on the Nasdaq Stock Market on December 31, 1997,
and the respective exercise prices of the stock options. If a "change in
control" (as defined in the plans) occurs, all options then outstanding
shall become fully exercisable, and, unless otherwise determined by the
Compensation Committee, the value of outstanding options (other than those
granted within the prior six months to persons subject to Section 16 of
the Securities Exchange Act of 1934) will be cashed out on the basis of
the highest price paid (or offered) during the preceding 60 day period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The directors and officers of the Company have no interlocking
relationships with the compensation committees (or their equivalent) of any
other entity.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires that the Company's directors and executive officers, and persons
who own more than ten percent of a registered class of the Company's equity
securities, file by specific dates with the Securities and Exchange Commission
("SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file. The Company is
required to report in this proxy statement any failure to file by the relevant
due date any of these reports during the preceding fiscal year.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than ten percent beneficial owners were timely satisfied,
except for one report on Form 4 for Mr. Brown which was due in January 1998 but
was filed in February 1998.
10
<PAGE>
PERSONNEL AND COMPENSATION COMMITTEE REPORT
REGARDING EXECUTIVE COMPENSATION
COMPENSATION POLICY REGARDING EXECUTIVE OFFICERS
The Compensation Committee is responsible for the design of the
Company's compensation and incentive programs. The Compensation Committee is
composed of the undersigned individuals who are non-employee independent
directors. The Compensation Committee's goal is to develop and implement
compensation and incentive programs which cause the Company's officers and
employees to focus on increasing shareholder value as well as attracting,
retaining and motivating employees who are capable of furthering that goal.
The Compensation Committee has established a three-part program with
respect to employee compensation. The first component involves providing base
salaries which approximate the average for companies comprising the offshore
contract drilling industry. With respect to the establishment of compensation
for each executive officer, the Compensation Committee considers an individual's
past performance and skills, as well as the individual's ability to enhance
shareholder value. The second component provides for the payment of performance
bonuses which are based upon (i) the Company's financial performance as compared
to a peer group of publicly traded offshore drilling contractors, (ii) each
individual employee's performance in furtherance of the Company's financial
performance and the attainment of the Company's goals with respect to its safety
record, customer satisfaction and operational performance, and (iii) each
employee's achievement of individual objectives (as applicable). During 1997,
the Company's executives received bonuses which reflected their individual
attainment of goals as described in (ii) and (iii) above, as well as the
Company's financial performance as described in (i). The third component is
incorporated into the design of the Marine Drilling 1992 Long-Term Incentive
Plan (the "Plan") and provides for the grant of long-term equity-based
incentives through the utilization of stock options, restricted stock and stock
appreciation rights in order to maintain a continuing emphasis on increasing
shareholder value.
The Omnibus Budget Reconciliation Act of 1993 (the "Act") imposes a
limit of $1 million on the amount that a publicly held corporation may deduct in
any year for the compensation paid or accrued with respect to each of its five
most highly compensated officers, subject to certain exceptions. While the
Compensation Committee cannot predict with certainty how the Company's executive
compensation might be affected in the future by the Act or regulations issued
thereunder, the Compensation Committee intends to try to preserve the tax
deductibility of all executive compensation while maintaining the Company's
executive compensation program as described in this report.
11
<PAGE>
DISCUSSION REGARDING COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee established the 1997 base salary of the
Company's Chief Executive Officer at $300,000, a level which it believes is
approximately average for companies of comparable size in the offshore drilling
industry. During 1996, the Company granted Mr. Rask stock options of significant
size (500,000 shares) which its believes will maintain a close alignment between
Mr. Rask's performance and the shareholder value of the Company. Mr. Rask was
paid a performance bonus in 1998 pursuant to the Plan in the amount of $200,000
as determined by the Company's 1997 financial performance and Mr. Rask's
contributions to the Company's attainment of its performance objectives for that
year. Although bonuses are generally limited to 50% of base salary, the
Compensation Committee determined to award Mr. Rask a higher bonus in light of
the Company's 1997 financial success and its success in expanding into the deep
water sector of the drilling industry. The Compensation Committee believes that
Mr. Rask's experience, reputation, performance and impact on the Company's
performance justify and reaffirm his compensation and incentive package.
April 9, 1998 The Personnel and Compensation Committee
David A. B. Brown
Howard I. Bull
12
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total
shareholder returns from the end of 1992 through the end of 1997 with the CRSP
Total Return Index for the NASDAQ Stock Market (the "NASDAQ Index"), and the
Simmons & Company International Offshore Drillers Index (the "SCI Index").
The companies that comprise the SCI Index include the Company; Atwood
Oceanics, Inc.; Cliffs Drilling Company; Diamond Offshore Drilling, Inc.; ENSCO
International, Inc.; Inc.; Global Marine, Inc.; Noble Drilling Corporation;
Pride International; R & B Falcon Corporation; Rowan Companies, Inc.; Sante Fa
International; Smedvig a.s.; and Transocean Offshore Inc. The performance graph
assumes that $100 was invested in each of these categories on December 31, 1992,
and that all dividends were re-invested. The Company has not paid any cash
dividends during the periods covered by the graph.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
DEC 92 DEC 93 DEC 94 DEC 95 DEC 96 DEC 97
- ------------------------ -------- -------- ------- -------- -------- -----------
MARINE DRILLING
COMPANIES, INC. $100 $460 $240 $410 $1575 $1660
- ------------------------ -------- -------- ------- -------- -------- -----------
NASDAQ INDEX 100 115 112 159 195 240
- ------------------------ -------- -------- ------- -------- -------- -----------
SCI INDEX 100 169 138 266 632 812
- ------------------------ -------- -------- ------- -------- -------- -----------
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
None.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP has been selected as Auditor of the
Company for the 1998 calendar year. That firm served as Auditor of the Company
for the 1997 calendar year. A representative of KPMG Peat Marwick LLP will be in
attendance at the Annual Meeting with the opportunity to make a statement and to
be available to respond to appropriate questions.
STOCKHOLDERS' PROPOSALS
Pursuant to the Securities Exchange Act of 1934, as amended, and
regulations thereunder, individual stockholders have a limited right to propose
for inclusion in the proxy statement a single proposal for action to be taken at
the Annual Meeting of Stockholders. Proposals intended to be presented at the
Annual Meeting to be held in 1999 must be received by the Company's principal
executive offices no later than December 9, 1998. They may be addressed to the
Secretary of the Company at One Sugar Creek Center Blvd., Suite 600, Sugar Land,
Texas 77478-3556.
ANNUAL REPORT
The Company's Annual Report for the year ended December 31, 1997,
which includes, among other things, the Company's audited consolidated balance
sheets of December 31, 1997 and 1996, respectively, and audited consolidated
statements of income and changes in financial position for each of the years
ended December 31, 1997, 1996 and 1995, respectively, will be mailed with this
Proxy Statement. Additional copies are available from the Company upon request.
EXPENSES OF SOLICITATION
The cost of this solicitation will be borne by the Company. It is
expected that the solicitation of proxies will be primarily by mail and
telephone. The Company has arranged for American Stock Transfer & Trust Company,
40 Wall Street, New York, New York 10005 to tabulate proxies in such manner at
no cost other than out-of-pocket expenses. Proxies may also be solicited
personally by directors, officers, and other regular employees of the Company in
the ordinary course of business and at nominal cost. Proxy materials will be
provided for distribution through brokers, custodians, and other nominees or
fiduciaries to beneficial holders of the Common Stock. The Company expects to
reimburse such parties for their reasonable out-of-pocket expenses incurred in
connection therewith.
14
<PAGE>
OTHER MATTERS
While management has no reason to believe that any other business will
be presented, if any other matters should properly come before the Annual
Meeting, the proxies will be voted as to such matters in accordance with the
best judgment of the proxy holders. The approval of such other matters will
require the affirmative vote of the majority of the shares of Common Stock
represented at the meeting, in person or by proxy. Abstentions from voting and
broker non-votes will have the same legal effect as a vote against such matter.
MARINE DRILLING COMPANIES, INC.
By Joan R. Smith
Secretary
Sugar Land, Texas
April 9, 1998
15
<PAGE>
DESCRIPTIONS FOR PERFORMANCE GRAPH IN
PROXY DATED APRIL 9, 1998 TO BE USED FOR EDGARIZED DOCUMENT
-----------------------------------------------------------
(page 13)
MARINE DRILLING COMPANIES, INC.
The value of $100.00 invested in Marine Drilling Companies, Inc. at December 31,
1992 was $460.00, $240.00, $410.00, $1575.00 and $1660.00 as of December 31,
1993, 1994, 1995, 1996 and 1997, respectively.
NASDAQ INDEX
The value of $100.00 invested in the stocks represented by the NASDAQ Index
(including reinvestment of dividends) as of December 31, 1992 was $115.00,
$112.00, $159.00, $195.00 and $240.00 as of December 31, 1993, 1994, 1995, 1996
and 1997, respectively.
SCI INDEX
The value of $100.00 invested in the stocks represented by the SCI Index
(including reinvestment of dividends) as of December 31, 1992 was $169.00,
$138.00, $266.00, $632.00 and $812.00 as of December 31, 1993, 1994, 1995, 1996
and 1997, respectively.
<PAGE>
MARINE DRILLING COMPANIES, INC.
PROXY STATEMENT ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Joan R. Smith and Jan Rask, or either of them
with full power of substitution, proxies to vote at the Annual Meeting of
Stockholders of Marine Drilling Companies, Inc. ("the company") to be held at
the Westchase Hilton located 9999 Westheimer, in Houston, Texas on Thursday,
May 14, 1998 at 9:00 a.m., central daylight time, and at all adjournments or
postponements thereof, hereby revoking any proxies heretofore given, all shares
of common stock of the Company held or owned by the undersigned as directed
hereon.
(To be Signed on Reverse Side)
<PAGE>
A [X] Please mark your
votes as in this
example.
WITHHOLD
AUTHORITY
FOR all to vote for all
listed nominees listed
1. Election of [ ] [ ]
Directors
[ ] For all nominees listed except vote
withheld for the following nominee(s)
- -----------------------------------------
- -----------------------------------------
Nominees: Robert L. Barbanelli
David A. B. Brown
Howard I. Bull
J.C. Burton
Jan Rask
David B. Robson
Robert C. Thomas
2. In their discretion, upon any other matter which may properly come before the
meeting or at any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, IF NO DIRECTION
IS MADE, THE PERSONS NAMED HEREIN INTEND TO VOTE FOR THE ELECTIONOF THE NAMED
NOMINEES FOR DIRECTOR.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
SIGNATURE(S)_______________________________________________ DATE______________
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as an attorney, executor, administrator, trustee or
guardian please give full title as such.
