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.
ONE SUGAR CREEK CENTER BLVD., SUITE 600
SUGAR LAND, TEXAS 77479
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1999
Notice is hereby given that the annual meeting of stockholders of Marine
Drilling Companies, Inc. ("the Company") will be held at the Windsor Court
Hotel, 300 Gravier Street, New Orleans, Louisiana on Thursday, May 13, 1999 at 1
p.m., New Orleans time, for the following purposes:
1. To elect a board of seven (7) directors to serve until the next annual
meeting of shareholders or until their successors are elected and
qualified; and
2. To transact such other business as may properly be brought before the
meeting or any adjournments thereof.
Stockholders of record of the Company's Common Stock at the close of
business on April 2, 1999 will be entitled to notice of and to vote at the
meeting or any adjournments 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.
Your vote is important. Whether or not you plan to attend the annual
meeting in person, we request that you sign, date and return the enclosed proxy
card promptly in the enclosed stamped envelope. The prompt return of proxies
will ensure a quorum and save the Company the expense of further solicitation.
By Order of the Board of Directors,
T. SCOTT O'KEEFE
SECRETARY
April 8, 1999
<PAGE>
MARINE DRILLING COMPANIES, INC.
ONE SUGAR CREEK CENTER BLVD., SUITE 600
SUGAR LAND, TEXAS 77479
PROXY STATEMENT
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 ("Annual Meeting") to be held at the Windsor Court Hotel, 300
Gravier Street, in New Orleans, Louisiana on Thursday, May 13, 1999 at 1:00 p.m.
CDT and any adjournments thereof, for the purposes set forth in the accompanying
notice. 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 8, 1999.
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 2, 1999 (the "Record Date") 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 adjournments
thereof. On April 2, 1999, the Company had 52,471,042 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 the Record Date,
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>
ITEM 1 - ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of seven directors.
Seven directors will be elected at the 1999 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 1999
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 the Record Date
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> <C>
Robert L. Barbanell (1)..... 68 Director and Chairman of the Board 1995
David A. B. Brown (2)....... 55 Director 1995
Howard I. Bull (1).......... 58 Director 1995
J. C. Burton (1)............ 60 Director 1998
Jan Rask.................... 43 President, Chief Executive Officer
and Director 1996
David B. Robson (2)......... 59 Director 1998
Robert C. Thomas (2)........ 70 Director 1998
</TABLE>
(1) Member, Compensation Committee of the Board of Directors
(2) Member, Audit Committee of the Board of Directors
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.
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.
2
<PAGE>
J. C. BURTON has been a Director of the Company since May 1998. He 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.
JAN RASK has been President, Chief Executive Officer and Director since
June 1996. Mr. Rask served as President and Chief Executive Officer of Arethusa
(Off-Shore) Limited from May 1993 until its acquisition 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. Mr. Rask is a
Director of Veritas DGC Inc.
DAVID B. ROBSON has been a Director of the Company since May 1998. He 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. and its predecessors since 1974.
ROBERT C. THOMAS has been a Director of the Company since February 1998.
Mr. Thomas served as Senior Associate of Cambridge Energy Research Associates
from June 1994 to December 1997. 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 also a Director of PetroCorp Incorporated.
3
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors currently has seven members. During
1998, the Board of Directors held seven meetings. In addition, some decisions
made by the Board of Directors were formalized during 1998 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. The Board does not have a
nominating committee. Each director attended at least 75% of the meetings held
during 1998 by the Board and their applicable committees, except for Mr. Robson
who attended 73% of the meetings held since he was elected a director May 1998.
PERSONNEL AND COMPENSATION COMMITTEE -- The Personnel and Compensation
Committee of the Board of Directors of the Company (the "Compensation
Committee") currently consists of three members: Howard I. Bull (Chairman),
Robert L. Barbanell, and J. C. Burton. 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 1998, the Compensation Committee held
nine meetings.
AUDIT COMMITTEE -- The Company's Audit Committee currently consists of
three members: David A. B. Brown (Chairman), David B. Robson and Robert C.
Thomas. 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
1998, the Audit Committee held two 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 that have received prior Board approval. During 1998, the Executive
Committee held five 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),
non-employee 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.
4
<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 the Record Date 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, (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) ..................................... 5,588,300 10.7%
82 Devonshire Street
Boston, MA 02109
Hugh L. Adkins (3) ................................ 49,991 *
Robert L. Barbanell (4) ........................... 36,595 *
V. G. "Buddy" Bounds (3) .......................... 102,083 *
David A. B. Brown (3) ............................. 10,733 *
Howard I. Bull (3) ................................ 27,522 *
J. C. Burton (3) .................................. 10,630 *
T. Scott O'Keefe (3) .............................. 44,532 *
Jan Rask (3) ...................................... 359,610 *
David B. Robson (3) ............................... 10,630 *
Danny R. Richardson (5) ........................... -- *
Robert C. Thomas (3) .............................. 13,842 *
All executive officers and directors
as a group (11 persons) (6) ...................... 666,168 1.3%
- ------------
* 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 - 1,177 shares, Mr. Adkins - 5,717 shares and Mr.
O'Keefe - 782 shares.
(2) Based on a Schedule 13G dated as of January 7, 1999, FMR Corp. may be
deemed to be the beneficial owner of 5,588,300 shares of common stock.
(3) Includes the following number of shares which the named individual has the
right to acquire upon exercise of stock options exercisable within sixty
(60) days of the Record Date: Mr. Adkins - 43,750; Mr. Bounds - 102,083;
Mr. Barbanell - 15,000; Mr. Brown - 7,500; Mr. Bull - 17,500; Mr. Burton -
10,000; Mr. O'Keefe - 43,750; Mr. Rask - 333,333; Mr. Robson - 10,000; and
Mr. Thomas - 12,500.
(4) Includes 6,666 shares held by the Barbanell Family 1998 Trust. Mr.
Barbanell disclaims any beneficial interest in all shares owned by the
trust.
(5) Mr. Richardson was Senior Vice President - Marketing of the Company until
his resignation on December 31, 1998.
(6) Included are 595,416 shares subject to options held by the executive
officers and directors, which are exercisable within sixty (60) days of
the Record Date.
5
<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 43 President, Chief Executive Officer and Director
Hugh L. Adkins 51 Executive Vice President and Chief Operating Officer
V. G. "Buddy" Bounds 62 Senior Vice President - Projects
T. Scott O'Keefe 43 Senior Vice President, Chief Financial Officer and Secretary
O. Peter Blom 51 Vice President - Engineering and Business Development
George H. Gentry, III 40 Vice President - Human Resources
Dale W. Wilhelm 36 Vice President and Controller
</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) Limited 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. From 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. Mr. Adkins is a director
of Norton Drilling Services.
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, Chief Financial Officer and Secretary. Prior to joining the Company
he was Senior Vice President and Chief Financial Officer of Grey Wolf, Inc.
since September 1996. From April 1995 through August 1996, Mr. O'Keefe was a
financial consultant providing services to various companies including Grey
Wolf, Inc. Prior to April 1995, 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.
O. PETER BLOM joined the Company in August 1998 as Vice President -
Engineering and Business Development. Mr. Blom served as Vice President -
Operations and Business Development of Arethusa (Offshore) Limited from May 1992
until its acquisition by Diamond Offshore Drilling, Inc. in April 1996. He
joined Arethusa's principal operating subsidiary as its Vice President in 1990
and has held other leading positions in the offshore drilling industry since
1975.
GEORGE H. GENTRY, III joined the Company in November 1998 as Vice
President - Human Resources. Prior to joining the Company he was Director of
Human Resources for Input/Output, Inc. from October 1997 until November 1998.
Prior to joining Input/Output he was with Tenneco Energy for thirteen years,
most recently as Vice President, Human Resources.
DALE W. WILHELM joined the Company in May 1998 as Vice President and
Controller. Prior to joining the Company, he was Corporate Controller of
Continental Emsco Company since August 1997 and Serv-Tech, Inc. since September
1994. Before joining Serv-Tech, Inc., he was Assistant Corporate Controller of
CRSS Inc. since May 1990. Prior to that time Mr. Wilhelm was with the public
accounting and consulting firm of KPMG Peat Marwick since September 1985, most
recently as Audit Manager. Mr. Wilhelm is a certified public accountant.
6
<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, 1998. These five individuals are the "Named
Executive Officers."
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- SECURITIES
OTHER UNDERLYING
NAME AND ANNUAL STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS(#) COMPENSATION(2)
- ------------------- ---- -------- -------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jan Rask(3) ........................... 1998 $349,992 $107,059 -- -- $ 25,501
Director, President ................... 1997 300,000 200,000 -- -- 19,838
& CEO ................................. 1996 136,538 98,269 -- 500,000 2,921
T. Scott O'Keefe(3) ................... 1998 201,250 146,643 -- 200,000 8,240
CFO & SVP
Hugh L. Adkins ........................ 1998 173,750 74,285 -- 100,000 16,130
COO & EVP - ........................... 1997 141,486 70,884 -- -- 9,243
Operations ............................ 1996 135,000 67,500 -- -- 11,357
V.G. "Buddy" Bounds(3) ................ 1998 144,456 16,999 -- 75,000 5,377
SVP - Projects ........................ 1997 135,000 67,500 -- -- 4,984
1996 24,577 -- -- 125,000 831
Danny R. Richardson(3) ................ 1998 132,709 -- -- 75,000 2,407
SVP - Marketing ....................... 1997 141,486 70,884 -- -- 2,155
1996 62,494 31,197 -- 125,000 937
</TABLE>
FOOTNOTES:
(1) Performance bonuses for 1998 were based on achievement of certain goals,
some of which are not yet quantifiable. The amounts shown were paid and
additional bonuses up to $125,125, $47,797, $41,266, and $16,251 for
Messrs. Rask, O'Keefe, Adkins and Bounds, respectively, may be paid during
1999 once specific goals are quantifiable.
(2) "All Other Compensation" includes $8,000 for Mr. Rask, $7,350 for Mr.
O'Keefe and $8,000 for Mr. Adkins related to the Marine Drilling Companies
401(k) Plan. These totals include the value of the Company's matching
contributions of up to 6% of qualified compensation. Accrued benefits
related to the Marine Drilling Companies, Inc. Executive Deferred
Compensation Plan were $16,583 for Mr. Rask and $5,559 for Mr. Adkins
including the value of the Company's matching contributions of up to 6%.
Benefits related to group life insurance were $918 for Mr. Rask, $890 for
Mr. O'Keefe, $2,571 for Mr. Adkins, $5,377 for Mr. Bounds and $2,407 for
Mr. Richardson.
(3) Mr. Rask became an officer of the Company on June 18, 1996; Mr. O'Keefe on
January 12, 1998; Mr. Bounds on October 28, 1996; and Mr. Richardson on
July 15, 1996. Mr. Richardson ceased to be an officer on December 31,
1998.
7
<PAGE>
STOCK OPTIONS
The following table contains certain information with respect to stock
options granted to the Named Executive Officers in 1998 under the Marine
Drilling 1992 Long-Term Incentive Plan.
STOCK OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS EXERCISE ANNUAL RATES OF STOCK PRICE
GRANTED TO OR BASE APPRECIATION FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------------------------
NAME GRANTED(1) IN 1998 ($/SHARE) DATE 0% 5% 10%
- -------------------------------------- ------------ ---------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Jan Rask ............................. -- -- $ -- -- $ -- $ -- $ --
T. Scott O'Keefe ..................... 175,000 20.08% 18.1250 01/12/2008 -- 1,994,775 5,055,152
25,000 2.87% 9.4375 11/19/2008 -- 148,380 376,024
Hugh L. Adkins ....................... 100,000 11.47% 18.1250 01/12/2008 -- 1,139,872 2,888,658
V.G. "Buddy" Bounds .................. 75,000 8.61% 18.1250 01/12/2008 -- 854,904 2,166,494
Danny R. Richardson .................. 75,000 8.61% 18.1250 03/31/1999 -- 67,969 135,938
Gain for all Shareholders
At Assumed Rates for Appreciation(3) -- -- -- -- $249,129,042 $631,528,376
</TABLE>
(1) Reflects options to purchase the indicated numbers of shares of the
Company's Common Stock. All options granted to the Named Executive
Officers were granted under the Marine Drilling 1992 Long-Term Incentive
Plan at exercise prices equal to or greater than the average of the high
and low price of the Common Stock on the grant date and typically vest
over a four year period. 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.
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates required by the SEC, and, therefore, are not intended
to forecast possible future appreciation, if any, of the stock price.
There can be no assurance that the amounts reflected in this table will be
achieved.
(3) Amounts were determined based on 52,365,537 shares of the Company's Common
Stock outstanding on December 31, 1998, using the Common Stock closing
price on December 31, 1998 ($7 9/16) as the base price.
8
<PAGE>
STOCK OPTIONS (CONT.)
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.
AGGREGATED 1998 OPTION EXERCISES
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
OPTIONS EXERCISED VALUE OF UNEXERCISED
----------------------------- NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS HELD AT 12/31/98 AT 12/31/98(1)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Jan Rask ......................... -- $ -- 333,333 166,667 $ -- $ --
T. Scott O'Keefe ................. -- -- -- 200,000 -- --
Hugh L. Adkins ................... 18,750 342,075 -- 118,750 -- 94,922
V.G. "Buddy" Bounds .............. -- -- 83,333 116,667 -- --
Danny R. Richardson .............. -- -- 33,333 -- -- --
</TABLE>
(1) This valuation represents the difference between $7 9/16, the closing
price of the Common Stock on the New York Stock Exchange on December 31,
1998, 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.
9
<PAGE>
COMPENSATION COMMITTEE REPORT
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 that 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 1998,
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 and restricted stock 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.
DISCUSSION REGARDING COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee established the 1998 base salary of the
Company's Chief Executive Officer at $350,000, 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 it 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 February 1999 pursuant to the Plan in the amount of
$107,059 as determined by the Company's 1998 financial performance. The
Company's targeted financial objective represented 40% of Mr. Rask's total
potential bonus award. The remaining 60% of Mr. Rask's 1998 bonus award is based
upon the achievement of certain non-financial objectives. As such, Mr. Rask is
eligible to receive an additional 1998 bonus amount of up to $125,125 to be paid
upon the completion of the MARINE 500 and 700 projects. 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 8, 1999 THE PERSONNEL AND COMPENSATION COMMITTEE
Robert L. Barbanell
Howard I. Bull
J. C. Burton
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert L. Barbanell, member of the Compensation Committee, served as the
Company's interim President from May 9, 1996 to July 18, 1996. David B. Robson
served in 1998 as a member of the Compensation Committee until his resignation
from that committee in November 1998. Subsequent to Mr. Robson's resignation,
Jan Rask was elected as a director of Veritas DGC Inc. Mr. Robson currently
serves as Chairman of the Board and Chief Executive Officer of Veritas DGC Inc.
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, 1998, all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than ten percent beneficial owners were timely satisfied.
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, which 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 and Bounds 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 and Bounds, 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.
11
<PAGE>
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. Gentry, Mr. O'Keefe and Mr.
Wilhelm. At April 8, 1999, eleven of the Company's management employees were
eligible to participate in the plan, of which four 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 6% 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, 1998, the assets held by the
Management Plan totaled approximately $333,000. The assets held by the trust on
behalf of the Management Plan are subject to the claims of the Company's
creditors.
12
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total shareholder
returns from the end of 1993 through the end of 1998 with Standard & Poor's 500
Stock Index, and the Company's peer group index, SCI Index.
Listing and trading of the Common Stock was moved from the Nasdaq Stock
Market to the New York Stock Exchange, Inc. on August 14, 1998. Therefore, the
Company has chosen the Standard & Poor's 500 Stock Index as its broad
comparative index for inclusion in prospective performance graphs. Due to this
transition, both the Standard & Poor's 500 Stock Index and the Nasdaq Stock
Market Composite Index are displayed in the performance graph.
The SCI Index includes Atwood Oceanics, Inc., Diamond Offshore Drilling,
Inc., ENSCO International, Inc., Global Marine, Inc., Marine Drilling Companies,
Inc., Noble Drilling Corporation, Pride International, Inc. R & B Falcon
Corporation, Rowan Companies, Inc., Santa Fe International Corporation, Smedvig
a.s., and Transocean Offshore Drilling, Inc. The performance graph assumes that
$100 was invested in each of these categories on December 31, 1993, 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 93 DEC 94 DEC 95 DEC 96 DEC 97 DEC 98
------ ------ ------ ------ ------ ------
MARINE DRILLING COMPANIES, INC. $ 100 $ 52 $ 89 $ 342 $ 361 $ 132
S&P 500 INDEX ................. 100 98 132 159 208 264
SCI INDEX ..................... 100 82 158 375 482 176
NASDAQ INDEX .................. 100 98 138 170 208 293
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG, LLP has been selected as Auditor of the Company for the
1999 calendar year. That firm served as Auditor of the Company for the 1998
calendar year. A representative of KPMG, 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
Under the rules of the Securities and Exchange Commission, proposals of
shareholders to be considered for inclusion in the proxy statement and form of
proxy for the 2000 annual meeting must be received by the Company at its offices
at One Sugar Creek Center Blvd., Suite 600, Sugar Land, Texas 77478-3556,
Attention: Secretary, no later than December 10, 1999, and must otherwise meet
the requirements of those rules. The date after which a shareholder proposal
submitted outside the processes of Rule 14a-8 under the Securities Exchange Act
of 1934 is considered untimely for the 2000 annual meeting is February 23, 2000,
calculated as provided in Rule 14a-4(c)(1) under the Securities Exchange Act of
1934.
ANNUAL REPORT
The Company's Annual Report for the year ended December 31, 1998, which
includes, among other things, the Company's audited consolidated balance sheets
of December 31, 1998 and 1997, respectively, and audited consolidated statements
of income and changes in financial position for each of the years ended December
31, 1998, 1997 and 1996, 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.
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.
By Order of the Board of Directors,
T. Scott O'Keefe
Secretary
Sugar Land, Texas
April 8, 1999
14
<PAGE>
MARINE DRILLING COMPANIES, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints T. Scott O'Keefe 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 Windsor Court Hotel located at 300 Gravier Street, in New Orleans, Louisiana
on Thursday, May 13, 1999 at 1:00 p.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>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
MARINE DRILLING COMPANIES, INC.
MAY 13, 1999
- --------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
WITHHOLD
FOR all AUTHORITY
nominees 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. Barbanell
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 ELECTION OF 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.
