<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
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):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO]
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 11, 2000
------------------
The 2000 Annual Meeting of the shareholders of Marine Drilling Companies,
Inc. ("the Company") will be held at the Westchase Hilton, 9999 Westheimer,
Houston, Texas on Thursday, May 11, 2000 at 9 a.m., central 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;
2. To approve the Company's 2000 Stock Incentive Plan; and
3. To transact such other business as may properly be brought before the meeting
or any adjournments thereof.
If you were a shareholder at the close of business on March 20, 2000, you
are entitled to notice of and to vote at the annual meeting or any adjournments
thereof. A list of such shareholders will be available at the meeting and at the
Company's offices, One Sugar Creek Center Blvd., Suite 600, Sugar Land, Texas
77478-3556, beginning on May 1, 2000.
Your vote is important. Whether or not you plan to attend the annual
meeting in person, we request that you indicate your vote as to the matters to
be acted upon at the meeting and 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
March 31, 2000
<PAGE> 3
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 shareholders 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
shareholders (the "Annual Meeting") to be held at the Westchase Hilton, 9999
Westheimer in Houston Texas, on Thursday, May 11, 2000 at 9:00 a.m. CST and any
adjournments thereof, for the purposes set forth in the accompanying notice.
This proxy statement and the accompanying proxy are first being sent or given to
shareholders of the Company on or about March 31, 2000.
At the Annual Meeting, shareholders will be asked (i) to consider and
vote upon the election of seven persons to serve on the Board of Directors of
the Company; (ii) to consider and approve the Company's 2000 Stock Incentive
Plan (the "Plan"); and (iii) to consider and take action upon such other matters
as may properly come before the Annual Meeting.
All shares of the Company's common stock, par value $.01 per share (the
"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" all nominees for election to the Board of
Directors and "FOR" approval of the Plan. 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:
o by providing written notice of revocation to the Company;
o delivering to the Company a signed proxy of a later date; or
o voting in person at the Annual Meeting.
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 Board of Directors has fixed the close of business on March 20, 2000
as the record date (the "Record Date") for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. As of the Record Date, there were outstanding and entitled to vote
58,257,616 shares of Common Stock, constituting the only class of stock
outstanding. Each share of Common Stock entitles the holder to one vote at the
Annual Meeting with respect to each matter to be voted upon. 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 shareholders 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, beginning May 1, 2000.
The election of directors requires a plurality of votes cast at the
Annual Meeting with respect to the election of directors. The proposal to
approve the Plan and all other matters to be voted on will be decided by the
affirmative vote of a majority of the votes cast by holders of Common Stock on
the proposal. Proxies that are marked "abstain" will be treated as present for
the purposes of determining whether a quorum is present, but will have the same
legal effect as a vote against the Plan. Broker non-votes are not considered
present at the Annual Meeting for the particular proposal for which the broker
lacks authority to vote and will not be counted in determining the number of
1
<PAGE> 4
votes cast on a proposal. Therefore, broker non-votes will have no effect on the
outcome of the approval of the Plan or other matters that may be properly
brought before the Annual Meeting.
If a quorum is not obtained, or if fewer shares are voted in favor of
approval of any of the proposals than the number required for approval, the
Annual Meeting may be adjourned for the purpose of obtaining additional proxies
or votes or for any other purpose, and, at any subsequent reconvening of the
Annual Meeting, all proxies will be voted in the same manner as such proxies
would have been voted at the original convening of the Annual Meeting (except
for any proxies which have theretofore been revoked).
ITEM 1 - ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of seven directors.
At the Annual Meeting seven nominees are to be elected, each to serve until the
next annual meeting of shareholders or until the election and qualification of
their respective successors. All of the nominees previously have been elected
directors by the shareholders.
It is intended that the proxies received from holders of the Common
Stock, in the absence of contrary instructions, will be voted at the 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, if any nominee should become unavailable for
election, the proxies may be voted for a substitute nominee selected by the
persons named in the proxy. Each of the nominees named below has consented to
being named in this proxy statement and to serve if elected.
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> <C>
Robert L. Barbanell (1) (3). 69 Director and Chairman of the Board 1995
David A. B. Brown (1) (2)... 56 Director 1995
Howard I. Bull (3) (4)...... 59 Director 1995
J. C. Burton (3) (4)........ 61 Director 1998
Jan Rask (1)................ 44 President, Chief Executive Officer and Director 1996
David B. Robson (2)......... 60 Director 1998
Robert C. Thomas (2) (4).... 71 Director 1998
</TABLE>
----------------------
(1) Member, Executive Committee of the Board of Directors
(2) Member, Audit Committee of the Board of Directors
(3) Member, Compensation Committee of the Board of Directors
(4) Member, Health, Safety and Environmental 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.
2
<PAGE> 5
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. Mr. Brown was Chairman of the Board of the Comstock Group,
Inc. from 1988 to 1990. Mr. Brown is a Director of BTU International Inc., EMCOR
Group, Inc. and Technical Communications Corporation.
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 NATCO Group, Inc.
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. Mr.
Robson has been serving as Chairman of the Board of Veritas DGC Inc. since
January 2000. He served as both Chairman of the Board and Chief Executive
Officer of Veritas DGC Inc. from August 1996 until January 2000. 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 has served as Senior Associate of Cambridge Energy Research
Associates since June 1994. Prior to that time, 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.
BOARD OF DIRECTORS AND COMMITTEES
During 1999, the Board of Directors held 12 meetings. The Board does not
have a nominating committee. Each director attended at least 75% of the meetings
held by the Board and each committee on which he served during 1999. The Board
has four standing committees, each of which is discussed below:
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 and/or transactions to be proposed to the full Board and to facilitate
the consummation of projects and/or transactions that have received prior Board
approval. During 1999, the Executive Committee held three 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
1999, the Audit Committee held three meetings.
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 1999, the Compensation Committee held
four meetings.
3
<PAGE> 6
HEALTH, SAFETY AND ENVIRONMENTAL ("HSE") COMMITTEE -- In November 1999,
the Company's Board of Directors approved the establishment of an HSE Committee
to oversee health, safety and environmental issues associated with the Company.
The HSE Committee consists of three members: Robert C. Thomas (Chairman), Howard
I. Bull and J.C. Burton. The HSE Committee held no meetings during 1999.
DIRECTOR COMPENSATION AND EXPENSES
Employee directors are not paid for their services as a director or as a
member of any committee of the Board. All other directors are compensated as
follows:
o annual retainer of $24,000 (consisting of $12,000 cash and shares of
Common Stock equal to $12,000), plus a fee of $500 for each Board
meeting attended;
o the Chairman of the Board receives a quarterly retainer of $10,000;
o the Chairman of the Audit and Compensation Committees each receive a
quarterly retainer of $500;
o each member of the Executive Committee (other than the Chairman of the
Board) receives a quarterly retainer of $5,000; and
o each member of the Audit and Compensation Committees also receives a
fee of $500 for each committee meeting attended (other than committee
meetings in which such director participates that are held together
with Board meetings for which each committee member receives a fee of
$250).
The Company has a 1995 Non-Employee Director's Plan, which is
administered by a committee comprised of those members of the Board of Directors
that are employees of the Company. Pursuant to the Plan, each eligible director
is granted options to purchase 10,000 shares of Common Stock upon his initial
election or appointment to the Board of Directors and 2,500 shares of Common
Stock upon each successive election to the Board of Directors.
For fiscal year 2000, non-employee directors will be compensated as
follows:
o an annual retainer of $24,000 (consisting of $12,000 cash and shares of
Common Stock equal to $12,000), plus a fee of $500 for each Board
meeting attended;
o the Chairman of the Board receives a quarterly retainer of $10,000;
o the Chairman of the Audit, Compensation and HSE Committees will each
receive a quarterly retainer of $1,500;
o attendance fees for each Board meeting will be $1,000;
o each member of the Audit, Compensation and HSE Committee will receive a
fee of $500 for each committee meeting attended; and
o each eligible director will be granted options to purchase 4,000 shares
of Common Stock upon each successive election to the Board of
Directors.
4
<PAGE> 7
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 all persons known to the Company to
beneficially own more than 5% of the outstanding shares of Common Stock, each
director of the Company, or nominee as a director, each Named Executive Officer
of the Company, as defined in the "Summary Compensation Table", and all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Common Stock
------------------------------
Number Percentage
of of Common
Stockholder Shares (1) Stock Owned
- ----------- -------------- --------------
<S> <C> <C>
FMR Corp. (2)....................................... 7,094,150 12.4%
82 Devonshire Street
Boston, MA 02109
Hugh L. Adkins (3) (5).............................. 50,524 *
Robert L. Barbanell (4)............................. 39,828 *
O. Peter Blom (3)................................... 29,025 *
David A. B. Brown (3)............................... 13,966 *
Howard I. Bull (3).................................. 30,755 *
J. C. Burton (3).................................... 13,863 *
George H. Gentry, III (3)........................... 17,408 *
T. Scott O'Keefe (3)................................ 110,681 *
Jan Rask (3)........................................ 562,848 1.0%
David B. Robson (3)................................. 13,863 *
Robert C. Thomas (3)................................ 17,075 *
All executive officers and directors
as a group (14 persons) (3)........................ 1,115,028 1.9%
</TABLE>
- ------------------
* Less than one percent
(1) Includes shares of Common Stock held in the Marine Drilling Companies
401(k) Profit Sharing Plan for the accounts of the executive officers as
follows: Mr. Adkins - 6,758 shares, Mr. Gentry - 458 shares, Mr. O'Keefe -
2,081 shares and Mr. Rask - 2,373 shares.
(2) Based on a Schedule 13G dated as of February 11, 2000, FMR Corp. may be
deemed to be the beneficial owner of 7,094,150 shares of common stock.
(3) Includes the following number of shares which the named party has the right
to acquire upon exercise of stock options exercisable within sixty (60)
days of the Record Date: Mr. Adkins - 50,000; Mr. Barbanell -17,500; Mr.
Blom - 29,025; Mr. Brown - 10,000; Mr. Bull - 20,000; Mr. Burton - 12,500;
Mr. Gentry - 15,450; Mr. O'Keefe - 108,600; Mr. Rask - 535,375; Mr. Robson
- 12,500; Mr. Thomas - 15,000; and 980,050 held by all executive officers
and directors as a group.
(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. Adkins was Executive Vice President and Chief Operating Officer of the
Company until his resignation on January 16, 2000.
5
<PAGE> 8
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. Set forth below
is the age, positions held with the Company, and certain business experience
information for each of the Company's executive officers who are not directors
of the Company.
<TABLE>
<CAPTION>
Name Age Position with the Company
- ------------------------ ------ ---------------------------------------------------------------
<S> <C> <C>
V. G. "Buddy" Bounds 63 Senior Vice President - Projects
T. Scott O'Keefe 44 Senior Vice President, Chief Financial Officer and Secretary
O. Peter Blom 52 Vice President - Engineering and Business Development
Bobby Benton 47 Vice President - Operations
George H. Gentry, III 41 Vice President - Human Resources
Dale W. Wilhelm 37 Vice President and Controller
</TABLE>
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 positions in the offshore drilling industry since 1975.
Bobby Benton was appointed Vice President - Operations in January 2000.
He previously served as Vice President - Marketing and Sales since joining the
Company in June 1999. Prior to joining Marine Drilling Companies, Mr. Benton
served as Vice President of International Operations for Diamond Offshore
Company. Mr. Benton joined Diamond Offshore as part of the acquisition of
Arethusa Offshore Company in April 1996. Mr. Benton entered the offshore
drilling industry in October 1975 with Zapata Offshore Company where he advanced
within Zapata and later Arethusa's management organizations until the Diamond
Offshore Company acquisition.
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, LLP since September 1985, most recently
as Audit Manager. Mr. Wilhelm is a certified public accountant.
6
<PAGE> 9
EXECUTIVE COMPENSATION AND RELATED MATTERS
The following table summarizes the annual and long-term compensation of
the Company's Chief Executive Officer and the four other most highly compensated
executive officers who were serving as executive officers as of December 31,
1999. (Collectively the "Named Executive Officers.")
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ----------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND STOCK STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(3) OPTIONS(#) COMPENSATION(1)
-------------------- ------ --------- ---------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jan Rask 1999 $349,992 $ -- $ -- 141,500 $27,237
Director, President 1998 349,992 198,059 -- -- 25,501
& CEO 1997 300,000 200,000 -- -- 19,838
T. Scott O'Keefe(2) 1999 210,000 -- -- 59,400 10,391
CFO & SVP 1998 201,250 211,893 -- 200,000 8,240
Hugh L. Adkins(2) 1999 200,000 -- -- 56,600 17,576
COO & EVP - 1998 173,750 91,660 -- 100,000 16,130
Operations 1997 141,486 70,884 -- -- 9,243
O. Peter Blom(2) 1999 145,000 -- -- 91,100 1,640
VP Engineering & 1998 59,394 109,206 -- 75,000 903
Business Development
George H. Gentry, III(2) 1999 130,000 -- -- 36,800 7,248
VP - Human Resources 1998 16,250 15,775 15,000 25,000 87
</TABLE>
Footnotes:
- ---------
(1) "All Other Compensation" includes $7,375 for Mr. Rask, $9,662 for Mr.
O'Keefe, $6,457 for Mr. Adkins and $6,697 for Mr. Gentry 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 $19,133 for Mr. Rask and $9,202 for Mr.
Adkins including the value of the Company's matching contributions of up to
5%. Benefits related to group life insurance were $729 for Mr. Rask, $729
for Mr. O'Keefe, $1,917 for Mr. Adkins, $1,640 for Mr. Blom, and $551 for
Mr. Gentry.
(2) Mr. O'Keefe became an officer of the Company on January 12, 1998, Mr. Blom
on August 4, 1998 and Mr. Gentry on November 15, 1998. Mr. Adkins was an
officer of the Company until his resignation on January 16, 2000.
(3) The restricted stock award of 1,500 shares to Mr. Gentry on November 15,
1998 vests twenty-five percent (25%) each year thereafter. Restricted Stock
awards are valued at the closing market price of the Common Stock on the
date of grant. The aggregate value of Mr. Gentry's restricted stock
holdings at December 31, 1999 was $33,656.
7
<PAGE> 10
The following table provides information about option grants to the Named
Executive Officers in 1999 under the Marine Drilling 1992 Long-Term Incentive
Plan.
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1999
INDIVIDUAL GRANTS
----------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR OPTION TERM(2)
OPTIONS EMPLOYEES EXERCISE EXPIRATION -------------------------------
NAME GRANTED(1) IN 1999 PRICE DATE 0% 5% 10%
- --------------- ----------- ----------- --------- ---------- ---- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jan Rask 141,500 14.17% $ 6.1875 2/18/2009 $ - $ 550,617 $1,395,371
T. Scott O'Keefe 59,400 5.95% 6.1875 2/18/2009 - 231,142 585,760
Hugh L. Adkins 56,600 5.67% 6.1875 2/18/2009 - 220,247 558,149
O. Peter Blom 41,100 4.12% 6.1875 2/18/2009 - 159,932 405,299
50,000 5.01% 17.0625 8/11/2009 - 321,915 815,797
George H. Gentry, III 36,800 3.68% 6.1875 2/18/2009 - 143,199 362,895
Gain for all Shareholders
At Assumed Rates for Appreciation(3) $807,227,788 $2,045,596,725
</TABLE>
(1) 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) Total dollar gains based on the assumed annual rates of appreciation equal
to 5% and 10% and calculated on 57,199,489 shares of Common Stock
outstanding on December 31, 1999 and the closing price of the Common Stock
on December 31, 1999 ($22 7/16).
The following table provides information concerning the exercise of
options during the last fiscal year and the number of shares covered by all
exercisable and non-exercisable options held by the Named Executive Officers at
the end of the fiscal year.
AGGREGATED 1999 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 12/31/99 AT 12/31/99(1)
ACQUIRED VALUE ------------------------- --------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ----------- -------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Jan Rask -- $ -- 500,000 141,500 $6,750,000 $2,299,375
T. Scott O'Keefe -- -- 50,000 209,400 269,921 1,775,015
Hugh L. Adkins -- -- 43,750 131,600 481,640 1,243,187
O. Peter Blom -- -- 18,750 147,350 245,507 1,673,148
George H. Gentry, III -- -- 6,250 55,550 77,734 831,203
</TABLE>
(1) The value of unexercised options represents the difference between $22
7/16, the closing price of the Common Stock on the New York Stock Exchange
on December 31, 1999 and the respective exercise prices
8
<PAGE> 11
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. The actual value realized upon
exercise will depend on the value of the Common Stock at the time of
exercise.
OTHER MATTERS
EMPLOYMENT AGREEMENTS -- The Company entered into amended employment
agreements with Mr. Rask and Mr. O'Keefe on September 1, 1999. Pursuant to the
terms of the employment agreements, Mr. Rask's and Mr. O'Keefe's annual base
salary will not be less than $350,000 and $210,000, respectively. If the
executive's employment terminates, he will generally be entitled to severance
pay equal to one year's then current base salary plus their earned bonus target.
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, Mr.
Rask will be entitled to severance pay equal to 300% of the sum of his base
salary plus bonus target and Mr. O'Keefe will be entitled to 200% of the sum of
his base salary plus bonus target. The employment agreements also provide for
tax gross up payments under certain circumstances and accelerated vesting of all
stock options in the event of a change in control.
SEVERANCE AGREEMENTS -- The Company has entered into severance agreements
with Mr. Blom and Mr. Gentry as well as other officers and key employees. These
agreements generally provide that in the event of an involuntary termination the
covered person will be entitled to one year's then current base salary plus his
earned bonus target. Certain of the severance agreements, including those
applicable to Mr. Blom and Mr. Gentry, provide that if termination occurs during
the 18 month period following a change in control as defined in the Company's
1992 Long-Term Incentive Plan, the covered person will be entitled to 200% of
the sum of his base salary plus bonus target. Mr. Blom's and Mr. Gentry's
severance agreements also provide for tax gross up payments under certain
circumstances. The agreements also generally provide for accelerated vesting of
all stock options and restricted stock 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. Gentry, Mr. O'Keefe and Mr.
Wilhelm. At March 31, 2000, 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 to defer up to
80% of compensation after reaching the annual deferral limitations applicable to
the Company's 401(k) plan and to defer any excess contributions refunded by the
Company's 401(k) plan due to certain nondiscrimination and maximum contribution
rules. 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,
1999, the assets held by the Management Plan totaled approximately $493,000.
The assets held by the trust on behalf of the Management Plan are subject to
the claims of the Company's creditors.
9
<PAGE> 12
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 base
compensation for each executive officer, the Compensation Committee considers an
individual's past performance and skills, competitive compensation information,
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
the following:
o the Company's financial performance;
o each individual employee's performance in furtherance of the Company's
goals with respect to its safety record, customer satisfaction and
operational performance; and
o each employee's achievement of individual objectives (as applicable).
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.
During 1999, no bonuses were paid as a result of the Company's financial
performance.
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 1999 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 1999, the Company granted Mr. Rask stock options of 141,500
shares which it believes will maintain a close alignment between Mr. Rask's
performance and the shareholder value of the Company. 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.
March 31, 2000 THE PERSONNEL AND COMPENSATION COMMITTEE
Howard I. Bull, Chairman
Robert L. Barbanell
J.C. Burton
10
<PAGE> 13
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 of Veritas DGC Inc.
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total shareholder
return on the Common Stock for the last five fiscal years with the cumulative
total return of the Standard & Poor's 500 Stock Index, and the Company's peer
group index, SCI Index.
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., Transocean Sedco Forex, Fred Olsen Energy and Parker Drilling. The
performance graph assumes that $100 was invested in each of these categories on
December 31, 1994, 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 GRAPH]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DEC 94 DEC 95 DEC 96 DEC 97 DEC 98 DEC 99
---------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
MARINE DRILLING COMPANIES, INC. $100 $171 $656 $692 $252 $748
S&P 500 INDEX 100 134 161 211 268 320
SCI INDEX 100 193 457 588 215 415
- --------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
APPROVAL OF THE COMPANY'S 2000 STOCK INCENTIVE PLAN
On February 24, 2000, the Board of Directors adopted, subject to
stockholder approval, the 2000 Stock Incentive Plan (the "Stock Plan") in order
to provide the Company with an effective means of attracting and retaining key
employees, consultants and outside directors, encouraging their commitment,
motivating their performance, facilitating their ownership interest in the
Company and enabling them to share in the Company's long term growth and
success.
The Board of Directors recommends a vote "FOR" the proposal to approve
the Stock Plan. The affirmative vote of a majority of the Common Stock present
in person or by proxy and entitled to vote at the Annual Meeting is required to
approve this proposal.
SUMMARY DESCRIPTION OF THE PROGRAM
The following summary of the terms of the Stock Plan is qualified in its
entirety by reference to the text of the Stock Plan, which is attached as
Appendix A to this Proxy Statement. If adopted by Company shareholders, the
Stock Plan will be effective as of February 24, 2000.
Shares Subject to Plan. Under the Stock Plan, the Company may issue
Incentive Awards up to 8% of the number of shares of Common Stock issued and
outstanding on the first day of the then preceding calendar quarter. No more
than 3,000,000 shares of Common Stock will be available for incentive stock
options ("ISO's"). The number of securities available under the Stock Plan and
outstanding Incentive Awards are subject to adjustments to prevent the dilution
of rights of plan participants resulting from stock dividends, stock splits,
recapitalization or similar transactions or resulting from a change in
applicable laws or other circumstances.
Administration. The Stock Plan will be administered by the Compensation
Committee of the board of directors. The Compensation Committee may delegate its
duties under the Stock Plan, except for the authority to grant Incentive Awards
or take other action on persons who are subject to Section 16 of the Exchange
Act or Section 162(m) of the Internal Revenue Code. In the case of an Incentive
Award to an outside director, the board acts as the Compensation Committee.
Subject to the express provisions of the Stock Plan, the Committee is authorized
to, among other things, select grantees under the Stock Plan and determine the
size, duration and type, as well as the other terms and conditions (which need
not be identical), of each Incentive Award. The compensation Committee also
construes and interprets the Incentive Plan and any related agreements. All
determinations and decisions of the Compensation Committee are final, conclusive
and binding on all parties. The Company will indemnify members of the
Compensation Committee against any damage, loss, liability, cost or expenses in
connection with any claim by reason of any act or failure to act under the Stock
Plan, except for an act or omission constituting willful misconduct or gross
negligence.
Eligibility. Employees, including officers (whether or not they are
directors), and consultants of the Company and non-employee directors are
eligible to participate in the Stock Plan.
Types of Incentive Awards. Under the Incentive Plan, the Committee may
grant "Incentive Awards," which can be:
o ISO's, as defined in Section 422 of the Internal Revenue Code;
o "nonstatutory" stock options ("NSOs");
o stock appreciation rights ("SARs");
o shares of restricted stock;
o performance units and performance shares; and
o other stock-based awards.
12
<PAGE> 15
ISOs and NSOs together are called "Options." The terms of each Incentive Award
will be reflected in an incentive agreement between the Company and the
participant.
Options. Generally, Options must be exercised within ten years of the
grant date and the exercise price may not be less than 100% of the fair market
value of the underlying share of Common Stock on the date of grant. However,
options covering up to 10% of the shares available for grant may have an
exercise price less than fair market value of the Common Stock on the date of
grant. To the extent the aggregate fair market value of shares of Common Stock
for which ISOs are exercisable for the first time by any employee during any
calendar year exceeds $100,000, those Options must be treated as NSOs.
The exercise price of each Option is payable in cash or, in the
Compensation Committee's discretion, by the delivery of shares of common stock
owned by the optionee, or the withholding of shares that would otherwise be
acquired on the exercise of the Option, or by any combination of the three.
An employee will not recognize income for federal income tax purposes,
nor will the Company be entitled to a deduction, when an NSO is granted.
However, when an NSO is exercised, the optionee will recognize ordinary income
in an amount equal to the difference between the fair market value of the shares
received and the exercise price of the NSO. The Company will generally recognize
a tax deduction in the same amount at the same time.
This summary is not a complete statement of the relevant provisions of
the Internal Revenue Code, and does not address the effect of any state, local
or foreign taxes.
SARs. Upon the exercise of an SAR, the holder will receive cash, the
aggregate value of which equals the amount by which the fair market value per
share of the Common Stock on the exercise date exceeds the exercise price of the
SAR, multiplied by the number of shares underlying the exercised portion of the
SAR. An SAR may be granted in tandem with or independently of an NSO. SARs will
be subject to such conditions and will be exercisable at such times as
determined by the Compensation Committee, but the exercise price per share must
be at least the fair market value of a share of Common Stock on the date of
grant.
Restricted Stock. Restricted stock may be subject to a substantial risk
of forfeiture, a restriction on transferability or rights of repurchase or first
refusal of the Company, as determined by the Compensation Committee. Unless the
Compensation Committee determines otherwise, during the period of restriction,
the grantee will have all other rights of a stockholder, including the right to
vote and receive dividends on the shares. Generally, the minimum restrictive
period will be three years.
Performance Units and Performance Shares. For each performance period
(to be determined by the Compensation Committee), the committee will establish
specific financial or non-financial performance objectives, the number of
performance units or performance shares and their contingent values. The values
may vary depending on the degree to which such objectives are met.
Other Stock-Based Awards. Other stock-based awards denominated or
payable in, valued in whole or in part by reference to, or otherwise related to,
shares of Common Stock. Subject to the terms of the Stock Plan, the Compensation
Committee may determine any terms and conditions of other stock-based awards,
provided that, in general, the amount of consideration to be received by the
Company shall be either (1) no consideration other than services actually
rendered or to be rendered (in the case of the issuance of shares), or (2) in
the case of an award in the nature of a purchase right, consideration (other
than services rendered) at least equal to 50% of the fair market value of the
shares covered by such grant on the grant date.
Other Tax Considerations. Upon accelerated exercisability of Options and
accelerated lapsing of restrictions upon restricted stock or other Incentive
Awards in connection with a Change in Control (as defined in the Stock Plan),
certain amounts associated with such Incentive Awards could, depending upon the
individual circumstances of the participant, constitute "excess parachute
payments" under Section 280G of the Internal Revenue Code. Such a determination
would subject the participant to a 20% excise tax on those payments and deny the
Company a corresponding deduction. The limit on deductibility of compensation
under Section 162(m) of the Code is also reduced by the amount of any excess
parachute payments. Whether amounts constitute excess parachute payments depends
upon, among other things, the value of the Incentive Awards accelerated and the
past compensation of the participant.
13
<PAGE> 16
Taxable compensation earned by executive officers who are subject to
Section 162(m) of the Internal Revenue Code with respect to Incentive Awards is
subject to certain limitations set forth in the Incentive Plan. Those
limitations are generally intended to satisfy the requirements for "qualified
performance-based compensation," but the Company may not be able to satisfy
these requirements in all cases, and may, in its sole discretion, determine in
one or more cases that it is best not to satisfy these requirements even if it
can.
Termination of Employment and Change in Control. Except as otherwise
provided in the applicable incentive agreement, if a participant's employment or
other service with the Company (or its subsidiaries) is terminated other than
due to his death, Disability, Retirement or for Cause (each capitalized term
being defined in the Incentive Plan), his then exercisable Options will remain
exercisable until the earlier of (a) the expiration date of such Options and (b)
three months after termination. If his termination is due to Disability or
death, his then exercisable Options will remain exercisable until the earlier of
(a) the expiration date of such options and (b) one year following termination.
On a termination for Cause, all his Options will expire at the opening of
business on the termination date.
Upon a Change in Control of the Company, any restrictions on restricted
stock and other stock-based awards will be deemed satisfied, all outstanding
Options and SARs may become immediately exercisable and all the performance
shares and units and any other stock-based awards may become fully vested and
deemed earned in full, at the discretion of the Compensation Committee. These
provisions could in some circumstances have the effect of an "anti-takeover"
defense because, as a result of these provisions a Change in Control of the
Company could be more difficult or costly.
Incentive Awards Transferable. Incentive Award may not be assigned, sold
or otherwise transferred by a participant, unless to an immediate family member
or by will or by the laws of descent and distribution, or be subject to any
lien, assignment or charge, as determined by the Compensation Committee.
Amendment and Termination. The Company's board of directors may amend or
terminate the Stock Plan at any time. However, the Stock Plan may not be
amended, without shareholder approval, if the amendment would have the following
effects:
o increase the number of shares of Common Stock which may be issued under
the Incentive Plan, except in connection with a recapitalization of the
Common Stock;
o amend the eligibility requirements for employees to purchase Common
Stock under the Stock Plan; or
o extend the term of the Stock Plan.
Without a participant's written consent, no termination or amendment of the
Stock Plan shall adversely affect in any material way any outstanding Incentive
Award granted to him.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Company's voting securities to file reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company with the Securities and Exchange Commission and the
New York Stock Exchange. Officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. 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.
14
<PAGE> 17
To the Company's knowledge, based solely on review of the copies of such
forms furnished to the Company and written representations that no other reports
were required, during the fiscal year ended December 31, 1999, all Section 16(a)
filing requirements applicable to the Company's officers, directors and greater
than ten percent beneficial owners were complied with.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company has selected the firm of KPMG LLP as its Auditor for the 2000
fiscal year. That firm served as Auditor of the Company for the 1999 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.
SHAREHOLDERS' 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 2001 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 1, 2000, and must otherwise meet
the requirements of those rules. The date after which a shareholder proposal
submitted outside outside the processes of Rule 14a-8 under the Securities
Exchange Act of 1934 is considered untimely for the 2001 annual meeting is
February 14, 2001, 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, 1999, which
includes, among other things, the Company's audited consolidated balance sheets
as of December 31, 1999 and 1998, and audited consolidated statements of income
and changes in financial position for each of the years ended December 31, 1999,
1998 and 1997, 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. In addition to solicitation by mail, proxies may also be solicited by
directors, officers, and other regular employees of the Company in the ordinary
course of business for which they will not be compensated. 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
March 31, 2000
15
<PAGE> 18
APPENDIX A
MARINE DRILLING COMPANIES, INC.
2000 STOCK INCENTIVE PLAN
(AS EFFECTIVE FEBRUARY 24, 2000)
<PAGE> 19
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. GENERAL PROVISIONS RELATING TO PLAN GOVERNANCE, COVERAGE AND BENEFITS.................................1
1.1 Purpose........................................................................................1
1.2 Definitions....................................................................................1
(a) Authorized Officer....................................................................1
(b) Board.................................................................................1
(c) Cause.................................................................................1
(d) CEO...................................................................................2
(e) Change in Control.....................................................................2
(f) Code..................................................................................2
(g) Committee.............................................................................2
(h) Common Stock..........................................................................2
(i) Company...............................................................................3
(j) Consultant............................................................................3
(k) Covered Employee......................................................................3
(l) Deferred Stock........................................................................3
(m) Disability............................................................................3
(n) Employee..............................................................................3
(o) Employment............................................................................3
(p) Exchange Act..........................................................................4
(q) Fair Market Value.....................................................................4
(r) Grantee...............................................................................4
(s) Immediate Family......................................................................4
(t) Incentive Award.......................................................................4
(u) Incentive Agreement...................................................................4
(v) Incentive Stock Option................................................................5
(w) Independent SAR.......................................................................5
(x) Insider...............................................................................5
(y) Nonstatutory Stock Option.............................................................5
(z) Option Price..........................................................................5
(aa) Other Stock-Based Award...............................................................5
(bb) Outside Director......................................................................5
(cc) Parent................................................................................5
(dd) Performance-Based Exception...........................................................5
(ee) Performance Period....................................................................5
(ff) Performance Share or Performance Unit.................................................5
(gg) Plan..................................................................................5
(hh) Publicly Held Corporation.............................................................5
(ii) Restricted Stock......................................................................6
</TABLE>
i
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TABLE OF CONTENTS (continued)
<TABLE>
<S> <C>
(jj) Restricted Stock Award................................................................6
(kk) Restriction Period....................................................................6
(ll) Share.................................................................................6
(mm) Share Pool............................................................................6
(nn) Spread................................................................................6
(oo) Stock Appreciation Right or SAR.......................................................6
(pp) Stock Option or Option................................................................6
(qq) Subsidiary............................................................................6
1.3 Plan Administration............................................................................6
(a) Authority of the Committee............................................................6
(b) Meetings..............................................................................6
(c) Decisions Binding.....................................................................7
(d) Modification of Outstanding Incentive Awards..........................................7
(e) Delegation of Authority...............................................................7
(f) Expenses of Committee.................................................................7
(g) Indemnification.......................................................................7
1.4 Shares of Common Stock Available for Incentive Awards..........................................8
1.5 Share Pool Adjustments for Awards and Payouts..................................................9
1.6 Common Stock Available.........................................................................9
1.7 Participation..................................................................................9
(a) Eligibility...........................................................................9
(b) Incentive Stock Option Eligibility...................................................10
(c) Exercise Price. Subject to Section1.7(b) and other applicable provisions of the Plan,
with respect to ninety percent (90%) of the number of
Shares then reserved under the Plan pursuant to
Section 1.4, the exercise price for a Stock Option or
other Incentive Award shall not be set by the
Committee below the Fair Market Value of the
underlying Shares on the grant date of the Incentive
Award. Subject to Section 1.7(b) and other applicable
provisions of the Plan, with respect to ten percent
(10%) of the number of Shares then reserved under the
Plan pursuant to Section 1.4 (referred to herein as
the "Non-Conforming Pool"), the exercise price for an
Option or other Incentive Award may be set by the
Committee, in its discretion, below the Fair Market
Value of the underlying Shares on the grant date of
the Incentive Award..................................................................10
1.8 Types of Incentive Awards.....................................................................10
SECTION 2. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS..........................................................10
2.1 Grant of Stock Options........................................................................10
2.2 Stock Option Terms............................................................................11
(a) Written Agreement....................................................................11
(b) Number of Shares.....................................................................11
(c) Exercise Price.......................................................................11
(d) Term.................................................................................11
</TABLE>
ii
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TABLE OF CONTENTS (continued)
<TABLE>
<S> <C>
(e) Exercise.............................................................................11
(f) $100,000 Annual Limit on Incentive Stock Options.....................................11
2.3 Stock Option Exercises........................................................................12
(a) Method of Exercise and Payment.......................................................12
(b) Restrictions on Share Transferability................................................13
(c) Notification of Disqualifying Disposition of Shares from Incentive Stock Options.....13
(d) Proceeds of Option Exercise..........................................................13
2.4 Stock Appreciation Rights Independent of Nonstatutory Stock Options...........................13
(a) Grant................................................................................13
(b) General Provisions...................................................................13
(c) Exercise.............................................................................14
(d) Settlement...........................................................................14
SECTION 3. RESTRICTED STOCK.....................................................................................14
3.1 Award of Restricted Stock.....................................................................14
(a) Grant................................................................................14
(b) Immediate Transfer Without Immediate Delivery of Restricted Stock....................14
3.2 Restrictions..................................................................................15
(a) Forfeiture of Restricted Stock.......................................................15
(b) Issuance of Certificates.............................................................15
(c) Removal of Restrictions..............................................................16
3.3 Delivery of Shares of Common Stock............................................................16
SECTION 4. PERFORMANCE UNITS AND PERFORMANCE SHARES.............................................................16
4.1 Performance Based Awards......................................................................16
(a) Grant................................................................................16
(b) Performance Criteria.................................................................16
(c) Modification.........................................................................16
(d) Payment..............................................................................17
(e) Special Rule for Covered Employees...................................................17
SECTION 5. OTHER STOCK-BASED AWARDS.............................................................................17
5.1 Grant of Other Stock-Based Awards.............................................................17
5.2 Other Stock-Based Award Terms.................................................................18
(a) Written Agreement....................................................................18
(b) Purchase Price.......................................................................18
(c) Performance Criteria and Other Terms.................................................18
(d) Payment..............................................................................18
(e) Dividends............................................................................18
SECTION 6. PROVISIONS RELATING TO PLAN PARTICIPATION............................................................18
6.1 Plan Conditions...............................................................................18
(a) Incentive Agreement..................................................................18
</TABLE>
iii
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TABLE OF CONTENTS (continued)
<TABLE>
<S> <C>
(b) No Right to Employment...............................................................19
(c) Securities Requirements..............................................................19
6.2 Transferability...............................................................................20
6.3 Rights as a Stockholder.......................................................................20
(a) No Stockholder Rights................................................................20
(b) Representation of Ownership..........................................................20
6.4 Listing and Registration of Shares of Common Stock............................................21
6.5 Change in Stock and Adjustments...............................................................21
(a) Changes in Law or Circumstances......................................................21
(b) Exercise of Corporate Powers.........................................................21
(c) Recapitalization of the Company......................................................22
(d) Issue of Common Stock by the Company.................................................22
(e) Assumption under the Plan of Outstanding Stock Options...............................22
(f) Acquisition of Company by a Successor................................................22
6.6 Termination of Employment, Death or Disability................................................23
(a) Termination of Employment............................................................23
(b) Termination of Employment for Cause..................................................24
(c) Disability or Death..................................................................24
(d) Continuation.........................................................................24
6.7 Change in Control.............................................................................25
6.8 Financing.....................................................................................26
SECTION 7. GENERAL..............................................................................................26
7.1 Effective Date and Grant Period...............................................................26
7.2 Funding and Liability of Company..............................................................27
7.3 Withholding Taxes.............................................................................27
(a) Tax Withholding......................................................................27
(b) Share Withholding....................................................................27
(c) Incentive Stock Options..............................................................27
(d) Loans................................................................................28
7.4 No Guarantee of Tax Consequences..............................................................28
7.5 Designation of Beneficiary by Participant.....................................................28
7.6 Deferrals.....................................................................................28
7.7 Amendment and Termination.....................................................................28
7.8 Requirements of Law...........................................................................29
7.9 Rule 16b-3 Securities Law Compliance for Insiders.............................................29
7.10 Compliance with Code Section 162(m) for Publicly Held Corporation.............................29
7.11 Successors to Company.........................................................................29
7.12 Miscellaneous Provisions......................................................................30
7.13 Severability..................................................................................30
</TABLE>
iv
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TABLE OF CONTENTS (continued)
<TABLE>
<S> <C>
7.14 Gender, Tense and Headings....................................................................30
7.15 Governing Law.................................................................................30
</TABLE>
<PAGE> 24
MARINE DRILLING COMPANIES, INC.
2000 STOCK INCENTIVE PLAN
SECTION 1.
GENERAL PROVISIONS RELATING TO
PLAN GOVERNANCE, COVERAGE AND BENEFITS
1.1 PURPOSE
The purpose of the Plan is to foster and promote the long-term
financial success of Marine Drilling Companies, Inc. (the "COMPANY") and its
Subsidiaries and to increase stockholder value by: (a) encouraging the
commitment of selected key Employees, Consultants and Outside Directors, (b)
motivating superior performance of key Employees, Consultants and Outside
Directors by means of long-term performance related incentives, (c) encouraging
and providing key Employees, Consultants and Outside Directors with a program
for obtaining ownership interests in the Company which link and align their
personal interests to those of the Company's stockholders, (d) attracting and
retaining key Employees, Consultants and Outside Directors by providing
competitive incentive compensation opportunities, and (e) enabling key
Employees, Consultants and Outside Directors to share in the long-term growth
and success of the Company.
The Plan provides for payment of various forms of incentive
compensation. It is not intended to be a plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended (ERISA). The Plan will be
interpreted, construed and administered consistent with its status as a plan
that is not subject to ERISA.
Subject to approval by the Company's stockholders pursuant to Section
7.1, the Plan will become effective as of February 24, 2000 (the "EFFECTIVE
DATE"). The Plan will commence on the Effective Date, and will remain in effect,
subject to the right of the Board to amend or terminate the Plan at any time
pursuant to Section 7.7, until all Shares subject to the Plan have been
purchased or acquired according to its provisions. However, in no event may an
Incentive Award be granted under the Plan after the expiration of ten (10) years
from the Effective Date.
1.2 DEFINITIONS
The following terms shall have the meanings set forth below:
(a) AUTHORIZED OFFICER. The Chairman of the Board or the Chief
Executive Officer of the Company or any other senior officer of the Company
to whom either of them delegate the authority to execute any Incentive
Agreement for and on behalf of the Company. No officer or director shall be
an Authorized Officer with respect to any Incentive Agreement for himself.
(b) BOARD. The Board of Directors of the Company.
(c) CAUSE. When used in connection with the termination of a Grantee's
Employment, shall mean the termination of the Grantee's Employment by the
Company or any Subsidiary for reason of (i) the conviction of the Grantee
by a court of competent jurisdiction as to which no further appeal can be
taken of a crime involving moral turpitude or a felony; (ii) the proven
commission by the Grantee of a material act of fraud upon the Company or
any
<PAGE> 25
Subsidiary, or any customer or supplier thereof; (iii) the willful and
proven misappropriation of any funds or property of the Company or any
Subsidiary, or of any customer or supplier thereof; (iv) the willful,
continued and unreasonable failure by the Grantee to perform the material
duties assigned to him which is not cured to the reasonable satisfaction of
the Company within 30 days after written notice of such failure is provided
to Grantee by either the Board or the Company's Chief Executive Officer;
(v) the knowing engagement by the Grantee in any direct and material
conflict of interest with the Company or any Subsidiary without compliance
with the Company's or Subsidiary's conflict of interest policy as then
effective; or (vi) the knowing engagement by the Grantee, without the
written approval of the Board, in any material activity which competes with
the business of the Company or any Subsidiary, or which would result in a
material injury to the business, reputation or goodwill of the Company or
any Subsidiary.
(d) CEO. The then-current Chief Executive Officer of the Company.
(e) CHANGE IN CONTROL. Any of the events described in and subject to
Section 6.7.
(f) CODE. The Internal Revenue Code of 1986, as amended, and the
regulations and other authority promulgated thereunder by the appropriate
governmental authority. References herein to any provision of the Code
shall refer to any successor provision thereto.
(g) COMMITTEE. A committee appointed by the Board consisting of not
less than two directors as appointed by the Board to administer the Plan.
While the Company is a Publicly Held Corporation, the Plan shall be
administered by a committee appointed by the Board consisting of not less
than two directors who fulfill the "non-employee director" requirements of
Rule 16b-3 under the Exchange Act and the "outside director" requirements
of Section 162(m) of the Code. In either case, the Committee may be the
Compensation Committee of the Board, or any subcommittee of the
Compensation Committee, provided that the members of the Committee satisfy
the requirements of the previous provisions of this paragraph. The Board
shall have the power to fill vacancies on the Committee arising by
resignation, death, removal or otherwise. The Board, in its sole
discretion, may bifurcate the powers and duties of the Committee among one
or more separate committees, or retain all powers and duties of the
Committee in a single Committee. The members of the Committee shall serve
at the discretion of the Board.
Notwithstanding the preceding paragraph, the term "Committee" as used
in the Plan with respect to any Incentive Award for an Outside Director
shall refer to the entire Board. In the case of an Incentive Award for an
Outside Director, the Board shall have all the powers and responsibilities
of the Committee hereunder as to such Incentive Award, and any actions as
to such Incentive Award may be acted upon only by the Board (unless it
otherwise designates in its discretion). When the Board exercises its
authority to act in the capacity as the Committee hereunder with respect to
an Incentive Award for an Outside Director, it shall so designate with
respect to any action that it undertakes in its capacity as the Committee.
(h) COMMON STOCK. The common stock of the Company, $.01 par value per
share, and any class of common stock into which such common shares may
hereafter be converted, reclassified or recapitalized.
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<PAGE> 26
(i) COMPANY. Marine Drilling Companies, Inc., a corporation organized
under the laws of the State of Texas, and any successor in interest
thereto.
(j) CONSULTANT. An independent agent, consultant, attorney, an
individual who has agreed to become an Employee within the next six months,
or any other individual who is not an Outside Director or employee of the
Company (or any Parent or Subsidiary) and who, in the opinion of the
Committee, is in a position to contribute to the growth or financial
success of the Company (or any Parent or Subsidiary), (ii) is a natural
person and (iii) provides bona fide services to the Company (or any Parent
or Subsidiary), which services are not in connection with the offer or sale
of securities in a capital raising transaction, and do not directly or
indirectly promote or maintain a market for the Company's securities.
(k) COVERED EMPLOYEE. A named executive officer who is one of the
group of covered employees, as defined in Section 162(m) of the Code and
Treasury Regulation Section 1.162-27(c) (or its successor), during such
period that the Company is a Publicly Held Corporation.
(l) DEFERRED STOCK. Shares of Common Stock to be issued or transferred
to a Grantee under an Other Stock-Based Award granted pursuant to Section 5
at the end of a specified deferral period, as set forth in the Incentive
Agreement pertaining thereto.
(m) DISABILITY. As determined by the Committee in its discretion
exercised in good faith, a physical or mental condition of the Employee
that would entitle him to payment of disability income payments under the
Company's long term disability insurance policy or plan for employees, as
then effective, if any; or in the event that the Grantee is not covered,
for whatever reason, under the Company's long-term disability insurance
policy or plan, "Disability" means a permanent and total disability as
defined in Section 22(e)(3) of the Code. A determination of Disability may
be made by a physician selected or approved by the Committee and, in this
respect, the Grantee shall submit to any reasonable examination by such
physician upon request.
(n) EMPLOYEE. Any employee of the Company (or any Parent or
Subsidiary) within the meaning of Section 3401(c) of the Code who, in the
opinion of the Committee, is in a position to contribute to the growth,
development or financial success of the Company (or any Parent or
Subsidiary), including, without limitation, officers who are members of the
Board.
(o) EMPLOYMENT. Employment by the Company (or any Parent or
Subsidiary), or by any corporation issuing or assuming an Incentive Award
in any transaction described in Section 424(a) of the Code, or by a parent
corporation or a subsidiary corporation of such corporation issuing or
assuming such Incentive Award, as the parent-subsidiary relationship shall
be determined at the time of the corporate action described in Section
424(a) of the Code. In this regard, neither the transfer of a Grantee from
Employment by the Company to Employment by any Parent or Subsidiary, nor
the transfer of a Grantee from Employment by any Parent or Subsidiary to
Employment by the Company, shall be deemed to be a termination of
Employment of the Grantee. Moreover, the Employment of a Grantee shall not
be deemed to have been terminated because of an approved leave of absence
from active Employment on account of temporary illness, authorized vacation
or granted for reasons of professional advancement, education, health, or
government service, or during military leave for any period
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<PAGE> 27
(if the Grantee returns to active Employment within 90 days after the
termination of military leave), or during any period required to be treated
as a leave of absence by virtue of any applicable statute, Company
personnel policy or agreement. Whether an authorized leave of absence shall
constitute termination of Employment hereunder shall be determined by the
Committee in its discretion.
Unless otherwise provided in the Incentive Agreement, the term
"Employment" for purposes of the Plan is also defined to include (i)
compensatory or advisory services performed by a Consultant for the Company
(or any Parent or Subsidiary) and (ii) membership on the Board by an
Outside Director.
(p) EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.
(q) FAIR MARKET VALUE. The Fair Market Value of one share of Common
Stock on the date in question is deemed to be (i) the closing sales price
on the immediately preceding business day of a share of Common Stock as
reported on the New York Stock Exchange or other principal securities
exchange on which Shares are then listed or admitted to trading, or (ii) if
not so reported, the average of the closing bid and asked prices for a
Share on the immediately preceding business day as quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), or
(iii) if not quoted on NASDAQ, the average of the closing bid and asked
prices for a Share as quoted by the National Quotation Bureau's "Pink
Sheets" or the National Association of Securities Dealers' OTC Bulletin
Board System. If there was no public trade of Common Stock on the date in
question, Fair Market Value shall be determined by reference to the last
preceding date on which such a trade was so reported.
If the Company is not a Publicly Held Corporation at the time a
determination of the Fair Market Value of the Common Stock is required to
be made hereunder, the determination of Fair Market Value for purposes of
the Plan shall be made by the Committee in its discretion exercised in good
faith. In this respect, the Committee may rely on such financial data,
valuations, experts, and other sources, in its discretion, as it deems
advisable under the circumstances.
(r) GRANTEE. Any Employee, Consultant or Outside Director who is
granted an Incentive Award under the Plan.
(s) IMMEDIATE FAMILY. With respect to a Grantee, the Grantee's child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships.
(t) INCENTIVE AWARD. A grant of an award under the Plan to a Grantee,
including any Nonstatutory Stock Option, Incentive Stock Option, Stock
Appreciation Right, Restricted Stock Award, Performance Unit, Performance
Share, or Other Stock-Based Award.
(u) INCENTIVE AGREEMENT. The written agreement entered into between
the Company and the Grantee setting forth the terms and conditions pursuant
to which an Incentive Award is granted under the Plan, as such agreement is
further defined in Section 6.1(a).
4
<PAGE> 28
(v) INCENTIVE STOCK OPTION. A Stock Option granted by the Committee to
an Employee under Section 2 which is designated by the Committee as an
Incentive Stock Option and intended to qualify as an Incentive Stock Option
under Section 422 of the Code.
(w) INDEPENDENT SAR. A Stock Appreciation Right described in Section
2.5.
(x) INSIDER. While the Company is a Publicly Held Corporation, an
individual who is, on the relevant date, an officer, director or ten
percent (10%) beneficial owner of any class of the Company's equity
securities that is registered pursuant to Section 12 of the Exchange Act,
all as defined under Section 16 of the Exchange Act.
(y) NONSTATUTORY STOCK OPTION. A Stock Option granted by the
Committee to a Grantee under Section 2 that is not designated by the
Committee as an Incentive Stock Option.
(z) OPTION PRICE. The exercise price at which a Share may be
purchased by the Grantee of a Stock Option.
(aa) OTHER STOCK-BASED AWARD. An award granted by the Committee to a
Grantee under Section 5.1 that is valued in whole or in part by reference
to, or is otherwise based upon, Common Stock.
(bb) OUTSIDE DIRECTOR. A member of the Board who is not, at the time
of grant of an Incentive Award, an employee of the Company or any Parent or
Subsidiary.
(cc) PARENT. Any corporation (whether now or hereafter existing) which
constitutes a "parent" of the Company, as defined in Section 424(e) of the
Code.
(dd) PERFORMANCE-BASED EXCEPTION. The performance-based exception from
the tax deductibility limitations of Section 162(m) of the Code, as
prescribed in Code Section 162(m) and Treasury Regulation Section
1.162-27(e) (or its successor), which is applicable during such period that
the Company is a Publicly Held Corporation.
(ee) PERFORMANCE PERIOD. A period of time determined by the Committee
over which performance is measured for the purpose of determining a
Grantee's right to and the payment value of any Performance Unit,
Performance Share or Other Stock-Based Award.
(ff) PERFORMANCE SHARE OR PERFORMANCE UNIT. An Incentive Award
representing a contingent right to receive cash or shares of Common Stock
(which may be Restricted Stock) at the end of a Performance Period and
which, in the case of Performance Shares, is denominated in Common Stock,
and, in the case of Performance Units, is denominated in cash values.
(gg) PLAN. Marine Drilling Companies, Inc. 2000 Stock Incentive Plan,
as set forth herein and as it may be amended from time to time.
(hh) PUBLICLY HELD CORPORATION. A corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act.
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<PAGE> 29
(ii) RESTRICTED STOCK. Shares of Common Stock issued or transferred to
a Grantee pursuant to Section 3.
(jj) RESTRICTED STOCK AWARD. An authorization by the Committee to
issue or transfer Restricted Stock to a Grantee.
(kk) RESTRICTION PERIOD. The period of time determined by the
Committee and set forth in the Incentive Agreement during which the
transfer of Restricted Stock by the Grantee is restricted.
(ll) SHARE. A share of the Common Stock of the Company.
(mm) SHARE POOL. The number of shares authorized for issuance under
Section 1.4, as adjusted for awards and Payouts under Section 1.5 and as
adjusted for changes in corporate capitalization under Section 6.5.
(nn) SPREAD. The difference between the exercise price per Share
specified in any Independent SAR grant and the Fair Market Value of a Share
on the date of exercise of the Independent SAR.
(oo) STOCK APPRECIATION RIGHT OR SAR. An Independent SAR described in
Section 2.4.
(pp) STOCK OPTION OR OPTION. Pursuant to Section 2, (i) an Incentive
Stock Option granted to an Employee, or (ii) a Nonstatutory Stock Option
granted to an Employee, Consultant or Outside Director, whereunder such
option the Grantee has the right to purchase Shares of Common Stock. In
accordance with Section 422 of the Code, only an Employee may be granted an
Incentive Stock Option.
(qq) SUBSIDIARY. Any corporation (whether now or hereafter existing)
which constitutes a "subsidiary" of the Company, as defined in Section
424(f) of the Code.
1.3 PLAN ADMINISTRATION
(a) AUTHORITY OF THE COMMITTEE. Except as may be limited by law and
subject to the provisions herein, the Committee shall have full power to
(i) select Grantees who shall participate in the Plan; (ii) determine the
sizes, duration and types of Incentive Awards; (iii) determine the terms
and conditions of Incentive Awards and Incentive Agreements; (iv) determine
whether any Shares subject to Incentive Awards will be subject to any
restrictions on transfer; (v) construe and interpret the Plan and any
Incentive Agreement or other agreement entered into under the Plan; and
(vi) establish, amend, or waive rules for the Plan's administration.
Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan.
(b) MEETINGS. The Committee shall designate a chairman from among its
members who shall preside at all of its meetings, and shall designate a
secretary, without regard to whether that person is a member of the
Committee, who shall keep the minutes of the proceedings and all
6
<PAGE> 30
records, documents, and data pertaining to its administration of the Plan.
Meetings shall be held at such times and places as shall be determined by
the Committee and the Committee may hold telephonic meetings. The Committee
may take any action otherwise proper under the Plan by the affirmative
vote, taken with or without a meeting, of a majority of its members. The
Committee may authorize any one or more of their members or any officer of
the Company to execute and deliver documents on behalf of the Committee.
(c) DECISIONS BINDING. All determinations and decisions made by the
Committee shall be made in its discretion pursuant to the provisions of the
Plan, and shall be final, conclusive and binding on all persons including
the Company, its shareholders, Employees, Grantees, and their estates and
beneficiaries. The Committee's decisions and determinations with respect to
any Incentive Award need not be uniform and may be made selectively among
Incentive Awards and Grantees, whether or not such Incentive Awards are
similar or such Grantees are similarly situated.
(d) MODIFICATION OF OUTSTANDING INCENTIVE AWARDS. Subject to the
stockholder approval requirements of Section 7.7 if applicable, the
Committee may, in its discretion, provide for the extension of the
exercisability of an Incentive Award, accelerate the vesting or
exercisability of an Incentive Award, eliminate or make less restrictive
any restrictions contained in an Incentive Award, waive any restriction or
other provisions of an Incentive Award, or otherwise amend or modify an
Incentive Award in any manner that is either (i) not adverse to the Grantee
to whom such Incentive Award was granted or (ii) consented to by such
Grantee; provided, however, the Committee shall not have the authority to
decrease the exercise price of any outstanding Stock Option or other
Incentive Award. With respect to an Incentive Award that is an incentive
stock option (as described in Section 422 of the Code), no adjustment to
such option shall be made to the extent constituting a "modification"
within the meaning of Section 424(h)(3) of the Code unless otherwise agreed
to by the optionee in writing.
(e) DELEGATION OF AUTHORITY. The Committee may delegate to the CEO or
other officers of the Company any of its duties and authority under this
Plan pursuant to such conditions or limitations as the Committee may
establish from time to time; provided, however, while the Company is a
Publicly Held Corporation, the Committee may not delegate to any person the
authority to take any action which would contravene the requirements of
Rule 16b-3 under the Exchange Act or the Performance-Based Exception under
Section 162(m) of the Code.
(f) EXPENSES OF COMMITTEE. The Committee may employ legal counsel,
including, without limitation, independent legal counsel and counsel
regularly employed by the Company, and other agents as the Committee may
deem appropriate for the administration of the Plan. The Committee may rely
upon any opinion or computation received from any such counsel or agent.
All expenses incurred by the Committee in interpreting and administering
the Plan, including, without limitation, meeting expenses and professional
fees, shall be paid by the Company.
(g) INDEMNIFICATION. Each person who is or was a member of the
Committee, or of the Board, shall be indemnified by the Company against and
from any damage, loss, liability, cost and expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any
claim, action, suit, or proceeding to which he may be a party or in which
he may be involved by reason of any action taken or failure to act under
the Plan, except for any
7
<PAGE> 31
such act or omission constituting willful misconduct or gross negligence.
Such person shall be indemnified by the Company for all amounts paid by him
in settlement thereof, with the Company's approval, or paid by him in
satisfaction of any judgment in any such action, suit, or proceeding
against him, provided he shall give the Company an opportunity, at its own
expense, to handle and defend the same before he undertakes to handle and
defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's Articles or Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power
that the Company may have to indemnify them or hold them harmless.
1.4 SHARES OF COMMON STOCK AVAILABLE FOR INCENTIVE AWARDS
Subject to adjustment under Section 6.5, there shall be available for
Incentive Awards that are granted wholly or partly in Common Stock (including
rights or Options that may be exercised for or settled in Common Stock), a
number of Shares of Common Stock which shall equal, from time to time, eight
percent (8%) of the number of issued and outstanding Shares as of the first day
of the then-current fiscal quarter of the Company. Not more than 3,000,000
Shares of Common Stock shall be available for Incentive Stock Options. The
number of Shares of Common Stock, which are the subject of Incentive Awards
under this Plan, that are forfeited or terminated, expire unexercised, are
settled in cash in lieu of Common Stock or in a manner such that all or some of
the Shares covered by an Incentive Award are not issued to a Grantee or are
exchanged for Incentive Awards that do not involve Common Stock, shall again
immediately become available for Incentive Awards hereunder. The Committee may
from time to time adopt and observe such procedures concerning the counting of
Shares against the Plan maximum as it may deem appropriate. The Company shall
from time to time take whatever actions are necessary to file any required
documents with governmental authorities, stock exchanges and transaction
reporting systems to ensure that Shares are available for issuance pursuant to
Incentive Awards.
During such period that the Company is a Publicly Held Corporation,
then unless and until the Committee determines that a particular Incentive Award
granted to a Covered Employee is not intended to comply with the
Performance-Based Exception, the following rules shall apply to grants of
Incentive Awards to Covered Employees:
(a) Subject to adjustment as provided in Section 6.5, the maximum
aggregate number of Shares of Common Stock (including Stock Options, SARs,
Restricted Stock, Performance Units and Performance Shares paid out in
Shares, or Other Stock-Based Awards paid out in Shares) that may be granted
or that may vest, as applicable, in any calendar year pursuant to any
Incentive Award held by any individual Covered Employee shall be 3,000,000
Shares.
(b) The maximum aggregate cash payout (including SARs, Performance
Units and Performance Shares paid out in cash, or Other Stock-Based Awards
paid out in cash) with respect to Incentive Awards granted in any calendar
year which may be made to any Covered Employee shall be Three Million
dollars ($3,000,000).
(c) With respect to any Stock Option or Stock Appreciation Right
granted to a Covered Employee that is canceled, the number of Shares
subject to such Stock Option or Stock Appreciation Right shall continue to
count against the maximum number of Shares that may be the subject of Stock
Options or Stock Appreciation Rights granted to such Covered Employee
8
<PAGE> 32
hereunder and, in this regard, such maximum number shall be determined in
accordance with Section 162(m) of the Code.
(d) The limitations of subsections (a), (b) and (c) above shall be
construed and administered so as to comply with the Performance-Based
Exception.
1.5 SHARE POOL ADJUSTMENTS FOR AWARDS AND PAYOUTS
The following Incentive Awards and payouts shall reduce, on a one Share
for one Share basis, the number of Shares authorized for issuance under the
Share Pool:
(a) Stock Option;
(b) SAR;
(c) Restricted Stock;
(d) A payout of a Performance Share in Shares;
(e) A payout of a Performance Unit in Shares; and
(f) A payout of an Other Stock-Based Award in Shares.
The following transactions shall restore, on a one Share for one Share
basis, the number of Shares authorized for issuance under the Share Pool:
(a) A Payout of an SAR, Restricted Stock Award, or Other Stock-Based
Award in the form of cash;
(b) A cancellation, termination, expiration, forfeiture, or lapse for
any reason of any Shares subject to an Incentive Award; and
(c) Payment of an Option Price with previously acquired Shares or by
withholding Shares which otherwise would be acquired on exercise (i.e., the
Share Pool shall be increased by the number of Shares turned in or withheld
as payment of the Option Price).
1.6 COMMON STOCK AVAILABLE.
The Common Stock available for issuance or transfer under the Plan
shall be made available from Shares now or hereafter (a) held in the treasury of
the Company, (b) authorized but unissued shares, or (c) shares to be purchased
or acquired by the Company. No fractional shares shall be issued under the Plan;
payment for fractional shares shall be made in cash.
1.7 PARTICIPATION
(a) ELIGIBILITY. The Committee shall from time to time designate those
Employees, Consultants and/or Outside Directors, if any, to be granted
Incentive Awards under the Plan, the type of Incentive Awards granted, the
number of Shares, Stock Options, rights or units, as the
9
<PAGE> 33
case may be, which shall be granted to each such person, and any other
terms or conditions relating to the Incentive Awards as it may deem
appropriate to the extent consistent with the provisions of the Plan. A
Grantee who has been granted an Incentive Award may, if otherwise eligible,
be granted additional Incentive Awards at any time.
(b) INCENTIVE STOCK OPTION ELIGIBILITY. No Consultant or Outside
Director shall be eligible for the grant of any Incentive Stock Option. In
addition, no Employee shall be eligible for the grant of any Incentive
Stock Option who owns or would own immediately before the grant of such
Incentive Stock Option, directly or indirectly, stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Company, or any Parent or Subsidiary. This restriction does
not apply if, at the time such Incentive Stock Option is granted, the
Incentive Stock Option exercise price is at least one hundred and ten
percent (110%) of the Fair Market Value on the date of grant and the
Incentive Stock Option by its terms is not exercisable after the expiration
of five (5) years from the date of grant. For the purpose of the
immediately preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply for the purpose of determining an Employee's
percentage ownership in the Company or any Parent or Subsidiary. This
paragraph shall be construed consistent with the requirements of Section
422 of the Code.
(c) EXERCISE PRICE. Subject to Section1.7(b) and other applicable
provisions of the Plan, with respect to ninety percent (90%) of the number
of Shares then reserved under the Plan pursuant to Section 1.4, the
exercise price for a Stock Option or other Incentive Award shall not be set
by the Committee below the Fair Market Value of the underlying Shares on
the grant date of the Incentive Award. Subject to Section 1.7(b) and other
applicable provisions of the Plan, with respect to ten percent (10%) of the
number of Shares then reserved under the Plan pursuant to Section 1.4
(referred to herein as the "NON-CONFORMING POOL"), the exercise price for
an Option or other Incentive Award may be set by the Committee, in its
discretion, below the Fair Market Value of the underlying Shares on the
grant date of the Incentive Award.
1.8 TYPES OF INCENTIVE AWARDS
The types of Incentive Awards under the Plan are Stock Options, Stock
Appreciation Rights as described in Section 2, Restricted Stock as described in
Section 3, Performance Units and Performance Shares as described in Section 4,
Other Stock-Based Awards as described in Section 5, or any combination of the
foregoing.
SECTION 2.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 GRANT OF STOCK OPTIONS
The Committee is authorized to grant (a) Nonstatutory Stock Options to
Employees, Consultants and/or Outside Directors and (b) Incentive Stock Options
to Employees only, in accordance with the terms and conditions of the Plan, and
with such additional terms and conditions, not inconsistent with the Plan, as
the Committee shall determine in its discretion. Successive grants may be made
to the same Grantee whether or not any Stock Option previously granted to such
person remains unexercised.
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2.2 STOCK OPTION TERMS
(a) WRITTEN AGREEMENT. Each grant of an Stock Option shall be
evidenced by a written Incentive Agreement. Among its other provisions,
each Incentive Agreement shall set forth the extent to which the Grantee
shall have the right to exercise the Stock Option following termination of
the Grantee's Employment. Such provisions shall be determined in the
discretion of the Committee, shall be included in the Grantee's Incentive
Agreement, need not be uniform among all Stock Options issued pursuant to
the Plan.
(b) NUMBER OF SHARES. Each Stock Option shall specify the number of
Shares of Common Stock to which it pertains.
(c) EXERCISE PRICE. The exercise price per Share of Common Stock under
each Stock Option shall be determined by the Committee subject to Section
1.7(c); provided, however, that in the case of an Incentive Stock Option,
such exercise price shall not be less than 100% of the Fair Market Value
per Share on the date the Incentive Stock Option is granted. To the extent
that the Company is a Publicly Held Corporation and the Stock Option is
intended to qualify for the Performance-Based Exception, the exercise price
shall not be less than 100% of the Fair Market Value per Share on the date
the Stock Option is granted. Each Stock Option shall specify the method of
exercise which shall be consistent with the requirements of Section 2.3(a).
(d) TERM. In the Incentive Agreement, the Committee shall fix the term
of each Stock Option which shall be not more than ten (10) years from the
date of grant. In the event no term is fixed, such term shall be ten (10)
years from the date of grant.
(e) EXERCISE. The Committee shall determine the time or times at which
a Stock Option may be exercised in whole or in part. Each Stock Option may
specify the required period of continuous Employment and/or the performance
objectives to be achieved before the Stock Option or portion thereof will
become exercisable. Each Stock Option, the exercise of which, or the timing
of the exercise of which, is dependent, in whole or in part, on the
achievement of designated performance objectives, may specify a minimum
level of achievement in respect of the specified performance objectives
below which no Stock Options will be exercisable and a method for
determining the number of Stock Options that will be exercisable if
performance is at or above such minimum but short of full achievement of
the performance objectives. All such terms and conditions shall be set
forth in the Incentive Agreement.
(f) $100,000 ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. Notwithstanding
any contrary provision in the Plan, to the extent that the aggregate Fair
Market Value (determined as of the time the Incentive Stock Option is
granted) of the Shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by any Grantee during any
single calendar year (under the Plan and any other stock option plans of
the Company and its Subsidiaries or Parent) exceeds the sum of $100,000,
such Incentive Stock Option shall be treated as a Nonstatutory Stock Option
to the extent in excess of the $100,000 limit, and not an Incentive Stock
Option, but all other terms and provisions of such Stock Option shall
remain unchanged. This paragraph shall be applied by taking Incentive Stock
Options into account in the order in which they were granted and shall be
construed in accordance with Section 422(d) of
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the Code. In the absence of such regulations or other authority, or if such
regulations or other authority require or permit a designation of the
Options which shall cease to constitute Incentive Stock Options, then such
Incentive Stock Options, only to the extent of such excess, shall
automatically be deemed to be Nonstatutory Stock Options but all other
terms and conditions of such Incentive Stock Options, and the corresponding
Incentive Agreement, shall remain unchanged.
2.3 STOCK OPTION EXERCISES
(a) METHOD OF EXERCISE AND PAYMENT. Stock Options shall be exercised
by the delivery of a signed written notice of exercise to the Company as of
a date set by the Company in advance of the effective date of the proposed
exercise. The notice shall set forth the number of Shares with respect to
which the Option is to be exercised, accompanied by full payment for the
Shares.
The Option Price upon exercise of any Stock Option shall be payable to
the Company in full either: (i) in cash or its equivalent, or (ii) subject
to prior approval by the Committee in its discretion, by tendering
previously acquired Shares having an aggregate Fair Market Value at the
time of exercise equal to the total Option Price (provided that the Shares
which are tendered must have been held by the Grantee for at least six (6)
months prior to their tender to satisfy the Option Price), or (iii) subject
to prior approval by the Committee in its discretion, by withholding Shares
which otherwise would be acquired on exercise having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price, or
(iv) subject to prior approval by the Committee in its discretion, by a
combination of (i), (ii), and (iii) above. Any payment in Shares of Common
Stock shall be effected by the delivery of such Shares to the Secretary of
the Company, duly endorsed in blank or accompanied by stock powers duly
executed in blank, together with any other documents as the Secretary shall
require from time to time.
The Committee, in its discretion, also may allow the Option Price to
be paid with such other consideration as shall constitute lawful
consideration for the issuance of Shares (including, without limitation,
effecting a "cashless exercise" with a broker of the Option), subject to
applicable securities law restrictions and tax withholdings, or by any
other means which the Committee determines to be consistent with the Plan's
purpose and applicable law. A "cashless exercise" of an Option is a
procedure by which a broker provides the funds to the Grantee to effect an
Option exercise. At the direction of the Grantee, the broker will either
(i) sell all of the Shares received when the Option is exercised and pay
the Grantee the proceeds of the sale (minus the Option Price, withholding
taxes and any fees due to the broker) or (ii) sell enough of the Shares
received upon exercise of the Option to cover the Option Price, withholding
taxes and any fees due the broker and deliver to the Grantee (either
directly or through the Company) a stock certificate for the remaining
Shares. Dispositions to a broker effecting a cashless exercise are not
exempt under Section 16 of the Exchange Act.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to or on behalf of the
Grantee, in the name of the Grantee or other appropriate recipient, Share
certificates for the number of Shares purchased under the Stock Option.
Such delivery shall be effected for all purposes when the Company or a
stock transfer
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agent of the Company shall have deposited such certificates in the United
States mail, addressed to Grantee or other appropriate recipient.
Subject to Section 6.2, during the lifetime of a Grantee, each Option
granted to him shall be exercisable only by the Grantee (or his legal
guardian in the event of his Disability) or by a broker-dealer acting on
his behalf pursuant to a cashless exercise under the foregoing provisions
of this Section 2.3(a).
(b) RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of a
Stock Option as it may deem advisable, including, without limitation,
restrictions under (i) any stockholders' agreement, buy/sell agreement or
right of first refusal, (ii) any applicable federal securities laws, (iii)
the requirements of any stock exchange or market upon which such Shares are
then listed and/or traded, or (iv) any blue sky or state securities law
applicable to such Shares. Any certificate issued to evidence Shares issued
upon the exercise of an Incentive Award may bear such legends and
statements as the Committee shall deem advisable to assure compliance with
federal and state laws and regulations.
Any Grantee or other person exercising an Incentive Award may be
required by the Committee to give a written representation that the
Incentive Award and the Shares subject to the Incentive Award will be
acquired for investment and not with a view to public distribution;
provided, however, that the Committee, in its sole discretion, may release
any person receiving an Incentive Award from any such representations
either prior to or subsequent to the exercise of the Incentive Award.
(c) NOTIFICATION OF DISQUALIFYING DISPOSITION OF SHARES FROM INCENTIVE
STOCK OPTIONS. Notwithstanding any other provision of the Plan, a Grantee
who disposes of Shares of Common Stock acquired upon the exercise of an
Incentive Stock Option by a sale or exchange either (i) within two (2)
years after the date of the grant of the Incentive Stock Option under which
the Shares were acquired or (ii) within one (1) year after the transfer of
such Shares to him pursuant to exercise, shall promptly notify the Company
of such disposition, the amount realized and his adjusted basis in such
Shares.
(d) PROCEEDS OF OPTION EXERCISE. The proceeds received by the Company
from the sale of Shares pursuant to Stock Options exercised under the Plan
shall be used for general corporate purposes.
2.4 STOCK APPRECIATION RIGHTS INDEPENDENT OF NONSTATUTORY STOCK OPTIONS
(a) GRANT. The Committee may grant Stock Appreciation Rights
independent of Nonstatutory Stock Options ("Independent SARs").
(b) GENERAL PROVISIONS. The terms and conditions of each Independent
SAR shall be evidenced by an Incentive Agreement. The exercise price per
share of Common Stock shall be not less than one hundred percent (100%) of
the Fair Market Value of a Share of Common Stock on the date of grant of
the Independent SAR. The term of an Independent SAR shall be determined by
the Committee.
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(c) EXERCISE. Independent SARs shall be exercisable at such time and
subject to such terms and conditions as the Committee shall specify in the
Incentive Agreement for the Independent SAR grant.
(d) SETTLEMENT. Upon exercise of an Independent SAR, the holder shall
receive, for each Share specified in the Independent SAR grant, an amount
equal to the Spread. The Spread shall be payable in cash, Common Stock, or
a combination of both, in the discretion of the Committee or as specified
in the Incentive Agreement. The Spread shall be paid within 30 calendar
days of the exercise of the Independent SAR. The number of Shares of Common
Stock which shall be issuable upon exercise of an Independent SAR shall be
determined by dividing (1) by (2), where (1) is the number of Shares as to
which the Independent SAR is exercised multiplied by the Spread in such
Shares and (2) is the Fair Market Value of a Share on the exercise date.
SECTION 3.
RESTRICTED STOCK
3.1 AWARD OF RESTRICTED STOCK
(a) GRANT. In consideration of the performance of Employment by any
Grantee who is an Employee, Consultant or Outside Director, Shares of
Restricted Stock may be awarded under the Plan by the Committee with such
restrictions during the Restriction Period as the Committee may designate
in its discretion, any of which restrictions may differ with respect to
each particular Grantee; provided, however, in no event shall the
Restriction Period be less than a three (3) consecutive year period unless
such Restricted Shares are allocable to the Non-Conforming Pool described
in Section 1.7(c). Restricted Stock shall be awarded for no additional
consideration or such additional consideration as the Committee may
determine, which consideration may be less than, equal to or more than the
Fair Market Value of the shares of Restricted Stock on the grant date. The
terms and conditions of each grant of Restricted Stock shall be evidenced
by an Incentive Agreement.
(b) IMMEDIATE TRANSFER WITHOUT IMMEDIATE DELIVERY OF RESTRICTED STOCK.
Unless otherwise specified in the Grantee's Incentive Agreement, each
Restricted Stock Award shall constitute an immediate transfer of the record
and beneficial ownership of the Shares of Restricted Stock to the Grantee
in consideration of the performance of services as an Employee, Consultant
or Outside Director, as applicable, entitling such Grantee to all voting
and other ownership rights in such Shares.
As specified in the Incentive Agreement and subject to Section 3.1(a)
regarding the Restriction Period, a Restricted Stock Award may limit the
Grantee's dividend rights during the Restriction Period in which the shares
of Restricted Stock are subject to a "substantial risk of forfeiture"
(within the meaning given to such term under Code Section 83) and
restrictions on transfer. In the Incentive Agreement, the Committee may
apply any restrictions to the dividends that the Committee deems
appropriate. Without limiting the generality of the preceding sentence, if
the grant or vesting of Shares of Restricted Stock granted to a Covered
Employee, if applicable, is designed to comply with the requirements of the
Performance-Based Exception,
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the Committee may apply any restrictions it deems appropriate to the
payment of dividends declared with respect to such Shares of Restricted
Stock, such that the dividends and/or the Shares of Restricted Stock
maintain eligibility for the Performance-Based Exception. In the event that
any dividend constitutes a derivative security or an equity security
pursuant to the rules under Section 16 of the Exchange Act, if applicable,
such dividend shall be subject to a vesting period equal to the remaining
vesting period of the Shares of Restricted Stock with respect to which the
dividend is paid.
Shares awarded pursuant to a grant of Restricted Stock may be issued
in the name of the Grantee and held, together with a stock power endorsed
in blank, by the Committee or Company (or their delegates) or in trust or
in escrow pursuant to an agreement satisfactory to the Committee, as
determined by the Committee, until such time as the restrictions on
transfer have expired. All such terms and conditions shall be set forth in
the particular Grantee's Incentive Agreement. The Company or Committee (or
their delegates) shall issue to the Grantee a receipt evidencing the
certificates held by it which are registered in the name of the Grantee.
3.2 RESTRICTIONS
(a) FORFEITURE OF RESTRICTED STOCK. Restricted Stock awarded to a
Grantee may be subject to the following restrictions until the expiration
of the Restriction Period: (i) a restriction that constitutes a
"substantial risk of forfeiture" (as defined in Code Section 83), or a
restriction on transferability; (ii) unless otherwise specified by the
Committee in the Incentive Agreement, the Restricted Stock that is subject
to restrictions which are not satisfied shall be forfeited and all rights
of the Grantee to such Shares shall terminate; and (iii) any other
restrictions that the Committee determines in advance are appropriate,
including, without limitation, rights of repurchase or first refusal in the
Company or provisions subjecting the Restricted Stock to a continuing
substantial risk of forfeiture in the hands of any transferee. Any such
restrictions shall be set forth in the particular Grantee's Incentive
Agreement.
(b) ISSUANCE OF CERTIFICATES. Reasonably promptly after the date of
grant with respect to Shares of Restricted Stock, the Company shall cause
to be issued a stock certificate, registered in the name of the Grantee to
whom such Shares of Restricted Stock were granted, evidencing such Shares;
provided, however, that the Company shall not cause to be issued such a
stock certificate unless it has received a stock power duly endorsed in
blank with respect to such Shares. Each such stock certificate shall bear
the following legend or any other legend approved by the Company:
The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture and restrictions
against transfer) contained in the Marine Drilling Companies,
Inc. 2000 Stock Incentive Plan and an Incentive Agreement
entered into between the registered owner of such shares and
Marine Drilling Companies, Inc. A copy of the Plan and
Incentive Agreement are on file in the corporate offices of
Marine Drilling Companies, Inc.
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Such legend shall not be removed from the certificate evidencing such
Shares of Restricted Stock until such Shares vest pursuant to the terms of
the Incentive Agreement.
(c) REMOVAL OF RESTRICTIONS. Subject to Section 3.1(a) regarding the
Restriction Period, the Committee, in its discretion, shall have the
authority to remove any or all of the restrictions on the Restricted Stock
if it determines that, by reason of a change in applicable law or another
change in circumstance arising after the grant date of the Restricted
Stock, such action is appropriate.
3.3 DELIVERY OF SHARES OF COMMON STOCK
Subject to withholding taxes under Section 7.3 and to the terms of the
Incentive Agreement, a stock certificate evidencing the Shares of
Restricted Stock with respect to which the restrictions in the Incentive
Agreement have been satisfied shall be delivered to the Grantee or other
appropriate recipient free of restrictions. Such delivery shall be effected
for all purposes when the Company shall have deposited such certificate in
the United States mail, addressed to the Grantee or other appropriate
recipient.
SECTION 4.
PERFORMANCE UNITS AND PERFORMANCE SHARES
4.1 PERFORMANCE BASED AWARDS
(a) GRANT. The Committee is authorized to grant Performance Units and
Performance Shares to selected Grantees who are Employees, Outside
Directors or Consultants. Each grant of Performance Units and/or
Performance Shares shall be evidenced by an Incentive Agreement in such
amounts and upon such terms as shall be determined by the Committee;
provided, however, the Performance Period shall not be less than one year
unless such Shares are allocable to the Non-Conforming Pool described in
Section 1.7(c). The Committee may make grants of Performance Units or
Performance Shares in such a manner that more than one Performance Period
is in progress concurrently. For each Performance Period, the Committee
shall establish the number of Performance Units or Performance Shares and
their contingent values which may vary depending on the degree to which
performance criteria established by the Committee are met.
(b) PERFORMANCE CRITERIA. At the beginning of each Performance Period,
the Committee shall (i) establish for such Performance Period specific
financial or non-financial performance objectives that the Committee
believes are relevant to the Company's business objectives; (ii) determine
the value of a Performance Unit or the number of Shares under a Performance
Share grant relative to performance objectives; and (iii) notify each
Grantee in writing of the established performance objectives and, if
applicable, the minimum, target, and maximum value of Performance Units or
Performance Shares for such Performance Period.
(c) MODIFICATION. If the Committee determines, in its discretion
exercised in good faith, that the established performance measures or
objectives are no longer suitable to the Company's objectives because of a
change in the Company's business, operations, corporate
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structure, capital structure, or other conditions the Committee deems to be
appropriate, the Committee may modify the performance measures and
objectives to the extent it considers to be necessary; provided, however,
the Performance Period shall not be less than one year unless such Shares
are allocable to the Non-Conforming Pool described in Section 1.7(c). The
Committee shall determine whether any such modification would cause the
Performance Unit or Performance Share to fail to qualify for the
Performance-Based Exception, if applicable.
(d) PAYMENT. The basis for payment of Performance Units or Performance
Shares for a given Performance Period shall be the achievement of those
performance objectives determined by the Committee at the beginning of the
Performance Period as specified in the Grantee's Incentive Agreement. If
minimum performance is not achieved for a Performance Period, no payment
shall be made and all contingent rights shall cease. If minimum performance
is achieved or exceeded, the value of a Performance Unit or Performance
Share may be based on the degree to which actual performance exceeded the
preestablished minimum performance standards. The amount of payment shall
be determined by multiplying the number of Performance Units or Performance
Shares granted at the beginning of the Performance Period times the final
Performance Unit or Performance Share value. Payments shall be made, in the
discretion of the Committee as specified in the Incentive Agreement, solely
in cash or Common Stock, or a combination of cash and Common Stock,
following the close of the applicable Performance Period.
(e) SPECIAL RULE FOR COVERED EMPLOYEES. The Committee may establish
performance goals applicable to Performance Units or Performance Shares
awarded to Covered Employees in such a manner as shall permit payments with
respect thereto to qualify for the Performance-Based Exception, if
applicable. If a Performance Unit or Performance Share granted to a Covered
Employee is intended to comply with the Performance-Based Exception, the
Committee in establishing performance goals shall be guided by Treasury
Regulation Section 1.162-27(e)(2) (or its successor).
SECTION 5.
OTHER STOCK-BASED AWARDS
5.1 GRANT OF OTHER STOCK-BASED AWARDS
Other Stock-Based Awards may be awarded by the Committee to selected
Grantees that are denominated or payable in, valued in whole or in part by
reference to, or otherwise related to, Shares of Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan and the goals of the
Company. Other types of Stock-Based Awards include, without limitation, Deferred
Stock, purchase rights, Shares of Common Stock awarded which are not subject to
any restrictions or conditions, convertible or exchangeable debentures, other
rights convertible into Shares, Incentive Awards valued by reference to the
value of securities of or the performance of a specified Subsidiary, division or
department, and settlement in cancellation of rights of any person with a vested
interest in any other plan, fund, program or arrangement that is or was
sponsored, maintained or participated in by the Company or any Parent or
Subsidiary. As is the case with other Incentive Awards, Other Stock-Based Awards
may be awarded either alone or in addition to any other Incentive Awards.
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5.2 OTHER STOCK-BASED AWARD TERMS
(a) WRITTEN AGREEMENT. The terms and conditions of each grant of an
Other Stock-Based Award shall be evidenced by an Incentive Agreement.
(b) PURCHASE PRICE. Except to the extent that an Other Stock-Based
Award is granted in substitution for an outstanding Incentive Award or is
delivered upon exercise of a Stock Option, the amount of consideration
required to be received by the Company shall be either (i) no consideration
other than services actually rendered (in the case of authorized and
unissued shares) or to be rendered, or (ii) in the case of an Other
Stock-Based Award in the nature of a purchase right, consideration (other
than services rendered or to be rendered) at least equal to 50% of the Fair
Market Value of the Shares covered by such grant on the grant date (or such
percentage higher than 50% that is required by any applicable tax or
securities law); provided, however, in the case of an Other Stock-Based
Award described in this clause (ii), if the consideration (other than
services rendered or to be rendered) is less than 100% of the Fair Market
Value of the Shares covered by such grant on the grant date, the Shares
subject to such Other Stock-Based Award shall be allocable to the
Non-Conforming Pool described in Section 1.7(c).
(c) PERFORMANCE CRITERIA AND OTHER TERMS. In its discretion, the
Committee may specify such criteria, periods or goals for vesting in Other
Stock-Based Awards and payment thereof to the Grantee as it shall
determine; and the extent to which such criteria, periods or goals have
been met shall be determined by the Committee; provided however, in no
event shall the Performance Period be less than one year unless such Shares
are allocable to the Non-Conforming Pool described in Section 1.7(c). All
terms and conditions of Other Stock-Based Awards shall be determined by the
Committee and set forth in the Incentive Agreement.
(d) PAYMENT. Other Stock-Based Awards may be paid in Shares of Common
Stock or other consideration related to such Shares, in a single payment or
in installments on such dates as determined by the Committee, all as
specified in the Incentive Agreement.
(e) DIVIDENDS. The Grantee of an Other Stock-Based Award shall be
entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the number of Shares covered by the
Other Stock-Based Award, as determined by the Committee and set forth in
the Incentive Agreement. The Committee may also provide in the Incentive
Agreement that such amounts (if any) shall be deemed to have been
reinvested in additional Shares of Common Stock.
SECTION 6.
PROVISIONS RELATING TO PLAN PARTICIPATION
6.1 PLAN CONDITIONS
(a) INCENTIVE AGREEMENT. Each Grantee to whom an Incentive Award is
granted shall be required to enter into an Incentive Agreement with the
Company, in such a form as is provided by the Committee. The Incentive
Agreement shall contain specific terms as determined
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by the Committee, in its discretion, with respect to the Grantee's
particular Incentive Award. Such terms need not be uniform among all
Grantees or any similarly-situated Grantees. The Incentive Agreement may
include, without limitation, vesting, forfeiture and other provisions
particular to the particular Grantee's Incentive Award, as well as, for
example, provisions to the effect that the Grantee (i) shall not disclose
any confidential information acquired during Employment with the Company,
(ii) shall abide by all the terms and conditions of the Plan and such other
terms and conditions as may be imposed by the Committee, (iii) shall not
interfere with the employment or other service of any employee, (iv) shall
not compete with the Company or become involved in a conflict of interest
with the interests of the Company, (v) shall forfeit an Incentive Award if
terminated for Cause, (vi) shall not be permitted to make an election under
Section 83(b) of the Code when applicable, and (vii) shall be subject to
any other agreement between the Grantee and the Company regarding Shares
that may be acquired under an Incentive Award including, without
limitation, a stockholders' agreement or other agreement restricting the
transferability of Shares by Grantee. An Incentive Agreement shall include
such terms and conditions, as are determined by the Committee, in its
discretion, to be appropriate and consistent with the terms of the Plan,
with respect to any individual Grantee. The Incentive Agreement shall be
signed by the Grantee to whom the Incentive Award is made and by an
Authorized Officer.
(b) NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any instrument
executed pursuant to the Plan shall create any Employment rights (including
without limitation, rights to continued Employment) in any Grantee or
affect the right of the Company to terminate the Employment of any Grantee
at any time without regard to the existence of the Plan.
(c) SECURITIES REQUIREMENTS. The Company shall be under no obligation
to effect the registration pursuant to the Securities Act of 1933 of any
Shares of Common Stock to be issued hereunder or to effect similar
compliance under any state laws. Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or
delivered any certificates evidencing Shares pursuant to the Plan unless
and until the Company is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities, and the requirements of any
securities exchange on which Shares are traded. The Committee may require,
as a condition of the issuance and delivery of certificates evidencing
Shares of Common Stock pursuant to the terms hereof, that the recipient of
such Shares make such covenants, agreements and representations, and that
such certificates bear such legends, as the Committee, in its discretion,
deems necessary or desirable.
If the Shares issuable on exercise of an Incentive Award are not
registered under the Securities Act of 1933, the Company may imprint on the
certificate for such Shares the following legend or any other legend which
counsel for the Company considers necessary or advisable to comply with the
Securities Act of 1933:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT UPON SUCH REGISTRATION OR
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UPON RECEIPT BY THE CORPORATION OF AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, THAT REGISTRATION IS NOT
REQUIRED FOR SUCH SALE OR TRANSFER.
6.2 TRANSFERABILITY
Incentive Awards granted under the Plan shall not be transferable or
assignable other than: (a) by will or the laws of descent and distribution or
(b) pursuant to a qualified domestic relations order (as defined by Section
414(p) of the Code); provided, however, only with respect to Incentive Awards
consisting of Nonstatutory Stock Options, the Committee may, in its discretion,
authorize all or a portion of the Nonstatutory Stock Options to be granted on
terms which permit transfer by the Grantee to (i) the members of the Grantee's
Immediate Family, (ii) a trust or trusts for the exclusive benefit of such
Immediate Family, (iii) a partnership in which such members of such Immediate
Family are the only partners, or (iv) any other entity owned solely by members
of the Immediate Family; provided that (A) there may be no consideration for any
such transfer, (B) the Incentive Agreement pursuant to which such Nonstatutory
Stock Options are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this Section 6.2, and
(C) subsequent transfers of transferred Nonstatutory Stock Options shall be
prohibited except in accordance with clauses (a) and (b) (above) of this
sentence. Following any permitted transfer, the Nonstatutory Stock Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that the term "Grantee" shall be deemed
to refer to the transferee. The events of termination of employment, as set out
in Section 6.6 and in the Incentive Agreement, shall continue to be applied with
respect to the original Grantee, and the Incentive Award shall be exercisable by
the transferee only to the extent, and for the periods, specified in the
Incentive Agreement.
Except as may otherwise be permitted under the Code, in the event of a
permitted transfer of a Nonstatutory Stock Option hereunder, the original
Grantee shall remain subject to withholding taxes upon exercise. In addition,
the Company and the Committee shall have no obligation to provide any notices to
any Grantee or transferee thereof, including, for example, notice of the
expiration of an Incentive Award following the original Grantee's termination of
employment.
No transfer by will or by the laws of descent and distribution shall be
effective to bind the Company unless the Committee has been furnished with a
copy of the deceased Grantee's enforceable will or such other evidence as the
Committee deems necessary to establish the validity of the transfer. Any
attempted transfer in violation of this Section 6.2 shall be void and
ineffective. All determinations under this Section 6.2 shall be made by the
Committee in its discretion.
6.3 RIGHTS AS A STOCKHOLDER
(a) NO STOCKHOLDER RIGHTS. Except as otherwise provided in
Section 3.1(b) for grants of Restricted Stock, a Grantee of an
Incentive Award (or a permitted transferee of such Grantee) shall have
no rights as a stockholder with respect to any Shares of Common Stock
until the issuance of a stock certificate for such Shares.
(b) REPRESENTATION OF OWNERSHIP. In the case of the exercise of
an Incentive Award by a person or estate acquiring the right to
exercise such Incentive Award by reason of
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<PAGE> 44
the death or Disability of a Grantee, the Committee may require
reasonable evidence as to the ownership of such Incentive Award or the
authority of such person and may require such consents and releases of
taxing authorities as the Committee may deem advisable.
6.4 LISTING AND REGISTRATION OF SHARES OF COMMON STOCK
The exercise of any Incentive Award granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of Shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authorities and
the requirements of any securities exchange on which Shares of Common Stock are
traded. The Committee may, in its discretion, defer the effectiveness of any
exercise of an Incentive Award in order to allow the issuance of Shares of
Common Stock to be made pursuant to registration or an exemption from
registration or other methods for compliance available under federal or state
securities laws. The Committee shall inform the Grantee in writing of its
decision to defer the effectiveness of the exercise of an Incentive Award.
During the period that the effectiveness of the exercise of an Incentive Award
has been deferred, the Grantee may, by written notice to the Committee, withdraw
such exercise and obtain the refund of any amount paid with respect thereto.
6.5 CHANGE IN STOCK AND ADJUSTMENTS
(a) CHANGES IN LAW OR CIRCUMSTANCES. Subject to Section 6.7
(which only applies in the event of a Change in Control), in the event
of any change in applicable laws or any change in circumstances which
results in or would result in any dilution of the rights granted under
the Plan, or which otherwise warrants equitable adjustment because it
interferes with the intended operation of the Plan, then, if the
Committee should determine, in its absolute discretion, that such
change equitably requires an adjustment in the number or kind of
shares of stock or other securities or property theretofore subject,
or which may become subject, to issuance or transfer under the Plan or
in the terms and conditions of outstanding Incentive Awards, such
adjustment shall be made in accordance with such determination. Such
adjustments may include changes with respect to (i) the aggregate
number of Shares that may be issued under the Plan, (ii) the number of
Shares subject to Incentive Awards, and (iii) the price per Share for
outstanding Incentive Awards. Any adjustment under this paragraph of
an outstanding Incentive Stock Option shall be made only to the extent
not constituting a "modification" within the meaning of Section
424(h)(3) of the Code unless otherwise agreed to by the Grantee in
writing. The Committee shall give notice to each applicable Grantee of
such adjustment which shall be effective and binding.
(b) EXERCISE OF CORPORATE POWERS. The existence of the Plan or
outstanding Incentive Awards hereunder shall not affect in any way the
right or power of the Company or its stockholders to make or authorize
any or all adjustments, recapitalization, reorganization or other
changes in the Company's capital structure or its business or any
merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting
the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.
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<PAGE> 45
(c) RECAPITALIZATION OF THE COMPANY. Subject to Section 6.7, if
while there are Incentive Awards outstanding, the Company shall effect
any subdivision or consolidation of Shares of Common Stock or other
capital readjustment, the payment of a stock dividend, stock split,
combination of Shares, recapitalization or other increase or reduction
in the number of Shares outstanding, without receiving compensation
therefor in money, services or property, then the number of Shares
available under the Plan and the number of Incentive Awards which may
thereafter be exercised shall (i) in the event of an increase in the
number of Shares outstanding, be proportionately increased and the
Fair Market Value of the Incentive Awards awarded shall be
proportionately reduced; and (ii) in the event of a reduction in the
number of Shares outstanding, be proportionately reduced, and the Fair
Market Value of the Incentive Awards awarded shall be proportionately
increased. The Committee shall take such action and whatever other
action it deems appropriate, in its discretion, so that the value of
each outstanding Incentive Award to the Grantee shall not be adversely
affected by a corporate event described in this subsection (c).
(d) ISSUE OF COMMON STOCK BY THE COMPANY. Except as hereinabove
expressly provided in this Section 6.5 and subject to Section 6.7, the
issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon any conversion of
shares or obligations of the Company convertible into such shares or
other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of, or Fair Market
Value of, any Incentive Awards then outstanding under previously
granted Incentive Awards; provided, however, in such event,
outstanding Shares of Restricted Stock shall be treated the same as
outstanding unrestricted Shares of Common Stock.
(e) ASSUMPTION UNDER THE PLAN OF OUTSTANDING STOCK OPTIONS.
Notwithstanding any other provision of the Plan, the Committee, in its
discretion, may authorize the assumption and continuation under the
Plan of outstanding and unexercised stock options or other types of
stock-based incentive awards that were granted under a stock option
plan (or other type of stock incentive plan or agreement) that is or
was maintained by a corporation or other entity that was merged into,
consolidated with, or whose stock or assets were acquired by, the
Company as the surviving corporation. Any such action shall be upon
such terms and conditions as the Committee, in its discretion, may
deem appropriate, including provisions to preserve the holder's rights
under the previously granted and unexercised stock option or other
stock-based incentive award, such as, for example, retaining an
existing exercise price under an outstanding stock option. Any such
assumption and continuation of any such previously granted and
unexercised incentive award shall be treated as an outstanding
Incentive Award under the Plan and shall count against the number of
Shares reserved for issuance pursuant to Section 1.4. In addition, any
Shares issued by the Company through the assumption or substitution of
outstanding grants from an acquired company shall reduce the Shares
available for grants under Section 1.4.
(f) ACQUISITION OF COMPANY BY A SUCCESSOR. Subject to the
accelerated vesting and other provisions of Section 6.7 that apply in
the event of a Change in Control, in the event of a Corporate Event
(defined below), each Grantee shall be entitled to receive, in lieu of
the number of Shares subject to Incentive Awards, such shares of
capital stock or other securities or property as may be issuable or
payable with respect to or in exchange for the number of Shares
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<PAGE> 46
which Grantee would have received had he exercised the Incentive Award
immediately prior to such Corporate Event, together with any
adjustments (including, without limitation, adjustments to the Option
Price and the number of Shares issuable on exercise of outstanding
Stock Options). For this purpose, Shares of Restricted Stock shall be
treated the same as unrestricted outstanding Shares of Common Stock. A
"Corporate Event" means any of the following: (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of
the Company's assets, or (iii) a merger, consolidation or combination
involving the Company (other than a merger, consolidation or
combination (A) in which the Company is the continuing or surviving
corporation and (B) which does not result in the outstanding Shares
being converted into or exchanged for different securities, cash or
other property, or any combination thereof). The Committee shall take
whatever other action it deems appropriate to preserve the rights of
Grantees holding outstanding Incentive Awards.
Notwithstanding the previous paragraph of this Section 6.5(f)
but subject to the accelerated vesting and other provisions of Section
6.7 that apply in the event of a Change in Control, the Committee, in
its discretion, if it determines that such action is in the best
interests of the Company, shall have the right and power to:
(i) cancel, effective immediately prior to the occurrence of
the Corporate Event, each outstanding Incentive Award (whether or
not then exercisable) and, in full consideration of such
cancellation, pay to the Grantee an amount in cash equal to the
excess of (A) the value, as determined by the Committee, of the
property (including cash) received by the holders of Common Stock
as a result of such Corporate Event over (B) the exercise price
of such Incentive Award, if any; provided, however, this
subsection (i) shall be inapplicable to an Incentive Award
granted within six (6) months before the occurrence of the
Corporate Event but only if the Grantee is an Insider and such
disposition is not exempt under Rule 16b-3 (or other rules
preventing liability of the Insider under Section 16 (b) of the
Exchange Act), and, in that event, the provisions hereof shall be
applicable to such Incentive Award after the expiration of six
(6) months from the date of grant; or
(ii) provide for the exchange of each Incentive Award
outstanding immediately prior to such Corporate Event (whether or
not then exercisable) for another award with respect to the
Common Stock or other property for which such Incentive Award is
exchangeable and, incident thereto, make an equitable adjustment
as determined by the Committee, in its discretion, in the
exercise price of the Incentive Award, if any, or in the number
of Shares or amount of property (including cash) subject to the
Incentive Award.
The Committee, in its discretion, shall have the authority to take
whatever action it deems to be necessary or appropriate to effectuate
the provisions of this subsection (f).
6.6 TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY
(a) TERMINATION OF EMPLOYMENT. Unless otherwise expressly
provided in the Grantee's Incentive Agreement, if the Grantee's
Employment is terminated for any reason other than due to his death or
Disability or for Cause, any non-vested portion of any Stock Option or
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<PAGE> 47
other applicable Incentive Award at the time of such termination shall
automatically expire and terminate and no further vesting shall occur
after his termination date. In such event, except as otherwise
expressly provided in his Incentive Agreement, the Grantee shall be
entitled to exercise his rights only with respect to the portion of
the Incentive Award that was vested as of the termination date for a
period that shall end on the earlier of (i) the expiration date set
forth in the Incentive Agreement or (ii) the three (3) month
anniversary of his termination date.
(b) TERMINATION OF EMPLOYMENT FOR CAUSE. Unless otherwise
expressly provided in the Grantee's Incentive Agreement, in the event
of the termination of a Grantee's Employment for Cause, all vested and
non-vested Stock Options and other Incentive Awards granted to such
Grantee shall immediately expire, and shall not be exercisable to any
extent, as of 12:01 a.m. (CST) on the date of such termination of
Employment.
(c) DISABILITY OR DEATH. Unless otherwise expressly provided in
the Grantee's Incentive Agreement, upon termination of Employment as a
result of the Grantee's Disability or death:
(i) any nonvested portion of any outstanding Option or other
applicable Incentive Award shall immediately terminate upon
termination of Employment and no further vesting shall occur; and
(ii) any vested Incentive Award shall expire on the earlier
of either (A) the expiration date set forth in the Incentive
Agreement or (B) the one year anniversary date of the Grantee's
termination of Employment date.
In the case of any vested Incentive Stock Option held by an
Employee following termination of Employment, notwithstanding the
definition of "Disability" in Section 1, whether the Employee has
incurred a "Disability" for purposes of determining the length of the
Option exercise period following termination of Employment under this
subsection (c) shall be determined by reference to Section 22(e)(3) of
the Code to the extent required by Section 422(c)(6) of the Code. The
Committee shall determine whether a Disability for purposes of this
subsection (c) has occurred.
(d) CONTINUATION. Subject to the conditions and limitations of
the Plan and applicable law and regulation in the event that a Grantee
ceases to be an Employee, Outside Director or Consultant, as
applicable, for whatever reason, the Committee and Grantee may
mutually agree with respect to any outstanding Option or other
Incentive Award then held by the Grantee (i) for an acceleration or
other adjustment in any vesting schedule applicable to the Incentive
Award, (ii) for a continuation of the exercise period following
termination for a longer period than is otherwise provided under such
Incentive Award, or (iii) to any other change in the terms and
conditions of the Incentive Award; provided, however, in each such
event, any modification of an outstanding Incentive Award shall be
subject to applicable terms of the Plan regarding the minimum
Restriction Period of Section 3.1(a) and the minimum Performance
Period of Section 4.1(a). Moreover, any reduction in the exercise
price of a Stock Option shall be subject to Section 1.7(c). In the
event of any such change to an outstanding Incentive Award, a written
amendment to the Grantee's Incentive Agreement shall be required.
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6.7 CHANGE IN CONTROL
Notwithstanding any contrary provision in the Plan, in the event of a
Change in Control (as defined below), the following actions shall automatically
occur as of the day immediately preceding the Change in Control date unless
expressly provided otherwise in the Grantee's Incentive Agreement:
(a) all of the Stock Options and Stock Appreciation Rights then
outstanding shall become 100% vested and immediately and fully
exercisable;
(b) all of the restrictions and conditions of any Restricted
Stock and any Other Stock-Based Awards then outstanding shall be
deemed satisfied, and the Restriction Period with respect thereto
shall be deemed to have expired, and thus each such Incentive Award
shall become free of all restrictions and fully vested; and
(c) all of the Performance Shares, Performance Units and any
Other Stock-Based Awards shall become fully vested, deemed earned in
full, and promptly paid within thirty (30) days to the affected
Grantees without regard to payment schedules and notwithstanding that
the applicable performance cycle, retention cycle or other
restrictions and conditions have not been completed or satisfied.
Notwithstanding any other provision of this Plan, unless otherwise
expressly provided in the Grantee's Incentive Agreement, the provisions of this
Section 6.7 may not be terminated, amended, or modified to adversely affect any
Incentive Award theretofore granted under the Plan without the prior written
consent of the Grantee with respect to his outstanding Incentive Award.
For all purposes of this Plan, a "CHANGE IN CONTROL" of the Company
means the occurrence of any one or more of the following events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "PERSON"))
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of either (i) the then outstanding shares
of common stock of the Company (the "OUTSTANDING COMPANY STOCK") or (ii)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"OUTSTANDING COMPANY VOTING SECURITIES"); provided, however, that the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company or any Subsidiary, (ii) any
acquisition by the Company or any Subsidiary or by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Subsidiary, or (iii) any acquisition by any corporation pursuant to a
reorganization, merger, consolidation or similar business combination
involving the Company (a "MERGER"), if, following such Merger, the
conditions described in clauses (i) and (ii) Section 6.7(c) (below) are
satisfied;
(b) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "INCUMBENT BOARD") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board
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shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board;
(c) Approval by the shareholders of the Company of a Merger, unless
immediately following such Merger, (i) substantially all of the holders of
the Outstanding Company Voting Securities immediately prior to Merger
beneficially own, directly or indirectly, more than 50% of the common stock
of the corporation resulting from such Merger in substantially the same
proportions as their ownership of Outstanding Company Voting Securities
immediately prior to such Merger and (ii) at least a majority of the
members of the board of directors of the corporation resulting from such
Merger were members of the Incumbent Board at the time of the execution of
the initial agreement providing for such Merger;
(d) The sale or other disposition of all or substantially all of the
assets of the Company, unless immediately following such sale or other
disposition, (i) substantially all of the holders of the Outstanding
Company Voting Securities immediately prior to the consummation of such
sale or other disposition beneficially own, directly or indirectly, more
than 50% of the common stock of the corporation acquiring such assets in
substantially the same proportions as their ownership of Outstanding
Company Voting Securities immediately prior to the consummation of such
sale or disposition, and (ii) at least a majority of the members of the
board of directors of such corporation were members of the Incumbent Board
at the time of execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of the Company; or
(e) Any other event that a majority of the Board, in its sole
discretion, determines to constitute a Change in Control hereunder.
6.8 FINANCING
The Company may extend and maintain, or arrange for and guarantee, the
extension and maintenance of financing to any Grantee to purchase Shares
pursuant to exercise of an Incentive Award upon such terms as are approved by
the Committee in its discretion.
SECTION 7.
GENERAL
7.1 EFFECTIVE DATE AND GRANT PERIOD
This Plan is adopted by the Board effective as of February 24, 2000 (the
"EFFECTIVE DATE") subject to the approval of the stockholders of the Company
within one year from the Effective Date. Incentive Awards may be granted under
the Plan at any time prior to receipt of such stockholder approval; provided,
however, if the requisite stockholder approval is not obtained then any
Incentive Awards granted hereunder shall automatically become null and void and
of no force or effect. Unless
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sooner terminated by the Board, no Incentive Award shall be granted under the
Plan after ten (10) years from the Effective Date.
7.2 FUNDING AND LIABILITY OF COMPANY
No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made, or otherwise
to segregate any assets. In addition, the Company shall not be required to
maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for
purposes of the Plan. Although bookkeeping accounts may be established with
respect to Grantees who are entitled to cash, Common Stock or rights thereto
under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Company shall not be required to segregate any assets that may
at any time be represented by cash, Common Stock or rights thereto. The Plan
shall not be construed as providing for such segregation, nor shall the Company,
the Board or the Committee be deemed to be a trustee of any cash, Common Stock
or rights thereto. Any liability or obligation of the Company to any Grantee
with respect to an Incentive Award shall be based solely upon any contractual
obligations that may be created by this Plan and any Incentive Agreement, and no
such liability or obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither the Company,
the Board nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
7.3 WITHHOLDING TAXES
(a) TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Grantee to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable
event arising as a result of the Plan or an Incentive Award hereunder.
(b) SHARE WITHHOLDING. With respect to tax withholding required upon
the exercise of Stock Options or upon any other taxable event arising as a
result of any Incentive Award, the Grantee may elect, subject to the
approval of the Committee in its discretion, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares
having a Fair Market Value on the date the tax is to be determined equal to
the minimum statutory total tax which could be imposed on the transaction.
All such elections shall be made in writing, signed by the Grantee, and
shall be subject to any restrictions or limitations that the Committee, in
its discretion, deems appropriate. Upon the lapse of restrictions on
Restricted Stock, the Committee, in its discretion, may elect to satisfy
the tax withholding requirement, in whole or in part, by having the Company
withhold Shares having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed
on the transaction.
(c) INCENTIVE STOCK OPTIONS. With respect to Shares received by a
Grantee pursuant to the exercise of an Incentive Stock Option, if such
Grantee disposes of any such Shares within (i) two years from the date of
grant of such Option or (ii) one year after the transfer of such shares to
the Grantee, the Company shall have the right to withhold from any salary,
wages or other compensation payable by the Company to the Grantee an amount
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sufficient to satisfy federal, state and local tax withholding requirements
attributable to such disqualifying disposition.
(d) LOANS. The Committee may provide for loans, on either a short term
or demand basis, from the Company to a Grantee who is an Employee or
Consultant to permit the payment of taxes required by law.
7.4 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Company nor the Committee makes any commitment or guarantee
that any federal, state or local tax treatment will apply or be available to any
person participating or eligible to participate hereunder.
7.5 DESIGNATION OF BENEFICIARY BY PARTICIPANT
Each Grantee may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any benefit under the
Plan is to be paid in case of his death before he receives any or all of such
benefit. Each such designation shall revoke all prior designations by the same
Grantee, shall be in a form prescribed by the Committee, and will be effective
only when filed by the Grantee in writing with the Committee during the
Grantee's lifetime. In the absence of any such designation, benefits remaining
unpaid at the Grantee's death shall be paid to the Grantee's estate.
7.6 DEFERRALS
The Committee may permit a Grantee to defer such Grantee's receipt of the
payment of cash or the delivery of Shares that would, otherwise be due to such
Grantee by virtue of the lapse or waiver of restrictions with respect to
Restricted Stock, or the satisfaction of any requirements or goals with respect
to Performance Units, Performance Shares or Other Stock-Based Awards. If any
such deferral election is permitted, the Committee shall, in its discretion,
establish rules and procedures for such payment deferrals to the extent required
for tax deferral under the Code.
7.7 AMENDMENT AND TERMINATION
The Board shall have complete power and authority to terminate or amend the
Plan at any time; provided, however, the Board shall not, without the approval
of the stockholders of the Company within the time period required by applicable
law, (a) except as provided in Section 6.5, increase the maximum number of
Shares which may be issued under the Plan pursuant to Section 1.4, (b) amend the
requirements of the Plan, if any, regarding the class of Employees eligible to
purchase Common Stock under the Plan, (c) extend the term of the Plan, or, if
the Company is a Publicly Held Corporation (i) increase the maximum limits on
Incentive Awards to Covered Employees as set for compliance with the
Performance-Based Exception, or (ii) decrease the authority granted to the
Committee under the Plan in contravention of Rule 16b-3 under the Exchange Act.
No termination, amendment, or modification of the Plan shall adversely
affect in any material way any outstanding Incentive Award previously granted to
a Grantee under the Plan, without the written consent of such Grantee or other
designated holder of such Incentive Award.
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In addition, to the extent that the Committee determines that (a) the
listing for qualification requirements of any national securities exchange or
quotation system on which the Company's Common Stock is then listed or quoted,
if applicable, or (b) the Code (or regulations promulgated thereunder), require
stockholder approval in order to maintain compliance with such listing
requirements or to maintain any favorable tax advantages or qualifications, then
the Plan shall not be amended in such respect without approval of the Company's
stockholders.
7.8 REQUIREMENTS OF LAW
The granting of Incentive Awards and the issuance of Shares under the Plan
shall be subject to all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required. Certificates evidencing shares of Common Stock delivered under this
Plan (to the extent that such shares are so evidenced) may be subject to such
stop transfer orders and other restrictions as the Committee may deem advisable
under the rules and regulations of the Securities and Exchange Commission, any
securities exchange or transaction reporting system upon which the Common Stock
is then listed or to which it is admitted for quotation, and any applicable
federal or state securities law, if applicable. The Committee may cause a legend
or legends to be placed upon such certificates (if any) to make appropriate
reference to such restrictions.
7.9 RULE 16B-3 SECURITIES LAW COMPLIANCE FOR INSIDERS
With respect to Insiders to the extent applicable, transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3 under
the Exchange Act. Any ambiguities or inconsistencies in the construction of an
Incentive Award or the Plan shall be interpreted to give effect to such
intention, and to the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void to the extent
permitted by law and deemed advisable by the Committee in its discretion.
7.10 COMPLIANCE WITH CODE SECTION 162(m) FOR PUBLICLY HELD CORPORATION
While the Company is a Publicly Held Corporation, unless otherwise
determined by the Committee with respect to any particular Incentive Award, it
is intended that the Plan shall comply fully with the applicable requirements so
that any Incentive Awards subject to Section 162(m) that are granted to Covered
Employees shall qualify for the Performance-Based Exception, except for grants
of Nonstatutory Stock Options with an Option Price set at less than the Fair
Market Value of a Share on the date of grant. If any provision of the Plan or an
Incentive Agreement would disqualify the Plan or would not otherwise permit the
Plan or Incentive Award to comply with the Performance-Based Exception as so
intended, such provision shall be construed or deemed to be amended to conform
to the requirements of the Performance-Based Exception to the extent permitted
by applicable law and deemed advisable by the Committee; provided, however, no
such construction or amendment shall have an adverse effect on the prior grant
of an Incentive Award or the economic value to a Grantee of any outstanding
Incentive Award.
7.11 SUCCESSORS TO COMPANY
All obligations of the Company under the Plan with respect to Incentive
Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is
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the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of the
Company.
7.12 MISCELLANEOUS PROVISIONS
(a) No Employee, Consultant, Outside Director, or other person shall
have any claim or right to be granted an Incentive Award under the Plan.
Neither the Plan, nor any action taken hereunder, shall be construed as
giving any Employee, Consultant, or Outside Director any right to be
retained in the Employment or other service of the Company or any Parent or
Subsidiary.
(b) The expenses of the Plan shall be borne by the Company.
(c) By accepting any Incentive Award, each Grantee and each person
claiming by or through him shall be deemed to have indicated his acceptance
of the Plan.
7.13 SEVERABILITY
In the event that any provision of this Plan shall be held illegal, invalid
or unenforceable for any reason, such provision shall be fully severable, but
shall not affect the remaining provisions of the Plan, and the Plan shall be
construed and enforced as if the illegal, invalid, or unenforceable provision
was not included herein.
7.14 GENDER, TENSE AND HEADINGS
Whenever the context so requires, words of the masculine gender used herein
shall include the feminine and neuter, and words used in the singular shall
include the plural. Section headings as used herein are inserted solely for
convenience and reference and constitute no part of the interpretation or
construction of the Plan.
7.15 GOVERNING LAW
The Plan shall be interpreted, construed and constructed in accordance with
the laws of the State of Texas without regard to its conflicts of law
provisions, except as may be superseded by applicable laws of the United States.
IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed in
its name and on its behalf by its duly authorized officer.
MARINE DRILLING COMPANIES, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
MARINE DRILLING COMPANIES, INC.
MAY 11, 2000
- Please Detach and Mail in the Envelope Provided -
- --------------------------------------------------------------------------------
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
1. Election of Directors NOMINEES: Robert L. Barbanell
David A. B. Brown
WITHHOLD Howard I. Bull
FOR all AUTHORITY J. C. Burton
nominees to vote for all Jan Rask
listed nominees listed David B. Robson
[ ] [ ] Robert C. Thomas
[ ] For all nominees listed except vote withheld for the following
nominee(s):
____________________________________________________________________________
____________________________________________________________________________
2. Approval of the Company's 2000 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. 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 AND APPROVAL OF THE
COMPANY'S 2000 STOCK INCENTIVE PLAN.
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 attorney, executor, administrator, trustee or
guardian please give full title as such.
<PAGE> 55
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 Westchase Hilton Hotel located at 9999 Westheimer in Houston, Texas on
Thursday, May 11, 2000 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)
