<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
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
DIAMOND OFFSHORE DRILLING, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[DIAMOND OFFSHORE DRILLING, INC. LOGO]
DIAMOND OFFSHORE DRILLING, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1997
To the Stockholders of
Diamond Offshore Drilling, Inc.:
NOTICE IS HEREBY GIVEN THAT the 1997 Annual Meeting of Stockholders of
Diamond Offshore Drilling, Inc., a Delaware corporation (the "Company"), will be
held at The Ritz Carlton Hotel, 1919 Briar Oaks Lane, Houston, Texas 77027 on
May 5, 1997, at 2:00 p.m., local time (the "Annual Meeting"), for the following
purposes: (1) to elect five directors, each to serve until the next annual
meeting of stockholders and until their respective successors are elected and
qualified or until their earlier resignation or removal; (2) to ratify the
appointment of independent certified public accountants for the Company and its
subsidiaries; and (3) to transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The Company has fixed the close of business on March 31, 1997 as the record
date for determining stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournments thereof. Stockholders who execute proxies
solicited by the Board of Directors of the Company retain the right to revoke
them at any time; unless so revoked, the shares of common stock, par value $.01
per share, of the Company represented by such proxies will be voted at the
Annual Meeting in accordance with the directions given therein. If a stockholder
does not specify a choice on such stockholders's proxy, the proxy will be voted
FOR the nominees for director named in the attached Proxy Statement and FOR the
ratification of appointment of the independent certified public accountants for
the Company and its subsidiaries named in such Proxy Statement. The list of
stockholders of the Company may be examined at the offices of the Company at
15415 Katy Freeway, Suite 100, Houston, Texas 77094.
Further information regarding the Annual Meeting is set forth in the
attached Proxy Statement.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN
AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED POSTPAID ENVELOPE. THE
PROXY IS REVOCABLE AND WILL NOT BE USED IF YOU ARE PRESENT AND PREFER TO VOTE IN
PERSON.
By Order of the Board of Directors
Sincerely,
/s/ RICHARD L. LIONBERGER
-----------------------------------
Richard L. Lionberger
Vice President, General Counsel
and Secretary
April 1, 1997
15415 Katy Freeway
Houston, Texas 77094
<PAGE> 3
[DIAMOND OFFSHORE DRILLING, INC. LOGO]
PROXY STATEMENT
DIAMOND OFFSHORE DRILLING, INC.
FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1997
This Proxy Statement is being furnished to stockholders of Diamond Offshore
Drilling, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company from such
stockholders for the 1997 Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held on May 5, 1997 and any adjournments and
postponements thereof. Shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), represented by a properly executed proxy in the
accompanying form will be voted at the meeting. The proxy may be revoked at any
time before its exercise by sending written notice of revocation to Richard L.
Lionberger, Corporate Secretary, Diamond Offshore Drilling, Inc., 15415 Katy
Freeway, Houston, Texas 77094, or by signing and delivering a proxy which is
dated later, or, if the stockholder attends the Annual Meeting in person, by
giving notice of revocation to the Inspector(s) of Election (as hereinafter
defined) at the Annual Meeting.
The Company has fixed the close of business on March 31, 1997 as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. On that date there were
outstanding and entitled to vote 68,395,368 shares of Common Stock, which is the
Company's only class of voting securities. The presence at the Annual Meeting in
person or by proxy of the holders of a majority of the outstanding shares of
Common Stock entitled to vote thereat is required to constitute a quorum for the
transaction of business. Abstentions and broker non-votes will be counted in
determining whether a quorum is present. Each stockholder is entitled to one
vote for each share of Common Stock held of record. A plurality of the shares of
Common Stock present in person or represented by proxy and entitled to vote at
the Annual Meeting is required for the election of directors. Accordingly, the
five nominees for election as directors at the Annual Meeting who receive the
greatest number of votes cast for election by the holders of Common Stock of
record on the Record Date shall be the duly elected directors upon completion of
the vote tabulation at the Annual Meeting. The affirmative vote of the holders
of a majority of the shares of Common Stock present in person or represented by
proxy and entitled to vote at the Annual Meeting is required for approval of all
other items being submitted to the stockholders for their consideration.
Abstentions will be considered present for purposes of calculating the vote, but
will not be considered to have been voted in favor of the matter voted upon, and
broker non-votes will not be considered present for purposes of calculating the
vote.
Votes will be tabulated by ChaseMellon Shareholder Services, L.L.C., the
transfer agent and registrar for the Common Stock, and the results will be
certified by one or more inspectors of election who are required to resolve
impartially any interpretive questions as to the conduct of the vote (the
"Inspector(s) of Election"). In tabulating votes, a record will be made of the
number of shares voted for each nominee or other matter voted upon, the number
of shares with respect to which authority to vote for that nominee or such other
matter has been withheld, and the number of shares held of record by
broker-dealers and present at the Annual Meeting but not voting.
This Proxy Statement is expected to be first mailed or delivered to
stockholders of the Company entitled to notice of the Annual Meeting on or about
April 4, 1997.
The date of this Proxy Statement is April 1, 1997.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth certain information with respect to each person
or entity known by the Company to be the beneficial owner of more than 5% of the
Common Stock as of December 31, 1996 (based upon Schedule 13D and Schedule 13G
filings by such persons with the Securities and Exchange Commission (the
"Commission") for beneficial ownership at such date).
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- ------------------------------------ -------------------- ----------------
<S> <C> <C> <C>
Common Stock................ Loews Corporation 35,050,000(1) 51.3%
667 Madison Avenue
New York, N.Y. 10021-8087
Common Stock................ FMR Corp. 4,373,960(2) 6.4%
82 Devonshire Street
Boston, Mass. 02109
</TABLE>
- ---------------
(1) Loews Corporation, a Delaware corporation ("Loews"), has sole investment
power and sole voting power over 35,050,000 shares.
(2) FMR Corp. has sole voting power with respect to 634,736 shares and sole
dispositive power with respect to 4,373,960 shares in its capacity as
investment advisor and manager.
Because Loews holds more than a majority of the outstanding Common Stock of
the Company, Loews has the power to approve matters submitted for consideration
at the Annual Meeting without regard to the votes of the other stockholders. The
Company understands that Loews intends to vote FOR the election of management's
nominees for the Board of Directors and FOR the ratification of the appointment
of Deloitte & Touche LLP as the Company's independent auditors. There are no
agreements between the Company and Loews with respect to the election of
directors or officers of the Company or with respect to the other matters which
may come before the Annual Meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table shows the amount and nature of beneficial ownership of
the Common Stock and of Loews common stock beneficially owned by each director
of the Company, each executive officer of the Company and all directors and
executive officers of the Company as a group, as of January 28, 1997. Directors
and executive officers of the Company individually and as a group own less than
1% of equity securities of the Company. Except as otherwise noted, the named
beneficial owner has sole voting power and sole investment power with respect to
the number(s) of shares shown below.
<TABLE>
<CAPTION>
COMPANY LOEWS
NAME OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
------------------------ ---------------- ------------
<S> <C> <C>
James S. Tisch........................................ 0 138,000(1)
Herbert C. Hofmann.................................... 1,300(2) 750(2)
Raymond S. Troubh..................................... 2,500 5,000
Arthur L. Rebell...................................... 0 0
Robert E. Rose........................................ 2,100(3) 0
Lawrence R. Dickerson................................. 500(3) 0
David W. Williams..................................... 100 0
Richard L. Lionberger................................. 0 0
Gary T. Krenek........................................ 100(3)(4) 0
All Directors and Executive Officers as a Group....... 6,600 143,750
</TABLE>
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(1) The number of shares includes 58,000 shares owned by the James and Merryl
Tisch Foundation, as to which Mr. Tisch has shared voting power and
investment power.
(2) The number of shares includes 300 shares of the Common Stock and 350 shares
of Loews common stock owned by his son, of which shares Mr. Hofmann
disclaims any beneficial ownership.
(3) Voting power and investment power with respect to shares listed for Mr.
Rose, Mr. Dickerson and Mr. Krenek are shared with the respective
individual's spouse.
(4) Mr. Krenek sold all 100 shares of Common Stock subsequent to January 28,
1997.
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<PAGE> 5
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Thomas P. Richards, a former executive officer of the Company, failed to
make a timely filing of a Form 4 concerning the sale of 6,000 shares of Common
Stock in September 1996 and, in accordance with the rules promulgated under the
Securities Exchange Act of 1934, as amended, the transaction was reported as a
late transaction by Mr. Richards on Form 5.
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of five directors.
Following the Company's 1996 Annual Meeting of Stockholders, Arthur L. Rebell
was elected by the remaining directors to fill a vacancy on the Company's Board
of Directors created by the death of David M. Ifshin. Mr. Rebell is not a
director, officer or employee of Loews or an officer or employee of the Company.
All directors are elected annually to serve until the next annual meeting of
stockholders and until their respective successors are duly elected and
qualified or until their earlier resignation or removal. The executive officers
of the Company are elected annually by the Board of Directors to serve until the
next annual meeting of the Board of Directors and until their successors are
duly elected and qualified, or until their earlier death, resignation,
disqualification or removal from office. Information with respect to the current
directors and executive officers of the Company is set forth below.
The nominees for director are James S. Tisch, Herbert C. Hofmann, Arthur L.
Rebell, Robert E. Rose and Raymond S. Troubh. Each of the five directors to be
elected at the Annual Meeting will serve a term of one year to expire at the
Company's 1998 Annual Meeting of Stockholders or until his successor is elected
and qualified or until his earlier death, resignation, disqualification or
removal from office.
It is intended that the proxies received from holders of Common Stock, in
the absence of contrary instructions, will be voted at the Annual Meeting for
the election of Messrs. Tisch, Hofmann, Rebell, Rose and Troubh. Although the
Company does not contemplate that any of the nominees will be unable to serve,
decline to serve, or otherwise be unavailable as a nominee at the time of the
Annual Meeting, in such event the proxies will be voted in accordance with the
authority granted in the proxies for such other candidate or candidates as may
be nominated by the Board of Directors.
Further information concerning the nominees for election as directors at
the Annual Meeting, including their business experience during the past five
years, appears below.
<TABLE>
<CAPTION>
AGE AS OF
JANUARY 31,
NAME POSITION 1997 DIRECTOR SINCE
---- -------- ----------- --------------
<S> <C> <C> <C>
James S. Tisch(1)...................... Chairman of the Board 44 1989
Herbert C. Hofmann(1).................. Director 54 1992
Arthur L. Rebell(2).................... Director 55 1996
Robert E. Rose(1)...................... Director, President and
Chief Executive Officer 58 1989
Raymond S. Troubh(2)................... Director 70 1995
</TABLE>
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(1) Member, Executive Committee of the Board of Directors
(2) Member, Audit Committee of the Board of Directors
James S. Tisch has served as Chairman of the Board since 1995 and as a
director of the Company since June 1989. Mr. Tisch has served as President and
Chief Operating Officer of Loews, a diversified holding company, since 1994 and
prior thereto served as Executive Vice President of Loews for more than five
years. Mr. Tisch, a director of Loews since 1986, also serves as a director of
CNA Financial Corporation, an 84% owned subsidiary of Loews, and serves as a
director of Vail Resorts, Inc.
3
<PAGE> 6
Herbert C. Hofmann has served as a director of the Company since January
1992. Mr. Hofmann has served as Senior Vice President of Loews since January
1992. He has served as President and Chief Executive Officer of Bulova
Corporation, a 97% owned subsidiary of Loews, since 1989. Bulova Corporation
distributes and sells watches and clocks.
Arthur L. Rebell has served as a director of the Company since July 1996.
Mr. Rebell has been a Professor of Mergers & Acquisitions at New York
University's Stern Graduate School of Business since 1996 and has served as a
Managing Director of Highview Capital since February 1997. Prior thereto, he
served as a Managing Director of Schroder Wertheim & Co. Inc. for more than five
years.
Robert E. Rose has served as a director and President and Chief Executive
Officer of the Company since June 1989.
Raymond S. Troubh has served as a director of the Company since November
1995. Mr. Troubh is a financial consultant, a former Governor of the American
Stock Exchange and a former general partner of Lazard Freres & Co., an
investment banking firm. Mr. Troubh also serves as a director of ADT Limited,
America West Airlines, Inc., ARIAD Pharmaceuticals, Inc., Becton, Dickinson and
Company, Foundation Health Corporation, General American Investors Company, The
MicroCap Fund, Inc., Olsten Corporation, Petrie Stores Corporation, Time Warner
Inc., Triarc Companies, Inc., and WHX Corporation.
DIRECTOR COMPENSATION
Directors who are employees of the Company are not paid any fees or
additional compensation for service as members of the Board of Directors or any
committee thereof. The annual retainer payable to directors of the Company who
are not employees of the Company or any of its subsidiaries or of Loews or any
other affiliated companies, for services as directors, is $20,000 per annum,
payable quarterly. Each member of the Audit Committee of the Board of Directors
of the Company receives a retainer of $2,500 per annum, payable quarterly, and
each director of the Company who is not an employee of the Company or any of its
subsidiaries or of Loews or any other affiliated companies is paid a fee of
$1,000 for attendance at each meeting of the Board of Directors and of the Audit
Committee thereof in addition to the reasonable costs and expenses incurred by
such directors in relation to their services as such.
BOARD OF DIRECTORS AND COMMITTEES
BOARD OF DIRECTORS
The Company's Board of Directors has five members and two standing
committees. During 1996, the Board of Directors held six meetings and took
action by unanimous written consent on one occasion. Further information
concerning the Board's standing committees appears below.
EXECUTIVE COMMITTEE
The Executive Committee of the Board of Directors consists of three
members, Mr. Tisch, Mr. Hofmann and Mr. Rose. The Executive Committee has all
the powers and exercises all the duties of the Board of Directors in the
management of the business of the Company that may lawfully be delegated to it
by the Board of Directors. These powers and duties include, among other things,
declaring a dividend, authorizing the issuance of stock, recommending to
stockholders mergers or a sale of substantially all of the assets of the
Company, providing advice and counsel to management of the Company, reviewing
management's recommendations for significant changes to the organizational
structure of the Company and recommending changes to the Board of Directors.
During 1996, the Executive Committee held one meeting and took action by
unanimous written consent on ten occasions.
4
<PAGE> 7
AUDIT COMMITTEE
The Audit Committee of the Board of Directors consists of two members, Mr.
Rebell and Mr. Troubh. The Audit Committee reviews and reports to the Board of
Directors on the scope and results of audits by the Company's independent
auditors. It recommends a firm of certified public accountants to serve as
auditors for the Company, authorizes all audit and other professional services
rendered by the auditors and periodically reviews the independence of the
auditors and the Company's internal accounting controls and internal audit
procedures. Membership on the Audit Committee is restricted to directors
independent of management and free from any relationship that, in the opinion of
the Board of Directors, would interfere with the exercise of independent
judgment as a committee member. Directors who are affiliates of the Company or
officers or employees of the Company or its subsidiaries or of Loews or any
other affiliated companies are not qualified for Audit Committee membership.
During 1996, the Audit Committee met two times.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Company's fiscal year ended December 31, 1996, the Company had
no compensation committee or other committee of the Board of Directors
performing similar functions. Decisions concerning compensation of executive
officers were made during such fiscal year by persons who were members of the
Company's Board of Directors, including Robert E. Rose, an executive officer of
the Company.
NOMINATING COMMITTEE
During the Company's fiscal year ended December 31, 1996, the Company had
no nominating committee or other committee of the Board of Directors performing
similar functions.
EXECUTIVE OFFICERS
The executive officers of the Company are elected annually by the Board of
Directors to serve until the next annual meeting of the Board of Directors, or
until their successors are duly elected and qualified, or until their earlier
death, resignation, disqualification or removal from office. Information with
respect to the current executive officers of the Company is set forth below:
<TABLE>
<CAPTION>
AGE AS OF
JANUARY 31,
NAME 1997 POSITION
---- ----------- --------
<S> <C> <C>
Robert E. Rose....................... 58 President, Chief Executive Officer and Director
Lawrence R. Dickerson................ 44 Senior Vice President and Chief Financial Officer
David W. Williams.................... 39 Senior Vice President -- Contracts and Marketing
Richard L. Lionberger................ 46 Vice President, General Counsel and Secretary
Gary T. Krenek....................... 38 Controller
</TABLE>
Robert E. Rose has served as President and Chief Executive Officer of the
Company and as a director since June 1989.
Lawrence R. Dickerson has served as Senior Vice President of the Company
since April 1993 and prior thereto served as a Vice President and the Chief
Financial Officer since June 1989.
David W. Williams has served as Senior Vice President of the Company since
December 1994 and was a Marketing Vice President of the Company between February
1992 and May 1994. Mr. Williams was employed by Noble Drilling Corporation, a
contract drilling company, from May 1994 through December 1994 as Vice President
of Marketing.
Richard L. Lionberger has served as Vice President, General Counsel and
Secretary of the Company since February 1992.
Gary T. Krenek has served as Controller of the Company since February 1992.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table shows for the years ended December 31, 1996, 1995 and
1994 the cash compensation paid by the Company, and a summary of certain other
compensation paid or accrued for such year, to its Chief Executive Officer and
each of the Company's four other most highly compensated executive officers as
of December 31, 1996 as well as one individual, Mr. Richards, for whom
information would have been provided as one of such four other most highly
compensated executive officers but for the fact that Mr. Richards was not
serving as an executive officer of the Company on December 31, 1996
(collectively, the "Named Executive Officers") for service in all capacities
with the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)(2)
-------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(3)
--------------------------- ---- -------- ------- ---------------
<S> <C> <C> <C> <C>
Robert E. Rose 1996 $500,000 297,578 19,258
President and Chief Executive Officer 1995 390,000 230,000 6,075
1994 363,315 -- 6,075
Lawrence R. Dickerson 1996 225,000 110,175 8,570
Senior Vice President and Chief Financial 1995 190,000 107,000 5,727
Officer 1994 168,000 -- 5,727
David W. Williams 1996 200,000 96,938 7,594
Senior Vice President -- Contracts and 1995 175,000 102,500 5,691
Marketing
Richard L. Lionberger 1996 154,517 47,500 6,136
Vice President, General Counsel and Secretary 1995 140,137 35,000 5,360
1994 134,842 -- 5,159
Gary T. Krenek 1996 101,228 44,000 3,890
Controller 1995 96,122 26,500 3,670
Thomas P. Richards (4) 1996 166,537 -- 26,477
Senior Vice President -- Worldwide Operations 1995 210,128 60,000 5,913
1994 199,615 -- 5,913
</TABLE>
- ---------------
(1) Amounts exclude perquisites and other personal benefits because such
compensation did not exceed the lesser of $50,000 or 10% of the total annual
salary reported for each Named Executive Officer.
(2) Amounts include salary and bonus earned, as well as all deferred portions of
bonuses based on service during the respective year indicated by the Named
Executive Officers. See "Board of Directors Report on Executive
Compensation -- Annual Cash Bonus Incentives."
(3) The amounts shown for 1996 include (i) the Company's contributions under the
Retirement Plan referred to below in the following amounts on behalf of the
following Named Executive Officers: Mr. Rose, $5,625; Mr. Dickerson, $5,625;
Mr. Williams, $5,625; Mr. Lionberger, $5,625; Mr. Krenek, $3,796; and Mr.
Richards, $5,625, (ii) the term portion of the life insurance premiums paid
by the Company in the following amounts on behalf of the following Named
Executive Officers: Mr. Rose, $508; Mr. Dickerson, $132; Mr. Williams, $94;
Mr. Lionberger, $223; Mr. Krenek, $94; and Mr. Richards, $204, (iii) the
Company's contributions under the Deferred Compensation and Supplemental
Executive Retirement Plan referred to below, adopted in 1996, in the
following amounts on behalf of the following Named Executive Officers: Mr.
Rose, $13,125; Mr. Dickerson, $2,813; Mr. Williams, $1,875; and Mr.
Lionberger, $288, and (iv) the amount paid for accumulated vacation in
connection with the resignation of Mr. Richards, $20,648.
(4) Mr. Richards ceased to be an executive officer of the Company in September
1996.
The Company maintains a defined contribution plan (the "Retirement Plan")
designed to qualify under Section 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), pursuant to which the
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<PAGE> 9
Company contributes 3.75 percent of the participant's base and overtime salary
subject to limitations on eligible salary. Employees are vested in all
contributions as made. Effective January 1, 1997, the Company modified the
Retirement Plan to provide that, in addition to the 3.75 percent contribution,
the Company will match 25 percent of the first 6 percent of each employee's
compensation contributed, subject to a vesting schedule that entitles the
employee to a percentage of the matching contributions based upon years of
service.
In addition, effective December 17, 1996, the Company adopted the Deferred
Compensation and Supplemental Executive Retirement Plan. The Company contributes
any portion of the 3.75 percent of the base salary contribution to the
Retirement Plan that cannot be contributed because of the limitations of
Sections 401(a)(17) and 415 of the Code, retroactively to January 1, 1996.
Additionally, the plan provides that participants may defer up to 10 percent of
base compensation and/or up to 100 percent of any performance bonus.
Participants in this plan are highly compensated employees of the Company and
are fully vested in all amounts paid into the plan.
EMPLOYMENT AGREEMENT
The Company and Robert E. Rose entered into and subsequently extended an
agreement dated November 1, 1992 (the "Employment Agreement"), providing for,
among other things, the employment of Mr. Rose as the President and Chief
Executive Officer of the Company until December 31, 1998. Mr. Rose currently
receives a salary at an annual rate of $535,000, subject to such increases as
the Board of Directors of the Company may from time to time determine. The
Employment Agreement provides that during the term of Mr. Rose's employment
thereunder and for a period of one year immediately following termination of
such employment by the Company for cause, Mr. Rose will not engage in any other
business which is in competition with the Company without written consent from
the Company. The Employment Agreement provides that, for a 120-day period after
consummation of a Change of Control (as defined in the Employment Agreement),
Mr. Rose has the right to terminate his employment and the Company would be
obligated to continue to compensate him for a three-year period at the annual
rate of salary then in effect.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The following report concerning the specific factors, criteria and goals
underlying decisions on payments and awards of compensation to each of the
executive officers of the Company for the fiscal year ended December 31, 1996 is
provided by the Company's Board of Directors.
GENERAL
Recommendations regarding compensation of the Company's executive officers
are prepared by the Chief Executive Officer and submitted to the Executive
Committee of the Board of Directors for approval, except that the Chief
Executive Officer does not participate in the preparation of recommendations, or
the review, modification or approval thereof, with respect to his compensation.
The Company's compensation program is designed to enable the Company to
attract, motivate and retain high-quality senior management by providing a
competitive total compensation opportunity based on performance. Toward this
end, the Company provides for competitive base salaries and annual variable
performance incentives payable in cash for the achievement of financial
performance goals.
SALARIES
Every salaried employee of the Company is assigned a salary grade at the
commencement of employment pursuant to a system that considers objective
criteria, such as the employee's level of financial responsibility and
supervisory duties, and the education and skills required to perform the
employee's functions; however, the assignment of an employee to a particular
salary grade necessarily involves subjective judgments. Within each grade,
salaries are determined within a range based solely on subjective factors such
as the employee's contribution to the Company and individual performance. No
fixed, relative weights are assigned to these subjective factors. On occasion,
an officer's compensation will be fixed at a level above the maximum level for
7
<PAGE> 10
his or her salary grade in response to a subjective determination that the
officer's compensation, if set at the maximum level for his or her grade, would
be below the level merited by his or her contributions to the Company.
ANNUAL CASH BONUS INCENTIVES
Bonuses were awarded under the Diamond Offshore Management Bonus Program,
which is intended to provide a means whereby certain selected officers and key
employees of the Company may develop a sense of proprietorship and personal
involvement in the development and financial success of the Company, and
encourage the participants to remain with and devote their best efforts to the
business of the Company, thereby advancing the interests of the Company and its
stockholders. At the beginning of each year, the Executive Committee of the
Company's Board of Directors establishes a bonus pool (the "Annual Bonus Pool")
equal to (i) a percentage (the "Applicable Percentage") ranging from 10% to 40%
of the total salaries of all participants for the prior year (the "Performance
Year"), divided by (ii) the arithmetical average of (x) the Company's cash flow
plus capital expenses for the year prior to the Performance Year and (y) cash
flow plus capital expenses as budgeted for the Performance Year, multiplied by
(iii) actual cash flow plus capital expenses for such Performance Year. The
Executive Committee determines the Applicable Percentage based on such
committee's evaluation of the Company during the Performance Year relative to
peer companies and the performance of the Company's share price and
extraordinary events during the Performance Year. The Executive Committee
establishes the bonus payout from the Annual Bonus Pool to each participant (not
to exceed 50% of such participant's eligible salary, or 60% of eligible salary
in the case of the President and Chief Executive Officer and 30% of eligible
salary in the case of participants of salary grade 11 or below) based upon
corporate, group or individual performance, or a combination thereof, or such
other subjective criteria as the Executive Committee may determine to be
appropriate. The bonuses are payable in annual installments (25%, 15%, 15%, 15%,
15% and 15%) over the six calendar year period following the Performance Year
and, with certain exceptions, are forfeited if not paid prior to termination of
employment.
The foregoing Diamond Offshore Management Bonus Program is effective for
the 1996 Performance Year and subsequent Performance Years. Amounts paid as
bonuses with respect to the 1995 Performance Year were paid under the Diamond
Offshore Management Bonus Program in effect for the 1995 Performance Year (the
"1995 Plan"). Certain significant differences between the 1995 Plan and the
Diamond Offshore Management Bonus Program in effect for the 1996 Performance
Year include: an Applicable Percentage ranging from 10% to 35% under the 1995
Plan; bonus payouts under the 1995 Plan from the Annual Bonus Pool not exceeding
30% of the participant's eligible salary; and bonuses under the 1995 Plan
payable in annual installments (50%, 25% and 25%) over the three calendar year
period following the Performance Year.
The Competitor Group Index used in the total stockholder return comparison
(see "Common Stock Performance Graph" below) is not used to determine any cash
bonus incentives for executives of the Company, and the peer companies
considered for purposes of the Diamond Offshore Management Bonus Program do not
necessarily correspond with the companies considered for purposes of the
Competitor Group Index. Although the two groups of companies include several of
the same companies (based on their similarity to the Company), the composition
of the two groups does not exactly correspond, and there are no specific bases
upon which certain companies included for purposes of the Competitor Group Index
are not included in the peer group for purposes of the Diamond Offshore
Management Bonus Program.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Decisions regarding compensation (salary and bonus) of the Company's Chief
Executive Officer are made by the Executive Committee of the Board of Directors,
except that the Chief Executive Officer does not participate in the preparation
of recommendations, or the review, modification or approval thereof, with
respect to his compensation. Such decision for 1996 was determined subjectively,
and not necessarily tied to corporate performance, with consideration given to
the Chief Executive Officer's level of responsibility and importance to the
Company relative to other Company executives, his time with the Company,
individual
8
<PAGE> 11
performance and contributions to the successful implementation of significant
initiatives that are expected to benefit the Company in future years, including
the Company's capital upgrade program, on-going rationalization of its rig fleet
(purchases and sales) and quality and safety improvements. No fixed, relative
weights were assigned to these subjective factors.
THE BOARD OF DIRECTORS
James S. Tisch, Chairman
Herbert C. Hofmann
Arthur L. Rebell
Robert E. Rose
Raymond S. Troubh
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the initial public offering of the Common Stock in October 1995
(the "Initial Public Offering"), the Company was a wholly owned subsidiary of
Loews, and in connection with the Initial Public Offering, the Company and Loews
entered into agreements pursuant to which certain management, administrative and
other services are provided by Loews to the Company and certain other
obligations were assumed by the parties. These agreements were not the result of
arm's length negotiations between the parties.
SERVICES AGREEMENT. The Company and Loews entered into a services agreement
effective upon consummation of the Initial Public Offering (the "Services
Agreement") pursuant to which Loews agreed to continue to perform certain
administrative and technical services on behalf of the Company. Such services
include personnel, telecommunications, purchasing, internal auditing,
accounting, data processing and cash management services, in addition to advice
and assistance with respect to preparation of tax returns and obtaining
insurance. Under the Services Agreement, the Company is to reimburse Loews for
(i) allocated personnel costs (such as salaries, employee benefits and payroll
taxes) of the Loews personnel actually providing such services and (ii) all
out-of-pocket expenses related to the provision of such services. The Services
Agreement may be terminated at the Company's option upon 30 days' notice to
Loews and at the option of Loews upon six months' notice to the Company. In
addition, the Company has agreed to indemnify and hold harmless Loews for all
claims and damages arising from the provision of services by Loews under the
Services Agreement, unless due to the gross negligence or willful misconduct of
Loews. Under the Services Agreement, the Company paid Loews $184,837 for
services performed by Loews in 1996.
REGISTRATION RIGHTS AGREEMENT. Under a Registration Rights Agreement (the
"Registration Rights Agreement") between the Company and Loews, the Company,
subject to certain limitations, will file, upon the request of Loews, one or
more registration statements under the Securities Act of 1933, as amended,
subject to a maximum of three such requests, in order to permit Loews to offer
and sell any Common Stock that Loews may hold. Loews will bear the costs of any
such registered offering, including any underwriting commissions relating to
shares it sells in any such offering, any related transfer taxes and the costs
of complying with non-U.S. securities laws, and any fees and expenses of
separate counsel and accountants retained by Loews. The Company has the right to
require Loews to delay any exercise by Loews of its rights to require
registration and other actions for a period of up to 90 days if, in the judgment
of the Company, any offering by the Company then being conducted or about to be
conducted would be adversely affected. Subject to certain conditions, the
Company has also granted Loews the right to include its Common Stock in any
registration statements covering offerings of Common Stock by the Company, and
the Company will pay all costs of such offerings other than underwriting
commissions and transfer taxes attributable to the shares sold on behalf of
Loews. The Company will indemnify Loews, and Loews will indemnify the Company,
against certain liabilities in respect of any registration statement or offering
covered by the Registration Rights Agreement.
9
<PAGE> 12
COMMON STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total stockholder return for
the Common Stock, the Standard & Poor's 500 Index and a Competitor Group Index
over the period during which the Common Stock has been publicly traded.
CUMULATIVE TOTAL STOCKHOLDER RETURN(1)
INDEXED TOTAL STOCKHOLDER RETURN
OCTOBER 11, 1995-DECEMBER 31, 1996
<TABLE>
<CAPTION>
MEASUREMENT PERIOD COMPETITOR
(FISCAL YEAR COVERED) THE COMPANY S&P 500 GROUP(2)
<S> <C> <C> <C>
OCTOBER 11, 1995 100 100 100
DECEMBER 29, 1995 141 107 115
DECEMBER 31, 1996 229 131 132
</TABLE>
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(1) Total return assuming reinvestment of dividends. There were no dividends for
the period reported other than the $2.1 million special dividend paid to
Loews in connection with the Initial Public Offering (which special dividend
was not used in calculating total return). Assumes $100 invested on October
11, 1995, in Common Stock, the S&P 500 Index and a Company-constructed
competitor group index.
(2) The Company-constructed competitor group consists of the following
companies: Baker Hughes Incorporated, Dresser Industries, Inc., Energy
Service Company, Global Marine Inc., Halliburton Company, Noble Drilling
Corporation, Reading & Bates Corporation, Schlumberger Ltd., Tidewater
Marine Inc., Transocean Offshore, Inc. and Western Atlas Inc. Total return
calculations were weighted according to the respective company's market
capitalization.
10
<PAGE> 13
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee of the Board of Directors,
none of whose members is an officer of the Company, the Board of Directors has
appointed Deloitte & Touche LLP, independent certified public accountants, as
the principal independent auditors of the Company and its subsidiaries for
fiscal year 1997. It is intended that such appointment be submitted to the
stockholders for ratification at the Annual Meeting. Deloitte & Touche LLP has
served as the Company's auditors since 1989 and has no investment in the Company
or its subsidiaries. If the appointment of Deloitte & Touche LLP is not approved
or if that firm shall decline to act or their employment is otherwise
discontinued, the Board of Directors will appoint other independent auditors.
It is expected that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting with an opportunity to make a statement should
they desire to do so and to respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1998 Annual
Meeting of Stockholders must be addressed to: Corporate Secretary, Diamond
Offshore Drilling, Inc., 15415 Katy Freeway, Houston, Texas 77094, and must be
received no later than December 5, 1997.
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.
By Order of the Board of Directors
RICHARD L. LIONBERGER
Vice President, General Counsel and
Secretary
11
<PAGE> 14
DIAMOND OFFSHORE DRILLING, INC.
COMMON
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
1997 ANNUAL MEETING OF STOCKHOLDERS ON MAY 5, 1997
The undersigned hereby appoints Robert E. Rose, Lawrence R. Dickerson and
Richard L. Lionberger, and any one of them, and any substitute or substitutes,
to be the attorneys and proxies of the undersigned at the 1997 Annual Meeting of
Stockholders of Diamond Offshore Drilling, Inc. (the "Company") to be held at
The Ritz Carlton Hotel, 1919 Briar Oaks Lane, Houston, Texas 77027 at 2:00 p.m.
local time, and at any adjournments or postponements of said meeting, and to
vote at such meeting the shares of stock the undersigned held of record on the
books of the Company on the record date for the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES AS DIRECTORS, FOR THE PROPOSAL TO RATIFY THE APPOINTMENT
OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR
FISCAL YEAR 1997 AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSONS
DESIGNATED ABOVE WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 15
Please mark
your votes as [ X ]
indicated in
this example.
Item 1. Election of Directors
FOR all nominees listed WITHHOLD AUTHORITY
to the right (except as to vote for all nominees
marked to the contrary) listed to the right
[ ] [ ]
NOMINEES: James S. Tisch, Herbert C. Hofmann, Arthur L. Rebell, Robert E.
Rose and Raymond S. Troubh
INSTRUCTION: To withhold authority to vote for individual nominees, write their
name(s) below.
- -------------------------------------------------------------------------------
Item 2. Proposal to ratify the appointment of Deloitte & Touche LLP as the
Independent Public Accountants of the Company for fiscal year 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 3. In their discretion, upon such other matters that may properly come
before the meeting and any adjournments or postponements thereof.
____ Please sign exactly as your name
| appears on this Proxy Card. When
| signing as attorney, executor,
administrator, trustee, guardian
or corporate or partnership
official, please give full title
as such and the full name of the
entity on behalf of whom you are
signing. If a partnership,
please sign in partnership name
by authorized person.
DATED:____________________, 1997
________________________________
Signature of Stockholder
________________________________
Signature if held jointly
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
