<PAGE> 1
SCHEDULE 14A INFORMATION
(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.____)
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
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[ ] 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 13, 1998
To the Stockholders of
Diamond Offshore Drilling, Inc.:
NOTICE IS HEREBY GIVEN THAT the 1998 Annual Meeting of Stockholders of
Diamond Offshore Drilling, Inc., a Delaware corporation (the "Company"), will be
held at The Regency Hotel, 540 Park Avenue, New York, New York 10021 on
Wednesday, May 13, 1998 at 11:30 a.m., local time (the "Annual Meeting") for the
following purposes:
(1) To elect six 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;
(3) To consider and vote upon the approval and adoption of an
amendment to the Restated Certificate of Incorporation of the Company that
would increase the number of authorized shares of common stock, par value
$.01 per share, of the Company ("Common Stock") from 200 million to 500
million (the "Amendment"); and
(4) 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 17, 1998 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 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
stockholder's proxy, the proxy will be voted FOR the nominees for director named
in the attached Proxy Statement, FOR the ratification of the appointment of the
independent certified public accountants for the Company and its subsidiaries
named in such Proxy Statement and FOR the Amendment. The list of stockholders of
the Company may be examined at the offices of Loews Corporation at 667 Madison
Avenue, New York, New York 10021.
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 AT THE ANNUAL MEETING
AND PREFER TO VOTE YOUR SHARES 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, 1998
15415 Katy Freeway
Houston, Texas 77094
<PAGE> 3
[DIAMOND OFFSHORE DRILLING, INC. LOGO]
PROXY STATEMENT
DIAMOND OFFSHORE DRILLING, INC.
FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1998
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 1998 Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held on May 13, 1998 and any adjournments and
postponements thereof. Shares of the Company's common stock, par value $.01 per
share ("Common Stock"), represented by a properly executed proxy in the
accompanying form will be voted at the Annual 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 17, 1998 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 139,328,160 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 six nominees for election as directors at the Annual Meeting
who receive the greatest number of votes cast for election by the holders of
record of Common Stock 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 entitled to vote
at the Annual Meeting is required for the approval and adoption of an amendment
to the Restated Certificate of Incorporation of the Company that would increase
the number of authorized shares of Common Stock from 200 million to 500 million
(the "Amendment"). 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. Broker
non-votes will have the effect of a vote against the Amendment, but otherwise
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 8, 1998.
The date of this Proxy Statement is April 1, 1998.
<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, 1997 (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>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- ----------------------- -------------------- --------
<S> <C> <C> <C>
Common Stock......................... Loews Corporation 70,100,000(1) 50.3%
667 Madison Avenue
New York, NY 10021-8087
</TABLE>
- ---------------
(1) Loews Corporation, a Delaware corporation ("Loews"), has sole investment
power and sole voting power over 70,100,000 shares.
Because Loews holds more than a majority of the outstanding shares of
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, FOR the
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors and FOR the Amendment. 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 Named Executive Officer (as hereinafter defined) of the
Company and all directors and executive officers of the Company as a group, as
of January 31, 1998. 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)
Robert E. Rose(2)......................................... 4,200 0
Herbert C. Hofmann........................................ 500 400
Arthur L. Rebell.......................................... 0 0
Michael H. Steinhardt..................................... 0 0
Raymond S. Troubh......................................... 5,000 5,000
Lawrence R. Dickerson..................................... 0 0
Rodney W. Eads............................................ 0 0
Denis J. Graham........................................... 200 0
Richard L. Lionberger..................................... 0 0
David W. Williams......................................... 200 0
All Directors and Executive Officers as a Group........... 10,355.1(3) 143,400
</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) Robert E. Rose resigned as President and Chief Executive Officer and a
director of the Company effective March 31, 1998. Voting power and
investment power with respect to shares listed for Mr. Rose are shared with
his spouse.
(3) The number of shares of Company Common Stock owned by all directors and
executive officers as a group includes 255.1 shares of Common Stock
beneficially owned, as of January 30, 1998, by Gary T. Krenek, an executive
officer of the Company who is not a Named Executive Officer, by virtue of
Mr. Krenek's investment in Common Stock pursuant to the Retirement Plan.
Investment and voting power with respect to such shares is shared with Mr.
Krenek's spouse.
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<PAGE> 5
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Arthur L. Rebell, a director of the Company, made an untimely filing of a
Form 3 and, in accordance with the rules promulgated under the Securities
Exchange Act of 1934, as amended, the transaction was reported (although not on
a timely basis) as a late transaction by Mr. Rebell on Form 5.
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of six directors. In
December 1997, the Company's Board of Directors voted to increase the size of
the Board from five to six members, and Michael H. Steinhardt was elected by the
Board of Directors to fill the vacancy created by such increase. Robert E. Rose
resigned from the Board of Directors effective March 31, 1998 and, effective as
of such date, Lawrence R. Dickerson was elected to fill the vacancy created by
the resignation of Mr. Rose. 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, Lawrence R. Dickerson,
Herbert C. Hofmann, Arthur L. Rebell, Michael H. Steinhardt and Raymond S.
Troubh. Each of the six directors to be elected at the Annual Meeting will serve
a term of one year to expire at the Company's 1999 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, Dickerson, Hofmann, Rebell, Steinhardt 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, DIRECTOR
NAME POSITION 1998 SINCE
---- -------- ----------- --------
<S> <C> <C> <C>
James S. Tisch(1)............. Chairman of the Board and Chief
Executive Officer 45 1989
Lawrence R. Dickerson(1)...... Director, President and Chief Operating
Officer 45 1998
Herbert C. Hofmann(1)......... Director 55 1992
Arthur L. Rebell(2)........... Director 56 1996
Michael H. Steinhardt......... Director 57 1997
Raymond S. Troubh(2).......... Director 71 1995
</TABLE>
- ---------------
(1) Member, Executive Committee of the Board of Directors
(2) Member, Audit Committee of the Board of Directors
James S. Tisch has served as Chief Executive Officer of the Company since
March 1998 and 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
3
<PAGE> 6
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.
Lawrence R. Dickerson has served as a director and President and Chief
Operating Officer of the Company since March 1998. Mr. Dickerson served as Chief
Financial Officer of the Company from June 1989 through March 1998. Mr.
Dickerson also served as Senior Vice President of the Company from April 1993
through March 1998 and as a Vice President of the Company from June 1989 through
April 1993.
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 Managing Director of Strategic Management Company LLC
since November 1997. He served as a Managing Director of Highview Capital
Corporation from February 1997 to July 1997 and was a Professor of Mergers &
Acquisitions at New York University's Stern Graduate School of Business from
1996 to 1998. Prior to February 1997, he served as a Managing Director of
Schroder & Co. Inc. for more than five years.
Michael H. Steinhardt has served as a director of the Company since
December 1997. Since December 1995, Mr. Steinhardt has been a Managing Member in
Steinhardt Management LLC. Prior thereto, he was Managing Partner of Steinhardt
Partners L.P., a hedge fund.
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 America West
Airlines, Inc., ARIAD Pharmaceuticals, Inc., Becton, Dickinson and Company,
Foundation Health Systems, Inc., General American Investors Company, Olsten
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 six members and two standing
committees. During 1997, the Board of Directors held seven meetings and took
action by unanimous written consent on four occasions. 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. Dickerson and Mr. Hofmann. 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,
4
<PAGE> 7
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 1997, the Executive
Committee held three meetings and took action by unanimous written consent on 10
occasions.
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 1997, the Audit Committee met two times.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Company's fiscal year ended December 31, 1997, the Company had
no compensation committee, although the Executive Committee of the Board of
Directors performed certain similar functions with respect to the compensation
of the Company's executive officers and bonuses. See "Board of Directors Report
on Executive Compensation -- General," "-- Annual Cash Bonus Incentives" and
"-- Compensation of the Chief Executive Officer." 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,
who was an executive officer of the Company at such time.
NOMINATING COMMITTEE
During the Company's fiscal year ended December 31, 1997, the Company had
no nominating committee or other committee of the Board of Directors performing
similar functions.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table shows for the years ended December 31, 1997, 1996 and
1995 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, 1997 (collectively, the "Named Executive Officers") for service
in all capacities with the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION(3)
--------------------------- ---- --------- --------- ---------------
<S> <C> <C> <C> <C>
Robert E. Rose 1997 $532,083 $ 68,750 $ 29,162
President and Chief Executive Officer(4) 1996 500,000 132,578 19,258
1995 390,000 230,000 6,075
Lawrence R. Dickerson 1997 236,812 210,000(5) 12,768
President and Chief Operating Officer(6) 1996 225,000 110,175 8,570
1995 190,000 107,000 5,727
David W. Williams 1997 211,667 198,000(5) 11,017
Executive Vice President(6) 1996 200,000 96,938 7,594
1995 175,000 102,500 5,691
Rodney W. Eads 1997 132,241 153,000(5) 1,197
Senior Vice President -- Worldwide
Operations(7)
Denis J. Graham 1997 170,938 170,000(5) 9,069
Senior Vice President -- Technical
Services(8) 1996 150,000 67,500 5,839
1995 124,546 34,000 5,799
Richard L. Lionberger 1997 161,236 64,000 8,297
Vice President, General Counsel and Secretary 1996 154,517 47,500 6,136
1995 140,137 35,000 5,360
</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 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 1997 include (i) the Company's 3.75 percent
contribution under the Retirement Plan referred to below in the following
amounts on behalf of the following Named Executive Officers: Mr. Rose,
$6,000; Mr. Dickerson, $6,000; Mr. Graham, $6,000; Mr. Williams, $6,000; and
Mr. Lionberger, $6,000, (ii) the Company's matching contribution under the
Retirement Plan referred to below in the following amounts on behalf of the
following Named Executive Officers: Mr. Rose, $2,375; Mr. Dickerson, $2,375;
Mr. Eads, $1,070; Mr. Graham, $2,281; Mr. Williams, $2,069; and Mr.
Lionberger, $2,000, (iii) 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, $494; Mr. Dickerson, $183; Mr. Eads,
$127; Mr. Graham, $214; Mr. Williams, $124; and Mr. Lionberger, $223 and
(iv) the Company's contributions under the Deferred Compensation and
Supplemental Executive Retirement Plan referred to below in the following
amounts on behalf of the following Named Executive Officers: Mr. Rose,
$20,292; Mr. Dickerson, $4,210; Mr. Graham, $575; Mr. Williams, $2,825; and
Mr. Lionberger, $74. In some cases, the total of the foregoing itemized
amounts does not equal the corresponding aggregate amount set forth in the
"All Other Compensation" column due to rounding.
(4) Robert E. Rose resigned as President and Chief Executive Officer and a
director of the Company effective March 31, 1998. The amount of annual bonus
for 1997 was reduced by $306,250 and the amount of annual bonus for 1996 was
reduced by $165,000, which amounts were forfeited by Mr. Rose as a result of
his resignation.
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<PAGE> 9
(5) The bonus shown for 1997 includes $100,000 payable to the Named Executive
Officer in annual installments (25%, 15%, 15%, 15%, 15% and 15%) over the
six calendar year period following 1998.
(6) The Named Executive Officer has held such position since March 31, 1998.
(7) Mr. Eads joined the Company in May 1997.
(8) Mr. Graham was designated an executive officer of the Company effective as
of March 11, 1998. Disclosure has been provided for Mr. Graham, who was not
serving as an executive officer of the Company at the end of fiscal year
1997, pursuant to the requirements of Item 402(a)(3)(iii) of Regulation S-K.
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 Company contributes 3.75 percent
of the participant's defined compensation and the Company matches 25 percent of
the first 6 percent of each participant's compensation contributed, subject to a
vesting schedule that entitles the employee to a percentage of the matching
contributions based upon years of service. Up to 25% of the amount of such
contributions to the Retirement Plan may be used to purchase shares of Common
Stock of the Company.
In addition, under the Company's Deferred Compensation and Supplemental
Executive Retirement Plan, the Company contributes to participants therein any
portion of the 3.75 percent of the base salary contribution and the matching
contribution to the Retirement Plan that cannot be contributed because of the
limitations of Sections 401(a)(17), 401(k)(3), 401(m)(2), 402(g) and 415 of the
Code and because of elective deferrals that the participant makes under the
plan. 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 a select group of management or 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 resigned
effective March 31, 1998. Beginning February 1, 1997, Mr. Rose received a salary
at an annual rate of $535,000, which amount, pursuant to the Employment
Agreement, was subject to such increases as the Board of Directors of the
Company may from time to time have determined. 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 also provides that, for a 120-day period after consummation of a
Change of Control (as defined in the Employment Agreement), Mr. Rose would have
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, 1997 is
provided by the Company's Board of Directors.
GENERAL
Recommendations regarding compensation of the Company's executive officers
are prepared by the President and submitted to the Executive Committee of the
Board of Directors for approval, except that the President does not participate
in the preparation of recommendations, or the review, modification or approval
thereof, with respect to his own compensation.
7
<PAGE> 10
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
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 for 1997 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 1998, the Executive Committee of the
Company's Board of Directors established a bonus pool (the "Bonus Pool") for
fiscal year 1997 (the "Performance Year"). The Executive Committee determined
the amount in the Bonus Pool based on such committee's evaluation of the Company
during 1997 relative to peer companies, the performance of the Company's share
price and extraordinary events during the Performance Year. The Executive
Committee established the bonus payout from the Bonus Pool based upon corporate,
group or individual performance, or a combination thereof, or such other
subjective criteria as the Executive Committee considered appropriate. The
bonuses for 1997 are payable in annual installments (25%, 15%, 15%, 15%, 15% and
15%) over the six calendar year period following 1997 for participants of salary
grade 12 and above, and are payable in annual installments (50%, 25% and 25%)
over the three calendar year period following 1997 for participants of salary
grade 11 and below, and, with certain exceptions, are forfeited if not paid
prior to termination of employment.
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 were made by the Executive Committee of the Board of
Directors, except that Robert E. Rose, who resigned as the Chief Executive
Officer effective March 31, 1998, did not participate in the preparation of
recommendations, or the review, modification or approval thereof, with respect
to his compensation. Such decision for 1997 was determined subjectively, and not
necessarily tied to corporate performance, with consideration given to Mr.
Rose's level of responsibility and importance to the Company relative to other
Company executives, his time with the Company, individual performance and
contributions to the successful implementation of significant initiatives that
are expected to benefit the Company in future years, including the Company's
8
<PAGE> 11
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
Lawrence R. Dickerson
Herbert C. Hofmann
Arthur L. Rebell
Michael H. Steinhardt
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 approximately
$248,000 for services performed by Loews in 1997.
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, as amended.
On September 16, 1997, Loews and the Company entered into an agreement
amending the Registration Rights Agreement (the "Registration Rights Agreement
Amendment") in contemplation of the offering by Loews of its 3.125% Exchangeable
Notes due 2007 (the "Loews Notes"), which are exchangeable into Common Stock.
Pursuant to the Registration Rights Agreement Amendment, Loews exercised the
first of its three demand registration rights for the shares of Common Stock
underlying the Loews Notes and, in
9
<PAGE> 12
connection with such demand, the Company agreed to file and to use its best
efforts to cause to be effective no later than September 30, 1998 a registration
statement for a continuous offering of such shares for delivery upon the
exchange of Loews Notes, and to maintain the effectiveness of such registration
statement through September 15, 2007, or such earlier time as no Loews Notes are
outstanding. Pursuant to the Registration Rights Agreement Amendment, the
Company has the right to defer the initial filing of its registration statement
or, at any time and from time to time after such registration statement has been
filed and declared effective, require Loews to suspend the use of any resale
prospectus or prospectus supplement included therein for a reasonable period of
time, not to exceed 90 days in any one instance or an aggregate of 120 days in
any 12-month period, if the Company is conducting or about to conduct an
underwritten public offering of its securities for its own account, or would be
required to disclose information regarding the Company not otherwise then
required by law to be publicly disclosed where such disclosure would reasonably
be expected to adversely affect any material business transaction or negotiation
in which the Company is then engaged. However, no such suspension period may be
in effect during the 14-day period preceding any redemption date with respect
to, or the final maturity date of, the Loews Notes. Before giving notice to
holders of Loews Notes of any optional redemption of Loews Notes, Loews agreed
in the Registration Rights Agreement Amendment to give prior notice to the
Company to enable the Company to determine whether it should suspend the use of
the current resale prospectus or prospectus supplement covering the shares of
Common Stock issuable upon the exchange of Loews Notes. Loews and the Company
agreed that Loews will not give notice to holders of Loews Notes of the exercise
of Loews's optional right to redeem any Loews Notes during the time that any
suspension period with respect to any such prospectus or prospectus supplement
is in effect. Pursuant to the Registration Rights Agreement, as amended by the
Registration Rights Agreement Amendment, the Company entered into an
Underwriting Agreement, dated September 16, 1997, among Loews, the Company and
Goldman, Sachs & Co. in connection with the offering by Loews of the Loews
Notes.
10
<PAGE> 13
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, 1997
<TABLE>
<CAPTION>
MEASUREMENT PERIOD COMPETITOR
(FISCAL YEAR COVERED) COMPANY S&P 500 GROUP(2)
<S> <C> <C> <C>
OCT. 11, 1995 100 100 100
DEC. 29, 1995 141 107 115
DEC. 31, 1996 241 133 176
DEC. 31, 1997 388 174 255
</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) and the quarterly dividend of $.07
per share of Common Stock payable August 7, 1997 to holders of record of
Common Stock on July 24, 1997 and payable December 1, 1997 to holders of
record of Common Stock on November 3, 1997. 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, Schlumberger Ltd., Tidewater Marine Inc., Transocean Offshore,
Inc. and Western Atlas Inc. Reading & Bates Corporation has been deleted
from the Company-constructed competitor group because historical data
concerning such company is no longer available as a result of its merger
with Falcon Drilling Company, Inc. Total return calculations were weighted
according to the respective company's market capitalization.
11
<PAGE> 14
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
Article Fourth of the Company's Restated Certificate of Incorporation (the
"Restated Certificate") provides that the total number of shares of all classes
of capital stock which the Company has authority to issue is 225 million shares,
consisting of 25 million shares of Preferred Stock, $.01 par value per share,
and 200 million shares of Common Stock. The Board of Directors has approved an
amendment to the Company's Restated Certificate to increase the authorized
number of shares of Common Stock that the Company has authority to issue from
200 million to 500 million and has directed that the Amendment be submitted to
the stockholders of the Company for approval at the Annual Meeting. To effect
such increase, the first paragraph of article Fourth of the Restated Certificate
will be amended to read in its entirety as follows:
"FOURTH: The total number of shares of all classes of capital stock
which the Company shall have authority to issue is 525,000,000 shares,
consisting of
(i) 25,000,000 shares of Preferred Stock, $.01 par value per share,
and
(ii) 500,000,000 shares of Common Stock, $.01 par value per share."
Upon the approval of the Amendment by the holders of a majority of the issued
and outstanding shares of Common Stock entitled to vote at the Annual Meeting,
the number of authorized shares of Common Stock will be increased from 200
million to 500 million.
The Board of Directors of the Company considers it prudent and in the best
interests of the Company and its stockholders to increase the number of
authorized shares of Common Stock in order to provide the Company with financing
and business flexibility. Common Stock may be issued by the Company in
connection with future acquisitions or equity financings, upon conversion or
exchange of outstanding securities, in connection with employee benefit plans or
under other circumstances. The issuance of a substantial amount of Common Stock,
or the granting of an option to purchase a substantial amount of Common Stock,
might impede a business combination by enabling a holder thereof to exercise
voting rights. Although the Board of Directors of the Company is required to
make any determination to issue any such Common Stock based on its judgment as
to the best interests of the stockholders of the Company, the Board could act in
a manner that would discourage an acquisition attempt or other transaction that
some of the stockholders of the Company might believe to be in their best
interests, or in which such stockholders might receive a premium for their
Common Stock over the then-current market price of such Common Stock.
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 1998. 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 1999 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 2, 1998.
12
<PAGE> 15
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
/s/ RICHARD L. LIONBERGER
RICHARD L. LIONBERGER
Vice President, General Counsel and
Secretary
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<PAGE> 16
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DIAMOND OFFSHORE DRILLING, INC.
COMMON
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS ON MAY 13, 1998
The undersigned hereby appoints Lawrence R. Dickerson, Richard L.
Lionberger and Gary T. Krenek and any one of them, and any substitute
or substitutes, to be the attorneys and proxies of the undersigned at
the 1998 Annual Meeting of Stockholders of Diamond Offshore Drilling,
Inc. (the "Company") to be held at The Regency Hotel, 540 Park
Avenue, New York, New York 10021 at 11:30 a.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 1998, FOR THE
AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON STOCK OF THE COMPANY AND IN ACCORDANCE WITH THE
DISCRETION OF THE PERSONS DESIGNATED ABOVE WITH RESPECT TO ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
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<PAGE> 17
Please mark
your votes as [X]
indicated in
this example
Item 1. Election of NOMINEES: James S. Tisch, Lawrence R. Dickerson,
Directors Herbert C. Hofmann, Arthur L. Rebell, Michael H.
Steinhardt and Raymond S. Troubh
FOR all nominees WITHHOLD INSTRUCTION: To withhold authority to vote for
listed to the right AUTHORITY individual nominees, write their name(s) below.
(except as marked to vote
to the contrary) for all ________________________________________________
nominees
listed to
the right
[ ] [ ]
Item 2. Proposal to ratify the appointment of Deloitte & Touche LLP as the
Independent Public Accountants of the Company for fiscal year 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 3. Proposal to amend the Company's Restated Certificate of Incorporation
to increase the number of authorized shares of the Company's Common Stock.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 4. 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: ____________________________________, 1998
_________________________________________________
Signature of Stockholder
_________________________________________________
Signature of Stockholder
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o FOLD AND DETACH HERE o
