<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-12
</TABLE>
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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(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:
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[ ] 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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<PAGE> 2
Diamond Logo
DIAMOND OFFSHORE DRILLING, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2000
To the Stockholders of
Diamond Offshore Drilling, Inc.:
NOTICE IS HEREBY GIVEN THAT the 2000 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 Tuesday,
May 16, 2000 at 11:30 a.m., local time (the "Annual Meeting") for the following
purposes:
(1) To elect seven 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 consider and act upon a proposal to approve the Diamond
Offshore Drilling, Inc. 2000 Stock Option Plan;
(3) To ratify the appointment of independent certified public
accountants for the Company and its subsidiaries; 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 20, 2000 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 approval of the Company's 2000 Stock
Option Plan and FOR the ratification of the 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 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/ WILLIAM C. LONG
William C. Long
General Counsel and Secretary
March 28, 2000
15415 Katy Freeway
Houston, Texas 77094
<PAGE> 3
[DIAMOND OFFSHORE DRILLING, INC. LOGO]
PROXY STATEMENT
DIAMOND OFFSHORE DRILLING, INC.
FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
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 2000 Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held on May 16, 2000 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
William C. Long, 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 20, 2000 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 135,815,535 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 seven 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 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
March 31, 2000.
The date of this Proxy Statement is March 28, 2000.
<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, 1999 (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). The percentages are
calculated based on the amount of outstanding securities as of February 29,
2000, excluding securities held by or for the account of the Company.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------- ----------------------- ---------- --------
<S> <C> <C> <C>
Common Stock........................ Loews Corporation 70,100,000(1) 51.7%
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 approval
of the Company's 2000 Stock Option Plan 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 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, 2000. Directors and executive officers of the Company
individually and as a group own less than 1% of the 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)
Lawrence R. Dickerson.................................... 0 0
Alan R. Batkin........................................... 1,000 0
Herbert C. Hofmann....................................... 500 400
Arthur L. Rebell......................................... 0 500
Michael H. Steinhardt.................................... 0 0
Raymond S. Troubh........................................ 5,000 5,000
Rodney W. Eads........................................... 0 0
Denis J. Graham.......................................... 200 0
David W. Williams........................................ 200 0
All Directors and Executive Officers as a Group.......... 8,474.4(2) 143,900
</TABLE>
- ---------------
(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 and investment
power.
(2) The number of shares of Company Common Stock owned by all directors and
executive officers as a group includes 1,574.4 shares of Common Stock
beneficially owned, as of January 31, 2000, by executive
2
<PAGE> 5
officers of the Company who are not Named Executive Officers. John L.
Gabriel, Gary T. Krenek, and William C. Long owned 1,208.7, 263.8 and 101.9
shares, respectively, by virtue of their investment in Common Stock pursuant
to the Retirement Plan. See "Executive Compensation." Investment and voting
power with respect to such shares owned by Mr. Gabriel and Mr. Krenek is
shared with that executive officer's spouse.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's executive officers and directors, and persons who
beneficially own more than ten percent of the Company's Common Stock, file
initial reports of ownership and reports of changes in ownership of the
Company's equity securities with the Commission and the New York Stock Exchange.
Executive officers, directors and greater than ten percent beneficial owners are
required by Commission regulations to furnish the Company with copies of all
Section 16(a) reports they file. Based solely on a review of such reports
furnished to the Company and written representations that no report on Form 5
was required for 1999, the Company believes that no director, officer or
beneficial owner of more than ten percent of the Common Stock failed to file a
report on a timely basis during 1999.
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of seven directors. In
July 1999, the Company's Board of Directors voted to increase the size of the
Board of Directors from six to seven members, and Alan R. Batkin was elected by
the Board of Directors to fill the vacancy created by such increase. 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 of the Company is set forth below.
The nominees for director are James S. Tisch, Lawrence R. Dickerson, Alan
R. Batkin, Herbert C. Hofmann, Arthur L. Rebell, Michael H. Steinhardt and
Raymond S. Troubh. Each of the seven directors to be elected at the Annual
Meeting will serve a term of one year to expire at the Company's 2001 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, Batkin, 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.
3
<PAGE> 6
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 2000 SINCE
- ---- -------- ----------- --------
<S> <C> <C> <C>
James S. Tisch(1).............. Chairman of the Board and Chief 47 1989
Executive Officer
Lawrence R. Dickerson(1)....... Director, President and Chief 47 1998
Operating Officer
Alan R. Batkin(2).............. Director 55 1999
Herbert C. Hofmann(1).......... Director 57 1992
Arthur L. Rebell............... Director 58 1996
Michael H. Steinhardt(2)....... Director 59 1997
Raymond S. Troubh(2)........... Director 73 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. Mr. 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 Chief Executive
Officer of Loews, a diversified holding company, since January 1999 and, prior
thereto, as President and Chief Operating Officer of Loews from 1994. Mr. Tisch,
a director of Loews since 1986, also serves as a director of CNA Financial
Corporation, an 86.5 percent owned subsidiary of Loews, and serves as a director
of Vail Resorts, Inc.
Lawrence R. Dickerson has served as President, Chief Operating Officer and
a director of the Company since March 1998. Previously, Mr. Dickerson served as
Senior Vice President of the Company from April 1993 and Chief Financial Officer
of the Company from June 1989.
Alan R. Batkin has served as a director of the Company since July 1999. Mr.
Batkin has served as Vice Chairman of Kissinger Associates, Inc. since 1990. Mr.
Batkin also serves as a director of Overseas Shipholding Group, Inc., Hasbro,
Inc., and Schweitzer-Mauduit International, Inc.
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, which distributes and sells
watches and clocks, since 1989.
Arthur L. Rebell has served as a director of the Company since July 1996.
Mr. Rebell has served as Senior Vice President of Loews since June 1998. Mr.
Rebell has also served as 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 ARIAD
Pharmaceuticals, Inc., Foundation Health Systems, Inc., General American
Investors Company, MicroCap Liquidating Trust (Trustee), Olsten Corporation,
Petrie Stores Liquidating Trust (Trustee), Starwood Hotels & Resorts (Trustee),
Triarc Companies, Inc. and WHX Corporation.
4
<PAGE> 7
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. The Chairman of the Audit Committee of the Board of Directors
of the Company receives a retainer of $5,000 per annum, payable quarterly, while
each of the other members of the Audit Committee receives a retainer of $2,500
per annum. 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 seven members and two standing
committees. During 1999, the Board of Directors held five meetings. Further
information concerning the Board of Directors' 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, 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 1999, the Executive Committee took action by unanimous written consent on
six occasions.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors consists of three members,
Mr. Batkin, Mr. Steinhardt 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 1999, the Audit Committee met two times.
ATTENDANCE AT MEETINGS
Each director of the Company attended not less than 75% of the total number
of meetings of the Board of Directors and committees of the Board of Directors
on which that director serves, with the exception of Michael H. Steinhardt who
attended approximately 71.4% of those meetings.
5
<PAGE> 8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Company's fiscal year ended December 31, 1999, 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 James S. Tisch and
Lawrence R. Dickerson, executive officers of the Company.
NOMINATING COMMITTEE
During the Company's fiscal year ended December 31, 1999, the Company had
no nominating committee or other committee of the Board of Directors performing
similar functions.
EXECUTIVE COMPENSATION
The following table shows for the years ended December 31, 1999, 1998 and
1997 the cash compensation paid by the Company, and a summary of certain other
compensation paid or accrued for each such year, to its Chief Executive Officer
and each of the Company's four other most highly compensated executive officers
as of December 31, 1999 (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(4)
- --------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
James S. Tisch
Chairman of the Board and Chief Executive 1999 $300,000 (3) $13,793
Officer 1998 214,808 $180,000 129
Lawrence R. Dickerson 1999 395,000 (3) 24,156
President and Chief Operating Officer 1998 330,111 175,000 17,075
1997 236,812 210,000 12,768
David W. Williams 1999 337,500 (3) 20,269
Executive Vice President 1998 284,344 140,000 14,203
1997 211,667 198,000 11,017
Rodney W. Eads 1999 263,144 (3) 16,340
Senior Vice President -- Worldwide 1998 246,718 84,500 13,032
Operations 1997 132,241 153,000 1,197
Denis J. Graham 1999 240,000 (3) 14,928
Senior Vice President -- Technical 1998 217,718 78,000 11,745
Services 1997 170,938 170,000 9,069
</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 and bonus 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 1999 bonuses for the Named Executive Officers, if any, are not yet
calculable as of the date of this Proxy Statement. See "Board of Directors
Report on Executive Compensation -- Annual Cash Bonus Incentives."
(4) The amounts shown for 1999 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:
6
<PAGE> 9
Mr. Tisch, $6,000; Mr. Dickerson, $6,000; Mr. Williams, $6,000; Mr. Eads,
$6,000; and Mr. Graham, $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. Dickerson, $2,400; Mr.
Williams, $2,400; Mr. Eads, $2,400; and Mr. Graham, $2,400, (iii) the
Company's contributions for group term life insurance, spouse/dependent life
insurance, and long-term disability insurance in the following amounts on
behalf of the following Named Executive Officers: Mr. Tisch, $2,490; Mr.
Dickerson, $2,486; Mr. Williams, $1,899; Mr. Eads, $2,262; and Mr. Graham,
$2,126, (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. Tisch,
$5,303; Mr. Dickerson, $13,270; Mr. Williams, $9,970; Mr. Eads, $5,678; and
Mr. Graham, $4,402. 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.
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. Participants
are fully vested immediately upon enrollment in the plan. Up to 25 percent 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 within 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.
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, 1999 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.
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
Annual cash bonus incentives may be 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. The Executive Committee of the Company's Board
of Directors is authorized to establish an annual bonus pool based on such
committee's evaluation of the Company during the year relative to peer
companies, the performance of the Company's share price and extraordinary events
during the year. As of the date of this Proxy Statement, the 1999 bonuses for
participants of salary grades 12 and above are not calculable. The Executive
Committee did establish a bonus pool (the "Bonus Pool") for fiscal year 1999 for
participants of salary grades 11 and below. The Executive Committee established
the bonus payout from the Bonus Pool for these participants based upon
corporate, group or individual performance, or a combination thereof, or such
other subjective criteria as the Executive Committee considered appropriate.
These bonuses for 1999 are payable in annual installments (50%, 25% and 25%)
over the three calendar year period following 1999, 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 members of the Board of Directors who were
independent of management and not affiliated with the Company, its officers or
employees of the Company or its subsidiaries or of Loews or any other affiliated
companies. James S. Tisch did not participate in the preparation of
recommendations, or the review, modification or approval thereof, with respect
to his compensation. Such decision for 1999 was determined subjectively, and not
necessarily tied to corporate performance, with consideration given to Mr.
Tisch's level of responsibility and importance to the Company relative to other
Company executives, his contributions to the successful implementation of
significant strategic initiatives that are expected to benefit the Company in
future years, including the Company's capital upgrade program and on-going
rationalization of its rig fleet (purchases and sales). No fixed, relative
weights were assigned to these subjective factors.
THE BOARD OF DIRECTORS
James S. Tisch, Chairman
Lawrence R. Dickerson
Alan R. Batkin
Herbert C. Hofmann
Arthur L. Rebell
Michael H. Steinhardt
Raymond S. Troubh
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<PAGE> 11
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
$271,000 for services performed by Loews in 1999.
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 for 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 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. Such registration statement was
filed by the Company and was declared effective by the Commission on September
29, 1998. Pursuant to the Registration Rights Agreement Amendment, at any time
and from time to time after such registration statement has been filed and
declared effective, the Company has the right to 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
9
<PAGE> 12
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.
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<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, 1999
[GRAPH]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Oct. 11, 1995 Dec. 29, 1995 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1999
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Company 100 141 229 388 193 254
S&P 500 100 107 131 174 224 271
Competitor Group(2) 100 118 191 274 130 197
</TABLE>
- ---------------
(1) Total return assuming reinvestment of dividends. Dividends for the periods
reported included a $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), quarterly dividends of $0.125 per share
of Common Stock paid during 1999 and 1998, and of $0.07 per share of Common
Stock paid August 7, 1997 and December 1, 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, ENSCO International Incorporated,
Global Marine Inc., Halliburton Company, Noble Drilling Corporation,
Schlumberger Ltd., Tidewater Marine Inc., and Transocean Sedco Forex Inc.
Total return calculations were weighted according to the respective
company's market capitalization.
11
<PAGE> 14
APPROVAL OF THE DIAMOND OFFSHORE 2000 STOCK OPTION PLAN
On March 28, 2000, the Board of Directors approved the Company's 2000 Stock
Option Plan (the "Stock Option Plan"). The purposes of the Stock Option Plan are
to allow the Company and its subsidiaries to attract and retain qualified
employees and consultants and to allow the Company to attract and retain non-
employee directors, to motivate these individuals to achieve the Company's long
term goals and to reward them upon achievement of those goals.
Accordingly, the Board of Directors has directed that the Stock Option Plan
be submitted to the Company's stockholders for approval at the Annual Meeting.
If the Company's stockholders fail to approve the Stock Option Plan, any options
previously granted under the Stock Option Plan will never become exercisable and
no further options will be granted thereunder.
The following is a summary of certain terms of the Stock Option Plan. It is
qualified in its entirety by the full text of the Stock Option Plan, which is
set forth in Exhibit A attached to this Proxy Statement.
OPTIONS GRANTED. As of the date hereof, no grants have been made under the
Stock Option Plan.
ELIGIBILITY AND TYPES OF GRANTS. Those persons who are responsible for or
contribute to the management, growth or profitability of the businesses of the
Company and its subsidiaries may receive grants under the Stock Option Plan.
Optionees will be selected from time to time by the Board of Directors from a
pool of all employees and consultants of the Company and its subsidiaries and
the non-employee directors of the Company, an estimated 4,600 people. The Stock
Option Plan provides for the grant of both incentive stock options ("ISOs"),
within the meaning of Section 422 of the Code, and nonqualified stock options
("NQOs"), which do not meet, or are not intended to meet, the requirements of
Section 422 of the Code. (See "Federal Income Tax Consequences" below.)
SHARES SUBJECT TO THE STOCK OPTION PLAN. The aggregate number of shares of
Common Stock for which options may be granted under the Stock Option Plan is
750,000; and the maximum number of shares of Common Stock with respect to which
options may be granted to any individual in any calendar year is 200,000. These
shares of Common Stock may consist either in whole or in part of authorized but
unissued shares of Common Stock or shares of Common Stock held in the treasury
of the Company. Shares of Common Stock subject to an option which has expired or
been canceled or terminated will become available for the granting of additional
options under the Stock Option Plan.
ADMINISTRATION. The Stock Option Plan will be administered by the Board of
Directors. Subject to the terms of the Stock Option Plan, the Board of Directors
has broad authority to administer and interpret the Stock Option Plan, including
the authority to determine who will receive a grant and to determine the
specific provisions of that grant. The Board of Directors also has the authority
to accelerate the exercisability of an outstanding option and extend the option
term of an outstanding option.
EXERCISE. The exercise price for the purchase of shares of Common Stock
under each option will be determined by the Board of Directors; provided,
however, that the exercise price per share may not be less than 100% of the fair
market value of the Common Stock on the date of grant. The full exercise price
of these shares shall be paid at the time of exercise. The Board of Directors
may permit an optionee to elect to pay the exercise price of an option by
irrevocably authorizing a third party to sell the shares of Common Stock (or a
sufficient portion of the shares) acquired upon exercise of the option and remit
to the Company a sufficient portion of the sale proceeds to pay the entire
exercise price and any applicable tax withholding. In addition, the Board of
Directors may permit full or partial payment to be made in the form of
unrestricted shares of Common Stock that have been owned by the optionee for at
least six months based on the fair market value of those shares on the date of
exercise.
VESTING. Unless otherwise provided by the Board of Directors at the time of
grant or thereafter, each option granted under the Stock Option Plan will vest
and become exercisable in four equal annual installments, commencing on the
first anniversary of the date of grant of the option, and shall thereafter
remain exercisable for the duration of the option's term.
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<PAGE> 15
TERM. Unless otherwise provided by the Board of Directors at the time of
grant or thereafter, the term of each option granted under the Stock Option Plan
will end on the earliest to occur of (i) the date the optionee's employment,
directorship or consultancy with the Company or its subsidiaries, as applicable,
is terminated for cause or voluntarily by the optionee, (ii) the first
anniversary of the optionee's death or disability, (iii) the third anniversary
of the optionee's retirement (if the optionee is an employee and (iv) the
ninetieth day after the optionee's employment, directorship or consultancy
terminates for any other reason. In no event may the term of any option granted
under the Stock Option Plan exceed ten years from the option's date of grant.
Unless otherwise provided by the Board of Directors, any outstanding option that
is unvested following a termination of employment, directorship or consultancy
shall be forfeited immediately.
TRANSFERABILITY. Options granted under the Stock Option Plan are not
transferable, except by will or the laws of descent and distribution or, in the
case of an NQO, to the optionee's immediate family, if expressly permitted by
the Board of Directors.
ADJUSTMENTS. In the event of a stock dividend, stock split, extraordinary
cash dividend, recapitalization, reorganization, merger, split-up, spin-off,
combination or exchange of shares, the Board of Directors may make adjustments
to preserve the benefits or potential benefits of the Stock Option Plan and
outstanding stock options. These adjustments may include adjustments to (i) the
number and kind of shares deliverable under the Stock Option Plan, (ii) the
number and kind of shares that may be covered by options granted to any
individual optionee, (iii) the number and kind of shares covered by outstanding
options, (iv) the exercise price of outstanding options, (v) settlement of
outstanding options in cash or Common Stock, and (vi) other adjustments that the
Board of Directors determines to be equitable.
AMENDMENTS AND TERMINATION. The Stock Option Plan will be unlimited in
duration. The Board of Directors may, at any time, amend or terminate the Stock
Option Plan, provided that no such amendment or termination may adversely affect
the rights of any optionee under any option granted under the Stock Option Plan
prior to the date of such amendment or termination without the prior written
consent of that optionee. The Stock Option Plan may not be amended without
stockholder approval to the extent such approval is required by law or the rules
of any exchange on which the Common Stock is traded.
REGISTRATION OF COMMON STOCK ISSUED UNDER THE STOCK OPTION PLAN. The
Company intends that the 750,000 shares of Common Stock covered by the Stock
Option Plan will be registered under the Securities Act of 1933, as amended.
Such registration, if completed, would in most cases permit the unrestricted
resale in the public market of shares issued pursuant to the Stock Option Plan.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary of the
principal federal income tax consequences of transactions under the Stock Option
Plan based on current federal income tax laws. This summary is not intended to
be exhaustive and, among other things, does not describe state, local or foreign
tax consequences.
NONQUALIFIED STOCK OPTIONS. In general, (i) an optionee will not be subject
to tax at the time an NQO is granted, and (ii) an optionee will include in
ordinary income in the taxable year in which he or she exercises an NQO an
amount equal to the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise. Upon disposition of the
Common Stock acquired upon exercise, appreciation or depreciation after the date
ordinary income is recognized will be treated as capital gain (or loss). The
Company generally will be entitled to a deduction in an amount equal to a
recipient's ordinary income in the Company's taxable year in which the optionee
includes that amount in income. The exercise of NQO's is subject to withholding
of all applicable taxes.
INCENTIVE STOCK OPTIONS. No taxable income will be realized by an option
holder upon the grant or exercise of an ISO. If shares are issued to an optionee
pursuant to the exercise of an ISO granted under the Stock Option Plan and if no
disposition of those shares is made by that optionee within two years after the
date of grant of the ISO or within one year after the receipt of those shares by
that optionee, then (i) upon a sale of those shares, any amount realized in
excess of the exercise price of the ISO will be taxed to that optionee as a
long-term capital gain and any loss sustained will be a long-term capital loss,
and (ii) no deduction will be allowed to the Company. However, if shares
acquired upon the exercise of an ISO are disposed of prior to the
13
<PAGE> 16
expiration of either holding period described above, generally (i) the optionee
will realize ordinary income in the year of disposition in an amount equal to
the excess (if any) of the fair market value of the shares at exercise (or, if
less, the amount realized on the disposition of the shares) over the exercise
price thereof, and (ii) the Company will be entitled to deduct that amount. Any
additional gain or loss recognized by the option holder will be taxed as a
short-term or long-term capital gain or loss, as the case may be, and will not
result in any deduction by the Company. If an ISO is exercised at a time when it
no longer qualifies as an incentive stock option under the Code, it will be
treated as an NQO.
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 2000. 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 will be available to respond to appropriate questions
from stockholders.
SOLICITATION EXPENSES
The Company will bear the cost of preparing, printing and mailing this
Proxy Statement and the accompanying proxy card and of this solicitation of
proxies on behalf of the Company's Board of Directors. In addition to
solicitation by mail, proxies may be solicited personally, by telephone or other
means. Brokerage houses and other custodians and nominees will be asked whether
other persons are beneficial owners of the shares of Common Stock which they
hold of record, and, if so, they will be supplied with additional copies of the
proxy materials for distribution to such beneficial owners. The Company will
reimburse banks, nominees, brokers and other custodians for the reasonable costs
of sending the proxy materials to the beneficial owners of the Common Stock.
STOCKHOLDER PROPOSALS
Stockholder proposals intended for inclusion in the Proxy Statement to be
issued in connection with the Company's 2001 annual meeting of stockholders must
be addressed to: William C. Long, Corporate Secretary, Diamond Offshore
Drilling, Inc., 15415 Katy Freeway, Houston, Texas 77094, and must be received
no later than November 28, 2000.
Stockholder proposals submitted outside of the Commission's procedures for
including such proposals in the Company's Proxy Statement must be mailed or
delivered to the attention of the Corporate Secretary at the address above and
must be received by the Company's Corporate Secretary no later than November 28,
2000, except that, with respect to nominations of one or more persons for
election as directors, written notice of the stockholder's intent to make such
nomination(s), which notice must comply in all respects with the requirements
therefore set forth in the Company's bylaws, must be mailed or delivered to the
attention of the Corporate Secretary at the address above and must be received
by the Company's Corporate Secretary no later than February 15, 2001. If a
proposal or notice of nomination is received after such respective date, the
Company's proxy for the 2001 annual meeting of stockholders may confer
discretionary authority to vote on such matter without any discussion of such
matter in the Proxy Statement for the 2001 annual meeting of stockholders.
14
<PAGE> 17
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/ WILLIAM C. LONG
WILLIAM C. LONG
General Counsel and Secretary
15
<PAGE> 18
EXHIBIT A
DIAMOND OFFSHORE DRILLING, INC.
2000 STOCK OPTION PLAN
SECTION 1
GENERAL
1.1. Purpose. The Diamond Offshore 2000 Stock Option Plan (the "Plan") has
been established by Diamond Offshore Drilling, Inc. (the "Company") to (i)
attract and retain persons eligible to participate in the Plan, (ii) motivate
Participants, by means of appropriate incentives, to achieve long-term Company
goals, and reward Participants for achievement of those goals, and (iii) provide
incentive compensation opportunities that are competitive with those of other
similar companies, and thereby promote the financial interest of the Company and
its Subsidiaries.
1.2. Operation and Administration. The operation and administration of the
Plan shall be subject to the provisions of Section 3 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 6 of the Plan).
SECTION 2
OPTIONS
2.1. Option Grant. The Board of Directors (the "Board") may grant Options
in accordance with this Section 2.
2.2. Definitions. The grant of an "Option" permits the Participant to
purchase shares of Stock at an Exercise Price established by the Board. Any
Option granted under the Plan may be either an incentive stock option (an "ISO")
or a non-qualified option (an "NQO"), as determined in the discretion of the
Board. An "ISO" is an Option that is intended to be an "incentive stock option"
described in section 422(b) of the Code and does in fact satisfy the
requirements of that section. An "NQO" is an Option that is not intended to be
an "incentive stock option" as that term is described in section 422(b) of the
Code, or that fails to satisfy the requirements of that section.
2.3. Exercise Price. The "Exercise Price" of each Option granted under this
Section 2 shall be established by the Board or shall be determined by a method
established by the Board at the time the Option is granted; except that the
Exercise Price shall not be less than 100% of the Fair Market Value of a share
of Stock on the date of grant (or, if greater, the par value of a share of
Stock).
2.4. Vesting and Exercise. An Option shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Board.
(a) Unless otherwise provided by the Board at the time of grant or
thereafter, each Option shall vest and become exercisable in four equal
annual installments beginning on the first anniversary of the date of
grant, and shall thereafter remain exercisable during the Option Term.
(b) Unless otherwise provided by the Board at the time of grant or
thereafter, the Option Term of each Option shall end on the earliest of (1)
the date on which such Option has been exercised in full, (2) the date on
which the Participant experiences a Termination for Cause or a voluntary
Termination, (3) the one-year anniversary of the date on which the
Participant experiences a Termination due to death or Disability, (4) the
three-year anniversary of the date on which the Participant experiences a
Termination due to such person's Retirement, and (5) the 90th day after the
Participant experiences a Termination for any other reason; provided, that
in no event may the Option Term exceed ten (10) years from the date of
grant of the Option. Except as otherwise determined by the Board at the
time of grant or
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<PAGE> 19
thereafter, upon the occurrence of a Termination of a Participant for any
reason, the Option Term of all outstanding Options held by the Participant
that are unvested as of the date of such Termination shall thereupon end
and such unvested Options shall be forfeited immediately; provided,
however, that the Board may, in its sole discretion, accelerate the vesting
of any Option and/or extend the exercise period of any Option (but not
beyond the ten-year anniversary of the grant date).
(c) An Option may be exercised and the underlying shares purchased in
accordance with this Section 2 at any time after the Option with respect to
those shares vests and before the expiration of the Option Term. To
exercise an Option, the Participant shall give written notice to the
Company stating the number of shares with respect to which the Option is
being exercised.
(d) The full Exercise Price for shares of Stock purchased upon the
exercise of any Option shall be paid at the time of such exercise (except
that, in the case of an exercise arrangement approved by the Board and
described in the last sentence of this paragraph (d), payment may be made
as soon as practicable after the exercise). The Exercise Price shall be
payable by check, or such other instrument as the Board may accept. The
Board may permit a Participant to elect to pay the Exercise Price upon the
exercise of an Option by irrevocably authorizing a third party to sell
shares of Stock (or a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding
resulting from such exercise. In the case of any ISO such permission must
be provided for at the time of grant and set forth in an Option
Certificate. In addition, if approved by the Board, payment, in full or in
part, may also be made in the form of unrestricted Mature Shares, based on
the Fair Market Value of the Mature Shares on the date the Option is
exercised; provided, however, that, in the case of an ISO the right to make
a payment in such Mature Shares may be authorized only at the time the
Option is granted.
SECTION 3
OPERATION AND ADMINISTRATION
3.1. Effective Date. Subject to the approval of the stockholders of the
Company at the Company's 2000 annual meeting of its stockholders, the Plan shall
be effective as of March 28, 2000 (the "Effective Date"); provided, however,
that to the extent that Options are granted under the Plan prior to its approval
by stockholders, the Options shall be contingent on approval of the Plan by the
stockholders of the Company at such annual meeting. The Plan shall be unlimited
in duration and, in the event of Plan termination, shall remain in effect as
long as any Options under it are outstanding.
3.2. Shares Subject to Plan. The shares of Stock for which Options may be
granted under the Plan shall be subject to the following:
(a) The shares of Stock with respect to which Options may be granted
under the Plan shall be shares currently authorized but unissued or
currently held or subsequently acquired by the Company as treasury shares,
including shares purchased in the open market or in private transactions.
(b) Subject to the following provisions of this subsection 3.2, the
maximum number of shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be 750,000 shares of Stock.
(c) To the extent any shares of Stock covered by an Option are not
delivered to a Participant or beneficiary because the Option is forfeited
or canceled, or the shares of Stock are used to pay the Exercise Price or
satisfy the applicable tax withholding obligation, such shares shall not be
deemed to have been delivered for purposes of determining the maximum
number of shares of Stock available for delivery under the Plan.
(d) Subject to paragraph 3.2(e), the maximum number of shares that may
be covered by Options granted to any one individual during any one calendar
year period shall be 200,000 shares.
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<PAGE> 20
(e) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares), the
Board may make adjustments to preserve the benefits or potential benefits
of the Plan and outstanding Options. Action by the Board may include: (i)
adjustment of the number and kind of shares which may be delivered under
the Plan; (ii) adjustment of the number and kind of shares referred to in
Section 3.2(d); (iii) adjustment of the number and kind of shares subject
to outstanding Options; (iv) adjustment of the Exercise Price of
outstanding Options; (v) settlement in cash or Stock in an amount equal to
the excess of the value of the Stock subject to such Option over the
aggregate Exercise Price (as determined by the Board) of such Options; and
(vi) any other adjustments that the Board determines to be equitable.
3.3. General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall
have no liability to deliver any shares of Stock under the Plan or make any
other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the issuance may
be effected on a non-certificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.
3.4. Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the delivery of any shares or other
benefits under the Plan shall be conditioned on satisfaction of the applicable
withholding obligations. The Board, in its discretion, and subject to such
requirements as the Board may impose prior to the occurrence of such
withholding, may permit such withholding obligations to be satisfied through
cash payment by the Participant, through the surrender of shares of Stock which
the Participant already owns, or through the surrender of shares of Stock to
which the Participant is otherwise entitled under the Plan; provided that
surrender of shares may be used only to satisfy the minimum withholding required
by law.
3.5. Grant and Use of Options. In the discretion of the Board, more than
one Option may be granted to a Participant. Options may be granted as
alternatives to or replacements of Options granted or outstanding under the
Plan, or any other plan or arrangement of the Company or a Subsidiary (including
a plan or arrangement of a business or entity, all or a portion of which is
acquired by the Company or a Subsidiary). Subject to the overall limitation on
the number of shares of Stock that may be delivered under the Plan, the Board
may use available shares of Stock as the form of payment for compensation,
grants or rights earned or due under any other compensation plans or
arrangements of the Company or a Subsidiary, including the plans and
arrangements of the Company or a Subsidiary assumed in business combinations.
Notwithstanding the foregoing, the assumption by the Company of options in
connection with the acquisition of a business or other entity and the conversion
of such options into options to acquire Stock shall not be treated as a new
grant of Options under the Plan unless specifically so provided by the Board.
3.6. Settlement of Options. The Board may from time to time establish
procedures pursuant to which a Participant may elect to defer, until a time or
times later than the exercise of an Option, receipt of all or a portion of the
shares of Stock subject to such Option and/or to receive cash at such later time
or times in lieu of such deferred shares, all on such terms and conditions as
the Board shall determine. If any such deferrals are permitted, then a
Participant who elects such deferral shall not have any rights as a stockholder
with respect to such deferred shares unless and until shares are actually
delivered to the Participant with respect thereto, except to the extent
otherwise determined by the Board.
3.7. Other Plans. Amounts payable under this Plan shall not be taken into
account as compensation for purposes of any other employee benefit plan or
program of the Company or any of its Subsidiaries, except to
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the extent otherwise provided by such plans or programs, or by an agreement
between the affected Participant and the Company.
3.8. Heirs and Successors. The terms of the Plan shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business.
3.9. Transferability. Options granted under the Plan are not transferable
except (i) as designated by the Participant by will or by the laws of descent
and distribution or (ii) in the case of an NQO, as otherwise expressly permitted
by the Board including, if so permitted, pursuant to a transfer to such
Participant's immediate family, whether directly or indirectly or by means of a
trust or partnership or otherwise. If any rights exercisable by a Participant or
benefits deliverable to a Participant under any Option Certificate under the
Plan have not been exercised or delivered, respectively, at the time of the
Participant's death, such rights shall be exercisable by the Designated
Beneficiary, and such benefits shall be delivered to the Designated Beneficiary,
in accordance with the provisions of the applicable terms of the Option
Certificate and the Plan. The "Designated Beneficiary" shall be the beneficiary
or beneficiaries designated by the Participant to receive benefits under the
Company's group term life insurance plan or such other person or persons as the
Participant may designate by notice to the Company. If a deceased Participant
fails to have designated a beneficiary, or if the Designated Beneficiary does
not survive the Participant, any rights that would have been exercisable by the
Participant and any benefits distributable to the Participant shall be exercised
by or distributed to the legal representative of the estate of the Participant.
If a deceased Participant designates a beneficiary and the Designated
Beneficiary survives the Participant but dies before the Designated
Beneficiary's exercise of all rights under the Option Certificate or before the
complete distribution of benefits to the Designated Beneficiary under the Option
Certificate, then any rights that would have been exercisable by the Designated
Beneficiary shall be exercised by the legal representative of the estate of the
Designated Beneficiary, and any benefits distributable to the Designated
Beneficiary shall be distributed to the legal representative of the estate of
the Designated Beneficiary. All Options shall be exercisable, subject to the
terms of this Plan, only by the Participant or any person to whom such Option is
transferred pursuant to this paragraph, it being understood that the term
Participant shall include such transferee for purposes of the exercise
provisions contained herein.
3.10. Notices. Any written notices provided for in the Plan or under any
Option Certificate shall be in writing and shall be deemed sufficiently given if
either hand delivered or if sent by confirmed fax or overnight courier, or by
postage paid first class mail. Notice and communications shall be effective when
actually received by the addressee. Notices shall be directed, if to the
Participant, at the Participant's address indicated in the Option Certificate,
or if to the Company, at the Company's principal executive office to the
attention of the Company's Corporate Secretary.
3.11. Action by Company. Any action required or permitted to be taken by
the Company shall be by resolution of the Board of Directors, or by action of
one or more members of the Board (including a Committee of the Board) who are
duly authorized to act for the Board, or by a duly authorized officer of the
Company.
3.12. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets,
funds or property of the Company whatsoever, including, without limitation,
any specific funds, assets, or other property which the Company, in its
sole discretion, may set aside in anticipation of a liability under the
Plan. A Participant shall have only a contractual right to the amounts, if
any, payable under the Plan, unsecured by any assets of the Company, and
nothing contained in the Plan shall constitute a guarantee that the assets
of the Company shall be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any Participant the right to be
retained in the employ of, or as a director or consultant to, the Company
or any Subsidiary, nor any right or claim to any benefit under the Plan,
unless such right or claim has specifically accrued under the terms of the
Plan.
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3.13. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
3.14. Laws Applicable to Construction. The interpretation, performance and
enforcement of this Plan and all Option Certificates shall be governed by the
laws of the State of Delaware without reference to principles of conflict of
laws, as applied to contracts executed in and performed wholly within the State
of Delaware.
3.15. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
SECTION 4
BOARD OF DIRECTORS
4.1. Administration. The authority to control and manage the operation and
administration of the Plan shall be vested in the Board in accordance with this
Section 4.
4.2. Powers of Board. The Board's administration of the Plan shall be
subject to the following:
(a) Subject to the provisions of the Plan, the Board will have the
authority and discretion to select from among the Eligible Grantees those
persons who shall receive Options, to determine the grant date of, the
number of shares subject to and the Exercise Price of those Options, to
establish all other terms and conditions of such Options, and (subject to
the restrictions imposed by Section 5) to cancel or suspend Options.
(b) The Board will have the authority and discretion to interpret the
Plan, to establish, amend, and rescind any rules and regulations relating
to the Plan, and to make all other determinations that may be necessary or
advisable for the administration of the Plan.
(c) Any interpretation of the Plan by the Board and any decision made
by it under the Plan is final and binding on all persons.
(d) In controlling and managing the operation and administration of
the Plan, the Board shall take action in a manner that conforms to the
articles and by-laws of the Company, and applicable state corporate law.
4.3. Delegation by Board. Except to the extent prohibited by applicable law
or the applicable rules of a stock exchange, the Board may allocate all or any
portion of its responsibilities and powers to any one or more of its members and
may delegate all or any part of its responsibilities and powers to any person or
persons selected by it. Any such allocation or delegation may be revoked by the
Board at any time.
4.4. Information to be Furnished to Board. The Company and Subsidiaries
shall furnish the Board with such data and information as it determines may be
required for it to discharge its duties. The records of the Company and
Subsidiaries as to an employee's or Participant's employment, engagement,
Termination, leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other persons
eligible for benefits under the Plan must furnish the Board such evidence, data
or information as the Board considers desirable to carry out the terms of the
Plan.
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SECTION 5
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan; provided that no
amendment or termination may, in the absence of written consent to the change by
the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Option granted under the Plan prior to the date such
amendment is adopted by the Board; and further provided that adjustments
pursuant to paragraph 3.2(e) shall not be subject to the foregoing limitations
of this Section 5.
SECTION 6
DEFINED TERMS
In addition to the other definitions contained herein, the following
definitions shall apply:
(a) Board. The term "Board" means the Board of Directors of the
Company.
(b) Cause. The term "Cause" shall have the meaning set forth in the
employment or engagement agreement between a Participant and the Company or
any Subsidiary thereof, if such an agreement exists and contains a
definition of Cause; otherwise Cause shall mean (1) conviction of the
Participant for committing a felony under Federal law or the law of the
state in which such action occurred, (2) dishonesty in the course of
fulfilling a Participant's employment, engagement or directorial duties,
(3) willful and deliberate failure on the part of a Participant to perform
the Participant's employment, engagement or directorial duties in any
material respect or (4) such other events as shall be determined in good
faith by the Board. The Board shall, unless otherwise provided in the
Option Certificate or an employment agreement with the Participant, have
the sole discretion to determine whether Cause exists, and its
determination shall be final.
(c) Code. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference
to any successor provision of the Code.
(d) Company. The term "Company" shall have the meaning set forth in
Section 1.1.
(e) Designated Beneficiary. The term "Designated Beneficiary" shall
have the meaning set forth in Section 3.9.
(f) Disability. The term "Disability" shall mean, unless otherwise
provided by the Board, (1) "Disability" as defined in any individual Option
Certificate to which the Participant is a party, or (2) if there is no such
Option Certificate or it does not define "Disability," permanent and total
disability as determined under the Company's long-term disability plan
applicable to the Participant.
(g) Effective Date. The term "Effective Date" shall have the meaning
set forth in Section 3.1.
(h) Eligible Grantee. The term "Eligible Grantee" shall mean any
individual who is employed on a full-time or part-time basis, or who serves
as a consultant to, by the Company or a Subsidiary and any non-employee
director of the Company. An Option may be granted to an individual in
connection with such individual's hiring or engagement prior to the date
the individual first performs services for the Company or the Subsidiaries,
provided that the individual will be an Eligible Grantee upon his hiring or
engagement, and further provided that such Options shall not become vested
prior to the date the individual first performs such services.
(i) Exercise Price. The term "Exercise Price" shall have the meaning
set forth in Section 2.3.
(j) Fair Market Value. The "Fair Market Value" of a share of Stock
shall be, as of any given date, the mean between the highest and lowest
reported sales prices on the immediately preceding date (or, if there are
no reported sales on such immediately preceding date, on the last date
prior to such date on which there were sales) of the Stock on the New York
Stock Exchange Composite Tape or, if not listed
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<PAGE> 24
on such exchange, on any other national securities exchange on which the
Stock is listed or on NASDAQ. If there is no regular public trading market
for such Stock, the Fair Market Value of the Stock shall be determined by
the Board in good faith.
(k) ISO. The term "ISO" shall have the meaning set forth in Section
2.2.
(l) Mature Shares. The term "Mature Shares" shall mean shares of Stock
that have been owned by the Participant in question for at least six
months.
(m) NQO. The term "NQO" shall have the meaning set forth in Section
2.2.
(n) Option. The term "Option" shall have the meaning set forth in
Section 2.2.
(o) Option Certificate. The term "Option Certificate" shall mean a
written Option certificate setting forth the terms and conditions of an
Option, in the form attached hereto as Exhibit A or such other form as the
Board may from time to time prescribe.
(p) Option Term. The term "Option Term" shall mean the period
beginning on the date of grant of an Option and ending on the date the
Option expires pursuant to the Plan and the relevant Option Certificate.
(q) Plan. The term "Plan" shall have the meaning set forth in Section
1.1.
(r) Retirement. The term "Retirement" shall mean retirement from
active employment with the Company pursuant to any retirement plan or
program of the Company or any Subsidiary in which the Participant
participates. A Termination by a consultant or non-employee director shall
in no event be considered a Retirement.
(s) Stock. The term "Stock" shall mean shares of common stock of the
Company.
(t) Subsidiary. The term "Subsidiary" means any business or entity in
which at any relevant time the Company holds at least a 50% equity (voting
or non-voting) interest.
(u) Termination. A Participant shall be considered to have experienced
a Termination if he or she ceases, for any reason, to be an employee,
consultant or non-employee director of the Company or any of its
Subsidiaries, including, without limitation, as a result of the fact that
the entity by which he or she is employed or engaged or of which he or she
is a director has ceased to be affiliated with the Company.
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<PAGE> 25
DIAMOND OFFSHORE DRILLING, INC.
COMMON
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
2000 ANNUAL MEETING OF STOCKHOLDERS ON MAY 16, 2000
The undersigned hereby appoints Lawrence R. Dickerson, William C. Long 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 2000 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 APPROVE THE DIAMOND
OFFSHORE DRILLING, INC. 2000 STOCK OPTION PLAN, FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT ACCOUNTANTS OF THE
COMPANY FOR FISCAL YEAR 2000 AND IN ACCORDANCE WITH THE DISCRETION OF THE
PERSONS DESIGNATED ABOVE WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY
COME BEFORE THE MEETING.
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<PAGE> 26
<TABLE>
<CAPTION>
<S> <C>
Please mark
your votes as
indicated in [X]
this example
Item 1. Election of Directors NOMINEES: James S. Tisch, Lawrence R. Dickerson, Alan R.
Batkin, Herbert C. Hofmann, Arthur L. Rebell, Michael H. Steinhardt
and Raymond S. Troubh.
FOR all nominees listed WITHHOLD AUTHORITY
to the right (except as to vote for all nominees INSTRUCTION: To withhold authority to vote for
marked to the contrary) listed to the right. individual nominees, write their name(s) below.
[ ] [ ] -------------------------------------------------------------------
Item 2. Proposal to approve the Diamond Offshore Drilling, Inc. 2000 Stock
Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 3. Proposal to ratify the appointment of Deloitte & Touche LLP as the Item 4. In their discretion, upon such other matters
Independent Public Accountants of the Company for fiscal year 2000. that may properly come before the meeting and any
adjournments or postponements thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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: ___________________________, 2000
________________________________________
Signature of Stockholder
________________________________________
Signature if held jointly
</TABLE>
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