UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Preliminary Proxy Statement. [ ] Confidential, for Use of the
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Rule 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) of
Section 240.14a-12.
Diamond Offshore Drilling, Inc.
(Name of Registrant as Specified in Its Charter)
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(DIAMOND OFFSHORE DRILLING, INC. LOGO)
DIAMOND OFFSHORE DRILLING, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2004
To the Stockholders of
Diamond Offshore Drilling, Inc.:
NOTICE IS HEREBY GIVEN THAT the 2004 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 18, 2004 at 11:30 a.m., local time (the "Annual Meeting") for the following
purposes:
(1) To elect seven directors to serve until the 2005 annual meeting of
stockholders;
(2) To consider and act upon a proposal to approve the Amended and
Restated Diamond Offshore Drilling, Inc. 2000 Stock Option Plan;
(3) To ratify the appointment of the Company's independent auditors
for fiscal year 2004; and
(4) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Company has fixed the close of business on March 22, 2004 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 amended and
restated Stock Option Plan and FOR the ratification of the appointment of the
independent auditors for the Company named in such Proxy Statement. The list of
stockholders of the Company may be examined at the executive offices of the
Company at 15415 Katy Freeway, Suite 100, Houston, Texas 77094.
Further information regarding the Annual Meeting is set forth in the
attached Proxy Statement.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN
AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED POSTPAID ENVELOPE. THE
PROXY IS REVOCABLE AND WILL NOT BE USED IF YOU ARE PRESENT 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
Vice President, General Counsel and
Secretary
March 29, 2004
15415 Katy Freeway
Houston, Texas 77094
(DIAMOND OFFSHORE DRILLING, INC. LOGO)
PROXY STATEMENT
DIAMOND OFFSHORE DRILLING, INC.
2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 2004
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 2004 Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held on May 18, 2004, 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, Suite 100, 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 22, 2004 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 129,322,455 shares of Common Stock, which is
the Company's only class of voting securities outstanding. 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 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. 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 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 ADP Investor Communication Services, 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 and for or against each 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 2, 2004.
The date of this Proxy Statement is March 29, 2004.
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
outstanding shares of Common Stock (based upon Schedule 13D and Schedule 13G
filings by such persons with the Securities and Exchange Commission (the
"Commission")). The percentages are calculated based on the amount of
outstanding securities as of March 22, 2004, excluding securities held by or for
the account of the Company.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- ------------------------------------- -------------------- --------
Common Stock........ Loews Corporation 70,104,620(1) 54.2%
667 Madison Avenue
New York, NY 10021-8087
Common Stock........ Merrill Lynch & Co., Inc.(2) 9,401,180(2) 7.3%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10381
Common Stock........ FMR Corp.(3) 11,752,716(3) 9.1%
82 Devonshire Street
Boston, MA 02109
Common Stock........ T. Rowe Price Associates, Inc.(4) 9,108,267(4) 7.0%
100 East Pratt Street
Baltimore, MD 21202
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(1) Loews Corporation ("Loews") has sole investment power and sole voting power
over the shares.
(2) Merrill Lynch & Co., Inc. (on behalf of Merrill Lynch Investment Managers)
has shared investment power and shared voting power over the shares.
(3) Information based solely on a Schedule 13G/A filed with the Commission
jointly by FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson. Such
Schedule 13G/A indicates that FMR Corp. has sole investment power over the
shares and that Mr. Johnson is Chairman of FMR Corp. and Ms. Johnson is a
director of FMR Corp., and may be deemed members of a controlling group with
respect to FMR Corp. Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp., was the beneficial owner of the shares of Common
Stock (including 357,946 shares resulting from the assumed exchange of
exchangeable debt securities of Loews which, by their terms, are
exchangeable by the holder for shares of Common Stock) in its capacity as
investment advisor to various registered investment companies.
(4) T. Rowe Price Associates, Inc. has sole investment power over the shares and
sole voting power over 1,406,456 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 the seven nominees for the Board of Directors, FOR the approval of
the Company's Amended and Restated 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.
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SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table shows the amount and nature of beneficial ownership of
the Common Stock and of the common stock, par value $1.00 per share, of Loews
("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 March 22,
2004. All directors and executive officers of the Company individually and as a
group own less than 1% of the Common Stock of the Company. None of the directors
or executive officers of the Company owns any shares of Loews's Carolina Group
Stock. 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.
COMPANY LOEWS % OF LOEWS
NAME OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK COMMON STOCK
------------------------ ------------ ------------ ------------
James S. Tisch(1)........................... 66,250 3,075,500 1.7%
Lawrence R. Dickerson(2).................... 49,871 0 *
Alan R. Batkin(3)........................... 8,000 0 *
Charles L. Fabrikant(4)..................... 274,200 0 *
Herbert C. Hofmann(5)....................... 7,500 19,250 *
Arthur L. Rebell(6)......................... 7,500 37,500 *
Raymond S. Troubh(7)........................ 12,000 10,000 *
Rodney W. Eads(8)........................... 14,500 0 *
David W. Williams(9)........................ 31,782 0 *
John L. Gabriel, Jr.(10).................... 18,175 0 *
All Directors and Executive Officers as a
Group(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11).. 537,740 3,142,250 1.7%
---------------
* Less than 1% of the Loews Common Stock.
(1) The number of shares of Company Common Stock includes 61,250 shares of
Company Common Stock issuable upon the exercise of options granted under
the Company's 2000 Stock Option Plan which are or will become exercisable
within 60 days of March 22, 2004. The number of shares of Loews Common
Stock includes 50,000 shares of Loews Common Stock issuable upon the
exercise of options granted under the Loews Corporation Stock Option Plan
which are currently exercisable. The number of shares of Loews Common Stock
also includes 1,467,787 shares of Loews Common Stock held by trusts of
which Mr. Tisch is the managing trustee and beneficiary and 100,000 shares
of Loews Common Stock held by a charitable foundation for which Mr. Tisch
has shared voting and investment power.
(2) Includes 1,996 shares held by virtue of Mr. Dickerson's investment in
Company Common Stock pursuant to the Retirement Plan (as hereinafter
defined), in which he shares voting and investment power with his spouse.
Also includes 47,875 shares of Company Common Stock issuable upon the
exercise of options granted under the Company's 2000 Stock Option Plan
which are or will become exercisable within 60 days of March 22, 2004.
(3) Includes 7,000 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 22, 2004. In addition, Mr.
Batkin holds 1,000 shares of Company Common Stock in which he shares voting
and investment power with his spouse.
(4) Includes 260,000 shares of Company Common Stock held by SEACOR SMIT Inc.,
in which shares Mr. Fabrikant shares voting and investment power. Mr.
Fabrikant disclaims beneficial ownership of such shares.
(5) Includes 7,000 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 22, 2004. The number of
shares of Loews Common Stock represents 19,250 shares of Loews
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Common Stock issuable upon the exercise of options granted under the Loews
Corporation Stock Option Plan which are currently exercisable.
(6) Includes 7,000 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 22, 2004. The number of
shares of Loews Common Stock includes 23,500 shares of Loews Common Stock
issuable upon the exercise of options granted under the Loews Corporation
Stock Option Plan which are currently exercisable.
(7) Includes 7,000 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 22, 2004.
(8) Includes 14,500 shares of Company Common Stock issuable upon the exercise
of options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 22, 2004.
(9) Includes 1,157 shares held by virtue of Mr. Williams' investment in Company
Common Stock pursuant to the Retirement Plan, in which he shares voting and
investment power with his spouse. Also includes 30,625 shares of Company
Common Stock issuable upon the exercise of options granted under the
Company's 2000 Stock Option Plan which are or will become exercisable
within 60 days of March 22, 2004.
(10) Includes 1,300 shares held by virtue of Mr. Gabriel's investment in Company
Common Stock pursuant to the Retirement Plan, in which he shares voting and
investment power with his spouse. Also includes 16,875 shares of Company
Common Stock issuable upon the exercise of options granted under the
Company's 2000 Stock Option Plan which are or will become exercisable
within 60 days of March 22, 2004.
(11) The number of shares of Company Common Stock owned by all directors and
executive officers as a group includes 5,462 shares of Company Common Stock
beneficially owned, as of March 22, 2004, and 42,500 shares of Company
Common Stock issuable upon the exercise of options granted under the
Company's 2000 Stock Option Plan which are or will become exercisable
within 60 days of March 22, 2004 by executive officers of the Company who
are not Named Executive Officers. See "Executive Compensation." Investment
and voting power with respect to shares owned by Mr. Krenek, Vice President
and Chief Financial Officer, and Mr. Vecchio, Senior Vice
President -- Technical Services, is shared with each such 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 2003, the Company believes that no director, executive officer
or beneficial owner of more than ten percent of the Common Stock failed to file
a Section 16(a) report on a timely basis during 2003.
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ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Company's Board of Directors consists of seven directors. 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 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, Charles L. Fabrikant, Herbert C. Hofmann, Arthur L. Rebell 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 2005 annual
meeting of stockholders.
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, Fabrikant, Hofmann, Rebell and
Troubh, each of whom is now a director. 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 it is expected that the proxies will be voted 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.
AGE AS OF
JANUARY 31, DIRECTOR
NAME POSITION 2004 SINCE
---- ----------------------------------- ----------- --------
James S. Tisch(1).................. Chairman of the Board and Chief 51 1989
Executive Officer
Lawrence R. Dickerson(1)........... Director, President and Chief 51 1998
Operating Officer
Alan R. Batkin(2).................. Director 59 1999
Charles L. Fabrikant(2)............ Director 59 2004
Herbert C. Hofmann(1).............. Director 61 1992
Arthur L. Rebell................... Director 62 1996
Raymond S. Troubh(2)............... Director 77 1995
---------------
(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 November 1995
and as a director of the Company since June 1989. Mr. Tisch has served as
President and 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, a 90% owned subsidiary of Loews, Vail
Resorts, Inc. and BKF Capital Group, Inc.
Lawrence R. Dickerson has served as President, Chief Operating Officer and
a director of the Company since March 1998. Mr. Dickerson has also served on the
United States Commission on Ocean Policy since 2001.
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 Cantel Medical Corp.
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Charles L. Fabrikant has served as a director of the Company since January
2004. Mr. Fabrikant has served as Chairman of the Board, Chief Executive Officer
and President of SEACOR SMIT Inc., which operates offshore support vessels
servicing oil and gas exploration and development, since 1989. Mr. Fabrikant is
also President of Fabrikant International Corporation, a privately owned
corporation engaged in marine operations and investments.
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.
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 is chairman of the board of directors of
Enron Corp. and also serves as a director of General American Investors Company,
Gentiva Health Services, Inc., Petrie Stores Liquidating Trust (Trustee), Triarc
Companies, Inc. and WHX Corporation.
DIRECTOR INDEPENDENCE
Because more than 50% of the Company's Common Stock is held by Loews, the
Company is a "controlled company" under the corporate governance listing
standards of the New York Stock Exchange (the "NYSE Listing Standards"). The
NYSE Listing Standards do not require controlled companies to maintain a
majority of independent directors and, accordingly, the Board of Directors has
determined that it is appropriate not to have a Board comprised of a majority of
independent directors. The Board of Directors has determined that the following
directors are independent under the NYSE Listing Standards ("Independent
Directors"): Mr. Batkin, Mr. Fabrikant and Mr. Troubh. The Board considered all
relevant facts and circumstances and applied the independence guidelines
described below in determining that none of the Independent Directors has any
material relationship with the Company or its subsidiaries.
The Board has established guidelines to assist it in determining director
independence. Under these guidelines, a director would not be considered
independent if:
(1) any of the following relationships existed during the past three years:
(i) the director is an employee of the Company or any of its
subsidiaries or has received more than $100,000 per year in direct
compensation from the Company or any of its subsidiaries, other than
director and committee fees and pension or certain other forms of deferred
compensation for prior service;
(ii) the director provided significant advisory or consultancy
services to the Company or any of its subsidiaries or is affiliated with a
company or a firm that has (annual revenue of the greater of 2% of the
other company's consolidated gross revenues or $1 million is considered
significant);
(iii) the director has been a significant customer or supplier of the
Company or any of its subsidiaries or affiliated with a company or firm
that is (annual revenue of the greater of 2% of the other company's
consolidated gross revenues or $1 million is considered significant);
(iv) the director has been employed by or affiliated with an internal
or external auditor that within the past three years provided services to
the Company or any of its subsidiaries; or
(v) the director has been employed by another company where any of the
Company's current executives serve on that company's compensation
committee;
(2) the director's spouse, parent, sibling, child, mother- or
father-in-law, son- or daughter-in-law or brother- or sister-in-law, or any
other person sharing the director's home (other than a domestic employee), has a
relationship described in (1) above;
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(3) the director has any other relationships with the Company or any of its
subsidiaries or with members of senior management that the Board of Directors
determines to be material.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has seven members and two standing
committees, the Executive Committee and the Audit Committee. The Company does
not have a standing nominating committee or a standing compensation committee.
Because the Company is a "controlled company" under the NYSE Listing Standards,
such committees are not required and the Board of Directors has determined that
it is appropriate not to have such committees. The entire Board of Directors
participates in the consideration of director nominees and, except as discussed
below in the Board of Directors Report on Executive Compensation, the Executive
Committee participates in the consideration of executive compensation.
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
and may exercise all the powers 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.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors consists of three members,
Mr. Batkin, Mr. Troubh and Mr. Fabrikant. The primary function of the Audit
Committee is to assist the Board of Directors in fulfilling its responsibility
to oversee management's conduct of the Company's financial reporting process,
including review of the financial reports and other financial information of the
Company, the Company's system of internal accounting controls, the Company's
compliance with legal and regulatory requirements, the qualifications and
independence of the Company's independent auditors and the performance of the
Company's internal audit staff and independent auditors. The Audit Committee has
sole authority to appoint, retain, compensate, evaluate and terminate the
independent auditors and to approve all engagement fees and terms for the
independent auditors.
The Company's Board of Directors has adopted a written Audit Committee
charter which can be found on the Company's website at www.diamondoffshore.com
and is available in print to any stockholder who requests a copy by writing to
the Company's Corporate Secretary. In addition, the Audit Committee charter is
attached as Exhibit A to this proxy statement. The Board has determined that
each member of the Audit Committee is an Independent Director and satisfies the
additional independence and other requirements for Audit Committee members
provided for in the listing standards of the New York Stock Exchange. The Board
has determined that Mr. Batkin qualifies as an "audit committee financial
expert" under the rules of the Commission.
DIRECTOR NOMINATING PROCESS
The Board of Directors will, subject to the terms of the Company's
Certificate of Incorporation and Bylaws, review candidates recommended by
stockholders for positions on the Board of Directors. The Bylaws provide that
any stockholder entitled to vote generally in the election of directors at a
meeting of stockholders who complies with the procedures set forth in the Bylaws
may nominate persons for election to the Board of Directors, subject to any
conditions, restrictions and limitations imposed by the Certificate of
Incorporation or Bylaws. These procedures include a requirement that the
Corporate Secretary receive timely written notice of the nomination, which, for
the 2005 annual meeting of stockholders, means that the nomination must be
received no later than February 17, 2005. Any notice of nomination must be
addressed to Diamond Offshore Drilling, Inc., 15415 Katy Freeway, Suite 100,
Houston, Texas 77094, Attention: Corporate Secretary and
7
must include, in addition to any other information or matters required by the
Certificate of Incorporation or Bylaws, the following:
(i) the name and address of the stockholder submitting the nomination
and of the person or persons to be nominated;
(ii) a representation that the stockholder is a holder of capital
stock of the Company entitled to vote at the meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons
specified in the notice;
(iii) a description of all contracts, arrangements or understandings
between the stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(iv) such other information regarding each nominee proposed by the
stockholder as would be required to be included in a proxy or information
statement filed pursuant to the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder; and
(v) the consent of each nominee to serve as a director of the Company
if so elected.
Nominations of directors may also be made by the Board of Directors or as
otherwise provided in the Company's Certificate of Incorporation or the Bylaws.
In determining whether it will recommend or support a candidate for a position
on the Board of Directors, the Board considers those matters it deems relevant,
which may include, but are not limited to, integrity, judgment, business
specialization, technical skills, independence, potential conflicts of interest
and the present needs of the Board of Directors. The Board retains its full
discretion in making such determinations, and also takes into account any
restrictions, requirements or limitations contained in the Company's Certificate
of Incorporation or Bylaws, or any other agreement to which the Company is a
party.
EXECUTIVE SESSIONS OF NON-MANAGEMENT DIRECTORS
The Company's non-management directors will meet in regular executive
sessions without management participation. In addition, an executive session
including only the Independent Directors will be held at least annually. Alan R.
Batkin has been selected by the Board of Directors to act as the Lead Director
and will serve as the presiding director at these meetings.
DIRECTOR ATTENDANCE AT MEETINGS
During 2003 there were five meetings of the Board of Directors, eight
meetings of the Audit Committee and the Executive Committee took action by
unanimous written consent on eight occasions. During 2003, each incumbent
director of the Company, then in office, attended not less than 75% of the total
number of meetings of the Board of Directors and committees of the Board on
which that director served. The Company does not have a specific policy
regarding attendance by directors at annual meetings of stockholders, but the
Board encourages all directors to attend the annual meeting and recognizes that
circumstances may prevent attendance from time to time. Six of the Company's
seven directors, then in office, attended its 2003 Annual Meeting of
Stockholders.
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. Each director who is not an employee of the Company receives
a quarterly award of options to purchase 500 shares of the Company's Common
Stock in accordance with the terms of the Company's 2000 Stock Option Plan. The
options vest immediately and have a term of five years from the date of grant.
The Chairman of the Audit Committee also receives a retainer of $2,500 per
annum, payable quarterly. 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 $1,500 for attendance at
8
each meeting of the Board of Directors and $1,000 for attendance at each meeting
of the Audit Committee in addition to the reasonable costs and expenses incurred
by such directors in relation to their services.
CODE OF ETHICS
The Company has a Code of Business Conduct and Ethics which applies to all
of the Company's directors, officers and employees, including the Company's
principal executive officer, principal financial officer and principal
accounting officer. This Code can be found on the Company's website at
www.diamondoffshore.com and is available in print to any stockholder who
requests a copy by writing to the Company's Corporate Secretary. The Company
intends to post changes to or waivers of this Code for its principal executive
officer, principal financial officer and principal accounting officer on its
website.
AUDIT COMMITTEE REPORT
As discussed above under the heading "Committees of the Board of
Directors -- Audit Committee," the primary role of the Board's Audit Committee
is to oversee the Company's financial reporting process and manage its
relationship with the independent auditors. In fulfilling its responsibilities,
the Audit Committee has reviewed and discussed the Company's audited financial
statements for the year ended December 31, 2003 with the Company's management
and independent auditors. The Audit Committee has also discussed with the
Company's independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61, "Communication with Audit Committees," as amended.
In addition, the Audit Committee has discussed with the independent auditors
their independence in relation to the Company and its management, including the
matters in the written disclosures provided to the Audit Committee as required
by Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," and has determined that the provision of non-audit services
provided by the auditors is compatible with maintaining the auditors'
independence.
The members of the Audit Committee rely without independent verification on
the information provided to them by management and the independent auditors and
on management's representation that the Company's financial statements have been
prepared with integrity and objectivity. They do not provide any expert or
special assurance as to the Company's financial statements or any professional
certification as to the independent auditors' work. Accordingly, the Audit
Committee's oversight does not provide an independent basis to determine that
management has applied appropriate accounting and financial reporting principles
or internal controls and procedures, that the audit of the Company's financial
statements has been carried out in accordance with generally accepted auditing
standards, that the Company's financial statements are presented in accordance
with generally accepted accounting principles, or that the Company's auditors
are in fact "independent."
Based on the review and discussions referred to above, the Audit Committee
recommended to the Company's Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2003, which has been filed with the Commission.
THE AUDIT COMMITTEE
Alan R. Batkin, Chairman
Charles L. Fabrikant
Raymond S. Troubh
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 2003, the Company had no compensation
committee, although the Executive Committee of the Board of Directors performed
certain similar functions with respect to the compensation and bonuses of the
Company's executive officers. 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 year by persons
9
who were members of the Company's Board of Directors, including James S. Tisch
and Lawrence R. Dickerson, executive officers of the Company. No executive
officer of the Company served on the board of directors or compensation
committee of any other entity that has or had an executive officer who served as
a member of the Board of Directors of the Company during 2003.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information regarding securities authorized
for issuance under the Company's equity compensation plan as of December 31,
2003:
EQUITY COMPENSATION PLAN INFORMATION
----------------------------------------------------------------------------
NUMBER OF SECURITIES NUMBER OF SECURITIES REMAINING
TO BE ISSUED UPON WEIGHTED-AVERAGE AVAILABLE FOR FUTURE ISSUANCE
EXERCISE OF EXERCISE PRICE OF UNDER EQUITY COMPENSATION
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
PLAN CATEGORY (a) (b) (c)
------------- -------------------- -------------------- ------------------------------
Equity compensation plans
approved by security
holders.................... 592,400 $28.66 157,600
Equity compensation plans not
approved by security
holders.................... -- -- --
------- ------ -------
Total...................... 592,400 $28.66 157,600
======= ====== =======
10
EXECUTIVE COMPENSATION
The following table shows for the years ended December 31, 2003, 2002 and
2001 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, 2003 (collectively, the "Named Executive Officers") for
service in all capacities with the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION(1) SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS COMPENSATION(3)
--------------------------- ---- ---------- ---------- ------------ ---------------
James S. Tisch....................... 2003 $300,000 $ -- 30,000 $15,189
Chairman of the Board and 2002 300,000 -- 36,250 15,009
Chief Executive Officer 2001 300,000 -- 18,750 14,522
Lawrence R. Dickerson................ 2003 534,750 175,000 22,500 33,524
President and Chief Operating
Officer 2002 516,000 185,000 27,500 31,589
2001 472,500 210,000 15,000 29,505
David W. Williams.................... 2003 445,095 145,000 15,000 28,210
Executive Vice President 2002 429,700 175,000 18,125 26,790
2001 393,750 175,000 9,375 24,855
Rodney W. Eads....................... 2003 330,609 88,000 8,000 21,537
Senior Vice President -- 2002 319,174 90,000 10,750 20,630
Worldwide Operations 2001 292,778 125,000 3,750 18,820
John L. Gabriel, Jr. ................ 2003 312,985 84,000 8,000 20,294
Senior Vice President -- 2002 294,383 90,000 10,375 19,090
Contracts and Marketing 2001 275,943 130,000 5,625 17,101
---------------
(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 amounts shown for 2003 include (i) the Company's contributions under the
Retirement Plan referred to below in the amount of $7,500 to each Named
Executive Officer, (ii) the Company's matching contribution under the
Retirement Plan referred to below in the amount of $3,000 to each Named
Executive Officer, except Mr. Tisch, (iii) the Company's contributions for
group term life insurance, spouse/dependent life insurance, and long-term
disability insurance in the amount of $3,505 to each Named Executive Officer
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. Tisch,
$4,184; Mr. Dickerson, $19,419; Mr. Williams, $14,205; Mr. Eads, $7,532; and
Mr. Gabriel, $6,289. 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% of the
participant's defined compensation and the Company matches 25% of the first 6%
of each participant's compensation contributed. Participants are fully vested
immediately upon enrollment in the plan. Up to 25% of the amount of such
contributions to the Retirement Plan may be used by the participants to purchase
shares of Common Stock of the Company.
11
In addition, under the Company's Deferred Compensation and Supplemental
Executive Retirement Plan, the Company contributes to participants any portion
of the 3.75% 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% of
base compensation and/or up to 100% 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.
STOCK OPTION PLAN
Under the terms of the Company's 2000 Stock Option Plan, certain of the
Company's employees, consultants and non-employee directors may be granted
options to purchase Common Stock at no less than 100% of the fair market value
of the Common Stock on the date the option is granted. The 2000 Stock Option
Plan is administered by the Board of Directors. Such plan authorizes the
issuance of options to acquire up to 750,000 shares of the Company's Common
Stock, none of which had been exercised as of December 31, 2003. Unless
otherwise specified by the Board of Directors at the time of the grant, stock
options have a maximum term of ten years, subject to earlier termination under
certain conditions, and vest in four equal, annual installments over four years.
The following table shows for the year ended December 31, 2003 stock
options granted by the Company to the Named Executive Officers.
OPTIONS GRANTED IN 2003
NO. OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION PRESENT VALUE AT
NAME GRANTED 2003(1) SHARE DATE GRANT DATE(2)
---- ---------- ------------ --------- ---------- ----------------
James S. Tisch................... 7,500 4.34% $19.78 4/22/2013 $54,000
7,500 4.34 21.23 7/01/2013 55,875
7,500 4.34 19.08 10/01/2013 53,550
7,500 4.34 20.77 12/31/2013 59,325
Lawrence R. Dickerson............ 5,625 3.25 19.78 4/22/2013 40,500
5,625 3.25 21.23 7/01/2013 41,906
5,625 3.25 19.08 10/01/2013 40,163
5,625 3.25 20.77 12/31/2013 44,494
David W. Williams................ 3,750 2.17 19.78 4/22/2013 27,000
3,750 2.17 21.23 7/01/2013 27,938
3,750 2.17 19.08 10/01/2013 26,775
3,750 2.17 20.77 12/31/2013 29,663
Rodney W. Eads................... 2,000 1.16 19.78 4/22/2013 14,400
2,000 1.16 21.23 7/01/2013 14,900
2,000 1.16 19.08 10/01/2013 14,280
2,000 1.16 20.77 12/31/2013 15,820
John L. Gabriel, Jr. ............ 2,000 1.16 19.78 4/22/2013 14,400
2,000 1.16 21.23 7/01/2013 14,900
2,000 1.16 19.08 10/01/2013 14,280
2,000 1.16 20.77 12/31/2013 15,820
---------------
(1) This calculation is based on options to purchase a total of 173,000 shares
of Common Stock granted to employees under the Company's 2000 Stock Option
Plan during 2003.
(2) The per share weighted-average fair value of stock options granted during
2003 on April 22, July 1, October 1 and December 31 was $7.20, $7.45, $7.14
and $7.91 per share, respectively. The fair value of each stock option
granted was estimated on the date of grant using the Binomial Option Pricing
Model.
12
Assumptions used in the model included a weighted average risk-free interest
rate of 3.40%, an expected life of options of seven years, expected
volatility of the Company's Common Stock price of 32% and an expected
dividend yield on the Company's Common Stock of 2.09%.
The following table provides information on the value of unexercised stock
options, as of December 31, 2003, held by each of the Named Executive Officers.
None of the Named Executive Officers exercised any stock options during fiscal
2003 and none of the Named Executive Officers held any stock appreciation rights
at December 31, 2003.
YEAR END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2003 DECEMBER 31, 2003
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
James S. Tisch................................ 35,000 70,000 -- $10,725
Lawrence R. Dickerson......................... 27,625 53,375 -- 8,044
David W. Williams............................. 17,500 35,000 -- 5,363
Rodney W. Eads................................ 8,625 14,875 -- 2,860
John L. Gabriel, Jr........................... 10,375 15,625 -- 2,860
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
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 and, as discussed below, the
compensation of the Company's Chief Executive Officer is reviewed and approved
by the Company's Independent Directors.
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, annual variable
performance incentives payable in cash, and stock options for the achievement of
financial performance goals.
SALARIES
Every salaried employee of the Company, including Company officers, 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
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
13
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. The Executive Committee did establish a bonus pool (the "Bonus Pool") for
2003.
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. These bonuses for 2003 are payable in annual installments (25%,
15%, 15%, 15%, 15% and 15%) over the six calendar year period following 2003 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
2003 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 or for purposes of the Diamond
Offshore Management Bonus Program.
STOCK OPTION PLAN
Stock options under the Company's 2000 Stock Option Plan may be granted to
optionees selected from time to time by the Board of Directors. The purposes of
the Stock Option Plan are to allow the Company and its subsidiaries to attract
and retain qualified employees, consultants and non-employee directors, to
motivate these individuals to achieve the Company's long-term goals and to
reward them upon achievement of those goals. During 2003, options to acquire
173,000 shares of the Company's Common Stock were granted under the Stock Option
Plan. All of these options were outstanding as of December 31, 2003.
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.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Decisions regarding compensation (salary and bonus) of the Company's Chief
Executive Officer for 2003 were made by the Company's Independent Directors.
Accordingly, 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 2003 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
Charles L. Fabrikant
Herbert C. Hofmann
Arthur L. Rebell
Raymond S. Troubh
14
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 reimburses 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
$356,785 for services performed by Loews in 2003.
Registration Rights Agreement. Under a Registration Rights Agreement dated
as of October 16, 1995 (the "Registration Rights Agreement"), as amended,
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
filed a registration statement for a continuous offering of such shares for
delivery upon the exchange of Loews Notes, and agreed 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 require Loews to
suspend the use of any resale prospectus or prospectus supplement included in
such registration statement 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
15
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.
Other. During 2003 the Company made payments of $753,331 to Ernst & Young
LLP for tax and other consulting services. The wife of Lawrence R. Dickerson,
the Company's President and Chief Operating Officer and a Director of the
Company, is an audit partner at this firm.
16
CUMULATIVE TOTAL STOCKHOLDER RETURN
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 five year period ended December 31, 2003.
COMPARISON OF 1999 - 2003 CUMULATIVE TOTAL RETURN(1)
INDEXED TOTAL STOCKHOLDER RETURN
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------------------------------------------
DEC. 31, 1998 DEC. 31, 1999 DEC. 31, 2000 DEC. 31, 2001 DEC. 31, 2002 DEC. 31, 2003
--------------------------------------------------------------------------------------------------------------------
Company 100 131 174 134 99 95
S&P 500 100 121 110 97 76 97
Competitor Group(2) 100 151 205 147 136 149
---------------
(1) Total return assuming reinvestment of dividends. Dividends for the periods
reported include quarterly dividends of $0.125 per share of Common Stock
paid during 2003, 2002, 2001, 2000 and 1999 except that in the last quarter
of 2003 the dividend was $0.0625 per share. Assumes $100 invested on
December 31, 1998, 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,
Halliburton Company, Noble Drilling Corporation, Schlumberger Ltd.,
Tidewater Inc., and Transocean Inc. Total return calculations were weighted
according to the respective company's market capitalization.
The foregoing information contained under the caption "Cumulative Total
Stockholder Return" shall not be deemed to be "soliciting material" or to be
"filed" with the Commission, nor shall such information be incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference in such filing.
17
APPROVAL OF THE AMENDED AND RESTATED DIAMOND OFFSHORE
2000 STOCK OPTION PLAN
(PROPOSAL NO. 2)
On February 25, 2004, the Board of Directors approved, subject to
stockholder approval, an amendment to the Company's 2000 Stock Option Plan which
would increase the number of shares of Common Stock authorized for issuance
under the plan from 750,000 to 1,500,000 shares. The Board of Directors has
directed that the Amended and Restated 2000 Stock Option Plan (as so amended and
restated, the "Stock Option Plan") be submitted to the Company's stockholders
for approval at the Annual Meeting.
The purpose of the Stock Option Plan is to assist the Company in its
efforts to attract and retain qualified employees and consultants and to assist
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.
REASONS FOR THE PROPOSED AMENDMENT
The primary reason for the proposed amendment to increase the number of
shares of Common Stock authorized for issuance under the Stock Option Plan is to
provide sufficient shares for continued issuance of stock options in accordance
with the purpose of the Stock Option Plan. As of March 29, 2004, 594,400 shares
of Common Stock were reserved for issuance pursuant to options outstanding under
the Company's 2000 Stock Option Plan and no options granted under the Company's
2000 Stock Option Plan had been exercised. As a result, as of that date the
Company had 155,600 shares of Common Stock remaining available for issuance
pursuant to the Company's 2000 Stock Option Plan. If the Stock Option Plan is
approved, an additional 750,000 shares of Common Stock will be available for
issuance under the Stock Option Plan. On March 26, 2003 the closing price of the
Company's Common Stock, as reported by the New York Stock Exchange, was $23.99
per share.
PLAN BENEFITS
Except as otherwise described herein, benefits under the Stock Option Plan
to the Named Executive Officers and the Company's executive officers, directors,
employees and consultants are not currently determinable because the Stock
Option Plan is discretionary.
DESCRIPTION OF THE STOCK OPTION PLAN
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 B attached to this Proxy Statement.
Options Granted. During 2003, options to acquire 173,000 shares of the
Company's Common Stock were granted under the Company's 2000 Stock Option Plan.
All of these options were outstanding as of December 31, 2003. As of March 29,
2004, options for 2,000 shares of Common Stock had been granted under the
Company's 2000 Stock Option Plan during 2004, and options for a total of 594,400
shares of Common Stock had been granted under such plan and were outstanding,
none of which had been exercised.
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 3,600 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
1,500,000; 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
18
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 terms.
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.
19
Registration of Common Stock Issued Under the Stock Option Plan. The
Company intends that the additional 750,000 shares of Common Stock covered by
the Stock Option Plan pursuant to its amendment 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. Subject to the discussion below regarding the
federal alternative minimum tax ("AMT"), no taxable income will be realized by
an option holder upon the grant or exercise of an ISO. ISO 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
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.
Different rules apply to option holders who are subject to the AMT. For
example, the amount by which the fair market value of the stock acquired by
exercising an incentive stock option exceeds the exercise price is included in
the calculation of AMT. Because the effect of the AMT on a specific option
holder depends on the option holder's particular tax situation, an option holder
granted incentive stock options should consult his or her own tax counsel
regarding the effect of the AMT on such option holder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 3)
The Audit Committee of the Board of Directors has selected Deloitte &
Touche LLP to serve as independent auditors for 2004. Although it is not
required to do so, the Board of Directors wishes to submit the selection of
Deloitte & Touche LLP for ratification by the Company's stockholders at the
Annual Meeting. Even if this selection is ratified by stockholders at the Annual
Meeting, the Audit Committee may in its discretion change the appointment at any
time during the year if it determines that such a change would be in the best
interests of the Company and its stockholders. If the Company's stockholders do
not ratify the selection of Deloitte & Touche LLP, the Audit Committee will
reconsider its selection.
20
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.
Deloitte & Touche LLP and its affiliates billed the following fees for
professional services rendered to the Company and its subsidiaries for the years
ended December 31, 2003 and 2002:
Audit Fees. The aggregate fees billed for the audit of the Company's
annual financial statements and for the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q and various statutory
audits for certain foreign subsidiaries of the Company for 2003 and 2002 were
$330,697 and $307,545, respectively.
Audit-Related Fees. The aggregate fees billed for audit-related services
for 2003 and 2002 were $63,350 and $42,910, respectively. These fees relate to
employee benefit plan audits and the audit of the annual financial statements of
one of the Company's subsidiaries in connection with regulatory compliance. In
addition, the fees for 2003 included implementation assistance, to the extent
permitted, in connection with Section 404 of the Sarbanes-Oxley Act. All
audit-related services for fiscal years 2003 and 2002 were 100% approved by the
Audit Committee.
Tax Fees. The aggregate fees billed for tax services for 2003 and 2002
were $35,280 and $47,071, respectively. These fees relate to tax return
preparation and tax planning and consulting. All tax services for fiscal years
2003 and 2002 were 100% approved by the Audit Committee.
All Other Fees. There were no fees billed for services other than those
included above for 2003 and 2002.
AUDITOR ENGAGEMENT AND PRE-APPROVAL POLICY
In order to assure the continued independence of the Company's independent
auditor, currently Deloitte & Touche LLP, the Audit Committee has adopted a
policy requiring its pre-approval of all audit and non-audit services performed
by the independent auditor. Under this policy, the Audit Committee annually
pre-approves certain limited, specified recurring services which may be provided
by Deloitte & Touche LLP, subject to maximum dollar limitations. All other
engagements for services which may be provided by Deloitte & Touche LLP must be
specifically pre-approved by the Audit Committee, or a designated committee
member to whom this authority has been delegated. Since its adoption of this
policy in July 2003, the Audit Committee or its designee has pre-approved all
engagements by the Company and its subsidiaries for services of Deloitte &
Touche LLP, including the terms and fees thereof, and concluded that such
engagements were compatible with the continued independence of Deloitte & Touche
LLP in serving as the Company's independent auditor.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
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.
21
COMMUNICATIONS WITH THE COMPANY AND OTHERS
Interested parties, including stockholders, wishing to communicate directly
with the Lead Director, other non-management directors or the Board as a whole
may do so by writing to Diamond Offshore Drilling, Inc., 15415 Katy Freeway,
Suite 100, Houston, Texas 77094, Attention: Corporate Secretary. Stockholders
should clearly specify in each communication the name of the individual director
or group of directors to whom the communication is addressed. All such
communications will be delivered to the director or directors to whom they are
addressed.
Stockholder proposals intended for inclusion in the Proxy Statement to be
issued in connection with the Company's 2005 annual meeting must be addressed
to: Diamond Offshore Drilling, Inc., 15415 Katy Freeway, Suite 100, Houston,
Texas 77094, Attention: Corporate Secretary, and must be received no later than
November 29, 2004.
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 29,
2004. If a proposal is received after such date, the Company's proxy for the
2005 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 2005 annual meeting of stockholders.
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
Vice President, General Counsel and
Secretary
22
EXHIBIT A
DIAMOND OFFSHORE DRILLING, INC.
AUDIT COMMITTEE CHARTER
(AS AMENDED AND RESTATED ON FEBRUARY 25, 2004)
---------------------
This Charter is intended as a component of the flexible governance
framework within which the Board, assisted by its committees, directs the
affairs of the Company. While it should be interpreted in the context of all
applicable laws, regulations and listing requirements, as well as in the context
of the Company's Certificate of Incorporation and By-Laws, it is not intended to
establish by its own force any legally binding obligations.
PURPOSE
The Audit Committee's primary function is to assist the Board of Directors
(the "Board") of Diamond Offshore Drilling, Inc. (the "Company") in fulfilling
its responsibility to oversee management regarding: (i) the conduct and
integrity of the Company's financial reporting to any governmental or regulatory
body, the public or other users thereof; (ii) the Company's systems of internal
accounting and financial and disclosure controls; (iii) the qualifications,
engagement, compensation, independence and performance of the Company's
independent auditors, their conduct of the annual audit, and their engagement
for any other services; (iv) the Company's legal and regulatory compliance; (v)
the Company's codes of ethics as established by management and the Board; and
(vi) the preparation of the audit committee report required by the rules of the
Securities and Exchange Commission ("SEC") to be included in the Company's
annual proxy statement.
COMMITTEE MEMBERSHIP
The Committee shall be comprised of three or more directors, as determined
by the Board from time to time, except to the extent that temporary vacancies
are created by the resignation or removal of a Committee member. The Board has
authority to appoint the Committee members, who serve at the pleasure of the
Board, and to designate the Committee Chairperson. Each member of the Committee
must satisfy the independence, experience, financial expertise and other
requirements of the New York Stock Exchange, the SEC and other applicable laws
and regulations. Committee members may not serve on the audit committees of more
than two other public companies unless approved by the Board and such approval
is disclosed in the Company's proxy statement. No member of the Committee may
receive, directly or indirectly, any consulting, advisory or other compensatory
fee from the Company other than (i) director's fees, which may be received in
cash, stock options or other in-kind consideration ordinarily available to
directors; (ii) a pension or other deferred compensation for prior services that
is not contingent on future service; and (iii) any other regular benefits that
other directors receive.
MEETINGS
The Committee shall meet as often as it determines, but not less frequently
than quarterly. The Committee shall periodically meet separately with
management, the internal auditors and the independent accountants. The Committee
shall also meet periodically in executive sessions without Company management
present. The Committee may request any employee or officer of the Company or its
outside counsel or independent accountants to attend a meeting or to meet with
the Committee or its advisors. The Committee may fix its own rules of procedure,
subject to the requirements of this Charter, stock exchange rules and applicable
laws and regulations.
AUTHORITY AND RESPONSIBILITIES
Company management is responsible for preparing financial statements. The
Committee's primary responsibility is oversight. To carry out this
responsibility, the Committee shall undertake the common
A-1
recurring activities described below, but may diverge from this list as
appropriate under the circumstances. The Committee is authorized to carry out
these activities and other actions reasonably related to the Committee's
purposes or assigned by the Board from time to time. The Committee may form and
delegate authority to sub-committees consisting solely of one or more members
when appropriate.
1. Oversight of the Independent Accountants. The Committee shall:
(a) have sole authority to directly appoint, retain, compensate,
evaluate and terminate the independent accountants and to approve all
engagement fees and terms, including mandatory pre-approval of all
engagements of the independent accountants in accordance with policies and
procedures adopted by the Committee from time to time or as required by
stock exchange rules or applicable laws or regulations;
(b) oversee the work of the independent accountants, including
resolution of disagreements between management and the independent
accountants regarding financial reporting, or relating to any audit report
or other audit, review or attest services provided by the independent
auditor, and the independent accountants shall report directly to the
Committee;
(c) at least annually, review reports from the independent accountants
regarding their internal quality-control procedures, any material issues
raised by the most recent internal quality-control review or peer review or
any regulatory or professional inquiry within the preceding five years, and
all relationships between the independent accountants and the Company;
(d) annually evaluate the qualifications, performance and independence
of the independent accountants and the lead partner, taking into account
the opinions of management and the internal auditors, and present its
conclusions to the Board;
(e) annually seek assurances that partners of the independent
accountants who are directly involved in the audit are rotated as required
by regulations or stock exchange rules and that no partner earns or
receives compensation based on the performance of any services for the
Company other than audit, review or attest services;
(f) consider annually whether, in addition to assuring the regular
rotation of the lead audit partner as required by law, in the interest of
assuring continuing independence of the independent auditor, the Company
should rotate its independent accounting firm on a regular basis;
(g) set policies for the Company's hiring of current or former
employees of the independent accountants;
(h) instruct the independent accountants that such firm is ultimately
accountable to the Board of Directors of the Company and the Committee, as
representatives of the shareholders;
(i) instruct the independent accountants to submit to the Committee
annually a formal written statement of the fees billed in each of the last
two fiscal years for each of the following categories of services rendered
by the independent accountants to the Company and each of its subsidiaries:
(i) the audit of their annual financial statements and the reviews of their
quarterly financial statements; (ii) assurance and related services not
included in clause (i) that are reasonably related to the performance of
the audit or review of financial statements, in the aggregate and by each
service; (iii) tax compliance, tax advice and tax planning services, in the
aggregate and by each service; and (iv) all other products and services
rendered by the independent accountants, in the aggregate and by each
service; and
(j) obtain from the independent accountants assurance that each audit
is conducted in a manner consistent with Section 10A of the Securities
Exchange Act of 1934, which sets forth certain procedures to be followed in
any audit of financial statements required under that Act.
2. Oversight of Financial Reporting and Controls. The Committee shall:
(a) meet with the independent accountants prior to any audit to
discuss the planning and staffing of the audit;
A-2
(b) review and discuss with management and the independent accountants
the annual audited financial statements and quarterly financial statements
to be included in the Company's reports filed with the SEC, including
Management's Discussion and Analysis of Financial Condition and Results of
Operations, prior to their public release;
(c) review and discuss the following with management and the
independent accountants, in connection with the Committee's review of the
Company's annual financial statements and, as appropriate, quarterly
financial statements and related disclosures:
- critical accounting policies and financial statement presentation,
including (i) key accounting decisions and judgments, (ii) any changes
required in the scope of the audit plan, (iii) significant changes in
the selection or application of accounting principles, the rationale
for such choices and the alternatives available under generally
accepted accounting principles ("GAAP"), including the ramifications
of the use of the alternative treatments and the treatment preferred
by the accounting firm, and (iv) any accounting and financial
reporting proposals that may have a significant impact on the
Company's financial reports;
- material written communications between the independent accountants
and management, including any "management" or "internal control"
letter or schedule of "unadjusted differences" issued or proposed to
be issued by the independent accountants and management's responses;
- any problems or difficulties encountered in the audit or review of the
financial statements, including any disagreements between management
and the independent accountants, limitations on the activities of the
independent accountants or any restrictions on the scope of activities
or access to required information, and management's responses;
- the effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, on the financial statements;
- any accounting adjustments that were noted or proposed by the
independent accountants but were "passed" (as immaterial or
otherwise);
- communications between the audit team and the independent accountants'
national office respecting auditing or accounting issues presented by
the engagement;
- the certifications made by the principal executive officer and
principal financial officer with respect to the Company's periodic
reports filed with the SEC;
- management's report on internal control over financial reporting and
the independent accountants' related attestation report and any
material changes in the Company's internal control over financial
reporting;
- any appointment and replacement of the director of the internal
auditing department; and
- major financial risk exposures and the steps management has taken to
monitor and control such exposures, including the Company's risk
assessment and risk management policies;
(d) review the type and presentation of information to be included in
earnings press releases (particularly any "pro forma" or "adjusted"
non-GAAP information), as well as financial information and earnings
guidance which management may provide to analysts and rating agencies;
provided, however, that such review need not take place in advance of each
earnings release or each instance in which guidance may be provided;
(e) annually review and discuss with the independent accountants and
management the Company's internal audit department and its audit plan,
responsibilities, budget and staffing;
(f) establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters;
A-3
(g) advise management, the internal auditing department and the
independent accountants that they are expected to provide to the Committee
a timely analysis of significant financial reporting issues and practices;
(h) consider any reports or communications (and management's and/or
the internal audit department's responses thereto) submitted to the
Committee by the independent auditors required by or referred to in
Statement of Accounting Standards 61; and
(i) inquire of the Company's Chief Executive Officer and Chief
Financial Officer as to the existence of any significant deficiencies in
the design or operation of internal controls that could adversely affect
the Company's ability to record, process, summarize and report financial
data, any material weakness in internal controls, and any fraud, whether or
not material, that involves management or other employees who have a
significant role in the Company's internal controls[; and
(j) review and recommend the appointment, reassignment, replacement,
compensation or dismissal of the Chief Financial Officer, Controller and
head of internal audit.
3. Compliance with Legal, Ethical and Regulatory Requirements. The
Committee shall:
(a) periodically discuss with the Company's General Counsel any
significant legal, compliance or regulatory matters that may have a
material effect on the Company's business, financial statements or
compliance policies including material notices to or inquiries received
from governmental agencies and the scope and effectiveness of compliance
policies and programs;
(b) review at least annually with management including the General
Counsel and head of internal audit compliance with, the adequacy of and any
requests for waivers under the Company's code of business conduct and
ethics (including codes that apply to all employees as well as those
applicable to directors, senior officers and financial officers and the
Company's policies and procedures concerning trading in Company securities
and use in trading of proprietary or confidential information), and any
waiver to any executive officer or director granted by the Committee shall
be reported by the Committee to the Board;
(c) review and address conflicts of interest of directors and
executive officers; and
(d) review, discuss with management and the independent auditor, and
approve any transactions or courses of dealing with related parties (e.g.,
including significant shareholders of the Company, directors, corporate
officers or other members of senior management or their family members)
that are significant in size or involve terms or other aspects that differ
from those that would likely be negotiated with independent parties.
4. Additional Responsibilities of the Committee. The Committee shall make
regular reports to the Board on Committee findings and recommendations
(including on any issues that arise with respect to the quality or integrity of
the Company's financial statements, the Company's compliance with legal or
regulatory requirements, the performance and independence of the independent
auditors or the performance of the internal audit function) and any other
matters the Committee deems appropriate or the Board requests, and maintain
minutes or other records of Committee meetings and activities. The Committee
shall oversee the preparation of and approve all reports required by the
Committee, including the report for inclusion in the Company's annual proxy
statement, stating whether the Committee: (i) has reviewed and discussed the
audited financial statements with management; (ii) has discussed with the
independent auditors the matters required to be discussed by Statement of
Accounting Standards Nos. 61 and 90; (iii) has received the written disclosure
and letter from the independent auditors (describing their relationships with
the Company) and has discussed with them their independence; and (iv) based on
the review and discussions referred to above, the members of the Committee
recommended to the Board that the audited financials be included in the
Company's Annual Report on Form 10-K for filing with the SEC. The Committee
shall annually review and evaluate the Committee's own performance, including
compliance with this Charter, and review and reassess the adequacy of this
Charter and recommend any proposed changes to the Board for approval.
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5. Additional Powers of the Committee. The Committee shall have the
authority, to the extent it deems necessary or appropriate, to retain special
legal, accounting or other experts to advise the Committee and carry out its
duties, and to conduct or authorize investigations into any matters within its
scope of responsibilities, with access to all books, records, facilities and
personnel of the Company. The Company shall provide the Committee with adequate
funding and other resources required to discharge its duties and
responsibilities, including payment of reasonable compensation to the
independent accountants and to any advisors employed by the Committee. The
Committee shall have the sole authority to retain, compensate, direct, oversee
and terminate counsel, independent auditors, and other advisors hired to assist
the Committee, who shall be accountable ultimately to the Committee.
LIMITATIONS OF THE COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to prepare financial statements,
plan or conduct audits or determine that the Company's financial statements and
disclosures are complete or accurate or in accordance with GAAP or applicable
laws or regulations. The Committee's job is one of review and it recognizes that
the Company's management is responsible for preparing the Company's financial
statements and that the independent accountants are responsible for auditing or
reviewing those financial statements, as applicable. The Committee recognizes
that management and the independent accountants have more time, knowledge and
detailed information concerning the Company than do Committee members.
Consequently, in performing its functions, the Committee is not providing any
expert or special assurance as to the Company's financial statements or any
professional certification as to the independent accountants' work.
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EXHIBIT B
DIAMOND OFFSHORE DRILLING, INC.
AMENDED AND RESTATED
2000 STOCK OPTION PLAN
SECTION 1
GENERAL
1.1. Purpose. The Diamond Offshore 2000 Stock Option Plan, which became
effective as of May 15, 2000 and, as herein amended and restated, will become
effective on the Effective Date (as so amended and restated, 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
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 2004 annual meeting of its stockholders, the Plan shall
be effective as of May 18, 2004 (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 1,500,000 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.
2
(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
3
to 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.
4
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.
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
5
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 by, or who
serves as a consultant to, 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 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.
6
(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.
7
DIAMOND OFFSHORE DRILLING, INC.
COMMON
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
2004 ANNUAL MEETING OF STOCKHOLDERS ON MAY 18, 2004
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 2004 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 approval of the Company's amended
and restated Stock Option Plan, FOR the proposal to ratify the appointment
of Deloitte & Touche LLP as the independent auditors of the Company for
fiscal year 2004, and in accordance with the discretion of the persons
designated above, with respect to any other business that may properly come
before the meeting.
(LOGO) VOTE BY INTERNET - www.proxyvote.com
DIAMOND OFFSHORE DRILLING, INC. Use the internet to transmit your voting instructions
15415 KATY FREEWAY and for electronic delivery of information up until 11:59
HOUSTON, TX 77094 P.M. Eastern Time the day before the cut-off date or
meeting date. Have your proxy card in hand when you
access the web site and follow the instructions to obtain
your records and to create an electronic voting
instruction form.
AUTO DATA PROCESSING VOTE BY PHONE - 1-800-690-6903
INVESTOR COMM SERVICES 16 21 Use any touch-tone telephone to transmit your voting
ATTENTION: instructions up until 11:59 P.M. Eastern Time the day
TEST PRINT before the cut-off date or meeting date. Have your proxy
51 MERCEDES WAY card in hand when you call and then follow the
EDGEWOOD, NY instructions.
11717
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we've provided or return to
Diamond Offshore Drilling, Inc. c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
123,456,789,012.00000
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-- 000000000000
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A/C 1234567890123456789
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X] DIAMD1 KEEP THIS PORTION FOR YOUR RECORDS
-----------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DIAMOND OFFSHORE DRILLING, INC. 03 0000000000 219781735674
1. Election of Directors
NOMINEES: 01) James S. Tisch, 02) Lawrence R. Dickerson For Withhold For All To withhold authority to
03) Alan R. Batkin, 04) Charles L. Fabrikant, 05) Herbert C. Hofmann, All All Except vote, mark "For All Except"
06) Arthur L. Rebell, and 07) Raymond S. Troubh [ ] [ ] [ ] and write the nominee's
number on the line below.
---------------------------
For Against Abstain
2. To consider and act upon a proposal to approve the amended and restated Diamond [ ] [ ] [ ]
Offshore Drilling, Inc. 2000 Stock Option Plan.
3. To ratify the appointment of Deloitte & Touche LLP as the independent auditors [ ] [ ] [ ]
of the Company for fiscal year 2004.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof. AUTO DATA PROCESSING
INVESTOR COMM SERVICES
Please sign exactly as your name appears on this Proxy Card. When signing ATTENTION:
as attorney, executor, administrator, trustee, guardian or corporate or TEST PRINT
partnership official, please give full title as such and the full name of 51 MERCEDES WAY
the entity on behalf of whom you are signing. If a partnership, please sign EDGEWOOD, NY
in partnership name by authorized person. 11717
123,456,789,012
---------------------------------- --------- ---------------------------------- ----------- 25271C102
Signature (PLEASE SIGN WITHIN BOX) Date P93064 Signature (Joint Owners) Date 21