UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-12
TRANSOCEAN INC.
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(Name of Registrant as Specified In Its Charter)
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[LETTERHEAD OF TRANSOCEAN INC.]
MARCH 28, 2003
Dear Shareholder:
The 2003 annual general meeting of Transocean Inc. will be held on
Thursday, May 8, 2003 at 9:00 a.m., at the Royal Pavilion Hotel, St. James,
Barbados. The Secretary's notice of annual general meeting, the proxy statement
and a proxy card are enclosed and describe the matters to be acted upon at the
meeting.
It is important that your shares be represented and voted at the
meeting. Please read the enclosed notice of annual general meeting and proxy
statement and date, sign and promptly return the proxy card in the enclosed
self-addressed envelope.
Sincerely,
/s/ J. Michael Talbert /s/ Robert L. Long
------------------------------------- ------------------------------------
J. Michael Talbert Robert L. Long
Chairman of the Board President & Chief Executive Officer
This proxy statement and the accompanying proxy card are dated March
28, 2003 and are first being mailed on or about April 4, 2003 to record
shareholders as of March 21, 2003.
NOTICE OF ANNUAL GENERAL MEETING OF TRANSOCEAN INC.
TO BE HELD MAY 8, 2003
The annual general meeting of Transocean Inc., a Cayman Islands exempted
company limited by shares, will be held at the Royal Pavilion Hotel, St. James,
Barbados at 9:00 a.m., Barbados time, on Thursday, May 8, 2003 for the following
purposes:
1. To re-elect five directors as members of our board of directors to
serve until the 2006 annual general meeting and until their respective
successors have been duly elected.
2. To approve the amendment of our Long-Term Incentive Plan to allow
grants of incentive stock options for an additional ten year period to
May 1, 2013, and to allow a continuing right to grant stock options
and share appreciation rights to our outside directors.
3. To approve the amendment of our Employee Stock Purchase Plan to
increase the number of ordinary shares reserved for issuance under the
plan from 1,500,000 to 2,500,000.
4. To approve the appointment of Ernst & Young LLP as independent
auditors for 2003.
5. To transact such other business as may properly be brought before the
meeting.
This constitutes notice of the meeting as required by Cayman Islands law
and our articles of association.
Only record holders of ordinary shares at the close of business on Friday,
March 21, 2003 will be entitled to notice of, and to vote at, the meeting.
The meeting may generally be adjourned from time to time without advance
notice other than announcement at the meeting, or any adjournment thereof, and
any and all business for which the meeting is hereby noticed may be transacted
at any such adjournment.
By order of the Board of Directors,
/s/ Eric B. Brown
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Eric B. Brown
Secretary
Houston, Texas
March 28, 2003
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YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN AND PROMPTLY RETURN YOUR PROXY CARD IN THE ENCLOSED
RETURN ENVELOPE.
================================================================================
PROXY STATEMENT
FOR ANNUAL GENERAL MEETING OF TRANSOCEAN INC.
MAY 8, 2003
This proxy statement is furnished in connection with the solicitation of
proxies by Transocean Inc., on behalf of our board of directors, to be voted at
our annual general meeting to be held on Thursday, May 8, 2003 at 9:00 a.m., at
the Royal Pavilion Hotel, St. James, Barbados.
PROPOSALS
At the annual general meeting, shareholders will be asked to vote upon the
following:
- A proposal to reelect each of five nominees as directors to serve
three-year terms. These directors will be members of a class of
directors that will serve until the 2006 annual general meeting
and until their respective successors have been duly elected.
- A proposal to approve the amendment of our Long-Term Incentive
Plan to allow grants of incentive stock options for an additional
ten year period to May 1, 2013, and to allow a continuing right
to grant stock options and share appreciation rights to our
outside directors.
- A proposal to approve the amendment of our Employee Stock
Purchase Plan to increase the number of ordinary shares reserved
for issuance under the plan from 1,500,000 to 2,500,000.
- A proposal to approve the appointment of Ernst & Young LLP as
independent auditors for 2003.
- Any other matters that may properly come before the meeting.
We know of no other matters that are likely to be brought before the annual
general meeting.
QUORUM
The presence, in person or by proxy, of shareholders holding a majority of
our outstanding ordinary shares will constitute a quorum. Abstentions and
"broker non-votes" will be counted as present for purposes of determining
whether there is a quorum at the meeting.
RECORD DATE
Only shareholders of record at the close of business on Friday, March 21,
2003 are entitled to notice of and to vote, or to grant proxies to vote, at the
meeting.
VOTES REQUIRED
Approval of the proposal to re-elect the five nominees as directors
requires the affirmative vote of a plurality of the votes cast. Abstentions and
"broker non-votes" will not be counted in that vote.
Approval of the proposal to amend our Long-Term Incentive Plan requires the
affirmative vote of the holders of at least a majority of votes cast on the
proposal, provided that the total number of votes cast on the proposal
represents a majority of the votes entitled to be cast. Abstentions and "broker
non-votes" on this proposal will not affect the voting on the proposal as long
as holders of a majority of ordinary shares cast votes on the proposal.
Otherwise, the effect of an abstention or "broker non-vote" is a vote against
the proposal.
Approval of the proposal to amend our Employee Stock Purchase Plan to
increase the number of ordinary shares reserved for issuance under the plan from
1,500,000 to 2,500,000 requires the affirmative vote of the holders of at least
a majority of votes cast on the proposal, provided that the total number of
votes cast on the proposal represents a majority of the votes entitled to be
cast. Abstentions and "broker non-votes" on this proposal will not affect the
voting on the proposal as long as holders of a majority of ordinary shares cast
votes on the proposal. Otherwise, the effect of an abstention or "broker
non-vote" is a vote against the proposal.
Approval of the proposal to appoint Ernst & Young LLP as independent
auditors requires the affirmative vote of holders of at least a majority of the
ordinary shares present in person or by proxy at the meeting and entitled to
vote on the matter. Abstentions and "broker non-votes" on the proposal have the
effect of a vote against the proposal.
As of the record date for the meeting, there were 319,767,820 ordinary
shares outstanding and entitled to notice of and to vote at the meeting.
Holders of ordinary shares on the record date are entitled to one vote for each
share held.
PROXIES
A proxy card is being sent to each shareholder as of the record date. If
you properly received a proxy card, you may grant a proxy to vote on each of the
four proposals by marking your proxy card appropriately, executing it in the
space provided, dating it and returning it to us. We may accept your proxy by
any form of communication permitted by Cayman Islands law and our articles of
association. If you hold your shares in the name of a bank, broker or other
nominee, you should follow the instructions provided by your bank, broker or
nominee when voting your shares.
If you have timely submitted a properly executed proxy card and clearly
indicated your votes, your shares will be voted as indicated. If you have
timely submitted a properly executed proxy card and have not clearly indicated
your votes, your shares will be voted "FOR" the election of all director
nominees and "FOR" each of the other three proposals.
If any other matters are properly presented at the meeting for
consideration, the persons named in the proxy card will have the discretion to
vote on these matters in accordance with their best judgment. Proxies voted
against any of the four proposals will not be voted in favor of any adjournment
of the meeting for the purpose of soliciting additional proxies.
You may revoke your proxy card at any time prior to its exercise by:
- giving written notice of the revocation to our Secretary;
- appearing at the meeting, notifying our Secretary and voting in
person; or
- properly completing and executing a later-dated proxy and
delivering it to our Secretary at or before the meeting.
Your presence without voting at the meeting will not automatically revoke
your proxy, and any revocation during the meeting will not affect votes
previously taken. If you hold your shares in the name of a bank, broker or
other nominee, you should follow the instructions provided by your bank, broker
or nominee in revoking your previously granted proxy.
SOLICITATION OF PROXIES
The accompanying proxy is being solicited on behalf of the board of
directors. The expenses of preparing, printing and mailing the proxy and the
materials used in the solicitation will be borne by us. We have retained D. F.
King & Co., Inc. for a fee of $6,000, plus expenses, to aid in the solicitation
of proxies. Proxies may be solicited by personal interview, telephone and
telegram by our directors, officers and employees, who will not
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receive additional compensation for those services. Arrangements also may be
made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation materials to the beneficial owners of ordinary
shares held by those persons, and we will reimburse them for reasonable expenses
incurred by them in connection with the forwarding of solicitation materials.
ELECTION OF DIRECTORS
Our articles of association divide our board of directors into three
classes: Class I, Class II and Class III. Five Class I directors are to be
elected at our 2003 annual general meeting to serve for three-year terms
expiring at the annual general meeting in 2006.
The board has nominated for re-election as Class I directors Victor E.
Grijalva, Arthur Lindenauer, Richard A. Pattarozzi, Kristian Siem and J. Michael
Talbert. If any of the nominees become unavailable for any reason, which we do
not anticipate, the board of directors in its discretion may designate a
substitute nominee. If you have submitted an executed proxy card, your vote
will be cast for the substitute nominee unless contrary instructions are given
in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RE-ELECTION OF VICTOR E.
GRIJALVA, ARTHUR LINDENAUER, RICHARD A. PATTAROZZI, KRISTIAN SIEM AND J. MICHAEL
TALBERT AS CLASS I DIRECTORS.
NOMINEES FOR DIRECTOR-CLASS I-TERMS EXPIRING 2006
VICTOR E. GRIJALVA, age 64, is Chairman of the Board of Hanover Compressor
Company. Mr. Grijalva has been a director since the Sedco Forex merger
described below and served as Chairman of our board of directors until
October 2002. He is the retired Vice Chairman of Schlumberger Limited.
Before serving as Vice Chairman, he served as Executive Vice President of
Schlumberger's Oilfield Services division from 1994 to January 1999 and as
Executive Vice President of Schlumberger's Wireline, Testing & Anadrill
division from 1992 to 1994.
ARTHUR LINDENAUER, age 65, is Chairman of the Board of Schlumberger
Technology Corporation, Schlumberger's principal U.S. subsidiary. He
previously served as Executive Vice President-Finance and Chief Financial
Officer of Schlumberger from January 1980 to December 1998. Mr. Lindenauer
was a partner with the accounting firm of Price Waterhouse from 1972 to
1980. Mr. Lindenauer has served as one of our directors since the Sedco
Forex merger. Mr. Lindenauer is also a director of the New York Chapter of
the Cystic Fibrosis Foundation and a Trustee of the American University in
Cairo.
RICHARD A. PATTAROZZI, age 59, served at Shell Oil Company as President and
CEO of Shell Deepwater Development Inc. and Shell Deepwater Production Inc.
from 1996 to 1999. In early 1999, he was promoted to Vice President of
Shell Oil Company, responsible for Shell Deepwater Development Inc., Shell
Deepwater Production Inc. and the company's Shallow Water Gulf of Mexico
exploration and production business and retired in January 2000. Mr.
Pattarozzi joined Shell in 1966 in its offshore engineering organization
and has more than 33 years of experience in the petroleum industry. Mr.
Pattarozzi has served as one of our directors since the merger with R&B
Falcon Corporation described below. Before the merger, he had served as a
director of R&B Falcon since February 2000. He is also a director of
Superior Energy Services, Inc., FMC Technologies, Inc., Global Industries,
Ltd., Stone Energy Company and Tidewater, Inc., all of which are publicly
traded.
KRISTIAN SIEM, age 54, is Chairman and Chief Executive Officer of Siem
Industries, Inc., an industrial holding company that owns offshore oil and
gas drilling and subsea construction services businesses, a fleet of reefer
vessels and a fleet of car carrying vessels through subsidiaries in
Bermuda, the U.K. and Norway. Mr. Siem has served as one of our directors
since September 1996 and was Chairman of Transocean ASA prior to its
acquisition by us in 1996. Mr. Siem is also chairman of DSND Inc., Subsea 7
Inc., Star Reefers Inc. and Four Seasons Capital A.B. During the past five
years, Mr. Siem has served as an executive officer with Siem Industries,
Inc. and as Chairman of Wilrig AS, and on the boards of Kvaerner ASA,
Norwegian
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Cruise Line, Lambert Fenchurch Group Holdings plc and Oslo Reinsurance ASA.
He was also a member of the board of directors of Saga Petroleum ASA until
its merger with Norsk Hydro in September 1999.
J. MICHAEL TALBERT, age 56, has served as Chairman of our board of
directors since October 2002 and a member of our board of directors since
August 1994. Mr. Talbert also served as Chief Executive Officer from August
1994 until October 2002, Chairman of our board of directors from August
1994 until December 1999, and as President from December 1999 until
December 2001. Prior to assuming his duties with us, Mr. Talbert was
President and Chief Executive Officer of Lone Star Gas Company, a natural
gas distribution company and a division of Ensearch Corporation. He has
also been elected as a director of El Paso Corporation to be effective
April 1, 2003.
CONTINUING DIRECTORS-CLASS II-TERMS EXPIRING 2004
ROBERT L. LONG, age 57, is President, Chief Executive Officer and a member
of our board of directors. Mr. Long served as President from December 2001
to October 2002, at which time he assumed the additional position of Chief
Executive Officer. Mr. Long also served as Chief Operating Officer from
June 2002 until October 2002, Chief Financial Officer from August 1996
until December 2001, as Senior Vice President from May 1990 until the time
of the Sedco Forex merger, at which time he assumed the position of
Executive Vice President, and as Treasurer from September 1997 until March
2001. Mr. Long has been an employee since 1976 and was elected Vice
President in 1987.
MARTIN B. MCNAMARA, age 55, is Partner-in-Charge of the Dallas, Texas,
office of the law firm of Gibson, Dunn & Crutcher and a member of the
firm's finance and compensation committees. He has served as one of our
directors since November 1994. During the past five years, Mr. McNamara has
been in the private practice of law.
ALAIN ROGER, age 72, is a retired executive officer of Schlumberger. He
served as Executive Vice President of Health, Safety and Environment for
Schlumberger from October 1993 to December 1995. He served as Executive
Vice President of Drilling and Pumping for Schlumberger from July 1991 to
September 1993, as President of Sedco Forex, which was the former offshore
contract drilling business of Schlumberger Limited, from 1985 to 1991 and
as President of Forex Neptune from 1976 to 1984. Mr. Roger has served as
one of our directors since the Sedco Forex merger. Mr. Roger also served as
Chairman of the International Association of Drilling Contractors
(I.A.D.C.) in 1991. Mr. Roger has informed us that he intends to retire
from the Board of Directors as of the Annual General Meeting.
CONTINUING DIRECTORS-CLASS III-TERMS EXPIRING 2005
RONALD L. KUEHN, JR., age 67, is currently Chairman of the Board and Chief
Executive Officer of El Paso Corporation, a diversified natural gas
company. He has served as one of our directors since 1975. Mr. Kuehn is
also a director of AmSouth Bancorporation, The Dun & Bradstreet Corporation
and Praxair, Inc., and is a member of the Board of Trustees of Tuskegee
University. From 1986 to 1999, Mr. Kuehn served as Chairman and Chief
Executive Officer of Sonat Inc. prior to its merger with El Paso Energy
Corporation (now known as El Paso Corporation), and he has served as a
director of El Paso Corporation since 1999. He served as Chairman of the
Board of El Paso Corporation from 1999 to 2000 and again became Chairman of
the Board and was named Chief Executive Officer in March 2003. Mr. Kuehn
also served as President and Chief Executive Officer of Sonat Inc. from
1984 to 1986. Mr. Kuehn has submitted his resignation from the Board of
Directors to be effective as of March 31, 2003.
PAUL B. LOYD, JR., age 56, has served as one of our directors since the R&B
Falcon merger. Before the merger, he served as Chairman of the Board of R&B
Falcon since January 1998 and Chief Executive Officer since April 1999. He
was CEO and Chairman of the Board of R&B Falcon Drilling (International &
Deepwater) Inc. (formerly Reading & Bates Corporation) from 1991 through
1997. Mr. Loyd has over 30 years of experience in the offshore drilling
industry, having joined Reading & Bates in 1970 in its management-training
program. He is also a director of Carrizo Oil & Gas, Inc. and Frontier Oil
Corporation and is on the Board of Trustees of Southern Methodist
University.
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ROBERTO MONTI, age 63, is the retired Executive Vice President of
Exploration and Production for Repsol YPF. He was the President and Chief
Executive Officer of YPF Sociedad Anonima from September 1995 to June 1999
prior to its acquisition by Repsol. From October 1993 to July 1995, he
served as President of Dowell, a division of Schlumberger. He is also a
director of Pecom Energia S.A. Mr. Monti has served as one of our directors
since the Sedco Forex merger.
IAN C. STRACHAN, age 59, is Chairman of the Board of Instinet Group
Incorporated and a director of Reuters Group PLC, Harsco Corporation and
Johnson Matthey plc. He served as Deputy Chairman of Invensys plc from 1999
to 2000. He served as CEO of BTR plc from 1996 until its merger with Siebe
plc in 1999, when it changed its name to Invensys plc. From 1987 to 1995,
Mr. Strachan was with Rio Tinto plc, serving as CFO from 1987 to 1991 and
as Deputy CEO from 1991 to 1995. He was employed by Exxon Corporation from
1970 to 1986. Mr. Strachan has served as one of our directors since the
Sedco Forex merger.
RETIREMENT OF MR. ROGER, RESIGNATION OF MR. KUEHN AND RESTRUCTURING OF DIRECTOR
CLASSES
Mr. Roger has informed us that he intends to retire from the Board of
Directors as of the Annual General Meeting. On March 27, 2003, Mr. Kuehn
submitted his resignation from the Board of Directors to be effective as of
March 31, 2003. In order to more evenly distribute directors among the three
classes, Mr. Talbert intends to resign from his Class I directorship immediately
after the Annual General Meeting (assuming he is reelected), and the Board of
Directors intends to then concurrently fill with Mr. Talbert the vacancy in the
Class II directors created by Mr. Roger's retirement. We expect Mr. Talbert to
then stand for re-election again in 2004 along with the other Class II
directors.
MERGER WITH R&B FALCON AND DESIGNATION OF BOARD MEMBERS
On January 31, 2001, we completed a merger transaction with R&B Falcon in
which common shareholders of R&B Falcon received 0.5 newly issued ordinary
shares for each R&B Falcon share and R&B Falcon became our indirect wholly owned
subsidiary. Pursuant to the merger agreement, our board elected three new
members who were designated by R&B Falcon in consultation with us and had
previously served on the R&B Falcon board of directors. Two of those directors,
Messrs. Loyd and Pattarozzi, continue to serve on our board of directors. On
December 12, 2002, R&B Falcon changed its name to TODCO.
MERGER WITH SEDCO FOREX, DESIGNATION OF BOARD MEMBERS AND APPOINTMENT OF MR.
GRIJALVA
On December 31, 1999, we completed a merger with Sedco Forex Holdings
Limited following the spin-off of Sedco Forex to Schlumberger stockholders on
December 30, 1999. As a result of the merger, Schlumberger stockholders
exchanged all of the Sedco Forex shares distributed to them by Schlumberger in
the Sedco Forex spin-off for our ordinary shares, and Sedco Forex became our
wholly owned subsidiary. Pursuant to the merger agreement, Transocean's board
of directors designated Messrs. Kinder, Kuehn, McNamara, Siem and Talbert as
directors and Schlumberger's board of directors designated Messrs. Grijalva,
Lindenauer, Monti, Roger and Strachan as directors. In the merger agreement, we
agreed to nominate Mr. Grijalva to our board of directors to serve as Chairman
until his 65th birthday (in July 2003). In October 2002, Mr. Grijalva resigned
his position as Chairman but agreed to remain as a director.
COMPENSATION OF DIRECTORS
Fees and Retainers. Our employees receive no extra pay for serving as
directors. Other than Mr. Grijalva, who has a consulting agreement with us that
terminates in July 2003, each director who is not one of our officers or
employees receives an annual retainer of $34,000. The audit committee chairman
receives an additional $20,000 annual retainer, and the other committee chairmen
receive an additional $5,000 annual retainer. Non-employee directors also
receive a fee of $2,000 for each board meeting and $1,500 for each board
committee meeting attended, plus incurred expenses where appropriate. Directors
are eligible to participate in our deferred compensation plan. The director may
defer any fees or retainer by investing those amounts in Transocean ordinary
share equivalents or in other investments selected by the administrative
committee.
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Stock Options/Stock Appreciation Rights. When elected, each outside
director is granted an option to purchase 4,000 ordinary shares at the fair
market value of those shares on the date of grant. Following the initial grant,
if the outside director remains in office, the director is granted an additional
option to purchase 6,000 ordinary shares after each annual general meeting at
the fair market value of those shares on the date of grant. Directors residing
in certain countries may receive share appreciation rights, commonly referred to
as SARs, instead of options.
Each stock option and SAR granted to a director has a ten-year term and
becomes exercisable in equal annual installments on the first, second and third
anniversaries of the date of grant assuming continued service on the board. In
the event of an outside director's retirement in accordance with the board's
retirement policy or his earlier death or disability, or in the event of a
change of control of our company as described under "Compensation of Executive
Officers-Compensation Upon Change of Control," options and SARs will become
immediately exercisable and will remain exercisable for the remainder of their
ten-year term. Options and SARs will terminate 60 days after an outside
director leaves the board for any other reason. However, if that person ceases
to be a director for our convenience, as determined by the board, the board may
at its discretion accelerate the exercisability and retain the original term of
those options and SARs. This treatment was afforded the options of Richard D.
Kinder in connection with his resignation from the Board of Directors in 2002.
We have reserved an aggregate of 600,000 ordinary shares for issuance to
outside directors under our Long-Term Incentive Plan, of which 255,032 remained
available for grant as of March 1, 2003. The provisions of the Long-Term
Incentive Plan relating to grants to outside directors will terminate on May 1,
2003. However, we are proposing to amend our Long-Term Incentive Plan to allow
for continuing grants to be made to our directors as described under "Proposal
to Amend Our Long-Term Incentive Plan".
BOARD MEETINGS AND COMMITTEES
During 2002, the board of directors held 5 regular meetings and 1 special
meeting. Each of our directors attended at least 75% of the meetings during the
year, including committee meetings.
The board has standing executive compensation, finance and benefits,
corporate governance and audit committees. In addition, the board may from time
to time form special committees to consider particular matters that arise.
Executive Compensation Committee. The executive compensation committee
reviews and approves the compensation of our officers, administers our executive
compensation programs and makes awards under the Long-Term Incentive Plan and
the Performance Award and Cash Bonus Plan. The current members of the executive
compensation committee are Mr. Kuehn, Chairman, and Messrs. Monti, Pattarozzi,
Roger and Siem, although Mr. Kuehn has submitted his resignation from the Board
of Directors to be effective as of March 31, 2003. Mr. Siem was appointed to the
executive compensation committee in February 2003. The executive compensation
committee met 4 times during 2002.
Finance and Benefits Committee. The finance and benefits committee
approves our long-term financial policies and annual financial plans,
significant capital expenditures, insurance programs and investment policies.
It also makes recommendations to the board concerning dividend policy, the
issuance and terms of debt and equity securities and the establishment of bank
lines of credit. In addition, the finance and benefits committee approves the
creation, termination and amendment of our employee benefit programs and
periodically reviews the status of these programs and the performance of the
managers of the funded programs. The current members of the finance and
benefits committee are Mr. Siem, Chairman, and Messrs. Lindenauer, Loyd and
Strachan. The finance and benefits committee met 4 times during 2002.
Corporate Governance Committee. The corporate governance committee makes
recommendations to the board with respect to the selection and compensation of
the board, how the board functions and how the board
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should interact with shareholders and management. It reviews the qualifications
of potential candidates for the board of directors, evaluates the performance of
incumbent directors and recommends to the board nominees to be elected at the
annual meeting of shareholders. The current members of the corporate governance
committee are Mr. Grijalva, Chairman, and Messrs. Kuehn, Loyd, McNamara and
Monti, although Mr. Kuehn has submitted his resignation from the Board of
Directors to be effective as of March 31, 2003. The corporate governance
committee met 2 times during 2002.
The corporate governance committee will consider nominees for director
recommended by shareholders. Please submit your recommendations in writing,
along with a resume of the nominee's qualifications and business experience and
a signed statement of the proposed candidate consenting to be named as a
candidate and, if nominated and elected, to serve as a director. Submit
nominations to Eric B. Brown, Secretary, Transocean Inc., 4 Greenway Plaza,
Houston, Texas 77046.
Audit Committee. The audit committee assists our board of directors in
fulfilling its oversight responsibilities by monitoring the integrity of the
Company's financial statements and the independence and performance of our
auditors and by reviewing our financial reporting processes. The committee
reviews and reports to the board the scope and results of audits by our outside
auditor and our internal auditing staff. It also reviews with the outside
auditor the adequacy of our system of internal controls. It reviews
transactions between us and our directors and officers, our policies regarding
those transactions and compliance with our business ethics and conflict of
interest policies. The audit committee also recommends to the board of
directors a firm of certified public accountants to serve as our outside
auditor, reviews the audit and other professional services rendered by the
outside auditor and periodically reviews the independence of the outside
auditor. The board of directors has adopted a written charter for the audit
committee, which is attached as Appendix A to this proxy statement. The current
members of the audit committee are Mr. Lindenauer, Chairman, and Messrs.
McNamara and Strachan. Mr. Siem was also a member of the audit committee until
February 2003. The audit committee met 8 times during 2002.
The rules of the New York Stock Exchange, Inc. restrict directors that have
relationships with the company that may interfere with the exercise of their
independence from management and the company from serving on the audit
committee. We believe that the members of the audit committee have no such
relationships and are therefore independent for purposes of New York Stock
Exchange rules.
AUDIT COMMITTEE REPORT
Our committee has reviewed and discussed the audited financial statements
of the Company for the year ended December 31, 2002 with management, our
internal auditors and Ernst & Young LLP. In addition, we have discussed with
Ernst & Young LLP, the independent auditing firm for the Company, the matters
required by Codification of Statements on Auditing Standards No. 61 (SAS 61).
The Sarbanes-Oxley Act of 2002 requires certifications by the Company's chief
executive officer and chief financial officer in certain of the Company's
filings with the Securities and Exchange Commission ("SEC"). The committee
discussed the review of the Company's reporting and internal controls undertaken
in connection with these certifications with the Company's management and
outside auditors. The audit committee has further periodically reviewed such
other matters as it deemed appropriate, including other provisions of the
Sarbanes-Oxley Act of 2002 and rules adopted or proposed to be adopted by the
SEC and the New York Stock Exchange.
The committee also has received the written disclosures and the letter from
Ernst & Young LLP required by Independence Standards Board Standard No. 1, and
we have reviewed, evaluated and discussed the written disclosures with that firm
and its independence from the Company. We also have discussed with management
of the Company and the auditing firm such other matters and received such
assurances from them as we deemed appropriate.
Based on the foregoing review and discussions and relying thereon, we have
recommended to the Company's Board of Directors the inclusion of the Company's
audited financial statements for the year ended December 31, 2002 in the
Company's Annual Report on Form 10-K for such year filed with the SEC.
ARTHUR LINDENAUER, CHAIRMAN IAN C. STRACHAN
MARTIN B. MCNAMARA
7
SECURITY OWNERSHIP OF 5% BENEFICIAL
OWNERS AND MANAGEMENT
The table below shows how many ordinary shares each of our directors and
nominees, each of the executive officers named in the summary compensation
section below and all directors and executive officers as a group owned as of
January 31, 2003. The table below also sets forth information concerning the
persons known by us to beneficially own 5% or more of our ordinary shares.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
SHARES OWNED PERCENT OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY (1)(2) OWNED BENEFICIALLY (3)
---------------------------------------------------------------- ------------------- ----------------------
Jean P. Cahuzac (4). . . . . . . . . . . . . . . . . . . . . . . 138,603
Gregory L. Cauthen (4) . . . . . . . . . . . . . . . . . . . . . 17,090
Victor E. Grijalva . . . . . . . . . . . . . . . . . . . . . . . 46,851
Ronald L. Kuehn, Jr .. . . . . . . . . . . . . . . . . . . . . . 40,684
Arthur Lindenauer. . . . . . . . . . . . . . . . . . . . . . . . 13,788
Robert L. Long (4)(5). . . . . . . . . . . . . . . . . . . . . . 178,679
Paul B. Loyd, Jr.. . . . . . . . . . . . . . . . . . . . . . . . 1,472,354
Martin B. McNamara . . . . . . . . . . . . . . . . . . . . . . . 36,688
Roberto Monti. . . . . . . . . . . . . . . . . . . . . . . . . . 8,667
Richard A. Pattarozzi. . . . . . . . . . . . . . . . . . . . . . 34,667
Donald R. Ray (4)(6) . . . . . . . . . . . . . . . . . . . . . . 271,901
Alain Roger. . . . . . . . . . . . . . . . . . . . . . . . . . . 14,209
Kristian Siem (7). . . . . . . . . . . . . . . . . . . . . . . . 19,520
Ian C. Strachan. . . . . . . . . . . . . . . . . . . . . . . . . 9,167
J. Michael Talbert (4)(8). . . . . . . . . . . . . . . . . . . . 669,526
All directors and executive officers as a group (21 persons) (4) 3,195,225 1%
Montag & Caldwell, Inc. (9). . . . . . . . . . . . . . . . . . . 20,882,399 7%
---------------
(1) The business address of each director and executive officer is c/o
Transocean Inc., 4 Greenway Plaza, Houston, Texas 77046.
(2) Includes options exercisable within 60 days held by Messrs. Cahuzac
(136,928), Cauthen (15,000), Grijalva (8,667), Kuehn (32,833), Lindenauer
(8,667), Long (137,666), Loyd (1,407,354), McNamara (28,339), Monti
(8,667), Pattarozzi (34,667), Ray (230,413), Roger (8,667), Siem (19,508),
Strachan (8,667), Talbert (588,793) and all directors and executive
officers as a group (3,190,300). Also includes rights to acquire ordinary
shares under our deferred compensation plan held by Messrs. Grijalva
(13,037), Kuehn (7,851) and McNamara (7,349), and all directors and
executive officers as a group (28,237).
(3) As of January 31, 2003, each listed individual beneficially owned less than
1.0% of the outstanding ordinary shares.
(4) Includes:
All directors
and executive
officers as a
Mr. Cahuzac Mr. Cauthen Mr. Long Mr. Ray Mr. Talbert group
----------- ----------- -------- ------- ----------- -------------
Shares held by
Trustee under
401(k) plan. . 0 0 3,269 2,960 1,914 12,350
Shares held in
Employee Stock
Purchase Plan. 1,294 590 3,422 3,297 0 16,737
8
(5) Includes 34,322 shares held in a joint account with his wife.
(6) Includes 35,231 shares held in a joint trust account with his wife.
(7) Siem Industries, Inc. holds 1,423,720 of our ordinary shares. Mr. Siem is
the Chairman and Chief Executive Officer of Siem Industries, Inc. As a
result, he may be deemed a beneficial owner of those ordinary shares.
(8) Includes 80,409 shares held in a joint account with his wife.
(9) Based on a Schedule 13G filed with the SEC on January 31, 2003. According
to the filing, Montag & Caldwell, Inc. has sole dispositive power over
20,882,399 shares and does not have voting power over any shares. The
address of Montag & Caldwell, Inc. is 3455 Peachtree Road, NE Suite 1200,
Atlanta, Georgia 30326-3248.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We believe all Section 16(a) reporting requirements related to our
directors and executive officers were timely fulfilled during 2002 except for a
late Form 4 reporting one option grant for each of Mr. Long and Mr. Cahuzac.
This belief is based solely on a review of the reports required to be filed
under Section 16(a) of the U.S. Securities Exchange Act of 1934 that have been
furnished to us and written representations from those with filing obligations
that all reports were timely filed.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The executive compensation committee is composed solely of nonemployee
directors. It administers our executive compensation program. The committee's
primary responsibility is to ensure that the executive compensation program
furthers our interests and those of our shareholders.
Our executive compensation program has three principal objectives:
(1) to attract and retain a highly qualified and motivated management
team;
(2) to appropriately reward individual executives for their contributions
to the attainment of key strategic goals; and
(3) to link the interests of executives and shareholders through
stock-based plans and performance measures.
The committee meets with outside consultants at least annually to review
and compare the level of compensation we pay or award to key executives to the
compensation practices of a peer group of companies. For 2002, the primary peer
group of companies used to determine compensation (base salary, annual cash
bonus incentives and stock options) for key executives consisted of 14 publicly
held companies which the committee believes are generally of comparable
financial size, business focus and scope; however, as described below, we use a
slightly different group of companies for comparison based on total shareholder
return.
The key components of our executive compensation program are base salary,
annual cash bonus incentives and long-term stock incentives. The committee's
policies with respect to each component of the program, including the basis for
the compensation of the Chief Executive Officer, are described below. The
committee consults with the Chief Executive Officer in reviewing the individual
performance and compensation of key executives (other than the Chief Executive
Officer). The committee reviews the Chief Executive Officer's performance and
compensation at least annually.
Base Salaries. The committee reviews at least annually the base salaries
of key executive officers and determines whether salaries should be adjusted.
Any adjustments are based primarily on the executive's individual performance,
responsibilities and experience and salary survey information. In general, the
committee's objective is
9
to maintain executive salaries at the size-adjusted median of the salaries for
comparable executives in our peer group. Executive salaries for 2002 were at the
median level as compared to the peer group of companies. Accordingly, at its
salary review meeting on July 10, 2002, the committee made no significant
adjustment of the base salaries of the executive officers. The committee is
advised by a third party executive compensation consultant. Upon Mr. Talbert's
resignation as CEO and appointment as Chairman in October 2002, his salary was
adjusted from $950,000 to $475,000. Upon Mr. Long's appointment as CEO in
October 2002, his salary was adjusted from $500,000 to $600,000.
Annual Cash Bonus Incentives. We award annual cash bonus incentive
opportunities under the Performance Award and Cash Bonus Plan. The amount of an
executive's bonus opportunity, which is expressed as a percentage of base
salary, depends primarily upon that individual's position and responsibilities
and bonus opportunities provided to comparable positions within our peer group.
At the beginning of each year, the committee reviews and approves annual
performance goals. Shortly after the end of the year, the committee determines
the appropriate bonus payout levels based on the degree to which these goals
have been achieved. The annual incentive program is designed to pay total
annual cash compensation, which is salary plus bonus, above the median of our
peer group when we meet substantially all of the goals established for an
executive's bonus opportunity. Similarly, when the goals are not achieved, the
program is intended to result in total annual cash compensation below the median
of our peer group. The committee also has the discretion to award
performance-based cash bonuses under our Long-Term Incentive Plan.
The committee determined that the payout of an executive's 2002 bonus
opportunity was to be based on the level of achievement of a company-wide
financial goal, corporate goals and individual goals, as described below. The
financial goal was weighted at 50%, the corporate goals at 35% and the
individual goals at 15%. The committee also has discretion to make additional
cash bonus awards beyond the bonus opportunity to recognize exceptional
individual performance or to take account of other factors.
The financial goal included in the 2002 bonus opportunities under our
Performance Award and Cash Bonus Plan for senior executive officers, including
Mr. Long, was our 2002 earnings per share (''EPS'') as compared to our budgeted
EPS. Payout of the EPS goal was based on minimum, target and maximum levels of
achievement. Mr. Talbert had no financial goal under our Performance Award and
Cash Bonus Plan, but he had similar financial performance goals under our Long
Term Incentive Plan. The corporate goals for all senior executives included in
the 2002 bonus opportunities included operating excellence, technical leadership
and annual goals relating to safety and customer focus programs.
The committee met in December 2002 and February 2003 to review the EPS
performance versus the goals and the attainment of the corporate goals and
objectives for the year 2002. Mr. Talbert's bonus under our Performance Award
Cash Bonus Plan and Long-Term Incentive Plan for the period during which he was
CEO was determined by the committee to entitle him to a bonus payment of
$685,000 or 114% of his bonus opportunity. Mr. Long's bonus under our
Performance Award Cash Bonus Plan for the period during which he was CEO was
determined by the committee to entitle him to a bonus payment of $114,000 or
114% of his bonus opportunity. Mr. Talbert's and Mr. Long's bonuses for the
entire year were $735,000 and $400,000, respectively.
Long-Term Stock Incentives. The long-term stock incentive component of our
executive compensation program is designed to align executive and shareholder
interests by rewarding executives for the attainment of stock price appreciation
and total shareholder return.
As a general rule, the committee administers the long-term stock incentive
program through annual grants of stock options to designated executive officers
and other key employees. In addition, the committee may consider the award of
restricted stock based on the company's total shareholder return ("TSR") when
compared to a peer group of companies, and the committee may also make special
awards to individual executives and other key employees during the year on a
discretionary basis. The peer group of companies used to measure our relative
TSR consists of fifteen (15) publicly traded companies with a narrower focus on
contract drilling and oilfield services. On July 11, 2002 the committee made
stock option grants to executives, including Mr. Talbert and Mr. Long, and stock
option grants to other key employees in order to further the goal of aligning
the executives' and key employees' interests with those of the shareholders and
to encourage management continuity. A further stock option grant was awarded to
Mr. Long upon his appointment as CEO on October 9, 2002.
10
Each executive officer is given a grant opportunity based on the
executive's individual position and compensation survey data of our peer group.
The executives are granted stock options at the 50th percentile level each year,
subject to the committee's discretion to grant more or fewer options based upon
company performance. Vesting of options would occur over three years.
Restricted stock awards generally would only be made for company performance
based upon the last year's TSR, if TSR had been above the 50th percentile. The
committee determines whether or not the restricted stock grant opportunity is
earned by comparing our annual TSR, calculated by considering stock price
appreciation and dividends, to the total shareholder return of the companies in
the peer group. Restricted stock awards would provide long-term incentive
compensation between the competitive median and 75th percentile levels directly
proportional to TSR performance between the 50th and 75th percentiles.
Based upon the above criteria, on July 11, 2002, we granted Mr. Talbert
options to purchase 200,000 ordinary shares at an exercise price of $28.80 per
share, which was the fair market value of the ordinary shares at the date of the
grant. On October 10, 2002, we granted Mr. Long options to purchase 50,000
ordinary shares at an exercise price of $18.82, which was the fair market value
of the ordinary shares at the date of the grant. Based upon the formula, the
executives, including Messrs. Talbert and Long, were not awarded any restricted
stock. Mr. Long also received a grant of options to purchase 60,000 ordinary
shares at an exercise price of $28.80 per share, which was the market value of
the ordinary shares at the date of the grant, related to the portion of 2002 for
which he was not CEO.
Stock Ownership Guidelines. In 1993, the committee established guidelines
designed to encourage our key executives to attain specified levels of stock
ownership over a five-year period. Stock ownership goals are based on the value
of the ordinary shares and are expressed as a multiple of the executive's base
salary.
Limitations on Deductibility of Non-Performance Based Compensation.
Section 162(m) of the U.S. Internal Revenue Code limits the tax deduction that
we or our subsidiaries can take with respect to the compensation of designated
executive officers, unless the compensation is ''performance-based.'' The
committee expects that all income recognized by executive officers upon the
exercise of stock options granted under the Long-Term Incentive Plan will
qualify as performance-based compensation. The committee also believes that all
restricted stock which it has awarded to date also qualifies as
performance-based.
Under the Long-Term Incentive Plan, the committee has the discretion to
award performance-based cash compensation that qualifies under Section 162(m) of
the U.S. Internal Revenue Code based on the achievement of objective performance
goals. For 2002, Mr. Talbert was the only executive eligible for a
performance-based cash award under the Long-Term Incentive Plan. The committee
may determine to award compensation that does not qualify under Section 162(m)
as performance-based compensation.
Conclusion. The committee believes that the executive compensation
philosophy that we have adopted effectively serves our interests and those of
our shareholders. It is the committee's intention that the pay delivered to
executives be commensurate with company performance.
Ronald L. Kuehn, Jr., Chairman Roberto L. Monti
Richard A. Pattarozzi Alain Roger
EXECUTIVE COMPENSATION
The table below shows the compensation during 2000, 2001 and 2002 of the
two individuals who served as our Chief Executive Officer during 2002 and our
four most highly compensated executive officers other than our Chief Executive
Officer who were serving as executive officers at the end of 2002 (the "named
executive officers").
11
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------- ----------------------------
Name and Restricted Securities
------------------------ Other Annual Stock Underlying All Other
Principal Position Year Salary($) Bonus($)(1) Compensation($) Award($)(2) Options/SARs(3) Compensation($)(4)
------------------------ ---- --------- ----------- --------------- ----------- --------------- ------------------
J. Michael Talbert (5) . 2002 851,042 735,000 0 0 200,000 2,318,844(6)
Chairman 2001 896,218 625,000 0 0 175,000 86,550
2000 736,458 580,700 0 0 175,000 54,602
Robert L. Long . . . . . 2002 520,833 400,000 0 0 110,000 968,380(7)
President and Chief 2001 460,494 260,039 0 0 50,000 46,938
Executive Officer 2000 346,875 179,100 0 0 50,000 22,925
Jean P. Cahuzac. . . . . 2002 395,000 281,768 45,486(8) 0 75,000 57,547
Executive Vice 2001 384,244 196,656 50,365(8) 0 50,000 74,708
President, Chief 2000 328,750 173,400 86,525(8) 50,000 40,393
Operating Officer
Donald R. Ray. . . . . . 2002 345,000 208,061 0 0 40,000 17,300
Executive Vice 2001 334,244 137,300 0 0 40,000 25,888
President, Quality, 2000 381,542 189,630 0 0 40,000 24,041
Safety, Health and
Environment
Gregory L. Cauthen (9) . 2002 286,458 154,340 0 0 40,000 13,002
Senior Vice 2001 176,791 53,270 0 0 30,000 1,060
President, Chief
Financial Officer
and Treasurer
---------------
(1) The amount shown as "Bonus" for a given year includes amounts earned
with respect to that year but paid in the first quarter of the
following year.
(2) Represents the number of restricted shares times the market price of
the shares on the date of grant. Any declared dividends are paid on
all restricted shares. As of December 31, 2002, none of the named
executive officers held any restricted ordinary shares.
(3) Represents options to purchase our ordinary shares at fair market
value on the date of the grants.
(4) With respect to 2002, the amounts shown as "All Other Compensation"
include the following:
Mr. Cahuzac Mr. Cauthen Mr. Long Mr. Ray Mr. Talbert
----------- ----------- -------- ------- -----------
Matching contributions
under the Savings Plan . 8,250 6,188 8,325 3,825 7,615
Contributions under the
Supplemental Benefit
Plan . . . . . . . . . . 10,449 6,814 17,546 13,475 38,286
Defined contribution . . 38,848 0 0 0 0
international retirement
benefit plan
(5) Mr. Talbert served as our Chief Executive Officer until October 2002.
(6) In addition to the items listed in footnote (4), includes a payment of
$2,272,943 to Mr. Talbert in connection with the change of control
provisions in his former employment agreement. See "-Employment
Agreements."
12
(7) In addition to the items listed in footnote (4), includes a payment of
$942,509 to Mr. Long in connection with the change of control
provisions in his former employment agreement. See "-Employment
Agreements."
(8) For the years 2001 and 2002, includes payments to Mr. Cahuzac relating
to school fees ($30,192 and $31,876, respectively) and home country
travel entitlement ($14,172 and $7,610, respectively). For the year
2000, includes payments relating to Mr. Cahuzac's relocation ($36,735)
and school fees ($26,852).
(9) Mr. Cauthen was not employed by us in 2000.
OPTIONS GRANTED
The table below contains information with respect to options to purchase
our ordinary shares granted to the named executive officers in 2002.
OPTION/SAR GRANTS IN 2002
Potential Realizable
Value at
Assumed Annual Rates
of Company
Share Price
Appreciation for Option
Individual Grants Term (10 Years)
--------------------------------------------------- --------------------------
% of Total
Number of Options/SARs
Securities Granted to
Underlying Company Exercise
Options/SARs Employees in Price Expiration
Name Granted 2002 ($/share) Date(1) 5%(2) 10%(2)
------------------ ------------ ------------ ---------- ----------- ----------- -----------
J. Michael Talbert 200,000 9 $ 28.80 7/10/12 $3,622,433 $9,179,956
Robert L. Long . . 60,000 3 $ 28.80 7/10/12 $1,086,729 $2,753,986
50,000 2 $ 18.82 10/10/12 $ 567,356 $1,460,805
Jean P. Cahuzac. . 50,000 2 $ 28.80 7/10/12 $ 905,608 $2,294,989
25,000 1 $ 18.82 10/10/12 $ 283,678 $ 730,402
Donald R. Ray. . . 40,000 2 $ 28.80 7/10/12 $ 724,486 $1,835,991
Gregory L. Cauthen 40,000 2 $ 28.80 7/10/12 $ 724,486 $1,835,991
---------------
(1) The options are subject to termination prior to their expiration date
in some cases where employment is terminated.
(2) These columns show the gains the named executives and all of our
shareholders could realize if our shares appreciate at a 5% or 10%
rate. These growth rates are arbitrary assumptions specified by the
Securities and Exchange Commission, not our predictions.
AGGREGATE OPTION EXERCISES
The following table shows information concerning options to purchase our
ordinary shares the named executive officers exercised during 2002, and
unexercised options they held as of December 31, 2002:
13
AGGREGATED OPTION EXERCISES IN 2002 AND 2002 YEAR-END OPTION VALUE
Number of Securities
Underlying Value of Unexercised,
Unexercised Options In-the-Money Options
at Fiscal Year End at Fiscal Year End
------------------ ------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable(1) Unexercisable
------------------ ----------- --------- ----------- ------------- --------------- --------------
J. Michael Talbert 0 $ 0.00 530,459 375,001 $ 991,362 $ 0
Robert L. Long . . 0 $ 0.00 120,999 160,001 $ 0 $ 219,000
Jean P. Cahuzac. . 0 $ 0.00 120,261 125,001 $ 0 $ 109,500
Donald R. Ray. . . 0 $ 0.00 217,079 80,001 $ 1,523,324 $ 0
Gregory L. Cauthen 0 $ 0.00 10,000 60,000 $ 0 $ 0
---------------
(1) The value of each unexercised in-the-money option or tandem SAR is
equal to the difference between $23.20, which was the closing price of
our ordinary shares on December 31, 2002, and the exercise price of
the option.
DEFINED BENEFIT PLANS
We maintain a U.S. Retirement Plan for our qualifying employees and
officers and those of participating subsidiaries. In general, we base annual
retirement benefits on average covered compensation for the highest five
consecutive years of the final ten years of employment and years of service. We
include salaries and bonuses and some personal benefits as covered compensation
under the U.S. Retirement Plan. We do not include (1) amounts relating to the
grant or vesting of restricted shares, the exercise of options and SARs, and
receipt of tax-offset supplemental payments with respect to options, SARs or
restricted shares, or (2) employer contributions under our Savings Plan or our
Supplemental Benefit Plan.
The maximum annual retirement benefit under our U.S. Retirement Plan is
generally 60% of the participant's average covered compensation minus 19.5% of
his or her covered social security earnings. The eligible survivors of a
deceased U.S. Retirement Plan participant are entitled to a survivor's benefit
under the plan. Benefits under our U.S. Retirement Plan are generally paid as
life annuities.
Eligible participants in our U.S. Retirement Plan and their eligible
survivors are entitled to receive retirement and survivors benefits that would
have been payable under the U.S. Retirement Plan but for the fact that benefits
payable under funded pension plans are limited by federal tax laws. As a
general rule, during 2002, the federal tax laws limited annual benefits under
tax-qualified retirement plans to $160,000, subject to reduction in some cases,
and required those plans to disregard any portion of the participant's 2002
compensation in excess of $200,000. A participant may choose to have these
benefits paid either as a life annuity or in a cash lump sum upon termination of
employment.
Mr. Cahuzac is a non-U.S. citizen and participates in a defined
contribution international retirement plan. He does not participate in our U.S.
Retirement Plan.
The following table contains the benefits payable to the named executive
officers under our U.S. Retirement Plan and related supplemental benefit plans
as of December 31, 2002:
14
DEFINED BENEFIT PLAN TABLE
Estimated Annual
Retirement
Current Years Benefit at
Name of Service(1) Age 65(2)
------------------ -------------- ------------------
J. Michael Talbert 8.3 $ 503,702
Robert L. Long . . 27.5 $ 430,339
Donald R. Ray. . . 30.8 $ 275,320
Gregory L. Cauthen 1.6 $ 147,938
---------------
(1) Includes years of service with Sonat Inc. in the case of Messrs. Long and
Ray.
(2) Estimated annual retirement benefit payable under the Retirement Plan and
related supplemental benefit plans as a single life annuity at age 65
(based on the assumptions that the officer retires from employment with us
at age 65 with average covered compensation at his retirement date equal to
his 2002 covered compensation) and calculated prior to the offset for
covered social security earnings.
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return of (1) our
ordinary shares, (2) the Standard & Poor's 500 Stock Index and (3) the Simmons &
Company International Upstream Index over our last five fiscal years. The graph
assumes that $100 was invested in our ordinary shares and each of the other two
indices on December 31, 1997, and that all dividends were reinvested on the date
of payment.
CUMULATIVE TOTAL SHAREHOLDER RETURN
INDEXED TOTAL SHAREHOLDER RETURN
DECEMBER 31, 1997-DECEMBER 31, 2002
[GRAPHIC OMITTED]
December 31,
---------------------------------------------
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ -----
Transocean 100.00 55.85 70.44 96.19 71.31 49.42
S&P 500 100.00 128.57 155.61 141.46 124.68 97.16
Simmons Upstream Index 100.00 57.79 57.79 98.13 73.34 70.32
15
COMPENSATION UPON CHANGE OF CONTROL
Some of our benefit plans provide for the acceleration of benefits in the
event of a change of control of our company. A change of control generally
includes acquisitions of beneficial ownership of 20% or more of our ordinary
shares, changes in board composition and certain merger and sale transactions.
Upon the occurrence of a change of control, all outstanding restricted
shares granted under the Long-Term Incentive Plan will immediately vest and all
options and SARs granted under the Long-Term Incentive Plan to outside directors
or held by then-current employees will become immediately exercisable. In
addition, the executive compensation committee may provide that if a SAR is
exercised within 60 days of the occurrence of a change of control, the holder
will receive a payment equal to the excess over the amount otherwise due of the
highest price per ordinary share paid during the 60-day period prior to exercise
of the SAR. The executive compensation committee also may provide that the
holder is entitled to a supplemental payment on that excess. Those payments are
in addition to the amount otherwise due on exercise. Also, upon the occurrence
of a change of control, the participant will become vested in 100% of the
maximum performance award he could have earned under our Performance Award and
Cash Bonus Plan for the proportionate part of the performance period prior to
the change of control and will retain the right to earn out any additional
portion of his award if he remains in our employ.
The Sedco Forex merger constituted a change of control under our Long-Term
Incentive Plan and Performance Award and Cash Bonus Plan.
CONSULTING AGREEMENTS WITH DIRECTORS
As part of the Sedco Forex merger and as a condition to his appointment as
Chairman of the Board, we entered into a consulting agreement with Victor E.
Grijalva. The consulting agreement originally contained the following material
terms:
- we will nominate Mr. Grijalva to the board of directors to serve as
Chairman until his 65th birthday, at which time he will tender his
resignation for action by the board of directors. Mr. Grijalva will
turn 65 in July of 2003;
- until the time of his resignation, Mr. Grijalva will provide
consulting services to us, as an independent contractor, with regard
to long-range planning, strategic direction and integration and
rationalization matters;
- we will pay Mr. Grijalva $400,000 per year;
- we will indemnify Mr. Grijalva in connection with the services he
provides to the fullest extent available under our articles of
association; and
- Mr. Grijalva will be entitled to the non-cash compensation and
benefits we provide to non-employee directors.
Effective October 10, 2002, the consulting agreement was amended to provide
that Mr. Grijalva would resign as Chairman of the Board but would remain as a
member of the board. Mr. Grijalva agreed to resign as a consultant no later
than the date of his 65th birthday. If Mr. Grijalva remains on the board after
the period he serves as a consultant, he will be entitled to the same
compensation and benefits (including any pro-rated cash director fees) as other
non-employee members of the board in accordance with our policies.
At the time of the R&B Falcon merger, R&B Falcon entered into a consulting
agreement with Paul B. Loyd, Jr. The consulting agreement, which has now
expired, contained the following material terms:
- the term of the consulting agreement was for a period of two years
following the date of Mr. Loyd's termination of employment from R&B
Falcon, which occurred on January 31, 2001, and he could terminate it
at any time on 30 days' advance written notice;
16
- Mr. Loyd would provide consulting services with regard to strategies,
policies, special projects, incentives, goals and other matters
related to the development and growth of R&B Falcon for a minimum of
30 hours per month;
- Mr. Loyd agreed not to perform substantially similar services during
the term of the consulting agreement for any other company that
provides offshore contract drilling services;
- we would pay Mr. Loyd $360,000 per year and he would waive all
director's fees or other remuneration that he would otherwise receive
for being a member of our board of directors; and
- Mr. Loyd would be entitled to reimbursement of expenses incurred in
providing consulting services.
EMPLOYMENT AGREEMENTS
During September and October 2000, we entered into new agreements with some
of our executive officers, including Messrs. Talbert, Long, Ray, Brown and Ms.
Koucouthakis. These agreements replaced employment agreements entered into
prior to the Sedco Forex merger. The prior agreements provided that the
occurrence of a change in control triggered provisions that allowed executives
to leave for any reason during a specified period following the change of
control and receive the payments defined in the employment agreements, which
generally guaranteed a minimum salary and bonus for a period of three years. The
Sedco Forex merger triggered these provisions, and as a result, the executives
could have left for any reason during January 2001 and received the payments
under the employment agreements. In order to induce the executives to remove
such right and remain with our company, we offered the executives either (a) a
cash payment equivalent to the amount otherwise due under the employment
agreement as if the executive left in January 2001 to be vested and paid, with
interest, over a three year period in equal annual installments commencing
January 2002, in exchange for termination of the employment agreement (such
amounts would become payable if the executive remained employed, and would
become payable in a lump sum if the executive's termination occurred due to
death, disability or termination without cause, or due to certain reductions in
authority or base salary), or (b) an extension of the existing employment
agreement for three years beyond the current one month trigger period with a
first term of 18 months during which the employee commits to remain with our
company, followed by an additional term of 18 months (commencing July 1, 2002)
during which the employee can self trigger the payment rights to predetermined
amounts, with interest, under the employment agreement by terminating his or her
employment. Mr. Brown and Ms. Koucouthakis entered into agreements described in
clause (a) of the foregoing sentence, and Messrs. Talbert, Long and Ray entered
into agreements described in clause (b) of the foregoing sentence. None of the
new agreements contain change of control provisions. The agreements with
Messrs. Talbert, Long, and Ray provide that in the event the payments called for
under the agreement would subject the executive to an excise tax under Section
4999 of the U.S. Internal Revenue Code, the executive will be entitled to
receive an additional "gross-up" payment in some circumstances. Mr. Ray has
indicated that he plans to retire at the end of this year, which would trigger
the payment of $1,794,212 excluding interest.
In May 2002, Mr. Long entered into an agreement revoking his employment
agreement described above, which had provided him a right to leave for any
reason and receive his change of control payments. The new agreement provides
for a cash payment of $2,142,756 to be vested and paid, with interest, over a
three year period in equal annual installments beginning June 1, 2002. The
amount of this payment is approximately equal to the amount Mr. Long would have
been entitled to receive under his employment agreement if his employment had
been terminated in January 2001.
In October 2002, in connection with the change in his duties with the
Company, Mr. Talbert entered into an agreement revoking his employment agreement
described above, which had provided him a right to leave for any reason and
receive his change of control payments. The new agreement provides for the
reduction in his annual salary to $475,000 and a cash payment of $4,877,593 to
be vested and paid, with interest, over a three year period in equal annual
installments beginning October 2002. The amount of this payment is
approximately equal to the amount Mr. Talbert would have been entitled to
receive under his prior employment agreement if his employment had been
terminated in January 2001. The agreement also provides that Mr. Talbert will
tender his resignation as
17
Chairman of the Board for action by the board of directors on the earliest to
occur of any regularly scheduled meeting of the board of directors in October
2004 and October 16, 2004.
Neither Mr. Cahuzac nor Mr. Cauthen is a party to an employment agreement
with us.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the executive compensation committee of the board of
directors during the last completed fiscal year were Mr. Kuehn, Chairman, and
Messrs. Monti, Pattarozzi and Roger. There are no matters relating to
interlocks or insider participation that we are required to report.
CERTAIN TRANSACTIONS
We own a 50 percent interest in an unconsolidated joint venture company,
Overseas Drilling Limited ("ODL"), which owns the drillship Joides Resolution.
DSND Inc. owns the other 50 percent interest in ODL. Our director, Kristian
Siem, is the chairman of DSND and is also a director and officer of ODL. We
provide operational and management services to ODL, and we earned $1.2 million
for these services in 2002. ODL also reimburses us for costs which we incur in
connection with these services. ODL loaned $1 million to each of DSND and us in
March 2003. These loans are to be repaid in September 2003 and do not bear
interest if repaid on time. Mr. Siem is also chairman and chief executive
officer of Siem Industries, Inc., which owns more than a 50 percent interest in
DSND.
PROPOSAL TO AMEND OUR LONG-TERM INCENTIVE PLAN
DESCRIPTION OF THE PROPOSAL
Our board of directors has unanimously adopted a resolution to submit to a
vote of our shareholders a proposal to amend our Long-Term Incentive Plan to
allow grants of incentive stock options for an additional ten year period to May
1, 2013, and to allow a continuing right to grant stock options and share
appreciation rights to our outside directors. The provisions of the Long-Term
Incentive Plan relating to grants to outside directors and grants of incentive
stock options will terminate on May 1, 2003 unless shareholders approve this
proposal. The board believes that the amendment is necessary to attract and
retain qualified outside directors and to allow flexibility in the types of
stock options that we award under the incentive plan.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE AMENDMENT TO OUR LONG-TERM INCENTIVE PLAN.
PRINCIPAL PROVISIONS OF THE LONG-TERM INCENTIVE PLAN
The following summary of the incentive plan is qualified by reference to
the full text of the proposed amended and restated plan, which is attached as
Appendix B to this proxy statement.
The incentive plan is administered by the executive compensation committee
of the board of directors, all of the members of which are "non-employee
directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 and "outside directors" within the meaning of Section 162(m) of the U.S.
Internal Revenue Code. It is intended that the grant of awards under the amended
incentive plan, after approval by shareholders, will satisfy the requirements of
Section 162(m) of the code, as applicable to limitations on deductions of
compensation expenses in excess of $1 million for certain executive officers.
The committee designates the employees of our company and our subsidiaries
and affiliated companies to be granted awards under the incentive plan and the
type and amount of awards to be granted. The committee has authority to
interpret and amend the incentive plan, adopt administrative regulations for the
operation of the incentive plan and determine and amend the terms of awards to
employees under the incentive plan. However, the committee has no authority to
vary the amount or terms of awards to outside directors from those set forth in
the incentive plan.
18
Under the incentive plan, options to purchase ordinary shares, share
appreciation rights in tandem with options, freestanding share appreciation
rights, restricted shares and cash performance awards may be granted to
employees at the discretion of the committee. The committee may provide for a
supplemental cash payment upon the exercise of an option or share appreciation
right to cover the employee's tax burden associated with the exercise. In
addition, the incentive plan provides for automatic awards to outside directors
of options to purchase 4,000 ordinary shares at the time the individual becomes
one of our directors and options to purchase 6,000 ordinary shares after each
annual meeting of our shareholders at which the individual remains or is
reelected as a director. Outside directors who reside in Norway may elect to
receive share appreciation rights instead of these option grants.
The aggregate number of ordinary shares that may be issued under the
incentive plan may not exceed 18,900,000 shares with respect to awards to
employees, reduced by the number of shares that have previously been issued with
respect to awards to employees. Cash tax-offset supplemental payments will not
count against these limits. Lapsed, forfeited or canceled awards, including
options canceled upon the exercise of tandem share appreciation rights, will not
count against these limits and can be regranted under the incentive plan. If the
exercise price of an option is paid in ordinary shares or if ordinary shares are
withheld from payment of an award to satisfy tax obligations with respect to the
award, those shares will also not count against the above limits. No employee
may be granted options or restricted shares with respect to more than 600,000
ordinary shares in any fiscal year. The aggregate number of ordinary shares
subject to awards to outside directors may not exceed 600,000. The aggregate
number of ordinary shares subject to awards of freestanding share appreciation
rights to employees may not exceed 300,000. The aggregate number of restricted
shares which may be issued from and after January 31, 2001 from the 18,900,000
shares then reserved under the plan may not exceed 2,000,000. The shares issued
under the incentive plan may be ordinary shares held in treasury or authorized
but unissued ordinary shares.
Our officers are eligible to participate in the incentive plan, as are
employees of our company and our subsidiaries, and of partnerships or joint
ventures in which we and our subsidiaries have a significant ownership interest,
as determined by the committee. Our outside directors are automatically granted
options or, for outside directors residing in Norway, share appreciation rights
that have the terms specified in the incentive plan. Outside directors are not
eligible for any other awards under the incentive plan. Approximately 350
current employees and all of our current outside directors have received awards
under the incentive plan. All of our employees are eligible to receive awards
under the incentive plan at present.
Each stock option and SAR granted to a director has a ten-year term and
becomes exercisable in equal annual installments on the first, second and third
anniversaries of the date of grant assuming continued service on the board. In
the event of an outside director's retirement in accordance with the board's
retirement policy or his earlier death or disability, or in the event of a
change of control of our company, options and SARs will become immediately
exercisable and will remain exercisable for the remainder of their ten-year
term. Options and SARs will terminate 60 days after an outside director leaves
the board for any other reason. However, if that person ceases to be a director
for our convenience, as determined by the board, the board may at its discretion
accelerate the exercisability and retain the original term of those options and
SARs.
The committee determines, in connection with each option awarded to an
employee, the exercise price, whether that price is payable in cash, ordinary
shares or by cashless exercise, the terms and conditions of exercise, whether
the option will qualify as an incentive stock option under the U.S. Internal
Revenue Code, or a non-qualified option, restrictions on transfer of the option
and other provisions not inconsistent with the incentive plan. The committee is
also authorized to grant share appreciation rights to incentive plan
participants, either as freestanding awards or in tandem with an option. Every
share appreciation right entitles the participant, upon exercise of the share
appreciation right, to receive in cash or ordinary shares a value equal to the
excess of the market value of a specified number of ordinary shares at the time
of exercise, over the exercise price established by the committee. The incentive
plan requires that the exercise price of options and share appreciation rights
be at least equal to fair market value on the date of grant, except with respect
to options granted within 90 days of the closing of our initial public offering
in June 1993. The term of options and share appreciation rights under the
incentive plan may not exceed 10 years, except that the committee may extend the
term for up to one year following the death of the participant.
The committee is authorized to grant employees awards of restricted shares.
The committee determines the terms, conditions, restrictions and contingencies
applicable to awards of restricted shares. Awards of restricted
19
shares may be designated as "qualified performance-based compensation" under
Section 162(m) of the U.S. Internal Revenue Code. The performance goals will be
based on the same criteria as the cash performance awards discussed below.
The committee may also provide for cash performance awards to employees
based on the achievement of one or more objective performance goals. Cash
performance awards may be designated as "qualified performance-based
compensation" under Section 162(m) of the U.S. Internal Revenue Code. If so
designated, the cash performance awards will be contingent upon our performance
during the performance period, as measured by targets established by the
committee, based on any one or more of:
- sales;
- operating profits;
- operating profits before interest expense and taxes;
- net earnings;
- earnings per share;
- return on equity;
- return on assets;
- return on invested capital;
- total shareholder return;
- cash flow;
- debt-to-equity ratio;
- market share;
- stock price;
- economic value added; and
- market value added.
Such performance measures may be applied to us on a consolidated basis and
to a business unit, as an absolute measure or as a measure relative to a peer
group of companies. The committee will establish the performance objectives for
an award in writing no later than 90 days after beginning of the fiscal year to
which the award relates.
We have not granted any incentive options to date under the plan but could
determine to do so in the future.
The number and kind of shares covered by the incentive plan and by
outstanding awards under the incentive plan and the exercise price of
outstanding awards are subject to adjustment in the event of any:
- reorganization;
- recapitalization;
20
- stock dividend;
- stock split;
- merger;
- consolidation;
- extraordinary cash dividend;
- split-up;
- spin-off;
- combination; or
- exchange of shares.
Upon the occurrence of a change of control, following the grant of an
award, (1) all outstanding restricted shares will immediately vest, (2) all
options and share appreciation rights held by outside directors will become
immediately exercisable and will remain exercisable for the remainder of their
term, and (3) all outstanding options, tandem share appreciation rights and
freestanding share appreciation rights held by then-current employees will
become immediately exercisable and will remain exercisable for the remainder of
their term.
The incentive plan is not limited in duration by its terms. However,
pursuant to Section 422(b)(2) of the U.S. Internal Revenue Code, no option that
is intended to constitute an incentive stock option may currently be granted
under the incentive plan after May 1, 2003. Also, the provisions of the
incentive plan relating to outside directors will terminate on May 1, 2003. The
proposal to amend our incentive plan would extend the period during which
incentive stock options may be granted for an additional ten years to May 1,
2013 and extend indefinitely the right to grant stock options and share
appreciation rights to our outside directors. Our board of directors may at any
time amend, suspend or terminate the incentive plan, but in doing so cannot
adversely affect any outstanding awards without the grantee's written consent.
In addition, the board of directors may not increase the number of shares
reserved for issuance under the incentive plan or change the minimum option or
share appreciation right price without shareholder approval.
The amount and type of awards to be granted in the future under the
incentive plan to the named officers, to all executive officers as a group and
to all other employees are not currently determinable.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the general rules of present U.S. federal
income tax law relating to the tax treatment of incentive stock options,
non-qualified stock options, share appreciation rights, restricted shares awards
and cash performance awards issued under the incentive plan. The discussion is
general in nature and does not take into account a number of considerations that
may apply based on the circumstances of a particular participant under the
incentive plan, including the possibility that a participant may not be subject
to U.S. federal income taxation. When the terms "we", "our" or "our company" is
used in this section, the term is understood to mean the principal U.S.
operating subsidiary of Transocean.
Options
Some of the options issuable under the incentive plan may constitute
"incentive stock options" within the meaning of Section 422 of the U.S. Internal
Revenue Code, while other options granted under the incentive plan will be
non-qualified stock options. The U.S. Internal Revenue Code provides for tax
treatment of stock options qualifying as incentive stock options that may be
more favorable to employees than the tax treatment accorded non-qualified stock
options. Upon the grant of either form of option, the optionee will not
recognize income for tax
21
purposes and we will not receive any deduction. Generally, upon the exercise of
an incentive stock option, the optionee will recognize no income for U.S.
federal income tax purposes. However, the difference between the exercise price
of the incentive stock option and the fair market value of the shares at the
time of exercise is an item of tax adjustment that may require payment of an
alternative minimum tax. On the sale of shares acquired by exercise of an
incentive stock option (assuming that the sale does not occur within two years
of the date of grant of the option or within one year from the date of exercise,
which is referred to as a disqualifying disposition) any gain will be taxed to
the optionee as mid-term or long-term capital gain, depending on the actual
holding period from the exercise date. In contrast, upon the exercise of a
non-qualified option, the optionee recognizes taxable ordinary income (subject
to withholding) in an amount equal to the difference between the fair market
value of the shares on the date of exercise and the exercise price. Upon any
sale of such shares by the optionee, any difference between the sale price and
the fair market value of the shares on the date of exercise of the non-qualified
option will be treated generally as a capital gain or loss. No deduction is
available to us upon the exercise of an incentive stock option (although a
deduction may be available if the employee sells the shares acquired upon
exercise before the applicable holding period expires) whereas upon exercise of
a non-qualified stock option, we are entitled to a deduction in an amount equal
to the income recognized by the employee. Except in the case of the death or
disability of an optionee, an optionee has three months after termination of
employment in which to exercise an incentive stock option and retain favorable
tax treatment at exercise. An option exercised more than three months after an
optionee's termination of employment other than upon death or disability of an
optionee cannot qualify for the tax treatment accorded incentive stock options.
Such option would be treated as a non-qualified stock option instead.
Share Appreciation Rights
The amount of any cash or the fair market value of any share received by
the holder upon the exercise of share appreciation rights under the incentive
plan will be subject to ordinary income tax in the year of receipt, and we will
be entitled to a deduction for that amount.
Restricted Share Awards
Generally, a grant of ordinary shares under the incentive plan that are
subject to vesting and transfer restrictions will not result in taxable income
to the recipient for U.S. federal income tax purposes or a tax deduction to us
in the year of the grant. The value of the shares will generally be taxable to
the recipient as compensation income in the years in which the restrictions on
the shares lapse. Such value will be the fair market value of the shares on the
dates the restrictions terminate, less any consideration paid for the shares.
Any recipient, however, may elect pursuant to Section 83(b) of the U.S. Internal
Revenue Code to treat the fair market value of the shares on the date of a grant
as compensation income in the year of the grant of restricted shares, provided
the recipient makes the election pursuant to Section 83(b) within 30 days after
the date of the grant. In any case, we will receive a deduction for U.S.
federal income tax purposes corresponding in amount to the amount of
compensation included in the recipient's income in the year in which that amount
is so included.
Cash Performance Awards
Cash performance awards are taxable income to the recipient for U.S.
federal income tax purposes at the time of payment. The recipient will have
compensation income equal to the amount of cash paid, and we will have a
corresponding deduction for U.S. federal income tax purposes.
Other
In general, a U.S. federal income tax deduction is allowed to us in an
amount equal to the ordinary income recognized by a participant with respect to
awards under the incentive plan, provided that such amount constitutes an
ordinary and necessary business expense of our company, that such amount is
reasonable, and that the qualified performance-based compensation requirements
of Section 162(m) of the U.S. Internal Revenue Code are satisfied. We will not
be entitled to a deduction with respect to payments to employees that are
contingent upon a change of control if those payments are deemed to constitute
"excess parachute payments" under Section 280G of the U.S. Internal Revenue Code
and do not qualify as reasonable compensation pursuant to that section; such
payments will subject the recipients to a 20% excise tax.
22
A participant's tax basis in shares acquired upon exercise of an option
under the incentive plan is equal to the sum of the price paid for the shares,
if any, and the amount of ordinary income recognized by the participant upon
receipt of the shares. The participant's holding period for the shares begins
upon receipt of the shares. If a participant sells the shares, any difference
between the amount realized in the sale and the participant's tax basis in the
shares is taxed as long-term, mid-term or short-term capital gain or loss
(provided the shares are held as a capital asset on the date of sale) depending
on the participant's holding period for the shares.
PROPOSAL TO AMEND OUR EMPLOYEE STOCK PURCHASE PLAN
DESCRIPTION OF THE PROPOSAL
Our board of directors has unanimously adopted a resolution to submit to a
vote of our shareholders a proposal to amend our Employee Stock Purchase Plan to
increase the number of ordinary shares reserved for issuance under the stock
purchase plan from 1,500,000 to 2,500,000. The purpose of our stock purchase
plan is to encourage and assist our employees to acquire an equity interest in
the company through the purchase of ordinary shares. Our board of directors
believes the stock purchase plan is achieving its purpose, and desires to have
sufficient shares authorized for issuance under the plan to continue
participation by our employees. We currently have 225,984 authorized shares
remaining for issuance under the plan, and, based on current enrollment, we do
not believe we would have a sufficient number of shares available at the end of
the current plan year to meet the participants' purchase needs. The stock
purchase plan will terminate after all of our ordinary shares covered by the
stock purchase plan have been purchased, unless our board of directors
terminates the plan earlier.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE AMENDMENT TO OUR EMPLOYEE STOCK PURCHASE PLAN.
PRINCIPAL PROVISIONS OF THE EMPLOYEE STOCK PURCHASE PLAN
The following summary of the employee stock purchase plan is qualified by
reference to the full text of the proposed amended and restated plan, which is
attached as Appendix C to this proxy statement.
Under the stock purchase plan, all full-time employees of Transocean Inc.
and any subsidiary that has, with the consent of Transocean Inc.'s board of
directors, adopted the stock purchase plan who do not own, or hold options to
acquire, five percent or more of the total combined voting power or value of our
ordinary shares, are eligible to participate in the stock purchase plan.
Participants in the stock purchase plan may purchase our ordinary shares through
payroll deductions on an after-tax basis over a plan year beginning on each
January 1 and ending on the following December 31 during the term of the stock
purchase plan. A participant's right to participate in the stock purchase plan
terminates immediately when a participant ceases to be employed by us. An
employee may elect to participate in the stock purchase plan as of any January 1
following his or her completion of six consecutive months of employment. A
participant may elect to make contributions each pay period in an amount not
less than two percent of the participant's monthly compensation, with no dollar
minimum, subject to a monthly limitation equal to twenty percent of his base
monthly earnings or such other amount established by the our board of directors
finance and benefits committee, taking into account a "maximum share
limitation." The maximum share limitation is the number of ordinary shares
derived by dividing $25,000 by the fair market value, as defined below, of
ordinary shares determined as of the first trading day of the plan year. The
contributions will be held in trust during a plan year, and interest will be
credited to the participant's account. Unless a participant elects otherwise,
the dollar amount in the participant's account at the end of the plan year will
then be used to purchase as many whole ordinary shares as the funds in his or
her account will allow subject to the maximum share limitation. The purchase
price for the stock will be 85 percent of the lesser of (1) its fair market
value on the first trading day of the plan year or (2) its fair market value on
the last trading day of the plan year. "Fair market value" means the closing
composite sales price per ordinary share on the New York Stock Exchange on the
applicable date. Any cash remaining in the participant's account is refunded to
the participant unless the finance and benefits committee of the board of
directors decides, in its discretion, to carry over the excess enrollments to
the following plan year.
If the participant elects not to purchase ordinary shares at the end of the
plan year, such participant will receive a return of his or her payroll
deductions during the plan year plus the interest accrued on such deductions. At
the end of each plan year, participants will receive a statement of their
account balances, including interest earned
23
and the number of whole ordinary shares purchased and in the accounts. Any
dividends on ordinary shares held in a participant's account will be credited to
his or her account. A participant may elect to withdraw his or her entire
contributions for the current year from the stock purchase plan at any time
prior to the purchase of our ordinary shares. Any participant who so elects will
receive his or her entire account balance, including interest and dividends, if
any. A participant who suspends his or her payroll deductions or withdraws
contributions cannot resume participation in the stock purchase plan during that
plan year and must reenroll in the stock purchase plan the following year in
order to participate. A participant may also elect at any time to withdraw
ordinary shares held in his or her account for at least one year. Although the
plan provides that a participant may not sell ordinary shares held in the
participant's account for less than three months, this restriction has been
waived by the finance and benefits committee. In the event of a participant's
death, amounts credited to his or her account, including interest and dividends,
if applicable, will be paid in cash, and a certificate for any ordinary shares
will be delivered to his or her designated beneficiaries or other legal
representative.
Our board of directors generally may amend or terminate the stock purchase
plan at any time, provided that approval of our shareholders must be obtained
for any amendment to the stock purchase plan if required under Section 423 of
U.S. Internal Revenue Code or any other applicable law or regulation. Section
423 of the U.S. Internal Revenue Code currently requires shareholder approval of
a plan amendment that would change the number of shares reserved for issuance
under the stock purchase plan. The shares to be issued pursuant to the stock
purchase plan may be ordinary shares held in treasury or authorized but unissued
ordinary shares.
The amount and type of awards to be granted in the future under the stock
purchase plan to the named officers, to all executive officers as a group and to
all other employees are not currently determinable.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the general rules of present U.S. federal
income tax law relating to the tax treatment of the ordinary shares purchased
under the stock purchase plan. The discussion is general in nature and does not
take into account a number of considerations that may apply based on the
circumstances of a particular participant under the stock purchase plan,
including the possibility that a participant may not be subject to U.S. federal
income taxation. When the term "we," "our" or "our company" is used in this
section, the term is understood to mean the principal U.S. operating subsidiary
of Transocean.
The stock purchase plan is intended to qualify as an "employee stock
purchase plan" under the provisions of Section 423 of the U.S. Internal Revenue
Code. A participant under the stock purchase plan is not subject to U.S.
federal income taxation when ordinary shares are purchased under the plan, even
though such shares are purchased at 85% of the lesser of the fair market value
on the first trading day of the calendar year or the fair market value on the
last trading day of the calendar year. A participant, however, will recognize
taxable ordinary income upon disposition of the ordinary shares acquired under
the stock purchase plan if such shares are disposed of in a "disqualifying
disposition," which is a disposition of the shares before the later of (1) two
years from the date a right to purchase stock was issued under the plan or (2)
one year from the date that shares acquired under the plan were transferred to
the participant. This taxable income will be recognized in the year of the
disqualifying disposition and will equal the amount by which the fair market
value of the shares on the purchase date exceeds the purchase price of the
shares, but in no event will the income recognized exceed the sales proceeds for
such shares reduced by the purchase price for such shares. Any additional gain
or loss recognized on the disqualifying disposition of the shares will be
short-term or long-term capital gain or loss, depending on the length of time
the participant has held the shares after the exercise of the purchase right.
If a participant sells or otherwise disposes of his or her shares after the
above holding period so that there is no disqualifying disposition or in the
event of a participant's death (whenever occurring), the participant (or the
participant's estate in the event of death) would realize ordinary income, in
the year of the qualifying disposition, equal to the lesser of (1) the excess of
the fair market value of the shares at the time of the disposition over the
purchase price or (2) the excess of the fair market value of the shares at the
time the purchase right was granted over the purchase price. Any additional
gain or loss recognized on the qualifying disposition of the shares will be
long-term capital gain or loss. If a participant sells the ordinary shares
acquired under the stock purchase plan, assuming there is no disqualifying
disposition, any difference between the amount realized in the sale and the
participants' tax basis in the shares (which would include any ordinary income
recognized with respect to the shares) is taxed as long-term or short-term
capital gain or loss, provided the shares are held as a capital asset on the
date of sale, and depending on the participant's holding period for the shares.
24
We are entitled to a deduction for U.S. federal income tax purposes for
dispositions of shares acquired by a participant in the stock purchase plan only
to the extent that the participant realizes ordinary income as a result of a
disqualifying disposition of shares acquired under the stock purchase plan. Any
such deduction is subject to the limitations of Section 162(m) of the U.S.
Internal Revenue Code.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information concerning securities authorized
for issuance under our equity compensation plans as of December 31, 2002.
Number of securities
remaining available for
Number of securities to be Weighted-average exercise future issuance under
issued upon exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
warrants and rights rights reflected in column (a))
Plan Category (a) (b) (c)
-------------------------- --------------------------- --------------------------- --------------------------
Equity compensation plans
approved by security
holders (1) (2) . . . 15,522,950 $ 28.10 9,273,465
--------------------------- --------------------------- --------------------------
Equity compensation plans
not approved by
security holders (3). - - -
--------------------------- --------------------------- --------------------------
Total . . . . . . . . . . 15,522,950 $ 28.10 9,273,465
=========================== =========================== ==========================
---------------
(1) Includes 7,306,631 shares to be issued upon exercise of options with a
weighted average exercise price of $23.22 that were granted under (a) our
Sedco Forex Employees Option Plan in connection with the Sedco Forex
merger, which was approved by our shareholders, and (b) equity compensation
plans of R&B Falcon assumed by us in connection with the R&B Falcon merger,
which was approved by our shareholders.
(2) In addition to stock options, we are authorized to grant awards of
restricted stock under our Long Term Incentive Plan, and 1,959,877
ordinary shares are available for future issuance pursuant to grants of
restricted stock under this plan.
(3) Does not include any shares that may be distributed under our deferred
compensation plan, which has not been approved by our shareholders. Under
this plan, our directors may defer any fees or retainers by investing those
amounts in Transocean ordinary share equivalents or in other investments
selected by the administrative committee. Amounts that are invested in the
ordinary share equivalents at the time of distribution are distributed in
ordinary shares. There is no limit on the number of shares directors may
acquire under this plan. As of December 31, 2002, our directors had
purchased 27,688 Transocean ordinary share equivalents under this plan.
SELECTION OF AUDITOR
We have selected Ernst & Young LLP as our auditor for the 2003 calendar
year. Ernst & Young LLP served as our auditor for the 2002 calendar year.
Although the selection and appointment of independent auditors is not required
to be submitted to a vote of shareholders, the Board of Directors has decided to
ask our shareholders to approve this appointment. Approval of our appointment
of Ernst & Young LLP to serve as independent auditors for the year 2003 requires
the affirmative vote of holders of at least a majority of the ordinary shares
present in person or by proxy at the meeting and entitled to vote on the matter.
If the shareholders do not approve the appointment of Ernst & Young LLP, the
Board of Directors will consider the appointment of other independent auditors.
A representative of Ernst & Young LLP is expected to be present at the annual
general meeting with the opportunity to make a statement if so desired and to
respond to appropriate questions.
25
FEES PAID TO ERNST & YOUNG LLP
Ernst & Young LLP has billed us fees as set forth in the table below for
(i) the audit of our annual financial statements and reviews of quarterly
financial statements, (ii) financial information systems design and
implementation work rendered in 2002 and (iii) all other services rendered in
2002.
All Other Fees
Financial Information ------------------------------------------
Systems Design and Audit-Related Total of
Audit Fees Implementation Fees Fees Other All Other Fees
---------- ------------------- ---- ----- ---------------
Fiscal year 2002 $ 400,000 $ 0 $ 1,815,060 $1,106,639 $ 2,921,699
The audit committee pre-approves all auditing services, review or attest
engagements and permitted non-audit services to be performed by our independent
auditor, subject to the some de minimis exceptions for non-audit services which
are approved by the audit committee prior to the completion of the annual audit.
The audit committee has considered whether the provision of services rendered in
2002 other than the audit of our financial statements and reviews of quarterly
financial statements was compatible with maintaining the independence of Ernst &
Young LLP and determined that the provision of such services was compatible with
maintaining such independence.
HOUSEHOLDING
The SEC permits a single set of annual reports and proxy statements to be
sent to any household at which two or more stockholders reside if they appear to
be members of the same family. Each stockholder continues to receive a separate
proxy card. This procedure, referred to as householding, reduces the volume of
duplicate information stockholders receive and reduces mailing and printing
expenses. A number of brokerage firms have instituted householding.
As a result, if you hold your shares through a broker and you reside at an
address at which two or more stockholders reside, you will likely be receiving
only one annual report and proxy statement unless any stockholder at that
address has given the broker contrary instructions. However, if any such
beneficial stockholder residing at such an address wishes to receive a separate
annual report or proxy statement in the future, or if any such beneficial
stockholder that elected to continue to receive separate annual reports or proxy
statements wishes to receive a single annual report or proxy statement in the
future, that stockholder should contact their broker or send a request to our
corporate secretary at Eric B. Brown, Secretary, Transocean Inc., 4 Greenway
Plaza, Houston, Texas 77046, telephone number (713) 232-7500. We will deliver,
promptly upon written or oral request to the corporate secretary, a separate
copy of the 2002 annual report and this proxy statement to a beneficial
stockholder at a shared address to which a single copy of the documents was
delivered.
2002 ANNUAL GENERAL MEETING OF SHAREHOLDERS
At our last Annual General Meeting held on May 9, 2002, our shareholders
elected Ronald L. Kuehn, Jr., Paul B. Loyd, Jr., Roberto Monti and Ian C.
Strachan as directors, approved the appointment of Ernst & Young LLP as our
independent auditors for 2002 and approved the change of our name to "Transocean
Inc." Since the 2002 Annual General Meeting, our articles and memorandum of
association have not been amended, other than to reflect the name change, and no
meetings of shareholders have been held.
PROPOSALS OF SHAREHOLDERS
Shareholder Proposals in the Proxy Statement. Rule 14a-8 under the
Securities Exchange Act of 1934 addresses when a company must include a
shareholder's proposal in its proxy statement and identify the proposal in its
form of proxy when the company holds an annual or special meeting of
shareholders. Under Rule 14a-8, in order for your proposals to be considered
for inclusion in the proxy statement and proxy card relating to our 2004 annual
general meeting, your proposals must be received at our principal executive
offices, 4 Greenway Plaza, Houston, Texas 77046, by no later than November 28,
2003. However, if the date of the 2004 annual general meeting changes by more
than 30 days from the anniversary of the 2003 annual general meeting, the
deadline is a reasonable
26
time before we begin to print and mail our proxy materials. We will notify you
of this deadline in a Quarterly Report on Form 10-Q or in another communication
to you. Shareholder proposals must also be otherwise eligible for inclusion.
Shareholder Proposals and Nominations for Directors to Be Presented at
Meetings. If you desire to bring a matter before an annual general meeting and
the proposal is submitted outside the process of Rule 14a-8, you must follow the
procedures set forth in our articles of association. Our articles of
association provide generally that, if you desire to propose any business at an
annual general meeting, you must give us written notice not less than 90 days
prior to the anniversary of the originally scheduled date of the immediately
preceding annual general meeting. However, if the date of the forthcoming
annual general meeting is more than 30 days before or after that anniversary
date, the deadline is the close of business on the tenth day after we publicly
disclose the meeting date. The deadline under our articles of association for
submitting proposals will be February 8, 2004 for the 2004 annual general
meeting unless it is more than 30 days before or after the anniversary of the
2003 annual general meeting. Your notice must set forth:
- a brief description of the business desired to be brought before the
meeting and the reasons for conducting the business at the meeting;
- your name and address;
- a representation that you are a holder of record of our ordinary
shares entitled to vote at the meeting, or if the record date for the
meeting is subsequent to the date required for shareholder notice, a
representation that you are a holder of record at the time of the
notice and intend to be a holder of record on the date of the meeting,
and, in either case, intend to appear in person or by proxy at the
meeting to propose that business; and
- any material interest you have in the business.
If you desire to nominate directors at an annual general meeting, you must
give us written notice within the time period described in the preceding
paragraph. If you desire to nominate directors at an extraordinary general
meeting at which the board of directors has determined that directors will be
elected, you must give us written notice by the close of business on the tenth
day following our public disclosure of the meeting date. Notice must set forth:
- your name and address and the name and address of the person or
persons to be nominated;
- a representation that you are a holder of record of our ordinary
shares entitled to vote at the meeting or, if the record date for the
meeting is subsequent to the date required for that shareholder
notice, a representation that you are a holder of record at the time
of the notice and intend to be a holder of record on the date of the
meeting and, in either case, setting forth the class and number of
shares so held, including shares held beneficially;
- a representation that you intend to appear in person or by proxy as a
holder of record at the meeting to nominate the person or persons
specified in the notice;
- a description of all arrangements or understandings between you and
each nominee you proposed and any other person or persons under which
the nomination or nominations are to be made by you;
- any other information regarding each nominee you proposed that would
be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission; and
- the consent of each nominee to serve as a director if so elected.
27
The chairman of the meeting may refuse to transact any business or to
acknowledge the nomination of any person if you fail to comply with the
foregoing procedures.
You may obtain a copy of our articles of association, in which these
procedures are set forth, upon written request to Eric B. Brown, Secretary,
Transocean Inc., 4 Greenway Plaza, Houston, Texas 77046.
28
APPENDIX A
TRANSOCEAN
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee is to assist the Board of Directors in fulfilling its
oversight responsibilities by reviewing: the Company's financial statements
contained in the annual report to stockholders; the Company's systems of
internal control regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and the Company's auditing,
accounting and financial reporting processes in general. Consistent with this
oversight function, the Audit Committee encourages continuous improvement of and
fosters adherence to the company's policies, procedures and practices at all
levels. The Audit Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the
corporation's financial reporting process and internal control system.
- Review and appraise the audit efforts of the Company's independent
auditors and internal audit function.
- Provide an open avenue of communication among the independent
auditors, financial and senior management, the internal auditing
department, and the Board of Directors.
- Prepare the audit committee report required by the rules of the
Securities and Exchange Commission (the "Commission") to be included
in the Company's annual proxy statement.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in the section on Committee Authority and
Responsibilities.
COMMITTEE MEMBERSHIP
The Audit Committee shall consist of at least three active members of the
Board, each of whom shall be independent directors, as defined by the New York
Stock Exchange, the rules and regulations of the Commission and applicable law,
and free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment as a member of
the Committee. In no event shall an active or retired officer or employee of the
Company be a member of the Committee.
The proposed committee members and Chairman of the Audit Committee shall be
recommended to the Board of Directors by the Corporate Governance Committee. All
members of the committee shall have a working familiarity with basic finance and
accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise.
MEETINGS
The Audit Committee shall meet as often as it determines but not less
frequently than quarterly. The Committee should meet periodically with the
internal auditors and the independent auditors in separate executive sessions to
discuss any matters that the Committee or any of these groups believe should be
discussed privately.
29
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall have the sole authority to retain or terminate
the independent auditors. The Audit Committee shall be directly responsible for
the compensation and oversight of the work of the independent auditors
(including resolution of disagreements between management and the independent
auditors regarding financial reporting) for the purpose of preparing or issuing
an audit report or related work. The independent auditors shall report directly
to the Audit Committee.
The Audit Committee shall pre-approve all auditing services, review or
attest engagements and permitted non-audit services (including the fees and
terms thereof) to be performed for the Company by its independent auditors,
subject to the de minimis exceptions for non-audit services described in Section
10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior
to the completion of the audit. The Audit Committee may establish policies and
procedures for purposes of such pre-approval to the extent allowed by applicable
law and regulations.
The Audit Committee may form and delegate authority to subcommittees
consisting of one or more members when appropriate, including the authority to
grant pre-approvals of audit and permitted non-audit services, provided that
decisions of such subcommittee to grant pre-approvals shall be presented to the
full Audit Committee at its next scheduled meeting.
The Audit Committee shall have the authority to retain, dismiss or replace
independent legal, accounting or other advisors. The Audit Committee shall have
the sole authority to approve the fees and other retention terms for any
advisors employed by the Audit Committee. The Company shall provide for
appropriate funding, as determined by the Audit Committee, for payment of
compensation to the independent auditors for the purpose of rendering or issuing
an audit report and to any advisors employed by the Audit Committee.
A. WITH REGARD TO THE INDEPENDENT AUDITORS
1. Review at least annually plans for the scope of the independent
auditors' activities, including the auditors' performance of
non-audit services, and expected fees to be incurred therefor,
the auditors' report of findings resulting from examination of
the Company's records and systems of internal accounting
controls, and matters affecting their independence in the
performance of the audit of Company accounts.
2. Review with Internal Audit and the independent auditors their
annual audit plans, including the degree of coordination of the
respective plans. The Committee should inquire as to the extent
to which the planned audit scope can be relied upon to detect
fraud or weaknesses in internal accounting controls.
3. Have a clear understanding with the independent auditors that
they are ultimately accountable to the Audit Committee, as
representatives of the shareholders, and that these shareholder
representatives have ultimate authority and responsibility to
engage, evaluate, and if appropriate, terminate their services.
To this end, the Committee will have the exclusive authority with
regard to the appointment or discharge of the independent
auditors.
4. On an annual basis, obtain from the independent auditors a
written communication delineating all their relationships and
professional services as required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees.
In addition, review with the independent auditors the nature and
scope of any disclosed relationships or professional services and
take, or recommend appropriate action to ensure the continuing
independence of the auditors. Evaluate whether the provision of
permitted non-audit services is compatible with maintaining the
auditors' independence.
5. Review with the independent auditors the cooperation received
from Management during the course of the audit and extent of any
restrictions that may have affected their examination.
30
6. Review and discuss reports from the independent auditors on:
- All critical accounting policies and practices to be used;
- All alternative treatments within Generally Accepted
Accounting Principles for policies and practices related to
material items that have been discussed with Management,
including ramification of the use of such alternative
disclosures and treatments; and the treatment preferred by
the independent auditors;
- Other material written communications between the
independent auditors and the Management, such as any
management letter or schedule of unadjusted differences.
7. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to
the conduct of the audit.
B. WITH REGARD TO THE COMPANY'S FINANCIAL STATEMENTS AND FOOTNOTES, AND
INTERNAL ACCOUNTING CONTROL SYSTEMS
1. Review the Annual Report and footnotes thereto prior to its
publication, and discuss with the independent auditors any
significant transactions not a normal part of the Company's
business, significant adjustments proposed by them, and comments
submitted by the independent auditors concerning the Company's
system of internal accounting control together with Management's
actions to correct any deficiencies noted.
2. Review with the independent auditors the quality, not just the
acceptability, of the company's accounting principles as applied
in its financial reporting in terms of clarity of disclosures,
degree of aggressiveness or conservatism of the Company's
accounting principles and underlying estimates and other
significant decisions made by the Company in preparing the
financial disclosures.
3. Review steps taken to assure compliance with the Company's policy
regarding conflicts of interest and business ethics.
4. Review transactions or relationships between the Company and any
Director, Officer, or shareholder owning more than 5% of the
Company's common stock (including any family members of the
foregoing), and make recommendation to the Board of Directors
concerning whether such relationships should continue.
5. Ascertain that appropriate reporting of such transactions or
relationships is made to the Commission or other regulatory
agencies.
6. Review the quality and depth of staffing of the Company's
financial, accounting, and internal audit personnel.
7. Review disclosures made to the Audit Committee by the Company's
CEO and CFO during their certification process for the Form 10-K
and Form 10-Q about any significant deficiencies in the design or
operation of internal controls or material weaknesses therein or
instances of fraud involving management or other employees who
have a significant role in the Company's internal controls.
8. Review and discuss with management and the independent auditors
the annual audited financial statements, and based upon the
review and discussion decide whether to recommend to the Board
that the audited financial statements should be included in the
Company's Form 10-K.
31
C. WITH REGARD TO THE COMPANY'S INTERNAL AUDITORS
1. Review the scope of the internal auditors' activities, their
report of findings resulting from the examination of the
Company's records, operations, and systems of internal accounting
controls, and matters affecting their independence in the
performance of the audit of Company accounts, including the
cooperation received from Management during the course of any
audit, and the extent of any restrictions that may have affected
their examination.
D. OTHER RESPONSIBILITIES
1. Review expense accounts and executive perquisites of the
Company's senior officers.
2. Review litigation involving claims by shareholders of wrongdoing
by or against directors, officers, or independent auditors of the
Company.
3. Review and update this Charter periodically, at least annually,
as conditions dictate.
4. Annually review the Audit Committee's own performance.
5. 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 concerns regarding
questionable accounting or auditing matters.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of Management and the independent auditors.
Unless he or she believes to the contrary (in which case, he or she will
advise the Audit Committee of such belief), each member of the Audit Committee
shall be entitled to assume and rely on (1) the integrity of those persons and
organizations within and outside the Company that it receives information from
and (2) the accuracy of the financial, legal and other information provided to
the Audit Committee by such persons or organizations.
32
APPENDIX B
PROPOSED AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
OF
TRANSOCEAN INC.
(As Amended and Restated Effective May 8, 2003)
I. GENERAL
1.1 PURPOSE OF THE PLAN
The Long-Term Incentive Plan (the "Plan") of Transocean Inc., a Cayman
Islands exempted company (the "Company"), is intended to advance the best
interests of the Company and its subsidiaries by providing Directors and
employees with additional incentives through the grant of options ("Options") to
purchase ordinary shares, par value US $0.01 per share of the Company ("Ordinary
Shares"), share appreciation rights ("SARs"), restricted Ordinary Shares
("Restricted Shares") and cash performance awards ("Cash Awards"), thereby
increasing the personal stake of such Directors and employees in the continued
success and growth of the Company.
1.2 ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Executive Compensation
Committee or other designated committee (the "Committee") of the Board of
Directors of the Company (the "Board of Directors") which shall consist of at
least two Directors, all of whom (i) are not eligible for awards under Articles
II and III of the Plan, (ii) are "non-employee directors" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, and (iii) are outside
directors satisfying the requirements of Section 162(m) of the Internal Revenue
Code of 1986, as amended, or any successor thereto ("the Code"). The Committee
shall have authority to interpret conclusively the provisions of the Plan, to
adopt such rules and regulations for carrying out the Plan as it may deem
advisable, to decide conclusively all questions of fact arising in the
application of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. Notwithstanding the foregoing,
the Committee shall have no power or discretion to vary the amount or terms of
awards under Article IV of the Plan, except as provided in Section 6.2. All
decisions and acts of the Committee shall be final and binding upon all affected
Plan participants.
(b) The Committee shall designate the eligible employees, if any, to be
granted awards under Articles II and III and the type and amount of such awards
and the time when awards will be granted. All awards granted under the Plan
shall be on the terms and subject to the conditions hereinafter provided.
1.3 ELIGIBLE PARTICIPANTS
Employees, including officers, of the Company and its subsidiaries, and of
partnerships or joint ventures in which the Company and its subsidiaries have a
significant ownership interest as determined by the Committee (all of such
subsidiaries, partnerships and joint ventures being referred to as
"Subsidiaries") shall be eligible for awards under Articles II, III and V of the
Plan. Directors who are not employees of the Company or its Subsidiaries shall
not be eligible for awards under Articles II, III and V.
Each Director of the Company who is not an officer or employee of the
Company or any of its subsidiaries (an "Eligible Director") shall automatically
be granted awards under Article IV of the Plan. Each Eligible Director to whom
Options or SARs are granted under Article IV is hereinafter referred to as a
"Participant."
1.4 AWARDS UNDER THE PLAN
Awards to employees under Articles II and III may be in the form of (i)
Options to purchase Ordinary Shares, (ii) Share Appreciation Rights which may be
either freestanding or issued in tandem with Options, (iii)
33
Restricted Ordinary Shares, (iv) Supplemental Payments which may be awarded with
respect to Options, Share Appreciation Rights and Restricted Ordinary Shares, or
(v) any combination of the foregoing. Awards to employees under Article V will
be in the form of performance awards payable in cash.
Awards to Eligible Directors under Article IV shall be in the form of (i)
Options to purchase Ordinary Shares and Supplemental Payments with respect
thereto, or (ii) solely in the case of Eligible Directors residing in Norway,
freestanding SARs.
1.5 SHARES SUBJECT TO THE PLAN
The aggregate number of Ordinary Shares which may be issued with respect to
awards made under Articles II and III shall not exceed 18,900,000 shares,
reduced by the number of shares which have been issued pursuant to such Articles
prior to January 31, 2001. Of such 18,900,000 shares, the aggregate number of
Restricted Ordinary Shares which may be issued pursuant to Article III from and
after January 31, 2001, shall not exceed 2,000,000 shares. In addition, the
aggregate number of Ordinary Shares which may be issued with respect to awards
made under Article IV shall not exceed 600,000, reduced by the number of shares
which have been issued pursuant to such Article prior to January 31, 2001. At
no time shall the number of shares issued plus the number of shares estimated by
the Committee to be ultimately issued with respect to outstanding awards under
the Plan exceed the number of shares that may be issued under the Plan. No
employee shall be granted Share Options, freestanding Share Appreciation Rights,
or Restricted Ordinary Shares, or any combination of the foregoing, with respect
to more than 600,000 Ordinary Shares in any fiscal year (subject to adjustment
as provided in Section 6.2). No employee shall be granted a Supplemental
Payment in any fiscal year with respect to more than the number of Ordinary
Shares covered by Share Options, freestanding Share Appreciation Rights or
Restricted Ordinary Shares awards granted to such employee in such fiscal year.
Shares distributed pursuant to the Plan may consist of authorized but unissued
shares or treasury shares of the Company, as shall be determined from time to
time by the Board of Directors.
If any Option under the Plan shall expire, terminate or be canceled
(including cancellation upon the holder's exercise of a related Share
Appreciation Right) for any reason without having been exercised in full, or if
any Restricted Ordinary Shares shall be forfeited to the Company, the
unexercised Options and forfeited Restricted Ordinary Shares shall not count
against the above limit and shall again become available for grants under the
Plan (regardless of whether the holder of such Options or shares received
dividends or other economic benefits with respect to such Options or shares).
Ordinary Shares equal in number to the shares surrendered in payment of the
option price, and Ordinary Shares which are withheld in order to satisfy
federal, state or local tax liability, shall not count against the above limit
and shall again become available for grants under the Plan. Only the number of
Ordinary Shares actually issued upon exercise of a Share Appreciation Right or
payment of a Supplemental Payment shall count against the above limit, and any
shares which were estimated to be used for such purposes and were not in fact so
used shall again become available for grants under the Plan.
Freestanding Shares Appreciation Rights which may be settled solely in cash
shall be issued with respect to no more than an aggregate of 300,000 underlying
shares. Such SARs shall not count against the limits set forth above on the
number of Ordinary Shares which may be issued under the Plan. If any
freestanding SAR shall expire, terminate, or be canceled for any reason without
having been exercised in full, the unexercised SARs shall not count against this
limit and shall again become available for grants under the Plan.
1.6 OTHER COMPENSATION PROGRAMS
The existence and terms of the Plan shall not limit the authority of the
Board of Directors in compensating Directors and employees of the Company and
its subsidiaries in such other forms and amounts, including compensation
pursuant to any other plans as may be currently in effect or adopted in the
future, as it may determine from time to time.
34
II. SHARE OPTIONS AND SHARE APPRECIATION RIGHTS
2.1 TERMS AND CONDITIONS OF OPTIONS
Subject to the following provisions, all Options granted under the Plan to
employees of the Company and its Subsidiaries shall be in such form and shall
have such terms and conditions as the Committee, in its discretion, may from
time to time determine.
(a) Option Price. The option price per share shall not be less than
the fair market value of the Ordinary Shares (as determined by the Committee) on
the date the Option is granted. Notwithstanding the foregoing, the option price
per share with respect to any Option granted by the Committee within 90 days of
the closing of the initial public offering of the Company's Ordinary Shares
shall be at the initial public offering price for such Shares.
(b) Term of Option. The term of an Option shall not exceed ten years
from the date of grant, except as provided pursuant to Section 2.1(g) with
respect to the death of an optionee. No Option shall be exercised after the
expiration of its term.
(c) Exercise of Options. Options shall be exercisable at such time or
times and subject to such terms and conditions as the Committee shall specify in
the Option grant. The Committee shall have discretion to at any time declare
all or any portion of the Options held by any optionee to be immediately
exercisable. An Option may be exercised in accordance with its terms as to any
or all shares purchasable thereunder.
(d) Payment for Shares. The Committee may authorize payment for shares
as to which an Option is exercised to be made in cash, Ordinary Shares, by
"cashless exercise" or in such other manner as the Committee in its discretion
may provide.
(e) Nontransferability of Options. No Option or any interest therein
shall be transferable by the optionee other than by will or by the laws of
descent and distribution. During an optionee's lifetime, all Options shall be
exercisable only by such optionee or by the guardian or legal representative of
the optionee.
(f) Shareholder Rights. The holder of an Option shall, as such, have
none of the rights of a shareholder.
(g) Termination of Employment. The Committee shall have discretion to
specify in the Option grant or an amendment thereof, provisions with respect to
the period during which the Option may be exercised following the optionee's
termination of employment. Notwithstanding the foregoing, the Committee shall
not permit any Option to be exercised beyond the term of the Option established
pursuant to Section 2.1(b), except that the Committee may provide that,
notwithstanding such Option term, an Option which is outstanding on the date of
an optionee's death shall remain outstanding and exercisable for up to one year
after the optionee's death.
(h) Change of Control. Notwithstanding the exercisability schedule
governing any Option, upon the occurrence of a Change of Control (as defined in
Section 6.10) all Options outstanding at the time of such Change of Control and
held by optionees who are employees of the Company or its Subsidiaries at the
time of such Change of Control shall become immediately exercisable and, unless
the optionee agrees otherwise in writing, shall remain exercisable for the
remainder of the Option term.
2.2 SHARE APPRECIATION RIGHTS IN TANDEM WITH OPTIONS
(a) The Committee may, either at the time of grant of an Option or at
any time during the term of the Option, grant Share Appreciation Rights with
respect to all or any portion of the Ordinary Shares covered by such Option. A
tandem Share Appreciation Right may be exercised at any time the Option to which
it relates is then exercisable, but only to the extent the Option to which it
relates is exercisable, and shall be subject to the conditions applicable to
such Option. When a tandem Share Appreciation Right is exercised, the Option to
which it relates shall cease to be exercisable to the extent of the number of
shares with respect to which the tandem Share Appreciation Right is exercised.
Similarly, when an Option is exercised, the tandem Share Appreciation Rights
35
relating to the shares covered by such Option exercise shall terminate. Any
tandem Share Appreciation Right which is outstanding on the last day of the term
of the related Option (as determined pursuant to Section 2.1(b)) shall be
automatically exercised on such date for cash without any action by the
optionee.
(b) Upon exercise of a tandem Share Appreciation Right, the holder
shall receive, for each share with respect to which the tandem Share
Appreciation Right is exercised, an amount (the "Appreciation") equal to the
amount by which the fair market value (as defined below) of an Ordinary Share on
the date of exercise of the Share Appreciation Right exceeds the option price
per share of the Option to which the tandem Share Appreciation Right relates.
For purposes of the preceding sentence, the fair market value of an Ordinary
Share shall be the average of the high and low prices of such share as reported
on the consolidated reporting system. The Appreciation shall be payable in cash,
Ordinary Shares, or a combination of both, at the option of the Committee, and
shall be paid within 30 days of the exercise of the tandem Share Appreciation
Right.
(c) Notwithstanding the foregoing, if a tandem Share Appreciation Right
is exercised within 60 days of the occurrence of a Change of Control, (i) the
Appreciation and any Supplemental Payment (as defined in Section 2.4) to which
the holder is entitled shall be payable solely in cash, and (ii) in addition to
the Appreciation and the Supplemental Payment (if any), the holder shall
receive, in cash, (1) the amount by which the greater of (a) the highest market
price per Ordinary Share during the 60-day period preceding exercise of the
tandem Share Appreciation Right or (b) the highest price per Ordinary Share (or
the cash-equivalent thereof as determined by the Board of Directors) paid by an
acquiring person during the 60-day period preceding a Change of Control, exceeds
the fair market value of an Ordinary Share on the date of exercise of the tandem
Share Appreciation Right, plus (2) if the holder is entitled to a Supplemental
Payment, an additional payment, calculated under the same formula as used for
calculating such holder's Supplemental Payment, with respect to the amount
referred to in clause (1) of this sentence.
2.3 FREESTANDING SHARE APPRECIATION RIGHTS
The Committee may grant Freestanding Share Appreciation Rights to employees
of the Company and its Subsidiaries, in such form and having such terms and
conditions as the Committee, in its discretion, may from time to time determine,
subject to the following provisions.
(a) Base Price and Appreciation. Each freestanding SAR shall be
granted with a base price, which shall not be less than the fair market value of
the Ordinary Shares (as determined by the Committee) on the date the SAR is
granted. Upon exercise of a freestanding SAR, the holder shall receive, for
each share with respect to which the SAR is exercised, an amount (the
"Appreciation") equal to the amount by which the fair market value (as defined
below) of an Ordinary Share on the date of exercise of the SAR exceeds the base
price of the SAR. For purposes of the preceding sentence, the fair market value
of an Ordinary Share shall be the average of the high and low prices of such
share as reported on the New York Stock Exchange composite tape. The
Appreciation shall be payable in cash and shall be paid within 30 days of the
exercise of the SAR.
(b) Term of SAR. The term of a freestanding SAR shall not exceed ten
years from the date of grant, except as provided pursuant to Section 2.3(f) with
respect to the death of the grantee. No SAR shall be exercised after the
expiration of its term. Any freestanding SAR which is outstanding on the last
day of its term (as such term may be extended pursuant to Section 2.3(f)) and as
to which the Appreciation is a positive number on such date shall be
automatically exercised on such date for cash without any action by the grantee.
(c) Exercise of SARs. Freestanding SARs shall be exercisable at such
time or times and subject to such terms and conditions as the Committee may
specify in the SAR grant. The Committee shall have discretion to at any time
declare all or any portion of the freestanding SARs then outstanding to be
immediately exercisable. A freestanding SAR may be exercised in accordance with
its terms in whole or in part.
(d) Nontransferability of SARs. No SAR or any interest therein shall
be transferable by the grantee other than by will or by the laws of descent and
distribution. During a grantee's lifetime, all SARs shall be exercisable only
by such grantee or by the guardian or legal representative of the grantee.
(e) Shareholder Rights. The holder of an SAR shall, as such, have none
of the rights of a shareholder.
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(f) Termination of Employment. The Committee shall have discretion to
specify in the SAR grant or an amendment thereof, provisions with respect to the
period during which the SAR may be exercised following the grantee's termination
of employment. Notwithstanding the foregoing, the Committee shall not permit
any SAR to be exercised beyond the term of the SAR established pursuant to
Section 2.3(b), except that the Committee may provide that, notwithstanding such
SAR term, an SAR which is outstanding on the date of a grantee's death shall
remain outstanding and exercisable for up to one year after the grantee's death.
(g) Change of Control. Notwithstanding the exercisability schedule
governing any SAR, upon the occurrence of a Change of Control (as defined in
Section 6.10) all SARs outstanding at the time of such Change of Control and
held by grantees who are employees of the Company or its Subsidiaries at the
time of such Change of Control shall become immediately exercisable and, unless
the grantee agrees otherwise in writing, shall remain exercisable for the
remainder of the SAR term. In addition, the Committee may provide that if a
freestanding SAR is exercised within 60 days of the occurrence of a Change of
Control, in addition to the Appreciation the holder shall receive, in cash, the
amount by which the greater of (a) the highest market price per Ordinary Share
during the 60-day period preceding exercise of the SAR or (b) the highest price
per Ordinary Share (or the cash equivalent thereof as determined by the Board of
Directors) paid by an acquiring person during the 60-day period preceding a
Change of Control, exceeds the fair market value of an Ordinary Share on the
date of exercise of the SAR.
2.4 SUPPLEMENTAL PAYMENT ON EXERCISE OF OPTIONS OR SHARE APPRECIATION RIGHTS
The Committee, either at the time of grant or at the time of exercise of
any Option or tandem Share Appreciation Right, may provide for a supplemental
payment (the "Supplemental Payment") by the Company to the optionee with respect
to the exercise of any Option or tandem Share Appreciation Right. The
Supplemental Payment shall be in the amount specified by the Committee, which
shall not exceed the amount necessary to pay the income tax payable to the
national government with respect to both exercise of the Option or tandem Share
Appreciation Right and receipt of the Supplemental Payment, assuming the
optionee is taxed at the maximum effective income tax rate applicable thereto.
The Committee shall have the discretion to grant Supplemental Payments that are
payable solely in cash or Supplemental Payments that are payable in cash,
Ordinary Shares, or a combination of both, as determined by the Committee at the
time of payment. The Supplemental Payment shall be paid within 30 days of the
date of exercise of an Option or Share Appreciation Right (or, if later, within
30 days of the date on which income is recognized for federal income tax
purposes with respect to such exercise).
2.5 STATUTORY OPTIONS
Subject to the limitations on Option terms set forth in Section 2.1, the
Committee shall have the authority to grant (i) incentive stock options within
the meaning of Section 422 of the Code and (ii) Options containing such terms
and conditions as shall be required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant. Options
granted pursuant to this Section 2.4 may contain such other terms and conditions
permitted by Article II of this Plan as the Committee, in its discretion, may
from time to time determine (including, without limitation, provision for Share
Appreciation Rights and Supplemental Payments), to the extent that such terms
and conditions do not cause the Options to lose their preferential tax
treatment. To the extent the Code and Regulations promulgated thereunder
require a plan to contain specified provisions in order to qualify options for
preferential tax treatment, such provisions shall be deemed to be stated in this
Plan.
III. RESTRICTED ORDINARY SHARES
3.1 TERMS AND CONDITIONS OF RESTRICTED ORDINARY SHARES AWARDS
Subject to the following provisions, all awards of Restricted Ordinary
Shares under the Plan to employees of the Company and its Subsidiaries shall be
in such form and shall have such terms and conditions as the Committee, in its
discretion, may from time to time determine.
(a) The Restricted Ordinary Shares award shall specify the number of
Restricted Ordinary Shares to be awarded, the price, if any, to be paid by the
recipient of the Restricted Ordinary Shares, and the date or dates on
37
which the Restricted Ordinary Shares will vest. The vesting of Restricted
Ordinary Shares may be conditioned upon the completion of a specified period of
service with the Company or its Subsidiaries, upon the attainment of specified
performance goals, or upon such other criteria as the Committee may determine in
its sole discretion.
(b) Share certificates representing the Restricted Ordinary Shares
granted to an employee shall be registered in the employee's name. Such
certificates shall either be held by the Company on behalf of the employee, or
delivered to the employee bearing a legend to restrict transfer of the
certificate until the Restricted Ordinary Shares have vested, as determined by
the Committee. The Committee shall determine whether the employee shall have
the right to vote and/or receive dividends on the Restricted Ordinary Shares
before they have vested. No Restricted Ordinary Shares may be sold,
transferred, assigned, or pledged by the employee until they have vested in
accordance with the terms of the Restricted Ordinary Shares award. In the event
of an employee's termination of employment before all of his Restricted Ordinary
Shares have vested, or in the event other conditions to the vesting of
Restricted Ordinary Shares have not been satisfied prior to any deadline for the
satisfaction of such conditions set forth in the award, the Restricted Ordinary
Shares which have not vested shall be forfeited and any purchase price paid by
the employee shall be returned to the employee. At the time Restricted Ordinary
Shares vest (and, if the employee has been issued legended certificates of
Restricted Ordinary Shares, upon the return of such certificates to the
Company), a certificate for such vested shares shall be delivered to the
employee (or the Beneficiary designated by the employee in the event of death),
free of all restrictions.
(c) Notwithstanding the vesting conditions set forth in the Restricted
Ordinary Shares award, (i) the Committee may in its discretion accelerate the
vesting of Restricted Ordinary Shares at any time, and (ii) all Restricted
Ordinary Shares shall vest upon a Change of Control of the Company.
3.2 PERFORMANCE AWARDS UNDER SECTION 162(M) OF THE CODE
The Committee shall have the right to designate awards of Restricted
Ordinary Shares as "Performance Awards." Notwithstanding any other provisions
of this Article III, awards so designated shall be granted and administered in a
manner designed to preserve the deductibility of the compensation resulting from
such awards in accordance with Section 162(m) of the Code. The grant or vesting
of a Performance Award shall be subject to the achievement of performance
objectives (the "Performance Objectives") established by the Committee based on
one or more of the following criteria, in each case applied to the Company on a
consolidated basis and/or to a business unit, and either as an absolute measure
or as a measure of comparative performance relative to a peer group of
companies: sales, operating profits, operating profits before interest expense
and taxes, net earnings, earnings per share, return on equity, return on assets,
return on invested capital, total shareholder return, cash flow, debt to equity
ratio, market share, share price, economic value added, and market value added.
The Performance Objectives for a particular Performance Award relative to a
particular fiscal year shall be established by the Committee in writing no later
than 90 days after the beginning of such year. The Committee shall have the
authority to determine whether the Performance Objectives and other terms and
conditions of the award are satisfied, and the Committee's determination as to
the achievement of Performance Objectives relating to a Performance Award shall
be made in writing. The Committee shall have discretion to modify or waive the
Performance Objectives or conditions to the grant or vesting of a Performance
Award only to the extent that the exercise of such discretion would not cause
the Performance Award to fail to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code.
3.3 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED ORDINARY SHARES
The Committee, either at the time of grant or at the time of vesting of
Restricted Ordinary Shares, may provide for a Supplemental Payment by the
Company to the employee in an amount specified by the Committee which shall not
exceed the amount necessary to pay the federal income tax payable with respect
to both the vesting of the Restricted Ordinary Shares and receipt of the
Supplemental Payment, assuming the employee is taxed at the maximum effective
federal income tax rate applicable thereto and has not elected to recognize
income with respect to the Restricted Ordinary Shares before the date such
Restricted Ordinary Shares vest. The Supplemental Payment shall be paid within
30 days of each date that Restricted Ordinary Shares vest. The Committee shall
have the discretion to grant Supplemental Payments that are payable solely in
cash or Supplemental Payments that are payable in cash, Ordinary Shares, or a
combination of both, as determined by the Committee at the time of payment.
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IV. SHARE OPTIONS OR FREESTANDING SHARE APPRECIATION RIGHTS
FOR DIRECTORS
4.1 GRANT OF OPTIONS OR FREESTANDING SARS
Each person who becomes an Eligible Director (other than a person who first
becomes an Eligible Director on the date of an annual meeting of the Company's
shareholders) shall be granted, effective as of the date such person becomes an
Eligible Director, (i) an Option to purchase 4,000 Ordinary Shares (the "Initial
Option"), if such person is not then residing in Norway, or (ii) a freestanding
SAR with respect to 4,000 Ordinary Shares (the "Initial SAR"), if such person is
then residing in Norway. Each person who is or becomes an Eligible Director on
the date of an annual meeting of the Company's shareholders and whose service on
the Board of Directors will continue after such meeting shall be granted,
effective as of the date of such meeting, (i) an Option to purchase 6,000
Ordinary Shares (the "Annual Option"), if such person is not then residing in
Norway, or (ii) a freestanding SAR with respect to 6,000 Ordinary Shares (the
"Annual SAR"), if such person is then residing in Norway.
4.2 TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Article shall have the following terms and
conditions:
(a) Option Price. The option price per share shall be the closing
sales price of an Ordinary Share on the date the Option is granted (or, if the
Ordinary Shares are not traded on such date, on the immediately preceding date
on which the Ordinary Shares are traded).
(b) Term of Option. Each Option shall expire ten years from the date
of grant, except as provided in Section 4.2(c) with respect to the death of an
optionee. No Option shall be exercised after the expiration of its term.
(c) Exercise of Options. Subject to Section 4.2(g) and the remainder
of this paragraph, the Initial Option shall become exercisable in installments
as follows: (1) a total of 1,333 Ordinary Shares may be purchased through
exercise of the Initial Option on or after the first anniversary of the date of
grant; (2) a total of 2,666 Ordinary Shares may be purchased through exercise of
the Initial Option on or after the second anniversary of the date of grant; and
(3) a total of 4,000 Ordinary Shares may be purchased through exercise of the
Initial Option on or after the third anniversary of the date of grant. Subject
to Section 4.2(g) and the remainder of this paragraph, the Annual Option shall
become exercisable in installments as follows: (1) a total of 2,000 Ordinary
Shares may be purchased through exercise of the Annual Option on or after the
first anniversary of the date of grant; (2) a total of 4,000 Ordinary Shares may
be purchased through exercise of the Annual Option on or after the second
anniversary of the date of grant; and (3) a total of 6,000 Ordinary Shares may
be purchased through exercise of the Annual Option on or after the third
anniversary of the date of grant. If a Participant ceases to be a Director of
the Company as a result of death, disability, or retirement from the Board of
Directors on his Retirement Date (as defined in Section 4.2(i)), each Option
shall immediately become fully exercisable and shall remain exercisable for the
remainder of its term, except that an Option which is outstanding on the date of
an optionee's death shall remain outstanding and exercisable for a term of the
greater of ten years from the date of grant or one year after the optionee's
death. If a Participant ceases to be a Director of the Company for any reason
not set forth in the preceding sentence, no additional portions of the Option
will become exercisable, and the portion of the Option that is then exercisable
shall expire if not exercised within 60 days after cessation of service as a
Director. An Option may be exercised in accordance with its terms as to any or
all shares purchasable thereunder.
(d) Payment for Shares. Payment for shares as to which an Option is
exercised shall be made in cash, Ordinary Shares, by "cashless exercise," or a
combination thereof, in the discretion of the Participant. Ordinary Shares
delivered in payment of the Option price shall be valued at the average of the
high and low prices of such Shares on the date of exercise (or, if the Ordinary
Shares are not traded on such date, at the weighted average of the high and low
prices on the nearest trading dates before and after such date).
39
(e) Nontransferability of Options. No Option or any interest therein
shall be transferable by the Participant other than by will or by the laws of
descent and distribution. During a Participant's lifetime, all Options shall be
exercisable only by such Participant or by the guardian or legal representative
of the Participant.
(f) Shareholder Rights. The holder of an Option shall, as such, have
none of the rights of a shareholder.
(g) Change of Control. Notwithstanding any other provisions of the
Plan, upon the occurrence of a Change of Control (as defined in Section 6.10)
all Options outstanding at the time of such Change of Control shall become
immediately exercisable and shall remain exercisable for the remainder of their
term.
(h) Tax Status. The Options granted under this Article shall be
"non-qualified" options, and shall not be incentive stock options as defined in
Section 422 of the Code.
(i) Retirement Date. For purposes of this Article, a Participant's
Retirement Date shall mean the date on which the Participant shall be required
to retire from the Board of Directors under the retirement policies of the Board
of Directors as in effect on the date of the Participant's retirement.
4.3 TERMS AND CONDITIONS OF FREESTANDING SHARE APPRECIATION RIGHTS
Each Freestanding Share Appreciation Right granted under this Article shall
have the following terms and conditions:
(a) Base Price and Appreciation. The base price of the SAR shall be
the closing sales price of an Ordinary Share on the date the SAR is granted (or,
if the Ordinary Shares are not traded on such date, on the immediately preceding
date on which the Ordinary Shares are traded). Upon exercise of an SAR, the
holder shall receive, for each share with respect to which the SAR is exercised,
an amount (the "Appreciation") equal to the amount by which the fair market
value of an Ordinary Share on the date of exercise of the SAR exceeds the base
price of the SAR. For purposes of the preceding sentence, the fair market value
of an Ordinary Share shall be the average of the high and low prices of such
share as reported on the New York Stock Exchange composite tape. The
Appreciation shall be payable in cash and shall be paid within 30 days of the
exercise of the SAR.
(b) Term of SAR. Each SAR shall expire ten years from the date of
grant, except as provided in Section 4.3(c) with respect to the death of a
Participant. No SAR shall be exercised after the expiration of its term.
(c) Exercise of SARs. Subject to Section 4.3(f) and the remainder of
this paragraph, the Initial SAR shall become exercisable in installments as
follows: (1) the Initial SAR shall be exercisable with respect to a total of
1,333 Ordinary Shares on or after the first anniversary of the date of grant;
(2) the Initial SAR shall be exercisable with respect to a total of 2,666
Ordinary Shares on or after the second anniversary of the date of grant; and (3)
the Initial SAR shall be exercisable with respect to a total of 4,000 Ordinary
Shares on or after the third anniversary of the date of grant. Subject to
Section 4.3(f) and the remainder of this paragraph, the Annual SAR shall become
exercisable in installments as follows: (1) the Annual SAR shall be exercisable
with respect to a total of 2,000 Ordinary Shares on or after the first
anniversary of the date of grant; (2) the Annual SAR shall be exercisable with
respect to a total of 4,000 Ordinary Shares on or after the second anniversary
of the date of grant; and (3) the Annual SAR shall be exercisable with respect
to a total of 6,000 Ordinary Shares on or after the third anniversary of the
date of grant. If a Participant ceases to be a Director of the Company as a
result of death, disability, or retirement from the Board of Directors on his
Retirement Date (as defined in Section 4.2(i)), each SAR shall immediately
become fully exercisable and shall remain exercisable for the remainder of its
term, except that notwithstanding the term of the SAR, an SAR which is
outstanding on the date of a Participant's death shall remain outstanding and
exercisable for a term of the greater of ten years from the date of grant or one
year after the Participant's death. If a Participant ceases to be a Director of
the Company for any reason not set forth in the preceding sentence, no
additional portions of the SAR will become exercisable, and the portion of the
SAR that is then exercisable shall expire if not exercised within 60 days after
cessation of service as a Director. An SAR may be exercised in accordance with
its terms in whole or in part.
40
(d) Nontransferability of SARs. No SAR or any interest therein shall
be transferable by the Participant other than by will or by the laws of descent
and distribution. During a Participant's lifetime, all SARs shall be
exercisable only by such Participant or by the guardian or legal representative
of the Participant.
(e) Shareholder Rights. The holder of an SAR shall, as such, have none
of the rights of a shareholder.
(f) Change of Control. Notwithstanding any other provisions of the
Plan, upon the occurrence of a Change of Control (as defined in Section 6.10)
all SARs outstanding at the time of such Change of Control shall become
immediately exercisable and shall remain exercisable for the remainder of their
term.
(g) Special Provisions. Notwithstanding the foregoing provisions of
Section 4.3, the freestanding SARs granted to Eligible Directors residing in
Norway who were first elected to the Board of Directors in 1996 (and who waived
the grant of an Option to which they were then entitled under the terms of the
Plan as then in effect) with respect to their initial election to the Board of
Directors (i) shall have a base price equal to the closing sales price of the
Ordinary Shares on the date of their initial election, and (ii) shall have
exercise and expiration dates determined as if such SARs had been granted on the
date of their initial election.
4.4 SUPPLEMENTAL PAYMENT ON EXERCISE OF PRIOR AWARDS OF OPTIONS OR SARS
(a) Supplemental Payments. Within 30 days of each date that an Option
or SAR granted prior to the date of this Amendment and Restatement is exercised,
a Supplemental Payment shall be paid to the Participant (or to the Participant's
Beneficiary in the event of death), in cash, in an amount equal to the amount
necessary to pay the income tax payable to the national government where the
Director resides with respect to both the exercise of such Option or SAR and
receipt of the Supplemental Payment, assuming the Participant is taxed at the
maximum effective income tax rate applicable thereto; provided, however, that no
such payment shall be made if the Participant has waived his right to the
payment pursuant to Section 4.4(b).
(b) Waiver. The Committee may grant an additional Option or SAR, as
applicable, to any Participant who agrees in writing to waive the right to
receive a supplemental cash payment under Section 4.4(a). Such Option or SAR
shall be immediately exercisable. All other provisions of Section 4.2 or 4.3
will apply as though the date of acceptance of the Option or SAR were the date
of grant. Notwithstanding the foregoing, however, in no event shall (i) the
number of Ordinary Shares subject to this Section 4.4(b) exceed 50,000, or (ii)
the number of SARs subject to this Section 4.4(b) exceed 50,000.
V. CASH PERFORMANCE AWARDS
5.1 TERMS AND CONDITIONS OF CASH PERFORMANCE AWARDS
A "Cash Award" is a cash bonus paid solely on account of the attainment of
one or more objective performance goals that have been preestablished by the
Committee. Each Cash Award shall be subject to such terms and conditions,
restrictions and contingencies, if any, as the Committee shall determine.
Restrictions and contingencies limiting the right to receive a cash payment
pursuant to a Cash Award shall be based on the achievement of single or multiple
performance goals over a performance period established by the Committee. No
employee shall receive Cash Awards during any calendar year aggregating in
excess of $1 million.
41
5.2 PERFORMANCE OBJECTIVES UNDER SECTION 162(M) OF THE CODE
The Committee shall have the right to designate Cash Awards as "Cash
Performance Awards." Notwithstanding any other provisions of this Article V,
awards so designated shall be granted and administered in a manner designed to
preserve the deductibility of the compensation resulting from such awards in
accordance with Section 162(m) of the Code. The payment of a Cash Performance
Award shall be subject to the achievement of performance objectives (the
"Performance Objectives") established by the Committee based on one or more of
the following criteria, in each case applied to the Company on a consolidated
basis and/or to a business unit, and either as an absolute measure or as a
measure of comparative performance relative to a peer group of companies: sales,
operating profits, operating profits before interest expense and taxes, net
earnings, earnings per share, return on equity, return on assets, return on
invested capital, total shareholder return, cash flow, debt to equity ratio,
market share, share price, economic value added, and market value added.
The Performance Objectives for a particular Cash Performance Award relative
to a particular fiscal year shall be established by the Committee in writing no
later than 90 days after the beginning of such year. The Committee shall have
the authority to determine whether the Performance Objectives and other terms
and conditions of the award are satisfied, and the Committee's determination as
to the achievement of Performance Objectives relating to a Cash Performance
Award shall be made in writing.
VI. ADDITIONAL PROVISIONS
6.1 GENERAL RESTRICTIONS
Each award under the Plan shall be subject to the requirement that, if at
any time the Committee shall determine that (i) the listing, registration or
qualification of the Ordinary Shares subject or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the
recipient of an award with respect to the disposition of Ordinary Shares is
necessary or desirable (in connection with any requirement or interpretation of
any federal or state securities law, rule or regulation) as a condition of, or
in connection with, the granting of such award or the issuance, purchase or
delivery of Ordinary Shares thereunder, such award may not be consummated in
whole or in part unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
6.2 ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a scheme of arrangement, reorganization, recapitalization,
Ordinary Share split, Ordinary Share dividend, combination of shares, rights
offer, liquidation, dissolution, merger, consolidation, spin-off, sale of
assets, payment of an extraordinary cash dividend, or any other change in or
affecting the corporate structure or capitalization of the Company, the
Committee shall make appropriate adjustment in the number and kind of shares
authorized by the Plan (including any limitations on individual awards), in the
number, price or kind of shares covered by the awards and in any outstanding
awards under the Plan; provided, however, that no such adjustment shall increase
the aggregate value of any outstanding award.
6.3 AMENDMENTS
(a) The Board of Directors may amend the Plan from time to time. No
such amendment shall require approval by the shareholders unless shareholder
approval is required to satisfy Rule 16b-3 under the Securities Exchange Act of
1934 or Section 162(m) of the Code, or by applicable law or Stock exchange
requirements.
(b) The Committee shall have the authority to amend any grant to
include any provision which, at the time of such amendment, is authorized under
the terms of the Plan; however, no outstanding award may be revoked or altered
in a manner unfavorable to the holder without the written consent of the holder.
(c) If a Participant has ceased or will cease to be a Director of the
Company for the convenience of the Company (as determined by the Board of
Directors), the Board of Directors may amend all or any portion of such
Participant's Options or SARs so as to make such Options or SARs fully
exercisable and/or specify a schedule
42
upon which they become exercisable, and/or permit all or any portion of such
Options or SARs to remain exercisable for such period designated by it, but not
beyond the expiration of the term established pursuant to Section 4.2(b) or
4.3(b). A Participant shall not participate in the deliberations or vote by the
Board of Directors under this paragraph with respect to his Options or SARs. The
exercise periods of Options or SARs established by the Board of Directors
pursuant to this paragraph shall override the provisions of Section 4.2(c) or
4.3(c) to the extent inconsistent therewith.
6.4 CANCELLATION OF AWARDS
Any award granted under Articles II and III of the Plan may be canceled at
any time with the consent of the holder and a new award may be granted to such
holder in lieu thereof, which award may, in the discretion of the Committee, be
on more favorable terms and conditions than the canceled award; provided,
however, that the Committee may not reduce the exercise or base price of
outstanding Options or SARs where the existing exercise or base price is higher
than the then current market price of the Ordinary Shares.
6.5 BENEFICIARY
An employee or Participant may file with the Company a written designation
of Beneficiary, on such form as may be prescribed by the Committee, to receive
any Options, SARs, Restricted Shares, Ordinary Shares and Supplemental Payments
that become deliverable to the employee or Participant pursuant to the Plan
after the employee's or Participant's death. An employee or Participant may,
from time to time, amend or revoke a designation of Beneficiary. If no
designated Beneficiary survives the employee or Participant, the executor or
administrator of the employee's or Participant's estate shall be deemed to be
the employee's or Participant's Beneficiary.
6.6 WITHHOLDING
(a) Whenever the Company proposes or is required to issue or transfer
Ordinary Shares under the Plan, the Company shall have the right to require the
award holder to remit to the Company an amount sufficient to satisfy any
applicable withholding tax liability prior to the delivery of any certificate
for such shares. Whenever under the Plan payments are to be made in cash, such
payments shall be net of an amount sufficient to satisfy any withholding tax
liability.
(b) An employee entitled to receive Ordinary Shares under the Plan who
has not received a cash Supplemental Payment may elect to have the withholding
tax liability (or a specified portion thereof) with respect to such Ordinary
Shares satisfied by having the Company withhold from the shares otherwise
deliverable to the employee Ordinary Shares having a value equal to the amount
of the tax liability to be satisfied with respect to the Ordinary Shares. An
election to have all or a portion of the tax liability satisfied using Ordinary
Shares shall comply with such requirements as may be imposed by the Committee.
6.7 NON-ASSIGNABILITY
Except as expressly provided in the Plan, no award under the Plan shall be
assignable or transferable by the holder thereof except by will or by the laws
of descent and distribution. During the life of the holder, awards under the
Plan shall be exercisable only by such holder or by the guardian or legal
representative of such holder.
6.8 NON-UNIFORM DETERMINATIONS
Determinations by the Committee under the Plan (including, without
limitation, determinations of the persons to receive awards under Articles II
and III; the form, amount and timing of such awards; the terms and provisions of
such awards and the agreements evidencing same; and provisions with respect to
termination of employment) need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, awards under the Plan,
whether or not such persons are similarly situated.
6.9 NO GUARANTEE OF EMPLOYMENT OR DIRECTORSHIP
43
The grant of an award under the Plan shall not constitute an assurance of
continued employment for any period or any obligation of the Board of Directors
to nominate any Director for re-election by the Company's shareholders.
6.10 CHANGE OF CONTROL
A "Change of Control" means:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding ordinary shares of the Company (the "Outstanding
Company Ordinary Shares") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation or other entity controlled by the Company or (iv) any
acquisition by any corporation or other entity pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of this Section
6.10; or
(b) Individuals who, as of the date hereof, constitute the Board of the
Company (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of the Company; provided, however, that for purposes of
this Section 6.10 any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of the Company; or
(c) Consummation of a scheme of arrangement, reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Ordinary Shares and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding ordinary shares
or shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation or other entity resulting from such Business
Combination (including, without limitation, a corporation or other entity which
as a result of such transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Ordinary Shares and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any
corporation or other entity resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation or
other entity resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
ordinary shares or shares of common stock of the corporation or other entity
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation or other entity except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the action of the Board of the Company providing
for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
44
6.11 DURATION AND TERMINATION
(a) The Plan shall be of unlimited duration. Notwithstanding the
foregoing, no incentive Share option (within the meaning of Section 422 of the
Code) shall be granted under the Plan after May 1, 2013, but awards granted
prior to such dates may extend beyond such dates, and the terms of this Plan
shall continue to apply to all awards granted hereunder.
(b) The Board of Directors may discontinue or terminate the Plan at any
time. Such action shall not impair any of the rights of any holder of any award
outstanding on the date of the Plan's discontinuance or termination without the
holder's written consent.
6.12 EFFECTIVE DATE
The Plan was originally effective May 1, 1993. The Plan was amended and
restated effective March 13, 1997, March 12, 1998 and January 1, 2000.
IN WITNESS WHEREOF, this document has been executed effective as of
May 8, 2003.
TRANSOCEAN INC.
By:
-----------------------------
Eric B. Brown
Corporate Secretary
45
APPENDIX C
PROPOSED AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
OF
TRANSOCEAN INC.
(As Amended and Restated Effective May 8, 2003)
1. PURPOSE
The Transocean Inc. Employee Stock Purchase Plan (the "Plan") is designed
to encourage and assist all employees of Transocean Inc., a Cayman Islands
exempted company limited by shares ("Transocean") and Subsidiaries (as defined
in Section 4) (hereinafter collectively referred to as the "Company"), where
permitted by applicable laws and regulations, to acquire an equity interest in
Transocean through the purchase of ordinary shares, par value US$.01 per share,
of Transocean ("Ordinary Shares"). It is intended that this Plan shall
constitute an "employee stock purchase plan" within the meaning of Section 423
of the Internal Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered and interpreted by the Finance and Benefits
Committee (the "Committee") appointed by the Board of Directors of Transocean
(the "Board"), which Committee shall consist of at least two (2) persons. The
Committee shall supervise the administration and enforcement of the Plan
according to its terms and provisions and shall have all powers necessary to
accomplish these purposes and discharge its duties hereunder including, but not
by way of limitation, the power to (i) employ and compensate agents of the
Committee for the purpose of administering the accounts of participating
employees; (ii) construe or interpret the Plan; (iii) determine all questions of
eligibility; and (iv) compute the amount and determine the manner and time of
payment of all benefits according to the Plan.
The Committee may act by decision of a majority of its members at a regular
or special meeting of the Committee or by decision reduced to writing and signed
by all members of the Committee without holding a formal meeting. The Committee
may delegate its duties and authority under this Plan to one or more officers of
the Company, and actions taken by such duly authorized officers shall be deemed
to be actions of the Committee.
3. NATURE AND NUMBER OF SHARES
The Ordinary Shares subject to issuance under the terms of the Plan shall
be shares of Transocean's authorized but unissued Ordinary Shares, previously
issued Ordinary Shares reacquired and held by Transocean or Ordinary Shares
purchased on the open market. The aggregate number of Ordinary Shares which may
be issued under the Plan shall not exceed two million five hundred thousand
(2,500,000) Ordinary Shares. All Ordinary Shares purchased under the Plan,
regardless of source, shall be counted against the two million five hundred
thousand (2,500,000) Ordinary Share limitation.
In the event of any scheme of arrangement, reorganization, share split,
reverse share split, share dividend, combination of shares, merger,
consolidation, offering of rights or other similar change in the capital
structure of Transocean, the Committee may make such adjustment, if any, as it
deems appropriate in the number, kind and purchase price of the Ordinary Shares
available for purchase under the Plan and in the maximum number of Ordinary
Shares which may be issued under the Plan, subject to the approval of the Board
and in accordance with Section 19.
4. ELIGIBILITY REQUIREMENTS
Each "Employee" (as hereinafter defined), except as described in the next
following paragraph, shall become eligible to participate in the Plan in
accordance with Section 5 on the first "Enrollment Date" (as defined therein)
following employment by the Company. Participation in the Plan is voluntary.
46
The following Employees are not eligible to participate in the Plan:
(i) Employees who would, immediately upon enrollment in the Plan, own
directly or indirectly, or hold options or rights to acquire, an
aggregate of five percent (5%) or more of the total combined
voting power or value of all outstanding shares of all classes of
the Company or any subsidiary (in determining share ownership of
an individual, the rules of Section 424(d) of the Code shall be
applied, and the Committee may rely on representations of fact
made to it by the employee and believed by it to be true); and
(ii) Employees of Transocean who are customarily employed for less
than twenty (20) hours per week or less than five (5) months in
any calendar year; and
(iii) Employees of any Subsidiary who are excluded under the terms of
any agreement evidencing the adoption of the Plan; and
(iv) Employees who reside in a country in which the Plan fails to meet
applicable legal and regulatory requirements or in a country
whose laws make participation impractical.
"Employee" shall mean any individual employed by Transocean or any
Subsidiary (as hereinafter defined). "Subsidiary" shall mean any corporation
(a) which is in an unbroken chain of corporations beginning with Transocean if,
on or after the Effective Date, each of the corporations other than the last
corporation in the chain owns stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain and (b) which has adopted the Plan with the approval
of the Committee.
5. ENROLLMENT
Each eligible Employee of Transocean or any Subsidiary as of May 14, 1998,
(the "Effective Date" herein) may enroll in the Plan as soon as administratively
feasible after the Effective Date, as determined by the Committee. Each other
eligible Employee of Transocean or a participating Subsidiary who thereafter
becomes eligible to participate may enroll in the Plan on the first January 1
following the date he first meets the eligibility requirements of Section 4.
Notwithstanding the foregoing, with respect to the Plan's designated purchase
period (the "Purchase Period") ending December 31, 2000, an eligible employee
must enroll in the Plan prior to the first to occur of (i) January 1, 2000 or,
if later, the date of the consummation of the merger transaction contemplated by
the July 12, 1999 Agreement and Plan of Merger between Schlumberger Limited,
Sedco Forex Holdings Limited, and the Company (the "Merger") or (ii) February
29, 2000. Any eligible Employee not enrolling in the Plan when first eligible
may enroll in the Plan on any subsequent January 1. Any eligible Employee may
enroll or re-enroll in the Plan on the dates hereinabove prescribed or such
other specific dates established by the Committee from time to time ("Enrollment
Dates"). In order to enroll, an eligible Employee must complete, sign and
submit the appropriate form to the person designated by the Committee.
6. METHOD OF PAYMENT
Payment for shares is to be made as of the applicable "Purchase Date" (as
defined in Section 9) through payroll deductions on an after-tax basis (with no
right of prepayment) over the Purchase Period, with the first such deduction
commencing with the first payroll period ending after the Enrollment Date. Each
Purchase Period under the Plan shall be a period of one (1) year beginning on
each January 1 and ending on the following December 31 or such other period as
the Committee may prescribe. Each participating Employee (hereinafter referred
to as a "Participant") will authorize such deductions from his pay for each
month during the Purchase Period, and such amounts will be deducted in
conformity with his employer's payroll deduction schedule; provided, however,
that payroll withholding during the initial Purchase Period will begin as soon
as administratively feasible, after the Effective Date, as is determined by the
Committee in its discretion.
Each Participant may elect to make contributions each pay period in amounts
not less than two percent (2%) of the Participant's monthly compensation (with
no dollar minimum), not to exceed a monthly contribution equal to twenty percent
(20%) of the Participant's monthly compensation (base pay and overtime pay
associated
47
with base pay, but excluding premium or special pay and overtime associated
therewith) (or such other dollar amounts as the Committee may establish from
time to time before an Enrollment Date for all purchases to occur during the
relevant Purchase Period). In establishing other dollar amounts of permitted
contributions, the Committee may take into account the "Maximum Share
Limitation" (as defined in Section 8). The rate of contribution shall be
designated by the Participant in the enrollment form.
A Participant may elect to increase or decrease the rate of contribution
effective as of the first day of the Purchase Period by giving prior written
notice to the person designated by the Committee on the appropriate form. A
Participant may not elect to increase or decrease the rate of contribution
during a Purchase Period. A Participant may suspend payroll deductions at any
time during the Purchase Period by giving prior written notice to the person
designated by the Committee on the appropriate form. If a Participant elects to
suspend his payroll deductions, such Participant's account will continue to
accrue interest and will be used to purchase shares at the end of the Purchase
Period. A Participant may also elect to withdraw his entire contributions for
the current Purchase Period in accordance with Section 8 by giving prior written
notice to the person designated by the Committee on the appropriate form. Any
Participant who withdraws his contributions will receive, as soon as
practicable, his entire account balance, including interest and dividends, if
any. Any Participant who suspends payroll deductions or withdraws contributions
during any Purchase Period cannot resume payroll deductions during such Purchase
Period and must re-enroll in the Plan in order to participate in the next
Purchase Period.
Any Participant, in accordance with the procedure established by the
Company, can elect to contribute to the Plan by making a cash payment or by
assigning to the Company the right to receive a cash payment. This assignment
or transfer of a cash payment to the Plan must occur after the consummation of
the Merger and not later than February 29, 2000.
Except in case of cancellation of election to purchase, death, resignation
or other terminating event, the amount in a Participant's account at the end of
the Purchase Period will be applied to the purchase of Ordinary Shares.
7. CREDITING OF CONTRIBUTIONS, INTEREST AND DIVIDENDS
Contributions shall be credited to a Participant's account as soon as
administratively feasible after payroll withholding. Unless otherwise
prohibited by laws and regulations, Participant contributions will receive
interest at a rate realized for the investment vehicle or vehicles designated by
the Committee for purposes of the Plan. Interest will be credited to a
Participant's account from the first date on which such Participant's
contributions are deposited with the investment vehicle until the earlier of (i)
the end of the Purchase Period or (ii) in the event of cancellation, death,
resignation or other terminating event, the last day for which interest is
allocated for such investment vehicle prior to the date on which such
contributions are returned to the Participant. Dividends on shares held in a
Participant's account in the Plan will be invested in Ordinary Shares under the
Company's Shareholder Dividend Reinvestment Plan. Any such contributions,
interest and dividends shall be deposited in or held by a bank or financial
institution designated by the Committee for this purpose (the "Custodian").
8. GRANT OF RIGHT TO PURCHASE SHARES ON ENROLLMENT
Enrollment in the Plan by an Employee on an Enrollment Date will constitute
the grant by the Company to the Participant of the right to purchase Ordinary
Shares under the Plan. Re-enrollment by a Participant in the Plan will
constitute a grant by the Company to the Participant of a new opportunity to
purchase shares on the Enrollment Date on which such re-enrollment occurs. A
Participant who has not (a) terminated employment, (b) withdrawn his
contributions from the Plan, or (c) notified the Company in writing, by December
1 (or such date as the Committee shall establish), of his election to withdraw
his payroll deductions plus interest as of December 31 will have Ordinary Shares
purchased for him on the applicable Purchase Date, and he will automatically be
re-enrolled in the Plan on the Enrollment Date immediately following the
Purchase Date on which such purchase has occurred, unless each Participant
notifies the person designated by the Committee on the appropriate form that he
elects not to re-enroll.
Each right to purchase Ordinary Shares under the Plan during a Purchase
Period shall have the following terms:
48
(i) the right to purchase Ordinary Shares during a particular
Purchase Period shall expire on the earlier of: (A) the
completion of the purchase of shares on the Purchase Date
occurring in the Purchase Period, or (B) the date on which
participation of such Participant in the Plan terminates for any
reason;
(ii) payment for shares purchased will be made through payroll
withholding and the crediting of interest and dividends, if
applicable, in accordance with Sections 6 and 7;
(iii) purchase of shares will be accomplished only in accordance with
Section 9;
(iv) the price per share will be determined as provided in Section 9;
(v) the right to purchase shares (taken together with all other such
rights then outstanding under this Plan and under all other
similar stock purchase plans of Transocean or any Subsidiary)
will in no event give the Participant the right to purchase a
number of shares during a calendar year in excess of the number
of Ordinary Shares derived by dividing twenty-five thousand
dollars (US$25,000) by the fair market value of the Ordinary
Shares (the "Maximum Share Limitation") on the applicable Grant
Date determined in accordance with Section 9;
(vi) shares purchased under this Plan may not be sold within three (3)
months of the Purchase Date, unless the Committee, in its sole
discretion, waives this requirement; and
(vii) the right to purchase shares will in all respects be subject to
the terms and conditions of the Plan, as interpreted by the
Committee from time to time.
9. PURCHASE OF SHARES
The right to purchase Ordinary Shares granted by the Company under the Plan
is for the term of a Purchase Period. The fair market value of the Ordinary
Shares ("Fair Market Value") to be purchased during such Purchase Period will be
the closing composite sales price per Ordinary Share in the New York Stock
Exchange Composite Transactions Quotations on the first trading day of the
calendar month of January, or such other trading date designated by the
Committee (the "Grant Date"); provided, however, that for the Purchase Period
which begins on the Effective Date, the Grant Date shall be the Effective Date.
Notwithstanding the foregoing, with respect to the Purchase Period ending
December 31, 2000, the Grant Date shall be the first to occur of (i) January 1,
2000 or, if later, the date of the consummation of the Merger or (ii) February
29, 2000. The Fair Market Value of the Ordinary Shares will again be determined
in the same manner on the last trading day of the calendar month of December, or
such other trading date designated by the Committee (the "Purchase Date");
however, in no event shall the Committee, in the exercise of its discretion,
designate a Purchase Date beyond twelve (12) months from the related Enrollment
Date or otherwise fail to meet the requirements of Section 423(b)(7) of the
Code. These dates constitute the date of grant and the date of exercise for
valuation purposes of Section 423 of the Code.
As of the Purchase Date, the Committee shall apply the funds then credited
to each Participant's account to the purchase of Ordinary Shares. The cost to
the Participant for the shares purchased during a Purchase Period shall be the
lower of:
(i) eighty-five percent (85%) of the Fair Market Value of Ordinary
Shares on the Grant Date; or
(ii) eighty-five percent (85%) of the Fair Market Value of Ordinary
Shares on the Purchase Date.
Certificates evidencing shares purchased shall be delivered to the
Custodian or to any other bank or financial institution designated by the
Committee for this purpose or delivered to the Participant (if the Participant
has elected by written notice to the Committee to receive the certificate) as
soon as administratively feasible after
49
the Purchase Date; however, certificates shall not be delivered to the
Participant within one (1) year of the Purchase Date of the underlying shares,
except as otherwise provided herein. Notwithstanding the foregoing, Participants
shall be treated as the record owners of their shares effective as of the
Purchase Date. Shares that are held by the Custodian or any other designated
bank or financial institution shall be held in book entry form. Until such
certificates are distributed to the Participant, the Participant will not be
permitted to transfer ownership of the certificates except as contemplated by
Section 10 or Section 14 of the Plan. Any Participant who terminates employment
will receive a certificate for the number of shares held in his account and a
cash refund attributable to amounts equal to less than the price of a whole
share, and any accumulated contributions, dividends and interest. If for any
reason the purchase of shares with a Participant's allocations to the Plan
exceeds or would exceed the Maximum Share Limitation, such excess amounts shall
be refunded to the Participant as soon as practicable after such excess has been
determined to exist.
If as of any Purchase Date the shares authorized for purchase under the
Plan are exceeded, enrollments shall be reduced proportionately to eliminate the
excess. Any funds that cannot be applied to the purchase of shares due to
excess enrollment shall be refunded as soon as administratively feasible,
including interest determined in accordance with Section 7. The Committee in
its discretion may also provide that excess enrollments may be carried over to
the next Purchase Period under this Plan or any successor plan according to the
regulations set forth under Section 423 of the Code.
10. WITHDRAWAL OF SHARES AND SALE OF SHARES
(a) A Participant may elect to withdraw at any time (without
withdrawing from participation in the Plan) shares which have been held in his
account for at least one (1) year by giving notice to the person designated by
the Committee on the appropriate form. Upon receipt of such notice from the
person designated by the Committee, the Custodian, bank or other financial
institution designated by the Committee for this purpose will arrange for the
issuance and delivery of such shares held in the Participant's account as soon
as administratively feasible.
(b) Notwithstanding anything in the Plan to the contrary, a Participant
may sell shares which are held in his account, including shares which have been
held in his account for less than one (1) year, but not less than three (3)
months as provided in Section 8(vi) (unless waived by the Committee), by giving
notice to the person designated by the Committee on the appropriate form. Upon
receipt of such notice from the person designated by the Committee, the
Custodian, bank or other financial institution designated by the Committee for
this purpose will arrange for the sale of such Participant's shares. Any sale
will be deemed to occur as soon as practicable after the Participant provides
such notice to the person designated by the Committee. The proceeds of any sale
under this subsection 10(b), less any associated commissions or required
withholding for taxes, shall be paid to the Participant as soon as practicable
after the sale.
11. TERMINATION OF PARTICIPATION
The right to participate in the Plan terminates immediately when a
Participant ceases to be employed by the Company for any reason whatsoever
(including death, unpaid disability or when the Participant's employer ceases to
be a Subsidiary) or the Participant otherwise becomes ineligible. Participation
also terminates immediately when the Participant voluntarily withdraws his
contributions from the Plan. Participation terminates immediately after the
Purchase Date if the Participant is not re-enrolled in the Plan for the next
Purchase Period or if the Participant has suspended payroll deductions during
any Purchase Period and has not re-enrolled in the Plan for the next Purchase
Period. As soon as administratively feasible after termination of participation
due to cessation of employment, the Committee shall pay to the Participant or
his beneficiary or legal representative all amounts credited to his account,
including interest and dividends, if applicable, determined in accordance with
Section 7, and shall cause a certificate for the number of shares held in his
account to be delivered to the Participant, subject to the restrictions in
Section 9. For purposes of the Plan, a Participant is not deemed to have
terminated his employment if he transfers employment from Transocean to a
Subsidiary, or vice versa, or transfers employment between Subsidiaries.
50
12. UNPAID LEAVE OF ABSENCE
Unless the Participant has voluntarily withdrawn his contributions from the
Plan, shares will be purchased for his account on the Purchase Date next
following commencement of an unpaid leave of absence by such Participant,
provided such leave does not constitute a termination of employment. The number
of shares to be purchased will be determined by applying to the purchase the
amount of the Participant's contributions made up to the commencement of such
unpaid leave of absence plus interest on such contributions and dividends, if
applicable, both determined in accordance with Section 7. If the Participant's
unpaid leave of absence both commences and terminates during the same Purchase
Period and he has resumed eligible employment prior to the Purchase Date related
to that Purchase Period, he may also resume payroll deductions immediately, and
shares will be purchased for him on such Purchase Date as otherwise provided in
Section 9.
13. DESIGNATION OF BENEFICIARY
Each Participant may designate one or more beneficiaries in the event of
death and may, in his sole discretion, change such designation at any time. Any
such designation shall be effective upon receipt by the person designated by the
Committee and shall control over any disposition by will or otherwise.
As soon as administratively feasible after the death of a Participant,
amounts credited to his account, including interest and dividends, if
applicable, determined in accordance with Section 7, shall be paid in cash and a
certificate for any shares shall be delivered to the Participant's designated
beneficiaries or, in the absence of such designation, to the executor,
administrator or other legal representative of the Participant's estate. Such
payment shall relieve the Company of further liability to the deceased
Participant with respect to the Plan. If more than one beneficiary is
designated, each beneficiary shall receive an equal portion of the account
unless the Participant has given express contrary instructions.
14. ASSIGNMENT
Except as provided in Section 13, the rights of a Participant under the
Plan will not be assignable or otherwise transferable by the Participant, other
than by will or the laws of descent and distribution or pursuant to a "qualified
domestic relations order," as defined in Section 414(p) of the Code. No
purported assignment or transfer of such rights of a Participant under the Plan,
whether voluntary or involuntary, by operation of law or otherwise, shall vest
in the purported assignee or transferee any interest or right therein
whatsoever, but immediately upon such assignment or transfer, or any attempt to
make the same, such rights shall terminate and become of no further effect. If
this provision is violated, the Participant's election to purchase Ordinary
Shares shall terminate, and the only obligation of the Company remaining under
the Plan will be to pay to the person entitled thereto the amount then credited
to the Participant's account. No Participant may create a lien on any funds,
securities, rights or other property held for the account of the Participant
under the Plan, except to the extent that there has been a designation of
beneficiaries in accordance with the Plan, and except to the extent permitted by
will or the laws of descent and distribution if beneficiaries have not been
designated. A Participant's right to purchase shares under the Plan shall be
exercisable only during the Participant's lifetime and only by him.
15. COSTS
All costs and expenses incurred in administering this Plan shall be paid by
the Company. Any brokerage fees for the sale of shares purchased under the Plan
shall be paid by the Participant.
16. REPORTS
At the end of each Purchase Period, the Company shall provide or cause to
be provided to each Participant a report of his contributions, including
interest earned, and the number of Ordinary Shares purchased with such
contributions by that Participant on each Purchase Date.
51
17. EQUAL RIGHTS AND PRIVILEGES
All eligible Employees shall have equal rights and privileges with respect
to the Plan to the extent necessary to enable the Plan to qualify for U.S. tax
purposes as an "employee stock purchase plan" within the meaning of Section 423
or any successor provision of the Code and related regulations. Any provision
of the Plan which is inconsistent with Section 423 or any successor provision of
the Code shall without further act or amendment by the Company be reformed to
comply with the requirements of Section 423. This Section 17 shall take
precedence over all other provisions in the Plan.
18. RIGHTS AS SHAREHOLDERS
A Participant will have no rights as a shareholder under the election to
purchase until he becomes a shareholder as herein provided. A Participant will
become a shareholder with respect to shares for which payment has been completed
as provided in Section 9 at the close of business on the last business day of
the Purchase Period.
19. MODIFICATION AND TERMINATION
The Board may amend or terminate the Plan at any time insofar as permitted
by law. No amendment shall be effective unless within one (1) year after it is
adopted by the Board, it is approved by the holders of Transocean's outstanding
shares if and to the extent such amendment is required to be approved by
shareholders in order to cause the rights granted under the Plan to purchase
Ordinary Shares to meet the requirements of Section 423 of the Code (or any
successor provision).
The Plan shall terminate after all Ordinary Shares issued under the Plan
have been purchased, unless terminated earlier by the Board or unless additional
Ordinary Shares are issued under the Plan with the approval of the shareholders.
In the event the Plan is terminated, the Committee may elect to terminate all
outstanding rights to purchase shares under the Plan either immediately or upon
completion of the purchase of shares on the next Purchase Date, unless the
Committee has designated that the right to make all such purchases shall expire
on some other designated date occurring prior to the next Purchase Date. If the
rights to purchase shares under the Plan are terminated prior to expiration, all
funds contributed to the Plan which have not been used to purchase shares shall
be returned to the Participants as soon as administratively feasible, including
interest and dividends, if applicable, determined in accordance with Section 7.
20. BOARD AND SHAREHOLDER APPROVAL; EFFECTIVE DATE
The Plan was originally adopted by the Board on March 12, 1998 and was
effective immediately on such date. The Plan was originally approved by
shareholders at the 1998 annual meeting. The Plan was amended and restated
effective January 1, 2000. This amendment and restatement of the Plan shall be
effective as of May 8, 2003.
21. GOVERNMENTAL APPROVALS OR CONSENTS
This Plan and any offering or sale made to Employees under it are subject
to any governmental approvals or consents that may be or become applicable in
connection therewith. Subject to the provisions of Section 19, the Board may
make such changes in the Plan and include such terms in any offering under the
Plan as may be desirable to comply with the rules or regulations of any
governmental authority.
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22. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board or the Committee shall determine, based on opinion
of legal counsel, that the listing, registration or qualification of the shares
covered by the Plan upon any national securities exchange or reporting system or
under any state or federal law is necessary or desirable as a condition of, or
in connection with, the sale or purchase of shares under the Plan, no shares
will be sold, issued or delivered unless and until such listing, registration or
qualification shall have been effected or obtained, or otherwise provided for,
free of any conditions not acceptable to legal counsel.
23. EMPLOYMENT RIGHTS
The Plan shall neither impose any obligation on Transocean or on any
Subsidiary to continue the employment of any Participant, nor impose any
obligation on any Participant to remain in the employ of Transocean or of any
Subsidiary.
24. WITHHOLDING OF TAXES
The Committee may make such provisions as it may deem appropriate for the
withholding of any taxes which it determines is required in connection with the
purchase of Ordinary Shares under the Plan.
25. SUBSIDIARY TERMS
In addition to changes in eligibility requirements, the adopting
Subsidiaries may make any changes in the terms of this Plan applicable to their
Employees as shall be acceptable to the Committee, provided that such changes do
not cause the Plan to fail to comply with the requirements of Section 423 of the
Code, to the extent it is applicable.
26. GOVERNING LAW
The Plan and rights to purchase shares that may be granted hereunder shall
be governed by and construed and enforced in accordance with the laws of the
State of Texas.
27. USE OF GENDER
The gender of words used in the Plan shall be construed to include
whichever may be appropriate under any particular circumstances of the
masculine, feminine or neuter genders.
28. OTHER PROVISIONS
The agreements to purchase Ordinary Shares under the Plan shall contain
such other provisions as the Committee and the Board shall deem advisable,
provided that no such provision shall in any way be in conflict with the terms
of the Plan.
IN WITNESS WHEREOF, this document has been executed effective as of May 8, 2003.
TRANSOCEAN INC.
By: ___________________________
Eric B. Brown
Corporate Secretary
53
TRANSOCEAN INC.
Walker House
Mary Street
P. O. Box 265 GT
George Town
Grand Cayman
Cayman Islands
P R O X Y
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking any proxy heretofore given in connection with the
Annual General Meeting described below, hereby appoints J. Michael Talbert,
Robert L. Long, Gregory L. Cauthen and Eric B. Brown, and each of them, proxies,
with full powers of substitution, to represent the undersigned at the Annual
General Meeting of Transocean Inc. to be held on Thursday, May 8, 2003 at 9:00
a.m., at the Royal Pavilion Hotel, St. James, Barbados and at any adjournment
thereof, and to vote all ordinary shares that the undersigned would be entitled
to vote if personally present as follows:
The shares represented by this proxy will be voted as directed herein. IF
THIS PROXY IS DULY EXECUTED AND RETURNED, AND NO VOTING DIRECTIONS ARE GIVEN
HEREIN, SUCH SHARES WILL BE VOTED "FOR" ALL NOMINEES LISTED IN ITEM 1, "FOR" THE
PROPOSAL TO AMEND OUR LONG-TERM INCENTIVE PLAN, "FOR" THE PROPOSAL TO AMEND OUR
EMPLOYEE STOCK PURCHASE PLAN, AND "FOR" THE PROPOSAL TO APPROVE THE APPOINTMENT
OF ERNST & YOUNG LLP. The undersigned hereby acknowledges receipt of notice of,
and the proxy statement for, the aforesaid Annual General Meeting.
(Continued and to be signed and dated on the reverse side)
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF ITEMS 1 THROUGH 4.
Item 1. Election of Directors
Nominees for the Board of Directors: Victor E. Grijalva, Arthur
Lindenauer, Richard A. Pattarozzi, Kristian Siem and J. Michael
Talbert
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to vote
for all nominees listed
[ ] FOR all nominees listed, except vote withheld for the following
nominee(s):
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Item 2. Approval of the amendment of our Long-Term Incentive Plan to allow
grants of incentive stock options for an additional ten year period to
May 1, 2013, and to allow a continuing right to grant stock options
and share appreciation rights to our outside directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3. Approval of the amendment of our Employee Stock Purchase Plan to
increase the number of ordinary shares reserved for issuance under the
plan from 1,500,000 to 2,500,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 4. Approval of the appointment of Ernst & Young LLP to serve as
independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
ITEM 5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Change of Address and/or Comments Mark Here [ ]
Date
-------------------------------------------
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Signature
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Signature
Sign exactly as name appears hereon. (If shares
are held in joint names, both should sign. If
signing as Attorney, Executor, Administrator,
Trustee or Guardian, please give your title as
such. If the signer is a corporation, please sign
in the full corporate name by duly authorized
officer.)
Votes must be indicated [ x ] in Black or Blue
Ink.
(Please sign, date and return this proxy promptly in the enclosed postage
prepaid envelope.)
TRANSOCEAN
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