SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement
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RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material under (S)240.14a-12
PRIDE INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[PRIDE LOGO APPEARS HERE]
To Our Shareholders: April 20, 2001
We are pleased to invite you to attend the Annual Meeting of Shareholders of
PRIDE INTERNATIONAL, INC., which will be held at 1:30 p.m., Houston time, on
May 18, 2001, at the St. Regis hotel, 1919 Briar Oaks Lane, Houston, Texas.
At this meeting, we will ask you to approve an amendment to our Restated
Articles of Incorporation to annually elect a portion of our directors to a
classified Board of Directors and to establish three classes of directors, with
each class serving three-year terms. Since 1988, when we became a publicly held
corporation, our Articles have provided that our directors are elected as a
single class once every five years. In 1999, after we were listed on the New
York Stock Exchange, the NYSE advised us of its view that these provisions in
the Articles are inconsistent with the NYSE's corporate governance policies,
which require a company listed on the NYSE to elect directors annually. In
2000, the NYSE advised us that the failure by our shareholders to approve an
amendment to the Articles providing for annual election of directors may
subject us to suspension and delisting from the NYSE. The amendment to the
Articles discussed in the accompanying proxy statement will bring us into
compliance with the NYSE's interpretation of its policies and will allow us to
maintain our listing on the Exchange. If the amendment is approved, you also
will be asked to elect two directors to serve as Class I directors. If the
amendment is not approved, the current directors will continue to serve until
the 2003 Annual Meeting.
In addition, we will ask you to approve an amendment to the Articles that
will increase the number of authorized shares of our common stock from
100,000,000 to 200,000,000 and to ratify PricewaterhouseCoopers LLP as our
independent accountants for 2001. The meeting also will provide us an
opportunity to review with you our business and affairs during 2000.
Whether or not you plan to attend, please sign, date and return the proxy
card in the accompanying envelope. Your vote is important no matter how many
shares you own. If you do attend the meeting and desire to vote in person, you
may do so even though you have previously submitted your proxy.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Paul A. Bragg
Paul A. Bragg
President and Chief Executive Officer
[PRIDE LOGO APPEARS HERE] PRIDE INTERNATIONAL, INC.
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NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
To be held on May 18, 2001
The Annual Meeting of Shareholders of Pride International, Inc. will be
held at the St. Regis hotel, 1919 Briar Oaks Lane, Houston, Texas 77027 on
Friday, May 18, 2001, at 1:30 p.m., Houston Time, for the following purposes:
1. In order to maintain Pride's listing on the New York Stock Exchange,
to adopt an amendment to Pride's Restated Articles of Incorporation to
annually elect a portion of the directors to a classified Board of
Directors and to establish three classes of directors (Class I, Class II
and Class III), such classes to serve staggered three-year terms.
2. To adopt an amendment to Pride's Restated Articles of Incorporation
to increase the number of authorized shares of Pride common stock from
100,000,000 to 200,000,000.
3. Subject to approval of Item 1 above, to elect two directors to serve
as Class I directors, each to serve for a term of three years.
4. To ratify the appointment of PricewaterhouseCoopers LLP as Pride's
independent accountants for 2001.
Attached to this Notice is a Proxy Statement setting forth information with
respect to the above items and certain other information.
The Board of Directors has established April 2, 2001 as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting.
Shareholders, whether or not they expect to be present at the meeting, are
requested to sign and date the enclosed proxy card and return it promptly in
the envelope enclosed for that purpose. Any person giving a proxy has the
power to revoke it at any time, and shareholders who are present at the
meeting may withdraw their proxies and vote in person.
By Order of the Board of Directors
/s/ Robert W. Randall
Robert W. Randall
Secretary
April 20, 2001
5847 San Felipe, Suite 3300
Houston, Texas 77057
PRIDE INTERNATIONAL, INC.
5847 San Felipe, Suite 3300
Houston, Texas 77057
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PROXY STATEMENT
for
2001 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the 2001 Annual Meeting of Shareholders of Pride
International, Inc. (the "Company") to be held on May 18, 2001, or at any
adjournment or adjournments thereof, at the time and place and for the
purposes set forth in the accompanying Notice of 2001 Annual Meeting of
Shareholders.
All properly executed written proxies delivered pursuant to this
solicitation (and not later revoked) will be voted at the Annual Meeting in
accordance with the instructions given in the proxy. When voting regarding the
amendments to the Company's Restated Articles of Incorporation, as amended
(the "Articles"), and the ratification of PricewaterhouseCoopers LLP ("PwC")
as the Company's independent accountants for 2001, shareholders may vote for
or against the proposal or may abstain from voting. When voting regarding the
election of directors, shareholders may vote in favor of all nominees,
withhold their votes as to all nominees or withhold their votes as to specific
nominees. Shareholders should vote their shares on the enclosed proxy card. If
no choice is indicated, proxies that are signed and returned will be voted
"for" amending the Articles to elect a portion of the Company's directors
annually to a classified Board of Directors of three classes, "for" amending
the Articles to increase the number of authorized shares of the Company's
common stock from 100,000,000 to 200,000,000, "for" the election of all
director nominees and "for" ratification of the appointment of PwC as the
Company's independent accountants for 2001.
The accompanying proxy is solicited on behalf of the Board of Directors of
the Company. All shares of the Company's common stock represented by properly
executed and unrevoked proxies will be voted if such proxies are received in
time for the meeting. Such proxies, together with this Proxy Statement and the
Company's Annual Report on Form 10-K for the year ended December 31, 2000, are
first being sent to shareholders on or about April 20, 2001.
QUORUM, VOTE REQUIRED AND REVOCATION OF PROXIES
The Board of Directors has established April 2, 2001 as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. At the record date, there were outstanding 72,925,993 shares
of common stock held by 1,512 shareholders of record. Each share of common
stock is entitled to one vote upon each matter to be voted on at the meeting.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of common stock at the Annual Meeting is necessary to
constitute a quorum. Abstentions and broker non-votes (proxies submitted by
brokers that do not indicate a vote for a proposal because they do not have
discretionary voting authority and have not received instructions as to how to
vote on the proposal) are counted as present in determining whether the quorum
requirement is satisfied. If a quorum is present, the adoption of the
amendments to the Articles and the ratification of the appointment of PwC as
the Company's independent accountants for 2001 require the affirmative vote of
at least a majority of the votes cast. Abstentions from voting will be
included in the voting tally and will have the same effect as a vote against a
proposal. Although broker non-votes are considered present for quorum
purposes, they are not considered entitled to vote with respect to a proposal.
Accordingly, broker non-votes will not affect the outcome of the voting, but
will have the effect of reducing the number of affirmative
votes required to achieve the majority vote for the proposal. If the proposal
regarding the annual election of a portion of the directors to a classified
Board of Directors is approved, the two nominees for director will be elected
by a plurality of the votes cast. There will be no cumulative voting in the
election of directors.
Any holder of common stock has the right to revoke his or her proxy at any
time prior to the voting thereof at the Annual Meeting by (1) filing a written
revocation with the Secretary prior to the voting of such proxy, (2) giving a
duly executed proxy bearing a later date or (3) attending the Annual Meeting
and voting in person. Attendance by a shareholder at the Annual Meeting will
not itself revoke his or her proxy.
COST AND METHOD OF PROXY SOLICITATION
The Company will bear the cost of the solicitation of proxies. In addition
to solicitation by mail, directors, officers and employees of the Company may
solicit proxies from shareholders by telephone, facsimile or telegram or in
person. The Company will supply banks, brokers, dealers and other custodian
nominees and fiduciaries with proxy materials to enable them to send a copy of
such material by mail to each beneficial owner of shares of the Company's
common stock that they hold of record and will, upon request, reimburse them
for their reasonable expenses in doing so. In addition, the Company has
engaged Georgeson Shareholder Communications, Inc. to assist in the
solicitation of proxies for a fee of $7,500, plus reimbursement of certain
out-of-pocket expenses.
ANNUAL ELECTION OF PORTION OF DIRECTORS
TO CLASSIFIED BOARD OF DIRECTORS
(ITEM 1)
Since 1988, when the Company became a publicly held corporation, the
Articles have provided that the directors of the Company are elected as a
single class once every five years. In 1999, after the Company's common stock
was listed on the New York Stock Exchange (the "NYSE"), the Company was
advised by the NYSE of its view that these provisions in the Articles are
inconsistent with the corporate governance policies articulated in the NYSE's
Listed Company Manual, which require a listed company to elect directors
annually. In 2000, the NYSE advised the Company that the failure by the
Company's shareholders to adopt an amendment to the Articles providing for
annual election of directors may subject the Company's common stock to
suspension and delisting from the NYSE.
To comply with the NYSE's interpretation of its policies and to maintain
the Company's listing on the NYSE, the Board of Directors has unanimously
approved an amendment to the Articles to elect a portion of the directors
annually to a classified Board of Directors and to establish three classes of
directors as nearly equal in number as possible, which classes, after an
interim arrangement, will serve staggered three-year terms. If the amendment
is adopted by the Company's shareholders, Class I directors will be initially
elected at this Annual Meeting (as more fully described in Item 3), Class II
directors at the 2002 Annual Meeting and Class III directors at the 2003
Annual Meeting. Any vacancy (including any vacancy resulting from an increase
in the authorized number of directors, or from failure of the shareholders to
elect the full number of authorized directors) would be filled by the vote of
at least two-thirds of the directors then in office, and a director elected to
fill a vacancy would serve until the next shareholders' meeting held for the
election of directors of the class in which the vacancy occurred and until
such director's successor has been elected and qualified. Shareholders will
continue to have the right currently provided by the Articles, at any special
meeting called for the purpose prior to such action by the Board, to fill the
vacancy. If the amendment to the Articles is adopted by the shareholders, the
Company's Bylaws also will be amended to be consistent with the amendment to
the Articles.
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Reasons for Proposal
If the Company's shareholders fail to adopt the amendment to the Articles
as described in this Item 1, the Company's directors will continue to be
elected for five-year terms, with the next election being held at the 2003
Annual Meeting. As discussed above, the NYSE has advised the Company that such
failure may subject the Company's common stock to suspension and delisting
from the NYSE. Accordingly, the proposal is being made at this time to
maintain the Company's listing on the NYSE, which the Board believes is in the
best interests of the Company's shareholders. The proposal is not the result
of any specific effort to accumulate the Company's common stock or to obtain
control of the Company by means of a merger, tender offer, solicitation in
opposition to management or otherwise, and the Company is not aware of any
such effort.
In approving the amendment to the Articles discussed in this Item 1, the
Board of Directors considered both a classified Board structure and a
structure whereby all directors would be elected annually. For the reasons
stated below, the Board of Directors believes that the classified Board
structure is in the best interests of the Company and its shareholders.
The Board believes that the staggered system of electing directors affords
the Company valuable protection against unsolicited, coercive proposals to
take control of the Company. In the event of a hostile takeover attempt, the
Board believes the fact that approximately two-thirds of the directors have
tenure of more than one year would encourage a person seeking control of the
Company to enter into arms'-length negotiations with the Board and would
afford the Company critically needed time and bargaining power to negotiate,
to consider alternative proposals and to ensure that shareholder value is
maximized.
The Board also believes that a classified Board should enhance shareholder
value by providing continuity and stability to the Company's business
strategies and policies. A system of electing one-third of the directors at
each annual meeting of shareholders helps to ensure that at least a majority
of the directors at all times will have in-depth knowledge of the Company and
its business, which assists the Board in conducting effective long-term
strategic planning. At the same time, shareholders have an opportunity each
year to renew and reinvigorate corporate decision-making by electing a class
of directors, while avoiding the sudden and disruptive changes in corporate
policies that could arise if an entirely new group of directors were elected
in a single year. The Company has experienced no difficulty in assuring the
continuity of the Company's affairs and policies in the past.
In this connection, the Board also notes that 10 of the 15 companies
constituting the Philadelphia Stock Exchange's Oil Service Index, and 12 of
the 30 companies constituting the Dow Jones Industrial Average, elect a
portion of their directors annually to a classified board.
Anti-Takeover Effects of Proposal
The proposal, together with provisions of Louisiana law and the Articles
and the Company's Bylaws currently in effect, may be considered to have an
anti-takeover effect and may discourage or make more difficult a merger,
tender offer or proxy contest, the assumption of control by a holder of a
large block of the Company's securities and the removal of incumbent
management, even if a shareholder might consider the transaction in his or her
best interest or the takeover attempt might result in a premium over the
market price for the Company's common stock. For a description of the
provisions in the current Articles and Bylaws of the Company and Louisiana law
that may be considered to have an anti-takeover effect, please read "Certain
Provisions of Current Articles and Bylaws" below. Other than the amendments to
the Articles described in this proxy statement, the Board of Directors does
not currently intend to propose other anti-takeover measures in future proxy
solicitations.
The Articles currently provide that directors are elected for five-year
terms. The shareholders of the Company can therefore replace the entire Board
of Directors, and effect a change in control of the Board, only once every
five years. The classification of the directors will have the effect of
requiring only two annual meetings of shareholders, instead of one every five
years, for shareholders to effect such a change in control.
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Accordingly, the proposed classification of the Board may be considered to
have less of an anti-takeover effect than the five-year term of directors
currently provided by the Articles, at least in years where directors are not
currently elected. It should also be noted that the classification provision
will apply to every election of directors.
As with the existing five-year terms, staggered three-year terms,
especially when combined with the existing director removal provisions and
vacancy filling procedures described below, make it more difficult for
shareholders to change or replace a Company director, even if the reason for
such a change is related to the performance or business judgment of the
director. The number of directors is designated in the Bylaws. Shareholders
may amend the Bylaws only by vote of 80% of the total voting power of the
Company's voting stock, provided that no change to the Bylaws to decrease the
number of directors may shorten the term of an incumbent director. In
addition, a vacancy on the Board may be filled by a vote of at least two-
thirds of the directors in office, and a director elected to fill a vacancy
serves until the next shareholder meeting held for the election of directors
generally, in the case of the five-year terms, or for the election of
directors of the class in which the vacancy occurs, in the case of a
classified board; provided that the Company's shareholders can fill a vacancy
on the Board only at a special meeting called to do so prior to such action of
the Board. These existing restrictions on amending the Company Bylaws and on
filling vacancies could allow the Board of Directors to prevent any
shareholder from obtaining majority representation on the Board by enlarging
the Board and filling the new directorships with its own nominees. In
addition, directors can be removed by the shareholders only for cause and only
by a vote of not less than 80% of the voting power. Such removal may be made
only at a shareholder meeting called specifically for that purpose. These
existing director removal provisions, when coupled with the provision of the
Articles authorizing the Board of Directors to fill vacant directorships prior
to shareholder action, will preclude shareholders from removing incumbent
directors without cause and filling the vacancies created by such removal with
their own nominees. The Company emphasizes, however, that the anti-takeover
effects of the provisions described in this paragraph are currently applicable
and will continue to be so regardless of whether the proposal to elect a
portion of the directors annually to a classified Board is approved.
Vote Required and Board Recommendation
If a quorum is present at the Annual Meeting, amending the Articles to
elect a portion of the directors annually to a classified Board of Directors
and to establish three classes of directors requires adoption by the
affirmative vote of at least a majority of the votes cast. Your Board of
Directors unanimously recommends a vote FOR such adoption.
INCREASE OF AUTHORIZED SHARES OF COMMON STOCK
(ITEM 2)
The Company is currently authorized to issue 100 million shares of common
stock. As of April 2, 2001, 72.9 million shares were issued and outstanding
and 26.1 million shares were reserved for issuance upon conversion of the
Company's outstanding convertible debt (which does not include the senior
convertible notes described below), upon exchange of the stock of one of the
Company's affiliates and under the Company's existing long-term incentive
plans and stock purchase plans. As of April 2, 2001, the Company therefore had
1.0 million authorized shares of common stock that had not been issued or
reserved for issuance. In addition, as described below, the Company has issued
senior convertible notes that are convertible into approximately 4.0 million
shares of common stock. As a result, the Company currently does not have
sufficient uncommitted shares to deliver shares upon conversion of such notes
or for use in future transactions where the Board of Directors determines that
common stock should be issued without using shares previously dedicated for
other purposes. The Company's Board of Directors has therefore unanimously
approved an increase in the number of shares of authorized common stock from
100 million to 200 million.
The increase would permit the Company to satisfy its obligations under the
Company's senior convertible notes issued in March 2001 as part of the
consideration for the Company's increase in ownership to 100% of
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two fourth-generation semisubmersible drilling rigs, the Pride Carlos Walter
and the Pride Brazil. These rigs were recently completed and are currently in
transit to Brazil to work under five-year charter and service rendering
contracts for Petroleos Brasilerio S.A. The notes, in an aggregate principal
amount of $86 million, have a term of three years, bear interest at 9% per
year and are convertible into approximately 4.0 million shares of the
Company's common stock. If the shareholders adopt the amendment to the
Articles described in this Item 2, the Company will be able to satisfy its
obligation to deliver shares of common stock upon conversion of the notes from
its additional authorized but unissued shares. If the shareholders fail to
adopt the amendment, upon conversion of the notes, the Company will be
required to issue shares that have previously been dedicated for other
purposes or that the Company repurchases to satisfy such obligation.
The additional common stock, if so authorized, could also be issued at the
discretion of the Board of Directors, without further action by the
shareholders except as required by applicable law or the rules of the NYSE, in
connection with acquisitions, equity financings, employee compensation and
benefit plans and other corporate purposes. The Board believes the approval of
this proposal is advisable because it will provide the Company with greater
flexibility in connection with possible future transactions. Except for
issuances as described in this Item 2, there are no proposals for any
issuances of additional shares of common stock pending before the Company's
Board of Directors.
If the shareholders approve the proposal, the additional shares of
authorized common stock will become part of the existing class of common
stock, and the additional shares, when issued, will have the same rights and
privileges as the shares of common stock now issued. The increase in the
authorized common stock will not have an immediate effect on the rights of
existing shareholders.
Anti-Takeover Effects of Proposal
The increase in the authorized shares of common stock and the subsequent
issuance of such shares may be considered to have an anti-takeover effect and
may discourage or make more difficult a merger, tender offer or proxy contest,
the assumption of control by a holder of a large block of the Company's
securities and the removal of incumbent management, even if a shareholder
might consider the transaction in his or her best interest or the takeover
attempt might result in a premium over the market price for the Company's
common stock. Any such issuance of additional common stock could have the
effect of diluting the earnings per share and book value per share of the
outstanding shares of common stock, and such additional shares could be used
to dilute the stock ownership or voting rights of a person seeking to obtain
control of the Company.
Other than the amendments to the Articles described in this proxy
statement, the Board of Directors does not currently intend to propose other
anti-takeover measures in future proxy solicitations. The proposal is not the
result of any specific effort to accumulate the Company's common stock or to
obtain control of the Company by means of a merger, tender offer, solicitation
in opposition to management or otherwise, and the Company is not aware of any
such effort. For a description of the provisions in the current Articles and
Bylaws of the Company and Louisiana law that may be considered to have an
anti-takeover effect, please read "Certain Provisions of Current Articles and
Bylaws" below.
Vote Required and Board Recommendation
If a quorum is present at the Annual Meeting, amending the Articles to
increase the authorized shares of common stock requires adoption by the
affirmative vote of at least a majority of the votes cast. Your Board of
Directors unanimously recommends a vote FOR such adoption.
CERTAIN PROVISIONS OF
CURRENT ARTICLES AND BYLAWS
In addition to the proposed provisions described in Items 1 and 2 above,
the provisions summarized below of Louisiana law and the Articles and Bylaws
currently in effect may be considered to have an anti-takeover
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effect and may delay, defer or prevent a tender offer or takeover attempt that
a shareholder of the Company might consider in his or her best interest,
including those attempts that might result in a premium over the market price
for the Company's common stock.
Preferred Stock
The Board of Directors can, without action by shareholders, issue up to
5,000,000 shares of preferred stock in one or more series. The Board can
determine for each series the number of shares, designation, relative voting
rights, dividend rates, liquidation and other rights, preferences and
limitations. In some cases, the issuance of preferred stock could discourage
or make more difficult a change in control of the Company.
Shareholder Meetings
The Articles and Bylaws provide that shareholders may call special meetings
only if the meeting is called by shareholders holding 80% of the total voting
power. In addition, shareholders may take action by written consent without
the holding of a meeting only if the consent is unanimous. The Bylaws provide
that the only business that can be conducted at a shareholders meeting is the
business set forth in the notice of meeting.
Shareholder Nominations of Directors
The Articles provide that only persons nominated by or at the direction of
the Board or by a shareholder who has given timely notice to the Secretary
prior to the meeting in which directors are to be elected are eligible for
election as directors. To be timely, the Company must receive notice between
45 and 90 days before the meeting. If less than 55 days' notice or prior
public disclosure of the meeting date is given or made to shareholders, the
Company must receive the notice not later than the tenth day after the day on
which the notice was mailed or the disclosure was made. The notice from a
shareholder nominating a person for election as a director must give specified
information about the person.
Supermajority Vote for Business Combinations
The Articles provide that certain business combinations between the Company
and a person that beneficially owns 30% of the total voting power of the
Company's voting stock require approval at a shareholder meeting called for
that purpose by 80% of the total voting power, excluding securities owned by
the acquiring entity and its affiliates. A 30% beneficial owner is referred to
as an "acquiring entity" under the Company's Articles and Bylaws. In addition,
these business combinations must meet conditions relating to: (1) form and
quantity of consideration to be received by shareholders; (2) restrictions on
the acquiring entity's purchasing additional voting securities; (3) dividends
paid on the Company's outstanding stock; (4) restrictions on the acquiring
entity's receiving the Company's financial assistance or making changes to the
Company's business or capital structure without unanimous Board approval; and
(5) distribution of a proxy statement containing the directors' recommendation
and opinion of a reputable investment bank.
Business combinations that are approved by "continuing directors" or that
involve a transfer of the Company's assets to a wholly owned subsidiary or a
merger that does not change the percentages of shareholder ownership are
exempt from these restrictions. Under the Articles, a "continuing director" is
any member of the Company's Board of Directors who was a member of the Board
prior to the time a person or entity becomes an acquiring entity and any
person who is subsequently elected to the Board if the person is recommended
or approved by a majority of the continuing directors. The "continuing
directors" do not include an acquiring entity or an affiliate or associate of
an acquiring entity.
Interested Shareholder Transactions
Louisiana law requires that mergers, consolidations or share exchanges with
a shareholder owning 10% or more of the voting power be recommended by the
Board and approved by (1) 80% of the votes entitled to be
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cast by outstanding shares of voting stock and (2) two-thirds of the votes
entitled to be cast by voting stock other than an interested shareholder.
Transactions that do not alter the contract rights of the stock or convert the
Company's shares and that satisfy certain consideration and procedural
requirements are exempt from these requirements.
Business Combinations under Louisiana Law
As permitted by Louisiana law, the Articles expressly authorize the Board
of Directors, when considering a tender offer, exchange offer, merger or
consolidation, to consider, among other factors, the social and economic
effects of the proposals on the Company, its subsidiaries and its employees,
customers, creditors and communities.
Limitation of Liability of Officers and Directors
Section 24 of the Louisiana Business Corporation Law authorizes
corporations to limit or eliminate the personal liability of officers and
directors to corporations and their shareholders for monetary damages for
breach of officers' and directors' fiduciary duties, except for (1) any breach
of the officer's or director's duty of loyalty to the Company or its
shareholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in Section
92D of the Louisiana Business Corporation Law or (4) any transaction from
which the officer or director derived an improper personal benefit.
The Articles limit the liability of the Company's officers and directors to
the Company and its shareholders to the fullest extent permitted by Louisiana
law. The inclusion of these provisions in the Articles may reduce the
likelihood of derivative litigation against the Company's officers and
directors, and may discourage or deter shareholders or management from
bringing a lawsuit against the Company's officers and directors for breach of
their duty of care, even though such an action, if successful, might have
otherwise benefited the Company and its shareholders. Both the Articles and
Bylaws provide indemnification to the Company's officers and directors and
certain other persons.
Amendment of Certain Provisions of the Articles and Bylaws
The Articles generally provide that if either a majority of the directors,
at a time when there is no acquiring entity, or a majority of the continuing
directors, at a time when there is an acquiring entity, recommends an
amendment to the Articles, the holders of a majority of the total voting power
present at a shareholder meeting are required to amend the Articles.
Otherwise, the holders of 80% of the total voting power are required.
Exceptions relate generally to (1) the authority of the Board of Directors to
issue preferred stock, where no shareholder vote is required, and (2)
supermajority voting provisions for business combinations and limitations on
director liability, where approval of holders of 80% of the total voting power
is required, regardless of whether there is an acquiring entity.
The Company's Bylaws may be amended or repealed only by (1) a majority of
the entire Board of Directors at any time when there is no acquiring entity,
(2) both a majority of the entire Board of Directors and a majority of the
continuing directors at any time when there is an acquiring entity or (3) the
affirmative vote of the holders of at least 80% of the total voting power.
Shareholder Rights Plan
On September 9, 1998, the Company's Board of Directors adopted a preferred
share purchase rights plan. Under the plan, each share of common stock
currently includes one right to purchase preferred stock. Currently, the
rights are not exercisable and are attached to all outstanding shares of
common stock. The rights will separate from the common stock and become
exercisable (1) ten days after public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the right to
acquire, beneficial ownership of 15% of
7
the outstanding common stock or (2) ten business days following the start of a
tender offer or exchange offer that would result in a person's acquiring
beneficial ownership of 15% of the outstanding common stock.
The Company's Board of Directors can elect to delay the separation of the
rights from the common stock beyond the ten-day periods referred to above. A
15% beneficial owner is referred to as an "acquiring person" under the plan.
Until the rights are separately distributed, the rights will be evidenced by
the common stock certificates and will be transferred with and only with the
common stock certificates.
After the rights are separately distributed, each right will entitle the
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock for a purchase price of $50. The rights
will expire at the close of business on September 9, 2008, unless the Company
redeems or exchanges them earlier as described below.
If a person becomes an acquiring person, the rights will become rights to
purchase shares of the Company's common stock for one-half the current market
price (as defined in the rights agreement) of the common stock. This
occurrence is referred to as a "flip-in event" under the plan. After any flip-
in event, all rights that are beneficially owned by an acquiring person, or by
certain related parties, will be null and void. The Board of Directors has the
power to decide that a particular tender or exchange offer for all outstanding
shares of the Company's common stock is fair to and otherwise in the best
interests of the Company's shareholders. If the Company's Board makes this
determination, the purchase of shares under the offer will not be a flip-in
event.
If, after there is an acquiring person, the Company is acquired in a merger
or other business combination transaction or 50% or more of the Company's
assets or earning power are sold or transferred, each holder of a right will
have the right to purchase shares of common stock of the acquiring company at
a price of one-half the current market price of that stock. This occurrence is
referred to as a "flip-over event" under the plan. An acquiring person will
not be entitled to exercise its rights, which will have become void.
Until ten days after the announcement that a person has become an acquiring
person, the Board may decide to redeem the rights at a price of $.01 per
right, payable in cash, shares of common stock or other consideration. The
rights will not be exercisable after a flip-in event until the rights are no
longer redeemable.
At any time after a flip-in event and prior to either a person's becoming
the beneficial owner of 50% or more of the shares of common stock or a flip-
over event, the Board may decide to exchange the rights for shares of common
stock on a one-for-one basis. Rights owned by an acquiring person, which will
have become void, will not be exchanged.
Other than provisions relating to the redemption price of the rights, the
rights agreement may be amended by the Board of Directors at any time that the
rights are redeemable. Thereafter, the provisions of the rights agreement
other than the redemption price may be amended by the Board of Directors to
cure any ambiguity, defect or inconsistency, to make changes that do not
materially adversely affect the interests of holders of rights (excluding the
interests of any acquiring person), or to shorten or lengthen any time period
under the rights agreement. No amendment to lengthen the time period for
redemption may be made if the rights are not redeemable at that time.
Various actions under the rights agreement, including redeeming and
exchanging the rights, amending the rights agreement or exempting a tender
offer from the flip-in provisions of the plan, will require the approval of
the Company's "continuing directors." A "continuing director" under the rights
agreement is any person who is a continuing director under the Articles if
that person was a member of the Board prior to the time a person becomes an
acquiring person or that person's nomination for election or election to the
Board is recommended or approved by a majority of the continuing directors.
The "continuing directors" do not include an acquiring person, or an affiliate
or associate of an acquiring person, or any representative or nominee of them.
8
The rights have certain anti-takeover effects. The rights will cause
substantial dilution to any person or group that attempts to acquire the
Company without the approval of the Board of Directors. As a result, the
overall effect of the rights may be to render more difficult or discourage any
attempt to acquire the Company even if the acquisition may be favorable to the
interests of the Company's shareholders. Because the Board of Directors can
redeem the rights or approve a tender or exchange offer, the rights should not
interfere with a merger or other business combination approved by the Board.
ELECTION OF DIRECTORS
(ITEM 3)
The Board of Directors currently consists of the eight members listed
below. If the Company's shareholders approve Item 1 of this proxy statement,
the Company will file an amendment to the Articles that will divide the Board
of Directors into three classes (Class I, Class II and Class III). Class I
directors will be elected at this Annual Meeting to hold office beginning
after the effectiveness of the amendment and until the 2004 Annual Meeting and
until their respective successors are elected and qualified. Class II and
Class III directors will be assigned by the Board of Directors as described
below, which directors will hold office until the 2002 Annual Meeting and 2003
Annual Meeting, respectively, and until their respective successors are
elected and qualified. If shareholders do not approve Item 1, the current
directors will continue to serve until the expiration of their term of office
at the 2003 Annual Meeting.
Nominees for Election
Each of the nominees for Class I director has been approved by the Board of
Directors for submission to the shareholders. Set forth below is the current
principal occupation (which, unless otherwise indicated, has been his
principal occupation during the last five years), age and certain other
information for each nominee:
Paul A. Bragg, 45, has been Chief Executive Officer and a director of the
Company since March 1999 and President since February 1997 and was Chief
Operating Officer from February 1997 to April 1999. He joined the Company in
July 1993 as its Vice President and Chief Financial Officer. From 1988 until
he joined the Company, Mr. Bragg was an independent business consultant and
managed private investments. He previously served as Vice President and Chief
Financial Officer of Energy Service Company, Inc. (now ENSCO International,
Inc.), an oilfield services company, from 1983 through 1987. Mr. Bragg serves
on the Executive Committee of the Board of Directors.
Jorge E. Estrada M., 53, has been a director of the Company since October
1993. For more than five years, Mr. Estrada has been President and Chief
Executive Officer of JEMPSA Media and Entertainment, a company specializing in
the Spanish and Latin American entertainment industry. Previously, Mr. Estrada
served as President--Worldwide Drilling Division of Geosource and Vice
President of Geosource Exploration Division--Latin America.
Vote Required and Board Recommendation
If a quorum is present at the Annual Meeting and the Company's shareholders
approve Item 1, the two nominees receiving the greatest number of votes cast
will be elected as Class I directors. If, prior to the Annual Meeting, any
nominee becomes unavailable for election, which is not anticipated, the
proxies received will be voted "for" the election of such substitute nominee
as the Board of Directors may propose. Your Board of Directors unanimously
recommends a vote FOR election of the two director nominees.
Information Concerning Current Directors Not Standing for Election
Set forth below is the current principal occupation (which, unless
otherwise indicated, has been his principal occupation during the last five
years), age and certain other information for the Company's directors that are
not standing for election.
9
James B. Clement, 54, has been a director of the Company since November
1993 and Chairman of the Board since March 1999. From 1977 until October 1997,
he was an executive officer of Offshore Logistics, Inc., a publicly traded
company engaged in helicopter transportation services, serving as its
President, Chief Executive Officer and a director since 1988. He is currently
serving as a consultant to Offshore Logistics and manages personal
investments. Mr. Clement serves on the Executive Committee and the Audit
Committee of the Board of Directors. If the shareholders approve Item 1, Mr.
Clement will become a Class III director.
Remi Dorval, 50, became a director of the Company in March 1997 in
connection with the acquisition by the Company of the operating subsidiaries
of Forasol-Foramer N.V. ("Forasol-Foramer"). See "Certain Relationships and
Related Transactions." From that time until March 1999, he served as Vice
Chairman of the Board of the Company. For more than five years prior to
becoming a director, Mr. Dorval was a Supervisory Director and Chief Executive
Officer of Forasol-Foramer and its predecessors. Since 1990, he has been a
supervisory director of Soletanche S.A., a privately held French company, and
is in charge of its interests in the oil and gas sector. Mr. Dorval serves on
the Audit Committee of the Board of Directors. If the shareholders approve
Item 1, Mr. Dorval will become a Class II director.
Christian J. Boon Falleur, 53, became a director of the Company in March
1997 in connection with the Forasol-Foramer transaction. See "Certain
Relationships and Related Transactions." For more than five years prior to
becoming a director, Mr. Boon Falleur was a Supervisory Director and Executive
Vice President of Forasol-Foramer and its predecessors. From 1972 until April
2000, he was affiliated with Ackermans & van Haaren Group, a publicly traded
company listed on the Brussels Stock Exchange. Since April 2000, he has been
managing director of DMC S.A., a managerial and consulting firm. Mr. Boon
Falleur serves on the Compensation Committee of the Board of Directors. If the
shareholders approve Item 1, Mr. Boon Falleur will become a Class II director.
William E. Macaulay, 55, became a director of the Company in July 1999. See
"Certain Relationships and Related Transactions." Mr. Macaulay is chairman and
Chief Executive Officer of First Reserve Corporation, the manager of the two
funds that own 14.7% of the Company's common stock. He is a director of the
following publicly held companies: Chicago Bridge & Iron Company, an
international engineering and construction company, National-Oilwell, Inc., a
distributor of oilfield equipment and machinery, Weatherford International,
Inc., an oilfield services company, Superior Energy Services, Inc., a provider
of specialized oilfield services and equipment, Maverick Tube Corporation, a
manufacturer of oilfield tubulars, line pipe and structural steel,
TransMontaigne Inc., a company engaged in transporting, terminalling, storing
and marketing refined petroleum products, and Grant Prideco, Inc., a company
engaged in drill stem technology development and drill pipe manufacturing. If
the shareholders approve Item 1, Mr. Macaulay will become a Class III
director.
Ralph D. McBride, 54, has been a director of the Company since September
1995 and Vice Chairman of the Board since March 1999. Mr. McBride has been a
partner with the law firm of Bracewell & Patterson, L.L.P. in Houston, Texas,
since 1980. Bracewell & Patterson provides legal services to the Company from
time to time. The Company paid approximately $800,000 to Bracewell & Patterson
for services rendered during 2000. Mr. McBride serves on the Executive
Committee, the Audit Committee and the Compensation Committee of the Board of
Directors. If the shareholders approve Item 1, Mr. McBride will become a Class
III director.
James T. Sneed, 69, has been a director of the Company since October 1992.
In 1991 he retired after 37 years of employment with Mobil Oil Corporation
where he was Production Manager USA. Mr. Sneed serves on the Executive
Committee and the Compensation Committee of the Board of Directors. If the
shareholders approve Item 1, Mr. Sneed will become a Class II director.
Compensation of Directors
General. The annual retainer for each outside director is $9,000 per
quarter, or $36,000 annually. Mr. Clement, the Chairman of the Board, receives
$56,000 annually, less costs incurred by the Company in connection with
providing Mr. Clement coverage under the Company's health insurance program.
Each outside
10
director also receives a fee of (i) $1,000 ($2,000 for Mr. Clement) for each
Board meeting attended and (ii) $1,000 ($2,000 for Mr. Clement) for each
committee meeting attended that is not on the date of a Board meeting or $500
($1,000 for Mr. Clement) for each committee meeting attended that is on the
date of a Board meeting.
In addition, each director who is not an employee of the Company (other
than Mr. Estrada) has received stock options under the Company's 1993
Directors' Stock Option Plan. A maximum of 400,000 shares of common stock is
available for purchase upon exercise of options granted under the plan. Under
the terms of the plan, each eligible director automatically receives an
initial option grant of 10,000 shares upon becoming a director and, as long as
the director remains eligible, may receive an annual grant as determined by
the Board of Directors or the Executive Committee following the calendar year
in which such director receives the initial grant. Persons who were eligible
directors on the date the plan was adopted received their initial option
grants of 10,000 shares each at that time. The exercise price of options is
the fair market value per share on the date the option is granted. Options
expire ten years from the date of grant. Each option becomes exercisable as to
50% of the shares covered at the end of one year from the date of grant and
the remaining 50% at the end of two years from the date of the grant. The plan
provides for adjustments of options in cases of mergers, stock splits and
similar capital reorganizations and for immediate vesting in the event of a
change in control of the Company. As of April 2, 2001, options to purchase
204,665 shares were outstanding under the plan.
Consulting Arrangement with Jorge E. Estrada M. The Company and Mr. Estrada
have entered into a consulting arrangement whereby Mr. Estrada is paid a fee
for the successful completion by the Company of an acquisition referred to the
Company by Mr. Estrada. The amount of the fee is based on the total dollar
amount of the transaction and may not exceed $1.0 million per transaction. The
Company has agreed to pay Mr. Estrada an amount equal to $15,000 per month
creditable against the fees payable under the arrangement. In addition, the
Company has agreed, on a case-by-case basis, to pay Mr. Estrada a business
development fee from revenues generated by projects identified by Mr. Estrada.
In the event of a change of control of the Company, the agreement and any
other benefits provided to Mr. Estrada will be automatically extended for
three years, and any amounts payable may, at Mr. Estrada's election, be
required to be paid upon demand in a lump sum. Fees paid to Mr. Estrada in
2000 under the agreement totaled $1.0 million.
Organization of the Board of Directors
The Board of Directors is responsible for the overall affairs of the
Company. To assist it in carrying out its duties, the Board has delegated
certain authority to an Executive Committee, an Audit Committee and a
Compensation Committee. During 2000, the Board of Directors of the Company
held 12 meetings. Each director attended at least 75% of the total number of
meetings of the Board of Directors and of the Committees of the Board on which
he served. The Board does not have a standing nominating committee.
The Executive Committee, currently comprising Messrs. Bragg, Clement,
McBride and Sneed, may exercise the power and authority of the Board of
Directors, subject to certain limitations, when the Board is not in session.
The Executive Committee did not hold any meetings during 2000.
The Audit Committee, currently comprising Messrs. Clement, Dorval and
McBride, has the authority and power to oversee the retention, performance and
compensation of the independent public accountants of the Company and the
establishment and oversight of such systems of internal accounting and
auditing control as it deems appropriate. The Audit Committee held two
meetings during 2000. A copy of the charter of the Audit Committee is attached
as Annex A to this Proxy Statement.
The Compensation Committee, currently comprising Messrs. Boon Falleur,
McBride and Sneed, recommends and approves employment agreements, salaries and
incentive plans, stock options and employee benefit plans for officers and key
employees. The Compensation Committee held two meetings during 2000.
11
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 4)
PwC has been appointed by the Board of Directors as independent public
accountants for the Company and its subsidiaries for the year ending December
31, 2001. This appointment is being presented to the shareholders for
ratification. Representatives of PwC are expected to be present at the Annual
Meeting and will be provided an opportunity to make statements if they desire
to do so and to respond to appropriate questions from shareholders.
Vote Required and Board Recommendation
If a quorum is present at the Annual Meeting, the ratification of the
appointment of PwC requires the affirmative vote of at least a majority of the
votes cast. Your Board of Directors recommends a vote FOR such ratification.
If the shareholders fail to ratify the appointment of PwC as the Company's
independent accountants, it is not anticipated that PwC will be replaced in
2001. Such lack of approval will, however, be considered by the Audit
Committee in selecting the Company's independent accountants for 2002.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
reports of changes in ownership of the Company's common stock with the
Securities and Exchange Commission and, pursuant to rules promulgated under
Section 16(a), such individuals are required to furnish the Company with
copies of Section 16(a) reports they file. Based solely on a review of the
copies of such reports furnished to the Company, the Company is not aware of
any failure by any of its executive officers or directors to comply with the
Section 16(a) reporting requirements during 2000.
12
SECURITY OWNERSHIP
The following table sets forth certain information as of April 2, 2001 with
respect to the beneficial ownership of the Company's common stock by (1) each
shareholder of the Company who is known by the Company to be a beneficial
owner of more than 5% of the Company's common stock, (2) the directors of the
Company and the persons named in the "Summary Compensation Table" below and
(3) all executive officers and directors of the Company as a group. Unless
otherwise indicated, all of such stock is owned directly, and the indicated
person or entity has sole voting and investment power.
Number of
Shares Percent
Beneficially of
Name and Address Owned (1) Class
- ---------------- ------------ -------
First Reserve Corporation (2)............................ 10,747,735 14.7%
411 West Putnam Avenue
Greenwich, Connecticut 06830
James W. Allen........................................... 603,171 *
Paul A. Bragg............................................ 581,500 *
John R. Blocker, Jr...................................... 240,580 *
Gary W. Casswell......................................... 34,300 *
James B. Clement......................................... 32,833 *
Remi Dorval (3).......................................... 534,083 *
Jorge E. Estrada M....................................... -- *
Christian J. Boon Falleur................................ 71,333 *
William E. Macaulay (2).................................. 10,752,735 14.7
Ralph D. McBride......................................... 48,333 *
John O'Leary............................................. 253,375 *
James T. Sneed........................................... 33,333 *
All current executive officers and directors as a group
(16 persons) (2)(3)..................................... 13,572,492 18.1
- --------
* Less than 1% of issued and outstanding shares of the Company's common
stock.
(1) The number of shares beneficially owned by the directors and executive
officers includes shares that may be acquired within 60 days of April 2,
2001 by exercise of stock options as follows: Mr. Allen--601,800; Mr.
Bragg--540,300; Mr. Blocker--229,300; Mr. Casswell--34,300; Mr. Clement--
32,833; Mr. Dorval--31,333; Mr. Boon Falleur--31,333; Mr. Macaulay--
5,000; Mr. McBride--38,333; Mr. O'Leary--251,282; Mr. Sneed--30,333; and
all other executive officers--370,500.
(2) First Reserve Fund VIII, L.P. ("Fund VIII") and First Reserve Fund VII,
Limited Partnership ("Fund VII") own beneficially and of record 9,865,072
shares and 882,663 shares, respectively, of the Company's common stock.
The shares owned beneficially and of record by Fund VIII and Fund VII are
beneficially owned by, and such funds share voting and investment power
with respect to such shares with, First Reserve GP VII, L.P. (882,663
shares), First Reserve GP VIII, L.P. (9,865,072 shares) and First Reserve
Corporation (10,747,735 shares). First Reserve Corporation is the
managing general partner of First Reserve GP VII, L.P. and First Reserve
GP VIII, L.P., which are, in turn, the general partners of Fund VII and
Fund VIII. Mr. Macaulay disclaims beneficial ownership of the shares
owned by Fund VIII and Fund VII, of which Mr. Macaulay is affiliated. The
business address of Mr. Macaulay is c/o First Reserve Corporation, 411
West Putnam Avenue, Greenwich, Connecticut 06830.
(3) Mr. Dorval disclaims beneficial ownership of the 482,750 shares
beneficially owned by Soletanche S.A., of which Mr. Dorval serves as a
supervisory director.
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
First Reserve Transactions. In March 2000, the Company sold 4,500,000
shares of common stock to First Reserve Fund VIII, L.P. ("Fund VIII"), an
investment partnership managed by First Reserve Corporation ("First Reserve"),
for $72.0 million in cash. In March 2001, as part of the Company's increase in
ownership to 100% of the joint venture that recently completed the
construction of two fourth-generation semisubmersible drilling rigs, the Pride
Carlos Walter and the Pride Brazil, the Company issued to Fund VIII and First
Reserve Fund VII, Limited Partnership ("Fund VII") a total of 519,468 shares
of common stock pursuant to Fund VIII's and Fund VII's original investment in
the joint venture. As a result of these and previous sales of the Company's
common stock to Fund VIII and Fund VII, those funds currently own a total of
10,747,735 shares of the Company's common stock, or 14.7% of the total shares
outstanding. The funds also hold a 11.9% interest in the joint venture that is
constructing two fourth-generation semisubmersible drilling rigs, the Amethyst
4 and the Amethyst 5, which interest is exchangeable for 527,652 shares of the
Company's common stock beginning in June 2002 (or earlier in certain events).
The Company currently owns a 26.4% interest in the joint venture.
The Company, Fund VIII and Fund VII have entered into a Shareholders
Agreement providing that, as long as Fund VIII or any other affiliate of First
Reserve (collectively, the "First Reserve Group") owns Company Securities,
First Reserve is entitled to nominate one director to the Company's Board of
Directors. "Company Securities" include the Company's common stock and any
class or series of the Company's preferred stock, and any other securities,
warrants or options or rights of any nature that are convertible into,
exchangeable for or exercisable for the purchase of, or otherwise give the
holder any rights in, the Company's common stock, or any class or series of
Company preferred stock entitled to vote generally for the election of
directors or otherwise. The First Reserve director nominee currently is
William E. Macaulay, Chairman and Chief Executive Officer of First Reserve. In
addition, the Shareholders Agreement provides that:
. Members of the First Reserve Group are restricted from acquiring Company
Securities without the Company's consent if the effect would be to
increase the First Reserve Group's ownership of Company Securities by an
amount equal to three percent or more of either the voting power of the
Company or the number of outstanding shares of any class or series of
Company Securities.
. Members of the First Reserve Group are restricted from transferring any
Company Securities they own except in accordance with the Shareholders
Agreement, which permits, among others, sales registered under the
Securities Act of 1933, sales effected in compliance with Rule 144 under
the Securities Act and other privately negotiated sales. Members of the
First Reserve Group will, however, use their reasonable efforts to
refrain from knowingly transferring more than five percent of the voting
power of the Company to one person unless the Company consents.
. Members of the First Reserve Group will vote all Company Securities they
beneficially own with respect to each matter submitted to the Company's
shareholders involving a business combination or other change in control
of the Company that has not been approved by the Board of Directors
either (a) in the manner recommended by the Board or (b) proportionately
with all other holders of Company Securities voting with respect to such
matter. The First Reserve Group will, however, retain the power to vote
for the election of the nominee of First Reserve to the Company's Board.
No member of the First Reserve Group will take any action, or solicit
proxies in any fashion, inconsistent with the provisions of this
paragraph.
. No member of the First Reserve Group will join a group or otherwise act
in concert with any other person for the purpose of acquiring, holding,
voting or disposing of any Company Securities, other than the First
Reserve Group itself.
These restrictions generally will not apply during any period that the
First Reserve director designee is not serving as a director either (a) as a
result of a failure of the Company or its Board to comply with the terms of
the Shareholders Agreement or (b) if such designee is not elected by the
shareholders.
14
Members of the First Reserve Group also are provided demand and piggyback
registration rights with respect to the Company's common stock they own.
Forasol-Foramer Acquisition. In accordance with the purchase agreement
pursuant to which the Company acquired the operating subsidiaries of Forasol-
Foramer in 1997, Ackermans & van Haaren Group and its affiliates
(collectively, the "AVH Group") and Soletanche S.A. and its affiliates
(collectively, the "Soletanche Group") were entitled to nominate one director
to the Board of Directors of the Company; provided that the AVH Group on the
one hand and the Soletanche Group on the other hand continued to own, directly
or indirectly, at least 50% of the shares of the Company's common stock
acquired pursuant to the purchase agreement. Christian J. Boon Falleur was the
director nominee of the AVH Group, and Remi Dorval was the director nominee of
the Soletanche Group. The AVH Group and the Soletanche Group are no longer
entitled to nominate any directors to the Board.
COMPENSATION OF EXECUTIVE OFFICERS
Executive Compensation
The following table discloses compensation for the years ended December 31,
2000, 1999 and 1998 for the Chief Executive Officer and the four other most
highly compensated executive officers of the Company.
Summary Compensation Table
Long-Term
Compensation
Awards
------------
Annual
Compensation Shares
----------------- Underlying All Other
Name and Principal Position (1) Year Salary Bonus Options Compensation (2)
------------------------------- ---- -------- -------- ------------ ----------------
Paul A. Bragg........................... 2000 $418,462 $836,924 86,000 $10,556
President and Chief Executive 1999 402,141 598,858 129,000 9,776
Officer 1998 313,692 158,072 198,750 9,830
James W. Allen.......................... 2000 308,461 370,153 64,000 10,308
Senior Vice President and Chief 1999 298,846 222,517 50,000 11,042
Operating Officer 1998 268,077 90,057 175,000 10,231
John O'Leary............................ 2000 234,230 210,807 57,000 10,471
Vice President -- 1999 227,846 127,238 50,000 9,854
International Marketing 1998 196,462 49,499 145,201 --
John R. Blocker, Jr..................... 2000 241,257 180,943 30,000 77
Vice President -- Latin American 1999 199,174 93,791 15,500 --
Operations 1998 181,833 18,325 95,000 --
Gary W. Casswell (3).................... 2000 204,230 153,173 27,500 760
Vice President -- Eastern Hemisphere 1999 190,768 89,830 15,500 334
Operations 1998 63,000 34,699 35,000 --
- --------
(1) As of December 31, 2000.
(2) Includes matching contributions deposited into the Company's 401(k) plan,
as well as premiums paid on behalf of the executive for life and
accidental death and disability insurance.
(3) Mr. Casswell joined the Company in August 1998.
15
Option Grants, Exercise and Valuation
During 2000, options were granted to the named executive officers as shown
in the first table below. All such options were granted at fair market value
on the grant date. Such options generally are exercisable as to one-fifth of
the shares covered thereby at the end of each six-month period after the grant
date. Each option permits tax withholding to be paid by the withholding of
shares of common stock issuable upon exercise of the option. Shown in the
second table below is information with respect to unexercised options held at
December 31, 2000.
Option Grants in 2000
Individual Grants
--------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rates
Number of % of Total of Stock Price Appreciation
Securities Options Granted Exercise or for Option Term(1)
Underlying to Employees in Base Price Expiration ----------------------------
Name Options Granted 2000 ($ per Share) Date 5% 10%
- ---- --------------- --------------- ------------- ---------- ------------- --------------
Paul A. Bragg........... 86,000 13.2% $19.563 07/25/10 $ 1,058,037 $ 2,681,272
James W. Allen.......... 64,000 9.8% 19.563 07/25/10 787,376 1,995,366
John O'Leary............ 57,000 8.8% 19.563 07/25/10 701,257 1,777,122
John R. Blocker, Jr..... 30,000 4.6% 19.563 07/25/10 369,083 935,328
Gary W. Casswell........ 27,500 4.2% 19.563 07/25/10 338,326 857,384
- --------
(1) The amounts under these columns result from calculations assuming 5% and
10% annual growth rates through the actual option term as set by the
Securities and Exchange Commission and are not intended to forecast future
price appreciation of the Company's common stock. The gains reflect a
future value based upon growth at these prescribed rates.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Value
Number of Shares
Underlying Unexercised Value of Unexercised In-
Shares Options at Fiscal Year the-Money Options at
Acquired End(1) Fiscal Year-End(2)
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
Paul A. Bragg........... -- -- 512,300 265,450 $5,462,563 $3,310,031
James W. Allen.......... -- -- 591,800 186,200 7,703,825 2,327,175
John O'Leary............ -- -- 239,882 152,721 2,251,977 1,865,552
John R. Blocker, Jr..... -- -- 220,200 96,300 2,394,395 1,175,093
Gary W. Casswell........ -- -- 25,700 52,300 348,169 591,863
- --------
(1) Number of options shown includes all options (both in and out of the
money) at December 31, 2000.
(2) Value reflects those options in-the-money based on a closing price of
$24.62 per share at December 31, 2000, less the option exercise price.
Options are in-the-money if the market value of the shares covered thereby
exceeds the option exercise price.
Employment Agreements
The Company is a party to employment agreements with Messrs. Bragg, Allen
and O'Leary, each for a term currently ending February 4, 2002, with Mr.
Casswell for a term currently ending August 15, 2002 and with Mr. Blocker for
a term ending October 15, 2002. Each agreement is subject to automatic
renewals for successive one-year terms until either party terminates the
contract effective upon the anniversary date of the respective agreement, with
at least one year's advance notice. Each agreement provides that if the
executive is terminated
16
involuntarily for reasons not associated with a Change in Control and not due
to cause (as defined), the executive will receive (1) two full years (one year
for Messrs. Casswell and Blocker) of base salary (not less than the highest
annual base salary during the preceding three years); (2) two years (one year
for Messrs. Casswell and Blocker) of life, health, accident and disability
insurance benefits for himself and dependents; (3) an amount equal to two
times the target award (one times the target award for Messrs. Casswell and
Blocker) for the Company's annual incentive compensation plan described below
under "Report of the Compensation Committee on Executive Compensation"; and
(4) immediate vesting of the executive's options and awards. The agreements
treat death, disability, certain constructive terminations of an executive or
the Company's failure to renew an agreement at the end of its term as an
involuntary termination of the executive.
Each agreement also provides for compensation due to involuntary
termination following a Change in Control. "Change in Control" is defined to
include the acquisition by a person of 20% or more of the Company's voting
power, certain changes in a majority of the Board of Directors, a merger
resulting in existing shareholders having less than 50% of the voting power in
the surviving company and sale or liquidation of the Company. In the event of
a Change in Control, the term of the agreements will be extended for a period
of three years (two years for Messrs. Casswell and Blocker) from the date of
the Change in Control. In the event of a termination during the extended term
of the agreement (including voluntary resignations by the executive within six
months after a Change in Control), the executive will be entitled to receive
(1) salary and benefits equal to three full years (two full years for Messrs.
Casswell and Blocker) of compensation; (2) bonus equal to three times (two
times for Messrs. Casswell and Blocker) the maximum award for the year of
termination; (3) life, health and accident and disability insurance continued
for three years (two years for Messrs. Casswell and Blocker) or until
reemployment; and (4) immediate vesting of the executive's options and awards.
The agreements with Messrs. Bragg, Allen and O'Leary also provide that the
Company shall reimburse the executive for certain taxes incurred by the
executive as a result of payments following a Change in Control.
In addition, each executive's agreement provides a noncompete clause for
two years (one year for Messrs. Casswell and Blocker) after termination
(voluntary or involuntary) assuming that it was not due to a Change in
Control. In the event of a Change in Control, the noncompete clause is void.
Report of the Compensation Committee on Executive Compensation
The Compensation Committee (the "Committee") consists of three outside
directors, Messrs. McBride, Boon Falleur and Sneed (Chairman), who are neither
officers or employees of the Company nor eligible to participate in any of the
compensation programs the Committee administers. The Committee meets at least
semiannually to review, recommend and approve employment agreements, salaries,
incentive plans, stock options and employee benefit plans for officers and key
employees. The key elements of the Committee's compensation program are base
salary, annual incentive awards and long-term incentive awards.
Base Salary. Under the Committee's program, the base salary for the
executive officers and other key employees is established to position the
individual in the median to upper salary level for the individual's peers in
the contract drilling industry. Specific compensation for individual
executives will vary within this target range as a result of the subjective
judgment of the Committee. The Company has employment agreements with all its
executive officers. These executives received base salary increases ranging
from 0% to 16% (equal to a weighted average of 5.9%) effective August 2000.
Annual Incentive Compensation. The second component of the program is the
annual incentive compensation plan. The plan provides incentives to each
executive officer to maximize cash generation and profitability of the
Company, enhance liquidity and build cash balances. Bonuses were paid on a
discretionary basis by the Committee from a bonus pool based on the amount of
free cash flow generated by the Company as determined in accordance with the
plan. For 2000, the bonus pool was $5.2 million.
Long-Term Incentive Compensation. The final component of the Committee's
compensation program is the Company's 1998 Long-Term Incentive Plan. Under the
plan, the Committee is authorized to grant key employees, including the named
executive officers, stock options and other stock and cash awards in an effort
to
17
provide long-term incentives to such executives. The Committee currently views
stock options as the most effective way to tie the long-term interests of
management directly to those of the shareholders. In awarding stock options to
executives other than the Chief Executive Officer, the Committee reviews and
approves or modifies recommendations made by the Chief Executive Officer.
Factors used in determining individual award size are competitive practice
(awards needed to attract and retain management talent), rank within the
Company (internal equity), responsibility for asset management (size of job)
and ability to affect profitability. In each individual case, previous option
and performance unit grants are considered in determining the size of new
awards. Considering these factors, the Committee makes a subjective
determination as to the level of each award.
Chief Executive Officer Compensation. The Committee applies the executive
compensation program described above in determining the Chief Executive
Officer's total compensation. In 2000, the Committee reviewed Mr. Bragg's base
salary, comparing it to the salary of his peers in the international contract
drilling industry, and recommended to the Board of Directors that his base
salary be increased to $430,000 effective August 2000. For 2000, the Company
awarded Mr. Bragg an incentive bonus of $836,924, which represented an
incentive compensation award of 200% of Mr. Bragg's weighted-average base
salary. In addition, the Committee awarded options to Mr. Bragg to purchase an
additional 86,000 shares of the Company's common stock (at the market value of
such stock on the date of the award).
Supplemental Retirement Plan. The Committee has implemented a supplemental
Executive Retirement Plan for executives that are selected from time to time
by the Company's Chief Executive Officer and approved by the Committee.
Currently, Messrs. Bragg and Allen participate in the Plan.
Limit on Deductibility of Compensation. Section 162(m) of the Internal
Revenue Code of 1986 denies a compensation deduction for federal income tax
purposes for certain compensation in excess of $1 million paid to specified
individuals. "Performance based" compensation meeting specified standards is
deductible without regard to the $1 million cap. The Committee does not
anticipate any payment of compensation in 2000 or 2001 in excess of what is
deductible under Section 162(m); however, the Committee reserves the right to
structure future compensation of the Company's executive officers without
regard for whether such compensation is fully deductible if, in the
Committee's judgment, it is in the best interests of the Company and its
shareholders to do so.
The Committee believes its practices are fair and equitable for both the
executive officers and the shareholders of the Company.
Respectfully submitted,
Christian J. Boon Falleur
Ralph D. McBride
James T. Sneed
18
Shareholder Return Performance Presentation
Presented below is a line graph comparing for the last five years the
yearly change in the Company's common stock against the Simmons & Company
International Index (which includes 82 upstream oil service and equipment
companies in the January 2001 SCI Monthly Performance & Valuation Guide), the
Simmons & Company International Offshore Drillers Index (which includes the
Company, Atwood Oceanics, Inc., Diamond Offshore Drilling, Inc., ENSCO
International, Incorporated, Fred Olsen Energy ASA, Global Marine Inc., Marine
Drilling Companies, Inc., Noble Drilling Corporation, Parker Drilling Company,
Rowan Companies, Inc., Smedvig ASA, Santa Fe International and Transocean
Sedco Forex, Inc.) and the S&P 500 Index.
Comparison of Cumulative Five Year Returns
[CHART APPEARS HERE]
1995 1996 1997 1998 1999 2000
----- ----- ----- ----- ----- -----
Pride.................................... 100.0 218.8 237.6 66.5 137.6 231.8
SCI...................................... 100.0 159.1 240.4 99.3 139.2 237.1
SCI Offshore............................. 100.0 237.2 304.9 111.6 210.7 288.8
S&P 500.................................. 100.0 122.6 163.3 210.0 254.2 231.1
19
AUDIT COMMITTEE REPORT
The Audit Committee consists of Messrs. Clement, Dorval and McBride. The
Audit Committee is primarily responsible for assisting the Board of Directors
in monitoring the quality and integrity of the accounting, auditing and
financial reporting practices of the Company and the independence of the firm
of independent public accountants hired to audit the Company's financial
statements. Each of the members of the Audit Committee is "independent" as
defined by listing standards of the NYSE. A copy of the charter of the Audit
Committee adopted by the Board of Directors is attached as Annex A to this
Proxy Statement.
The Audit Committee conducts an annual review of its charter to assess its
adequacy. In 2000, the Audit Committee made a number of changes to reflect the
new standards set forth in SEC regulations and the NYSE listing standards.
Generally, these changes reflected increased specificity in the charter rather
than changes in the Committee's practices.
The Company's management is responsible for preparing the Company's
financial statements and the independent auditors are responsible for auditing
those financial statements and issuing a report thereon. Accordingly, the
Committee's responsibility is one of oversight. In this context, the Audit
Committee discussed with PwC, the Company's independent auditors for 2000,
those matters PwC communicated to and discussed with the Audit Committee under
applicable auditing standards, including information regarding the scope and
results of the audit and other matters required to be discussed by Statement
on Auditing Standards No. 61, "Communication with Audit Committees." These
communications and discussions are intended to assist the Audit Committee in
overseeing the financial reporting and disclosure process. The Audit Committee
also discussed with PwC its independence from the Company and received a
written statement from PwC concerning independence as required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees." This discussion and disclosure informed the Audit Committee of
the independence of PwC and assisted the Audit Committee in evaluating such
independence. The Audit Committee also considered whether the provision of
services by PwC not related to the audit of the Company's financial statements
and to the review of the Company's interim financial statements is compatible
with maintaining the independence of PwC. Finally, the Audit Committee
reviewed and discussed with the Company management, the internal auditors of
the Company and PwC the Company's audited consolidated balance sheet as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 2000. PwC informed the Audit Committee that the
Company's audited financial statements had been prepared in accordance with
accounting principles generally accepted in the United States.
Based on the review and discussions referred to above, and such other
matters deemed relevant and appropriate by the Audit Committee, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that these financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2000.
Respectfully submitted,
James B. Clement
Remi Dorval
Ralph D. McBride
20
FEES PAID TO PRICEWATERHOUSECOOPERS LLP
Audit Fees
The aggregate fees for professional services rendered by PwC for the audit
of the Company's financial statements for the year ended December 31, 2000 and
the reviews of the financial statements included in the Company's Forms 10-Q
for such year were approximately $880,000.
Financial Information Systems Design and Implementation Fees
PwC did not provide the Company any financial information systems design
and implementation services as used in Paragraph (c)(4)(ii) of Rule 2-01 of
Regulation S-X for the year ended December 31, 2000.
All Other Fees
The aggregate fees for all other services rendered by PwC for the year
ended December 31, 2000 were approximately $708,000.
SUBMISSION OF SHAREHOLDER PROPOSALS
FOR THE 2002 ANNUAL MEETING
To be included in the proxy materials for the 2002 Annual Meeting of
Shareholders, shareholder proposals submitted for presentation at the annual
meeting must be received by the Company no later than December 21, 2001.
Proxies granted in connection with that annual meeting may confer
discretionary authority to vote on any shareholder proposal if notice of the
proposal is not received by the Company by March 6, 2001. It is suggested that
proponents submit their proposals by certified mail, return receipt requested.
Detailed information for submitting resolutions will be provided upon written
request to the Secretary of the Company. No shareholder proposals have been
received for inclusion in this Proxy Statement.
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
Management does not intend to bring before the Annual Meeting any matters
other than those disclosed in the Notice of Annual Meeting of Shareholders,
and it does not know of any business that persons, other than management,
intend to present at the meeting. If any other matters requiring a vote of the
shareholders arises, the proxies in the enclosed form shall be deemed to
confer upon the person or persons entitled to vote the shares represented by
such proxies discretionary authority for any such other matter in accordance
with their best judgment. Copies of the Company's Annual Report on Form 10-K
for the year ended December 31, 2000, as filed with the Securities and
Exchange Commission, are available without charge to shareholders upon request
to Earl W. McNiel, Chief Financial Officer, at the principal executive offices
of Pride International, Inc., 5847 San Felipe, Suite 3300, Houston, Texas
77057.
By Order of the Board of Directors
/s/ Robert W. Randall
Robert W. Randall
Secretary
21
ANNEX A
PRIDE INTERNATIONAL, INC.
Audit Committee Charter
Purpose
The Audit Committee of the Board of Directors (the "Committee") is
appointed by the Board to assist the Board in monitoring (i) the quality and
integrity of the accounting, auditing and financial reporting practices of
Pride International, Inc. (the "Company") and (ii) the independence of the
firm of independent public accountants hired to audit the Company's financial
statements (the "external auditors").
Membership and Meetings
The Committee shall consist of not less than three directors, each of whom
shall serve at the discretion of the Board. The Committee's composition shall
meet the requirements of the Audit Committee Policy of the New York Stock
Exchange, Inc. ("NYSE") and applicable regulations of the Securities and
Exchange Commission (the "SEC"). Accordingly, each member shall have no
relationship to the Company that may interfere with the exercise of his or her
independence from management and the Company. In addition, (i) each member
shall be (or shall become within a reasonable time after appointment)
financially literate, and (ii) at least one member shall have accounting or
related financial management expertise, in each case as the Board interprets
such qualification in its business judgment.
The Committee shall meet twice annually, with special meetings called as
circumstances dictate, and shall meet periodically with management and the
external auditors in order to maintain direct lines of communication. The
Committee may hold executive sessions with these individuals to discuss any
matters that they or the Committee believe should be discussed privately. The
Committee has the authority to conduct or authorize investigations into any
matters within the Committee's scope of responsibilities, and is empowered to
retain, at the Company's expense, independent counsel and other professionals
to assist in the conduct of any such investigation.
Accountability of External Auditors
The external auditors are ultimately accountable to the Committee and the
Board. The Committee and the Board have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
external auditors.
Duties and Responsibilities
The Committee shall:
1. Annually recommend to the Board the selection of the external auditors,
with such selection to be submitted to the shareholders for
ratification.
2. Review and approve the plan and scope of the annual audit of the
Company's financial statements and any other services provided by the
external auditors, as well as the fees related to the audit and such
other services.
3. Discuss with management and the external auditors the design, quality
and adequacy of the Company's internal controls.
4. Review and discuss with management and the external auditors the
Company's audited annual financial statements prior to filing with the
SEC, and determine whether to recommend to the Board that the audited
financial statements be included in the Company's Annual Report on Form
10-K.
5. Discuss with the external auditors the matters required to be discussed
by the Statement of Auditing Standards No. 61 (Communication with Audit
Committees) and any matters brought to the Committee's attention as a
result of the application of the Statement of Auditing Standards No. 71
(Interim Financial Information).
A-1
6. Ensure that the external auditors submit to the Committee on a periodic
basis a formal written statement delineating all relationships between
the external auditors and the Company, actively engage in a dialogue
with the external auditors with respect to any such disclosed
relationships or services that may impact the objectivity and
independence of the external auditors, and recommend that the Board take
appropriate action in response to the written statement to satisfy
itself of the independence of the external auditors.
7. Prepare a report to shareholders as required by the SEC to be included
in the Company's annual proxy statement.
8. Provide reports of Committee activities to the Board, and perform such
other functions, as requested by the Board or required by law or NYSE
rule.
Annual Review of Charter
At least annually, the Committee shall review and reassess the adequacy of
this Charter. The Committee shall report the results of the review to the
Board and, if necessary, recommend that the Board amend this Charter.
Oversight/Reliance
While the Committee has the responsibilities and powers set forth in this
Charter, the Board and the Committee recognize that the Company's management
is responsible for preparing the Company's financial statements and the
external auditors are responsible for auditing those financial statements.
Therefore, the Committee's responsibility is one of oversight. Absent actual
knowledge to the contrary (which shall be promptly reported to the Board),
each member of the Committee shall be entitled to assume and rely upon (i) the
integrity of those persons and organizations within and outside the Company
from which it receives information, and (ii) the accuracy of the financial and
other information provided to the Committee by such persons and organizations.
A-2
PRIDE INTERNATIONAL, INC
PROXY-2001 ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 2001
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated April 20, 2001. Paul A. Bragg and
Robert W. Randall, each with full power of substitution, and acting alone, are
hereby constituted proxies of the undersigned and authorized to attend the
Annual Meeting of Shareholders of Pride International, Inc. (the "Company") to
be held at the St. Regis hotel, 1919 Briar Oaks Lane, Houston, Texas on May 18,
2001 at 1:30 p.m., Houston Time, or any adjournment of such meeting, and to
represent and vote all shares of common stock of the Company that the
undersigned is entitled to vote.
(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE)
This proxy is revocable. The undersigned hereby revokes any proxy or proxies to
vote or act with respect to such shares heretofore given by the undersigned.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SPECIFIED ABOVE AND, IN THE
ABSENCE OF SUCH SPECIFICATIONS, WILL BE VOTED "FOR" ITEMS 1, 2 AND 4 AND "FOR"
ALL DIRECTOR NOMINEES. IF ANY OTHER BUSINESS PROPERLY COMES BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF, THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE
PROXIES NAMED HEREIN.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
----------------------------------------
(Signature)
----------------------------------------
(Signature if held jointly)
----------------------------------------
(Printed Name)
Dated:----------------------------------
Please sign exactly as your stock is
registered. Joint owners should each sign
personally. Executors, administrators,
trustees, etc. should so indicate when
signing.
. FOLD AND DETACH HERE .
[X] Please mark your votes as in
this example.
FOR AGAINST ABSTAIN
3. If Item 1 is approved, election of nominees 1. Adoption of the amendment to the [ ] [ ] [ ]
Paul A. Bragg and Jorge E. Estrada M. as Articles to annually elect a
Class I directors. portion of directors to a
classified Board of Directors.
FOR WITHHELD
All nominees [ ] [ ] 2. Adoption of the amendment to the [ ] [ ] [ ]
Articles to increase authorized
FOR, except withheld from the following common stock to 200,000,000
nominees: shares.
------------------------------------------- 4. Ratification of the appointment [ ] [ ] [ ]
of PricewaterhouseCoopers LLP.