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Exhibit 10b
ROWAN COMPANIES, INC.
1988 NONQUALIFIED STOCK OPTION PLAN
I. PURPOSE OF THE PLAN
The Rowan Companies, Inc. 1988 Nonqualified Stock Option Plan (the
"Plan") is intended to provide a means whereby certain employees of Rowan
Companies, Inc., a Delaware corporation (the "Company"), and its subsidiaries
and affiliates may develop a sense of proprietorship and personal involvement
in the development and financial success of the Company, and to encourage them
to remain with and devote their best efforts to the business of the Company,
thereby advancing the interests of the Company and its stockholders.
Accordingly, the Company may grant to certain employees the option ("Option")
to purchase shares of the $0.125 par value common stock of the Company
("Stock"), as hereinafter set forth.
II. ADMINISTRATION
The Plan shall be administered by a committee of the Board of
Directors of the Company (the "Committee") appointed by the Board of Directors.
Members of the Committee shall not be eligible, and shall not have been
eligible at any time within one year prior to their appointment to the
Committee, to participate in the Plan or in any other stock plan of the Company
or any of its affiliates. The Committee shall have sole authority to select
the employees who are to be granted Options from among those eligible hereunder
and to establish the number of shares which may be issued under each Option.
The Committee is authorized to interpret the Plan and may from time to time
adopt such rules and regulations, not inconsistent with the provisions of the
Plan, as it may deem advisable to carry out the Plan. All decisions made by
the Committee in selecting the employees to whom Options shall be granted, in
establishing the number of shares which may be issued under each Option, and in
construing the provisions of the Plan shall be final.
III. OPTION AGREEMENTS
Each Option shall be evidenced by an Option Agreement and shall
contain such terms and conditions as may be approved by the Committee. The
terms and conditions of the respective Option Agreements need not be identical.
The Committee may, in its discretion, provide in an Option agreement
that the Option granted thereby to the employee may be transferred (in whole or
in part and subject of such other conditions or limitations, if any, as the
Committee may impose with respect to such
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Exhibit 10b
transfer) by the employee to (i) the spouse, children or grandchildren of the
employee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive
benefit of the Immediate Family Members and, if applicable, the employee, (iii)
a partnership or limited liability company in which such Immediate Family
Members and, if applicable, the employee are the only partners or members, or
(iv) an organization that has been determined by the Internal Revenue Service
to be exempt under Section 501(c)(3) of the Internal Revenue Code. Following a
transfer, such transferred Option shall continue to be subject to the same
terms and conditions as were applicable to the Option immediately prior to
transfer and no transferred Option shall be exercisable unless arrangements
satisfactory to the Company have been made with respect to the Option.
IV. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are employees
(including officers and directors who are also employees) of the Company or any
subsidiary corporation (as defined in Section 425 of the Internal Revenue Code)
or affiliated corporation (as defined by the Board of Directors) of the Company
at the time the Option is granted. Options may be granted to the same employee
on more than one occasion.
V. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options
granted under the Plan shall not exceed 7,000,000* shares of Stock. Such
shares may consist of authorized unissued shares of Stock or previously issued
shares reacquired by the Company. Any of such shares which remain unissued and
which are not subject to outstanding Options at the termination of the Plan
shall cease to be subject to the Plan, but until termination of the Plan, the
Company shall at all times make available a sufficient number of shares to meet
the requirements of the Plan. Should any Option hereunder expire prior to its
exercise in full, the shares theretofore subject to such Option may again be
subject to an Option granted under the Plan. The aggregate number of shares
which may be issued under the Plan may be adjusted to reflect a change in
capitalization of the Company, such as a stock dividend or stock split.
VI. OPTION PRICE
The purchase price of stock issued under each Option shall be
determined by the Committee, which purchase price may be less than the fair
market value of the Stock subject to the Option at the time the Option is
granted. In no event, however, may the purchase price of Stock issued under
any Option be less than the par value of such Stock.
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* The total number of shares issuable under the Plan increased from 2,000,000
to 7,000,000 by a Plan amendment approved by the stockholders on April 24,
1992.
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Exhibit 10b
VII. TERM OF PLAN
The Plan shall be effective upon the date of its adoption by the Board
of Directors, subject to its approval by the stockholders of the Company.
Except with respect to Options then outstanding, if not sooner terminated under
provisions of Paragraph IX, the Plan shall terminate upon, and no further
Options shall be granted after, the expiration of fifteen years* from the
effective date of the plan.
VIII. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Plan and the Options granted hereunder
shall not affect in any way the right or power of the Board of Directors or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issue of debt or equity securities ahead of or affecting Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
(b) The shares with respect to which Options may be granted are
shares of Stock as presently constituted, but if, and whenever, prior to the
expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Stock or the payment of a stock
dividend on Stock without receipt of consideration by the Company, the number
of shares of Stock with respect to which such Option may thereafter be
exercised (i) in the event of an increase in the number of outstanding shares
shall be proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased.
(c) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted the
optionee shall be entitled to purchase under such Option, in lieu of the number
of shares of Stock as to which such Option shall then be exercisable, the
number and class of shares of stock and securities to which the optionee would
have been entitled pursuant to the terms of the recapitalization if,
immediately prior to such recapitalization, the optionee had been the holder of
record of the number of shares of Stock as to which such Option is then
exercisable. If (i) the Company shall not be the surviving entity in any
merger or consolidation (or survives only as a
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* The term of the Plan was extended from ten years to fifteen years by a Plan
amendment approved by the stockholders on April 24, 1992.
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Exhibit 10b
subsidiary of an entity other than a previously wholly-owned subsidiary of the
Company), (ii) the Company sells, leases or exchanges or agrees to sell, lease
or exchange all or substantially all of its assets to any other person or
entity (other than a wholly-owned subsidiary of the Company), (iii) the Company
is to be dissolved and liquidated, (iv) any person or entity, including a
"group" as contemplated by Section 13(d) (3) of the 1934 Act, acquires or gains
ownership or control (including, without limitation, power to vote) of more
than 50% of the outstanding shares of Stock, or (v) as a result of or in
connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board of Directors (each such event is referred to herein as a
"Corporate Change"), then effective as of a date (selected by the Committee)
within (a) ten days after the approval by the shareholders of the Company of
such merger, consolidation, sale, lease or exchange of assets or dissolution
or such election of directors or (b) thirty days of such change of control,
the Committee, acting in its sole discretion without the consent or approval of
any optionee, shall effect one or more of the following alternatives, which may
vary among individual optionees: (1) accelerate the time at which Options then
outstanding may be exercised so that such Options may be exercised in full for
a limited period of time on or before a specified date (before or after such
Corporate Change) fixed by the Committee, after which specified date all
unexercised Options and all rights of optionees thereunder shall terminate, (2)
require the mandatory surrender to the Company by selected optionees of some or
all of the outstanding Options held by such optionees (irrespective of whether
such Options are then exercisable under the provisions of the Plan) as of a
date, before or after such Corporate Change, specified by the Committee, in
which event the Committee shall thereupon cancel such Options and pay to each
optionee an amount of cash per share equal to the excess of the amount
calculated in Subparagraph (d) below (the "Change of Control Value") of the
shares subject to such Option over the exercise price(s) under such Options for
such shares, (3) make such adjustments to Options then outstanding as the
Committee deems appropriate to reflect such Corporate Change (provided,
however, that the Committee may determine in its sole discretion that no
adjustment is necessary to Options then outstanding) or (4) provide that
thereafter upon any exercise of an Option theretofore granted the optionee
shall be entitled to purchase under such Option, in lieu of the number of
shares of Stock as to which such Option shall then be exercisable, the number
and class of shares of stock or other securities or property to which the
optionee would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets and dissolution if, immediately prior
to such merger, consolidation or sale of assets and dissolution the optionee
had been the holder of record of the number of shares of Stock as to which such
Option is then exercisable.
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Exhibit 10b
(d) For the purposes of clause (2) in Subparagraph (c) above, the
"Change of Control Value" shall equal the amount determined in clause (i), (ii)
or (iii), whichever is applicable, as follows: (i) the per share price offered
to shareholders of the Company in any such merger, consolidation, sale of
assets or dissolution transaction, (ii) the price per share offered to
shareholders of the Company in any tender offer or exchange offer whereby a
Corporate Change takes place, or (iii) if such Corporate Change occurs other
than pursuant to a tender or exchange offer, the fair market value per share of
the shares into which such Options being surrendered are exercisable, as
determined by the Committee as of the date determined by the Committee to be
the date of cancellation and surrender of such Options. In the event that the
consideration offered to shareholders of the Company in any transaction
described in this Subparagraph (d) or Subparagraph (c) above consists of
anything other than cash, the Committee shall determine the fair cash
equivalent of the portion of the consideration offered which is other than
cash.
(e) Any adjustment provided for in Subparagraphs (b) or (c) above
shall be subject to any required shareholder action.
(f) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Stock subject to Options theretofore granted or the
purchase price per share.
IX. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors in its discretion may terminate the Plan at any
time with respect to any shares for which Options have not heretofore been
granted. The Board of Directors shall have the right to alter or amend the
Plan or any part thereof from time to time; provided, that no change in any
Option theretofore granted may be made which would impair the rights of the
optionee without the consent of such optionee; and provided, further, that the
Board of Directors may not make any alteration or amendment which would
materially increase the benefits accruing to participants under the Plan,
increase the aggregate number of shares which may be issued under the Plan
(other than an increase reflecting a stock dividend or stock split), change the
class of employees eligible to receive Options under the Plan, or extend the
term of the Plan, without the approval of the stockholders of the Company.
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Exhibit 10b
X. SECURITIES LAWS
The Company shall not be obligated to issue any Stock pursuant to any
Option granted under the Plan at any time when the shares covered by such
Option have not been registered under the Securities Act of 1933 and such other
state and federal laws, rules or regulations as the Company or Committee deems
applicable and, in the opinion of legal counsel for the Company, there is no
exemption from the registration requirements of such laws, rules or regulations
available for issuance and sale of such shares.
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Exhibit 10b
ROWAN COMPANIES, INC.
STOCK OPTION AGREEMENT
Agreement made this______ day of ________________________, 19___,
between ROWAN COMPANIES, INC. (the "Company"), and ______________________,
("Employee").
To carry out the purposes of the Rowan Companies, Inc. 1988
Nonqualified Stock Option Plan (the "Plan") by affording Employee the
opportunity to purchase shares of the $0.125 par value common stock of the
Company ("Stock"), the Company and Employee hereby agree as follows:
1. GRANT OF OPTION. The Company hereby irrevocably grants to
Employee the right and option ("Option") to purchase all or any part of an
aggregate of shares of Stock, on the terms and conditions set
forth herein and in the Plan, which is incorporated herein by reference as a
part of this Option.
2. PURCHASE PRICE. The purchase price of Stock purchased pursuant
to the exercise of this Option shall be $ per share.
3. EXERCISE OF OPTION. Except as otherwise set forth below with
respect to the acceleration of exercisability upon Disability (as defined in
Schedule A hereto) or death and subject to the earlier expiration of this
Option as herein provided, this Option may be exercised, by written notice to
the Company at its principal executive office addressed to the attention of its
Chief Financial Officer, at any time and from time to time after one year after
the date of grant hereof, but this Option shall not be exercisable for more
than a percentage of the aggregate number of shares offered by the Option
determined by the number of full years from the date of grant hereof to the
date of such exercise, in accordance with the following schedule:
NUMBER OF FULL YEARS PERCENTAGE OF SHARES PURCHASABLE
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Less than 1 year 0%
1 year 25%
2 years 50%
3 years 75%
4 years 100%
Subject to the following, this Option may be exercised only by
Employee during his lifetime and while Employee remains an employee of the
Company:
(a) If Employee's employment with the Company terminates by
reason of normal retirement, Employee may exercise this
Option at any time during the period of five years
following the date of such termination, but only as to
the number of shares Employee was entitled to purchase
hereunder as of the date his employment so terminates,
plus such additional number of shares, if any, that the
Committee (as defined in the Plan), in its sole
discretion, determines to be exercisable as of such
retirement.
(b) If Employee dies within the five year period following
the date of Employee's termination of employment by
reason of normal retirement, Employee's estate, or the
person who acquires this Option by
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Exhibit 10b
bequest or inheritance or by reason of the death of
Employee, may exercise this Option at any time during
the period of two years following the date of Employee's
death, but only as to the number of shares Employee was
entitled to purchase hereunder as of the date Employee's
employment terminated by reason of normal retirement.
(c) If Employee's employment with the Company terminates by
reason of Disability, Employee may exercise this Option
at any time during the period of five years following
the date of such termination, and the times at which
portions of this Option become exercisable shall be
accelerated upon such termination of employment by
reason of Disability so that, regardless of how long it
has been held after the date of grant, this Option shall
be exercisable in full during such five year period for
100% of the shares purchasable hereunder.
(d) If Employee dies while in the employ of the Company or
within the five year period following the date of
Employee's termination of employment by reason of
Disability, Employee's estate, or the person who
acquires this Option by bequest or inheritance or by
reason of the death of Employee, may exercise this
Option at any time during the period of two years
following the date of Employee's death, and the times at
which portions of this Option become exercisable shall
be accelerated upon the death of Employee so that,
regardless of how long it has been held after the date
of grant, this Option shall be exercisable in full
during the two year period following the date of
Employee's death for 100% of the shares purchasable
hereunder.
(e) Notwithstanding anything to the contrary in this
Agreement, this Option may be transferred (in whole or
in part pursuant to such form as approved by the
Company) by Employee to (i) the spouse, children or
grandchildren of Employee ("Immediate Family Members"),
(ii) a trust or trusts for the exclusive benefit of the
Immediate Family Members and, if applicable, Employee,
(iii) a partnership or limited liability company in
which such Immediate Family Members and, if applicable,
Employee are the only partners or members, or (iv) an
organization that has been determined to be exempt under
Section 501(c)(3) of the Internal Revenue Code;
provided, however, that subsequent transfers of the
Option shall be prohibited, except that after the death
or dissolution of the transferee, as applicable, any
exercisable portion of the transferred Option may be
exercised by the transferee's personal representative or
by any person empowered to do so under the transferee's
will or under the then applicable laws of descent and
distribution. Following transfer, the Option shall
continue to be subject to the same terms and conditions
as were applicable to Employee with respect to the
Option immediately prior to the transfer, including,
without limitation, vesting and the expiration
provisions of Paragraphs (a), (b), (c) and (d) above,
which shall be applied "as if" Employee continued to be
the holder of the Option. No transferred Option shall
be exercisable unless arrangements satisfactory to the
Company have been made to satisfy any tax withholding
obligations the Company may have with respect to the
exercise of the Option. Further, the Company shall have
no obligation to provide any notices to an Option
transferee of any event, term or provision with respect
to the Option, including, without limitation, the early
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Exhibit 10b
termination of the Option on account of termination of
Employee's employment.
If Employee's employment with the Company terminates other than by reason of
normal retirement, Disability or death, this Option (to the extent not exercised
prior thereto) shall terminate as of the date Employee's employment so
terminates. Notwithstanding any other provision of this Agreement, this Option
shall not be exercisable in any event after the expiration of ten years from the
date of grant hereof. The purchase price of shares as to which this Option is
exercised shall be paid in full in cash at the time of such exercise. Unless
and until a certificate or certificates representing such shares shall have been
issued by the Company to Employee, or the person permitted to exercise this
Option (i) following the transfer of the Option as permitted by Paragraph (e)
above or (ii), in the event of Employee's death prior to any transfer (such
person being the "Option Holder"), neither Employee nor the Option Holder, as
the case may be, shall be, or have any of the rights or privileges of, a
stockholder of the Company with respect to shares acquirable upon an exercise of
this Option.
4. WITHHOLDING OF TAX. To the extent that the exercise of this
Option or the disposition of shares of Stock acquired by exercise of this
Option results in compensation income to Employee for federal or state income
tax purposes, Employee shall pay to the Company at the time of such exercise or
disposition such amount of money as the Company may require to meet its
obligation under applicable tax laws or regulations, and if Employee fails to
do so, the Company is authorized to withhold from any cash remuneration then or
thereafter payable to Employee any tax required to be withheld by reason of
such resulting compensation income.
5. STATUS OF STOCK. The Company intends to register for issue
under the Securities Act of 1933, as amended (the "Act") the shares of Stock
acquirable upon exercise of this Option, and to keep such registration
effective throughout the period this Option is exercisable. In the absence of
such effective registration or an available exemption from registration under
the Act, issuance of shares of Stock acquirable upon exercise of this Option,
will be delayed until registration of such shares is effective or exemption
from registration under the Act is available. The Company intends to use its
best efforts to ensure that no such delay will occur. In the event exemption
from registration under the Act is available upon exercise of this Option,
Employee (or the person permitted to exercise this Option in the event of
Employee's death or incapacity), if requested by the Company to do so, will
execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with applicable
securities laws.
Employee agrees that the shares of Stock which he may acquire by
exercising this Option will not be sold or otherwise disposed of in any manner
which would constitute a violation of any applicable securities laws, whether
federal or state. Employee also agrees (i) that the certificates representing
the shares of Stock purchased under this Option may bear such legend or legends
as the Committee deems appropriate in order to assure compliance with applicable
securities laws, (ii) that the Company may refuse to register the transfer of
the shares of Stock purchased under this Option on the stock transfer records of
the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any applicable securities
law and (iii) that the Company may give related instructions to its transfer
agent, if any, to stop registration of the transfer of the shares of Stock
purchased under this Option.
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Exhibit 10b
6. EMPLOYMENT RELATIONSHIP. Employee shall be considered to be in
the employment of the Company as long as he remains an employee of either the
Company, a parent or subsidiary corporation (as defined in Section 424 of the
Internal Revenue Code ) or an affiliated corporation (as defined in the Plan)
of the Company, or a corporation or a parent or subsidiary of such corporation
assuming or substituting a new option for this Option. Any question as to
whether and when there has been a termination of such employment, and the cause
of such termination, shall be determined by the Board of Directors of the
employing corporation, and its determination shall be final.
7. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officers thereunto duly authorized, and Employee has executed
this Agreement, all as of the day and year first above written.
ROWAN COMPANIES, INC.
By:
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ATTEST: Senior Vice President
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Assistant Secretary Employee
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Exhibit 10b
SCHEDULE A
TO
STOCK OPTION AGREEMENT
DISABILITY. For purposes of the foregoing Stock Option
Agreement, the "Disability" of an Employee shall have occurred if he has a
mental or physical condition which totally and presumably permanently prevents
him from engaging in any substantial gainful employment with the Company which
(i) did not arise while engaged in or as a result of being engaged in an
illegal act or enterprise, (ii) did not result from chronic alcoholism,
addiction to narcotics or the use of illegal or unauthorized drugs in any
manner, (iii) did not result from service in the Armed Forces of the United
States which entitled the Employee to a Veteran's Disability Pension, and (iv)
did not arise while employed by an employer other than the Company or a
subsidiary or affiliated corporation (as defined in the Plan) of the Company.
The existence of such Disability must be certified by two duly licensed and
practicing physicians selected, respectively, at the direction of the Committee
(as defined in the Plan) and at the direction of the Employee or his
representative. If they fail to agree, a third physician shall be selected at
the direction of the Committee, and the determination of any two of such three
physicians shall be final and controlling on all interested parties. The
determination of any such physicians shall be evidenced by appropriate written
certifications delivered to the Committee. Notwithstanding the foregoing, the
Committee may, in its discretion, waive the requirement for certification of
Disability by licensed physicians, and, in lieu of such certification, rely on
such other appropriate medical evidence of Disability as is deemed satisfactory
by the Committee. Determination of whether such Disability exists shall be
made as promptly as possible after the date such Disability is claimed to have
commenced. Determination of the date of termination of employment by reason of
Disability shall be based on such evidence as the Committee may require and a
determination by the Committee of such date of termination shall be final and
controlling on all interested parties.
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