<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.1a-11(c) or (S)240.1a-12
THE COASTAL CORPORATION
(Name of Registrant as Specified In Its Charter)
THE COASTAL CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- --------
*Set forth amount on which the filing is calculated and state how it was
determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
The Coastal Corporation The Energy People
March 29, 1994
Dear Fellow Stockholder:
You are cordially invited to attend the 1994 Annual Meeting of Stockholders
of The Coastal Corporation to be held on May 5, 1994, at the Stouffer Presidente
Hotel, Greenway Plaza, Houston, Texas, at 10:00 a.m. Your Board of Directors and
executive officers look forward to personally greeting those stockholders able
to attend.
The matters to be acted on at the meeting are set forth in the accompanying
Notice of Annual Meeting and Proxy Statement.
It is important that your shares be represented at the meeting. Would you
please sign, date and mail the enclosed proxy in the envelope provided at your
earliest convenience.
Sincerely,
[Signature of O.S. Wyatt, Jr. appears here]
O. S. Wyatt, Jr.
Chairman of the Board and
Chief Executive Officer
[Signature of David A. Arledge appears here]
David A. Arledge
President and
Chief Operating Officer
COASTAL TOWER
NINE GREENWAY PLAZA
HOUSTON, TEXAS 77046-0995
<PAGE>
THE COASTAL CORPORATION
Coastal Tower
Nine Greenway Plaza
Houston, Texas 77046-0995
NOTICE OF THE 1994 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 1994
To the Stockholders of The Coastal Corporation:
NOTICE IS HEREBY GIVEN that the 1994 Annual Meeting of Stockholders of The
Coastal Corporation ("Coastal" or the "Company") will be held at 10:00 a.m. on
May 5, 1994, at the Stouffer Presidente Hotel, Greenway Plaza, Houston, Texas,
for the following purposes:
(1) To elect four Class II directors to terms of office expiring at the
1997 Annual Meeting of Stockholders;
(2) To consider a proposal to adopt the 1994 Incentive Stock Plan;
(3) To consider a proposal to adopt the Stock Purchase Plan;
(4) To consider a stockholder proposal, described in the accompanying
Proxy Statement, which is opposed by the Board of Directors; and
(5) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The voting stock of the Company should be represented as fully as possible
at the Annual Meeting. Therefore, it will be appreciated if you would sign, date
and return the enclosed proxy at your earliest convenience. You may, of course,
change or withdraw your proxy at any time prior to the voting at the meeting.
However, signing and returning the proxy will assure your representation at the
Annual Meeting.
The Board of Directors has fixed the close of business on March 16, 1994 as
the record date for the determination of holders of Common Stock, Class A Common
Stock, $1.19 Cumulative Convertible Preferred Stock, Series A, $1.83 Cumulative
Convertible Preferred Stock, Series B, and $5.00 Cumulative Convertible
Preferred Stock, Series C, entitled to notice of, and to vote at, the Annual
Meeting.
By Order of the Board of Directors,
[Signature of Austin M. O'Toole appears here]
Austin M. O'Toole
Senior Vice President and Secretary
March 29, 1994
YOUR VOTE IS IMPORTANT
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AT THE MEETING AND SAVE THE
EXPENSE OF A SECOND MAILING, WOULD YOU PLEASE SIGN, DATE AND MAIL YOUR PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Stock Ownership.................................................................... 2
PROPOSAL 1 - Election of Directors................................................. 3
Committees and Meetings.......................................................... 6
Compensation of Directors........................................................ 6
Executive Compensation............................................................. 7
Summary of Cash and Certain Other Compensation................................... 7
Stock Options.................................................................... 9
Option/SAR Exercises and Holdings................................................ 10
Compensation and Executive Development Committee Report on Executive Compensation.. 10
Description of the Executive Compensation Program................................ 11
1993 Chief Executive Officer Pay................................................. 13
Pension Plan....................................................................... 14
Performance Graphs - Shareholder Return on Common Stock............................ 15
Transactions with Management and Others............................................ 16
Certain Business Relationships..................................................... 17
PROPOSAL 2 - Proposal to Adopt the 1994 Incentive Stock Plan....................... 17
PROPOSAL 3 - Proposal to Adopt the Stock Purchase Plan............................. 22
PROPOSAL 4 - Stockholder Proposal.................................................. 23
Board of Directors Statement in Opposition to Stockholder Proposal............... 24
Vote Required for Approval......................................................... 25
Compliance with Section 16(a) of the Exchange Act.................................. 25
Independent Auditors............................................................... 25
Stockholder Proposals.............................................................. 25
Other Matters...................................................................... 25
Availability of Form 10-K Annual Report............................................ 26
APPENDIX A - The Coastal Corporation 1994 Incentive Stock Plan..................... A-1
APPENDIX B - The Coastal Corporation Stock Purchase Plan........................... B-1
</TABLE>
(i)
<PAGE>
THE COASTAL CORPORATION
PROXY STATEMENT
The enclosed proxy is being solicited by the Board of Directors of The
Coastal Corporation ("Coastal" or the "Company"), Coastal Tower, Nine Greenway
Plaza, Houston, Texas 77046-0995, telephone number (713) 877-1400, for use at
the 1994 Annual Meeting of Stockholders (the "Meeting") to be held at 10:00 a.m.
on May 5, 1994, at the Stouffer Presidente Hotel, Greenway Plaza, Houston,
Texas, or any adjournments thereof. Certain directors, officers and employees of
the Company will solicit proxies by telephone, telegram, mail or personal
contact at the Company's expense. In addition, the Company has retained D. F.
King & Co., Inc. to assist in the solicitation of proxies and will pay such firm
a fee of $6,000 plus reimbursement of expenses. Arrangements will be made with
brokers, nominees and fiduciaries to send proxies and proxy material at the
Company's expense to their principals. This proxy statement is being mailed on
or about March 29, 1994 to stockholders of record on March 16, 1994.
The purpose of the Meeting is for the stockholders of the Company (1) to
elect four Class II directors to terms of office expiring at the 1997 Annual
Meeting of Stockholders; (2) to consider and act on the Company's 1994 Incentive
Stock Plan; (3) to consider and act on the Company's Stock Purchase Plan; (4) to
consider and act on a stockholder proposal, which is opposed by the Board of
Directors; and (5) to transact such other business as may properly come before
the Meeting or any adjournments thereof.
The total number of shares of stock of the Company outstanding and entitled
to vote at the Meeting is 104,832,796: consisting of 64,403 shares of $1.19
Cumulative Convertible Preferred Stock, Series A (the "Series A Preferred
Stock"), 87,398 shares of $1.83 Cumulative Convertible Preferred Stock, Series B
(the "Series B Preferred Stock"), and 35,252 shares of $5.00 Cumulative
Convertible Preferred Stock, Series C (the "Series C Preferred Stock") (the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
are referred to herein collectively as the "Preferred Stock"), 104,218,335
shares of Common Stock, and 427,408 shares of Class A Common Stock. Each share
of Common Stock or Preferred Stock entitles the holder to one vote with respect
to all matters to come before the Meeting and all of such shares will vote
together as a single class. Except with respect to the election of one of the
four Class II directors, each share of Class A Common Stock entitles the holder
to 100 votes with respect to all matters to come before the Meeting, voting with
the Common Stock and the Preferred Stock. In the election of directors, the
Class A Common Stock will vote, together as a class with the Common Stock and
Preferred Stock, for the election of three of the four Class II directors
standing for election. The Common Stock and Preferred Stock will vote together
as a class for the election of the one remaining Class II director standing for
election. Only holders of voting securities of record at the close of business
on March 16, 1994 are entitled to notice of, and to vote at, the Meeting or any
adjournments thereof. Management knows of no person that owns beneficially more
than five percent (5%) of the outstanding shares of any class of voting
securities of the Company, other than as set forth below under "Stock
Ownership." The aggregate of all shares entitled to vote at the meeting have
147,146,188 votes. A quorum consists of a majority of the votes entitled to be
cast, or 73,573,095 votes.
The Annual Report of the Company for the year ended December 31, 1993,
including financial statements, is being mailed on or about March 29, 1994,
together with this Proxy Statement to all stockholders of record as of March 16,
1994, except for accounts where the stockholder has filed a written request to
eliminate duplicate reports. Additional copies of the Annual Report are
available without charge, upon request. See "Availability of Form 10-K Annual
Report."
Each properly executed proxy received at or before the Meeting on May 5, 1994
will be voted at the Meeting as specified therein. If a stockholder does not
specify otherwise, the shares represented by his or her proxy will be voted FOR
the election of all the nominees as Class II directors, FOR the proposals to
approve the 1994 Incentive Stock Plan and Stock Purchase Plan and AGAINST the
stockholder proposal. The shares held by each stockholder who signs and returns
the enclosed proxy will be counted for purposes of determining the presence of a
quorum at the Meeting unless such proxy is timely revoked. If the enclosed form
of proxy is executed and returned, it may nevertheless be revoked at any time
before it is voted by giving written notice to the Secretary of the Company, or
by a stockholder personally voting his or her shares at the Meeting, or by
giving a later dated proxy.
<PAGE>
STOCK OWNERSHIP
The following table sets forth information, as of March 16, 1994, with
respect to each person known or believed by the Company to be the beneficial
owner, who has or shares voting and/or investment power (other than as set forth
below), of more than five percent (5%) of any class of its voting securities.
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT (%)
OF BENEFICIAL OWNER TITLE OF CLASS NUMBER OF SHARES OF CLASS (1)
- -------------------- -------------- ----------------- -------------
<S> <C> <C> <C>
O. S. Wyatt, Jr. Class A Common Stock 154,577(2) 35.0
Chairman of the Board
of Coastal
Nine Greenway Plaza
Houston, Texas 77046-0995
Trustee/Custodian under the Common Stock 13,663,166(3) 13.0
Thrift, ESOP and Pension Plans Class A Common Stock 83,758(3) 18.9
of Coastal and its subsidiaries
Texas Commerce Bank
National Association
600 Travis, 10th Flr.
Houston, Texas 77002
The Prudential Insurance Common Stock 6,044,025 5.8
Company of America
Prudential Plaza
Newark, New Jersey 07102-3777
Isabel H. Long Series A Preferred 28,976 45.0
485 S. Parkview Ave., Stock
Columbus, Ohio 43209-1075
The DeZurik Family Series C Preferred 35,252(4) 100.0
c/o David DeZurik Stock
2460 S.E. 8th St.
Pompano Beach, Florida 33062
</TABLE>
__________
(1) Class includes presently exercisable stock options held by directors and
executive officers.
(2) Includes 7,354 shares of Class A Common Stock owned by the spouse and a
son of Mr. Wyatt, as to which shares beneficial ownership is disclaimed.
(3) The Trustee/Custodian is the record owner of these shares; and also is
the record owner of 969 shares of the Series B Preferred Stock, each of
which is convertible into 3.6125 shares of Common Stock and 0.1 share of
Class A Common Stock. Voting instructions are requested from each
participant in the Thrift Plan and ESOP and from the trustees under a
Pension Trust. Absent voting instructions, the Trustee is permitted to
vote Thrift Plan shares on any matter, but has no authority to vote ESOP
shares or Pension Plan shares. Nor does the Trustee/Custodian have any
authority to dispose of shares except pursuant to instructions of the
administrator of the Thrift Plan and ESOP or pursuant to instructions
from the trustees under the Pension Trust.
(4) Members of the DeZurik family acquired the Series C Preferred Stock in
connection with a 1972 Agreement of Merger involving the acquisition of
Colorado Interstate Gas Company, a subsidiary of the Company.
2
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a Board of
Directors to serve in three classes having staggered terms of three years each.
At present, there are fourteen directors: four directors whose terms of office
expire at the 1994 Annual Meeting; four directors whose terms of office expire
at the 1995 Annual Meeting; and six directors whose terms of office expire at
the 1996 Annual Meeting. Information regarding each of the incumbent directors
is set forth herein under the headings "Information Regarding Directors,"
"Executive Compensation," and "Certain Business Relationships." At the 1994
Annual Meeting, the stockholders will be asked to elect four Class II directors.
The four nominees for Class II director, each of whom is presently serving in
that capacity, and whose new terms would expire at the 1997 Annual Meeting of
Stockholders, are: David A. Arledge, George L. Brundrett, Jr., L. D. Wooddy,
Jr. and O. S. Wyatt, Jr.
The holders of Common Stock, voting as a class with the Preferred Stock, are
entitled to elect 25% of the Company's directors standing for election at each
meeting held for the election of directors. Mr. Arledge has been nominated by
the Board of Directors to stand for election by the holders of Common Stock and
Preferred Stock at the 1994 Annual Meeting. Each share of Common Stock and
Preferred Stock has one vote for the election of this director. All directors
and executive officers as a group own shares representing 3.6% of the votes
entitled to be cast for the election of Mr. Arledge.
The holders of Common Stock, Preferred Stock and Class A Common Stock, voting
together as a class, are entitled to elect the remaining 75% of the Company's
directors standing for election. Messrs. Brundrett, Wooddy and Wyatt have been
nominated by the Board of Directors to stand for election by the holders of
Common Stock, Preferred Stock and Class A Common Stock at the 1994 Annual
Meeting. Each share of Common Stock or Preferred Stock has one vote for the
election of these three directors. Each share of Class A Common Stock has 100
votes for the election of these three directors. Holders of Class A Common Stock
entitled to vote at the Meeting have 42,740,806 votes of a total of 147,146,188
votes, or 29.0% of the votes entitled to be cast. All directors and executive
officers as a group own shares representing 15.3% of the votes entitled to be
cast for the election of Messrs. Brundrett, Wooddy and Wyatt.
If any nominee becomes unwilling or unable to serve, which is not expected,
the proxies will be voted for a substitute person, if any, designated by the
Board of Directors.
The enclosed form of proxy provides a means for stockholders to vote for the
election of the Class II directors listed above, to withhold authority to vote
for one or more of such directors, or to withhold authority to vote for all of
such directors. Unless a stockholder who withholds authority votes for the
election of one or more other persons at the Meeting or votes by means of
another proxy, the withholding of authority will have no effect upon the
election of directors, assuming that a quorum is present at the Meeting.
INFORMATION REGARDING DIRECTORS
The following table sets forth information, as of March 16, 1994, regarding
each of the then current directors, including Class II directors standing for
election, and all directors and executive officers as a group. Each director has
furnished the information with respect to age, principal occupation and
ownership of shares of stock of the Company. As of such date, Messrs. Bissell,
Burrow, Chapin, Cordes, Gates and Katzin were the Class I directors whose terms
expire in 1996; Messrs. Arledge, Brundrett, Wooddy and Wyatt were the Class II
directors whose terms expire in 1994; and Messrs. Buck, Johnson, Marshall and
McDade were the Class III directors whose terms expire in 1995.
3
<PAGE>
<TABLE>
<CAPTION>
OFFICES WITH COASTAL NUMBER OF SHARES
NAME, (AGE), YEAR AND/OR PRINCIPAL BENEFICIALLY PERCENT (%)
FIRST BECAME DIRECTOR OCCUPATION TITLE OF CLASS OWNED(1) OF CLASS*
- ----------------------------- -------------------------- -------------- ---------------- ----------
<S> <C> <C> <C> <C>
O. S. Wyatt, Jr. Chairman of the Board and Common Stock 3,183,935(2) 3.0
(69), 1955 Chief Executive Officer Class A Common Stock 154,577(2) 35.0
Harold Burrow Vice Chairman of the Board; Common Stock 156,693(2)
(79), 1973 Chairman of Colorado Class A Common Stock 13,602 3.1
Interstate Gas Company
David A. Arledge President and Common Stock 158,342
(49), 1988 Chief Operating Officer Class A Common Stock 13,484 3.1
John M. Bissell Chairman and Chief Executive Common Stock 4,575
(63), 1985 Officer of Bissell Inc. Class A Common Stock -0-
George L. Brundrett, Jr. Attorney; Former Senior Vice Common Stock 4,910
(72), 1973 President and General Counsel
of the Company Class A Common Stock 2,290
Ervin O. Buck Former Vice Chairman of Texas Common Stock 25,243
(89), 1973 National Bank of Commerce Class A Common Stock -0-
Roy D. Chapin, Jr. Former Chairman and Common Stock 3,250(2)
(78), 1988 Chief Executive Officer Class A Common Stock -0-
of American Motors
Corporation
James F. Cordes Executive Vice President; Common Stock 105,117
(53), 1985 President of American Class A Common Stock -0-
Natural Resources
Company; President, Natural
Gas Group
Roy L. Gates Retired; Ranching and Common Stock 4,095
(65), 1969 Investments Class A Common Stock 2,736
Kenneth O. Johnson Senior Vice President Common Stock 89,308
(73), 1988 Class A Common Stock 9,604 2.2
Jerome S. Katzin Retired; Former Managing Common Stock 1,803(2)
(75), 1983 Director of Shearson Class A Common Stock -0-
Lehman Brothers Inc.
J. Howard Marshall, II Retired; Former Executive of Common Stock 11,924(2)
(89), 1973 Allied Chemical Corporation, Class A Common Stock 600(2)
Ashland Oil and Refining
Company and Signal
Oil and Gas Company
Thomas R. McDade Senior Partner, Law Firm of Common Stock 500
(61), 1993 McDade and Fogler, Houston Class A Common Stock -0-
L. D. Wooddy, Jr. Retired; Former President
(67), 1992 of Exxon Pipeline Company Common Stock 1,000
Class A Common Stock -0-
All directors and executive officers as a group Common Stock 4,393,491(3) 4.2
(33 persons, including the above) Class A Common Stock 202,129(3) 45.7
</TABLE>
* Less than one percent unless otherwise indicated. Class includes outstanding
shares and presently exercisable stock options held by directors and executive
officers. Excluding presently exercisable stock options, directors and
executive officers as a group would own 187,501 shares of Class A Common
Stock, which would constitute 43.9% of the shares of such class.
4
<PAGE>
(1) Except for the shares referred to in Notes 2 and 3 below, and the shares
represented by presently exercisable stock options, the holders are
believed by Coastal to have sole voting and investment power as to the
shares indicated. Amounts include shares in Coastal ESOP and Thrift
plans, and presently exercisable stock options held by Messrs. Burrow
(14,189 shares of Common Stock), Arledge (140,960 shares of Common Stock
and 13,412 shares of Class A Common Stock), Cordes (89,786 shares of
Common Stock), and Johnson (60,415 shares of Common Stock).
(2) Includes shares owned by the spouse and a son of Mr. Wyatt (266,295
shares of Common Stock and 7,354 shares of Class A Common Stock), by the
spouse of Mr. Burrow (5,000 shares of Common Stock), by the spouse of Mr.
Chapin (1,000 shares of Common Stock) and by the spouse of Mr. Katzin
(928 shares of Common Stock), as to which shares beneficial ownership is
disclaimed; also includes shares owned by the estate of the late Mrs.
Marshall (4,362 shares of Common Stock and 100 shares of Class A Common
Stock).
(3) Includes presently exercisable stock options to purchase 629,038 shares
of Common Stock and 14,628 shares of Class A Common Stock; also includes
280,239 shares of Common Stock and 7,354 shares of Class A Common Stock
owned by spouses and children, as to which shares beneficial ownership is
disclaimed; also includes 4,362 shares of Common Stock and 100 shares of
Class A Common Stock owned by the estate named in Note 2 above. In
addition, one executive officer owns 8 shares of Series B Preferred
Stock, each of which is convertible into 3.6125 shares of Common Stock
and 0.1 share of Class A Common Stock.
No incumbent director is related by blood, marriage or adoption to another
director or to any executive officer of the Company or its subsidiaries or
affiliates.
Except as hereafter indicated, the above table includes the principal
occupation of each of the directors during the past five years. The listed
executive officers have held various executive positions with Coastal, American
Natural Resources Company, ANR Pipeline Company and/or Colorado Interstate Gas
Company during the five-year period.
Mr. Bissell is a member of the Boards of Directors of Old Kent Financial
Corporation and Batts Inc.
Mr. Cordes is a member of the Boards of Directors of Comerica Inc. and Royal
Group, Inc.
Mr. Katzin is a member of the Board of Directors of Qualcomm Incorporated.
Mr. Marshall is a member of the Boards of Directors of Missouri-Kansas-Texas
Railroad Company and Presidio Oil Company.
Mr. McDade is a trial lawyer and the founding senior partner of the Houston
law firm of McDade & Fogler. Prior to forming McDade & Fogler he was a senior
partner in the Houston law firm of Fulbright & Jaworski.
Messrs. Arledge, Burrow, Cordes and Wyatt are directors of Colorado
Interstate Gas Company. Mr. Cordes is a director of ANR Pipeline Company. Both
of these subsidiaries of the Company are subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
5
<PAGE>
COMMITTEES AND MEETINGS
The Company's Board of Directors has an Executive Committee which consists of
Messrs. Wyatt (Chairman), Buck, Burrow, Cordes and Marshall which has general
authority to act in the management and business affairs of the Company when the
full Board is not in session, except for the review of capital expenditures in
excess of $15,000,000.
As permitted by the General Corporation Law of the State of Delaware and the
Company's By-Laws, the Board of Directors and the Executive Committee took
various corporate actions during 1993 by means of unanimous written consent.
These actions included approval or review of certain capital expenditures,
credit arrangements, corporate guarantees, elections of officers, establishment
of bank accounts and similar authorizations.
During 1993, the Board of Directors held 9 meetings and also approved 14
separate actions by unanimous consent. The Executive Committee held 2 meetings
and also approved 70 separate actions by unanimous consent.
Each incumbent director attended a minimum of 87% of the aggregate of (i) the
1993 meetings of the Board of Directors held during the period for which he has
been a director and (ii) the total number of meetings held by all committees of
the Board on which he served.
The Company also has an Audit Committee consisting of Messrs. Buck
(Chairman), Bissell, Gates and Katzin which meets periodically to review the
results of operations of the Company with members of the Company's staff who are
responsible for accounting matters and from time to time with the Company's
independent auditors, Deloitte & Touche. During 1993, the Audit Committee met 7
times.
In addition, the Company has a Compensation and Executive Development
Committee which consists of Messrs. Bissell (Chairman), Chapin and Katzin which
meets from time to time to review compensation, stock option awards and other
matters concerning remuneration of employees of the Company. During 1993, the
Compensation and Executive Development Committee met 7 times and also approved 8
separate actions by unanimous consent.
The Company does not have a nominating committee.
COMPENSATION OF DIRECTORS
There is a limitation of $60,000 per annum on director fees paid to any non-
officer director. During 1993, each director, except Messrs. Wyatt, Burrow,
Arledge, Cordes and Johnson received directors' fees at the annual rate of
$24,000 for services as a director; in addition, Messrs. Buck and Marshall each
received fees of $24,000 for services as a member of the Executive Committee;
Messrs. Bissell and Katzin each received fees of $24,000 for services as a
member of the Audit Committee; Mr. Gates, who was elected to the Audit Committee
in February, 1993, received fees of $22,000 for services as a member of that
committee; Mr. Buck received fees of $12,000 for serving as a member of the
Audit Committee; Messrs. Bissell and Katzin each received fees of $12,000 for
services as a member of the Compensation and Executive Development Committee.
Mr. Chapin received fees of $15,000 for services as a member of the Compensation
and Executive Development Committee. In September, 1993, Messrs. Wyatt, Burrow,
Arledge, Cordes and Johnson agreed to relinquish their right to receive
directors' fees in any capacity and, except for Mr. Wyatt, each received a one-
time stock option reflected in the stock option grant table entitled
"Options/SAR Grants in Last Fiscal Year (1993)" herein. Through September, 1993,
each such person had received directors' fees and/or Executive Committee fees of
$36,000, $36,000, $18,000, $36,000 and $18,000, respectively. Directors can
elect to defer the receipt of all or any portion of their directors'
compensation (including interest thereon at a market-related rate) until
termination of service as a director.
Mr. McDade's firm received a retainer of $250,000 for legal services rendered
to the Company in 1993; and has received the same retainer for legal services
rendered and to be rendered in 1994.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information for the fiscal years ended
December 31, 1993, 1992 and 1991 as to cash compensation paid by the Company and
its subsidiaries, as well as certain other compensation paid or accrued for
those years, to the Company's Chief Executive Officer ("CEO") and its four most
highly compensated executive officers other than the CEO (the "Named Executive
Officers"). The table also sets forth the cash compensation paid to James R.
Paul, CEO through July 20, 1993, including Long Term Incentive Plan ("LTIP")
cash compensation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation(1) Awards Payouts
------------------------------------- ----------- -------
Securities All Other
Underlying LTIP Compen-
Name and Options/ Payouts sation
Principal Position Year Salary ($) Bonus ($)(3) SARs (#)(4) ($) $(5)
- ------------------ ---- ---------- ------------ ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
O. S. Wyatt, Jr., 1993 896,120 (3) -0- -0- 138,065
Chairman of the Board 1992 949,678(2) -0- -0- 164,474
(and CEO commencing 1991 849,093 300,000 -0- 156,427
July 21, 1993)
David A. Arledge, 1993 455,211 (3) 38,848 -0- 60,042
President, Chief 1992 445,858(2) 60,000 35,000 72,794
Operating Officer 1991 398,635 140,000 35,000 79,328
and Director
James R. Paul, 1993 658,664 -0- -0- 45,000 76,000
President, CEO and 1992 648,724(2) -0- 40,000 159,148
Director (through 1991 580,015 266,666 40,000 172,401
July 20, 1993)
James F. Cordes, 1993 558,300 (3) 32,094 -0- 114,789
Executive V.P. 1992 507,721(2) 60,000 25,000 136,618
and Director 1991 453,946 160,000 25,000 136,816
Sam F. Willson, Jr., 1993 334,062 (3) 15,000 -0- 28,600
Executive V.P. 1992 344,603(2) 60,000 15,000 29,443
1991 334,062 150,000 15,000 31,225
Harold Burrow, 1993 292,614 52,000 14,189 -0- 80,033
Vice Chairman of 1992 359,117(2) -0- -0- 104,229
the Board 1991 345,816 -0- -0- 103,165
- ------------------------
</TABLE>
(1) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation, if any, does not exceed
the lesser of $50,000 or 10 percent of annual salary and bonus for any
named individual.
7
<PAGE>
(2) Due to the Company's practice of paying bi-weekly, there is one extra pay
period reflected in the 1992 salary. Normally there are 26 pay periods, but
approximately once every 11 years there are 27 pay periods; 1992 was such a
year.
(3) The bonuses shown in the table represent the amount awarded for
performance in the year indicated. With the exception of Mr. Burrow, bonuses
for 1993 will not be finalized until after preliminary results for the 1994
first quarter are known. These bonuses will be reported in the Proxy
Statement for the 1995 Annual Meeting. Mr. Burrow's bonus was paid in full
in 1993. Bonuses for 1992 were paid or are payable in equal installments
over a three-year period, provided the employee is still employed on the
anniversary date of the award. The 1991 bonuses were payable in equal
installments in 1992 and 1993.
(4) The options do not carry any stock appreciation rights.
(5) All Other Compensation for 1993 consists of: (i) directors' fees paid by
Company, American Natural Resources Company and Colorado Interstate Gas
Company (O. S. Wyatt, Jr. $66,375; David A. Arledge $18,000; James R. Paul
$51,625; James F. Cordes $66,375; Sam F. Willson, Jr. $-0-; and Harold
Burrow $56,624); (ii) cash payments for relinquishing certain stock
appreciation rights (O. S. Wyatt, Jr. $ -0-; David A. Arledge $5,625; James
R. Paul $9,375; James F. Cordes $3,750; Sam F. Willson, Jr. $1,875; and
Harold Burrow $-0-); (iii) Company contributions to the Coastal Thrift Plan
(O. S. Wyatt, Jr. $15,000; David A. Arledge $15,000; James R. Paul $15,000;
James F. Cordes $15,000; Sam F. Willson, Jr. $15,000; and Harold Burrow
$15,000); and (iv) certain payments in lieu of Thrift Plan contributions (O.
S. Wyatt, Jr. $56,690; David A. Arledge $21,417; James R. Paul $-0-; James
F. Cordes $29,664; Sam F. Willson, Jr. $11,725; and Harold Burrow $8,409).
Mr. Cordes is employed pursuant to a five-year employment contract expiring
in 1995, which provides that if he is terminated for a reason not permitted by
the employment contract, he will be entitled to receive for the remainder of the
term the salary, employee benefits, perquisites, salary increases, bonuses and
other incentive compensation which he would have received had he not been
terminated. Such reasons are a significant change in title, duties, authorities
or reporting responsibilities, a reduction in salary or benefits or a move of
the location of his office to a location not acceptable to him.
8
<PAGE>
STOCK OPTIONS
The following table sets forth information with respect to stock options
granted on November 4, 1993 and December 8, 1993 for the fiscal year ended
December 31, 1993 to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1993)
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise Grant Date
Options/SARs Employees in Price Expiration Present
Name Granted(1) Fiscal Year(4) ($/Sh) Date Value ($)(5)
---- ------------ ---------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
O. S. Wyatt, Jr. -0- -0- -0- -0-
David A. Arledge 3,848(2) 1.25 27.00 11/3/2003 44,156
35,000(3) 11.40 26.50 12/7/2003 370,072
James R. Paul -0- -0- -0- -0-
James F. Cordes 7,094(2) 2.31 27.00 11/3/2003 81,404
25,000(3) 8.14 26.50 12/7/2003 264,337
Sam F. Willson, Jr. 15,000(3) 4.88 26.50 12/7/2003 158,602
Harold Burrow 14,189(2) 4.62 27.00 11/3/2003 162,819
- ------------------
</TABLE>
(1) Options expire ten years from the date of issuance and are granted at the
fair market value of the Common Stock of the Company on the date of grant.
Options granted on November 4, 1993 vested in full immediately. Options
granted on December 8, 1993, vest in full on the second anniversary of the
date of grant.
(2) Granted November 4, 1993 as a one-time grant for relinquishment of
directors fees.
(3) Granted December 8, 1993.
(4) The options do not carry any stock appreciation rights. The option
information included in the table does not include grants made on March 4,
1993 for the fiscal year ended December 31, 1992 which (except for Mr.
Willson) were reported in the 1993 Proxy Statement. These grants were at
$26.06 per share as follows: O. S. Wyatt, Jr. -0-; David A. Arledge 35,000
shares; James R. Paul 40,000 shares; James F. Cordes 25,000 shares; Sam F.
Willson, Jr. 15,000 shares; and Harold Burrow -0-.
(5) Based on the Black-Scholes option pricing model expressed as a ratio (.425
for options granted on November 4, 1993; .399 for options granted on
December 8, 1993) x exercise price x number of shares. The actual value, if
any, an executive may realize will depend on the excess of the stock price
over the exercise price on the date the option is exercised, so that there
is no assurance the value realized by an executive will be at or near the
value estimated by the Black-Scholes model. The estimated values under that
model are based on assumptions that include (i) a stock price volatility of
.2786, calculated using monthly stock prices for the three years prior to
the grant date, (ii) an interest rate of 6.10%, (iii) a dividend yield of
1.44% and (iv) an option exercise term of ten years. No adjustments were
made for the non-transferability of the options or to reflect any risk of
forfeiture prior to vesting. The SEC requires disclosure of the potential
realizable value or present value of each grant. The Company's use of the
Black-Scholes model to indicate the present value of each grant is not an
endorsement of this valuation, which is based on certain assumptions,
including the assumption that the option will be held for the full ten-year
term prior to exercise. Studies conducted by the Company's independent
consultants indicate that options are usually exercised before the end of
the full ten-year term.
9
<PAGE>
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers, concerning the exercise of options during the last fiscal
year and unexercised options and SARs held as of the fiscal year ("FY") ended
December 31, 1993.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1993)
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)(1)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ------------------- --------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
O. S. Wyatt, Jr. -0- -0- -0- / -0- -0- / -0-
David A. Arledge -0- -0- 154,372 / 116,001 682,448 / 120,400
James R. Paul 330,917 2,950,384 42,750 / -0- -0- / -0-
James F. Cordes -0- -0- 89,786 / 82,001 307,534 / 86,000
Sam F. Willson, Jr. -0- -0- 22,149 / 51,000 16,380 / 51,600
Harold Burrow 23,750 454,813 14,189 / -0- 14,189 / -0-
- ------------------
</TABLE>
(1) $-based on the market price of $28.00 at December 31, 1993.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Performance Graphs on page 15 shall not be incorporated by reference into
any such filings.
COMPENSATION AND EXECUTIVE DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
PRINCIPLES OF EXECUTIVE COMPENSATION
OVERALL OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM
The Coastal Corporation executive compensation program is designed to help
the Company attract, motivate and retain the executive resources that the
Company needs in order to maximize its return to shareholders. Toward that end,
the Company's executive compensation program attempts to provide levels of
compensation that are competitive and incentive compensation programs that
reward executives for performance. In designing and administering its executive
compensation program, Coastal attempts to strike an appropriate balance among
these objectives, each of which is discussed in greater detail below.
10
<PAGE>
PROVIDING COMPETITIVE LEVELS OF COMPENSATION
The Company attempts to provide its executives with a total compensation
package that - at expected levels of performance - is competitive with those
provided to executives who hold comparable positions or have similar
qualifications in other organizations of our size. The company targets the
market 50th percentile for its total compensation program.
The Company estimates an executive's competitive level of compensation based
on information drawn from a variety of sources, including proxy statements,
special surveys, and compensation consultants. This information is used in
creating the basic structure of our program. While the Company reviews
compensation information for the same companies used in the total shareholder
return graphs contained in this proxy, greater emphasis is paid to published and
private survey sources which provide market compensation information for
companies of comparable size to Coastal.
It should be noted that the value of an executive's compensation package will
vary significantly based on performance. So while the expected value of an
executive's compensation package may be competitive, its actual value will, of
course, exceed or fall below competitive levels depending on performance.
ENSURING INCENTIVE COMPENSATION VARIES WITH PERFORMANCE
The Company's incentive plans are largely designed to ensure that incentive
compensation varies in a manner consistent with the financial performance of the
Company and/or its various business units. Individual performance is also
considered in Coastal's incentive plans, but is addressed in a qualitative/non-
formula fashion.
It should be noted, however, that the Company's various incentive plans each
serve somewhat different purposes and, as such, employ different measures of
financial performance and cover different periods of time. Accordingly, an
executive's total compensation will not typically vary based on any single
measure of Company or business unit performance over a particular period of
time.
DESCRIPTION OF THE EXECUTIVE COMPENSATION PROGRAM
This section describes each of the principal elements of the Company's
executive compensation program with specific references to the objectives
discussed above.
BASE SALARY PROGRAM
The long-term objective of Coastal's base salary program for key management
positions is to provide competitive base salaries that are typically between the
market 50th and 75th percentiles of salaries for similar positions at companies
similar in size to Coastal. We believe it is crucial to provide strongly
competitive salaries over time in order to attract and retain managers who are
highly talented.
Salary adjustments for Coastal are based on three factors: general levels of
market salary increases, individual performance, and Coastal's overall financial
results. All base salary increases are based on a philosophy of pay-for-
performance and perceptions of an individual's long-term value to the Company.
As a result, employees with higher levels of performance sustained over time
will be paid correspondingly higher salaries.
Consistent with the Company's pay-for-performance philosophy, in September
1993 Mr. Wyatt and Mr. Arledge voluntarily recommended to the Committee and the
Committee accepted the recommendation to reduce their salaries to January 1991
levels. This recommendation was made as a result of the Company's 1991, 1992 and
early 1993 performance falling below plan and was intended to show the
commitment to focus on the critical goal of enhancing shareholder value.
11
<PAGE>
THE ANNUAL BONUS PLAN
The objectives of the Annual Bonus Plan are to motivate and reward the
accomplishment of corporate annual objectives; reinforce a strong performance
orientation with differentiation and variability in individual awards based on
contributions to business results; and provide a fully competitive compensation
package which will attract, reward and retain individuals of the highest
quality. As a pay-for-performance plan, cash bonus awards are paid upon the
achievement of performance objectives established for the fiscal year and an
assessment of management's contributions to the Company for the year.
Targeted bonus award levels are determined for plan eligible positions each
year using data obtained from an independent consultant. Target bonus levels
reflect competitive market norms (slightly below the market 50th percentile).
Together with base salary, the annual bonus opportunities support Coastal's
philosophy of providing competitive total annual compensation opportunities.
A bonus pool is established each year based on the Company's overall
performance against measures established jointly by the Committee and
management. In fiscal year 1993, the key performance measure considered was
earnings before interest and taxes ("EBIT") against plan. This measure was
weighted 50% of the total bonus program. In 1993, Coastal's EBIT performance was
above threshold but below target, resulting in the EBIT portion of the bonus
pool being below target. The remaining 50% of the annual bonus opportunity in
1993 was designed to serve as a discretionary annual bonus pool. Although no
formula performance measures were used in establishing the size of awards under
this portion of the plan, the Committee did consider the EBIT performance of
each business unit, progress made toward improving the Company's operational and
financial performance, the need to reward unique individual contributions, and a
comparison of return on total capital and return on equity compared to the
industry peer group (the Value Line Diversified Natural Gas Group which is the
same industry peer group in the performance graphs). The size of the 1993
discretionary bonus pool element was established well below the target level
based on the qualitative performance assessment described above, but the
Committee did consider the very positive results obtained during the latter part
of the year.
Individual awards from the established bonus pool are recommended by senior
management, with advice and consent from the Committee. Individual awards from
the pool are based on business unit and individual employee performance, future
potential, and the current marketability of each participant. All individual
performance assessments are conducted in a non-formula fashion. The total bonus
awards made may not exceed the amount of funds in the bonus pool.
Although the 1993 bonus pool and individual awards from that pool will be
based on 1993 performance, management and the Committee decided to delay the
final decision and payment of the awards (other than to Mr. Burrow, whose bonus
is reflected in the Summary Compensation Table) until after the first quarter
1994 preliminary financial results are known. The year 1993 saw significant
improvement in many segments of the Company during the latter months and this
will allow management and the Committee to ensure that individuals are rewarded
for sustained performance.
THE LONG-TERM INCENTIVE PLAN
Coastal's current long-term incentive plan focuses on stock option plans.
Stock options align the interests of employees and shareholders by providing
value to the employee only when the stock price increases. Options granted in
1993 to the executive officers named in the Compensation Table and certain other
executive officers were granted at 100% of the market value of the stock on the
date of grant.
All options have terms of 10 years and are generally (with the exception of
the special grants discussed below) fully exercisable within 6 years of the date
of the grant. The exercise price is payable in cash, shares of Company stock,
broker-financed cashless exercise, or some combination of these approaches. No
option holder has any rights as a shareholder for any shares subject to an
option until the exercise price has been paid and the shares are issued to the
employee.
12
<PAGE>
Coastal's overall stock option grant levels are established by considering
competitive market data on grant levels, and an appropriate overall level of
shares reserved for such plans in the market. Individual option grants are based
on the level of each participant in the Company and individual performance
(measured qualitatively). Also, the Committee does consider the size of past
stock option grants in establishing new stock option grant levels.
Coastal's practice in recent years has been to make the number of shares
included in stock option grants at or slightly below the market 50th percentile.
In 1993, however, the Company made two special stock option grants which
included the executive officers shown in the Summary Compensation Table, except
Messrs. Wyatt and Paul. The first was a one-time grant made in November of 1993
(other than to Mr. Wyatt who declined an option grant) which was intended to
compensate for discontinuing the practice of paying board fees to management
directors. These options are immediately exercisable. The second grant, made in
December 1993, was a special grant to operating heads and key officials and was
intended to provide a strong incentive for improvement in financial results tied
to Coastal's two-year operating plan. These options are exercisable in full at
the end of two years.
The Committee has also proposed and the Board of Directors has approved the
1994 Incentive Stock Plan for shareholder approval (the plan document is
provided in this Proxy Statement as Appendix A). The Committee and the Board of
Directors believe that the incentive opportunities under the proposed plan will
provide a crucial link between the interests of shareholders and those of key
employees of the Company. Although the Committee intends to use stock options as
the principal long-term incentive award, a more flexible plan is recommended so
that the Committee has discretion in determining the most appropriate form of
long-term incentive award in a given year. We believe it is in the shareholders'
interest for the Committee to have this flexibility in order to provide long-
term incentives in any given period that best fit the Company's strategy and
allow the Committee to respond to potential regulatory and legislative changes
impacting long-term incentive practices.
1993 CHIEF EXECUTIVE OFFICER PAY
In July 1993, Mr. Paul stepped down as the Company's CEO and Mr. Wyatt
assumed the position of CEO. Thus, this section discusses actions involving Mr.
Wyatt's compensation in 1993.
Base Salary - As discussed above, Mr. Wyatt's salary was reduced from an annual
- -----------
rate of $920,160 to $852,000 in September, 1993. This reduction of salary to
January 1991 levels was intended to focus on improving shareholder value, and
reinforce the pay-for-performance philosophy. This action was taken by the
Committee upon the recommendation of Mr. Wyatt.
Annual Bonus - As discussed above, the award of a bonus for 1993 performance has
- ------------
been deferred until after the first quarter 1994 preliminary results are
determined. The award will be reported in the Proxy Statement for the 1995
Annual Meeting of Stockholders.
Stock Options - Mr. Wyatt refused any stock options in 1993.
- -------------
$1 MILLION PAY DEDUCTIBILITY CAP
In 1993, the U.S. Treasury Department issued proposed regulations that limit,
with certain exemptions, the tax deduction on compensation paid to the top five
executive officers to $1 million. To address the $1 million pay deductibility
cap issue, the proposed 1994 Incentive Stock Plan has been structured so that
stock options (which are intended to be the primary long-term incentive vehicle
for the present time) and performance-based stock awards qualify for an
exemption from the $1 million pay deductibility limit.
13
<PAGE>
Also, at the present time, the CEO is the only executive whose base salary
plus target bonus exceeds $l million. In order to preserve the Company's tax
deduction for the CEO's base salary plus bonus, the Company has established a
non-qualified deferred compensation program for Mr. Wyatt. Under this program,
any annual incentive awards that bring Mr. Wyatt's cash compensation to a level
over $1 million will be deferred so that payments occur after Mr. Wyatt is no
longer a proxy-named executive, thus preserving the deductibility of the
compensation for the Company. Finally, the Committee plans to review the final
regulations and, if appropriate, take necessary actions in the future to avoid
losing tax deductions related to compensation for Mr. Wyatt and other key
employees.
COMPENSATION AND EXECUTIVE DEVELOPMENT COMMITTEE
John M. Bissell, Chairman
Roy D. Chapin, Jr.
Jerome S. Katzin
PENSION PLAN
The following table shows for illustration purposes the estimated annual
benefits payable under the Pension Plan and the Company's Replacement Pension
Plan described below upon retirement at age 65 based on the compensation and
years of credited service indicated.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
--------------------------------------------------------
5-YEAR FINAL
AVERAGE PAY 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000........ $ 34,403 $ 45,871 $ 57,339 $ 68,806 $ 68,118
150,000........ 41,903 55,871 69,839 83,806 83,118
175,000........ 49,403 65,871 82,339 98,806 98,118
200,000........ 56,903 75,871 94,839 113,806 113,118
225,000........ 62,610 83,480 104,351 125,221 124,532
250,000........ 62,610 83,480 104,351 125,221 124,532
</TABLE>
(A) Compensation covered under the Pension Plan for Employees of the Company and
the Company Replacement Pension Plan generally includes only base salary and
is limited to $235,840 for 1993.
(B) At December 31, 1993 each of the individuals named in the Summary
Compensation Table had covered salary of $235,840 and the following years of
credited service: Mr. Wyatt, 38 years; Mr. Arledge, 13 years; Mr. Paul, 20
years; Mr. Cordes, 16 years; Mr. Willson, 21 years; and Mr. Burrow, 19
years.
(C) The normal form of retirement income is a straight life annuity. Benefits
payable under the Pension Plan are subject to offset by 1.5% of applicable
monthly social security benefits multiplied by the number of years of
credited service (up to 33 1/3 years).
The Employee Retirement Income Security Act of 1974, as amended by subsequent
legislation, limits the retirement benefits payable under the tax-qualified
Pension Plan. Where this occurs, the Company will provide to certain executives,
including persons named in the Summary Compensation Table, additional
nonqualified retirement benefits under a Company Replacement Pension Plan. These
benefits, plus payments under the Pension Plan, will not exceed the maximum
amount which the Company would have been required to provide under the Pension
Plan before application of the legislative limitations, and are reflected in the
above table.
14
<PAGE>
PERFORMANCE GRAPHS - SHAREHOLDER RETURN ON COMMON STOCK
FIVE-YEAR CUMULATIVE VALUES
$100 INVESTED 12/31/88
DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
5 YEARS ENDED 12/31/1993
------------------------------------
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Coastal.............................. $146 $144 $113 $111 $132
S&P 500.............................. $132 $128 $166 $179 $197
Index(1)(2).......................... $140 $114 $103 $120 $146
</TABLE>
YEAR ENDED 12/31
TEN-YEAR TWO MONTHS CUMULATIVE VALUES
$100 INVESTED 12/31/83
DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
10 YEARS 2 MONTHS ENDED 2/28/1994
------------------------------------------------------------------
1984 1985 1986 1987 1988 1989 1990 1991 1882 1883 2/1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coastal.... $ 97 $179 $183 $183 $241 $347 $343 $270 $266 $314 $348
S&P 500.... $106 $140 $165 $165 $204 $268 $260 $339 $365 $401 $404
Index(1)(2) $100 $108 $107 $107 $125 $181 $159 $143 $172 $214 $229
</TABLE>
YEAR ENDED 12/31
(1) The Index is based on the Value Line Diversified Natural Gas Group - the
Performance Graphs reflect total shareholder return weighted to reflect the
market capitalization of the peer companies. The peer group is comprised
of: Arkla, Burlington Res., Columbia, Consolidated Nat. Gas, Eastern
Enterprises, Enron, Enserch, Equitable Res., KN Energy, Mitchell Energy,
National Fuel Gas, Panhandle Eastern, Seagull Energy, Sonat, Southwestern
Energy, Tenneco, Transco, Valero, and Williams Co's.
(2) Coastal excluded from Index.
15
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In February 1987, Coastal Mart, Inc. ("Coastal Mart"), a subsidiary of the
Company, entered into a ten-year lease/purchase agreement (with four 5-year
options to renew) with Pester Marketing Company ("Pester Marketing") for 220
gasoline service stations located in the midwestern region of the United States.
Jack Pester, a principal stockholder and Chief Executive Officer of Pester
Marketing, subsequently became an employee, officer, and director of Coastal
Mart and was elected a Senior Vice President of the Company. Mr. Pester is no
longer active in the management of Pester Marketing, and his stock interest in
that company has been placed in trust.
The initial lease term provides for monthly rents ranging from $408,000 to
$600,000; Coastal Mart has the option to acquire the service stations during and
after the tenth year of the lease at a purchase price of approximately $52
million in the tenth year and which escalates thereafter based on the Consumer
Price Index. The obligations of Coastal Mart are guaranteed by the Company.
Lease payments in 1993 were approximately $4.5 million. In addition, during
1993, Coastal Mart received net repayments under the lease/purchase agreement of
approximately $515,000 (recoverable from lease payments) from Pester Marketing.
Pester Marketing and certain affiliates are parties to a Chapter 11
reorganization proceeding in the U.S. Bankruptcy Court in Des Moines, Iowa. In
part, the cash advances enabled Pester Marketing to obtain the release of the
leased service stations from the Chapter 11 reorganization proceedings.
In the opinion of the Company, the transactions with Pester Marketing were on
terms no less favorable to Coastal Mart than could have been obtained in similar
transactions with other third parties.
The following table sets forth ownership of units of limited partnership
interests in the Coastal 1985 Drilling Program, Ltd., Coastal 1985-B Drilling
Program, Ltd., Coastal 1986 Drilling Program, Ltd., and Coastal 1987 Drilling
Program, Ltd. by directors and all directors and executive officers as a group.
<TABLE>
<CAPTION>
1985 1985-B 1986 1987
$1,000 $1,000 $1,000 $1,000
Directors unit unit unit unit
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
O. S. Wyatt, Jr............................... 2,235 463 175 750
Harold Burrow................................. 174 233 258 100
David A. Arledge.............................. 10 10 15 -
John M. Bissell............................... - 73 92 -
George L. Brundrett, Jr....................... 34 71 - -
Ervin O. Buck................................. 132 50 133 100
Roy D. Chapin, Jr............................. - - - 20
James F. Cordes............................... - - 91 -
Roy L. Gates.................................. - - - -
Kenneth O. Johnson............................ 91 - 25 -
Jerome S. Katzin.............................. 30 50 50 -
J. Howard Marshall, II........................ 173 188 175 350
Thomas R. McDade.............................. - - - -
L. D. Wooddy, Jr.............................. - - - -
All directors and executive
officers as a group (33
persons, including the above)................ 2,934 1,183 1,084 1,340
</TABLE>
16
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS
Mr. J. Howard Marshall, II is part of the family group which owns 16% of Koch
Industries, Inc., to and from which the Company and/or its subsidiaries
frequently purchase, sell and exchange crude oil and refined products in the
ordinary course of business. Mr. Marshall is also a director of Koch Industries,
Inc. During 1993, the Company and/or its subsidiaries purchased, sold and
exchanged approximately 20,990,500 barrels of oil and refined products with Koch
Industries, Inc. and/or its subsidiaries ("Koch") costing approximately
$397,008,600. In addition, during 1993, subsidiaries of the Company had natural
gas and natural gas liquids purchases, sales, transportation, gathering and
compression fees of approximately $16,266,600 with Koch. It is anticipated that
the Company and/or its subsidiaries will continue to enter into similar
transactions with Koch in the ordinary course of business.
PROPOSAL 2 - A PROPOSAL TO ADOPT THE 1994 INCENTIVE STOCK PLAN
On March 3, 1994, the Board of Directors (the "Board") adopted The Coastal
Corporation 1994 Incentive Stock Plan (the "1994 Stock Plan") under which a
total of 2,000,000 shares of Common Stock are made available for the granting of
awards, a portion or all of which may qualify as incentive stock options, non-
incentive stock options, restricted stock grants and/or stock awards. The Board
believes that the shares of Common Stock made available under the 1994 Stock
Plan will aid Coastal in retaining the services of key employees and attracting
the best available personnel. Accordingly, the Board has approved and adopted
the 1994 Stock Plan, subject to approval by the stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
The full text of the 1994 Stock Plan is set forth in Appendix A to this Proxy
Statement and reference is made thereto for a complete description. The
following is a summary of the major provisions of the 1994 Stock Plan and is
qualified by the full text thereof.
NUMBER OF SHARES
A total of up to 2,000,000 shares of Common Stock are available for the
granting of options, restricted stock grants and stock awards under the 1994
Stock Plan. If an option, restricted stock grant or stock award under the 1994
Stock Plan expires or terminates before it has been exercised or earned in full,
the shares of Common Stock allocable to the unexercised portion of such option,
restricted stock grant or stock award may again be subject to an option,
restricted stock grant or stock award under the 1994 Stock Plan. The number of
shares available and subject to options, option prices and, to the extent
applicable, the number of shares subject to any restricted stock grant or stock
award will be adjusted upward or downward, as the case may be, in the event of
any subdivision or consolidation of shares or other capital readjustment, stock
dividend, merger, consolidation or similar transaction affecting the shares. The
maximum aggregate number of shares with respect to which options, restricted
stock grants or stock awards may be granted or issued to any employee under the
1994 Stock Plan during each year is 100,000 shares.
ADMINISTRATION
The 1994 Stock Plan is administered by the Compensation and Executive
Development Committee (the "Committee") of the Board of Directors of the
Company, which consists of directors who are not employees of the Company and
who are not eligible to receive options, restricted stock grants and stock
awards. Except as provided below, the Committee has sole authority to determine
which eligible employees of the Company receive options, restricted stock grants
and stock awards under the 1994 Stock Plan, the times when options, restricted
stock grants and stock awards are granted, the number of shares covered by the
option, restricted stock grant or stock award in each case, the provisions of
any agreement and when options may be exercised or when restricted stock grants
or stock awards become vested. The directors currently serving on the Committee
are John M. Bissell (Chairman), Roy D. Chapin, Jr. and Jerome S. Katzin.
17
<PAGE>
STOCK OPTIONS
Stock options may be granted by the Committee at prices determined in the
discretion of the Committee, provided that the option price must be at least
equal to the fair market value of the Common Stock on the date of grant. The
option price is payable in cash, Common Stock or such other form of payment as
may be determined by the Committee. On March 16, 1994 the fair market value of
Common Stock on the New York Stock Exchange was $32.75 per share.
RESTRICTED STOCK GRANTS
The Committee may grant to an eligible employee shares of Common Stock
subject to specified restrictions on transferability and vesting as provided in
the 1994 Stock Plan.
STOCK AWARDS
The Committee may award and cause the Company to issue shares of Common Stock
to an eligible employee. Stock awards may be made in lieu of cash compensation
or as additional compensation. The Committee may also make stock awards
contingent on pre-established performance goals determined by the Committee;
such performance-based awards are limited to senior officers (i.e. Vice
President, Secretary, Treasurer and above) of the Company and its subsidiaries.
Performance goals determined by the Committee may be based on specific increases
in net profits, stock price, Company or segment sales, market share, earnings
per share, and/or return on equity. The maximum number of shares which may be
issued to any one employee is 100,000 per year.
ELIGIBILITY
Subject to selection by the Committee, any full-time key employee of Coastal
or its subsidiaries is eligible to be granted one or more options, restricted
stock grants or stock awards pursuant to the 1994 Stock Plan. At present, it is
estimated that up to approximately 150 current employees will be eligible to
receive benefits under the 1994 Stock Plan.
DURATION
No option, restricted stock grant or stock award granted under the 1994 Stock
Plan may be made exercisable after the expiration of ten years from the date it
is granted.
NONTRANSFERABILITY
No option, restricted stock grant or stock award is transferable by the
optionee except by will or the laws of descent and distribution.
EXERCISE OF OPTIONS
An option generally is exercisable by the optionee only while he is an
employee of Coastal or its subsidiaries before the expiration date of the option
or one day less than three months after the termination of such employment,
whichever occurs earlier. In the event of total and permanent disability or
death while the option is still exercisable by the employee, the option
terminates on the earlier of the expiration date of such option or one day less
than one year following the date of death or termination of employment due to
total and permanent disability. Options vest as the Committee may determine, and
may not be exercised until vested. However, the Committee in its discretion may
at any time accelerate in full the vesting of any option which has not yet
vested, and the Company believes that the Committee would take such action in
the event of a tender offer for shares of the Company.
18
<PAGE>
AMENDMENTS
The Board of Directors may modify, revise or terminate the 1994 Stock Plan
without the approval of stockholders, except that approval by the affirmative
vote of a majority of the votes cast attributable to shares present in person or
by proxy and entitled to vote at a meeting of stockholders of the Company's
stock, or if the provisions of the corporate charter, by-laws or applicable
state law prescribes a greater degree of stockholder approval for this action,
the degree of stockholder approval thus required, will be required for any
amendment which would (i) change the aggregate number of shares available for
options, restricted stock grants or stock awards under the 1994 Stock Plan, (ii)
reduce any option price, (iii) extend the term during which an option,
restricted stock grant or stock award may be exercised or the termination date
of the 1994 Stock Plan, or (iv) change the class of employees eligible to
receive options, restricted stock grants or stock awards pursuant to the 1994
Stock Plan.
EFFECTIVE DATE AND DURATION
The 1994 Stock Plan was effective as of March 3, 1994, subject to approval by
the stockholders. No option, restricted stock grant or stock award shall be
granted pursuant to the 1994 Stock Plan after March 2, 2004.
FEDERAL INCOME TAX CONSEQUENCES
The following statements concerning tax liability under the 1994 Stock Plan
are intended to summarize briefly the current federal income tax consequences
arising therefrom and are in no way meant to provide or supplement tax advice to
employees.
INCENTIVE STOCK OPTIONS. The grant of incentive stock options to an employee
does not result in any income tax consequences. The exercise of an incentive
stock option does not result in any income tax consequences to the employee if
the incentive stock option is exercised by the employee during his employment
with the Company or a subsidiary, or within a specified period after termination
of employment. However, the excess of the fair market value of the shares of
stock as of the date of exercise over the option price is a tax preference item
for purposes of determining an employee's alternative minimum tax. An employee
who sells shares acquired pursuant to the exercise of an incentive stock option
after the expiration of (i) two years from the date of grant of the incentive
stock option, and (ii) one year after the transfer of the shares to him (the
"Waiting Period") will generally recognize long-term capital gain or loss on the
sale.
An employee who disposes of his incentive stock option shares prior to the
expiration of the Waiting Period (an "Early Disposition") generally will
recognize ordinary income in the year of sale in an amount equal to the excess,
if any, of (a) the lesser of (i) the fair market value of the shares as of the
date of exercise or (ii) the amount realized on the sale, over (b) the option
price. Any additional amount realized on an Early Disposition should be treated
as capital gain to the employee, short or long term, depending on the employee's
holding period for the shares. If the shares are sold for less than the option
price, the employee will not recognize any ordinary income but will recognize a
capital loss, short or long term, depending on the holding period.
The Company will not be entitled to a deduction as a result of the grant of
an incentive stock option, the exercise of an incentive stock option, or the
sale of incentive stock option shares after the Waiting Period. If an employee
disposes of his incentive stock option shares in an Early Disposition, the
Company will be entitled to deduct the amount of ordinary income recognized by
the employee.
NON-INCENTIVE STOCK OPTIONS. The grant of non-incentive stock options will
not result in the recognition of any taxable income by the employee. An employee
will recognize ordinary income on the date of exercise of the non-incentive
stock option equal to the difference between (i) the fair market value on that
date of the shares acquired, and (ii) the exercise price. The tax basis of these
shares for purpose of a subsequent sale includes the option price paid and the
ordinary income reported on exercise of the option. The income reportable on
exercise of the non-incentive stock option is subject to federal and state
income and employment tax withholding.
19
<PAGE>
Generally, the Company will be entitled to a deduction in the amount
reportable as income by the employee on the exercise of a non-incentive stock
option.
RESTRICTED STOCK GRANTS. Restricted stock granted under the 1994 Stock Plan
generally will not be taxed to the recipient, nor deductible by the Company, at
the time of grant. Restricted stock grants involve the issuance of stock to an
employee subject to specified restrictions as to sale or transferability of the
stock and/or subject to a substantial risk of forfeiture. On the date the
restrictions lapse, and the stock becomes transferable or not subject to a
substantial risk of forfeiture, whichever is applicable, the recipient
recognizes ordinary income equal to the excess of the fair market value of the
stock on that date over the purchase price paid for the stock, if any. The
employee's tax basis for the stock includes the amount paid for the stock, if
any, and the income recognized.
Generally, the Company will be entitled to a corresponding tax deduction in
an amount equal to the income recognized by the employee.
STOCK AWARDS. Stock awards involve the issuance of shares of stock without
any payment, as compensation for services to the Company. The employee will
recognize taxable income equal to the fair market value of the shares on the
date of the award, which becomes the recipient's tax basis in a subsequent sale.
Stock awards granted for stock to be issued only after satisfaction of specified
performance goals established by the Committee constitute compensation when
issued.
Generally, the Company will be entitled to a corresponding tax deduction in
an amount equal to and in the year income is recognized by the employee. See
following discussion of "performance-based compensation."
COMPENSATION DEDUCTION LIMITATION. In the 1993 Omnibus Budget Reconciliation
Act ("OBRA"), Congress generally limited to $1 million per year the tax
deduction available to public companies for certain compensation paid to
designated executives. These executives include the Chief Executive Officer and
the next four highest compensated officers of the Company. OBRA provides an
exception from this deduction limitation, for certain "performance-based"
compensation, if specified requirements are satisfied. The 1994 Stock Plan is
designed to satisfy these statutory requirements for stock options and for
performance-based stock awards. Thus, the Company anticipates being entitled to
deduct an amount equal to the ordinary income reportable by an optionee on
exercise of a non-incentive stock option, the Early Disposition of shares of
stock acquired by exercise of an incentive stock option, and the issuance of
performance-based stock awards.
The Company does not anticipate that the deduction limitation imposed by OBRA
will have a material impact on the deduction available for restricted stock
grants and stock awards granted under the 1994 Stock Plan.
20
<PAGE>
1994 STOCK PLAN BENEFITS
As stated above, the Committee has the sole authority to determine all awards
under the 1994 Stock Plan. No awards have been made to date and it is not
possible to determine what awards, if any, will be made to any individual.
If the 1994 Stock Incentive Plan had been in effect on January 1, 1993 and
options actually granted during 1993 for that fiscal year had been awarded under
the 1994 Stock Incentive Plan, the following persons and groups would have been
granted options as follows:
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1994 Stock Incentive Plan
---------------------------------------
Name and Position Dollar Value ($)(1) Number of Units(2)
- ----------------- ------------------- ------------------
<S> <C> <C>
O. S. Wyatt -0- -0-
Chairman of the Board
and CEO
David A. Arledge 414,228 38,848
President, Chief Operating
Officer and Director
James F. Cordes 345,741 32,094
Executive V.P. and Director
Sam F. Willson, Jr. 158,602 15,000
Executive V.P.
Harold Burrow 162,819 14,189
Vice Chairman of the Board
Executive Group 2,537,231 236,979
Non-Executive Director Group -0- -0-
Non-Executive Officer
Employee Group 749,160 70,000
</TABLE>
- ------------------
(1) See footnote (5) to the stock option table on page 9.
(2) See footnote (4) to the stock option table on page 9. In addition, the March
4, 1993 option grants included the following:
<TABLE>
<CAPTION>
Dollar Value ($) Number of Units
---------------- ---------------
<S> <C> <C>
Executive Group 2,287,547 190,000
Non-Executive Director Group -0- -0-
Non-Executive Officer
Employee Group 1,744,555 144,900
</TABLE>
21
<PAGE>
PROPOSAL 3 - A PROPOSAL TO ADOPT THE STOCK PURCHASE PLAN
On December 11, 1987 the Executive Committee of the Board of Directors
adopted the Stock Purchase Plan. All employees and members of the Board of
Directors of the Company and its subsidiaries are eligible to participate in the
Stock Purchase Plan. The purpose of the Stock Purchase Plan is to provide a
convenient and economical way to purchase shares of Common Stock of the Company
through payroll deductions or optional cash payments, or both.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
GENERAL PROVISIONS OF THE STOCK PURCHASE PLAN
The full text of the Stock Purchase Plan is set forth in Appendix B to this
Proxy Statement and reference is made thereto for a complete description. The
following is a summary of the major provisions of the Stock Purchase Plan and is
qualified by the full text thereof.
The minimum payroll deduction is $5 per week and the minimum optional cash
payment, which can be made at any time, is $500. In addition, the Company or any
subsidiary may submit optional payments (which can be in the form of cash or
shares of Common Stock of the Company, including treasury shares) for the
account of any employee or director. All payroll deductions and cash payments
are collected by the Company and delivered bi-weekly to an independent broker
who makes open market purchases of shares of Common Stock for the accounts of
the participants. Participants have no control over the timing of purchases or
the purchase price of shares of Common Stock. Shares purchased are registered in
the name of and held by the independent broker as agent for the participants.
Although directors are eligible to participate in the Stock Purchase Plan, no
director has participated since January 1, 1993 or earlier.
The Company acts as administrator of the Stock Purchase Plan and keeps a
record of each participant's account. Dividends paid on shares of Common Stock
are credited to a participant's account and automatically reinvested by the
independent broker in additional shares of Common Stock.
A participant may withdraw shares in that participant's account at any time
or request a sale of such shares by the independent broker as of any internal
settlement date, which dates coincide with the end of the Company's bi-weekly
pay periods.
All costs of administering the Stock Purchase Plan are paid by the Company.
Participants are required to pay a nominal brokerage commission (approximately
$.05 per share) and other fees for any shares purchased or sold by the
independent broker.
Shares of Common Stock held for a participant are voted at meetings of
stockholders in accordance with the participant's written instructions.
REASON FOR SUBMISSION TO STOCKHOLDERS
Stockholder approval of the Stock Purchase Plan is not required under
Delaware law or any provision of the Internal Revenue Code of 1986 or U.S.
Treasury regulations. However, the Board of Directors has been advised by legal
counsel to the Company that participation in the Stock Purchase Plan by
directors and certain officers of the Company could be limited by the Securities
Exchange Act of 1934 which prohibits purchases and sales or sales and purchases
at a profit of shares of Common Stock of the Company during any six month
period, with various exceptions. Absent stockholder approval of the Stock
Purchase Plan, a director or officer of the Company who participates in the
Stock Purchase Plan and "purchases" shares of Common Stock, could not sell any
shares (whether or not the shares sold were purchased under the Stock Purchase
Plan) at a profit for six months following each purchase (and, cannot have sold
any shares during the six month period prior to any such purchase if the
subsequent purchase would result in a "profit"). Securities and Exchange
Commission ("SEC") rules contain certain exemptions from the six months "no
purchase/no sale" rule for various employee benefit plans which have been
approved by
22
<PAGE>
stockholders. The SEC has also adopted a rule which, when implemented, will
require that cash withdrawals (other than in the event of retirement, disability
or termination of employment, including death) by directors or officers through
a sale of the stock by the independent broker can be made only after a six
months irrevocable election to withdraw. At such time as the rule is
implemented, the Stock Purchase Plan will be amended to comply with this rule
and any other applicable rule of the SEC, as determined by the Board of
Directors of the Company. The Board of Directors believes that directors and
officers should have the opportunity to participate in the Stock Purchase Plan
to the full extent as other employees of the Company without being subject to
the securities laws liability exposure outlined above.
PROPOSAL 4 - STOCKHOLDER PROPOSAL
Management has been advised by four stockholders that they will introduce a
resolution at the Annual Meeting of Stockholders. The names and addresses of the
co-sponsors, and the information they have provided as to the number of shares
of stock of the Company they own, will be furnished by the Company either orally
or in writing upon request. The proposal follows:
"WHEREAS WE BELIEVE:
The responsible implementation of sound environmental policy increases long-
term shareholder value by increasing efficiency, decreasing clean-up costs,
reducing litigation, and enhancing public image and product attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than is achieved by following standards created by
industry alone. In order to maximize public credibility and usefulness, such
standards also need to reflect what investors and other stakeholders want to
know about the environmental records of their companies;
Standardized environmental reports will provide shareholders with useful
information which allows comparisons of performance against uniform standards
and comparisons of progress over time. Companies can also attract new capital
from investors seeking investments that are environmentally responsible,
responsive, progressive, and which minimize the risk of environmental
liability.
AND WHEREAS:
The Coalition for Environmentally Responsible Economies (CERES), which
comprises large institutional investors with $150 billion in stockholdings
(including shareholders of this Company), public interest representatives,
and environmental experts - consulted with dozens of corporations and
produced comprehensive public standards for both environmental performance
and reporting. Over 50 companies have endorsed the CERES Principles -
including the Sun Company, a Fortune-500 company - to demonstrate their
commitment to public environmental accountability.
In endorsing the CERES Principles, a company commits to work toward:
1. Protection of the biosphere
2. Sustainable use of natural resources
3. Waste reduction & disposal
4. Energy conservation
5. Risk reduction
6. Safe products and services
7. Environmental restoration
8. Informing the public
9. Management commitment
10. Audits and reports
23
<PAGE>
The full text of the CERES Principles and the accompanying CERES Report Form
are available from CERES, 711 Atlantic Avenue, Boston MA 02110, tel: 617/451-
0927.
Concerned investors are asking the Company to be publicly accountable for its
environmental impact, including collaboration with this corporate,
environmental, investor, and community coalition to develop (a) standards for
environmental performance and disclosure; (b) appropriate goals relative to
these standards; (c) evaluation methods and tools for measurement of progress
toward these goals; and (d) a format for public reporting of this progress.
We believe this request is consistent with regulation adopted by the European
Community for companies' voluntary participation in verified and publicly-
reported eco-management and auditing.
RESOLVED: Shareholders request the Company to prepare a report at reasonable
cost and omitting proprietary information, describing company
programs, progress, and future plans relative to the CERES
Principles, and using the standard CERES Report Form as a guide."
SUPPORTING STATEMENT
We believe that investors and customers are expecting comprehensive and
impartial environmental reports by business, as a sign of corporate
commitment to environmental excellence. Without this public scrutiny,
corporate environmental policies and reports lack the critical component of
adherence to standards set not only by management but also by other
stakeholders. Shareholders are invited to support this resolution, to
encourage our Company to demonstrate environmental leadership and account for
its environmental impact.
BOARD OF DIRECTORS STATEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL
Substantially similar stockholder proposals were submitted at the 1992 and
1993 Annual Meetings of Stockholders and were defeated by over 90% of the votes
cast.
Your Board of Directors has concluded that this proposal continues to be
- ------------------------------------------------------------------------
contrary to the best interest of the stockholders.
- --------------------------------------------------
The Company diligently undertakes compliance with all environmental laws and
regulations. Coastal has a positive environmental record and believes it makes a
significant contribution to environmental principles by virtue of its production
of clean burning, low-sulphur coal and natural gas and environment compliance in
its other businesses. The Board of Directors of Coastal continues to address
environmental matters on an ongoing basis, conscientious of its obligations.
As an example of Coastal's environmental citizenship, in April, 1993, the
state of Utah awarded Coastal Oil & Gas Corporation ("COG") the 1993 Earth Day
Award, citing COG's going "beyond the requirement of regulations to reclaim
ninety-one emergency pits, bioremediate contaminated soil, and construct new
synthetically lined emergency pits in the Altamont-Bluebell Fields" to protect
ground water resources and prevent soil contamination.
Coastal actively stresses environmental responsibility in all facets of its
subsidiaries' operations and undertakes to keep its stockholders and the public
at large informed regarding environmental matters in compliance with existing
securities laws. Such information is contained in the 10-K Annual Reports of
Coastal and its two pipeline subsidiaries, ANR Pipeline Company and Colorado
Interstate Gas Company. In addition, the Coastal World a Company publication,
has published various articles reporting on environmental matters which affect
the businesses of Coastal's subsidiaries. The Company suspended publication of
Coastal World in 1993; however, the Company is in the process of publishing a
new but less expensive employee newsletter which will be available to
stockholders. The first issue will include information as to environmental
achievements and compliance. It is expected that future newsletters will from
time to time address environmental matters and will be made available to
stockholders.
24
<PAGE>
In light of the above, the Board of Directors believes that adoption of the
stockholder proposal, however well-intentioned, would not help the Company to
maintain its policy of protecting the environment. Moreover, the CERES form of
report referred to in the proposal is lengthy and complex, would be burdensome
to complete and could divert efforts away from environmental compliance. CERES,
by prescribing this report, is seeking oversight of the Company's environmental
compliance which must remain the responsibility of the Company and the Board of
Directors.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE
- -----------------------------------------------------------------------------
STOCKHOLDER PROPOSAL (PROPOSAL 4).
- ----------------------------------
VOTE REQUIRED FOR APPROVAL
The nominees for director receiving a majority of the votes cast at the
Meeting by stockholders present in person or by proxy and entitled to vote shall
be elected. The proposal to adopt the 1994 Incentive Stock Plan, the proposal to
adopt the Stock Purchase Plan and the stockholder proposal require the
affirmative vote of a majority of the votes cast attributable to shares present
in person or by proxy at the Meeting and entitled to vote. For purposes of
counting the vote, abstentions, broker non-votes and other votes not cast will
not be counted as voted, and the number of votes of which a majority is required
will be reduced by the number of votes not cast.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers to file reports of ownership and changes in ownership of
shares of the Company's stock with the SEC. Directors and officers are required
by Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) reports they file. Based on its review of the copies
of such reports received by it, or written representations from certain
reporting persons that no Forms 5 were required for those persons, the Company
believes that, from January 1 through December 31, 1993, its directors and
officers complied with all applicable filing requirements, except that the
purchase of 100 shares of Series H Preferred Stock by Mr. Burrow's spouse on
Thursday, September 30, 1993 (which was part of a 4,000 share order, the balance
of which was executed on Friday, October 1, 1993 and timely reported) was not
reported until November 2, 1993, rather than on or before October 10, 1993. The
September 30, 1993 transaction was refused by the purchaser until the broker
filled both purchases as an all-or-none order for 4,000 shares.
INDEPENDENT AUDITORS
The Board of Directors of Coastal has designated Deloitte & Touche to audit
the books and accounts of the Company for the year ending December 31, 1994.
Deloitte & Touche have been auditors for the Company since 1957. It is
anticipated that representatives of such firm will be present at the Meeting for
the purpose of making a statement, should they desire, and responding to
appropriate stockholder questions.
STOCKHOLDER PROPOSALS
Stockholders who desire to submit proposals to the Company for consideration
for inclusion in the Company's Proxy Statement and form of proxy for the 1995
Annual Meeting of Stockholders of Coastal must submit such proposals to the
Secretary of the Company by November 29, 1994.
25
<PAGE>
OTHER MATTERS
Management does not intend to present any business at the Meeting other than
as set forth in the Notice of Annual Meeting and knows of no other business to
be presented for action at the Meeting. If, however, any other business should
properly come before the Meeting or any adjournments thereof, it is intended
that all proxies will be voted with respect thereto in accordance with the best
judgment of the persons named in the proxies.
AVAILABILITY OF FORM 10-K ANNUAL REPORT
COPIES OF COASTAL'S ANNUAL REPORT TO STOCKHOLDERS OR ITS ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1993, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, ARE AVAILABLE WITHOUT CHARGE TO STOCKHOLDERS UPON REQUEST
TO MR. AUSTIN M. O'TOOLE, SENIOR VICE PRESIDENT AND SECRETARY, THE COASTAL
CORPORATION, COASTAL TOWER, NINE GREENWAY PLAZA, HOUSTON, TEXAS 77046-0995.
26
<PAGE>
APPENDIX A
THE COASTAL CORPORATION
1994 INCENTIVE STOCK PLAN
<PAGE>
THE COASTAL CORPORATION
1994 INCENTIVE STOCK PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
1. Purpose...................................................................... A-1
2. Administration............................................................... A-1
3. Shares Available Under the Plan.............................................. A-1
4. Authority to Grant Options, Restricted Stock Grants and Stock Awards......... A-2
5. Eligibility.................................................................. A-2
6. Option Price................................................................. A-3
7. Duration of Options.......................................................... A-3
8. Maximum Value of Stock Subject to Options Which are Incentive Stock Options.. A-3
9. Amount Exercisable........................................................... A-3
10. Exercise of Options.......................................................... A-3
11. Non-Transferability of Options............................................... A-4
12. Termination of Employment or Death of Optionee............................... A-4
13. Requirements of Law.......................................................... A-5
14. No Rights as Shareholder..................................................... A-6
15. Restricted Stock Grants...................................................... A-6
16. Stock Awards................................................................. A-7
17. Employment Obligation........................................................ A-7
18. Changes in the Company's Capital Structure................................... A-7
19. Substitution Options......................................................... A-9
20. Amendment or Termination of Plan............................................. A-9
21. Forfeitures.................................................................. A-9
22. Tax Withholding.............................................................. A-10
23. Written Agreement............................................................ A-10
24. Indemnification of Committee................................................. A-10
25. Effective Date of Plan....................................................... A-11
</TABLE>
(i)
<PAGE>
THE COASTAL CORPORATION
1994 INCENTIVE STOCK PLAN
1. PURPOSE. This 1994 Incentive Stock Plan (the "Plan") of The Coastal
Corporation (the "Company") for key employees (including officers and employee
directors) of the Company and its subsidiaries, is intended to advance the best
interests of the Company by providing personnel who have substantial
responsibility for the management and growth of the Company and its subsidiaries
with additional incentive by increasing their proprietary interest in the
success of the Company, thereby encouraging them to remain in the employ of the
Company or any of its subsidiaries.
2. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") consisting of not less than three members of the Board of Directors
of the Company (the "Board"). Until changed by the Board, the Compensation and
Executive Development Committee of the Board shall serve as the Committee. All
of the members of the Committee shall be "disinterested persons" as defined in
Rule 16b-3 of the Rules and Regulations promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") or any similar or successor rule and
"outside directors" as described in Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations issued thereunder. The Board
shall have the power to add or remove members of the Committee from time to
time, and to fill vacancies thereon arising by resignation, death, removal, or
otherwise. The Committee shall designate a chairman from among its members, who
shall preside at all of its meetings, and shall designate a secretary, without
regard to whether that person is a member of the Committee, who shall keep the
minutes of the proceedings and all records, documents, and data pertaining to
its administration of the Plan. Meetings shall be held at such times and places
as shall be determined by the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of those members present at any meeting shall decide any
question brought before that meeting. In addition, the Committee may take any
action otherwise proper under the Plan by the affirmative vote, taken without a
meeting, of a majority of its members. Any decision or determination reduced to
writing and signed by a majority of the members shall be as effective as if it
had been made by a majority vote at a meeting properly called and held. No
member of the Committee shall be liable for any act or omission of any other
member of the Committee or for any act or omission on his own part, including
but not limited to the exercise of any power or discretion given to him under
the Plan, except those resulting from his own gross negligence or willful
misconduct. All questions of interpretation and application of the Plan,
including those involving options (the "Options"), restricted stock ("Restricted
Stock"), or awards of stock ("Stock Awards") shall be subject to the
determination of the Committee. The actions of the Committee in exercising all
of the rights, powers and authorities set out in this Plan, when performed in
good faith and in its sole judgment, shall be final, conclusive, and binding on
the parties. When appropriate, the Plan shall be administered in order to
qualify certain of the Options granted hereunder as "incentive stock options"
described in Section 422 of the Internal Revenue Code of 1986, as amended.
3. SHARES AVAILABLE UNDER THE PLAN. The stock subject to Options,
Restricted Stock Grants and Stock Awards shall be shares of the Company's Common
Stock, $.33 1/3 par value (the "Common Stock"). The total number of shares of
Common Stock available under the Plan shall not exceed in the aggregate
2,000,000 shares; provided, that the class and aggregate number of shares which
may be subject to grant hereunder shall be subject to adjustment in accordance
with the provisions of Paragraph 18 hereof. Such shares may be treasury shares
or authorized but unissued shares. The maximum aggregate number of shares with
respect to which Options, Restricted Stock, or Stock Awards may be granted or
issued to any employee under the Plan during each year is 100,000 shares.
In the event that any outstanding Option or Restricted Stock for any reason
shall expire or terminate by reason of the death or severance of employment of
the optionee or grantee, the surrender of any Option, the forfeiture of any
Restricted Stock, or any other cause, the shares of Common Stock allocable to
the unexercised portion of that Option or the forfeited Restricted Stock may
again be available under the Plan.
<PAGE>
4. AUTHORITY TO GRANT OPTIONS, RESTRICTED STOCK GRANTS AND STOCK AWARDS.
The Committee in its discretion and subject to the provisions of the Plan, may
grant the following from time to time to eligible employees of the Company or
any of its subsidiaries:
(a) "INCENTIVE" STOCK OPTIONS. The Committee may grant to an eligible
employee an Option or Options to buy a stated number of shares of Common
Stock under the terms and conditions of the Plan, so that the Option
qualifies as an "incentive stock option" within the meaning of Section 422 of
the Code ("Incentive Stock Option").
(b) "NON-INCENTIVE" STOCK OPTIONS. The Committee may grant to an eligible
employee an Option or Options to buy a stated number of shares of Common
Stock under the terms and conditions of the Plan, which Option or Options do
not constitute "incentive stock options" within the meaning of Section 422 of
the Code ("Non-incentive Stock Option").
(c) RESTRICTED STOCK GRANT. The Committee may grant to an eligible
employee shares of Common Stock subject to specified restrictions on
transferability and vesting as provided in the Plan ("Restricted Stock
Grant").
(d) STOCK AWARD. The Committee may award and cause the Company to issue
shares of Common Stock under the Plan to an eligible employee ("Stock
Award"). Stock Awards may be made in lieu of cash compensation or as
additional compensation. Stock Awards may also be made pursuant to
performance based goals established by the Committee.
Each Option granted by the Committee shall specify whether the Option
constitutes an Incentive Stock Option or Non-incentive Stock Option. Subject
only to any applicable limitations set forth in the Plan, the number of shares
of Common Stock covered by any Option, Restricted Stock Grant, and Stock Award,
shall be determined by the Committee.
5. ELIGIBILITY. The individuals who shall be eligible to participate in the
Plan shall be the key employees, including officers and directors if they are
employees, of the Company, or of any parent or subsidiary corporations, as the
Committee shall determine from time to time. However, no eligible employee who
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the corporation employing the employee or of
its parent or subsidiary corporation shall be eligible to receive an Option
which is an Incentive Stock Option unless at the time the Option is granted, the
Option price is at least one hundred ten percent (110%) of the fair market value
of the Common Stock, and the Option by its own terms is not exercisable after
the expiration of five years from the date of grant. No individual shall be
eligible to receive an Option under the Plan while a member of the Committee.
For the purposes of the preceding paragraph, an employee shall be considered
as owning the stock owned, directly or indirectly, by or for his brothers and
sisters (whether by the whole or half blood), spouse, ancestors, and lineal
descendants; and stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be considered as being owned proportionately
by or for its shareholders, partners or beneficiaries.
Except as otherwise provided, for all purposes of the Plan relating to
Incentive Stock Options, the term "parent corporation" shall mean any
corporation (other than the Company) in an unbroken chain of corporations ending
with the Company if, on the date of grant of the Incentive Stock Option in
question, each of the corporations other than the Company owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain; and the term "subsidiary
corporation" shall mean any corporation in an unbroken chain of corporations,
beginning with the Company if, on the date of grant of the Option in question,
each of the corporations, other than the last corporation in the chain, owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
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<PAGE>
For all purposes of the Plan relating to Non-incentive Stock Options,
Restricted Stock Grants, and Stock Awards, the terms "parent corporation" and
"subsidiary corporation" as defined above shall be expanded to include, in
addition to the specified entities which are corporations, any unincorporated
trade, business, or partnership in which fifty percent (50%) or more of the
ownership interest in such entity is owned directly or indirectly by the
Company.
6. OPTION PRICE. The price at which shares may be purchased pursuant to an
Option, whether it is an Incentive Stock Option or a Non-incentive Stock Option,
shall not be less than the fair market value of the shares of Common Stock on
the date the Option is granted. However, the Committee in its discretion may
provide that the price at which shares may be purchased shall be more than the
fair market value of the shares of Common Stock on the date the Option is
granted. The Option price determined under this Paragraph 6 shall be referred
to herein as the "Option Price."
In the case of any eligible employee under the Plan who owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the corporation employing the employee, or of its parent or subsidiary
corporation (described in Paragraph 5), the Option Price at which shares may be
purchased pursuant to any Option which is an Incentive Stock Option granted
under this Plan shall not be less than one hundred ten percent (110%) of the
fair market value of the Common Stock on the date the Option is granted.
For all purposes of this Plan, the "fair market value" of a share of Common
Stock as of any particular date shall mean the average of the high and low sales
price of a share of Common Stock on that date as reported by the principal
national securities exchange on which the Common Stock is then listed, if the
Common Stock is then listed on a national securities exchange, or the average of
the bid and asked price of a share of Common Stock on that date as reported in
the NASDAQ listing, if the Common Stock is not then listed on a national
securities exchange, provided that if no closing price or quotes are reported on
that date or, if in the discretion of the Committee, another means of
determining the fair market value of a share of Common Stock at that date shall
be necessary or advisable, the Committee may provide for another means of
determining fair market value.
7. DURATION OF OPTIONS. No Option, whether an Incentive Stock Option or a
Non-incentive Stock Option, shall be exercisable after the expiration of ten
(10) years from the date the Option is granted; and the Committee in its
discretion may provide that the Option shall be exercisable throughout the ten-
year period or during any lesser period of time commencing on or after the date
of grant and ending on or before the expiration of the ten-year period.
Provided, in the case of any eligible employee who owns stock possessing more
than ten percent of the total combined voting power of all classes of stock of
the corporation employing the employee or of its parent or subsidiary
corporation (described in Paragraph 5), no Option which is an Incentive Stock
Option shall be exercisable after the expiration of five (5) years from the date
the Option is granted.
8. MAXIMUM VALUE OF STOCK SUBJECT TO OPTIONS WHICH ARE INCENTIVE STOCK
OPTIONS. Notwithstanding any other provisions of the Plan to the contrary, the
aggregate fair market value (determined as of the date the Option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by the optionee in any calendar year (under this Plan and any
other incentive stock option plan(s) of the Company and any parent or subsidiary
corporation thereof), shall not exceed $100,000. In making this determination,
Options shall be taken into account in the order in which they were granted.
9. AMOUNT EXERCISABLE. Each option may be exercised, so long as it is valid
and outstanding, at a cumulative rate of 20% of the Option shares on each annual
anniversary of the date the Option is granted, beginning with the second
anniversary of the date the Option is granted, or from time to time in part or
as a whole, subject to any limitations with respect to the number of shares for
which the Option may be exercised at a particular time and to such other
conditions as the Committee in its discretion may specify upon granting the
Option. However, the Committee in its absolute discretion may accelerate the
time at which any outstanding Option may be exercised.
10. EXERCISE OF OPTIONS. An optionee may exercise an Option by delivering to
the Company a written notice stating (i) that the optionee wishes to exercise
the Option on the date notice is delivered, (ii) the number of shares of Common
Stock with respect to which the Option is to be exercised, (iii) the address to
which the
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<PAGE>
certificate representing the shares of Common Stock should be mailed, and (iv)
the social security number of the optionee. In order to be effective, the
written notice shall be accompanied by (i) payment of the Option Price of the
shares of Common Stock and (ii) payment of an amount of money necessary to
satisfy the withholding tax liability, if any, that may result from the exercise
of the Option. Each payment shall be made by cash or by check drawn on a
national banking association and payable to the order of the Company in United
States dollars.
At the time of receipt by the Company of written notice of exercise, the
optionee may deliver to the Company, to the extent permitted by law, in payment
of the Option Price of the shares of Common Stock with respect to which the
Option is exercised, (x) certificates registered in the name of the optionee
that represent a number of shares of Common Stock legally and beneficially owned
by the optionee (free of all liens, claims and encumbrances of every kind) and
having a fair market value on the date of receipt by the Company of written
notice that is not greater than the Option Price of the shares of Common Stock
with respect to which the Option is to be exercised, the certificates to be
accompanied by stock powers duly endorsed in blank by the record holder of the
shares of Common Stock represented by certificates (or in lieu of such
certificates, other arrangements for the transfer of shares to the Company which
are satisfactory to the Company), and cash or a check for the balance and (y) if
the Option Price of the shares of Common Stock with respect to which such Option
is to be exercised exceeds the fair market value, a check drawn on a national
banking association and payable to the order of the Company in an amount, in
United States dollars, equal to the amount of the excess plus (z) the amount of
money, in a form acceptable to the Committee, necessary to satisfy the
withholding tax liability, if any, that may result from the exercise of the
Option.
Notwithstanding the provisions of the immediately preceding sentence, the
Committee, in its sole discretion, may refuse to accept shares of Common Stock
in payment of the Option Price of the shares of Common Stock with respect to
which the Option is to be exercised and, in that event, any certificates
representing shares of Common Stock that were received by the Company with
written notice shall be returned to the optionee, together with notice by the
Company to the optionee of the refusal of the Committee to accept the shares of
Common Stock. The Company, upon approval of the Committee and in its sole
discretion, following the request of the optionee, may retain shares of Common
Stock which would otherwise be issued upon exercise of an Option to satisfy the
withholding tax liability that may result from the exercise of an Option. In
this case, the retained shares shall be valued at their then fair market value.
If, at the expiration of seven business days after the delivery to the optionee
of written notice from the Company that it will not accept shares of Common
Stock in payment of the exercise price, the optionee shall not have delivered to
the Company a check or money order drawn on a national banking association and
payable to the order of the Company in an amount, in United States dollars,
equal to the Option Price of the shares of Common Stock with respect to which
such Option is to be exercised, the written notice from the optionee to the
Company shall be ineffective to exercise the Option.
As promptly as practicable after the receipt by the Company of (i) the
written notice from the optionee, (ii) payment, in the form required by the
foregoing provisions of this Paragraph of the Option Price of the shares of
Common Stock with respect to which the Option is to be exercised, and (iii)
payment, in the form required by the foregoing provisions of this Paragraph of
an amount of money necessary to satisfy any withholding tax liability that may
result from the exercise of the Option, the Company shall deliver to the
optionee a certificate representing the number of shares of Common Stock with
respect to which the Option has been exercised, reduced to the extent applicable
by the number of shares retained by the Company as provided above to pay any
required withholding tax liability, the certificate to be registered in the name
of the optionee, provided that delivery shall be considered to have been made
when the certificate shall have been mailed, postage prepaid, to the optionee at
the address specified for that purpose in written notice from the optionee to
the Company.
11. NON-TRANSFERABILITY OF OPTIONS. Options shall not be transferable by the
optionee other than by will or under the laws of descent and distribution, and
shall be exercisable, during the optionee's lifetime, only by the optionee.
12. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE. Except as may be
otherwise expressly provided herein, each Option, to the extent it shall not
previously have been exercised, shall terminate on the earlier of the date of
the expiration of the Option or one day less than three months after the date of
the severance of the employment relationship between the Company and the
optionee, whether with or without cause, for any reason
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<PAGE>
other than the death or disability of the optionee, during which period the
optionee shall be entitled to exercise the Option in respect of the number of
shares that the optionee would have been entitled to purchase had the optionee
exercised the Option on the date of severance of employment. Whether authorized
leave of absence, or absence on military or government service, shall constitute
severance of the employment relationship between the Company and the optionee
shall be determined by the Committee at the time thereof.
In the event of severance because of the disability of the holder of any
Option while in the employ of the Company and before the date of expiration of
the Option, the Option shall terminate on the earlier of the date of expiration
or one day less than one year following the date of severance because of
disability, during which period the optionee shall be entitled to exercise the
Option in respect of the number of shares that the optionee would have been
entitled to purchase had the optionee exercised the Option on the date of
severance because of disability.
In the event of the death of the holder of any Option while in the employ of
the Company and before the date of expiration of the Option, the Option shall
terminate on the earlier of the date of expiration or one day less than one year
following the date of death. After the death of the optionee, the executors,
administrators or any person or persons to whom the Option was transferred by
will or by the laws of descent and distribution, shall have the right, at any
time prior to the expiration of an Option, to exercise the Option in whole or in
part, without regard to any limitation the optionee would have been subject to
had he exercised the Option on the day of his death while in employment.
An employment relationship between the Company and the optionee shall be
deemed to exist during any period in which the optionee is employed by the
Company, by any parent or subsidiary corporation, by a corporation issuing or
assuming a common stock option in a transaction to which Section 424(a) of the
Code applies, or by a parent or subsidiary corporation of the corporation
issuing or assuming a stock option (and for this purpose, the phrase
"corporation issuing or assuming a stock option" shall be substituted for the
word "Company" in the definitions of parent and subsidiary corporations
specified in Paragraph 5 of this Plan, and the parent-subsidiary relationship
shall be determined at the time of the corporate action described in Section
424(a) of the Code).
13. REQUIREMENTS OF LAW. The Company shall not be required to sell or issue
any shares under any Option or Stock Award if the issuance of those shares would
constitute a violation by the optionee, recipient, or the Company of any
provisions of any law or regulation of any governmental authority. Each Option
and Stock Award granted under the Plan shall be subject to the requirements
that, if at any time the Board or the Committee shall determine that the
listing, registration or qualification of the shares subject thereto upon any
securities exchange or under any state or federal law of the United States or of
any other country or governmental subdivision thereof, or the consent or
approval of any governmental regulatory body, or investment or other
representations, are necessary or desirable in connection with the issue or
purchase of shares subject thereto, no Option may be exercised in whole or in
part, or Stock Award issued, unless the listing, registration, qualification,
consent, approval or representations shall have been effected or obtained free
of any conditions not acceptable to the Board. If required at any time by the
Board or the Committee, an Option may not be exercised or a Stock Award issued
until the optionee or recipient has delivered an investment letter to the
Company. In addition, specifically in connection with the Securities Act of
1933 (as now in effect or hereafter amended) (the "1933 Act"), upon exercise of
any Option or entitlement to a Stock Award, the Company shall not be required to
issue the underlying shares unless the Committee has received evidence
satisfactory to it to the effect that the holder of the Option or Stock Award
will not transfer the shares except pursuant to a registration statement in
effect under the 1933 Act or unless an opinion of counsel satisfactory to the
Committee has been received by the Company to the effect that registration is
not required. Any determination in this connection by the Committee shall be
final, binding and conclusive. In the event the shares issuable on exercise of
an Option or pursuant to a Stock Award are not registered under the 1933 Act,
the Company may imprint on the certificate for the shares the following legend
or any other legend which counsel for the Company considers necessary or
advisable to comply with the 1933 Act:
The shares of stock represented by this certificate have not been registered
under the Securities Act of 1933 or under the securities laws of any state
and may not be sold or transferred except upon such registration or upon
receipt by the Corporation of an opinion of counsel satisfactory to the
Corporation,
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<PAGE>
in form and substance satisfactory to the Corporation, that registration is
not required for such sale or transfer.
The Company may, but shall not be obligated to, register any securities covered
hereby pursuant to the 1933 Act (as now in effect or as hereafter amended) and,
in the event any shares are registered, the Company may remove any legend on
certificates representing these shares. The Company shall not be obligated to
take any other affirmative action in order to cause the exercise of an Option or
the issuance of shares pursuant thereto or pursuant to a Stock Award to comply
with any law or regulation of any governmental authority.
14. NO RIGHTS AS SHAREHOLDER. No optionee shall have rights as a shareholder
with respect to shares covered by an Option until the date of issuance of a
stock certificate for the shares; and, except as otherwise provided in Paragraph
18 hereof, no adjustment for dividends, or otherwise, shall be made if the
record date therefor is prior to the date of issuance of the certificate.
15. RESTRICTED STOCK GRANTS. The Committee may issue shares of Common Stock
to an eligible employee subject to the terms of a Restricted Stock Grant. The
shares may be issued for no payment by the employee or for a payment below the
fair market value on the date of grant. Restricted Stock shall be subject to
restrictions as to sale or other transfer and generally will be subject to
vesting over a period of time specified in the Restricted Stock Grant. The
Committee shall determine the number of shares and the price, if any, at which
shares of Restricted Stock will be granted.
Restricted Stock shall be subject to the following terms and conditions as
determined by the Committee, including without limitation any or all of the
following:
(a) a prohibition against the sale, transfer, pledge or other encumbrance
of the shares of Restricted Stock, such prohibition to lapse (i) at such time
or times as the Committee shall determine (whether in annual or more frequent
installments, at the time of the death, disability or retirement of the
holder of such shares, or otherwise);
(b) a requirement that the holder of shares of Restricted Stock forfeit,
or in the case of shares sold to a Participant, resell back to the Company at
his cost, all or a part of such shares in the event of termination of the
holder's employment during any period in which the shares remain subject to
restrictions;
(c) a prohibition against employment of the holder of Restricted Stock by
any competitor of the Company or its affiliates, or against such holder's
dissemination of any secret or confidential information belonging to the
Company or a subsidiary of the Company;
(d) unless stated otherwise in the Restricted Stock Grant, if restrictions
remain at the time of severance of employment with the Company or a parent or
subsidiary corporation, the Restricted Stock shall be forfeited; provided
however, if severance of employment is by reason of disability or death, the
restrictions on the shares shall lapse and the grantee or his heirs or estate
shall be 100% vested in the shares subject to the Restricted Stock Grant.
No holder of Restricted Stock shall exercise the election authorized by
Section 83(b) of the Code without the express written consent of the Committee
to this election. Any grantee of Restricted Stock making this election without
the consent of the Committee shall forfeit all shares of Restricted Stock
granted to him.
Shares of Restricted Stock shall be registered in the name of the grantee and
deposited, together with a stock power endorsed in blank, with the Company.
Each such certificate shall bear a legend in substantially the following form:
The transferability of this certificate and the shares of Common Stock
represented by it are subject to the terms and conditions (including
conditions of forfeiture) contained in The Coastal Corporation 1994
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Incentive Stock Plan, and an agreement entered into between the registered
owner and the Company. A copy of the Plan and agreement is on file in the
office of the Secretary of the Company.
At the end of any time period during which the shares of Restricted Stock are
subject to forfeiture and restrictions on transfer, the shares will be delivered
free of all restrictions to the grantee or to the grantee's legal
representative, beneficiary or heir; provided the certificate shall bear such
legend, if any, as the Committee determines is reasonably required by applicable
law.
Subject to the terms and conditions of the Plan, each grantee receiving
Restricted Stock shall have all the rights of a stockholder with respect to the
shares of Common Stock during any period in which such shares are subject to
forfeiture and restrictions on transfer, including without limitation, the right
to vote such shares. By accepting a Restricted Stock Grant, the grantee agrees
to remit when due any federal and state income and employment taxes required to
be withheld. Dividends paid in cash or property other than stock with respect
to shares of Restricted Stock shall be paid to the grantee currently.
16. STOCK AWARDS.
(a) The Committee may grant Common Stock to an eligible employee under the
Plan, without any payment by the employee, in lieu of certain cash
compensation or as additional compensation. The Stock Award is subject to
appropriate tax withholding. After compliance with the tax withholding
requirements, a stock certificate shall be issued to the employee recipient
of the Stock Award. The certificate shall bear such legend, if any, as the
Committee determines is reasonably required by applicable law. Prior to
receipt of a Stock Award, the employee must comply with appropriate requests
of the Committee to assure compliance with all relevant laws.
(b) The Committee may award shares of Common Stock, without any payment
for such shares, to designated employees if specified performance goals
established by the Committee are satisfied. The terms and provisions herein
relating to performance-based Stock Awards are intended to satisfy Section
162(m) of the Code and regulations issued thereunder. The designation of an
employee eligible for a specific performance-based Stock Award shall be made
by the Committee in writing prior to the beginning of the 12-month period for
which the performance is measured. The Committee shall establish the number
of shares to be issued to a designated employee if the performance goal is
met; provided the maximum number of shares which may be issued to any one
employee per year under this Paragraph 16 is 100,000 shares. The Committee
must certify in writing that a performance goal has been met prior to
issuance of any certificate for a performance-based Stock Award to any
employee. If the Committee certifies the entitlement of an employee to the
performance-based Stock Award, the certificate shall be issued to the
employee as soon as administratively practicable, and subject to other
applicable provisions of the Plan, including but not limited to, all legal
requirements and tax withholding.
Performance goals determined by the Committee may be based on specified
increases in net profits, stock price, Company or segment sales, market
share, earnings per share, and/or return on equity.
The employees eligible for a performance-based Stock Award are the senior
officers (i.e., Vice President, Secretary, Treasurer, and above) of the
Company and its subsidiaries.
17. EMPLOYMENT OBLIGATION. The granting of any Option, Restricted Stock
Grant, or Stock Award shall not impose upon the Company any obligation to employ
or continue to employ any optionee or grantee; and the right of the Company to
terminate the employment of any officer or other employee shall not be
diminished or affected by reason of the fact that an Option, Restricted Stock
Grant or Stock Award, has been granted to him.
18. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of outstanding
Options, Restricted Stock Grants, and Stock Awards shall not affect in any way
the right or power of the Company or its shareholders to make
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or authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or other
capital readjustment, the payment of a dividend in capital stock or other equity
securities of the Company on its Common Stock or other increase or reduction of
the number of shares of the Common Stock outstanding, without receiving
consideration therefor in money, services, or property, or the reclassification
of its Common Stock, in whole or in part, into other equity securities of the
Company, then (a) the number, class and per share price of shares of Common
Stock subject to outstanding Options, Restricted Stock Grants, and Stock Awards
hereunder shall be appropriately adjusted (or in the case of the issuance of
other equity securities as a dividend on, or in a reclassification of, the
Common Stock, the Options, Restricted Stock Grants, and Stock Awards shall
extend to such other securities) in a manner so as to entitle an optionee or a
grantee to receive, upon exercise of an Option, for the same aggregate cash
consideration, and for the vesting of Restricted Stock, and award of pending
performance-based Stock Awards, the same total number and class or classes of
shares (or in the case of a dividend of, or reclassification into, other equity
securities, those other securities) he would have held after adjustment if he
had exercised his Option, or the Restricted Stock was vested in full, or the
Stock Award was earned, immediately prior to the event requiring the adjustment,
or, if applicable, the record date for determining shareholders to be affected
by the adjustment; and (b) the number and class of shares then reserved for
issuance under the Plan (or in the case of a dividend of, or reclassification
into, other equity securities, those other securities) shall be adjusted by
substituting for the total number and class of shares of stock then reserved,
the number and class or classes of shares of stock (or in the case of a dividend
of, or reclassification into, other equity securities, those other securities)
that would have been received by the owner of an equal number of outstanding
shares of Common Stock as a result of the event requiring the adjustment.
Comparable rights shall accrue to each optionee or employee in the event of
successive subdivisions, consolidations, capital adjustments, dividends or
reclassifications of the character described above.
After a merger of one or more corporations into the Company, after any
consolidation of the Company and any one or more corporations, or after any
other corporate transaction described in Section 424(a) of the Code in which the
Company shall be the surviving corporation, each optionee, at no additional
cost, shall be entitled to receive (subject to any required action by
stockholders), upon any exercise of his Option, in lieu of the number of shares
as to which the Option shall then be exercisable, the number and class of shares
of stock or other securities to which the holder would have been entitled
pursuant to the terms of the agreement of merger or consolidation, if,
immediately prior to such merger or consolidation, such holder had been the
holder of a number of shares of Common Stock equal to the number of shares as to
which the Option shall then be exercised and, if as a result of the merger,
consolidation or other transaction, the holders of Common Stock are not entitled
to receive any shares of Common Stock pursuant to the terms thereof, each
optionee, at no additional cost, shall be entitled to receive, upon exercise of
his Option, other assets and property, including cash, to which he would have
been entitled if at the time of such merger, consolidation or other transaction
he had been the holder of the number of shares of Common Stock equal to the
number of shares as to which the Option shall then be exercised. Comparable
rights shall accrue to each optionee in the event of successive mergers or
consolidations of the character described above. Appropriate adjustments shall
also be made to shares of Restricted Stock and to pending Stock Awards.
If the Company is merged into or consolidated with another corporation under
circumstances where the Company is not the surviving corporation, or if the
Company is liquidated, or sells or otherwise disposes of substantially all its
assets to another corporation while unexercised Options remain outstanding under
the Plan, (i) subject to the provisions of clause (iii) below, after the
effective date of such merger, consolidation or sale, as the case may be, each
holder of an outstanding Option shall be entitled, upon exercise of such Option,
to receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of the merger, consolidation or sale; (ii) the Board may waive any
limitations set forth in or imposed pursuant to Paragraph 9 hereof so that all
Options from and after a date prior to the effective date of such merger,
consolidation, liquidation or sale, as the case may be, specified by the Board
shall be exercisable in full; and (iii) all outstanding Options may be canceled
by the Board as of the effective date of any
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such merger, consolidation, liquidation or sale provided that (x) notice of such
cancellation shall be given to each holder of an Option and (y) each holder of
an Option shall have the right to exercise such Option in full (without regard
to any limitations set forth in or imposed pursuant to Paragraph 9 hereof)
during a 30-day period preceding the effective date of such merger,
consolidation, liquidation, sale or acquisition.
Except as hereinbefore expressly provided, the issue by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, for cash or property, or for labor or services either upon direct sale or
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, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to outstanding Options, Restricted Stock Grants, or Stock Awards.
19. SUBSTITUTION OPTIONS. Options may be granted under the Plan from time to
time in substitution for stock options held by employees of other corporations
who are about to become employees of the Company, or whose employer is about to
become a parent or subsidiary corporation of the Company, as a result of the
merger or consolidation of the Company with another corporation, or the
acquisition by the Company of substantially all the assets of another
corporation, or the acquisition by the Company of at least 50% of the issued and
outstanding stock of another corporation as the result of which it becomes a
subsidiary of the Company, conditioned in the case of an Incentive Stock Option
upon the employee being an employee of the Company or a parent or subsidiary
corporation of the Company. The terms and conditions of the substitute Options
granted may vary from the terms and conditions set forth in the Plan to the
extent the Board at the time of grant may deem appropriate to conform, in whole
or in part, to the provisions of the stock options in substitution for which
they are granted, but with respect to stock options which are incentive stock
options, no variation shall be such as to affect the status of any substitute
option as an incentive stock option under Section 422 of the Code.
20. AMENDMENT OR TERMINATION OF PLAN. The Board may modify, revise or
terminate the Plan at any time and from time to time; provided, however, that
without the further approval by the affirmative vote of a majority of the votes
cast attributable to shares present in person or by proxy and entitled to vote
at a meeting of shareholders, or if the provisions of the corporate charter, by-
laws or applicable state law prescribes a greater degree of shareholder approval
for this action, without the degree of shareholder approval thus required, the
Board may not (a) change the aggregate number of shares which may be issued
under Options, Restricted Stock Grants, and Stock Awards pursuant to the
provisions of the Plan, (b) extend the term during which an Option, Restricted
Stock Grant, or Stock Award may be exercised or granted or the termination date
of the Plan, (c) change the class of employees eligible to receive Options,
Restricted Stock Grants, or Stock Awards under the Plan, or (d) reduce the
Option Price; unless, in each such case, the Board shall obtain an opinion of
legal counsel to the effect that shareholder approval of the amendment is not
required (i) by law, (ii) by the applicable rules and regulations of, or any
agreement with, any national securities exchange on which the Common Stock is
then listed or if the Common Stock is not so listed, the rules and regulations,
or any agreement with, the National Association of Securities Dealers, Inc., and
(iii) in order to make available to the optionee with respect to any option
granted under the Plan, the benefits of Rule 16b-3 of the Rules and Regulations
under the Exchange Act, or any similar or successor rule. In addition, the
Board shall have the power to make changes in the Plan and in the regulations
and administrative provisions hereunder or in any outstanding Option as in the
opinion of counsel for the Company may be necessary or appropriate from time to
time to enable any Option granted pursuant to the Plan to qualify as an
Incentive Stock Option under Section 422 of the Code, and the regulations which
may be issued thereunder as in existence from time to time.
21. FORFEITURES. Notwithstanding any other provisions of this Plan, if the
Committee finds by a majority vote after full consideration of the facts that
the employee, before or after termination of his employment with the Company or
its subsidiaries for any reason (a) committed or engaged in fraud, embezzlement,
theft, commission of a felony, or proven dishonesty in the course of his
employment by the Company or its subsidiaries, which conduct damaged the Company
or its subsidiaries, or disclosed trade secrets of the Company or its
subsidiaries, or (b) participated, engaged in or had a financial or other
interest, whether as an employee, officer, director, consultant, contractor,
shareholder, owner, or otherwise, in any commercial endeavor in the United
States which is competitive with the business of the Company or its subsidiaries
without the written consent of the Company or
A-9
<PAGE>
its subsidiaries, the employee shall forfeit all outstanding Options and
Restricted Stock which is not fully vested, including all rights related to such
matters, and including all unexercised Options, exercised Options, and any
performance based Stock Awards to which he may be entitled, and other elections
pursuant to which the Company has not yet delivered a stock certificate. Clause
(b) shall not be deemed to have been violated solely by reason of the employee's
ownership of stock or securities of any publicly owned corporation, if that
ownership does not result in effective control of the corporation, and if
written notice of the ownership is given the Committee by the employee within 60
days after the later of the date on which the employee is notified of a grant of
an Option, Restricted Stock Grant, or Stock Award under this Plan or the date on
which the employee acquires the ownership.
The decision of the Committee as to the cause of the employee's discharge,
the damage done to the Company or its subsidiaries, and the extent of the
employee's competitive activity shall be final. No decision of the Committee,
however, shall affect the finality of the discharge of the employee by the
Company or its subsidiaries in any manner. To provide the Company with an
opportunity to enforce this Section, no certificate for Stock may be issued
under this Plan without the certification by the Committee that no action
forbidden by this provision has been raised for their determination.
22. TAX WITHHOLDING. The Company or any parent or subsidiary shall be
entitled to deduct from other compensation payable to each employee any sums
required by federal, state, or local tax law to be withheld with respect to the
grant, exercise, or vesting, as appropriate, of an Option, Restricted Stock
Grant, or Stock Award. In the alternative, the Company may require the employee
(or other person exercising the Option, or receiving the Restricted Stock or
Stock Award) to pay the sum directly to the employer corporation. If the
employee (or other person) is required to pay the sum directly, payment in cash
or by check of such sums for taxes shall be delivered within five (5) days after
the date of exercise. The Company shall have no obligation upon exercise of any
Option, vesting of Restricted Stock or issuance of a Stock Award until payment
has been received, unless withholding (or offset against a cash payment) as of
or prior to the date of exercise is sufficient to cover all sums due with
respect to that exercise or vesting. The Company shall not be obligated to
advise an employee of the existence of the tax or the amount which the employer
corporation will be required to withhold.
23. WRITTEN AGREEMENT. Each Option, Restricted Stock Grant, and Stock Award
granted hereunder shall be embodied in a written agreement, which shall be
subject to the terms and conditions prescribed herein, and shall be signed by
the optionee or grantee and by an appropriate officer of the Company for and in
the name and on behalf of the Company. Each agreement shall contain other
provisions which the Committee in its discretion shall deem advisable.
24. INDEMNIFICATION OF COMMITTEE. The Company shall, to the fullest extent
provided by law, indemnify each present and future member of the Committee
against, and each member of the Committee shall be entitled without further act
on his part to indemnity from the Company for all expenses (including the amount
of judgments and the amount of approved settlements made with a view to the
curtailment of costs of litigation, other than amounts paid to the Company
itself) reasonably incurred by him in connection with or arising out of any
action, suit or proceeding in which he may be involved by reason of his being or
having been a member of the Committee, whether or not he continues to be a
member of the Committee at the time of incurring such expenses; provided,
however, that such indemnity shall not include any expenses incurred by any such
member of the Committee (a) in respect of matters as to which he shall be
finally adjudged in any such action, suit or proceeding to have been guilty of
gross negligence or willful misconduct in the performance of his duty as such
member of the Committee, or (b) in respect of any matter in which any settlement
is effected, to an amount in excess of the amount approved by the Company on the
advice of its legal counsel; and provided further, that no right of
indemnification under the provisions set forth herein shall be available to or
enforceable by any such member of the Committee unless, within sixty (60) days
after institution of any such action, suit or proceeding, he shall have offered
the Company, in writing, the opportunity to handle and defend same at its own
expense. The foregoing right of indemnification shall inure to the benefit of
the heirs, executors or administrators of each member of the Committee and shall
be in addition to all other rights to which the member of the Committee may be
entitled as a matter of law, contract, or otherwise.
A-10
<PAGE>
25. EFFECTIVE DATE OF PLAN. The Plan shall become effective and shall be
deemed to have been adopted on March 3, 1994, if within one year of that date it
shall have been approved by the affirmative vote of a majority of the votes cast
attributable to shares present in person or by proxy and entitled to vote at a
meeting of stockholders, or if the provisions of the corporate charter, by-laws
or applicable state law prescribes a greater degree of shareholder approval for
this action, the approval by the holders of that percentage, at a meeting of
shareholders. No Option, Restricted Stock Grant, or Stock Award shall be
granted pursuant to the Plan after March 2, 2004.
A-11
<PAGE>
APPENDIX B
THE COASTAL CORPORATION
STOCK PURCHASE PLAN
Restated
As of January 1, 1994
<PAGE>
THE COASTAL CORPORATION
STOCK PURCHASE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
1 Name, Effective Date and Purpose............... B-1
2 Definitions.................................... B-1
2.1 Administrator.................................. B-1
2.2 Administrative Agent........................... B-1
2.2A Board of Directors Member...................... B-1
2.3 Business Day................................... B-1
2.4 Coastal........................................ B-1
2.5 Company........................................ B-1
2.6 Company Stock.................................. B-1
2.7 Current Market Value........................... B-1
2.8 Employee....................................... B-1
2.9 Employer....................................... B-1
2.10 Enrollment Form................................ B-1
2.11 Internal Settlement Date....................... B-1
2.12 Participant.................................... B-1
2.13 Plan........................................... B-1
2.14 Plan Year...................................... B-2
2.15 Subsidiary..................................... B-2
2.16 Masculine pronouns............................. B-2
2.17 Singular....................................... B-2
3 Eligibility and Participation.................. B-2
3.1 Participation.................................. B-2
3.2 Payroll Deduction.............................. B-2
3.3 Change or Termination of Payroll Deduction..... B-2
3.4 Optional Payment............................... B-2
3.5 Minimum Contribution........................... B-3
3.6 Purchase and Sales............................. B-3
3.7 Purchase and Sale Commissions and Other Costs.. B-3
3.8 Cost of Shares - Purchase and Sale............. B-3
3.9 Withdrawal by Participant...................... B-4
3.10 Dividends...................................... B-5
3.11 Vesting........................................ B-5
3.12 Registration of Certificates................... B-5
3.13 Full Investment and Fractional Shares.......... B-5
3.14 Reports........................................ B-5
4 Claims......................................... B-5
4.1 Claim and Appeal to Administrator.............. B-5
5 Administration and Miscellaneous............... B-6
5.1 Plan Administrator............................. B-6
5.2 Rights Not Expanded............................ B-6
5.3 Exercise of Ownerships Rights.................. B-6
5.4 Assignment of Assets........................... B-7
5.5 Administrative Agent........................... B-7
5.6 Applicable Law................................. B-7
5.7 Participant Cannot be Located.................. B-7
5.8 Notices by Participants........................ B-7
6 Modification and Termination B-7
</TABLE>
(i)
<PAGE>
THE COASTAL CORPORATION
STOCK PURCHASE PLAN
(Restated as of January 1, 1994)
SECTION 1
---------
NAME, EFFECTIVE DATE AND PURPOSE
--------------------------------
The name of this Plan is "The Coastal Corporation Stock Purchase Plan" and the
Plan became effective as of April 1, 1988. The Plan was restated as of January
1, 1994. The purpose of the Plan is to provide Participants with a convenient
and economical way to purchase Common Stock of the Company.
SECTION 2
---------
DEFINITIONS
-----------
2.1 "Administrator" means Coastal.
2.2 "Administrative Agent" means a person or firm designated by the Company
to perform the ministerial functions required by the Plan and such
other duties as the Company shall designate.
2.2A "Board of Directors Member" means a person who is a member of the Board
of Directors of the Company or any Subsidiary including any person who
is designated as a "Director Emeritus" with respect to a Board of
Directors of Coastal or a Subsidiary.
2.3 "Business Day" is a day the New York Stock Exchange is open for
business.
2.4 "Coastal" means the Company.
2.5 "Company" means The Coastal Corporation, a Delaware corporation.
2.6 "Company Stock" means common stock of Coastal.
2.7 "Current Market Value" means the closing price in the daily composite
list for transactions on the New York Stock Exchange and other markets
on the applicable date.
2.8 "Employee" means an employee of an Employer for purposes of payment of
federal employment taxes.
2.9 "Employer" means the Company and any Subsidiary.
2.10 "Enrollment Form" means the form or forms provided by the Administrator
for the purposes of indicating enrollment in the Plan by a Participant,
the amount and type of contribution to be made by a Participant, and
any changes to any of the foregoing.
2.11 "Internal Settlement Date" is April 15, 1988 and the last Business Day
of every other week thereafter.
2.12 "Participant" means a Board of Directors Member or an Employee who is
eligible for participation under the Plan and who elects to enroll in
the Plan or who has an account balance under the Plan due to prior
enrollment.
2.13 "Plan" means The Coastal Corporation Stock Purchase Plan as amended
from time to time.
<PAGE>
2.14 "Plan Year" means the calendar year.
2.15 "Subsidiary" includes any corporation in which Coastal owns, directly
or indirectly, at least fifty percent of the outstanding voting
securities.
2.16 Masculine pronouns shall include the feminine gender where appropriate.
2.17 Singular form of words shall include the plural where appropriate.
SECTION 3
---------
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 Participation
An Employee of an Employer may enroll for payroll deduction or submit
an optional payment and become a Participant. A Participant who owns
shares of Common Stock not held by the Plan may not contribute such
shares to his Plan account.
A Board of Directors Member may submit an optional payment or direct in
writing that director fees or other compensation for services from the
Company or a Subsidiary be contributed to the Plan as an optional
payment in lieu of payment of such amounts to such Board of Directors
Member. Such Board of Directors Member shall become a Participant when
such optional payment is received by the Administrator.
3.2 Payroll Deduction
To enroll for payroll deduction, an Enrollment Form must be completed
by the Employee and submitted to the Administrator. The Enrollment Form
must be received by the Administrator prior to the beginning of a pay
period to be effective for such period.
3.3 Change or Termination of Payroll Deduction
a) A person may submit an Enrollment Form to change or terminate
contributions through payroll deductions at any time. Such change
or discontinuance must be received by the Administrator prior to
the beginning of a pay period to be effective for such period.
b) If a Participant ceases to contribute by payroll deduction while
an Employee, such person may not reenroll for payroll deduction
for twelve weeks.
3.4 Optional Payment
a) An Employee may submit an optional payment to the Administrator.
Such optional payment may be in addition to or in lieu of payroll
deduction contributions.
b) An Employer may submit an optional payment or Company Stock to the
Administrator for the account of an Employee.
c) A Board of Directors Member may submit an optional payment to the
Administrator.
d) The Company or a Subsidiary may submit an optional payment to the
Administrator on behalf of and pursuant to the written direction
of a Board of Directors Member.
B-2
<PAGE>
3.5 Minimum Contribution
The minimum contribution amount shall be five dollars per week for
contributions made through payroll deduction or five hundred dollars
per payment for contributions made through the optional payment method.
Such minimum shall not apply to optional contributions made by an
Employer.
3.6 Purchase and Sales
a) The Administrator shall advise the Administrative Agent performing
the brokerage function of the amount of cash, if any, to be
applied to purchase shares of Company Stock in the open market or
the number of shares, if any, of Company Stock to be sold in the
open market. Such advice shall be furnished by the Administrator
on (i) the Business Day following each Internal Settlement Date,
(ii) the Business Day following the last Business Day of each
week, and (iii) each other Business Day following the date of a
transfer of funds by the Administrator to an account used by the
Administrative Agent to purchase Company Stock.
b) In determining the dollar amount to be invested and the number of
shares to be sold, the Administrator shall first determine the
amount of payroll and optional contributions received and the
number of shares of stock to be sold from the accounts of
Participants. In lieu of transferring funds to the Administrative
Agent for the purchase of shares, the Administrator shall match
funds for purchase with shares designated for sale as of each
Internal Settlement Date. The Administrator shall determine the
amount, if any, of contributions available for the purchase of
shares in the open market or the number of shares, if any,
available for sale in the open market.
c) The Administrative Agent performing brokerage functions shall
purchase or sell shares and report such purchases and sales to the
Administrator. The Administrative Agent shall be solely
responsible for determining the prices at which, and the number of
shares of, Company Stock to be purchased or sold at any one time.
3.7 Purchase and Sale Commissions and Other Costs
a) The Participants shall bear all expenses of purchases and sales
including applicable commissions, taxes, fees, and other charges.
b) The Employer shall bear the costs of administration of the Plan.
3.8 Cost of Shares - Purchase and Sale
a) Purchases of Company Stock shall be allocated to accounts of
Participants on a monthly basis. The weighted average price per
share for shares purchased with respect to a month shall be used
in such allocation.
b) Sales of Company Stock shall be allocated to accounts of
Participants as of each Internal Settlement Date. The weighted
average sales price per share for shares sold with respect to an
allocation period shall be used in such allocation. Such weighted
average sales price for an allocation period shall include the
Current Market Value of shares which were disposed of through
internal investment within the Plan as of an Internal Settlement
Date and shares sold in the open market before or after such date
which were sold pursuant to a withdrawal request effective as of
such Internal Settlement Date.
B-3
<PAGE>
c) The weighted average price per share for shares acquired and
disposed of during an allocation period shall be computed
separately for acquisitions and dispositions using the method
outlined herein. The weighted average purchase price is determined
by dividing the sum of (i) and (ii) by the sum of (iii) and (iv).
For this purpose, (i) is the total purchase price including
commissions, taxes, fees and other charges of shares purchased on
the open market with respect to the allocation period. For this
purpose, (ii) is the total Current Market Value of shares acquired
by the Plan from accounts of Participants for whom shares are
being disposed of by the Plan with respect to the allocation
period. The Current Market Value shall be determined as of the
appropriate Internal Settlement Date with respect to shares
acquired by the Plan as of such date. For this purpose, (iii) is
the total number of shares purchased in the open market with
respect to such allocation period. For this purpose, (iv) is the
total number of shares acquired by the Plan from accounts of
Participants for whom shares were being disposed of by the Plan
with respect to such allocation period.
The weighted average sales price shall be determined on the same
basis using dispositions of stock to the Plan and sales of stock
in the open market with respect to the appropriate allocation
period for such dispositions and sales. The average sales price of
shares sold in the open market shall be the net sales price
determined by subtracting applicable commissions, taxes, fees and
other charges from the gross sales price.
3.9 Withdrawal by Participant
a) Each Participant may withdraw Company Stock or, if approved by the
Administrator, cash from the Plan by submitting a written request
to the Administrator. In its discretion, the Administrator may
decline to process a cash withdrawal request and elect instead to
deliver shares of Company Stock. A written request for a
withdrawal of cash must be received by the Administrator at least
two days prior to an Internal Settlement Date to be effective as
of such date. Request for a sale of stock due to a withdrawal of
cash from the Plan shall be effective as of an Internal Settlement
Date only and not on any other date. Stock may be withdrawn as of
any date the transfer agent is open for business. However, the
transfer agent for Company Stock may require that requests for
withdrawal be received by it two business days prior to issuance
of certificates.
b) The minimum amount a Participant may withdraw is the lesser of his
allocated account balance or the value of one hundred shares of
Company Stock. Such withdrawals may be in the form of stock or, if
approved by the Administrator, cash. In general, a Participant
who requests a distribution of the value of twenty-five or fewer
shares and who does not own Company Stock in addition to Company
Stock held by the Plan, shall receive the distribution in cash
unless the Administrator, in its discretion, elects to make the
distribution in Company Stock.
c) Fractional shares must be disposed of and the proceeds withdrawn
as cash.
d) A Participant who withdraws less than the value of one hundred
shares of Company Stock is not eligible for a subsequent
withdrawal of less than the value of one hundred shares of stock
for twelve weeks after such withdrawal. Such twelve week period
shall not apply to one withdrawal after termination of employment
with the Company and Subsidiaries.
e) Participants who are deemed to be "affiliates" of the Company
under the Securities Act of 1933 (the "Act") may sell or transfer
shares only in accordance with the provisions of Rule 144 under
such Act, in a transaction otherwise exempt from registration
under such Act or pursuant to an effective registration under such
Act.
B-4
<PAGE>
3.10 Dividends
a) Dividends shall be allocated to the accounts of Participants based
upon their allocated account balance as of the record date for
such dividend. Dividends payable on shares of Company Stock
credited to a Participant's account under the Plan (including
dividends with respect to fractions) will be automatically
reinvested in additional shares of Company Stock. In the case of
those foreign Participants whose dividends are subject to United
States federal income tax withholding, the Administrator shall
apply the net amount of the dividends of such Participants, after
the deduction of taxes, to the purchase of shares of Company
Stock.
b) Any shares of stock distributed by the Company as a stock dividend
on shares credited to a Participant's account, or upon any split
of such shares, will be credited to the Participant's account. In
a rights offering, a Participant's entitlement will be based upon
the Participant's total holdings of whole shares credited to his
account under the Plan.
3.11 Vesting
Each Participant shall at all times be fully vested in his account
balance. No amounts held by the Plan shall be forfeitable.
3.12 Registration of Certificates
Company Stock under the Plan shall be registered in the name of an
Administrative Agent.
3.13 Full Investment and Fractional Shares
Fractions of shares, as well as full shares, shall be credited to
Participants' accounts. Fractions of shares shall be computed to three
decimal places.
3.14 Reports
Each Participant having an account balance in the Plan will receive a
quarterly statement of his account. In addition, each Participant will
receive any new or revised Prospectus for the Plan and the same
information sent to every other stockholder, including the Company's
annual report to stockholders, quarterly reports to stockholders, a
notice of annual meeting and proxy statement and federal income tax
information for reporting dividends paid by the Company.
SECTION 4
---------
CLAIMS
------
4.1 Claim and Appeal to Administrator
A Participant who believes that he is entitled to any benefit or right
provided under the Plan shall have the right to file a written claim
with the Administrator. All such claims shall state the basis for the
claim, the action to be taken by the Administrator, sufficient
information to enable the Administrator to determine the validity of
the claim, and shall be signed by the claimant. It shall be considered
filed on the date the claim is received by the Administrator.
Within ninety days after receipt of the claim by the Administrator,
notice of the decision of the Administrator shall be furnished to the
claimant or, in lieu thereof, the claimant shall be notified of any
special circumstances which require an extension of time for processing
the claim and the date by which the Administrator expects to render a
final decision. Any required extension of time
B-5
<PAGE>
may not exceed ninety days. The claim shall be either honored or denied
in the decision and if denied (in whole or in part), the Administrator
shall provide the claimant with a written statement of the reasons for
such denial. The statement shall be delivered to the claimant or sent
by certified mail to the last known address of the claimant.
Within ninety days after receipt of notice of the denial of a claim for
benefits as provided above, the claimant and/or his authorized
representative may request, in writing, to appear before the
Administrator for a review of his claim. In conducting its review, the
Administrator shall consider any written statement or other evidence
presented by the claimant and/or his authorized representative in
support of his claim. The Administrator shall give the claimant and his
authorized representative reasonable access to all pertinent documents
necessary for the preparation of his claim.
Within sixty days after receipt by the Administrator of a written
request for review of his claim, or, in the event of circumstances
which require additional time for review, not later than one hundred
twenty days after receipt of such request, the Administrator shall
notify the claimant of its decision by delivery to him or by certified
or registered mail sent to his last known address. The decision of the
Administrator shall be in writing and shall include the reasons for the
decision and references to relevant Plan provisions. The decision of
the Administrator shall be final and conclusive.
SECTION 5
---------
ADMINISTRATION AND MISCELLANEOUS
--------------------------------
5.1 Plan Administrator
The Company shall be the Administrator of the Plan and shall have final
responsibility for duties delegated to it by the Plan and all duties
which are not specifically delegated to others. The decisions of the
Administrator shall be conclusive and binding with respect to all
persons. The Administrator, Employer and Administrative Agent shall
not be liable for any act done in good faith or for any omission to act
in good faith, including, without limitation, any claim of liability
arising out of failure to terminate a Participant's account upon such
Participant's death, prior to receipt of notice in writing of such
death. The Administrator may adopt rules and regulations to facilitate
the administration of the Plan.
5.2 Rights Not Expanded
The establishment of this Plan shall not be construed as giving to any
Participant or other person any legal or equitable right against the
Employer, any officer or employee thereof, or any Administrative Agent
except as herein provided. Under no circumstances shall the terms of
employment of any Participant be modified or in any way affected
hereby.
5.3 Exercise of Ownerships Rights
a) In the event of a tender or exchange offer for shares held by the
Plan, each Participant will be furnished with any information
distributed to shareholders of such stock in connection with such
offer. Additionally, the Company will make suitable arrangements
with an independent third party to ensure that Participants shall
have the right to determine confidentially whether shares under
the Plan will be tendered in a tender or exchange offer. With
respect to shares allocated to his account, each Participant has
the right to direct the manner in which to respond to such offer.
B-6
<PAGE>
b) Before each annual or special meeting of the stockholders of
Coastal, each Participant will be furnished with a copy of the
proxy solicitation material for such meeting and instructions will
be requested from each Participant as to the voting of the Company
Stock credited to his account.
5.4 Assignment of Assets
Shares of Company Stock credited to the account of a Participant under
the Plan may not be pledged as collateral. A Participant who wishes to
pledge such shares must request that certificates for such shares be
issued in his name.
Any voluntary or involuntary assignment or alienation of the account of
a Participant shall be considered as a request for withdrawal when the
Administrator receives notice of such assignment or alienation.
5.5 Administrative Agent
The Administrator may appoint an Administrative Agent to perform duties
of the Administrator.
5.6 Applicable Law
This Plan shall be construed according to applicable federal laws and
the law of the State of Delaware.
5.7 Participant Cannot be Located
In the event that the Administrator is unable to locate a Participant
or another recipient entitled to a distribution from the Plan, the
undistributed amount shall be disposed of in accordance with applicable
laws.
5.8 Notices by Participants
Enrollment Forms and any notices or correspondence by Participants
shall be directed to:
The Coastal Corporation
Shareholder Relations
9 Greenway Plaza
Houston, TX 77046
SECTION 6
---------
MODIFICATION AND TERMINATION
----------------------------
The Administrator shall have the right to suspend, modify or terminate
the Plan at any time. All Participants shall be given notice of any
such suspension, modification or termination.
B-7
<PAGE>
PROXY
THE COASTAL CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE MAY 5, 1994 ANNUAL MEETING
The undersigned hereby appoints O.S. WYATT, JR., HAROLD BURROW and DAVID A.
ARLEDGE, and each of them, proxies, with power of substitution, to vote all
stock owned by the undersigned of THE COASTAL CORPORATION at the Annual Meeting
of Stockholders to be held on May 5, 1994, and at any and all adjournments
thereof, hereby revoking any proxy heretofore given.
PLEASE SIGN, DATE AND RETURN YOUR PROXY
promptly in the enclosed envelope. Sign
exactly as name(s) appear(s) hereon. Joint
owners should each sign. When signing in a
fiduciary capacity, please give full title.
-------------------------------
Date
-------------------------------
Signature(s)
-------------------------------
-Continued on Reverse Side-
PLEASE DETACH, SIGN, DATE AND MAIL YOUR PROXY
YOUR VOTE IS IMPORTANT
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AT THE ANNUAL MEETING OF
STOCKHOLDERS AND SAVE THE EXPENSE OF A SECOND MAILING, WOULD YOU PLEASE RETURN
YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES.
PROXY
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, IT WILL BE
VOTED FOR ALL NOMINEES NAMED BELOW, FOR PROPOSALS 2 AND 3 AND AGAINST PROPOSAL
4. THE CLASS OF STOCK VOTED BY THIS PROXY IS INDICATED ON THE REVERSE SIDE, AND
THE SHARES REPRESENTED WILL BE VOTED (COMMON STOCK AND PREFERRED STOCK - ONE
VOTE PER SHARE, AND CLASS A COMMON STOCK - ONE HUNDRED VOTES PER SHARE) AS
FOLLOWS:
(1) The Board of Directors unanimously recommends a vote FOR all persons
named below:
Elect four Class II directors to terms of office expiring at the 1997
Annual Meeting of Stockholders as follows:
ELECTION OF ONE DIRECTOR BY HOLDERS OF COMMON AND PREFERRED STOCK
VOTING TOGETHER AS A CLASS:
DAVID A. ARLEDGE
ELECTION OF THREE DIRECTORS BY HOLDERS OF COMMON, CLASS A COMMON AND
PREFERRED STOCK VOTING TOGETHER AS A CLASS:
GEORGE L. BRUNDRETT, JR., L.D. WOODDY, JR. AND O.S. WYATT, JR.
FOR / / all persons named above, WITHHOLD / / authority to vote
except authority withheld for all persons
as to the following person(s), named above.
if any.
----------------------------------
(2) The Board of Directors unanimously recommends a vote FOR the following
proposal:
FOR / / AGAINST / / ABSTAIN / / PROPOSAL TO ADOPT THE 1994
INCENTIVE STOCK PLAN.
(3) The Board of Directors unanimously recommends a vote FOR the following
proposal:
FOR / / AGAINST / / ABSTAIN / / PROPOSAL TO ADOPT THE STOCK
PURCHASE PLAN.
(4) The Board of Directors unanimously recommends a vote AGAINST the
following proposal:
FOR / / AGAINST / / ABSTAIN / / STOCKHOLDER PROPOSAL
DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT.
(5) In their discretion on such other matters as may properly come before the
meeting.
PLEASE DETACH, SIGN AND DATE (ON REVERSE) AND MAIL YOUR PROXY
YOUR VOTE IS IMPORTANT
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AT THE ANNUAL MEETING OF
STOCKHOLDERS AND SAVE THE EXPENSE OF A SECOND MAILING, WOULD YOU PLEASE RETURN
YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES.
<PAGE>
THE COASTAL CORPORATION
VOTING INSTRUCTIONS FOR THE MAY 5, 1994 ANNUAL MEETING.
The undersigned hereby instructs Texas Commerce Bank National Association, the
Plan Trustee of the securities identified below, to vote all stock beneficially
owned by the undersigned in such plan of THE COASTAL CORPORATION at the Annual
Meeting of Stockholders to be held on May 5, 1994, and at any and all
adjournments thereof, hereby revoking any instructions heretofore given.
PLEASE SIGN, DATE AND RETURN YOUR
INSTRUCTIONS promptly in the enclosed
envelope. Sign exactly as name appears
hereon. When signing in a fiduciary
capacity, please give full title.
-------------------------------
Date
-------------------------------
Signature
-CONTINUED ON REVERSE SIDE-
PLEASE DETACH, SIGN, DATE AND MAIL YOUR INSTRUCTIONS
YOUR INSTRUCTIONS ARE IMPORTANT
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AT THE ANNUAL MEETING OF
STOCKHOLDERS AND SAVE THE EXPENSE OF A SECOND MAILING, WOULD YOU PLEASE
RETURN YOUR INSTRUCTIONS PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
These INSTRUCTIONS will be followed as directed, but if not otherwise directed,
the shares will be voted FOR all nominees named below, FOR Proposals 2 and 3 and
AGAINST Proposal 4. The class of stock voted by these instructions is indicated
on the reverse side, and the shares represented will be voted (Common Stock and
Preferred Stock - one vote per share, and Class A Common Stock - one hundred
votes per share) as follows:
(1) The Board of Directors unanimously recommends a vote FOR all persons
named below:
Elect four Class II directors to terms of office expiring at the 1997
Annual Meeting of Stockholders as follows:
ELECTION OF ONE DIRECTOR BY HOLDERS OF COMMON AND PREFERRED STOCK
VOTING TOGETHER AS A CLASS:
DAVID A. ARLEDGE
ELECTION OF THREE DIRECTORS BY HOLDERS OF COMMON, CLASS A COMMON AND
PREFERRED STOCK VOTING TOGETHER AS A CLASS:
GEORGE L. BRUNDRETT, JR., L.D. WOODDY, JR. AND O.S. WYATT, JR.
FOR / / all persons named above, WITHHOLD / / authority to vote
except authority withheld for all persons
as to the following person(s), named above.
if any.
----------------------------------
(2) The Board of Directors unanimously recommends a vote FOR the following
proposal:
FOR / / AGAINST / / ABSTAIN / / PROPOSAL TO ADOPT THE 1994
INCENTIVE STOCK PLAN.
(3) The Board of Directors unanimously recommends a vote FOR the following
proposal:
FOR / / AGAINST / / ABSTAIN / / PROPOSAL TO ADOPT THE STOCK
PURCHASE PLAN.
(4) The Board of Directors unanimously recommends a vote AGAINST the
following proposal:
FOR / / AGAINST / / ABSTAIN / / STOCKHOLDER PROPOSAL
DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT.
(5) In their discretion on such other matters as may properly come before the
meeting.
PLEASE DETACH, SIGN AND DATE (ON REVERSE) AND MAIL YOUR INSTRUCTIONS
YOUR INSTRUCTIONS ARE IMPORTANT
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AT THE ANNUAL MEETING OF
STOCKHOLDERS AND SAVE THE EXPENSE OF A SECOND MAILING, WOULD YOU PLEASE
RETURN YOUR INSTRUCTIONS PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
