Exhibit 4.1
THE COASTAL CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Amended and Restated Effective January 1, 1998
i. Participants. Any member of the Board of Directors ("Director")
of The Coastal Corporation ("Company") is eligible to participate
under this plan ("Plan") and may elect to become a participant
("Participant") under the Plan by filing a written notice ("Notice")
with the Secretary of the Company.
ii. Deferred Compensation. Any Participant may elect to defer the
receipt of a portion of the Director's cash compensation otherwise
payable to him by the Company, which portion shall be designated by
the Participant as a percentage of the Director's cash compensation
otherwise payable to such Participant. Such election shall be made
prior to the time any amount subject to the deferral election is
earned. The election is irrevocable for that period, but a different
election may be made with respect to different periods of deferred
compensation, provided such elections are made in advance of earning
any portion of the cash compensation subject to the election. A
change of election shall be effective only on the first day of
January of a year and shall be made prior to the effective date. An
exception to the effective date for an election shall apply when an
individual first becomes a Director during the year or when the terms
of the Plan are substantially modified. Pursuant to these exceptions,
a Director may make an election within 30 days of becoming eligible
to participate, or within 30 days of substantial modification of the
Plan, which election may be effective prior to the end of that
calendar year, but in no event shall the election apply to any
amounts which have previously been earned.
Director's compensation deferred pursuant to this Section shall be recorded
by the Company in deferred compensation accounts ("Accounts") maintained in the
name of and selected by the Participant, which Accounts shall be credited on
each date of payment of Director's compensation, in accordance with the
Company's normal practices, with (a) a dollar amount equal to the percentage of
the amount otherwise payable as designated by the Participant or (b) shares of
Phantom Stock if designated by the Participant as provided herein. The Company
shall furnish each Participant with a quarterly statement of his Accounts. The
Company shall also credit interest to Account #1 from the date of credit until
final distribution of the Account. The percentage of director's compensation
that a Participant elects to defer under this Section will remain constant until
suspended or modified by the filing of another election with the Company by a
Participant as provided herein.
iii. (a) Account #1 -- Deferred Amount and Interest. The amounts
credited by the Company to Account #1 at the election of a
Participant shall be credited with interest at an annual rate to be
determined by the Company each year. Such interest rate shall be
based on debt obligations issued by the U.S. Treasury with a ten year
maturity plus an upward adjustment to approximate the difference
between such rate and the average cost of borrowed capital of
comparable maturity for the Company, and shall be credited until
Account #1 has been fully distributed to the Participant or to the
beneficiary or beneficiaries designated by the Participant in a
writing delivered to the Company.
(b) Account #2 -- Phantom Stock. The amount credited by the Company to
Account #2 at the election of a Participant shall be converted each pay period
to that number of shares of Phantom Stock equal to the number of shares (to the
nearest hundredth of a share) of Stock which could have been purchased with this
amount at the Fair Market Value of the Stock on the date the cash would have
been paid to the Participant if not subject to deferral under this Plan.
During any period that the Company maintains Account #2 for a Participant,
on each date on which the Company pays dividends on shares of its Stock, Account
#2 of a Participant shall be credited with an additional number of shares of
Phantom Stock equal to the number of shares (to the nearest hundredth of a
share) of Stock which could have been purchased at the Fair Market Value for
shares of Stock on such dividend payment date, with the amount of dividends that
would have been received on the number of shares of Stock equal to the number of
shares of Phantom Stock in such Participant's Account #2, as of the end of the
month preceding the dividend record date. In the event of any stock
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Exhibit 4.1
dividend, stock split, combination of shares, recapitalization or the like of
the Stock of the Company, appropriate adjustment shall be made in the number of
shares of Phantom Stock credited to the Participant's Account #2.
The Participant may not receive any amount from Account #2 any sooner than
the date which would be required to comply with the rules and regulations of the
Securities and Exchange Commission prohibiting short-swing transactions.
Stock Options. As an incentive for a Participant to defer amounts into
Account #2, thereby further aligning his interests with those of the Company's
Shareholders, the Company shall grant to Participant an Option to purchase
shares of Stock of the Company equal in number (whole number of shares only,
with any fractional share carried over to the next pay period) to the number of
shares credited each pay period to the Participant's Account #2 pursuant to this
deferral. The Option exercise price shall be equal to the Fair Market Value
price used to convert the amount deferred by the Participant into shares of
Phantom Stock. Each Option shall be reflected in an Option Agreement, shall vest
on a cumulative basis as to one-third of such shares on each of the first three
anniversaries of the date of grant, and shall expire at the earliest of the end
of (i) the five-year period commencing with the date of grant, (ii) the
three-year period commencing with the Director's retirement from the Board or
termination of Board membership, or (iii) the one-year period commencing with
the date of death of the Director. The terms of the Option Agreement shall be
substantially in the form attached hereto as Exhibit A, and shall be subject to
such restrictions as required by law.
iv. Distribution. A Participant may elect a method of distribution
in the same manner as the Participant elects to participate in
the Plan. Such election shall be made prior to the time any
amount subject to the distribution election is earned. The
election is irrevocable. A different election may be made with
respect to different periods of deferred compensation provided
such elections are made in advance of earning any portion of
the compensation subject to the election. Such distribution may
not begin until the Participant terminates service as a
Director for any reason, including death.
Interest on the deferred amounts shall be prorated by any method selected
by the Company to portions of Account #1 of the Participant which are subject to
different distribution directions of the Participant and/or the distribution
method selected by the Company, if applicable.
With respect to all or any portion of the Accounts of a Participant with
respect to which the Participant has not submitted a valid distribution
election, the Company shall determine the method of distribution as described in
the following provisions.
(i) Upon termination as a Director of the Company for any
reason other than death, the Participant will be entitled
to receive all amounts credited to the Participant's
Accounts as of the date of termination of service.
Subject to the provisions of subsection (a), the Company
shall determine whether the Participant will receive
distribution of all amounts payable to him under this
paragraph (b) in a lump sum or in installments over a
designated period of years, pursuant to the provisions of
paragraph (e) of this Section.
(ii) Upon termination of a Participant's service as a Director
of the Company by reason of his death, the Participant's
designated beneficiary or beneficiaries will be entitled
to receive all amounts credited to the Accounts of the
Participant as of the date of his death. Subject to the
provisions of subsection (a), such amounts shall be
payable in a lump sum or in installments over a designated
period of years, pursuant to the provisions of paragraph
(e) of this Section.
(iii) Subject to the provisions of subsection (a), upon the
death of the Participant prior to complete distribution to
him of the entire balance of his Accounts (and after the
date of termination of his service as a Director of the
Company), the balance of his
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Exhibit 4.1
Accounts on the date of his death shall be payable to the
Participant's designated beneficiary or beneficiaries
pursuant to paragraph (e) of this Section.
(iv) Subject to the provisions of subsection (a), the Company,
in its discretion, shall direct distribution of the
amounts credited to a Participant's Accounts, including
interest credited thereon, to a Participant or his
beneficiary or beneficiaries pursuant to the preceding
paragraphs of this Section, in a lump sum, or in
installments over such period of years as the Company
shall determine. Distribution shall be made or commence
on the first day of the month next following (i) the
date upon which the Participant's service as a Director
of the Company terminates in the event of a distribution
pursuant to paragraphs (b) or (c) of this Section, or
(ii) the date of the Participant's death in the event of a
distribution pursuant to paragraph (d) of this Section.
Subsequent installments, if any, shall be made on the
annual, quarterly, or monthly anniversary dates of the
date of the first installment as determined by the
Company. Each such installment, if any, shall include
interest credited to the balance of Account #1.
v. Election to Defer. The Notice and Election by which a Participant
elects to defer Director's fees as provided in this Plan shall be
in writing, signed by the Participant, and delivered to the Company
prior to the time any cash compensation to be deferred is earned by
the Director and prior to the time any such cash compensation to be
deferred is otherwise payable to the Participant. Such election (and
any subsequent election) will continue until suspended or modified in
a writing delivered by the Participant to the Company, which new
election shall only apply to Director's fees otherwise earned and
payable to the Participant after the end of the calendar year in
which such election is delivered to the Company (unless an exception
provided in Section 2 is applicable). Any deferral election made by
the Participant shall be irrevocable with respect to any Director's
compensation covered by such election, including the Director's
compensation payable in the calendar year in which the election
suspending or modifying the prior election is delivered to the
Company. The election to defer shall be made on a Notice and Election
form substantially in the form attached hereto as Exhibit B.
vi. Participant's Rights Unsecured. The right of the Participant or his
designated beneficiary to receive a distribution hereunder shall be
an unsecured claim against the general assets of the Company, and
neither the Participant nor his designated beneficiary shall have any
rights in or against any amount credited to his Accounts or any other
specific assets of the Company. All amounts credited to any Account
shall constitute general assets of the Company and may be disposed of
by the Company at such time and for such purposes as it may deem
appropriate. Accounts may not be encumbered or assigned by a
Participant or any beneficiary. A Participant shall have no rights as
a stockholder with respect to shares of Phantom Stock credited to
Account #2 nor by virtue of any unexercised stock option granted
pursuant to Section 3(b) of the Plan.
vii. Amendments to the Plan. The Board may amend the Plan at any time,
without the consent of the Participants or their beneficiaries,
provided, however, that no amendment shall divest any Participant
or beneficiary of the credits to his Accounts, or of any rights to
which he would have been entitled if the Plan had been terminated
immediately prior to the effective date of such amendment.
viii. Termination of the Plan. The Board may terminate the Plan at any
time. Upon termination of the Plan, distribution of the credits to a
Participant's Accounts shall be made in the manner and at the time
heretofore prescribed; provided that no additional credits shall be
made to the Accounts of a Participant following termination of the
Plan other than interest credited to Account #1 pursuant to Plan
provisions and adjustments to the number of shares of Phantom Stock
in Account #2 required by Section 3(b) of the Plan.
ix. Expenses. Costs of administration of the Plan will be paid by the
Company.
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Exhibit 4.1
x. Notices. Any notices or election required or permitted to be given
hereunder shall be in writing ------- and shall be deemed to be filed
(a) on the date it is personally delivered to the Secretary of the
Company or (b) three business days after it is sent by registered or
certified mail, addressed to such Secretary at the principal office
of the Company.
xi. Governing Law. This Plan shall be construed, administered, and
governed in all respect by the laws of the State of Texas.
xii. Definitions. The following terms used herein shall have the meaning
described below:
"Fair Market Value" of the Stock as of any date means the average of the
high and low sales prices of the Stock on that date (or, if no Stock sale is
reported on that date, the next preceding Trading Day) on the New York Stock
Exchange, or if this definition is not applicable, the price as determined by
the Board of Directors of the Company in its discretion.
"Phantom Stock" means the equivalent of a share of stock of the Company
which entitles the Participant to receive in exchange, at the time and under the
terms provided for distribution herein, an amount in cash equal to a share of
Stock.
"Stock" means the common stock of the Company $.331/3 par value, or in the
event that the outstanding shares of common stock are later changed into or
exchanged for a different class of stock or securities of the Company (or any
other compensation) that other stock or security.
"Trading Day" means a day on which trading of securities takes place on the
New York Stock Exchange and the NASDAQ National Market and on which shares of
Stock are traded.
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Exhibit 4.1
Exhibit A
Deferred Compensation
Plan for Directors
THE COASTAL CORPORATION
STOCK OPTION AGREEMENT
Pursuant to the terms and conditions of The Coastal Corporation Deferred
Compensation Plan for Directors (the "Plan"), a copy of which is attached hereto
and incorporated in this Agreement by reference, The Coastal Corporation (the
"Company") grants to _______________________ (the "Optionee") the option to
purchase _____ shares of the Company's Common Stock, $.331/3 par value, at the
price of $____ per share (the "Option"), subject to adjustment for changes in
capitalization of the Company .
This Option shall be for a term commencing on this date and shall expire at
the earliest of the end of (i) the five-year period commencing with the date of
grant, (ii) the three-year period commencing with the Director's retirement from
the Board or termination of Board membership, or (iii) the one-year period
commencing with the date of death of the Director. At the time of termination of
service as a Director, unvested Options shall be forfeited.
This Option shall become exercisable (in whole shares) in the following
manner:
Cumulative Shares Exercisable
First Anniversary of Date of Grant 1/3
Second Anniversary of Date of Grant 2/3
Third Anniversary of Date of Grant 100%
This Option is a nonqualified stock option which is not governed by Section
422 of the Internal Revenue Code of 1986, as amended.
The terms and conditions of the 1997 Director Stock Plan shall govern this
Option to the extent not inconsistent with this Option or the Plan.
The Optionee in accepting this Stock Option Agreement accepts and agrees to
be bound by all the terms and conditions *f this Agreement and of the Plan.
Granted the _______ day of ______________________, 199___.
THE COASTAL CORPORATION
By
ACCEPTED this _______ day of __________________, 199_____.
Optionee
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