<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
ENERGEN CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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:
<PAGE> 2
ENERGEN CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 28, 1998
To the Shareholders of
ENERGEN CORPORATION
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Energen Corporation will be held at the principal office of the
Company, 2101 Sixth Avenue North, Birmingham, Alabama, on Wednesday, January 28,
1998, at 10:00 A.M., Central Standard Time, for the following purposes:
1. To elect three directors to serve for a three-year term expiring in
2001;
2. To consider and take action on a proposal to amend the Company's
Restated Certificate of Incorporation to increase the Company's
authorized shares of Common Stock from 30,000,000 to 75,000,000
shares;
3. To consider and take action on a proposal to approve the Energen
Corporation 1997 Stock Incentive Plan, as more fully described in
the accompanying Proxy Statement;
4. To consider and take action on a proposal to approve certain
issuances of Common Stock under the Energen Corporation 1997
Deferred Compensation Plan, as more fully described in the
accompanying Proxy Statement; and
5. To transact such other business as may properly come before the
Annual Meeting.
Shareholders of record at the close of business on December 10, 1997 are
entitled to notice of and to vote upon all matters at the Annual Meeting. The
Annual Meeting may be adjourned from time to time without notice other than by
announcement at the meeting or any adjournments thereof, and any business for
which notice of the Annual Meeting is hereby given may be transacted at any such
adjournment.
By Order of the Board of Directors
DUDLEY C. REYNOLDS, Secretary
Birmingham, Alabama
December , 1997
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
<TABLE>
<S> <C>
ENERGEN LOGO ENERGEN CORPORATION
-----------------------------------------------------------
2101 Sixth Avenue North
Birmingham, Alabama 35203
(205) 326-2700
</TABLE>
December , 1997
To Our Shareholders:
It is our pleasure to extend to you a cordial invitation to attend the
Annual Meeting of Shareholders of Energen Corporation. The Meeting will be held
at the principal office of the Company in Birmingham on Wednesday, January 28,
1998, at 10:00 A.M., Central Standard Time.
Details of the matters to be presented at this meeting are given in the
foregoing Notice of the Annual Meeting and in the Proxy Statement that follows.
We hope that you will be able to attend this meeting so that we may have
the opportunity of meeting with you and discussing the affairs of the Company.
However, if you cannot attend, we would appreciate your signing and returning
the enclosed Proxy as soon as convenient so that your stock may be voted.
We have enclosed a copy of the Company's Annual Report to Shareholders for
the year ended September 30, 1997.
Yours very truly,
/s/ REX J. LYSINGER
Chairman of the Board
<PAGE> 4
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF ENERGEN CORPORATION
JANUARY 28, 1998
------------------
This Proxy Statement is being furnished by the Board of Directors of
Energen Corporation, an Alabama corporation (the "Company"), in connection with
the solicitation of proxies for use at the Annual Meeting of Shareholders of the
Company to be held at the principal office of the Company, 2101 Sixth Avenue
North, Birmingham, Alabama, on Wednesday, January 28, 1998, at 10:00 A.M.,
Central Standard Time, and at any adjournment thereof (the "Annual Meeting"),
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders of the Company. It is contemplated that the Proxy Statement and
accompanying form of proxy will initially be mailed to Shareholders of the
Company on or around December , 1997.
All properly completed proxies received by the Board of Directors of the
Company will be voted in accordance with the instructions appearing on such
proxies. In the absence of contrary instructions, the proxies received by the
Board of Directors will be voted FOR the election of all nominees for director
of the Company, FOR the proposal to amend the Company's Restated Certificate of
Incorporation to increase the Company's authorized shares of Common Stock, FOR
the proposal to approve the Energen Corporation 1997 Stock Incentive Plan, and
FOR the proposal to approve certain issuances of Common Stock under the Energen
Corporation 1997 Deferred Compensation Plan. A Shareholder who has given a proxy
may revoke it at any time prior to its exercise by written notice of such
revocation to the Secretary of the Company, by executing and delivering to the
Company a later dated proxy reflecting contrary instructions, or by appearing at
the Annual Meeting and taking appropriate steps to vote in person.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting the shareholders of the Company will consider and
take action on the following matters and on such other matters as may properly
come before the meeting:
1. ELECTION OF DIRECTORS
Directors of the Company are elected on a staggered basis, with
approximately one-third of the directors being elected at each annual meeting
for three-year terms. Three directors are to be elected to serve for a term of
three years expiring at the Annual Meeting of Shareholders held in 2001. The
names of the nominees for director, as well as the names of those directors
continuing in office, are set forth in this Proxy Statement.
<PAGE> 5
NOMINEES FOR ELECTION AS DIRECTORS
FOR THREE-YEAR TERMS TO EXPIRE IN 2001
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION
---- ------------------------------------------
<S> <C>
Dr. Stephen D. Ban....................... Dr. Ban, 57, is President and CEO of Gas Research
Institute ("GRI"), a nonprofit cooperative research
organization of the natural gas industry,
headquartered in Chicago. He joined GRI in 1981, was
first elected President in April, 1987, and has
overall responsibility for GRI's multifaceted
research and development program in gas technology
development, including research and development
related to gas supply and end-use technologies. In
1991, Dr. Ban was elected a director of UGI
Corporation, a Pennsylvania gas and electric utility
and national marketer of propane. In 1994 he became a
director of CALSTART, Inc., a California nonprofit
consortium dedicated to the development of advanced
transportation technologies utilizing clean
alternative fuels and cooperative research and
development. He is also a member of the Natural Gas
Council and the Board of Directors of the United
States Energy Association.
Dr. Ban has served as director of the Company and
Alabama Gas Corporation since January, 1992.
Julian W. Banton......................... Mr. Banton, 57, is Chairman of the Board, President and
Chief Executive Officer of SouthTrust Bank, N.A.,
headquartered in Birmingham, Alabama. He joined
SouthTrust in 1982, was named President in 1985 and
in 1988 was named to his current position. Prior to
joining SouthTrust, Mr. Banton was in charge of
Corporate and International Banking for Signet Bank
in Richmond, Virginia. He is also a director of
SouthTrust Corporation; Brookwood Hospital; Consumer
Bankers Association; the Metropolitan Development
Board (Birmingham, Alabama); United Way of Central
Alabama; Inroads Development Program and the Alabama
School of Fine Arts. Mr. Banton is also a past
director of the Birmingham Branch of the Federal
Reserve Bank of Atlanta.
Mr. Banton has served as a director of the Company and
Alabama Gas Corporation since October, 1997.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION
---- ------------------------------------------
<S> <C>
Wm. Michael Warren, Jr................... Mr. Warren, 50, is President and Chief Executive
Officer of the Company and is a director of the Company
and each of its subsidiaries. He joined Alabama Gas
Corporation in 1983 as Vice-President and General
Counsel and was elected President of Alabama Gas
Corporation in 1984. He was elected President and
Chief Operating Officer of the Company in February,
1991, was elected President and Chief Executive
Officer of Alabama Gas Corporation and Taurus
Exploration, Inc. in September, 1995 and was elected
Chief Executive Officer of the Company in February,
1997. Mr. Warren will become Chairman of the Board of
the Company effective January 1, 1998. He is also a
city director of AmSouth Bank of Alabama and a member
of the Board of Trustees of Birmingham-Southern
College.
Mr. Warren has served as a director of the Company
since January, 1986, and has served as a director of
Alabama Gas Corporation since October, 1984.
</TABLE>
DIRECTORS WHOSE TERMS EXPIRE IN 1999
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION
---- ------------------------------------------
<S> <C>
J. Mason Davis, Jr...................... Mr. Davis, 62, is a partner with the Birmingham, Alabama
law firm of Sirote & Permutt, P.C. He joined that firm
in 1984. Mr. Davis also serves as an Adjunct Professor
of Law at the University of Alabama School of Law in
Tuscaloosa, Alabama. He is also Chairman of the Board
of Directors of Protective Industrial Insurance
Company of Alabama, Inc., based in Birmingham,
Alabama.
Mr. Davis has served as a director of the Company and
Alabama Gas Corporation since September, 1992.
James S. M. French...................... Mr. French, 57, is Chairman, President, Chief Executive
Officer, and a director of Dunn Investment Company,
the parent of a group of companies in the construction
industry and also an investor in equity and income
securities in selected industries. Dunn was founded in
1878 and is headquartered in Birmingham. He joined the
firm in 1968 and became its President in 1974. He is
also a director of Regions Financial Corporation;
Hilb, Rogal and Hamilton Company, a network of
insurance agencies; Protective Life Corporation; and
the subsidiaries of Dunn Investment Company.
Mr. French has served as a director of the Company since
its formation in January, 1979 and has served as a
director of Alabama Gas Corporation since April, 1978.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION
---- ------------------------------------------
<S> <C>
Wallace L. Luthy........................ Mr. Luthy, 64, retired effective December 31, 1995, as
President and General Manager of Mobil Natural Gas
Inc., headquartered in Houston, Texas. Mobil Natural
Gas is a subsidiary of Mobil Corporation and processes
and markets natural gas in the United States and Ca-
nada. Upon his retirement, Mr. Luthy completed 40
years of service with Mobil.
Mr. Luthy has served as a director of the Company and
Alabama Gas Corporation since October, 1995.
</TABLE>
DIRECTORS WHOSE TERMS EXPIRE IN 2000
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION
---- ------------------------------------------
<S> <C>
R.D. Cash............................... Mr. Cash, 55, is Chairman of the Board, President and
Chief Executive Officer of Questar Corporation, a
holding company engaged, through its affiliates, in
the exploration for, and production and distribution
of, natural gas. In 1982 Mr. Cash was elected
President and Chief Executive Officer of Mountain
Fuel Supply Company, now a Questar subsidiary. When
Questar was formed in 1984, Mr. Cash became its
President and Chief Executive Officer, and in 1985 he
was named Chairman of the Board. Mr. Cash is also a
director of Zions Bancorporation; Zions First
National Bank; Associated Electric & Gas Insurance
Services Limited, a mutual insurance company serving
the United States public utility industry; and the
Salt Lake City Branch of the Federal Reserve Bank of
San Francisco.
Mr. Cash has served as a director of the Company and
Alabama Gas Corporation since November, 1996.
Rex J. Lysinger......................... Mr. Lysinger, 60, is Chairman of the Board and is a
director of each of the Company's subsidiaries. He
joined Alabama Gas Corporation in July, 1975 as a
Vice President and was elected President in 1977. In
1981, Mr. Lysinger was named Chief Executive Officer
of the Company and its subsidiaries and was named
Chairman of the Board effective October 1, 1982. In
February, 1997 Mr. Lysinger resigned as Chief
Executive Officer of the Company, and he will resign
as Chairman of the Board effective January 1, 1998.
He is also a director of SouthTrust Corporation;
Associated Electric & Gas Insurance Services Lim-
ited, a mutual insurance company serving the United
States public utility industry; and a member of the
Board of Trustees of Samford University in Birming-
ham, Alabama.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION
---- ------------------------------------------
<S> <C>
Mr. Lysinger has served as director of the Company
since its formation in January, 1979 and has served
as a director of Alabama Gas Corporation since
January, 1977.
Dr. Judy M. Merritt..................... Dr. Merritt, 54, is President of Jefferson State Commu-
nity College located in Birmingham, Alabama. Dr.
Merritt was named President in 1979 and with the
exception of a four-year assignment at Florida
International University in Miami, Florida from 1975
to 1979, has been associated with Jefferson State and
its predecessor since 1965. She is also a member of
the Board of Directors of SouthTrust Bank, N.A.
Dr. Merritt has served as a director of the Company and
Alabama Gas Corporation since June, 1993.
Drayton Nabers, Jr. .................... Mr. Nabers, 57, is Chairman of the Board and Chief
Executive Officer and a director of Protective Life
Corporation and Chairman of the Board and a director
of Protective Life Insurance Company. He joined
Protective Life Insurance Company in 1979 as Senior
Vice President, Operations, and General Counsel and
served in that capacity until his election as
President of Empire General Life Insurance Company in
1980 and his election as President and Chief
Operating Officer of Protective Life in August, 1982.
He became Chief Executive Officer of Protective Life
in 1992 and Chairman of the Board in 1994. Mr. Nabers
is also a member of the Board of Directors of Alabama
National Bancorporation.
Mr. Nabers has served as a director of the Company and
Alabama Gas Corporation since October, 1984.
</TABLE>
Mr. George S. Shirley, who has served as a director of the Company since
September, 1981, will retire from service as a director and will not stand for
re-election at the Annual Meeting. He will continue to serve as a director until
January 28, 1998.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company has established a standing Audit
Committee currently composed of four directors who are not officers of the
Company. The members of the Audit Committee are: James S. M. French (Chairman),
R. D. Cash, J. Mason Davis, Jr. and Judy M. Merritt. The duties of the Audit
Committee are (1) to recommend to the Board of Directors a firm of independent
public accountants to serve as auditors, (2) to meet with representatives of the
auditors to review the planned scope of their audit and to review the results of
their examination, (3) to meet with representatives of the auditors and
management to discuss matters regarding the Company's accounting policies,
practices and related financial reporting, and the adequacy of the accounting
system and related internal accounting controls to safeguard corporate assets
and provide a basis for preparing materially reliable financial information, and
(4) to report to the Board of Directors the results of such meetings with such
recommendations as the Audit Committee deems appropriate. During the 1997 fiscal
year the Audit Committee held three meetings.
The Board of Directors of the Company has established an Officers Review
Committee (the "ORC") currently composed of four directors who are not officers
of the Company. The members of this Committee are: George S. Shirley (Chairman),
Stephen D. Ban, Wallace L. Luthy and Drayton Nabers, Jr. The duties of
5
<PAGE> 9
the ORC are to study and make recommendations to the Board of Directors with
regard to executive succession and compensation paid to officers of the Company
and its subsidiaries. The ORC also administers the Company's 1992 Long-Range
Performance Share Plan, the 1988 Stock Option Plan, and the 1997 Deferred
Compensation Plan and will administer the 1997 Stock Incentive Plan if it is
approved by the shareholders of the Company. During the 1997 fiscal year, the
ORC held five meetings.
The Board of Directors of the Company has established a Finance Committee
currently composed of four directors who are not officers of the Company. The
members of the Finance Committee are: J. Mason Davis, Jr. (Chairman), James S.
M. French, Wallace L. Luthy and George S. Shirley. The duties of the Finance
Committee are to review financial policy, capital structure and the issuance of
securities necessary to finance the activities of the Company. During the 1997
fiscal year, the Finance Committee held six meetings.
The Board of Directors of the Company has established a Governance and
Nominations Committee currently composed of four directors who are not officers
of the Company. The members of the Governance and Nominations Committee are:
Drayton Nabers, Jr. (Chairman), Stephen D. Ban, James S. M. French and Judy M.
Merritt. The duties of the Governance and Nominations Committee are to review
and advise the Board of Directors on general governance and structure issues and
to review and recommend to the Board the term and tenure of Directors, consider
future Board members and recommend nominations to the Board. During the 1997
fiscal year, the Governance and Nominations Committee held two meetings.
During the 1997 fiscal year the Board of Directors of the Company met eight
times. All directors of the Company attended at least 75% of the meetings of the
Board of Directors and the committees of the Board of which they are members.
DIRECTORS' COMPENSATION
During the 1997 fiscal year, directors who are not officers were paid a
monthly retainer of $1,000. In addition, non-officer directors of the Company
and of its subsidiaries were paid a fee of $1,000 for each meeting attended,
including committee meetings.
The Energen Corporation 1992 Directors Stock Plan provides for an annual
grant and issuance of three hundred shares of Common Stock, following the last
day of the fiscal year ended September 30, 1992 and each fiscal year thereafter
so long as the plan remains in effect, to each non-employee director who is
serving as such on the last day of the Company's fiscal year and who has served
as such for at least six months. The size of this annual grant is subject to
adjustment in the event of a stock dividend, stock split or similar transaction.
The plan also allows each non-employee director to elect to have any part or all
of the fees payable for services as a director of the Company and its
subsidiaries paid in shares of Common Stock.
The plan is administered by the Company's Board of Directors, whose members
are normally elected to three-year terms by the Shareholders. Although the plan
has no fixed duration, the Board of Directors or the Shareholders of the Company
may terminate the plan. The Board of Directors of the Company may also amend the
plan from time to time. However, Shareholder approval is required for any
amendment that materially increases the benefits accruing to participants in the
plan, materially increases the number of shares of Common Stock which may be
issued under the plan or materially modifies eligibility requirements. The
number of shares issued under this plan for fiscal year 1997 was 3,375,
including 412 shares which were deferred and issued to the trustee under the
Company's 1997 Deferred Compensation Plan.
In addition to making deferrals of their compensation as directors under
the Company's 1997 Deferred Compensation Plan, members of the Board of Directors
who are not employees of the Company may elect to defer (without duplication)
all or part of their fees for services as a director under the Company's
Director Fees Deferral Plan, although no current directors of the Company have
done so under this plan. By written election delivered prior to the end of a
calendar year, a director may elect to defer the receipt of fees payable in the
following calendar year. Once made, the deferral election will renew
automatically from year to year unless revoked or changed by the filing of a new
election. The amount of any deferred fees are credited to an account on the
books of the Company on the date on which the fees would have first become
payable to the director. At the end of each calendar quarter until all deferred
amounts are distributed, the daily balance in a director's
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<PAGE> 10
account will be credited with interest based on the prime rate quoted at the
beginning of the quarter by AmSouth Bank of Alabama, Birmingham, Alabama. A
director may not defer fees past age 75, but he may elect to have fees paid in
up to ten (10) annual installments beginning with age 75. The amount deferred
under this plan, including interest, during 1997 was $ .
2. PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION TO INCREASE THE COMPANY'S
AUTHORIZED SHARES OF COMMON STOCK
The Restated Certificate of Incorporation of the Company as presently in
effect authorizes the Company to issue 30,000,000 shares of Common Stock of the
Company, par value of $0.01 per share (the "Common Stock"). The Board of
Directors of the Company recommends the approval of an amendment to the Restated
Certificate of Incorporation of the Company to increase the number of authorized
shares of Common Stock of the Company from 30,000,000 to 75,000,000 shares.
Under the Alabama Business Corporation Act and the Company's Restated
Certificate of Incorporation, upon issuance of any additional shares of Common
Stock, shareholders will not be entitled to preemptive rights.
As of the record date for the Annual Meeting, an aggregate of
shares of Common Stock of the Company were issued and outstanding and
an additional shares of Common Stock of the Company were reserved for
issuance in connection with the Company's stock option, long-range performance
share, employee stock purchase, director stock and other employee benefit plans.
An additional 650,000 shares and 250,000 shares of Common Stock of the Company
have been reserved for issuance under the Company's 1997 Stock Incentive Plan
and 1997 Deferred Compensation Plan, respectively, which plans (or certain
issuances of Common Stock thereunder) are being submitted to the shareholders
for approval at the Annual Meeting. Also, as of such record date, an additional
shares of Common Stock of the Company were reserved for issuance in
connection with the Company's dividend reinvestment and direct stock purchase
plan.
If the proposed amendment to the Restated Certificate of Incorporation of
the Company is approved by the shareholders, management of the Company presently
intends to recommend to the Board of Directors that the Company effect a
two-for-one split of the Common Stock by paying a 100% stock dividend on its
shares of issued and outstanding Common Stock, that is, one additional share of
stock for each share presently outstanding.
As previously announced, the Company is implementing a diversified growth
strategy which calls for its subsidiary Taurus Exploration, Inc. ("Taurus") both
to acquire producing oil and gas properties and to participate in selected
exploration prospects. During the first two fiscal years of the implementation
of this strategy which ended September 30, 1997, Taurus had expenditures of $280
million for producing properties, $32 million for associated development costs
and $45 million for exploration and related activities. In order to finance a
portion of these expenditures, the Company issued $40 million of medium-term
notes in September, 1996, 1,725,000 shares of Common Stock in January, 1997
(generating $49.1 million in proceeds), $85 million of medium-term notes in
July, 1997, and 1,200,000 shares of Common Stock in September, 1997 (generating
$41.1 million in proceeds). During the next three fiscal years, depending upon
the type and availability of appropriate opportunities, Taurus anticipates
spending $350 to $500 million for acquisitions and development and approximately
$150 million for exploration and related activities. The Company anticipates
that it will continue to finance a significant portion of the expenditures by
Taurus through the issuance of additional debt securities and Common Stock.
Except as described above and except for issuances of shares of Common
Stock pursuant to its employee benefit and compensation plans (including those
issuances for which approval is being sought from the shareholders of the
Company at the Annual Meeting) and its dividend reinvestment and direct stock
purchase plan, the Company does not currently have plans to issue any shares of
Common Stock. The shares of Common Stock authorized for issuance by the Company
prior to the approval of the proposed amendment to the Restated Certificate of
Incorporation are sufficient to fund the proposed issuances described above,
other than the possible stock split described above.
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<PAGE> 11
The Board of Directors believes it is advisable to authorize additional
shares of Common Stock so that there will be sufficient shares available for
issuance for purposes that the Board of Directors may determine to be in the
best interest of the Company. Such purposes could include the acquisition of one
or more business entities, the declaration of additional dividends, stock splits
and similar distributions and other general corporate purposes. The Board of
Directors of the Company believes it is advantageous for the Company to be able
to act promptly with respect to such matters without the expense and delay
involved in holding a special meeting of the Shareholders to authorize
additional shares of Common Stock for issuance in such transactions.
There may be certain disadvantages, however, to the additional flexibility
afforded the Company as a result of an increase in the authorized shares of
Common Stock. The adoption of the proposed amendment will permit the Company to
issue additional shares of Common Stock, thus diluting the voting and ownership
interest of existing Shareholders. If the Company were to issue a significant
number of the newly authorized shares of Common Stock, it is possible that the
ownership and interests of the current shareholders of the Company could be
diluted and, depending upon the circumstances of such issuance, it is possible
that the earnings per share and book value of the currently outstanding shares
of Common Stock could be diluted. The adoption of the amendment may have the
effect of discouraging unilateral attempts by third parties to take over or
obtain control of the Company since the issuance of additional shares of Common
Stock could be used to dilute the voting power of or increase the cost of any
person seeking to obtain control of the Company. In addition, authorizing
additional shares of Common Stock of the Company may have the effect of
discouraging a potential purchaser from making a tender offer or otherwise
attempting to obtain control of the Company, thus depriving shareholders of
advantageous opportunities to sell their shares of Common Stock in the future.
VOTE REQUIRED; RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock is necessary to approve the proposed amendment to
the Company's Restated Certificate of Incorporation to increase the number of
shares of Common Stock authorized to be issued. The Board of Directors
recommends that shareholders vote FOR the approval of the proposed amendment.
3. PROPOSAL TO APPROVE THE ENERGEN CORPORATION
1997 STOCK INCENTIVE PLAN
The Board of Directors of the Company believes that the future success of
the Company is, in significant part, dependent upon the quality and continuity
of the Company's management and that a comprehensive management compensation
program is essential in order for the Company to attract and retain individuals
of superior ability. The Board of Directors also believes that it is important
to increase the financial incentive for management to build future shareholder
value, to instill in management a greater proprietary interest in the Company,
and to strengthen management motives to remain in the employ of the Company.
To further this goal, the Board of Directors adopted the 1988 Stock Option
Plan at a meeting held November 23, 1988. On January 25, 1989, the shareholders
of the Company approved this plan at their annual meeting. Under the 1988 Stock
Option Plan, 270,000 shares of the Company's Common Stock were reserved for
issuance.
Because options with respect to all of the shares of Common Stock reserved
for issuance under the 1988 Stock Option Plan have been granted, at a meeting
held November 25, 1997, the Board of Directors adopted the Energen Corporation
1997 Stock Incentive Plan (the "Stock Plan"). The Board of Directors has
directed the submission of the Stock Plan to the shareholders of the Company for
their approval.
The following summary of the principal features of the Stock Plan is
qualified in all respects by the specific provisions of the Stock Plan, a copy
of which is set forth as Appendix A hereto.
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<PAGE> 12
SUMMARY OF STOCK PLAN FEATURES
The Stock Plan provides for the grant of incentive stock options,
non-qualified stock options, or a combination thereof to officers and employees
of the Company and its subsidiaries. Directors of the Company who are not
officers are not eligible to participate in the Stock Plan. Options granted
under the Stock Plan will provide for purchase of the Company's Common Stock at
not less than the fair market value thereof on the date the option is granted.
650,000 shares of the Company's Common Stock have been reserved for issuance
under the Stock Plan. As of the date hereof, options to acquire shares of
Common Stock at $ per share have been granted, subject to approval of the
Stock Plan by the shareholders, under the Stock Plan.
The Stock Plan is administered by a committee which shall be either the ORC
or another committee consisting of not less than two members of the Board of
Directors designated by the Board of Directors (the "Plan Committee"). The Stock
Plan is presently administered by the ORC. Members of the committee
administering the Stock Plan are not eligible to participate in the Stock Plan
while serving on such committee.
The Board of Directors may from time to time suspend or discontinue the
Stock Plan or revise or amend it without further shareholder approval. New York
Stock Exchange rules, however presently would require shareholder approval to
increase the number of shares which may be issued under the Stock Plan, but if
such rules were to be amended so as not to require such approval, the Board of
Directors would be able to increase the number of shares issuable under the
Stock Plan (or adopt a new plan similar to the Stock Plan) without further
shareholder action.
Stock Options
The Plan Committee will (a) determine and designate from time to time those
employees to whom options are to be granted and the number of shares of stock to
be optioned to each employee; (b) authorize the granting of incentive stock
options, non-qualified stock options, or a combination of incentive stock
options and non-qualified stock options; (c) determine the number of shares
subject to each option; and (d) determine the time or times when and the manner
in which each option shall contain a stock appreciation right and/or dividend
equivalents. No participant shall be granted options under the Stock Plan to
acquire more than 150,000 shares of Common Stock.
Each option agreement shall specify the period for which the option
thereunder is granted and shall provide that the option shall expire at the end
of such period. No part of any option may be exercised until the optionee shall
have remained in the employ of the Company or of a subsidiary for such period,
if any, as the Plan Committee may specify in the option agreement, and the
option agreement may provide for exercisability in installments. Subject to
option period limitations applicable to incentive stock options, the Plan
Committee will have authority to extend the option period or accelerate for any
reason it deems appropriate the vesting schedule of all or any part of any
option issued under the Stock Plan.
The purchase price of the shares as to which an option shall be exercised
shall be paid to the Company at the time of exercise either in cash, or, subject
to approval of the Plan Committee, in stock already owned by the optionee having
a total fair market value equal to the purchase price, through an election to
have the Company withhold from stock to be delivered to the optionee on the
exercise of the option shares of stock having a fair market value equal to the
purchase price or a combination of such forms of consideration having a total
fair market value equal to the purchase price. In addition, the Plan Committee
in its discretion may accept such other consideration or combination of other
consideration as the Plan Committee shall deem to be appropriate and to have a
total fair market value equal to the purchase price.
If an optionee's employment by the Company or a subsidiary shall terminate
because of the optionee's (i) death, (ii) disability, or (iii) retirement in
accordance with the terms of the Company's tax-qualified retirement plans, the
optionee's options may be exercised on or prior to the applicable expiration
dates, but only to the extent that such options were exercisable on the date of
such termination. If an optionee's employment by the Company or a subsidiary
shall terminate for any reason other than (i) those set forth in the preceding
sentence or (ii) for "Cause" (as defined in the Stock Plan), then all
unexercised options under
9
<PAGE> 13
the Stock Plan held by the optionee (vested or unvested) shall terminate ninety
days following the date of termination of employment, provided the Plan
Committee shall have the authority to extend such termination date. The Plan
Committee shall have full authority to accelerate (including retroactively) the
vesting schedule of all or any part of any option issued under the Stock Plan
and held by an employee who has terminated or plans to terminate his or her
employment, such that a terminated employee or his or her heirs or personal
representatives may exercise (at such time or times on or prior to the
applicable expiration dates as may be specified by the Plan Committee) any part
or all of any unvested option under the Stock Plan held by such employee at the
date of his or her termination of employment. Upon termination for Cause, all
unexercised options held by the employee shall immediately terminate and may not
be exercised.
To the extent that an option includes stock appreciation rights, the
optionee may elect to cancel the option and receive cash in an amount equal to
the excess, if any, of the fair market value at the time of cancellation of the
shares subject to the option over the aggregate exercise price for such shares,
or, if mutually agreed by the Plan Committee and the optionee, (i) the issuance
or transfer to the optionee of shares of stock with a fair market value equal to
any such excess or (ii) a combination of cash and shares of stock with a
combined value equal to any such excess.
An option agreement may provide that upon (i) exercise of a non-qualified
stock option, (ii) cancellation of such option in exchange for stock
appreciation rights, or (iii) the normal expiration of such option, the optionee
shall be paid an additional amount equal to the aggregate amount of cash
dividends which would have been paid on the shares of stock purchased upon such
exercise or with respect to which such cancellation or expiration occurs, if
such shares had been issued and outstanding during the period commencing with
the option grant date and ending on the date of option exercise, cancellation,
or expiration, plus an amount equal to the interest that such dividends would
have earned from the respective dividend payment dates if deposited in an
interest-bearing account. Such additional amount will be paid by cash, or if
mutually agreed by the Plan Committee and the optionee, (i) by the issuance of
stock having a fair market value equal to any such excess or (ii) a combination
of cash and shares of stock having a combined fair market value equal to any
such excess.
With respect to the grant of incentive stock options, the Stock Plan
contains certain additional provisions and restrictions consistent with those of
the Internal Revenue Code of 1986, as amended (the "Code").
Restricted Stock
In addition to providing for stock options and stock appreciation rights,
the Stock Plan provides for the grant of restricted stock to employees of the
Company. No shares of restricted stock may be sold or pledged until restrictions
on such shares have lapsed or have been removed. The Plan Committee shall
establish as to each award of restricted stock the terms and conditions upon
which the restrictions shall lapse, which terms and conditions may include a
required period of service or individual or corporate performance conditions.
The Plan Committee may, in its discretion, permit a person granted restricted
stock to retain such restricted stock following termination of the person's
employment with the Company or its subsidiaries. Finally, in its sole
discretion, the Plan Committee may accelerate the time at which any or all
restrictions on an award of restricted stock shall lapse, or the Plan Committee
may remove any and all such restrictions; however, the Plan Committee may not
accelerate the lapse or remove restrictions that require the attainment of a
performance measure, except as may be permitted by the exception for "qualified
performance-based compensation" under Section 162(m) of the Code described
below.
Upon acceptance by a person of an award of restricted stock, subject to the
restrictions noted above, the person shall have all the rights of a shareholder
with respect to such shares of restricted stock, including the right to vote
such shares of restricted stock and the right to receive all dividends and other
distributions paid on such restricted stock. Certificates representing
restricted stock shall be held by the Company until the restrictions lapse and
shall bear such restrictive legends as the Company shall deem appropriate.
10
<PAGE> 14
SECTION 162(M) OF THE CODE
Because stock options and stock appreciation rights granted under the Stock
Plan must have an exercise price equal at least to fair market value at the date
of grant and because the Stock Plan states the maximum number of shares with
respect to which options or stock appreciation rights may be granted during a
specified period to any employee, compensation from the exercise of stock
options and stock appreciation rights should be treated as "qualified
performance-based compensation" for Section 162(m) purposes. In addition, the
Stock Plan authorizes the Plan Committee to make awards of restricted stock that
are conditioned on the satisfaction of certain performance criteria. For such
awards intended to result in "qualified performance-based compensation," the
Plan committee will establish prior to or within 90 days after the start of the
applicable performance period the applicable performance conditions. The Plan
Committee may select from the following performance measures for such purpose:
(i) return on shareholders' equity of the Company, (ii) return on assets of the
Company, (iii) net income of the Company, (iv) earnings per common share of the
Company, (v) total shareholder return of the Company, (vi) oil and/or gas
reserve additions, (vii) utility customer number, volume and/or revenue growth
and (viii) such other criteria as may be established by the Plan Committee in
writing and which meets the requirements for "qualified performance-based
compensation" under Section 162(m). The performance conditions will be stated in
the form of an objective nondiscretionary formula, and the Plan Committee will
certify in writing the attainment of such performance conditions prior to any
payout with respect to such awards.
WITHHOLDING FOR PAYMENT OF TAXES
The Stock Plan provides for the withholding and payment by a participant of
any payroll or withholding taxes required by applicable federal, state or local
law. The Stock Plan permits a participant to satisfy such requirement, with the
approval of the Plan Committee and subject to the terms of the Stock Plan, by
having the Company withhold from the participant a number of shares of Common
Stock otherwise issuable under the award having a fair market value equal to the
amount of the applicable payroll and withholding taxes.
CHANGES IN CAPITALIZATION AND SIMILAR CHANGES
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend, stock split or similar recapitalization, the
aggregate number of shares of Common Stock with respect to which awards may be
made under the Stock Plan, and the terms, types of shares and number of shares
of any outstanding awards under the Stock Plan will be equitably adjusted.
CHANGE IN CONTROL
The Stock Plan provides that in the event of a change in control of the
Company, all options will be fully exercisable as of the date of the change in
control and shall remain exercisable through their full term. Outstanding awards
of restricted stock will become immediately vested, and any applicable
restrictions on restricted stock shall immediately lapse, as of the date of the
change in control.
FEDERAL INCOME TAX TREATMENT
Incentive Stock Options
Incentive stock options ("ISOs") granted under the Stock Plan will be
subject to the applicable provisions of the Code, including Section 422 of the
Code. If shares of Common Stock are issued to an optionee upon the exercise to
an ISO, and if no "disqualifying disposition" of such shares is made by such
optionee within one year after the exercise of the ISO or within two years after
the date the ISO was granted, then (i) no income will be recognized by the
optionee at the time of the grant of the ISO, (ii) no income, for regular income
tax purposes, will be realized by the optionee at the date of exercise, (iii)
upon sale of the shares acquired by exercise of the ISO, any amount realized in
excess of the option price will be taxable to the optionee, for federal income
tax purposes, as a long-term capital gain and any loss sustained will be a long-
term capital loss if the optionee has held the stock acquired pursuant to such
exercise for more than eighteen months, and as a mid-term capital gain if the
optionee has held the stock for less than eighteen months but
11
<PAGE> 15
more than one year, and (iv) no deduction will be allowed to the Company for
federal income tax purposes. If a "disqualifying disposition" of such shares is
made, the optionee will realize taxable ordinary income in an amount equal to
the excess of the fair market value of the shares purchased at the time of
exercise over the option price (the "bargain purchase element") and the Company
will be entitled to a federal income tax deduction equal to such amount. The
amount of any gain in excess of the bargain purchase element realized upon a
"disqualifying disposition" will be taxable as capital gain to the holder (for
which the Company will not be entitled a federal income tax deduction). Upon
exercise of an ISO, the optionee may be subject to alternative minimum tax.
Nonqualified Stock Options
With respect to nonqualified stock options ("NQSOs") granted to optionees
under the Stock Plan, (i) no income is realized by the optionee at the time the
NQSO is granted, (ii) at exercise, ordinary income is realized by the optionee
in an amount equal to the difference between the option price and the fair
market value of the shares on the date of exercise, such amount is treated as
compensation and is subject to income and wage tax withholding, and the Company
receives a tax deduction for the same amount, and (iii) on disposition,
appreciation or depreciation after the date of exercise is treated as either
short-term, mid-term or long-term capital gain or loss depending on whether the
shares have been held for less than one year, more than one year but not more
than eighteen months or more than eighteen months, respectively.
Restricted Stock
Upon becoming entitled to receive shares at the end of the applicable
restriction period without a forfeiture, the recipient will recognize ordinary
income in an amount equal to the fair market value of the shares at that time.
Recipients are not permitted by the Stock Plan to make an election under Section
83(b) of the Code to be treated as having ordinary taxable income on the date of
the grant equal to the fair market value of the shares of restricted stock as if
the shares were unrestricted and could be sold immediately. The Company
generally will be entitled to a deduction equal to the amount that is taxable as
ordinary compensation income to the recipient.
STOCK PLAN BENEFITS
On November 25, 1997, the Board of Directors granted option to purchase the
following number of shares of Common Stock at $ per share to the following
persons and groups: Mr. Lysinger, shares; Mr. Warren, shares; Mr.
Ketcham, shares; Mr. Youngblood, shares; Mr. McManus,
shares; Mr. Reynolds, shares; all executive officers as a group (( )
persons), shares; all current directors who are not executive officers, 0
shares; and each nominee for director, 0 shares.
VOTE REQUIRED; RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock casting votes for or against approval of the Stock
Plan is necessary to approve the Stock Plan. The Board of Directors recommends
that shareholders vote FOR the approval of the Stock Plan.
4. PROPOSAL TO APPROVE CERTAIN COMMON STOCK ISSUANCES UNDER THE ENERGEN
CORPORATION 1997 DEFERRED COMPENSATION PLAN
As described under Proposal 3 above, the Board of Directors of the Company
believes that the future success of the Company is, in significant part,
dependent upon the quality and continuity of the Company's management and that a
comprehensive management compensation program is essential in order for the
Company to attract and retain individuals with superior ability.
12
<PAGE> 16
Toward that end, on April 25, 1997, the Board of Directors of the Company
adopted, and on November 25, 1997 amended, the Energen Corporation 1997 Deferred
Compensation Plan (the "Deferred Compensation Plan").
The following discussion of the Deferred Compensation Plan is qualified in
all respects by the specific provisions of the Deferred Compensation Plan, a
copy of which is set forth as Appendix B hereto.
SUMMARY OF DEFERRED COMPENSATION PLAN FEATURES
The purpose of the Deferred Compensation Plan is to assist the Company and
its affiliated companies in retaining directors and officers, encouraging their
long-term commitment to the Company's success, and attracting new directors and
officers by offering them an opportunity to defer compensation and participate
in the success of the Company and its affiliated companies, and allowing them to
share in increases in the value of the Company.
The Deferred Compensation Plan is not limited as to the amount of
compensation which the participants in the Deferred Compensation Plan may elect
to defer under it, or the value of the compensation which may ultimately become
payable under the Deferred Compensation Plan. The Company has filed a
registration statement under the Securities Act of 1933 providing initially for
the deferral of up to $5,000,000 of compensation under the Deferred Compensation
Plan. The expenses of administering the Deferred Compensation Plan are to be
borne by the Company.
The Deferred Compensation Plan is administered by the Board of Directors of
the Company, which has the power to administer and interpret the Deferred
Compensation Plan and to adopt rules and regulations concerning the Deferred
Compensation Plan. The Board of Directors may also delegate authority with
respect to administration of the Deferred Compensation Plan to the ORC or to
such other committee or persons as the Board of Directors deems appropriate for
administration of the Deferred Compensation Plan. The Board of Directors' or its
delegee's interpretation and construction of the Deferred Compensation Plan is
conclusive and binding on the Company and the Deferred Compensation Plan's
participants.
Although the Deferred Compensation Plan has no fixed duration, the Board of
Directors of the Company may amend or terminate the Deferred Compensation Plan
at any time, except that no amendment or termination shall adversely affect a
participant's rights to deferred compensation credited to the participant's
accountants as of the date of such amendment or termination.
Each director and each officer of a "Participating Employer" is eligible to
participate in the Defined Compensation Plan. In addition, the ORC may designate
other management level or highly compensated employees of Participating
Employers as eligible to participate in the Deferred Compensation Plan. For
purposes of the Deferred Compensation Plan, "Participating Employers" include
generally the Company and its wholly-owned subsidiaries determined to be
eligible by the Company to participate in the Deferred Compensation Plan. An
individual eligible to participate in the Deferred Compensation Plan and who
elects to participate in the Deferred Compensation Plan is referred to as a
"Participant." The ORC (or the board of directors of the Participating Employer
if the affected Participant is a director of such Participating Employer) may in
its discretion determine that a Participant will no longer be eligible to
participate in the Deferred Compensation Plan, in which event future deferrals
of compensation under the Deferred Compensation Plan will terminate until the
Participant is again determined to be eligible to participate in the Deferred
Compensation Plan and so elects to participate.
A Participant may elect to defer part or all of any one or more of the
following items of compensation to the extent such item of compensation is
applicable to the participant: (a) base salary; (b) annual incentive
compensation plan awards; (c) shares to be issued under the Restricted Stock
Incentive Plan; (d) shares to be issued under the 1988 Stock Option Plan; (e)
awards to be received under the 1992 Long-Range Performance Share Plan awards;
(f) director fees; (g) annual and/or elective grants under the Directors Stock
Plan; and (h) awards or shares to be received under the Stock Plan.
All deferral elections other than elections to terminate a prior deferral
election are subject to approval and acceptance by the Company at its
discretion. At the time a Participant makes an initial deferral election, the
13
<PAGE> 17
Participant must specify which one or more distributable events the Participant
desires to have trigger distribution. Once made, the distributable event
election cannot be changed. The Deferred Compensation Plan does provide the
Company with the authority to allow a Participant to make a new distributable
event election with respect to items of compensation deferrable subsequent to
the new distributable event election. Such change, however, would not be
applicable to previously deferred compensation.
Distribution of a Participant's benefit will commence on the first day of
the second calendar month immediately following the calendar month in which the
applicable distributable event occurs. A participant may elect to have the
distribution made in a lump sum, in installments (over not more than 10 years),
or in such other manner as may be specified by the participant and accepted by
the Company. The payment option may be changed from time-to-time by the
Participant so long as the change is made prior to the calendar year in which a
distributable event occurs.
Amounts deferred by a Participant under the Deferred Compensation Plan are
credited to one of two separate accounts maintained for a Participant, a Company
stock account or an investment account. The value of a Participant's Company
stock account is intended to track the performance of the Company Common Stock,
including reinvestment of dividends. At distribution, the Company stock account
will be distributed in the form of shares of Company Common Stock and/or cash in
the discretion of the Company. In the event of a change of control, the Company
stock account transfers to the investment account. Participants age 58 and older
may, subject to the Company's approval, request transfers from their Company
stock accounts to their investment accounts.
Amounts deferred under the Deferred Compensation Plan from the Restricted
Stock Incentive Plan the 1988 Stock Option Plan, the 1992 Long-Range Performance
Share Plan, the Directors Stock Plan, and the Stock Plan (collectively, the
"Stock Based Plans") will be credited to the participant's Company stock
account. In addition to compensation deferred by a Participant, the Deferred
Compensation Plan allows the Board of Directors to credit a Participant's
Company stock account with additional amounts referred to as "Discretionary
Amounts" under the Deferred Compensation Plan. By standing resolution, the Board
of Directors has authorized certain Discretionary Amount contributions intended
to provide, with respect to deferred compensation, a Company match and ESOP
contribution comparable to that available under the Company's 401(k) Plan but
without regard to the compensation limitations applicable to the 401(k) Plan.
At present, the foregoing are the only amounts permitted to be deferred by
a Participant into the Company stock account. Amounts deferred which are not
credited to the Company stock account will be credited to the Participant's
investment account. The Company may permit a Participant to request allocation
of the Participant's investment account among certain investment options for
performance measurement purposes. These investment options currently include a
selection of Frank Russell Trust Company mutual funds. A Participant may make
the allocation request or a reallocation request at any time, but all such
requests are subject to approval and acceptance by the Company. Amounts credited
to the investment account which are not allocated by the Participant to an
investment option are credited with interest at the prime rate of AmSouth Bank
of Alabama.
A Participant's Company stock account and investment account are only
bookkeeping accounts. While the Deferred Compensation Plan is completely
unfunded and the Participants' accounts thereunder are unsecured claims against
the appropriate Participating Employer (which claims are guaranteed by the
Company in the case of the Company's subsidiaries), the Company has established
a "rabbi" trust with Frank Russell Trust Company, as trustee, and plans to fund
the trust in a manner that generally tracks the Company stock account and
investment account allocations made by Participants in the Deferred Compensation
Plan. There is no requirement, however, that the trust be so funded or invested
by the Company. Although the Company intends for the trust assets to be used for
the payment of benefits under the Deferred Compensation Plan to the
Participants, the trust assets are subject to claims of creditors of the
Company. The Deferred Compensation Plan also provides that upon a "Change of
Control" of the Company (as defined in the Deferred Compensation Plan) the trust
will be funded in an amount equal to the aggregate value of the Participant
accounts as of the time of the Change of Control.
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<PAGE> 18
One of the purposes of the Company in establishing the trust is to allow
the Company to create investment pools that generally match the performance of
the amounts allocated under the Deferred Compensation Plan to the Company stock
account and the investment account and to have shares of Company Common Stock
and cash available to distribute to Participants from the trust upon the
occurrence of distributable events in amounts approximately equal to the
aggregate amounts of shares of Company Common Stock credited to the Company
stock accounts and cash credited to the investment account under the Deferred
Compensation Plan. Because, under the rules of the New York Stock Exchange, the
Company may not list and issue shares to its directors and officers under
employee plans which are not broadly-based unless such plans have been approved
by the shareholders of the Company, the Company presently limits the amounts
which may be credited to Participants' Company stock accounts under the Deferred
Compensation Plan to Discretionary Amounts and awards and grants payable under
the Stock Based Plans for which shareholder approval of the issuance of stock to
directors and officers has been previously obtained. To the extent that amounts
deferred under a Stock Based Plan would have been paid in Common Stock, the
Company can use such Common Stock to fund the trust. Shares of Common Stock held
in the trust are enrolled in the Company's dividend reinvestment and direct
stock purchase plan, which is available to all shareholders of the Company, and
dividends on shares credited in the Company stock accounts are invested in
shares of Common Stock issued under that Plan.
Amounts deferred by Participants under the Deferred Compensation Plan from
compensation not paid under Stock Based Plan, principally salary, bonus payments
under the Annual Incentive Compensation Plan of the Company and Director's fees
(collectively "Cash Compensation"), are not presently permitted to be deferred
by a Participant into the Company stock account. The Company desires to permit
Participants to defer Cash Compensation into the Company stock account if they
so elect, but prior to allowing such deferrals, the Company desires to be in a
position to fund the trust with Common Stock in an amount equal to the amount of
Cash Compensation deferred into the Company stock accounts. In addition, the
Company desires to be able to fund the trust with Common Stock with respect to
Discretionary Amounts, as well as to have greater flexibility with respect to
funding for amounts deferred under the Stock Based Plans and amounts credited to
a Participant's Company stock account with respect to dividends paid on Common
Stock.
Accordingly, the Company is seeking approval by the shareholders of the
Company for the issuance under the Deferred Compensation Plan of up to 250,000
shares of Company Common Stock, which shares will be in addition to shares of
Company Common Stock which may be issued to the trust in connection with the
Deferred Compensation Plan pursuant to deferrals by Participants of shares
otherwise issuable to such Participants under other Stock Based Plans. As a
result, if the shareholders of the Company approve the proposal relating to the
Deferred Compensation Plan, and the Company fully funds the trust as described
above with respect to all deferrals under the Deferred Compensation Plan into
the Company stock accounts, the Company will be able to, but will not be
required to, fund all distributions to Participants from Company stock accounts
with shares of Common Stock. IF THIS PROPOSAL IS NOT APPROVED BY THE
SHAREHOLDERS, THE DEFERRED COMPENSATION PLAN WILL CONTINUE IN EFFECT, BUT THE
COMPANY WILL NOT BE ABLE TO FUND THE TRUST WITH COMPANY COMMON STOCK FOR ANY
AMOUNTS DEFERRED WITH RESPECT TO CASH COMPENSATION WHICH THE COMPANY MAY
SUBSEQUENTLY PERMIT TO BE DEFERRED INTO THE COMPANY STOCK ACCOUNT OR FOR ANY
DISCRETIONARY AMOUNTS CONTRIBUTED TO THE DEFERRED COMPENSATION PLAN.
The Deferred Compensation Plan is subject to the disclosure requirements
relating to unfunded deferred compensation plans of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
15
<PAGE> 19
DEFERRED COMPENSATION PLAN BENEFITS
The following participants and groups had the following respective account
balances under the Deferred Compensation Plan at September 30, 1997:
<TABLE>
<CAPTION>
DOLLAR VALUE COMPANY
OF STOCK
INVESTMENTS ACCOUNT --
ACCOUNT NUMBER OF
NAME AND POSITION ($) SHARES
- - ----------------- ------------ ---------------
<S> <C> <C>
Rex J. Lysinger............................................ $ 0 0
Chairman of the Board and (through January, 1997) Chief
Executive Officer
Wm. Michael Warren, Jr..................................... $ 1,340
President and (from February, 1997) Chief Executive
Officer
G.C. Ketcham............................................... $ 891
Executive Vice President, Chief Financial Officer and
Treasurer
Gary C. Youngblood......................................... $ 0 0
President and Chief Operating Officer of Alabama Gas
Corporation
James T. McManus........................................... $ 0 1,313
President and Chief Operating Officer of Taurus
Exploration, Inc.
Dudley C. Reynolds......................................... $ 0 805
General Counsel and Secretary
Executive Group............................................ $ 7,464
Non-Executive Director Group............................... $ 0 30
Non-Executive Officer Employee Group....................... $ 20
</TABLE>
REQUIRED VOTE; RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock casting votes for or against approval of certain
issuances of Common Stock under the Deferred Compensation Plan is necessary to
approve this proposal. The Board of Directors recommends that shareholders vote
FOR the approval of this proposal.
16
<PAGE> 20
SUMMARY OF SECURITY OWNERSHIP OF MANAGEMENT AND
EMPLOYEE STOCK OWNERSHIP PLAN PARTICIPANTS
The following table shows the shares of Common Stock of the Company
("Common Stock") beneficially owned by each director or nominee for director, by
each executive officer of the Company named in the Summary Compensation Table,
and by all directors and executive officers of the Company (including certain
executive officers of the Company's subsidiaries) as a group and by participants
in the Energen Corporation Employee Savings Plan as a group, as of December 10,
1997. Except as noted below, each such individual has sole voting power and sole
investment power with respect to such shares.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL NUMBER OF PERCENT
OR PERSONS IN GROUP SHARES(1) OF CLASS
------------------- --------- --------
<S> <C> <C>
Stephen D. Ban.............................................. *
Julian W. Banton............................................ 500 *
R.D. Cash................................................... *
J. Mason Davis, Jr.......................................... *
James S. M. French.......................................... *
Wallace L. Luthy............................................ *
Rex J. Lysinger............................................. *
Geoffrey C. Ketcham......................................... *
James T. McManus............................................ *
Judy M. Merritt............................................. *
Drayton Nabers, Jr.......................................... *
Dudley C. Reynolds.......................................... *
George S. Shirley........................................... *
Wm. Michael Warren, Jr...................................... *
Gary C. Youngblood.......................................... *
All directors and executive officers (18 persons)...........
Energen Corporation Employee Savings Plan(2)................
</TABLE>
- - ------------
* Less than one percent.
(1) The shares of Common Stock shown above include shares owned by wives and
children of directors as to which shares the directors disclaim any
interest. Dunn Investment Company, of which Mr. French is President, Chief
Executive Officer and a director, owns 60,000 shares of Common Stock, which
shares are not included in the totals noted above. The shares of Common
Stock shown above for Messrs. Lysinger, Warren, Ketcham, Youngblood,
McManus, Reynolds and the executive officers of the Company include shares
which are held for their respective accounts under the Energen Corporation
Employee Savings Plan and the Restricted Stock Incentive Plan, described in
the Executive Compensation section, but do not include any units credited to
their respective Company stock accounts under the Deferred Compensation
Plan. Messrs. Lysinger, Warren, Ketcham, Youngblood, McManus, Reynolds and
all executive officers as a group hold presently exercisable options to
acquire shares of Common Stock, respectively, which
amounts are included in the above table.
(2) The Energen Corporation Employee Savings Plan is a qualified voluntary
contributory retirement plan, with an employee stock ownership feature. The
Vanguard Group, Inc. serves as trustee for the Plan and must vote the shares
held by the plan in accordance with individual participant instructions.
Both current and retired employees of the Company are participants in the
Plan.
Except for the Company's Employee Savings Plan, the Company is not aware of
any person or group which beneficially owns more than 5% of the Company's Common
Stock.
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<PAGE> 21
1997 COMPENSATION COMMITTEE REPORT
The Officers Review Committee ("ORC") of the Board of Directors is
comprised entirely of outside Directors. The ORC is responsible for overseeing
and administering the Company's executive compensation program.
COMPENSATION POLICY
The executive compensation program of the Company is reviewed annually by
the ORC and is designed to serve the interests of the Company and its
shareholders by aligning executive compensation with shareholder objectives and
to encourage and reward management initiatives that will benefit the Company
itself, its shareholders, its customers, and its employees over the long term.
Specifically, the executive compensation program seeks to:
(i) implement compensation practices which allow the Company to
attract and retain highly qualified executives and maintain a competitive
position in the executive marketplace with employers of comparable size and
in similar lines of business;
(ii) enhance the compensation potential of executives who are in the
best position to contribute to the development and success of the Company
by providing the flexibility to compensate for individual contributions to
superior corporate performance as measured by specific objectives compared
against a peer group; and
(iii) directly align the interests of executives with the long-term
interests of stockholders through compensation opportunities in the form of
integrated short- and long-term incentive plans the payouts of which are
predominantly in the form of Common Stock.
These objectives are met through a program comprised of salary, annual cash
incentive awards, and long-term stock and performance share opportunities which
are dependent on meeting or exceeding carefully defined corporate, subsidiary
and individual objectives.
SALARY. As a matter of policy, the ORC administers annual salary levels
relative to the competitive marketplace as determined through the use of
available compensation surveys. Each year the ORC reviews the issue of
competitive pay and adjusts salary structures accordingly with the midpoint of
each pay range approximating the average of the market. The ORC then considers
salary adjustments for the Company's executive officers, including those named
in the Summary Compensation Table. Salary adjustments are designed to reflect
consideration of the performance of each executive over the prior compensation
period, recognition of individual contributions to overall Company performance,
internal comparability considerations, as appropriate, and the executive's
placement in the salary range.
ANNUAL INCENTIVES. Executives are eligible each year for cash incentive
awards based upon attaining financial and non-financial objectives relative to
pre-established performance targets. Incentive awards, if made, are based upon
the successful attainment of objective corporate performance criteria (expressed
in terms of such criteria as return on equity, net income, market yield,
customer service, productivity, finding costs and reserve additions) and, where
appropriate, subsidiary performance, as well as defined individual performance
criteria. Assuming corporate, subsidiary and individual objectives are met, the
incentive award is based upon a percentage of the salary earned by the
participant during the performance year.
LONG-TERM INCENTIVE COMPENSATION. Currently the Company has in place a
Performance Share Plan and the 1988 Stock Option Plan. By its terms, the
Company's Restricted Stock Incentive Plan terminated on January 31, 1994,
subject to outstanding award agreements, the remaining restrictions with respect
to which lapsed during 1997. The Performance Share Plan and Stock Option Plan
may be used separately or in combination with one another at the discretion of
the ORC. As a matter of policy, however, the ORC has been using the Performance
Share Plan as the primary vehicle to deliver long-term incentives. However, if
the shareholders approve the 1997 Stock Incentive Plan, the ORC will begin
supplementing the Performance Share Plan with the 1997 Stock Incentive Plan to
deliver long-term incentives. The purpose of all these plans
18
<PAGE> 22
is to provide executives and key employees an opportunity to participate in the
long-term economic growth and performance of the Company.
1992 LONG-RANGE PERFORMANCE SHARE PLAN. An award of Performance Shares
entitles a participant to be paid the equivalent in value of one share of Common
Stock for each Performance Share awarded to a participant if the ORC has
determined that all conditions of payment, which are known as performance
condition guidelines, have been satisfied at the end of the four-year period
that commences on the first day of the fiscal year in which an award is granted
(the "Award Period") or, under certain circumstances, at the end of a one, two,
or three-year period within the Award Period (the "Interim Period"). The ORC
may, in its discretion, alter or amend performance condition guidelines prior to
granting any new awards and may pay a participant in cash or a combination of
cash and shares of Common Stock.
According to the performance condition guidelines that have been adopted by
the ORC and are currently in effect under the plan, payment of an award will be
based on the Company's percentile ranking among a comparison group of forty
companies as measured for the applicable Award or Interim Period. For award
periods ending on or prior to September 30, 1997, the payout percentage for
one-half of the award was based on the Company's percentile ranking with respect
to total shareholder return, which is based on dividends paid and changes in the
market price of a company's common stock over a period of time. The payout
percentage for the other one-half of such awards was based on the Company's
percentile ranking with respect to Average ROE, which is based on a company's
average annual reported income or loss before extraordinary items over average
shareholders' equity. Subject to the discretion of the ORC to adjust for
extenuating circumstances, the payout percentage measured separately for each
one-half of the award will be 100% if the Company ranks at or above the 75th
percentile, 50% at the 50th percentile and 0% below the 50th percentile with
interpolation between the 50th and 75th percentiles. For award periods ending
after September 30, 1997, all of the award payout will be based on the Company's
percentile ranking with respect to total shareholder return.
1988 STOCK OPTION PLAN. The 1988 Stock Option Plan provides for the grant
of incentive stock options, non-qualified stock options, stock appreciation
rights and dividend equivalents or a combination thereof to officers and key
employees, all as determined by the ORC. If an option includes stock
appreciation rights ("SARs"), then the optionee may elect to cancel all or any
portion of the option then subject to exercise, in which event the Company's
obligation in respect of such option may be discharged by payment of an amount
in cash equal to the excess, if any, of the fair market value of the shares of
Common Stock subject to such cancellation over the option exercise price for
such shares. If the exercised option includes dividend equivalents, the optionee
will in addition to the shares of Common Stock purchased upon exercise receive
additional consideration in an amount equal to the amount of cash dividends
which would have been paid on such shares had they been issued and outstanding
during the period commencing with the option grant date and ending on the option
exercise date, plus an amount equal to the interest that such dividends would
have earned from the respective dividend payment dates if deposited in an
account bearing interest compounded quarterly at the announced prime rate of
AmSouth Bank of Alabama in effect on the first day of the respective quarter.
1997 STOCK INCENTIVE PLAN. Because options have been granted with respect
to all shares of Common Stock reserved for issuance under the 1988 Stock Option
Plan, at a meeting held November 25, 1997, the Board of Directors adopted the
Energen Corporation 1997 Stock Incentive Plan. The 1997 Stock Incentive Plan
provides for the grant of incentive stock options and non-qualified stock
options with stock appreciation rights and dividend equivalents, and for the
grant of restricted stock or a combination thereof to officers and key employees
all as determined by the ORC. If an option includes stock appreciation rights,
then the optionee may elect to cancel all or any portion of the option then
subject to exercise, in which event the Company's obligation in respect of such
option may be discharged by payment of an amount in cash equal to the excess, if
any, of the fair market value of the shares of Common Stock subject to such
cancellation over the option exercise price for such shares. If the exercised
option includes dividend equivalents, the optionee will in addition to the
shares of Common Stock purchased upon exercise receive additional consideration
in an amount equal to the amount of cash dividends which would have been paid on
such shares had they been issued and outstanding during the period commencing
with the option grant date and ending on the option exercise date, plus an
amount equal to the interest that such dividends would have earned from the
respective
19
<PAGE> 23
dividend payment dates if deposited in an account bearing interest compounded
quarterly at the announced prime rate of AmSouth Bank of Alabama in effect on
the first day of the respective quarter.
OPERATING SUMMARY
As demonstrated in each of the plan descriptions provided, compensation in
all its forms is linked directly to objective performance criteria of both the
Company, subsidiaries where applicable, and the individual executive's
performance. By doing so, the ORC has created an environment which encourages
long-term decisions which will benefit the Company, its shareholders, customers,
and employees and at the same time allow those executives, managers, and other
key employees within the Company to share in the success of those decisions and
actions.
ISSUES INFLUENCING COMPENSATION DECISIONS DURING THE REPORTING YEAR (OCTOBER 1,
1996 TO SEPTEMBER 30, 1997)
Energen completed another successful year October 1, 1996 through September
30, 1997. Earnings of $29 million were achieved from current year operations
equal to $2.31 per share, reflecting an 18.5% growth rate over the prior fiscal
year earnings of $1.95 per share. Energen was able to increase its cash dividend
3.4% to $1.20 and had a total shareholder return of 54%. These successes were
made possible by similar successes in major corporate subsidiaries. In spite of
its successful year, Energen's actual ROE performance against a comparison group
of peer companies was below the 50th percentile for the year. This peer group
comparison, in large part, reflects the effect of the successful efforts
accounting method in a year when the Company's oil and gas subsidiary has
increased its exploration activities, and the majority of those companies in the
peer group engaged in oil and gas activities utilize the full cost accounting
method. The ORC considered these and other factors in funding the incentive
program, adjusting salaries, and approving payouts under the Long-Range
Performance Share Plan. Specifically, the ORC considered Energen's total
shareholder return and earnings results for the fiscal year and evaluated the
Company's return on equity performance against the peer group using comparable
accounting methods.
As noted elsewhere in the proxy statement, Rex J. Lysinger resigned as CEO
of Energen in February, 1997 and will resign as Chairman of the Board effective
January 1, 1998. Wm. Michael Warren, Jr. was elected CEO in February, 1997 and
will become Chairman of the Board effective January 1, 1998. With respect to Mr.
Lysinger, base salary was adjusted to $378,750 reflecting both market
competitive salary levels and actual individual performance during the 1996-1997
performance year. An incentive award payable $228,000 in cash was earned for the
1996-97 reporting year reflecting the performance of the Company, its
subsidiaries, and the incumbent himself in achieving the financial and business
results of the Company. With respect to Mr. Warren, base salary was adjusted to
$335,000 effective March 1, 1997, which base salary will remain in effect for a
period of thirty-two months. In evaluating overall compensation philosophy for
the CEO position, the ORC determined to tie more of the CEO's compensation to
the Company's stock performance through the award of stock options and
performance share awards. Mr. Warren's incentive award of $180,000 payable in
cash was earned for the 1996-97 reporting year, reflecting the performance of
the Company, its subsidiaries, and the incumbent himself in achieving the
financial and business results of the Company. Performance share awards were
made based on a percentage of salary with the applicable percentage being a
function of an executive's position with the Company. Actual payout is dependent
on obtaining performance levels in accordance with previously described
guidelines.
The Officers Review Committee: George S. Shirley, Chairman
Stephen D. Ban
Wallace L. Luthy
Drayton Nabers, Jr.
20
<PAGE> 24
EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation paid in
fiscal year 1997 and the two prior fiscal years to each person serving as Chief
Executive Officer of the Company during any part of the fiscal year, and the
Company's four other most highly compensated executive officers:
TABLE 1
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- ------------------------- ---------
RESTRICTED LONG-TERM
NAME AND INCENTIVE OTHER STOCK STOCK INCENTIVE ALL OTHER
PRINCIPAL SALARY COMPENSATION ANNUAL AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) COMPENSATION ($) (#) ($) ($)(1)
- - --------------------- ------- -------- ------------ ------------ ---------- ------------ --------- ------------
(A) (B) (C) (D) (E) (F) (G) (H)(*) (I)
- - --------------------- ------- -------- -------- -------- -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lysinger, Rex J. -- Chairman and (through January, 1997) Chief Executive Officer
9/30/97 $378,750 $18,435
9/30/96 $363,083 $ 90,000 $263,520 $12,441
9/30/95 $343,394 $150,000 7,000 $186,073 $12,934
Warren, Jr., Wm. Michael -- President and (from February, 1997) Chief Executive Officer
9/30/97 $316,833 28,000 $14,793
9/30/96 $283,250 $ 63,000 $152,280 $ 9,248
9/30/95 $264,273 $110,000 3,000 $111,219 $ 9,870
Ketcham, Geoffrey C. -- Executive Vice President, Chief Financial Officer and Treasurer
9/30/97 $191,817 $11,556
9/30/96 $185,416 $ 40,000 $ 91,800 $ 9,283
9/30/95 $179,099 $ 85,700 $ 68,108 $ 9,339
Youngblood, Gary C. -- President and Chief Operating Officer of Alabama Gas Corporation
9/30/97 $166,667 $10,385
9/30/96 $152,000 $ 32,000 $ 47,520 $ 9,795
9/30/95 $138,231 $ 54,200 $ 35,989 $ 8,905
McManus, James T. -- President and Chief Operating Officer of Taurus Exploration, Inc.
9/30/97 $152,416 25,000 $ 9,053
9/30/96 $127,000 $ 32,000 $ 44,388 $ 7,609
9/30/95 $108,417 $ 41,100 $ 32,385 $ 6,505
Reynolds, Dudley C. -- General Counsel and Secretary
9/30/97 $157,500 $ 9,270
9/30/96 $150,833 $ 32,000 $ 51,840 $ 9,039
9/30/95 $137,933 $ 48,900 $ 38,046 $ 7,211
</TABLE>
NOTES TO TABLE 1
(1) The amounts shown represent contributions made by the Company to its defined
contribution plans on behalf of each executive officer.
21
<PAGE> 25
TABLE 2
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- - -------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/
UNDERLYING SARS EXERCISE
OPTIONS/ GRANTED TO OF GRANT DATE
SARS GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#) FISCAL YEAR ($/SH) DATE ($)(1)
(A) (B) (C) (D) (E) (F)
- - ---------------------- ------------ -------------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Lysinger 0
Warren 6,000 11% $30.00 11/1/97 $30,900
9,000 17% $30.00 11/1/98 $46,350
13,000 25% $30.00 11/1/99 $69,950
Ketcham 0
Youngblood 0
McManus 5,000 9% $30.00 11/1/97 $25,750
8,000 15% $30.00 11/1/98 $41,200
12,000 23% $30.00 11/1/99 $61,800
Reynolds 0
</TABLE>
NOTES TO TABLE 2
(1) Reflects a valuation of $5.15 per share using the Black-Scholes valuation
method. For purposes of this valuation, the following assumptions were used:
[to be inserted].
22
<PAGE> 26
TABLE 3
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END
ACQUIRED (#) (#)(2)
ON EXERCISE VALUE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) (D) (E)
--------------------- ----------- -------------- --------------------------- ---------------------------
(A) (B) (C) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lysinger -- -- 51,958 0 $877,574 $ 0
Warren -- -- 29,048 28,000 $491,297 $155,750
Ketcham -- -- 2,950 0 $ 55,497 $ 0
Youngblood -- -- 1,850 0 $ 34,803 $ 0
McManus 8,600 25,000 $151,225 $139,063
Reynolds -- -- 1,250 0 $ 23,516 $ 0
</TABLE>
NOTES TO TABLE 3
(1) Market value of underlying securities at time of exercise minus the exercise
price.
(2) Market value of underlying securities at year-end market price (September
30, 1997) of $35 9/16 per share minus the exercise price.
TABLE 4
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF SHARES, OR OTHER NON-STOCK PRICE-BASED PLANS
UNITS OR PERIOD UNTIL -------------------------------
OTHER RIGHTS MATURATION OR THRESHOLD TARGET MAXIMUM
NAME (#) PAYOUT ($ OR #) ($ OR #) ($ OR #)
- - ----------------------- ----------------- ------------------ --------- -------- --------
(A) (B) (C) (D) (E) (F)
- - ----------------------- ----------------- ------------------ --------- -------- --------
<S> <C> <C> <C> <C> <C>
Lysinger 11,880 10/1/96 to 9/30/00 5,940 N/A 11,880
Warren 10,470 10/1/96 to 9/30/00 5,235 N/A 10,470
Ketcham 3,960 10/1/96 to 9/30/00 1,980 N/A 3,960
Youngblood 3,000 10/1/96 to 9/30/00 1,500 N/A 3,000
McManus 2,710 10/1/96 to 9/30/00 1,355 N/A 2,710
Reynolds 3,000 10/1/96 to 9/30/00 1,500 N/A 3,000
</TABLE>
The 1992 Long-Range Performance Share Plan is described more fully under
the caption "1997 Compensation Committee Report -- 1992 Long-Range Performance
Share Plan" of the Proxy Statement above.
RETIREMENT INCOME PLAN
Officers of the Company are covered by the Energen Corporation Retirement
Income Plan, a defined benefit plan covering substantially all employees of the
Company. The amount of contributions made by the Company to the plan is not
reflected in the Compensation Table, since the amount of the contribution with
respect to a specified person is not and cannot readily be separately or
individually calculated by the regular actuaries for the plan.
Benefits under the plan are based on years of service at retirement and on
"Final Earnings," the average base compensation for the highest sixty
consecutive months out of the final 120 months of employment. (This compensation
consists only of base salary and excludes remuneration in the form of
contributions to other benefit plans or any other form of compensation such as
any compensation received under the Annual Incentive Compensation Plan or
Restricted Stock Incentive Plan.) Normal or delayed retirement benefits are
payable upon retirement on the first day of any month following attainment of
age 65 and continuing for life, subject to an annual cost-of-living increase of
up to three percent. Benefits payable to an employee under the
23
<PAGE> 27
plan are subject to limits imposed by Section 415 of the Internal Revenue Code.
As of September 30, 1997, no employees of the Company would have been entitled
to payments for benefits in excess of the Section 415 limits.
The Company has entered into retirement supplement agreements
("Supplemental Agreements") with certain officers. Generally, each such
agreement provides that the employee will receive, upon normal retirement (which
under the Supplemental Agreement is defined as retirement on the first day of
any month following attainment of age 60), a supplemental retirement benefit
equal to the difference between 60% of the employee's compensation determined as
of the employee's normal retirement date and the employee's normal retirement
benefit (including social security benefit). For purposes of the Supplemental
Agreements compensation is determined based on a formula taking into account the
average of the highest 36 months of base salary during the five years prior to
retirement plus the average of the three highest annual incentive awards for the
five full fiscal years preceding the earlier of retirement or the officer's 61st
birthday.
The following table presents estimated annual benefits payable from both
the plan and the Supplemental Agreements upon normal or delayed retirement to
persons in specified compensation and years-of-service classifications. The
amounts shown are subject to deduction for applicable Social Security benefits
at age 62.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
COMPENSATION 15 20 25 30 35 40
------------ -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$125,000........................... $77,625 $103,500 $103,500 $103,500 $103,500 $103,500
$150,000........................... $93,150 $124,200 $124,200 $124,200 $124,200 $124,200
$175,000........................... $108,675 $144,900 $144,900 $144,900 $144,900 $144,900
$200,000........................... $124,200 $165,600 $165,600 $165,600 $165,600 $165,600
$225,000........................... $139,725 $186,300 $186,300 $186,300 $186,300 $186,300
$250,000........................... $155,250 $207,000 $207,000 $207,000 $207,000 $207,000
$300,000........................... $186,300 $248,400 $248,400 $248,400 $248,400 $248,400
$400,000........................... $248,400 $331,200 $331,200 $331,200 $331,200 $331,200
$450,000........................... $279,450 $372,600 $372,600 $372,600 $372,600 $372,600
$500,000........................... $310,500 $414,000 $414,000 $414,000 $414,000 $414,000
</TABLE>
The amount of base compensation and the years of service credited under the
plan for individuals shown in the Compensation Table are as follows: Mr.
Lysinger, $378,750, 22 years; Mr. Warren, $316,833, 14 years; Mr. Ketcham,
$191,817, 16 years; Mr. Youngblood $166,667, 28 years; Mr. McManus $152,416, 12
years and Mr. Reynolds $157,500, 17 years.
SEVERANCE COMPENSATION AGREEMENTS
The Company has entered into severance compensation agreements with Messrs.
Lysinger, Warren, Ketcham, Youngblood, McManus and Reynolds, as well as seven
other officers not named in the Summary Compensation Table. Generally, each such
agreement provides that if, within thirty-six months following a
change-in-control of the Company, the employee's employment is terminated in a
qualified termination, then the Company shall make a lump sum payment to the
employee equal to a percentage of the employee's annual base salary in effect
immediately prior to the change-in-control, plus that percentage of the
employee's highest additional cash compensation for the three fiscal years
immediately prior to the fiscal year during which the change-in-control occurs.
For purposes of establishing the applicable percentage of an employee's annual
salary and additional cash compensation, the Company has established a
three-tier structure in which tier-one employees receive 250% of such
compensation, tier-two employees receive 200% of such compensation and
tier-three employees receive 150% of such compensation. For purposes of
severance compensation calculations, Messrs. Lysinger, Warren and Ketcham are
considered tier-one employees, Messrs. Youngblood, McManus and Reynolds are
considered tier-two employees and the remainder of the employees with whom the
Company has entered into severance compensation agreements are considered either
tier-two or tier-three employees. The agreements also provide for the
continuance of certain insurance and other employee benefits
24
<PAGE> 28
for a period of twenty-four months following any such termination of employment.
For purposes of the agreements, (i) the term "qualified termination" means a
termination during a window period other than for cause, death or disability and
a termination other than during a window period by the Company other than for
cause, by the employee for good reason or by written agreement to such effect
between the employee and the Company, (ii) the term "window period" means the
thirty-day period immediately following the first anniversary of a
change-in-control, (iii) the term "cause" generally means failure to
substantially perform duties, misconduct injurious to the Company or conviction
of a felony, and (iv) the term "good reason" generally means a reduction in the
position, duties, responsibilities, status or benefits of the employee's job.
PERFORMANCE GRAPH(1)
ENERGEN CORPORATION -- COMPARISON OF FIVE-YEAR
CUMULATIVE SHAREHOLDER RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ENERGEN PEER GROUP #1 PEER GROUP #2
(FISCAL YEAR COVERED) S&P 500 INDEX CORPORATION INDEX(2) INDEX(3)
<S> <C> <C> <C> <C>
1992 100 100 100 100
1993 113 143 127 127
1994 117 137 107 107
1995 152 140 121 121
1996 183 162 154 154
1997 257 249 181 181
</TABLE>
NOTES TO PERFORMANCE GRAPH
(1) Total shareholder return includes reinvested dividends.
(2) Peer Group #1 Index includes the following 36 companies: AGL Resources, Inc.
(Atlanta Gas Light Company), ATMOS Energy Corporation, Bay State Gas
Company, Cascade Natural Gas Corp., Colonial Gas Company, Connecticut Energy
Corporation, Consolidated Natural Gas, CTG Resources Inc. (Connecticut
Natural Gas Corp.), Eastern Enterprises, Equitable Resources, Inc., Indiana
Energy, Inc., K N Energy, Inc., Keyspan Energy Corp. (Brooklyn Union Gas),
Laclede Gas Company, MCN Energy Group (MCN Corporation), National Fuel Gas
Corporation, New Jersey Resources Corp., NICOR Inc., North Carolina Natural
Gas Corporation, Northwest Natural Gas Company, NUI Corporation, ONEOK,
Inc., Pacific Enterprises, Pennsylvania Enterprises, Inc., Peoples Energy
Corporation, Piedmont Natural Gas Co., Inc., Providence Energy Corporation,
Public Service Company of North Carolina, Incorporated, Questar Corporation,
SEMCO Energy Inc. (Southeastern Michigan Gas Ent.), South Jersey Industries,
Inc., Southwest Gas Corporation, Southwestern Energy Company, UGI
Corporation, Washington Gas Light Company, and WICOR, Inc. This peer group
index was the index shown in the Proxy Statement for the Annual Meeting of
Shareholders of Energen Corporation, January 22, 1997, but does not include
the following companies which were eliminated from such index subsequent to
the date of such proxy statement because they ceased to be publicly traded
companies as a result of change in control transactions: Enserch
Corporation, NorAm Energy Corp., United Cities Gas Company, and Washington
Energy Company.
25
<PAGE> 29
(3) Peer Group #2 Index of 37 companies was the index used for measuring fiscal
1997 total shareholder return performance for executive compensation
purposes. This index includes all companies shown in Peer Group #1 Index
except for Pacific Enterprises and, in addition, includes Southern Union
Company and Yankee Energy System.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand LLP examined the financial statements of the
Company for the fiscal year ended September 30, 1997, and the Board of Directors
intends to continue the services of this firm for the fiscal year ending
September 30, 1998. A representative of Coopers & Lybrand LLP will be present at
the Annual Meeting and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in next year's proxy
statement must be received by the Company no later than August , 1998.
GENERAL INFORMATION
Shareholders of record at the close of business on December 10, 1997 are
entitled to notice of and to vote upon all matters at the Annual Meeting. As of
the close of business on December 10, 1997 there were outstanding
shares of Common Stock, each share of which is entitled to one vote on all
matters to be considered at the Annual Meeting.
Pursuant to Section 10-2B-2.25 of the Code of Alabama 1975, as amended, and
the Company's bylaws, a majority of the Common Stock shares entitled to vote,
represented in person or by proxy, will constitute a quorum at a meeting of the
shareholders. Section 10-2B-7.28 of the Code of Alabama 1975, as amended,
requires that each of the nominees to be elected to the Board of Directors,
receive the affirmative vote of the majority of the votes cast by the holders of
shares of Common Stock represented at the Annual Meeting as part of the quorum.
Section 10-2B-7.25 of the Code of Alabama 1975, as amended, requires, for the
proposals to approve the Stock Plan and to approve certain issuances of Common
Stock under the Deferred Compensation Plan, the affirmative vote of the holders
of a majority of the outstanding shares of the Company's Common Stock casting
votes for or against approval of such proposals at a meeting of the shareholders
at which a quorum is present. In neither the case of the election of directors,
the approval of the proposals relating to approval of the Stock Plan or certain
issuances of Common Stock under the Deferred Compensation Plan does the vote
include shares which abstain from voting on a matter or which are not voted on
such matter by a nominee because such nominee is not permitted to exercise
discretionary voting authority and the nominee has not received voting
instructions from the beneficial owner of such shares. Alabama law requires, for
the approval of the amendment to the Restated Certificate of Incorporation of
the Company to increase the Company's authorized shares of Common Stock, the
affirmative vote of the holders of a majority of the outstanding shares of the
Company's Common Stock. Generally, brokers who act as nominees will be permitted
to exercise discretionary voting authority where they have received no
instructions in uncontested elections for directors or with respect to
consideration of the proposals to approve the Stock Plan or issuances of Common
Stock under the Deferred Compensation Plan where the brokers have complied with
New York Stock Exchange Rule 451 concerning the delivery of proxy materials to
beneficial owners of the Company's Common Stock held by such brokers.
In case any person named herein for election as a director is not available
when the election occurs, proxies in the accompanying form may be voted for a
substitute as well as for the other persons named herein.
So far as the Board of Directors of the Company now knows, no business
other than that referred to above will be acted upon at the Annual Meeting. The
persons named in the Board of Directors' proxy may, in the absence of
instruction to the contrary, vote upon all matters presented for action at the
Annual Meeting according to their best judgment.
26
<PAGE> 30
The costs of soliciting proxies on behalf of the Board of Directors will be
borne by the Company. In addition to the use of the mails, proxies may be
solicited by personal interview or by telephone and telegraph. Brokerage houses
and other custodians and fiduciaries will be requested to forward at the
Company's expense soliciting materials to the beneficial owners of stock held of
record by them. The Company has also engaged Georgeson & Co. of New York to
assist in the solicitation of proxies of brokers and financial institutions and
their nominees. This firm will be paid a fee of $7,500, including out-of-pocket
expenses.
ENERGEN CORPORATION
/s/ REX J. LYSINGER
Chairman of the Board
Birmingham, Alabama
December , 1997
27
<PAGE> 31
APPENDIX A
ENERGEN CORPORATION
1997 STOCK INCENTIVE PLAN
The purpose of this Plan is to provide a means whereby Energen Corporation
may, through the use of stock and stock related compensation, attract and retain
persons of ability as employees and motivate such employees to exert their best
efforts on behalf of Energen Corporation and its subsidiaries.
1. DEFINITIONS. As used in the Plan, the following terms have meanings
indicated:
"Award" means Incentive Stock Options, Nonqualified Stock Options
and/or Restricted Stock granted under the Plan.
"Board" means the Board of Directors of Energen.
"Cause" means any of the following:
(1) The willful and continued failure by a Participant to
substantially perform such Participant's duties with Energen or
Subsidiary (other than any such failure resulting from such
Participant's incapacity due to physical or mental illness) after a
written demand for substantial performance is delivered to the
Participant specifically identifying the manner in which such
Participant has not substantially performed such Participant's duties.
(2) The engaging by a Participant in willful, reckless or grossly
negligent misconduct which is demonstrably injurious to Energen or a
Subsidiary monetarily or otherwise; or,
(3) The conviction of a Participant of a felony.
"Change in Control" means:
(1) The acquisition by any person, entity or "group", within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (excluding
for this purpose, any employee benefit plan of Energen or any of its
Subsidiaries which acquires beneficial ownership of voting securities of
Energen), of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 25% or more of either the then outstanding
shares of Stock or the combined voting power of Energen's then
outstanding voting securities, in one transaction or a series of
transactions;
(2) Individuals who, as of November 25, 1997, constitute the Board
of Directors (the "Continuing Directors") cease for any reason to
constitute at least a majority of the Board of Directors, provided that
any person becoming a director of Energen subsequent to November 25,
1997, whose election, or nomination for election by Energen's
stockholders, was approved by a vote of at least a majority of the
Continuing Directors (other than an election or nomination of an
individual whose initial assumption of office is in connection with an
actual or threatened solicitation with respect to the election or
removal of directors of Energen, as such terms are used in Rule 14a-11
of Regulation 14A under the Exchange Act) shall be, for purposes of the
Plan, considered as though such person were a Continuing Director;
(3) (i) The occurrence of a merger, consolidation or reorganization
of Energen in which, as a consequence of the transaction, either the
Continuing Directors do not constitute a majority of the directors of
the continuing or surviving corporation or any person, entity or
"group", within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act, controls 25% or more of the combined voting power of the
continuing or surviving corporation; (ii) the occurrence of any sale,
lease or other transfer, in one transaction or a series of transactions,
of all or substantially all of the assets of Energen; or (iii) the
adoption by Energen of a plan for its liquidation or dissolution.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
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"Committee" means the Officers Review Committee of the Board or such
other Committee of two or more directors as may be determined by the Board.
"Energen" means Energen Corporation and any successor corporation by
merger or other reorganization.
"Employee" means any employee of one or more of Energen and the
Subsidiaries.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exercise Date" means the date on which a notice of option exercise is
delivered to Energen pursuant to Section 6.3(c) or a notice of option
cancellation is delivered to Energen pursuant to Section 6.3(i).
"Expiration Date" means the last day on which an option issued under
the Plan may be exercised, as such date may be extended pursuant to Section
6.3(a).
"Fair Market Value" means, with respect to a share of Stock, the
closing price of the Stock on the New York Stock Exchange (or such other
exchange or system on which the Stock then trades or is quoted) or, if
there is no trading of the Stock on the relevant date, then the closing
price on the most recent trading date preceding the relevant date. With
respect to other consideration, the term Fair Market Value means fair
market value as may be reasonably determined by the Committee.
"Incentive Stock Options" means options granted under the Plan to
purchase Stock which at the time of grant qualify as "incentive stock
options" within the meaning of Section 422 of the Code.
"Nonqualified Stock Options" means options granted under the Plan to
purchase Stock which are not Incentive Stock Options.
"Participant" means an Employee who is selected by the Committee to
receive an Award.
"Performance Measures" has the meaning set forth in Section 7.3.
"Plan" means this Energen Corporation 1998 Stock Incentive Plan.
"Restricted Stock" means Stock granted to a Participant under Section
7 of the Plan with respect to which the applicable Restrictions have not
lapsed or been removed.
"Restrictions" means the transfer and other restrictions set forth in
Section 7.2(a).
"Stock" means the common stock, par value $.01 per share, of Energen
as such stock may be reclassified, converted or exchanged by
reorganization, merger or otherwise.
"Subsidiary" means any corporation, the majority of the outstanding
voting stock of which is owned, directly or indirectly by Energen
Corporation.
"Ten Percent Stockholder" means an individual who, at the time of
grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of Energen.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment in accordance with
Section 3, an aggregate of 650,000 shares of Stock are available for issuance
(including shares transferred from treasury) under the Plan. Shares of Stock
allocable to an Award or portion of an Award that is canceled by forfeiture,
expiration or for any other reason (excepting pursuant to a stock appreciation
right election under Section 6.3(i)) shall again be available for additional
Awards. If any option granted under the Plan shall be canceled as to any shares
of Stock pursuant to Section 6.3(i) (stock appreciation rights), then such
shares of Stock shall not be available for the grant of another Award.
3. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK. In the event of any
change in the Stock by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or rights offering to purchase Stock at a price substantially below fair
market value, or of any similar change affecting the Stock, the number and kind
of shares which thereafter may be available for issuance under the Plan, and the
number and kind of shares subject to option in outstanding option agreements
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and the purchase price per share thereof shall be appropriately adjusted
consistent with such change in such manner as the Committee may deem equitable
to prevent dilution or enlargement of the rights granted to, or available for,
Participants in the Plan. If the adjustment would result in fractional shares
with respect to an Award, then the Committee may make such further adjustment
(including, without limitation, the use of consideration other than Stock or
rounding to the nearest whole number of shares) as the Committee shall deem
appropriate to avoid the issuance of fractional shares.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. No member of the Committee shall be eligible to participate in the
Plan while serving as a member of the Committee. Subject to the provisions of
the Plan, the Committee shall have the exclusive authority to select the
Employees who are to be Participants in the Plan, to determine the Award to be
made to each Participant, and to determine the conditions subject to which
Awards will become payable under the Plan. The Committee shall have full power
to administer and interpret the Plan and to adopt such rules and regulations
consistent with the terms of the Plan as the Committee deems necessary or
advisable in order to carry out the provisions of the Plan. The Committee's
interpretation and construction of the Plan and of any conditions applicable to
Awards shall be conclusive and binding on all persons, including Energen and all
Participants. Any action which can be taken, or authority which can be
exercised, by the Committee with respect to the Plan, may also be taken or
authorized by the Board.
5. PARTICIPATION. Participants in the Plan shall be selected by the
Committee from those Employees who, in the judgment of the Committee, have
significantly contributed or can be expected to significantly contribute to
Energen's success.
6. OPTIONS
6.1 GRANT OF OPTIONS. Subject to the provisions of the Plan, the Committee
may (a) determine and designate from time to time those Participants to whom
options are to be granted and the number of shares of Stock to be optioned to
each employee; (b) authorize the granting of Incentive Stock Options,
Nonqualified Stock Options, or combination of Incentive Stock Options and
Nonqualified Stock Options; (c) determine the number of shares subject to each
option; (d) determine the time or times when each Option shall become
exercisable and the duration of the exercise period; and (e) determine whether
and, if applicable, the manner in which each option shall contain stock
appreciation rights and/or dividend equivalents; provided, however, that (i) no
Incentive Stock Option shall be granted after the expiration of ten years from
the effective date of the Plan specified in Section 13 and (ii) the aggregate
Fair Market Value (determined as of the date the option is granted) of the Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any employee during any calendar year (under all plans of Energen and its
Subsidiaries) shall not exceed $100,000.
6.2 INDIVIDUAL LIMITATION. The aggregate of all Awards received by any
individual Participant shall not include options with respect to more than
150,000 shares of Stock (adjusted in accordance with Section 3.).
6.3 TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Plan
shall be evidenced by an agreement, in a form approved by the Committee. Such
agreement shall be subject to the following express terms and conditions and to
such other terms and conditions as the Committee may deem appropriate:
(a) Option Period. Each option agreement shall specify the period for
which the option thereunder is granted and shall provide that the option
shall expire at the end of such period. The Committee may extend such
period provided that, in the case of an Incentive Stock Option, such
extensions shall not in any way disqualify the option as an Incentive Stock
Option. In no case shall such period for an Incentive Stock Option,
including any such extensions, exceed ten years from the date of grant,
provided, however that, in the case of an Incentive Stock Option granted to
a Ten Percent Stockholder, such period, including extensions, shall not
exceed five years from the date of grant.
(b) Option Price. The option price per share shall be determined by
the Committee at the time any option is granted, and shall be not less than
(i) the Fair Market Value, or (ii) in the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, 110 percent of the Fair Market Value,
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(but in no event less than the par value) of one share of Stock on the date
the option is granted, as determined by the Committee.
(c) Exercise of Option. No part of any option may be exercised until
the optionee shall have remained in the employ of Energen or of a
Subsidiary for such period, if any, as the Committee may specify in the
option agreement, and the option agreement may provide for exercisability
in installments. The Committee shall have full authority to accelerate for
any reason it deems appropriate the vesting schedule of all or any part of
any option issued under the Plan. Each option shall be exercisable in whole
or part on such date or dates and during such period and for such number of
shares as shall be set forth in the applicable option agreement. An
optionee electing to exercise an option shall give written notice to
Energen of such election and of the number of shares the optionee has
elected to purchase and shall at the time of exercise tender the full
purchase price of the shares the optionee has elected to purchase plus any
required withholding taxes in accordance with Sections 6.3(d) and 8.
(d) Payment of Purchase Price upon Exercise. The purchase price of
the shares as to which an option shall be exercised shall be paid to
Energen at the time of exercise (i) in cash, (ii) in Stock already owned by
the optionee having a total Fair Market Value equal to the purchase price
and not subject to any lien, encumbrance or restriction on transfer other
than pursuant to federal or state securities laws, (iii) by election to
have Energen withhold (from the Stock to be delivered to the optionee upon
such exercise) shares of Stock having a Fair Market Value equal to the
purchase price or (iv) by any combination of such consideration having a
total Fair Market Value equal to the purchase price; provided that the use
of consideration described in clauses (ii), (iii) and (iv) shall be subject
to approval by the Committee. In addition the Committee in its discretion
may accept such other consideration or combination of consideration as the
Committee shall deem to be appropriate and to have a total Fair Market
Value equal to the purchase price. In each case, Fair Market Value shall be
determined as of the Exercise Date.
(e) Exercise in the Event of Death or Termination of Employment. If
an optionee's employment by Energen and all Subsidiaries shall terminate
because of the optionee's (i) death, (ii) disability, or (iii) retirement
in accordance with the terms of Energen's tax-qualified retirement plans,
the optionee's options may be exercised on or prior to the applicable
Expiration Dates, but only to the extent that such options were exercisable
on the date of such termination. If an optionee's employment by Energen and
all Subsidiaries shall terminate for any reason other than (i) those set
forth in the preceding sentence, or (ii) termination for Cause, then all
unexercised options under the Plan held by the optionee (vested or
unvested) shall terminate ninety days following the date of termination of
employment, provided that the Committee shall have the authority to extend
such option termination date. Without limiting the generality of Section
5(c), the Committee shall have full authority to accelerate the vesting
schedule of all or any part of any option issued under the Plan and held by
an employee who has terminated or plans to terminate his or her employment,
such that a terminated employee, his heirs or personal representatives may
exercise (at such time or times on or prior to the applicable Expiration
Dates as may be specified by the Committee) any part or all of any unvested
option under the Plan held by such employee at the date of his or her
termination of employment. Upon termination for Cause, all unexercised
options held by the terminated Employee shall immediately terminate and may
not be exercised.
(f) Nontransferability. Except as may otherwise be provided in this
Section 5(f), no option granted under the Plan shall be transferable other
than by will or by the laws of descent and distribution and, during the
lifetime of the optionee, an option shall be exercisable only by the
optionee. The foregoing notwithstanding, the optionee may transfer
Nonqualified Stock Options to (i) the optionee's spouse or natural, adopted
or step-children or grandchildren (including the optionee, "Immediate
Family Members"), (ii) a trust for the benefit of one or more of the
Immediate Family Members, (iii) a family charitable trust established by
one or more of the Immediate Family Members, or (iv) a partnership in which
the only partners are (and, except as may be otherwise agreed by the
Committee, will remain during the option period) one or more of the
Immediate Family Members. Any options so transferred shall not be further
transferable except in accordance with the terms of this Plan, shall remain
subject to all terms and conditions of the Plan and the applicable option
agreement, and may be exercised by the
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transferee only to the extent that the optionee would have been entitled to
exercise the option had the option not been transferred.
(g) Investment Representation. To the extent reasonably necessary to
assure compliance with all applicable securities laws, upon demand by the
Committee for such a representation, the optionee shall deliver to the
Committee at the time of any exercise of an option or portion thereof or
settlement of stock appreciation rights or dividend equivalents a written
representation that the shares to be acquired upon such exercise are to be
acquired for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such representation
prior to the delivery of any shares issued upon exercise of an option and
prior to the expiration of the option period shall be a condition precedent
to the right of the optionee or such other person to purchase any shares.
(h) Incentive Stock Options. Each option agreement which provides for
the grant of an Incentive Stock Option to a participant shall contain such
terms and provisions as the Committee may determine to be necessary or
desirable in order to qualify such option as an "incentive stock option"
within the meaning of Section 422 of the Code, or any amendment thereof or
substitute therefor. Energen, in its discretion, may retain possession of
any certificates for Stock delivered in connection with the exercise of an
Incentive Stock Option or appropriately legend such certificates during the
period that a disposition of such Stock would disqualify the exercised
option from treatment as an incentive stock option under Section 422 of the
Code (a "422 Option"). Subject to the other provisions of the Plan, Energen
shall cooperate with the optionee should the optionee desire to make a
disqualifying disposition. Any Incentive Stock Option which is disqualified
from treatment as a 422 Option for whatever reason, shall automatically
become a Nonqualified Stock Option. No party has any obligation or
responsibility to maintain an Incentive Stock Option's status as a 422
Option. The optionee shall, however, immediately notify Energen of any
disposition of Stock which would cause an Incentive Stock Option to be
disqualified as a 422 Option.
(i) Stock Appreciation Right. Each option agreement may provide that
the optionee may from time to time elect, by written notice to Energen, to
cancel all or any portion of the option then subject to exercise, in which
event Energen's obligation in respect of such option shall be discharged by
payment to the optionee of an amount in cash equal to the excess, if any,
of the Fair Market Value as of the Exercise Date of the shares subject to
the option or the portion thereof so canceled over the aggregate purchase
price for such shares as set forth in the option agreement or, if mutually
agreed by the Committee and the optionee, (i) the issuance or transfer to
the optionee of shares of Stock with a Fair Market Value as of the Exercise
Date equal to any such excess, or (ii) a combination of cash and shares of
Stock with a combined value as of the Exercise Date equal to any such
excess.
(j) Dividend Equivalents. Each option agreement may provide that upon
(i) exercise of all or part of a Nonqualified Stock Option, (ii)
cancellation of all or part of such option pursuant to paragraph 5(i), or
(iii) the occurrence of an Expiration Date, for no additional
consideration, the optionee shall be paid an additional amount equal to the
aggregate amount of cash dividends which would have been paid on the shares
of Stock purchased upon such exercise or with respect to which such
cancellation or expiration occurs, if such shares had been issued and
outstanding during the period commencing with the option grant date and
ending on the date of option exercise, cancellation or expiration, plus an
amount equal to the interest that such dividends would have earned from the
respective dividend payment dates if deposited in an account bearing
interest, compounded quarterly on each April 1, July 1, October 1 and
January 1, at a rate calculated as follows. For purposes of the preceding
sentence, the assumed interest rate in effect for a calendar quarter shall
be the announced prime rate of AmSouth Bank of Alabama (or such comparable
rate of a comparable institution as the Committee may from time to time
determine) in effect on the first day of such calendar quarter. Such
additional amount shall be paid by cash, or if mutually agreed by the
Committee and the optionee, by the issuance of Stock or a combination of
cash and shares of Stock having an aggregate Fair Market Value as of the
applicable Expiration or Exercise Date, equal to any such excess.
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(k) No Rights as Shareholder. No optionee shall have any rights as a
shareholder with respect to any shares subject to the optionee's option
prior to the date of issuance to the optionee of a certificate or
certificates for such shares.
(l) Delivery of Certificates. Subject to Section 6.3(h), as soon as
reasonably practicable after receipt of an exercise notice and full
payment, Energen shall deliver to the optionee, registered in the
optionee's name, certificates for the appropriate number of shares of
Stock.
7. RESTRICTED STOCK
7.1 GRANT OF RESTRICTED STOCK. The Committee may make grants of Restricted
Stock to Participants. Each restricted Stock Award shall be evidence by an
agreement in a form approved by the Committee, setting forth the number of
shares of Restricted Stock granted and the terms and conditions to which the
Restricted Stock is subject. Restricted Stock may be awarded by the Committee in
its discretion with or without cash consideration.
7.2 TERMS AND CONDITIONS OF RESTRICTED STOCK.
(a) Restrictions. No shares of Restricted Stock may be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered or
disposed of (the "Restrictions") until the Restrictions on such shares have
lapsed or been removed.
(b) Lapse. The Committee shall establish as to each Award of
Restricted Stock the terms and conditions upon which the Restrictions shall
lapse, which terms and conditions may include, without limitation, a
required period of service, Performance Measures, or any other individual
or corporate performance conditions.
(c) Termination of Employment. Except as may be otherwise expressly
provided in the applicable Restricted Stock Award agreement, should the
Participant's employment with Energen and all Subsidiaries terminate for
any reason including, without limitation, termination because of the
Participant's death, disability, or retirement in accordance with Energen's
tax-qualified retirement plans, any shares of Stock which remain subject to
Restrictions, shall be forfeited and returned to Energen unless the
Committee decides, in its discretion, to accelerate the time at which any
remaining Restrictions lapse or to remove any or all such Restrictions
entirely (subject to Section 7.2(d)). Upon the termination of the
Participant's employment for any reason, the Committee is not required to
act and, absent some action by the Committee, all shares of Stock remaining
subject to Restriction will be forfeited and returned to Energen.
(d) Lapse at Discretion of Committee. The Committee may at any time,
in its sole discretion, accelerate the time at which any or all
Restrictions on a Restricted Stock Award will lapse or remove any and all
such Restrictions; provided that the Committee may not accelerate the lapse
of or remove Restrictions which require the attainment of a Performance
Measure except as may be permitted by the performance-based exception to
Section 162(m) of the Code.
(e) Rights with respect to Restricted Stock. Upon the acceptance by a
Participant of an award of Restricted Stock, such Participant shall,
subject to the restrictions set forth in paragraph (b) above, have all the
rights of a shareholder with respect to such shares of Restricted Stock,
including, but not limited to, the right to vote such shares of Restricted
Stock and the right to receive all dividends and other distributions paid
thereon. Certificates representing Restricted Stock may be held by Energen
until the restrictions lapse and shall bear such restrictive legends as
Energen shall deem appropriate.
(f) No Section 83(b) Election. Unless otherwise expressly agreed in
writing by Energen, a Participant shall not make an election under Section
83(b) of the Code with respect to a Restricted Stock Award and upon the
making of any such election, all shares of Restricted Stock subject to the
election shall be forfeited and returned to Energen.
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7.3 PERFORMANCE MEASURES. At its discretion, the Committee may make the
lapsing of Restrictions subject to the attainment of one or more Performance
Measures designed to qualify for the performance-based exceptions from Section
162(m) of the Code.
Unless and until Energen's shareholders approve a change in the Performance
Measures set forth in this Section 7.3, the Performance Measures to be used for
purposes of such Awards shall be chosen from among the following alternatives,
as measured with respect to Energen and/or any one or more of the Subsidiaries,
with or without comparison to a peer group:
(a) return on shareholder's equity;
(b) return on assets;
(c) net income;
(d) earnings per common share;
(e) total shareholder return;
(f) oil and/or gas reserve additions;
(g) utility customer number, volume and/or revenue growth; and
(h) such other criteria as may be established by the Committee in
writing and which meets the requirements of the performance-based exception
to Section 162(m) of the Code.
In the event that the performance-based exception to Section 162(m) or its
successor is amended such that the performance-based exception permits the
employer to alter the governing performance measures without obtaining
shareholder approval of such changes, the Committee shall have discretion to
make such changes without obtaining shareholder approval.
8. WITHHOLDING. Each Participant shall, no later than the date as of which
the value of an Award first becomes includible in the gross income of the
Participant for Federal income tax purposes, pay to Energen and Subsidiaries, or
make arrangements satisfactory to the Committee, in its sole discretion,
regarding payment of, any Federal, FICA, state, or local taxes of any kind
required by law to be withheld with respect to the Award. The obligations of
Energen under the Plan shall be conditional on such payment or arrangements.
Energen and, where applicable, its Subsidiaries shall, to the extent permitted
by law, have the right to deduct any such taxes owed hereunder by a Participant
from any payment of any kind otherwise due to said Participant. The Committee
may permit Participants to elect to satisfy their Federal, and where applicable,
FICA, state and local tax withholding obligations with respect to all Awards by
the reduction, in an amount necessary to pay all said withholding tax
obligations, of the number of shares of Stock or amount of cash otherwise
issuable or payable to said Participants in respect of an Award.
9. NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan and any Award granted under
the Plan shall not confer upon any Participant any right with respect to
continuance of employment by Energen or any Subsidiary or any right to further
Awards under the Plan, nor shall they interfere in any way with the right of
Energen or any Subsidiary by which a Participant is employed to terminate the
Participant's employment at any time.
10. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant and
fulfillment of Awards thereunder, and the obligations of Energen to sell, issue,
release and/or deliver shares of Stock shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by any
government or regulatory agency as may be required. Energen shall not be
required to issue or deliver any certificates for shares of Stock prior to (a)
the listing of such shares on any stock exchange on which the Stock may then be
listed and (b) the completion of any registration or qualification of such
shares under any federal or state law, or any ruling or regulation of any
government body which Energen shall, in its sole discretion, determine to be
necessary or advisable
11. CHANGE IN CONTROL. Except as may be otherwise expressly provided in
the applicable Award agreement, upon the occurrence of a Change in Control all
outstanding Incentive Stock Options and
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Nonqualified Stock Options shall be immediately and fully vested and exercisable
and all restrictions on all outstanding Restricted Stock shall immediately
lapse.
12. AMENDMENT AND DISCONTINUANCE. The Board of Directors of Energen may
from time to time amend, suspend or discontinue the Plan. Without the written
consent of a Participant, no amendment or suspension of the Plan shall alter or
impair any Award previously granted to a Participant under the Plan.
13. EFFECTIVE DATE OF THE PLAN. The effective date of the Plan shall be
November 25, 1997, the date of its adoption by the Board, subject to approval by
shareholders of Energen holding not less than a majority of the shares present
and voting at its January 1998 Annual Meeting. Awards may be granted under the
Plan by the Committee as provided herein prior but subject to such subsequent
shareholder approval of the Plan.
14. NAME. The Plan shall be known as the "Energen Corporation 1997 Stock
Incentive Plan."
15. 1997 DEFERRED COMPENSATION PLAN. If and to the extent permitted under
the Energen Corporation 1997 Deferred Compensation Plan (the "Deferred
Compensation Plan"), a Participant may elect, pursuant to the Deferred
Compensation Plan, to defer receipt of part or all of any shares of Stock or
other consideration deliverable under an Award and upon such deferral shall have
no further right with respect to such deferred Award other than as provided
under the Deferred Compensation Plan. In the event of such a deferral election,
certificates for such shares of Stock as would have otherwise been issued under
the Plan but for the deferral election, may at the discretion of Energen be
delivered to the Trustee under the Deferred Compensation Plan and registered in
the name of the Trustee or such other person as the Trustee may direct.
Regardless of whether such deferred shares of Stock are issued to the Trustee,
they shall constitute "issued" shares for purposes of the Plan's maximum number
of shares limitation set forth in Section 2.
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APPENDIX B
ENERGEN CORPORATION
1997 DEFERRED COMPENSATION PLAN
Energen Corporation, an Alabama corporation, hereby establishes the Energen
Corporation 1997 Deferred Compensation Plan, effective as of April 25, 1997, in
order to provide deferred compensation to directors and certain key employees of
Energen Corporation and its affiliated companies. The purpose of the Energen
Corporation Deferred Compensation Plan is to assist Energen Corporation and its
affiliated companies in retaining directors and key employees, encouraging their
long term commitment to the company's success, and attracting new directors and
key employees by offering them an opportunity to defer compensation and
participate in the success of Energen Corporation and its affiliated companies,
and allowing them to share in increases in the value of Energen Corporation.
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When used in this document with initial capital
letters, the following terms have the meanings indicated unless a different
meaning is plainly required by the context:
(a) "Account" or "Accounts" means the account or accounts established
and maintained for a Participant pursuant to Article IV of the Plan. A
Participant's Account shall consist of the Participant's Investment Account
and the Participant's Company Stock Account.
(b) "Alagasco" means Alabama Gas Corporation, a subsidiary of Energen
Corporation.
(c) "Allocation Request Form" means such form or forms as may be
approved by Energen from time to time for use by a Participant to request
(i) an allocation of certain deferred compensation and/or an allocation or
reallocation of the Participant's Investment Account among available
investment options pursuant to Section 7.2(c), (ii) that certain deferred
compensation be allocated to the Participant's Company Stock Account
pursuant to Section 7.1(g); and/or (iii) diversification of part or all of
the Company Stock Account pursuant to Section 7.1(h).
(d) "Basin" means Basin Pipeline Corporation, a subsidiary of Energen
Corporation.
(e) "Board of Directors" means the Board of Directors of Energen
Corporation.
(f) "Cash Compensation" means any one or more of the following items
of compensation:
(i) Base salary;
(ii) Awards under the Energen Corporation Annual Incentive
Compensation Plan (or any successor plan), as amended from time to time;
(iii) Awards under the Energen Corporation Salaried Employee
Incentive Compensation Plan (or any successor plan), as amended from
time to time; and
(iv) Director fees including retainer, meeting, committee, and
other fees payable to a Director for service in such capacity.
(g) "Change in Control" means:
(1) The acquisition by any person, entity or "group", within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (excluding for this purpose, any employee benefit plan of Energen or
any of its "subsidiaries" which acquires beneficial ownership of voting
securities of Energen), of beneficial ownership (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934) of 50% or more of either
the then outstanding shares of Common Stock or the combined voting power of
Energen's then outstanding voting securities, in one transaction or a
series of transactions; or
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(2) Individuals who, as of April 25, 1997, constituted the Board of
Directors (the "Continuing Directors") cease for any reason to constitute
at least a majority of the Board of Directors, provided that any person
becoming a director of Energen subsequent to April 25, 1997, whose
election, or nomination for election by Energen's stockholders, was
approved by a vote of at least a majority of the Continuing Directors
(other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
solicitation with respect to the election or removal of directors of
Energen, as such terms are used in Rule 14a-11 of Regulation 14A under the
Securities Exchange Act of 1934) shall be, for purposes of the Plan,
considered as though such person were a Continuing Director; or
(3)(i) The occurrence of a merger, consolidation or reorganization of
Energen in which, as a consequence of the transaction, either the
Continuing Directors do not constitute a majority of the directors of the
continuing or surviving corporation or any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, controls 50% or more of the combined voting power of
the continuing or surviving corporation; (ii) the occurrence of any sale,
lease or other transfer, in one transaction or a series of transactions, of
all or substantially all of the assets of Energen; or (iii) the adoption by
Energen of a plan for its liquidation or dissolution.
For purposes of this definition of "Change in Control," the term
"subsidiary" means any corporation, the majority of the outstanding voting stock
of which is owned, directly or indirectly, by Energen.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Common Stock" means the Common Stock, par value $0.01 per share,
of Energen Corporation as such stock may be reclassified, converted or
exchanged by reorganization, merger or otherwise.
(j) "Company Stock Account" means an account established and
maintained for a Participant as a record of the Participant's hypothetical
investments in shares of Common Stock.
(k) "Deferral Election Form" means such the form or forms as may be
approved by Energen from time to time for use by a Participant to elect to
defer compensation under the Plan.
(l) "Director" means a member of the board of directors of a
Participating Employer.
(m) "Disability" means the total and permanent disability of a
Participant which entitles the Participant to a disability benefit under a
disability program sponsored or maintained by the Participant's
Participating Employer; provided, that if no such program is applicable to
the Participant, then "Disability" with respect to such Participant means
that, based on medical evidence reasonably satisfactory to Energen, the
Participant is totally and permanently unable to engage in any occupation
or gainful employment for which the Participant is reasonably suited by
background, training, education or experience.
(n) "Discretionary Amount" means amounts credited to a Participant's
Account pursuant to Section 4.4.
(o) "Distributable Event" means an event identified as such in Section
6.1.
(p) "EGN" means EGN Services, Inc., a subsidiary of Energen
Corporation.
(q) "Energen" means Energen Corporation, an Alabama corporation.
(r) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(s)(i) "Fair Market Value Average", (ii) "Fair Market Value Close",
and (iii) "Fair Market Value Twenty" mean respectively:
(i) the average of the high and low sales prices on the Composite
Tape for the New York Stock Exchange -- Listed Stocks ("NYSE composite")
for the Common Stock on a specified date,
(ii) the closing sales price of the Common Stock on the NYSE
composite for a specified date, and
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(iii) the twenty day average high and low sales prices for the
Common Stock on the NYSE composite for the twenty business days ending
on a specified date.
In the event that the Common Stock is not traded on the NYSE, the Officers
Review Committee, in its reasonable discretion, shall specify appropriate
alternative measures of Common Stock value.
(t) "Heat Tech, Inc." means American Heat Tech, Inc., a subsidiary of
Energen Corporation.
(u) "Investment Account" means an account established and maintained
for a Participant as a record of the Participant's hypothetical investments
in available investment options.
(v) "Midtown NGV" means Midtown NGV, Inc., a subsidiary of Energen
Corporation.
(w) "Officer" means an officer of a Participating Employer elected to
such position by the board of directors of such Participating Employer.
(x) "Officers Review Committee" means the Officers Review Committee of
the Board of Directors or such other person or persons as may be designated
by the Board of Directors to act on behalf of the Board of Directors in the
administration of the Plan.
(y) "Participant" means an individual identified as such under Article
III of the Plan.
(z) "Participating Employer" means any employer participating in the
Plan pursuant to Article II of the Plan.
(aa) "Plan" means the Energen Corporation 1997 Deferred Compensation
Plan, as of its original effective date, including any amendments thereto,
which is maintained by Energen and its affiliated companies primarily for
the purpose of providing financial incentives for directors and certain key
employees of Energen and its affiliated companies.
(bb) "Qualifying Compensation" means items of compensation which
either:
(i) first become payable in a calendar year subsequent to the
calendar year of the applicable election for services rendered during
periods of service subsequent to the date of such election; or
(ii) first become payable and determinable in amount during a
calendar year subsequent to the calendar year of the applicable election
and at least 180 days subsequent to the date of such election.
The foregoing notwithstanding, with respect to an election made within thirty
days of the effective date of the Plan, "Qualifying Compensation" means items of
Compensation which either
(i) first become payable subsequent to the date of the applicable
election for services rendered during periods of service subsequent to
the date of such election; or
(ii) first become payable and determinable in amount subsequent to
the date of the applicable election.
(cc) "Stock Compensation" means any one or more of the following items
of compensation:
(i) Awards under the Restricted Stock Incentive Plan of Energen
Corporation, as amended;
(ii) Awards under the Energen Corporation 1992 Long-Range
Performance Share Plan, as amended from time to time;
(iii)Annual or elective grants under the Energen Corporation 1992
Directors Stock Plan, as amended from time to time;
(iv) Grants under the Energen Corporation 1988 Stock Option Plan,
as amended from time to time; and
(v) Awards under the Energen Corporation 1997 Stock Incentive Plan,
as amended from time to time.
(dd) "Taurus" means Taurus Exploration, Inc., a subsidiary of Energen
Corporation.
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(ee) "Taurus USA" means Taurus Exploration USA, Inc., a subsidiary of
Taurus.
(ff) "Trust" means the trust described in Section 12.4. The Trust
shall constitute an unfunded arrangement and shall not affect the status of
the Plan as an unfunded plan. Participants and their beneficiaries shall
have no beneficial ownership interest in any assets of any such Trust.
(gg) "Trustee" means the corporation or person or persons selected by
Energen to serve as Trustee for the Trust.
(hh) "Vested" means an interest in the benefit described under the
Plan which may be payable to or on behalf of the Participant in accordance
with the terms of the Plan.
ARTICLE II
PARTICIPATING EMPLOYERS
Section 2.1 Eligibility. To be eligible to adopt and participate in the
Plan, an employer must be a member of the "controlled group" of corporations,
within the meaning of Section 414 of the Code, that includes Energen and must be
determined to be eligible to participate in the Plan by Energen. The
corporations which are eligible to participate in this Plan as of April 25,
1997, are Energen, Alagasco, Taurus, Taurus USA, Basin, EGN, Heat Tech, and
Midtown NGV.
Section 2.2 Participation Reimbursements. Energen, the sponsor of the
Plan, Alagasco, Taurus, Taurus USA, Basin, EGN, Heat Tech and Midtown NGV are
Participating Employers in the Plan effective as of April 25, 1997. Any other
affiliated company that is or becomes eligible to adopt the Plan and become a
Participating Employer pursuant to Section 2.1 of the Plan may, with the
approval of the Board of Directors by resolution of the Board of Directors,
adopt this Plan and become a Participating Employer in the Plan. The date on
which such eligible company may become a Participating Employer in the Plan
shall be stated in the resolutions of the Board of Directors. Each of the
Participating Employers agree to make payments of their allocable portion of the
benefits provided under the Plan to their respective employee and Director
Participants. Energen hereby guarantees the performance by each of the other
Participating Employers of their respective obligations under the Plan. Neither
the respective benefit payment obligations of the Participating Employers nor
Energen's guarantee of performance is secured in any way. Such obligations and
guarantee constitute no more than unfunded and unsecured promises of payment and
performance. Each Participating Employer, other than Energen, shall reimburse
Energen for its allocable share of costs and expenses paid by Energen in
connection with the operation and administration of the Plan, and shall
reimburse Energen for any benefits paid by Energen under the Plan to
Participants to the extent allocable to such Participating Employer and its
Participants. Payments made to Participants by the Trust shall constitute
payments by Energen and Energen shall be reimbursed for such payments by the
appropriate Participating Employers.
Section 2.3 Recordkeeping and Reporting. Each Participating Employer,
other than Energen, shall furnish to Energen the information with respect to
each of its Participants necessary to enable Energen to maintain records
sufficient to determine the benefits (and the compensation sources of such
benefits) which may become payable to or with respect to such Participants and
to give those Participants any reports which may be required under the terms of
the Plan or by law.
Section 2.4 Termination of Participation. A Participating Employer, other
than Energen, may withdraw from participation in the Plan at any time by
providing Energen with 30 days advance written notice of such withdrawal from
participation and the effective date of such Participating Employer's
withdrawal, which 30-day notice period may be waived by Energen. In addition,
Energen may terminate a Participating Employer's participation in the Plan by
providing such Participating Employer with 30 days advance written notice, which
30-day notice period may be waived by the Participating Employer. A
Participating Employer which terminates its participation in the Plan shall
remain obligated under the Plan with respect to deferrals made prior to such
termination by its Participants (including subsequent investment performance
adjustments), unless otherwise expressly agreed by Energen with Energen fully
assuming such obligations.
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Section 2.5 Separate Accounting. Energen shall establish and maintain
separate Accounts for each of the Participating Employers and their respective
Participants. Such separate accounting is intended to comply with Section
404(a)(5) of the Code and Section 1.404(a)-12 of the Treasury Regulations (which
provide that an employer can deduct the amounts contributed to a nonqualified
plan in the taxable year in which an amount attributable to the contribution is
includable in the gross income of employees participating in the plan, but, in
the case of a plan in which more than one employee participates only if separate
accounts are maintained for each employee).
ARTICLE III
ELIGIBILITY AND PARTICIPATION
Section 3.1 Eligibility. Each Director and each Officer of a
Participating Employer shall be eligible to participate in the Plan effective as
of the later of the effective date of the Plan or the date on which such
individual first becomes a Director or Officer. In addition, the Officers Review
Committee may by express action designate other management level or highly
compensated employees of the Participating Employers as eligible to participate
in the Plan. If the Officers Review Committee designates a management level or
highly compensated employee as eligible to become a Participant in the Plan,
Energen shall inform the employee in writing of such designation and the date on
which the employee shall become a Participant in the Plan.
Section 3.2 Participation. An individual eligible to participate in the
Plan shall become a Participant upon the filing with Energen of a completed
Deferral Election Form and acceptance of such form by Energen. The name of each
individual eligible to participate in the Plan and the date on which such
individual becomes a Participant in the Plan, shall be recorded on Exhibit A,
which exhibit is attached hereto and incorporated herein by reference and which
shall be revised by Energen from time to time to reflect the operation of the
Plan. Once an individual becomes a Participant in the Plan, the individual shall
remain a Participant until the benefits which may be payable to the individual
under the Plan have been distributed to or on behalf of the individual.
Section 3.3 Suspension of Eligibility. The Officers Review Committee (or
the Board of Directors if the affected Participant is a Director) may in its
discretion determine that a Participant will no longer be eligible to
participate in the Plan and in such event, the Participant's Section 4.1
compensation deferral election will immediately terminate and no additional
amounts shall be credited to his or her Accounts under Sections 7.1(a), (b), (c)
and 7.2(a) until such time as the individual is again determined to be eligible
to participate in the Plan by the Officers Review Committee (or Board of
Directors as appropriate) and makes a new Section 4.1 election. However, the
Account of such Participant shall continue to be adjusted by the other
provisions of Sections 7.1 and 7.2 until fully distributed.
ARTICLE IV
BENEFITS
Section 4.1 Deferred Compensation. A Participant may elect to defer
receipt of part or all of any one or more items of Cash Compensation and/or
Stock Compensation. A Participant may defer an item of compensation only to the
extent that the Participant is entitled to receive such item of compensation.
Upon such deferral, the Participant will have no further right to such deferred
compensation other than as provided under the Plan. Such deferred compensation
shall be the record of the value of such deferred compensation credited to a
Participant's Account and shall be used solely for accounting purposes.
Section 4.2 Form and Effectiveness of Deferral Election. Elections to
defer compensation under the Plan shall be made in writing on the Deferral
Election Form. Such elections may be revised or terminated by the making of a
new deferral election on the Deferral Election Form. Deferral elections
(including revisions or terminations of prior elections) shall be effective for
Qualifying Compensation (subject to the last sentence of this section).
Notwithstanding the other provisions of this Plan, a Participant's Deferral
Election Form and the various elections and selections made thereon (excepting
elections to terminate deferral of one or more items
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of compensation), shall not become effective unless acceptance thereof by
Energen in its sole discretion is acknowledged in writing. A Participant's
election to terminate a prior compensation deferral election shall be effective
upon delivery to Energen and shall be accepted and honored by the Participating
Employers with respect to Qualifying Compensation (subject to the following
sentence). An election to reduce or terminate a prior election to defer an item
of compensation shall in no event be effective with respect to compensation for
services rendered during a period of service commencing prior to the date of
such election.
Section 4.3 Participant Accounts. A Company Stock Account and an
Investment Account shall be established and maintained for each Participant. The
Company Stock Account shall be measured in shares of Common Stock and the
Investment Account shall be measured in dollars. The Company Stock Account shall
be credited as described in Section 7.1 for deferred amounts attributable to (i)
Stock Compensation and (ii) such amounts of Cash Compensation as may be
allocated to the Company Stock Account pursuant to Section 7.1(g). The
Investment Account shall be credited as described in Section 7.2 for any
deferred amounts of Cash Compensation which are not allocated to the Company
Stock Account pursuant to Section 7.1(g).
Section 4.4 Discretionary Amounts. In addition to amounts deferred by a
Participant, the Board of Directors may from time to time, in its sole
discretion, authorize a Participant's Participating Employer to credit the
Participant's Company Stock Account with additional amounts (denominated in
dollars). Such additional amounts may be authorized for such purpose or purposes
as the Board of Directors may deem appropriate, including, without limitation,
as mirror employer matching contributions or ESOP contributions made by such
Participating Employer with respect to The Energen Corporation Employee Savings
Plan.
ARTICLE V
VESTING
Section 5.1 Vested Benefit. A Participant shall be considered to be 100%
Vested in his or her Account.
Section 5.2 Limitation on Benefits. The benefits that may be payable to
or on behalf of a Participant under the Plan shall be equal to a cash payment
equal to the value of the amounts credited to the Participant' s Investment
Account and a distribution of that number of Common Shares equal to the number
of shares credited to the Participant's Company Stock Account (with any
fractional share being rounded to a whole share).
ARTICLE VI
DISTRIBUTIONS
Section 6.1 Distributable Events. A Participant's Distributable Event
shall be the first to occur of the following events; provided, that events
(b)-(e) shall be Distributable Events only if so elected by the Participant in
the Deferral Election Form and further provided that events (d)-(f) are subject
to Section 6.6:
(a) the Participant's 70th birthday (i.e., the 70th anniversary of the
Participant's birth) or such earlier birthday as the Participant may
specify in the Deferral Election Form;
(b) Disability (as defined in Section 1.1);
(c) the Participant's death;
(d) the first date on which the Participant is neither an employee nor
a Director of any Participating Employer;
(e) such other event as the Participant may specify in the Deferral
Election Form (subject to approval of Energen);
(f) the taking of action by the Board of Directors to terminate the
Plan pursuant to Section 14.1, or
(g) termination for Cause subject to and in accordance with Section
6.7.
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A Participant's Distributable Event elections must be made on the
Participant's initial Deferral Election Form and are irrevocable; provided, that
Energen may in its sole discretion allow a Participant to make different
Distributable Event elections applicable only with respect to Qualifying
Compensation for services rendered during periods of service commencing after
the date of such election.
Section 6.2 Distribution of Benefits.
(a) Distribution Commencement Date. Excepting withdrawals under
Sections 6.3 and 6.4 which shall be distributed in accordance with those
Sections, distribution of a Participant's Plan benefit shall commence as of
the first day of the second calendar month immediately following the
calendar month in which the Participant's applicable Distributable Event
occurs.
(b) Form of Distribution. Benefits attributable to the value of the
Investment Account shall be delivered to the Participant in dollars.
Benefits attributable to the Company Stock Account shall be delivered to
the Participant in the form of dollars and/or shares of Common Stock, as
Energen may determine in its sole discretion. To the extent that the
distribution is in the form of shares of Common Stock, such delivery shall
be subject to all applicable securities laws and regulations and Energen
shall have taken all steps, if any, including registration and listing, as
may be necessary to make the shares immediately saleable by the Participant
without further regulatory action or compliance on the part of the
Participant (other than compliance with paragraphs (f) and (h) of Rule 144
under the Securities Act of 1933). The Participant shall reasonably
cooperate with Energen, at Energen's expense, to facilitate such compliance
and related actions by Energen. To the extent that a distribution from the
Company Stock Account is in the form of dollars, it shall be in an amount
equal to number of shares in lieu of which such amount is distributed
multiplied by the Fair Market Value Twenty for the period ended on the
fifth business day prior to the applicable payment date.
(c) Payment Options. In the event a Participant becomes eligible to
receive a payment of benefits under the Plan, the benefits payable to the
Participant or, in the event of the Participant's death, to the
Participant's designated beneficiary under the Plan shall be paid in
accordance with one of the payment options available under the Plan as
elected by the Participant on the Participant's Deferral Election Form. The
Participant may elect separate payment options with respect to the
Investment Account and the Company Stock Account. A Participant may change
payment options by electing another payment option available under the Plan
on a subsequent Deferral Election Form, but such change in payment option
will not be effective until the calendar year following the calendar year
in which the change was elected. Further, in no event will any such change
in payment option be effective if such change is elected during the
calendar year in which the Distributable Event occurs and no further
elections may be made once a Distributable Event occurs. The payment
options include installment payments over a period certain, a lump sum
payment, and such other payment method as may be specified by the
Participant and accepted by Energen. The Board of Directors may, in its
sole discretion, reduce the payment period over which payments would have
been made pursuant to the payment option elected by a Participant
(including consolidation into a lump sum); provided, that in the event of a
Change in Control, no reduction of a payment period may be made prior to
the fifth anniversary of such Change in Control. Absent a payment option
election, the Board of Directors shall direct the payment of any benefits
payable under the Plan to or on behalf of the Participant in a lump sum
payment to the Participant, or in the event of the Participant's death, to
the Participant's designated beneficiary under the Plan.
Section 6.3 Early Withdrawals. Notwithstanding any provision in this Plan
to the contrary, a Participant may request, by providing a written request to
the Officers Review Committee, a withdrawal prior to the distribution date under
the Plan of all or any portion of his or her benefits from any of his or her
Accounts under the Plan in increments of 25% (of aggregate Account value). If
such a request is approved by the Officers Review Committee, which decision by
the Officers Review Committee shall be made in its sole discretion on a case by
case basis, a distribution of such benefits may be made to the Participant
subject to a penalty for such an early withdrawal at any point equal to a
six-month period of nonparticipation (during which no additional amounts will be
credited to the Participant's Accounts under Sections 7.1(a), (b), (c) and
7.2(a) of the Plan) for each 25% increment withdrawn. The nonparticipation
period would begin as of the
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date on which the request made by the Participant is approved by the Officers
Review Committee. As a result, a Participant withdrawing his or her entire
benefit from all of his or her Accounts would be excluded from eligibility to
participate in the Plan for a 24-month period beginning as of the date of such
approval by the Officers Review Committee. In addition, a penalty of 10% of the
amount withdrawn will be imposed on any withdrawal made pursuant to this Section
6.3.
Section 6.4 Hardship Withdrawals. In addition to the other distribution
and withdrawal provisions of this Article VI and notwithstanding any provision
herein to the contrary, in the event a Participant incurs an unforeseeable
emergency, the Participant may request, by providing a written request to the
Officers Review Committee, a hardship withdrawal of all or any portion of his or
her benefits from his or her Accounts under the Plan. An unforeseeable emergency
is a severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a dependent (as defined
in Section 152(a) of the Code) of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. If such a request is approved by the Officers Review Committee,
which decision by the Officers Review Committee shall be made in its sole
discretion on a case by case basis, a hardship withdrawal may be permitted under
this Section 6.4. Withdrawals of amounts because of an unforeseeable emergency
are only permitted to the extent reasonably needed to satisfy the emergency
need. This provision shall be interpreted in a manner not inconsistent with
Sections 1.457-2(h)(4) and 1.457-2(h)(5) of the Treasury Regulations.
Section 6.5 Distributions as Result of Tax Determination. Notwithstanding
any provision in this Plan to the contrary, if, at any time, a court or the
Internal Revenue Service determines that any amounts or shares credited to a
Participant's Accounts under the Plan or Trust are includable in the gross
income of the Participant and subject to tax, the Officers Review Committee may,
in its sole discretion, permit a lump sum distribution of an amount equal to the
amounts or shares determined to be includable in the Participant's gross income.
Section 6.6 No Parachute Payment. An event described in Sections 6.1(d),
(e) and (f) shall not constitute a Distributable Event if the Officers Review
Committee in its reasonable discretion following consultation with appropriate
tax and/or legal advisors reasonably determines that such distribution will
likely constitute a parachute payment for purposes of Section 280G of the Code.
Furthermore, if such event occurs subsequent to a Change in Control, the
Officers Review Committee shall, at Energen's expense, promptly request a
written opinion of the Independent Auditor with respect to the applicability of
such Section 280G and such event shall not constitute a Distributable Event
unless and until the Independent Auditor delivers its written unqualified
opinion, a copy of which shall be provided to the Participant, to the effect
that a distribution of benefits as a result of such event will not constitute a
parachute payment under Section 280G of the Code. As used in this Section 6.6,
the term independent auditor means the firm of certified public accountants
which at the time of the Change in Control had been most recently engaged by
Energen or such other comparable and nationally recognized firm of certified
public accountants as may be selected by the Officers Review Committee in its
reasonable discretion.
Section 6.7 Distribution Upon Termination for Cause. In the event that a
Participant is terminated for Cause (as defined below), the Company may, at its
discretion, treat such termination or any date subsequent thereto as a
Distributable Event. For purposes of this Plan, termination for Cause means
termination based on any of the following:
(i) The willful and continued failure by the Participant to
substantially perform Participant's duties with a Participating Employer
(other than any such failure resulting from Participant's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to Participant specifically identifying the manner
in which Participant has not substantially performed Participant's duties;
(ii) the engaging by Participant in willful misconduct which is
demonstrably injurious to any one or more of the Participating Employers
monetarily or otherwise; or
(iii) the conviction of Participant of a felony.
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ARTICLE VII
VALUATION OF BENEFITS
Section 7.1 Company Stock Account.
(a) Stock Award Deferral. When a Participant's Company Stock Account
is to be credited for deferred amounts attributable to awards which would
otherwise have been distributed to the Participant in the form of Common
Stock, then the number of shares of Common Stock which would have otherwise
been distributed to the Participant shall be credited to the Participant's
Company Stock Account as of the date that such distribution to the
Participant would have otherwise occurred.
(b) Cash Deferral. When a Participant's Company Stock Account is to
be credited for deferred amounts which would have otherwise been
distributed to the Participant in the form of cash, then the Participant's
Company Stock Account shall be credited with that number of shares of
Common Stock equal to the number of such shares that could have been
purchased with such cash amounts at the Fair Market Value Average for the
last business day of the month during which such cash amounts would have
otherwise been distributed to the Participant.
(c) Discretionary Amount. When a participant's Company Stock Account
is to be credited for a Discretionary Amount, it shall be credited with
that number of shares of Common Stock equal to the number of such shares
(including fractional shares) that could have been purchased with the
dollar amount of the Discretionary Amount at the Fair Market Value Average
for the last business day of the month during which such Discretionary
Amount is authorized or such other date as may be specified in the
Discretionary Amount authorization.
(d) Dividends. A Participant's Company Stock Account shall be
credited on each Common Stock dividend payment date with that number of
shares which could have been acquired through the Energen Corporation
Dividend Reinvestment and Direct Stock Purchase Plan or similar successor
plan (the "DRIP") by the reinvestment of the dividends payable on the
number of shares of Common Stock credited to such Company Stock Account as
of the record date for such dividend. In the event that the DRIP is no
longer operative, or at such time as the Officers Review Committee in its
discretion shall specify, the number of dividend reinvestment shares shall
be calculated based on the Fair Market Value Average for the dividend
payment date.
(e) Stock Dividend, etc. The number of shares of Common Stock shall
be adjusted to reflect any change in the outstanding Common Stock by reason
of any stock dividend or split, recapitalization, merger, consolidation,
combination or exchange of shares or other similar corporate change.
(f) Transfer upon Change in Control. In the event of a Change in
Control, effective as of the close of business on the date of the Change in
Control, each Participant's Investment Account shall be credited with an
amount measured in dollars equal to the value of such Participant's Company
Stock Account based on the Fair Market Value Close on such date (or such
other valuation method selected by the Section 1.1(g) Continuing Directors
in their reasonable discretion), and the Participant's Company Stock
Account shall be closed and the Participant shall have no further interest
in the Company Stock Account.
(g) Allocation of Cash Compensation. A Participant may request that
part or all of deferred compensation attributable to Cash Compensation be
allocated to the Participant's Company Stock Account. A Participant's
request to make such an allocation or change a previous allocation must be
in writing on an Allocation Request Form. All such requests are subject to
acceptance by Energen in its discretion. If accepted by Energen, the
allocation request will be effective as of the date specified by the
request.
(h) Diversification. A Participant who is at least 58 years old may
from time to time request that part or all of the Participant's Company
Stock Account be allocated to the Participant's Investment Account. Such
request must be in writing on an Allocation Request Form. All such requests
are subject to acceptance by Energen in its discretion. If accepted, as of
the close of business on the allocation date
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(as defined in Section 7.4) of the request, the Participant's Company Stock
Account shall be reduced by the number of shares of Common Stock
representing the portion of the Company Stock Account to be reallocated
(the "Reallocated Shares") and the Participant's Investment Account shall
be increased by an amount measured in dollars equal to the number of
Reallocated Shares measured by the Fair Market Value Twenty for the period
ending on the allocation date (as defined in Section 7.4).
Section 7.2 Investment Account.
(a) Deferred Amounts. When a Participant's Investment Account is to
be credited with a deferred amount, that amount measured in dollars equal
to such deferred amount shall be credited to the Investment Account as of
the close of business on the date that such amount would have otherwise
been paid to the Participant.
(b) Interest. Subject to 7.2(c), as of the close of the last day of
each calendar quarter, an additional amount shall be credited to each
Participant's Investment Account equal to the product of (i) the average
daily balance in such Investment Account for the quarter, times (ii)
one-fourth of the annual prime rate for corporate borrowers quoted at the
beginning of the quarter by AmSouth Bank of Alabama, Birmingham, Alabama
(or such other comparable interest rate as the Officers Review Committee
may designate from time to time).
(c) Investment Options. Energen may permit a Participant to allocate
the Participant's Investment Account among one or more investment options
for purposes of measuring the value of the benefit. To the extent that the
Investment Account is allocated to an investment option, it shall not be
credited with interest under Section 7.2(b). That portion of the Investment
Account allocated to an investment option shall be deemed to be invested in
such investment option and shall be valued as if so invested, reflecting
all earnings, losses and other distributions or charges and changes in
value which would have been incurred through such an investment. The
determination of which investment options, if any to make available, and
the continued availability of selected investment options rests in
Energen's sole discretion; provided, that subsequent to a Change in
Control, Energen shall maintain the availability of those investment
options in place at the time of the Change in Control (or substantially
equivalent investment options).
(d) Participant Allocation Request. A Participant's request to
allocate or reallocate among investment options must be in writing on an
Allocation Request Form in such increments as Energen may require. All such
requests are subject to acceptance by Energen at its discretion. If
accepted by Energen, an allocation request will be effective as of the
close of business on the allocation date (as defined in Section 7.4).
Section 7.3 Hypothetical Accounts. The Accounts established under this
Plan shall be hypothetical in nature and shall be maintained for bookkeeping
purposes only. Neither the Plan nor any of the Accounts (or subaccounts) shall
hold or be required to hold any actual funds or assets.
Section 7.4 Allocation Date. Upon acceptance of an allocation request
pursuant to Section 7.1(g) or 7.2(d), Energen will process the request as soon
as reasonably administratively practicable and the request shall be implemented
and reflected in the Participant's account as of the close of business on such
date as may be determined by Energen in its reasonable discretion (the
"allocation date").
ARTICLE VIII
NONTRANSFERABILITY
Section 8.1 Anti-Alienation of Benefits. Any benefits which may be
credited to a Participant's Accounts under the Plan, and any rights or
privileges pertaining thereto, may not be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered, or subjected to any charge or legal
process; and no interest or right to receive a benefit may be taken, either
voluntarily or involuntarily, for the satisfaction of the debts of, or other
obligations or claims against, such person or entity, including claims for
alimony, support, separate maintenance and claims in bankruptcy proceedings.
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Section 8.2 Incompetent Participants. If any person who may be eligible
to receive a payment under the Plan has been legally declared incompetent and a
conservator or other person legally charged with the care of such person or of
his or her estate has been appointed, any payment under the Plan to which the
person is eligible to receive shall be paid to such conservator or other person
legally charged with the care of the person or his or her estate. Any such
payment shall be a payment for the account of such person and a complete
discharge of any liability of the Participating Employers and the Plan therefor.
Section 8.3 Designated Beneficiary. In the event of a Participant's death
prior to the payment of all or a portion of any benefits which may be payable
with respect to the Participant under the Plan, the payment of any benefits
payable on behalf of the Participant under the Plan shall be made to the
Participant's beneficiary designated on a Deferral Election Form. If no such
beneficiary has been designated, payment shall be made as required under the
Participant's will; or, in the event that there shall be no functioning will
under applicable state law, then to such persons as, at the date of the
Participant's death, would be entitled to share in the distribution of such
deceased Participant's personal estate under the provisions of the applicable
statute then in force governing the decedent's intestate property, in the
proportions specified in such statute.
ARTICLE IX
WITHHOLDING
Section 9.1 Withholding. The amounts payable pursuant to the Plan may be
reduced by the amount of any federal, state or local taxes required by law to be
withheld with respect to such payments.
ARTICLE X
VOTING OF STOCK
Section 10.1 Voting of Company Stock. No Participant shall be entitled to
any voting rights with respect to any shares credited to his or her Company
Stock Account.
ARTICLE XI
ADMINISTRATION OF A PLAN
Section 11.1 Administrator. The administrator of the Plan shall be
Energen. However, the Board of Directors shall act on behalf of Energen with
respect to the administration of the Plan and may delegate authority with
respect to the administration of the Plan to the Officers Review Committee or
such other committee, person or persons as it deems necessary or appropriate for
the administration and operation of the Plan.
Section 11.2 Authority of Administrator. Energen shall have the
authority, duty and power to interpret and construe the provisions of the Plan
as it deems appropriate, to adopt, establish and revise rules, procedures and
regulations relating to the Plan, to determine the conditions subject to which
any benefits may be payable, to resolve all questions concerning the status and
rights of Participants and others under the Plan, including, but not limited to,
eligibility for benefits and to make any other determinations which it believes
necessary or advisable for the administration of the Plan. Energen shall have
the duty and responsibility of maintaining records, making the requisite
calculations and disbursing payments hereunder. The determinations,
interpretations, regulations and calculations of Energen shall be final and
binding on all persons and parties concerned. The Secretary of Energen shall be
the agent of the Plan for the service of legal process in accordance with
Section 502 of the Employee Retirement Income Security Act of 1974, as amended.
Section 11.3 Operation of Plan and Claims Procedures. Energen shall be
responsible for the general operation and administration of the Plan and for
carrying out the provisions thereof. Energen shall be responsible for the
expenses incurred in the administration of the Plan. Energen shall also be
responsible for determining eligibility for payments and the amounts payable
pursuant to the Plan. Energen shall be entitled to rely conclusively upon all
tables, valuations, certificates, opinions and reports furnished by any actuary,
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accountant, controller, counsel or other person employed or engaged by Energen
with respect to the Plan. The procedures for filing claims for payments under
the Plan are described below. For claims procedures purposes, the "Claims
Manager" shall be Energen.
(a) Claim Forms. It is the intent of Energen to make payments under
the Plan without the Participant having to complete or submit any claims
forms. However, a Participant who believes he or she is entitled to a
payment under the Plan may submit a claim for payments in writing to
Energen. Any claim for payments under the Plan must be made by the
Participant or his or her beneficiary in writing and state the claimant's
name and the nature of benefits payable under the Plan on a form acceptable
to Energen. If for any reason a claim for payments under the Plan is denied
by Energen, the Claims Manager shall deliver to the claimant a written
explanation setting forth the specific reasons for the denial, specific
references to the pertinent provisions of the Plan on which the denial is
based, a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why such
material or information is necessary, and information on the procedures to
be followed by the claimant in obtaining a review of his or her claim, all
written in a manner calculated to be understood by the claimant. For this
purpose:
(i) The claimant's claim shall be deemed to be filed when presented
orally or in writing to the Claims Manager.
(ii) The Claims Manager's explanation shall be in writing delivered
to the claimant within 90 days of the date the claim is filed.
(b) Review. The claimant shall have 60 days following his or her
receipt of the denial of the claim to file with the Claims Manager a
written request for review of the denial. For such review, the claimant or
the claimant's representative may review pertinent documents and submit
written issues and comments.
(c) Decision on Review. The Claims Manager shall decide the issue on
review and furnish the claimant with a copy within 60 days of receipt of
the claimant's request for review of the claimant's claim. The decision on
review shall be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant,
as well as specific references to the pertinent provisions in the Plan on
which the decision is based. If a copy of the decision is not so furnished
to the claimant within such 60 days, the claim shall be deemed denied on
review. In no event may a claimant commence legal action for benefits the
claimant believes are due the claimant until the claimant has exhausted all
of the remedies and procedures afforded the claimant by this Section 11.3.
Section 11.4 Participant's Address. Each Participant shall keep Energen
informed of his or her current address and the current address of his or her
beneficiary. Energen shall not be obligated to search for any person. If the
location of a Participant is not made known to Energen within three (3) years
after the date on which payment of the Participant's benefits payable under the
Plan may be made, payment may be made as though the Participant had died at the
end of the three-year period. If, within one (1) additional year after such
three-year period has elapsed, or, within three (3) years after the actual death
of a Participant, Energen is unable to locate any designated beneficiary of the
Participant, then Energen shall have no further obligation to pay any benefit
hereunder to or on behalf of such Participant or designated beneficiary and such
benefits shall be irrevocably forfeited.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 No Employment Rights. Neither the Plan nor any action taken
hereunder shall be construed as giving any Participant any right to be retained
in the service or employ of any Participating Employer.
Section 12.2 Participants Should Consult Advisors. Neither any
Participating Employer, nor their respective directors, officers, employees or
agents makes any representation or warranty with respect to the
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state, federal or other tax, financial, estate planning, or the securities or
other legal implications of participation in the Plan. Participants should
consult with their own tax, financial and legal advisors with respect to their
participation in the Plan.
Section 12.3 Unfunded and Unsecured. The Plan shall at all times be
considered entirely unfunded both for tax purposes and for purposes of Title I
of the Employee Retirement Income Security Act of 1974, as amended, and no
provision shall at any time be made with respect to segregating assets of any
Participating Employer for payment of any amounts hereunder. Any funds invested
hereunder allocable to a Participating Employer shall continue for all purposes
to be part of the respective general assets of such Participating Employer and
available to the general creditors of such Participating Employer in the event
of a bankruptcy (involvement in a pending proceeding under the Federal
Bankruptcy Code) or insolvency (inability to pay debts as they mature) of such
Participating Employer. Energen shall promptly notify the Trustee and the
applicable Participants of such bankruptcy or insolvency of a Participating
Employer. No Participant or any other person shall have any interests in any
particular assets of any Participating Employer by reason of the right to
receive a benefit under the Plan and to the extent the Participant or any other
person acquires a right to receive benefits under the Plan, such right shall be
no greater than the right of any general unsecured creditor of any Participating
Employer. The Plan constitutes a mere promise by the Participating Employers to
make payments to the Participants in the future. With respect to the guarantee
of Energen under Section 2.2, Participants have rights only as general unsecured
creditors of Energen. Nothing contained in the Plan shall constitute a guaranty
by any Participating Employer or any other person or entity that any funds in
any trust or the assets of any Participating Employer will be sufficient to pay
any benefit hereunder. Furthermore, no Participant shall have any right to a
benefit under the Plan except in accordance with the terms of the Plan.
Section 12.4 The Trust.
(a) Establishment of Trust. In order to provide assets from which to
fulfill its obligations to the Participants and their beneficiaries under
the Plan, Energen shall establish a Trust by a trust agreement with a third
party, the Trustee, to which Energen may, in its discretion, contribute
cash or other property, including securities issued by Energen, to provide
for the benefit payments under the Plan. The Trustee will have the duty to
invest the Trust assets and funds in accordance with the terms of the
Trust. Energen shall be entitled at any time, and from time to time, in its
sole discretion, to substitute assets of at least equal fair market value
for any assets held in the Trust. All rights associated with the assets of
the Trust will be exercised by the Trustee or the person designated by the
Trustee, and will in no event be exercisable by or rest with Participants
or their beneficiaries. The Trust shall provide that in the event of the
insolvency of Energen, the Trustee shall hold the assets for the benefit of
the general creditors of Energen and its affiliated companies. The Trust
shall be based on the model trust contained in Internal Revenue Service
Revenue Procedure 92-64 with such changes and modifications as may be
approved by Energen.
(b) Contribution Upon Change in Control. If as of the close of
business on the date of a Change in Control, the aggregate value of the
Participant Accounts exceeds the value of the Trust assets, then within
thirty days of such Change in Control, Energen shall contribute to the
Trust assets having a value at least equal to the amount of such excess.
Section 12.5 Plan Provisions. Except when otherwise required by the
context, any singular terminology shall include the plural.
Section 12.6 Severability. If a provision of the Plan shall be held to be
illegal or invalid, the illegality or invalidity shall not affect the remaining
parts of the Plan and the Plan shall be construed and enforced as if the illegal
or invalid provision had not been included.
Section 12.7 Applicable Law. To the extent not preempted by the laws of
the United States, the laws of the State of Alabama shall apply with respect to
the Plan.
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ARTICLE XIII
AMENDMENTS
Section 13.1 Amendment of the Plan. Energen reserves the power to alter,
amend or wholly revise the Plan at any time and from time to time by the action
of the Board of Directors and the interest of each Participant is subject to the
powers so reserved; provided, however, that no amendment made subsequent to a
Change in Control shall be effective to the extent that it would have a
materially adverse impact on a Participant's reasonably expected economic
benefit attributable to compensation deferred by the Participant prior to the
Change in Control. An amendment shall be authorized by the Board of Directors
and shall be stated in an instrument in writing signed in the name of Energen by
a person or persons authorized by the Board of Directors. After the instrument
has been so executed, the Plan shall be deemed to have been amended in the
manner therein set forth, and all parties interested herein shall be bound
thereby. No amendment to the Plan may alter, impair, or reduce the benefits
credited to any Accounts prior to the effective date of such amendment without
the written consent of any affected Participant.
ARTICLE XIV
TERM OF PLAN
Section 14.1 Term of the Plan. Energen may at any time terminate the Plan
by action of the Board of Directors with such termination being effective as of
the date that all Participant Accounts have been distributed to Participants in
accordance with and subject to the provisions of Article VI of the Plan
including, without limitation, Section 6.6 of the Plan. Effective as of the date
of such Board of Directors action (or such later date as may be specified
therein) all Section 4.1 compensation deferral elections will terminate and no
further amounts shall be credited to any Accounts of any Participant under
Sections 7.1(a), (b), (c) and 7.2(a) after such date. However, the Participants'
Accounts shall continue to be adjusted by the other provisions of Sections 7.1
and 7.2 until all benefits are distributed to the Participants or to the
Participants' beneficiaries.
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APPENDIX C
PROXY -- ENERGEN CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 28, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ENERGEN CORPORATION
The undersigned, revoking all proxies heretofore given with respect to the
shares represented hereby, hereby appoints WM. MICHAEL WARREN, JR. and DUDLEY
C. REYNOLDS, or either of them acting in the absence of the other, with full
power of substitution, proxies to represent the undersigned at the Annual
Meeting of Shareholders of Energen Corporation (the "Company"), to be held on
January 28, 1998 at 10:00 a.m., Central Standard Time, at the principal office
of the Company in Birmingham, Alabama, and at any adjournments thereof (the
"Annual Meeting"), respecting the shares of Common Stock which the undersigned
would be entitled to vote if then personally present, as follows:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
This proxy should be mailed in the enclosed addressed envelope (no postage
required if mailed in the United States). To assure the necessary
representation at the Annual Meeting, please date and sign this proxy and mail
it to the Company promptly. Please mail your proxy to the Company even though
you plan to attend the Meeting. If you vote in person at the Annual Meeting,
your Proxy will not be used.
ENERGEN CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [/]
[ ]
<TABLE>
<CAPTION>
FOR all VOTE
nominees listed WITHHELD
(except as from all
indicated below) nominees FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS: [ ] [ ] 3. Proposal to approve the Energen [ ] [ ] [ ]
Nominees--For three year term ending 2001: Corporation 1997 Stock Incentive
Dr. Stephen D. Ban, Julian W. Banton, and Plan.
Wm. Michael Warren, Jr.
(To withhold authority to vote for any 4. Proposal to approve certain issuances
individual nominee, write that nominee's of Common Stock under the Energen
name in the space provided below.) Corporation 1997 Deferred Compensation
Plan.
________________________________________
FOR AGAINST ABSTAIN 5. In their discretion, to vote upon such
2. Proposal to amend the Company's Restated [ ] [ ] [ ] other matters as may properly come
Certificate of Incorporation to increase before the Annual Meeting.
the Company's authorized shares of Common
Stock from 30,000,000 to 75,000,000 shares.
All as such items or proposals are more fully set forth in the Proxy Statement with respect to the Annual Meeting
received by the undersigned. (THIS PROXY WILL BE VOTED ACCORDANCE WITH THE SPECIFIC INDICATION ABOVE. IN THE
ABSENCE OF SUCH INDICATION, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES, AND FOR PROPOSALS
2, 3, and 4.
DATED_________________________________________________, 19__
____________________________________________________________
____________________________________________________________
Signature(s) of Shareholder(s)
(Please sign exactly as name appears below.)
</TABLE>
<PAGE> 54
[ENERGEN LOGO]
ENERGEN CORPORATION
2101 SIXTH AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
(205) 326-2700
