<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>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
OCEAN ENERGY, INC.
- --------------------------------------------------------------------------------
(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
[OCEAN ENERGY LOGO]
OCEAN ENERGY, INC.
HOUSTON, TEXAS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, MAY 10, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders
(the "Annual Meeting") of Ocean Energy, Inc., a Texas corporation (the
"Company"), which will be held on Wednesday, May 10, 2000 at 10:00 a.m., local
time, at The Four Seasons Hotel, 1300 Lamar, Houston, Texas. The Annual Meeting
will be held for the following purposes:
1. To elect five directors to serve until the 2003 Annual Meeting of
Shareholders;
2. To ratify the appointment of KPMG LLP as independent auditors of
the Company for the fiscal year ending December 31, 2000; and
3. To transact such other business as may properly come before such
meeting or any adjournment(s) or postponement(s) thereof.
The close of business on March 31, 2000 has been fixed as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Annual Meeting or any adjournment(s) or postponement(s) thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE TO ENSURE THAT YOUR SHARES
WILL BE REPRESENTED. A SELF-ADDRESSED ENVELOPE HAS BEEN ENCLOSED FOR YOUR
CONVENIENCE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW ANY PREVIOUSLY GIVEN
PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
/s/ ROBERT K. REEVES
Robert K. Reeves
Secretary
April 7, 2000
<PAGE> 3
OCEAN ENERGY, INC.
1001 FANNIN, SUITE 1600
HOUSTON, TEXAS 77002
(713) 265-6000
------------------------
PROXY STATEMENT
------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
(the "Board of Directors" or the "Board") of Ocean Energy, Inc., a Texas
corporation (the "Company"), for use at the 2000 Annual Meeting of Shareholders
(the "Annual Meeting") to be held on Wednesday, May 10, 2000 at 10:00 a.m.,
local time, at The Four Seasons Hotel, 1300 Lamar, Houston, Texas, or at any
adjournment(s) or postponement(s) thereof. The solicitation of proxies by the
Board of Directors will be conducted primarily by mail. Georgeson & Company Inc.
has been retained to assist the Company in the distribution and solicitation of
proxies in connection with the Annual Meeting for a fee of $8,000, plus
out-of-pocket expenses. In addition, officers, directors and employees of the
Company may solicit proxies personally or by telephone, telegram or other forms
of wire or facsimile communication. The Company will reimburse brokers,
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
forwarding proxy material to beneficial owners of common stock (the "Common
Stock") of the Company. The costs of the solicitation will be borne by the
Company. This proxy statement and the form of proxy were first mailed to
shareholders of the Company on or about April 7, 2000.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy (a) by the execution and submission of
a revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by the proxies will be voted at the Annual Meeting.
At the close of business on March 31, 2000, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding 166,796,903 shares of Common Stock and 50,000
shares of the Company's Series C Convertible Preferred Stock (the "Convertible
Preferred Stock"). Each shareholder is entitled to one vote for each share of
Common Stock, and 68.82 votes for each share of Convertible Preferred Stock.
Holders of Common Stock and Convertible Preferred Stock will vote together as a
single class on the matters to be voted on at the Annual Meeting. The Common
Stock and Convertible Preferred Stock are the only classes of outstanding
securities of the Company entitled to notice of and to vote at the Annual
Meeting.
The Company's annual report to shareholders for the year ended December 31,
1999, including financial statements, is being mailed with this proxy statement
to all shareholders entitled to vote at the Annual Meeting. The annual report
does not constitute a part of this proxy soliciting material.
At a special meeting held on March 30, 1999, the Company's shareholders
approved the merger of Ocean Energy, Inc., a Delaware corporation ("OEI") into
Seagull Energy Corporation, a Texas corporation ("Seagull"). Seagull, the
surviving corporation, was renamed Ocean Energy, Inc. in connection with the
merger. This proxy statement relates to the continuing corporation -- Seagull
renamed Ocean Energy, Inc.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Five directors are to be elected at the Annual Meeting. The Company's
Bylaws provide for a classified Board of Directors, divided into Classes I, II
and III, the terms of office of which are currently scheduled to expire,
respectively, on the dates of the Company's Annual Meetings of Shareholders in
2002, 2000 and 2001.
<PAGE> 4
The five nominees are to be elected to Class II for a three-year term expiring
at the Company's annual meeting of shareholders in 2003.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION OF EACH OF THE
NOMINEES.
A plurality of the votes cast in person or by proxy by the holders of
Common Stock and Convertible Preferred Stock, voting together as a class, is
required to elect a director. Accordingly, under the Texas Business Corporation
Act and the Company's Bylaws, abstentions and broker non-votes would have no
effect on the election of directors. A broker non-vote occurs if a broker or
other nominee does not have discretionary authority and has not received
instructions with respect to a particular item. Shareholders may not cumulate
their votes in the election of directors.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors.
The following table sets forth information regarding the names, ages and
principal occupations of the nominees and directors, directorships in other
companies held by them and the length of continuous service as a director of the
Company (or its predecessor):
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
<TABLE>
<CAPTION>
CLASS II NOMINEES PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE
- ----------------- -------------------------------------- ---
<S> <C> <C>
J. Evans Attwell................. Retired Managing Partner, Vinson & Elkins L.L.P. 69
Director, American General Corporation and Dain
Rauscher Corporation. Director of the Company since
1974.
Barry J. Galt.................... Director, StanCorp Financial Group, Inc., Trinity 66
Industries, Inc. and Friede Goldman Halter, Inc.
Director of the Company since 1983.
Elvis L. Mason................... Principal, Elvis Mason & Associates, Inc. Consulting 66
and Advisory Services. Director of OEI and a
predecessor entity, United Meridian Corporation
("UMC"), from 1987 until election as a director of the
Company in March 1999.
David K. Newbigging.............. Chairman, Friends' Provident Life Office, Thistle 66
Hotels plc and Faupel Trading Group plc. Director,
Merrill Lynch & Co., Inc. and Paccar Inc. Director of
OEI and a predecessor entity, UMC, from 1987 until
election as a director of the Company in March 1999.
Dee S. Osborne................... President, Crest Investment Company (investments); 69
Director, EOTT Energy Corp. (the general partner of
EOTT Energy Partners, L.P.). Director of the Company
since 1983.
</TABLE>
2
<PAGE> 5
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
CLASS I DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE
- ----------------- -------------------------------------- ---
<S> <C> <C>
Milton Carroll................... Chairman of the Board, President and Chief Executive 49
Officer, Instrument Products, Inc.; Director, Health
Care Service Corporation, Reliant Energy, Inc. and
TEPPCO Partners, LP. Director of the Company since
1997.
Thomas D. Clark, Jr. ............ Ourso Distinguished Professor of Business and Dean of 59
College of Business Administration at Louisiana State
University. Director of OEI from 1997 until election as
a director of the Company in March 1999.
Peter J. Fluor................... President and Chief Executive Officer, Texas Crude 52
Energy, Inc. (independent oil and gas company);
Director, Fluor Corporation. Director of the Company
since 1980.
Robert L. Howard................. Retired Vice President of Domestic Operations, 63
Exploration and Production, Shell Oil Company.
Director, Southwestern Energy Company and McDermott
International Inc. Director of OEI and a predecessor
entity, UMC, from 1996 until election as a director of
the Company in March 1999.
Charles F. Mitchell, M.D......... Otolaryngologist and facial plastic surgeon. Director 51
of OEI from 1995 until election as a director of the
Company in March 1999.
</TABLE>
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
CLASS III DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE
- ------------------- -------------------------------------- ---
<S> <C> <C>
John B. Brock.................... Director, Southwest Bank of Texas, Southwest 67
Bancorporation of Texas, Inc., St. Luke's Episcopal
Health System and St. Luke's Episcopal Hospital.
Director of OEI and a predecessor entity, UMC, from
1989 until election as a director of the Company in
March 1999.
James C. Flores.................. Vice Chairman of the Company. Director of OEI from 1992 40
until election as a director of the Company in March
1999.
James T. Hackett................. Chairman of the Board, President and Chief Executive 46
Officer of the Company. Director, New Jersey Resources
Corporation and Temple-Inland Corp. Director of the
Company since 1998.
R. A. Walker..................... Senior Managing Director, Prudential Capital Group; 43
Director, Maxus Energy Corporation. Director of the
Company since 1996.
</TABLE>
Each of the nominees and directors named above has been engaged in the
principal occupation set forth opposite his name for the past five years except
as follows:
Mr. Clark was employed with Florida State University until 1995 in a
variety of positions including Professor and Chairman of the Department of
Information and Management Sciences and Director of the Center for Information
Systems Research.
Prior to our merger with OEI, Mr. Galt served as Chairman and Chief
Executive Officer of Seagull from 1983 to September 1998, and then as its
Chairman until December 1998, and finally as its Vice Chairman until the merger
was consummated in March 1999.
Mr. Mason served as Managing Partner of Mason Best Company, L.P., a
merchant banking firm, from 1984 to 1998. He has also served as a director or
officer of certain business entities affiliated with Mason Best Company, L.P.
since 1991.
3
<PAGE> 6
Mr. Newbigging has served as Chairman of Friends' Provident Life Office
since May 1998 and as Chairman of Faupel Trading Group P.L.C. since January
1994. He was appointed Chairman of Thistle Hotels plc in March 1999. He also
served as Chairman of Equitas Holdings Limited from December 1995 to October
1998.
Mr. Brock served as Chairman of the Board of OEI from March 1998 until
March 1999. He also served as Chairman of the Board of UMC from 1995 to March
1998 at which time UMC was merged into OEI. From 1989 to 1998, Mr. Brock held a
variety of positions with UMC, including President and Chief Executive Officer
from 1992 to March 1998.
Mr. Flores was a founder of OEI and has served in various capacities with
OEI since its inception in 1992, most recently as President and Chief Executive
Officer from July 1995 until March 1999. Mr. Flores served as Chairman of the
Board of the Company from March 1999 until January 2000.
Mr. Hackett served as Chairman of the Board of the Company from January
1999 to March 1999 prior to the merger with OEI and was renamed Chairman of the
Board in January 2000. Prior to joining the Company, he served as Group
President of the Energy Services division of Duke Energy from June 1997 through
September 1998, following the merger of Duke Power Company and PanEnergy
Corporation. From January 1996 until the merger, Mr. Hackett served as
PanEnergy's Executive Vice President. Prior to his employment with PanEnergy,
Mr. Hackett was employed by NGC Corporation from 1990 through December 1995.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned by each director, each nominee for director, the Chief
Executive Officer and each of the other four most highly compensated individuals
for 1999 who were serving as executive officers of the Company as of December
31, 1999 (the "Named Officers") and the directors and executive officers of the
Company as a group, as of the date of this Proxy Statement:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
-------------------------------
PERCENT
NUMBER OF SHARES(2) OF CLASS
------------------- --------
<S> <C> <C>
J. Evans Attwell....................................... 86,000 *
John B. Brock.......................................... 1,170,681(3) *
Milton Carroll......................................... 29,000 *
Thomas D. Clark, Jr. .................................. 40,372 *
Peter J. Fluor......................................... 73,998(4) *
Barry J. Galt.......................................... 1,523,647(4) *
Robert L. Howard....................................... 46,800 *
Elvis L. Mason......................................... 65,547 *
Charles F. Mitchell, M.D............................... 46,700 *
David K. Newbigging.................................... --(5) *
Dee S. Osborne......................................... 131,193 *
R.A. Walker............................................ 28,000(6) *
James T. Hackett....................................... 935,832(7) *
James C. Flores........................................ 8,710,481(7)(8) 5.2%
William L. Transier.................................... 508,014(7)(9) *
Robert K. Reeves....................................... 606,423(7)(9) *
John D. Schiller, Jr. ................................. 208,665(7)(9) *
Directors and executive officers as a group:
(19 persons)........................................... 14,381,863(10) 8.8%
</TABLE>
- ---------------
* Less than 1%
4
<PAGE> 7
(1) Unless otherwise indicated, beneficial owners have sole voting and
investment power with respect to the shares listed. Amounts shown are as of
April 7, 2000, except for amounts held by the trustees of the Company's
thrift plans and Employee Stock Ownership Plan, which are estimated as of
December 31, 1999.
(2) Includes shares that the above named persons have a right to purchase
within 60 days pursuant to stock options granted under the Company's stock
option plans. Such shares are allocated as follows: Mr. Attwell -- 46,000;
Mr. Brock -- 871,563; Mr. Carroll -- 28,000; Mr. Clark -- 39,680; Mr.
Fluor -- 46,000; Mr. Galt -- 1,110,000; Mr. Howard -- 42,800; Mr. Mason
-- 50,600; Dr. Mitchell -- 44,360; Mr. Osborne -- 46,000; Mr.
Walker -- 28,000; Mr. Hackett -- 558,664; Mr. Flores -- 1,760,500; Mr.
Transier -- 283,334; Mr. Reeves -- 541,037; and Mr. Schiller -- 106,669.
Prior to exercising these options, the directors and officers will have no
voting or investment power with respect to the underlying shares.
(3) Includes 5,000 shares owned by his wife as separate property with respect
to which Mr. Brock disclaims beneficial ownership because he has neither
voting nor dispositive power with respect to such shares.
(4) Includes 4,000 shares held by certain trusts with respect to which Mr.
Fluor is the sole trustee but for which he disclaims any beneficial
ownership.
(5) Mr. Newbigging has been the recipient of various stock options which have
been assigned to a trust of which members of his family are the
beneficiaries and of which Mr. Newbigging is not the trustee.
(6) Does not include 5,562,261 shares held by The Prudential Insurance Company
of America ("Prudential"). Mr. Walker is a Senior Managing Director of
Prudential Capital Group, a division of Prudential.
(7) Includes shares held by the trustee of the Company's Employee Stock
Ownership Plan for which the above Named Officers have sole voting power
and no investment power. Shares held are as follows: Mr. Hackett -- 2,168;
Mr. Flores -- 2,168; Mr. Transier -- 6,080; Mr. Reeves -- 2,168; and Mr.
Schiller -- 2,168.
(8) Includes 3,305,016 shares held by a family limited partnership.
(9) Includes shares held by the trustees of the Company's thrift plans for
which the above Named Officers have sole voting power and no investment
power. Shares held are as follows: Mr. Flores -- 6,563; Mr.
Transier -- 69,501; Mr. Reeves -- 2,128; and Mr. Schiller -- 1,053.
(10) Includes 128,144 shares held for directors and executive officers as a
group in the Company's thrift plans and Employee Stock Ownership Plan for
which such persons have sole voting power and no investment power. Also,
includes 5,745,832 shares for directors and executive officers as a group
that such persons have the right to purchase within 60 days pursuant to
options granted under the Company's stock option plans. Prior to exercising
these options, said persons will have no voting or investment power with
respect to the underlying shares.
PRINCIPAL SHAREHOLDERS
To the knowledge of the management of the Company and based upon filings
with the Securities and Exchange Commission ("SEC"), the only person who may be
deemed to own beneficially more than 5% of the outstanding Common Stock
(including any "group" as that term is used in Section 13(d)(3) of the Exchange
Act), as of the date of this Proxy Statement, is named in the following table:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- ------------------------------------ ---------------- ----------------
<S> <C> <C>
James C. Flores........................................ (1) 5.2%
1001 Fannin, Suite 1600
Houston, Texas 77002
</TABLE>
- ---------------
(1) See Notes 1, 2, 7 and 8 to the table set forth under the heading "Security
Ownership of Directors and Management."
5
<PAGE> 8
DIRECTORS' MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors held ten meetings during 1999. Each
director attended at least 75% of the aggregate total meetings of the Board of
Directors and the committees on which such director served during his tenure of
service.
The Board has the following standing committees, the current members of
which were appointed by the Board on March 30, 1999:
Audit Committee. The Audit Committee currently consists of Messrs.
Osborne (Chairman), Attwell, Carroll, Howard and Newbigging. The
Committee's principal functions are to confirm the existence of effective
accounting and internal control systems and to oversee the entire audit
function, both independent and internal. During 1999, the Audit Committee
held three meetings.
Organization and Compensation Committee. The Organization and
Compensation Committee currently consists of Messrs. Mason (Chairman),
Carroll, Clark, Mitchell and Walker. The Committee's principal functions
are to study, advise and consult with the Company's management respecting
the compensation of officers and other key employees of the Company. During
1999, the Compensation Committee held six meetings.
Executive Committee. The Executive Committee currently consists of
Messrs. Fluor (Chairman), Attwell, Brock, Galt and Mason. The Committee's
principal function is to aid and assist the Company's management in the
day-to-day operation of the Company. During 1999, the Executive Committee
held four meetings.
Nominating Committee. The Nominating Committee currently consists of
Messrs. Clark (Chairman), Carroll, Fluor, Howard and Mitchell. The
Committee's principal function is to make proposals to the full Board of
Directors for candidates to be nominated by the Board to fill vacancies or
for new directorship positions, if any, which may be created from time to
time. The Nominating Committee will consider suggestions from any source,
particularly shareholders, regarding possible candidates for director. With
respect to the procedures that must be followed in order for nominations
from shareholders to be considered, see "Shareholder Proposals and Director
Nominations." During 1999, the Nominating Committee held two meetings.
COMPENSATION OF DIRECTORS
Prior to the effectiveness of the merger with OEI, each director of the
Company who was not a full-time employee was paid a director's fee of $24,000
plus $1,000 for each Board of Directors and Committee meeting attended. A
nonemployee director who attended a meeting of a committee of which he was not a
member was entitled to an attendance fee of $1,000. Each nonemployee director
who served as a committee chairman prior to the merger received an additional
$1,000 per year.
Concurrent with the effectiveness of the merger, the director fee payable
to each director of the Company who was not a full-time employee increased to
$35,000 (on an annualized basis) and each such director was entitled to an
attendance fee of $1,000 for each Board of Directors and Committee meeting
attended. Following the merger, the fee payable to each nonemployee director who
served as a committee chairman was increased to $5,000 per year.
Stock Options. The 1999 Long Term Incentive Plan (the "Plan") provides for
the grant of options to acquire Common Stock to each director who is not also an
employee of the Company (each a "Director"). On the date of any annual meeting
of shareholders prior to the termination of the Plan, each Director who is
continuing in office will automatically receive an option to purchase 6,000
shares of Common Stock at an exercise price equal to the fair market value of
the Common Stock on the date of grant with one-third vested at each of the next
three annual meeting dates. In addition, each Director who is elected or
appointed to the Board of Directors for the first time will receive on the date
of such director's election or appointment an option to purchase 10,000 shares
of Common Stock at an exercise price equal to the fair market value of the
6
<PAGE> 9
Common Stock on the date of grant with 50% immediately vested and the remaining
50% vested on the next annual meeting of shareholders of the Company. All
outstanding options have terms of ten years.
Deferred Fee Plan. The Company has an Outside Directors Deferred Fee Plan
(the "Deferred Fee Plan"), a non-qualified deferred compensation plan, pursuant
to which all directors who are not employees of the Company ("Outside
Directors") may elect to defer all or a portion of their directors' fees.
Outside Directors are permitted to make quarterly elections regarding the method
of income crediting for these deferrals, which may be credited either based upon
"phantom stock" units (which have the same value as Common Stock, and increase
or decrease in value to the full extent of any increase or decrease in the value
of the Common Stock and receive credit for any cash or stock dividends paid with
respect to the Common Stock) or with interest equivalents based upon the prime
rate of interest as published in The Wall Street Journal on the last day of the
quarter, plus a bonus rate of interest of up to 2% depending on the number of
years the Outside Director has served on the Board. Distributions under the
Deferred Fee Plan can be made only in cash. As of April 7, 2000, all Outside
Directors except Messrs. Brock, Clark, Mitchell, Newbigging and Walker were
participants in the Deferred Fee Plan.
CERTAIN TRANSACTIONS
Simultaneously with OEI's acquisition of its Main Pass 69, South Pass 24
and South Pass 27 fields in 1992, 1993 and 1993, respectively, and in
consideration of its efforts in consummating the acquisition of such fields,
Sable Minerals, Inc. ("Sable") was granted a non-cost bearing overriding royalty
representing an average 0.9% net revenue interest in the fields by the owner of
a minority interest in such fields. Sable is a corporation owned by James C.
Flores, Vice Chairman of the Company. The royalty interest was reserved out of
and burdens only the minority interest, which was acquired by OEI in December
1994. During 1999, the Company paid $619,816 to Sable with respect to such
interest.
During 1999, the Company paid the father of Mr. Flores $127,331 for various
geological consulting services.
During 1999, the Company through a third party relocation agency purchased
Mr. Flores' principal residence and property located in Baton Rouge, Louisiana
for $4,192,706. Such amount represented the fair market value of the residence
and property as independently appraised. This purchase was made pursuant to Mr.
Flores' then existing employment agreement which required the Company to
reimburse Mr. Flores' for all out-of-pocket expenses incurred in connection with
his relocation to Houston, Texas. The Company is currently marketing this
residence and property for resale.
During 1999, the Company retained the law firm of Vinson & Elkins L.L.P.,
of which Mr. Attwell, a director of the Company, is retired managing partner, to
perform various legal services for the Company. Vinson & Elkins L.L.P. has been
retained to perform similar services in 2000.
During 1999, the Company retained the law firm of Moyers, Martin, Santee,
Imel & Tetrick ("Moyers, Martin"), of Tulsa, Oklahoma, with respect to matters
of Oklahoma law. Moyers, Martin has been retained to perform similar services
with respect to matters of Oklahoma law in 2000. Mr. D. Stanley Tacker, Mr.
Galt's son-in-law, is a partner in Moyers, Martin. Mr. Galt was a director and
executive officer of the Company during 1999 and continued to serve as a
director following the merger with OEI.
The following director and executive officers have outstanding loans from
the Company. These loans were made in connection with the exercise of stock
options.
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING
(INCLUDING ACCRUED INTEREST)
NAME AS OF DECEMBER 31, 1999 MATURITY DATE INTEREST RATE
- ---- ---------------------------- ------------- -------------
<S> <C> <C> <C>
Barry J. Galt................................. $1,530,739 5/31/2002 6.5%
William L. Transier........................... $ 404,134 12/17/2002 4.8%
John D. Schiller, Jr. ........................ $ 510,454 12/17/2002 4.8%
</TABLE>
Since the inception of these loans, no payments of principal or interest
have been made. The loan to Mr. Galt was made on September 2, 1998 pursuant to
his employment and consulting agreement to allow for
7
<PAGE> 10
the exercise of 192,000 options. The loans to Mr. Transier and Mr. Schiller were
made on December 17, 1998 to allow for the exercise of 60,982 and 77,025 stock
options, respectively, pursuant to the Company's Equity Ownership Program. Each
of these loans is secured by the shares of Common Stock acquired upon exercise
of the stock options described above. The amounts outstanding listed in the
above table represent the maximum aggregate amount outstanding (including
accrued interest) during 1999.
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of the Common Stock to
file reports of ownership and changes in ownership concerning the Common Stock
with the SEC and to furnish the Company with copies of all Section 16(a) forms
they file. Based upon the Company's review of the Section 16(a) filings that
have been received by the Company, the Company believes that all filings
required to be made under Section 16(a) during 1999 were timely made, except
that certain shares of the Company's Common Stock were omitted from John B.
Brock's initial Form 3 and a purchase of Common Stock by John D. Schiller, Jr.
in October 1999 was inadvertently not reported on a Form 4. Mr. Brock's and Mr.
Schiller's 16(a) filings were subsequently amended to reflect the ownership of
these shares of Common Stock.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended December
31, 1999, 1998 and 1997, of the Named Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS
-------------------------------------------- -------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
COMPENSATION AWARD(S) OPTIONS/SARS COMPENSATION
NAME & PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) ($)(2) (#)(3) ($)(4)
- ------------------------- ---- --------- -------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James T. Hackett......... 1999 $ 3,600(5) $475,000 $ -- $1,527,600 575,000 $57,815(6)
Chairman of the Board, 1998 $ 875(5) $500,000 $ -- $ 677,922 391,996 $22,015(6)
President and Chief 1997 $ -- $ -- $ -- $ -- -- $ --
Executive Officer
James C. Flores(7)....... 1999 $450,000 $425,000 $ -- $ -- 500,000 $59,995
Vice Chairman 1998 $ -- $ -- $ -- $ -- -- $ --
1997 $ -- $ -- $ -- $ -- -- $ --
William L. Transier...... 1999 $341,500 $350,000 $ -- $ -- 250,000 $36,246
Executive Vice
President 1998 $290,500 $300,000 $ -- $ 554,186 130,982 $53,586
and Chief Financial 1997 $260,000 $120,000 $ -- $ -- 40,000 $32,972
Officer
Robert K. Reeves(7)...... 1999 $262,500 $300,000 $ -- $ -- 250,000 $15,611
Executive Vice
President, 1998 $ -- $ -- $ -- $ -- -- $ --
General Counsel and 1997 $ -- $ -- $ -- $ -- -- $ --
Secretary
John D. Schiller, Jr. ... 1999 $287,500 $250,000 $ -- $ -- 200,000 $26,129
Executive Vice
President, 1998 $ 72,917 $ 70,614 $ -- $ -- 117,025 $63,970
Operations 1997 $ -- $ -- $ -- $ -- -- $ --
</TABLE>
- ---------------
(1) Includes "Perquisites and Other Personal Benefits" if value is greater than
the lesser of $50,000 or 10% of reported salary and bonus.
(2) The restricted stock included in the table represents the fair market value
of the entire restricted stock award on the date of grants. The Company does
not currently pay dividends on its Common Stock; however, it would pay
dividends on the restricted stock should the Company change its dividend
policy.
8
<PAGE> 11
Mr. Hackett received 241,996 shares of restricted stock with respect to
which the restrictions were scheduled to lapse on various dates through
September 16, 2002. As a result of the merger, all of the restrictions
related to the restricted stock held by Mr. Hackett and Mr. Transier lapsed
in March 1999.
(3) No grants of stock appreciation rights have been made.
(4) Amounts reported under "All Other Compensation," represent contributions by
the Company to defined contribution plans, parking or car allowances and
premiums paid on life insurance policies, and in the case of Mr. Hackett and
Mr. Flores, include amounts for personal use of aircraft chartered by the
Company. Also includes a sign-on bonus paid to Mr. Schiller in 1998.
(5) Under Mr. Hackett's employment agreement, Mr. Hackett received his annual
compensation of $500,000 for 1998 and 1999 in the form of stock options. In
connection with the merger with OEI, Mr. Hackett's salary increased from
$500,000 to $600,000. Mr. Hackett deferred this increase, which is not
reflected in the above table, under the Company's Supplemental Benefit Plan
as phantom shares or common stock equivalents. As a result, Mr. Hackett
received only a nominal amount of 1999 base salary in cash sufficient to
cover costs associated with the Company's benefit plans. During 1998, Mr.
Hackett elected to waive receipt of his 1998 and 1999 salary in exchange for
an option to purchase 200,000 shares of Common Stock.
(6) Includes annual premium payments paid by the Company for Mr. Hackett's
Flexible Premium Adjustable Life Insurance policy of $1,390 for both 1999
and 1998. The remaining amounts represent contributions by the Company to
the Company's defined contribution plans.
(7) Mr. Flores and Mr. Reeves assumed their positions with the Company in March
1999, upon consummation of the merger with OEI. Mr. Flores served as
Chairman of the Board of the Company until January 2000 when he assumed his
current position.
COMPENSATION ARRANGEMENTS
Employment Agreements.
Mr. Hackett entered into a three-year employment agreement with the Company
effective September 16, 1998. The term of Mr. Hackett's employment agreement is
extended automatically for an additional year on each anniversary of the
employment agreement, unless terminated prior to such renewal by either Mr.
Hackett or the Company. Consequently, the remaining term of Mr. Hackett's
employment agreement will always range from two to three years. However, if the
Company terminates Mr. Hackett's employment for cause (as defined in the
agreement), or because of Mr. Hackett's uncorrected material breach of the
employment agreement, the employment agreement will terminate. Similarly, if Mr.
Hackett voluntarily terminates his employment for reasons other than the
Company's uncorrected material breach of the employment agreement, his failure
to be re-elected to the positions specified in the employment agreement,
including as a director, the assignment of duties materially inconsistent with
his positions, or the relocation of the principal place of his employment by
more than 50 miles, the employment agreement will terminate. The employment
agreement provides for Mr. Hackett to serve as the Company's President and Chief
Executive Officer and as a member of the Board of Directors and, effective
January 1, 2000, as Chairman of the Company's Board of Directors. The employment
agreement also includes noncompetition provisions that apply while Mr. Hackett
is employed by the Company and for two years following a termination of Mr.
Hackett's employment by reason of his disability or a voluntary termination by
Mr. Hackett prior to September 16, 2000. During his term of employment, Mr.
Hackett will also receive various club memberships and certain other personal
and business-related benefits.
The foregoing description reflects an amendment to Mr. Hackett 's
employment agreement effective January 1, 2000, that amended the provision
pertaining to Mr. Hackett's service as Chairman of the Company's Board of
Directors and the noncompetition provision, both of which had been amended
previously in connection with the merger.
Mr. Flores entered into a two-year employment agreement with the Company
effective January 1, 2000, which replaced an existing employment agreement.
Following the two-year term of the employment agreement, with the consent of the
Company, Mr. Flores may continue to be employed by the Company either as an "at
will" employee or pursuant to another employment agreement mutually agreed upon
by Mr. Flores
9
<PAGE> 12
and the Company. However, if the Company terminates Mr. Flores' employment for
cause (as defined in the agreement), or because of Mr. Flores' uncorrected
material breach of the employment, the employment agreement will terminate.
Similarly, if Mr. Flores voluntarily terminates his employment for reasons other
than the Company's uncorrected material breach of the employment agreement, the
employment agreement will terminate. The employment agreement provides for Mr.
Flores to serve as Vice Chairman of the Company's Board of Directors and to have
such powers and duties as designated by the Company's Bylaws and as may assigned
to him by the Company's Chief Executive Officer. The employment agreement also
includes noncompetition provisions that apply during the term of the employment
agreement. During his term of employment, Mr. Flores will receive a salary of
$100,000 per year and various club memberships and certain other personal and
business-related benefits.
Under the terms of his previous employment agreement and in consideration
of Mr. Flores' resignation as Chairman of the Board of Directors of the Company
and acceptance of the position of Vice Chairman of the Board of Directors of the
Company, the Company agreed to pay to Mr. Flores a lump sum cash payment in the
amount of $5.4 million dollars and to vest all of Mr. Flores' outstanding and
unvested stock options.
Mr. Transier entered into a five-year employment agreement with the Company
effective June 22, 1999, which replaced an existing severance agreement.
However, if the Company terminates Mr. Transier's employment because of his
misconduct or disability (both as defined therein), the employment agreement
will terminate. Similarly, if Mr. Transier resigns for other than good reason
(as defined therein), the employment agreement will terminate. The employment
agreement provides for Mr. Transier to serve as Executive Vice President and
Chief Financial Officer of the Company. Mr. Transier's salary is subject to
review and possible increase by the Company's Board of Directors on an annual
basis. Further, during his term of employment, Mr. Transier will receive certain
other personal and business-related benefits.
Mr. Reeves entered into a five-year employment agreement with the Company
effective June 22, 1999, which replaced an existing employment agreement.
However, if the Company terminates Mr. Reeves' employment because of his
misconduct or disability (both as defined therein), the employment agreement
will terminate. Similarly, if Mr. Reeves resigns for other than good reason (as
defined therein), the employment agreement will terminate. The employment
agreement provides for Mr. Reeves to serve as Executive Vice President, General
Counsel and Corporate Secretary of the Company. Mr. Reeves' salary is subject to
review and possible increase by the Company's Board of Directors on an annual
basis. Further, during his term of employment, Mr. Reeves will receive an
automobile allowance and certain other personal and business-related benefits.
Executive Severance Agreements.
Messrs. Hackett and Schiller have entered into agreements with the Company
(the "Severance Agreements") that provide certain severance benefits in the
event their employment is subject to an involuntary termination (as defined
therein) within two years following a change of control (as defined therein) of
the Company. The merger between the Company and OEI is deemed a change of
control within the meaning of the Severance Agreements. The initial term of the
Severance Agreements is two years. This term may be extended for successive
two-year terms following the initial term; however, if a change of control
occurs during the term of the Severance Agreements, the Severance Agreements
cannot terminate until two years after the change of control. The Severance
Agreements generally provide for (a) the payment of 2.99 times the sum of annual
salary and targeted incentive bonus or, where applicable two-year average bonus
at the time of the change of control or the involuntary termination, whichever
is greater, and, where applicable, reduced by the present value of any salary
continuation, bonus or severance payments payable under any other Company plan,
policy or agreement, other than a plan within the meaning of section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, (b) where
applicable, the payment of targeted incentive bonus if the involuntary
termination occurs after a bonus is earned but before it is paid, (c) the
continuation of health and insurance benefit coverage at active employee cost
for up to thirty-six months, and (d) outplacement services up to a maximum cost
of $6,000. Additionally, the Severance Agreements provide that if any payments
to an executive by the Company would be subject to any excise tax imposed by
10
<PAGE> 13
section 4999 of the Code, a "gross-up" payment will be made to place such
executive in the same net after-tax position as would have been the case if no
excise tax had been imposed.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following is information with respect to the unexercised options to
purchase Common Stock under the Company's stock option plans granted to the
Named Officers and held by them at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES DECEMBER 31, 1999 (#) AT DECEMBER 31, 1999 ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James T. Hackett.......... -- $ -- 391,996 575,000 $ -- $375,000
James C. Flores........... -- $ -- 1,260,500 500,000 $1,651,982 $375,000
William L. Transier....... -- $ -- 200,000 250,000 $ -- $187,500
Robert K. Reeves.......... 30,000 $207,405 457,703 250,000 $ 451,427 $187,500
John D. Schiller, Jr. .... -- $ -- 40,000 200,000 $ -- $150,000
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following is information with respect to grants of options in fiscal
1999 pursuant to the Company's stock option plans to the Named Officers
reflected in the Summary Compensation Table on page 8. No stock appreciation
rights were granted under those plans in fiscal 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF PERCENT OF POTENTIAL REALIZABLE VALUE AT
SECURITIES TOTAL ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS/SARS STOCK PRICE APPRECIATION FOR
OPTIONS/SARS GRANTED TO EXERCISE OR OPTION TERM(2)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
(#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
------------ ------------ ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James T. Hackett......... 400,000 7.5% $ 6.8125 3/30/2009 $1,713,738 $4,342,948
100,000 1.9% $ 9.75 5/25/2009 $ 613,172 $1,553,899
75,000 1.4% $10.5625 9/16/2009 $ 498,202 $1,262,543
James C. Flores.......... 400,000 7.5% $ 6.8125 3/30/2009 $1,713,738 $4,342,948
100,000 1.9% $ 9.75 5/25/2009 $ 613,172 $1,553,899
William L. Transier...... 200,000 3.7% $ 6.8125 3/30/2009 $ 856,869 $2,171,474
50,000 0.9% $ 9.75 5/25/2009 $ 306,586 $ 776,949
Robert K. Reeves......... 200,000 3.7% $ 6.8125 3/30/2009 $ 856,869 $2,171,474
50,000 0.9% $ 9.75 5/25/2009 $ 306,586 $ 776,949
John D. Schiller, Jr. ... 160,000 3.0% $ 6.8125 3/30/2009 $ 685,495 $1,737,179
40,000 0.8% $ 9.75 5/25/2009 $ 245,269 $ 621,560
</TABLE>
- ---------------
(1) All options that were granted on March 30, 1999 were granted at an exercise
price of $6.8125. All options that were granted on May 25, 1999 were granted
at an exercise price of $9.75. The remaining options were granted on
September 16, 1999. All options vest in one-third increments on the first
three anniversaries of the grant date. The exercise price per share is equal
to the closing price of Common Stock on the NYSE Composite Tape on the date
of grant.
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of options assuming that the market price of Common
Stock appreciates in value from the date of grant at the 5% and 10% annual
rates of return prescribed by the SEC. These calculations are not intended
to forecast possible future appreciation, if any, of the price of Common
Stock.
11
<PAGE> 14
REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The primary goal of the Organization and Compensation Committee (the
"Committee") is to establish a compensation program that serves the long-term
interests of the Company and its shareholders. We intend to attract and retain
the highest caliber executive talent in the industry. The quality and caliber of
executive talent is fully expected to manifest itself in superior Company
performance within the industry. Generally, the strategy for managing executive
compensation will emphasize highly leveraged variable compensation, with a
strong link to Company performance. We intend to emphasize variable and equity
components of compensation that, upon attainment of expected performance, will
position total compensation at or near the 75th percentile of the competitive
market.
The Company's executive compensation program, as structured and implemented
by our Committee, consists of three main components: (1) base salary; (2)
potential for an annual bonus based on overall Company performance as well as
individual performance; and (3) the opportunity to earn long-term stock-based
incentives that are intended to encourage the achievement of superior results
over time and to align executive and shareholder interests. We engage the
outside compensation consulting firm of William M. Mercer, Incorporated
("Mercer") for advice in evaluating the executive compensation levels of the
Company's executive officers. Mercer's evaluation includes a peer group of
companies substantially similar to the peer group named under the heading
"Shareholder Return Performance Presentation" and various energy industry survey
sources.
Base Salary. The Company's objective in determining base salaries is to
position base salaries for executives between the 50th and 75th percentile of
the competitive market. Based upon Mercer's evaluation, we believe that the base
salary objectives have been met.
Adjustments to base salaries are made on an as needed basis depending on
the executive's performance over time and such factors as changes in job scope,
competitive market and the Company's size. No specific weight or emphasis is
placed on any one of these factors.
Annual Incentive Compensation. Annual incentive compensation is intended to
provide additional reward opportunities to our executives depending on
individual and Company performance. Annual incentives are determined at the end
of the fiscal year based on an evaluation of individual and Company performance.
Company performance is measured against the goals approved by the Board of
Directors at the beginning of the fiscal year for which the incentive
compensation is being paid. Generally, Company performance goals for any fiscal
year will include a combination of such factors as successful drilling results,
reduction in production and operating costs, increases in production and
reserves, attainment of cash flow and net income goals, implementation of
corporate finance strategies, successful mergers and acquisitions and common
stock price performance.
Annual incentive payments could position the executive's total cash
compensation between the 75th to 90th percentile of the competitive market when
justified by superior Company performance. We utilize data obtained from Mercer
to determine the target annual incentive award levels. Annual incentive award
payments can increase to a maximum of two times the targeted percentage or
decrease to zero for any year, based upon the achievement of predetermined
Company and individual performance goals.
The 1999 Company performance goals also specifically included a reduction
in gross lease operating expenditures from 1998 levels, a reduction in gross
general and administrative expenditures on an annualized basis, reduction in
interest costs per barrel of oil equivalent produced, the sale of at least $400
million in oil and gas properties, reduction of debt/total capitalization, and a
limiting of capital expenditures to internally generated cash flow.
No specific weight or emphasis is placed on any one of these goals. After
the objective goals are measured independently and evaluated as a whole, we
evaluate the individual executive's performance and the Company's stock price
performance.
Long-Term Incentive Compensation. The Company delivers long-term incentive
compensation in the form of stock option grants and, on a limited basis to the
senior executives, restricted stock awards. We believe
12
<PAGE> 15
strongly that incentive compensation in the form of stock options and restricted
stock tends to align the interests of employees and shareholders by rewarding
performance that increases shareholder value. Option holders will only realize
value when the stock price increases over the exercise price established on the
date of grant, after vesting has occurred and upon exercise of the option.
Restricted stock recipients will only realize value if they remain employed by
the Company until the end of the vesting period, during which time and,
thereafter, they have a significant incentive to influence stock price
appreciation.
We determine the size of the grants by considering the value of the
long-term incentive grants to similarly situated executives of companies
included in the peer group. The Company's long-term incentive grants are
intended to approximate the 75th percentile value of grants made by companies in
the peer group. We base decisions concerning individual option grants on the
individual performance and the level of responsibility of the executive. The
Committee does not utilize the number of options, restricted stock awards or
shares held by any individual as a factor to limit long-term incentive grants to
that individual in subsequent years.
All outstanding options have terms of ten or eleven years, depending on the
plan from which they were granted. All options granted in 1999 have ten year
terms and, with the exception of grants made to Mr. Hackett under the terms of
his Employment Agreement, vest in three equal annual installments beginning one
year from the date of grant. All options have been granted at 100% of the market
value of the Common Stock on the date of grant. The exercise price is payable in
cash, shares of Common Stock, or any combination thereof. With the exception of
a grant made to Mr. Hackett under the terms of his Employment Agreement, no
restricted stock awards were made to executives during 1999.
We periodically review the Company's executive compensation strategy to
ensure that the Company provides an appropriate mix of base salary and
short-term and long-term compensation opportunities that are competitive with
market alternatives.
Chief Executive Officer Compensation
As previously described, we consider several factors in developing an
executive compensation package. For the Chief Executive Officer, these factors
include competitive pay practices (consistent with the philosophy of market
competitiveness described above for other executives), experience, achievement
of strategic goals and financial success of the Company. Specific actions taken
by our Committee regarding Mr. Hackett's compensation in 1999 are summarized
below.
Base Salary. As with the Company's other executives, Mr. Hackett's 1999
base salary was based on a review of a variety of factors such as certain
individual performance criteria and such factors as changes in job scope,
competitive market and the Company's size. Following the merger in March 1999,
we increased Mr. Hackett's salary from $500,000 to $600,000 per year. The salary
increase was deferred under the Supplemental Benefit Plan as phantom shares or
common stock equivalents. Mr. Hackett received only a nominal amount of 1999
base salary in cash sufficient to cover the cost of benefit plans, having
elected in 1998 to waive receipt of his then current base salary through 1999 in
exchange for an option to purchase 200,000 shares of Common Stock. Effective
January 1, 2000, Mr. Hackett's base salary became payable in cash.
Annual Incentive Compensation. As a result of his leadership in the
attainment of the Company's 1999 goals and the stock price performance as
previously described, we awarded Mr. Hackett a 1999 bonus award of $475,000,
which is 79% of his 100% target.
Long-Term Incentive Compensation. In accordance with his Employment
Agreement, Mr. Hackett was granted a restricted stock grant covering 241,996
shares on January 1, 1999. This grant was scheduled to vest in one-third
increments on the first three anniversaries of his date of employment. However,
as a result of the merger, the restrictions associated with this grant lapsed in
March 1999. Also in accordance with his employment agreement, Mr. Hackett was
granted a stock option covering 75,000 shares. The stock options were granted on
September 16, 1999. They have an exercise price of $10.5625, which was the fair
market value on the date of grant, and vest in 25% increments on the first four
anniversaries of the date of grant.
13
<PAGE> 16
In connection with the merger, Mr. Hackett was granted stock options
covering 400,000 shares on March 30, 1999 and 100,000 shares on May 25, 1999.
The stock options have an exercise price of $6.8125 and $9.75, respectively, and
vest in one-third increments on the next three anniversaries of the dates of
grants.
Section 162(m). Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), which was enacted in 1993, precludes a public corporation
from taking a deduction in 1994 or subsequent taxable years for compensation in
excess of $1 million paid to its chief executive officer or any of its four
other highest-paid officers. However, compensation that qualified under Section
162(m) of the Code as "performance-based" is specifically exempt from the
deduction limit. Our Committee has been advised that the Company's ability to
deduct compensation income generated in connection with the exercise of stock
options granted under the Company's stock option plans should not be limited by
Section 162(m) of the Code. We believe that it is not in the shareholders'
interests to modify the Company's annual incentive plan to enable the Company to
meet the requirements of the Code provisions which limit to $1 million the
deductibility of annual cash compensation paid to any executive officer named in
the Summary Compensation Table for corporate income tax purposes. We believe
that it is in the shareholders' interests for our Committee to retain discretion
in the awarding of cash bonuses to the officers to better ensure that the bonus
which is paid to each officer reflects the officer's contribution to the
achievement of the Company's goals. The Company has determined that the impact
to the Company, if any, of being unable to deduct that portion of the cash bonus
paid to officers which, together with their annual salary, exceeds $1 million
will be minimal.
Organization and Compensation
Committee
Elvis L. Mason, Chairman
Milton Carroll
Thomas D. Clark, Jr.
Charles F. Mitchell
R. A. Walker
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The performance graph shown below was prepared by using data from the
Standard and Poor's Compustat Database for use in this Proxy Statement. As
required by applicable rules of the SEC, the graph was prepared based upon the
following assumptions:
1. $100 was invested in Common Stock, the Old Peer Group (as defined
below), the New Peer Group (as defined below) and the S&P 500 on December
31, 1994.
2. The Old Peer Group and New Peer Group investments are weighted
based on the market capitalization of each individual company within the
applicable peer group at the beginning of each year.
3. Dividends are reinvested on the ex-dividend dates.
The old industry peer group (the "Old Peer Group") is comprised of the
following: Anadarko Petroleum Corporation, Apache Corporation, Burlington
Resources Inc., EEX Corporation, Enron Oil & Gas Company, Equitable Resources,
Inc., Kerr-McGee Corporation (successor by merger to Oryx Energy Company), Noble
Affiliates, Inc., Nuevo Energy Company, Pioneer Natural Resources Company, Pogo
Producing Company, Santa Fe Snyder Corporation, Union Pacific Resources Group
Inc. and Vastar Resources, Inc.
Our new industry peer group (the "New Peer Group") is comprised of the
following: Anadarko Petroleum Corporation, Apache Corporation, Burlington
Resources Inc., Devon Energy Corporation, EOG Resources, Inc., Noble Affiliates,
Inc., Pioneer Natural Resources Company, Santa Fe Snyder Corporation, Unocal
Corporation, Union Pacific Resources Group Inc. and Vastar Resources, Inc.
We believe the New Peer Group more accurately reflects our industry peers
based on size and business focus.
14
<PAGE> 17
OCEAN ENERGY, INC.
(FORMERLY SEAGULL ENERGY CORPORATION)
COMPARATIVE TOTAL RETURNS
DECEMBER 1994-DECEMBER 1999
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, OLD PEER GROUP, NEW PEER GROUP AND S&P 500 INDEX
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C> <C> <C>
Ocean Energy, Inc. Old Peer Group New Peer Group S & P 500
Dec 94 100.00 100.00 100.00 100.00
Dec 95 116.00 126.00 120.00 138.00
Dec 96 115.00 155.00 153.00 169.00
Dec 97 108.00 138.00 141.00 226.00
Dec 98 33.00 97.00 105.00 290.00
Dec 99 41.00 118.00 121.00 351.00
Dec 99
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Company $100 $116 $115 $108 $ 33 $ 41
Old Peer Group $100 $126 $155 $138 $ 97 $118
New Peer Group $100 $120 $153 $141 $105 $121
S&P 500 $100 $138 $169 $226 $290 $351
</TABLE>
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
The Company has an Executive Supplemental Retirement Plan (the "Retirement
Plan") in which James. T. Hackett participates. The Retirement Plan was
established to provide supplemental retirement benefits for those employees who
are designated by the Compensation Committee as participants and who complete
the required period of employment with the Company. Benefits under the
Retirement Plan constitute unfunded, unsecured obligations of the Company. The
Retirement Plan provides a benefit for the surviving spouse of a participant who
dies before retirement with a vested benefit.
Subject to specified vesting requirements, a participant is entitled to
receive commencing upon termination of his or her employment by the Company or
upon his or her normal retirement date, whichever is later, a pension equal to
the applicable percentage of average monthly compensation less 50% of his or her
social security benefit. Mr. Hackett is 60% vested in his benefit under the
Retirement Plan.
For Mr. Hackett, the applicable percentage is 50%, and the average monthly
compensation (including bonus) is determined based on the last three consecutive
calendar years of employment with the Company.
15
<PAGE> 18
Based upon Mr. Hackett's average monthly compensation (including deemed annual
salary and annual bonuses for years 1998 and 1999) of $96,506, the estimated
vested accrued annual benefit for Mr. Hackett is $341,364 with such payment
continuing to the survivor for life upon the death of either Mr. Hackett or his
spouse.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 2 ON PROXY CARD)
The Board of Directors has appointed the firm of KPMG LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000, and
recommends ratification by the shareholders of such appointment. Assuming a
quorum is present, ratification of KPMG LLP as independent auditors requires the
affirmative vote of a majority of the votes entitled to be cast by holders of
shares of Common Stock and Convertible Preferred Stock, voting together as a
class, who are entitled to vote at the Annual Meeting and who vote for or
against or expressly abstain with respect to such approval. Under the Texas
Business Corporation Act and the Company's Bylaws, an abstention would have the
same legal effect as a vote against this proposal, but a broker non-vote would
not be counted for purposes of determining whether a majority had been achieved.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the appointment of KPMG LLP as independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. The Board of Directors
may terminate the appointment of KPMG LLP as the Company's independent auditors
without the approval of the shareholders of the Company whenever the Board of
Directors deems such termination necessary or appropriate. A representative of
KPMG LLP is expected to attend the Annual Meeting and will have the opportunity
to make a statement, if such representative desires to do so, and will be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders may propose matters to be presented at shareholders' meetings
and may also nominate persons to be directors. Formal procedures have been
established for those proposals and nominations.
PROPOSALS FOR 2001 ANNUAL MEETING
Pursuant to various rules promulgated by the SEC, any proposals of holders
of Common Stock intended to be presented to the annual meeting of shareholders
of the Company to be held in 2001 (the "2001 Annual Meeting") must be received
by the Company, addressed to Robert K. Reeves, Corporate Secretary, 1001 Fannin,
Suite 1600, Houston, Texas 77002, no later than December 9, 2000, to be included
in the Company proxy statement and form of proxy relating to that meeting. With
respect to business to be brought before the 2001 Annual Meeting, the Company
has not received any notices from its shareholders.
In addition to the SEC rules described in the preceding paragraph, the
Company's bylaws provide that for business to be properly brought before the
Company's annual meetings of shareholders, it must be either (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise brought before the meeting by or at the
direction of the Board of Directors or (c) otherwise properly brought before the
meeting by a shareholder of the Company who is a shareholder of record at the
time of giving of notice hereinafter provided for, who shall be entitled to vote
at such meeting and who complies with the following notice procedures. In
addition to any other applicable requirements, for business to be brought before
an annual meeting by a shareholder of the Company, the shareholder must have
given timely notice in writing of the business to be brought before an annual
meeting of shareholders of the Company to the Secretary of the Company. If a
shareholder fails to provide timely notice of a proposal to be presented at the
2001 Annual Meeting, the proxies designated by the Board of Directors of the
Company will
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have discretionary authority to vote on any such proposal which may come before
the meeting. A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the Company's books, of the shareholder proposing
such business, (iii) the acquisition date, the class and the number of shares of
Common Stock which are owned beneficially by the shareholder, (iv) any material
interest of the shareholder in such business and (v) a representation that the
shareholder intends to appear in person or by proxy at the meeting to bring the
proposed business before the meeting. Notwithstanding the foregoing bylaw
provisions, a shareholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in the foregoing bylaw provisions. Notwithstanding anything in
the Company's bylaws to the contrary, no business shall be conducted at the
annual meeting except in accordance with the procedures outlined above.
NOMINATIONS FOR 2001 ANNUAL MEETING AND FOR ANY SPECIAL MEETINGS
Only persons who are nominated in accordance with the following procedures
will be eligible for election as directors. Nominations of persons for election
to the Company's Board of Directors may be made at a meeting of shareholders (a)
by or at the direction of the Board of Directors or (b) by any shareholder of
the Company who is a shareholder of record at the time of giving of notice
hereinafter provided for, who shall be entitled to vote for the election of
directors at the meeting and who complies with the following notice procedures.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company. To be timely, a shareholder's notice shall be delivered to or
mailed and received at the Company's principal executive offices, 1001 Fannin,
Suite 1600, Houston, Texas 77002 (i) with respect to an election to be held at
the 2001 Annual Meeting, on or before February 9, 2001 and (ii) with respect to
an election to be held at a special meeting of shareholders of the Company for
the election of Directors, not later than the close of business on the 10th day
following the date on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever first occurs.
Such shareholder's notice to the Secretary shall set forth (a) as to each person
whom the shareholder proposes to nominate for election or re-election as a
director, all information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors, or is
otherwise required, pursuant to Regulation 14A under the Exchange Act (including
the written consent of such person to be named in the proxy statement as a
nominee and to serve as a director if elected); and (b) as to the shareholder
giving the notice, (i) the name and address, as they appear on the Company's
books, of such shareholder, and (ii) the class and number of shares of capital
stock of the Company which are beneficially owned by the shareholder. In the
event a person is validly designated as a nominee to the Board and shall
thereafter become unable or unwilling to stand for election to the Board of
Directors, the Board of Directors or the shareholder who proposed such nominee,
as the case may be, may designate a substitute nominee. Notwithstanding the
foregoing bylaw provisions, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in the foregoing bylaw provisions.
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OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) or postponement(s)
thereof, it is intended that the enclosed proxy will be voted in accordance with
the judgment of the persons named in the proxy.
By Order of the Board of Directors,
/s/ ROBERT K. REEVES
Robert K. Reeves
Secretary
April 7, 2000
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OCE45B DETACH HERE
PROXY
OCEAN ENERGY, INC.
ANNUAL MEETING OF SHAREHOLDERS - MAY 10, 2000
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints James T. Hackett and Robert K. Reeves as
proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote as designated below, all the shares of
Common Stock or Series C Convertible Preferred Stock of Ocean Energy, Inc. (the
"Company"), held of record by the undersigned at the close of business on March
31, 2000, at the Annual Meeting of Shareholders to be held May 10, 2000, or any
adjournment(s) or postponement(s) thereof.
The undersigned hereby revokes any proxy to vote shares held by the
undersigned heretofore given. THE UNDERSIGNED ACKNOWLEDGES THAT THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER AND THAT IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND IN FAVOR OF PROPOSAL 2.
THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE VOTING OF THE PROXY BY
THE EXECUTION AND SUBMISSION OF A REVISED PROXY, BY WRITTEN NOTICE TO THE
SECRETARY OF THE COMPANY OR BY VOTING IN PERSON AT THE MEETING.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 22
DETACH HERE
<TABLE>
<S> <C>
PLEASE MARK
VOTES AS IN
[X] THIS EXAMPLE.
1. Election of Five Directors to serve in Class II until the 2003 Annual 2. Proposal to ratify the FOR AGAINST ABSTAIN
Meeting of Shareholders. appointment by the Board of
NOMINEES: (01) J. Evans Attwell, (02) Barry J. Galt, (03) Elvis L. Mason Directors of the firm of [ ] [ ] [ ]
(04) David K. Newbigging and (05) Dee S. Osborne KPMG LLP as independent audi-
tors of the Company for the
FOR WITHHELD fiscal year ending
ALL [ ] [ ] FROM ALL December 31, 2000.
NOMINEES NOMINEES
3. In their discretion the proxies are authorized to
[ ] vote upon such other business as may properly
------------------------------------------ come before the meeting or any adjournment(s) or
For all nominees except as noted above postponement(s) thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name
by president or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
Signature: Date: Signature: Date:
------------------------------- ---------- ---------------------------- ----------
</TABLE>
