<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
EVERGREEN RESOURCES, 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):
/ / 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>
EVERGREEN RESOURCES, INC.
1000 Writer Square, 1512 Larimer Street
Denver, Colorado 80202
303-534-0400
------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 12, 1998
TO THE SHAREHOLDERS OF EVERGREEN RESOURCES, INC.:
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders (the "Meeting")
of Evergreen Resources, Inc., a Colorado corporation (the "Company") will be
held on the 37th floor of the Denver Petroleum Club, 555 Seventeenth Street,
Denver, Colorado, on May 12, 1998, at 3:00 p.m., Mountain Daylight Time, and at
any and all adjournments thereof, for the purpose of considering and acting upon
the following matters:
1. To elect two (2) Directors of the Company;
2. To vote on a proposal to amend the Company's Articles of Incorporation
(the "Articles") to establish certain relevant factors to be
considered by the Board of Directors (the "Board") in evaluating
certain extraordinary corporate transactions (the "Relevant Factors
Amendment");
3. To vote on a proposal to amend the Articles to require the approval of
holders of 2/3 of the outstanding common stock of the Company and/or
the approval of 2/3 of the directors of the Company for certain
corporate transactions (the "Supermajority Amendment");
4. To vote on a proposal to amend the Articles to require the approval of
holders of 2/3 of the outstanding common stock of the Company to
increase the number of directors on the Board unless a majority of the
Continuing Directors (as defined herein) also approves of the increase
(the "Board Enlargement Amendment");
5. To vote on a proposal to amend the Articles to limit the personal
liability of officers and directors of the Company in certain
circumstances (the "Liability Limitation Amendment");
6. To vote on a proposal to approve the Evergreen Resources, Inc. Initial
Stock Option Plan (the "Plan");
7. To vote on a proposal to approve the issuance to certain directors and
key employees of the Company of warrants (the "Warrants") for 79,990
shares of the Company's no par value voting common stock (the "Common
Stock"); and
8. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
This Proxy Statement and the accompanying Proxy Card will be mailed to the
Company's Shareholders on or about April 17, 1998.
Only holders of record of the Company's common stock at the close of business on
April 10, 1998 will be entitled to notice of and to vote at the Meeting or at
any adjournment or adjournments thereof.
All Shareholders, whether or not they expect to attend the Meeting in person,
are urged to sign and date the enclosed Proxy and return it promptly in the
enclosed postage-paid envelope which requires no additional postage if mailed in
the United States. The giving of a proxy will not affect your right to vote in
person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS.
J. KEITHER MARTIN
SECRETARY
Denver, Colorado
April 10, 1998
<PAGE>
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of Directors of
Evergreen Resources, Inc., a Colorado corporation (the "Company"), for use at
the Company's Annual Meeting of Shareholders to be held on the 37th floor of the
Denver Petroleum Club, 555 Seventeenth Street, Denver, Colorado, on May 12,
1998, at 3:00 p.m., Mountain Daylight Time, and at any adjournment thereof.
This Proxy Statement and the accompanying Proxy Card will be mailed to the
Company's Shareholders on or about April 17, 1998.
Any person signing and returning the enclosed Proxy may revoke it at any time
before it is voted by giving written notice of such revocation to the Company,
or by voting in person at the Meeting. Any written notice revoking a proxy
should be sent to: Evergreen Resources, Inc., P.O. Box 660, Denver, CO
80201-0660. The expense of soliciting proxies, including the cost of preparing,
assembling and mailing this proxy material to Shareholders, will be borne by the
Company. It is anticipated that solicitations of proxies for the Meeting will
be made only by use of the mails; however, the Company may use the services of
its Directors, Officers and Employees to solicit proxies personally or by
telephone without additional salary or compensation to them. Brokerage houses,
custodians, nominees and fiduciaries will be requested to forward the proxy
soliciting materials to the beneficial owners of the Company's shares held of
record by such persons, and the Company will reimburse such persons for their
reasonable out-of-pocket expenses incurred by them in that connection.
All shares represented by valid proxies will be voted in accordance therewith at
the Meeting. Shares not voting as a result of a proxy marked abstain will be
counted as part of total shares voting in order to determine whether or not a
quorum has been achieved at the Meeting.
Shares will not be counted as part of the vote on any business at the Meeting on
which the Shareholder has abstained.
The Company's Annual Report to Shareholders for the fiscal year ended December
31, 1997 is being mailed simultaneously to the Company's Shareholders, and
contains financial information constituting a part of this proxy soliciting
materials. See "Financial Information".
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's no par
value voting common stock, with each share entitled to one vote. Only
Shareholders of record at the close of business on April 10, 1998 are entitled
to notice of and to vote at the Meeting or any adjournment thereof. On April
10, 1998 the Company had 10,457,374 shares of its no par value voting common
stock outstanding, each of which is entitled to one vote on all matters to be
voted upon at the Meeting, including the election of Directors. No fractional
shares are presently outstanding.
A majority of the Company's outstanding voting common stock represented in
person or by proxy shall constitute a quorum at the Meeting. The two nominees
for director receiving the most votes for their election will be elected
director, providing a quorum is present. The affirmative vote of a majority of
shares represented at the meeting, providing a quorum is present, is necessary
to approve the Relevant Factors Amendment, the Liability Limitation Amendment,
the Plan and the issuance of the Warrants. The affirmative vote of holders of
2/3 of the outstanding shares of the Company's no par value voting common stock
is necessary to approve of the Supermajority Amendment and the Board Enlargement
Amendment. Abstentions and broker non-votes have no effect on the election of
directors or the votes to approve the Relevant Factors Amendment, the Liability
Limitation Amendment, the Plan or the issuance of the Warrants. Abstentions and
broker non-votes have the same effect as votes against the Supermajority
Amendment and the Board Enlargement Amendment.
2
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows the identity of beneficial owners known to the Company
to own five percent or more of the Company's common stock as of April 10, 1998.
This information is based upon filings made by such persons with the Securities
and Exchange Commission or upon information provided to the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
---------------- -------------------- -----------
<S> <C> <C>
Advisory Research, Inc. 938,300 (1) 9.0%
David B. Heller
Two Prudential Plaza
180 N. Stetson, Suite 5780
Chicago, IL 60601
Heartland Advisors, Inc. 744,400 7.1%
790 North Milwaukee Street
Milwaukee, WI 53202
Wellington Management Co. 671,000 6.4%
75 State Street
Boston, MA 02109
Gerald R. Forsythe 1,592,716 (2) 15.2%
1075 Noel Avenue
Wheeling, IL 60090
John Hancock Mutual Life Ins. Co. 2,498,376 (3) 23.9%
200 Claredon Street
Boston, MA 02117
</TABLE>
- ---------------
(1) David B. Heller is President and the controlling shareholder of Advisory
Research, Inc.
(2) Consists of shared voting and dispositive power over 364,500 shares and
14,452 shares issuable under stock purchase warrants currently exercisable
held by Energy Investors Fund I ("Fund I") and 1,028,216 shares and 185,548
shares issuable under stock purchase warrants currently held by Energy
Investors Fund II ("Fund II"). Fund I is controlled by its general partner
Energy Investors Partners, L.P. ("Partners I"). Fund II is controlled by
its general partner Energy Investors Partners II, L.P. ("Partners II").
Partners I and Partners II are each 50%-owned by John Hancock Energy
Resources Management, Inc. ("JHERM"), an indirect, wholly-owned subsidiary
of John Hancock Mutual Life Insurance Co. ("John Hancock"), and by EIF
Investors, Inc. ("Investors"). Investors is 100%-owned by EIF
Acquisition, L.L.C., which in turn is 99%-owned by Indeck Capital, Inc.,
which in turn is 80%-owned by Gerald R. Forsythe. North American Funding,
L.L.C. owns the other 1% of Investors.
(3) Consists of 905,660 shares held directly and voting and dispositive power
over 1,592,716 shares held by JHERM as described in note (2) above. JHERM
is a wholly-owned subsidiary of John Hancock Subsidiaries, Inc., which in
turn is a wholly-owned subsidiary of John Hancock.
In addition to those persons set forth in the table above, CEDE & Co. was the
record holder of more than 5% of the common stock as of April 10, 1998. The
Company does not know the nature of the beneficial ownership of such shares.
3
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
The following table provides information as of April 10, 1998, regarding the
Company's common stock beneficially owned by each Director, nominee for Director
and each officer.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
---------------- -------------------- -----------
<S> <C> <C>
Alain G. Blanchard 57,690 (1) 0.6%
98 Avenue Moliere
Brussels, Belgium
Dennis R. Carlton 159,346 (2) 1.6%
7664 S. Platteview Dr.
Littleton, CO 80128
Kevin R. Collins 46,800 (3) *
7520 S. Emerson St.
Littleton, CO 80122
Larry D. Estridge 21,770 (1) *
106 Lady Banks Lane
Greer, SC 29650
J. Keither Martin 3,000 *
3 Sequoia Street
Golden, CO 80401
John J. Ryan III 391,790 (4) 3.7%
13 avenue de Bude
1202 Geneva Switzerland
Mark S. Sexton 197,194 (5) 1.9%
4059 Witter Gulch Road
Evergreen, CO 80439
Scott D. Sheffield 6,240 *
4300 Park Lane
Dallas, TX 75220
James S. Williams 121,540 (6) 1.2%
2800 S. University Blvd. #158
Denver, CO 80210
All Officers and Directors 1,005,370 9.8%
As a Group (9 Persons)
</TABLE>
- ---------------
* Less than 1%
(1) Includes 20,000 shares issuable pursuant to stock purchase warrants
presently exercisable.
(2) Includes 95,000 shares issuable pursuant to stock purchase warrants
presently exercisable.
(3) Includes 32,500 shares issuable pursuant to stock purchase warrants
presently exercisable.
(4) Includes 30,000 shares issuable pursuant to stock purchase warrants
presently exercisable.
(5) Includes 101,500 shares issuable pursuant to stock purchase warrants
presently exercisable.
(6) Includes 75,000 shares issuable pursuant to stock purchase warrants
presently exercisable.
There is no arrangement, known to the Company, including any pledge by any
person of securities of the Company or any of its parents, the operation of
which may at a subsequent date result in a change in control of the Company.
4
<PAGE>
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY)
The Articles of Incorporation of Evergreen Resources, Inc. provide that the
members of the Company's Board of Directors shall be divided into three classes,
as nearly equal in number as possible, each of which is to serve for three
years, with one class being elected each year.
The two nominees for director receiving the most votes for their election will
be elected director. Abstentions and broker non-votes have no effect on the
election of directors. Shareholders do not have the right to cumulate their
votes for directors. The persons named in the enclosed form of proxy, unless
otherwise directed therein, intend to vote such proxy FOR the election of the
nominee named below as Director for the term specified. If the nominee becomes
unavailable for any reason, the persons named in the form of proxy are expected
to consult with management of the Company in voting the shares represented by
them. Management has no reason to believe that the nominee will be unavailable
or unwilling to serve if elected to office. To the knowledge of management, the
nominee intends to serve the term for which election is sought.
The Board of Directors has nominated two persons for election as Director at
this Meeting to serve for three year terms. The nominees are currently serving
as Directors and have consented to serve for the new terms.
PRESENT DIRECTORS NOMINATED FOR RE-ELECTION
<TABLE>
<CAPTION>
Director Term to
Name Age Position Since Expire
---- --- -------- ----- ------
<S> <C> <C> <C> <C>
Dennis R. Carlton 46 Sr. Vice President and Director 1995 2001
Mark S. Sexton 42 President, CEO and Director 1995 2001
</TABLE>
CONTINUING DIRECTORS WHOSE TERMS ARE NOT EXPIRING
<TABLE>
<CAPTION>
Director Term to
Name Age Position Since Expire
---- --- -------- ----- ------
<S> <C> <C> <C> <C>
Alain G. Blanchard 56 Director 1989 2000
Larry D. Estridge 54 Director 1989 1999
John J. Ryan III 70 Director 1989 1999
Scott D. Sheffield 45 Director 1996 2000
</TABLE>
James S. Williams, a present Director whose term expires May 12, 1998, will not
stand for election to a new term.
There is no family relationship between any Director, executive or person
nominated or chosen by Evergreen to become a Director or Executive Officer.
There is no compensatory plan or arrangement with respect to any individual
named above which results or will result from the resignation, retirement or any
other termination of employment with the Company, or from a change in the
control of the Company.
No Director or Executive Officer of the Company or nominee for election as a
Director has been indebted to the Company or its subsidiaries at any time since
the beginning of the Company's last fiscal year in any amount.
Additional information regarding the nominees for election as Directors and the
continuing Directors of the Company is as follows:
5
<PAGE>
NOMINEES
DENNIS R. CARLTON - SENIOR VICE PRESIDENT EXPLORATION AND OPERATIONS AND
DIRECTOR
PRESIDENT - EVERGREEN OPERATING CORPORATION ("EOC")
Mr. Carlton joined Evergreen in 1981 and was named a Director in March 1995. In
May 1989, Mr. Carlton was named Executive Vice President of Evergreen's
operating subsidiary and President in 1995. He received a B.S. in Geology in
1972 and a Masters of Science Degree in Geology in 1975 from Wichita State
University. He resides in Littleton, Colorado and devotes full time to
Evergreen. Mr. Carlton was also a director of Evergreen from 1985 to 1989.
MARK S. SEXTON - PRESIDENT, CEO AND DIRECTOR
CEO - EOC
Mr. Sexton has been with Evergreen since 1987, when he was hired to manage the
daily operating activities of Evergreen's operating subsidiary. Mr. Sexton is a
registered Professional Engineer in Colorado. In 1978 he was awarded a B.S.
degree in Mechanical Engineering from Stanford University. He was previously
employed in various technical, financial, and management positions with Amoco,
Norwest Bank, and Sound Energy Development Company. He resides in Evergreen,
Colorado and devotes full time to Evergreen. He has been a director of
Evergreen since March 1995.
CONTINUING DIRECTORS
ALAIN BLANCHARD - DIRECTOR
Mr. Blanchard was named Director of Evergreen in May 1989. From 1983 until 1988
Mr. Blanchard was an Associate and shareholder of Laidlaw Adams and Peck. A
resident of Brussels, Belgium, he has managed discretionary funds for private
and institutional clients for over 20 years and continues to do so.
Mr. Blanchard graduated from the University of Paris with a doctorate in
economics and a degree in political science.
LARRY D. ESTRIDGE - DIRECTOR
Mr. Estridge was named a Director of Evergreen in May 1989. He received an A.B.
degree from Furman University in 1966 and a J.D. from Harvard University School
of Law in 1969. He resides in Greenville, South Carolina, and is a partner in
the law firm of Wyche, Burgess, Freeman & Parham, P.A. He has been affiliated
with the Wyche law firm since July 1972. He has represented Evergreen and a
number of affiliated companies for over 10 years.
JOHN J. RYAN III - DIRECTOR
CHAIRMAN - EVERGREEN RESOURCES (U.K.) LTD.
Mr. Ryan was named a Director of Evergreen in May 1989. Since 1982 he has been
engaged in international tax and investment activities through his firm,
Corporate Investment Services. Mr. Ryan, a resident of Geneva, Switzerland, is
also Chairman of Evergreen Resources (U.K.) Ltd. Mr. Ryan serves as a director
of Vail Resorts, Inc., and Converse, Inc.
SCOTT D. SHEFFIELD - DIRECTOR
Mr. Sheffield was named a Director of Evergreen in September 1996. Since April
1985, Mr. Sheffield has served as President and Chief Executive Officer of
Pioneer Natural Resources Company, an energy company traded on the New York
Stock Exchange, and its predecessor company, Parker & Parsley Petroleum Company.
From 1979 to April 1985 he was employed by Parker & Parsley in various
engineering positions, serving from 1981-1985 as Vice President of Engineering.
Mr. Sheffield obtained a Bachelor of Science Degree in Petroleum Engineering
from the University of Texas in 1975. He resides in Dallas, Texas.
6
<PAGE>
BUSINESS EXPERIENCE OF KEY MANAGEMENT
KEVIN R. COLLINS - VICE PRESIDENT - FINANCE, CHIEF FINANCIAL OFFICER AND
TREASURER
Mr. Collins, age 41, joined Evergreen as Vice President and Treasurer in June
1995. He has over 13 years of public accounting experience and became a CPA in
1983. Mr. Collins received a B.S. in Business Administration and Accounting
from the University of Arizona in 1980, and before working with Evergreen, was
employed by BDO Seidman, LLP, where he was a senior manager. He resides in
Littleton, Colorado and devotes full time to Evergreen.
J. KEITHER MARTIN - SECRETARY
CONTROLLER - EOC
Mr. Martin, age 64, was named Secretary of Evergreen in June 1995. He has
served as Controller for EOC since 1984. During the previous sixteen years, Mr.
Martin was employed by Anderson Oil Company as Director of Financial
Information. He resides in Golden, Colorado and devotes full time to Evergreen.
IAN M. THOMSON - MANAGING DIRECTOR
EVERGREEN RESOURCES (U.K.) LTD.
Mr. Thomson, age 56, graduated in 1961 from Edinburgh University with a BSc
(Hons) degree in engineering followed by post-graduate studies at Imperial
College, London. He was a Board Director of the Laird Group PLC, a leading U.K.
industrial conglomerate, responsible for a mining equipment subsidiary in the
U.K., U.S. and other countries. He presently holds various non-executive
directorships in U.K. industrial and manufacturing companies. Mr. Thomson
resides in Oxford, England.
FLOYD TRUJILLO - GAS MARKETING MANAGER
Mr. Trujillo, age 41, joined EOC as Production Supervisor in 1988. From
1986-1988 he was employed by Consolidated Oil & Gas as a Production Analyst.
From 1983-1986 he was employed by Henderson Petroleum as Production Supervisor.
Mr. Trujillo resides in Denver and devotes full time to Evergreen.
MEETINGS OF DIRECTORS AND COMMITTEES
The Company's Board of Directors held six meetings, formally or by consent,
during the year ended December 31, 1997. No incumbent Director attended fewer
than 75% of such meetings.
The Audit Committee, presently composed of Alain Blanchard and Larry D.
Estridge, was formed on May 11, 1989. The Committee recommends to the Board the
firm to be employed as the Company's independent auditors and consults with and
reviews the reports of the Company's independent auditors and the Company's
internal financial staff. One meeting was held during the year ended December
31, 1997, and all members were present.
The Compensation Committee, formed in August 1990, is presently composed of Mark
S. Sexton and Larry D. Estridge. The Compensation Committee assists the Board
in establishing compensation for key Employees. Two meetings were held during
the year ended December 31, 1997, and both members were present at both
meetings.
The Board performs the functions of a nominating committee.
Each Officer holds office until his successor is duly elected and qualified or
until his death, resignation or removal, if earlier. Any Officer elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the Company will be served
thereby.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended December 31, 1997 and
March 31, 1996 and for the nine month fiscal period ended December 31, 1996, for
the Company's Chief Executive Officer, the Chief Financial Officer and one other
executive officer of the Company whose salary and bonus exceeded $100,000 during
1997.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS ALL OTHER COMPENSATION ($)
---------------------------------------------------------------------------------
RESTRICTED SECURITIES
FISCAL OTHER ANNUAL STOCK UNDERLYING DEFERRED
NAME AND YEAR/ SALARY BONUS COMPENSATION AWARDS WARRANTS ESOP COMPENSATION
PRINCIPAL POSITION PERIOD ($)(a) ($) ($) ($)(b) (#)(C) (d) (e)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark S. Sexton 12/31/97 118,300 -- -- 32,900 19,250 -- 20,000
President, CEO and a 12/31/96 60,000 -- -- 23,963 33,000 3,534 10,000
Director 3/31/96 86,750 -- -- 31,875 -- 3,983 --
- ---------------------------------------------------------------------------------------------------------------------
Dennis R. Carlton 12/31/97 118,905 -- -- 32,900 17,500 -- 20,000
Sr. Vice President and 12/31/96 60,000 -- -- 23,963 30,000 3,466 10,000
a Director 3/31/96 86,750 -- -- 31,875 -- 3,906 --
- ---------------------------------------------------------------------------------------------------------------------
Kevin R. Collins 12/31/97 86,673 -- -- 32,900 8,750 -- --
Vice President, CFO 12/31/96 53,333 -- -- 12,780 15,000 980 --
and Treasurer 3/31/96 49,600 -- -- 4,260 -- -- --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The amounts shown in this column include salaries and contributions which
have been deferred pursuant to the Company's 401(k) Plan. The Company's
executives received no annual bonuses for the years included in the table,
and for each of the named Executives, the aggregate amount of perquisites
and other personal benefits did not exceed 10% of the Executive's total
annual salary.
(b) The restricted shares were issued pursuant to the Company's Key Employee
Equity Plan. At December 31, 1997, Mr. Sexton, Mr. Carlton, and Mr.
Collins each held 10,000 shares of restricted stock worth $155,000 based on
the last trade reported by NASDAQ for the Company's common stock at
December 31, 1997, of $15.50 per share. No dividends will be paid on the
restricted stock shown.
(c) During fiscal year 1997, Messrs. Sexton, Carlton and Collins became vested
in warrants covering 19,250, 17,500 and 8,750 shares of the Company's
Common Stock, respectively. During the nine month period ended December
31, 1996, they became vested in warrants covering 33,000, 30,000 and 15,000
shares of the Company's Common Stock, respectively. These warrants were
awarded in 1996 under the Company's Key Employee Equity Plan. Vesting of
the warrants listed for 1997 was conditioned on the Company experiencing
20% growth in the nine month period ending December 31, 1996 in total
proved developed reserves, total production and cash flow as compared to
March 31, 1996. In December 1996, the Company experienced 86%, 110% and
over 200% growth over March 1996 in these three areas, respectively.
(d) Represents the dollar value of named executives' portions of contributions
to the Company's ESOP for the periods shown.
(e) Represents premiums and contributions made on a split dollar life insurance
policy of which the named executives or their estates are the beneficiaries
for the periods shown.
8
<PAGE>
WARRANT/OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named Executives
of the Company concerning the exercise of options/warrants during the last
fiscal year and unexercised warrants held as of the end of the fiscal year.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-The-Money
Shares Warrants/Options Warrants/Options
Acquired Value FY End (#) FY End ($)
on Exercise Realized Exercisable (E)/ Exercisable (E)/
Name (#) ($) Unexercisable (U) Unexercisable (U)
- ------------------- ----------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Dennis R. Carlton 15,450 113,944 77,500 (E) $658,750 (E)
Kevin R. Collins 0 0 23,750 (E) $201,875 (E)
Mark S. Sexton 10,652 119,835 82,250 (E) $699,125 (E)
</TABLE>
REPORT ON EXECUTIVE COMPENSATION
The goal of the Compensation Committee is to ensure that the Company employs
qualified, experienced Executives whose financial interest is aligned with that
of the Shareholders. The Committee considers general industry practice, tax
effects and other factors in structuring executive compensation.
Base salaries for each of the Company's Executives are determined by taking into
consideration performance, length of tenure with the Company and compensation by
Industry competitors for comparable positions. In order to determine comparable
salary levels paid within the Industry, the Committee reviews various surveys
and publicly filed information of its competitors.
Executive performance may be measured by several criteria that are considered
important to the Company's success. These criteria are not specifically
weighted in the determination of whether to award an annual bonus to an
Executive, since the relative importance of such criteria may change from year
to year and the relative responsibilities of each Executive in the achievement
of each of the objectives may differ. Examples of criteria considered are:
quantity of oil and gas reserves, production and cash flow added; finding cost
of oil and gas reserves; control of lifting costs; project development, and
overall financial management. Of particular importance in determining 1997
compensation were growth in proved reserves, production and cash flow. The
Company experienced 62%, 205% and 382% growth in 1997 in these indicators
respectively.
The Company also utilizes restricted stock, stock options and/or stock purchase
warrants as incentives for Executives. The size of such grants is dependent on
individual performance, level of responsibility and base salary, and the number
of restricted shares, options and/or warrants in relation to the total
outstanding shares of Common Stock and Common Stock equivalents.
During the fiscal year ended December 31, 1997, Mark S. Sexton, President and
CEO, received $118,300 of compensation for his services.
During the fiscal year ended December 31, 1997, the Committee approved
restricted stock grants to members of Management as additional compensation.
SUBMITTED BY THE COMPENSATION COMMITTEE
LARRY D. ESTRIDGE AND MARK S. SEXTON
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS,
INSIDER PARTICIPATION AND TRANSACTIONS WITH MANAGEMENT
During the last fiscal year, the Compensation Committee of the Board consisted
of Mark S. Sexton, President and CEO of the Company, and Larry D. Estridge, a
non-executive director of the Company. Mr. Estridge is a member of the law firm
of Wyche, Burgess, Freeman & Parham, P.A. of Greenville, South Carolina (the
"Firm"). The Firm provides legal services to the Company from time to time,
including services rendered in connection with the preparation of this Proxy
Statement. The Firm charges the Company for these services at customary rates.
No Director or Executive Officer of the Company, nominee for election as a
Director, security holder who is known to the Company to own of record or
beneficially more than 5% of any class of the Company's voting securities, or
any member of the immediate family of any of the foregoing persons, has had any
material transaction since the beginning of the Company's last fiscal year, or
has any currently proposed material transaction, to which the Company was or is
to be a party, in any amount except as described below.
COMPENSATION OF DIRECTORS
Directors of the Company receive fees of $100 per meeting for their attendance
at meetings of the Company's Board of Directors and have currently waived these
fees. All Directors are reimbursed for reasonable out-of-pocket expenses
incurred in connection with attending Board and Shareholder's meetings.
Directors who are not Officers or are not on salary with the Company
("Non-Executive Directors") receive $20,000 per year.
Non-Executive Directors may elect to receive either 50% or 100% of their $20,000
in Company Common Stock. Subject to shareholder approval, Non-Executive
Directors opting in 1997 to take all or part of their compensation in the form
of Common Stock will receive warrants for two shares of the Common Stock for
each share of Common Stock received as salary. Non-Executive Directors also
receive $2,500 per year per committee for participation on the Audit Committee
and/or the Compensation Committee. Subject to shareholder approval,
Non-Executive Directors may elect to receive warrants for 1,000 shares of Common
Stock in lieu of each $2,500 to which they are entitled. See "Proposal to Issue
Warrants for 79,990 Shares of the Company's Common Stock -- Recipients of the
Warrants and Basis of Awards."
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
To the Company's knowledge, during the fiscal period ended December 31, 1997,
the Company's Officers and Directors complied with all applicable Section 16(a)
filing requirements. This statement is based solely on a review of the copies
of such reports furnished to the Company by its Officers and Directors and their
written representations that such reports accurately reflect all reportable
transactions.
10
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PERFORMANCE GRAPH
The following performance graph reflects yearly percentage change in (i) the
Company's cumulative, five year total stockholder return on Common Stock as
compared with the cumulative, five year total return of (ii) the National
Securities Dealers Automated Quotation System ("NASDAQ") Stock Market Index of
U.S. Companies and (iii) a peer group index. The NASDAQ index and the peer
group index were supplied by the Center for Research in Security Prices (CRSP),
an independent third-party source, and is comprised of approximately 155
companies categorized under the Standard Industrial Classification Number 13
(Oil and Gas Extraction) applicable to the Company. All cumulative returns are
calculated on a fiscal year basis ending on December 31 of each year.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
- --------------------------------------------------------------------------------
LEGEND
<TABLE>
<CAPTION>
Symbol CRSP Total Returns Index for: 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ------ ---------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
_______ / / EVERGREEN RESOURCES, INC. 100.0 70.0 52.5 50.0 82.5 155.0
- -.-.-.- * Nasdaq Stock Market (US Companies) 100.0 114.8 112.2 158.7 195.2 239.5
....... TRIANGLE NASDAQ Stocks (SIC 1300-1399 US Companies) 100.0 128.5 120.0 148.4 243.0 263.2
Oil and Gas Extraction
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/31/92.
- --------------------------------------------------------------------------------
11
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THE RELEVANT FACTORS AMENDMENT
TO THE ARTICLES OF INCORPORATION
(ITEM 2 ON THE PROXY)
GENERAL
The Board proposes that the Company's Articles of Incorporation (the "Articles")
be amended to establish certain relevant factors to be considered by the Board
in evaluating certain extraordinary corporate transactions (the "Relevant
Factors Amendment"). The Relevant Factors Amendment provides that in evaluating
potential acquisitions of the Company by third parties, the Board can consider
various social, legal, and economic effects of the proposed transaction on the
employees, customers, suppliers and other constituencies of the Company and its
subsidiaries, on the communities and geographical areas in which the Company and
its subsidiaries operate or are located and on any of the businesses and
properties of the Company or any of its subsidiaries. The proposal would also
explicitly permit the Board to evaluate an acquirer's offer not only in relation
to the price offered, but also in relation to the current market price of the
Company's outstanding stock, and the Company's estimated future value as an
independent going concern.
The Relevant Factors Amendment would provide explicit authority for the Board to
take into account non-shareholder concerns in evaluating acquisition proposals
and would provide the Board with the authority to consider and negotiate on
behalf of these interests. The Board believes that consideration of factors
other than the price offered by an acquirer allows the Board to better evaluate
offers to acquire the Company. The Board believes that it is appropriate to
consider all of these factors in the acquisition context and believes that the
Company as an organization will benefit from this amendment. Accordingly, the
Board believes that adoption of the Relevant Factors Proposal is appropriate.
The text of the Relevant Factors Amendment is set forth in Exhibit A. The
current Articles and Bylaws of the Company do not contain any provisions that
deal specifically with such transactions or the Board's consideration of
acquisition proposals.
VOTE REQUIRED FOR APPROVAL
The Relevant Factors Amendment will be approved if a quorum is present at the
Meeting and the number of votes cast for the amendment is greater than the
number of votes cast against the amendment. Abstentions and broker non-votes
will have no effect on the vote to approve the amendment.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR THE RELEVANT FACTORS AMENDMENT.
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THE SUPERMAJORITY AMENDMENT
TO THE ARTICLES OF INCORPORATION
(ITEM 3 ON THE PROXY)
GENERAL
The Board proposes that the Company's Articles be amended to provide that the
approval of holders of 2/3 of the outstanding common stock of the Company and/or
the approval of 2/3 of the directors of the Company be necessary for certain
corporate transactions (the "Supermajority Amendment"). The Supermajority
Amendment provides that the affirmative vote of holders of not less than 2/3 of
the outstanding common stock of the Company entitled to vote for approval shall
be required if the Company:
(a) merges or consolidates with any other corporation;
(b) sells or exchanges all or a substantial part of its assets to or with
any other corporation, or
(c) issues or delivers any stock or other securities of its issue in
exchange or payment for any properties or assets of any other
corporation, or securities issued by any other corporation, or in a
merger of any subsidiary of this corporation (80% or more of the
common stock of which is held by this corporation) with or into any
other corporation.
This 2/3 supermajority vote requirement will not apply, however, if the Board
approves and recommends without condition a transaction of the type listed above
by the affirmative vote of not less than two-thirds of the directors. The 2/3
supermajority vote requirement also will not apply to any such transaction
solely between the Company and another corporation if the Company owns 50% or
more of the voting stock of the other corporation. The Supermajority Amendment
will permit the Board to condition its own approval of any such transaction upon
the approval of holders of 2/3 of the outstanding stock of the Company entitled
to vote on such transaction.
The Board believes that it is in the shareholders' best interest to require a
supermajority Board vote and/or a supermajority shareholder vote when the
Company proposes to engage in a transaction such as a merger, which is likely to
be very material to the Company and its operations. The Supermajority Amendment
is designed to encourage corporations that seek to acquire control of the
Company to propose terms which would be acceptable to a supermajority of
directors and/or shareholders, rather than a simple majority. The Board believes
that such a provision would improve the Board's negotiating leverage in any
"change of control" transaction and would help ensure that adequate
consideration is received by the Company shareholders in connection with any
such transaction. In addition, the Board believes that the Supermajority
Amendment would facilitate the Company's hiring and retention of competent
management personnel by increasing the likelihood of a stable employment
environment.
The text of the Supermajority Amendment is set forth in Exhibit A. Generally,
Colorado law provides that transactions of the type covered by the Supermajority
Amendment only require the approval of the holders of a majority of the shares
eligible to vote on such a transaction unless a company's articles or
shareholder-approved bylaws provide otherwise. Thus the Supermajority Amendment
will make it more difficult to obtain Company shareholder approval of mergers,
consolidations, the sale or exchange of Company assets, or the issuance and
delivery of its stock or securities. If the Supermajority Amendment is
approved, it can only be repealed by the vote of holders of 2/3 of the common
stock of the Company entitled to vote on amendments to the Company's Articles.
VOTE REQUIRED FOR APPROVAL
The approval of holders of 2/3 of the outstanding Common Stock is required to
approve the Supermajority Amendment. Abstentions and broker non-votes thus
count as votes against the Supermajority Amendment.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR THE SUPERMAJORITY AMENDMENT.
13
<PAGE>
THE BOARD ENLARGEMENT AMENDMENT
TO THE ARTICLES OF INCORPORATION
(ITEM 4 ON THE PROXY)
GENERAL
The Board proposes that the Company's Articles be amended to provide that the
approval of holders of 2/3 of the outstanding common stock of the Company be
necessary to increase the number of directors on the Board unless a majority of
the Continuing Directors (as defined below) also approves of the increase (the
"Board Enlargement Amendment"). Continuing directors ("Continuing Directors")
are directors who were members of the Board at the time of the proposed increase
in the number of directors and who continue to be directors when the Board
itself votes on the same proposal to increase the number of directors. If a
majority of Continuing Directors approves of a proposal to increase the number
of directors, then the increase may be approved by any means otherwise permitted
in the Company's Articles, the Company's Bylaws of applicable law.
The Board Enlargement Amendment prevents circumvention of the Supermajority
Amendment and other provisions of the Articles by means of a two-step process in
which (i) shareholders vote to increase the size of the Board and then (ii)
shareholders elect all of the new directors. The Board Enlargement Provision,
however, preserves flexibility for shareholders and the Board to more easily
increase the size of the Board for other purposes. The text of the Board
Enlargement Amendment is set forth in Exhibit A. The Board believes that the
Board Enlargement Amendment is in the shareholders' best interest for the same
reasons it believes the Supermajority Amendment is in the shareholders' best
interest.
The Articles currently provide for a Board of no less than 6 directors who serve
three-year terms. There are currently 7 directors. The Board is staggered such
that approximately 1/3 of the directors are elected each year. The Articles
provide that the Board may increase the number of directors by resolution
adopted by a majority of the entire Board. The Articles also provide that
newly-created directorships and other vacancies on the Board are filled by a
majority vote of the remaining directors (even if less than a quorum), but the
directors so chosen hold office for a term expiring at the next annual meeting
of shareholders at which a successor shall be elected and shall qualify.
Colorado law permits a Company's bylaws to set a maximum and minimum number of
directors, and it permits the shareholders or the board of directors to change
the number of directors within the set range. Colorado law also permits a
company's articles of incorporation to contain any provision permitted to be
included in the corporation's bylaws. Under Colorado law and the Articles and
Bylaws, holders of 10% of the shares entitled to vote on an amendment to the
Articles can propose an amendment to the Articles, and such amendment can be
approved by a majority of votes present at a meeting of shareholders if a quorum
is present. Both the Board and shareholders can amend the Bylaws. Shareholders
can approve of an amendment to the Bylaws by a majority of votes present at a
meeting of shareholders if a quorum is present.
The number of director nominees equal to the number of directorships to be
filled at a shareholder meeting and receiving the most votes cast for their
election are elected directors. See "Election of Directors."
VOTE REQUIRED FOR APPROVAL
The approval of holders of 2/3 of the outstanding Common Stock is required to
approve the Board Enlargement Amendment. Abstentions and broker non-votes thus
count as votes against the Board Enlargement Amendment.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR THE BOARD ENLARGEMENT AMENDMENT.
ANTITAKEOVER CONSIDERATIONS AND OTHER MATTERS
The Relevant Factors Amendment, the Supermajority Amendment and the Board
Enlargement Amendment have antitakeover implications and could be used to deter
a takeover of the Company which is opposed by the Company's Board of Directors
and make it more difficult to remove incumbent management. Thus these
amendments could be considered as serving interests of management which are not
identical to the interests of the Company's shareholders.
14
<PAGE>
If the Relevant Factors Amendment is approved, the Board would have the
authority to turn down an acquisition proposal if the Board believed that the
long-term plans of the acquiring company would have a strong negative impact on
the community or the Company's employees, even if that proposal reflected a fair
price for the Company. The Board would also have the explicit authority to
reject an acquisition proposal that it believes undervalues the Company compared
to a valuation of the Company suggested by current market prices, the price an
acquirer might pay in a freely negotiated transaction, or the value the Company
might attain if it remains independent. Particularly in hostile acquisitions,
these concerns are heightened. Furthermore, the Relevant Factors Proposal
permits the Board to take into account certain non-shareholder interests, even
if such interests conflict with the economic interests of shareholders in
maximizing the value of their shares. In addition, because certain members of
Company management are also Board members, the interest of each Board member may
not always be identical to that of the Company's shareholders.
The overall effect of the Supermajority Amendment and the Board Enlargement
Amendment would be to render more difficult the accomplishment of certain
mergers and other transactions, including transactions involving assumptions of
control by hostile third parties. Accordingly, if the Supermajority Amendment
and the Board Enlargement Amendment are approved, Company shareholders could be
deprived (in certain instances) of temporary opportunities to sell their shares
at higher market prices. Moreover, by possibly deterring proxy contests, merger
proposals or acquisitions of substantial blocks of the Common Stock, the
Supermajority Amendment and the Board Enlargement Amendment might have the
incidental effect of inhibiting certain changes in incumbent management, some or
all of whom may be replaced in the course of a change in control. Because
certain members of Company management are also Board members, the interest of
each Board member may not always be identical to that of the Company's
shareholders. The Supermajority Amendment and the Board Enlargement Amendment
could give management or a minority of shareholders the power to veto a
transaction desired by a majority of shareholders. Officers and directors of
the Company, as a group, hold 9.8% of the Company's Common Stock. See
"Securities Ownership of Management." Beneficial owners of 5% or more of the
Company's Common Stock collectively own 46.4% of the Company's Common Stock.
See "Securities Ownership of Certain Beneficial Owners."
The Articles already contain some provisions that have antitakeover effects that
could deter a takeover attempt opposed by Company management. The Articles do
not permit shareholders to cumulate their votes in elections of directors; they
provide for a "staggered" Board in which approximately one third of the
directors are elected each year for three year terms; and they only permit
shareholders to remove directors for cause by a vote of holders of 80% of the
outstanding shares entitled to vote for directors. These provisions could deter
a takeover that was opposed by management by preventing an acquirer from
obtaining immediate control of the Board if it were to acquire a majority of the
shares of the Company.
On July 7, 1997, the Board adopted a shareholder rights plan (the "Rights
Plan"), pursuant to which stock purchase rights (the "Rights") were distributed
as a dividend to holders of Common Stock at a rate of one Right for each share
of Common Stock held of record as of July 22, 1997. The Rights Plan provides,
among other things, that the Rights become exercisable only if a "triggering
event" occurs. A triggering event occurs if (i) a person or group (except for
Existing 20% Shareholders as defined below) acquires or commences a tender offer
for 20% or more of the Common Stock or (ii) an Existing 20% Shareholder acquires
Common Stock resulting in, or commences a tender offer which would result in,
such person's ownership of 30% or more of the Common Stock (each an "Acquiring
Person"). Upon the occurrence of a triggering event, the Right then represents
the Right to receive in exchange for the exercise price of $42.50 per share,
Common Stock having a value worth twice the exercise price. Alternatively, the
Board of Directors, in lieu of the payment of the exercise price, could exchange
one share of Common Stock for each outstanding Right (except Rights held by the
Acquiring Person). An Existing 20% Shareholder is a person or group holding 20%
or more of the Common Stock prior to the adoption of the Rights Plan. Also, in
the event that the Company is involved in a merger or other business combination
at any time after a triggering event, the Rights will be modified so as to
entitle a holder to buy a number of shares of Common Stock of the acquiring
entity having a market value of twice the exercise price of each Right.
Until the Rights become exercisable, they attach to and trade with the Common
Stock. The Rights will expire July 22, 2007. The Rights may be redeemed by the
Company at a price of $0.001 per Right if the redemption is approved by the
members of the Board who were members of the Board prior any event triggering
the Rights.
The Rights Plan is designed to enhance the Board's ability to prevent an
acquirer from depriving shareholders of the long-term value of their investment
and to protect shareholders against attempts to acquire the Company by means of
15
<PAGE>
unfair or abusive takeover tactics. However, the existence of the Rights Plan
may impede a takeover of the Company not supported by the Board of Directors,
including a takeover which may be desired by a majority of the Company's
shareholders or involving a premium over the prevailing stock price.
Company management is not aware of any specific effort to accumulate the
Company's securities or to obtain control of the Company by means of a merger,
tender offer, solicitation in opposition to management or otherwise.
16
<PAGE>
THE LIABILITY LIMITATION AMENDMENT
TO THE ARTICLES OF INCORPORATION
(ITEM 5 OF THE PROXY)
GENERAL
The Board proposes that the Company's Articles be amended to limit the personal
liability of officers and directors of the Company in certain circumstances (the
"Liability Limitation Amendment"). The Liability Limitation Amendment repeals
and replaces a similar existing but less-extensive provision of the Articles.
It provides that no director shall be personally liable to the Company or to its
shareholders for monetary damages for breach of fiduciary duty as a director
occurring on or after the date on which the amendment becomes effective so long
as such breach does not involve a breach of the director's duty of loyalty to
the Company or to its shareholders, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, acts specified in
Section 7-108-403 of the Colorado Revised Statutes, or any successor provision
thereof (pertaining to unlawful distributions by the Company), or any
transaction from which the director directly or indirectly derived an improper
personal benefit.
The Liability Limitation Amendment also provides that no director or officer
will be personally liable for any injury to person or property arising out of a
tort committed by an employee of the Company unless such director or officer was
personally involved in the situation giving rise to the litigation or unless
such director or officer committed a criminal offense in connection with such
situation. The protection afforded by the Liability Limitation Amendment will
not restrict other common-law protections and rights that a director or officer
may have.
The text of the Liability Limitation Amendment is set forth in Exhibit A. The
Liability Limitation Amendment contains provisions permitted to be included in
the Articles by Section 7-108-402 of the Colorado Revised Statutes. The
Articles currently contain a provision similarly limiting the liability of
directors for breach of fiduciary duty that was based on an older version of
Colorado law, but the current provision does not explicitly limit the personal
liability of officers or directors for torts committed by the Company's
employees. Thus the Liability Limitation Amendment updates and extends the
limitation of liability of officers and directors of the Company to the extent
permitted by current Colorado law.
VOTE REQUIRED FOR APPROVAL
The Liability Limitation Amendment will be approved if a quorum is present at
the Meeting and the number of votes cast for the amendment is greater than the
number of votes cast against the amendment. Abstentions and broker non-votes
will have no effect on the vote to approve the amendment.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR THE LIABILITY LIMITATION AMENDMENT.
17
<PAGE>
PROPOSAL TO APPROVE THE COMPANY'S
INITIAL STOCK OPTION PLAN
(ITEM 6 ON THE PROXY)
The Board of Directors recommends that the shareholders of the Company
approve adoption of the Evergreen Resources, Inc. Initial Stock Option Plan (the
"Plan"). Under the Plan, the Compensation Committee of the Board (the
"Committee") would have the discretion to grant options for up to an aggregate
maximum of 500,000 shares of the Company's Common Stock. Holders of shares of
the Common Stock do not have preemptive rights. This maximum number of shares
may be appropriately adjusted to reflect any change in capitalization of the
Company resulting from a stock dividend, recapitalization, merger,
reorganization, consolidation, stock split or any other similar change in the
characteristics of the shares of Common Stock of the Company. The Board
recommends approval of the Plan because it will provide the Company's key
personnel who participate in the Plan with an incentive to maximize shareholder
value by aligning the compensation of the Company's key executives with the
interests of the Company's shareholders. Proceeds received by the Company from
the sale of shares pursuant to options granted under the Plan will constitute
general funds of the Company. Because shares of the Company's Common Stock will
be issued upon exercise of options granted pursuant to the Plan, the
proportional ownership of the Company by existing shareholders will be reduced.
The Plan is a plan separate from the Company's Key Employee Equity Plan, and
options issued under the Plan should not be counted in determining the number of
warrants or options issued under the Company's Key Employee Equity Plan.
PURPOSE OF THE PLAN
The purpose of the Plan is to serve as a performance incentive and to encourage
the ownership of Company Common Stock by officers and other key employees of the
Company so that the person to whom the option is granted may acquire a
proprietary interest in the success of the Company, and to encourage such person
to remain in the employ of the Company.
ELIGIBLE PARTICIPANTS IN THE PLAN
All employees of the Company (including salaried officers or employees who are
members of the Board, but excluding directors who are not officers or employees
of the Company) will be eligible to receive awards under the Plan. Subject to
the provisions of the Plan, the Committee will from time to time select from
such eligible employees those to whom awards will be granted and determine the
size of the awards. No officer or employee of the Company will have any right
to be granted an award under the Plan, as all awards will be granted in the sole
and absolute discretion of the Committee. The Company expects that awards under
the Plan will be made to approximately 20 employees of the Company who are
either executive officers of the Company or key employees who have strongly
contributed to the Company's growth or who are expected to contribute to
continued growth in the future.
ADMINISTRATION OF THE PLAN
The Plan will be administered by the Committee. All questions of interpretation
and application of the Plan, or of the terms and conditions pursuant to which
awards are granted, exercised, or forfeited under the provisions of the Plan,
will be subject to the determination of the Committee. Such determination will
be final and binding upon all parties affected thereby. It is contemplated that
awards granted under the Plan will be recommended by the management of the
Company or the Board to the Committee, and that the Committee will determine
whether to accept such recommendations.
AWARDS UNDER THE PLAN
The Committee may, from time to time, grant awards of options to one or more
eligible employees in its discretion, subject to the limitation that the
aggregate number of shares of Common Stock subject to awards under the Plan may
not exceed 500,000 shares of Common Stock (as adjusted to account for the
effects of stock splits, combinations of shares, share exchanges and other
changes in corporate structure as provided in the Plan). To the extent that an
award lapses or the rights of the participant to whom the award was granted
terminate, or to the extent that the award is canceled by mutual agreement of
the Committee and the participant (which cancellation opportunities may be
offered by the Committee to participants from time to time), any shares of
Common Stock subject to such award will again be available for the grant of an
award under the Plan. Shares of Common Stock ceasing to be subject to an award
because of the exercise of an option will no longer be available for the grant
of an award under the Plan.
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<PAGE>
In determining the size of awards, the Committee may take into account
recommendations by the Board or the Company's management, a participant's
responsibility level, performance, potential, and cash compensation level, the
fair market value of the Common Stock at the time of awards, and such other
considerations as it deems appropriate.
An award will be granted to participants in the form of an option to purchase
Common Stock. The Committee may choose to grant a participant who is an eligible
employee either an incentive stock option (an "Incentive Stock Option"), within
the meaning of Section 422 of the Internal Revenue Code (the "Code"), or a
nonqualified stock option (a "Nonqualified Stock Option"), which is an option
not qualifying as an Incentive Stock Option, or both, subject to the limitations
contained in the Plan. If the Committee grants an Incentive Stock Option, the
aggregate fair market value (determined as of the date the option is granted) of
any such option plus any incentive stock options granted under any other plans
of the Company which will be first exercisable by any one participant during any
one calendar year will not exceed $100,000, or such other dollar limitation as
may be provided in the Code.
TERMS AND CONDITIONS OF STOCK OPTIONS GRANTED UNDER THE PLAN
Awards will be evidenced by Stock Option Agreements (as defined in the Plan and
referred to herein as "Agreements") in such form as the Committee will, from
time to time, approve. Such Agreements, which need not be identical, will
comply with and be subject to the following terms and conditions:
MEDIUM OF PAYMENT. Upon exercise of the option, the option price will be
payable either (i) in United States dollars in cash or by certified check, bank
draft, or money order payable to the order of the Company, or (ii) in the
discretion of the Committee, through the delivery of shares of Common Stock with
a fair market value equal to the total option price, or (iii) by a combination
of the methods described in (i) and (ii); provided, however, that in the case of
an option price which is paid by an Insider (as defined in the Plan) in whole or
in part by the delivery of shares of Common Stock, the Common Stock acquired in
the exercise of such option will not be disposed of by the Insider for a six (6)
month period commencing on the date on which the Insider last purchased Common
Stock (including the Common Stock tendered in connection with such exercise).
NUMBER OF SHARES. The Agreements will state the total number of shares to which
it pertains.
OPTION PRICE. With respect to a Nonqualified Stock Option, the option price
will be not less than the fair market value of such shares on the date of the
granting of the option. With respect to an Incentive Stock Option, the option
price will be not less than the fair market value of such shares on the date of
the granting of the option (or one hundred ten percent (110%) of such amount if
the option is granted to an individual owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company). On April 3, 1998, the closing price of the Common Stock was $17.67.
TERM OF OPTIONS. Each Nonqualified Stock Option and Incentive Stock Option
granted under the Plan will expire not more than ten (10) years from the date
the option is granted, except that each Incentive Stock Option granted under the
Plan to an individual owning stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company will expire
not more than five (5) years from the date the option is granted.
DATE OF EXERCISE. Subject to the preceding paragraph, any option which becomes
a vested option (defined as, at any date, any portion of an option which a
participant is then entitled to exercise pursuant to the terms of the Plan and
as applicable in the Agreement, hereinafter, a "Vested Option") may be exercised
in whole or in part at any time thereafter. Each option awarded under the Plan
will become exercisable as a Vested Option, as follows:
(i) The aggregate number of shares of Common Stock subject to an award
will be divided into four (4) equal installments. The first installment
will become a Vested Option one (1) year from the date of such award, the
second installment will become a Vested Option two (2) years from the date
of such award, the third installment will become a Vested Option three (3)
years from the date of such award, and the fourth installment will become a
Vested Option four (4) years from the date of such award.
(ii) Except as otherwise provided under the Plan, the Committee may in its
discretion accelerate the time at which an option granted under the Plan
may be exercised; provided, however, that in the event of any such
acceleration with respect to an option held by an Insider, at least six (6)
months will elapse from the date of
19
<PAGE>
such acceleration to the later of the date of exercise of the option or
the disposition of the Common Stock acquired by exercising the option.
(iii) Notwithstanding the preceding, all options which are awarded to a
participant under the Plan will become Vested Options upon the
participant's retirement, disability, or death.
FORFEITURE OR EXERCISE OF OPTION. If a participant ceases employment with the
Company, each option held by him or her which is not a Vested Option will
terminate. If a participant terminates employment with the Company or a
subsidiary prior to exercise of the participant's Vested Option, such Vested
Option will be exercised, as follows:
(i) Termination. In the event of a participant's termination, the
participant will have the right to exercise his or her Vested Option within
three (3) months (or such shorter period as the Code or the terms of the
particular Agreement may require) of the participant's termination date.
(ii) Retirement. In the event of a participant's retirement, the
participant will have the right to exercise his or her Vested Option within
three (3) months (or such shorter period as the Code or the terms of the
particular Agreement may require) of the participant's retirement date.
(iii) Disability. Upon the disability of a participant, the participant's
Vested Option will be exercisable within twelve (12) months (or such
shorter period as the Code or the terms of the particular Agreement may
require) of the participant's date of disability.
(iv) Death. If the participant dies while in the employment of the
Company or within the period of time after retirement during which the
participant would have been entitled to exercise his or her Vested Option
rights, the participant's estate, personal representative, or beneficiary
(as applicable) will have the right to exercise such Vested Option within
one (1) year from the date of the participant's death (or such shorter
period as the Code or the terms of the particular Agreement may require).
AGREEMENT AS TO SALE OF SECURITIES. If, at the time of the exercise of any
option, in the opinion of counsel for the Company, it is necessary or desirable,
in order to comply with any applicable laws or regulations relating to the sale
of securities, that the participant exercising the option will agree to purchase
the shares that are subject to the option for investment only and not with any
present intention to resell the same and that the participant will dispose of
such shares only in compliance with such laws and regulations, the participant
will, upon the request of the Company, execute and deliver to the Company an
agreement to such effect.
MINIMUM NUMBER OF SHARES. The minimum number of shares of Common Stock with
respect to which an option may be exercised at any one time will be ten (10)
shares, unless the number is the total number at the time available for exercise
under the award.
REQUIRED AMENDMENTS. Each award will be subject to any provision necessary to
assure compliance with federal and state securities laws.
LIMITATION OF PARTICIPANT RIGHTS. A participant will not be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to an option unless and until the option will have been
exercised pursuant to the terms thereof, the Company will have issued and
delivered the shares to the participant, and the participant's name will have
been entered as a stockholder of record on the books of the Company.
Thereafter, the participant will have full voting, dividend, and other ownership
rights with respect to such shares of stock.
NONTRANSFERABILITY OF OPTIONS
Except by the laws of descent and distribution, no benefit provided under the
Plan will be subject to alienation, assignment, or transfer by a participant (or
by any person entitled to such benefit pursuant to the terms of the Plan), nor
will it be subject to attachment or other legal process of whatever nature, and
any attempted alienation, assignment, attachment, or transfer will be void and
of no effect whatsoever and, upon any such attempt, the benefit will terminate
and be of no force or effect. During a participant's lifetime, options granted
to the participant will be exercisable only by the participant. Shares of
Common Stock will be delivered only into the hands of the participant or death
beneficiary entitled to receive the same or into the hands of the participant's
authorized legal representative.
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<PAGE>
DURATION OF THE PLAN; TERMINATION AND AMENDMENT
The Plan will be effective as of May 27, 1997 (the "Effective Date") if approved
by shareholders at the Meeting. Awards may be made under the Plan for a period
of ten (10) years after that date. The Plan will terminate on the tenth (10th)
anniversary of the Effective Date of the Plan. The Board may at any time and
from time to time alter, amend, suspend, or terminate the Plan in whole or in
part, except (i) without such stockholder approval as may be required by law and
the Company's by-laws, no such action may be taken which changes the minimum
option price, increases the maximum term of options, materially increases the
benefits accruing to participants under the Plan, materially increases the
number of securities which may be issued pursuant to the Plan (except as
provided below), extends the period for granting awards hereunder, or materially
modifies the requirements as to eligibility for participation under the Plan,
and (ii) without the consent of the participant to whom any award will
theretofore have been granted, no such action may be taken which adversely
affects the rights of such participant concerning such award, except as such
termination or amendment of the Plan is required by statute, or rules and
regulations promulgated thereunder, or as otherwise permitted under the Plan.
If the Plan is terminated as described in this paragraph, it will continue in
effect until all matters relating to the payment of awards and the
administration of the Plan have been settled.
GRANTS IN SUBSTITUTION FOR OPTIONS GRANTED BY OTHER CORPORATIONS
Awards may be granted under the Plan from time to time in substitution for
similar awards held by employees of corporations who become or are about to
become employees of the Company as the result of a merger or consolidation of
the employing corporation with the Company, or the acquisition by the Company of
the assets of the employing corporation, or the acquisition by the Company of
fifty percent (50%) or more of the stock of the employing corporation causing it
to become a subsidiary of the Company. Subject to the procurement of the
approval of the stockholders of the Company as may be required for the Plan to
satisfy the requirements of Rule 16b-3 under the Securities Exchange Act of
1934, as amended, the terms and conditions of the substitute awards so granted
may vary from the terms and conditions set forth in the Plan to such extent as
the Committee at the time of the grant may deem appropriate to conform, in whole
or in part, to the provisions of the options in substitution for which they are
granted.
CHANGES IN CAPITAL STRUCTURE; COMPANY SUCCESSORS
If the outstanding shares of the Company's Common Stock as a whole are changed
into a different number or kind of shares of securities of the Company through
stock dividend, stock split, reorganization or the like, an appropriate and
proportionate adjustment will be made in the number and kinds of shares subject
to the Plan and in the terms of unexercised options granted prior to such
change. Upon dissolution or liquidation of the Company or upon occurrence of a
transaction in which the Corporation is not the surviving corporation such as a
merger, the Plan and options issued thereunder will terminate unless provision
is made in the transaction for the surviving corporation to assume the options
or issue substitute options so as to preserve substantially the rights and
benefits of participants under the Plan. Successor companies in transactions
where the Company is not the surviving corporation are not required by the terms
of the Plan to assume the options or issue substitute options. If the Plan and
options issued thereunder are so terminated without provision for substitute
options, all outstanding options will be exercisable in full for at least thirty
days prior to the termination date whether or not otherwise exercisable during
such period.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF AWARDS UNDER THE PLAN
Generally, a participant is not taxed upon either the grant or exercise of an
Incentive Stock Option. However, for purposes of determining an individual's
alternative minimum tax, the difference between the exercise price of an
Incentive Stock Option and the market price at the date of exercise gives rise
to an adjustment of alternative minimum tax income in the year of exercise. To
qualify as an Incentive Stock Option, the stock acquired by a participant must
be held for at least two years after the option is granted and one year after it
is exercised. The Company does not receive a tax deduction for the value of the
option at date of grant or date of exercise of the option or at any other time
unless the participant disposes of the stock before the holding periods expire.
In the event of an early disposition of an Incentive Stock Option, the
participant recognizes ordinary income in the taxable year of the disposition
equal to the difference between the option price and the market value at date of
exercise, and the Company receives a tax deduction in an equal amount. If the
participant holds the stock for the period of time required for Incentive Stock
Option qualification, then he will be taxed only on the gain realized upon
21
<PAGE>
the disposition of the stock. His gain will be equal to the difference between
the sales price of the stock and its option price. (An alternative minimum tax
credit will be available to offset this tax inclusion if the optionee paid
alternative minimum tax upon his exercise of the Incentive Stock Option.) There
is no requirement that Incentive Stock Options must be exercised in the order
granted. For all options intended to be Incentive Stock Options to receive
Incentive Stock Option treatment, the fair market value of stock subject to
Incentive Stock Options that are exercisable by an individual for the first time
in any future year cannot exceed $100,000, determined in accordance with fair
market value at the date of grant. If an Incentive Stock Option is exercised
after the death of the employee by the estate of the decedent, or by a person
who acquired the right to exercise such option by bequest or inheritance or by
reason of the death of the decedent, none of the time limits described above in
this paragraph will apply.
If options granted under the Plan do not qualify as Incentive Stock Options,
they will be treated as Nonqualified Stock Options. Ordinarily Nonqualified
Stock Options do not result in tax liability for Federal income tax purposes to
the participant upon grant. Generally, upon exercise of a Nonqualified Stock
Option, the participant recognizes ordinary income for Federal income tax
purposes equal to the difference between the fair market value of the stock on
the day of exercise and the exercise price. Generally, the Company receives a
tax deduction for the amount the participant reports as ordinary income by
reason of the exercise if the amount of ordinary income the participant should
recognize is included in the participant's income reported on a timely Form W-2
or 1099. Upon a subsequent sale or disposition of the stock received from
exercise of an option, the holder is generally taxable on any excess of the
selling price over its fair market value at the date of exercise.
The Company will have the right to deduct from all awards paid any federal,
state, local, or employment taxes which it deems are required by law to be
withheld with respect to such payments. The participant receiving Common Stock
pursuant to the exercise of an option may be required to pay to the Company an
amount required to be withheld with respect to such Common Stock. At the
request of a participant, or as required by law, such sums as may be required
for the payment of any estimated or accrued income tax liability may be withheld
and paid over to the governmental entity entitled to receive the same.
INTEREST OF CERTAIN PERSONS IN THE PLAN
Each of the executive officers named in this Proxy Statement, as a potential
participant in the Plan, could be deemed to have an interest in approval of the
Plan.
PLAN BENEFITS
The following table provides certain information with respect to options granted
under the Plan, subject to shareholder approval at the Meeting:
1998 GRANTS UNDER THE
EVERGREEN RESOURCES, INC.
INITIAL STOCK OPTION PLAN
<TABLE>
<CAPTION>
Number of Securities
Underlying Options
Name and Position Dollar Value ($)(a) Granted
------------------------------------- ------------------- --------------------
<S> <C> <C>
Mark S. Sexton, President, Chief $234,375 50,000
Executive Officer & Director
Dennis R. Carlton, Senior Vice 234,375 50,000
President & Director
Kevin R. Collins, Vice President, 234,375 50,000
Chief Financial Officer & Treasurer
Executive Group 703,125 150,000
Non-Executive Director Group -- --
Non-Executive Officer Employee Group 171,094 36,500
</TABLE>
(a) The dollar value of the options granted was calculated by multiplying the
number of options times the difference between the fair market value of the
common stock on April 3, 1998 ($17.67) less the exercise price.
22
<PAGE>
VOTE REQUIRED FOR APPROVAL
The Plan will be approved if a quorum is present at the Meeting and a majority
of votes present are cast for approval of the Plan. Abstentions and broker
non-votes will have the same effect as a vote against the Plan. If the Plan is
not approved by the requisite shareholder vote described above, it shall not
become effective. By approving the Plan, shareholders will be approving, among
other things, the performance measure or measures, the class of employees
eligible to participate in the Plan and the limits on various compensation
awards contained therein. Shareholders have no dissenters' rights or rights of
appraisal with respect to the vote to approve the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE APPROVAL OF THE EVERGREEN RESOURCES, INC.
23
<PAGE>
INITIAL STOCK OPTION PLAN.
PROPOSAL TO ISSUE WARRANTS FOR 79,990 SHARES
OF THE COMPANY'S COMMON STOCK
(ITEM 7 ON THE PROXY)
The Board proposes that shareholders approve the issue of warrants for 79,990
shares of the Company's Common Stock (the "Warrants") to be issued as described
below as part of the Company's warrant program (the "Warrant Program") under its
Key Employee Equity Plan.
GENERAL
On August 12, 1992, the Company's shareholders ratified the Key Employee Equity
Plan, which is administered by the Compensation Committee and under which key
employees designated by the Board may receive stock bonuses, stock purchase
warrants or stock options in order to bring their total compensation in line
with normal industry compensation levels. On September 6, 1996, the Board
adopted the Warrant Program as part of the Key Employee Equity Plan, authorizing
the issue of warrants for up to 415,000 shares of Common Stock to certain key
employees. Under the Warrant Program, the following persons could receive, over
a four-year period, warrants for up to the number of shares of Common Stock
indicated: Mark S. Sexton -- 110,000, Dennis R. Carlton -- 100,000, James S.
Williams -- 75,000 and Kevin R. Collins 50,000. In addition 79,990 warrants
constituting the Warrants were set aside in a pool to be allocated at a future
date. The Board now proposes that shareholders approve the issue of the
Warrants as described below. The awards described below were allocated by the
Compensation Committee on January 3, 1998.
Holders of shares of the Common Stock underlying the Warrants do not have
preemptive rights. Because shares of the Company's Common Stock will be issued
upon exercise of the Warrants, the proportional ownership of the Company by
existing shareholders will be reduced. Proceeds received by the Company from
the exercise of the Warrants will be general funds of the Company. If all of
the Warrants are exercised, the Company will receive gross proceeds of $559,300.
There is no public market for the Warrants.
RECIPIENTS OF THE WARRANTS AND BASIS OF AWARDS
Recipients of the Warrants will be the officers and directors of the Company
listed in the table below:
24
<PAGE>
1998 WARRANT RECIPIENTS UNDER
EVERGREEN RESOURCES, INC. WARRANT PROGRAM
AS PART OF ITS KEY EMPLOYEE EQUITY PLAN
<TABLE>
<CAPTION>
Number of Securities
Underlying Warrants
Name and Position Dollar Value ($)(a) Granted
- ----------------------------------- ------------------- --------------------
<S> <C> <C>
Mark S. Sexton, President, Chief $149,625 14,000
Executive Officer & Director
Dennis R. Carlton, Senior Vice 149,625 14,000
President & Director
Kevin R. Collins, Vice President, 149,625 14,000
Chief Financial Officer & Treasurer
John J. Ryan, III, Director 32,918 3,080
Scott D. Sheffield, Director 246,668 23,080
Larry D. Estridge, Director 37,834 3,540
Alain Blanchard, Director 27,146 2,540
James S. Williams 61,543 5,750
Executive Group 448,875 42,000
Non-Executive Director Group 406,018 37,990
Non-Executive Officer Employee Group -- --
-------- ------
TOTAL 854,893 79,990
</TABLE>
(a) The dollar value of the options granted was calculated by multiplying the
number of options times the difference between the fair market value of the
common stock on April 3, 1998 ($17.67) less the exercise price.
The purpose of the Warrants is to reward directors and key personnel for past
performance and to give them an incentive to remain with the Company. The
Warrants may be issued only if the Company experiences at least 20% growth in
the fiscal year of issue over the preceding fiscal year in total proved
developed reserves, total production and cash flow. In fiscal year 1997, the
Company experienced 62% growth in proved developed reserves, 205% growth in
total production and 382% growth in cash flow compared to 1996.
Under the Warrant Program, Mr. Sexton, Mr. Carlton and Mr. Collins received
warrants in 1997 because the Company exceeded 20% growth targets in total proved
developed reserves, total production and cash flow. See, "Other Information --
Key Employee Equity Plan." Because Company performance greatly exceeded the 20%
growth targets, the Board proposes to issue Warrants for an additional 14,000
shares of Common Stock to each of Mr. Sexton, Mr. Carlton and Mr. Collins.
Of the portion of the Warrants issued to non-executive directors, 9,240 will be
issued as an inducement to such directors to take all or part of their
non-executive directors' compensation in the form of Common Stock.
Non-executive directors receive base compensation of $20,000 per year. They can
elect to receive either 50% or 100% of this amount in Company Common Stock. As
a further incentive to take Common Stock, non-executive directors will receive
Warrants for two shares of the Common Stock for each share of the Common Stock
taken as base compensation. Mr. Ryan and Mr. Sheffield elected to receive 100%
of their base 1997 compensation as Common Stock, so they will receive 1,540
shares each plus Warrants for 3,080 shares each. Mr. Blanchard and Mr. Estridge
elected to receive 50% of their base compensation as Common Stock, so they will
receive 770 shares each, plus warrants for 1,540 shares each.
Mr. Sheffield joined the Board following the initial allocation of Warrants
under the Warrant Program, so upon approval of the grant of the Warrants, he
will immediately receive Warrants for 20,000 shares of Common Stock to make his
1996 compensation consistent with that of other non-executive directors.
Starting in fiscal year 1997, non-executive directors are compensated $2,500 per
year for their participation on the Audit Committee and the Compensation
Committee. They may elect to receive warrants for 1,000 shares of Common Stock
in lieu of the $2,500 per committee membership. Mr. Williams and Mr.
Blanchard each elected to
25
<PAGE>
receive Warrants for 1,000 shares for their work on the Audit Committee, and Mr.
Estridge elected to receive Warrants for 2,000 shares for his work on the Audit
and Compensation Committees.
The Compensation Committee will grant Warrants for 4,750 shares of Common Stock
to Mr. Williams as additional compensation for his work for the Company in 1997
in facilitating negotiations with other companies.
TERMS AND CONDITIONS OF THE WARRANTS
The exercise price for all of the Warrants will be $7.00 per share of Common
Stock. As of April 3, 1998, the closing price of the Company's Common Stock was
$17.67. Each of the Warrants must be exercised within 5 years of its date of
issue or else it expires. Recipients must be employees or directors of the
Company at the time the Warrants are granted. To exercise the Warrants,
recipients must pay the exercise price of the Warrants to be exercised to the
Company in cash or Evergreen common stock at current market value. Recipients
may exercise all or a portion of the Warrants at any time prior to their
expiration, and a partial exercise will in no way impair the ability of the
recipient to later exercise the remaining Warrants in his possession.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Warrants will generally be treated as non-qualified stock options
("Nonqualified Stock Options"). Ordinarily Nonqualified Stock Options do not
result in tax liability for Federal income tax purposes to the participant upon
grant. Generally, upon exercise of a Nonqualified Stock Option, the participant
recognizes ordinary income for Federal income tax purposes equal to the
difference between the fair market value of the stock on the day of exercise and
the exercise price. Generally, the Company receives a tax deduction for the
amount the participant reports as ordinary income by reason of the exercise if
the amount of ordinary income the participant should recognize is included in
the participant's income reported on a timely Form W-2 or 1099. Upon a
subsequent sale or disposition of the stock received from exercise of a Warrant,
the holder is generally taxable on any excess of the selling price over its fair
market value at the date of exercise.
INTEREST OF CERTAIN PERSONS IN THE ISSUE OF THE WARRANTS
Each of the executive officers and directors receiving a portion of the Warrants
could be deemed to have an interest in approval of the issue of the Warrants.
VOTE REQUIRED FOR APPROVAL
Issue of the Warrants will be approved if a quorum is present at the Meeting and
a majority of votes present are cast for approval of the issue of the Warrants.
Abstentions and broker non-votes will have the same effect as a vote against the
issue of the Warrants. By approving the issue of the Warrants, shareholders will
be approving, among other things, the performance measure or measures and the
class of persons eligible to receive Warrants. Shareholders have no dissenters'
rights or rights of appraisal with respect to the vote to approve the issue of
the Warrants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE PROPOSAL TO ISSUE WARRANTS FOR 79,990 SHARES
OF THE COMPANY'S COMMON STOCK.
26
<PAGE>
INDEPENDENT AUDITORS
BDO Seidman, LLP, currently serves the Company as independent auditors.
Representatives of BDO Seidman, LLP, will be present at the Annual Meeting, will
have an opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions from Shareholders.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company was not aware
of any other matter to be presented at the Meeting other than as set forth
herein. However, if any other matters are properly brought before the Meeting,
the shares represented by valid proxies will be voted with respect to such
matters in accordance with the judgment of the persons voting them.
FINANCIAL INFORMATION
The Company's 1997 Annual Report is enclosed. The Company will provide without
charge to any shareholder of record as of April 10, 1998 who requests in
writing, a copy of the Company's 1997 Annual Report or the 1997 Annual Report on
Form 10-K (without exhibits), including financial statements and financial
statement schedules, filed with the Securities and Exchange Commission. Any
such request should be directed to Evergreen Resources, Inc. P.O. Box 660,
Denver, CO 80201-0660, Attention: J. Keither Martin, Secretary.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Any proposal by a Shareholder to be presented at the Company's 1999 Annual
Meeting must be received at the offices of the Company, P.O. Box 660, Denver,
Colorado 80201-0660, no later than January 10, 1999.
J. KEITHER MARTIN
SECRETARY
Denver, Colorado
April 10, 1998
27
<PAGE>
EXHIBIT A
Text of Proposed Amendments
I. THE LIABILITY LIMITATION AMENDMENT
Article XIII of Evergreen Resources, Inc.'s amended Articles of Incorporation
titled "Limitation of Liability of Directors to Corporations and Shareholders"
shall be repealed and replaced in its entirety by the following provision:
ARTICLE XIII
LIMITATION OF CERTAIN LIABILITIES OF DIRECTORS AND OFFICERS
13.1 No director shall be personally liable to the corporation or to its
shareholders for monetary damages for breach of fiduciary duty as a
director occurring on or after the date on which this Article XIII becomes
effective; provided, however, that this Article XIII shall not eliminate or
limit the liability of a director to the corporation or to its shareholders
for monetary damages for any breach of the director's duty of loyalty to
the corporation or to its shareholders, acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, acts
specified in Section 7-108-403 of the Colorado Revised Statutes (or any
successor provision thereof), or any transaction from which the director or
indirectly derived an improper personal benefit.
13.2 No director or officer shall be personally liable for any injury to
person or property arising out of a tort committed by an employee of the
corporation unless such director or officer was personally involved in the
situation giving rise to the litigation or unless such director or officer
committed a criminal offense in connection with such situation. The
protection afforded in this Section 13.2 shall not restrict other
common-law protections and rights that a director or officer may have.
This Section 13.2 shall not restrict the corporation's right to eliminate
or limit the personal liability of a director to the corporation or to its
shareholders for monetary damages for breach of fiduciary duty as a
director as provided in Section 13.1.
II. THE SUPERMAJORITY AMENDMENT
ARTICLE XV
SUPERMAJORITY VOTE
The affirmative vote of the holders of not less than 2/3 of the outstanding
common stock of the corporation entitled to vote for approval shall be required
if (a) this corporation merges or consolidates with any other corporation, or if
(b) this corporation sells or exchanges all or a substantial part of its assets
to or with any other corporation, or if (c) this corporation issues or delivers
any stock or other securities of its issue in exchange or payment for any
properties or assets of any other corporation, or securities issued by any other
corporation, or in a merger of any subsidiary of this corporation (80% or more
of the common stock of which is held by this corporation) with or into any other
corporation; provided, however, that the foregoing shall not apply to any plan
of merger or consolidation, or sale or exchange of assets, or issuance or
delivery of stock or other securities which was approved (or adopted) and
recommended without condition by the affirmative vote of not less than
two-thirds of the directors, nor shall it apply to any such transaction solely
between this corporation and another corporation 50% or more of the voting stock
of which is owned by this corporation. The Board of Directors shall be
permitted to condition its approval (or adoption) of any plan of merger or
exchange of assets, or issuance or delivery of stock or securities upon the
approval of holders of 2/3 of the outstanding stock of this corporation entitled
to vote on such plan of merger or consolidation, or sale or exchange of assets,
or issuance or delivery of stock or securities.
28
<PAGE>
III. THE RELEVANT FACTORS AMENDMENT
ARTICLE XVI
FACTORS TO CONSIDER
The Board of Directors, when evaluating any offer of another party to (a) make a
tender or exchange offer for any equity security of this corporation, (b) merge
or consolidate this corporation with another corporation, or (c) purchase or
otherwise acquire all or substantially all of the properties and assets of this
corporation, shall, in connection with the exercise of its judgment in
determining what is in the best interests of this corporation and its
stockholders, give due consideration to (i) all relevant factors, including
without limitation the social, legal, environmental and economic effects on the
employees, customers, suppliers and other constituencies of this corporation and
its subsidiaries, on the communities and geographical areas in which this
corporation and its subsidiaries operate or are located and on any of the
businesses and properties of this corporation or any of its subsidiaries, as
well as such other factors as the directors deem relevant, and (ii) not only the
consideration being offered, in relation to the then current market price for
the corporation's outstanding shares of capital stock, but also in relation to
the then current value of the corporation in a freely negotiated transaction and
in relation to the board of directors' estimate of the future value of this
corporation (including the unrealized value of its properties and assets) as an
independent going concern.
IV. THE BOARD ENLARGEMENT AMENDMENT
ARTICLE XVII
ENLARGING THE BOARD OF DIRECTORS
The affirmative vote of the holders of not less than 2/3 of the outstanding
common stock of the corporation entitled to vote on any proposal to change
the size of the Board of Directors shall be required in order to increase the
number of directors on the Board of Directors; provided, however, that the
foregoing shall not apply if a majority of the directors holding office prior
to any proposal to increase the number of directors and continuing in office
at the time of the Board of Directors votes on such proposal approves of such
proposal, in which case the number of directors may be increased by any
manner otherwise permitted by these Articles of Incorporation, the
corporation's bylaws or by applicable law.
29
<PAGE>
The issuer hereby supplementally informs the U.S. Securities and Exchange
Commission that the securities to be issued pursuant to Evergreen Resources,
Inc.'s Initial Stock Option Plan will be registered under the Securities Act
following approval of the Plan by the shareholders of the issuer.
EVERGREEN RESOURCES, INC.
INITIAL STOCK OPTION PLAN
ARTICLE I - PURPOSE OF PLAN
1.1 PURPOSE OF PLAN. The purpose of the Evergreen Resources, Inc. Initial
Stock Option Plan is to serve as a performance incentive and to encourage the
ownership of Evergreen Resources, Inc. common stock by officers and other key
employees of the Company so that the person to whom the option is granted may
acquire a proprietary interest in the success of the Company, and to encourage
such person to remain in the employ of the Company. This Plan shall consist of
grants of incentive stock options, which are intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended, and of options which are
intended not to so qualify.
ARTICLE II - DEFINITIONS
2.1 "Award" means an Option granted hereunder.
2.2 "Board" means the Board of Directors of Evergreen Resources, Inc.
2.3 "Code" means the Internal Revenue Code of 1986, as amended. Reference in
this Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations promulgated
thereunder.
2.4 "Committee" means the Compensation Committee of the Board, which shall
consist of not less than two (2) members of the Board.
2.5 "Company" means Evergreen Resources, Inc or any successors as described in
Article XI and any subsidiary of the Company of which the Company owns, directly
or indirectly, greater than fifty percent (50%) of its voting capital stock.
2.6 "Date of Disability" means the date on which a Participant is classified as
Disabled.
2.7 "Disability" or "Disabled" means the classification of a Participant as
"Disabled" pursuant to a long-term disability plan of the Company, if any, or
successor to such plan (or, if there is no such plan, as determined by the
Committee), provided that the Participant meets the requirements of Section
22(e)(3) of the Code.
2.8 "Effective Date" means May 27, 1997.
2.9 "Eligible Employee" means any person employed by the Company on a
full-time, salaried basis who satisfies all of the requirements of Article VI.
2.10 "Fair Market Value" means the fair market value of the Stock, as
determined by the Committee; provided, however, that (i) if the Stock is
admitted to trading on a national securities exchange on the date the Option is
granted, Fair Market Value shall not be less than the last sale price reported
for the Stock on such exchange on such date or, if no sales are reported on the
date the Option is granted, on the date next preceding such date on which a sale
was reported, or (ii) if the Stock is not admitted to trading on a national
securities exchange on the date the Option is granted but the Stock is admitted
to quotation on the National Association of Securities Dealers Automated
Quotation system on the date the Option is granted, Fair Market Value shall not
be less than the average of the highest bid and lowest asked prices of the stock
on such system on such date.
2.11 "Incentive Stock Option" means an Option which is an "incentive stock
option" within the meaning of Section 422 of the Code and which is granted under
Article VII.
2.12 "Insider" means an "officer" or "director" of the Company within the
meaning of Section 16 of the Securities Exchange Act of 1934, as amended.
<PAGE>
2.13 "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option and which is granted under Article VII.
2.14 "Option" means either a Nonqualified Stock Option or an Incentive Stock
Option granted under Article VII.
2.15 "Participant" means an Eligible Employee who has been granted an Award
under this Plan.
2.16 "Plan" means this Evergreen Resources, Inc. Initial Stock Option Plan.
2.17 "Retirement" means the normal retirement by an employee from the Company
under a pension or retirement plan maintained by the Company.
2.18 "Retirement Date" is the employee's date of Retirement from the Company.
2.19 "Stock" means common stock of Evergreen Resources, Inc., no par value per
share.
2.20 "Stock Option Agreement" means an agreement with respect to an Option, as
described in Article VIII.
2.21 "Termination" means resignation or discharge from employment with the
Company, except in the event of death, Disability, or Retirement.
2.22 "Termination Date" is the employee's date of Termination from the Company.
2.23 "Vested Option" means, at any date, any portion of an Option which a
Participant is then entitled to exercise pursuant to the terms of the Plan and
an applicable Stock Option Agreement.
ARTICLE III - EFFECTIVE DATE AND DURATION
3.1 EFFECTIVE DATE. Subject to the approval by a majority of the holders of
Stock voted, in person or by proxy, at the 1998 Annual Meeting of Stockholders
of the Company, this Plan shall be effective as of May 27, 1997.
3.2 PERIOD FOR GRANTS OF AWARDS. Awards may be made as provided herein for a
period of ten (10) years after the Effective Date.
3.3 TERMINATION. This Plan may be terminated as provided in Article XII, but
shall continue in effect until all matters relating to the payment of Awards and
the administration of the Plan have been settled.
ARTICLE IV - ADMINISTRATION
4.1 ADMINISTRATION. Except where this Plan expressly reserves administrative
or other powers to the Company or the Board, this Plan shall be administered by
the Committee. All questions of interpretation and application of this Plan, or
of the terms and conditions pursuant to which Awards are granted, exercised, or
forfeited under the provisions hereof, shall be subject to the determination of
the Committee. Such determination shall be final and binding upon all parties
affected thereby.
It is contemplated that Awards granted hereunder will be recommended by the
management of the Company or the Board to the Committee, and that the Committee
will determine whether to accept such recommendations.
ARTICLE V - GRANT OF AWARDS AND
LIMITATION OF NUMBER OF SHARES OF STOCK AWARDED
5.1 GRANTS OF AWARDS; NUMBER OF SHARES. The Committee may, from time to time,
grant Awards of Options to one or more Eligible Employees in its discretion;
provided, however, that:
(i) Subject to any adjustment pursuant to Article X or Article XI, the
aggregate number of shares of Stock subject to Awards under this Plan may not
exceed 500,000 shares of Stock;
(ii) To the extent that an Award lapses or the rights of the Participant to
whom it was granted terminate, or to the extent that the Award is canceled by
mutual agreement of the Committee and the Participant (which cancellation
<PAGE>
opportunities may be offered by the Committee to Participants from time to
time), any shares of Stock subject to such Award shall again be available for
the grant of an Award hereunder; and
(iii) Shares of Stock ceasing to be subject to an Award because of the exercise
of an Option shall no longer be available for the grant of an Award hereunder.
In determining the size of Awards, the Committee may take into account
recommendations by the Board or the Company's management, a Participant's
responsibility level, performance, potential, and cash compensation level, the
Fair Market Value of the Stock at the time of Awards, and such other
considerations as it deems appropriate.
ARTICLE VI - ELIGIBILITY
6.1 ELIGIBLE INDIVIDUALS. All employees of the Company (including salaried
officers or employees who are members of the Board, but excluding directors who
are not officers or employees of the Company) shall be eligible to receive
Awards hereunder. Subject to the provisions of this Plan, the Committee shall
from time to time select from such Eligible Employees those to whom Awards shall
be granted and determine the size of the Awards. A Participant may hold more
than one Option at any one time. No officer or employee of the Company shall
have any right to be granted an Award under this Plan, as all Awards granted
hereunder are granted in the sole and absolute discretion of the Committee, as
provided herein.
ARTICLE VII - OPTIONS
7.1 GRANTS OF OPTIONS. An Award shall be granted to Participants in the form
of an Option to purchase Stock.
7.2 TYPE OF OPTION. The Committee may choose to grant a Participant who is an
Eligible Employee either an Incentive Stock Option or a Nonqualified Stock
Option or both, subject to the limitations contained herein.
7.3 INCENTIVE STOCK OPTION DOLLAR LIMITATIONS. If the Committee grants an
Incentive Stock Option, the aggregate Fair Market Value (determined as of the
date the Option is granted) of any such Option plus any incentive stock options
granted under any other plans of the Company which shall be first exercisable by
any one Participant during any one calendar year shall not exceed $100,000, or
such other dollar limitation as may be provided in the Code.
ARTICLE VIII - TERMS AND CONDITIONS OF STOCK OPTION AGREEMENTS
8.1 STOCK OPTION AGREEMENTS. Awards shall be evidenced by Stock Option
Agreements in such form as the Committee shall, from time to time, approve.
Such Stock Option Agreements, which need not be identical, shall comply with and
be subject to the following terms and conditions:
(a) Medium of Payment. Upon exercise of the Option, the Option price shall be
payable either (i) in United States dollars in cash or by certified check, bank
draft, or money order payable to the order of the Company, or (ii) in the
discretion of the Committee, through the delivery of shares of Stock with a Fair
Market Value equal to the total Option price, or (iii) by a combination of the
methods described in (i) and (ii); provided, however, that in the case of an
Option price which is paid by an Insider in whole or in part by the delivery of
shares of Stock, the Stock acquired in the exercise of such Option shall not be
disposed of by the Insider for a six (6) month period commencing on the date on
which the Insider last purchased Stock (including the Stock tendered in
connection with such exercise).
(b) Number of Shares. The Stock Option Agreement shall state the total number
of shares to which it pertains.
(c) Option Price. With respect to a Nonqualified Stock Option, the Option
price shall be not less than the Fair Market Value of such shares on the date of
the granting of the Option. With respect to an Incentive Stock Option, the
option price shall be not less than the Fair Market Value of such shares on the
date of the granting of the Option (or one hundred ten percent (110%) of such
amount if the Option is granted to an individual owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company).
(d) Term of Options. Each Nonqualified Stock Option and Incentive Stock Option
granted under this Plan shall expire not more than ten (10) years from the date
the Option is granted, except that each Incentive Stock Option granted under the
Plan to an individual owning stock possessing more than ten percent (10%) of the
total combined
<PAGE>
voting power of all classes of stock of the Company shall expire not more than
five (5) years from the date the Option is granted.
(e) Date of Exercise. Subject to subsection (d) of this Section, any Option
which becomes a Vested Option may be exercised in whole or in part at any time
thereafter. Each Option awarded hereunder shall become exercisable as a Vested
Option, as follows:
(i) The aggregate number of shares of Stock subject to an Award shall be
divided into four (4) equal installments. The first installment shall become a
Vested Option one (1) year from the date of such award, the second installment
shall become a Vested Option two (2) years from the date of such Award, the
third installment shall become a Vested Option three (3) years from the date of
such Award, and the fourth installment shall become a Vested Option four (4)
years from the date of such Award.
(ii) Except as otherwise provided hereunder, the Committee may in its
discretion accelerate the time at which an Option granted hereunder may be
exercised; provided, however, that in the event of any such acceleration with
respect to an Option held by an Insider, at least six (6) months shall elapse
from the date of such acceleration to the later of the date of exercise of the
Option or the disposition of the Stock acquired by exercising the Option.
(iii) Notwithstanding the preceding, all Options which are awarded to a
Participant hereunder shall become Vested Options upon the Participant's
Retirement, Disability, or death.
(f) Forfeiture or Exercise of Option. If a Participant ceases employment with
the Company, each Option held by him or her which is not a Vested Option shall
terminate. If a Participant terminates employment with the Company or a
subsidiary prior to exercise of the Participant's Vested Option, such Vested
Option shall be exercised, as follows:
(i) Termination. In the event of a Participant's Termination, the Participant
shall have the right to exercise his or her Vested Option within three (3)
months (or such shorter period as the Code or the terms of the particular Stock
Option Agreement may require) of the Participant's Termination Date.
(ii) Retirement. In the event of a Participant's Retirement, the Participant
shall have the right to exercise his or her Vested Option within three (3)
months (or such shorter period as the Code or the terms of the particular Stock
Option Agreement may require) of the Participant's Retirement Date.
(iii) Disability. Upon the Disability of a Participant, the Participant's
Vested Option shall be exercisable within twelve (12) months (or such shorter
period as the Code or the terms of the particular Stock Option Agreement may
require) of the Participant's Date of Disability.
(iv) Death. If the Participant dies while in the employment of the Company or
within the period of time after Retirement during which the Participant would
have been entitled to exercise his or her Vested Option rights, the
Participant's estate, personal representative, or beneficiary (as applicable)
shall have the right to exercise such Vested Option within one (1) year from the
date of the Participant's death (or such shorter period as the Code or the terms
of the particular Stock Option Agreement may require).
(g) Agreement as to Sale of Securities. If, at the time of the exercise of any
Option, in the opinion of counsel for the Company, it is necessary or desirable,
in order to comply with any applicable laws or regulations relating to the sale
of securities, that the Participant exercising the Option shall agree to
purchase the shares that are subject to the Option for investment only and not
with any present intention to resell the same and that the Participant will
dispose of such shares only in compliance with such laws and regulations, the
Participant will, upon the request of the Company, execute and deliver to the
Company an agreement to such effect.
(h) Minimum Number of Shares. The minimum number of shares of Stock with
respect to which an Option may be exercised at any one time shall be ten (10)
shares, unless the number is the total number at the time available for exercise
under the Award.
(i) Required Amendments. Each Award shall be subject to any provision
necessary to assure compliance with federal and state securities laws.
(j) Limitation of Participant Rights. A Participant shall not be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares of Stock subject to an Option unless and until the Option shall have
<PAGE>
been exercised pursuant to the terms thereof, the Company shall have issued and
delivered the shares to the Participant, and the Participant's name shall have
been entered as a stockholder of record on the books of the Company.
Thereafter, the Participant shall have full voting, dividend, and other
ownership rights with respect to such shares of stock.
ARTICLE IX - GRANTS IN SUBSTITUTION
FOR OPTIONS GRANTED BY OTHER CORPORATIONS
9.1 SUBSTITUTE AWARDS. Awards may be granted under this Plan from time to time
in substitution for similar awards held by employees of corporations who become
or are about to become employees of the Company as the result of a merger or
consolidation of the employing corporation with the Company, or the acquisition
by the Company of the assets of the employing corporation, or the acquisition by
the Company of fifty percent (50%) or more of the stock of the employing
corporation causing it to become a subsidiary of the Company. Subject to the
procurement of the approval of the stockholders of the Company as may be
required for the Plan to satisfy the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, the terms and conditions of the
substitute Awards so granted may vary from the terms and conditions set forth in
this Plan to such extent as the Committee at the time of the grant may deem
appropriate to conform, in whole or in part, to the provisions of the options in
substitution for which they are granted.
ARTICLE X - CHANGES IN CAPITAL STRUCTURE
10.1 CAPITAL STRUCTURE CHANGES.
(a) If the outstanding shares of the Company's Stock as a whole are increased,
decreased, changed into, or exchanged for a different number or kind of shares
or securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure, or the
like, an appropriate and proportionate adjustment shall be made in the number
and kinds of shares subject to the Plan and in the number, kinds, and per share
exercise price of shares subject to unexercised Options or portions thereof
granted prior to any such change. Any such adjustment in an outstanding Option,
however, shall be made without a change in the total price applicable to the
unexercised portion of the Option but with a corresponding adjustment in the
price for each share of Stock covered by the Option.
(b) Upon dissolution or liquidation of the Company, or upon a reorganization,
merger, or consolidation in which the Company is not the surviving corporation,
or upon the sale of substantially all of the assets of the Company to another
corporation, the Plan and the Options issued thereunder shall terminate, unless
provision is made in connection with such transaction for the assumption of
Options theretofore granted, or the substitution for such Options of new options
of the successor employer corporation or a parent or subsidiary thereof, with
appropriate adjustment as to the number and kinds of shares and the per share
exercise prices. In the event of such termination, all outstanding Options
shall be exercisable in full for at least thirty (30) days prior to the
termination date whether or not otherwise exercisable during such period.
(c) In the event of a change in the Stock which is limited to a change in the
designation thereof to "capital stock" or other similar designation, or in no
par value to par value, without increase or decrease in the number of issued
shares, the shares resulting from any such change shall be deemed to be Stock
within the meaning of this Plan.
(d) Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustment shall be made, and the extent thereof, shall
be conclusive. The Committee shall have the discretion and power in any such
event to determine and to make effective provision for the acceleration of time
during which the Option may be exercised, notwithstanding the provisions of the
Option setting forth the date or dates on which all or any part of it may be
exercised. No fractional shares of Stock shall be issued under the Plan on
account of any adjustment specified above.
ARTICLE XI - COMPANY SUCCESSORS
11.1 IN GENERAL
(a) If the Company shall be the surviving or resulting corporation in any
merger, sale of assets or sale of stock, consolidation, or corporate
reorganization (including a reorganization in which the holders of Stock receive
<PAGE>
securities of another corporation), any Award granted hereunder shall pertain to
and apply to the securities to which a holder of Stock would have been entitled.
The Committee shall make such appropriate determinations and adjustments as it
deems necessary so as to preserve substantially the rights and benefits, both as
to number of shares and otherwise, of Participants under this Plan.
(b) If the Company shall not be the surviving corporation in any merger, sale
of assets or sale of stock, consolidation, or corporate reorganization
(including a reorganization in which the holders of Stock receive securities of
another corporation) involving the Company, the successor corporation may, but
shall not be required to, issue substitute options so as to preserve
substantially the rights and benefits of the Participants under this Plan.
ARTICLE XII - AMENDMENT OR TERMINATION OF PLAN
12.1 AMENDMENTS AND TERMINATION. The Plan shall terminate on the tenth (10th)
anniversary of the Effective Date of the Plan. The Board may at any time and
from time to time alter, amend, suspend, or terminate this Plan in whole or in
part, except (i) without such stockholder approval as may be required by law and
the Company's by-laws, no such action may be taken which changes the minimum
option price, increases the maximum term of Options, materially increases the
benefits accruing to Participants hereunder, materially increases the number of
securities which may be issued pursuant to this Plan (except as provided in
Section 10.1 and 11.1), extends the period for granting Awards hereunder, or
materially modifies the requirements as to eligibility for participation
hereunder, and (ii) without the consent of the Participant to whom any Award
shall theretofore have been granted, no such action may be taken which adversely
affects the rights of such Participant concerning such Award, except as such
termination or amendment of this Plan is required by statute, or rules and
regulations promulgated thereunder, or as otherwise permitted hereunder.
ARTICLE XIII - MISCELLANEOUS PROVISIONS
13.1 NONTRANSFERABILITY. Except by the laws of descent and distribution, no
benefit provided hereunder shall be subject to alienation, assignment, or
transfer by a Participant (or by any person entitled to such benefit pursuant to
the terms of this Plan), nor shall it be subject to attachment or other legal
process of whatever nature, and any attempted alienation, assignment,
attachment, or transfer shall be void and of no effect whatsoever and, upon any
such attempt, the benefit shall terminate and be of no force or effect. During
a Participant's lifetime, Options granted to the Participant shall be
exercisable only by the Participant. Shares of Stock shall be delivered only
into the hands of the Participant or death beneficiary entitled to receive the
same or into the hands of the Participant's authorized legal representative.
13.2 NO EMPLOYMENT RIGHT. Neither this Plan nor any action taken hereunder
shall be construed as giving any right to any individual to be retained as an
officer or employee of the Company.
13.3 TAX WITHHOLDING. The Company shall have the right to deduct from all
Awards paid any federal, state, local, or employment taxes which it deems are
required by law to be withheld with respect to such payments. The Participant
receiving Stock pursuant to the exercise of an Option may be required to pay to
the Company an amount required to be withheld with respect to such Stock. At
the request of a Participant, or as required by law, such sums as may be
required for the payment of any estimated or accrued income tax liability may be
withheld and paid over to the governmental entity entitled to receive the same.
13.4 FRACTIONAL SHARES. Any fractional shares concerning Awards shall be
eliminated at the time of payment or payout by rounding down for fractions of
less than one-half (1/2) and rounding up for fractions of equal to or greater
than one-half (1/2). No cash settlements shall be made with respect to
fractional shares eliminated by rounding.
13.5 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make
payment of Awards in Stock or otherwise shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any government agencies as may
be deemed necessary or appropriate by the Committee. If Stock awarded hereunder
may in certain circumstances be exempt from registration under the Securities
Act of 1933, the Company may restrict its transfer in such manner as it deems
advisable to ensure such exempt status. The Plan is intended to comply with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Any provision
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan. The Plan shall be subject to any provision necessary to
assure compliance with federal and state securities laws.
<PAGE>
13.6 INDEMNIFICATION. Each person who is or at any time serves as a member of
the Board or the Committee shall be indemnified and held harmless by Evergreen
Resources, Inc. against and from (i) any loss, cost, liability, or expense that
may be imposed on or reasonably incurred by such person in connection with or
resulting from any claim, action, suit, or proceeding to which such person may
be a party or in which such person may be involved by reason of any action or
failure to act under this Plan; and (ii) any and all amounts paid by such person
in satisfaction of judgment in any such action, suit, or proceeding relating to
this Plan. Each person covered by this indemnification shall give the Company
an opportunity, at its own expense, to handle and defend the same before such
person undertakes to handle and defend the same on such person's own behalf.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
charter or by-laws of the Company, as a matter of law, or otherwise, or any
power that the Company may have to indemnify such person or hold such person
harmless.
13.7 RELIANCE ON REPORTS. Each member of the Board or the Committee shall be
fully justified in relying or acting in good faith upon any report made by the
independent public accountants of the Company, and upon any other information
furnished in connection with this Plan. In no event shall any person who is or
shall have been a member of the Board or the Committee be liable for any
determination made or other action taken or any omission to act in reliance upon
any such report or information, or for any action taken, including the
furnishing of information, or failure to act, if in good faith.
13.8 GOVERNING LAW. All matters relating to this plan or to Awards granted
hereunder shall be governed by the laws of the State of Colorado, without regard
to the principles of conflict of laws thereof, except to the extent preempted by
the laws of the United States.
13.9 RELATIONSHIP TO OTHER BENEFITS. No payment under this Plan shall be take
into account in determining any benefits under any pension, retirement, profit
sharing, or group insurance plan of the Company.
13.10 EXPENSES. The expenses of implementing and administering this Plan shall
be borne by the Company.
13.11 TITLES AND HEADINGS. The titles and headings of the Articles and
Sections in this Plan are for convenience of reference only, and in the event of
any conflict, the text of this Plan, rather than such titles or headings, shall
control
13.12 USE OF PROCEEDS. Proceeds from the sale of Stock pursuant to Options
granted under the Plan shall constitute general funds of the Company.
13.13 NONEXCLUSIVITY OF PLAN. Neither the adoption of the Plan by the Board
nor the submission of the Plan to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options other than under the Plan, and
such arrangements may be applicable either generally or only in specific cases.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly
authorized officers and its seal to be affixed hereto, effective, except as
specified to the contrary herein, as of May ___, 1997.
ATTEST/WITNESS EVERGREEN RESOURCES, INC.
By: By:
----------------------------- ---------------------------
Name: J. Keither Martin Name: Mark S. Sexton
Title: Secretary Title: President
[SEAL]
<PAGE>
PROXY PROXY
- ----- -----
EVERGREEN RESOURCES, INC.
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS TO BE HELD ON MAY 12, 1998
The undersigned hereby constitutes and appoints Mark S. Sexton and Kevin R.
Collins, and each of them, the true and lawful attorneys and proxies of the
undersigned, with full power of substitution and appointment, for and in the
name, place and stead of the undersigned, to act for and vote all of the
undersigned's shares of no par value common stock of Evergreen Resources, Inc.,
a Colorado corporation, at the Annual Meeting of Shareholders to be held at the
Denver Petroleum Club, 555 Seventeenth Street, Denver, Colorado, at 3:00 p.m.,
Mountain Daylight Time, on May 12, 1998, and any and all adjournments thereof
(the "Annual Meeting"), for the purposes of considering and acting upon the
following matters proposed by Evergreen Resources, Inc.:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
1. The Election of two (2) Directors of the Company.
Nominees: Dennis R. Carlton / / / / / /
Mark. S. Sexton / / / / / /
Approval of Amendments to Articles of Incorporation:
2. Relevant Factors Amendment / / / / / /
3. Supermajority Amendment / / / / / /
4. Board Enlargement Amendment / / / / / /
5. Liability Limitation Amendment / / / / / /
6. Approval of the Initial Stock Option Plan / / / / / /
7. Issuance of warrants for 79,990 shares of Evergreen's / / / / / /
Common Stock for certain directors and key employees.
8. To transact such other business as properly may come
before the Annual Meeting.
</TABLE>
APPROVAL OF EACH MATTER LISTED ABOVE IS NOT CONTINGENT UPON THE APPROVAL OF ANY
OTHER MATTER LISTED ABOVE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH OF THE ABOVE PROPOSALS.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH
THE SHAREHOLDER'S SPECIFICATION ABOVE. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY WITH RESPECT TO MATTERS NOT KNOWN TO THE BOARD OF DIRECTORS OR
DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF
SHAREHOLDERS TO THE UNDERSIGNED. IT ALSO CONFERS DISCRETIONARY AUTHORITY WITH
RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF THE ANNUAL MEETING.
(Continued on other side)
<PAGE>
The undersigned hereby acknowledges receipt of the
Notice of Annual Meeting of Shareholders, Proxy
Statement and Annual Report to Shareholders
furnished therewith.
Dated: , 1998
-----------------------
--------------------------------------------------
--------------------------------------------------
Signature(s) should agree with the name(s) hereon.
Executors, administrators, trustees, guardians and
attorneys should indicate when signing. Attorneys
should submit power of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF EVERGREEN
RESOURCES, INC. PLEASE SIGN AND RETURN THIS PROXY TO EVERGREEN RESOURCES, INC.,
PO BOX 660, DENVER, COLORADO 80201-0660. THE GIVING OF A PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
