<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 /X/
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
- - --------------------------------------------------------------------------------
(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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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:
------------------------------------------------------------------------
/X/ 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>
FOREST OIL CORPORATION
1600 BROADWAY, SUITE 2200
DENVER, CO 80202
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 8, 1996
---------------------
To the Shareholders of
FOREST OIL CORPORATION:
As a shareholder of Forest Oil Corporation, a New York corporation (the
"Company"), you are invited to be present in person or to be represented by
proxy at the Annual Meeting of Shareholders, to be held at the Hyatt Regency
Denver, 1750 Welton Street, Denver, Colorado, on Wednesday, May 8, 1996, at
10:00 a.m., M.D.T., for the following purposes:
1. To elect three (3) Class II Directors and one (1) Class III Director;
2. To approve the amendment and restatement of the 1992 Stock Option
Plan;
3. To consider and vote upon the ratification of the appointment of KPMG
Peat Marwick LLP as independent auditors for the Company for the
fiscal year ending December 31, 1996; and
4. To transact such other business as may be properly brought before the
meeting and any adjournments thereof.
Shareholders of the Company of record at the close of business on
March 20, 1996 are entitled to vote at the meeting and all adjournments
thereof.
A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY
MUST BE REPRESENTED AT THE MEETING TO CONSTITUTE A QUORUM. THEREFORE, ALL
SHAREHOLDERS ARE URGED EITHER TO ATTEND THE MEETING OR TO BE REPRESENTED BY
PROXY. IF A QUORUM IS NOT PRESENT AT THE MEETING, A VOTE FOR ADJOURNMENT
WILL BE TAKEN AMONG THE SHAREHOLDERS PRESENT OR REPRESENTED BY PROXY. IF A
MAJORITY OF THE SHAREHOLDERS PRESENT OR REPRESENTED BY PROXY VOTE FOR
ADJOURNMENT, IT IS THE COMPANY'S INTENTION TO ADJOURN THE MEETING UNTIL A
LATER DATE AND TO VOTE PROXIES RECEIVED AT SUCH ADJOURNED MEETING(S).
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
BUSINESS REPLY ENVELOPE. If you later find that you can be present or for any
other reason desire to revoke your proxy, you may do so at any time before
the voting.
By order of the Board of Directors
DANIEL L. McNAMARA
SECRETARY
April 8, 1996
<PAGE>
PROXY STATEMENT
OF
FOREST OIL CORPORATION
1600 BROADWAY, SUITE 2200
DENVER, COLORADO 80202
April 8, 1996
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board of Directors") of Forest Oil
Corporation (the "Company") of proxies to be voted at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Wednesday, May 8, 1996, at
the Hyatt Regency Denver, 1750 Welton Street, Denver, Colorado, at 10:00
a.m., M.D.T., and at any adjournment thereof. Each holder of record at the
close of business on March 20, 1996 of shares of the Company's Common Stock,
Par Value $.10 Per Share (the "Common Stock"), will be entitled to one vote
for each share so held. As of February 29, 1996, there were 24,527,575 shares
of Common Stock issued and outstanding.
Shares represented by properly executed proxy cards received by the
Company at or prior to the Annual Meeting will be voted according to the
instructions indicated on the proxy card. Unless contrary instructions are
given, the persons named on the proxy card intend to vote the shares so
represented for (i) the election of the nominees for directors, (ii) the
amendment and restatement of the 1992 Stock Option Plan, and (iii) the
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1996. As to any
other business which may properly come before the meeting, the persons named
on the proxy card will vote according to their judgment. The enclosed proxy
may be revoked prior to the meeting by written notice to the Secretary of the
Company at 1600 Broadway, Suite 2200, Denver, Colorado 80202, or by written
or oral notice to the Secretary at the Annual Meeting at any time prior to
being voted. This Proxy Statement and the Proxy Card enclosed herewith are
expected to be first sent to shareholders of the Company on or about April
12, 1996.
If a quorum is not present at the meeting, a vote for adjournment
will be taken among the shareholders present or represented by proxy. If a
majority of the shareholders present or represented by proxy vote for
adjournment, it is the Company's intention to adjourn the meeting until a
later date and to vote proxies received at such adjourned meeting(s).
Under the law of New York, the Company's state of incorporation,
"votes cast" at a meeting of shareholders by the holders of shares entitled
to vote are determinative of the outcome of the matter subject to vote.
Abstentions and broker non-votes will not be considered "votes cast" based on
the Company's understanding of state law requirements. A "broker non-vote"
occurs if a broker or other nominee does not have discretionary authority and
has not received instructions with respect to a particular item. Shareholders
may not cumulate their votes.
ELECTION OF DIRECTORS
The Company's By-laws currently provide that the Board of Directors
shall be divided into four classes as nearly equal in number as possible,
with each class having not less than two members, whose terms of office
expire at different times in annual succession. Currently the number of
directors is fixed at 10, with one vacancy.
Each class of directors is elected for a term expiring at the Annual
Meeting to be held four years after the date of their election. The Class I
Directors with the exception of Philip F. Anschutz were elected at the 1995
Annual Meeting. Robert S. Boswell, a Class II Director, was elected at the
1992 Annual Meeting. Michael B. Yanney, a Class III Director, was elected at
the 1993 Annual Meeting and Richard J. Callahan, a
<PAGE>
Class IV Director, was elected at the 1994 Annual Meeting. Messrs. Anschutz,
Slater and Tempest were appointed to their respective classes in July 1995.
William L. Britton was designated by the Nominating Committee as a Class II
Nominee and Jordan L. Haines was designated as a Class III Nominee. Dale F.
Dorn, a Class II Director, is not standing for reelection.
A majority of the votes represented at the Annual Meeting by shares
of Common Stock entitled to vote is required to elect a director.
The persons named as proxies in the enclosed proxy, who have been so
designated by the Board of Directors, intend to vote for the election of the
Class II Nominees and the Class III Nominee referred to below as directors
unless otherwise instructed in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THESE NOMINEES. Certain
information concerning such nominees, as well as the other current directors,
is set forth below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION,
AGE AND POSITIONS WITH COMPANY
YEARS OF SERVICE AND BUSINESS EXPERIENCE DIRECTOR
NAME WITH COMPANY DURING LAST FIVE YEARS SINCE
-------------- --------------- ----------------------- --------
CLASS II NOMINEES - TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 2000
<S> <C> <C>
Robert S. Boswell 46-10 President since November 1993 and Chief 1985
Executive Officer since December 1995, Vice
President from May 1991 until November 1993.
Member of the Executive Committee since
July 1991. Director of Franklin Supply
Company Ltd. and Saxon Petroleum Inc.
Drake S. Tempest 42-1 Partner in the law firm of O'Melveny & Myers 1995
since February 1991 and was Special Counsel to
such firm from 1988 to February 1991. Member
of the Compensation Committee.
William L. Britton 61-0 Partner in the law firm of Bennett Jones Verchere.
Mr. Britton is also a Director of Akita Drilling Ltd.
since November 1992, Atco Ltd., since September
1975, Canadian Western Natural Gas Ltd. since May
1995, Canadian Utilities Limited since June 1980,
Canutilities Holdings Ltd. since July 1989 and
Northwestern Utilities Limited since May 1995.
<CAPTION>
CLASS III NOMINEE - TERM EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 1997
<S> <C> <C>
Jordan L. Haines 68-0 Mr. Haines was Chairman of the Board of Fourth
Financial Corporation, a Kansas based bank holding
company, and its subsidiary Bank IV Wichita, N.A.
from 1983 to his retirement in 1991. Director of
Coleman Company, Inc. since 1992, a Director of
KN Energy, Inc. since 1982 and a Director of the
Southern Pacific Rail Corporation since August
1993.
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION,
AGE AND POSITIONS WITH COMPANY
YEARS OF SERVICE AND BUSINESS EXPERIENCE DIRECTOR
NAME WITH COMPANY DURING LAST FIVE YEARS SINCE
--------- ---------------- ------------------------- --------
CLASS III DIRECTOR - TERM EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 1997
<S> <C> <C>
Michael B. Yanney 62 - 4 Chairman and Chief Executive Officer of the 1992
America First Companies, L.L.C. and a Director
of Burlington Northern Inc., MFS Communications
Company, Inc. and America First REIT Inc.
Chairman of the Compensation Committee.
Member of the Nominating Committe.
<CAPTION>
CLASS IV DIRECTORS - TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 1998
<S> <C> <C>
Richard J. Callahan 54 - 3 Executive Vice President of US WEST, Inc. 1993
since January 1988 and President of US WEST
International and Business Development Group
since October 1991. Chairman of Mercury One
2 One since 1993, Chairman of Russian
Telecommunications Development Corporation
since 1992 and Vice Chairman of Televest plc.
Member of the Compensation Committee.
Craig D. Slater 38 - 1 Vice President of Acquisitions and Investments 1995
of The Anschutz Corporation ("Anschutz")
since 1992 and Corporate Secretary of Anschutz
since 1991. Mr. Slater held other positions with
Anschutz from 1988 to 1992. Member of the
Executive and Audit Committees.
<CAPTION>
CLASS I DIRECTORS - TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 1999
<S> <C> <C>
William L. Dorn 47 - 24 Chairman of the Board and Chairman of the 1982
Executive Committee since July 1991 and Chief
Executive Officer from February 1990 until
December 1995. Chairman of the Nominating
Committee since July 1995. Member of the
Executive Committee since August 1988.
President from February 1990 until November
1993.
James H. Lee 47 - 5 Managing Partner, Lee, Hite & Wisda Ltd. 1991
Member of the Executive Committee since
February 1994. Member of the Audit Committee
since July 1995.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION,
AGE AND POSITIONS WITH COMPANY
YEARS OF SERVICE AND BUSINESS EXPERIENCE DIRECTOR
NAME WITH COMPANY DURING LAST FIVE YEARS SINCE
-------- ---------------- -----------------------
<S> <C> <C>
Philip F. Anschutz 56 - 1 Director, Chairman of the Board and President 1995
of The Anschutz Corporation and a Director,
Chairman of the Board and President of
Anschutz Company, the corporate parent of
Anschutz, since the formation of Anschutz
Company in August 1991. Mr. Anschutz
has been a Director of Southern Pacific Rail
Corporation since June 1988 and Chairman of
Southern Pacific since October 1988. He served
as President and Chief Executive Officer of
Southern Pacific from October 1988 until July
1993. Member of the Nominating Committee.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows, as of February 29, 1996, the number of
shares of the Company's Common Stock beneficially owned by each director and
nominee, each of the executive officers named in the Summary Compensation
Table set forth under the caption "Executive Compensation" below, and all
directors and executive officers as a group. Unless otherwise indicated, each
of the persons has sole voting power and sole investment power with respect
to the shares beneficially owned by such person. All share amounts have been
adjusted to give effect to a five-to-one reverse stock split (the "Reverse
Stock Split") that occurred on January 8, 1996.
<TABLE>
<CAPTION>
COMMON STOCK (2)
--------------------------
NAME OF INDIVIDUAL OR NUMBER OF PERCENT
NUMBER IN GROUP (1) SHARES OF CLASS
--------------------- --------- --------
<S> <C> <C>
Philip F. Anschutz . . . . . . . . . . . . . . . . . 11,138,888(3)(4) 34.9%
Bulent A. Berilgen . . . . . . . . . . . . . . . . . 8,105(5) *
Robert S. Boswell. . . . . . . . . . . . . . . . . . 28,485(6) *
William L. Britton . . . . . . . . . . . . . . . . . 2,000 *
Richard J. Callahan. . . . . . . . . . . . . . . . . 400 *
Dale F. Dorn . . . . . . . . . . . . . . . . . . . . 18,448(7) *
Forest D. Dorn . . . . . . . . . . . . . . . . . . . 30,607(8) *
William L. Dorn. . . . . . . . . . . . . . . . . . . 68,366(9) *
Jordan L. Haines . . . . . . . . . . . . . . . . . . 1,000 *
David H. Keyte . . . . . . . . . . . . . . . . . . . 14,328(10) *
James H. Lee . . . . . . . . . . . . . . . . . . . . 200 *
Craig D. Slater. . . . . . . . . . . . . . . . . . . 2,500 *
Drake S. Tempest . . . . . . . . . . . . . . . . . . 2,500 *
V. Bruce Thompson. . . . . . . . . . . . . . . . . . 5,193(11) *
Michael B. Yanney. . . . . . . . . . . . . . . . . . 3,000 *
All directors and executive officers as a group
(18 persons, including the 15 named above) . . . . 11,343,065(12) 35.4%
</TABLE>
___________
* The percentage of shares beneficially owned does not exceed one percent
of the outstanding shares of the class.
<PAGE>
(1) William L. Dorn and Forest D. Dorn are brothers. Mr. Haines shares were
purchased on March 28, 1996.
(2) Amounts reported also include shares held for the benefit of certain
directors and executive officers by the trustee of the Company's Retirement
Savings Plan Trust as of December 31, 1995.
(3) The shares indicated as owned by Philip F. Anschutz are owned of record by
Anschutz, of which Mr. Anschutz is the Chairman of the Board, President and
a Director. Mr. Anschutz may be deemed to beneficially own such shares
based on his affiliation with Anschutz. The shares indicated as
beneficially owned by Philip F. Anschutz include (a) 1,240,000 shares
issuable upon conversion of 620,000 shares of the Company's Second Series
Preferred Stock and (b) 6,138,888 shares issuable pursuant to an option and
warrants exercisable within 60 days. Anschutz has also agreed to not
transfer any of its shares of Common Stock, except in limited
circumstances, until after October 31, 1996.
(4) Based on Schedules 13D and 13G and amendments thereto filed with the SEC
and the Company by the reporting person through February 29, 1996 and the
number of shares of Common Stock outstanding on February 29, 1996.
(5) Includes 8,000 Common shares that Bulent A. Berilgen has the vested right
to purchase pursuant to the terms of the Company's 1992 Stock Option Plan
(the "Stock Option Plan").
(6) Includes 20,000 Common shares that Robert S. Boswell has the vested right
to purchase pursuant to the terms of the Stock Option Plan. Does not
include 45 Common shares held by Robert S. Boswell's wife or 166 shares
held by his children, of which shares Mr. Boswell disclaims beneficial
ownership.
(7) Of the 18,448 shares indicated as owned by Dale F. Dorn, 687 shares are
held by Mr. Dorn as trustee of a trust for the benefit of his immediate
family, and of which shares Mr. Dorn has disclaimed beneficial ownership,
and 2,450 shares are shares, which Mr. Dorn as trustee, has the right to
acquire upon conversion of 3,500 shares of the Company's $.75 Convertible
Preferred Stock.
(8) Includes 8,000 Common shares that Forest D. Dorn has the vested right to
purchase pursuant to the terms of the Stock Option Plan. Also includes
5,160 Common shares held of record by Forest D. Dorn as co-trustee of a
trust for the benefit of his mother (see Footnote 9), of which shares Mr.
Dorn disclaims beneficial ownership. Does not include 1,725 Common shares
held by Forest D. Dorn's wife or 5,192 shares held by his children, of
which shares Mr. Dorn disclaims beneficial ownership.
(9) Includes 20,000 Common shares that William L. Dorn has the vested right to
purchase pursuant to the terms of the Stock Option Plan. Also includes (i)
5,160 Common shares held of record by William L. Dorn as co-trustee of a
trust for the benefit of his mother (see Footnote 8), and (ii) 14,840
Common shares held of record by William L. Dorn as trustee of trusts for
the benefit of related parties, of which shares Mr. Dorn disclaims
beneficial ownership. Does not include 2,998 Common shares held by William
L. Dorn's wife or 7,199 shares held by his children, of which shares Mr.
Dorn disclaims beneficial ownership.
(10) Includes 11,400 Common shares that David H. Keyte has the vested right to
purchase pursuant to the terms of the Stock Option Plan. Also includes
1,400 Common shares that David H. Keyte has the right to acquire upon the
conversion of 2,000 shares of the Company's $.75 Convertible Preferred
Stock.
(11) Includes 4,000 Common shares that V. Bruce Thompson has the vested right to
purchase pursuant to the terms of the Stock Option Plan. Also includes 350
Common shares that V. Bruce Thompson has the right to acquire upon the
conversion of 500 shares of the Company's $ .75 Convertible Preferred
Stock.
-5-
<PAGE>
(12) Includes 87,800 Common shares held by various executive officers who have
the vested right to purchase such shares pursuant to the terms of the Stock
Option Plan and 4,270 shares of Common Stock that a director and three
executive officers have the right to acquire upon the conversion of 6,100
shares of the Company's $.75 Convertible Preferred Stock.
BOARD OF DIRECTORS AND COMMITTEES
During 1995, the Board of Directors met on 12 occasions. The Board of
Directors has appointed four committees: the Executive Committee, the Audit
Committee, the Compensation Committee and the Nominating Committee. The Royalty
Bonus Committee was disbanded at the end of 1995. Only two members of each
committee are necessary to constitute a quorum. During 1995, the Executive
Committee met six times and acted by consent once. Robert S. Boswell, William
L. Dorn, James H. Lee and Craig D. Slater are the members of the Executive
Committee.
The Compensation Committee met three times during 1995. This committee
makes recommendations to the Board of Directors in the area of executive
compensation, including the selection of individual employees to be granted
options from among those eligible under the Company's 1992 Stock Option Plan,
and establishes the number of shares issued under each option. Members of the
Compensation Committee are not currently eligible to participate in the
Company's 1992 Stock Option Plan; however, pursuant to the proposed amendment
and restatement of such plan, non-employee directors of the Company will be
automatically awarded shares of Common Stock on an annual basis. See "Proposal
to Amend and Restate the 1992 Stock Option Plan." The members of the
Compensation Committee are Richard J. Callahan, Drake S. Tempest and Michael B.
Yanney. A Report of the Compensation Committee on Executive Compensation is set
forth below.
The Audit Committee is appointed for the purpose of overseeing and
monitoring the Company's independent audit process and discharges its duties,
responsibilities and functions according to a plan designed to provide assurance
to the Board of Directors that the resources allocated to that process are
adequate and utilized effectively. It is also charged with the responsibility
for reviewing all related party transactions for potential conflicts of
interest. This committee met three times during the year, and its members are
James H. Lee and Craig D. Slater.
The Nominating Committee consists of Philip F. Anschutz, William L.
Dorn, and Michael B. Yanney. The Nominating Committee is responsible for,
among other things, review of qualifications and recommendations for
replacement and/or additional nominees to the Board of Directors, and
recommendation of policies regarding directors to the Board. The Nominating
Committee will not consider nominees recommended by security holders, and has
not established any procedures for such recommendations.
During 1995, each incumbent director of the Company, except Michael B.
Yanney, attended at least 75% of the aggregate number of meetings of the Board
of Directors and the committees of the Board of Directors on which he served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Callahan, Tempest and Yanney. The Executive Committee members are Robert S.
Boswell, William L. Dorn, James H. Lee and Craig D. Slater. William L. Dorn is
Chairman of the Board and Robert S. Boswell is President and Chief Executive
Officer. During 1995 there were no compensation committee interlocks between the
Company and any other entity.
-6-
<PAGE>
DIRECTOR COMPENSATION
Each director who is not an employee of the Company is compensated for
services at the rate of $20,000 annually, and in addition, is paid a fee of
$2,500 for attendance in person at each meeting or series of meetings of the
Board of Directors. Shareholders are being asked to approve amendments to the
Company's 1992 Stock Option Plan to provide for, among other things, the payment
of a portion of directors' fees in stock. Subject to shareholder approval, half
of the $20,000 annual amount will be paid at each annual meeting of the
shareholders of the Company in shares of Common Stock, determined by dividing
$10,000 by the average of the fair market values of a share of Common Stock on
the 20 consecutive trading days immediately preceding the date that is three
trading days prior to the date of such meeting.
All directors, whether employees or not, are reimbursed for all costs
incurred by them in their capacities as directors, including the costs of
attending directors' meetings and committee meetings. The nonemployee directors
and the amounts each was paid during 1995 as directors were: Donald H.
Anderson, who resigned as a director in December 1995, received $30,000 for his
services as a director and $3,000 for attendance at meetings of the Audit
Committee. Philip F. Anschutz received $15,000 for his services as a director.
Austin M. Beutner, who resigned as a director in July 1995, received $16,667 for
his services as a director and $1,000 for attendance at a meeting of the
Compensation Committee. Richard J. Callahan received $32,500 for his services
as a director and $2,000 for attendance at meetings of the Compensation
Committee. John C. Dorn, who resigned as a director in July 1995, received
$16,667 for his services as a director. Dale F. Dorn, who is not standing for
reelection, received $32,500 for his services as a director. Harold D. Hammar,
who resigned as a director in July 1995, received $14,167 for his services as a
director. James H. Lee received $32,500 for his services as a director, $2,000
for attendance at a meeting of the Audit Committee and $50,000 as payment for
his services on the Executive Committee. Jeffrey W. Miller, who resigned as a
director in July 1995, received $19,167 for his services as a director. Jack D.
Riggs, who retired as a director in July 1995, received $16,667 for his services
as a director and $2,000 for attendance at meetings of the Compensation and
Audit Committees. Craig D. Slater received $15,000 for his services as a
director and $2,000 for attendance at meetings of the Audit Committee. Drake S.
Tempest received $15,000 for his services as a director and $1,000 for
attendance at meetings of the Compensation Committee. Michael B. Yanney
received $30,000 for his services as a director and $2,000 for attendance at
meetings of the Compensation Committee.
No additional amounts were paid for committee participation or special
assignments, except that (i) each member of the Compensation Committee was paid
$1,000 per meeting which he attended up to a maximum of $4,000 per year for
service on that committee, (ii) each member of the Audit Committee was paid
$1,000 per meeting which he attended up to a maximum of $4,000 per year for
service on that committee and (iii) Mr. Lee was paid $50,000 per year for
service on the Executive Committee. The payment of fees to directors for
attendance at committee meetings was discontinued in 1996. If the amendments to
the 1992 Stock Option Plan are approved by the Company's shareholders, half of
Mr. Lee's annual fee will be paid in shares of Common Stock.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation earned during each of the Company's last three fiscal years by
the Company's Chief Executive Officer and each of the Company's four other
most highly compensated executive officers (collectively, the "Named
Executive Officers"), based on salary and bonus earned in 1995. Both William
L. Dorn and Robert S. Boswell served as Chief Executive Officer in 1995.
-7-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS (4)
-------------------------------------- -----------------------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND BONUS COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) ($)(1)(2) ($) (3) OPTIONS (#) ($)(5)
------------------- ---- ---------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
William L. Dorn, 1995 $300,012 $ 41,415 $ 1,873 -0- $17,328
Chairman of the Board 1994 300,012 11,849 2,795 -0- 22,942
1993 250,008 100,159 665 35,000 32,640
Robert S. Boswell, 1995 284,004 41,321 1,699 -0- 16,310
President and Chief 1994 284,004 11,409 2,515 -0- 21,559
Executive Officer 1993 234,000 88,239 607 35,000 30,503
Bulent A. Berilgen, 1995 166,512 17,162 20,354 -0- 8,326
Vice President of 1994 166,512 6,639 -0- -0- 11,507
Operations 1993 137,850 53,336 -0- 20,000 16,458
David H. Keyte, 1995 165,000 32,113 21,619 -0- 8,250
Vice President and 1994 165,000 6,580 21,945 -0- 11,469
Chief Financial Officer 1993 139,494 36,433 18,192 20,000 16,517
Forest D. Dorn, 1995 163,800 20,889 23,977 -0- 9,264
Vice President and 1994 163,800 8,104 18,335 -0- 12,910
General Business Manager 1993 160,650 22,013 324 20,000 20,342
V. Bruce Thompson 1995 165,000 16,292 -0- -0- 8,250
Vice President and 1994 68,750 3,241 -0- 20,000 2,063
General Counsel (6)
</TABLE>
(1) The following amounts indicate the awards made with respect to the years
indicated, under the Forest Oil Corporation Incentive Plan (the "Incentive
Plan"), which was terminated in 1996:
<TABLE>
<CAPTION>
1993 1994 1995
------- ---- ----
<S> <C> <C> <C>
William L. Dorn. . . . . . . . . . . . $30,500 -0- -0-
Robert S. Boswell. . . . . . . . . . . 29,020 -0- -0-
Bulent A. Berilgen . . . . . . . . . . 18,135 -0- -0-
David H. Keyte . . . . . . . . . . . . 16,185 -0- -0-
Forest D. Dorn . . . . . . . . . . . . 14,819 -0- -0-
</TABLE>
Distributions of awards were made pursuant to the Incentive Plan in equal
installments over a three-year period. Pursuant to the Incentive Plan, if a
participant's employment is terminated prior to the vesting of awards, the
remainder of such awards is reallocated to other participants. Amounts
reallocated in 1995 for the years 1993 and 1994 were as follows: William L.
Dorn - $1,472; Robert S. Boswell - $1,378; Bulent A. Berilgen - $812; David
H. Keyte - $821; and Forest D. Dorn - $946. See "Report of the Compensation
Committee on Executive Compensation - Changes in Compensation Programs."
(2) During 1995, the Company assigned to certain of its executive officers and
other key personnel, as additional compensation, certain bonuses of
undivided interests in overriding royalty interests in the gross production
from certain exploratory oil and gas prospects in which the Company had an
interest. The cost to the Company at the time of the assignment of such
royalty interests was $9,943 each for
-8-
<PAGE>
William L. Dorn, Robert S. Boswell and Forest D. Dorn, $6,350 for Bulent A.
Berilgen, $6,292 for David H. Keyte and $6,292 for V. Bruce Thompson.
During 1995 interests in twenty exploratory oil and gas prospects were so
awarded by the Royalty Bonus Committee. This program was discontinued at
the end of 1995.
(3) Does not include perquisites and other personal benefits because the value
of these items did not exceed the lesser of $50,000 or 10% of reported
salary and bonus of any of the Named Executive Officers, except for David
H. Keyte, Bulent A. Berilgen, and Forest D. Dorn. The 1995 total includes
a cash auto allowance of $15,000 each for David H. Keyte and Forest D. Dorn
and $13,750 for Bulent A. Berilgen.
(4) No stock appreciation rights or restricted stock awards were granted to any
of the Named Executive Officers during any of the last three fiscal years.
Share numbers give effect to the Reverse Stock Split that occurred on
January 8, 1996.
(5) The 1995 totals include (i) the fair market value of the Company's matching
contribution of Common Stock to the Retirement Savings Plan in the
following amounts: William L. Dorn - $7,500; Robert S. Boswell - $7,500;
Bulent A. Berilgen - $7,500; David H. Keyte - $7,500; Forest D. Dorn -
$7,500; and V. Bruce Thompson - $7,500; and (ii) the Company's matching
contribution pursuant to deferred compensation agreements in the following
amounts: William L. Dorn - $7,501; Robert S. Boswell - $6,700; Bulent A.
Berilgen - $826; David H. Keyte - $750; Forest D. Dorn - $690; and V.
Bruce Thompson - $750. The 1995 totals also include the following amounts
attributable to the term life portion of premiums paid by the Company
pursuant to a split dollar insurance arrangement: William L. Dorn - $2,327;
Robert S. Boswell - $2,110; and Forest D. Dorn - $1,074. The remainder of
the premium is not included and does not benefit the Named Executive
Officers because the Company has the right to the cash surrender value of
the policy. There were no profit sharing bonus contributions by the Company
in 1995 to the Retirement Savings Plan or pursuant to the deferred
compensation agreements of William L. Dorn and Robert S. Boswell.
(6) V. Bruce Thompson became an officer of the Company on August 10, 1994.
YEAR END STOCK OPTION VALUES
No stock options were granted to the Named Executive Officers in 1995.
There were no stock option exercises by any Named Executive Officers
during 1995. The following table shows the number of shares covered by both
exercisable and non-exercisable stock options as of December 31, 1995 and
their values at such date. On February 6, 1996, all of the stock options
were exchanged for new options with an exercise price of $11.25 per share.
OUTSTANDING STOCK OPTION VALUES AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL YEAR END
AT FISCAL YEAR END (#)(1)(2) ($)(3)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William L. Dorn. . . . . . 49,000 21,000 $0 $0
Robert S. Boswell. . . . . 49,000 21,000 0 0
Bulent A. Berilgen . . . . 28,000 12,000 0 0
David H. Keyte . . . . . . 28,000 12,000 0 0
Forest D. Dorn . . . . . . 28,000 12,000 0 0
V. Bruce Thompson. . . . . 8,000 12,000 0 0
</TABLE>
-9-
<PAGE>
__________
(1) The above share numbers give effect to the Reverse Stock Split.
(2) On February 6, 1996, regrants and additional grants were made to the Named
Executive Officers in exchange for the cancellation of all previously held
options. The exercise price per share of the new options is $11.25, and
the number of new options held are as follows: William L. Dorn - 100,000;
Robert S. Boswell - 100,000; Bulent A. Berilgen - 40,000; David H. Keyte -
57,000; Forest D. Dorn - 40,000 and V. Bruce Thompson - 20,000. These
options will vest 20% per year.
(3) After giving effect to the Reverse Stock Split, on December 31, 1995 the
last reported sales price of the Common Stock as quoted on the NASDAQ
National Market was $14.065 per share. The option price for the options
granted in 1992 was $15.00 per share and the option price for the options
granted in 1993 was $25.00 per share, after giving effect to the Reverse
Stock Split. Since the last reported sales price at December 31, 1995 was
lower than the option price for the options granted in 1992 and 1993, no
value is ascribed to those options in the above table.
STOCK PERFORMANCE GRAPHS
The following graph compares the yearly percentage change in the
cumulative total shareholder return on the Common Stock during the five years
ended December 31, 1995 with the cumulative return on the S & P 500 Index and
the Dow Jones Oil, Secondary Index. The Company believes that the Dow Jones
Secondary Index is meaningful because it is an independent, objective view of
the performance of other similarly sized energy companies. The graph assumes
that $100 was invested in each category on the last trading day of 1990 and
that dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS (1)
[CHART]
(1) In the proxy statement for the 1995 Annual Meeting of Shareholders, the
Company included the above index measures as well as an index of peer
companies. The companies included in the peer index were American
Exploration Co., DEKALB Energy Company, Devon Energy Corporation, Noble
Affiliates, Inc., Plains Petroleum Company, Presidio Oil Company, Snyder Oil
Corporation and The Wiser Oil Company. During 1995, two of these peer
companies (DEKALB and Plains) were acquired or merged into other companies
and several others were in the process of undertaking similar transactions;
in addition, the size criteria used in selecting the peer companies was no
longer applicable and did not provide a relevant basis for comparison to the
Company. For this reason, Forest has chosen to discontinue the use of the
peer index comparison and to rely instead on the Dow Jones Oil, Secondary
Index which the Company believes provides an appropriate basis for
comparison.
-10-
<PAGE>
The following graph has been prepared on the same basis as the preceding
graph, except that it shows semi-annual stock performance over the period from
July 31, 1991 to December 31, 1995. In 1991, William L. Dorn was elected
Chairman of the Board.
COMPARISON OF SEMI-ANNUAL CUMULATIVE TOTAL RETURNS
[CHART]
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The goal of the Compensation Committee is to design the Company's
executive compensation program to enable the Company to attract, retain and
motivate executive personnel deemed necessary to maximize return to
shareholders. The fundamental concept of the program is to align the amount
of an executive's total compensation with his contribution to the success of
the Company in creating shareholder value.
In furtherance of this objective, in November 1995, the Compensation
Committee determined that the program should have the following components:
BASE SALARIES. The Compensation Committee believes that the Company
should offer competitive base salaries to enable it to attract,
motivate and retain capable executives. The Compensation Committee
has in the past determined levels of base compensation using
published compensation surveys for energy and similar sized companies
and information obtained from compensation consultants. The
Compensation Committee may or may not use such surveys or other
information to determine levels of base compensation in the future.
SHORT-TERM INCENTIVES. The Compensation Committee believes that the
Company should offer short-term incentive compensation annually to
reward the Company's executives for achieving certain predetermined
corporate and individual performance objectives. The incentives may
be awarded in the form of cash bonuses, restricted stock and stock
options, or a combination of the foregoing.
LONG-TERM INCENTIVES. The Compensation Committee believes that
long-term compensation should comprise a substantial portion of each
executive officer's total compensation. Long-term compensation
provides incentives that encourage the executive officers to own and
hold the Company's stock and tie their long-term economic interests
directly to those of the Company's shareholders. Long-term
compensation can be provided in the form of restricted stock or stock
options.
The Compensation Committee significantly modified the Company's
executive compensation program in 1995 based on the objective of creating
shareholder value and expects to continue to review the executive
compensation program during 1996 to further refine these components. See
"Changes in Compensation Programs" below.
-11-
<PAGE>
The Compensation Committee's duties include the annual review and
approval of the compensation of the Chairman and the President and Chief
Executive Officer, review and determination of individual elements of
compensation for the Company's executive officers, review of the
administration of long-term incentive plans for management and determining
the terms and awards under the Company's 1992 Stock Option Plan and, prior to
its termination of the program in 1995, review of the administration of the
Company's Incentive Plan. Prior to the elimination of the Company's royalty
bonus program described below, the Royalty Bonus Committee was responsible
for granting bonuses of undivided overriding royalty interests pursuant to
such program. The Executive Committee is responsible for determining the
salaries for all officers except the Chairman and the President and Chief
Executive Officer. In 1995, the Compensation Committee held three meetings.
The Compensation Committee has studied the limitation on the
deductibility of compensation for federal income tax purposes pursuant to
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Compensation Committee does not currently intend to award levels of
compensation that results in such limitation. The Compensation Committee may
authorize compensation in the future that results in amounts above the limit
if it determines that such compensation is in the best interests of the
Company. In addition, the limitation may affect the future grant of stock
options.
CHANGES IN COMPENSATION PROGRAMS. In November 1995, the Compensation
Committee adopted changes in the Company's executive compensation program.
The Compensation Committee terminated the Incentive Plan that became
effective in 1992 and the discretionary cash incentive bonus plan for
managers adopted in 1994, in each case without approving any awards
thereunder for 1994 or 1995, terminated the Company's royalty bonus program
(as described below under "Royalty Bonuses"), terminated the provision of
leased automobiles and club memberships for executives and other employees
and determined not to award Christmas bonuses to executives in 1995. The
Compensation Committee also authorized the adjustments in base salaries,
payment of cash bonuses and grant of replacement and additional stock options
referred to below.
BASE SALARIES. In 1995, the Company adjusted base salaries of
certain officers to reflect promotions and changes of responsibilities and to
partially offset the loss of perquisites.
SHORT-TERM INCENTIVES. In November 1995, the Compensation Committee
authorized senior management of the Company to establish individual annual
performance objectives for managers to earn short-term incentive
compensation. Senior management has undertaken to establish such a program
for 1996. In 1995, the Compensation Committee authorized one-time cash
bonuses for certain officers as additional compensation for their performance
in 1995 and in consideration of the elimination of certain perquisites
referred to above. William L. Dorn and Robert S. Boswell each received a
$30,000 cash bonus.
LONG-TERM INCENTIVES. In November 1995, the Compensation Committee
authorized the issuance of replacement and additional stock options at an
exercise price of $11.25 per share to all officers and employees that had
outstanding options in exchange for such outstanding options, which had
exercise prices of $15.00 and $25.00 per share. The $11.25 options were
issued in February 1996 with a new vesting schedule at the rate of 20% per
year. William L. Dorn and Robert S. Boswell each exchanged old options for
70,000 shares and received new options for 100,000 shares. The exchange and
additional issuance were completed in February 1996.
EXECUTIVE SEVERANCE AGREEMENTS. In March 1995, the Compensation
Committee renewed the Executive Severance Agreements and extended their term
to December 1997. In addition, the definition of change of control was
modified. See "Transactions with Management and Others - Executive Severance
Agreements."
ROYALTY BONUSES. The Company's royalty bonus program was terminated
at the end of 1995. During 1995, the Company assigned to certain of its
executive officers, other key personnel and certain retirees, as additional
compensation, certain bonuses of undivided interests in overriding royalty
interests equal to approximately 6% of the Company's net interest in all oil,
gas and other minerals produced, saved and sold from certain oil and gas
prospects in which the Company had an interest. The prospects, the size of
the interest and
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<PAGE>
the participants in such bonuses were determined from time to time by the
Royalty Bonus Committee of the Board of Directors. The interest of each
officer and key employee in such bonuses varies according to his
responsibility and salary. The interests of William L. Dorn and Robert S.
Boswell were established based upon their responsibilities as directors and
officers, and on their salaries. By the terms of the issuing documents, such
interests were to terminate, revert to and revest in the Company on December
31, 1995, unless on such date certain conditions with respect to production
or drilling operations on the properties subject to the royalties were
fulfilled. Certain royalty interests awarded in 1993, 1994 and 1995 (nine in
number) terminated, reverted to and revested in the Company during 1995.
Date: April 8, 1996
COMPENSATION COMMITTEE
----------------------
Michael B. Yanney, Chairman
Richard J. Callahan
Drake S. Tempest
EXECUTIVE COMMITTEE ROYALTY BONUS COMMITTEE
------------------- -----------------------
William L. Dorn, Chairman William L. Dorn, Chairman
Robert S. Boswell Robert S. Boswell
James H. Lee James H. Lee
Craig D. Slater
PENSION PLAN
The Company's Pension Plan is a qualified, non-contributory defined
benefit plan. On May 8, 1991, the Board of Directors suspended benefit
accruals under the Pension Plan effective as of May 31, 1991.
The following table shows the estimated maximum annual benefits
payable upon retirement at age 65 as a straight life annuity to participants
in the Pension Plan for the indicated levels of average annual compensation
and various periods of service, assuming no future changes in such plan:
<TABLE>
<CAPTION>
ESTIMATED MAXIMUM ANNUAL
PENSION BENEFITS (2)
------------------------------------
YEARS OF SERVICE
------------------------------------
REMUNERATION (1) 10 20 30
---------------- ------ ------- -------
<S> <C> <C> <C>
$100,000................ 36,846 48,060 53,400
200,000................ 73,692 96,120 106,800
300,000................ 79,282 103,412 114,902
400,000................ 79,282 103,412 114,902
</TABLE>
_________________
(1) For each Named Executive Officer, the level of compensation used to
determine benefits payable under the Pension Plan is such officer's base
salary for 1991.
(2) Normal retirement benefits attributable to the Company's contributions are
limited under certain provisions of the Code to $120,000 in 1996, as
increased annually thereafter for cost of living adjustments.
The amount of the Company's contribution, payment or accrual in
respect to any specified person in the Pension Plan is not and cannot readily
be separately or individually calculated by the Pension Plan actuaries.
Annual benefits at normal retirement are approximately 24% of average annual
earnings (excluding bonuses) for any consecutive 60-month period which
produces the highest amount, in the last 15 years prior to retirement, up to
May 31, 1991, when benefit accruals ceased plus 21% of such earnings prorated
over 20 years of credited
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<PAGE>
service, and 1/2 of 1% of such earnings for each year of credited service in
excess of 20, subject to certain adjustments for lack of plan participation.
There is no Social Security offset. Such benefits are payable for life with a
10 year certain period, or the actuarial equivalent of such benefit.
Because benefit accruals under the Pension Plan were suspended effective
May 31, 1991, the years of credited service for the Named Executive Officers
are as follows: William L. Dorn - 20; Robert S. Boswell - 2; Bulent A.
Berilgen - 7; Forest D. Dorn - 14 and David H. Keyte - 4. The estimated
annual accrued benefit payable, based on a life annuity benefit, upon normal
retirement for each of such persons is: William L. Dorn - $50,429; Robert S.
Boswell - $4,616; Bulent A. Berilgen - $11,162; David H. Keyte - $5,097 and
Forest D. Dorn - $17,823. V. Bruce Thompson has no benefit under this plan
because his employment commenced after benefit accruals were suspended.
Certain participants in the Pension Plan have been prevented by the
limits of the Code from receiving the full amount of pension benefits to
which they would otherwise have been entitled. Such persons have had benefits
credited to them under a Supplemental Retirement Plan, which together with
the benefits payable under the Pension Plan, equaled the benefit to which
they would have been entitled under the Pension Plan but for such Code
limits. The Supplemental Retirement Plans for each participant were unfunded,
non-qualified, non-contributory benefit plans. Benefits payable vest to the
same extent as the Pension Plan benefits and are unsecured general obligations
of the Company. Benefit accruals under these plans were suspended effective
May 31, 1991 in conjunction with the suspension of benefit accruals under the
Pension Plan.
PRINCIPAL HOLDERS OF SECURITIES
The Company currently has one class of voting securities outstanding. On
February 29, 1996, there were 24,527,575 shares of Common Stock outstanding,
with each such share being entitled to one vote.
As of February 29, 1996, to the knowledge of the Board of Directors the
only shareholders who owned beneficially more than 5% of the outstanding
shares of Common Stock were:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
- - -------------- ------------------------ -------------------- --------
<S> <C> <C> <C>
Common Stock (1) The Anschutz Corporation 11,138,888(2) 34.9%
2400 Anaconda Tower
555 17th Street
Denver, Colorado 80202
Joint Energy Development 1,680,000 6.8%
Investments Limited Partnership
P. O. Box 1188
Houston, Texas 77251-1188
</TABLE>
___________________
(1) Based on Schedules 13D and 13G and amendments thereto filed with the SEC
and the Company by the reporting person through February 29, 1996 and the
amount of Common Stock outstanding on February 29, 1996. All share amounts
give effect to the Reverse Stock Split.
(2) The shares indicated as beneficially owned by Anschutz and Philip F.
Anschutz include (a) 1,240,000 shares issuable upon conversion of 620,000
shares of the Company's Second Series Preferred Stock and (b) 6,138,888
shares issuable pursuant to an option and a warrant exercisable within 60
days. Anschutz has also agreed to not transfer any of its shares of Common
Stock, except in limited circumstances, until after October 31, 1996.
-14-
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
RETIREMENT BENEFITS FOR FORMER EXECUTIVES AND DIRECTORS. In December
1990, in consideration of their many years of service, the Company entered
into retirement agreements with seven executives and directors ("Retirees")
pursuant to which the Retirees will receive supplemental retirement payments
in addition to the amounts to which they are entitled under the Company's
retirement plan. In addition, the Retirees and their spouses are entitled to
lifetime coverage under the Company's group medical and dental plans, tax and
other financial services and payments by the Company in connection with certain
club membership dues. The Retirees also participated in the Company's royalty
bonus program until it was terminated at the end of 1995. The Company has also
agreed to maintain certain life insurance policies in effect at December 1990
for the benefit of each of the Retirees. All of the Retirees have subsequently
resigned as directors. Pursuant to the terms of the retirement agreements, the
Retirees who cease to be a director (or his spouse) will be paid $2,500 a
month until December 2000.
The Company's obligation to one Retiree under a revised retirement
agreement is payable in Common Stock or cash, at the Company's option, in May
of 1996 at approximately $190,000 per year with the balance ($149,000)
payable in May 1997. The retirement agreements for the other six Retirees,
one of whom received in 1991 the payments scheduled to be made in 1999 and
2000, provide for supplemental retirement payments totaling approximately
$938,400 per year through 1998 and approximately $740,400 per year in 1999
and 2000.
EXECUTIVE SEVERANCE AGREEMENTS. The Company has entered into executive
severance agreements (the "Executive Severance Agreements") with certain
executive officers, including the Named Executive Officers. The Executive
Severance Agreements provide for severance benefits for termination without
cause and for termination following a "change of control" of the Company. The
Executive Severance Agreements provide that if an executive's employment is
terminated either (a) by the Company for reasons other than cause or other
than as a consequence of death, disability, or retirement, or (b) by the
executive for reasons of diminution of responsibilities, compensation, or
benefits or, in the case of a change of control, a significant change in the
executive's principal place of employment, the executive will receive certain
payments and benefits. In March 1995, the Compensation Committee renewed the
Executive Severance Agreements and extended their term to December 1997. In
addition, the definition of "change of control" was modified.
In the case of termination of an executive's employment which does not
occur within two years of a change of control, these severance benefits
include (a) payment of the executive's base salary for a term of months equal
to the whole number of times that the executive's base salary can be divided
by $10,000, limited to 30 months (such amounts payable will be reduced by 50%
if the executive obtains new employment during the term of payment) and (b)
continued coverage of the executive and any of his or her dependents under
the Company's medical and dental benefit plans throughout the payment term
without any cost to the executive.
If an executive's employment by the Company is terminated under the
circumstances described above within two years after the date upon which a
change of control occurs, the Company would be obligated to take the
following actions after the last day of the executive's employment:
(a) the Company will pay to the executive an amount equal to 2.5 times
the executive's base salary;
(b) the Company will permit the executive and those of his dependents who
are covered under the Company's medical and dental benefit plans to be
covered by such plans without any cost to the executive for a two-year
period of time;
(c) the Company will cause any and all outstanding options to purchase
stock of the Company held by the executive to become immediately
exercisable in full and cause the executive's accrued benefits under
any non-qualified deferred compensation plans to become immediately
non-forfeitable; and
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<PAGE>
(d) if any payment or distribution to the executive, whether or not
pursuant to such agreement, is subject to the federal excise tax on
"excess parachute payments," the Company will be obligated to pay to
the executive such additional amount as may be necessary so that the
executive realizes, after the payment of any income or excise tax on
such additional amount, an amount sufficient to pay all such excise
taxes.
The Executive Severance Agreements also provide that the Company will
pay legal fees and expenses incurred by an executive to enforce rights or
benefits under such agreements. Under the Executive Severance Agreements, a
"change of control" of the Company would be deemed to occur if, as modified
in March 1995, (i) the Company is not the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity other than a previously wholly-owned subsidiary of the Company); (ii)
the Company sells, leases or exchanges all or substantially all of its assets
to any other person or entity (other than a wholly-owned subsidiary of the
Company); (iii) the Company is dissolved and liquidated; (iv) any person or
entity, including a "group" as contemplated by Section 13(d)(3) of the
Exchange Act acquires or gains ownership or control (including, without
limitation, power to vote) of more than 40% of the outstanding shares of the
Company's voting stock (based upon voting power); or (v) as a result of or in
connection with a contested election of directors, the persons who were
directors of the Company before such election cease to constitute a majority
of the Board of Directors.
SECTION 16 REPORTING
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the National Association of Security Dealers, Inc.
Officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of copies of such forms received by it and
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
January 1, 1995 to February 15, 1996, its officers, directors, and greater
than 10% beneficial owners complied with all applicable filing requirements,
except that Michael B. Yanney was late in filing a monthly report of one
transaction.
PROPOSAL TO AMEND AND RESTATE THE 1992 STOCK OPTION PLAN
At the Annual Meeting, the shareholders will be asked to approve an
amendment and restatement of the 1992 Stock Option Plan, a copy of which
amendment and restatement is attached hereto as Appendix A. Pursuant to the
amendment and restatement, the name of such plan will be changed to the Stock
Incentive Plan (the "Stock Incentive Plan"). The primary differences between
the amended and restated Stock Incentive Plan and the plan as originally
adopted in 1992 are (1) shares of Common Stock subject to certain forfeiture
and/or transfer restrictions may be awarded to employees and (2) shares of
Common Stock subject to certain transfer restrictions will be automatically
awarded to nonemployee directors of the Company ("Nonemployee Directors").
The amended and restated Stock Incentive Plan was unanimously approved
by the Board on March 22, 1996, subject to shareholder approval at the Annual
Meeting. The Stock Incentive Plan is designed to enable the Company and its
subsidiaries to provide a means to attract able directors and employees and
to provide a means whereby those individuals upon whom the responsibilities
of the successful administration and management of the Company rest, and
whose present and potential contributions to the welfare of the Company are
of importance, can acquire and maintain stock ownership, thereby strengthening
their concern for the welfare of the Company. A further purpose of the Stock
Incentive Plan is to provide such individuals with additional
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<PAGE>
incentive and reward opportunities designed to enhance the profitable growth
of the Company. Accordingly, the Stock Incentive Plan provides for (a)
granting to employees stock options that do not constitute incentive stock
options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), ("Options"), (b) granting to employees shares of Common
Stock that are subject to forfeiture under certain circumstances and/or
certain transfer restrictions ("Restricted Stock"), and (c) granting to
Nonemployee Directors shares of Common Stock that are subject to certain
transfer restrictions ("Director Stock Awards").
Below is a summary of the terms of the amended and restated Stock
Incentive Plan which is qualified in its entirety by reference to the full
text of the Stock Incentive Plan which is attached to this Proxy Statement as
Appendix A. Approval of the Stock Incentive Plan requires the affirmative
vote of a majority of the shares present, or represented, and entitled to
vote at the Annual Meeting.
NUMBER OF SHARES SUBJECT TO THE STOCK INCENTIVE PLAN
The aggregate maximum number of shares of Common Stock that may be
issued under the Stock Incentive Plan cannot, on the date of the grant of any
award thereunder, exceed an amount equal to 10% of the sum of the number of
then outstanding shares of Common Stock plus the aggregate number of shares
of Common Stock then issuable pursuant to the exercise, conversion, or
exchange of outstanding rights, warrants, convertible or exchangeable
securities or options (other than Options granted under the Stock Incentive
Plan). Shares of Common Stock in the Company's treasury are not deemed to be
outstanding for purposes of calculating such limitation. The aggregate
maximum number of shares of Common Stock that may be the subject of Options
or Restricted Stock awards granted to any one employee during a calendar year
beginning on or after January 1, 1996, may not exceed 250,000 shares, subject
to adjustment upon a reorganization, stock split, recapitalization, or other
change in the Company's capital structure.
ADMINISTRATION
The Stock Incentive Plan is administered by a committee, currently the
Compensation Committee (the "Committee"), appointed by the Board, constituted
so as to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and constituted solely of two or more
Nonemployee Directors. The Board has appointed the Compensation Committee to
administer the Stock Incentive Plan. No member of the Committee is eligible
to receive an Option or an award of Restricted Stock under the Stock
Incentive Plan, and no person who has received an Option or an award of
Restricted Stock under the Stock Incentive Plan in the preceding year may
serve on the Committee. Members of the Committee will, however, receive
Director Stock Awards under the Stock Incentive Plan.
The Committee has full authority, subject to the terms of the Stock
Incentive Plan, to establish rules and regulations for the proper administration
of the Stock Incentive Plan, to select the employees to whom awards of Options
or Restricted Stock are granted, and to set the date of grant and the other
terms of the awards. When granting awards, the Committee considers such
factors as an employee's duties and present and potential contributions to the
Company's success.
ELIGIBILITY
All of the employees of the Company and its subsidiaries (including an
employee who may also be a director of any such company) are eligible to
participate in the Stock Incentive Plan. The selection of employees, from
among those eligible, who will receive Options or Restricted Stock awards, or
any combination thereof, is within the discretion of the Committee. Director
Stock Awards will be awarded only to Nonemployee Directors, and Options and
Restricted Stock awards will not be granted to any Nonemployee Director.
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TERM OF STOCK INCENTIVE PLAN
The Stock Incentive Plan originally became effective on March 6, 1992.
Subject to approval by the shareholders of the Company at the Annual Meeting,
the amendment and restatement of the Stock Incentive Plan became effective
March 22, 1996, the date of its adoption by the Board. No further awards may
be granted under the Stock Incentive Plan after March 5, 2002, and the Stock
Incentive Plan will terminate thereafter once all awards have been satisfied
or expired. The Board of Directors may, however, terminate the Stock
Incentive Plan at any time without prejudice to the holders of any then
outstanding awards.
STOCK OPTIONS
a. TERM OF OPTION. The term of each Option will be as specified by the
Committee at the date of grant. The effect of an employee's termination of
employment by reason of death, retirement, disability or otherwise will be
specified in the contract that evidences each Option grant.
b. OPTION PRICE. The Option price will be determined by the Committee
but such price will be no less than 85% of the fair market value of the
shares on the date that the Option is granted.
c. STATUS OF OPTIONS. Options granted under the Stock Incentive Plan
will not constitute incentive stock options within the meaning of Section 422
of the Code.
d. SIZE OF GRANT. The number of shares for which an Option is granted
to an employee will be determined by the Committee.
e. PAYMENT. The Option price upon exercise may, at the discretion of
the Committee, be paid by an employee in cash, other shares of Common Stock
owned by the employee, or by a combination of cash and Common Stock. The
Stock Incentive Plan also allows the Company, in its discretion, to pay a
cash bonus to an optionee on the date of exercise of an Option in order to
facilitate the payment of all or any portion of the Option exercise price.
f. OPTION CONTRACT. All Options will be evidenced by a written
contract containing provisions consistent with the Stock Incentive Plan and
such other provisions as the Committee deems appropriate.
g. TRANSFERABILITY. No Option is transferable other than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order, and only the employee or his guardian or legal
representative may exercise any Option during the employee's lifetime.
RESTRICTED STOCK
a. RESTRICTED STOCK SUBJECT TO FORFEITURE AND TRANSFER RESTRICTIONS.
Except as described in subparagraph (b) below, shares of Common Stock awarded
in a Restricted Stock award will be issued or delivered to the employee at
the time the award is made without any payment to the Company (other than for
any payment amount determined by the Committee in its discretion or the
possible requirement that the par value per share be paid), but such shares
will be subject to certain restrictions on the disposition thereof, certain
obligations to forfeit such shares to the Company, and such other
restrictions as may be determined in the discretion of the Committee. The
restrictions on disposition may lapse based on (i) the Company's attainment
of targets established by the Committee that are based on (1) the price of a
share of Common Stock, (2) the Company's earnings per share, (3) the
Company's market share, (4) the market share of a business unit of the
Company designated by the Committee, (5) the Company's sales, (6) the sale of
a business unit of the Company designated by the Committee, or (7) the return
on shareholders' equity achieved by the Company, (ii) the employee's tenure
with the Company, (iii) a combination of both factors or (iv) upon the
occurrence of any event or the satisfaction of any other condition specified
by the Committee in its sole discretion. Upon the issuance to an employee of
shares of Common Stock pursuant to such a Restricted Stock award, except for
the foregoing
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restrictions, such employee will have all the rights of a shareholder of the
Company with respect to such shares, including the right to vote such shares
and to receive all dividends and other distributions paid with respect to
such shares. The Committee will determine the effect of the termination of
employment of a recipient of such a Restricted Stock award (by reason of
retirement, disability, death or otherwise) prior to the lapse of any
applicable restrictions. If shares of Common Stock issued pursuant to such a
Restricted Stock award are voluntarily or involuntarily transferred by the
employee at any time before they become nonforfeitable, such shares will be
forfeited and canceled.
b. RESTRICTED STOCK SUBJECT ONLY TO TRANSFER RESTRICTIONS. In the
discretion of the Committee, shares of Common Stock that are the subject of a
Restricted Stock award may be subject to restrictions on disposition by the
employee without any obligation of the employee to forfeit and surrender the
shares to the Company under any circumstances. Pursuant to such a Restricted
Stock award, shares of Common Stock will be issued or delivered to the
employee at the time the award is made without any payment to the Company
(other than for any payment amount determined by the Committee in its
discretion or the possible requirement that the par value per share be paid).
An employee who receives Common Stock pursuant to such a Restricted Stock
award will have the right to receive dividends with respect to such Common
Stock, to vote such Common Stock, and to enjoy all other shareholder rights,
except that such Common Stock will be subject to certain transfer
restrictions and the Company will retain custody of the stock until such
transfer restrictions have expired. For a period of time after the date of
grant of such a Restricted Stock award (which period will be established by
the Committee), the employee may not sell, assign, pledge, or otherwise
transfer or dispose of the shares of Common Stock issued in connection with
such award. Upon the expiration of such period or, if earlier, upon the
occurrence of any event or the satisfaction of any condition specified by the
Committee, the transfer restrictions will cease to apply and the Company will
deliver the Common Stock certificate to the employee. Shares of Common Stock
issued pursuant to such a Restricted Stock award will bear a legend to
reflect such transfer restrictions. The Committee intends to award
Restricted Stock that is subject only to transfer restrictions as partial
payment under individual performance agreements (see "Report of the
Compensation Committee on Executive Compensation - Short-Term Incentives").
DIRECTOR STOCK AWARDS
a. DIRECTOR STOCK AWARDS. On the date of each annual meeting of the
shareholders of the Company (beginning with the Annual Meeting), the Company
will, without cost to the recipient and without the exercise of the
discretion of any person or persons, award and issue to each Nonemployee
Director then in office or elected to the Board on the date of such meeting
that number of shares of Common Stock (rounded up to the nearest whole share)
determined by dividing (i) one-half of the annual retainer fee, if any,
payable by the Company to such Nonemployee Director for the year during which
such meeting occurs by (ii) the average of the fair market values of a share
of Common Stock on the 20 trading days immediately preceding the date that is
three trading days prior to the date of such meeting. On the last day of
each March, June, September, and December (beginning with June 30, 1996), the
Company will, without cost to the recipient and without the exercise of the
discretion of any person or persons, award and issue to each Nonemployee
Director serving on the Executive Committee of the Board on such date that
number of shares of Common Stock (rounded up to the nearest whole share)
determined by dividing (1) one-eighth of the annual fee, if any, payable by
the Company to such Nonemployee Director for service on such committee for
the year during which such date occurs by (2) the average of the fair market
values of a share of Common Stock on the 20 trading days immediately
preceding the date that is three trading days prior to such date. If, as of
any date that the Stock Incentive Plan is in effect, there are not sufficient
shares of Common Stock available to allow for the award to each Nonemployee
Director of the number of shares described in the preceding sentences, each
Nonemployee Director will receive his or her pro-rata share of the total
number of shares of Common Stock then available under the Stock Incentive
Plan. Shares of Common Stock issued pursuant to a Director Stock Award will
be subject to the restrictions on transfer described in subparagraph (b)
below, and such shares will bear a legend to reflect such transfer
restrictions.
b. TRANSFER RESTRICTIONS. A Nonemployee Director who receives
Common Stock pursuant to a Director Stock Award will have the right to
receive dividends with respect to such Common Stock, to vote such Common
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Stock, and to enjoy all other shareholder rights, except that such Common
Stock will be subject to certain transfer restrictions and the Company will
retain custody of the stock until such transfer restrictions have expired.
For a period of 24 months after the date of grant of a Director Stock Award,
the Nonemployee Director may not sell, assign, pledge, or otherwise transfer
or dispose of the shares of Common Stock issued in connection with such
award. Upon the expiration of such 24 month period or, if earlier, upon the
occurrence of a Corporate Change (as such term is defined below) or the
termination of the Nonemployee Director's service as a director of the
Company for any reason whatsoever, the transfer restrictions will cease to
apply and the Company will deliver the Common Stock certificate to the
Nonemployee Director.
CORPORATE CHANGE
The Stock Incentive Plan provides that, upon a Corporate Change (as
hereinafter defined), the Committee may accelerate the vesting of Options,
cancel Options and make payments in respect thereof in cash, adjust the
outstanding Options as appropriate to reflect such Corporate Change, or
provide that each Option shall thereafter be exercisable for the number and
class of securities or property that the optionee would have been entitled to
had the Option already been exercised. Shares of Common Stock issued
pursuant to Director Stock Awards will cease to be subject to any transfer
restrictions upon the occurrence of a Corporate Change. The Committee may
provide at the time of grant that shares of Common Stock issued pursuant to
Restricted Stock awards that are subject only to transfer restrictions will
cease to be subject to any transfer restrictions upon the occurrence of a
Corporate Change. Upon the occurrence of a Corporate Change, the Committee
may fully vest any Restricted Stock awards that are subject to both
forfeiture and transfer restrictions and, upon such vesting, all restrictions
applicable to such stock will terminate. The Stock Incentive Plan provides
that a Corporate Change occurs (a) if the Company is dissolved and
liquidated, (b) if the Company is not the surviving entity in any merger or
consolidation, (c) if the Company sells, leases or exchanges or agrees to
sell, lease or exchange all or substantially all of its assets, (d) if any
person, entity or group acquires or gains ownership or control of more than
50% of the outstanding shares of the Company's voting stock or (e) if after a
contested election of directors, the persons who were directors before such
election cease to constitute a majority of the Board of Directors.
AMENDMENTS
The Board of Directors may from time to time amend the Stock
Incentive Plan; however, no amendment which modifies the class of eligible
individuals, increases the number of shares of Common Stock authorized or
available under the Stock Incentive Plan, extends the duration of the Stock
Incentive Plan, changes the minimum option exercise price, changes the terms
relating to Director Stock Awards, or materially increases the benefits
accruing to employees may be adopted without the prior approval of the
shareholders of the Company.
FEDERAL INCOME TAX ASPECTS OF THE STOCK INCENTIVE PLAN
STOCK OPTIONS. As a general rule, no federal income tax is imposed
on the optionee upon the grant of an Option under the Stock Incentive Plan
and the Company is not entitled to a tax deduction by reason of such a grant.
Generally, upon the exercise of an Option, the optionee will be treated as
receiving compensation taxable as ordinary income in the year of exercise in
an amount equal to the excess of the fair market value of the shares on the
date of exercise over the option price paid for such shares. Upon the
exercise of an Option, and subject to the application of Section 162(m) of
the Code as discussed below, the Company may claim a deduction for
compensation paid at the same time and in the same amount as compensation
income is recognized to the optionee assuming any federal income tax
withholding requirements are satisfied. Upon a subsequent disposition of the
shares received upon exercise of an Option, any appreciation after the date
of exercise should qualify as capital gain. If the shares received upon the
exercise of an Option are transferred to the optionee subject to certain
restrictions, then the taxable income realized by the optionee, unless the
optionee elects otherwise, and the Company's tax deduction (assuming any
federal income tax withholding requirements are satisfied) should be deferred
and should be measured at the fair market value of the shares at the time the
restrictions lapse. The restrictions imposed on officers, directors and 10%
shareholders by Section 16(b) of the
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Exchange Act is such a restriction during the period prescribed thereby if
other shares have been purchased by such an individual within six months of
the exercise of an Option.
RESTRICTED STOCK SUBJECT TO FORFEITURE AND TRANSFER RESTRICTIONS. An
employee who receives a Restricted Stock award under the Stock Incentive Plan
that is subject to both forfeiture and transfer restrictions will not realize
taxable income at the time of grant, and the Company will not be entitled to
a deduction at that time, assuming that the restrictions constitute a
substantial risk of forfeiture for federal income tax purposes. Upon
expiration of the forfeiture restrictions (i.e., as shares become vested),
the holder will realize ordinary income in an amount equal to the excess of
the fair market value of the shares at such time over the amount, if any,
paid for such shares, and, subject to the application of Section 162(m) of
the Code as discussed below, the Company will be entitled to a corresponding
deduction. Dividends paid to the holder during the period that the
forfeiture restrictions apply will also be compensation to the employee and
deductible as such by the Company. Notwithstanding the foregoing, the
recipient of such a Restricted Stock award may elect to be taxed at the time
of grant of the award based upon the fair market value of the shares on the
date of the award, in which case (a) subject to Section 162(m) of the Code,
the Company will be entitled to a deduction at the same time and in the same
amount, (b) dividends paid to the recipient during the period the forfeiture
restrictions apply will be taxable as dividends and will not be deductible by
the Company, and (c) there will be no further federal income tax consequences
when the forfeiture restrictions lapse.
RESTRICTED STOCK SUBJECT ONLY TO TRANSFER RESTRICTIONS. Ordinary
income will be recognized by an employee at the time of the grant of a
Restricted Stock award that is subject only to transfer restrictions in an
amount equal to the excess of the fair market value on such date of the
shares of Common Stock subject to such grant over the amount, if any, paid
for such shares. However, if other shares of Common Stock have been
purchased by an employee within six months of the date of grant of such a
Restricted Stock award, recognition of the income attributable to such award
may under certain circumstances be postponed for a period of up to six months
from the date of such purchase of such other shares of Common Stock due to
liability to suit under Section 16(b) of the Exchange Act. If applicable,
one effect of any such postponement would be to measure the amount of the
employee's taxable income by reference to the fair market value of such
shares at the time such liability to suit under Section 16(b) of the Exchange
Act no longer exists (rather than at the earlier date of the grant of the
Restricted Stock award). With respect to such a Restricted Stock award under
the Stock Incentive Plan, subject to the application of Section 162(m) of the
Code as discussed below, the Company may claim a deduction for compensation
paid at the same time and in the same amount as ordinary income is recognized
by the employee.
DIRECTOR STOCK AWARDS. Ordinary income will be recognized by a
Nonemployee Director at the time of the grant of a Director Stock Award in an
amount equal to the fair market value on such date of the shares of Common
Stock subject to such grant. However, if other shares of Common Stock have
been purchased by a Nonemployee Director within six months of the date of
grant of a Director Stock Award, recognition of the income attributable to
such award may under certain circumstances be postponed for a period of up to
six months from the date of such purchase of such other shares of Common
Stock due to liability to suit under Section 16(b) of the Exchange Act. If
applicable, one effect of any such postponement would be to measure the
amount of the Nonemployee Director's taxable income by reference to the fair
market value of such shares at the time such liability to suit under Section
16(b) of the Exchange Act no longer exists (rather than at the earlier date
of the grant of the Director Stock Award). With respect to a Director Stock
Award under the Stock Incentive Plan, the Company may claim a deduction for
compensation paid at the same time and in the same amount as ordinary income
is recognized by the Nonemployee Director.
SECTION 162(M) OF THE CODE. Section 162(m) of the Code, which was
enacted in 1993, precludes a public corporation from taking a deduction in
1994 or subsequent taxable years for compensation in excess of $1 million
paid to its chief executive officer or any of its four other highest-paid
officers. However, compensation that qualifies under Section 162(m) of the
Code as "performance-based" is specifically exempt from the deduction limit.
Based on Section 162(m) of the Code and the regulations thereunder, the
Company's
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ability to deduct compensation income generated in connection with the
exercise of Options granted under the Stock Incentive Plan that have an
exercise price equal to or greater than the fair market value of the shares
on the date of grant should not be limited by Section 162(m) of the Code.
However, Section 162(m) of the Code could limit the Company's deduction with
respect to compensation income generated in connection with the exercise of
an Option that had an exercise price less than the fair market value of the
shares on the date of grant. Restricted Stock awards under the Stock
Incentive Plan that are subject only to transfer restrictions will not
qualify as performance-based compensation under Section 162(m) of the Code
and, therefore, compensation expense deductions relating to such Restricted
Stock awards will be subject to the Section 162(m) deduction limitation. The
Stock Incentive Plan has been designed to provide flexibility with respect to
whether Restricted Stock awards that are subject to both forfeiture and
transfer restrictions will qualify as performance-based compensation under
Section 162(m) of the Code and, therefore, be exempt from the deduction
limit. If the forfeiture restrictions relating to such a Restricted Stock
award are based solely upon the satisfaction of one of the performance
criteria set forth in the Stock Incentive Plan, then the Company believes
that the compensation expense relating to such an award will be deductible by
the Company if the Restricted Stock award becomes vested. However,
compensation expense deductions relating to such a Restricted Stock award
will be subject to the Section 162(m) deduction limitation if the award
becomes vested based upon any other criteria set forth in such award (such as
the occurrence of a Corporate Change or vesting based upon continued
employment with the Company).
The Stock Incentive Plan is not qualified under section 401(a) of the
Code.
The comments set forth in the above paragraphs are only a summary of
certain of the Federal income tax consequences relating to the Stock
Incentive Plan. No consideration has been given to the effects of state,
local, or other tax laws on the Stock Incentive Plan or award recipients.
INAPPLICABILITY OF ERISA
Based upon current law and published interpretations, the Company
does not believe the Stock Incentive Plan is subject to any of the provisions
of the Employee Retirement Income Security Act of 1974.
ACQUISITIONS
Options may be granted in substitution for options held by officers
and employees of other corporations who are about to, or who have, become
employees of the Company or a subsidiary corporation as a result of a merger,
consolidation, acquisition of assets, or similar transaction by the Company
or a subsidiary. The terms, including the option price, of the substitute
Options so granted may vary from the terms set forth in the Stock Incentive
Plan to such extent as the Committee may deem appropriate to conform, in
whole or in part, to the provisions of the options in substitution for which
they are granted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDED AND RESTATED STOCK INCENTIVE PLAN.
APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders of the Company, the Board
has designated the firm of KPMG Peat Marwick LLP, Suite 2300, 707 Seventeenth
Street, Denver, Colorado 80202 as independent auditors to examine and audit
the Company's financial statements for the year 1996. This firm has audited
the Company's financial statements for approximately 46 years and is
considered to be well qualified. The designation of such firm as auditors is
being submitted for ratification or rejection at the Annual Meeting. Action
by shareholders is not required under the law for the appointment of
independent auditors, but the ratification of their appointment is submitted
by the Board in order to give the shareholders of the Company the final
choice in the designation of auditors. The Board will be governed by the
decision of a majority of the votes entitled to be cast. A majority of
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the vote represented at the Annual Meeting by shares of Common Stock entitled
to vote is required to ratify the appointment of KPMG Peat Marwick LLP.
A representative of KPMG Peat Marwick LLP will be present at the
Annual Meeting with the opportunity to make a statement if he desires to do
so and will also be available to respond to appropriate questions. A
representative of the firm was present at the last Annual Meeting for the
same purpose.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be included in the Board of Directors'
solicitation of proxies for the 1997 Annual Meeting of Shareholders must be
received by Daniel L. McNamara, Secretary, at 1600 Broadway, Suite 2200,
Denver, CO 80202, no later than December 2, 1996.
GENERAL AND OTHER MATTERS
The Board of Directors knows of no matter, other than those referred
to in this Proxy Statement, which will be presented at the Annual Meeting.
However, if any other matters are properly brought before the meeting or any
of its adjournments, the person or persons voting the proxies will vote them
in accordance with their judgment on such matters. Should any nominee for
director be unwilling or unable to serve at the time of the Annual Meeting,
or any adjournment thereof, the persons named in the proxy will vote it for
the election of such other person for such directorship as the Board of
Directors may recommend unless, prior to the Annual Meeting, the Board of
Directors has eliminated that directorship by reducing the size of the Board
of Directors. The Board of Directors is not aware that any nominee named
herein will be unwilling or unable to serve as a director.
On July 25, 1995, the Company renewed Directors and Officers
Liability Coverages designed to indemnify the directors and officers of the
Company and its subsidiaries against certain liabilities incurred by them in
the performance of their duties and also providing for reimbursement in
certain cases to the Company and its subsidiaries for sums paid by them to
directors and officers as indemnification for similar liability. This type of
coverage was originally purchased by the Company on May 24, 1978. The 1995
renewal was for a one-year period. Primary insurance of $20,000,000 was
renewed with National Union Fire Insurance Company. Aggregate premiums for
the 12-month period ending July 25, 1996 were $440,000. No claims have been
filed and no payments have been made to the Company or its subsidiaries or to
any of their directors or officers under this coverage.
The Restated Certificate of Incorporation of the Company limits the
personal liability of the Company's directors to the fullest extent permitted
by the New York Business Corporation Law ("BCL"), as currently formulated or
as it might be revised in the future. The Restated Certificate of
Incorporation provides that a director will not be liable for damages for any
breach of duty unless it is finally established that (a) the director's acts
or omissions were in bad faith or involved intentional misconduct or a
knowing violation of law; or (b) the director personally gained a financial
profit or other advantages to which he was not legally entitled; or (c) the
director's acts violated Section 719 of the BCL which provides that directors
who vote for, or concur in, certain types of corporate action proscribed by
the BCL will be jointly and severally liable for any injury resulting from
such action.
The cost of preparing, assembling, and mailing this Proxy Statement,
the enclosed proxy card and the Notice of Annual Meeting will be paid by the
Company. Additional solicitation by mail, telephone, telegraph or personal
solicitation may be done by directors, officers, and regular employees of the
Company. Such persons will receive no additional compensation for such
services. Brokerage houses, banks and other nominees,
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fiduciaries and custodians nominally holding shares of Common Stock of record
will be requested to forward proxy soliciting material to the beneficial
owners of such shares, and will be reimbursed by the Company for their
reasonable expenses.
AVAILABLE INFORMATION. UPON REQUEST OF ANY SHAREHOLDER, THE
COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1995 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") ON FORM 10-K, INCLUDING
FINANCIAL STATEMENTS, THE SCHEDULES AND ANY AMENDMENTS THERETO AND ANY
DOCUMENTS INCORPORATED BY REFERENCE THEREIN WILL BE SENT TO THE SHAREHOLDER
WITHOUT CHARGE BY FIRST CLASS MAIL WITHIN ONE BUSINESS DAY OF RECEIPT OF SUCH
REQUEST. ALL REQUESTS SHOULD BE ADDRESSED TO THE SECRETARY OF THE COMPANY AT
1600 BROADWAY, SUITE 2200, DENVER, COLORADO 80202 OR BY TELEPHONE TO (303)
812-1400.
You are urged to complete, sign, date and return your proxy promptly.
You may revoke your proxy at any time before it is voted. If you attend the
Annual Meeting, as we hope you will, you may vote your shares in person.
By order of the Board of Directors
DANIEL L. McNAMARA
SECRETARY
April 8, 1996
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APPENDIX A
FOREST OIL CORPORATION
STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF MARCH 22, 1996
I. PURPOSE
The purpose of the FOREST OIL CORPORATION STOCK INCENTIVE PLAN (the
"Plan") is to provide a means through which FOREST OIL CORPORATION, a New
York corporation (the "Company"), and its subsidiaries may attract able
persons to serve as directors or enter the employ of the Company and to
provide a means whereby those individuals upon whom the responsibilities of
the successful administration and management of the Company rest, and whose
present and potential contributions to the welfare of the Company are of
importance, can acquire and maintain stock ownership, thereby strengthening
their concern for the welfare of the Company. A further purpose of the Plan
is to provide such individuals with additional incentive and reward
opportunities designed to enhance the profitable growth of the Company.
Accordingly, the Plan provides for granting Director Stock Awards to the
nonemployee directors of the Company and for granting Options, Restricted
Stock Awards, or any combination of the foregoing to employees.
The Plan as set forth herein constitutes an amendment and
restatement, effective as of March 22, 1996, of the Forest Oil Corporation
1992 Stock Option Plan, as previously adopted by the Company, and shall
supersede and replace in its entirety such previously adopted plan.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan
unless specifically modified by any paragraph:
(a) "AWARD" means, individually or collectively, any Director
Stock Award, Option, or Restricted Stock Award.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to such section and any regulations
under such section.
(d) "COMMITTEE" means not less than two members of the Board who
are selected by the Board as provided in Paragraph IV(a).
(e) "COMMON STOCK" means the common stock, par value $.10 per
share, of the Company.
(f) "COMPANY" means Forest Oil Corporation.
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(g) "CORPORATE CHANGE" means an event defined as a "Corporate
Change" under Paragraph X(c).
(h) "DIRECTOR" means an individual elected to the Board by the
shareholders of the Company or by the Board under applicable corporate law
who is serving on the Board on the date the Plan is adopted by the Board or
is elected to the Board after such date.
(i) "DIRECTOR STOCK AWARD" means an Award granted under Paragraph
IX of the Plan to a Nonemployee Director.
(j) An "EMPLOYEE" means any person (including a Director) in an
employment relationship with the Company or any parent or subsidiary
corporation (as defined in Section 424 of the Code).
(k) "FAIR MARKET VALUE" means, as of any specified date, the mean
of the high and low sales prices of the Common Stock (i) reported by the
National Market System of NASDAQ on that date or (ii) if the Common Stock is
listed on a national stock exchange, reported on the stock exchange composite
tape on that date; or, in either case, if no prices are reported on that
date, on the last preceding date on which such prices of the Common Stock are
so reported. If the Common Stock is traded over the counter at the time a
determination of its fair market value is required to be made hereunder, its
fair market value shall be deemed to be equal to the average between the
reported high and low or closing bid and asked prices of Common Stock on the
most recent date on which Common Stock was publicly traded. In the event
Common Stock is not publicly traded at the time a determination of its value
is required to be made hereunder, the determination of its fair market value
shall be made by the Committee in such manner as it deems appropriate.
(l) "HOLDER" means an employee who has been granted an Option or
Restricted Stock Award or a Nonemployee Director who has been granted a
Director Stock Award.
(m) "1934 ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "NONEMPLOYEE DIRECTOR" means a Director who is not an
employee.
(o) "OPTION" means an Award granted under Paragraph VII of the
Plan to an employee.
(p) "OPTION AGREEMENT" means a written agreement between the
Company and a Holder with respect to an Option.
(q) "PLAN" means the Forest Oil Corporation Stock Incentive Plan,
as amended from time to time.
(r) "RESTRICTED STOCK AGREEMENT" means a written agreement
between the Company and a Holder with respect to a Restricted Stock Award.
(s) "RESTRICTED STOCK AWARD" means an Award granted under
Paragraph VIII of the Plan to an employee.
(t) "RULE 16b-3" means SEC Rule 16b-3 promulgated under the 1934
Act, as such may be amended from time to time, and any successor rule,
regulation or statute fulfilling the same or a similar function.
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(u) "TRADING DAY" means a day during which trading in securities
generally occurs on the principal national or regional securities exchange on
which the Common Stock is listed or, if the Common Stock is not listed on a
national or regional securities exchange, on the National Market System of
NASDAQ or, if the Common Stock is not quoted thereon, on the principal other
market on which the Common Stock is then traded.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan originally became effective on March 6, 1992. This
amendment and restatement of the Plan shall become effective upon the date of
its adoption by the Board, provided this amendment and restatement of the
Plan is approved by the shareholders of the Company within twelve months
thereafter. Notwithstanding any provision in the Plan, in any Option
Agreement or in any Restricted Stock Agreement, no Option granted on or after
the effective date of this amendment and restatement of the Plan shall be
exercisable and no Restricted Stock Award or Director Stock Award shall be
made prior to such shareholder approval. No further Awards may be granted
under the Plan after March 5, 2002. The Plan shall remain in effect until
all Awards granted under the Plan have been satisfied or expired.
IV. ADMINISTRATION
(a) COMPOSITION OF COMMITTEE. The Plan shall be administered by
a committee which shall be (i) appointed by the Board, (ii) constituted so as
to permit the Plan to comply with Rule 16b-3, and (iii) constituted solely of
two or more "outside directors," within the meaning of Section 162(m) of the
Code and applicable interpretive authority thereunder. No member of the
Committee shall be eligible to receive an Award (other than a Director Stock
Award) under the Plan and no person who has received an Award (other than a
Director Stock Award) in the preceding year shall be eligible to serve on the
Committee.
(b) POWERS. Subject to the express provisions of the Plan, the
Committee shall have authority, in its discretion, to determine which
employees shall receive an Option and/or Restricted Stock Award, the time or
times when such Award shall be made, and the number of shares to be subject
to each Option or Restricted Stock Award. In making such determinations the
Committee shall take into account the nature of the services rendered by the
respective employees, their present and potential contribution to the
Company's success and such other factors as the Committee in its discretion
shall deem relevant.
(c) ADDITIONAL POWERS. The Committee shall have such additional
powers as are delegated to it by the other provisions of the Plan. Subject
to the express provisions of the Plan, this shall include the power to
construe the Plan and the respective agreements executed hereunder, to
prescribe rules and regulations relating to the Plan, to determine the terms,
restrictions and provisions of the agreement relating to each Award, and to
make all other determinations necessary or advisable for administering the
Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any agreement relating to an
Award in the manner and to the extent it shall deem expedient to carry it
into effect. The determinations of the Committee on the matters referred to
in this Paragraph IV shall be conclusive. The provisions of this Paragraph IV
with respect to decisions made by, and authority of, the Committee shall be
subject to the controlling provisions of Paragraph IX.
V. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
(a) STOCK GRANT AND AWARD LIMITS. Director Stock Awards shall be
awarded only to Nonemployee Directors as provided in Paragraph IX, and,
except as expressly authorized by Paragraph IX, no grant of an Award will be
made to a Nonemployee Director. The Committee may from time to time grant
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Options and/or Restricted Stock Awards to one or more employees determined by
it to be eligible for participation in the Plan in accordance with the
provisions of Paragraph VI. Subject to Paragraph X, the aggregate number of
shares of Common Stock that may be issued under the Plan shall not, on the
date of the grant of any Award, exceed an amount equal to 10% of the sum of
the number of then outstanding shares of Common Stock plus the aggregate
number of shares of Common Stock then issuable pursuant to the exercise,
conversion, or exchange of outstanding rights, warrants, convertible or
exchangeable securities or options (other than Options granted under the
Plan). The shares of Common Stock in the Company's treasury shall not be
deemed to be outstanding for purposes of calculating such limitation. To the
extent that an Award lapses or the rights of its Holder terminate, any shares
of Common Stock subject to such Award shall again be available for the grant
of an Award to the extent permitted under Rule 16b-3. Notwithstanding any
provision in the Plan to the contrary, the maximum number of shares of Common
Stock that may be subject to Options and/or Restricted Stock Awards granted
to any one individual during any calendar year beginning on or after January
1, 1996, may not exceed 250,000 (subject to adjustment in the same manner as
provided in Paragraph X hereof with respect to shares of Common Stock subject
to Awards then outstanding). The limitation set forth in the preceding
sentence shall be applied in a manner which will permit compensation
generated under the Plan to constitute "performance-based" compensation for
purposes of Section 162(m) of the Code, including, without limitation,
counting against such maximum number of shares, to the extent required under
Section 162(m) of the Code and applicable interpretive authority thereunder,
any shares subject to Options that are cancelled or repriced.
(b) STOCK OFFERED. The stock to be offered pursuant to the grant
of an Award may be authorized but unissued Common Stock or Common Stock
previously issued and outstanding and reacquired by the Company.
VI. ELIGIBILITY
Options and Restricted Stock Awards may be granted only to persons
who, at the time of grant, are employees. An Award to an employee may be
granted on more than one occasion, and, subject to the limitations set forth
in the Plan, such Award may include an Option, a Restricted Stock Award, or
any combination thereof. Director Stock Awards shall be awarded only to
Nonemployee Directors, and Options and Restricted Stock Awards may not be
granted to any Nonemployee Director.
VII. STOCK OPTIONS
(a) OPTION PERIOD. The term of each Option shall be as specified
by the Committee at the date of grant.
(b) LIMITATIONS ON EXERCISE OF OPTION. An Option shall be
exercisable in whole or in such installments and at such times as determined
by the Committee.
(c) NO INCENTIVE STOCK OPTIONS. Options granted under the Plan
shall not constitute incentive stock options within the meaning of Section
422 of the Code.
(d) OPTION AGREEMENT. Each Option shall be evidenced by an
Option Agreement in such form and containing such provisions not inconsistent
with the provisions of the Plan as the Committee from time to time shall
approve. Each Option Agreement shall specify the effect of termination of
employment on the exercisability of the Option. An Option Agreement may
provide for the payment of the option price, in whole or in part, by the
delivery of a number of shares of Common Stock (plus cash if necessary)
having a Fair Market
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Value equal to such option price. Moreover, an Option Agreement may provide
for a "cashless exercise" of the Option by establishing procedures whereby
the Holder, by a properly executed written notice, directs (i) an immediate
market sale or margin loan respecting all or a part of the shares of Common
Stock to which he is entitled upon exercise pursuant to an extension of
credit by the Company to the Holder of the option price, (ii) the delivery of
the shares of Common Stock from the Company directly to a brokerage firm, and
(iii) the delivery of the option price from sale or margin loan proceeds from
the brokerage firm directly to the Company. The terms and conditions of the
respective Option Agreements need not be identical.
(e) OPTION PRICE AND PAYMENT. The price at which a share of
Common Stock may be purchased upon exercise of an Option shall be determined
by the Committee but, subject to adjustment as provided in Paragraph X, such
purchase price shall not be less than 85% of the Fair Market Value of a share
of Common Stock on the date such Option is granted. The Option or portion
thereof may be exercised by delivery of an irrevocable notice of exercise to
the Company. The purchase price of the Option or portion thereof shall be
paid in full in the manner prescribed by the Committee. In connection with
the grant of an Option by the Committee to an employee, the Company, in its
discretion, may grant bonuses in cash to such employee on the date of
exercise of such Option in order to facilitate the payment of the purchase
price of such Option.
(f) SHAREHOLDER RIGHTS AND PRIVILEGES. The Holder shall be
entitled to all the privileges and rights of a shareholder only with respect
to such shares of Common Stock as have been purchased under the Option and
for which certificates of stock have been registered in the Holder's name.
(g) OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER
CORPORATIONS. Options may be granted under the Plan from time to time in
substitution for stock options held by individuals employed by corporations
who become employees as a result of a merger or consolidation of the
employing corporation with the Company or any subsidiary, or the acquisition
by the Company or a subsidiary of the assets of the employing corporation, or
the acquisition by the Company or a subsidiary of stock of the employing
corporation with the result that such employing corporation becomes a
subsidiary.
VIII. RESTRICTED STOCK AWARDS
(a) RESTRICTED STOCK SUBJECT TO TRANSFER AND FORFEITURE
RESTRICTIONS.
(i) Except as described in Subparagraph (b) below,
shares of Common Stock that are the subject of a Restricted Stock Award
shall be subject to restrictions on disposition by the Holder and an
obligation of the Holder to forfeit and surrender the shares to the
Company under certain circumstances (the "Forfeiture Restrictions") and
further to such other restrictions as shall be determined by the
Committee in its sole discretion. The Forfeiture Restrictions shall be
determined by the Committee in its sole discretion, and the Committee may
provide that the Forfeiture Restrictions shall lapse upon (1) the
attainment of targets established by the Committee that are based on (A)
the price of a share of Common Stock, (B) the Company's earnings per
share, (C) the Company's market share, (D) the market share of a business
unit of the Company designated by the Committee, (E) the Company's sales,
(F) the sales of a business unit of the Company designated by the
Committee, or (G) the return on stockholders' equity achieved by the
Company; (2) the Holder's continued employment with the Company for a
specified period of time; or (3) a combination of any two or more of the
factors listed in clauses (1) and (2) of this sentence or upon the
occurrence of any event or the satisfaction of any other condition
specified by the Committee in its sole discretion. Each Restricted Stock
Award may have different Forfeiture Restrictions, in the discretion of
the Committee. The Forfeiture Restrictions applicable to a particular
Restricted Stock Award shall not be changed except as permitted by
Subparagraph VIII(a)(ii) or Paragraph X.
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(ii) Common Stock awarded pursuant to a Restricted Stock Award
that includes Forfeiture Restrictions shall be represented by a stock
certificate registered in the name of the Holder of such Restricted Stock
Award. The Holder shall have the right to receive dividends with respect
to Common Stock subject to such a Restricted Stock Award, to vote Common
Stock subject thereto and to enjoy all other shareholder rights, except
that (1) the Holder shall not be entitled to delivery of the stock
certificate until the Forfeiture Restrictions have expired, (2) the Company
shall retain custody of the stock until the Forfeiture Restrictions have
expired, (3) the Holder may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the stock until the Forfeiture
Restrictions have expired, and (4) a breach of the terms and conditions
established by the Committee pursuant to the Restricted Stock Agreement,
shall cause a forfeiture of the Restricted Stock Award. At the time of
such Award, the Committee may, in its sole discretion, prescribe
additional terms, conditions or restrictions relating to Restricted Stock
Awards, including, but not limited to, rules pertaining to the termination
of employment (by retirement, disability, death or otherwise) of a Holder
prior to expiration of the Forfeiture Restrictions. Such additional terms,
conditions or restrictions shall be set forth in a Restricted Stock
Agreement made in conjunction with the Award.
(b) RESTRICTED STOCK SUBJECT ONLY TO TRANSFER RESTRICTIONS. In the
discretion of the Committee, shares of Common Stock that are the subject of a
Restricted Stock Award may be subject to restrictions on disposition by the
Holder without any obligation of the Holder to forfeit and surrender the shares
to the Company under any circumstances. Common Stock awarded pursuant to such
a Restricted Stock Award shall be represented by a stock certificate
registered in the name of the Holder of such Award. The Holder shall have
the right to receive dividends with respect to Common Stock subject to such a
Restricted Stock Award, to vote Common Stock subject thereto, and to enjoy
all other shareholder rights, except that (i) the transfer restrictions
described in the following sentence shall apply, (ii) the Holder shall not be
entitled to delivery of the stock certificate until such transfer
restrictions have expired, and (iii) the Company shall retain custody of the
stock until such transfer restrictions have expired. For a period of time
(which period shall be established by the Committee) after the effective date
of the grant of such a Restricted Stock Award or, if earlier, until the
occurrence of any event or the satisfaction of any condition specified by the
Committee, the shares of Common Stock issued in connection with such Award
may not be sold, assigned, pledged, exchanged, hypothecated or otherwise
transferred, encumbered or disposed of by the Holder; provided, however, that
such restriction shall not apply to the transfer of such shares of Common
Stock pursuant to a plan of reorganization of the Company, but the stock,
securities or other property received in exchange therefor shall also become
subject to the same transfer restrictions applicable to the original shares
of Common Stock, and shall be held by the Company pursuant to the provisions
hereof. Upon the expiration of such period or, if earlier, upon the
occurrence of such event or the satisfaction of such condition so specified
by the Committee, the transfer restrictions set forth in this Subparagraph
VIII(b) shall cease to apply and the Company shall deliver the Common Stock
certificate to the Holder.
(c) PAYMENT FOR RESTRICTED STOCK. The Committee shall determine
the amount and form of any payment for Common Stock received pursuant to a
Restricted Stock Award, provided that in the absence of such a determination,
a Holder shall not be required to make any payment for Common Stock received
pursuant to a Restricted Stock Award, except to the extent otherwise required
by law.
(d) AGREEMENTS. At the time any Award is made under this
Paragraph VIII, the Company and the Holder shall enter into a Restricted
Stock Agreement setting forth each of the matters contemplated hereby and
such other matters not inconsistent herewith as the Committee may determine
to be appropriate. The terms and provisions of the respective Restricted
Stock Agreements need not be identical.
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IX. DIRECTOR STOCK AWARDS
(a) DIRECTOR STOCK AWARDS. On the date of each annual meeting of
the shareholders of the Company that occurs on or after the date this
amendment and restatement of the Plan is adopted by the Board, the Company
shall, without cost to the recipient and without the exercise of the
discretion of any person or persons, award and issue to each Nonemployee
Director then in office or elected to the Board on the date of such meeting
that number of shares of Common Stock (rounded up to the nearest whole share)
determined by dividing (i) one-half of the annual retainer fee, if any,
payable by the Company to such Nonemployee Director for the year during which
such meeting occurs by (ii) the average of the Fair Market Values of a share
of Common Stock on the 20 consecutive Trading Days immediately preceding the
date that is three Trading Days prior to the date of such meeting. On the
last day of each March, June, September, and December (beginning with June 30,
1996), the Company shall, without cost to the recipient and without the
exercise of the discretion of any person or persons, award and issue to each
Nonemployee Director serving on the Executive Committee of the Board on such
date that number of shares of Common Stock (rounded up to the nearest whole
share) determined by dividing (1) one-eighth of the annual fee, if any,
payable by the Company to such Nonemployee Director for service on such
committee for the year during which such date occurs by (2) the average of
the fair market values of a share of Common Stock on the 20 consecutive
trading days immediately preceding the date that is three Trading Days prior
to such date. If, as of any date that the Plan is in effect, there are not
sufficient shares of Common Stock available under the Plan to allow for the
award to each Nonemployee Director of the number of shares provided in the
preceding provisions of this Subparagraph IX(a), each Nonemployee Director
shall receive his or her pro-rata share of the total number of shares of
Common Stock then available under the Plan. Shares of Common Stock issued
pursuant to a Director Stock Award shall be subject to the restrictions on
transfer described in Subparagraph (b) below, and such shares shall bear a
legend to reflect such transfer restrictions.
(b) DELIVERY OF SHARE CERTIFICATE; TRANSFER RESTRICTIONS. Common
Stock awarded pursuant to a Director Stock Award shall be represented by a
stock certificate registered in the name of the Holder of such Award. The
Holder shall have the right to receive dividends with respect to Common Stock
subject to a Director Stock Award, to vote Common Stock subject thereto, and
to enjoy all other shareholder rights, except that (i) the transfer
restrictions described in the following sentence shall apply, (ii) the Holder
shall not be entitled to delivery of the stock certificate until such
transfer restrictions have expired, and (iii) the Company shall retain
custody of the stock until such transfer restrictions have expired. For a
period of 24 months after the effective date of a Director Stock Award or, if
earlier, until the occurrence of a Corporate Change or the termination of the
Holder's service as a Director for any reason whatsoever, the shares of
Common Stock issued in connection with such Award may not be sold, assigned,
pledged, exchanged, hypothecated or otherwise transferred, encumbered or
disposed of by the Holder; provided, however, that such restriction shall not
apply to the transfer of such shares of Common Stock pursuant to a plan of
reorganization of the Company, but the stock, securities or other property
received in exchange therefor shall also become subject to the same transfer
restrictions applicable to the original shares of Common Stock, and shall be
held by the Company pursuant to the provisions hereof. Upon the expiration
of such 24 month period or, if earlier, upon the occurrence of a Corporate
Change or the termination of the Holder's service as a Director for any
reason whatsoever, the transfer restrictions set forth in this Subparagraph
IX(b) shall cease to apply and the Company shall deliver the Common Stock
certificate to the Holder.
(c) NO DISCRETION. Except as expressly provided in this Paragraph IX,
Director Stock Awards shall be subject to the terms and conditions of the Plan;
provided, however, that if there is a conflict between the terms and conditions
of this Paragraph IX and any other term or condition of the Plan, then the
terms and conditions of this Paragraph IX shall control. The Committee may
not exercise any discretion with respect to a Director Stock Award that would
be inconsistent with the intent expressed in Paragraph XII(f) or would cause a
Nonemployee Director to cease to be a "disinterested director" within the
meaning of Rule 16b-3 with respect to the Plan and other stock related plans
of the Company.
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X. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issue of debt or equity securities ahead of or affecting Common Stock or the
rights thereof, the dissolution or liquidation of the Company or any sale,
lease, exchange or other disposition of all or any part of its assets or
business or any other corporate act or proceeding.
(b) The shares with respect to which Options may be granted are
shares of Common Stock as presently constituted, but if, and whenever, prior
to the expiration of an Option theretofore granted, the Company shall effect
a subdivision or consolidation of shares of Common Stock or the payment of a
stock dividend on Common Stock without receipt of consideration by the
Company, the number of shares of Common Stock with respect to which such
Option may thereafter be exercised (i) in the event of an increase in the
number of outstanding shares shall be proportionately increased, and the
purchase price per share shall be proportionately reduced, and (ii) in the
event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per share shall be
proportionately increased. Any fractional share resulting from such
adjustment shall be rounded up to the next whole share.
(c) If the Company recapitalizes, reclassifies its capital stock,
or otherwise changes its capital structure (a "recapitalization"), the number
and class of shares of Common Stock covered by an Option theretofore granted
shall be adjusted so that such Option shall thereafter cover the number and
class of shares of stock and securities to which the Holder would have been
entitled pursuant to the terms of the recapitalization if, immediately prior
to the recapitalization, the Holder had been the holder of record of the
number of shares of Common Stock then covered by such Option. If (i) the
Company shall not be the surviving entity in any merger or consolidation (or
survives only as a subsidiary of an entity other than a previously wholly
owned subsidiary of the Company), (ii) the Company sells, leases or exchanges
or agrees to sell, lease or exchange all or substantially all of its assets
to any other person or entity (other than a wholly owned subsidiary of the
Company), (iii) the Company is to be dissolved and liquidated, (iv) any
person or entity, including a "group" as contemplated by Section 13(d)(3) of
the 1934 Act, acquires or gains ownership or control (including, without
limitation, power to vote) of more than 50% of the outstanding shares of the
Company's voting stock (based upon voting power), or (v) as a result of or in
connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event is referred to herein as a "Corporate
Change"), no later than (x) ten days after the approval by the shareholders
of the Company of such merger, consolidation, reorganization, sale, lease or
exchange of assets or dissolution or such election of directors or (y) thirty
days after a Corporate Change of the type described in clause (iv), the
Committee, acting in its sole discretion without the consent or approval of
any Holder, shall effect one or more of the following alternatives, which may
vary among individual Holders and which may vary among Options held by any
individual Holder: (1) accelerate the time at which Options then outstanding
may be exercised so that such Options may be exercised in full for a limited
period of time on or before a specified date (before or after such Corporate
Change) fixed by the Committee, after which specified date all unexercised
Options and all rights of Holders thereunder shall terminate, (2) require the
mandatory surrender to the Company by selected Holders of some or all of the
outstanding Options held by such Holders (irrespective of whether such
Options are then exercisable under the provisions of the Plan) as of a date,
before or after such Corporate Change, specified by the Committee, in which
event the Committee shall thereupon cancel such Options and pay to each
Holder an amount of cash per share equal to the excess, if any, of the amount
calculated in Subparagraph (d) below (the "Change of Control Value") of the
shares subject to such Option over the exercise price(s) under such Options
for such shares, (3) make such adjustments to Options then outstanding as the
Committee deems appropriate to reflect such Corporate Change (provided,
however, that the Committee may
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determine in its sole discretion that no adjustment is necessary to Options
then outstanding) or (4) provide that the number and class of shares of
Common Stock covered by an Option theretofore granted shall be adjusted so
that such Option shall thereafter cover the number and class of shares of
stock or other securities or property (including, without limitation, cash)
to which the Holder would have been entitled pursuant to the terms of the
agreement of merger, consolidation or sale of assets and dissolution if,
immediately prior to such merger, consolidation or sale of assets and
dissolution, the Holder had been the holder of record of the number of shares
of Common Stock then covered by such Option.
(d) For the purposes of clause (2) in Subparagraph (c) above, the
"Change of Control Value" shall equal the amount determined in clause (i),
(ii) or (iii), whichever is applicable, as follows: (i) the per share price
offered to shareholders of the Company in any such merger, consolidation,
sale of assets or dissolution transaction, (ii) the price per share offered
to shareholders of the Company in any tender offer or exchange offer whereby
a Corporate Change takes place, or (iii) if such Corporate Change occurs
other than pursuant to a tender or exchange offer, the Fair Market value per
share of the shares into which such Options being surrendered are
exercisable, as determined by the Committee as of the date determined by the
Committee to be the date of cancellation and surrender of such Options. In
the event that the consideration offered to shareholders of the Company in
any transaction described in this Subparagraph (d) or Subparagraph (c) above
consists of anything other than cash, the Committee shall determine the fair
cash equivalent of the portion of the consideration offered which is other
than cash.
(e) In the event of changes in the outstanding Common Stock by
reason of recapitalization, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in capitalization occurring
after the date of the grant of any Restricted Stock Award, such Award and
any agreement evidencing such Award shall be subject to adjustment by the
Committee at its discretion as to the number and price of shares of Common
Stock or other consideration subject to such Award. In the event of any such
change in the outstanding Common Stock, the aggregate number of shares
available under the Plan may be appropriately adjusted by the Committee,
whose determination shall be conclusive.
(f) Any adjustment provided for in the above Subparagraphs shall be
subject to any required shareholder action.
(g) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such
shares or other securities, and in any case whether or not for fair value,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Common Stock subject to Awards
theretofore granted or the purchase price per share, if applicable.
(h) Plan provisions to the contrary notwithstanding, with respect
to any Restricted Stock Awards described in Subparagraph VIII(a) that are
outstanding at the time a Corporate Change as described in Subparagraph (c)
above occurs, the Committee may, in its discretion and as of a date
determined by the Committee, fully vest any or all Common Stock awarded to
the Holder pursuant to such Restricted Stock Award and then outstanding and,
upon such vesting, all restrictions applicable to such Restricted Stock Award
shall terminate as of such date. Any action by the Committee pursuant to
this Subparagraph may vary among individual Holders and may vary among the
Restricted Stock Awards held by any individual Holder.
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XI. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with
respect to any shares of Common Stock for which Awards have not theretofore
been granted. The Board shall have the right to alter or amend the Plan or
any part thereof from time to time; provided that no change in any Award
theretofore granted may be made which would impair the rights of the Holder
without the consent of the Holder, and provided, further, that the Board may
not, without approval of the shareholders, amend the Plan:
(a) to increase the maximum number of shares of Common Stock which
may be issued on exercise of Options or pursuant to Director Stock Awards or
Restricted Stock Awards, except as provided in Paragraph X;
(b) to change the minimum Option price;
(c) to change the class of individuals eligible to receive Awards
or materially increase the benefits accruing to individuals under the Plan;
(d) to extend the maximum period during which Awards may be granted
under the Plan;
(e) to modify materially the requirements as to eligibility for
participation in the Plan;
(f) to change the provisions of Paragraph IX; or
(g) to decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
XII. MISCELLANEOUS
(a) NO RIGHT TO AN AWARD. Neither the adoption of the Plan nor any
action of the Board or of the Committee shall be deemed to give an employee
any right to be granted an Option, a right to a Restricted Stock Award, or
any other rights hereunder except as may be evidenced by an Option Agreement
or a Restricted Stock Agreement duly executed on behalf of the Company, and
then only to the extent and on the terms and conditions expressly set forth
therein. The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
funds or assets to assure the payment of any Award.
(b) NO EMPLOYMENT RIGHTS CONFERRED. Nothing contained in the Plan
shall (i) confer upon any employee any right with respect to continuation of
employment with the Company or any subsidiary or (ii) interfere in any way
with the right of the Company or any subsidiary to terminate his or her
employment at any time.
(c) OTHER LAWS; WITHHOLDING. The Company shall not be obligated to
issue any Common Stock pursuant to any Award granted under the Plan at any
time when the shares covered by such Award have not been registered under the
Securities Act of 1933 and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the
opinion of legal counsel for the Company, there is no exemption from the
registration requirements of such laws, rules or regulations available for
the issuance and sale of such shares. No fractional shares of Common Stock
shall be delivered, nor shall any cash in lieu of fractional shares be paid.
The Company shall have the right to deduct in connection with all Awards any
taxes
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required by law to be withheld and to require any payments required to enable
it to satisfy its withholding obligations.
(d) NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the
Plan shall be construed to prevent the Company or any subsidiary from taking
any corporate action which is deemed by the Company or such subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No employee,
Nonemployee Director, beneficiary or other person shall have any claim
against the Company or any subsidiary as a result of any such action.
(e) RESTRICTIONS ON TRANSFER. Except to the extent otherwise
provided herein, an Award shall not be transferable otherwise than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. An Award
shall be exercisable during the lifetime of a Holder only by such Holder or
the Holder's guardian or legal representative.
(f) RULE 16b-3. It is intended that the Plan and any grant of an
Award made to a person subject to Section 16 of the 1934 Act meet all of the
requirements of Rule 16b-3. If any provision of the Plan or any such Award
would disqualify the Plan or such Award under, or would otherwise not comply
with, Rule 16b-3, such provision or Award shall be construed or deemed
amended to conform to Rule 16b-3.
(g) GOVERNING LAW. This Plan shall be construed in accordance with
the laws of the State of New York.
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