<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section240.14a-11(c) or
Section240.14a-12
FOREST OIL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
FOREST OIL CORPORATION
1600 BROADWAY, SUITE 2200
DENVER, CO 80202
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 1997
------------------------
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 1600 Broadway, Suite
590, Denver, Colorado, on Wednesday, May 14, 1997, at 10:00 a.m., M.D.T., for
the following purposes:
1. To elect three (3) Class III Directors;
2. To approve the Company's Stock Incentive 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, 1997; 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 28,
1997 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 18, 1997
<PAGE>
PROXY STATEMENT
OF
FOREST OIL CORPORATION
1600 BROADWAY, SUITE 2200
DENVER, COLORADO 80202
APRIL 18, 1997
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 14, 1997, at 1600 Broadway, Suite
590, 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 28, 1997 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 March 31, 1997, there were
32,689,398 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 approval of the Company's Stock
Incentive Plan (the "Stock Incentive 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, 1997. 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 18, 1997.
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 whose terms of
office expire at different times in annual succession. Currently the number of
directors is fixed at 11, 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 1996 Annual
Meeting. Michael B. Yanney, a Class III Director, was elected at the 1993 Annual
Meeting. Philip F. Anschutz, Craig D. Slater and Drake S. Tempest were appointed
to their respective classes in July 1995. William L. Britton, a Class II
Director was elected at the 1996 Annual Meeting. Jordan L. Haines, a Class III
Director, was elected at the 1996 Annual Meeting. Cortlandt S. Dietler was
appointed as a Class IV
<PAGE>
Director in October 1996. J. J. Simmons III has been designated by the
Nominating Committee as a Class III Nominee.
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 III Nominees 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>
AGE AND YEARS
OF SERVICE WITH PRINCIPAL OCCUPATION, POSITIONS WITH COMPANY AND DIRECTOR
NAME COMPANY BUSINESS EXPERIENCE DURING LAST FIVE YEARS SINCE
- ---------------------- --------------- --------------------------------------------------------------- -----------
<S> <C> <C> <C>
CLASS III NOMINEES--TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 2001
Jordan L. Haines 69--1 Mr. Haines was Chairman of the Board of Fourth Financial 1996
Corporation, a Kansas based bank holding company, and its
subsidiary Bank IV Wichita, N.A. from 1983 until his retirement
in 1991. Director of Coleman Company, Inc. and a Director of KN
Energy, Inc. Member of the Audit Committee.
J. J. Simmons III 72--0 President of The Simmons Company, a consulting firm. Mr.
Simmons was Vice Chairman of the Surface Transportation Board
from 1995 to 1996 and prior thereto Commissioner--Vice Chairman
of the U.S. Interstate Commerce Commission.
Michael B. Yanney 63--5 Chairman and Chief Executive Officer of the America First 1992
Companies, L.L.C. Director of Burlington Northern Santa Fe
Corporation, C-Tec Corporation, WorldCom, Inc, and Mid-America
Apartment Communities, Inc. Chairman of the Compensation
Committee. Member of the Nominating Committee.
CLASS IV DIRECTORS--TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 1998
Craig D. Slater 39--2 Vice President of The Anschutz Corporation ("Anschutz"), and 1995
Anschutz Company, the corporate parent of Anschutz, since 1995.
Corporate Secretary of Anschutz and Anschutz Company from 1991
to 1996, and other positions with Anschutz from 1988 to 1996.
Director of Internet Communications Corporation since September
1996. Member of the Executive Committee and of the Audit
Committee.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AGE AND YEARS
OF SERVICE WITH PRINCIPAL OCCUPATION, POSITIONS WITH COMPANY AND DIRECTOR
NAME COMPANY BUSINESS EXPERIENCE DURING LAST FIVE YEARS SINCE
- ---------------------- --------------- --------------------------------------------------------------- -----------
<S> <C> <C> <C>
Cortlandt S. Dietler 75--0 Chairman and Chief Executive Officer of Trans-Montaigne Oil 1996
Company since April 1995. Prior thereto founder, Chairman and
Chief Executive Officer of Associated Natural Gas prior to its
1994 merger with Panhandle Eastern Corporation. Advisory
Director of PanEnergy Corporation. Director of Hallador
Petroleum Company, Key Production Company, Inc. and Grease
Monkey Holding Corporation.
CLASS I DIRECTORS--TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 1999
William L. Dorn 48--25 Chairman of the Board and Chairman of the Executive Committee. 1982
Chief Executive Officer until December 1995. President until
November 1993. Chairman of the Nominating Committee.
James H. Lee 48--6 Managing Partner, Lee, Hite & Wisda Ltd., a private oil and gas 1991
consulting firm. Member of the Executive Committee since
February 1994. Chairman of the Audit Committee.
Philip F. Anschutz 57--2 Director and Chairman of the Board of Anschutz, and Anschutz 1995
Company, the corporate parent of Anschutz, for more than five
years, and President of Anschutz and Anschutz Company until
December 1996. Director and Vice-Chairman of Union Pacific
Corporation since September 1996. Director and Chairman of
Southern Pacific Rail Corporation ("SPRC") to September 1996,
and President and Chief Executive Officer of SPRC to 1993.
Member of the Nominating Committee.
CLASS II DIRECTORS--TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 2000
Robert S. Boswell 47--11 President since November 1993 and Chief Executive Officer since 1985
December 1995, Vice President until November 1993. Chief
Financial Officer until December 1995. Member of the Executive
Committee. Director of C.E. Franklin Ltd. and Saxon Petroleum
Inc.
Drake S. Tempest 43--2 Partner in the law firm of O'Melveny & Myers LLP. Member of the 1995
Compensation Committee.
William L. Britton 62--1 Partner in the law firm of Bennett Jones Verchere. Director of 1996
Akita Drilling Ltd., Atco Ltd., Canadian Western Natural Gas
Ltd., Canadian Utilities Limited, Canutilities Holdings Ltd.
and Northwestern Utilities Limited.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows, as of April 14, 1997, 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
3
<PAGE>
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.
<TABLE>
<CAPTION>
COMMON STOCK(1)
------------------------------
NUMBER OF PERCENT OF
NAME OF INDIVIDUAL OR NUMBER IN GROUP SHARES CLASS(2)
- ---------------------------------------------------------------- --------------- -------------
<S> <C> <C>
Philip F. Anschutz.............................................. 11,135,722(3) 30.8%
Bulent A. Berilgen.............................................. 14,442(4) *
Robert S. Boswell............................................... 83,406(5) *
William L. Britton.............................................. 2,000 *
Cortlandt S. Dietler............................................ 2,200 *
William L. Dorn................................................. 104,614(6) *
Jordan L. Haines................................................ 1,000 *
David H. Keyte.................................................. 44,396(7) *
James H. Lee.................................................... 2,361 *
J. J. Simmons III............................................... 0 *
Craig D. Slater................................................. 7,334 *
Drake S. Tempest................................................ 3,334 *
V. Bruce Thompson............................................... 15,240(8) *
Michael B. Yanney............................................... 11,834 *
All directors and executive officers as a group (18 persons,
including the 14 named above)................................. 11,507,879(9) 31.8%
</TABLE>
- ------------------------
* The percentage of shares beneficially owned does not exceed one percent of
the outstanding shares of the class.
(1) 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, 1996.
(2) Based on the number of shares outstanding as of March 31, 1997.
(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 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 3,500,000 shares issuable pursuant to a warrant
exercisable within 60 days, and 834 shares owned by Philip F. Anschutz.
(4) Includes 12,000 shares that Bulent A. Berilgen has the vested right to
purchase pursuant to options granted under the Stock Incentive Plan, and
2,424 shares of restricted stock also awarded under the Stock Incentive
Plan.
(5) Includes 70,000 shares that Robert S. Boswell has the vested right to
purchase pursuant to options granted under the Stock Incentive Plan, and
2,000 shares of restricted stock also awarded under the Stock Incentive
Plan. Does not include 45 shares held by Robert S. Boswell's wife or 166
shares held by his children, of which shares Mr. Boswell disclaims
beneficial ownership.
(6) Includes 55,000 shares that William L. Dorn has the vested right to purchase
pursuant to options granted under the Stock Incentive Plan. Also includes
(i) 5,160 shares held of record by William L. Dorn as co-trustee of a trust
for the benefit of his mother, and (ii) 14,840 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
shares held by William L. Dorn's wife or 7,199 shares held by his children,
of which shares Mr. Dorn disclaims beneficial ownership.
(7) Includes 36,800 shares that David H. Keyte has the vested right to purchase
pursuant to options granted under the Stock Incentive Plan, and 3,788 shares
of restricted stock also awarded under the
4
<PAGE>
Stock Incentive Plan. Does not include 710 shares held by one of his
children, of which shares Mr. Keyte disclaims beneficial ownership.
(8) Includes 12,000 shares that V. Bruce Thompson has the vested right to
purchase pursuant to options granted under the Stock Incentive Plan, and
2,273 shares of restricted stock also awarded under the Stock Incentive
Plan.
(9) Includes 51,400 shares held by various executive officers who have the
vested right to purchase such shares pursuant to options granted under the
Stock Incentive Plan, and 6,060 shares of restricted stock awarded to
various executive officers under the Stock Incentive Plan.
BOARD OF DIRECTORS AND COMMITTEES
During 1996, the Board of Directors met on six occasions. The Board of
Directors has appointed four committees: the Executive Committee, the Audit
Committee, the Compensation Committee and the Nominating Committee. Only two
members of each committee are necessary to constitute a quorum. During 1996, the
Executive Committee met formally three times and acted by written consent twice.
The Executive Committee meets informally on a monthly basis. Robert S. Boswell,
William L. Dorn, James H. Lee and Craig D. Slater are the members of the
Executive Committee.
The Compensation Committee makes recommendations to the Board of Directors
in the area of executive compensation, including the selection of individual
employees to be granted awards from among those eligible under the Stock
Incentive Plan, and establishes the amount of such awards. The Company's
nonemployee directors are automatically awarded shares of Common Stock on an
annual basis pursuant to the Stock Incentive Plan. The Compensation Committee
met three times during 1996, and its members are Drake S. Tempest and Michael B.
Yanney. A Report of the Compensation Committee on Executive Compensation is set
forth below.
The Audit Committee oversees and monitors 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. The Audit Committee met four times during 1996,
and its members are Jordan L. Haines, James H. Lee and Craig D. Slater.
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. The members of the Nominating Committee are Philip F. Anschutz,
William L. Dorn and Michael B. Yanney. The Nominating Committee acted by consent
on three occasions in 1996.
During 1996, each incumbent director of the Company, except Richard J.
Callahan, Jordan L. Haines and Drake S. Tempest, 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 they served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Drake S.
Tempest and Michael B. 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 1996 there were no compensation committee interlocks between the
Company and any other entity. For a description of transactions with William L.
Dorn and Robert S. Boswell see "Transactions with Management and
Others--Executive Severance Agreements".
5
<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. The Stock Incentive Plan provides for, among other things,
the payment of a portion of directors' fees in stock. Half of the $20,000 annual
amount is 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 non-employee directors
and the amounts and shares of Common Stock each received during 1996 as
directors were: Philip F. Anschutz received $30,000, $10,000 of which was paid
in the form of 834 shares for his services as a director. William L. Britton
received $16,667 for his services as a director. Cortlandt S. Dietler received
$7,500 for his services as a director. Jordan L. Haines received $16,667 for his
services as a director. James H. Lee received $30,000, $10,000 of which was paid
in the form of 834 shares for his services as a director, $1,000 for attendance
at a meeting of the Audit Committee and $50,000, $12,500 of which was paid in
the form of 884 shares as payment for his services on the Executive Committee.
Craig D. Slater received $30,000, $10,000 of which was paid in the form of 834
shares for his services as a director and $1,000 for attendance at a meeting of
the Audit Committee. Drake S. Tempest received $27,500, $10,000 of which was
paid in the form of 834 shares for his services as a director. Michael B. Yanney
received $27,500, $10,000 of which was paid in the form of 834 shares for his
services as a director and $1,000 for attendance at a meeting of the
Compensation Committee. The payment of fees to directors for attendance at
committee meetings was discontinued in February 1996, except that Mr. Lee
receives $50,000 per year for his service on the Executive Committee, which
service consists of attendance at monthly meetings and review of certain oil and
gas exploration and development prospects.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
earned during each of the Company's last three fiscal years by the Company's
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers (collectively, the "Named Executive Officers"),
based on salary and bonus earned in 1996.
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- -------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND BONUS COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) ($)(1) ($)(2) OPTIONS (#) ($)(3)
- ----------------------------------- --------- ---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
William L. Dorn,................... 1996 $ 300,012 $ 100,000 -0- 175,000 $ 17,434
Chairman of the Board 1995 300,012 41,415 $ 1,873 -0- 17,328
1994 300,012 11,849 2,795 -0- 22,942
Robert S. Boswell,................. 1996 287,868 177,000 -0- 250,000 16,605
President and Chief 1995 284,004 41,321 1,699 -0- 16,310
Executive Officer 1994 284,004 11,409 2,515 -0- 21,559
David H. Keyte,.................... 1996 200,004 62,500 -0- 127,000 10,000
Vice President and 1995 165,000 32,113 21,619 -0- 8,250
Chief Financial Officer 1994 165,000 6,580 21,945 -0- 11,469
Bulent A. Berilgen,................ 1996 172,008 40,000 -0- 60,000 8,600
Vice President and 1995 166,512 17,162 20,354 -0- 8,326
Chief Technical Officer 1994 166,512 6,639 -0- -0- 11,507
V. Bruce Thompson,................. 1996 168,864 37,500 26,725 40,000 8,443
Vice President and 1995 165,000 16,292 -0- -0- 8,250
General Counsel 1994 68,750 3,241 -0- -0- 2,063
</TABLE>
- ------------------------
(1) In 1996 the Company established annual performance goals for executive
officers and key employees which were reached resulting in the Named
Executive Officers receiving cash and restricted stock. Dollar amounts in
1996 represent the cash portion of performance bonuses with respect to 1996.
In addition, the Named Executive Officers received grants of restricted
stock in the following respective share amounts: Robert S. Boswell--2,000;
David H. Keyte--3,788; Bulent A. Berilgen--2,424 and V. Bruce
Thompson--2,273. The restricted stock was awarded on April 14, 1997, vested
immediately and is subject to a two-year restriction on transferability. See
"Report of the Compensation Committee on Executive Compensation--Short-Term
Incentives" and "Proposal to Approve the Stock Incentive Plan--Restricted
Stock".
(2) The 1996 totals do 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 V. Bruce Thompson. The 1996 total includes the gift to Mr. Thompson of a
Company-owned automobile valued at $25,751.
(3) The 1996 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: $7,500 for each of the following: William L. Dorn; Robert S.
Boswell; David H. Keyte; Bulent A. Berilgen; V. Bruce Thompson, and (ii) the
Company's matching contribution pursuant to deferred compensation agreements
in the following amounts: William L. Dorn--$7,501; Robert S.
Boswell--$6,893; David H. Keyte--$2,500; Bulent A. Berilgen--$1,100; V.
Bruce Thompson--$943. The 1996 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--$2,433
and Robert S. Boswell--$2,212. The remainder of the premium is not included
and does not benefit the Named Executive Officers, because the Company has
the right to the cash surrender value of the policy. There were no profit
sharing bonus contributions by the Company in 1996 to the Retirement Savings
Plan or pursuant to the deferred compensation agreements of William L. Dorn
and Robert S. Boswell.
7
<PAGE>
STOCK OPTION GRANTS DURING 1996
The following table provides details regarding stock options granted to the
Named Executive Officers in 1996. In addition, in accordance with rules of the
Securities and Exchange Commission (the "SEC"), there are shown the hypothetical
gains or "option spreads" that would exist for the respective options. These
gains are based on assumed rates of annual compound stock price appreciation of
5% and 10% from the date the options were granted over the full option term. The
Company does not have any outstanding SARs.
STOCK OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ----------------------------------------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
NUMBER OF OPTIONS APPRECIATION FOR OPTION
SECURITIES GRANTED TO TERM (3)
UNDERLYING OPTIONS EMPLOYEES EXERCISE EXPIRATION ------------------------
NAME GRANTED (#)(1) IN 1996 (2) PRICE ($/SH) DATE 5% ($) 10% ($)
- ------------------------- ------------------ ------------- ------------- ------------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
William L. Dorn.......... 100,000 7.2 $ 11.25 February 6, 2006 $ 707,506 $ 1,792,960
75,000 5.4 14.00 November 5, 2006 660,339 1,673,429
Robert S. Boswell........ 100,000 7.2 11.25 February 6, 2006 707,506 1,792,960
150,000 10.8 14.00 November 5, 2006 1,320,679 3,346,859
David H. Keyte........... 57,000 4.1 11.25 February 6, 2006 403,278 1,021,987
70,000 5.1 14.00 November 5, 2006 616,317 1,561,868
Bulent A. Berilgen....... 40,000 2.9 11.25 February 6, 2006 283,003 717,184
20,000 1.4 14.00 November 5, 2006 176,091 446,248
V. Bruce Thompson........ 20,000 1.4 11.25 February 6, 2006 141,501 358,592
20,000 1.4 14.00 November 5, 2006 176,091 446,248
</TABLE>
- --------------------------
(1) Includes repriced options. See "Option Repricings in 1996" below. The
options are subject to a four-year vesting schedule with 20% being
exercisable at December 31, 1996. An additional 20% becomes exercisable on
each succeeding anniversary of the date of grant.
(2) The percentage for each year is the amount granted to each of the Named
Executive Officers as a percent of the total of each issuance granted to all
employees.
(3) These amounts represent certain assumed rates of appreciation based on
actual option term and annual compounding from the date of grant. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock and overall stock
market conditions. There can be no assurance that the amounts reflected in
this table will be achieved. These numbers do not take into account
provisions of the options providing for termination of the option following
termination of employment, non-transferability or vesting.
8
<PAGE>
OPTION REPRICINGS IN 1996
In February 1996, the Company repriced options held by certain officers and
employees. The following table contains certain information regarding repriced
options held by the Named Executive Officers.
REPRICINGS IN 1996
<TABLE>
<CAPTION>
SECURITIES LENGTH OF
UNDERLYING MARKET PRICE ORIGINAL OPTION
NUMBER OF OF STOCK AT TERM REMAINING
OPTIONS TIME OF EXERCISE PRICE AT AT DATE OF
REPRICED OR REPRICING OR TIME OF REPRICING NEW EXERCISE REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) OR AMENDMENT($) PRICE($) AMENDMENT(1)
- ----------------------- ----------------- ------------- -------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William L. Dorn........ February 6, 1996 35,000 $ 11.8125 $ 15.00 $ 11.25 73 months
February 6, 1996 35,000 11.8125 25.00 11.25 73 months
Robert S. Boswell...... February 6, 1996 35,000 11.8125 15.00 11.25 73 months
February 6, 1996 35,000 11.8125 25.00 11.25 73 months
David H. Keyte......... February 6, 1996 20,000 11.8125 15.00 11.25 73 months
February 6, 1996 20,000 11.8125 25.00 11.25 73 months
Bulent A. Berilgen..... February 6, 1996 20,000 11.8125 15.00 11.25 73 months
February 6, 1996 20,000 11.8125 25.00 11.25 73 months
V. Bruce Thompson...... February 6, 1996 20,000 11.8125 25.00 11.25 97 months
</TABLE>
- ------------------------
(1) The term of all repriced options was extended to ten years.
STOCK OPTION EXERCISES AND YEAR-END STOCK OPTION VALUES
The following table shows options exercised and value realized, and the
number of shares covered by both exercisable and non-exercisable stock options
as of December 31, 1996 and their values at such date.
AGGREGATED OPTION EXERCISES IN 1996 AND
OUTSTANDING STOCK OPTION VALUES AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/96(#) AT 12/31/96($)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William L. Dorn............. -0- -0- 35,000 140,000 $ 181,875 $ 727,500
Robert S. Boswell........... -0- -0- 50,000 200,000 236,250 945,000
David H. Keyte.............. -0- -0- 25,400 101,600 123,425 493,700
Bulent A. Berilgen.......... 8,000 $ 14,000 4,000 48,000 14,500 262,000
V. Bruce Thompson........... -0- -0- 8,000 32,000 40,000 160,000
</TABLE>
9
<PAGE>
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, 1996 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 1991 and that
dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FOREST OIL D.J. OIL SECONDARY S&P 500
<S> <C> <C> <C>
1991 100 100 100
1992 213 101 108
1993 292 112 118
1994 150 108 120
1995 188 125 165
1996 235 154 203
</TABLE>
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. The program has 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'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
10
<PAGE>
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 Stock Incentive Plan. The Executive Committee is
responsible for determining the salaries for all officers except the Chairman
and the President and Chief Executive Officer.
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 result
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.
BASE SALARIES. In 1996, 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 1996, the Compensation Committee established
individual annual performance goals for managers to earn short-term incentive
compensation. Based on the attainment of certain of these goals, cash bonuses
were awarded in February 1997 and restricted stock bonuses were awarded in April
1997 to the Company's executive officers. The restricted stock was issued
pursuant to the Stock Incentive Plan. See "Proposal to Approve the Stock
Incentive Plan". Robert S. Boswell received a cash bonus of $177,000 and 2,000
shares of restricted stock. The Compensation Committee intends to set new goals
for 1997 and to continue to pay any earned bonus in cash and/or restricted stock
or stock options.
LONG-TERM INCENTIVES. On February 6, 1996, the Compensation Committee
approved the repricing of outstanding stock options and the granting of
additional options. The adjustments were intended to partially compensate the
recipients for the loss of certain perquisites and also to provide incentives to
the recipients and to better align their interests with those of the Company's
shareholders. The old exercise prices were $15 and $25 per share and the new
price was $11.25 per share. In addition to the repricing, the terms of the
options were extended to ten years. On February 5, 1996, the last sale price of
the Common Stock as reported on the Nasdaq National Market was $11 13/16 per
share. The Company and a selling shareholder sold 13,800,000 shares of Common
Stock in a public offering in January 1996 at a price of $11.00 per share.
Additional options were also granted in November 1996 at an exercise price of
$14 per share. In February 1996, Robert S. Boswell exchanged options for 35,000
shares with an exercise price of $25 per share and options for 35,000 shares
with an exercise price of $15 per share and received new options for 100,000
shares at an exercise price of $11.25. In November 1996, Robert S. Boswell
received a grant of options for 150,000 shares at an exercise price of $14 per
share.
Date: April 18, 1997
<TABLE>
<S> <C>
EXECUTIVE COMMITTEE COMPENSATION COMMITTEE
- --------------------------------------------- ---------------------------------------------
William L. Dorn, Chairman Michael B. Yanney, Chairman
Robert S. Boswell Drake S. Tempest
James H. Lee
Craig D. Slater
</TABLE>
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.
11
<PAGE>
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 $125,000 in 1997, 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
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; David H. Keyte--4; Bulent A.
Berilgen--7; and V. Bruce Thompson--0. 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; David H.
Keyte--$5,097; and Bulent A. Berilgen--$11,162. V. Bruce Thompson has no benefit
under this plan because his employment commenced after 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. The
additional annual accrued benefit payable, based on a life annuity benefit, upon
normal retirement for each of such persons is: William L. Dorn--$3,788; Robert
S. Boswell--$463.
PRINCIPAL HOLDERS OF SECURITIES
The Company currently has one class of voting securities outstanding. On
March 31, 1997, there were 32,689,398 shares of Common Stock outstanding, with
each such share being entitled to one vote.
12
<PAGE>
As of March 31, 1997, 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>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OF BENEFICIAL PERCENT OF
TITLE OF CLASS OWNERS OWNERSHIP CLASS
- -------------------- ------------------------------------ ------------------- ------------
<S> <C> <C> <C>
Common Stock(1) The Anschutz Corporation 11,135,722(2) 30.8%
2400 Anaconda Tower
555 17th Street
Denver, Colorado 80202
Joint Energy Development 3,680,000(3) 11.2%
Investments Limited Partnership
P.O. Box 1188
Houston, Texas 77251-1188
Heartland Advisors, Inc. 2,372,500 7.2%
790 North Milwaukee St.
Milwaukee, WI 53202
</TABLE>
- ------------------------
(1) Based on Schedules 13D and 13G and amendments thereto filed with the SEC and
the Company by the reporting person through March 31, 1997 and the amount of
Common Stock outstanding on March 31, 1997.
(2) The shares indicated as beneficially owned by Anschutz include 3,500,000
shares issuable pursuant to a warrant exercisable within 60 days, and 834
shares owned by Philip F. Anschutz.
(3) Joint Energy Development Investments Limited Partnership ("JEDI") has agreed
to not transfer any of its shares, except in limited circumstances, until
after May 31, 1997.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
TRANSACTIONS WITH ANSCHUTZ. In August 1996, Anschutz exercised an option to
acquire 2,250,000 shares of Common Stock at an exercise price of $11.64 per
share. In November 1996, Anschutz converted 620,000 shares of preferred stock
into 1,240,000 shares of Common Stock. Anschutz also exercised a portion of a
warrant to acquire 388,888 shares of Common Stock at an exercise price of $10.50
per share. The warrant entitles Anschutz to purchase an additional 3,500,000
shares of Common Stock at an exercise price of $10.50 per share. As
consideration for the partial exercise of the warrant and the conversion of the
preferred stock, the Company extended the remaining term of the warrant one year
to July 27, 1999.
OTHER TRANSACTIONS. The Company paid Neal A. Stanley $72,500 for consulting
services in 1996 prior to his election as Vice President--Western Region in
August 1996. The Company also entered into a severance agreement with Mr.
Stanley. See "Executive Severance Agreements" below. The Company engaged the law
firm of Bennett, Jones Verchere for legal services in 1996. William L. Britton,
a Director of the Company, is a partner in such firm.
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 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
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
13
<PAGE>
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 balance of the Company's obligation to one Retiree under a revised
retirement agreement is payable in Common Stock or cash, at the Company's option
($149,000) 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
(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, (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
14
<PAGE>
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 Securities and
Exchange Act of 1934 ("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(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1996 to February 15, 1997, its officers, directors, and greater than
10% beneficial owners complied with all applicable filing requirements, except
that Michael B. Yanney was late in filing two monthly reports of one
transaction, and one monthly report of two transactions.
PROPOSAL TO APPROVE THE STOCK INCENTIVE PLAN
At the Annual Meeting, the shareholders will be asked to approve the Stock
Incentive Plan, a copy of which is attached hereto as Appendix A. The Stock
Incentive Plan was unanimously approved by the Board on March 22, 1996, and
approved by the shareholders at the 1996 Annual Meeting. Reapproval of the
shareholders at the 1997 Annual Meeting is being sought to ensure that income
generated in connection with certain awards made under the Stock Incentive Plan
will qualify as "performance-based" compensation for purposes of Section 162(m)
of the Code (as described below). No changes to the Stock Incentive Plan are
being proposed at this time.
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 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 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 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. If the
Stock Incentive Plan is not approved by the shareholders of the Company at the
Annual Meeting, then no further awards will be granted under the Stock Incentive
Plan from and after the date of the Annual Meeting.
15
<PAGE>
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 (the "Committee"),
appointed by the Board, 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.
TERM OF STOCK INCENTIVE PLAN
The Stock Incentive Plan originally became effective on March 6, 1992. 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.
16
<PAGE>
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 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
17
<PAGE>
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.
DIRECTOR STOCK AWARDS
a. DIRECTOR STOCK AWARDS. On the date of each annual meeting of the
shareholders of the Company, 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, 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 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.
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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 reporting 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 reporting 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 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 recognize
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
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purposes. Upon the lapse 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, and assuming any federal
income tax reporting requirements are met, 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, and assuming any federal income
tax reporting requirements are met, 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 such
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 precludes a public
corporation from taking a deduction for annual 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 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
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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 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 1997. This firm has audited the
Company's financial statements for approximately 47 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 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.
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SHAREHOLDER PROPOSALS
Any shareholder proposals to be included in the Board of Directors'
solicitation of proxies for the 1998 Annual Meeting of Shareholders must be
received by Daniel L. McNamara, Secretary, at 1600 Broadway, Suite 2200, Denver,
CO 80202, no later than December 10, 1997.
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, 1996, 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 1996 renewal was for a one-year
period. Primary insurance of $10,000,000 was secured with Executive Risk
Indemnity, Inc. and the excess insurance coverage of $10,000,000 was secured
with Reliance Insurance Company for a total coverage of $20,000,000. Aggregate
premiums for the 12-month period ending July 25, 1996 were $271,250. 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, 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. The Company has
retained Morrow & Co., Inc. to assist in such solicitation and has agreed to pay
reasonable and customary fees for its services and to reimburse it for
reasonable out-of-pocket expenses in connection therewith.
AVAILABLE INFORMATION. UPON REQUEST OF ANY SHAREHOLDER, THE COMPANY'S
ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1996 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
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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 18, 1997
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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.
(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).
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(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.
(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
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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 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.
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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 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.
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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.
(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
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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.
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
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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.
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
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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 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
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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.
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
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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 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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FOREST OIL CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Forest Oil Corporation, a New York
corporation (the Company), hereby appoints William L. Dorn, Robert S. Boswell
and Daniel L. McNamara, or any one of them, attorneys, agents and proxies of
the undersigned, with full power of substitution to each of them, to vote all
the shares of Common Stock, Par Value $.10 Per Share, of the Company which
are entitled to one vote per share and which the undersigned may be entitled
to vote at the Annual Meeting of Shareholders of the Company to be held at
1600 Broadway, Suite 590, Denver, Colorado, on Wednesday, May 14, 1997, at
10:00 a.m., M.D.T., and at any adjournment of such meeting, with all powers
which the undersigned would possess if personally present:
1. To elect three (3) Class III Directors;
2. To approve the Stock Incentive 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
ended December 31, 1997; and
4. To vote upon such other matters as may be properly brought before the
meeting or any adjournment thereof hereby revoking all previous proxies and
ratifying all that any of said proxies, their substitutes, or any of them,
may lawfully do by virtue hereof.
If no directions are given, the individuals designated above will vote
for the above proposals and, at their discretion, on any other matter that
may come before the meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement of the Company.
(CONTINUED AND TO BE VOTED, DATED AND SIGNED ON REVERSE SIDE)
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<TABLE>
<S> <C>
FOREST OIL CORPORATION Common Stock Proxy One (1) Vote Per Share PLEASE MARK VOTES /X/ or /X/
The Board of Directors recommends a Vote FOR the following Proposals: SPECIAL NOTES
No. 1. Election of Directors. I plan to attend the meeting. / /
Nominees are Jordan L. Haines, J.J. Simmons III and Michael B. Yanney
FOR WITHHELD (To withhold authority to vote for all nominees check the block
marked "Withheld." To withhold authority to vote for any individual
/ / / / nominee write that nominee's name on the space provided below.)
____________________________________________________________________
No. 2. Approval of the Stock Incentive Plan. No. 3. Ratification of the Appointment of Independent Auditors.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
(Signature(s) should agree with names on Stock
Certificates as shown herein. Attorneys, executors,
administrators, trustees, guardians or custodians
should give full title as such.) Please complete,
date and sign this proxy and return it promptly in
the enclosed envelope whether or not you plan to
attend the meeting.
Dated:________________________________________, 1997
----------------------------------------------------
----------------------------------------------------
Signature of Shareholder(s)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
</TABLE>
