October 9, 1998
1998 Annual Meeting of Stockholders
December 2, 1998
Dear Stockholder:
It's a pleasure for us to extend to you a cordial invitation to attend
the 1998 Annual Meeting of Magellan Petroleum Corporation at the Hyatt Regency
Orlando International Airport, 9300 Airport Boulevard, Orlando, Florida 32827,
Wednesday, December 2, 1998 at 1:00 P.M. (telephone 407-825-1234).
While we are aware that most of our stockholders are unable personally
to attend the Annual Meeting, proxies are solicited so that each stockholder has
an opportunity to vote on all matters to come before the meeting. Whether or not
you plan to attend, please take a few minutes now to sign, date and return your
proxy in the enclosed postage-paid envelope. Regardless of the number of shares
you own, your vote is important.
Besides helping us conduct business at the annual meeting, there is
another reason for you to return your proxy vote card. Under the abandoned
property law of some jurisdictions, a stockholder may be considered "missing" if
that stockholder has failed to communicate with us in writing. The return of
your proxy vote card qualifies as written communication with us.
The Notice of Annual Meeting and Proxy Statement accompanying this
letter describe the business to be acted on at the meeting.
As in the past, members of management will review with you the
Company's results and will be available to respond to questions during the
meeting.
We look forward to seeing you at the meeting.
Sincerely,
James R. Joyce
President
<PAGE>
MAGELLAN PETROLEUM CORPORATION
149 Durham Road
Oak Park - Unit 31
Madison, CT 06443
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 2, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
MAGELLAN PETROLEUM CORPORATION, a Delaware Corporation (the "Company"), will be
held on Wednesday, December 2, 1998 at 1:00 P.M., local time at the Hyatt
Regency Orlando International Airport, 9300 Airport Boulevard, Orlando, Florida
32827 for the following purposes:
1. To elect two directors of the Company;
2. To ratify the appointment of independent auditors of the
Company for the fiscal year ending June 30, 1999; and
3. To approve the 1998 Stock Option Plan.
4. To act upon such other matters as may properly come before the
meeting or any adjournments or postponements thereof.
This notice and proxy statement and the enclosed form of proxy are
being sent to stockholders of record at the close of business on October 9, 1998
to enable such stockholders to state their instructions with respect to the
voting of the shares. Proxies should be returned to American Stock Transfer &
Trust Company, 40 Wall Street, 46th Floor, New York, NY 10269, in the reply
envelope enclosed.
By order of the Board of Directors,
Dated: October 9, 1998 Timothy L. Largay
Secretary
- - --------------------------------------------------------------------------------
RETURN OF PROXIES
WE URGE EACH STOCKHOLDER WHO IS UNABLE TO ATTEND THE MEETING TO VOTE BY PROMPTLY
SIGNING, DATING AND RETURNING THE ACCOMPANYING PROXY IN THE REPLY ENVELOPE
ENCLOSED.
- - --------------------------------------------------------------------------------
<PAGE>
MAGELLAN PETROLEUM CORPORATION
149 Durham Road
Oak Park - Unit 31
Madison, CT 06443
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished to stockholders of Magellan Petroleum
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors for use at the Annual Meeting
of Stockholders to be held on Wednesday, December 2, 1998 at 1:00 P.M., local
time, at the Hyatt Regency Orlando International Airport, 9300 Airport
Boulevard, Orlando, Florida 32827 and at any adjournments or postponements
thereof. The notice of meeting, proxy statement, and proxy are first being
mailed to stockholders on or about October 9, 1998. The proxy may be revoked at
any time before it is voted by (i) so notifying the Company in writing; (ii)
signing and dating a new and different proxy card of a later date; or (iii)
voting your shares in person or by your duly appointed agent at the meeting.
The persons named in the enclosed form of proxy will vote the shares of
Common Stock represented by said proxy in accordance with the specifications
made by means of a ballot provided in the proxy, and will vote the shares in
their discretion on any other matters properly coming before the meeting or any
adjournment or postponement thereof. The Board of Directors knows of no matters
which will be presented for consideration at the meeting other than those
matters referred to in this proxy statement.
The record date for the determination of stockholders entitled to
notice of and to vote at the meeting has been fixed by the Board of Directors as
the close of business on October 9, 1998. On that date, there were 25,032,495
outstanding shares of Common Stock of the Company, par value $.01 per share
("Common Stock"). Each outstanding share of Common Stock is entitled to one
vote.
PROPOSAL 1
ELECTION OF TWO DIRECTORS
In accordance with the Company's By-Laws, two directors are to be
elected to hold office for terms of three years each, expiring with the 2001
Annual Meeting of Stockholders. The Company's By-Laws provide for three classes
of directors who are to be elected for terms of three years each and until their
successors shall have been elected and shall have been duly qualified. Both
nominees are currently directors of the Company. Mr. Heath has indicated his
intention to serve only one year of his three year term. The Board of Directors
expects to nominate a successor to Mr. Heath to complete his three year term at
the 1999 Annual Meeting of Stockholders. If no one candidate for a directorship
<PAGE>
receives the affirmative vote of a majority of both the shares voted and of the
stockholders present in person or by proxy and voting thereon, then the
candidate who receives the majority in number of the stockholders present in
person or by proxy and voting thereon, shall be elected. The persons named in
the accompanying proxy will vote properly executed proxies for the election of
the persons hereinafter named, unless authority to vote for either or both
nominees is withheld.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE ELECTION OF THE NOMINEES.
The following table sets forth certain information about each nominee
for director and each director whose term of office continues beyond the 1998
Annual Meeting. The information presented includes, with respect to each such
person, his business history for at least the past five years; his age as of the
date of this proxy statement; his other directorships, if any; his other
positions with the Company, if any; and the year during which he first became a
director of the Company.
<TABLE>
<CAPTION>
Other
Director Offices Held
Name Since with Company Age and Business Experience
Nominees for three year terms expiring at the 2001 Annual Meeting:
<S> <C> <C> <C>
Dennis D. Benbow 1985 None Mr. Dennis D. Benbow has been the General Manager
of Magellan Petroleum Australia Limited ("MPAL")
since July 7, 1993. He had served as Operations
Manager of MPAL from 1980 until his election as
General Manager. He has been a director of MPAL
since 1983. Age fifty-nine.
Benjamin W. Heath 1957 None Mr. Benjamin W. Heath was President of the
Company from 1957 until he retired from that
position on June 30, 1993 and was Chairman of the
Board of MPAL until September 2, 1997. He
continues to be President and a director of
Coastal Caribbean Oils & Minerals, Ltd. ("Coastal
Caribbean"), a director of Canada Southern
Petroleum Ltd. ("Canada Southern"). Age
eighty-four.
Directors continuing in office with terms expiring at the 1999 Annual Meeting:
James R. Joyce 1993 President and Chief Mr. James R. Joyce has been President since
Financial Officer July 1, 1993 and Chief Financial Officer since
January 1990. Mr. Joyce has been President of
G&O'D INC since July 1, 1994, a firm which
provides accounting and administrative services,
office facilities and support staff to the Company
and other clients. He had been Vice President of
G&O'D INC from 1979 until June 1994. Mr. Joyce has
been Treasurer of Coastal Caribbean since June
1994. Age fifty-seven.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Other
Director Offices Held
Name Since with Company Age and Business Experience
<S> <C> <C> <C>
Timothy L. Largay 1996 Secretary Timothy L. Largay has been a partner in the law
firm of Murtha, Cullina, Richter and Pinney LLP
("Murtha Cullina"), Hartford, Connecticut since
1974. He served as a director and Chairman of
the Board of Raymond Engineering, Inc., a
publicly held defense contractor, from 1984-1986
and as a director of Buell Industries, Inc., a
publicly held manufacturer from 1976-1990. On
October 1, 1997, Mr. Largay was elected a
director of Canada Southern. Murtha Cullina has
been retained by the Company for more than five
years and is being retained during the current
year. Age fifty-five.
Directors continuing in office with terms expiring at the 2000 Annual Meeting:
Walter McCann 1983 Audit Committee Mr. Walter McCann has been the President of
Richmond College, The American International
University, located in London, England, since
January 1993. Mr. McCann was elected a director
of MPAL, the Company's majority owned subsidiary,
on September 2, 1997. From 1985 to 1992, he was
President of Athens College in Athens, Greece.
He was the Dean of the Barney School of Business
and Public Administration, University of Hartford
from 1979 to 1985. He is a member of the Bars of
Massachusetts and the District of Columbia. Age
sixty-one.
Ronald P. Pettirossi 1997 Audit Committee Mr. Ronald P. Pettirossi was elected on April 24,
1997 to fill the vacancy created by Mr. C. Dean
Reasoner's resignation on March 11, 1997. Mr.
Pettirossi was the Chief Financial Officer of
Discas, Inc. from February 1997 to August 1998.
Discas, Inc. is a Waterbury, Connecticut based
proprietary plastic and rubber compounds
manufacturer. Mr. Pettirossi has been President
of ER Ltd., a consulting company since October 1,
1995. Mr. Pettirossi is a former audit partner
of Ernst & Young LLP, who has worked with public
and privately held companies for 31 years. Age
fifty-five.
</TABLE>
- - -----------------
* All of the named companies are engaged in oil, gas or mineral exploration
and/or development, except where noted.
All officers are elected annually and serve at the pleasure of the
Board of Directors. No family relationships exist between any of the directors
or officers.
<PAGE>
COMMITTEES
The only standing committee of the Board is the Audit Committee, of
which Messrs. McCann and Pettirossi are the sole members. The principal
functions of the Audit Committee are: (1) to meet or otherwise communicate with
the Chief Financial Officer and those assisting him and request these
individuals to undertake such projects and provide such information as the Audit
Committee deems appropriate; (2) to approve the engagement or discharge of the
Company's independent auditors, meet with such auditors at least twice a year
and scrutinize their performance; (3) to require documentation relating to
periodic reports, statements and filings with regulatory agencies to determine
that appropriate review of such material has been made, as provided in the
Company's policies, by qualified individuals such as outside legal counsel,
independent auditors, the Chief Executive Officer, and other individuals as
necessary; (4) to require counsel regularly to advise the Committee as to
current legal requirements applicable to the Company; and (5) to report
regularly to the Board as to the Company's accounting policies and procedures
and compliance therewith.
The Board has no standing nominating, compensation or stock option
committees. The functions that would be performed by such committees are
performed by the full Board.
Five meetings of the Board and two meetings of the Audit Committee were
held during the year ended June 30, 1998. No director attended less than 75% of
the aggregate number of meetings held by the Board and the committee on which he
served.
<PAGE>
ADDITIONAL INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
Executive Compensation
The following table sets forth certain summary information concerning
the compensation of Mr. James R. Joyce, who is President and Chief Executive
Officer of the Company, and each of the most highly compensated executive
officers of the Company who earned in excess of $100,000 during fiscal year 1998
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
========================================================================================================
Summary Compensation Table
- - --------------------------------------- -------------------------- ------------------- -----------------
Long Term All Other
Compensation Compensation
Annual Compensation Awards ($)
- - --------------------------------------- ------------- ------------ ------------------- -----------------
Name and Principal Position Fiscal Salary Options/SARs
Year ($) (#)
- - --------------------------------------- ------------- ------------ ------------------- -----------------
<S> <C> <C> <C> <C>
James R. Joyce (1) 1998 - - -
President , Chief Financial 1997 - - -
Officer, and a director of 1996 - - -
the Company
- - --------------------------------------- ------------- ------------ ------------------- -----------------
Dennis D. Benbow (2) 1998 168,332 - 14,996
Director and General Manager - MPAL 1997 189,015 - 10,449
1996 178,185 - 10,243
========================================================================================================
</TABLE>
(1) Fees paid to G&O'D INC for Mr. Joyce's services only and related overhead in
fiscal years 1998, 1997 and 1996 were $172,744, $148,588 and $123,700,
respectively. It is expected that G&O'D INC will continue to receive fees for
providing accounting and administrative services, office facilities and support
staff provided to the Company by G&O'D INC, and that Mr. Joyce will receive no
additional compensation or other direct benefits from the Company for serving as
President and Chief Financial Officer and a director of the Company. See
"Certain Business Relationships and Transactions" below.
(2) Mr. Benbow has an employment contract with MPAL that is effective for a term
of three years beginning January 1, 1998. Mr. Benbow's salary is subject to an
annual adjustment for changes in the Australian Consumer Price Index. In the
event that Mr. Benbow is terminated by MPAL prior to December 31, 2000, without
cause, he will be entitled to the balance of his unpaid salary for the remaining
period of the employment agreement. MPAL has a termination policy applicable to
all MPAL employees (including Mr. Benbow) which provides for three weeks of pay
for each year of service up to a maximum 52 weeks of salary. If the termination
payment exceeded the amount due under his employment agreement, Mr. Benbow would
be entitled to the termination payment in lieu of any unpaid salary amount.
Defined Benefit or Actuarial Plan Disclosure
Under the terms of MPAL's funded pension plan, Mr. Benbow will receive
a lump sum payment from an insurance carrier upon his retirement which will be a
multiple of 4.6 times the average of his basic salary for his highest average
salary over three consecutive years. Based on Mr. Benbow's annual average salary
for the three years ended June 30, 1998, such lump sum payment would have been
$521,000, if he retired, died or was disabled.
<PAGE>
Mr. Joyce is not covered by any pension plan funded by the Company.
Messrs. Benjamin W. Heath, Timothy L. Largay, Walter McCann and Ronald
P. Pettirossi are each paid director's fees of $25,000 per annum.
Mr. Heath receives a reimbursement of $500 per month for office and
secretarial expenses from the Company. Mr. Heath also received a similar
reimbursement of $833 per month from MPAL, in his capacity as a consultant.
Under the Company's medical reimbursement plan for all outside
directors, the Company reimburses certain directors the cost of their medical
premiums, up to $500 per month. During fiscal 1998, the cost of this plan was
$10,928.
Stock Options
The following table provides information about stock options exercised
during fiscal 1998 and unexercised stock options held by the Named Executive
Officers at the end of fiscal year 1998.
<TABLE>
<CAPTION>
=======================================================================================================================
Aggregated Option/SAR Exercises in Fiscal 1998 and June 30, 1998
Option/SAR Values Table
- - -----------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-The-Money
Securities Options/SARs Options/SARs
Underlying at 1998 Year-end (#) at 1998 Year-end ($)
- - ------------------------ Options/SARs Value ------------- --------------- ------------- ----------------
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- - ------------------------ --------------- -------------- ------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James R. Joyce - - 100,000 - 147,000 -
- - ------------------------ --------------- -------------- ------------- --------------- ------------- ----------------
Dennis D. Benbow - - 50,000 - 73,000 -
=======================================================================================================================
</TABLE>
Compensation Committee Interlocks and Insider Participation
The only officers or employees of the Company or any of its
subsidiaries, or former officers or employees of the Company of any of its
subsidiaries, who participated in the deliberations of the Board concerning
executive officer compensation during the fiscal year ended June 30, 1998 were
Messrs. Benjamin W. Heath, Dennis B. Benbow and James R. Joyce. At the time of
such deliberations, Messrs. Benbow and Joyce were directors of the Company and
MPAL. None of the above individuals participated in any discussions or
deliberations regarding their own compensation.
<PAGE>
Compensation Committee Report
The Company does not maintain a compensation committee; compensation
decisions are made by the Board of Directors as a whole. The compensation of
each of the Company's executive officers over the past several years has been
determined as discussed below. In establishing compensation, the Company has
considered the value of the services rendered, the skills and experience of each
executive officer, the Company's circumstances and other factors. The Board did
not establish specific guidelines governing last year's compensation for
executive officers, and there was no specific relationship between corporate
performance and the compensation of executive officers in the fiscal year ended
June 30, 1998.
Mr. Benbow's compensation was determined by the independent directors
of MPAL. Consistent with its usual practice on compensation of MPAL employees,
the Board of Directors of the Company did not intervene in that determination.
The Company has for several years maintained an arrangement with G&O'D, INC
whereby G&O'D, INC is compensated for its services on an hourly basis, including
Mr. Joyce's services in fiscal 1998 as President and Chief Financial Officer of
the Company. Statements for such services were submitted to the Company's
directors for review and approval. The Company had no other executive officers
in fiscal 1998.
Dennis D. Benbow Timothy L. Largay
Benjamin W. Heath Walter McCann
James R. Joyce Ronald P. Pettirossi
Tax Deductibility of Compensation
At this time, The Company does not expect that the Revenue
Reconciliation Act of 1993 will have any effect on the Company's executive
compensation for the following reasons:
1. It is not likely that compensation to any executive will
exceed $1 million.
2. The only executive officer receiving a salary is paid by MPAL,
which is a foreign corporation not subject to taxation in the
United States.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of the Company's Common Stock to file initial reports of beneficial
ownership and reports of changes in beneficial ownership with the Securities and
Exchange Commission (the "SEC"). Such persons are required by the SEC
regulations to furnish the Company with copies of all Section 16(a) forms filed
by such persons. Based solely on its copies of forms received by it, or written
representations from certain reporting persons that no Form 5's were required
for those persons, the Company believes that during the just completed fiscal
year, its executive officers, directors, and greater than 10% beneficial owners
compiled with all applicable filing requirements.
<PAGE>
Certain Business Relationships and Transactions
G&O'D INC
During the year ended June 30, 1998, $248,174 was paid or accrued for
providing accounting and administrative services, office facilities and support
staff to the Company by G&O'D INC ("G&O'D"), a firm that is owned by Mr. James
R. Joyce, President and Chief Financial Officer. The services rendered by G&O'D
to the Company include the following: preparation and filing of all reports
required by Federal and State governments, preparations of reports and
registration statements required under the Federal securities laws; preparation
and filing of interim, special and annual reports to Stockholders; maintaining
corporate ledgers and records; furnishing office facilities and record
retention. G&O'D is also responsible for the investment of the Company's
available funds and other banking relations and securing adequate insurance to
protect the Company. G&O'D is responsible for the preparation and maintenance of
all the minutes of any directors' and stockholders' meetings, arranging all
meetings of directors and stockholders, coordinating the activities and services
of all companies and firms rendering services to the Company, responding to
stockholder inquiries, and such other services as may be requested by the
Company. G&O'D maintains and provides current information about the Company's
activities so that the directors of the Company may keep themselves informed as
to the Company's activities. G&O'D's fees are based on the time spent in
performing these services to the Company.
Murtha, Cullina, Richter and Pinney LLP
Mr. Timothy L. Largay, a director of the Company, is a member of the
law firm of Murtha, Cullina, Richter and Pinney LLP, which firm was paid fees of
$36,366 for fiscal 1998.
Royalty Interests
Mr. Benjamin W. Heath has overriding royalty interests on certain oil
and gas properties in which the Company also has interests. These royalties
were received directly or indirectly from the Company:
Benjamin W. Heath
-----------------
Property Royalty
-------- -------
Amadeus Basin, Australia:
Dingo .1285469% (*) and .0770625%
Palm Valley .1480469% (*) and .1758125%
Mereenie .1187969% (*) and .0276875%
Kotaneelee gas field, Canada .128% (*)
(*) Held by a marital trust in which Mr. Heath has a 54.4% income
interest.
Mr. Heath received (directly and indirectly) gross royalty payments of
$46,044, with respect to his royalty interests during the year ended June 30,
1998. These amounts represent payments by all of the owners of the fields, and
not just the Company's share. Mr. Heath received these royalty interests between
1957 and 1968, prior to any oil and gas discoveries.
<PAGE>
Security Ownership of Management
The following table sets forth information as to the number of shares
of the Company's Common Stock owned beneficially as of October 1, 1998 by each
director and each Named Executive Officer listed in the Summary Compensation
Table and by all directors and executive officers of the Company as a group:
Amount and Nature of
Name of Individual or Group Beneficial Ownership* Percent of Class
Shares Options
Dennis D. Benbow 32,000 50,000 **
Benjamin W. Heath 20,000 - **
James R. Joyce 66,000 100,000 **
Timothy L. Largay 3,000 50,000 **
Walter McCann 80,868 - **
Ronald P. Pettirossi 1,500 - **
Directors and Executive Officers as a
Group (a total of 6) 203,368 200,000 1.6%
* Unless otherwise indicated, each person listed has the sole power to
vote and dispose of the shares listed.
** The percent of class owned is less than 1%.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 1999. Ernst & Young LLP
and its predecessor have been the Company's independent auditors for many years.
Although ratification by stockholders is not required by law, the Board requests
that stockholders ratify this appointment. The proxy permits a stockholder to
vote for, to vote against, or to abstain from voting for the ratification of the
appointment of auditors. If no specification is indicated, the shares will be
voted in favor of ratifying the appointment of Ernst & Young LLP. If
ratification is not obtained, the Board will reconsider the appointment.
Representatives of Ernst & Young LLP will not be present at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" PROPOSAL 2.
PROPOSAL 3
1998 STOCK OPTION PLAN
On December 3, 1997, the Board of Directors approved the 1998 Stock
Option Plan (the "Plan") that permits the granting of stock options ("Options")
and stock appreciation rights ("SARs") to the directors, officers, key employees
and consultants of the Company, its subsidiaries, and any business in which the
Company has a substantial interest. The effectiveness of the Plan is subject to
prior shareholder approval. Reference is made to Exhibit A for the terms of the
Plan, which are set forth in full therein.
<PAGE>
Purpose of the Plan
The purpose of the Plan is to further the success of the Company and
its subsidiaries or affiliates by making stock of the Company available for
purchase by directors, officers, key employees and consultants of the Company
and its subsidiaries or affiliates, and thus to provide an additional incentive
to such persons to continue their affiliation with the Company and its
subsidiaries or affiliates and to give them a greater interest in the success of
the Company.
Under the terms of the Plan, a maximum of 1,000,000 shares of the
Company's Common Stock, par value $.01 per share ("the Common Stock") can be
issued, and no shares can be issued at a price less than the fair value of such
shares on the date of grant. As of October 1, 1998, the closing price of one
share of Common Stock on the Pacific Exchange was $1.69.
Plan Administration
Unless otherwise determined by the Board of Directors, the Plan will be
administered by the Board of Directors who will act as a committee of the whole
(the "Committee"). The Committee will determine the persons to whom Options or
SARs are to be granted, the number of shares which may be acquired upon the
exercise of each Option or SAR, the purchase price at which the Options or SARs
are exercisable, the time or times at which Options or SARs shall be granted,
and the time or times at which Options or SARs can be exercised and whether in
whole or installments.
Stock Options
The Plan provides for the grant of Options to purchase shares of Common
Stock subject to terms as determined by the Committee and evidenced in a form
also determined by the Committee. The purchase price of each Option may not be
less than the fair market value of the Common Stock on the date of grant.
Unless determined otherwise by the Committee or in an option agreement,
Options will vest over a three year period. The Plan also includes provisions
for the cashless exercise of Options and, at the Committee's discretion, the
granting of "Reload Options" when an optionee exercises an Option granted under
the Plan and makes payment using previously owned shares of Common Stock.
The Options, which are nontransferable except as specified in the Plan,
can have a maximum period of ten years, and may expire earlier in the event that
the optionee dies or, in the case of employees, employment with the Company is
terminated.
<PAGE>
Stock Appreciation Rights
The Plan also provides for the grant of SARs subject to terms as
determined by the Committee and evidenced in a form also determined by the
Committee. SARs may be granted alone, simultaneously with a grant of Options
under the Plan, or subsequent to a grant of Options under the Plan. The exercise
price of each SAR granted alone may not be less than the fair market value of
one share of the Common Stock on the date of grant. SARs granted simultaneously
with or subsequent to a grant of Options have the same exercise price as the
related Option, but are exercisable only when the fair market value of Common
Stock subject to the SAR and related Option exceeds the exercise price thereof.
Unless determined otherwise by the Committee or in a SAR agreement, SARs will
vest over a three year period.
SARs, which are nontransferable except as specified in the Plan, can
have a maximum period of ten years, and are deemed exercised at the end of ten
years if the fair market value of the Common Stock exceeds the exercise price.
SARs may expire earlier in the event that the optionee dies or, in the case of
employees, employment with the Company is terminated.
Tax Consequences
A recipient will not realize any taxable income upon the grant of an
Option or SAR, nor will the Company generally be entitled to a deduction.
However, a recipient will realize taxable income in an amount equal to the
excess of the fair market value of the Common Stock acquired over the option
price paid at the time of exercise on an Option or an amount equal to the cash
or fair market value of the Common Stock received upon the exercise of a SAR.
The Company will not be entitled to a corresponding deduction. The sum of the
exercise price plus the benefit received upon the exercise of the Option or SAR
becomes the recipient's tax basis in the stock to be used for purposes of
computing gain or loss upon any subsequent disposition. When the shares acquired
by exercise of an Option or SAR are sold, any gain will be taxed as capital
gain.
The income tax consequences to a recipient are dependent on the
particular facts and circumstances of the particular grant and the particular
circumstances of the recipient.
There have been no Options or SARs granted under the Plan as of the
date herein.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" PROPOSAL 3.
OTHER MATTERS
If any other matters are properly presented to stockholders for a vote
at the meeting, the persons named as proxies on the proxy card will have
discretionary authority, to the extent permitted by law, to vote on such matters
in accordance with their best judgment. The Board of Directors knows of no other
matters which will be presented to stockholders for consideration at the meeting
other than the matters referred to in Proposals 1, 2 and 3 above.
<PAGE>
VOTE REQUIRED FOR APPROVAL
Each outstanding share of Common Stock is entitled to one vote. Article
Twelfth of the Company's Certificate of Incorporation provides that:
Any matter to be voted upon at any meeting of
stockholders must be approved, not only by a majority of the
shares voted at such meeting (or such greater number of shares
as would otherwise be required by law or this Certificate of
Incorporation), but also by a majority of the stockholders
present in person or by proxy and entitled to vote thereon;
provided, however, except and only in the case of the election
of directors, if no candidate for one or more directorships
receives both such majorities, and any vacancies remain to be
filled, each person who receives the majority in number of the
stockholders present in person or by proxy and voting thereon
shall be elected to fill such vacancies by virtue of having
received such majority. When shares are held by members or
stockholders of another company, association or similar entity
and such persons act in concert, or when shares are held by or
for a group of stockholders whose members act in concert by
virtue of any contract, agreement or understanding, such
persons shall be deemed to be one stockholder for the purposes
of this Article.
The Company may require brokers, banks and other nominees holding
shares for beneficial owners to furnish information with respect to such
beneficial owners for the purpose of applying the last sentence of Article
Twelfth.
Only stockholders of record are entitled to vote; beneficial owners of
Common Stock of the Company whose shares are held by brokers, banks and other
nominees (such as persons who own shares in "street name") are not entitled to a
vote for purposes of applying the provision relating to the vote of a majority
of stockholders. Each stockholder of record is considered to be one stockholder,
regardless of the number of persons who might have a beneficial interest in the
shares held by such stockholder. For example, assume XYZ broker is the
stockholder of record for ten persons who each beneficially own 100 shares of
the Company, eight of these beneficial owners direct XYZ to vote in favor of a
proposal and two direct XYZ to vote against the proposal. For purposes of
determining the vote of the majority of shares, 800 shares would be counted in
favor of the proposal and 200 shares against the proposal. For purposes of
determining the vote of a majority of stockholders, one stockholder would be
counted as voting in favor of the proposal.
The holders of thirty-three and one third percent (33 1/3%) of the
total number of shares entitled to be voted at the meeting, present in person or
by proxy, shall constitute a quorum for the transaction of business. In counting
the number of shares voted, broker nonvotes and abstentions will not be counted
and will have no effect. In counting the number of stockholders voting, (i)
broker nonvotes will have no effect and (ii) abstentions will have the same
effect as a negative vote or, in the case of the election of directors, as a
vote not cast in favor of the nominee.
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total returns, including
reinvestment of dividends, if applicable, of Company Stock with companies in the
NASDAQ Index and an Industry Group Index (Media General's Oil, Natural Gas
Production Industry Group).
The chart displayed below is presented in accordance with SEC
requirements. Stockholders are cautioned against drawing any conclusions from
the data contained therein, as past results are not necessarily indicative of
future performance.
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Magellan Petroleum 100.00 57.89 163.16 210.53 192.11 192.11
Industry Index 100.00 107.96 112.49 134.39 152.42 131.77
Brood Market 100.00 109.66 128.61 161.89 195.02 258.52
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company knows of no person that owns beneficially more than 5% of
the outstanding common stock of the Company.
SOLICITATION OF PROXIES
The entire expense of preparing and mailing this Proxy Statement and
any other soliciting material (including, without limitation, costs, if any,
related to advertising, printing, fees of attorneys, financial advisors and
solicitors, public relations, transportation and litigation) will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
the Company or certain of its employees by telephone, telegram and personal
solicitation; however, no additional compensation will be paid to those
employees in connection with such solicitation. In addition, the Company has
retained the firm of Morrow & Co., to assist in the distribution of proxy
solicitation materials for an estimated fee of $6,500 plus out-of-pocket
expenses. The cost of the proxy solicitation will be borne by the Company.
Banks, brokerage houses and other custodians, nominees and fiduciaries
will be requested to forward solicitation material to the beneficial owners of
the Common Stock that such institutions hold of record, and the Company will
reimburse such institutions for their reasonable out-of-pocket disbursements and
expenses.
STOCKHOLDER PROPOSALS
Stockholders who intend to have a proposal included in the notice of
meeting and related proxy statement relating to the Company's 1999 Annual
Meeting of Stockholders must submit the proposal by June 24, 1999.
<PAGE>
Article II, Section 2.1, of the Company's By-Laws provides in part that,
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the board
of directors, (b) otherwise properly brought before the meeting by or at the
direction of the board of directors, or (c) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation, not less than sixty (60) days
nor more than ninety (90) days prior to the meeting; provided, however, that in
the event that less than seventy days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth day following the date on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. For purposes of this
Section 2.1, public disclosure shall be deemed to have been made to stockholders
when disclosure of the date of the meeting is first made in a press release
reported by the Dow Jones News Services, Associated Press, Reuters Information
Services, Inc. or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended.
A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting
(a) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting;
(b) the name and address, as they appear on the corporation's books, of
the stockholder intending to propose such business;
(c) the class and number of shares of the corporation which are
beneficially owned by the stockholder;
(d) a representation that the stockholder is a holder of record of
capital stock of the corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to present such business;
(e) any material interest of the stockholder in such business.
<PAGE>
Notice by a stockholder under this provision of the Company's By-laws
must have been received by October 2, 1998. No stockholder has submitted a
proposal for the 1998 Annual Meeting of Stockholders which complied with the
above requirements.
All stockholder proposals should be submitted to the Secretary of
Magellan Petroleum Corporation at 149 Durham Road, Oak Park - Unit 31, Madison,
CT 06443. The fact that a stockholder proposal is received in a timely manner
does not insure its inclusion in the proxy material, since there are other
requirements in the Company's By-Laws and proxy rules relating to such
inclusion.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE REPLY ENVELOPE PROVIDED.
By Order of the Board of Directors,
Timothy L. Largay
Secretary
Dated: October 9, 1998
<PAGE>
EXHIBIT A
MAGELLAN PETROLEUM CORPORATION
1998 STOCK OPTION PLAN
1. Purpose of Plan.
The purpose of this Non-Qualified Stock Option Plan (the "Plan") is to
further the interests of Magellan Petroleum Corporation, a Delaware corporation,
(the "Company"), and its subsidiaries or affiliates, by providing eligible
individuals (as designated in Section 4 below) with an opportunity to acquire or
increase a proprietary interest in the Company through the grant of options to
purchase common stock of the Company or through the grant of Stock Appreciation
Rights ("SARs"), and thus to provide an additional incentive to such persons to
continue their affiliation with the Company and its subsidiaries or affiliates
and to give them a greater interest in the success of the Company (options and
SARs are referred to herein collectively as "Awards"). Options granted to
eligible individuals ("Optionees") may be accompanied or followed by SARs or
SARs may be granted to eligible individuals without accompanying option grants
as described in Section 6, below.
2. Stock Subject to Plan.
There shall be reserved for issuance or transfer upon the exercise of
all Awards to be granted from time to time under the Plan an aggregate of
1,000,000 shares of the Company's common stock, one cent par value (the
"Stock"), which shares may be in whole or in part authorized and unissued shares
of stock or issued shares of stock which shall have been reacquired by the
Company, as the Board of Directors shall from time to time determine. For the
purposes of this Section 2, a share of Stock shall be deemed issued or
transferred upon the exercise of any SAR. If any Award granted under the Plan
shall expire, be surrendered to the Company or terminate for any reason without
having been exercised in full, the shares of Stock subject thereto that have not
been issued or transferred or deemed issued or transferred shall again be
available for the purposes of the Plan.
3. Administration.
The Plan shall be administered by a committee (the "Committee") of not
less than two (2) members of the Board of Directors of the Company, appointed by
the Board. Vacancies occurring in membership of the Committee shall be filled by
the Board.
The Committee shall keep minutes of its meetings. The Committee shall
select one of its members as its chairman and shall hold its meetings at such
times and places as it may determine. The Committee shall establish such rules
and regulations for the conduct of its business as it shall deem advisable and
may act without meeting by unanimous written consent. One or more members of
<PAGE>
the Committee may participate in a meeting of the Committee by means of
conference telephone or similar communications equipment provided all persons
participating in the meeting can hear one another. A majority of the entire
Committee shall constitute a quorum, and the acts of a majority of the members
present at or so participating in any meeting at which a quorum is constituted
shall be the acts of the Committee.
The Committee shall have absolute authority in its discretion, but
subject to the express provisions of the Plan, to interpret the Plan; to
prescribe, amend, and rescind rules and regulations relating to the Plan; and to
make any and all other determinations deemed necessary or advisable for the
administration of the Plan. The Committee's determination on the foregoing
matters shall be conclusive.
Absent any other provision by the Board of Directors of the Company,
the power and responsibilities of the Committee shall be vested and assumed by
the Board of Directors of the Company acting as a committee of the whole.
4. Eligibility.
Awards under the Plan may be granted to all employees, directors,
officers of, and consultants and consulting firms to (i) the Company, (ii)
subsidiary corporations of the Company from time to time (the "Subsidiaries"),
(iii) any business entity in which the Company shall from time to time have a
substantial interest ("Affiliate"), who, in the sole opinion of the Committee
are, from time to time, responsible for the management and/or growth of all or
part of the business of the Company. In determining the persons to whom Awards
shall be granted and the number of shares to be covered by each Award, the
Committee may take into account the nature of the services rendered by such
persons, their present and potential contribution to the Company's success, and
such other factors as the Committee in its sole discretion shall deem relevant.
5. Stock Options
(a) Grant of Options. The Committee shall have absolute
authority in its discretion, but subject to the express provisions of the Plan,
to determine (i) the person to whom options shall be granted, (ii) the time or
times at which options shall be granted, (iii) the number of shares to be
subject to each option, (iv) the time or times at which an option can be
exercised and whether in whole or in installments, and (v) the amount, if any,
by which the exercise price of any granted option may be reduced during the term
thereof.
(b) Option Agreements. The Committee shall have absolute
authority in its discretion to determine the terms and provisions (and
amendments thereof) of the respective option agreements (which need not be
identical), including such terms and provisions (and amendments) as shall be
required in the judgment of the Committee to conform to any change in any law or
regulation applicable thereto. The Committee's determination on the foregoing
matters shall be conclusive. All options granted pursuant to the Plan shall be
evidenced by the Company and by the Optionee, in such form or forms as the
Committee shall from time to time determine. Option agreements covering options
<PAGE>
granted from time to time or at the same time need not contain similar
provisions; provided, however, that all such option agreements shall comply with
all terms of the Plan. The terms and conditions of any and all SARs granted at
the same time as an option shall be included in the option agreement and shall
comply with the terms of Section 6, below. Terms and provisions of agreements
evidencing SARs granted alone or following the grant of an option shall comply
with Section 6(b), below.
(c) Option Prices. The purchase price of each share of Stock
subject to an option granted hereunder shall be determined by the Committee but
may not be less than the fair market value of the Stock on the date of grant.
The fair market value of the Stock on any given date shall be the closing price
of the Stock on the Pacific Exchange (or the principal exchange on which the
Stock is traded) on the date immediately prior to such grant, or, if no sales of
the Stock occurred on that day, then the most recent day for which sales were
reported.
(d) Term and Exercise of Options.
(i) The Committee shall have authority in its discretion to
prescribe in any option agreement that the option may be exercised in different
installments during the term of the option. Unless otherwise determined by the
Committee or in the option agreement, each option granted under the Plan shall
be exercisable with respect to not more than one-third (1/3) of such shares of
Stock subject thereto after the expiration of one (1) year following the date of
its grant, and shall be exercisable as to an additional one-third (1/3) of such
shares of Stock after the expiration of each of the succeeding two (2) years, on
a cumulative basis, so that such option, or any unexercised portion thereof,
shall be fully exercisable after a period of three (3) years following the date
of its grant. An option that is exercisable under the Plan may be exercised by
delivery to the Company (on any business day, at its principal office, addressed
to the attention of the Committee) of a written notice of exercise, which notice
shall specify the number of shares of Stock with respect to which the option is
being exercised. The purchase price of the shares to be acquired shall be paid
in full in cash upon the exercise of the option, except as provided in
subsection (ii) below. The Company shall not be required to deliver certificates
for such shares until payment has been made in accordance with the terms of this
Section and such other conditions to the valid and lawful issuance of the shares
as may exist from time to time shall have been fully satisfied.
(ii) Payment in full need not accompany the exercise of
options provided that the Stock certificate or certificates for the shares for
which the option is exercised be delivered to a licensed broker acceptable to
the Company as the agent for the individual exercising the option and, at the
time such Stock certificate or certificates are delivered, the broker tenders to
the Company an amount in cash (or cash equivalents acceptable to the Company)
equal to the exercise price for the shares of Stock purchased pursuant to the
exercise of the option plus the amount (if any) of federal or other taxes which
the Company may, in its judgment, be required to withhold with respect to the
exercise of an option. The Committee shall have the authority, but not the
<PAGE>
obligation, to establish at its discretion and in accordance with all applicable
laws and the terms of this Plan, procedures by which an Optionee may exercise an
option in accordance with this subsection 5(ii) absent the requirement that the
Optionee deliver such certificates to a licensed broker, provided, that the
Optionee deliver such certificates directly to the Company.
(iii) The term of each option shall be for such period as the
Committee shall determine, but not more than ten years from the date of the
granting thereof, or such shorter period as described in Sections 8 and 9
hereof.
(iv) As to employees, except as provided in Sections 8 and 9
hereof, an option granted to an employee of the Company or one of its
Subsidiaries or Affiliates may not be exercised unless the holder thereof is at
the time of such exercise (and has been since the date of the grant) an employee
of the Company or one of its then Subsidiaries or a then Affiliate.
(v) An Optionee shall not have any of the rights of a
stockholder with respect to the shares subject to option until such shares shall
be issued or transferred to him upon exercise of his option.
(vi) The exercise of any option by a United States citizen or
resident may be contingent upon receipt of a representation that at the time of
such exercise it is the Optionee's present intention to acquire the shares being
purchased for investment.
(vii) The certificate(s) representing shares issued upon
exercise of any option may contain a legend restricting the transfer thereof.
6. Grant of Stock Appreciation Rights.
(a) Grant of SARs. The Committee shall have absolute authority
in its discretion, but subject to the express provisions of the Plan, to
determine (i) the person to whom SARs shall be granted, (ii) the time or times
at which SARs shall be granted, (iii) the number of shares to be subject to each
SAR, and (iv) the time or times at which a SAR can be exercised and whether in
whole or in installments, and (v) the amount, if any, by which the exercise
price of any granted SAR may be reduced during the term thereof. In the
discretion of the Committee, a SAR may be granted alone; simultaneously with the
grant of an option under the Plan and in conjunction therewith or in the
alternative thereto; or subsequent to the grant of an option under the Plan and
in conjunction therewith or in the alternative thereto.
(b) SAR Agreements. The Committee shall have absolute
authority in its discretion to determine the terms and provisions (and
amendments thereof) of the respective SAR agreements (which need not be
identical), including such terms and provisions (and amendments) as shall be
required in the judgment of the Committee to conform to any change in any law or
regulation applicable thereto. The Committee's determination on the foregoing
matters shall be conclusive. All SARs granted independently of or following
<PAGE>
options granted +pursuant to the Plan shall be evidenced by the Company and by
the SAR holder, in such form or forms as the Committee shall from time to time
determine. Such agreements concerning the grant of SARs granted from time to
time or at the same time need not contain similar provisions; provided, however,
that all such agreements shall comply with all terms of the Plan.
(c) SAR Prices.
(i) The exercise price of each SAR granted alone shall be
determined by the Committee but may not be less than the fair market value of
one share of the Stock on the date of grant. The fair market value of the Stock
on any given date shall be the closing price of the Stock on the Pacific Stock
Exchange (or the principal exchange on which the Stock is traded) on the date
immediately prior to such grant, or, if no sales of the Stock occurred on that
day, then the most recent day for which sales were reported.
(ii) A SAR granted simultaneously with or subsequent to the
grant of an option and in conjunction therewith or in the alternative thereto
shall have the same exercise price as the related option, shall be transferable
only upon the same terms and conditions as the related option, and shall be
exercisable only to the same extent as the related option; provided, however,
that a SAR, by its terms, shall be exercisable only when the fair market value
of the shares subject to the SAR and related option exceeds the exercise price
thereof.
(d) Term and Exercise of SARs.
(i) The Committee shall have authority in its discretion to
prescribe in any SAR agreement that the SAR may be exercised in different
installments during the term of the SAR. Unless otherwise determined by the
Committee or in the SAR agreement, each SAR granted under the Plan shall be
exercisable with respect to not more than one-third (1/3) of such shares of
Stock subject thereto after the expiration of one (1) year following the date of
its grant, and shall be exercisable as to an additional one-third (1/3) of such
shares of Stock after the expiration of each of the succeeding two (2) years, on
a cumulative basis, so that such SAR, or any unexercised portion thereof, shall
be fully exercisable after a period of three (3) years following the date of its
grant. A SAR shall entitle the holder upon exercise thereof to receive from the
Company, upon a written request filed with the Committee (the "Request"), a
number of shares (with or without restrictions as to substantial risk of
forfeiture and transferability, as determined by the Committee, in its sole
discretion), an amount in cash, or any combination of shares of Stock and cash,
as specified in the Request (but subject to the approval of the Committee, in
its sole discretion, at any time up to and including the time of payment, as to
the making of any cash payment), having an aggregate fair market value equal to
the product of (i) the excess of the fair market value, on the day of such
Request, of one (1) share over the exercise price per share specified in such
SAR or its related option, multiplied by (ii) the number of shares for which
such SAR shall be exercised.
<PAGE>
(ii) Any election by a holder of a SAR to receive cash in full
or partial settlement of such SAR, and any exercise of such SAR for cash, may be
made only by a Request filed with the Committee during the period beginning on
the third (3rd) business day following the date of release for publication by
the Company of quarterly or annual summary statements of sales and earnings and
ending on the twelfth (12th) business day following such date. Within thirty
(30) days of the receipt by the Company of a Request to receive cash in full or
partial settlement of a right or to exercise such SAR for cash, the Committee
shall, in its sole discretion, either consent to or disapprove, in whole or in
part, such Request. A Request to receive cash in full or partial settlement of a
SAR or to exercise a SAR for cash may provide that, in the event the Committee,
shall disapprove such Request, such Request shall be deemed to be an exercise of
such SAR for shares.
(iii) A holder of a SAR shall not be entitled to request or
receive cash in full or partial payment of such SAR during the first six (6)
months of its term; provided, however, that such prohibition shall not apply if
the holder of such SAR is not subject to the reporting requirements of Section
16(a) of the Exchange Act. In no event will a holder of a SAR who is subject to
the reporting requirements of Section 16(a) of the Exchange Act be entitled to
make such a request or receive cash in full or partial payment of such SAR until
the Company shall have satisfied the informational requirements of Rule
16b-3(e)(1) promulgated under the Exchange Act for the specified one-year
period.
(iv) Upon exercise of a SAR granted simultaneously with or
subsequent to an option and in the alternative thereto, the number of shares for
which the related option shall be exercisable shall be reduced by the number of
shares for which the SAR shall have been exercised. The number of shares for
which a SAR shall be exercisable shall be reduced upon any exercise of a related
option by the number of shares for which such option shall have been exercised.
(v) If the Committee disapproves in whole or in part any
election by a holder to receive cash in full or partial settlement of a SAR or
to exercise such SAR for cash, such disapproval shall not affect such holder's
right to exercise such SAR at a later date, to the extent that such SAR shall be
otherwise exercisable, or to elect the form of payment at a later date, provided
that an election to receive cash upon such later exercise shall be subject to
the approval of the Committee. Additionally, such disapproval shall not affect
such holder's right to exercise any related option or options granted to such
holder under the Plan.
(vi) The term of each SAR shall be for such period as the
Committee shall determine, but not more than ten years from the date of the
granting thereof, or such shorter period as described in Sections 8 and 9
hereof. A SAR shall be deemed exercised on the last day of its term, if not
otherwise exercised by the holder thereof, provided that the fair market value
of the Shares subject to the SAR exceeds the exercise price thereof on such
date.
<PAGE>
(vii) As to employees, except as provided in Sections 8 and 9
hereof, an option granted to an employee of the Company or one of its
Subsidiaries or Affiliates, may not be exercised unless the holder thereof is at
the time of such exercise (and has been since the date of the grant) an employee
of the Company of one of its then Subsidiaries or a then Affiliate.
(viii) Any SAR shall be exercisable upon such additional terms
and conditions as may from time to time be prescribed the Committee.
7. Restrictions on Transfer of Awards.
Subject to the terms of Section 9 below, Awards are transferable only
to members of the Optionee's immediate family. For purposes of this Section 7,
an Optionee's immediate family includes, and only includes, the parents, spouse
and children of the Optionee.
8. Termination of Employment.
In the case of an Award granted to any employee of the Company or one
of its Subsidiaries or Affiliates, in the event of termination of employment,
other than (a) a termination that is either (i) for cause or (ii) voluntary on
the part of the employee and without the written consent of the Company, or (b)
a termination by reason of death, the employee may (unless otherwise provided in
his or her award agreement) exercise his or her Award at any time within three
months after such termination of employment, or such other time as the Committee
shall authorize, but in no event after ten years from the date of granting
thereof, to the extent of the number of shares subject to the Award and
exercisable by him or her at the date of termination of his or her employment.
In the event of the termination of the employment of an employee to whom an
Award has been granted under the Plan that is either (i) for cause or (ii)
voluntary on the part of the employee without the written consent of the
Company, any Award granted pursuant to the Plan, to the extent not theretofore
exercised, shall terminate forthwith. Nothing in the Plan or any Award agreement
shall confer on any individual any right to continue in any capacity his
relationship with the Company or any of its Subsidiaries or Affiliates or
interfere in any way with the right of the Company or any of its Subsidiaries or
Affiliates to terminate such relationship at any time.
9. Rights in the Event of Death of Holder of Awards.
In the event of the death of any holder of an Award which has been
granted under the Plan, such Award (unless previously terminated or exercised)
may be exercised (to the extent exercisable by such person at the date of his or
her death) by a legatee or legatees of such option under such person's will, or
by such person's legal representative or distributees, at any time within a
period of one year after his death, but not after ten years from the date of
granting thereof.
<PAGE>
10. Reload Options.
Within the Committee's complete discretion, whenever an Optionee
holding options (the "Original Option") outstanding under the Plan (including
any Reload Option granted under this Section) exercises the Original Option and
makes payment of the option price in whole or in part by delivering shares of
common stock (valued at the then current fair market value per share) previously
held by that individual (the "Owned Shares"), then that Optionee may receive a
new option (the "Reload Option") in an amount equal to the Owned Shares
surrendered by the Optionee in payment of the purchase price for the Original
Option being exercised. All such Reload Options granted hereunder shall be
nonqualified stock options and shall be subject to the following terms and
conditions:
(a) the option price per share shall be the then current fair
market value per share of the common stock as of the date of exercise of the
Original Option; and
(b) the Committee shall have absolute authority in its
discretion to determine all other terms and conditions of Reload Options.
11. Adjustment Upon Changes in Capitalization.
Notwithstanding any other provisions of the Plan, each Award agreement
shall contain such provisions as the Committee shall determine to be appropriate
for the adjustment of the number and class of shares subject to such Award and
of the exercise price in the event of changes in the outstanding Stock by
reasons of any stock dividend, split-up, recapitalization, rights offering,
combination or exchange of shares, merger, consolidation, acquisition of
property or stock, separation, reorganization, divisive reorganization or
liquidation and the like, and, in the event of any such change in the
outstanding Stock, the aggregate number and class of shares authorized to be
issued under the Plan shall be appropriately adjusted by the Committee, whose
determination of such adjustment shall be conclusive.
12. Adjustments Upon Change of Control.
In the case of a Change of Control (as defined below) of the Company,
each Option and SAR then outstanding shall immediately be nonforfeitable and
exercisable in full.
The term "Change of Control" shall mean the occurrence of any of the
following events:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
company, or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of the Stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the company (not including in
the securities beneficially owned by such person any securities
<PAGE>
acquired directly from the Company or its affiliates) representing more
than 15% of the combined voting power of the Company's then outstanding
voting securities; provided, however, a Change of Control shall not be
deemed to occur solely because such person acquired beneficial
ownership of more than 15% of the combined voting power of the
Company's then outstanding voting securities as a result of the
acquisition of voting securities by the Company, which by reducing the
number of voting securities outstanding, increases the proportional
number of shares beneficially owned by such person, provided that if a
Change of Control would occur (but for the operation of this sentence)
as a result of the acquisition of voting securities by the Company, and
after such share acquisition by the Company, such person becomes the
beneficial owner of any additional voting securities which increases
the percentage of the then outstanding voting securities beneficially
owned by such person, then a Change of Control shall occur;
(ii) during any period of 24 consecutive months (not including
any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in
subsection (i), (iii) or (iv) of this Section 12) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-third (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board;
(iii) the stockholders of the Company approve a merger,
consolidation or reorganization of the Company with any other
corporation, other than a merger, consolidation or reorganization which
would result in the stockholders of the Company immediately before such
merger, consolidation or reorganization, owning, directly or indirectly
immediately following such merger, consolidation or reorganization, at
least 60% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding in immediately after such
merger, consolidation or reorganization in substantially the same
proportion as their ownership of the voting securities immediately
before such merger, consolidation, or reorganization; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
<PAGE>
13. Tax Withholding.
Any obligation of the Company to issue shares of stock or cash pursuant
to the grant or exercise of any Award shall be conditioned on the Award holder
having paid or made provision for payment of all applicable tax withholding
obligations, if any, satisfactory to the Committee. The Company and its
Subsidiaries and Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Award holder.
14. Amendment and Termination.
The Board of Directors of the Company may make such modifications or
amendments to the Plan as it shall deem advisable, or in order to conform to any
change in any law or regulation applicable thereto. Without the consent of any
person to whom any Award shall therefore have been granted, no termination,
modification or amendment of the Plan shall adversely affect any rights which
may previously have been granted under the Plan to such persons.
15. Term of Plan.
The Plan shall take effect on January 1, 1998 (the "Effective Date")
and shall remain effective until termination by the Board of Directors of the
Company or until all shares of Stock authorized to be issued pursuant to the
Plan have been issued or transferred or deemed issued or transferred as provided
in Section 2.
16. Shareholder Approval.
The Plan will be submitted to the common stockholders of the Company
for confirmation, ratification and approval by the holders of a majority of the
outstanding shares of common stock of the Company by any method adequate under
Delaware law in the case of an action requiring shareholder approval. If the
Plan is not approved by the holders of a majority of the outstanding shares of
common stock of the Company by December 31, 1998, then the Plan shall terminate
and any Awards granted hereunder shall be void and of no further force or
effect.
