<PAGE> 1
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 Section 240.14a-11(c) or Section
240.14a-12
NOBLE AFFILIATES, INC.
(Name of Registrant as Specified In Its Charter)
NOBLE AFFILIATES, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
...............................................................
2) Aggregate number of securities to which transaction applies:
...............................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:(1)
...............................................................
4) Proposed maximum aggregate value of transaction:
...............................................................
5) Total fee paid:
...............................................................
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
...............................................................
2) Form, Schedule or Registration Statement No.:
...............................................................
3) Filing Party:
...............................................................
4) Date Filed:
...............................................................
<PAGE> 2
NOBLE AFFILIATES, INC.
110 WEST BROADWAY
ARDMORE, OKLAHOMA 73401
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 23, 1996
To the Stockholders of
NOBLE AFFILIATES, INC.:
The annual meeting of stockholders of Noble Affiliates, Inc., a Delaware
corporation (the "Company"), will be held on Tuesday, April 23, 1996, at 10:00
a.m., local time, at the Charles B. Goddard Center, D Street and First Avenue,
S.W., Ardmore, Oklahoma, for the following purposes:
1. To elect the Board of Directors for the ensuing year;
2. To consider and vote upon a proposal to approve and ratify
indemnity agreements between the Company and its directors and
certain officers and to authorize the Company to enter into such
agreements in the future with directors and certain officers;
3. To consider and vote upon a proposal to amend the 1988 Nonqualified
Stock Option Plan for Non-Employee Directors of Noble Affiliates,
Inc.;
4. To consider and vote upon a proposal to extend the period of
exercisability under certain outstanding stock option agreements of
non-employee directors of the Company; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 11, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting or any adjournment thereof. Only stockholders of
record at the close of business on the record date are entitled to notice of
and to vote at the meeting. A complete list of such stockholders will be
available for examination at the offices of the Company in Ardmore, Oklahoma,
during ordinary business hours for a period of 10 days prior to the meeting.
A record of the Company's activities during 1995 and financial statements
for the fiscal year ended December 31, 1995 are contained in the accompanying
1995 Annual Report. The Annual Report does not form any part of the material
for solicitation of proxies.
All stockholders are cordially invited to attend the meeting.
STOCKHOLDERS ARE URGED, WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING, TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND TO RETURN IT PROMPTLY IN THE
POSTAGE-PAID RETURN ENVELOPE PROVIDED. If a stockholder who has returned a
proxy attends the meeting in person, such stockholder may revoke the proxy and
vote in person on all matters submitted at the meeting.
By Order of the Board of Directors
Orville Walraven
Secretary
Ardmore, Oklahoma
March 22, 1996
<PAGE> 3
NOBLE AFFILIATES, INC.
110 WEST BROADWAY
ARDMORE, OKLAHOMA 73401
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 23, 1996
INTRODUCTION
The accompanying proxy, mailed together with this proxy statement, is
solicited by and on behalf of the Board of Directors of the Company for use at
the annual meeting of stockholders of the Company to be held on April 23, 1996,
and at any adjournment thereof. The approximate date on which this proxy
statement and the accompanying proxy were first sent to stockholders of the
Company is March 22, 1996.
Shares represented by valid proxies will be voted at the meeting in
accordance with the directions given. If no direction is indicated, the shares
will be voted for election of the nominees for director named in the proxy and
for the other proposals set forth in the notice. Any stockholder of the
Company returning a proxy has the right to revoke the proxy at any time before
it is voted by communicating such revocation in writing to Orville Walraven,
Secretary, Noble Affiliates, Inc., P.O. Box 1967, Ardmore, Oklahoma 73402, or
by executing and delivering a proxy bearing a later date. No revocation by
written notice or by delivery of another proxy shall be effective until such
notice of revocation or other proxy, as the case may be, has been received by
the Company at or prior to the meeting.
In order for an item of business proposed by a stockholder to be
considered properly brought before the annual meeting of stockholders, the
By-laws of the Company require that such stockholder give written notice to the
Secretary of the Company. The notice must specify certain information
concerning such stockholder and the item of business proposed to be brought
before the meeting. The notice must be received by the Company not later than
60 days prior to the annual meeting if such meeting is to be held on a day
within 30 days preceding the anniversary of the previous year's annual meeting,
or 90 days in advance of such meeting if it is to be held on or after the
anniversary of the previous year's annual meeting. Accordingly, any such
stockholder notice in connection with the 1997 annual meeting of stockholders
must be received by the Company no later than February 21, 1997.
VOTING PROCEDURES AND TABULATION
The Company will appoint one or more inspectors of election to act at the
meeting and to make a written report thereof. Prior to the meeting, the
inspectors will sign an oath to perform their duties in an impartial manner and
according to the best of their ability. The inspectors will ascertain the
number of shares outstanding and the voting power of each, determine the shares
represented at the meeting and the validity of proxies and ballots, count all
votes and ballots, and perform certain other duties as required by law.
The inspectors will tabulate (i) the number of votes cast for or withheld
as to the vote on each nominee for director and (ii) the number of votes cast
for, against or withheld, as well as the number of abstentions and broker
non-votes, as to (a) the proposal to approve and ratify indemnity agreements
between the Company and its directors and certain officers, (b) the proposal to
amend the 1988 Nonqualified Stock Option Plan for Non-Employee Directors of
Noble Affiliates, Inc. and (c) the proposal to extend the period of
exercisability under certain outstanding stock option agreements of
non-employee directors of the Company.
With regard to the election of directors, votes may be cast in favor of
or withheld from each nominee. Votes that are withheld will be excluded
entirely from the vote and will have no effect. Abstentions may be specified on
all proposals except the election of directors and will be counted as present
for purposes of determining the existence of a quorum regarding the item on
which the abstention is noted. Abstentions on the proposals to (i) approve and
ratify indemnity agreements between the Company and its directors and certain
officers, (ii) amend the 1988
<PAGE> 4
Nonqualified Stock Option Plan for Non-Employee Directors of Noble Affiliates,
Inc. and (iii) extend the period of exercisability under certain outstanding
stock option agreements of non-employee directors of the Company will have the
effect of a negative vote because they require the affirmative vote of a
majority of shares of Common Stock present in person or represented by proxy
and entitled to vote. Under the rules of the New York Stock Exchange, brokers
who hold shares in street name have the authority to vote on certain "routine"
items when they have not received instructions from beneficial owners. Brokers
will have discretionary authority to vote on each of the scheduled items of
business. Under applicable Delaware law and the Company's Certificate of
Incorporation and By-laws, a broker non-vote or other limited proxy will have
no effect on the outcome of the election of directors, approval and
ratification of the indemnity agreements, amendment of the 1988 Nonqualified
Stock Option Plan for Non-Employee Directors of Noble Affiliates, Inc. or
extension of the period of exercisability under the outstanding stock option
agreements of non-employee directors.
VOTING SECURITIES
Only holders of record of common stock of the Company, par value
$3.33-1/3 per share ("Common Stock"), at the close of business on March 11,
1996, the record date for the meeting, are entitled to notice of and to vote at
the meeting. A majority of the shares of Common Stock entitled to vote,
present in person or represented by proxy, is necessary to constitute a quorum.
On the record date for the meeting, there were issued and outstanding
50,314,692 shares of Common Stock. Each share of Common Stock is entitled to
one vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tabulation sets forth as of December 31, 1995 information
with respect to the only persons who were known to the Company to be beneficial
owners of more than five percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) OF CLASS
- ------------------- ---------------------- --------
<S> <C> <C>
The Samuel Roberts Noble Foundation, Inc. . . . . . 6,664,220 (2) 13.3%
P. O. Box 2180
Ardmore, Oklahoma 73402
FMR Corp. . . . . . . . . . . . . . . . . . . . . . 3,786,450 (3) 7.5%
82 Devonshire Street
Boston, Massachusetts 02109
Wellington Management Company . . . . . . . . . . . 2,574,547 (4) 5.1%
75 State Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
(1) Unless otherwise indicated, all shares listed are directly held with sole
voting and investment power.
(2) Beneficial ownership of such shares was reported in an Amendment No. 5 to
Schedule 13G dated February 7, 1996 filed with the Securities and
Exchange Commission (the "SEC") by The Samuel Roberts Noble Foundation,
Inc. (the "Foundation") with respect to its beneficial ownership of the
Common Stock. The Foundation is an Oklahoma not-for-profit corporation
organized in 1952 as successor to a charitable trust formed in 1945. The
Foundation is engaged in basic plant biology research and agricultural
research,
(footnotes to table continued on following page)
2
<PAGE> 5
consultation and demonstration. From time to time as funds are
available, the Foundation also makes grants to various charitable
organizations. The Foundation organized the Company in 1969. Michael A.
Cawley and John F. Snodgrass, directors of the Company, serve on the
Board of Trustees of the Foundation. In addition, Mr. Cawley is
President and Chief Executive Officer of the Foundation, and Mr.
Snodgrass is President Emeritus of the Foundation. In the event of a
vacancy in a trusteeship of the Foundation, a majority of the remaining
trustees has the power to elect a successor trustee to fill the vacancy.
(3) According to an Amendment No. 6 to Schedule 13G dated February 14, 1996
filed with the SEC by FMR Corp., FMR Corp. beneficially owns all the
shares with sole dispositive power but has no voting power with respect
to any of the shares. FMR Corp. indicated in its amended Schedule 13G
that it is a parent holding company that owns the shares indirectly
through two of its wholly-owned subsidiaries. According to the amended
Schedule 13G, one subsidiary beneficially owns 3,753,750 of the shares as
a result of its acting as an investment adviser to several investment
companies and one subsidiary beneficially owns 32,700 shares as a result
of serving as an investment manager of several institutional accounts.
FMR Corp. also reported beneficial ownership of such shares by Edward C.
Johnson 3d, the Chairman and controlling stockholder of FMR Corp.
(4) Beneficial ownership of such shares was reported in a Schedule 13G dated
February 9, 1996 filed with the SEC by Wellington Management Company
("Wellington") with respect to its beneficial ownership of the Common
Stock. In its Schedule 13G, Wellington reports that, in its capacity as
investment adviser, it may be deemed to be the beneficial owner of such
shares which are owned by numerous investment advisory clients, which
clients receive dividends and the proceeds from the sale of such shares.
ELECTION OF DIRECTORS
Seven directors, constituting the entire Board of Directors, are to be
elected at the meeting to serve until the next annual meeting of stockholders
and until their successors have been elected and qualified. The Board of
Directors currently consists of ten directors; however, three of the current
directors, Roy Butler, Guy W. Nichols and John F. Snodgrass, will have
attained the age of 70 prior to the meeting and, therefore, are retiring
pursuant to the mandatory retirement provision contained in the Company's
By-laws and will not stand for reelection at the meeting. All nominees for
director were elected directors of the Company by vote of the stockholders at
the 1995 annual meeting with the exception of Alan A. Baker who was elected as
director of the Company by the directors effective July 26, 1995. Generally,
the Company's By-laws provide that a stockholder must deliver written notice to
the Secretary of the Company not later than 90 days prior to the annual meeting
naming such stockholder's nominee(s) for director and specifying certain
information concerning such stockholder and nominee(s). Accordingly, a
stockholder's nominee(s) for director to be presented at the 1997 annual
meeting of stockholders must be received by the Company no later than January
22, 1997.
Directors are elected by plurality vote. All duly submitted and
unrevoked proxies in the form accompanying this proxy statement will be voted
for the nominees selected by the Board of Directors, except where authorization
so to vote is withheld. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF SUCH NOMINEES.
NOMINEES FOR DIRECTOR
ALAN A. BAKER -- Mr. Baker, age 64, has served as a consultant to Halliburton
Co. since May of 1995. For more than five years prior to May of 1995, Mr.
Baker served in various capacities at Halliburton Energy Services Group,
including President from November 1989 to July 1991, Chairman and Chief
Executive Officer from July 1991 to February 1994 and Chairman of Oil and Gas
Services from February 1994 to May 1995. Mr. Baker also serves as a director
of National Gas & Oil Company.
MICHAEL A. CAWLEY -- Mr. Cawley, age 48, has served as President and Chief
Executive Officer of the Foundation since February 1, 1992, after serving as
Executive Vice President of the Foundation since January 1, 1991. For more
than five years prior to 1991, Mr. Cawley was the President of Thompson &
Cawley, a professional corporation, attorneys at law; and Mr. Cawley currently
serves as of counsel to the law firm of Thompson, Cawley,
3
<PAGE> 6
Veazey & Burns, a professional corporation, which firm provided certain legal
services to the Company during 1995. Mr. Cawley has served as a trustee of the
Foundation since 1988 and is also a director of Panhandle Royalty Company and
Noble Drilling Corporation. He has served as a director of the Company since
1995.
EDWARD F. COX -- Mr. Cox has been a partner in the law firm of Donovan Leisure
Newton & Irvine, New York, New York for more than five years. Mr. Cox, age 49,
has served as a director of the Company since 1984.
JAMES C. DAY -- Mr. Day, age 52, has served as President and Chief Executive
Officer of Noble Drilling Corporation since January 1984, and as Chairman of
the Board of Noble Drilling Corporation since October 1992. Prior to 1984, Mr.
Day served as Vice President of Noble Drilling Corporation from January 1983.
Prior to 1983, Mr. Day served as Vice President and Assistant Secretary of the
Company. Mr. Day is also a director of Global Industries, Ltd. He has served
as a director of the Company since 1994.
ROBERT KELLEY -- Mr. Kelley has served as President and Chief Executive Officer
of the Company since August 1986, and as Chairman of the Board since October
1992. Prior to August 1986, he had served as Executive Vice President of the
Company since January 1986. Mr. Kelley, age 50, also serves as President and
Chief Executive Officer of Samedan Oil Corporation ("Samedan"), a wholly-owned
subsidiary of the Company, and he has held such positions since 1984. For more
than five years prior thereto, Mr. Kelley served as an officer of Samedan. Mr.
Kelley also serves as a director of AmQuest Financial Corporation (formerly
Security Corporation) of Duncan, Oklahoma, Exchange National Bank and Trust
Company of Ardmore, Oklahoma and OG&E Electric Services of Oklahoma City,
Oklahoma. He has served as director of the Company since 1986.
HAROLD F. KLEINMAN -- Mr. Kleinman has been a senior member of the law firm of
Thompson & Knight, A Professional Corporation, Dallas, Texas, counsel for the
Company, for more than five years and is currently a shareholder of such firm.
Mr. Kleinman, age 65, has served as director of the Company since 1985.
GEORGE J. MCLEOD -- Mr. McLeod currently serves as President and Chief
Executive Officer and as a director of Geolock Resources Ltd., a company
engaged in oil and gas exploration and production in Canada. Mr. McLeod, age
67, retired as President and Chief Executive Officer of the Company in 1986,
after serving in such positions since 1984. For more than five years prior
thereto, Mr. McLeod served as President of Samedan. Mr. McLeod also currently
serves as a director of Noble Drilling International Ltd., an indirect
wholly-owned subsidiary of Noble Drilling Corporation, and of Crestar Energy in
Calgary, Alberta. He has served as director of the Company since 1977.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors held six meetings in 1995. Each director attended
every meeting of the Board and every meeting of the Board committees on which
he served, except that Messrs. Cox and Kleinman were each absent from one Board
meeting and Mr. Cox was absent from one meeting of the audit committee on which
he serves.
COMMITTEES OF THE BOARD
The committees of the Board, the current members and the primary
functions of the committees are as follows:
COMPENSATION AND BENEFITS COMMITTEE -- Roy Butler, Chairman; James C.
Day; George J. McLeod; and John F. Snodgrass. The primary
responsibilities of the compensation and benefits committee are to fix
annual salaries and bonuses of the officers of the Company, including
those officers who are also directors, and to administer the Company's
employee stock option plans. The compensation and benefits committee
held five meetings during 1995.
4
<PAGE> 7
AUDIT COMMITTEE -- Harold F. Kleinman, Chairman; Michael A. Cawley;
Edward F. Cox; and Guy W. Nichols. The primary responsibilities of the
audit committee are to review with the Company's auditors the audit
procedures to be applied in the conduct of the annual audit and the
results of the annual audit. During 1995 the audit committee held three
meetings.
EXECUTIVE COMMITTEE -- Robert Kelley, Chairman; Roy Butler; Harold F.
Kleinman; and John F. Snodgrass. The primary responsibilities of the
executive committee are to exercise the authority of the Board during the
intervals between meetings of the Board. The executive committee held no
meetings during 1995.
NOMINATING COMMITTEE -- George J. McLeod, Chairman; Edward F. Cox; James
C. Day; and Guy W. Nichols. The primary responsibilities of the
nominating committee are to review the role, composition and structure of
the Board and its committees, and advise the Chief Executive Officer of
the Company with respect thereto; and to consider and recommend nominees
for election to the Board. The nominating committee held no meetings
during 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The current
members of the compensation and benefits committee were the only persons who
served on such committee during 1995. Messrs. Butler, Day and McLeod were
formerly officers of the Company. See "Election of Directors" in this proxy
statement for a description of the prior business experience and principal
employment of Messrs. Butler, Day and McLeod.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company or any of its subsidiaries
receive an annual retainer of $24,000 and a fee of $1,000 for each Board or
committee meeting attended. Each director who is such an officer receives a
fee of $100 for each Board meeting attended. The chairman of each committee
receives an additional annual retainer of $2,500. The Company also reimburses
directors for travel, lodging and related expenses they incur in attending
Board and committee meetings.
STOCK OPTION PLAN. The 1988 Nonqualified Stock Option Plan for
Non-Employee Directors provides for the grant of nonqualified stock options to
each director of the Company who is not also either an employee or officer of
the Company and who has not made an irrevocable, one-time election to decline
to participate in the plan. Harold F. Kleinman has elected not to participate
in the plan. The plan was adopted by the Board of Directors in 1988 and
approved by stockholders at the 1989 annual meeting. The plan as originally
adopted provided for the grant of nonqualified stock options and SARs but was
amended during 1993 to eliminate the granting of SARs. An aggregate of 250,000
shares of Common Stock has been reserved for issuance under the plan. The plan
provides generally for a formula grant of options annually on each July 1
during the term of the plan. The formula results in the automatic grant
(unless revoked by the Board in a particular year) to each participating
non-employee director of an option to purchase a number of shares of Common
Stock equal to 30,000 divided by the number of participating non-employee
directors. The purchase price per share of Common Stock under the option is
the fair market value of the share on the grant date of such option.
As of July 1, 1995, each of Messrs. Butler, Cox, McLeod, Nichols and
Snodgrass was granted an option under the plan covering 4,286 shares of Common
Stock at the exercise price of $25.50 per share, and each of Messrs. Cawley and
Day was granted an option under the plan covering 4,285 shares of Common Stock
at the exercise price of $25.50 per share. The period within which a
non-employee director's option may be exercised commences at the close of such
director's first year of service as a director after the grant date of such
option and ends ten years after such grant date, unless expiring sooner due to
termination of service or death, or unless such option is fully exercised prior
to the end of such ten-year period.
5
<PAGE> 8
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The tabulation below sets forth as of December 31, 1995, beneficial
ownership of shares of Common Stock by the seven nominees for director, Messrs.
Butler, Nichols and Snodgrass, and each named executive officer listed in the
Summary Compensation Table included elsewhere in this proxy statement. The
tabulation also sets forth the number of shares of Common Stock beneficially
owned as of that date by all directors and executive officers of the Company as
a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED (1)
--------------------------------------------
NUMBER PERCENT OF
NAME OF SHARES CLASS (2)
---- ----------------- ------------------
<S> <C> <C>
Director
Alan A. Baker . . . . . . . . . . . . . . . 500 --
Roy Butler . . . . . . . . . . . . . . . . 16,377 (3) --
Michael A. Cawley . . . . . . . . . . . . . 6,664,720 (4) 13.3%
Edward F. Cox . . . . . . . . . . . . . . . 34,000 (3) --
James C. Day . . . . . . . . . . . . . . . 5,018 (3) --
Robert Kelley . . . . . . . . . . . . . . . 130,324 (3) .3%
Harold F. Kleinman . . . . . . . . . . . . 200 (5) --
George J. McLeod . . . . . . . . . . . . . 29,054 (3) --
Guy W. Nichols . . . . . . . . . . . . . . 36,000 (3) --
John F. Snodgrass . . . . . . . . . . . . . 6,697,075 (3)(4)(6) 13.4%
Named Executive Officers (excluding
any director named above) and Group
William D. Dickson . . . . . . . . . . . . 60,460 (3) .1%
Dan O. Dinges . . . . . . . . . . . . . . . 69,128 (3) .1%
W. A. Poillion . . . . . . . . . . . . . . 62,597 (3) .1%
James C. Woodson . . . . . . . . . . . . . 63,667 (3) .1%
All directors and executive
officers as a group (16 persons) . . . . 7,270,831 (7) 14.5%
</TABLE>
- ---------------
(1) Unless otherwise indicated, all shares are directly held with sole voting
and investment power.
(2) Less than one-tenth of one percent unless otherwise indicated.
(3) Includes shares not outstanding but subject to currently exercisable
options, as follows: Mr. Butler -- 5,000 shares; Mr. Cox -- 21,000
shares; Mr. Day -- 5,000 shares; Mr. Dickson -- 55,326 shares; Mr. Dinges
-- 60,134 shares; Mr. Kelley -- 118,259 shares; Mr. McLeod -- 16,000
shares; Mr. Nichols -- 31,000 shares; Mr. Poillion -- 56,818 shares; Mr.
Snodgrass -- 28,000 shares; and Mr. Woodson -- 57,696 shares.
(4) Includes 6,664,220 shares held of record by the Foundation. Under the
rules and regulations of the SEC, such shares are required to be included
in the foregoing table as "beneficially owned" because such person
possesses shared voting and investment power with respect thereto as one
of nine trustees of the Foundation. As with other corporate action, the
voting of the shares held by the Foundation requires a majority vote of
its trustees at a meeting at which a quorum of trustees is present.
Accordingly, such person does not represent sufficient voting power on
the Foundation's board of trustees to determine voting or investment
decisions with respect to the 6,664,220 shares. Both Mr. Cawley and Mr.
Snodgrass disclaim any pecuniary interest in the 6,664,220 shares.
(5) Consists of 200 shares held as joint tenant with Mr. Kleinman's spouse.
(6) Includes 460 shares held as joint tenant with Mr. Snodgrass' spouse.
(7) Includes 517,372 shares not outstanding but subject to currently
exercisable options and 6,664,220 shares held of record by the
Foundation, as to which Mr. Cawley and Mr. Snodgrass possess shared
voting and investment power as trustees of the Foundation and in which
they disclaim any pecuniary interest.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following report of the compensation and benefits committee of the
Board of Directors and the information herein under "Performance Graph" shall
not be deemed to be "soliciting material" or to be "filed" with the SEC or
subject to the SEC's proxy rules, except for the required disclosure herein, or
to the liabilities of Section 18 of the Exchange Act, and such information
shall not be deemed to be incorporated by reference into any filing made by the
Company under the Securities Act of 1933 or the Exchange Act.
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
ON EXECUTIVE COMPENSATION
To the Stockholders
of Noble Affiliates, Inc.:
As members of the compensation and benefits committee (the "Committee")
of the Board of Directors, we have responsibility for administering the
executive compensation program of the Company. All decisions by the Committee
relating to the compensation of executive officers are reviewed by the full
Board, except for decisions about grants or awards under the 1992 Stock Option
and Restricted Stock Plan of the Company, which must be made solely by the
Committee in order to satisfy the condition of disinterested administration of
such plan under the applicable Federal securities laws and regulations.
COMPENSATION POLICIES
The executive compensation policy of the Company, which is endorsed by
the Committee, is to provide a compensation program that will attract,
motivate, and retain persons of high quality and will support a long-standing
internal culture of loyalty and dedication to the interests of the Company. In
administering the executive compensation program, the Committee is mindful of
the following principles and guidelines which are supported by the full Board.
Base salaries for executive officers should be competitive. A sufficient
portion of annual compensation should be at risk in order to align the
interests of executives with those of stockholders of the Company. This
variable part of annual compensation should reflect both corporate and
individual performance. As a person's level of responsibility increases, a
greater portion of total compensation should be at risk and the mix of total
compensation should be weighted more heavily in favor of stock-based
compensation. The Committee has not established objective, arbitrary
percentages of the mix of total compensation that should be fixed versus at
risk for any executive officers of the Company. Stock options provide
executives long-term incentive and are beneficial in aligning the interests of
executives and stockholders in the enhancement of stockholder value.
COMPENSATION PROGRAM FOR 1995
For 1995, the executive compensation program consisted of three principal
elements, which are discussed below: base salary, an annual incentive bonus
plan, and stock options that are exercisable over a ten-year period.
BASE SALARY: Base salary for executive officer positions is
determined principally by competitive factors. The Company obtains
information through participation in oil and gas industry compensation
surveys which are conducted by independent compensation consultants,
including William M. Mercer, Incorporated ("Mercer") and KPMG Peat
Marwick, and others. One such survey includes information on an industry
group called the Energy 27 Group comprised of corporations in the same
industry as the Company. Eleven of the 13 companies included in the Dow
Jones Total Return Index for Secondary Oil Companies referenced in the
performance graph contained elsewhere in this proxy statement are
included in the Energy 27 Group. The Committee analyzes the information
and makes annual adjustments effective January 1st based on performance,
incumbent length of service in the executive position and cost of living.
The policy of the
7
<PAGE> 10
Committee generally is to establish base salary levels that approximate
survey averages, and as such, the salary level for each executive officer
for 1995 was within 12 percent, plus or minus, of the applicable average.
ANNUAL INCENTIVE BONUS PLAN: The annual incentive bonus plan in
which executive officers participate is available to all full-time
employees of the Company or its subsidiaries (except those geologists
employed by the Company who choose to be covered by the geological
incentive plan, and the seventeen employees of Noble Gas Marketing, Inc.,
a wholly-owned subsidiary of the Company, who are covered under a
separate bonus plan) who have completed one year of service at the close
of the plan year (December 31). The target bonus for an employee is the
base salary at year end of such employee multiplied times the percentage
factor assigned to such employee's salary classification. Target
percentage factors range from 5 to 40 percent, with factors of 40 percent
for the CEO and 30 to 35 percent for operating committee members of
Samedan, the principal operating subsidiary of the Company. An aggregate
pre-adjustment bonus pool is determined for each division and department.
Annual performance goals for the Company and its divisions are
weighted with respect to five criteria as follows: cost of finding and
developing new reserves (40 percent), new reserves added (40 percent),
cash flow from operations (10 percent for division; 5 percent for
Company), production growth in oil and gas volumes as measured against
previous year's actual production (10 percent for division; 5 percent for
Company) and consolidated net income (10 percent for Company). The
annual performance goals for cost of finding and developing new reserves,
new reserves added, and cash flow from operations are established based
upon financial budgets and forecasts approved initially by the operating
committee of Samedan at the beginning of each year and then reviewed and
finally approved by the full Board. Annual performance goals are subject
to revision, in the discretion of the full Board in the event of changed
conditions since December of the preceding goal year, provided any such
revision is made no later than the date of the Board of Directors meeting
regularly held the day preceding the Company's annual meeting of
stockholders in the plan year. At its April 1995 meeting, the Board
revised the annual performance goals in accordance with the revised
financial budget for 1995, which reflected a decrease in the Company's
estimated forecast of net income from $50,839,000 to $17,811,000, and a
decrease in the Company's estimated cash flow from operations from
$248,984,000 to $191,346,000. Such decreases resulted primarily from a
reduction of the estimated prices received from the sale of natural gas
from $2.01 per thousand cubic feet ("MCF") to $1.71 per MCF.
Additionally, both oil and gas volumes were revised downward 2,416
barrels per day and 9,992 MCF per day, respectively, primarily as a
result of revisions to the estimated timing of production of new
properties being developed. As a result, the 1995 annual performance
goals were revised as follows: cash flow from operations (18 percent
decrease) and consolidated net income (53 percent decrease).
Each goal weighting percentage is subject to adjustment within a
range of zero for achievement of less than 75 percent of the goal to 200
percent for achievement of greater than 135 percent of the goal. The
combined, weighted goal achievement is then determined within a range of
zero for achievement of less than 65 percent of the goal to 200 percent
for achievement of more than 160 percent of the goal. The target bonus
for employees of divisions is also adjusted to reflect the combined
percentage of achievement of all assigned goals using the ratio of 75
percent for division goal achievement and 25 percent for Company goal
achievement. The bonus amount is then determined by multiplying the
target bonus times the applicable multiplier. Using these percentages,
the bonus received by an executive officer will not exceed 80 percent of
his salary, in the case of the CEO, and from 60 to 70 percent of his
salary, in the case of operating committee members of Samedan.
1992 STOCK OPTION AND RESTRICTED STOCK PLAN (THE "OPTION PLAN"):
The Option Plan is designed to align a significant portion of the
executive compensation program with stockholder interests. The Option
Plan, which was approved by stockholders in 1992, permits the use of
several different types of stock-based grants or awards: nonqualified,
incentive, or discount stock options with or without stock appreciation
rights and restricted stock. To date only nonqualified stock options
have been granted under the Option Plan.
8
<PAGE> 11
The options represent the right to purchase shares of Common Stock
over a ten-year period at the fair market value per share as of the date
the option is granted. The options vest at the rate of one-third per
year commencing on the first anniversary of the grant date.
During 1991, the Company engaged Mercer to advise the Committee as
to appropriate grant guidelines. Mercer based its recommendations as to
appropriate grant guidelines on an analysis of average annual stock
grants over a three-year period as disclosed in publicly available proxy
statements of 16 companies it considered comparable to the Company in
business and scope. The recommendation of Mercer ranged from 0.3 to 0.5
at the lower levels of employees, from 1.2 to 2.1 for vice presidents and
from 1.5 to 2.6 at the CEO level. On the basis of the recommendation of
Mercer, the Committee in 1991 adopted grant multiples that ranged from
0.3 to 2.0, which fell approximately in the middle of the Mercer
recommended range, with multiples of 2.0 for the CEO and 1.5 for other
executive officers. The Committee believes that the grant multiples
adopted by it remain appropriate, although it has not undertaken since
1991 to formally reassess the adopted grant multiples.
The number of shares granted is determined by dividing (i) the sum
of the optionee's annual base salary plus target bonus multiplied times
the applicable grant multiple by (ii) the fair market value per share of
the underlying Common Stock on the calculation date. The Committee, in
its discretion, can adjust the number of shares granted under this plan
from the number determined under the grant guidelines. Options granted
to executive officers in 1995 were based on the guidelines described
above using a fair market value on grant date of $24.25.
1995 COMPENSATION OF CEO
The 1995 salary of Mr. Kelley was determined in January 1995 as a
function of performance and competitive factors at that time. Mr. Kelley's
1995 salary was increased 18 percent over his 1994 salary, reflecting
consideration of competitive data provided by Mercer and the assessment by the
Committee and the Board of the Company's 1994 results of operations under Mr.
Kelley's leadership. As a result, Mr. Kelley's 1995 salary fell within the
range discussed above in the last sentence under "Compensation Program for 1995
- - Base Salary" in this report.
In determining the amount of bonus paid to Mr. Kelley for 1995, the
Committee applied the performance goals' criteria discussed above under
"Compensation Program for 1995 - Annual Incentive Bonus Plan" which resulted in
an applicable multiplier under the plan of .75. This factor of .75 multiplied
times the target bonus for Mr. Kelley produced a calculated bonus of $127,500.
In 1995, the Committee granted Mr. Kelley an option to purchase 49,086
shares of Common Stock pursuant to the Option Plan. In granting this option,
the Committee used a grant multiplier of 2.0 (see "Compensation Program for
1995 - 1992 Stock Option and Restricted Stock Plan" above), which took into
account Mr. Kelley's level of responsibility and was based on the
recommendation of Mercer.
PARTICIPATION IN MINERAL, ROYALTY AND OVERRIDING ROYALTY ACQUISITIONS
In addition to the executive compensation policies and programs described
above, the Company has a long-standing policy pursuant to which directors,
officers and key employees of the Company and Samedan are permitted to acquire
interests in minerals, royalties, and overriding royalties purchased from time
to time by Samedan (or its subsidiaries). When this participation is offered,
usually up to one-half of the interests acquired by Samedan (or its
subsidiaries) is made available to be acquired by the participants in the
aggregate. A participant is required to purchase his or her interest for cash
on the same cost basis as Samedan and is responsible for obtaining any required
financing. In certain instances, the Company or Samedan has assisted
participants in obtaining financing from a third party lender and/or provided a
guarantee of the amount financed by a participant. This policy applies only
with respect to mineral, royalty, and overriding royalty interests acquired by
Samedan (or its subsidiaries) and does not apply to the acquisition of working
interests, even though a group of oil and gas properties acquired by Samedan
(or its subsidiaries) includes both working interests and mineral, royalty, and
overriding royalty interests.
9
<PAGE> 12
The policy was initiated to serve as an incentive for employees in
connection with the acquisition of oil and gas properties by Samedan and for
directors to continue in the service of the Company. The Board of Directors of
the Company believes the policy to be in the best interests of the Company and
its stockholders and, because the participant purchases the interest for fair
value and shares the same risk as Samedan, does not consider the operation of
the policy to be compensatory in nature. The Committee has responsibility for
administering the policy.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 contains provisions which
limit the tax deductibility of executive compensation in excess of $1 million
per year, subject to certain exceptions. The policy of the Company is to
design its compensation programs to preserve the tax deductibility of
compensation paid to its executive officers and other members of management.
However, the Committee could in the future determine, taking into consideration
the relevant factors then in existence, to make awards or approve compensation
that does not qualify for a compensation deduction for tax purposes, if the
Committee believes it is in the Company's interest to do so.
SUMMARY
The Committee believes that linking executive compensation to corporate
performance results in a better alignment of compensation with corporate goals
and stockholder interests. As performance goals are met or exceeded, resulting
in increased value to stockholders, executive officers are rewarded
commensurately. The Committee believes that compensation levels during 1995
adequately reflect the compensation goals and policies of the Company.
March 22, 1996 Roy Butler, Chairman
James C. Day
George J. McLeod
John F. Snodgrass
10
<PAGE> 13
The following table sets forth certain summary information concerning the
compensation awarded to, earned by, or paid to the Chief Executive Officer of
the Company and each of the four most highly compensated executive officers of
the Company other than the Chief Executive Officer (collectively, the "named
executive officers") for the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
---------------------------------------------------
Other
Annual Stock All Other
Name and Compen- Options Compen-
Principal sation (number of sation
Position Year Salary ($) Bonus ($) ($) shares) (1) ($)
-------- ---- ---------- --------- ----- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert Kelley, Chief 1995 425,000 127,500 2,392 49,086 32,913(2)
Executive Officer 1994 360,000 201,600 2,187 33,027 23,045
1993 315,000 94,500 2,739 31,875 8,994
James C. Woodson, Vice 1995 193,500 50,794 2,392 16,164 16,621(3)
President - Exploration and 1994 186,000 91,140 2,187 12,798 12,689
Operating Committee member of 1993 180,000 54,000 1,932 13,662 9,916
Samedan
W.A. Poillion, Vice President 1995 187,500 49,219 2,392 15,663 15,265(4)
- Production and Drilling and 1994 180,000 88,200 2,187 12,387 11,548
Operating Committee member of 1993 149,750 44,924 1,943 11,367 8,976
Samedan
William D. Dickson, Vice 1995 182,000 45,950 2,392 14,640 14,659(5)
President - Finance and 1994 175,000 73,500 2,187 12,042 11,050
Treasurer 1993 142,000 44,080 1,974 10,347 6,097
Dan O. Dinges, Vice President 1995 182,000 45,950 2,860 14,640 8,638(6)
- Division General Manager 1994 175,000 77,438 2,860 12,042 7,582
and Operating Committee 1993 140,400 45,271 2,760 10,200 5,897
member of Samedan
</TABLE>
- ---------------
(1) Options represent the right to purchase shares of Common Stock at a fixed
price per share.
(2) Consists of $500 of directors' fees and Company contributions of $8,504
to a defined contribution plan and $23,909 to a nonqualified contribution
plan.
(3) Consists of Company contributions of $8,712 to a defined contribution
plan and $6,897 to a nonqualified contribution plan and term life
insurance premiums of $1,012.
(4) Consists of Company contributions of $8,442 to a defined contribution
plan and $6,592 to a nonqualified contribution plan and term life
insurance premiums of $231.
(5) Consists of Company contributions of $8,100 to a defined contribution
plan and $6,340 to a nonqualified contribution plan and term life
insurance premiums of $219.
(6) Consists of Company contributions of $5,723 to a defined contribution
plan and $2,915 to a nonqualified contribution plan.
11
<PAGE> 14
The following table sets forth certain information with respect to
options to purchase Common Stock granted during the year ended December 31,
1995 to each of the named executive officers.
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
---------------------------------------------------------- ----------------------
Number of Securities % of Total
Underlying Options Options Exercise
Granted Granted to or Base
(number of shares) Employees Price Expiration
Name (1) in 1995 ($/sh) Date 5%($)(2) 10%($)(3)
---- -------------------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert Kelley . . . . 49,086 15.0% $24.25 7/24/05 748,562 1,897,174
James C. Woodson 16,164 4.9% $24.25 7/24/05 246,501 624,739
W.A. Poillion . . . . 15,663 4.8% $24.25 7/24/05 238,861 605,375
William D. Dickson . 14,640 4.5% $24.25 7/24/05 223,260 565,836
Dan O. Dinges . . . . 14,640 4.5% $24.25 7/24/05 223,260 565,836
</TABLE>
- ---------------
(1) Options represent the right to purchase shares of Common Stock at a fixed
price per share. The options vest at the rate of one-third per year
commencing on the first anniversary of the grant date.
(2) Represents an assumed market price per share of Common Stock of $39.50.
(3) Represents an assumed market price per share of Common Stock of $62.90.
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the year ended December 31,
1995, and the unexercised options held at December 31, 1995 and the value
thereof, by each of the named executive officers.
AGGREGATED OPTION EXERCISES IN 1995
AND 12/31/95 OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised
Options at Value of Unexercised
December 31, 1995 In-the-Money Options
(number of shares) at December 31, 1995 ($)
--------------------------- ------------------------------
Shares
Acquired on Value
Name Exercise Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Kelley . . . . . - - 118,259 81,729 1,350,649 387,029
James C. Woodson . . . 16,700 260,637 57,696 29,250 676,424 136,090
W.A. Poillion . . . . . - - 56,818 27,710 736,122 128,726
William D. Dickson . . 2,000 30,250 55,326 26,117 697,034 120,669
Dan O. Dinges . . . . . - - 60,134 26,068 787,622 120,424
</TABLE>
12
<PAGE> 15
DEFINED BENEFIT PLANS
The defined benefit plans of the Company that cover its executive
officers provide the benefits shown below. The estimates assume that benefits
are received in the form of a ten-year certain and life annuity.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Estimated Annual Benefits Upon Retirement at Age 65
After Completion of the Following Years of Service
60 Month Average ---------------------------------------------------------------------
Annual Compensation 15 20 25 30 35
------------------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
$ 100,000 . . . . . . $ 30,000 $ 40,000 $ 40,510 $ 48,612 $ 48,612
150,000 . . . . . . 45,000 60,000 62,385 74,862 74,862
200,000 . . . . . . 60,000 80,000 84,260 101,112 101,112
250,000 . . . . . . 75,000 100,000 106,135 127,362 127,362
300,000 . . . . . . 90,000 120,000 128,010 153,612 153,612
350,000 . . . . . . 105,000 140,000 149,885 179,862 179,862
400,000 . . . . . . 120,000 160,000 171,760 206,112 206,112
500,000 . . . . . . 150,000 200,000 215,510 258,612 258,612
600,000 . . . . . . 180,000 240,000 259,260 311,112 311,112
700,000 . . . . . . 210,000 280,000 303,010 363,612 363,612
</TABLE>
Upon vesting, the amount of retirement benefit depends on an employee's
final average monthly compensation, age and the number of years of credited
service (maximum of 30 years). Final average monthly compensation is defined
generally to mean the participant's average monthly rate of compensation from
the Company for the 60 consecutive months prior to retirement which give the
highest average monthly rate of compensation for the participant. Compensation
covered by the defined benefit plans is defined (with certain exceptions) to
mean the compensation actually paid to a participant as reported on the
participant's federal income tax withholding statement for the applicable
calendar year. Accordingly, the amounts reported in the Summary Compensation
Table included elsewhere herein under "Annual Compensation" approximate covered
compensation for 1995. The amount of benefit shown in the above table is not
subject to any deductions for social security or any other offset amounts.
As of December 31, 1995, the named executive officers had the following
approximate number of years of credited service for retirement purposes: Mr.
Kelley--20; Mr. Woodson--21; Mr. Poillion--19; Mr. Dickson--17; and Mr.
Dinges--14.
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph sets forth the cumulative total stockholder return
for the Common Stock, the S&P 500 Index and the Dow Jones Total Return Index
for Secondary Oil Companies for the years indicated as prescribed by the SEC's
rules.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (1)
AMONG NOBLE AFFILIATES, INC., S&P 500 INDEX
AND DOW JONES TOTAL RETURN INDEX FOR
SECONDARY OIL COMPANIES (2)
[GRAPH]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Company 100 98 127 193 181 220
S&P 500 Index 100 130 140 155 157 215
Dow Jones Total Return Index for Secondary 100 98 99 110 106 123
Oil Companies (3)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return assuming reinvestment of dividends. Assumes $100 invested
on January 1, 1991 in Common Stock, the S&P 500 Index and the Dow Jones
Total Return Index for Secondary Oil Companies.
(2) Fiscal year ending December 31.
(3) Comprised of the following companies: Amerada Hess Corporation, Anadarko
Petroleum Corporation, Ashland Oil, Inc., Burlington Resources Inc.,
Kerr-McGee Corporation, The Louisiana Land and Exploration Company, MAPCO
Inc., Murphy Oil Corporation, Noble Affiliates, Inc., Occidental
Petroleum Corporation, Oryx Energy Company, Pennzoil Company and Union
Texas Petroleum Holdings, Inc.
14
<PAGE> 17
PROPOSAL TO APPROVE AND RATIFY DIRECTOR AND OFFICER
INDEMNITY AGREEMENTS
INTRODUCTION
The Company's Board of Directors has approved, and has authorized the
Company to enter into, indemnity agreements with the Company's current
directors and By-law officers and with the Company's future directors and
By-law officers which increase the protection afforded such persons against
legal claims and related expenses. The Company entered into an indemnity
agreement with each of its current directors and By-law officers effective as
of March 1, 1996. In addition to any rights granted by the indemnity
agreements, the Company's directors and officers presently have certain rights
to indemnification under the Company's Certificate of Incorporation (the
"Certificate of Incorporation") and By-laws (the "By-laws") and Section 145 of
the General Corporation Law of the State of Delaware (the "Delaware Statute").
The Board of Directors believes that the Company should provide the
maximum indemnification protection for its present and future directors and
By-law officers, both as a matter of fairness and to assist the Company in
attracting capable individuals to serve in such capacities. For this reason,
the Board of Directors believes that the Company should supplement the
indemnification protection available under the Certificate of Incorporation,
the By-laws and the Delaware Statute by executing agreements with its directors
and By-law officers providing for indemnification to the fullest extent
permitted by law.
The form of indemnity agreement, as approved by the Board of Directors
and entered into between the Company and its directors and By-law officers (the
"Indemnity Agreement"), is included in this Proxy Statement as Exhibit A. Set
forth below is a summary of the principal terms and provisions of the Indemnity
Agreement, which summary does not purport to be complete and is qualified in
its entirety by the detailed portions of the Indemnity Agreement that are
incorporated herein by reference.
Although stockholder approval of the Indemnity Agreement is not
required by law, the Board is seeking stockholder approval because each of the
directors is potentially benefited by such an agreement and, therefore, has an
inherent conflict of interest with regard thereto. Also, stockholder approval
would strengthen the validity of the Indemnity Agreement by substantially
reducing the likelihood that any Indemnity Agreement could be successfully
challenged on grounds of the directors' conflict of interest. If the Company's
stockholders do not approve the proposal to ratify and approve the Indemnity
Agreement and to authorize the Company to enter into substantially similar
Indemnity Agreements with its directors and By-law officers in the future, the
Company anticipates that it will honor the existing Indemnity Agreements
because such Indemnity Agreements, by their terms, do not provide for a
unilateral right of termination by the Company. Thus, the existing Indemnity
Agreements will remain in full force and effect to the extent permitted under
the Delaware Statute. Under the Delaware Statute, the Indemnity Agreement will
not be void or voidable solely because of the inherent conflict of interest of
the directors if the Indemnity Agreement is deemed to be fair as to the Company
as of the time it was approved and authorized by the Board of Directors. The
Board would reconsider, however, whether additional Indemnity Agreements should
be entered into in the future.
The Indemnity Agreement is not being proposed in response to any
specific resignation, threat of resignation or refusal to serve by any
director, and to the knowledge of the Company, there is no pending or
threatened litigation affecting the directors or officers of the Company for
which indemnification may be sought under the Indemnity Agreement or otherwise.
REASONS AND PRINCIPAL EFFECTS OF THE PROPOSAL
Management of the Company believes that entering into the Indemnity
Agreement with each of its directors and By-law officers is necessary in order
for the Company to be able to attract and retain qualified and competent
15
<PAGE> 18
management personnel, upon whose efforts and judgment the success of the
Company is largely dependent. Accordingly, management believes that it is in
the best interests of the Company and its stockholders to protect its directors
and By-law officers through the Indemnity Agreement, which generally provides
that the Company will indemnify such persons to the fullest extent permitted by
law.
Management generally believes that because of the claims and
litigation normally associated with any business, directors and officers are
continually exposed to a potentially large number of claims, suits, and other
proceedings, even though their actions are taken in complete good faith and in
the best interests of the Company. Responding to such claims and litigation
can involve very substantial personal expense, including legal fees,
disbursements, settlements and even judgments. For several reasons, management
believes that it is unfair to expect the directors and officers to personally
bear expenses that result from the Company's operations.
First, management believes that there has been a substantial growth in
the number of lawsuits that expose directors and officers of all corporations
to substantial financial penalties, ridicule, harassment and abuse. Second,
the vagaries of public policy and the interpretations of ambiguous statutes and
regulations appear to management to create such uncertainty as to deprive
corporate directors and officers of adequate, reliable, advance knowledge of
the risks to which they become personally exposed and the means of reducing or
eliminating such risks. Third, damages sought in third-party stockholder and
derivative suits frequently bear no reasonable or logical relationship to the
compensation received by directors for their services. Fourth, the cost of
defending against such suits, whether or not meritorious, is beyond the
resources of most persons. Fifth, the issues in controversy frequently involve
the knowledge, motives and intent of the persons involved such that they are
the only witnesses who can testify in their own defense; however, because of
the length of time that usually elapses before such suits are disposed of,
individuals will frequently be retired or deceased and either they or their
estates will face undue hardship in maintaining an adequate defense to such
suits.
Management believes that the confluence of the foregoing factors has
generally led to an increased reluctance on the part of qualified persons to
serve on corporate boards of directors, and to a lesser degree, as officers or
employees of public corporations. Furthermore, management believes that an
inevitable result of the above trends will be timid, overly cautious and less
effective direction and supervision of the Company's business and operations
instead of aggressive supervision in an attempt to maximize profits and serve
the best interests of Company stockholders. Management considers such
potential consequences to be so detrimental to the best interests of the
Company's stockholders that it has concluded that its directors and By-law
officers should receive the maximum protection possible against the inordinate
risks and expenses of litigation outlined above to ensure that the most capable
persons available will be attracted to and retained in such positions.
The Delaware Statute contains detailed provisions governing the
indemnification of directors and officers, and by its nonexclusive nature,
permits the adoption of indemnification agreements generally to effect the
policy of such indemnification. In accordance with the Delaware Statute, the
Certificate of Incorporation and By-laws provide for the Company to indemnify
and insure its directors and officers to the fullest extent permitted by law.
Management believes, however, that the existing indemnification protection
provided is inadequate in certain respects. First, the Company currently does
not have directors and officers liability insurance. Management believes that
the Indemnity Agreement serves the interests of the Company and its
stockholders by being the basis of self-insurance against potential director
and officer liabilities. Second, management believes that the Certificate of
Incorporation and By-laws do not provide sufficient protection for directors
and officers since their provisions can be unilaterally changed by the Company,
whereas the Indemnity Agreement, which constitutes a binding contract of the
Company, prevents the Company from modifying its indemnity policy in a way that
is adverse to any person who is a party to such a contract. Last, management
believes that the Delaware Statute expressly recognizes that a person may
become entitled to indemnification outside the terms of the statute.
Accordingly, the purpose of the Indemnity Agreement is also to provide fuller
indemnification protection for the Company's directors and By-law officers than
presently provided in the Delaware Statute, the Certificate of Incorporation
and the By-laws.
16
<PAGE> 19
SUMMARY OF THE INDEMNITY AGREEMENT
Actions Covered. Section 3 of the Indemnity Agreement deals with
third party proceedings (other than proceedings by or on behalf of the
Company), and Section 4 deals with actions by or on behalf of the Company.
Under both sections, the right to indemnification extends to a person who is a
party or is threatened to be made a party to any proceeding by reason of the
fact that the person is or was a director and/or officer of the Company, or is
or was serving at the request of the Company as a director, officer, employee,
or agent of another entity.
With respect to third party proceedings, indemnification extends to
expenses, judgments, fines and amounts paid in settlement that are actually and
reasonably incurred. In the case of proceedings by or on behalf of the
Company, indemnification extends only to expenses actually and reasonably
incurred by the indemnitee in connection with the defense, settlement or other
disposition of such proceeding, except that no indemnification shall be made in
respect of any claim, issue or matter as to which the indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent that,
the Delaware Court of Chancery or the court in which such proceeding was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the indemnitee is
fairly and reasonably entitled to indemnity for such expenses as the Delaware
Court of Chancery or such other court shall deem proper.
Requisite Standards of Conduct. The general standard of conduct
required for indemnification is that the individual acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests
of the Company. Added to this standard in the case of third party criminal
actions is the requirement that the individual had no reasonable cause to
believe his conduct was unlawful.
Expenses. Section 6 of the Indemnity Agreement provides that the
expenses incurred by an indemnitee pursuant to Sections 3 and/or 4 of the
Indemnity Agreement in connection with any proceeding shall, at the written
request of the indemnitee, be paid by the Company in advance of the final
disposition of such proceeding upon receipt by the Company of an undertaking
(which need not be secured) by or on behalf of the indemnitee (the
"indemnitee's undertaking") to repay such amount to the extent that it is
ultimately determined that the indemnitee is not entitled to be indemnified by
the Company. As used in the Indemnity Agreement, the term "expenses" includes,
without limitation, all reasonable attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees and all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, or being or preparing to be a witness in a proceeding.
Determinations on Indemnification. Pursuant to Section 7 of the
Indemnity Agreement, any indemnification under Sections 3 and/or 4 of the
Indemnity Agreement shall be made no later than 45 days after receipt by the
Company of the written request of an indemnitee, unless a determination is made
within the 45-day period by (i) a majority vote of the directors of the Company
who are not parties to the involved proceeding, even though less than a quorum,
or (ii) independent legal counsel in a written opinion (which counsel shall be
appointed if there are no such directors or if such directors so direct), that
the indemnitee has not met the applicable standards for indemnification set
forth in Section 3 or 4, as the case may be. Any advancement of expenses under
Section 6 of the Indemnity Agreement shall be made no later than 10 days after
receipt by the Company of the indemnitee's undertaking.
In any action to establish or enforce the right of indemnification or
to receive advancement of expenses as provided in the Indemnity Agreement, the
burden of proving that indemnification or advancement of expenses is not
appropriate shall be on the Company. Neither the failure of the Company
(including its Board of Directors or independent legal counsel) to have made a
determination prior to the commencement of such action that indemnification or
advancement of expenses is proper in the circumstances because an indemnitee
has met the applicable standard of conduct, nor an actual determination by the
Company (including its Board of Directors or independent legal counsel) that an
indemnitee has not met such applicable standard of conduct, will be a defense
to the action or create a presumption that an indemnitee has not met the
applicable standard of conduct. Expenses incurred by an indemnitee in
connection with successfully establishing or enforcing his right of
indemnification or
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to receive advancement of expenses, in whole or in part, under the Indemnity
Agreement will also be indemnified by the Company.
Success on the Merits or Otherwise. Section 5 of the Indemnity
Agreement provides that, to the extent that an indemnitee has been successful
on the merits or otherwise in defense of any proceeding referred to in Sections
3 and/or 4 of the Indemnity Agreement, or in defense of any claim, issue or
matter therein, including dismissal without prejudice, the indemnitee shall be
indemnified against all expenses actually and reasonably incurred by such
indemnitee in connection therewith.
Other Provisions. The Indemnity Agreement provides that the rights of
indemnification and to receive advancement of expenses provided by it shall not
be deemed exclusive of any other rights to which an indemnitee may be entitled
under the Certificate of Incorporation, By-laws, any other agreement, any vote
of stockholders or disinterested directors, the General Corporation Law of the
State of Delaware, or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office. In addition, the
Indemnity Agreement provides that it is intended to be retroactive and shall be
available as to events occurring prior to the date of the Indemnity Agreement.
Furthermore, the Indemnity Agreement provides that the rights of
indemnification and to receive advancement of expenses provided by it shall
continue as to an indemnitee even though an indemnitee may have ceased to be a
director or officer of the Company and shall inure to the benefit of an
indemnitee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
RECOMMENDATION AND REQUIRED AFFIRMATIVE VOTE
The affirmative vote of the holders of record of a majority of the
shares of Common Stock present in person or represented by proxy and entitled
to vote thereon at the meeting is required to approve the proposal to approve
and ratify the Indemnity Agreement. For the reasons stated above, the Board of
Directors of the Company unanimously recommends that the Company's stockholders
vote FOR the approval of the proposal to approve and ratify the Indemnity
Agreement.
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PROPOSAL TO APPROVE AMENDMENTS TO THE COMPANY'S
1988 NONQUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
GENERAL
The 1988 Nonqualified Stock Option Plan for Non-Employee Directors of
Noble Affiliates, Inc. (the "Plan") was adopted by the Board of Directors of
the Company in 1988 and approved by the stockholders of the Company at the 1989
annual meeting of stockholders. At a meeting of the Board of Directors of the
Company in January 1996, the Board of Directors adopted a proposal to (i)
increase the number of shares of Common Stock authorized under the Plan by
300,000 shares and extend the term of the Plan to July 25, 2006; (ii) extend to
five years the period during which an option may be exercised after termination
of directorship; and (iii) clarify the operation of the Plan in respect of the
option grant made to directors in the last term of their service prior to
mandatory retirement as a regular director because of age in accordance with
Article III of the Company's By-laws (the "retirement clarification")
(collectively, the "Plan Amendments"). A copy of the Plan, as amended by the
Board of Directors, is attached hereto as Exhibit B. The proposal to amend the
Plan is subject to stockholder approval. The material features of the Plan as
currently in effect are described in "Description of the Plan as Currently in
Effect" below.
REASONS AND PRINCIPAL EFFECTS OF THE PROPOSAL
Increase in Number of Shares and Extension of Term. As of January 31,
1996, there were outstanding stock options covering 136,000 shares of Common
Stock held by seven persons and only 34,000 shares of Common Stock remained
available for future awards under the Plan. One purpose of the Plan Amendments
is to continue the Plan by increasing by 300,000 shares the aggregate number of
shares of Common Stock that may be issued under the Plan. In addition, under
the current terms of the Plan, the Plan will terminate at the close of business
on July 25, 1998, after which time no further grants may be made under the
Plan. Another purpose of the Plan Amendments is to extend the term of the Plan
to July 25, 2006. If the Plan Amendments are approved, the directors of the
Company who are eligible to participate in the Plan could receive more benefits
under the Plan than they could if the Plan Amendments are not approved.
Extension of the Exercise Period. The Plan currently provides that if
a non-employee director dies during his tenure or within three months after his
tenure has ended, his estate would have one year from the date of death to
exercise an outstanding option, provided that such option had been exercisable
at the time of his death and that the date of exercise would otherwise be
within the option period. If the tenure of the non-employee director
terminates for any other reason, he would have three months from the date of
termination to exercise the option, provided that such option had been
exercisable at the time of his termination and that the date of exercise would
otherwise be within the option period; provided, however, that if the
non-employee director is removed for fraud, intentional misrepresentation,
embezzlement, misappropriation or conversion of assets or opportunities of the
Company (a "removal for intentional misconduct"), such option would be void.
One purpose of the Plan Amendments is to extend the period during which an
option may be exercised after termination of directorship, other than a removal
for intentional misconduct, from three months to five years, thereby allowing a
non-employee director or his estate a longer period of time after which he is
no longer a director to elect to exercise an issued but unexercised option,
provided that such option had been exercisable at the time of his death and
that the date of exercise would otherwise be within the option period.
Clarification of Effect of Retirement. The Plan currently provides
that each option to purchase shares of Common Stock granted to the non-employee
directors "shall become exercisable upon the completion of one year service by
the [director]" after the grant date of such option and that an option shall be
granted automatically on each July 1 during the term of the Plan. One purpose
of the Plan Amendments is to clarify the operation of the Plan in respect of
the option grant made to directors in the last term of their service prior to
mandatory retirement as a regular director because of age in accordance with
the Company's By-laws. The Company's By-laws have, since before adoption of
the Plan in 1988, provided for mandatory retirement of directors at age 70.
Specifically, the By-law provision states that "A person shall be eligible to
be elected a regular Director until the annual meeting [of stockholders] next
succeeding such person's 70th birthday." The By-laws also provide for the
annual meeting of stockholders to be held on the fourth Tuesday of April of
each year.
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The July 1st grant date was specified in the Plan in order to provide
a fixed annual grant date that was not subject to the discretion of any person.
It was arbitrarily selected as a date to follow the scheduled annual meeting
date in each year (fourth Tuesday in April) by a reasonable period of time to
allow for a possible delay in holding the annual meeting in any particular
year. A director subject to mandatory retirement from the Board because of
attainment of age 70 will have served at least approximately 83 percent of a
one calendar year period (ten of twelve months) following an annual grant date
of July 1st. The Plan Amendments would clarify that the option has indeed been
earned and need not be forfeited under these circumstances upon the mandatory
retirement of the director from the Board because of age, which is an
interpretation of the operation of the Plan that the Board believes can be
fairly implied from the terms and conditions of the Plan. Were this not a
correct interpretation of an apparent ambiguity in the Plan, the Plan would
necessarily have had provisions prohibiting the grant of an option to any
non-employee director who was age 69 on July 1st of that year. Instead, the
Plan clearly provides for the option grant to each non-employee director
serving on July 1st.
The Company currently has three directors, Messrs. Butler, Nichols and
Snodgrass, who will have become age 70 prior to the annual meeting and who
therefore will not be eligible to stand for reelection to the Board. Under the
Plan, each of these directors was automatically granted an option to purchase
4,286 shares of Common Stock on July 1, 1995. If adopted, the Plan Amendments
would clarify that such options will not be forfeited by such directors because
they will have been eligible to serve as a director for a period of only
approximately 10 months following the option grant date (July 1, 1995). The
Board has proposed that the stock option agreements dated as of July 1, 1995
entered into with such directors be amended, subject to stockholder approval,
to provide retroactively for the retirement clarification of the Plan
Amendments. See "Proposal to Extend the Period of Exercisability under Certain
Outstanding Stock Option Agreements of Non-Employee Directors" below.
DESCRIPTION OF THE PLAN AS CURRENTLY IN EFFECT
The Plan authorizes the issuance of up to 250,000 shares of Common
Stock. Any shares of Common Stock allocable to the unexercised portion of an
option that expires or terminates will again be available for the purposes of
the Plan. The Plan contains provisions providing for adjustment of the number
of shares available for option and subject to unexercised options in the event
of stock splits, dividends payable in Common Stock, combinations or certain
other events. The Plan as originally adopted provided for the grant of
nonqualified stock options and SARs but was amended during 1993 to eliminate
the granting of SARs.
Administration. The Plan is administered by the Board of Directors.
The Board has no authority, discretion or power to select the participants who
will receive options pursuant to the Plan, to set the number of shares of
Common Stock to be covered by each option, to set the exercise price or the
period within which the options may be exercised or to alter any other terms or
conditions specified therein, except in the sense of administering the Plan
subject to the express provisions of the Plan and except as set forth below
under "Stock Options" and "Amendment of the Plan."
Stock Options. The Plan provides that, on each July 1 during the term
of the Plan, options shall be granted automatically to the non-employee
directors serving the Company on such date. The date of grant of an option
pursuant to the Plan, shall be referred to hereinafter as the "grant date" of
such option. The Board of Directors may revoke, on or prior to each July 1,
the next automatic grant of options otherwise provided for by the Plan if no
options have been granted to employees since the preceding July 1 under the
Company's 1982 Stock Option Plan or any other employee stock option plan that
the Company might adopt hereafter.
On each grant date, each non-employee director of the Company, who has
not made an irrevocable, one time election to decline to participate in the
Plan, will be granted an option to purchase the number of shares of Common
Stock equal to the nearest number of whole shares determined in accordance with
the following formula set forth in the Plan: 30,000 divided by Number of
Non-Employee Directors (as defined). "Number of Non-Employee Directors" is
defined in the Plan as the number of non-employee directors serving the Company
in such capacity on such grant date. The formula set forth above will not be
affected by any decision of the Board of Directors to revoke an automatic
grant. For example, if the Board's nominees for election to the Board of
Directors are elected by the stockholders at the 1996 annual meeting (and
continue to serve as such), then five of the six non-employee directors
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<PAGE> 23
serving the Company on July 1, 1996 would be automatically granted an option
under the Plan covering 6,000 shares of Common Stock (30,000 / 5 = 6,000)
(Harold F. Kleinman has elected not to participate in the Plan).
The price at which each share of Common Stock covered by an option may
be purchased upon exercise of such option pursuant to the Plan is the fair
market value of the share on the grant date of such option. The period within
which a non-employee director's option may be exercised commences at the close
of such director's first year of service as a director after the grant date of
such option and ends ten years after such grant date (the "option period"),
unless ended sooner due to termination of service or death, or unless such
option is fully exercised prior to the end of such ten-year period.
If a non-employee director dies during his tenure or within three
months after his tenure has ended, his estate would have one year from the date
of death to exercise the option, provided that such option had been exercisable
at the time of his death and that the date of exercise would otherwise be
within the option period. If the tenure of the non- employee director
terminates for any other reason, he would have three months from the date of
termination to exercise the option, provided that such option had been
exercisable at the time of his termination and that the date of exercise would
otherwise be within the option period; provided, however, that if the
non-employee director is removed for fraud, intentional misrepresentation,
embezzlement, misappropriation or conversion of assets or opportunities of the
Company, such option would be void. The options are not transferrable other
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986, as amended (the "Code"), or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
Amendment of the Plan. Subject to the provisions of Rule 16b-3 of the
Exchange Act, the Board may from time to time amend, modify, suspend or
terminate the Plan. Nevertheless, no such amendment, modification, suspension
or termination may (a) impair any options theretofore granted under the Plan or
deprive any optionee of any shares of Common Stock which he may have acquired
through or as a result of the Plan or (b) be made without the approval of the
stockholders of the Company where such change would (i) increase the total
number of shares of Common Stock which may be granted under the Plan or
decrease the purchase price under the Plan (other than in accordance with the
Plan's antidilution provisions), (ii) materially alter the class of person
eligible to be granted options under the Plan, (iii) materially increase the
benefits accruing to optionees under the Plan or (iv) extend the term of the
Plan or the option period.
Termination. Unless previously terminated, the Plan will terminate at
the close of business on July 25, 1998, after which time no further grants may
be made under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
All options granted under the Plan are non-statutory options not
entitled to special tax treatment under Section 422 of the Code. The Plan also
is not qualified under Section 401(a) of the Code and not subject to the
provisions of the Employee Retirement Income Security Act of 1974.
No income will be recognized by an optionee for federal income tax
purposes upon the grant of an option. Except as described below in the case of
an "insider" subject to Section 16(b) of the Exchange Act who exercises his or
her option less than six months from the date of grant, upon exercise of an
option, the optionee will recognize ordinary income in an amount equal to the
excess of the fair market value of the shares on the date of exercise over the
option price of such shares. In the absence of an election pursuant to Section
83(b) of the Code, an "insider" subject to Section 16(b) of the Exchange Act
who exercises an option less than six months from the date the option was
granted will recognize income on the date six months after the date of grant in
an amount equal to the excess of the fair market value of the shares on such
date over the option price of such shares. An optionee subject to Section
16(b) of the Exchange Act can avoid such deferral by making an election,
pursuant to Section 83(b) of the Code, no later than 30 days after the date of
exercise. Directors of the Company generally are considered to be "insiders"
for purposes of Section 16(b) of the Exchange Act.
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<PAGE> 24
The Company will be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee at the time of such recognition by
the optionee. The basis of shares transferred to an optionee pursuant to
exercise of an option is the price paid for such shares plus an amount equal to
any income recognized by the optionee as a result of the exercise of such
option. If an optionee thereafter sells shares acquired upon exercise of an
option, any amount realized over the basis of such shares will constitute
capital gain to such optionee for federal income tax purposes.
RECOMMENDATION AND REQUIRED AFFIRMATIVE VOTE
The affirmative vote of the holders of record of a majority of the
outstanding shares of Common Stock present in person or by proxy and entitled
to vote thereon at the meeting is required to approve the proposal to approve
the Plan Amendments. The Board of Directors of the Company unanimously
recommends that the Company's stockholders vote FOR the approval of the
proposal to approve the Plan Amendments.
PROPOSAL TO EXTEND THE PERIOD OF EXERCISABILITY UNDER CERTAIN
OUTSTANDING STOCK OPTION AGREEMENTS OF NON-EMPLOYEE DIRECTORS
REASONS AND PRINCIPAL EFFECTS OF THE PROPOSAL
As described above under "Proposal to Approve Amendments to the
Company's 1988 Nonqualified Stock Option Plan for Non-Employee Directors -
Reasons and Principal Effects of the Proposal - Clarification of Effect of
Retirement", one purpose of the Plan Amendments is to clarify the operation of
the Plan in respect of the option grant made to directors in the last term of
their service prior to mandatory retirement as a regular director because of
age in accordance with the Company's By-laws. The Company desires to amend,
subject to stockholder approval, the stock option agreements entered into as of
July 1, 1995 with each of Messrs. Butler, Nichols and Snodgrass (collectively,
the "Option Agreements"), each of whom will have become age 70 prior to the
annual meeting and who therefore will not be eligible to stand for reelection
to the Board, to extend the exercisability of the options granted thereunder
consistent with the retirement clarification of the Plan Amendments (the
"Option Amendments").
RECOMMENDATION AND REQUIRED AFFIRMATIVE VOTE
The affirmative vote of the holders of record of a majority of the
outstanding shares of Common Stock present in person or by proxy and entitled
to vote thereon at the meeting is required to approve the proposal to approve
the Option Amendments. The Board of Directors of the Company unanimously
recommends that the Company's stockholders vote FOR the approval of the
proposal to approve the Option Amendments.
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CERTAIN TRANSACTIONS
SECTION 16(A) REPORTING DELINQUENCIES
Section 16(a) of the Exchange Act requires directors and officers of
the Company, and persons who own more than 10 percent of the Common Stock, to
file with the SEC initial reports of ownership and reports of changes in
ownership of the Common Stock. Directors, officers and more than 10 percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. Under the Section 16(a) rules as they
apply to trustees, the trustees of the Foundation are themselves deemed to be
more than 10 percent beneficial owners of the Company because such trustees
possess shared voting and investment power with respect to the securities of
the Company held by the Foundation.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1995, all Section
16(a) filing requirements applicable to its directors, officers and more than
10 percent beneficial owners were complied with.
INDEPENDENT ACCOUNTANTS
The appointment of the accounting firm selected to audit the Company's
financial statements is subject to ratification by the Board of Directors and
will not be submitted to stockholders for ratification or approval. It is the
present intention of the Company's management to recommend to the Board of
Directors the re-appointment of Arthur Andersen LLP, which has audited the
Company's financial statements since 1989, to audit the financial statements of
the Company for 1996. Representatives of Arthur Andersen LLP are expected to
be present at the meeting to respond to appropriate questions from stockholders
and will be given the opportunity to make a statement at the meeting should
they desire to do so.
STOCKHOLDER PROPOSALS AND OTHER MATTERS
Stockholder proposals intended to be included in the Company's proxy
statement relating to the 1997 annual meeting of stockholders, which is
currently scheduled to be held on April 22, 1997, must be received by the
Company at its office in Ardmore, Oklahoma, addressed to the Secretary of the
Company, no later than November 22, 1996.
The cost of solicitation of proxies will be borne by the Company.
Solicitation may be made by mail, personal interview, telephone or telegraph by
officers and regular employees of the Company, who will receive no additional
compensation therefor. To aid in the solicitation of proxies, the Company has
employed the firm of Georgeson & Co., Inc., which will receive a fee of
approximately $7,000 plus out-of-pocket expenses. The Company will bear the
reasonable expenses incurred by banks, brokerage firms, custodians, nominees
and fiduciaries in forwarding proxy material to beneficial owners.
The Board of Directors does not intend to present any other matter at
the meeting and knows of no other matters that will be presented. However, if
any other matter comes before the meeting, the persons named in the enclosed
proxy intend to vote thereon in accordance with their best judgment.
Ardmore, Oklahoma NOBLE AFFILIATES, INC.
March 22, 1996
William D. Dickson
Vice President-Finance and Treasurer
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EXHIBIT A
INDEMNITY AGREEMENT
This Agreement made and entered into as of this 1st day of March,
1996, by and between NOBLE AFFILIATES, INC., a Delaware corporation (the
"Company"), and ___________________ ("Indemnitee"), who is currently serving
the Company in the capacity of a director and/or officer thereof;
W I T N E S S E T H:
WHEREAS, the Company and Indemnitee recognize that the interpretation
of ambiguous statutes, regulations and court opinions and of the Certificate of
Incorporation and Bylaws of the Company, and the vagaries of public policy, are
too uncertain to provide the directors and officers of the Company with
adequate or reliable advance knowledge or guidance with respect to the legal
risks and potential liabilities to which they become personally exposed as a
result of performing their duties in good faith for the Company; and
WHEREAS, the Company and the Indemnitee are aware that highly
experienced and capable persons are often reluctant to serve as directors or
officers of a corporation unless they are protected to the fullest extent
permitted by law by comprehensive insurance or indemnification, especially
since the legal risks and potential liabilities, and the very threat thereof,
associated with lawsuits filed against the officers and directors of a
corporation, and the resultant substantial time, expense, harassment, ridicule,
abuse and anxiety spent and endured in defending against such lawsuits, whether
or not meritorious, bear no reasonable or logical relationship to the amount of
compensation received by the directors or officers from the corporation; and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, which sets forth certain provisions relating to the mandatory and
permissive indemnification of, and advancement of expenses to, officers and
directors (among others) of a Delaware corporation by such corporation, is
specifically not exclusive of other rights to which those indemnified
thereunder may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, and, thus, does not by itself limit the
extent to which the Company may indemnify persons serving as its officers and
directors (among others); and
WHEREAS, after due consideration and investigation of the terms and
provisions of this Agreement and the various other options available to the
Company and the Indemnitee in lieu thereof, the board of directors of the
Company has determined that the following Agreement is not only reasonable and
prudent but necessary to promote and ensure the best interests of the Company
and its stockholders; and
WHEREAS, the Company desires to have Indemnitee serve or continue to
serve as an officer and/or director of the Company, free from undue concern for
unpredictable, inappropriate or unreasonable legal risks and personal
liabilities by reason of his acting in good faith in the performance of his
duty to the Company; and Indemnitee desires to serve, or to continue to serve
(provided that he is furnished the indemnity provided for hereinafter), in
either or both of such capacities;
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<PAGE> 27
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Indemnitee, intending to be legally bound, do hereby agree as follows:
1. AGREEMENT TO SERVE. Indemnitee agrees to serve or continue to
serve as director and/or officer of the Company, at the will of the Company or
under separate contract, if such exists, for so long as he is duly elected or
appointed and qualified in accordance with the provisions of the Bylaws of the
Company or until such time as he tenders his resignation in writing.
2. DEFINITIONS. As used in this Agreement:
(a) The term "Proceeding" shall mean any action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit or proceeding, and
any inquiry or investigation that could lead to such an action, suit
or proceeding, except one initiated by Indemnitee to enforce his
rights under this Agreement.
(b) The term "Expenses" includes, without limitation, all
reasonable attorneys' fees, retainers, court costs, transcript costs,
fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery
service fees and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing
to be a witness in a Proceeding.
(c) References to "other enterprise" shall include
employee benefit plans; references to "fines" shall include any (i)
excise taxes assessed with respect to any employee benefit plan and
(ii) penalties; references to "serving at the request of the Company"
shall include any service as a director, officer, employee or agent of
the Company which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acts
in good faith and in a manner he reasonably believes to be in the
interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
3. INDEMNITY IN THIRD PARTY PROCEEDINGS. The Company shall
indemnify Indemnitee in accordance with the provisions of this Section 3 if
Indemnitee is a party to or is threatened to be made a party to or otherwise
involved in any threatened, pending or completed Proceeding (other than a
Proceeding by or in the right of the Company to procure a judgment in its
favor) by reason of the fact that Indemnitee is or was a director and/or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against all Expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by Indemnitee in
connection with such Proceeding, provided it is determined pursuant to Section
7 of this Agreement or by the court having jurisdiction in the matter, that
Indemnitee acted in good
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<PAGE> 28
faith and in a manner that he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal
Proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any Proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that Indemnitee did not act in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, had reasonable cause to
believe that his conduct was unlawful.
4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY.
The Company shall indemnify Indemnitee in accordance with the provisions of
this Section 4 if Indemnitee is a party to or is threatened to be made a party
to or otherwise involved in any threatened, pending or completed Proceeding by
or in the right of the Company to procure a judgment in its favor by reason of
the fact that Indemnitee is or was a director and/or officer of the Company, or
is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against all Expenses actually and reasonably incurred by
Indemnitee in connection with the defense, settlement or other disposition of
such Proceeding, but only if he acted in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification shall be made under this Section 4 in
respect of any claim, issue or matter as to which Indemnitee shall have been
adjudged to be liable to the Company unless and only to the extent that the
Delaware Court of Chancery or the court in which such Proceeding was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for such Expenses as the Delaware Court of
Chancery or such other court shall deem proper.
5. INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding any other provision of this Agreement to the contrary, to the
extent that Indemnitee has been successful on the merits or otherwise in
defense of any Proceeding referred to in Sections 3 and/or 4 of this Agreement,
or in defense of any claim, issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against all Expenses
actually and reasonably incurred by Indemnitee in connection therewith.
6. ADVANCES OF EXPENSES. The Expenses incurred by Indemnitee
pursuant to Sections 3 and/or 4 of this Agreement in connection with any
Proceeding shall, at the written request of the Indemnitee, be paid by the
Company in advance of the final disposition of such Proceeding upon receipt by
the Company of an undertaking by or on behalf of Indemnitee ("Indemnitee's
Undertaking") to repay such amount to the extent that it is ultimately
determined that Indemnitee is not entitled to be indemnified by the Company.
The request for advancement of Expenses by Indemnitee and the undertaking to
repay of Indemnitee, which need not be secured, shall be substantially in the
form of Exhibit A to this Agreement.
7. RIGHT OF INDEMNITEE TO INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES UPON APPLICATION; PROCEDURE UPON APPLICATION.
(a) Any indemnification under Sections 3 and/or 4 of this
Agreement shall be made no later than 45 days after receipt by the
Company of the written request of
A-3
<PAGE> 29
Indemnitee, unless a determination is made within said 45-day period
by (i) a majority vote of the directors of the Company who are not
parties to the involved Proceeding, even though less than a quorum, or
(ii) independent legal counsel in a written opinion (which counsel
shall be appointed if there are no such directors or if such directors
so direct), that the Indemnitee has not met the applicable standards
for indemnification set forth in Section 3 or 4, as the case may be.
(b) Any advancement of Expenses under Section 6 of this
Agreement shall be made no later than 10 days after receipt by the
Company of Indemnitee's Undertaking.
(c) In any action to establish or enforce the right of
indemnification or to receive advancement of Expenses as provided in
this Agreement, the burden of proving that indemnification or
advancement of Expenses is not appropriate shall be on the Company.
Neither the failure of the Company (including its board of directors
or independent legal counsel) to have made a determination prior to
the commencement of such action that indemnification or advancement of
Expenses is proper in the circumstances because Indemnitee has met the
applicable standard of conduct, nor an actual determination by the
Company (including its board of directors or independent legal
counsel) that Indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that
Indemnitee has not met the applicable standard of conduct. Expenses
incurred by Indemnitee in connection with successfully establishing or
enforcing his right of indemnification or to receive advancement of
Expenses, in whole or in part, under this Agreement shall also be
indemnified by the Company.
8. INDEMNIFICATION AND ADVANCEMENT OF EXPENSES UNDER THIS
AGREEMENT NOT EXCLUSIVE. The rights of indemnification and to receive
advancement of Expenses as provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under the
Certificate of Incorporation or Bylaws of the Company, any other agreement, any
vote of stockholders or disinterested directors, the General Corporation Law of
the State of Delaware, or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
9. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification or to receive advancement by the
Company for some or a portion of the Expenses, judgments, fines or amounts paid
in settlement actually and reasonably incurred by Indemnitee in the
investigation, defense, appeal, settlement or other disposition of any
Proceeding but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled.
10. RIGHTS CONTINUED. The rights of indemnification and to
receive advancement of Expenses as provided by this Agreement shall continue as
to Indemnitee even though Indemnitee may have ceased to be a director or
officer of the Company and shall inure to the benefit of Indemnitee's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
A-4
<PAGE> 30
11. NO CONSTRUCTION AS AN EMPLOYMENT AGREEMENT OR ANY OTHER
COMMITMENT. Nothing contained in this Agreement shall be construed as giving
Indemnitee any right to be retained in the employ of the Company or any of its
subsidiaries, if Indemnitee currently serves as an officer of the Company, or
to be renominated as a director of the Company, if Indemnitee currently serves
as a director of the Company.
12. LIABILITY INSURANCE. To the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or policies in accordance
with its or their terms, to the maximum extent of the coverage available for
any director or officer of the Company under such policy or policies.
13. NO DUPLICATION OF PAYMENTS. The Company shall not be liable
under this Agreement to make any payment of amounts otherwise indemnifiable
under this Agreement if, and to the extent that, Indemnitee has otherwise
actually received such payment under any contract, agreement or insurance
policy, the Certificate of Incorporation or Bylaws of the Company, or
otherwise.
14. SUBROGATION. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including without
limitation the execution of such documents as may be necessary to enable the
Company effectively to bring suit to enforce such rights.
15. EXCEPTIONS. Notwithstanding any other provision in this
Agreement, the Company shall not be obligated pursuant to the terms of this
Agreement, to indemnify or advance Expenses to the Indemnitee with respect to
any Proceeding, or any claim therein, (i) brought or made by Indemnitee
against the Company, or (ii) in which final judgment is rendered against the
Indemnitee for an accounting of profits made from the purchase and sale or the
sale and purchase by Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended,
or similar provisions of any federal, state or local statute.
16. NOTICES. Any notice or other communication required or
permitted to be given or made to the Company or Indemnitee pursuant to this
Agreement shall be given or made in writing by depositing the same in the
United States mail, with postage thereon prepaid, addressed to the person to
whom such notice or communication is directed at the address of such person on
the records of the Company, and such notice or communication shall be deemed
given or made at the time when the same shall be so deposited in the United
States mail. Any such notice or communication to the Company shall be
addressed to the Secretary of the Company.
17. CONTRACTUAL RIGHTS. The right to be indemnified or to receive
advancement of Expenses under this Agreement (i) is a contract right based upon
good and valuable consideration, pursuant to which Indemnitee may sue, (ii) is
and is intended to be retroactive and shall be available as to events occurring
prior to the date of this Agreement and (iii) shall continue after any
rescission or restrictive modification of this Agreement as to events occurring
prior thereto.
A-5
<PAGE> 31
18. SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby; and, to the
fullest extent possible, the provisions of this Agreement shall be construed so
as to give effect to the intent manifested by the provisions held invalid,
illegal or unenforceable.
19. SUCCESSORS; BINDING AGREEMENT. The Company shall require any
successor to all or substantially all of the business and/or assets of the
Company (whether direct or indirect, by purchase, merger, consolidation or
otherwise), by agreement in form and substance reasonably satisfactory to
Indemnitee, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers the agreement provided
for in this Section 19 or which otherwise becomes bound by the terms and
provisions of this Agreement by operation of law.
20. COUNTERPARTS, MODIFICATION, HEADINGS, GENDER.
(a) This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same
instrument, and either party hereto may execute this Agreement by
signing any such counterpart.
(b) No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by Indemnitee and an appropriate
officer of the Company. No waiver by any party at any time of any
breach by any other party of, or compliance with, any condition or
provision of this Agreement to be performed by any other party shall
be deemed a waiver of similar or dissimilar provisions or conditions
at the same time or at any prior or subsequent time.
(c) Section headings are not to be considered part of
this Agreement, are solely for convenience of reference, and shall not
affect the meaning or interpretation of this Agreement or any
provision set forth herein.
(d) Pronouns in masculine, feminine and neuter genders
shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires.
21. ASSIGNABILITY. This Agreement shall not be assignable by
either party without the consent of the other.
A-6
<PAGE> 32
22. EXCLUSIVE JURISDICTION; GOVERNING LAW. The Company and
Indemnitee agree that all disputes in any way relating to or arising under this
Agreement, including, without limitation, any action for advancement of
Expenses or indemnification, shall be litigated, if at all, exclusively in the
Delaware Court of Chancery, and, if necessary, the corresponding appellate
courts. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in such state without giving effect to the principles of
conflicts of laws. The Company and Indemnitee expressly submit themselves to
the personal jurisdiction of the State of Delaware.
23. TERMINATION.
(a) This Agreement shall terminate upon the mutual
agreement of the parties that this Agreement shall terminate or upon
the death of Indemnitee or the resignation, retirement, removal or
replacement of Indemnitee from all of his positions as a director
and/or officer of the Company.
(b) The termination of this Agreement shall not
terminate:
(i) the Company's liability for claims or actions
against Indemnitee arising out of or related to acts,
omissions, occurrences, facts or circumstances occurring or
alleged to have occurred prior to such termination; or
(ii) the applicability of the terms and conditions
of this Agreement to such claims or actions.
IN WITNESS WHEREOF, the Company and Indemnitee have executed this
Agreement as of the date and year first above written.
NOBLE AFFILIATES, INC.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
INDEMNITEE
----------------------------------
Name:
-----------------------------
A-7
<PAGE> 33
EXHIBIT B
1988 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
OF
NOBLE AFFILIATES, INC.*
AS AMENDED AND RESTATED EFFECTIVE JANUARY 30, 1996
RECITALS
A. Effective as of July 26, 1988 (the "Effective Date"), the
board of directors (the "Board of Directors") of Noble Affiliates, Inc., a
Delaware corporation (the "Company"), hereby adopts this 1988 Nonqualified
Stock Option Plan for Non-Employee Directors (the "Plan").
B. The purposes of the Plan are to provide to each of the
directors of the Company who is not also either an employee or an officer of
the Company added incentive to continue in the service of the Company and a
more direct interest in the future success of the operations of the Company by
granting to such directors options (the "Options", or individually, the
"Option") to purchase shares of the Company's common stock, $3.33-1/3 par value
(the "Common Stock"), subject to the terms and conditions described below.
ARTICLE I
GENERAL
1.01 Definitions. For purposes of this Plan and as used herein,
"non-employee director" shall mean an individual who (a) is now, or hereafter
becomes, a member of the Board of Directors by virtue of an election by the
shareholders of the Company, (b) is neither an employee nor an officer of the
Company and (c) has not elected to decline to participate in the Plan pursuant
to the next succeeding sentence. A director otherwise eligible to participate
in the Plan may make an irrevocable, one-time election, by written notice to
the Company within 30 days after his initial election to the Board of Directors
or, in the case of the directors in office on the Effective Date, prior to
shareholder approval of the Plan, to decline to participate in the Plan. For
purposes of this Plan, "employee" shall mean an individual whose wages are
subject to the withholding of federal income tax under Section 3401 of the
Internal Revenue Code of 1986, as amended from time to time (the "Code"), and
"officer" shall mean an individual elected or appointed by the Board of
Directors or chosen in such other manner as may be prescribed in the By-laws of
the Company to serve as such, except that for the purposes of this Plan, the
Chairman of the Board will not be deemed to be an officer of the Company.
_______________
* As amended by the Board of Directors on January 30, 1996. Language
added to the Plan is double underscored and language deleted is struck
through.
B-1
<PAGE> 34
For purposes of this Plan, and as used herein, the "fair market value"
of a share of Common Stock is the closing sales price on the date in question
(or, if there was no reported sale on such date, on the last preceding day on
which any reported sale occurred) of the Common Stock on the New York Stock
Exchange.
1.02 Options. The Options granted hereunder shall be options that
are not qualified under Section 422A of the Code.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Board of Directors. The Board
of Directors shall have no authority, discretion or power to select the
participants who will receive Options, to set the number of shares to be
covered by each Option, or to set the exercise price or the period within which
the Options may be exercised, or to alter any other terms or conditions
specified herein, except in the sense of administering the Plan subject to the
express provisions of the Plan and except in accordance with Sections 3.02(a)
and 6.02 hereof. Subject to the foregoing limitations, the Board of Directors
shall have authority and power to adopt such rules and regulations and to take
such action as it shall consider necessary or advisable for the administration
of the Plan, and to construe, interpret and administer the Plan. The decisions
of the Board of Directors relating to the Plan shall be final and binding upon
the Company, the Holders, as defined hereinafter, and all other persons. No
member of the Board of Directors shall incur any liability by reason of any
action or determination made in good faith with respect to the Plan or any
stock option agreement entered into pursuant to the Plan.
ARTICLE III
OPTIONS
3.01 Participation. Each non-employee director shall be granted
Options to purchase Common Stock under the Plan on the terms and conditions
herein described.
3.02 Stock Option Agreements. Each Option granted under the Plan
shall be evidenced by a written stock option agreement, which agreement shall
be entered into by the Company and the non-employee director to whom the Option
is granted (the "Holder"), and which agreement shall include, incorporate or
conform to the following terms and conditions, and such other terms and
conditions not inconsistent therewith or with the terms and conditions of this
Plan as the Board of Directors considers appropriate in each case:
(a) Option Grant Date. Options shall be granted
initially as of the Effective Date to each non- employee director
serving the Company as a director on such date. Thereafter, on each
July 1 during the term of the Plan, Options shall be granted
automatically to the non-employee directors serving the Company as
directors on such date. The date of grant of an Option pursuant to
the Plan shall be referred to hereinafter as the "Grant Date" of such
Option. Notwithstanding anything herein to the contrary, the Board of
Directors may revoke, on or prior to each July 1, the next automatic
grant
B-2
<PAGE> 35
of Options otherwise provided for by the Plan if no options have been
granted to employees since the preceding July 1 under the Company's
1982 Stock Option Plan or any other employee stock option plan that
the Company might adopt hereafter.
(b) Number. Each non-employee director serving the
Company as a director on the Effective Date shall be granted, as of
such date, an Option to purchase a number of shares of Common Stock
equal to the product obtained by multiplying (i) the number of
completed years such director has served the Company as director by
(ii) 500. Thereafter, as of each subsequent Grant Date, each then
current non-employee director shall be granted an Option to purchase
the number of shares of Common Stock equal to the nearest number of
whole shares determined in accordance with the following formula,
subject to adjustment in accordance with Section 5.02 hereof:
<TABLE>
<S> <C> <C>
30,000 = Number of Shares of
------------------------------------
Number of Non-Employee Directors Common Stock
</TABLE>
"Number of Non-Employee Directors" shall mean the number of
non-employee directors serving the Company as a director on such Grant
Date. The formula set forth above will not be affected by any
decision of the Board of Directors to revoke an automatic grant.
If, on any July 1 during the term of the Plan, fewer than
30,000 shares of Common Stock (subject to adjustment in accordance
with Section 5.02 hereof) remain available for grant on such date,
such smaller number will be substituted for 30,000 as the numerator in
the formula described above to determine the number of shares of
Common Stock to be subject to each Option to be granted to each
non-employee director on such date.
(c) Price. The price at which each share of Common Stock
covered by an Option may be purchased pursuant to this Plan shall be
the fair market value of the shares on the Grant Date of such Option.
(d) Option Period. EACH OPTION SHALL BE EXERCISABLE
FROM TIME TO TIME OVER A PERIOD (THE "OPTION PERIOD") COMMENCING ONE
YEAR from the Grant Date of such Option AND ENDING UPON THE EXPIRATION
OF TEN YEARS FROM THE GRANT DATE, unless terminated sooner pursuant to
THE PROVISIONS DESCRIBED IN Section 3.02(e) below; PROVIDED, HOWEVER,
THAT ANY OPTION GRANTED PURSUANT TO THE PLAN SHALL BECOME EXERCISABLE
IN FULL UPON THE MANDATORY RETIREMENT OF THE HOLDER AS A REGULAR
DIRECTOR BECAUSE OF AGE IN ACCORDANCE WITH ARTICLE III OF THE BY-LAWS
OF THE COMPANY.
(e) Termination of Service, Death, Etc. Each stock
option agreement shall provide as follows with respect to the exercise
of the Option granted thereby in the event that the Holder ceases to
be a non-employee director for the reasons described in this Section
3.02(e):
B-3
<PAGE> 36
(i) IF THE HOLDER CEASES TO BE A DIRECTOR OF THE
COMPANY ON ACCOUNT OF SUCH HOLDER'S (A) fraud or intentional
misrepresentation, or (B) embezzlement, misappropriation or
conversion of assets or opportunities of the Company or any
direct or indirect majority-owned subsidiary of the Company,
THEN THE OPTION SHALL AUTOMATICALLY TERMINATE AND BE OF NO
FURTHER FORCE OR EFFECT AS OF THE DATE THE HOLDER'S
DIRECTORSHIP TERMINATED;
(ii) If the Holder shall die during the Option
Period while a director of the Company (or during the
additional FIVE-YEAR period provided by paragraph (iii) of
this Section 3.02(e)), the Option may be exercised, to the
extent that the Holder was entitled to exercise it at the date
of Holder's death, within FIVE YEARS after such death (if
otherwise within the Option Period), but not thereafter, by
the executor or administrator of the estate of THE Holder, or
by the person or persons who shall have acquired the Option
directly from the Holder by bequest or inheritance; or
(iii) If the directorship of a Holder is terminated
for any reason (other than the circumstances specified in
paragraphs (i) and (ii) of this Section 3.02(e)) within the
Option Period, the Option may be exercised, to the extent THE
Holder was able to do so at the date of termination of the
directorship, within FIVE YEARS after such termination (if
otherwise within the Option Period), but not thereafter.
(f) Transferability. An Option granted under the Plan
shall not be transferable by the Holder other 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. The designation of a beneficiary by a Holder does not
constitute a transfer.
(g) Agreement to Continue in Service. Each Holder shall
agree to remain in the service of the Company, at the pleasure of the
Company's shareholders, for a continuous period of at least one year
after the date of the grant of any Option, at the retainer rate and
fee schedule then in effect or at such changed rate or schedule as the
Company from time to time may establish.
(h) Exercise, Payments, Etc. Each stock option agreement
shall provide that the method for exercising the Option granted
thereby shall be by delivery to the President of the Company of, or by
sending by United States registered or certified mail, postage
prepaid, addressed to the Company (for the attention of its President)
of, written notice signed by Holder specifying the number of shares of
Common Stock with respect to which such Option is being exercised.
Such notice shall be accompanied by the full amount of the purchase
price of such shares. Any such notice shall be deemed to be given on
the date on which the same was deposited in a regularly maintained
receptacle for the deposit of United States mail, addressed and sent
as above-stated. In addition to the foregoing, promptly after demand
by the Company, the exercising Holder shall pay
B-4
<PAGE> 37
to the Company an amount equal to applicable withholding taxes, if
any, due in connection with such exercise.
ARTICLE IV
[Deleted]
ARTICLE V
AUTHORIZED COMMON STOCK
5.01 Common Stock. The total number of shares of Common Stock as
to which Options may be granted pursuant to the Plan shall be 550,000, in the
aggregate, except as such number of shares shall be adjusted from and after the
Effective Date in accordance with the provisions of Section 5.02 hereof. If
any outstanding Option under the Plan shall expire or be terminated for any
reason before the end of the Option Period, the shares of Common Stock
allocable to the unexercised portion of such Option may again be subject to the
Plan. The Company shall, at all times during the life of any outstanding
Options, retain as authorized and unissued Common Stock at least the number of
shares from time to time included in the outstanding Options or otherwise
assure itself of its ability to perform its obligation under the Plan.
5.02 Adjustments Upon Changes in Common Stock. In the event the
Company shall effect a split of the Common Stock or dividend payable in Common
Stock, or in the event the outstanding Common Stock shall be combined into a
smaller number of shares, the maximum number of shares as to which Options may
be granted under the Plan shall be increased or decreased proportionately. In
the event that before delivery by the Company of all of the shares of Common
Stock in respect of which any Option has been granted under the Plan, the
Company shall have effected such a split, dividend or combination, the shares
still subject to the Option shall be increased or decreased proportionately and
the purchase price per share shall be increased or decreased proportionately so
that the aggregate purchase price for all the then optioned shares shall remain
the same as immediately prior to such split, dividend or combination.
In the event of a reclassification of the Common Stock not covered by
the foregoing, or in the event of a liquidation or reorganization, including a
merger, consolidation or sale of assets, the Board of Directors of the Company
shall make such adjustments, if any, as it may deem appropriate in the number,
purchase price and kind of shares covered by the unexercised portions of
Options theretofore granted under the Plan. The provisions of this Section
5.02 shall only be applicable if, and only to the extent that, the application
thereof does not conflict with any valid governmental statute, regulation or
rule.
B-5
<PAGE> 38
ARTICLE VI
GENERAL PROVISIONS
6.01 Termination of the Plan. The Plan shall terminate whenever
the Board of Directors adopts a resolution to that effect. If not sooner
terminated under the preceding sentence, the Plan shall wholly cease and expire
at the close of business on JANUARY 25, 2006. After termination of the Plan,
no Options shall be granted under this Plan, but the Company shall continue to
recognize Options previously granted.
6.02 Amendment of the Plan. Subject to the limitations set forth
in this Section 6.02, the Board of Directors may from time to time amend,
modify, suspend or terminate the Plan. No such amendment, modification,
suspension or termination shall (a) impair any Options theretofore granted
under the Plan or deprive any Holder of any shares of Common Stock which he
might have acquired through or as a result of the Plan, or (b) be made without
the approval of the shareholders of the Company where such change would (i)
increase the total number of shares of Common Stock which may be granted under
the Plan or decrease the purchase price under the Plan (other than as provided
in Section 5.02 hereof), (ii) materially alter the class of persons eligible to
be granted Options under the Plan, (iii) materially increase the benefits
accruing to Holders under the Plan or (iv) extend the term of the Plan or the
Option Period. Notwithstanding any other provision of this Section 6.02, in
accordance with Rule 16b-3(c)(2)(ii)(B), the provisions of the Plan governing
the matters described in Rule 16b-3(c)(2)(ii)(A) shall not be amended more than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
6.03 Treatment of Proceeds. Proceeds from the sale of Common Stock
pursuant to Options granted under the Plan shall constitute general funds of
the Company.
6.04 Effectiveness. This Plan shall become effective as of the
Effective Date, subject to the conditions stated in the following sentence.
This Plan and each Option granted or to be granted hereunder is conditional on
and shall be of no force and effect, and no Option shall be exercised, unless
and until, (a) shareholder approval of the Plan by the affirmative votes of the
holders of a majority of the shares of Common Stock present, or represented,
and entitled to vote at a meeting of shareholders duly held not later than the
date of the next annual meeting of shareholders and (b) receipt by the Company
of a favorable response from the staff of the Securities and Exchange
Commission to the Company's position to the effect that (i) the Plan will meet
the requirements of Rule 16b-3 and (ii) the receipt of Options under the Plan
by non-employee directors will not prohibit them from continuing to be
"disinterested persons" within the meaning of paragraphs (b) and (d)(3) of Rule
16b-3 with respect to the Company's employee stock option plans.
6.05 Paragraph Headings. The paragraph headings included herein
are only for convenience, and they shall have no effect on the interpretation
of the Plan.
B-6
<PAGE> 39
IN WITNESS WHEREOF, THE UNDERSIGNED HAS EXECUTED THIS AMENDED AND
RESTATED 1988 NONQUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS ON THIS
23RD DAY OF APRIL, 1996, EFFECTIVE AS OF JANUARY 30, 1996.
NOBLE AFFILIATES, INC.
BY
NAME:
TITLE:
B-7
<PAGE> 40
- --------------------------------------------------------------------------------
<TABLE>
<C> <S>
NOBLE AFFILIATES, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert Kelley and William D. Dickson, and
either of them, proxies with power of substitution in each, and hereby
authorizes them to represent and to vote, as designated below, all shares of
common stock of Noble Affiliates, Inc. standing in the name of the
undersigned on March 11, 1996 at the annual meeting of stockholders to be
held on April 23, 1996 at Ardmore, Oklahoma, and at any adjournment thereof
and especially to vote on the items of business specified below, as more
fully described in the notice of the meeting dated March 22, 1996, and the
proxy statement accompanying the same, the receipt of which is hereby
acknowledged.
</TABLE>
<TABLE>
<S> <C>
1. Election of Directors
FOR ALL NOMINEES WITH EXCEPTIONS NOTED / / WITHHOLD AUTHORITY FOR ALL NOMINEES / /
</TABLE>
Alan A. Baker, Michael A. Cawley, Edward F. Cox, James C. Day, Robert Kelley,
Harold F. Kleinman, George J. McLeod
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
------------------------------------------------------------------------------
2. Proposal to approve and ratify indemnity agreements between the Company and
its directors and certain officers and to authorize the Company to enter into
such agreements in the future with directors and certain officers:
FOR / / AGAINST / / ABSTAIN / /
3. Proposal to amend the 1988 Nonqualified Stock Option Plan for Non-Employee
Directors of Noble Affiliates, Inc. to (i) increase the number of shares of
common stock of the Company authorized under the Plan by 300,000 shares and
extend the term of the Plan to July 25, 2006, (ii) extend to five years the
period during which an option may be exercised after termination of
directorship and (iii) clarify the operation of the Plan in respect of the
option grant made to directors in the last term of their service prior to
mandatory retirement as a regular director because of age in accordance with
Article III of the Company's By-Laws:
FOR / / AGAINST / / ABSTAIN / /
4. Proposal to extend the period of exercisability under certain outstanding
stock option agreements of non-employee directors of the Company:
FOR / / AGAINST / / ABSTAIN / /
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
<PAGE> 41
- --------------------------------------------------------------------------------
5. In their discretion, the proxies are authorized to vote upon such other
business or matters as may properly come before the meeting or any
adjournment thereof.
This proxy when duly executed will be voted in the manner directed herein by the
undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
EACH OF THE PROPOSALS SET FORTH ABOVE.
The undersigned hereby revokes any
proxy or proxies heretofore given to
represent or vote such common stock
and hereby ratifies and confirms all
action that said proxies, their
substitutes, or any of them, might
lawfully take in accordance with the
terms hereof.
Dated: , 1996
--------------------------------
--------------------------------
Signature(s) of Stockholder(s)
This proxy should be signed
exactly as your name appears
hereon. Joint owners should both
sign. If signed as attorney,
executor, guardian, or in some
other representative capacity,
or as an officer of a
corporation, please indicate
your capacity or title.
Please complete, date and sign
this proxy and return it in the
enclosed envelope, which
requires no postage if mailed in
the United States.
- --------------------------------------------------------------------------------
