<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)
________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
...............................................................
2) Aggregate number of securities to which transaction applies:
...............................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined).
...............................................................
4) Proposed maximum aggregate value of transaction:
...............................................................
5) Total fee paid:
...............................................................
[ ] 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 22, 1997
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 22, 1997,
at 10:00 a.m., local time, at the Charles B. Goddard Center, D Street and First
Avenue, S.W., Ardmore, Oklahoma 73401, 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 the
1992 Stock Option and Restricted Stock Plan as amended and
restated; and
3. 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 10,
1997 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 1996 and financial
statements for the fiscal year ended December 31, 1996 are contained in the
accompanying 1996 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 21, 1997
<PAGE> 3
NOBLE AFFILIATES, INC.
110 WEST BROADWAY
ARDMORE, OKLAHOMA 73401
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 22, 1997
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 22, 1997,
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 21, 1997.
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 proposal to approve and ratify the 1992 Stock Option and Restricted
Stock Plan (the "Option Plan"), as amended and restated, as 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 1998 annual meeting of stockholders
must be received by the Company no later than January 28, 1998.
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 the proposal to approve and ratify the Option Plan as amended
and restated.
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
with respect to the proposal to approve and ratify the Option Plan as amended
and restated and will be counted as present for purposes of determining the
existence of a quorum regarding that item of business. Abstentions with
respect
<PAGE> 4
to this proposal will have the effect of a negative vote because it requires
the affirmative vote of a majority of shares of common stock of the Company
present in person or represented by proxy at the meeting and entitled to vote
thereon. 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 both 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 or the proposal to
approve and ratify the Option Plan as amended and restated.
VOTING SECURITIES
Only holders of record of common stock of the Company, par value $3.33
1/3 per share (the "Common Stock"), at the close of business on March 10, 1997,
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 56,854,308
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, 1996 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>
FMR Corp. . . . . . . . . . . . . . . . . . . . . . 8,513,668(2) 15.0%
82 Devonshire Street
Boston, Massachusetts 02109
The Samuel Roberts Noble Foundation, Inc. . . . . . 5,558,633(3) 9.8%
P. O. Box 2180
Ardmore, Oklahoma 73402
</TABLE>
_______________________
(1) Unless otherwise indicated, all shares listed are directly held with sole
voting and investment power.
(2) According to an Amendment No. 8 to Schedule 13G dated February 14, 1997
filed with the Securities and Exchange Commission (the "SEC") by FMR
Corp., FMR Corp. beneficially owns all the shares with sole dispositive
power and has voting power with respect to 1,400 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 8,267,668 of the shares as a result of its acting as an
investment adviser to several investment companies and one subsidiary
beneficially owns 246,000 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.
(3) Beneficial ownership of such shares was reported in Amendment No. 6 to
Schedule 13G dated January 22, 1997 filed with 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, consultation and
demonstration. From time to time as funds are available, the Foundation
also makes grants to various charitable organizations. The Foundation
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<PAGE> 5
organized the Company in 1969. Michael A. Cawley, a director of the
Company, serves as President, Chief Executive Officer and a trustee 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.
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. All nominees for
director were elected directors of the Company by vote of the stockholders at
the 1996 annual meeting. 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 1998 annual meeting of stockholders must be
received by the Company no later than January 28, 1998.
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 has served as an independent consultant in the oil
and gas industry since May 1995. For more than five years prior thereto, 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, age 65, also serves as a
director of National Gas & Oil Company and CRESTAR Energy, Inc. in Calgary,
Alberta. He has served as a director of the Company since 1995.
MICHAEL A. CAWLEY -- Mr. Cawley 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. Mr. Cawley, age 49, 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 50,
has served as a director of the Company since 1984.
JAMES C. DAY -- Mr. Day 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, age 53, 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 51, also serves as President and
Chief Executive Officer of Samedan Oil Corporation ("Samedan"), a wholly-owned
subsidiary of the Company, positions he has held 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), Exchange National
3
<PAGE> 6
Bank and Trust Company of Ardmore, Oklahoma and OG&E Electric Services. 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 66, 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
68, 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 CRESTAR Energy, Inc.
in Calgary, Alberta. He has served as director of the Company since 1977.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors held nine meetings in 1996. Each director
attended every meeting of the Board and every meeting of the Board committees
on which he served, except that Messrs. Baker, Cawley, Cox, Day and McLeod were
each absent from one Board meeting.
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 -- Alan A. Baker, Chairman; James C.
Day; Harold F. Kleinman; and George J. McLeod. The primary
responsibilities of the compensation and benefits committee are to fix
annual salaries and bonuses of the officers of the Company, including any
officer who is also a director, and to administer the Company's employee
stock option plans. The compensation and benefits committee held six
meetings during 1996.
AUDIT COMMITTEE -- Harold F. Kleinman, Chairman; Michael A. Cawley; and
Edward F. Cox. 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.
The audit committee held three meetings during 1996.
EXECUTIVE COMMITTEE -- Robert Kelley, Chairman; Alan A. Baker; Michael A.
Cawley; and Harold F. Kleinman. 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 1996.
NOMINATING COMMITTEE -- George J. McLeod, Chairman; Edward F. Cox; and
James C. Day. 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 one meeting during 1996.
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 1996. Messrs. Day and McLeod were formerly
officers of the Company and Mr. Kleinman's law firm provided in 1996 and
currently provides legal services to the Company. See "Election of Directors"
in this proxy statement for a description of the prior business experience and
principal employment of Messrs. Day, Kleinman and McLeod.
4
<PAGE> 7
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. A director who is also an officer of the Company
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. Amendments to the plan
were approved by stockholders at the 1996 annual meeting. 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, 1996, each of Messrs. Baker, Cawley, Cox, Day and McLeod
was granted an option under the plan covering 6,000 shares of Common Stock at
the exercise price of $37.625 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 following tabulation sets forth as of December 31, 1996 the shares of
Common Stock beneficially owned by each director, each named executive officer
listed in the Summary Compensation Table included elsewhere in this proxy
statement, and all directors and executive officers 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 --
Michael A. Cawley . . . . . . . . . . . . . 5,563,418(3)(4) 9.8%
Edward F. Cox . . . . . . . . . . . . . . . 38,286(4) --
James C. Day . . . . . . . . . . . . . . . 9,303(4) --
Robert Kelley . . . . . . . . . . . . . . . 153,352(4) .3%
Harold F. Kleinman . . . . . . . . . . . . 200(5) --
George J. McLeod . . . . . . . . . . . . . 22,340(4) --
Named Executive Officers (excluding
any director named above) and Group
William D. Dickson . . . . . . . . . . . . 61,928(4) .1%
Dan O. Dinges . . . . . . . . . . . . . . . 78,433(4) .1%
W. A. Poillion . . . . . . . . . . . . . . 78,411(4) .1%
James C. Woodson . . . . . . . . . . . . . 46,097(4) .1%
All directors and executive . . . . . . .
officers as a group (13 persons) . . . . 6,117,047(3)(6) 10.8%
</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 5,558,633 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 5,558,633 shares. Mr. Cawley disclaims any
pecuniary interest in the 5,558,633 shares.
(4) Includes shares not outstanding but subject to currently exercisable
options, as follows: Mr. Cawley -- 4,285 shares; Mr. Cox -- 25,286
shares; Mr. Day -- 9,285 shares; Mr. Dickson -- 61,669 shares; Mr. Dinges
-- 72,428 shares; Mr. Kelley -- 141,255 shares; Mr. McLeod -- 9,286
shares; Mr. Poillion -- 69,957 shares; and Mr. Woodson -- 39,856 shares.
(5) Consists of 200 shares held as joint tenant with Mr. Kleinman's spouse.
(6) Includes 496,557 shares not outstanding but subject to currently
exercisable options.
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 Securities Exchange Act of 1934 (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 (the "Option Plan") of the Company, which are made
solely by the Committee in accordance with the terms of the Option Plan.
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 1996
For 1996, 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 Towers Perrin Inc. ("Towers Perrin"), William M. Mercer,
Incorporated ("Mercer"), 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.
During 1996, the Company engaged Towers Perrin to review its
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<PAGE> 10
compensation program. Such review covered base salary, annual incentive
bonus plan and option plans. The Committee analyzes the information and
makes annual adjustments based on performance, incumbent length of
service in the executive position and cost of living. The policy of the
Committee generally is to establish base salary levels that approximate
survey averages, and as such, the salary level for each executive officer
for 1996 was within 15 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 20 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 70 percent, with factors of 70 percent
for the CEO and 60 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.
Certain adjustments to target percentage factors were made in 1996 based
on the Towers Perrin review and recommendations made in their report.
Annual performance goals for the Company and its divisions are
weighted with respect to four criteria as follows: cost of finding and
developing new reserves (40 percent), new reserves added (40 percent),
cash flow from operations (20 percent for division; 10 percent for
Company), and net income as a percentage return on stockholders' equity
at the beginning of 1996 (10 percent for the Company). The annual
performance goals for cost of finding and developing new reserves, new
reserves added, cash flow from operations and net income 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.
While the Board approved the initial 1996 financial budgets and
forecasts in December 1995, it deferred establishment of annual
performance goals until the Board of Directors meeting of April 21, 1996.
The Board's decision to defer establishing annual performance goals was
primarily based upon the ongoing review by Towers Perrin and the Board's
experience that goals set in December are often adjusted the following
April due to changed economic conditions. Therefore, at its April 22,
1996 meeting, the Board established the following annual performance
goals in accordance with the revised financial budget for 1996: Cost of
finding and developing new oil and gas reserves was set at $5.00 per
barrel of oil equivalent ("BOE") for secondary reserves and $7.00 per BOE
for primary reserves. The rate for converting thousands of cubic feet of
natural gas to BOE's was changed throughout the Company in 1995 from 8 to
1 to rates that more accurately reflected relative commodity values in
1996, and ranged from 6 to 1 in the Company's Offshore Gulf of Mexico
division to 14 to 1 in the Company's Canadian division. The new reserves
added goal was set at 39 million BOE's. The cash flow goal was
established as a measure of the percentage growth compared to prior
year's cash flow of $194.4 million with cash flow increases (or
decreases) as a result of changing commodity prices removed from the
calculation. Achievement of a portion of the cash flow goal could occur
by maintaining a level of cash flow equal to the prior year amount. The
net income goal was set as a percent return on shareholders' equity at
the beginning of the year with achievement of at least a portion of the
goal occurring by achieving at least a five percent return on beginning
of the year shareholders' equity.
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
8
<PAGE> 11
multiplier, provided that the bonus of an executive officer is limited to
100 percent of the executive officer's base salary at year end.
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 or incentive stock options with or without stock
appreciation rights and restricted stock. To date only nonqualified
stock options have been granted under the Option Plan. For information
on amendments to the Option Plan adopted by the Board, subject to
stockholder approval, see "Proposal Regarding Amended and Restated Option
Plan."
The options represent the right to purchase shares of Common Stock
over a period of up to ten years upon such terms and conditions,
consistent with the provisions of the Option Plan, as are specified by
the Committee at the time of grant. The option price for incentive stock
options is not less than the fair market value per share at the date of
grant and for nonqualified stock options is not less than 50 percent of
fair market value per share at the date of grant.
During 1996, the Company engaged Towers Perrin to advise the
Committee as to appropriate grant guidelines. Towers Perrin 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 10 companies it considered
comparable to the Company in business and scope. The recommendation of
Towers Perrin was a multiple of 0.5 of base salary at the lower levels of
employees of the Company, from 1.5 to 3.0 for vice presidents of the
Company and 4.0 at the CEO level. On the basis of the recommendation of
Towers Perrin the Committee in 1996 adopted grant multiples that ranged
from 0.5 to 4.0 of base salary, with multiples of 4.0 for the CEO and 3.0
for other executive officers.
The approximate number of shares granted is determined by dividing
(i) the optionee's annual base salary 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 the Option Plan from the
number determined under the grant guidelines. Options granted to
executive officers in 1996 were based on the guidelines described above
and the following terms and conditions: 10-year term; vest at the rate of
one-third per year commencing on the first anniversary of the grant date;
and option price equal to fair market value per share at the grant date
($40.375).
1996 COMPENSATION OF CEO
The 1996 base salary of Mr. Kelley was determined in January 1996 as a
function of performance and competitive factors at that time and was adjusted
July 1, 1996 to $525,000 per year as a result of the Towers Perrin review
conducted during 1996. Mr. Kelley's reported 1996 salary represented an
increase of 14.7 percent over his reported 1995 salary, reflecting
consideration of competitive data provided by Towers Perrin and the assessment
by the Committee and the Board of the Company's 1995 results of operations
under Mr. Kelley's leadership. As a result, the salary paid to Mr. Kelley for
1996 fell within the range discussed above in the last sentence under
"Compensation Program for 1996 - Base Salary" in this report.
In determining the amount of bonus paid to Mr. Kelley for 1996, the
Committee applied the performance goals' criteria discussed above under
"Compensation Program for 1996 - Annual Incentive Bonus Plan" which resulted in
an applicable multiplier under the plan of 1.5. This factor of 1.5 multiplied
times the target bonus for Mr. Kelley produced a calculated bonus of $551,250
which the Committee limited to $525,000, or 100 percent of Mr. Kelley's base
salary at year end, as described above.
In 1996, the Committee granted Mr. Kelley an option to purchase 59,445
shares of Common Stock pursuant to the Option Plan. In granting this option,
the Committee used a grant multiplier of 4.0 (see "Compensation Program for
1996 - Option Plan" above), which took into account Mr. Kelley's level of
responsibility and was based on the recommendation of Towers Perrin.
9
<PAGE> 12
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.
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
Samedan's cost 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
Section 162(m) of the Internal Revenue Code contains provisions which
limit the tax deductibility of executive compensation in excess of $1 million
per person 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. Certain of the
proposed amendments to the Option Plan are designed to allow compensation paid
thereunder in the form of stock options and stock appreciation rights to
qualify as "performance-based compensation" for purposes of Section 162(m).
See "Proposal Regarding Amended and Restated Option Plan - The Plan Amendments
- - Limitation on Number of Shares Covered by Stock Options and SARs;
Administration by Outside Directors."
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 1996
adequately reflect the compensation goals and policies of the Company.
March 21, 1997 Alan A. Baker, Chairman
James C. Day
Harold F. Kleinman
George J. McLeod
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 Executive Officer 1996 487,500 525,000 2,392 59,445 45,998(2)
1995 425,000 127,500 2,392 49,086 32,913
1994 360,000 201,600 2,187 33,027 23,045
James C. Woodson, Vice President - 1996 220,500 216,000 2,392 19,074 22,295(3)
Exploration and Operating Committee 1995 193,500 50,794 2,392 16,164 16,621
member of Samedan 1994 186,000 91,140 2,187 12,798 12,689
W.A. Poillion, Vice President 1996 210,000 202,500 2,392 19,074 20,402(3)
- Production and Drilling and 1995 187,500 49,219 2,392 15,663 15,265
Operating Committee member of 1994 180,000 88,200 2,187 12,387 11,548
Samedan
William D. Dickson, Vice 1996 207,000 202,500 2,392 19,074 20,020(3)
President - Finance and Treasurer 1995 182,000 45,950 2,392 14,640 14,659
1994 175,000 73,500 2,187 12,042 11,050
Dan O. Dinges, Vice President 1996 207,000 202,500 2,860 19,074 13,957(3)
- Division General Manager and 1995 182,000 45,950 2,860 14,640 8,638
Operating Committee member of Samedan 1994 175,000 77,438 2,860 12,042 7,582
</TABLE>
_______________________
(1) Options represent the right to purchase shares of Common Stock at a fixed
price per share.
(2) Consists of $800 of directors' fees and Company contributions of $9,000
to a defined contribution plan and $36,198 to a nonqualified contribution
plan.
(3) Consists of contributions by the Company to a defined contribution
plan/nonqualified contribution plan and payment by the Company of term
life insurance premiums as follows: J.C. Woodson -- $7,994/$13,173;
$1,128; W.A. Poillion -- $8,771/$11,368; $263; W.D. Dickson --
$8,514/$11,252; $254; and Dan O. Dinges -- $6,811/$7,146; $0.
11
<PAGE> 14
The following table sets forth certain information with respect to
options to purchase Common Stock granted during the year ended December 31,
1996 to each of the named executive officers.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
---------------------------------------------------------- ----------------------
Number of Securities % of Total
Underlying Options Options Exercise
Granted Granted to or Base
(number of shares) Employees Price Expiration
Name (1) in 1996 ($/sh) Date 5%($)(2) 10%($)(3)
---- -------------------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert Kelley . . . . 59,445 17.1% $40.375 9/24/06 663,000 1,465,000
James C. Woodson 19,074 5.5% $40.375 9/24/06 213,000 470,000
W.A. Poillion . . . . 19,074 5.5% $40.375 9/24/06 213,000 470,000
William D. Dickson . 19,074 5.5% $40.375 9/24/06 213,000 470,000
Dan O. Dinges . . . . 19,074 5.5% $40.375 9/24/06 213,000 470,000
</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 $51.53.
(3) Represents an assumed market price per share of Common Stock of $65.02.
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the year ended December 31,
1996, and the unexercised options held at December 31, 1996 and the value
thereof, by each of the named executive officers.
AGGREGATED OPTION EXERCISES IN 1996
AND 12/31/96 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options at Value of Unexercised
December 31, 1996 In-the-Money Options
Shares (number of shares) at December 31, 1996($)
Acquired Value --------------------------- ------------------------------
Name on Exercise Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Kelley . . . . . -- -- 141,255 103,178 3,819,798 1,446,002
James C. Woodson . . . 30,774 682,228 39,856 34,116 997,983 485,624
W.A. Poillion . . . . . 2,400 44,100 69,957 33,645 2,054,499 474,908
William D. Dickson . . 6,000 114,875 61,669 32,848 1,759,807 456,424
Dan O. Dinges . . . . . -- -- 72,428 32,848 2,146,312 456,424
</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 $ 40,303 $ 48,364 48,364
150,000 . . . . . . 45,000 60,000 62,178 74,614 74,614
200,000 . . . . . . 60,000 80,000 84,053 100,864 100,864
300,000 . . . . . . 90,000 120,000 127,803 153,364 153,364
400,000 . . . . . . 120,000 160,000 171,553 205,864 205,864
600,000 . . . . . . 180,000 240,000 259,053 310,864 310,864
800,000 . . . . . . 240,000 320,000 346,553 415,864 415,864
1,000,000 . . . . . . 300,000 400,000 434,053 520,864 520,864
1,300,000 . . . . . . 390,000 520,000 565,303 678,364 678,364
</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 1996. 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, 1996, the named executive officers had the following
approximate number of years of credited service for retirement purposes: Mr.
Kelley--21; Mr. Woodson--22; Mr. Poillion--20; Mr. Dickson--18; and Mr.
Dinges--15.
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>
- -----------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Company 100 131 198 186 226 363
S&P 500 Index 100 108 118 120 165 203
Dow Jones Total Return Index for Secondary 100 101 112 108 125 154
Oil Companies(3)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return assuming reinvestment of dividends. Assumes $100 invested on
January 1, 1992 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) Composed 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, Pennzoil Company, Union Pacific Resources Group, Inc. and
Union Texas Petroleum Holdings, Inc.
14
<PAGE> 17
PROPOSAL REGARDING AMENDED AND RESTATED OPTION PLAN
GENERAL
The Option Plan was adopted by the Board of Directors of the Company in
1992 and approved by stockholders at the 1992 annual meeting of stockholders.
At a meeting of the Board of Directors in December 1996, the Board amended and
restated the Option Plan, subject to stockholder approval, to (i) increase from
2,000,000 to 4,000,000 the aggregate number of shares of Common Stock available
under the Option Plan; (ii) preserve for federal income tax purposes the
deductibility of compensation paid under the Option Plan in the form of stock
options and stock appreciation rights ("SARs"); (iii) extend the period of time
during which Optionees may exercise their stock options and SARs after
termination of employment in certain cases; (iv) provide that Incentive Options
may be granted under the Option Plan until December 9, 2006; and (v) update the
Option Plan, in particular in regard to amendments in the SEC's rules and
regulations under Section 16 of the Exchange Act (collectively, the "Plan
Amendments").
A copy of the Option Plan as amended and restated, subject to stockholder
approval, is attached hereto as Exhibit A. Capitalized terms not otherwise
defined herein adopt the same meaning as assigned to them in the text of the
Option Plan.
THE PLAN AMENDMENTS
Increase in Number of Shares Available Under the Option Plan. As of
December 31, 1996, there were outstanding Options covering 1,210,079 shares of
Common Stock held by 93 persons and only 525,660 shares of Common Stock
remained available for future grants under the Option Plan. The purpose of
increasing the number of shares of Common Stock that may be issued under the
Option Plan by 2,000,000 shares in the aggregate is to permit the continued use
of a long-term equity component in the Company's compensation program. If the
Option Plan as amended and restated is approved and ratified by stockholders,
the employees of the Company and its affiliates eligible to participate therein
could receive more benefits under the Option Plan than are currently available
to them.
Limitation on Number of Shares Covered by Stock Options and SARs;
Administration by Outside Directors. Pursuant to Section 162(m) of the
Internal Revenue Code (the "Code"), the amount of compensation payments to
certain highly compensated officers of the Company that is deductible from
income for federal income tax purposes is limited to $1 million per person per
year. Compensation recognized by employees in connection with the exercise of
stock options and SARs granted under the Option Plan may, however, continue to
be exempt from the $1 million limitation as "qualified performance-based
compensation" if certain requirements are satisfied, including that (i) the
Option Plan state the maximum number of shares for which stock options or SARs
may be granted during a specified period to any employee and (ii) the Option
Plan is administered by a committee composed solely of two or more "outside
directors" within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
Prior to the Plan Amendments, the Option Plan did not limit the total
number of shares of Common Stock for which stock options and SARs could be
granted to a person under the Option Plan nor restrict administration to
persons who qualified as "outside directors." In order to ensure the
deductibility of compensation recognized by employees in connection with the
exercise of stock options and SARs granted under the Option Plan, the Plan
Amendments (i) limit to 80,000 the total number of shares of Common Stock that
may be made subject to grants of stock options or SARs or awards of restricted
stock under the Option Plan to any one person during any calendar year and (ii)
provide for administration of the Option Plan by a committee composed solely of
"outside directors" who are also "non-employee directors" under Rule 16b-3
promulgated under the Exchange Act.
Extension of Exercise Period. Prior to the Plan Amendments, the Option
Plan provided that an Optionee's right to exercise any stock option and SARs
would terminate three months after the termination of employment of the
Optionee unless such termination was a result of the Optionee's death or
disability. If the Optionee's termination
15
<PAGE> 18
of employment resulted from death or disability, then such Optionee's exercise
right would terminate one year after the employment termination date.
The Plan Amendments give an Optionee, or his or her estate, a longer
period of time after termination of employment in which to exercise a stock
option or SAR that was outstanding and vested on the date of termination of
employment; provided, that such period of time would not in any event extend
beyond the expiration of the term thereof. Under the Plan Amendments, the
Optionee's right to exercise a stock option and SARs related thereto would be
extended to one year after termination of employment, unless such termination
of employment resulted from the Optionee's death, disability or Retirement, in
which event the right to exercise would be extended to five years. Retirement
is defined in the Option Plan as amended and restated to mean a termination of
employment with the Company or an Affiliate either (i) on a voluntary basis by
a person who is at least 55 years of age with five years of credited service
with the Company or one or more Affiliates, or has at least 20 years of
credited service with the Company or one or more Affiliates, immediately prior
to such termination of employment or (ii) otherwise with the written consent of
the Committee in its sole discretion.
Subject to stockholder approval of the Plan Amendments, (i) all stock
options and SARs granted after receipt of such approval would include the
longer exercise periods and (ii) all stock option and SAR agreements in
existence at the time of such approval would be amended to incorporate the
longer exercise periods.
Incentive Option Amendment. Prior to the Plan Amendments, the Option
Plan provided that no Incentive Options and related SARs could be granted after
January 27, 2002. The Plan Amendments change this date to December 9, 2006,
which is the date that is ten years after Board of Director approval of the
Plan Amendments.
Updating Amendments. The Plan Amendments effect changes to Sections 7(c)
and 10 of the Option Plan to delete language no longer necessary or appropriate
as a result of amendments to Rule 16b-3 under the Exchange Act and a change to
Section 11(a) of the Option Plan to delete a reference to "guardian or legal
representative" as surplusage.
DESCRIPTION OF THE OPTION PLAN
The material features of the Option Plan, without giving effect to the
Plan Amendments, are described below.
General. Under the Option Plan, shares of Common Stock may be subject to
grants of Incentive Options, Nonqualified Options, SARs or award of Restricted
Stock to officers and other employees of the Company and its affiliates.
Options and any SARs related thereto may be granted, and Restricted Stock may
be awarded, until the 2,000,000 shares of Common Stock available under the
Option Plan have been exhausted or the Option Plan has been terminated. Shares
of Common Stock covered by an Option that expires or terminates prior to
exercise and shares of Restricted Stock returned to the Company are again
available for grant of Options and awards of Restricted Stock. The Option Plan
contains antidilution provisions applicable in the event of increase or
decrease in the number of outstanding shares of Common Stock, effected without
receipt of consideration therefor by the Company, through a stock dividend or
any recapitalization or merger or otherwise in which the Company is the
surviving corporation, resulting in a stock split-up, combination or exchange
of shares of the Company, in which event appropriate adjustments will be made
in the maximum number of shares subject to the Option Plan and the number of
shares and option prices under then outstanding Options.
Administration. The Option Plan is administered by a committee (the
"Committee") of the Board of Directors of the Company. The Committee must
consist of two or more directors of the Company, all of whom must be
Non-Employee Directors as defined in Rule 16b-3. The Committee determines the
grants of Options and awards of Restricted Stock, the terms and provisions of
the respective agreements covering such grants or awards and all other
decisions concerning the Option Plan. It is impracticable to estimate the
total number of officers and employees eligible to participate in the Option
Plan. The Option Plan provides that the determination of the Committee is
binding with respect to all questions of interpretation and application of the
Option Plan and of Options granted or
16
<PAGE> 19
awards of Restricted Stock made thereunder, subject to the express provisions
of the Option Plan and except as set forth below under "Stock Options and SARs"
and "Amendment of the Option Plan."
Stock Options and SARs. The Option Plan provides that, from time to time
during the term of the Option Plan, the Committee, in its sole discretion, may
grant Incentive Options, Nonqualified Options, Restricted Stock or any
combination thereof to any employee eligible under the Option Plan. Each
person who accepts an Option shall enter into an agreement with the Company
whereupon such person shall become a participant in the Option Plan in
accordance with the terms of such agreement.
The Committee may from time to time grant SARs in conjunction with all or
any portion of an Option either at the time of the initial Option grant or,
with respect to a Nonqualified Option, at any time after the initial Option
grant while the Nonqualified Option is outstanding. SARs generally will be
subject to the same terms and conditions and exercisable to the same extent as
Options, as described above. SARs entitle an Optionee to receive without
payment to the Company (except for applicable withholding taxes) the excess of
the aggregate fair market value per share with respect to which the SAR is then
being exercised (determined as of the date of such exercise) over the aggregate
purchase price of such shares as provided in the related Option. Payment may
be made in shares of Common Stock or in cash, or a combination thereof, as
determined by the Committee.
Option Price. The option price for each Share covered by an Incentive
Option shall not be less than the greater of (a) the par value of such Share or
(b) the Fair Market Value of such Share at the time such Option is granted.
The option price for each Share covered by a Nonqualified Option shall not be
less than the greater of (a) the par value of such Share or (b) 50 percent of
the Fair Market Value of such Share at the time the Option is granted. If the
Company agrees to substitute a new Option under the Option Plan for an old
Option, or to assume an old Option, as provided for in the Option Plan, the
option price of the Shares covered by each such new Option or assumed Option
may be otherwise determined by a formula; provided, however, in no event shall:
(a) the excess of the aggregate Fair Market Value of the Shares subject to the
Option immediately after the substitution or assumption over the aggregate
option price of such Shares be more than the excess of the aggregate Fair
Market Value of all Shares subject to the Option immediately prior to the
substitution or assumption over the aggregate option price of such Shares; (b)
in the case of an Incentive Option, the new Option or the assumption of the old
Option give the Optionee additional benefits that he would not have under the
old Option; or (c) the ratio of the option price to the Fair Market Value of
the stock subject to the Option immediately after the substitution or
assumption be more favorable to the Optionee than the ratio of the option price
to the Fair Market Value of the stock subject to the old Option immediately
prior to such substitution or assumption, on a Share by Share basis.
Notwithstanding the foregoing, the new option price in the case of an Incentive
Option shall be subject to the requirements of Section 424(a) of the Code and
the Treasury regulations and revenue rulings promulgated thereunder.
Restricted Stock. The Option Plan provides that Restricted Stock may be
awarded by the Committee to such eligible recipients as it may determine from
time to time. The eligible recipients are those individuals who are eligible
for Option grants. Restricted Stock is Common Stock that may not be sold,
assigned, transferred, discounted, exchanged, pledged or otherwise encumbered
or disposed of until the terms and conditions set by the Committee, which terms
and conditions may include, among other things, the achievement of specific
goals, have been satisfied (the "Restricted Period"). During the Restricted
Period, unless specifically provided otherwise in accordance with the terms of
the Option Plan, the recipient of Restricted Stock would be the record owner of
such shares and have all the rights of a stockholder with respect to such
shares, including the right to vote and the right to receive dividends or other
distributions made or paid with respect to such shares.
The Option Plan provides that the Committee has the authority to cancel
all or any portion of any outstanding restrictions prior to the expiration of
the Restricted Period with respect to any and all of the shares of Restricted
Stock awarded to an individual on such terms and conditions as the Committee
may deem appropriate. If during the Restricted Period an individual's
continuous employment terminates for any reason, any Restricted Stock remaining
subject to restrictions will be forfeited by the individual and transferred at
no cost to the Company; provided, however, that as noted above, the Committee
has the authority to cancel any or all outstanding restrictions
17
<PAGE> 20
prior to the end of the Restricted Period, including the cancellation of
restrictions in connection with certain types of termination of employment.
Amendment of the Option Plan. The Board of Directors may at any time
amend, suspend or terminate the Option Plan; provided, however, the Board may
not, without approval of the stockholders of the Company, amend the Option Plan
so as to (i) increase the maximum number of shares subject thereto, or (ii)
reduce the option price per share covered by Options granted under the Option
Plan below the price specified in the Option Plan. Additionally, the Board may
not modify, impair or cancel any outstanding Option or SARs related thereto, or
the restrictions, terms or conditions applicable to Shares of Restricted Stock,
without the consent of the holder thereof.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary is based upon an analysis of the Code, existing
laws, judicial decisions, administrative rulings, regulations and proposed
regulations, all of which are subject to change. Moreover, the following is
only a summary of United States federal income tax consequences and such
consequences may be either more or less favorable than those described below
depending on a an employee's particular circumstances.
Incentive Options. No income will be recognized by an Optionee for
federal income tax purposes upon the grant or exercise of an Incentive Option;
provided, however, that to the extent that an Incentive Option is exercised
more than three months (twelve months in the event of disability) from the date
of termination of employment for any reason other than death, such Incentive
Option will be taxed in the same manner described below for Nonqualified
Options (rather than in the manner described herein for an Incentive Option).
As described above, the Plan Amendments extend the periods of time for
exercise, after termination of employment, beyond those time periods that would
permit the Optionee to receive Incentive Option tax treatment. The basis of
shares transferred to an Optionee pursuant to the exercise of an Incentive
Option is the price paid for the shares. If the Optionee holds the shares for
at least one year after transfer of the shares to the Optionee and two years
after the grant of the Incentive Option, the Optionee will recognize capital
gain or loss upon sale of the shares received upon the exercise equal to the
difference between the amount realized on the sale and the basis of the stock.
Generally, if the shares are not held for that period, the Optionee will
recognize ordinary income upon disposition in an amount equal to the excess of
the fair market value of the shares on the date of exercise over the amount
paid for such shares, or if less (and if the disposition is a transaction in
which loss, if sustained, would be recognized), the gain on disposition. Any
additional gain or loss realized by the Optionee upon such disposition will be
a capital gain or loss.
The excess of the fair market value of shares received upon the exercise
of an Incentive Option over the option price for the shares is an item of
adjustment for the Optionee for purposes of the alternative minimum tax.
The Company is not entitled to a deduction upon the exercise of an
Incentive Option by an Optionee. If the Optionee disposes of the shares
received pursuant to such exercise prior to the expiration of one year
following transfer of the shares to the Optionee or two years after grant of
the option, however, the Company may, subject to the deduction limitations
described below, deduct an amount equal to the ordinary income recognized by
the Optionee upon disposition of the shares at the time such income is
recognized by the Optionee.
If an Optionee uses already owned shares of Common Stock to pay the
exercise price for shares under an Incentive Option, the resulting tax
consequences will depend upon whether the already owned shares of Common Stock
are "statutory option stock", and, if so, whether such statutory option stock
has been held by the Optionee for the applicable holding period referred to in
Section 424(c)(3)(A) of the Code. In general, "statutory option stock" (as
defined in Section 424(c)(3)(B) of the Code) is any stock acquired through the
exercise of an Incentive Option, a qualified stock option, an option granted
pursuant to an employee stock purchase plan or restricted stock option, but not
stock acquired through the exercise of a nonstatutory option. If the stock is
statutory option stock with respect to which the applicable holding period has
been satisfied, no income will be recognized by the Optionee upon the transfer
of such stock in payment of the exercise price of an Incentive Option. If the
stock is not statutory option stock, no income will be recognized by the
Optionee upon the transfer of the stock unless the stock is not substantially
vested within the meaning of the regulations under Section 83 of the Code (in
which event it appears
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<PAGE> 21
that the Optionee will recognize ordinary income upon the transfer equal to the
amount by which the fair market value of the transferred shares exceeds their
basis). If the stock used to pay the exercise price of an Incentive Option is
statutory option stock with respect to which the applicable holding period has
not been satisfied, the transfer of such stock will be a disqualifying
disposition described in Section 421(b) of the Code which will result in the
recognition of ordinary income by the Optionee in an amount equal to the excess
of the fair market value of the statutory option stock at the time the
Incentive Option covering such stock was exercised over the amount paid for
such stock. Under the present provisions of the Code, it is not clear whether
all shares received upon the exercise of an Incentive Option with already-owned
shares will be statutory option stock or how the Optionee's basis will be
allocated among such shares.
Nonqualified Options. No income will be recognized by an Optionee for
federal income tax purposes upon the grant of a Nonqualified Option. Upon
exercise of a Nonqualified 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 amount paid for such shares. Income recognized upon
the exercise of Nonqualified Options will be considered compensation subject to
withholding at the time the income is recognized, and, therefore, the Company
must make the necessary arrangements with the Optionee to ensure that the
amount of the tax required to be withheld is available for payment.
Nonqualified Options are designed to provide the Company with a deduction equal
to the amount of ordinary income recognized by the Optionee at the time of such
recognition by the Optionee, subject to the deduction limitations described
below.
The basis of shares transferred to an Optionee pursuant to exercise of a
Nonqualified 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 the
option. If an Optionee thereafter sells shares acquired upon exercise of a
Nonqualified Option, any amount realized over the basis of the shares will
constitute capital gain to the Optionee for federal income tax purposes.
If an Optionee uses already owned shares of Common Stock to pay the
exercise price for shares under a Nonqualified Option, the number of shares
received pursuant to the Nonqualified Option which is equal to the number of
shares delivered in payment of the exercise price will be considered received
in a nontaxable exchange, and the fair market value of the remaining shares
received by the Optionee upon the exercise will be taxable to the Optionee as
ordinary income. If the already owned shares of Common Stock are not
"statutory option stock" or are statutory option stock with respect to which
the applicable holding period referred to in Section 424(c)(3)(A) of the Code
has been satisfied, the shares received pursuant to the exercise of the
Nonqualified Option will not be statutory option stock and the Optionee's basis
in the number of shares received in exchange for the stock delivered in payment
of the exercise price will be equal to the basis of the shares delivered in
payment. The basis of the remaining shares received upon the exercise will be
equal to the fair market value of the shares. However, if the already owned
shares of Common Stock are statutory option stock with respect to which the
applicable holding period has not been satisfied, it is not presently clear
whether the exercise will be considered a disqualifying disposition of the
statutory option stock, whether the shares received upon such exercise will be
statutory option stock, or how the Optionee's basis will be allocated among the
shares received.
SARs. There will be no federal income tax consequences to either the
recipient or the Company upon the grant of SARs. Generally, the recipient will
recognize ordinary income subject to withholding upon the exercise of SARs in
an amount equal to the amount of cash received and the fair market value of any
shares acquired pursuant to the exercise. Subject to the deduction limitations
described below, the Company generally will be entitled to a corresponding tax
deduction equal to the amount includable in the recipient's income.
Restricted Stock. If the restrictions on an award of Restricted Stock
are of a nature that such shares are both subject to a substantial risk of
forfeiture and are not freely transferable within the meaning of Section 83 of
the Code, the recipient will not recognize income for federal income tax
purposes at the time of the award unless such recipient affirmatively elects to
include the fair market value of the shares of restricted stock on the date of
the award, less any amount paid therefor, in gross income for the year of the
award pursuant to Section 83(b) of the Code. In the absence of such an
election, the recipient will be required to include in income for federal
income tax purposes in the year in which occurs the date the shares either
become freely transferable or are no longer
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<PAGE> 22
subject to a substantial risk of forfeiture within the meaning of Section 83 of
the Code, the fair market value of the shares of restricted stock on such date,
less any amount paid therefor. The Company will be entitled to a deduction at
the time of income recognition to the recipient in an amount equal to the
amount the recipient is required to include in income with respect to the
shares, subject to the deduction limitations described below. If a Section
83(b) election is made within 30 days after the date the Restricted Stock is
received, the recipient will recognize ordinary income at the time of the
receipt of the Restricted Stock and the Company will be entitled to a
corresponding deduction equal to the fair market value (determined without
regard to applicable restrictions) of the shares at such time less the amount
paid, if any, by the recipient for the Restricted Stock. If a Section 83(b)
election is made, no additional income will be recognized by the recipient upon
the lapse of restrictions on the Restricted Stock, but, if the Restricted Stock
is subsequently forfeited, no deduction will be allowed to the recipient with
respect to such forfeiture. Dividends paid to a recipient holding restricted
stock before the expiration of the restriction period will be additional
compensation taxable as ordinary income to the recipient, unless the recipient
made an election under Section 83(b). Subject to the deduction limitations
described below, the Company generally will be entitled to a corresponding tax
deduction equal to the dividends includable in the recipient's income as
compensation. If the recipient has made a Section 83(b) election, the
dividends will be dividend income, rather than additional compensation, to the
recipient.
If the restrictions on an award of Restricted Stock are not of a nature
that such shares are both subject to a substantial risk of forfeiture and not
freely transferable, within the meaning of Section 83 of the Code, the
recipient will recognize ordinary income for federal income tax purposes at the
time of the award in an amount equal to the fair market value of the shares of
Restricted Stock on the date of the award, less any amount paid therefor. The
Company will be entitled to a deduction at such time in an amount equal to the
amount the recipient is required to include in income with respect to the
shares, subject to the deduction limitations described below.
Limitations on the Company's Compensation Deduction. Section 162(m) of
the Code limits the deduction which the Company may take for otherwise
deductible compensation payable to certain officers of the Company to the
extent that compensation paid to any such officer for such year exceeds $1
million, unless such compensation is performance-based, is approved by the
Company's stockholders, and meets certain other criteria. Compensation
attributable to a stock option or SAR is deemed to satisfy the requirements for
performance-based compensation if (i) the grant or award is made by a
compensation committee composed of two or more outside directors; (ii) the plan
under which the option or right is granted states the maximum number of shares
with respect to which options or rights may be granted during a specified
period to any employee; and (iii) under the terms of the option or right, the
amount of compensation the employee could receive is based solely on an
increase in the value of the stock after the date of the grant or award. The
Option Plan as amended and restated has been designed to enable awards of
Options (other than Nonqualified Options granted at less than fair market value
on the date of grant) and SARs granted by the Committee to qualify as
performance-based compensation for purposes of Section 162(m) of the Code.
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 at the meeting and
entitled to vote thereon is required to approve and ratify the Option Plan as
amended and restated. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE AND RATIFY THE OPTION PLAN AS AMENDED AND RESTATED.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and officers of the
Company, and persons who beneficially 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.
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, 1996, 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 1997. 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 1998 annual meeting of stockholders, which is
currently scheduled to be held on April 28, 1998, must be received by the
Company at its office in Ardmore, Oklahoma, addressed to the Secretary of the
Company, no later than November 21, 1997.
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 $7,500 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 21, 1997
William D. Dickson
Vice President-Finance and Treasurer
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<PAGE> 24
EXHIBIT A
NOBLE AFFILIATES, INC.
1992 STOCK OPTION AND RESTRICTED STOCK PLAN
AS AMENDED AND RESTATED ON DECEMBER 10, 1996,
SUBJECT TO THE APPROVAL OF STOCKHOLDERS
[Language added to the Plan is in boldface type and double underscored
and language deleted is struck through.]
SECTION 1. PURPOSE
The purpose of this Plan is to assist Noble Affiliates, Inc., a
Delaware corporation, in attracting and retaining, as officers and key
employees of the Company and its Affiliates, persons of training, experience
and ability and to furnish additional incentive to such persons by encouraging
them to become owners of Shares of the Company's capital stock, by granting to
such persons Incentive Options, Nonqualified Options, Restricted Stock, or any
combination of the foregoing.
SECTION 2. DEFINITIONS
Unless the context otherwise requires, the following words as used
herein shall have the following meanings:
(a) "Affiliate" means any corporation (other than the
Company) in any unbroken chain of corporations (i) beginning with the
Company if, at the time of the granting of the Option or award of
Restricted Stock, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or
more of the total combined voting power of all classes of stock in one
of the other corporations in such chain, or (ii) ending with the
Company if, at the time of the granting of the Option or award of
Restricted Stock, each of the corporations, other than the Company,
owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
(b) "Agreement" means the written agreement (i) between
the Company and the Optionee evidencing the Option and any SARs that
relate to such Option granted by the Company and the understanding of
the parties with respect thereto or (ii) between the Company and a
recipient of Restricted Stock evidencing the restrictions, terms and
conditions applicable to such award of Restricted Stock and the
understanding of the parties with respect thereto.
(c) "Board" means the Board of Directors of the Company
as the same may be constituted from time to time.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means the Committee provided for in
Section 3 of the Plan as the same may be constituted from time to
time.
(f) "Company" means Noble Affiliates, Inc., a Delaware
corporation.
(g) "Corporate Transaction" shall have the meaning as
defined in Section 8 of the Plan.
<PAGE> 25
(H) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(I) "Fair Market Value" means the fair market value per
Share as determined by the Committee in good faith; provided, however,
that if a Share is listed or admitted to trading on a securities
exchange registered under the Exchange Act, the Fair Market Value per
Share shall be the average of the reported high and low sales price on
the date in question (or if there was no reported sale on such date,
on the last preceding date on which any reported sale occurred) on the
principal securities exchange on which such Share is listed or
admitted to trading, or if a Share is not listed or admitted to
trading on any such exchange but is listed as a national market
security on the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or any similar system then in
use, the Fair Market Value per Share shall be the average of the
reported high and low sales price on the date in question (or if there
was no reported sale on such date, on the last preceding date on which
any reported sale occurred) on such system, or if a Share is not
listed or admitted to trading on any such exchange and is not listed
as a national market security on NASDAQ but is quoted on NASDAQ or any
similar system then in use, the Fair Market Value per Share shall be
the average of the closing high bid and low asked quotations on such
system for such Share on the date in question. For purposes of
valuing Shares to be made subject to Incentive Options, the Fair
Market Value per Share shall be determined without regard to any
restriction other than one which, by its terms, will never lapse.
(J) "Incentive Option" means an Option that is intended
to satisfy the requirements of Section 422(b) of the Code and Section
17 of the Plan.
(K) "Nonqualified Option" means an Option that does not
qualify as a statutory stock option under Section 422 or 423 of the
Code.
(L) "NON-EMPLOYEE DIRECTOR" MEANS A DIRECTOR OF THE
COMPANY WHO SATISFIES THE DEFINITION THEREOF UNDER RULE 16B-3
PROMULGATED UNDER THE EXCHANGE ACT.
(m) "Option" means an option to purchase one or more
Shares granted under and pursuant to the Plan. Such Option may be
either an Incentive Option or a Nonqualified Option.
(n) "Optionee" means a person who has been granted an
Option and who has executed an Agreement with the Company.
(O) "OUTSIDE DIRECTOR" MEANS A DIRECTOR OF THE COMPANY
WHO IS AN OUTSIDE DIRECTOR WITHIN THE MEANING OF SECTION 162(M) OF THE
CODE AND THE REGULATIONS PROMULGATED THEREUNDER.
(P) "Plan" means this Noble Affiliates, Inc. 1992 Stock
Option and Restricted Stock Plan, as amended from time to time.
(Q) "Restricted Stock" means Shares issued or transferred
pursuant to Section 20 of the Plan.
(R) "RETIREMENT" MEANS A TERMINATION OF EMPLOYMENT WITH
THE COMPANY OR AN AFFILIATE EITHER (I) ON A VOLUNTARY BASIS BY A
PERSON WHO (A) IS AT LEAST 55 YEARS OF AGE WITH FIVE YEARS OF CREDITED
SERVICE WITH THE COMPANY OR ONE OR MORE AFFILIATES OR (B) HAS AT LEAST
20 YEARS OF CREDITED SERVICE WITH THE COMPANY OR ONE OR MORE
AFFILIATES, IMMEDIATELY PRIOR TO SUCH TERMINATION OF EMPLOYMENT OR
(II) OTHERWISE WITH THE WRITTEN CONSENT OF THE COMMITTEE IN ITS SOLE
DISCRETION.
(S) "SARs" means stock appreciation rights granted
pursuant to Section 7 of the Plan.
(T) "Securities Act" means the Securities Act of 1933, as
amended.
(U) "Share" means a share of the Company's present common
stock, par value $3.33-1/3 per share, and any share or shares of
capital stock or other securities of the Company hereafter issued or
issuable in respect of or in substitution or exchange for each such
present share. Such Shares may be unissued or reacquired Shares, as
the Board, in its sole and absolute discretion, shall from time to
time determine.
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SECTION 3. ADMINISTRATION
The Plan shall be administered by, and the decisions concerning the
Plan shall be made solely by, a Committee of two or more directors of the
Company, all of whom are (A) NON-EMPLOYEE DIRECTORS, AND (B) NOT LATER THAN
IMMEDIATELY AFTER THE FIRST MEETING OF STOCKHOLDERS OF THE COMPANY AT WHICH ITS
DIRECTORS ARE ELECTED THAT OCCURS AFTER DECEMBER 31, 1996, OUTSIDE DIRECTORS.
Each member of the Committee shall be appointed by and shall serve at the
pleasure of the Board. The Board shall have the sole continuing authority to
appoint members of the Committee. In making grants or awards, the Committee
shall take into consideration the contribution the person has made or may make
to the success of the Company or its Affiliates and such other considerations
as the Board may from time to time specify.
The Committee shall elect one of its members as its chairman and shall
hold its meetings at such times and places as it may determine. A majority of
the members of the Committee shall constitute a quorum. All decisions and
determinations of the Committee shall be made by the majority vote or decision
of the members present at any meeting at which a quorum is present; provided,
however, that any decision or determination reduced to writing and signed by
all members of the Committee shall be as fully effective as if it had been made
by a majority vote or decision at a meeting duly called and held. The
Committee may appoint a secretary (who need not be a member of the Committee)
who shall keep minutes of its meetings. The Committee may make any rules and
regulations for the conduct of its business that are not inconsistent with the
express provisions of the Plan, the bylaws or certificate of incorporation of
the Company or any resolutions of the Board.
All questions of interpretation or application of the Plan, or of a
grant of an Option and any SARs that relate to such Option or an award of
Restricted Stock, including questions of interpretation or application of an
Agreement, shall be subject to the determination of the Committee, which
determination shall be final and binding upon all parties.
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole and absolute discretion, (a) to adopt, amend or
rescind administrative and interpretive rules and regulations relating to the
Plan; (b) to construe the Plan; (c) to make all other determinations necessary
or advisable for administering the Plan; (d) to determine the terms and
provisions of the respective Agreements (which need not be identical),
including provisions defining or otherwise relating to (i) the term and the
period or periods and extent of exercisability of the Options, (ii) the extent
to which the transferability of Shares issued upon exercise of Options or any
SARs that relate to such Options is restricted, (iii) the effect of termination
of employment upon the exercisability of the Options, and (iv) the effect of
approved leaves of absence (consistent with any applicable regulations of the
Internal Revenue Service) upon the exercisability of such Options; (e) subject
to Sections 9 and 11 of the Plan, to accelerate, for any reason, regardless of
whether the Agreement so provides, the time of exercisability of any Option and
any SARs that relate to such Option that have been granted or the time of the
lapsing of restrictions on Restricted Stock; (f) to construe the respective
Agreements; and (g) to exercise the powers conferred on the Committee under the
Plan. The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent it shall deem
expedient to carry it into effect, and it shall be the sole and final judge of
such expediency. The determinations of the Committee or Board, as the case may
be, on the matters referred to in this Section 3 shall be final and conclusive.
SECTION 4. SHARES SUBJECT TO THE PLAN
(a) The total number of Shares that may be purchased
pursuant to Options, issued or transferred pursuant to the exercise of
SARs or awarded as Restricted Stock shall not exceed a maximum of
4,000,000 IN THE AGGREGATE, AND THE TOTAL NUMBER OF SHARES FOR WHICH
OPTIONS AND SARS MAY BE GRANTED, AND WHICH MAY BE AWARDED AS
RESTRICTED STOCK, TO ANY ONE PERSON DURING A CALENDAR YEAR IS 80,000
in the aggregate; provided that EACH such maximum NUMBER OF SHARES
shall be increased or decreased as provided in Section 13 of the Plan.
(b) At any time and from time to time after the Plan
takes effect, the Committee, pursuant to the provisions herein set
forth, may grant Options and any SARs that relate to such Options and
award Restricted Stock until the maximum number of Shares shall be
exhausted or the Plan shall be sooner terminated; provided, however,
that no Incentive Option and any SARs that relate to such Option shall
be granted after DECEMBER 9, 2006.
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<PAGE> 27
(c) Shares subject to an Option that expires or
terminates prior to exercise and Shares that had been previously
awarded as Restricted Stock that have since been forfeited shall be
available for further grant of Options or award as Restricted Stock.
No Option shall be granted and no Restricted Stock shall be awarded if
the number of Shares for which Options have been granted and which
pursuant to this Section are not again available for Option grant,
plus the number of Shares that have been awarded as Restricted Stock,
would, if such Option were granted or such Restricted Stock were
awarded, exceed 4,000,000.
(d) Any Shares withheld pursuant to Section 19(c) of the
Plan shall not be available after such withholding for being optioned
or awarded pursuant to the provisions hereof.
(e) Unless the Shares awarded as Restricted Stock are Shares
that have been reacquired by the Company as treasury shares,
Restricted Stock shall be awarded only for services actually rendered,
as determined by the Committee.
SECTION 5. ELIGIBILITY
The persons who shall be eligible to receive grants of Options and any
SARs that relate to such Options, and to receive awards of Restricted Stock,
shall be regular salaried officers or other employees of the Company or one or
more of its Affiliates.
SECTION 6. GRANT OF OPTIONS
(a) From time to time while the Plan is in effect, the
Committee may, in its sole and absolute discretion, select from among
the persons eligible to receive a grant of Options under the Plan
(including persons who have already received such grants of Options)
such one or more of them as in the opinion of the Committee should be
granted Options. The Committee shall thereupon, likewise in its sole
and absolute discretion, determine the number of Shares to be allotted
for option to each person so selected.
(b) Each person so selected shall be offered an Option to
purchase the number of Shares so allotted to him, upon such terms and
conditions, consistent with the provisions of the Plan, as the
Committee may specify. Each such person shall have a reasonable
period of time, to be fixed by the Committee, within which to accept
or reject the proffered Option. Failure to accept within the period
so fixed may be treated as a rejection.
(c) Each person who accepts an Option offered to him
shall enter into an Agreement with the Company, in such form as the
Committee may prescribe, setting forth the terms and conditions of the
Option, whereupon such person shall become a participant in the Plan.
In the event a person is granted both one or more Incentive Options
and one or more Nonqualified Options, such grants shall be evidenced
by separate Agreements, one for each Incentive Option grant and one
for each Nonqualified Option grant. The date on which the Committee
completes all action constituting an offer of an Option to a person,
including the specification of the number of Shares to be subject to
the Option, shall constitute the date on which the Option covered by
such Agreement is granted. In no event, however, shall an Optionee
gain any rights in addition to those specified by the Committee in its
grant, regardless of the time that may pass between the grant of the
Option and the actual signing of the Agreement by the Company and the
Optionee.
(d) Each Agreement that includes SARs in addition to an
Option shall comply with the provisions of Section 7 of the Plan.
SECTION 7. GRANT OF SARS
The Committee may from time to time grant SARs in conjunction with all
or any portion of any Option either (i) at the time of the initial Option grant
(not including any subsequent modification that may be treated as a new grant
of an Incentive Option for purposes of Section 424(h) of the Code) or (ii) with
respect to Nonqualified Options, at any
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<PAGE> 28
time after the initial Option grant while the Nonqualified Option is still
outstanding. SARs shall not be granted other than in conjunction with an
Option granted hereunder.
SARs granted hereunder shall comply with the following conditions and
also with the terms of the Agreement governing the Option in conjunction with
which they are granted:
(a) The SAR shall expire no later than the expiration of
the underlying Option.
(b) Upon the exercise of an SAR, the Optionee shall be
entitled to receive payment equal to the excess of the aggregate Fair
Market Value of the Shares with respect to which the SAR is then being
exercised (determined as of the date of such exercise) over the
aggregate purchase price of such Shares as provided in the related
Option. Payment may be made in Shares, valued at their Fair Market
Value on the date of exercise, or in cash, or partly in Shares and
partly in cash, as determined by the Committee in its sole and
absolute discretion.
(c) SARs shall be exercisable (i) only at such time or
times and only to the extent that the Option to which they relate
shall be exercisable, (II) only when the Fair Market Value of the
Shares subject to the related Option exceeds the purchase price of the
Shares as provided in the related Option, and (III) only upon
surrender of the related Option or any portion thereof with respect to
the Shares for which the SARs are then being exercised.
(d) Upon exercise of an SAR, a corresponding number of
Shares subject to option under the related Option shall be canceled.
Such canceled Shares shall be charged against the Shares reserved for
the Plan, as provided in Section 4 of the Plan, as if the Option had
been exercised to such extent and shall not be available for future
Option grants or Restricted Stock awards hereunder.
SECTION 8. OPTION PRICE
The option price for each Share covered by an Incentive Option shall
not be less than the greater of (a) the par value of such Share or (b) the Fair
Market Value of such Share at the time such Option is granted. The option
price for each Share covered by a Nonqualified Option shall not be less than
the greater of (a) the par value of such Share or (b) 50 percent of the Fair
Market Value of such Share at the time the Option is granted. Notwithstanding
the two immediately preceding sentences, if the Company or an Affiliate agrees
to substitute a new Option under the Plan for an old Option, or to assume an
old Option, by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation (any of such
events being referred to herein as a "Corporate Transaction"), the option price
of the Shares covered by each such new Option or assumed Option may be other
than the Fair Market Value of the Shares at the time the Option is granted as
determined by reference to a formula, established at the time of the Corporate
Transaction, which will give effect to such substitution or assumption;
provided, however, in no event shall:
(a) the excess of the aggregate Fair Market Value of the
Shares subject to the Option immediately after the substitution or
assumption over the aggregate option price of such Shares be more than
the excess of the aggregate Fair Market Value of all Shares subject to
the Option immediately prior to the substitution or assumption over
the aggregate option price of such Shares;
(b) in the case of an Incentive Option, the new Option or
the assumption of the old Option give the Optionee additional benefits
that he would not have under the old Option; or
(c) the ratio of the option price to the Fair Market
Value of the stock subject to the Option immediately after the
substitution or assumption be more favorable to the Optionee than the
ratio of the option price to the Fair Market Value of the stock
subject to the old Option immediately prior to such substitution or
assumption, on a Share by Share basis.
A-5
<PAGE> 29
Notwithstanding the above, the provisions of this Section 8 with respect to the
option price in the event of a Corporate Transaction shall, in the case of an
Incentive Option, be subject to the requirements of Section 424(a) of the Code
and the Treasury regulations and revenue rulings promulgated thereunder. In
the case of an Incentive Option, in the event of a conflict between the terms
of this Section 8 and the above cited statute, regulations and rulings, or in
the event of an omission in this Section 8 of a provision required by said
laws, the latter shall control in all respects and are hereby incorporated
herein by reference as if set out at length.
SECTION 9. OPTION PERIOD AND TERMS OF EXERCISE
(a) Each Option shall be exercisable during such period
of time as the Committee may specify, but in no event for longer than
10 years from the date when the Option is granted; provided, however,
that
(i) All rights to exercise an Option and any SARs
that relate to such Option shall, subject to the provisions of
subsection (c) of this Section 9, terminate ONE YEAR after
the date the Optionee ceases to be employed by at least one of
the employers in the group of employers consisting of the
Company and its Affiliates, for any reason other than death,
becoming disabled (within the meaning of Section 22(e)(3) of
the Code) OR RETIREMENT, except that, in the event of the
termination of employment of the Optionee on account of (a)
fraud or intentional misrepresentation, or (b) embezzlement,
misappropriation or conversion of assets or opportunities of
the Company or its Affiliates, the Option and any SARs that
relate to such Option shall thereafter be null and void for
all purposes. Employment shall not be deemed to have ceased
by reason of the transfer of employment, without interruption
of service, between or among the Company and any of its
Affiliates.
(ii) If the Optionee ceases to be employed by at
least one of the employers in the group of employers
consisting of the Company and its Affiliates, by reason of his
death, becoming disabled (within the meaning of Section
22(e)(3) of the Code) OR RETIREMENT, all rights to exercise
such Option and any SARs that relate to such Option shall,
subject to the provisions of subsection (c) of this Section 9,
terminate FIVE YEARS thereafter.
(b) If an Option is granted with a term shorter than 10
years, the Committee may extend the term of the Option and any SARs
that relate to such Option, but for not more than 10 years from the
date when the Option was originally granted.
(c) In no event may an Option or any SARs that relate to
such Option be exercised after the expiration of the term thereof.
SECTION 10. OPTIONS AND SARS NOT TRANSFERABLE
No Option or any SARs that relate to such Option shall be transferable
by the Optionee otherwise than by will or the applicable laws of descent and
distribution.
SECTION 11. EXERCISE OF OPTIONS AND SARS
(a) During the lifetime of an Optionee, only such
Optionee may exercise an Option or any SARs that relate to such
Option granted to him. In the event of his death, any then
exercisable portion of his Option and any SARs that relate to such
Option may, within FIVE YEARS thereafter, or earlier date of
termination of the Option, be exercised in whole or in part by the
duly authorized representative of the deceased Optionee's estate.
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<PAGE> 30
(b) At any time, and from time to time, during the period
when any Option and any SARs that relate to such Option, or a portion
thereof, are exercisable, such Option or SARs, or portion thereof, may
be exercised in whole or in part; provided, however, that the
Committee may require any Option or SAR that is partially exercised to
be so exercised with respect to at least a stated minimum number of
Shares.
(c) Each exercise of an Option, or a portion thereof,
shall be evidenced by a notice in writing to the Company accompanied
by payment in full of the option price of the Shares then being
purchased. Payment in full shall mean payment of the full amount due,
either in cash, by certified check or cashier's check, or, with the
consent of the Committee, with Shares owned by the Optionee, including
an actual or deemed multiple series of exchanges of such Shares.
Notwithstanding anything contained herein to the contrary, at
the request of an Optionee and to the extent permitted by applicable
law, the Committee may, in its sole and absolute discretion,
selectively approve arrangements with a brokerage firm or firms under
which any such brokerage firm shall, on behalf of the Optionee, make
payment in full to the Company of the option price of the Shares then
being purchased, and the Company, pursuant to an irrevocable notice in
writing from the Optionee, shall make prompt delivery of one or more
certificates for the appropriate number of Shares to such brokerage
firm. Payment in full for purposes of the immediately preceding
sentence shall mean payment of the full amount due, either in cash or
by certified check or cashier's check.
(d) Each exercise of SARs, or a portion thereof, shall be
evidenced by a notice in writing to the Company.
(e) No Shares shall be issued upon exercise of an Option
until full payment therefor has been made, and an Optionee shall have
none of the rights of a shareholder until Shares are issued to him.
(f) Nothing herein or in any Agreement shall require the
Company to issue any Shares upon exercise of an Option or SAR if such
issuance would, in the opinion of counsel for the Company, constitute
a violation of the Securities Act or any similar or superseding
statute or statutes, or any other applicable statute or regulation, as
then in effect. Upon the exercise of an Option or SAR (as a result of
which the Optionee receives Shares), or portion thereof, the Optionee
shall give to the Company satisfactory evidence that he is acquiring
such Shares for the purposes of investment only and not with a view to
their distribution; provided, however, if or to the extent that the
Shares delivered to the Optionee shall be included in a registration
statement filed by the Company under the Securities Act, such
investment representation shall be abrogated.
SECTION 12. DELIVERY OF STOCK CERTIFICATES
As promptly as may be practicable after an Option or SAR (as a result
of the exercise of which the Optionee receives Shares), or a portion thereof,
has been exercised as hereinabove provided, the Company shall make delivery of
one or more certificates for the appropriate number of Shares. In the event
that an Optionee exercises both (i) an Incentive Option or SARs that relate to
such Option (as a result of which the Optionee receives Shares), or a portion
thereof, and (ii) a Nonqualified Option or SARs that relate to such Option (as
a result of which the Optionee receives Shares), or a portion thereof, separate
stock certificates shall be issued, one for the Shares subject to the Incentive
Option and one for the Shares subject to the Nonqualified Option.
SECTION 13. CHANGES IN COMPANY'S SHARES AND CERTAIN CORPORATE
TRANSACTIONS
If at any time while the Plan is in effect there shall be any increase
or decrease in the number of issued and outstanding Shares of the Company
effected without receipt of consideration therefor by the Company, through the
declaration of a stock dividend or through any recapitalization or merger or
otherwise in which the Company is the surviving corporation, resulting in a
stock split-up, combination or exchange of Shares of the Company, then and in
each such event:
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<PAGE> 31
(a) An appropriate adjustment shall be made in the
maximum number of Shares then subject to being optioned or awarded as
Restricted Stock under the Plan, to the end that the same proportion
of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned and awarded;
(b) Appropriate adjustment shall be made in the number of
Shares and the option price per Share thereof then subject to purchase
pursuant to each Option previously granted and then outstanding, to
the end that the same proportion of the Company's issued and
outstanding Shares in each such instance shall remain subject to
purchase at the same aggregate option price; and
(c) In the case of Incentive Options, any such
adjustments shall in all respects satisfy the requirements of Section
424(a) of the Code and the Treasury regulations and revenue rulings
promulgated thereunder.
Except as is otherwise expressly provided herein, the issue by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with a direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number of or option price of Shares then
subject to outstanding Options granted under the Plan. Furthermore, the
presence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities
or preferred stock that would rank above the Shares subject to outstanding
Options granted under the Plan; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or any part of the assets
or business of the Company; or (vi) any other corporate act or proceeding,
whether of a similar character or otherwise.
SECTION 14. EFFECTIVE DATE
The Plan WAS ORIGINALLY ADOPTED BY THE BOARD on January 28, 1992 AND
APPROVED BY THE STOCKHOLDERS OF THE COMPANY ON APRIL 28, 1992. THE PLAN AS
AMENDED AND RESTATED ON DECEMBER 10, 1996 SHALL BE EFFECTIVE AS OF THAT DATE,
the date of THE adoption THEREOF by the Board, but shall be submitted to the
STOCKHOLDERS of the Company for approval and ratification at the next regular
or special meeting thereof to be held AFTER DECEMBER 31, 1996. If at such a
meeting of the STOCKHOLDERS of the Company a quorum is present, the Plan AS
AMENDED AND RESTATED shall be presented for approval and ratification, and
unless at such a meeting the Plan AS AMENDED AND RESTATED is approved and
ratified by the affirmative vote of a majority of the outstanding shares of
common stock, par value $3.33-1/3 per share, of the Company present in person
or by proxy and entitled to vote, then, and in such event, the AMENDMENTS TO
THE PLAN ADOPTED BY THE BOARD ON DECEMBER 10, 1996 AND ANY then outstanding
Options (and any SARs that relate to such Options) THAT MAY HAVE BEEN
CONDITIONALLY GRANTED PRIOR TO SUCH STOCKHOLDER MEETING DEPENDENT UPON AN
INCREASE IN THE NUMBER OF SHARES SUBJECT TO THE PLAN shall become null and void
and of no further force or effect. No award of Restricted Stock DEPENDENT
UPON AN INCREASE IN THE NUMBER OF SHARES SUBJECT TO THE PLAN shall be made
prior to the approval and ratification of the Plan AS AMENDED AND RESTATED BY
STOCKHOLDERS in accordance with this Section 14.
SECTION 15. AMENDMENT, SUSPENSION OR TERMINATION
The Board may at any time amend, suspend or terminate the Plan;
provided, however, that after the shareholders have approved and ratified the
Plan in accordance with Section 14 of the Plan, the Board may not, without
approval of the shareholders of the Company, amend the Plan so as to (a)
increase the maximum number of Shares subject thereto, as specified in Sections
4(a) and 13 of the Plan, or (b) reduce the option price for Shares covered by
Options granted hereunder below the price specified in Section 8 of the Plan;
and provided further, that the Board may not modify, impair or cancel any
outstanding Option or SAR that relates to such Option, or the restrictions,
terms or conditions applicable to Shares of Restricted Stock, without the
consent of the holder thereof.
A-8
<PAGE> 32
SECTION 16. REQUIREMENTS OF LAW
Notwithstanding anything contained herein or in any Agreement to the
contrary, the Company shall not be required to sell or issue Shares under any
Option or SAR if the issuance thereof would constitute a violation by the
Optionee or the Company of any provision of any law or regulation of any
governmental authority or any national securities exchange; and as a condition
of any sale or issuance of Shares upon exercise of an Option or SAR, the
Company may require such agreements or undertakings, if any, as the Company may
deem necessary or advisable to assure compliance with any such law or
regulation.
SECTION 17. INCENTIVE OPTIONS
The Committee may, in its sole and absolute discretion, designate any
Option granted under the Plan as an Incentive Option intended to qualify under
Section 422(b) of the Code. Any provision of the Plan to the contrary
notwithstanding, (a) no Incentive Option shall be granted to any person who, at
the time such Incentive Option is granted, owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or any Affiliate unless the option price under such Incentive Option is
at least 110 percent of the Fair Market Value of the Shares subject to the
Incentive Option at the date of its grant and such Incentive Option is not
exercisable after the expiration of five years from the date of its grant; and
(b) the aggregate Fair Market Value of the Shares subject to an Incentive
Option and the aggregate Fair Market Value of the shares of stock of the
Company or any Affiliate (or a predecessor corporation of the Company or an
Affiliate) subject to any other incentive stock option (within the meaning of
Section 422(b) of the Code) of the Company and its Affiliates (or a predecessor
corporation of any such corporation), that may become first exercisable in any
calendar year, shall not (with respect to any Optionee) exceed $100,000,
determined as of the date the Incentive Option is granted.
SECTION 18. MODIFICATION OF OPTIONS AND SARS
Subject to the terms and conditions of and within the limitations of
the Plan, the Committee may modify, extend or renew outstanding Options and any
SARs that relate to such Options granted under the Plan, or accept the
surrender of Options and any SARs that relate to such Options outstanding
hereunder (to the extent not theretofore exercised) and authorize the granting
of new Options and any SARs that relate to such new Options hereunder in
substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing provisions of this Section 18, no modification of
an Option and any SARs that relate to such Option granted hereunder shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option and any SARs that relate to such Option theretofore granted
hereunder to such Optionee, except as may be necessary, with respect to
Incentive Options, to satisfy the requirements of Section 422(b) of the Code.
SECTION 19. AGREEMENT PROVISIONS
(a) Each Agreement shall contain such provisions
(including, without limitation, restrictions or the removal of
restrictions upon the exercise of the Option and any SARs that relate
to such Option and the transfer of shares thereby acquired) as the
Committee shall deem advisable. Each Agreement relating to an Option
shall identify the Option evidenced thereby as an Incentive Option or
Nonqualified Option, as the case may be. Incentive Options and
Nonqualified Options may not both be covered by a single Agreement.
Each such Agreement relating to Incentive Options shall contain such
limitations and restrictions upon the exercise of the Incentive Option
as shall be necessary for the Incentive Option to which such Agreement
relates to constitute an incentive stock option, as defined in Section
422(b) of the Code.
(b) Each Agreement shall recite that it is subject to the
Plan and that the Plan shall govern where there is any inconsistency
between the Plan and the Agreement.
(c) Each Agreement shall contain a covenant by the
Optionee, in such form as the Committee may require in its discretion,
that he consents to and will take whatever affirmative actions are
required, in the opinion of the Committee, to enable the Company or
appropriate Affiliate to satisfy its Federal income tax
A-9
<PAGE> 33
and FICA and any applicable state and local withholding obligations.
An Agreement may contain such provisions as the Committee deems
appropriate to enable the Company or its Affiliates to satisfy such
withholding obligations, including provisions permitting the Company,
upon the exercise of an Option or SAR (as a result of which the
Optionee receives Shares), to withhold Shares otherwise issuable to
the Optionee exercising the Option or SAR, or to accept delivery of
Shares owned by the Optionee, to satisfy the applicable withholding
obligations.
(d) Each Agreement relating to an Incentive Option shall
contain a covenant by the Optionee immediately to notify the Company
in writing of any disqualifying disposition (within the meaning of
Section 421(b) of the Code) of Shares received upon the exercise of an
Incentive Option.
SECTION 20. RESTRICTED STOCK
(a) Subject to the provisions of Section 14 of the Plan,
the Committee may from time to time, in its sole and absolute
discretion, award Shares of Restricted Stock to such persons as it
shall select from among those persons who are eligible under Section 5
of the Plan to receive awards of Restricted Stock. Any award of
Restricted Stock shall be made from Shares subject hereto as provided
in Section 4 of the Plan.
(b) A Share of Restricted Stock shall be subject to such
restrictions, terms and conditions, including forfeitures, if any, as
may be determined by the Committee, which may include, without
limitation, the rendition of services to the Company or its Affiliates
for a specified time or the achievement of specific goals, and to the
further restriction that no such Share may be sold, assigned,
transferred, discounted, exchanged, pledged or otherwise encumbered or
disposed of until the terms and conditions set by the Committee at the
time of the award of the Restricted Stock have been satisfied. Each
recipient of an award of Restricted Stock shall enter into an
Agreement with the Company, in such form as the Committee shall
prescribe, setting forth the restrictions, terms and conditions of
such award, whereupon such recipient shall become a participant in the
Plan.
If a person is awarded Shares of Restricted Stock, whether or
not escrowed as provided below, the person shall be the record owner
of such Shares and shall have all the rights of a shareholder with
respect to such Shares (unless the escrow agreement, if any,
specifically provides otherwise), including the right to vote and the
right to receive dividends or other distributions made or paid with
respect to such Shares. Any certificate or certificates representing
Shares of Restricted Stock shall bear a legend similar to the
following:
The shares represented by this certificate have been
issued pursuant to the terms of the Noble Affiliates, Inc.
1992 Stock Option and Restricted Stock Plan and may not be
sold, assigned, transferred, discounted, exchanged, pledged or
otherwise encumbered or disposed of in any manner except as
set forth in the terms of the agreement embodying the award of
such shares dated , 19 .
In order to enforce the restrictions, terms and conditions
that may be applicable to a person's Shares of Restricted Stock, the
Committee may require the person, upon the receipt of a certificate or
certificates representing such Shares, or at any time thereafter, to
deposit such certificate or certificates, together with stock powers
and other instruments of transfer, appropriately endorsed in blank,
with the Company or an escrow agent designated by the Company under an
escrow agreement in such form as by the Committee shall prescribe.
After the satisfaction of the restrictions, terms and
conditions set by the Committee at the time of an award of Restricted
Stock to a person, a new certificate, without the legend set forth
above, for the number of Shares that are no longer subject to such
restrictions, terms and conditions shall be delivered to the person.
If a person to whom Restricted Stock has been awarded dies
after satisfaction of the restrictions, terms and conditions for the
payment of all or a portion of the award but prior to the actual
payment of all or such portion thereof, such payment shall be made to
the person's beneficiary or beneficiaries at the time and in the same
manner that such payment would have been made to the person.
A-10
<PAGE> 34
The Committee shall have the authority (and the Agreement
evidencing an award of Restricted Stock may so provide) to cancel all
or any portion of any outstanding restrictions prior to the expiration
of such restrictions with respect to any or all of the Shares of
Restricted Stock awarded to a person hereunder on such terms and
conditions as the Committee may deem appropriate.
(c) Without limiting the provisions of the first
paragraph of subsection (b) of this Section 20, if a person to whom
Restricted Stock has been awarded ceases to be employed by at least
one of the employers in the group of employers consisting of the
Company and its Affiliates, for any reason, prior to the satisfaction
of any terms and conditions of an award, any Restricted Stock
remaining subject to restrictions shall thereupon be forfeited by the
person and transferred to, and reacquired by, the Company or an
Affiliate at no cost to the Company or the Affiliate; provided,
however, if the cessation is due to the person's death, disability OR
RETIREMENT, the Committee may, in its sole and absolute discretion,
deem that the terms and conditions have been met for all or part of
such remaining portion. In the event of such forfeiture, the person,
or in the event of his death, his personal representative, shall
forthwith deliver to the Secretary of the Company the certificates for
the Shares of Restricted Stock remaining subject to such restrictions,
accompanied by such instruments of transfer, if any, as may reasonably
be required by the Secretary of the Company.
(d) In case of any consolidation or merger of another
corporation into the Company in which the Company is the surviving
corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of
the Shares (other than a change in par value, or from par value to no
par value, or as a result of a subdivision or combination, but
including any change in such shares into two or more classes or series
of shares), the Committee may provide that payment of Restricted Stock
shall take the form of the kind and amount of shares of stock and
other securities (including those of any new direct or indirect parent
of the Company), property, cash or any combination thereof receivable
upon such consolidation or merger.
SECTION 21. GENERAL
(a) The proceeds received by the Company from the sale of
Shares pursuant to Options shall be used for general corporate
purposes.
(b) Nothing contained in the Plan or in any Agreement
shall confer upon any Optionee or recipient of Restricted Stock the
right to continue in the employ of the Company or any Affiliate, or
interfere in any way with the rights of the Company or any Affiliate
to terminate his employment at any time, with or without cause.
(c) Neither the members of the Board nor any member of
the Committee shall be liable for any act, omission or determination
taken or made in good faith with respect to the Plan or any Option and
any SARs that relate to such Option granted hereunder or any
Restricted Stock awarded hereunder; and the members of the Board and
the Committee shall be entitled to indemnification and reimbursement
by the Company in respect of any claim, loss, damage or expenses
(including counsel fees) arising therefrom to the full extent
permitted by law and under any directors' and officers' liability or
similar insurance coverage that may be in effect from time to time.
(d) Any payment of cash or any issuance or transfer of
Shares to the Optionee, or to his legal representative, heir, legatee
or distributee, in accordance with the provisions hereof, shall, to
the extent thereof, be in full satisfaction of all claims of such
persons hereunder. The Committee may require any Optionee, legal
representative, heir, legatee or distributee, as a condition precedent
to such payment, to execute a release and receipt therefor in such
form as it shall determine.
(e) Neither the Committee, the Board nor the Company
guarantees the Shares from loss or depreciation.
(f) All expenses incident to the administration,
termination or protection of the Plan, including, but not limited to,
legal and accounting fees, shall be paid by the Company or its
Affiliates.
A-11
<PAGE> 35
(g) Records of the Company and its Affiliates regarding a
person's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment and other matters
shall be conclusive for all purposes hereunder, unless determined by
the Committee to be incorrect.
(h) Any action required of the Company shall be by
resolution of its Board or by a person authorized to act by resolution
of the Board. Any action required of the Committee shall be by
resolution of the Committee or by a person authorized to act by
resolution of the Committee.
(i) If any provision of the Plan or any Agreement is held
to be illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining provisions of the Plan or such
Agreement, as the case may be, but such provision shall be fully
severable and the Plan or such Agreement, as the case may be, shall be
construed and enforced as if the illegal or invalid provision had
never been included herein or therein.
(j) Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or
sent by mail. Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered on the date on which it is
personally delivered, or, whether actually received or not, on the
third business day after it is deposited in the United States mail,
certified or registered, postage prepaid, addressed to the person who
is to receive it at the address which such person has theretofore
specified by written notice delivered in accordance herewith. The
Company, an Optionee or a recipient of Restricted Stock may change, at
any time and from time to time, by written notice to the other, the
address that it or he had theretofore specified for receiving notices.
Until changed in accordance herewith, the Company and each Optionee
and recipient of Restricted Stock shall specify as its and his address
for receiving notices the address set forth in the Agreement
pertaining to the Shares to which such notice relates.
(k) Any person entitled to notice hereunder may waive
such notice.
(l) The Plan shall be binding upon the Optionee or
recipient of Restricted Stock, his heirs, legatees, distributees and
legal representatives, upon the Company, its successors and assigns,
and upon the Committee, and its successors.
(m) The titles and headings of Sections and paragraphs
are included for convenience of reference only and are not to be
considered in the construction of the provisions hereof.
(n) All questions arising with respect to the provisions
of the Plan shall be determined by application of the laws of the
State of Texas except to the extent Texas law is preempted by Federal
law.
(o) Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of the Plan
dictates, the plural shall be read as the singular and the singular as
the plural.
A-12
<PAGE> 36
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints Robert Kelley and
William D. Dickson, and each 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. (the "Company") standing in
NOBLE AFFILIATES, INC. the name of the undersigned on March 10, 1997, at
the annual meeting of stockholders to be held on
April 22, 1997 at 10:00 a.m., local time, in
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 21, 1997, and
the proxy statement accompanying the same, receipt
of which is hereby acknowledged.
<TABLE>
<S> <C>
1. Election of Directors
FOR ALL NOMINEES WITH EXCEPTIONS NOTED [ ] WITHHOLD AUTHORITY FOR ALL NOMINEES [ ]
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 the Company's 1992 Stock Option and Restricted Stock Plan as amended and restated:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. 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.
</TABLE>
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 37
THIS PROXY, WHEN DULY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF THIS PROXY IS DULY EXECUTED
AND RETURNED, BUT WITHOUT CLEAR VOTING DIRECTION, IT 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 actions that
said proxies, their substitutes, or any of
them, may lawfully take in accordance with
the terms hereof.
Dated: , 1997
---------------------
---------------------------------
---------------------------------
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 officer of a
corporation, please indicate
your capacity or title.
PLEASE COMPLETE, DATE AND SIGN
THIS PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED
STATES.
