<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 ss. 240.14a-11(c) or ss. 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 28, 1998
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 28, 1998,
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; and
2. 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 16,
1998 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 1997 and financial
statements for the fiscal year ended December 31, 1997 are contained in the
accompanying 1997 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 27, 1998
<PAGE> 3
NOBLE AFFILIATES, INC.
110 WEST BROADWAY
ARDMORE, OKLAHOMA 73401
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 1998
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 28, 1998,
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 27, 1998.
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. 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 1999 annual meeting of stockholders must be received by the
Company no later than February 26, 1999.
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 the number of votes cast for or withheld as
to the vote on each nominee for director. 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. 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 the election of
directors. 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.
<PAGE> 4
VOTING SECURITIES
Only holders of record of common stock of the Company, par value $3.331/3
per share (the "Common Stock"), at the close of business on March 16, 1998, 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 56,915,805 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, 1997 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............................................... 3,300,400(2) 5.8%
82 Devonshire Street
Boston, Massachusetts 02109
The Samuel Roberts Noble Foundation, Inc............... 4,608,633(3) 8.1%
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. 10 to Schedule 13G dated February 14, 1998
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 no voting power with respect to the shares. FMR Corp.
indicated in its amended Schedule 13G that it is a parent holding company
that owns the shares indirectly through two of its wholly-owned
subsidiaries. According to the amended Schedule 13G, one subsidiary
beneficially owns 3,200,400 of the shares as a result of its acting as an
investment adviser to several investment companies and one subsidiary
beneficially owns 100,000 shares as a result of serving as an investment
manager of several institutional accounts. FMR Corp. also reported
beneficial ownership of such shares by each of Edward C. Johnson 3d, the
Chairman of FMR Corp., and Abigail P. Johnson, a director of FMR Corp.
(3) Beneficial ownership of such shares was reported in Amendment No. 7 to
Schedule 13G dated February 10, 1998 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 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.
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<PAGE> 5
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 1997 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 1999 annual meeting of stockholders must be received by
the Company no later than January 26, 1999.
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 66, also serves as a
director of National Gas & Oil Company, CRESTAR Energy, Inc. in Calgary,
Alberta, and Friede Goldman International Inc. 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 50, 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 51,
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 54, 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 52, 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 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 67, has served as director of the Company since 1985.
GEORGE J. MCLEOD -- Mr. McLeod has served as President, Chief Executive Officer
and as a director of Geolock Resources Ltd., a company engaged in oil and gas
exploration and production in Canada, since November 1986. Mr.
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<PAGE> 6
McLeod, age 69, 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 1997. Each director attended
every meeting of the Board and every meeting of the Board committees on which he
served, except that Messrs. Baker and McLeod were each absent from one Board
meeting and Mr. Cox was absent from one meeting of the audit committee on which
he serves.
COMMITTEES OF THE BOARD
The committees of the Board, the current members and the primary functions
of the committees are as follows:
COMPENSATION AND BENEFITS COMMITTEE -- 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
benefits other than the stock-based plans in which executive officers of
the Company participate. The compensation and benefits committee held four
meetings during 1997.
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 1997.
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 one
meeting during 1997.
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 1997.
STOCK OPTION COMMITTEE -- Edward F. Cox, Chairman; Alan A. Baker; and
Michael A. Cawley. The primary responsibilities of the stock option
committee are to administer, in accordance with applicable rules and
regulations under federal securities and income tax laws, the stock-based
plans in which executive officers of the Company participate, including
the Company's 1992 Stock Option and Restricted Stock Plan. The stock
option committee held two meetings during 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The current
members of the compensation and benefits committee and the stock option
committee were the only persons who served on such committees during 1997.
Messrs. Day and McLeod were formerly officers of the Company, and Mr. Kleinman's
law firm provided in 1997, 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.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company or any of its subsidiaries
receive an annual retainer of $28,000 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
4
<PAGE> 7
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, as amended, 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 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 fair market value on the date of grant.
As of July 1, 1997, 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 $39.625 per share. The options have a ten-year term and are
initially exercisable one year after date of grant.
5
<PAGE> 8
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following tabulation sets forth as of December 31, 1997 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.................................. 6,500 (3) - %
Michael A. Cawley.............................. 4,619,418 (3)(4) 8.1%
Edward F. Cox.................................. 39,286 (3) 0.1%
James C. Day................................... 16,303 (3) - %
Robert Kelley.................................. 225,892 (3) 0.4%
Harold F. Kleinman............................. 1,000 (5) - %
George J. McLeod............................... 15,606 (3) - %
Named Executive Officers (excluding
any director named above) and Group
William D. Dickson............................. 84,230 (3) 0.1%
Dan O. Dinges.................................. 93,685 (3) 0.2%
W. A. Poillion................................. 100,682 (3) 0.2%
James C. Woodson............................... 66,757 (3) 0.1%
All directors and executive ...................
officers as a group (13 persons)............. 5,360,824 (4)(6) 9.4%
</TABLE>
- -----------------
(1) Unless otherwise indicated, all shares are directly held with sole voting
and investment power.
(2) Less than one-tenth of one percent unless otherwise indicated.
(3) Includes shares not outstanding but subject to currently exercisable
options, as follows: Mr. Baker-- 4,500 shares; Mr. Cawley -- 10,285
shares; Mr. Cox -- 31,286 shares; Mr. Day -- 15,285 shares; Mr. Dickson --
71,921 shares; Mr. Dinges -- 87,680 shares; Mr. Kelley -- 161,441 shares;
Mr. McLeod -- 15,286 shares; Mr. Poillion -- 81,165 shares; and Mr.
Woodson -- 55,868 shares.
(4) Includes 4,608,633 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 ten 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 4,608,633 shares. Mr. Cawley disclaims any pecuniary
interest in the 4,608,633 shares.
(5) Consists of 1,000 shares held as joint tenant with Mr. Kleinman's spouse.
(6) Includes 621,308 shares not outstanding but subject to currently
exercisable options.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following report of the compensation and benefits committee and the
stock option 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 and 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
AND THE STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
To the Stockholders
of Noble Affiliates, Inc.:
As members of the compensation and benefits committee and the stock option
committee of the Board of Directors, we have responsibility for administering
the executive compensation program of the Company. All decisions by the
committees 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 stock option committee in accordance with the terms of the
Option Plan.
COMPENSATION POLICIES
The executive compensation policy of the Company, which is endorsed by the
committees, 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 Committees are 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 committees have
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 1997
For 1997, 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"), Effective Compensation,
Inc. ("ECI"), KPMG Peat Marwick ("KPMG"), 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. Nine of the
14 companies included in the Dow Jones Total Return Index for Secondary
Oil Companies referenced in the performance graph contained elsewhere in
this proxy statement are included in the Energy 27 Group. (The Energy 27
Group survey, together with the ECI and KPMG reports, are herein referred
to as the "Supplement Reports".) In 1996, the Company engaged Towers
Perrin to review its compensation program. Such review
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<PAGE> 10
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 compensation and benefits committee
generally is to establish base salary levels that approximate survey
averages, and as such, the salary level for each executive officer for
1997 was within 13 percent, plus or minus, of the applicable average,
except one executive officer whose salary level was 19 percent above 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 and
geophysicists employed by the Company who choose to be covered by the
geological incentive plan and the 19 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.
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 1997 (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.
At its April 1997 meeting, the Board established the following
annual performance goals in accordance with the revised financial budget
for 1997: 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, for purposes of determining internal
achievement of reserve goals, was changed throughout the Company in 1995
from 8 to 1 to rates that more accurately reflected relative commodity
values in 1997, and ranged from 6 to 1 in the Company's Offshore Gulf of
Mexico and International divisions to 6 to 1, 8 to 1, and 12 to 1 in the
Company's onshore divisions. The new reserves added goal was set at 58
million BOE's. The cash flow goal was established as a measure of the
percentage growth compared to prior year's cash flow of $405 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 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 and amended
and restated in 1997, 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.
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<PAGE> 11
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
stock option 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. No
nonqualified stock options were granted in 1997 at a price less than fair
market value at the date of grant.
In 1996, the Company engaged Towers Perrin to advise the stock
option 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 Towers Perrin report
suggested multiples of 0.8 of base salary at the lower levels of employees
of the Company, from 1.5 to 4.4 for vice presidents of the Company and 5.7
at the CEO level. Using the Towers Perrin report, and adjusting its
recommendations to account for annual inflation and data obtained from the
Supplement Reports, the stock option committee in 1997 adopted grant
multiples that ranged from 0.8 to 5.7 of base salary, with multiples of
5.7 for the CEO and 4.4 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 stock option 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 1997 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.
1997 COMPENSATION OF CEO
The 1997 base salary of Mr. Kelley was adjusted July 1, 1997 to $575,000
per year as a result of a review of Company performance, competitive industry
factors existing at the time and the Supplement Reports. Mr. Kelley's reported
1997 salary represented an increase of 12.8 percent over his reported 1996
salary, reflecting consideration of competitive data provided by Towers Perrin,
the Supplement Reports and the assessment by the Committee and the Board of the
Company's 1997 results of operations under Mr. Kelley's leadership. As a result,
the salary paid to Mr. Kelley for 1997 fell within the range discussed above in
the last sentence under "Compensation Program for 1997 - Base Salary" in this
report.
In determining the amount of bonus paid to Mr. Kelley for 1997, the
performance goals' criteria discussed above under "Compensation Program for 1997
- - Annual Incentive Bonus Plan" were applied which resulted in an applicable
multiplier under the plan of 2. This factor of 2 multiplied times the target
bonus for Mr. Kelley produced a calculated bonus of $805,000, which was then
reduced to an amount equal to 100 percent of base salary at year end ($575,000)
in accordance with terms of the Plan.
In 1997, the stock option committee granted Mr. Kelley an option to
purchase 75,237 shares of Common Stock pursuant to the Option Plan. In granting
this option, the committee used a grant multiplier of 5.7 (see "Compensation
Program for 1997 - Option Plan" above), which took into account Mr. Kelley's
level of responsibility and was based on the recommendation of Towers Perrin.
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.
9
<PAGE> 12
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 compensation and
benefits 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 compensation and benefits committee could determine, taking into
consideration the burdens of compliance with Section 162(m) and other relevant
facts and circumstances, to pay compensation that is not fully deductible, if
the committee believes such payments are in the Company's best interest. In
1997, the stockholders of the Company approved the amended and restated Option
Plan, allowing 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).
SUMMARY
The members of the committees believe 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
1997 adequately reflect the compensation goals and policies of the Company.
<TABLE>
<CAPTION>
March 27, 1998 COMPENSATION AND STOCK OPTION
BENEFITS COMMITTEE COMMITTEE
<S> <C>
Alan A. Baker, Chairman Edward F. Cox, Chairman
James C. Day Alan A. Baker
Harold F. Kleinman Michael A. Cawley
George J. McLeod
</TABLE>
------------------
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 1997 550,000 575,000 2,445 75,237 62,093(2)
Executive Officer 1996 487,500 525,000 2,392 59,445 45,998
1995 425,000 127,500 2,392 49,086 32,913
James C. Woodson, Senior 1997 250,000 260,000 2,445 25,080 31,516(3)
Vice President - Exploration 1996 220,500 216,000 2,392 19,074 22,295
and Operating Committee 1995 193,500 50,794 2,392 16,164 16,621
member of Samedan
W.A. Poillion, Senior Vice 1997 230,000 235,000 2,445 25,080 26,859(3)
President - Production and 1996 210,000 202,500 2,392 19,074 20,402
Drilling and Operating 1995 187,500 49,219 2,392 15,663 15,265
Committee member of
Samedan
William D. Dickson, Senior 1997 230,000 235,000 2,445 25,080 26,524(3)
Vice President - Finance and 1996 207,000 202,500 2,392 19,074 20,020
Treasurer 1995 182,000 45,950 2,392 14,640 14,659
Dan O. Dinges, Senior Vice 1997 230,000 176,250 2,902 25,080 21,790(3)
President - Division General 1996 207,000 202,500 2,860 19,074 13,957
Manager and Operating 1995 182,000 45,950 2,860 14,640 8,638
Committee member of
Samedan
</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 $7,878
to a defined contribution plan and $53,415 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 -- $9,500/$19,166;
$2,850; W.A. Poillion -- $9,022/$17,514; $323; W.D. Dickson --
$9,022/$17,179; $323; and Dan O. Dinges -- $9,022/$12,768; $0.00.
11
<PAGE> 14
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the year ended December 31, 1997 to each
of the named executive officers.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
-------------------------------------------------------------- ----------------------
Number of Securities % of Total
Underlying Options Options Exercise
Granted Granted to or Base
(number of shares) Employees Price Expiration
Name (1) in 1997 ($/sh) Date 5%($)(2) 10%($)(3)
---- -------------------- ---------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert Kelley........... 75,237 11.1% $39.875 7/20/07 1,890,000 4,770,000
James C. Woodson........ 25,080 3.7% $39.875 7/20/07 630,000 1,590,000
W.A. Poillion........... 25,080 3.7% $39.875 7/20/07 630,000 1,590,000
William D. Dickson...... 25,080 3.7% $39.875 7/20/07 630,000 1,590,000
Dan O. Dinges........... 25,080 3.7% $39.875 7/20/07 630,000 1,590,000
</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) Reflects an assumed market price per share of Common Stock of $65.00.
(3) Reflects an assumed market price per share of Common Stock of $103.28.
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the year ended December 31,
1997, and the unexercised options held at December 31, 1997 and the value
thereof, by each of the named executive officers.
AGGREGATED OPTION EXERCISES IN 1997
AND 12/31/97 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options at Value of Unexercised
December 31, 1997 In-the-Money Options
Shares (number of shares) at December 31, 1997 ($)
Acquired Value --------------------------- ----------------------------
Name on Exercise Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Kelley............ 42,000 $1,120,125 161,441 131,229 $1,763,383 $179,982
James C. Woodson......... 1,274 41,564 55,868 43,184 588,198 59,268
W.A. Poillion............ 4,500 156,375 81,165 43,017 1,150,943 57,431
William D. Dickson....... 5,000 151,250 71,921 42,676 957,653 53,680
Dan O. Dinges............ -- -- 87,680 42,676 1,317,701 53,680
</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 $ 40,086 $ 48,103 48,103
150,000................ 45,000 60,000 62,961 74,353 74,353
200,000................ 60,000 80,000 83,836 100,603 100,603
300,000................ 90,000 120,000 127,586 153,103 153,103
400,000................ 120,000 160,000 171,336 205,603 205,603
600,000................ 180,000 240,000 258,836 310,603 310,603
800,000................ 240,000 320,000 346,336 415,603 415,603
1,000,000................ 300,000 400,000 433,836 520,603 520,603
1,300,000................ 390,000 520,000 565,086 678,103 678,103
1,400,000................ 420,000 560,000 608,836 730,603 730,603
1,500,000................ 450,000 600,000 652,586 783,103 783,103
</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 1997. 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, 1997, the named executive officers had the following
approximate number of years of credited service for retirement purposes: Mr.
Kelley--22; Mr. Woodson--23; Mr. Poillion--21; Mr. Dickson--19; and Mr.
Dinges--16.
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 CHART]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Company 100 151 142 173 278 206
S&P 500 Index 100 110 112 153 189 252
Dow Jones Total Return Index for Secondary 100 111 107 124 153 163
Oil Companies (3)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return assuming reinvestment of dividends. Assumes $100 invested on
January 1, 1993 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, Inc., Burlington Resources Inc., Kerr-McGee
Corporation, MAPCO Inc., Murphy Oil Corporation, Noble Affiliates, Inc.,
Occidental Petroleum Corporation, Pennzoil Company, Sun Company, Inc.,
TOSCO CORP., Union Pacific Resources Group, Inc. and Union Texas Petroleum
Holdings, Inc.
14
<PAGE> 17
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, 1997, all Section
16(a) filing requirements applicable to its directors, officers and more than 10
percent beneficial owners were complied with, with the exception that a Form 4
filed by Mr. McLeod, a director of the Company, was filed late.
CERTAIN TRANSACTIONS
Harold F. Kleinman, a director of the Company and a nominee for director,
is the brother-in-law of Jack Bender. Mr. Bender is the sole owner of Cactus
Pipe and Supply Company, a corporation from which Samedan purchases oil field
tubulars from time to time in the ordinary course of its business. During 1997,
Samedan purchased an aggregate of approximately $860,000 of such tubulars from
such corporation. The terms of all such purchases were similar to those that
could have been obtained from unrelated third parties. Mr. Kleinman has no
pecuniary or other interest in either the purchases or Mr. Bender's corporation.
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 1998. 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 1999 annual meeting of stockholders, which is
currently scheduled to be held on April 27, 1999, must be received by the
Company at its office in Ardmore, Oklahoma, addressed to the Secretary of the
Company, no later than November 27, 1998.
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.
15
<PAGE> 18
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 27, 1998
William D. Dickson
Senior Vice President-Finance and Treasurer
16
<PAGE> 19
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: , 1998
--------------------------
- --------------------------------------
- --------------------------------------
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.
<PAGE> 20
NOBLE AFFILIATES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert Kelley and William D. Dickson, and 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 the name of the undersigned
on March 16, 1998, at the annual meeting of stockholders to be held on April 28,
1998 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 27, 1998, and the proxy
statement accompanying the same, receipt of which is hereby acknowledged.
1. Election of Directors
FOR ALL NOMINEES WITH WITHHOLD AUTHORITY
EXCEPTIONS NOTED [ ] 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. 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.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
