<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Hondo Oil & Gas Company
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
HONDO OIL & GAS COMPANY
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the Appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[_] 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>
HONDO OIL & GAS COMPANY
410 EAST COLLEGE BOULEVARD, ROSWELL, NM 88201
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 24, 1994
----------------
TO THE SHAREHOLDERS OF HONDO OIL & GAS COMPANY:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the shareholders of Hondo
Oil & Gas Company will be held in the Second Floor Conference Room, United New
Mexico Bank, 200 Lomas, N.W., Albuquerque, New Mexico, on Thursday, February
24, 1994 at 10:00 o'clock A.M., Albuquerque Time, for the following purposes:
(1) To elect a board of eight directors;
(2) To approve the Company's 1993 Stock Incentive Plan; and
(3) To transact such other business as may properly come before the
meeting, or any adjournment thereof.
The Board of Directors has fixed January 4, 1994 as the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
Accordingly, only shareholders of record at the close of business on that date
are entitled to vote at the meeting, or any adjournment thereof. Any
shareholder who wishes to examine a list of the shareholders entitled to vote
at the meeting may do so at the Company's office in Roswell, New Mexico, on and
after February 14, 1994.
Shareholders are cordially invited to attend the Annual Meeting. Regardless
of whether you expect to attend the meeting in person, we urge you to read the
attached Proxy Statement and sign, date and mail the accompanying proxy card in
the enclosed postage-prepaid envelope. It is important that your shares be
represented at the meeting, and your promptness will assist us in making
necessary preparations for the meeting. If you receive more than one proxy card
because your shares are registered in different names or addresses, each card
should be completed and returned to assure that all your shares are voted.
A copy of the Company's 1993 Annual Report is enclosed herewith. Please take
time to read the report.
By Order of the Board of Directors,
C. B. McDaniel
Secretary
Roswell, New Mexico
January 28, 1994
<PAGE>
HONDO OIL & GAS COMPANY
410 EAST COLLEGE BOULEVARD
ROSWELL, NEW MEXICO 88201
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 24, 1994
This proxy statement is furnished to shareholders of Hondo Oil & Gas Company
(the "Company") in connection with the solicitation by the Board of Directors
of the Company of proxies to be voted at the 1994 Annual Meeting of
Shareholders (the "Annual Meeting") at the time and place set forth in the
attached Notice of Annual Meeting. This Proxy Statement was first mailed to
shareholders on or about January 28, 1994. All costs of soliciting proxies will
be borne by the Company.
At the Annual Meeting, the Company's shareholders will be asked to consider
and vote upon (1) the election of the eight nominees for directors named below
and (2) the approval of the 1993 Stock Incentive Plan.
Any shareholder present at the Annual Meeting may withdraw his or her proxy
and vote in person on each matter brought before the Annual Meeting. The
accompanying proxy is also subject to revocation at any time before it is
exercised by filing with the Secretary of the Company an instrument revoking
the proxy or a duly executed proxy bearing a later date. All shares represented
by each properly signed and returned proxy in the accompanying form, unless
revoked, will be voted at the Annual Meeting, or at any adjournment thereof, in
accordance with the instructions thereon. If no instructions are specified, the
shares will be voted in favor of the election of the nominees for directors and
approval of the 1993 Stock Incentive Plan. If any other matters are properly
presented at the Annual Meeting, or any adjournment thereof, the persons voting
the proxies will vote them in accordance with their best judgment.
Votes cast by proxy or in person at the Annual Meeting will be counted by the
persons appointed by the Company to act as election inspectors for the meeting.
The election inspectors will treat shares represented by proxies that reflect
abstentions as shares that are present and entitled to vote, for purposes of
determining the presence of a quorum and for purposes of determining the
outcome of any matter submitted to the shareholders for a vote. Abstentions,
however, do not constitute a vote "for" or "against" any matter and thus will
be disregarded in the calculation of a plurality of "votes cast."
The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees as to which instructions have not
been received from the beneficial owners or persons entitled to vote that the
broker or nominee does not have discretionary power to vote on a particular
matter) as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. However, for purposes of determining the
outcome of any matter as to which the broker has physically indicated on the
proxy that it does not have discretionary authority to vote, those shares will
be treated as not present and not entitled to vote with respect to that matter
(even though those shares are considered entitled to vote for quorum purposes
and may be entitled to vote on other matters).
In the election of directors, shares present but not voting will be
disregarded (except for quorum purposes) and the candidates for election
receiving the highest number of affirmative votes of the shares entitled to be
voted for them, up to the number of directors to be elected by those shares,
will be elected and votes cast against a candidate or votes withheld will have
no legal effect.
1
<PAGE>
Only holders of shares of the Company's common stock of record at the close
of business on January 4, 1994 are entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. On that date, there were 13,006,892
shares of common stock outstanding and entitled to one vote per share.
ADDITIONAL MATERIALS
Enclosed with this Proxy Statement is a copy of the Company's 1993 Annual
Report which is not to be regarded as proxy soliciting material or as a
communication by means of which solicitation is made with respect to the Annual
Meeting. Financial statements for the fiscal year ended September 30, 1993 are
not made part of this Proxy Statement.
AVAILABILITY OF FORM 10-K
SHAREHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1993, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, BY WRITING TO THE SECRETARY, HONDO OIL &
GAS COMPANY, P.O. BOX 2208, ROSWELL, NEW MEXICO 88202.
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Proxy Statement and for consideration
at the Annual Meeting, shareholder proposals must be submitted on a timely
basis. Proposals for the 1995 Annual Meeting of Shareholders must be received
by the Company no later than September 30, 1994. Any such proposals, as well as
any questions related thereto, should be directed to the Secretary of the
Company.
ELECTION OF DIRECTORS
INFORMATION REGARDING THE NOMINEES
All of the current members of the Board of Directors listed below, except
Messrs. Hoey and McDaniel, were elected at the 1993 Annual Meeting of
Shareholders held on February 25, 1993.
At the Annual Meeting eight directors are to be elected, each director to
hold office until the next Annual Meeting. In the absence of contrary
instructions, it is the intention of the persons named in the accompanying
proxy to vote for the nominees listed below, all of whom constitute the current
Board of Directors. A majority of the votes cast at the Annual Meeting shall be
sufficient to elect a director. The Board of Directors recommends that
shareholders vote FOR each of the nominees. In the event that any of the
nominees should become unavailable for any reason, which the Board of Directors
does not anticipate, it is intended that proxies will be voted for the election
of those persons, if any, as shall be designated by the Board of Directors.
Robert O. Anderson: Mr. Anderson, 76, has been a director and Chairman of the
Board of the Company since January 19, 1988. He was President and Chief
Executive Officer of the Company until December 1, 1993. He is also a director
of Hondo Magdalena Oil & Gas Limited and Blue Nile Oil & Gas Company of Sudan
Limited, Mackenzie Porcupine Pipeline Company, Pauley Pacific Inc. and The
Anderson Company, and the President and Co-Chairman of the Board of Directors
of The Hondo Company. He served as Chief Executive Officer of Atlantic
Richfield Company from 1963 until 1982, as Chairman of the Board of Directors
from 1965 until January 1986 and as a director until September 1986.
2
<PAGE>
John J. Hoey: Mr. Hoey, 54, became a director on June 2, 1993 and became
President and Chief Executive Officer of the Company on December 1, 1993. He is
also President and sole shareholder of Beneficial Capital Corp. of New York, an
investment company with ownership in a number of public and private companies.
From 1985 to 1992, he was associated with Atlantic Petroleum Corp. of
Pennsylvania, including serving as President of Atlantic Refining and Marketing
Corporation until its sale to Sun Co. in November 1988. From 1972 to 1984, Mr.
Hoey held various executive positions in international banking and investment
companies. From 1967 to 1971 he served in the U.S. Department of State in
Saigon, South Vietnam. He is a director of GVC Corp., a publicly-held
corporation.
C. B. McDaniel: Mr. McDaniel, 49, became a director of the Company on
November 15, 1993. He joined the Company as Counsel in June 1988 and became
Secretary of the Company on November 30, 1988. He is also Secretary or
Assistant Secretary of each of the Company's subsidiaries and director of
Newhall Refining Co., Inc., Red-E-Crete, Inc., Pauley Transportation Inc., Via
Verde Development Company, and The Anderson Company. From 1980 to 1988, he was
employed as an attorney for Atlantic Richfield Company in Houston and Dallas,
Texas, and from 1975 to 1980, he was in private practice of law in El Paso,
Texas.
Douglas G. McNair: Mr. McNair, 65, has been a director of the Company since
February 25, 1993. He is an independent consultant for international
transactions, marketing and negotiations. From 1985 to 1986 he was Vice
President and Assistant to the Chairman and Chief Executive Officer of Atlantic
Richfield Company. From 1977 to 1985, he was Vice President of Atlantic
Richfield Company and worked with that company's subsidiary, Anaconda, in
connection with international operations. From 1972 to 1977, he was Vice
President of Atlantic Richfield Company in charge of international marketing.
From 1970 to 1972, he was President and Chief Executive Officer of Atlantic
Richfield Company's Brazilian marketing subsidiary.
John F. Price: Mr. Price, 52, became a director of the Company on November
16, 1992 and is a director of Hondo Magdalena Oil & Gas Limited. He has been
President of Princess Hotels International, Inc. and Lonrho Inc. and Executive
Vice President of Princess Properties International Limited since March 1983.
He was appointed an Associate Director of Lonrho Plc in 1991. He is a Chartered
Accountant and joined the Lonrho group in 1969. He was appointed Managing
Director of Lonrho (Zambia) Ltd. in 1974 and was Managing Director of Lonrho
(Zimbabwe) Ltd. from 1979 to 1983.
R. W. Rowland: Mr. Rowland, 76, has been a director of the Company since
January 19, 1988 and is a director of Hondo Magdalena Oil & Gas Limited and
Blue Nile Oil & Gas Company of Sudan Limited. He is Joint Managing Director and
Chief Executive of Lonrho Plc, as well as the Co-Chairman of the Board of
Directors of The Hondo Company. He was appointed a director and Joint Managing
Director of Lonrho Plc in September 1961 and Chief Executive in April 1972. He
is also a director of approximately 200 of the more than 800 companies
comprising the Lonrho group worldwide, including Princess Hotels International,
Inc. in the United States, of which he is Chairman of the Board.
P.G.B. Spicer: Mr. Spicer, 65, has been a director of the Company since
January 19, 1988. He has been an Executive Director of Lonrho Plc since October
1978 and became Deputy Chairman on December 18, 1991. He joined the Lonrho
group in 1970 and is also a director of 55 other Lonrho group companies,
including The Hondo Company.
3
<PAGE>
R. E. Whitten: Mr. Whitten, 53, has been a director of the Company since
January 19, 1988. He has been an Executive Director of Lonrho Plc since July
1981, having joined the Lonrho group in 1978. He is also a director of some 50
other companies in the Lonrho group, including Princess Hotels International,
Inc. and The Hondo Company.
EXECUTIVE OFFICERS
The following is a list of the executive officers of the Company and their
positions:
<TABLE>
<CAPTION>
OFFICER POSITION
------- --------
<S> <C>
John J. Hoey President, Chief Executive Officer
I. P. Brownlow Vice President, Treasurer, Chief Financial Officer
C. B. McDaniel Secretary and Counsel
</TABLE>
I. P. Brownlow: Mr. Brownlow, 36, joined the Company on June 1, 1989 as
Deputy Chief Accounting Officer. He was appointed Vice President for Marketing
and Information Services on November 1, 1991, and on September 1, 1992, became
Treasurer and Chief Financial Officer. He is also Vice President and Treasurer
of each of the Company's subsidiaries (except Hondo Magdalena Oil & Gas Limited
and Blue Nile Oil & Gas Company of Sudan Limited). Mr. Brownlow is a Chartered
Accountant and served with Ernst & Whinney in London. He has been seconded to
the Company by Lonrho Plc. He joined the Lonrho group in 1986 and has served in
financial functions with Lonrho in Central Africa and London prior to joining
the Company.
For descriptions of the other executive officers of the Company, see
"Information Regarding the Nominees."
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS OF THE COMPANY
The following table sets forth certain information concerning the beneficial
ownership of the Company's common stock as of January 4, 1994, by (i) each
person who is known by the Company to own beneficially more than five percent
of the Company's common stock, (ii) the Company's directors and executive
officers and (iii) all directors and executive officers as a group. To the
Company's knowledge, The Hondo Company is the only person who beneficially owns
more than five percent of the Company's common stock. The address of The Hondo
Company is 410 East College Boulevard, Roswell, New Mexico 88201.
<TABLE>
<CAPTION>
COMMON STOCK PERCENTAGE OF
BENEFICIALLY OWNED COMMON STOCK
------------------ -------------
<S> <C> <C>
The Hondo Company(1) 10,150, 200 78.0%
Robert O. Anderson See Note (1) --
I. P. Brownlow 0 --
John J. Hoey 0 --
C. B. McDaniel 0 --
Douglas G. McNair 0 --
John F. Price See Note (1) --
R.W. Rowland See Note (1) --
P.G.B. Spicer See Note (1) --
R.E. Whitten See Note (1) --
All directors and executive officers as
a group See Note (1) --
</TABLE>
(1) The shareholders of The Hondo Company and their approximate respective
percentages of ownership of The Hondo Company as of the above date are set
forth below:
<TABLE>
<CAPTION>
PERCENTAGE OF
THE HONDO COMPANY
THE HONDO COMPANY SHAREHOLDER COMMON STOCK
----------------------------- -----------------
<S> <C>
Robert O. Anderson 40.002%
Phelps Anderson, son of Robert O. Anderson 5.005%
Robert B. Anderson, son of Robert O. Anderson 5.005%
Lonrho, Inc. 49.988%
</TABLE>
Due to their shareholdings of The Hondo Company, Robert O. Anderson and
Lonrho, Inc. may be deemed to have shared voting and investment power as to
the shares owned by The Hondo Company. Due to its indirect ownership of 100%
of the stock of Lonrho, Inc., Lonrho Plc may also be deemed to beneficially
own such shares. The business addresses of the above-mentioned persons are
as follows:
Robert O. Anderson Lonrho, Inc. Lonrho Plc
The Hondo Company 805 3rd Avenue Cheapside House
410 East College Blvd. New York, NY 10022 138 Cheapside
Roswell, New Mexico 88201 London EC2V 6BL
England
Messrs. Price, Rowland, Spicer and Whitten are directors and officers of
Lonrho Plc and/or its subsidiaries. See "Information Regarding the
Nominees" and "Certain Transactions." On July 6, 1993, Robert O. Anderson
granted an option in favor of a subsidiary of Lonrho, Inc., to acquire up
to 25% of the shares of The Hondo Company out of his holdings. The option
may be exercised at any time on or before July 5, 1996. The exercise of
the option is subject to prior commitments and pledges to lenders made by
Robert O. Anderson with respect to the shares subject thereto.
5
<PAGE>
COMMITTEES, ATTENDANCE AND COMPENSATION OF DIRECTORS
The Company's Board of Directors has created and delegated certain of its
authority to an Audit Committee and a Compensation and Benefits Committee. The
Company does not have a standing Nominating Committee. The Bylaws authorize the
establishment of an Executive Committee which possesses and may exercise all of
the powers of the Board of Directors. No Executive Committee was appointed by
the Board during the fiscal year.
The Audit Committee currently consists of Messrs. Hoey, McNair and Price. The
Audit Committee performs numerous functions, including making a review of
management's selection of an independent accounting firm, meeting with the
independent accounting firm to review the scope and conduct of the annual
audit, reviewing the selection of acceptable accounting principles and making
inquiries about and reviewing the Company's policies and procedures with
respect to principles of business conduct, financial and accounting controls,
areas of special concern and other related matters. During fiscal year 1993,
the Audit Committee met on three occasions.
The Compensation and Benefits Committee consists of Messrs. McNair, Price and
Spicer. The primary functions of the Compensation and Benefits Committee are to
review and determine salaries of officers, to review and approve officers'
employment contracts, to review and establish Company policy with respect to
compensation of all employees stock options and stock appreciation rights under
the Company's 1993 Stock Incentive Plan, if approved by the shareholders.
During fiscal year 1993, the Compensation and Benefits Committee met on three
occasions.
During fiscal year 1993, there were seven meetings of the Board of Directors.
Messrs. Rowland and Whitten attended fewer than 75% of these meetings. Outside
directors of the Company are paid $15,000 per year. Mr. McNair was paid $8,750
for services as an outside director during fiscal year 1993.
6
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth, for the fiscal year ended September 30, 1993,
certain information concerning compensation paid to or accrued for the Chief
Executive Officer ("CEO") and the four most highly compensated executive
officers, other than the CEO, who were serving as executive officers on
September 30, 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
OTHER
ANNUAL AWARD OF ALL OTHER
SALARY BONUS COMPENSATION(1) OPTIONS/SARS COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ---- ------- ----- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert O. Anderson...... 1993 268,750 -- -- -- --
Chief Executive Offi-
cer(3) 1992 350,000 -- -- -- --
1991 350,000 -- -- --
John J. Hoey............ 1993 24,663 -- -- -- --
Chief Executive Offi-
cer(4) 1992 -- -- -- -- --
1991 -- -- -- --
I. P. Brownlow.......... 1993 170,000 -- -- -- --
Chief Financial Officer 1992 175,000 -- -- -- --
1991 103,000 -- -- --
William W. Daily........ 1993 145,702 -- -- -- 7,063
Vice President 1992 150,000 -- -- -- 7,813
1991 150,000 -- 7,500
Charles B. McDaniel..... 1993 131,127 -- -- -- 6,359
Secretary 1992 133,507 7,500 -- -- 6,954
1991 131,303 -- 3,000 7,565
</TABLE>
- --------
(1) "Other Annual Compensation" includes compensation for fiscal year 1992 and
1993 only, and perquisites and other personal benefits, securities or
property only if the aggregate amount of such compensation exceeds 10% of
the total of annual salary and bonus reported for the named executive
officer.
(2) The amounts in this column are the matching contributions made by the
Company under its profit sharing plan described below.
(3) Robert O. Anderson served as Chief Executive Officer until December 1,
1993.
(4) John J. Hoey became Chief Executive Officer on December 1, 1993.
Compensation shown under "Salary" is amount paid Mr. Hoey for services
performed for the Company from June through September 1993.
7
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
LONRHO PLC(1) HONDO OIL & GAS
------------------ ------------------
VALUE OF
NUMBER OF NUMBER OF UNEXERCISED
UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT OPTIONS/SARS AT
SEPTEMBER 30, 1993 SEPTEMBER 30, 1993 SEPTEMBER 30, 1993
(#) (#) ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Robert O. Anderson...... -- -- 115,711/35,000 0/0
I. P. Brownlow.......... -- -- 11,550/26,248 0/12,684
William W. Daily........ -- -- 10,000/7,000 0/0
Charles B. McDaniel..... -- -- 12,832/7,000 2,000/3,000 0/0
</TABLE>
- --------
(1) The Board of Directors of Lonrho Plc grants options to employees of
companies in which Lonrho Plc owns an interest. See "Security Ownership of
Management and Certain Beneficial Owners of the Company." The options are
granted under plans adopted and administered by Lonrho Plc.
There were no individual grants of stock options (whether or not in tandem
with stock appreciation rights ("SARs"), or freestanding SARs made during the
fiscal year ended September 30, 1993, to the named executive officers.
There were no awards made to the named executive officers in the fiscal year
ended September 30, 1993, under any long-term incentive plan.
The Company's defined benefit retirement plan was terminated on December 31,
1989. No other defined benefit or actuarial plan exists with respect to the
named executive officers. The Company has made available to all full-time
administrative employees who have completed at least one year of service a
defined contribution profit sharing plan ("401(k) Plan"). Qualifying employees
may contribute up to 10% of their annual earnings, but not in excess of the
maximum allowed by Internal Revenue Service regulations, and the Company will
match employee contributions up to a maximum of 5% of an employee's annual
earnings. Matching contributions made by the Company under the 401(k) plan for
the benefit of the named executive officers are included in the "Summary
Compensation Table."
The Company has no employment contracts or termination of employment and
change-in-control arrangements with the named executive officers. During the
fiscal year ended September 30, 1993, no adjustments or amendments of the
exercise price of stock options or SARs previously awarded to the named
executive officers were made.
Compensation and Benefits Committee Report
To: The Board of Directors
As members of the Compensation and Benefits Committee, it is our duty to
review and approve officers' employment contracts, to review and establish
company policy with respect to compensation of all employees and to make
recommendations to the Board regarding the grant of stock options.
Fiscal 1993 has been a year of enormous challenge to the Company caused
by a very critical cash position and prior year losses, now largely
stemmed. Hondo's principal effort, against the above background, was to
continue work in the Magdalena Basin by obtaining a financially strong and
technically expert partner. This has been accomplished.
8
<PAGE>
Due to the above, the Board has taken strong measures to decrease all
expenses with the area of remuneration being of particular concern of the
Committee. Staff has been greatly reduced, with Hondo personnel falling
from 19 to 14 and the whole Fletcher payroll being eliminated as of the end
of September. Executive salaries have also been diminished.
During 1993, the compensation of R.O. Anderson, who resigned as CEO
effective December 1, 1993, was reduced from $350,000 to $275,000 in
January and again to $175,000 in July. Phelps Anderson resigned from the
Board and the Company in June 1993.
Concomitant with R.O. Anderson's resignation as CEO the Board appointed
one of its outside Directors, John J. Hoey to that position. Mr. Hoey had
been elected to the Board in June when he immediately began to spend much,
if not most, of his time on Company matters. Mr. Hoey's compensation is
$150,000 yearly; pending stockholders approval the Board has granted him
options of 100,000 shares of the Company's common stock.
Mr. Hoey's duties are specific. He is to take whatever actions are
required to control expenses, keeping these to a minimum and commensurate
with the Company's cash flow. He is to dispose of the Company's remaining
real estate assets, he must manage Hondo's Colombian venture under either
of two scenarios - success or failure. He is responsible to the Board and
stockholders for the day to day operations of the Company.
In November 1993, the Committee recommended an incentive stock option
plan which the Board has approved. This plan will be submitted to the
stockholders in February 1994 for final approval. The plan is for 350,000
shares of Hondo common stock. If approved, three executives will be granted
options with an option price of $7.50 a share as per the following table:
John J. Hoey 100,000 shares
I.P. Brownlow 15,000 shares
C.B. McDaniel 15,000 shares
The Board is also recommending that outside directors be awarded options
under the 1993 plan in the amount of 15,000 shares at fair market value on
the date of the grant.
Both the Committee and the Board feel there is a real need for a stock
option plan given the present difficulties the Company is facing and a
future which depends entirely on success in its Colombian venture. Without
such an incentive it might prove difficult to keep the few key executives
the Company still has.
Finally, an annual fee of $15,000 was approved for outside Directors. At
present there is only one such outside director, Douglas G. McNair.
Compensation and Benefits Committee
Douglas G. McNair, Chairman John F.
Price P.G.B. Spicer
Date: January 25, 1994
The above report of the Compensation and Benefits Committee will not be
deemed to be incorporated by reference into any filing by the Company under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates same by reference.
9
<PAGE>
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Messrs. Price and Spicer, members of the Compensation and Benefits Committee,
are also Associate Director and Executive Director, respectively, of Lonrho
Plc. See "Security Ownership of Management and Certain Beneficial Owners of the
Company" and "Certain Transactions."
Performance Graph
The following graph compares the yearly change in the Company's cumulative
total shareholder return on its common stock to that of the American Stock
Exchange Market Index and a group of peer companies engaged in oil and gas
exploration and production.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG HONDO OIL & GAS CO., AMEX MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION> --------- -------- --------
AMEX PEER
HONDO OIL MARKET GROUP
& GAS CO. INDEX INDEX
--------- -------- --------
<S> <C> <C> <C>
OCT. 1, 1988 $ 100 $ 100 $ 100
SEPT. 30, 1989 $ 91 $ 134 $ 126
SEPT. 30, 1990 $ 93 $ 110 $ 130
SEPT. 30, 1991 $ 109 $ 130 $ 145
SEPT. 30, 1992 $ 60 $ 134 $ 128
SEPT. 30, 1993 $ 57 $ 161 $ 155
</TABLE>
ASSUMES $100 INVESTED ON OCT. 1, 1988
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING SEP. 30, 1993
The stock price performance depicted in the above graph is not necessarily
indicative of future price performance. The Performance Graph will not be
deemed to be incorporated by reference in any filing by the Company under the
Securities Act of 1933 or the Securities Exchange Act 1934, except to the
extent that the Company specifically incorporates same by reference.
REPORTS UNDER SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and the rules thereunder
require the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and the American Stock Exchange and to furnish the Company with
copies.
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<PAGE>
Based on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that,
from October 1, 1992 to September 30, 1993, all filing requirements applicable
to its officers, directors, and greater than ten-percent beneficial owners
were complied with except that two reports, covering a number of transactions
in two months, were filed late by William R. Pagen. These reports were filed
after Mr. Pagen's resignation from the Board of Directors and were not more
than seven days late in either instance.
CERTAIN TRANSACTIONS
Certain officers and employees of the Company (including Messrs. Robert O.
Anderson and Mr. Brownlow) provide services to The Hondo Company. For the
fiscal year ended September 30, 1993, the Company made a charge to The Hondo
Company of $91,000 for these services. The Company believes that there is no
incremental cost to the Company in excess of that charged for these services.
On November 30, 1988, the Company made a private placement of a $75,000,000
13.5% Senior Subordinated Note to Thamesedge Ltd., a wholly owned subsidiary
of Lonrho Plc. See "Security Ownership of Management and Certain Beneficial
Owners of the Company." The terms of the transaction were approved by the
Board of Directors upon the recommendation of a special committee of the Board
appointed to review the transaction. Messrs. Rowland, Spicer and Whitten took
no part in these considerations. The terms are substantially the same as those
which were under discussion and negotiation with an underwriter for a public
offering of a similar debt instrument.
During the fiscal years ended September 30, 1991 and 1992, the Company
entered into and amended a loan agreement with Lonrho Plc pursuant to which it
borrowed the sum of $32,000,000. See "Security Ownership of Management and
Certain Beneficial Owners of the Company." The interest rate of the loan is
similar to that in the Company's former working capital loan with a bank for
its refining and marketing operations. The terms of the loan, and all
amendments thereto, were approved by all of the disinterested directors of the
Company.
On December 18, 1992, the Company entered into an agreement with Lonrho Plc
and Thamesedge Ltd. to defer interest and principal payments on the loans
described above. On April 30, 1993, Lonrho Plc loaned the Company an
additional $3,000,000, and as security the Company granted to Lonrho Plc a
mortgage on certain real property. On June 25, 1993, Lonrho Plc loaned the
Company an additional $4,000,000 (of which $3,000,000 was advanced as of
September 30, 1993), and as security the Company granted to Lonrho Plc a
mortgage on certain other real property. The interest rate of the new loans is
the same as that for other loans from Lonrho Plc. The terms of the agreement
to defer interest and principal payments and the terms of the new loans were
approved by all of the disinterested directors of the Company.
F. E. Wright, a subsidiary of Lonrho Plc, acts as insurance broker for
certain of the Company's policies of insurance. See "Security Ownership of
Management and Certain Beneficial Owners of the Company." The insurance
companies who provide the policies are those from whom coverage could be
obtained by the use of other independent insurance brokers. The terms of these
policies are identical to the ones which could be obtained through any
independent broker. Management believes that F. E. Wright is able to obtain
more favorable premiums for certain of the Company's insurance coverage by
virtue of inclusion in the larger, group-wide "Lonrho Global Program." During
the fiscal year ended September 30, 1993, the Company paid commissions of
$19,500 to F. E. Wright.
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<PAGE>
APPROVAL OF THE COMPANY'S 1993
STOCK INCENTIVE PLAN
GENERAL
The Company's 1993 Stock Incentive Plan (sometimes referred to herein as the
"Plan") was approved by the Company's Board of Directors on November 15, 1993.
The purpose of the Plan is to attract, motivate, retain and reward key
employees (including officers) of the Company and its subsidiaries and certain
other eligible persons. The Plan includes an automatic award feature to
attract, motivate and retain experienced and knowledgeable outside directors
through the grant of a fixed award to them (the "Director Award"). Typically,
the only consideration received by the Company for the grant of an award will
be past services and/or the expectation of future services. The following
summary is qualified in its entirety by reference to the Plan, which is set
forth in Exhibit A attached hereto. Capitalized terms not otherwise defined
herein have the meaning specified in the Plan.
The Plan consists of two parts: the Key Employee Program under which options
(both incentive and non-qualified) and stock appreciation rights may be granted
to officers, key employees and certain other individuals who perform
significant services for the Company or one of its subsidiaries; and the
Director Award under which a non-qualified option will be automatically granted
to each eligible non-employee director under certain circumstances. Mr. McNair
is the only director currently eligible for the Director Award.
ADMINISTRATION
The Director Award feature of the Plan is, to the extent possible, self
effectuating. The Plan is administered by the Compensation and Benefits
Committee composed of three or more directors appointed from time to time by
the Board of Directors of the Company (the "Committee"). The Committee has
considerable discretion under the Plan. See Section 1.2 of the Plan. The
Committee members are Messrs. McNair, Price and Spicer.
SHARES SUBJECT TO THE PLAN
The shares available under the Plan are authorized but unissued shares of the
Company's common stock, $1.00 par value. The aggregate amount of the stock
issuable upon exercise of all options and stock appreciation rights granted
under the Plan may not exceed 350,000 shares, subject to adjustment upon the
occurrence of certain events such as a stock split or dividend, reorganization,
merger, recapitalization, consolidation or other similar corporate change. Of
the 350,000 shares, 305,000 shares are designated for grants to officers (who
may also be directors), key employees and certain other eligible persons under
the Key Employee Program, and 45,000 shares are designated for the automatic
grants to outside directors. A grant to any one individual under the Key
Employee Program may not exceed 100,000 shares in any one-year period. If any
option or right granted under the Plan expires or terminates without having
been exercised in full, the unissued shares will again be available for
issuance pursuant to the Plan.
ELIGIBILITY
Officers and certain other key employees of the Company are eligible for
grants of options by the Committee. In addition, certain other eligible persons
(including significant agents and consultants) who perform substantial services
for the Company or one of its subsidiaries of a nature similar to those
performed by key employees may also be eligible. The Committee determines which
eligible persons will receive awards
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<PAGE>
under the Key Employee Program and the amount of those awards. Members of the
Committee are not, while members of the Committee, eligible to receive
discretionary grants of options or stock appreciation rights under the Key
Employee Program. Under the Plan, each director who is not an officer or
employee of the Company or any holder of more than 10% of the common stock of
the Company is automatically granted an option over 15,000 shares on the date
of his or her election.
There is no maximum number of shares subject to stock option or other stock
awards (other than the one-year limit for one individual), or limit on the
number of awards, which may be granted to any eligible individual under the
Plan, except under the Director Award Program. The Plan is not exclusive. A
person who holds an award may be granted additional awards under the Plan or
under other plans or by appropriate authorization of the Board or the Committee
without reference to a specific plan.
The Board may also grant to a holder of an award under the Key Employee
Program, if he or she is otherwise eligible and (where consent is required)
consents, a new or modified award in lieu of an award previously granted with
respect to a number of shares, at an exercise price and for a length of time,
which is greater or lesser than under the earlier award, or may do so by
cancellation and regrant, amendment, substitution or otherwise, subject only to
the general limitations described in the Plan or under applicable law.
TERMS OF EXERCISE OF OPTIONS
Key Employee Options
The purchase price of each share of stock covered by an option granted under
the Plan is determined by the Committee, but in no event may such price be less
than 100% of the Fair Market Value (as defined in the Plan) of such share on
the date such option is granted. Options generally are exercisable in such
installments as the Committee may determine. In no event, however, may an
option be exercisable prior to six months, or after five years, from the date
of grant. The Committee may designate each option as a "non-qualified" or an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code. For a summary of the differences in the tax treatment of the two
types of options, see "Federal Income Tax Consequences" below.
An option holder may pay the option exercise price (i) in cash or by check,
(ii) by delivery of previously acquired shares of common stock provided,
however, that the Committere may disallow payment in such form, (iii) by the
promissory note (consistent with the terms of Section 1.8 of the Plan) of the
option holder if authorized by the Committee or the applicable award agreement
and (iv) by notice and third party payment in such manner as may be authorized
by the Committee.
Director Awards
The purchase price of an option automatically granted under the Plan is not
less than Fair Market Value on the date of grant. One-half the option is
exercisable six months after the date of grant, and the remainder of the option
is exercisable 18 months after the date of grant. An option under the Director
Award feature is a "non-qualified stock option" (see "Federal Income Tax
Consequences" below) and the option price may be paid in cash or previously
owned shares of common stock or in any combination of the foregoing. An option
terminates in all events five years after the date of grant, or earlier: (i) in
the event of death or disability of the holder, 12 months after the date of
death or disability; or, (ii) in the event the holder no longer serves as a
director of the Company, three months after the date of such termination
(options not then exercisable expire on the date of such termination).
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STOCK APPRECIATION RIGHTS
A stock appreciation right ("SAR") is a right to receive payment based on the
appreciation in the fair market value of a share of common stock from the date
of grant to the date of exercise. SARs are only granted to key employees and
other eligible persons under the Plan. The Committee may grant such rights
concurrently with an option covering the same number of shares or in respect of
an outstanding option. Unless an individual award agreement otherwise provides,
such right is exercisable only to the extent that the option to which it is
attached is exercisable. The number of shares with respect to which SARs are
exercised will be charged against the aggregate amount of common stock
available under the Plan.
Upon exercise of an SAR and surrender of the related option, the Company will
pay the holder an amount equivalent to the difference between the fair market
value of a share of common stock of the Company on the date of exercise and the
exercise price of the stock appreciation right, times the number of shares with
respect to which the right is exercised. The amount may be paid in cash, common
stock or a combination thereof, subject to the discretion of the Committee.
CONTINUATION OF EMPLOYMENT
No option or SAR will be exercisable unless the recipient remains in the
continuous employment of the Company or its subsidiaries for at least six
months following the applicable date of grant.
Upon the date a recipient is no longer employed by the Company for any
reason, the recipient's options under the Key Employee Program which have not
yet become exercisable usually will terminate, while options which have become
exercisable usually must be exercised within three months from such date, or
one year from such date if the termination of employment is a result of
retirement, death or total disability. Such periods, however, cannot exceed the
expiration dates of the options and are subject to extension, acceleration of
ability to exercise or amendment in the discretion of the Committee, all as
described in the Plan. SARs have the same termination provisions as the options
to which they relate.
ACCELERATION OF AWARDS, CHANGE IN CONTROL, ADJUSTMENTS
Upon the occurrence of a merger, liquidation, sale of all the assets, or
change in control, which constitutes a "Change in Control Event" (as defined in
the Plan), each option and each SAR previously granted under the Key Employee
Program will immediately become exercisable. Such acceleration will
automatically occur unless the Committee, prior the Change in Control Event,
determines otherwise. The Committee may (subject to the consent of the holder,
where required) substitute awards or modify the terms and conditions or an
outstanding award, among other changes, to extend the term, accelerate vesting,
reduce the price or otherwise preserve or enhance intended benefits, subject to
the other limits of the Plan. An option under the Director Award feature will
terminate upon an event or transaction which the Company does not survive,
provided that the holder has been given a right to exercise the option prior to
its temrination, or an adjustment to the option is made as a part of the
transaction.
OPTIONS GRANTED
On November 15, 1993, the Committee granted options, subject to approval of
the Plan by the shareholders, as follows:
<TABLE>
<CAPTION>
Name and Position Number of Shares
----------------- ----------------
<S> <C>
John J. Hoey, Chief Executive Officer, Director 100,000 shares
Ian P. Brownlow, Chief Financial Officer 15,000 shares
C.B. McDaniel, Secretary and Counsel, Director 15,000 shares
</TABLE>
14
<PAGE>
The exercise price for the options is $7.50 (the Fair Market Value of the
common stock on November 15, 1993 was $6.50), and one-half the options granted
will be exercisable six months after the date of grant, or May 15, 1994, and
the remainder will be exercisable 18 months after the date of grant, or May 15,
1995. The options are to be treated as incentive stock options to the extent
permitted under the Internal Revenue Code ($100,000 in value determined as of
the date of grant) and the remainder, as non-qualified options. See "Federal
Income Tax Consequences" below.
On November 15, 1993, through the Board of Directors' approval of the Plan,
but subject to approval of the Plan by the shareholders, Mr. McNair was granted
an option over 15,000 shares, at the same price and with the same vesting
schedule as described above. The option is a non-qualified option.
No specific valuation of these options was made. The potential realizable
value at an assumed annual rate of stock appreciation for the option term at 5%
would be $79,583 for Mr. Hoey's option, and $11,937 for the options of Messrs.
Brownlow, McNair and McDaniel. This potential realizable value is based solely
upon an arbitrarily assumed rate of appreciation used in other SEC regulations.
Actual gains, if any, on options are dependent on the future performance of the
Company's common stock, overall stock market conditions, and other factors. No
other determinations have been made with respect to other persons to be granted
awards under the Plan.
On January 19, 1994 the fair market value of a share of common stock was
$6.38.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of the Plan under current federal law,
which is subject to change, are summarized in the following discussion which
deals with the general tax principles applicable to the Plan. State and local
tax consequences are beyond the scope of this summary.
Non-Qualified Stock Options
No taxable income will be realized by an optionee upon the grant of a non-
qualified stock option. Upon exercise of a non-qualified stock option, the
optionee will realize ordinary income in an amount measured by the excess of
the fair market value of the shares on the date of exercise over the option
price, and the Company will be entitled to a corresponding deduction. Upon a
subsequent disposition of the shares, the participant will realize short-term
or long-term capital gain or loss measured by the difference between the fair
market value of the shares on the date of exercise and the amount realized upon
disposition of the shares. The Company will not be entitled to any further
deduction at that time.
Incentive Stock Options
An optionee who receives an incentive stock option will not be treated as
receiving taxable income upon the grant of the option or upon the exercise of
the option. However, any appreciation in share value from the date of grant to
the date of exercise will be an item of tax preference in determining liability
for the alternative minimum tax. If stock acquired pursuant to an incentive
stock option is not sold or otherwise disposed of within two years from the
date of grant of the option or within one year after the date of exercise, any
gain or loss resulting from disposition of the stock will be treated as long-
term capital gain or loss. If stock acquired upon exercise of an incentive
stock option is disposed of prior to the expiration of such holding periods
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(a "disqualifying disposition"), the optionee will realize ordinary income in
the year of such disposition in an amount equal to the excess of the fair
market value of the stock on the date of exercise over the exercise price. Any
gain in excess of that ordinary income amount generally will be taxed at
capital gains rates. However, under a special rule, the ordinary income
realized upon a disqualifying disposition will not exceed the amount of the
optionee's gain.
The Company will not be entitled to any deduction as a result of the grant or
exercise of an incentive stock option or on a later disposition of the stock
received, except that in the event of a disqualifying disposition, the Company
will be entitled to a deduction equal to the amount of ordinary income realized
by the optionee.
Stock Appreciation Rights
At the time of receiving an SAR the participant will not recognize any
taxable income. Likewise, the Company will not be entitled to a deduction for
the SAR. Upon the exercise of an SAR, the participant will generally recognize
ordinary income in an amount equal to the cash and/or fair market value of the
shares received. If a participant receives stock, then the amount recognized as
ordinary income becomes the participant's tax basis for determining gains or
losses (taxable either as short-term or long-term capital gain or loss,
depending on whether or not the shares are held for more than one year) on the
subsequent sale of such stock. The holding period for such shares commences as
of the date ordinary income is recognized. The Company will be entitled to a
deduction in the amount and at the time that the participant first recognizes
ordinary income.
Special Rules Governing Persons Subject to Section 16(b)
Under the federal tax law, special rules may apply to participants in the
Plan who are subject to the restrictions on resale of the common stock under
Section 16(b) of the Securities Exchange Act. These rules, which effectively
take into account the Section 16(b) restrictions, apply in limited
circumstances and may impact the timing and/or amount of income recognized by
these persons with respect to certain stock-based awards under the Plan.
Limitations on Deductibility
If, as a result of certain changes in control of the Company, a participant's
options or SARs become immediately exercisable the additional economic value,
if any, attributable to the acceleration may be deemed a "parachute payment."
The additional value will be deemed a parachute payment if such value, when
combined with the value of other payments which are deemed to result from the
change in control, equals or exceeds a threshold amount equal to 300% of the
participant's average annual taxable compensation over the five calendar years
preceding the year in which the change in control occurs. In such case, the
excess of the total parachute payments over such participant's average annual
taxable compensation will be subject to a 20 percent non-deductible excise tax
in addition to any income tax payable. The Company will not be entitled to a
deduction for that portion of any parachute payment which is subject to the
excise tax. A "change in control" for these purposes is defined in Section
5.1(g) of the Plan.
Effective January 1, 1994, the amount which may be deducted by the Company
with respect to compensation paid to the Chief Executive Officer and four other
most highly compensated executives is limited to $1,000,000 per tax year for
each individual. Notwithstanding the preceding sentence, certain
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<PAGE>
awards under the Plan and certain other compensation paid by the Company may be
exempt from the $1,000,000 because of a "performance-based" compensation
exception.
AMENDMENT AND TERMINATION
The Board of Directors or the Committee may at any time suspend, amend or
terminate the Plan; provided that, except for certain adjustments made in the
event of a change in the outstanding shares of common stock of the company, no
amendment or modification may be adopted which would increase the maximum
number of shares of stock issuable under the Plan, modify the requirements for
participation in the Plan or materially increase the benefits accruing to
participants in the Plan without the approval of the holders of a majority of
the Company's outstanding capital stock entitled to vote at a meeting held for
the purpose of approving such amendment. Amendments to the Plan that are
permitted without shareholder approval could increase the costs to the Company
of the Plan. The amendment, suspension or termination of the Plan will not
alter or impair any rights or obligations under any option or right theretofore
granted under the Plan without the consent of the holder of such option or
right.
TERM OF THE PLAN
Unless previously terminated by the Company's Board of Directors or the
Committee in accordance with the provisions discussed above, the Plan will
terminate on November 14, 2003, and no option or right will be granted under it
thereafter, but such termination will not affect any option or right previously
granted.
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares of common stock
present or represented and entitled to vote at the Annual Meeting is required
for approval of the 1993 Stock Incentive Plan.
Subject to approval by the shareholders, Messrs. Hoey, McDaniel and McNair
have received options under the Plan and Messrs. Hoey and McDaniel may receive
additional options under the Plan. Because of this personal interest in the
Plan, each abstained from voting upon it. The Board believes that the Plan is
in the best interests of the Company and its shareholders and, accordingly, has
approved the Plan. The Board of Directors recommends a vote FOR the approval of
the 1993 Stock Incentive Plan.
OTHER MATTERS
The Board of Directors knows of no matters which are likely to be brought
before the Annual Meeting other than those listed in the attached Notice of
Annual Meeting. If any other matters should properly come before the Annual
Meeting or any adjournment thereof, the persons named on the enclosed proxy
card will vote all proxies given to them in accordance with their best judgment
on such matters.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company engaged Ernst & Young as principal independent public accountants
for the audit of the Company's financial statements for the fiscal year ended
September 30, 1993. Representatives of Ernst & Young are expected to be present
at the Annual Meeting, will have an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions. The
Company has not yet selected its certified public accountants for the current
fiscal year.
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SOLICITATION OF PROXIES
Solicitation of proxies is to be conducted primarily by mail, although
officers and other employees of the Company, without receiving additional
compensation therefor, may also solicit proxies by telephone, telegraph or
personal interview. Arrangement may be made with brokerage houses and with the
Company's transfer agent, Chemical Trust Company of California, Los Angeles,
California, to send notices, proxy statements, proxies and other materials to
shareholders. The cost for these services is estimated to be nominal. All costs
of soliciting proxies will be borne by the Company.
By Order of the Board of Directors,
C. B. McDaniel
Secretary
January 28, 1994
18
<PAGE>
EXHIBIT A
HONDO OIL & GAS COMPANY
1993 STOCK INCENTIVE PLAN
I. THE PLAN.
1.1 Purpose
The purpose of this Plan is to attract, motivate, retain and reward key
employees, including officers, whether or not directors, of the Company and
certain other eligible persons by providing incentives related to equity
interests in and the financial performance of the Company. In addition, the
purpose of the Plan is to attract, motivate and retain experienced and
knowledgeable independent directors through the benefits provided under Article
VI. Capitalized terms are defined in Article V.
1.2 Administration and Authorization; Power and Procedure.
(a) Committee. This Plan shall be administered by and all Awards to Eligible
Employees shall be authorized by the Committee. Action of the Committee with
respect to the administration of this Plan shall be taken pursuant to a
majority vote or by written consent of its members.
(b) Plan Awards; Interpretation; Powers of Committee. Subject to the express
provisions of this Plan, the Committee shall have the authority:
(i) to determine from among those persons eligible the particular
Eligible Employees who will receive any Awards;
(ii) to grant Awards to Eligible Employees, determine the price at which
securities will be offered or awarded and the amount of securities to be
offered or awarded to any of such persons, and determine the other specific
terms and conditions of such Awards consistent with the express limits of
this Plan, and establish the installments (if any) in which such Awards
shall become exercisable, or determine that no delayed exercisability is
required, and establish the events of termination of such Awards;
(iii) to approve the forms of Award Agreements (which need not be
identical either as to type of award or among Eligible Employees);
(iv) to construe and interpret this Plan and any agreements defining the
rights and obligations of the Company and Eligible Employees under this
Plan, further define the terms used in this Plan, and prescribe, amend and
rescind rules and regulations relating to the administration of this Plan;
(v) to cancel, modify, or waive the Corporation's rights with respect to,
or modify, discontinue, suspend, or terminate any or all outstanding Awards
held by Eligible Employees, subject to any required consent under Section
4.6;
(vi) to accelerate or extend the exercisability or extend the term of any
or all such outstanding Awards (including, without limitation, in the event
of termination of employment, death, a change in control, reorganization or
other circumstances deemed appropriate by the Committee) within the maximum
five-year term of Awards under Section 1.6; and
(vii) to make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
A-1
<PAGE>
Notwithstanding the foregoing, the provisions of Article VI relating to Non-
Employee Director Awards shall be automatic and, to the maximum extent
possible, self-effectuating, and the discretion of the Committee shall not
extend to such Awards in any manner that would be impermissible under Rule 16b-
3(c)(2).
(c) Binding Determinations. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or pursuant to
this Plan shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. No member of the Board or
Committee, or officer of the Corporation or any Subsidiary, shall be liable for
any such action or inaction of the entity or body, of another person or, except
in circumstances involving bad faith, of himself or herself. Subject only to
compliance with the express provisions hereof, the Board and Committee may act
in their absolute discretion in matters within their authority related to this
Plan.
(d) Reliance on Experts. In making any determination or in taking or not
taking any action under this Plan, the Committee or the Board, as the case may
be, may obtain and may rely upon the advice of experts, including professional
advisors to the Corporation. No director, officer or agent of the Company shall
be liable for any such action or determination taken or made or omitted in good
faith.
(e) Delegation. The Committee may delegate ministerial, non-discretionary
functions to individuals who are officers or employees of the Company.
1.3 Participation.
Awards may be granted by the Committee only to those persons that the
Committee determines to be Eligible Employees. An Eligible Employee who has
been granted an Award may, if otherwise eligible, be granted additional Awards
if the Committee shall so determine, subject to the limitations of Section 1.4.
Non-Employee Directors shall not be eligible to receive any Awards except for
Non-Qualified Stock Options granted automatically without action of the
Committee under the provisions of Article VI.
1.4 Shares Available for Awards.
Subject to the provisions of Section 4.2, the capital stock that may be
delivered under this Plan shall be shares of the Corporation's authorized but
unissued Common Stock and any shares of its Common Stock held as treasury
shares.
(a) Number of Shares; Individual Limit. The maximum number of shares of
Common Stock that may be delivered pursuant to Awards granted to Eligible
Employees under this Plan shall not exceed 305,000 shares, and the maximum
number of shares of Common Stock that may be delivered under the provisions of
Article VI shall not exceed 45,000 shares, in each case subject to adjustments
contemplated by Section 4.2. The maximum number of shares of Common Stock which
may be delivered pursuant to Awards granted during any one-year period to any
individual Eligible Employee under this Plan shall not exceed 100,000, subject
to adjustments contemplated by Section 4.2.
(b) Calculation of Available Shares and Replenishment. Shares subject to
outstanding Awards of derivative securities (as defined in Rule 16a-1(c) under
the Exchange Act) shall be reserved for issuance. If any option or other right
to acquire shares of Common Stock under an Award shall expire or be cancelled
or terminated without having been exercised in full, the unpurchased shares
subject thereto shall again be available for the purposes of the Plan, subject
to any applicable limitations under Rule 16b-3. If a Stock Appreciation Right
or similar right is exercised, the number of shares of Common Stock to which
such
A-2
<PAGE>
exercise relates under the applicable Award shall be charged against the
maximum amount of Common Stock that may be delivered pursuant to Awards under
this Plan and, if applicable, such Award. If the Corporation withholds shares
of Common Stock pursuant to Section 4.5, the number of shares that would have
been deliverable with respect to an Award but that are withheld pursuant to the
provisions of Section 4.5 may in effect not be issued, but the aggregate number
of shares issuable with respect to the applicable Award and under the Plan
shall be reduced by the number of shares withheld and such shares shall not be
available for additional Awards under this Plan.
1.5 Grant of Awards.
Subject to the express provisions of this Plan, the Committee shall determine
the number of shares of Common Stock subject to each Award, and the price (if
any) to be paid for the shares or the Award. Each Award shall be evidenced by
an Award Agreement signed by the Corporation and, if required by the Committee,
by the Participant.
1.6 Award Period.
Each Award and all executory rights or obligations under the related Award
Agreement shall expire on such date (if any) as shall be determined by the
Committee, but not later than five (5) years after the Award Date.
1.7 Limitations on Exercise and Vesting of Awards.
(a) Provisions for Exercise.
No Award shall be exercisable until at least six months after the initial
Award Date, and once exercisable an Award shall remain exercisable until the
expiration or earlier termination of the Award, unless the Committee otherwise
provides.
(b) Procedure. Any exercisable Award shall be deemed to be exercised when the
Secretary of the Corporation receives written notice of such exercise from the
Eligible Employee, together with any required payment made in accordance with
Section 2.2.
(c) Fractional Shares/Minimum Issue. Fractional share interests shall be
disregarded, but may be accumulated. The Committee, however, may determine in
the case of Eligible Employees that cash, other securities, or other property
will be paid or transferred in lieu of any fractional share interests. No fewer
than 100 shares may be purchased on exercise of any Award at one time unless
the number purchased is the total number at the time available for purchase
under the Award.
1.8 Acceptance of Notes to Finance Exercise.
The Corporation may, with the Committee's approval, accept one or more notes
from any Eligible Employee in connection with the exercise or receipt of any
outstanding Award; provided that any such note shall be subject to the
following terms and conditions:
(a) The principal of the note shall not exceed the amount required to be
paid to the Corporation upon the exercise or receipt of one or more Awards
under the Plan and the note shall be delivered directly to the Corporation
in consideration of such exercise or receipt.
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(b) The initial term of the note shall be determined by the Committee;
provided that the term of the note, including extensions, shall not exceed
a period of five (5) years.
(c) The note shall provide for full recourse to the Eligible Employee and
shall bear interest at a rate determined by the Committee but not less than
the applicable imputed interest rate specified by the Code.
(d) If the employment of the Eligible Employee terminates, the unpaid
principal balance of the note shall become due and payable on the 10th
business day after such termination; provided, however, that if a sale of
such shares would cause such Eligible Employee to incur liability under
Section 16(b) of the Exchange Act, the unpaid balance shall become due and
payable on the 10th business day after the first day on which a sale of
such shares could have been made without incurring such liability assuming
for these purposes that there are no other transactions by the Eligible
Employee subsequent to such termination.
(e) If required by the Committee or by applicable law, the note shall be
secured by a pledge of any shares or rights financed thereby in compliance
with applicable law.
(f) The terms, repayment provisions, and collateral release provisions of
the note and the pledge securing the note shall conform with applicable
rules and regulations of the Federal Reserve Board as then in effect.
1.9 No Transferability.
Awards may be exercised only by, and amounts payable or shares issuable
pursuant to an Award shall be paid only to (or registered only in the name
of), the Eligible Employee or, if the Eligible Employee has died, the Eligible
Employee's Beneficiary or, if the Participant has suffered a Disability, the
Eligible Employee's Personal Representative, if any, or if there is none, the
Eligible Employee, or (to the extent, if any, permitted by applicable law and
Rule 16b-3) to a third party pursuant to such conditions and procedures as the
Committee may establish in the Award Agreement or by amendment thereto. Other
than by will or the laws of descent and distribution or pursuant such other
exceptions to transfer restrictions under Rule 16b-3 and applicable law as may
hereafter be so authorized (and, in the case of an Incentive Stock Option,
consistent therewith), no right or benefit under this Plan or any Award shall
be transferrable by the Eligible Employee or shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge (other than to the Corporation) and any such attempted action shall be
void. The Corporation shall disregard any attempt at transfer, assignment or
other alienation prohibited by the preceding sentences and shall pay or
deliver any cash or shares of Common Stock issuable on exercise of an Award in
accordance with the provisions of this Plan. The designation of a Beneficiary
hereunder shall not constitute a transfer for these purposes. The restrictions
set forth herein shall not apply to shares actually issued on exercise of
Awards, except as to the extent required by Section 4.4 or by the Committee in
the Award Agreement.
II. OPTIONS.
2.1 Grants.
One or more Options may be granted under this Article to any Eligible
Employee. Each Option granted may be either an Option intended to be an
Incentive Stock Option, or not so intended, and such intent shall be indicated
in the applicable Award Agreement.
2.2 Option Price.
(a) Pricing Limits. The purchase price per share of the Common Stock covered
by each Option shall be determined by the Committee at the time of the Award,
but shall not be less than 100% (110% in the case of
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an Incentive Stock Option granted to an Eligible Employee who owns or is deemed
to own under Section 424(d) of the Code more than 10% of the total combined
voting power of all classes of stock of the Corporation) of the Fair Market
Value of the Common Stock on the date of grant.
(b) Payment Provisions. The purchase price of any shares purchased on
exercise of an Option granted under this Article shall be paid in full at the
time of each purchase in one or a combination of the following methods: (i) in
cash or by electronic funds transfer; (ii) by check payable to the order of the
Corporation;(iii) if authorized by the Committee or specified in the applicable
Award Agreement, by a promissory note of the Eligible Employee consistent with
the requirements of Section 1.8; (iv) by notice and third party payment in such
manner as may be authorized by the Committee; or (v) by the delivery of shares
of Common Stock of the Corporation already owned by the Eligible Employee,
provided, however, that the Committee may in its absolute discretion limit the
Eligible Employee's ability to exercise an Award by delivering such shares.
Shares of Common Stock used to satisfy the exercise price of an Option shall be
valued at their Fair Market Value on the date of exercise.
2.3 Limitations on Grant and Terms of Incentive Stock Options.
(a) $100,000 Limit. To the extent that the aggregate "fair market value" of
stock with respect to which incentive stock options first become exercisable by
a Eligible Employee in any calendar year exceeds $100,000, taking into account
both Common Stock subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of the Company or any
parent corporation, such options shall be treated as nonqualified stock
options. For this purpose, the "fair market value" of the stock subject to
options shall be determined as of the date the options were awarded. In
reducing the number of options treated as incentive stock options to meet the
$100,000 limit, the most recently granted options shall be reduced first. To
the extent a reduction of simultaneously granted options is necessary to meet
the $100,000 limit, the Committee may, in the manner and to the extent
permitted by law, designate which shares of Common Stock are to be treated as
shares acquired pursuant to the exercise of an Incentive Stock Option.
(b) Option Period. Each Option and all rights thereunder shall expire no
later than five (5) years after the Award Date.
(c) Other Code Limits. There shall be imposed in any Award Agreement relating
to Incentive Stock Options such terms and conditions as from time to time are
required in order that the Option be an "incentive stock option" as that term
is defined in Section 422 of the Code.
2.4 Option Repricing/Cancellation and Regrant/Waiver of Restrictions.
Subject to Section 1.4 and Section 4.6 and the specific limitations on Awards
contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee
any adjustment in the exercise or purchase price, the number of shares subject
to, the restrictions upon or the term of, an Award granted under this Article
by cancellation of an outstanding Award and a subsequent regranting of an
Award, by amendment, by substitution of an outstanding Award, by waiver or by
other legally valid means. Such amendment or other action may result among
other changes in an exercise or purchase price which is higher or lower than
the exercise or purchase price of the original or prior Award, provide for a
greater or lesser number of shares subject to the Award, or provide for a
longer or shorter vesting or exercise period. Notwithstanding the preceding
sentence, if the exercise or purchase price of an Award is reduced by
amendment, such price shall not be less than the Fair Market Value of the
shares subject to the Award on the date of such amendment.
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III. LIMITED STOCK APPRECIATION RIGHTS.
3.1 Grants.
In its discretion, the Committee may grant Stock Appreciation Rights to any
Eligible Employee either concurrently with the grant of an Option or in respect
of an outstanding Option, in whole or in part. Any Stock Appreciation Right
granted in connection with an Incentive Stock Option shall contain such terms
as may be required to comply with the provisions of Section 422 of the Code and
the regulations promulgated thereunder, unless the Eligible Employee otherwise
agrees.
3.2 Exercise of Stock Appreciation Rights.
(a) Exercisability. The exercisability provisions of a Stock Appreciation
Right shall be subject to Section 3.4. Unless the Award Agreement or the
Committee otherwise provides, a Stock Appreciation Right shall be exercisable
at such time or times, and to the extent, that the related Option shall be
exercisable.
(b) Effect on Available Shares. In the event that a Stock Appreciation Right
is exercised, the number of shares of Common Stock subject to a related Option
shall be charged against the maximum amount of Common Stock that may be
delivered pursuant to Awards under this Plan. The number of shares subject to
the Stock Appreciation Right and the related Option of the Eligible Employee
shall also be reduced by such number of shares.
3.3 Payment.
(a) Amount. Unless the Committee otherwise provides, upon exercise of a Stock
Appreciation Right and surrender of an exercisable portion of any related
Award, the Eligible Employee shall be entitled to receive payment of an amount
determined by multiplying
(i) the difference obtained by subtracting the exercise price per share
of Common Stock under the related Award (if applicable) or the initial
share value specified in the Award from the Fair Market Value of a share of
Common Stock on the date of exercise of the Stock Appreciation Right, by
(ii) the number of shares with respect to which the Stock Appreciation
Right shall have been exercised.
(b) Form of Payment. The Committee, in its sole discretion, shall determine
the form in which payment shall be made of the amount determined under
paragraph (a) above, either solely in cash, solely in shares of Common Stock
(valued at Fair Market Value on the date of exercise of the Stock Appreciation
Right), or partly in such shares and partly in cash, provided that the
Committee shall have determined that such exercise and payment are consistent
with applicable law. If the Committee permits the Participant to elect to
receive cash or shares (or a combination thereof) on such exercise, any such
election shall be subject to such conditions as the Committee may impose and,
in the case of any Section 16 Person, any election to receive cash shall be
subject to any applicable limitations under Rule 16b-3.
3.4 Limited Stock Appreciation Rights.
Stock Appreciation Rights shall be exercisable only upon or in respect of one
or more specified event, (including but not limited to a change in control),
shall relate to or operate in tandem with or substitution for Options, may be
payable in cash or in shares of equivalent value on the date of exercise, and
shall be exercisable only at a specified time or during a specified period not
more than six months and 10 days before, after or including such event.
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IV. OTHER PROVISIONS.
4.1 Rights of Eligible Employees and Beneficiaries.
(a) Employment Status. Status as an Eligible Employee shall not be construed
as a commitment that any Award will be made under this Plan to an Eligible
Employee or to Eligible Employees generally.
(b) No Employment Contract. Nothing contained in this Plan (or in any other
documents related to this Plan or to any Award) shall confer upon any Eligible
Employee any right to continue in the employ or other service of the Company or
constitute any contract or agreement of employment or other service, nor shall
interfere in any way with the right of the Company to change such person's
compensation or other benefits or to terminate the employment of such person,
with or without cause, but nothing contained in this Plan or any document
related hereto shall adversely affect any independent contractual right of such
person without his or her consent thereto.
(c) Plan Not Funded. Awards payable under this Plan shall be payable in
shares or from the general assets of the Corporation, and no special or
separate reserve, fund or deposit shall be made to assure payment of such
Awards. No Eligible Employee, Beneficiary or other person shall have any right,
title or interest in any fund or in any specific asset (including shares of
Common Stock, except as expressly otherwise provided) of the Company by reason
of any Award hereunder. Neither the provisions of this Plan (or of any related
documents), nor the creation or adoption of this Plan, nor any action taken
pursuant to the provisions of this Plan shall create, or be construed to
create, a trust of any kind or a fiduciary relationship between the Company and
any Eligible Employee, Beneficiary or other person. To the extent that an
Eligible Employee, Beneficiary or other person acquires a right to receive
payment pursuant to any Award hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Company.
4.2 Adjustments; Acceleration.
(a) Adjustments. If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the Common Stock (whether in the form
of cash, Common Stock, other securities, or other property), or any
recapitalization, stock split (including a stock split in the form of a stock
dividend), reverse stock split, reorganization, merger, combination,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Common Stock or other securities of the Corporation, or there shall occur any
other like corporate transaction or event in respect of the Common Stock or a
sale of substantially all the assets of the Corporation as an entirety, then
the Committee shall, in such manner and to such extent (if any) as it deems
appropriate and equitable (1) proportionately adjust any or all of (a) the
number and type of shares of Common Stock (or other securities) which
thereafter may be made the subject of Awards (including the specific maxima and
numbers of shares set forth elsewhere in this Plan), (b) the number, amount and
type of shares of Common Stock (or other securities or property) subject to any
or all outstanding Awards, (c) the grant, purchase, or exercise price of any or
all outstanding Awards, (d) the securities, cash or other property deliverable
upon exercise of any outstanding Awards, or (2) in the case of an extraordinary
dividend or other distribution, merger, reorganization, consolidation,
combination, sale of assets, split up, exchange, or spin off, make provision
for a cash payment or for the substitution or exchange of any or all
outstanding Awards or the cash, securities or property deliverable to the
holder of any or all outstanding Awards based upon the distribution or
consideration payable to holders of the Common Stock of the corporation upon or
in respect of such event; provided, however, in each case, that with respect to
Awards of Incentive Stock Options, no such adjustment shall be made which would
cause the Plan to violate Section 424(a) of the Code or any successor
provisions thereto.
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(b) Acceleration of Awards Upon Change in Control. As to any Eligible
Employee, unless prior to a Change in Control Event the Committee determines
that, upon its occurrence, there shall be no acceleration of benefits under
Awards or determines that only certain or limited benefits under Awards shall
be accelerated and the extent to which they shall be accelerated, and/or
establishes a different time in respect of such Event for such acceleration,
then upon the occurrence of a Change in Control Event each Option and Stock
Appreciation Right shall become immediately exercisable; provided, however,
that in no event shall any Award be accelerated as to any Section 16 Person to
a date less than six months after the Award Date of such Award. The Committee
may override the limitations on acceleration in this Section 4.2(b) by express
provision in the Award Agreement and may accord any Eligible Employee a right
to refuse any acceleration, whether pursuant to the Award Agreement or
otherwise, in such circumstances as the Committee may approve. Any acceleration
of Awards shall comply with applicable regulatory requirements, including
without limitation Section 422 of the Code.
(c) Possible Early Termination of Accelerated Awards. If any Option or other
right to acquire Common Stock under this Plan (other than under Article VI) has
been fully accelerated as permitted by Section 4.2(b) but is not exercised
prior to (i) a dissolution of the Corporation, or (ii) a reorganization event
described in Section 4.2(a) that the Corporation does not survive, or (iii) the
consummation of reorganization event described in Section 4.2(a) that results
in a Change of Control approved by the Board, and no provision has been made
for the survival, substitution, exchange or other settlement of such Option or
right, such Option or right shall thereupon terminate.
4.3 Effect of Termination of Employment.
The Committee shall establish in respect of each Award granted to an Eligible
Employee the effect of a termination of employment on the rights and benefits
thereunder and in so doing may make distinctions based upon the cause of
termination.
4.4 Compliance with Laws.
This Plan, the granting and vesting of Awards under this Plan and the
issuance and delivery of shares of Common Stock and/or the payment of money
under this Plan or under Awards granted hereunder are subject to compliance
with all applicable federal and state laws, rules and regulations (including
but not limited to state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Corporation, be necessary
or advisable in connection therewith. Any securities delivered under this Plan
shall be subject to such restrictions, and the person acquiring such securities
shall, if requested by the Corporation, provide such assurances and
representations to the Corporation as the Corporation may deem necessary or
desirable to assure compliance with all applicable legal requirements.
4.5 Tax Withholding.
(a) Cash or Shares. Upon any exercise or payment of any Award, the Company
shall have the right at its option to (i) require the Eligible Employee (or
Personal Representative or Beneficiary, as the case may be) to pay or provide
for payment of the amount of any taxes which the Company may be required to
withhold with respect to such transaction or (ii) deduct from any amount
payable in cash the amount of any taxes which the Company may be required to
withhold with respect to such cash amount. In any case where a tax is required
to be withheld in connection with the delivery of shares of Common Stock under
this Plan, the Committee may grant (either at the time of the Award or
thereafter) to the Eligible Employee the right to
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elect, pursuant to such rules and subject to such conditions as the Committee
may establish, to have the Corporation reduce the number of shares to be
delivered by (or otherwise reacquire) the appropriate number of shares valued
at their then Fair Market Value, to satisfy such withholding obligation.
(b) Tax Loans. The Company may, in its discretion, authorize a loan to an
Eligible Employee in the amount of any taxes which the Company may be required
to withhold with respect to shares of Common Stock received (or disposed of, as
the case may be) pursuant to a transaction described in subsection (a) above.
Such a loan shall be for a term, at a rate of interest and pursuant to such
other terms and conditions as the Company, under applicable law may establish
and such loan need not comply with the provisions of Section 1.8.
4.6 Plan Amendment, Termination and Suspension.
(a) Board Authorization. The Board may, at any time, terminate or, from time
to time, amend, modify or suspend this Plan, in whole or in part. No Awards may
be granted during any suspension of this Plan or after termination of this
Plan, but the Committee shall retain jurisdiction as to Awards then outstanding
in accordance with the terms of this Plan.
(b) Shareholder Approval. If any amendment would (i) materially increase the
benefits accruing to Eligible Employees under this Plan, (ii) materially
increase the aggregate number of securities that may be issued under this Plan,
or (iii) materially modify the requirements as to eligibility for participation
in this Plan, then to the extent then required by Rule 16b-3 to secure benefits
thereunder or to avoid liability under Section 16 of the Exchange Act (and
Rules thereunder) or required under Section 425 of the Code or any other
applicable law, or deemed necessary or advisable by the Board, such amendment
shall be subject to shareholder approval.
(c) Amendments to Awards. Without limiting any other express authority of the
Committee under but subject to the express limits of this Plan, the Committee
by agreement or resolution may waive conditions of or limitations on Awards to
Eligible Employees that the Committee in the prior exercise of its discretion
has imposed, without the consent of an Eligible Employee, and may make other
changes to the terms and conditions of Awards that do not affect in any manner
materially adverse to the Eligible Employee, his or her rights and benefits
under an Award.
(d) Limitations on Amendments to Plan and Awards. No amendment, suspension or
termination of the Plan or change of or affecting any outstanding Award shall,
without written consent of the Eligible Employee, affect in any manner
materially adverse to the Participant any rights or benefits of the Eligible
Employee or obligations of the Corporation under any Award granted under this
Plan prior to the effective date of such change. Changes contemplated by
Section 4.2 shall not be deemed to constitute changes or amendments for
purposes of this Section 4.6.
4.7 Privileges of Stock Ownership.
Except as otherwise expressly authorized by the Committee or this Plan, an
Eligible Employee shall not be entitled to any privilege of stock ownership as
to any shares of Common Stock not actually delivered to and held of record by
him or her. No adjustment will be made for dividends or other rights as a
shareholders for which a record date is prior to such date of delivery.
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4.8 Effective Date of the Plan.
This Plan shall be effective as of November 15, 1993, the date of Board
approval, subject to shareholder approval within 12 months thereafter.
4.9 Term of the Plan.
No Award shall be granted more than ten years after the effective date of
this Plan (the "termination date"). Unless otherwise expressly provided in this
Plan or in an applicable Award Agreement, any Award theretofore granted may
extend beyond such date, and all authority of the Committee with respect to
Awards hereunder shall continue during any suspension of this Plan and in
respect of outstanding Awards on such termination date.
4.10 Governing Law/Construction/Severability.
(a) Choice of Law. This Plan, the Awards, all documents evidencing Awards and
all other related documents shall be governed by, and construed in accordance
with the laws of the state of incorporation of the Corporation.
(b) Severability. If any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of this
Plan shall continue in effect.
(c) Plan Construction. It is the intent of the Corporation that this Plan and
Awards hereunder satisfy and be interpreted in a manner that in the case of
Participants who are or may be subject to Section 16 of the Exchange Act
satisfies the applicable requirements of Rule 16b-3 so that such persons will
be entitled to the benefits of Rule 16b-3 or other exemptive rules under
Section 16 of the Exchange Act and will not be subjected to avoidable liability
thereunder. If any provision of this Plan or of any Award would otherwise
frustrate or conflict with the intent expressed above, that provision to the
extent possible shall be interpreted and deemed amended so as to avoid such
conflict.
4.1 Captions.
Captions and headings are given to the sections and subsections of this Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
4.12 Effect of Change of Subsidiary Status.
For purposes of this Plan and any Award hereunder, if an entity ceases to be
a Subsidiary a termination of employment shall be deemed to have occurred with
respect to each employee of such Subsidiary who does not continue as an
employee of another entity within the Company.
4.13 Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed to
limit the authority of the Board or the Committee to grant awards or authorize
any other compensation, with or without reference to the Common Stock, under
any other plan or authority.
V. DEFINITIONS.
5.1 Definitions.
(a) "Award" shall mean an award of any Option or Stock Appreciation Right, or
any combination thereof, whether alternative or cumulative, authorized by and
granted under this Plan.
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(b) "Award Agreement" shall mean any writing setting forth the terms of an
Award that has been authorized by the Committee.
(c) "Award Date" shall mean the date upon which the Committee took the action
granting an Award or such later date as the Committee designates as the Award
Date at the time of the Award or, in the case of Awards under Article VI, the
applicable dates set forth therein.
(d) "Award Period" shall mean the period beginning on an Award Date and
ending on the expiration date of such Award.
(e) "Beneficiary" shall mean the person, persons, trust or trusts entitled by
will or the laws of descent and distribution to receive the benefits specified
in the Award Agreement and under this Plan in the event of a Participant's
death, and shall mean the Participant's executor or administrator if no other
Beneficiary is identified and able to act under the circumstances.
(f) "Board" shall mean the Board of Directors of the Corporation.
(g) "Change in Control Event" shall mean any of the following:
(1) Approval by the shareholders of the Corporation of the dissolution or
liquidation of the Corporation;
(2) Approval by the shareholders of the Corporation of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or more
entities that are not Subsidiaries, as a result of which less than 50% of
the outstanding voting securities of the surviving or resulting entity
immediately after the reorganization are, or will be, owned by shareholders
of the Corporation immediately before such reorganization (assuming for
purposes of such determination that there is no change in the record
ownership of the Corporation's securities from the record date for such
approval until such reorganization but taking into consideration securities
of the other parties to such reorganization held by such record holders);
(3) Approval by the shareholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a person
or entity which is not a Subsidiary; or
(4) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) (other than a person having beneficial ownership of the
securities of the Corporation at the time of adoption of this Plan or an
affiliate of such person, or any successor, heir, descendent or related
party of or to any of them) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Corporation representing more than 50% of the combined voting power
of the Corporation's then outstanding securities entitled to then vote
generally in the election of directors of the Corporation.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
(i) "Commission" shall mean the Securities and Exchange Commission.
(j) "Committee" shall mean the entire Board or a committee appointed by the
Board to administer this Plan, which committee shall be comprised only of two
directors or such greater number of directors as may be required under Rule
16b-3 or applicable law, each of whom, during such time as one or more Eligible
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Employees may be subject to Section 16 of the Exchange Act, shall unless the
Board otherwise provides be Disinterested.
(k) "Common Stock" shall mean the Common Stock of the Corporation and such
other securities or property as may become the subject of Awards, or become
subject to Awards, pursuant to an adjustment made under Section 4.2 of this
Plan.
(l) "Company" shall mean, collectively, the Corporation and its Subsidiaries.
(m) "Corporation" shall mean Hondo Oil & Gas Company, a Delaware corporation,
and its successors.
(n) "Disinterested" shall mean disinterested within the meaning of any
applicable regulatory requirements, including Rule 16b-3.
(o) "Eligible Employee" shall mean an officer (whether or not a director) or
key executive, administrative, managerial, production, marketing or sales
employee of the Company, or any Other Eligible Person.
(p) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
(r) "Fair Market Value" shall mean (i) if the stock is listed or admitted to
trade on a national securities exchange, the closing price of the stock on the
Composite Tape, as published in the Western Edition of The Wall Street Journal,
of the principal national securities exchange on which the stock is so listed
or admitted to trade, on such date, or, if there is no trading of the stock on
such date, then the closing price of the stock as quoted on such Composite Tape
on the next preceding date on which there was trading in such shares; (ii) if
the stock is not listed or admitted to trade on a national securities exchange,
the last price for the stock on such date, as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through the NASDAQ National
Market Reporting System or a similar organization if the NASD is no longer
reporting such information; (iii) if the stock is not listed or admitted to
trade on a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for the stock
on such date, as furnished by the NASD or a similar organization; or (iv) if
the stock is not listed or admitted to trade on a national securities exchange,
is not reported on the National Market Reporting System and if bid and asked
prices for the stock are not furnished by the NASD or a similar organization,
the value as established by the Committee at such time for purposes of this
Plan.
(s) "Incentive Stock Option" shall mean an Option which is designated as an
incentive stock option within the meaning of Section 422 of the Code, the award
of which contains such provisions as are necessary to comply with that section.
(t) "Nonqualified Stock Option" shall mean an Option that is designated as a
Nonqualified Stock Option and shall include any Option intended as an Incentive
Stock Option that fails to meet the applicable legal requirements thereof. Any
Option granted hereunder that is not designated as an incentive stock option
shall be deemed to be designated a nonqualified stock option under this Plan
and not an incentive stock option under the Code.
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(u) "Non-Employee Director" shall mean a member of the Board of Directors of
the Corporation who is not an officer or employee of the Company or any holder
of more than 10 percent of the Common Stock of the Corporation.
(v) "Option" shall mean an option to purchase Common Stock under this Plan.
The Committee shall designate any Option granted to an Eligible Employee as a
Nonqualified Stock Option or an Incentive Stock Option. Options granted under
Article VI shall be Nonqualified Stock Options.
(w) "Other Eligible Person" shall mean any other person (including
significant agents and consultants) who performs substantial services for the
Company of a nature similar to those performed by key employees and who would
not compromise the Corporation's ability to register the shares on Form S-8,
selected to participate in this Plan by the Committee from time to time;
provided that in no event shall a Director be selected as an Other Eligible
Person.
(x) "Personal Representative" shall mean the person or persons who, upon the
disability or incompetence of an Eligible Employee, shall have acquired on
behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan and who shall have
become the legal representative of the Eligible Employee.
(y) "Plan" shall mean this 1993 Stock Incentive Plan.
(z) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission
pursuant to the Exchange Act, as amended from time to time but subject to any
applicable transition rules.
(aa) "Section 16 Person" shall mean a person subject to Section 16(a) of the
Exchange Act.
(bb) "Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
(cc) "Stock Appreciation Right" shall mean a right to receive a number of
shares of Common Stock or an amount of cash, or a combination of shares and
cash, the aggregate amount or value of which is determined by reference to a
change in the Fair Market Value of the Common Stock that is authorized under
this Plan.
(dd) "Subsidiary" shall mean any corporation or other entity a majority of
whose outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Corporation.
(ee) "Total Disability" shall mean a "permanent and total disability" within
the meaning of Section 22(e)(3) of the Code and (except in the case of a Non-
Employee Director) such other disabilities, infirmities, afflictions or
conditions as the Committee by rule may include.
VI. NON-EMPLOYEE DIRECTOR OPTIONS.
6.1 Participation.
Awards under this Article VI shall be made only to Non-Employee Directors.
6.2 Option Grants.
(a) Time of Award. Persons who are Non-Employee Directors in office on
November 15, 1993 shall be granted, subject to approval of this Plan by the
shareholders of the Corporation, without further corporate
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action an Option to purchase 15,000 shares of Common Stock at $7.50 per share,
subject to adjustment as set forth in the form of Award Agreement attached
hereto as Exhibit A. After November 15, 1993 and subject to the approval of
this Plan by the shareholders of the Corporation, if any person who is not then
an officer or employee of the Company shall become an eligible Non-Employee
Director of the Corporation, there shall be granted automatically to such
person (without any action by the Board or Committee) a Nonqualified Stock
Option (the Award Date of which shall be the date such person takes office) to
purchase 15,000 shares of Common Stock.
(b) Maximum Number of Awards. A Non-Employee Director shall not receive more
than one Nonqualified Stock Option under this Section 6.2.
6.3 Option Price.
The purchase price per share of the Common Stock covered by each Option
granted after November 15, 1993 pursuant to Section 6.2 hereof shall be 100
percent of the Fair Market Value of the Common Stock on the Award Date.
6.4 Option Period and Exercisability.
Each Option granted under this Article VI and all rights or obligations
thereunder shall commence on the Award Date and expire five years thereafter
and shall be subject to earlier termination as provided below. Each Option
granted under Section 6.2 shall become exercisable in two equal installments
commencing six months and eighteen months after the Award Date. Each person
granted an option hereunder shall exercise and deliver to the Corporation an
agreement in such form, duly completed by an officer of the Corporation.
6.5 Other Option Terms.
Other terms, conditions, and provisions of the Options granted pursuant to
Section 6.2 hereof are set forth in the form of Non-Employee Director Award
Agreement which is attached hereto as Exhibit A and incorporated herein by this
reference.
6.6 Limitation on Amendments.
The provisions of this Article VI shall not be amended more than once every
six months (other than as may be necessary to conform to any applicable changes
in the Code or the rules thereunder), unless such amendment would be consistent
with the provisions of Rule 16b-3(c)(2)(ii) (or any successor provision).
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EXHIBIT A
HONDO OIL & GAS COMPANY
NONEMPLOYEE DIRECTOR
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the day of 199 , between Hondo Oil
& Gas Company, a Delaware corporation (the "Corporation"), and
(the "Director").
W I T N E S S E T H
WHEREAS, the Corporation has granted to the Director effective as of the
day of , 199 (the "Award Date") a nonqualified stock option to
purchase all or any part of 15,000 authorized but unissued or treasury shares
of Common Stock, $1.00 par value, of the Corporation upon the terms and
conditions set forth herein and under the terms of Article VI of the Hondo Oil
& Gas Company 1993 Stock Incentive Plan (the "Plan").
NOW, THEREFORE, in consideration of services rendered and to be rendered by
the Director, the parties agree as follows:
1. Grant of Option. This Agreement evidences the Corporation's grant to the
Director of the right and option to purchase, on the terms and conditions set
forth herein, all or any part of an aggregate of 15,000 shares of the Common
Stock at the price of $ per share (the "Option"), exercisable from time to
time, subject to the provisions of this Agreement, prior to the close of
business on the day before the fifth anniversary of the Award Date (the
"Expiration Date"). Such price is not less than the fair market value of the
Common Stock as of the Award Date.
2. Exercisability of Option. The Option shall become exercisable in
installments as to 50% of the aggregate number of shares set forth in Section
1 hereof (subject to adjustment) on and after , 199 /1/ (Insert date
which is 6 months after Award Date) and as to the remaining 50% of such
aggregate number of shares (subject to adjustment) on , 199 /2/.
(Insert date which is 18 months after Award Date) To such extent the Option
may be exercised, in whole or in part, from time to time, until its expiration
or earlier termination.
To the extent the Director does not in any period purchase all or any part
of the shares to which the Director is entitled, the Director has the right
cumulatively thereafter to purchase any shares not so purchased and such right
shall continue until the Option terminates or expires. Fractional share
interests shall be disregarded, but may be cumulated. No fewer than 100 shares
may be purchased at any one time, unless the number purchased is the total
number at the time available for purchase under the Option.
- --------
1. (Insert date which is 6 months after Award Date)
2. (Insert date which is 18 months after Award Date)
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<PAGE>
3. Method of Exercise of Option. The Option shall be exercisable by the
delivery to the Corporation of a written notice stating the number of shares to
be purchased pursuant to the Option and accompanied by payment made
(a) in cash or by check payable to the order of the Corporation;
(b) by exchange of Common Stock of the Corporation, then having been
owned by the Director for at least six months, having a then fair market
value (as determined by the Board) equal to such purchase price; or
(c) in any combination of the consideration permitted by the foregoing
subsections;
subject to such further limitations, rules and procedures as the Committee may
from time to time establish as to any non-cash payment by persons exercising
options.
4. No Service Commitment. Nothing contained in this Agreement (or in any
other documents related to this Agreement) shall confer upon Director any right
to continue to serve as a director of the Corporation nor shall interfere in
any way with any right of the Corporation to terminate the Director's service
as a director, with or without cause. Nothing contained in this Agreement shall
influence the construction or interpretation of the Corporation's Articles of
Incorporation or Bylaws regarding service on the Board.
5. Effect of Termination of Service. If the Director dies or becomes disabled
while serving as a director, the Option shall immediately become and shall
remain fully exercisable for twelve (12) months after the date the Director
becomes disabled or dies or until the expiration of the stated term of this
Option, whichever first occurs, and shall thereafter terminate. If the
Director's services as a member of the Board terminate for any other reason,
then any portion of this Option which is not then exercisable shall terminate
and any portion of this Option which is then exercisable may be exercised for
three (3) months after the date of such termination (provided that if the
Director dies or becomes disabled during such period, then such period shall be
extended an additional twelve (12) months) or until the expiration of the
stated term, whichever first occurs, and shall thereafter terminate.
6. Termination of Option Under Certain Events. The Option to the extent not
previously exercised shall terminate upon an event or transaction which the
Corporation does not survive provided that (1) the Director shall have at least
ten (10) days advance notice of any such termination, and the Director shall
have had the right prior to or simultaneously with the consummation of the
event or other transaction to exercise this Option, or (2) the Board (or the
terms of such transaction) shall have provided for and the stockholders shall
have approved an adjustment pursuant to the provisions of Section 8 below of
the securities or other property deliverable upon exercise of the Option, to
the extent then exercisable in accordance with the terms hereof or by
acceleration similarly approved.
7. Non-Transferability of Option. This Option may be exercised only by, and
shares issuable pursuant to this Option shall be paid only to the Director or,
if the Director has died, the Director's beneficiary or, if the Director has
suffered a disability, the Director's personal representative, if any, or if
there is none, the Director or (to the extent permitted by applicable law and
Rule 16b-3 under the Securities and Exchange Act of 1934) to a third party
pursuant to such conditions and procedures as the Board of Directors of the
Corporation may establish. Other than by will or the laws of descent and
distribution or pursuant to an exception (by rule or interpretation) to
transfer restrictions under Rule 16b-3, no right or benefit under this Option
shall be transferrable by the Director or shall be subject in any manner to
anticipation, alienation,
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<PAGE>
sale, transfer, assignment, pledge, encumbrance or charge and any such
attempted action shall be void. The Director's designation of a beneficiary
shall not constitute a transfer for these purposes.
8. Adjustments. If there shall occur any extraordinary distribution in
respect of the Common Stock (whether in the form of Common Stock, other
securities, or other property), or any recapitalization, stock split (including
a stock split in the form of a stock dividend), reverse stock split,
reorganization, merger, combination, consolidation, split-up, spin-off,
combination, or exchange of Common Stock or other securities of the
Corporation, or a sale of substantially all of the assets of the Corporation as
an entirety, then the Board shall, in such manner and to such extent (if any)
as may be appropriate and equitable (1) proportionately adjust any or all of
(a) the number, amount and type of shares of Common Stock subject to this
Option, (b) the vesting provisions of this Option, and (c) the exercise price
of this Option, or (2) in the case of an extraordinary distribution, merger,
reorganization, consolidation, combination, sale of assets, split up, exchange,
or spin off, make provision for a substitution or exchange of this Option or
for a change in the Common Stock deliverable upon exercise of this Option,
based upon the distribution or consideration payable to holders of the Common
Stock of the Corporation upon or in respect of such event; provided, however,
that (i) such adjustment and the Board's actions in respect thereof are based
on objective criteria and (ii) such adjustment is consistent with adjustments
to comparable options (if any) held by persons other than directors of the
Corporation.
9. Compliance with Laws. This Option and the issuance and delivery of shares
of Common Stock pursuant this Option are subject to compliance with all
applicable federal and state laws, rules and regulations (including but not
limited to state and federal tax and securities laws) and to such approvals by
any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Corporation, be necessary or advisable in connection therewith.
Any securities delivered under this Option shall be subject to such
restrictions, and the Director shall, if requested by the Corporation, provide
such assurances and representations to the Corporation as the Corporation may
deem necessary or desirable to assure such compliance.
10. Modification or Cancellation. Any modification of any of the provisions
of this Agreement or cancellation or replacement of this Agreement shall not be
valid unless in writing and signed by both parties.
11. Notices. Any notice to be given under the terms of this Agreement shall
be in writing and addressed to the Corporation at its principal office, to the
attention of the Corporate Secretary and to the Director at the address given
beneath the Director's signature hereto, or at such other address as either
party may hereafter designate in writing to the other.
12. Director not a Shareholder. Neither the Director nor any other person
entitled to exercise the Option shall have any of the rights or privileges of a
shareholder of the Corporation as to any shares of Common Stock not actually
issued and delivered to him prior to delivery of the exercise price and
satisfaction of all other conditions precedent to the due exercise of the
Option and delivery of shares.
13. Effect of Award Agreement. This Agreement shall be binding upon and inure
to the benefit of any successor or successors of the Corporation except to the
extent the Board determines otherwise.
14. Laws Applicable to Construction. The Option has been granted, executed
and delivered as of the day and year first above written, and the
interpretation, performance and enforcement of the Option and this Agreement
shall be governed by the laws of the State of Delaware.
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<PAGE>
15. Stockholder Approval. Notwithstanding anything else contained herein to
the contrary, this Agreement and the Option granted hereunder are subject to
stockholder approval in accordance with the Corporation's By-Laws and
applicable law.
16. Plan. The Option is subject to, and the Director agrees to be bound by,
all of the terms and conditions of the provisions of Articles I, IV, V and VI
of the Plan. The Director acknowledges receipt of a copy of the Plan, which is
made a part hereof by this reference.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed
on its behalf by a duly authorized officer and the Optionee has hereunto set
his hand.
HONDO OIL & GAS COMPANY
(a Delaware corporation)
By
-----------------------------------
Title
---------------------------------
DIRECTOR
-------------------------------------
(Signature)
-------------------------------------
(Print Name)
-------------------------------------
(Address)
-------------------------------------
(City, State, Zip Code)
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<PAGE>
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Nonqualified Stock Option
Agreement by Hondo Oil & Gas Company, I, , the
spouse of the Director herein named, do hereby join with my spouse in executing
the foregoing Nonqualified Stock Option Agreement and do hereby agree to be
bound by all of the terms and provisions thereof.
DATED: , 19 .
-------------------------------------
Signature of Spouse
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<PAGE>
PROXY
HONDO OIL & GAS COMPANY
Annual Meeting of Shareholders, February 24, 1994
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints John J. Hoey and C.B. McDaniel, or either of
them, attorneys and proxies to represent the undersigned, with power of
substitution, to appear and to vote all of the shares of stock of HONDO OIL &
GAS COMPANY (the "Company") which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of the Company to be
held in the Second Floor Conference Room, United New Mexico Bank, 200 Lomas,
N.W., Albuquerque, New Mexico, on Thursday, February 24, 1994 at 10:00 A.M., or
any adjournment thereof.
(Continued and To Be Signed on Reverse Side)
/X/ Please mark
your vote
this way
------------
COMMON
1. Election of Directors INSTRUCTION: To withhold authority to
vote for any individual nominee, strike
FOR all nominees WITHHOLD a line through the nominee's name on
listed at the right AUTHORITY the list below.
(except as marked to vote for all
to the contrary) nominees listed ROBERT O. ANDERSON, JOHN J. HOEY,
at right C.B. McDANIEL, DOUGLAS G. McNAIR,
JOHN F. PRICE, R.W. ROWLAND,
/ / / / P.G.B. SPICER AND R.E. WHITTEN
2. Approval of the 1993 Stock Incentive
Plan
FOR AGAINST ABSTAIN
/ / / / / /
3. Upon such other business as may
properly come before said meeting,
or any adjournment thereof.
UNMARKED PROXIES SHALL BE VOTED IN FAVOR OF EACH OF
THE FOREGOING MATTERS UNLESS SPECIFIED TO THE CONTRARY.
Receipt of copies of the Proxy Statement dated January 28, 1994 and
the 1993 Annual Report is hereby acknowledged.
Annual Meeting: February 24, 1994
Please date and sign exactly as name appears on this proxy. Joint owners
should each sign. If the signer is a corporation, please sign full corporate
name by duly authorized officer. Executors, trustees, etc. should give full
title as such.
Dated:
-------------------------------------------------
- --------------------------------------------------------
(Signature of Shareholder)
- --------------------------------------------------------
(Signature of Shareholder)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Please return this proxy promptly in the enclosed envelope which requires no
postage if mailed in the U.S.A.
