<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
UNION TEXAS PETROLEUM HOLDINGS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[UNION TEXAS PETROLEUM UNION TEXAS PETROLEUM HOLDINGS, INC.
HOLDINGS, INC. LOGO]
March 24, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Union Texas Petroleum Holdings, Inc. on Friday, May 9, 1997, at 10:00 a.m.,
Houston time. The meeting will be held in the first floor auditorium of the
Company's offices located at 1330 Post Oak Blvd., Houston, Texas.
The attached Notice of Annual Meeting and Proxy Statement cover the formal
business of the meeting. To acquaint you better with the director nominees, the
Proxy Statement contains biographical sketches of each nominee.
During the meeting, I will report on the operations of the Company during
1996 and its plans for 1997. Directors and officers of the Company will be
present to respond to questions from stockholders.
The Board of Directors appreciates and encourages stockholder participation
in the Company's affairs. There is a space on the enclosed proxy for you to
indicate if you will be able to attend the meeting. Whether or not you plan to
attend the meeting, please sign, date and return the enclosed proxy promptly in
the envelope provided. If you attend the meeting, you may, at your discretion,
withdraw the proxy and vote in person.
Sincerely,
/s/ JOHN L. WHITMIRE
JOHN L. WHITMIRE
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
UNION TEXAS PETROLEUM HOLDINGS, INC.
1330 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 1997
To the Stockholders of Union Texas Petroleum Holdings, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Union
Texas Petroleum Holdings, Inc. (the "Company") will be held in the first floor
auditorium of the Company's offices located at 1330 Post Oak Blvd., Houston,
Texas, on Friday, May 9, 1997, at 10:00 a.m., Houston time, for the following
purposes:
1. To elect 11 directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected and qualified;
2. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending December 31, 1997; and
3. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on March 12, 1997,
as the record date for determining stockholders entitled to notice of and to
vote at the meeting and any adjournment thereof. Only stockholders of record at
the close of business on such date will be entitled to notice of and to vote at
the meeting and any adjournment thereof.
All stockholders are cordially invited and urged to attend the meeting.
Even if you expect to attend the meeting, you are requested to sign, date and
return the accompanying proxy in the enclosed addressed envelope. If you attend,
you may vote in person, if you wish, whether or not you have sent in your proxy.
By Order of the Board of Directors
/s/ AMY J. WATKINS
AMY J. WATKINS
Secretary
Houston, Texas
March 24, 1997
<PAGE> 4
UNION TEXAS PETROLEUM HOLDINGS, INC.
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Union Texas Petroleum
Holdings, Inc. (the "Company") for use at the Annual Meeting of Stockholders of
the Company to be held in the first floor auditorium of the Company's offices
located at 1330 Post Oak Blvd., Houston, Texas, on Friday, May 9, 1997, 10:00
a.m., Houston time, and at any adjournment thereof pursuant to and for the
purposes set forth in the accompanying Notice of Meeting. The date of the first
mailing to stockholders of this Proxy Statement and the related form of proxy
included herewith was on or about March 24, 1997.
The costs of soliciting proxies will be borne by the Company, including
reasonable costs incurred by custodians, nominees, fiduciaries and other agents
in forwarding the proxy material to their principals. The Company has retained
Kissel-Blake Inc. to assist in the solicitation of proxies for a fee estimated
at $6,000, plus reimbursement of out-of-pocket expenses. In addition to such
solicitation and the solicitation made hereby, certain directors, officers and
employees of the Company may solicit proxies by facsimile, telex, telephone and
personal interview.
A proxy will be voted in accordance with the stockholder's instruction, or
if no instruction is indicated, it will be voted in favor of the proposals set
forth in the notice attached hereto. Any stockholder may revoke his or her proxy
at any time prior to its exercise by written notice or by execution of a
subsequent proxy sent to Amy J. Watkins, Secretary, Union Texas Petroleum
Holdings, Inc., 1330 Post Oak Blvd., Houston, Texas 77056. The proxy also may be
revoked if the stockholder is present at the meeting and elects to vote in
person.
VOTING SECURITIES AND CERTAIN BENEFICIAL OWNERS
At the close of business on March 12, 1997, the record date for
determination of stockholders entitled to notice of and to vote at the meeting,
there were issued and outstanding 84,953,958 shares of the Company's common
stock, par value $.05 per share ("Common Stock"), excluding Common Stock held by
the Company, each share being entitled to one vote upon each of the matters to
be voted upon at the meeting. There are no other voting securities outstanding.
The presence in person or by proxy of the holders of a majority of the
issued and outstanding Common Stock, excluding Common Stock held by the Company,
is necessary to constitute a quorum at this meeting. In the absence of a quorum
(42,476,980 shares) at the meeting, the meeting may be adjourned from time to
time without notice, other than announcement at the meeting, until a quorum
shall be formed. A plurality of the votes of the shares present in person or by
proxy at the meeting and entitled to vote is required for the election of
directors, meaning that the 11 nominees with the largest number of affirmative
votes will be elected as directors. Any other matter that may come before the
meeting shall be adopted if the votes cast for such matter exceed the votes cast
against. Under Delaware law and under the Company's Restated Certificate of
Incorporation, each share of Common Stock entitles a stockholder to one vote.
In certain circumstances, a stockholder will be considered to be present at
the meeting for quorum purposes but will not be deemed to have cast a vote on a
matter. Such circumstances exist when a stockholder is present but abstains from
voting on a matter or when shares are represented at the meeting by a proxy
conferring authority to vote only on certain matters, as in the case of broker
non-votes. In conformity with the Company's Bylaws, shares abstaining from
voting or not voted on certain matters coming before the meeting, including
broker non-votes, will not be treated as votes cast with respect to those
matters, and therefore will not affect the outcome of any such matter.
<PAGE> 5
The table below sets forth certain information as of March 12, 1997,
regarding the beneficial ownership of the Common Stock, excluding Common Stock
held by the Company, by (i) each person known by the Company to own beneficially
more than 5% of its outstanding shares of Common Stock, (ii) each director of
the Company, (iii) the five executive officers of the Company named in the
Summary Compensation Table and (iv) all executive officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF
NATURE OF SHARES OF
BENEFICIAL COMMON STOCK
NAME OWNERSHIP(1) OUTSTANDING
---- ------------ -------------
<S> <C> <C>
Petroleum Associates, L.P.(2)............................... 21,833,334 25.7%
KKR Partners II, L.P.(2)....................................
9 West 57th Street
New York, New York 10019
GSB Investment Management, Inc.(3).......................... 4,335,285 5.1%
301 Commerce Street
Fort Worth, Texas 76102
Glenn A. Cox, Director(4)(5)................................ 19,000 *
Edward A. Gilhuly, Director(2).............................. 0 --
James H. Greene, Jr., Director(2)........................... 0 --
Henry R. Kravis, Director(2)................................ 0 --
Michael W. Michelson, Director(2)........................... 0 --
Stanley P. Porter, Director(5).............................. 15,000 *
George R. Roberts, Director(2).............................. 0 --
Richard R. Shinn, Director(5)............................... 19,000 *
Sellers Stough, Director(5)................................. 15,000 *
James D. Woods, Director(5)................................. 8,000 *
John L. Whitmire(5)(6)(7)................................... 95,221 *
Chairman of the Board and Chief Executive Officer
William M. Krips, Senior Vice President(5)(6)............... 175,440 *
Arthur W. Peabody, Jr., Senior Vice President(5)(6)......... 249,776 *
Newton W. Wilson, III, Regional Vice President(5)(6)........ 133,703 *
Larry D. Kalmbach(5)(6)..................................... 61,127 *
Vice President and Chief Financial Officer
All executive officers and directors as a group, including
the above (group equals 22 persons)(5)(6)(8).............. 1,079,090 1.3%
</TABLE>
- - ---------------
* Less than 1%.
(1) Beneficial ownership of Common Stock, except as noted.
(2) KKR Associates is the sole general partner of each of Petroleum Associates,
L.P. ("Petroleum Associates") and KKR Partners II, L.P. (collectively, the
"KKR Partnerships") and possesses sole voting and investment power with
respect to the 21,833,334 shares owned by such stockholders. KKR Associates
is a limited partnership of which Henry R. Kravis, George R. Roberts,
Michael W. Michelson, James H. Greene, Jr., Edward A. Gilhuly (all directors
of the Company), Robert I. MacDonnell, Paul E. Raether, Michael T. Tokarz,
Perry Golkin, Clifton S. Robbins and Scott Stuart are the general partners
and Messrs. Kravis and Roberts are also the members of the Executive
Committee of KKR Associates. None of the aforementioned individuals
beneficially owns any other shares of Common Stock. Mr. Saul A. Fox, a
former director of the Company who resigned in January 1997, was a general
partner through September 1996 and currently is a limited partner of KKR
Associates.
Petroleum Associates made its investment in the Company in 1985. The limited
partnership agreement pursuant to which Petroleum Associates was organized
will, by its terms, expire on December 31, 1997 unless amended by all of the
limited partners to extend the term beyond such date. If such partnership
(Footnotes continued on following page)
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<PAGE> 6
agreement expires, the limited partnership will dissolve. There can be no
assurance that KKR Associates, the general partner of Petroleum Associates,
will seek such amendments, or, if sought, that such amendments will be
approved by the limited partners. In the event of the dissolution and
winding up of Petroleum Associates, KKR Associates will have sole
discretion regarding the timing (which may be one or more years after the
expiration of the partnership agreement) and manner of the disposition of
any Common Stock of the Company held by such partnership, including public
or private sales of such Common Stock, the distribution of such Common
Stock to the limited partners of Petroleum Associates, as the case may be,
or a combination of the foregoing. If shares of the Company's Common Stock
are distributed to the limited partners of Petroleum Associates, each
limited partner will thereafter have sole discretion with respect to its
Common Stock. The Company has agreed that, upon request of the KKR
Partnerships, the Company will register under the Securities Act of 1933,
as amended (the "Securities Act") and applicable state securities laws the
sale of the Company's Common Stock owned by the KKR Partnerships as to
which registration has been requested. The Company's obligation is subject
to certain limitations relating to a minimum amount required for
registration, the timing of a registration and other similar matters. The
Company is obligated to pay any registration expenses incidental to such
registration, excluding underwriters' commissions and discounts.
The KKR Partnerships currently own approximately 25.7% of the issued and
outstanding shares of Common Stock of the Company, excluding shares held by
the Company. As a result, the KKR Partnerships and their general partners
may be able to exercise substantial influence over the Company, through
their representation on the Board and by reason of their significant voting
power with respect to the election of directors and actions submitted to a
vote of stockholders. See also "Compensation Committee Interlocks and
Insider Participation."
(3) GSB Investment Management, Inc. is a registered investment advisor that
pursuant to a Schedule 13G dated January 31, 1997 reported such shares.
(4) Voting and investment power are shared with Veronica Cox with respect to
5,000 shares, all of which are held in the Glenn A. Cox Trust, UTA.
(5) Includes the following shares issuable upon the exercise of outstanding or
issuable stock options that are exercisable within 60 days after March 12,
1997: (i) 14,000 for each of Messrs. Cox, Porter, Shinn and Stough; (ii)
8,000 for Mr. Woods; (iii) 56,250 for Mr. Whitmire; 161,299 for Mr. Krips;
173,369 for Mr. Peabody; 123,588 for Mr. Wilson; 47,851 for Mr. Kalmbach;
and (iv) 825,676 for all executive officers and directors as a group.
(6) Shares held by executive officers in the Company's Savings Plan for Salaried
Employees are included in the table.
(7) Voting and investment power are shared with Virginia Whitmire with respect
to 9,700 shares, all of which are held in the Virginia Kempton Whitmire
Revocable Trust dated September 7, 1995.
(8) As of March 12, 1997, the executive officers of the Company include the five
executive officers named in the Summary Compensation Table and the other
officers listed as Executive Officers. See "Executive Officers."
ELECTION OF DIRECTORS
PROPOSAL 1: THE BOARD OF DIRECTORS OF THE COMPANY URGES YOU TO VOTE FOR THE
NOMINEES FOR THE BOARD OF DIRECTORS DESCRIBED BELOW. PROXIES WILL BE SO VOTED
UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES. NOMINEES FOR DIRECTOR
WILL BE ELECTED BY A PLURALITY OF VOTES.
The Board recommends election of the nominees listed below as directors to
hold office until the next annual meeting of stockholders or until their
successors are elected and qualified. All of the nominees, except Mr. Woods,
were previously elected by the stockholders. Mr. Woods is standing for election
by the stockholders for the first time. If, at the time of the 1997 Annual
Meeting of Stockholders, any of such nominees should be unable to serve or for
good cause will not serve, discretionary authority provided in the
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<PAGE> 7
proxy will be used to vote for a substitute or substitutes designated by the
Board. The Board has no reason to believe that any substitute nominees will be
required.
The nominees, and certain information with respect to each of them, are as
follows:
Glenn A. Cox -- Age 67, Director since January 1993. Mr. Cox is a retired
President and Chief Operating Officer of Phillips Petroleum Company
("Phillips"), a position he held from 1985 until December 1991. Phillips is a
corporation involved in petroleum exploration, production and refining and also
in the manufacturing and distribution of a variety of chemicals. Mr. Cox is also
a director of BOK Financial Corp., Bank of Oklahoma, The Williams Companies and
Helmerich & Payne, Inc. Member of the Audit Committee and the Section 16
Committee.
Edward A. Gilhuly -- Age 37, Director since December 1992. Mr. Gilhuly was
an associate of KKR from 1986 until 1995, when he became a partner. He is also a
director of Owens-Illinois, Inc., Red Lion Properties, Inc., Layne Christensen
Company, Doubletree Corporation and Owens-Illinois Group, Inc. Member of the
Organization and Compensation Committee.
James H. Greene, Jr. -- Age 46, Director since December 1992. Mr. Greene
was an associate of KKR from 1986 until 1993, when he became a partner. He is
also a director of Owens-Illinois, Inc., Bruno's, Inc., Safeway Inc.,
Owens-Illinois Group, Inc. and The Vons Companies Inc.
Henry R. Kravis -- Age 53, Director since July 1985. Mr. Kravis has been a
partner in KKR since its organization in 1976. He is also a director of
Owens-Illinois, Inc., Owens-Illinois Group, Inc., Safeway Inc., Borden, Inc.,
Bruno's, Inc., Gillette Company, IDEX Corporation, K-III Communications Corp.,
Flagstar Companies, Inc., Flagstar Corporation and World Color Press, Inc. Mr.
Kravis is a first cousin of Mr. Roberts.
Michael W. Michelson -- Age 45, Director since July 1985. Mr. Michelson has
been a partner of KKR since January 1987, and prior to that he had been an
associate of KKR. Mr. Michelson is also a director of Owens-Illinois, Inc.,
Owens-Illinois Group, Inc., AutoZone, Inc., Red Lion Properties, Inc. and
Doubletree Corporation. Member of the Organization and Compensation Committee.
Stanley P. Porter -- Age 78, Director since July 1985. Mr. Porter is a
retired Vice Chairman of Arthur Young & Company. Mr. Porter was a director of
AlliedSignal Inc. (collectively with its predecessor, Allied Corporation,
"Allied") from 1980 until April 1989. Allied is an advanced technology company.
Mr. Porter is a former director of Fiber Industries, Inc. and Engraph, Inc.
Member of the Audit Committee.
George R. Roberts -- Age 53, Director since July 1985. Mr. Roberts has been
a partner in KKR since its organization in 1976. He is also a director of
Owens-Illinois, Inc., Bruno's, Inc., IDEX Corporation, Owens-Illinois Group,
Inc., Safeway Inc., AutoZone, Inc., K-III Communications Corp., Flagstar
Companies, Inc., Flagstar Corporation, World Color Press, Inc. and Borden Inc.
Mr. Roberts is a first cousin of Mr. Kravis.
Richard R. Shinn -- Age 79, Director since May 1988. Mr. Shinn was
Executive Vice Chairman of the New York Stock Exchange from May 1985 through
December 1990. Mr. Shinn retired as Chairman and Chief Executive Officer of
Metropolitan Life Insurance Company in 1983. Mr. Shinn was a director of Allied
from 1973 until April 1988. Mr. Shinn is also a director of Grey Advertising
Inc. Member of the Audit Committee, the Organization and Compensation Committee
and the Section 16 Committee.
Sellers Stough -- Age 74, Director since March 1988. Mr. Stough is a
retired Vice President, Finance of Chevron Corporation. Mr. Stough also served
on the Executive Committee of Chevron Corporation from August 1986 until his
retirement in December 1987. Mr. Stough was a consultant to the law firm of
Pillsbury Madison & Sutro from February 1988 until June 1991. Mr. Stough served
as Executive Director of the firm from November 1989 through December 1990. Mr.
Stough was a director of Amax, Inc. from 1982 until 1987. Member of the Audit
Committee.
John L. Whitmire -- Age 56, Chairman of the Board and Chief Executive
Officer since January 1996. Mr. Whitmire has responsibility for the overall
management of the Company. Mr. Whitmire served as Executive Vice
President-Exploration and Production and as a director of Phillips from January
1994 to
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<PAGE> 8
January 1996 when he retired. Prior thereto, Mr. Whitmire served in a number of
executive capacities throughout his career of more than 30 years with Phillips.
James D. Woods -- Age 65, Director since February 1997. Mr. Woods is a
retired Chairman and Chief Executive Officer of Baker Hughes Incorporated
("Baker"), a position he held from 1989 until January 1997. Baker is a
corporation involved in the oil field service industry. Prior thereto, Mr. Woods
served in a number of executive capacities throughout his career of more than 40
years with Baker. Mr. Woods is also a director of The Kroger Company, Varco
International, Inc. and Wynn's International, Inc.
The Board has standing audit, organization and compensation and executive
compensation committees that are composed of directors of the Company. The
functions of the Audit Committee include reviewing external financial reporting,
both annual and quarterly reports, and other financial portions of external
reporting of the Company, recommending engagement of the Company's independent
accountants, reviewing and approving the terms of engagement of the independent
accountants, reviewing the independence of such accountants, reviewing with the
independent accountants the plan, scope and results of the auditing engagement,
and reviewing the scope and results of the Company's procedures for internal
auditing and the adequacy of the Company's internal accounting controls.
The functions of the Organization and Compensation Committee (the
"Compensation Committee") include establishing compensation for executive
officers, monitoring compensation arrangements of certain management employees
for consistency with corporate objectives and to enhance shareholder value,
recommending remuneration arrangements for senior management, serving as the
Stock Option Committee under the Company's 1985, 1987 and 1992 Stock Option
Plans and the Company's 1994 Incentive Plan, administering the Incentive
Compensation Plan (as defined herein), and making recommendations with respect
to employee benefit plans.
The functions of the Section 16 Committee, established on October 24, 1996
to comply with recent amendments to the rules promulgated under Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as well as
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
include approving grants of options, stock, stock appreciation rights and other
types of awards to officers of the Company that are subject to or intended for
compliance with the Exchange Act or the Code ("Section 16 Officers").
In addition, although the Board does not have a standing nominating
committee, the Compensation Committee considers and makes recommendations to the
Board regarding persons to be nominated for election as directors by the Board
to fill vacancies that arise between annual meetings of stockholders.
Stockholders wishing to recommend a person for consideration as a nominee for
election to the Board can do so in accordance with the Company's Bylaws by
providing timely written notice to the Secretary of the Company at 1330 Post Oak
Blvd., Houston, Texas 77056, providing such nominee's name, appropriate
biographical information and any other information that would be required in a
proxy statement. Any such recommendation should be accompanied by a written
statement from the person recommended, giving his or her consent to be named as
a nominee and, if nominated and elected, to serve as a director. A notice must
be delivered to the Secretary not later than the close of business on the 60th
day nor earlier than the close of business on the 90th day prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than 30 days before or
more than 60 days after such anniversary date, notice by the stockholder must be
so delivered not earlier than the close of business on the 90th day prior to
such annual meeting and not later than the close of business on the later of the
60th day prior to such annual meeting or the close of business on the 10th day
following the day on which public announcement of the date of such meeting is
first made by the Company. Such notice to the Secretary must set forth the name
and address of the stockholder that is giving the notice and the beneficial
owner, if any, on whose behalf the nomination is made and the number of shares
that are owned beneficially by such stockholder and, if any, such beneficial
owner.
During the year ended December 31, 1996, the Board held a total of five
meetings, the Audit Committee held three meetings and the Compensation Committee
held five meetings. The new Section 16 Committee
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<PAGE> 9
held no meetings and acted by written consent in lieu of meeting once in 1996.
Messrs. Greene, Kravis and Roberts attended less than 75% of the Board meetings.
DIRECTOR COMPENSATION
All directors who are not officers of the Company receive $40,000 per annum
for serving on the Board. In addition, all directors are reimbursed for
out-of-pocket costs of attending Board and committee meetings. Messrs. Gilhuly,
Greene, Kravis, Michelson and Roberts are directors affiliated with KKR. See
"Compensation Committee Interlocks and Insider Participation."
Under the shareholder-approved 1994 Incentive Plan, each person who becomes
a director who is not then an employee of the Company or any subsidiary or is
not affiliated with KKR (a "Non-employee Director") for the first time is
granted an option to purchase 5,000 shares of Common Stock effective as of the
date the individual becomes a Non-employee Director. Each incumbent Non-employee
Director also receives an option to purchase 3,000 shares of Common Stock
effective as of the date of each annual meeting of stockholders. During 1996,
each Non-employee Director, other than Mr. Woods, who was not then a director,
received an annual grant of an option to purchase 3,000 shares of Common Stock
at $18.3125 per share under the 1994 Incentive Plan. Effective February 20,
1997, Mr. Woods received an option to purchase 5,000 shares of Common Stock at
$18.4375 per share under the 1994 Incentive Plan. Each such option is fully
vested and exercisable and has a term of ten years, but must be exercised within
six months of termination of service on the Board for any reason other than
death or disability or retirement after at least five years of continuous Board
service, in which event such option must be exercised within two years of death
or disability and within three years of retirement. The price per share to be
paid by the holder of such an option is equal to the fair market value per share
of Common Stock on the date the option is granted. No transfer, sale or other
disposition of Common Stock acquired upon option exercise is permitted until the
Non-employee Director terminates service as a Non-employee Director of the
Company, unless a prior extraordinary corporate transaction occurs.
RATIFICATION OF SELECTION OF ACCOUNTANTS
PROPOSAL 2: THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND URGES YOU
TO VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP ("PRICE
WATERHOUSE") AS THE COMPANY'S INDEPENDENT ACCOUNTANTS TO SERVE UNTIL THE NEXT
ANNUAL MEETING OF STOCKHOLDERS. PROXIES WILL BE SO VOTED UNLESS THE STOCKHOLDERS
SPECIFY OTHERWISE IN THEIR PROXIES. PROPOSAL 2 WILL BE ADOPTED IF THE VOTES CAST
IN FAVOR EXCEED THE VOTES CAST OPPOSING THIS PROPOSAL.
The Board and the Audit Committee recommend ratification of the appointment
of Price Waterhouse. Price Waterhouse has audited the financial statements of
the Company since the Company's formation in 1982. Price Waterhouse will have a
representative at the meeting who will have the opportunity to make a statement,
if the representative desires to do so, and will be available to respond to
appropriate questions.
OTHER MATTERS
It is not anticipated that there will be presented to the meeting any
business other than election of directors and the ratification of the
appointment of independent accountants. If any other matters requiring the vote
of the stockholders arise, including the question of adjourning the meeting and
other matters not known reasonably in advance by the Company, the persons
appointed as proxies in the accompanying proxy will vote on such matters
according to their best judgment.
Regardless of the number of shares owned by you, it is important that they
be represented at the meeting, and you are respectfully requested to sign, date
and return the accompanying proxy at your earliest convenience.
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<PAGE> 10
EXECUTIVE OFFICERS
Set forth below are the current executive officers of the Company elected
by the Board of Directors.
John L. Whitmire -- Age 56, Chairman of the Board and Chief Executive
Officer since January 1996. Information about Mr. Whitmire is included on pages
3 through 5 with the information on nominees for the Board.
William M. Krips -- Age 57, Senior Vice President since May 1994, after
having served as Senior Vice President -- Exploration and Production, Senior
Vice President and General Manager -- U.S. Exploration and Production, Senior
Vice President and General Manager -- Hydrocarbon Products Group and Vice
President and General Manager -- International Operations. Mr. Krips has
responsibility for the Regional Business Units and Technical Services. Mr. Krips
joined Allied in 1964, and served in a number of management positions in
planning, finance, marketing and operations. Mr. Krips is also a member of the
Management Board of Unimar Company, a partnership that is half owned by the
Company, and a director of ENSTAR Corporation ("ENSTAR") and of VICO 7.5, Inc.,
ENSTAR Indonesia, Inc., Virginia International Company and Virginia Indonesia
Company, which entities are subsidiaries of ENSTAR.
Arthur W. Peabody, Jr. -- Age 53, Senior Vice President since May 1994,
after having served as Senior Vice President -- Exploration and Production,
Senior Vice President and General Manager -- Hydrocarbon Products Group, Vice
President -- Planning and Administration and Vice President -- Acquisitions and
Planning. Mr. Peabody has responsibility for Exploration, Acquisitions, Enhanced
Production Ventures and Portfolio Management. Mr. Peabody is also a member of
the Unimar Company Management Board, and a director of ENSTAR, ENSTAR Indonesia,
Inc., VICO 7.5, Inc. and Virginia International Company, which entities are
subsidiaries of ENSTAR. Mr. Peabody joined Allied in 1981 and, prior to assuming
his current position, held various positions in management and in planning and
development with Allied and thereafter with the Company.
Larry D. Kalmbach -- Age 45, Vice President and Chief Financial Officer
since February 1995, after having served as Vice President -- Finance and Vice
President and Controller of the Company. Mr. Kalmbach has responsibility for
Accounting, Tax, Treasury, Audit, Management Information Systems, Risk
Management, Corporate Planning, Purchasing, Administration and Investor
Relations. He joined the Company in 1974 and has held various financial
management positions with the Company. He is also a member of the Unimar Company
Management Board, and a director of ENSTAR and of VICO 7.5, Inc., Virginia
International Company and Virginia Indonesia Company, which entities are
subsidiaries of ENSTAR.
Alan R. Crain, Jr. -- Age 45, Vice President and General Counsel since May
1996, after having served as Assistant General Counsel from September 1988 until
he assumed his current position. Mr. Crain has responsibility for Law,
Commercial Negotiations and Security. Mr. Crain joined the Company in March
1988.
Richard A. Cunningham -- Age 45, Regional Vice President since May 1996,
after having served as General Manager Worldwide Business Development from
September 1991 until he assumed his current position. Mr. Cunningham has
responsibility for the Asia Pacific regional business unit. Mr. Cunningham
joined the Company in 1981 and, prior to assuming his current position, held
various positions in negotiations and business development as well as serving as
President VICO Indonesia.
James E. Knight -- Age 51, Regional Vice President since May 1996, after
having served as Vice President, Technical Services from December 1991 until he
assumed his current position. Mr. Knight has responsibility for the Europe,
Middle East, Africa and Central Asia regional business unit. Mr. Knight joined
the Company in 1980 and, prior to assuming his current position, held various
positions in management in gas processing, engineering and international
operations.
Michael N. Markowitz -- Age 49, Vice President and Treasurer since July
1985, after having served as Treasurer from August 1983 until he assumed his
current position. Mr. Markowitz has responsibility for Treasury and Tax. Mr.
Markowitz joined the Company in 1972 and, prior to assuming his current
position, held various positions of increasing responsibility in tax and
treasury.
7
<PAGE> 11
Donald M. McMullan -- Age 47, Vice President and Controller since June
1993, after having served as Assistant Treasurer and Director Finance from July
1988 until he assumed his current position. Mr. McMullan has responsibility for
Accounting and Corporate Planning. Mr. McMullan joined the Company in 1980 and,
prior to assuming his current position, held various management positions in
finance, treasury and acquisitions.
Roger W. Pierce -- Age 47, Vice President Exploration since May 1996, after
having served as General Manager Exploration Operations from December 1994 until
he assumed his current position. Mr. Pierce has responsibility for worldwide
Exploration. Mr. Pierce joined the Company in 1976 and, prior to assuming his
current position, held various positions in domestic and international
exploration operations.
Newton W. Wilson, III -- Age 46, Regional Vice President since May 1996,
after having served as General Counsel, Vice President -- Administration and
Secretary from January 1993 until he assumed his current position. Mr. Wilson
has responsibility for the Americas regional business unit. Mr. Wilson joined
the Company in October 1985 as Vice President, General Counsel and Secretary.
John M. Zimmerman -- Age 49, Vice President -- Investor Relations since May
1996, and Vice President -- Planning and Investor Relations from April 1990
until he assumed his current position. Mr. Zimmerman joined the Company in April
1983.
Certain of the executive officers also serve as directors of certain of the
Company's subsidiaries and affiliates in addition to those named above. The
Company's Bylaws provide that each officer shall hold office until the officer's
successor is elected or appointed or until the officer's death, resignation or
removal by the Board.
8
<PAGE> 12
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth information regarding aggregate cash
compensation, stock option awards and other compensation earned by the Company's
Chief Executive Officer and the four other most highly compensated executive
officers for services rendered in all capacities to the Company and its
subsidiaries in the years 1994 to 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
------------------------------------- UNDERLYING
NAME AND OTHER ANNUAL OPTIONS/SARS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) GRANTED(3) COMPENSATION(4)
------------------ ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
John L. Whitmire........... 1996 $586,957 $565,500 $577,873(5) 345,000 $28,000
Chairman of the Board and
Chief Executive Officer
William M. Krips........... 1996 $314,667 $205,300 -- 39,100 $25,173
Senior Vice President 1995 $305,000 $193,000 -- 39,100 $24,400
1994 $290,000 $160,000 -- 39,100 $23,200
Arthur W. Peabody, Jr...... 1996 $310,000 $205,300 -- 39,100 $24,800
Senior Vice President 1995 $296,250 $193,000 -- 39,100 $23,700
1994 $281,250 $160,000 -- 39,100 $22,500
Newton W. Wilson, III...... 1996 $294,667 $170,000 -- 39,600 $23,574
Regional Vice President 1995 $285,000 $170,000 -- 31,600 $22,800
1994 $270,000 $135,000 -- 31,600 $21,600
Larry D. Kalmbach.......... 1996 $267,000 $154,900 -- 31,600 $21,360
Vice President and 1995 $255,833 $150,000 -- 31,600 $20,467
Chief Financial Officer 1994 $205,000 $105,000 -- 20,700 $16,400
</TABLE>
- - ---------------
(1) Includes compensation under the Company's Incentive Compensation Plan for
Executive Officers and Key Salaried Employees (the "Incentive Compensation
Plan"), which program is under the 1994 Incentive Plan and provides cash
awards for executive officers and key salaried employees of the Company. For
a description of the Incentive Compensation Plan, see "Report of the
Organization and Compensation Committee and the Section 16 Committee of the
Board of Directors on Executive Compensation." Awards are paid currently in
a lump sum or deferred for a period determined by the Compensation
Committee. No incentive compensation accrued in 1996, 1995 or 1994 was
deferred by any of the executive officers to later years.
(2) During each of the three years ended December 31, 1994, 1995 and 1996,
perquisites for each individual named in the Summary Compensation Table,
other than Mr. Whitmire, aggregated less than 10% of the total annual salary
and bonus reported for such individual in the Summary Compensation Table, or
$50,000, if lower. Accordingly, no such amounts are included in the Summary
Compensation Table.
(3) Each option granted included an equal number of stock appreciation rights
("SARs").
(4) Information in this column includes amounts contributed by the Company under
the Company's Savings Plan for Salaried Employees (the "Savings Plan") and
Supplemental Non-Qualified Savings Plan for Executive Employees (the
"Supplemental Savings Plan"). The Company's matching contributions to the
Savings Plan for 1996 were in the respective amounts of: $9,500.00 for Mr.
Whitmire, $9,500.00 for Mr. Krips, $9,500.00 for Mr. Peabody, $8,534.32 for
Mr. Wilson, and $9,500.00 for Mr. Kalmbach. The Company's matching
contributions to the Supplemental Savings Plan for 1996 were in the
respective
(Footnotes continued on following page)
9
<PAGE> 13
amounts of: $18,500 for Mr. Whitmire, $15,673.37 for Mr. Krips, $15,300.05
for Mr. Peabody, $15,040.01 for Mr. Wilson, and $11,859.97 for Mr. Kalmbach.
(5) Includes certain amounts in connection with Mr. Whitmire's employment in
January 1996, including the purchase of Mr. Whitmire's home in Bartlesville,
Oklahoma at its appraised value of $388,000 and special payment of $170,000
related to relocation to Houston, Texas by the Company. See "Report of the
Organization and Compensation Committee and the Section 16 Committee of the
Board of Directors on Executive Compensation -- Chief Executive Officer
Compensation."
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth information concerning the grant of stock
options and tandem SARs under the Company's 1994 Incentive Plan to the executive
officers named in the Summary Compensation Table:
OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------
PERCENT GRANT
REPRESENTS
NUMBER OF OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO ALL GRANT DATE
OPTIONS/SARS EMPLOYEES IN EXERCISE EXPIRATION PRESENT
GRANTED(1) 1996 PRICE(2) DATE VALUE(3)
------------ -------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
John L. Whitmire............. 225,000 18.0% $19.3125 01/09/2006 $1,972,771.88
120,000 9.6% $21.4375 10/23/2006 $1,203,930.00
William M. Krips............. 39,100 3.1% $21.4375 10/23/2006 $ 392,280.53
Arthur W. Peabody, Jr........ 39,100 3.1% $21.4375 10/23/2006 $ 392,280.53
Newton W. Wilson, III........ 31,600 2.5% $21.4375 10/23/2006 $ 317,034.90
Larry D. Kalmbach............ 31,600 2.5% $21.4375 10/23/2006 $ 317,034.90
</TABLE>
- - ---------------
(1) A total of 1,252,300 options were granted in 1996. A total of 225,000
options were granted to Mr. Whitmire on January 9, 1996 and a total of
1,027,300 were granted to all U.S.-based employees on October 24, 1996, with
397,600 options (89,622 of which were Incentive Stock Options ("ISOs"))
being granted to the executive officers, including Mr. Whitmire, and 629,700
options being granted to 469 other employees. See "Report of the
Organization and Compensation Committee and the Section 16 Committee of the
Board of Directors on Executive Compensation." The options become
exercisable for 25% of the shares after the expiration of one year from the
date of grant, 50% after the expiration of two years, 75% after the
expiration of three years and in full after the expiration of four years.
Options are granted for a term of ten years, subject to termination between
90 days to three years following termination of employment. Each option
vests in full upon death, disability, normal retirement, voluntary
resignation for the purpose of accepting employment with Virginia Indonesia
Company, involuntary termination of an executive officer, or a change in
control (generally defined as liquidation or dissolution of the Company or
acquisition of 50% or more of the Company's voting stock or 75% or more of
the Company's assets, other than such a transaction with the KKR
Partnerships, but not a merger or consolidation unless the Board determines
by a majority vote that such transaction is a change in control). Upon the
occurrence of a change-in-control event, including specified sales of Common
Stock by the KKR Partnerships, the options held by executive officers are
automatically exchanged for cash equal to the difference in the value of the
Common Stock and the option exercise price. In addition, each option to
executive officers is accompanied by an equivalent number of SARs. The SARs
allow the optionee, subject to certain restrictions, to surrender his option
in return for a payment in cash or shares of Common Stock or a combination
thereof equal in value to the excess of the fair market value of the shares
of Common Stock represented by the option over the option price thereof. The
SARs are subject to the same vesting, expiration and termination provisions
as the related option.
(Footnotes continued on following page)
10
<PAGE> 14
(2) The options other than ISOs contain an "early payment provision" whereby the
Board, the Compensation Committee or the Section 16 Committee may authorize
the Company to make a cash payment, equal to the difference in the market
value of a share of Common Stock on the date of payment and the exercise
price, to the holder of the option and adjust the exercise price of the
option to the then market price of the Common Stock.
(3) To calculate the present value of option/SAR grants in 1996, the Company has
used the Black-Scholes option pricing model. The actual value, if any, an
executive may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The estimated values under that model
are based on assumptions that include (i) a stock price volatility of
25.32%, calculated using monthly stock prices for the three years prior to
the grant date, (ii) an interest rate of 6.59% on the January grant and
6.73% on the October grants, (iii) a dividend yield of 1.03% and (iv) an
option exercise term of ten years. This value has been adjusted to reflect
any risk of forfeiture prior to vesting. The Securities and Exchange
Commission (the "SEC") requires disclosure of the potential realizable value
or present value of each grant. The Company's use of the Black-Scholes model
to indicate the present value of each grant is not an endorsement of this
valuation, which is based on certain assumptions, including the assumption
that the option will be held for the full ten-year term prior to exercise.
Studies conducted by the Company's independent consultants indicate that
options are usually exercised before the end of the full ten-year term.
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to the executive
officers named in the Summary Compensation Table concerning the exercise of
options and SARs during 1996 and unexercised options and SARs held as of the end
of 1996, which include grants made under the Company's 1985 and 1992 Stock
Option Plans and the 1994 Incentive Plan.
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND OPTION/SAR VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY
SECURITIES OPTIONS/SARS HELD AT OPTIONS/SARS HELD AT
UNDERLYING 1996 FISCAL YEAR-END 1996 FISCAL YEAR-END(2)
OPTIONS/SARS VALUE --------------------------- ---------------------------
NAME EXERCISED REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John L. Whitmire....... 0 $ 0 0 345,000 $ 0 $823,125
William M. Krips....... 0 $ 0 161,299 108,375 $ 925,228 $288,788
Arthur W. Peabody,
Jr................... 0 $ 0 173,369 108,375 $1,077,644 $288,788
Newton W. Wilson,
III.................. 9,665 $68,259.06 123,588 87,600 $ 733,292 $233,425
Larry D. Kalmbach...... 0 $ 0 47,851 75,450 $ 206,537 $195,428
</TABLE>
- - ---------------
(1) Market value of the Company's Common Stock at the time of exercise, minus
the exercise price, multiplied by the number of shares underlying the
options or SARs exercised.
(2) Value calculated by subtracting the exercise price from the market value of
the Company's Common Stock on December 31, 1996, which was $22.4375 based on
the average of the high and low sales price on December 31, 1996 on the New
York Stock Exchange, multiplied by the number of shares underlying the
unexercised options or SARs.
11
<PAGE> 15
PENSION BENEFITS
Certain employees of the Company, including each of its executive officers,
are participants in the Company's Salaried Employees' Pension Plan (the "Pension
Plan"). The table below illustrates the annual straight-life annuity benefits
payable to an employee under the Pension Plan as if the employee were age 65 in
1996.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION BENEFIT FOR YEARS OF CREDITED SERVICE INDICATED
----------------------------------------------------------------------------
AVERAGE 5 10 15 20 25 30 35 40
ANNUAL PAY YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS
---------- ------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 300,000........... 24,600 49,200 73,800 98,400 123,000 147,600 172,200 196,800
400,000........... 32,800 65,600 98,400 131,200 164,000 196,800 229,600 262,400
500,000........... 41,000 82,000 123,000 164,000 205,000 246,000 287,000 328,000
600,000........... 49,200 98,400 147,600 196,800 246,000 295,200 344,400 393,600
700,000........... 57,400 114,800 172,200 229,600 287,000 344,400 401,800 459,200
800,000........... 65,600 131,200 196,800 262,400 328,000 393,600 459,200 524,800
900,000........... 73,800 147,600 221,400 295,200 369,000 442,800 516,600 590,400
1,000,000........... 82,000 164,000 246,000 328,000 410,000 492,000 574,000 656,000
1,100,000........... 90,200 180,400 270,600 360,800 451,000 541,200 631,400 721,600
1,200,000........... 98,400 196,800 295,200 393,600 492,000 590,400 688,800 787,200
</TABLE>
The Pension Plan is a noncontributory, tax-qualified plan and provides that
the normal retirement age is 65. The benefits listed in the table above are not
subject to any reduction for Social Security benefits or, with respect to the
executive officers named in the Summary Compensation Table, for other offset
amounts. The amount of pension payable at normal or later retirement under the
Pension Plan is based on an employee's years of credited service and the
employee's average pay (including salary, Incentive Compensation Plan payments
that are not deferred, elective deferrals made under the Company's Savings Plan
or Section 125 cafeteria plans, and severance pay (excluding officers), but
excluding amounts deferred under a deferred compensation plan, income from an
exercise of a stock option or SAR and certain other fringe benefits as specified
in the Pension Plan) during the most highly paid five consecutive years of the
employee's last ten years of employment. An employee who was employed by the
Company on April 29, 1990, may elect to receive a lump sum payment at retirement
in lieu of a pension.
The Code places certain maximum limitations on the amount of benefits that
may be payable under tax-qualified plans, such as the Pension Plan. Any excess
over such maximum limitation calculated in accordance with the provisions of the
Pension Plan will be paid separately by the Company through one or more unfunded
excess benefit plans. Such excess benefit plans also provide benefits to certain
employees in excess of those provided under the Pension Plan, based upon
deferred compensation, severance pay and certain additional service that is not
taken into account under the Pension Plan and to the extent the formula in
effect for the Pension Plan prior to 1989 would produce a larger benefit than
the current formula. Such additional benefits are calculated and included in the
table above, with the exception of benefits related to the formula in effect
prior to 1989 and a special supplemental benefit to Mr. Whitmire. In 1988, the
Company adopted a trust pursuant to which the Company may, at its discretion,
including in the event of a change of control, contribute amounts to the trust
to provide for all or part of the benefits the Company is obligated to pay
pursuant to the excess benefit plans. Any assets placed in the trust will remain
subject to the general unsecured creditors of the Company.
At December 31, 1996, the following individuals had the number of years of
credited service indicated: Mr. Whitmire, 0; Mr. Krips, 32; Mr. Peabody, 15; Mr.
Wilson, 11; and Mr. Kalmbach, 22. Mr. Whitmire also is entitled to receive a
special supplemental benefit to ensure that he receives compensation for any
loss of total pension benefit as a result of his early retirement from his
former employer. See "Report of the Organization and Compensation Committee and
the Section 16 Committee of the Board of Directors on Executive
Compensation -- Chief Executive Officer Compensation."
12
<PAGE> 16
EXECUTIVE SEVERANCE PLAN
The Company's Executive Severance Plan provides for certain salary and
other severance benefits to certain of the Company's employees, including each
of the Company's executive officers, if the employee's employment with the
Company is terminated under certain circumstances following a change of control
(as defined therein) of the Company. For purposes of the Executive Severance
Plan, the acquisition by affiliates of KKR of approximately 50% of the Common
Stock from Allied (the "1985 Stock Acquisition") constituted a change of control
of the Company. The period following such change of control through the later of
March 31, 1999, or 24 months after a change of control is referred to as the
"Protected Period." Since benefits are payable if employment with the Company is
terminated during the Protected Period, benefits could be required to be paid in
the future to employees who are covered by the Executive Severance Plan. The
Executive Severance Plan does not restrict the termination of a participant's
employment, and no benefits are payable if the participant voluntarily
terminates his employment, accepts employment with the purchaser of assets from
the Company, or receives a comparable offer of employment (as defined in the
plan) by the purchaser of assets from the Company. Certain offers of continued
employment either at lower compensation or that require a participant to change
his work site are deemed involuntary terminations of employment. If a change of
control occurs, certain reductions in benefits and changes in an employee's
responsibilities are also deemed involuntary terminations of employment.
A participant in the Executive Severance Plan who is involuntarily
terminated other than for gross cause during the Protected Period is entitled to
receive his base salary together with incentive compensation payments for a
period of not less than 24, nor greater than 36 months, as specified in the
Executive Severance Plan as to such participant. Payments under the Executive
Severance Plan will not continue, however, past the month in which the
participant attains age 65. Also, an employee who is so terminated is entitled
to have 12 months of service and compensation payments credited toward
calculation of benefits payable under the excess benefit plans. Under the
Executive Severance Plan, Messrs. Whitmire, Krips and Peabody are entitled to 36
months of benefits, and Messrs. Wilson and Kalmbach are entitled to 24 months of
benefits. See "Description of Certain Employment Agreements and Changes of
Employment Arrangements." A participant entitled to Executive Severance Plan
benefits is also entitled to continuation of certain basic life and medical
insurance coverage. If a change of control occurs after July 25, 1991, an
employee who either becomes entitled to salary and benefit continuation pursuant
to the Executive Severance Plan after such change of control or who was
receiving benefits pursuant to the Executive Severance Plan on the date of such
change of control is entitled to receive in a lump sum any cash benefits which
he is entitled to receive or which remain to be paid as of the change of
control. The cash benefits will be discounted at the rate of 8% per annum if
paid in a lump sum. Assuming that Messrs. Whitmire, Krips, Peabody, Wilson and
Kalmbach were entitled to receive payments as of December 31, 1996, such
payments would total $2,605,943, $1,240,213, $1,186,624, $778,835 and $696,852,
respectively.
The Company may generally terminate the Executive Severance Plan, but no
termination of the Plan is permitted prior to the later of March 31, 1999, or 24
months after a change of control. In addition, no termination may adversely
affect the rights of participants already receiving benefits at the time of
termination. Benefits may be reduced, eliminated or deferred in order to prevent
application of the "golden parachute" provisions of the Code, if such provisions
would result in a net after-tax financial detriment to the participant if the
benefits were paid in full to the participant. Such reduction, elimination or
deferral will not apply if a participant is provided with a "golden parachute"
tax gross-up. There currently are no participants with a "golden parachute" tax
gross-up right.
DESCRIPTION OF CERTAIN EMPLOYMENT AGREEMENTS AND CHANGES OF EMPLOYMENT
ARRANGEMENTS
In connection with Mr. Whitmire's appointment in January 1996 as Chairman
of the Board and Chief Executive Officer, the Company provided an annual base
salary of $600,000 for 1996 and eligibility for an annual cash bonus target
award under the Company's Incentive Compensation Plan of 65% of his base salary,
as well as certain other compensation and benefits, including coverage under the
Executive Severance Plan. See "Report of the Organization and Compensation
Committee and the Section 16 Committee of the Board of Directors on Executive
Compensation -- Chief Executive Officer Compensation."
13
<PAGE> 17
In connection with the 1985 Stock Acquisition by affiliates of KKR of
approximately 50% of the Company's stock from Allied, the Company summarized in
letter agreements its existing understandings with certain officers, including
the executive officers named in the Summary Compensation Table, except Mr.
Whitmire, regarding compensation and benefits. In all cases, these letter
agreements provide for employment at will, which may be terminated by the
Company or such officers at any time, with or without cause. The compensation
and benefits summarized in the letter agreements are consistent with the
Compensation and Benefits Agreement among the Company, Allied and affiliates of
KKR (the "Compensation and Benefits Agreement"), which was executed in
connection with the 1985 Stock Acquisition, in part as an inducement for
employees to continue employment with the Company. Such letter agreements have
not been formally amended since the original date of the agreements to reflect
changes made in benefits resulting from promotions and increased or changed job
responsibilities.
Currently, each of Messrs. Whitmire, Krips, Peabody, Wilson and Kalmbach
has an annual incentive compensation (bonus), as determined by the Compensation
Committee, and each is covered by the Executive Severance Plan (with 36, 36, 36,
24 and 24 months of benefits, respectively), 1985 and 1992 Stock Option Plans
(other than Mr. Whitmire), 1994 Incentive Plan, Pension Plan, Savings Plan,
Supplemental Savings Plan and supplemental executive retirement plans. See
"Report of the Organization and Compensation Committee and the Section 16
Committee of the Board of Directors on Executive Compensation."
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return (change in year-end stock price plus
reinvested dividends) on the Company's Common Stock against the cumulative total
return of the Standard & Poor's 500 Stock Index and the Dow Jones Secondary Oil
Industry Index for the period of five years ended December 31, 1996.
VALUE OF INVESTMENT ($)
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD SECONDARY
(FISCAL YEAR COVERED) UNION TEXAS S&P 500 OIL
<S> <C> <C> <C>
1991 100 100 100
1992 93.6 107.6 100.7
1993 102.6 118.5 111.7
1994 105.6 120.0 108.2
1995 99.7 165.1 122.2
1996 116.3 201.5 154.2
</TABLE>
Assumes $100 invested December 31, 1991, in the Company's Common Stock, S&P 500
Stock Index and Dow Jones Secondary Oil Industry Index (dividends reinvested).
The Stock Price Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under
14
<PAGE> 18
the Exchange Act, except to the extent that the Company specifically
incorporates this graph by reference, and shall not otherwise be deemed filed
under such Acts.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The Company will not make or endorse any predictions as to future stock
performance.
REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE
AND THE SECTION 16 COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
COMPENSATION PROGRAM
The Company's compensation program for all executives, including the
executive officers named in the Summary Compensation Table, is administered by
the Compensation Committee and the Section 16 Committee of the Company's Board.
The Compensation Committee currently consists of three members, all of whom are
non-employee directors and two of whom are affiliated with the KKR Partnerships,
which collectively own approximately 25% of the Company's Common Stock. The
Section 16 Committee currently consists of two members, both of whom are
non-employee directors as defined under the Exchange Act and approves grants of
options, stock, stock appreciation rights and other types of awards to Section
16 Officers. Set forth below is a report collectively submitted by the
Compensation Committee and the Section 16 Committee (collectively the
"Committees" and individually a "Committee") addressing the Company's executive
compensation programs for 1996.
The Company's executive compensation program is designed to attract,
motivate and retain executives critical to the long-term success of the Company.
An important consideration in this philosophy is to relate the interests of the
executive officers with those of the stockholders. In connection with this
philosophy, the compensation package of the executive employees of the Company
consists of four components: a base salary, an annual incentive, long-term
incentives in the form of stock options, and savings programs. Further, the
Company's 1994 Incentive Plan is intended to continue the alignment between
executives' compensation and stockholder wealth creation. The Committees
annually review the Company's executive compensation program on the basis of
information provided by the Company, as well as studies, data and reports
provided by independent consultants. Each component of the executive
compensation program is described below.
BASE SALARIES
The objective of the Company's base salary program for key management
positions is to provide its executives with base salary opportunities that are
competitive with similar positions in companies similar in size to the Company,
based on annual revenues (referred to in this report as comparable companies).
In order to motivate and retain key executives critical to the long-term success
of the Company, the Company has established certain practices in regard both to
base salary and to the relationship of incentive bonus to predetermined
performance-oriented goals for the Company. The base salaries established for
1996 for the executive officers (excluding the Chief Executive Officer) of the
Company were reviewed at the January and May 1996 meetings of the Compensation
Committee. In setting base salaries for fiscal 1996, the Compensation Committee
reviewed compensation data for comparable companies, including a comparison of
market compensation data from a December 1995 comprehensive study that included
detailed market data regarding base salaries, annual incentives and long-term
incentives, prepared by Towers Perrin, an independent consultant (the
"Consultant Study"), and analyzed the Company's executive compensation program.
The Consultant Study included data collected from nationally recognized private
and published compensation surveys of energy and other industry companies of
comparable size to the Company for fiscal year 1995, but did not necessarily
include data from proxy statements published in 1995 for fiscal year 1994 for
the companies included in the Dow Jones Secondary Oil Industry published index.
The data obtained from the foregoing surveys is more reflective of
competitive compensation among companies of similar size, based on annual
revenues, than the data pertaining to companies included in the
15
<PAGE> 19
Dow Jones Secondary Oil Industry published index for purposes of the Company's
Stock Price Performance Graph, which index includes several companies that are
much larger and other companies that are smaller than the Company in terms of
annual revenues. The energy and other industry survey data provide more detail
about actual current compensation practices and levels to the Compensation
Committee than information from proxy statements published in prior years. With
the data collected, the Compensation Committee's objective for 1996 was to
establish the executives' salary and bonus opportunities above the market median
(50th percentile) in an effort to be competitive with compensation provided to
executives of the Company's competitors. The Company believes it is crucial to
provide strongly competitive salaries in order to attract and retain managers
who are highly talented. The specific competitive markets considered depend on
the nature and level of the particular positions and the labor markets from
which qualified individuals would be recruited for such positions. Base salary
levels also reflect the performance of each individual employee over time. Thus,
employees with higher levels of performance sustained over time will be paid
correspondingly higher salaries. The Chief Executive Officer and the senior
human resources executive of the Company reviewed with the Compensation
Committee a proposed 1996 salary plan for the Company's executive officers
(excluding the Chief Executive Officer), following which the Compensation
Committee approved the proposed 1996 plan at the May 1996 meeting.
All base salary increases for the executive officers were based on a
philosophy of pay-for-performance and assessments of an individual's significant
accomplishments and long-term value to the Company. In addition to reviewing the
market salary data, the Compensation Committee recognized the importance of
individual achievements and, accordingly, reviewed individual significant
accomplishments for 1995 for each executive officer who received a salary
increase as well as the timing of such increases. Such accomplishments included
financial, operating and reserve acquisition results, reduction and efficiencies
in operating expenses, general and administrative costs and employee benefit
plan costs for the Company. The Compensation Committee took into account both
qualitative and quantitative factors in making its salary compensation decisions
for the executive officers (excluding the Chief Executive Officer); however, no
quantitative formula was applied for weighing the importance of these factors in
its decision. Base salaries for the executive officers were established at
levels considered appropriate in view of the duties and scope of
responsibilities of each such officer's position and were in a range generally
consistent with the market median (50th percentile) of competitors.
ANNUAL INCENTIVES
The objectives of the Company's annual incentive bonus, a
pay-for-performance program under the 1994 Incentive Plan, are to motivate and
reward individuals based on contributions to business results. The Compensation
Committee administers the Company's incentive program, recommends to the Board
the aggregate amount of incentive compensation and approves individual officer
awards. The Board approves the aggregate amount of the incentive compensation
awards to all participants.
Due to the nature of the management's 1996 business objectives, which
included (i) the creation of a long-term business strategy that supports the
growth of the Company and subsequent restructuring of the organization into
regional business units and growth teams and (ii) the review of the Company's
compensation and benefit programs to ensure that these programs support the
attainment of the new business strategy and provide proper alignment between
interests of the employees and stockholders, the 1996 incentive compensation
program was approved as discretionary in nature. Accordingly, each executive
officer's bonus and therefore a significant portion of each executive officer's
compensation was at risk. In recognition of a strong financial and operating
performance and the response and efforts of the officers and employees in
support of the Company's strategy under the new organization as well as the
implementation of a new compensation program for 1997, annual incentive awards
for 1996 were approved by the Compensation Committee and paid in January 1997.
Although the annual bonus in 1996 was discretionary for the Compensation
Committee, it was based upon achievement of performance-oriented indicators, 75%
of which were financial measures directly related to the Company. For 1996, the
corporate financial measures considered in the incentive compensation program
included net income, cash flow and reserve additions, revisions or acquisitions.
Financial results were
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<PAGE> 20
measured against targets in the Company's business plan for 1996. Since the
Company's financial performance exceeded the target objectives for 1996, the
incentive awards were calculated on a higher percentage. The remaining portion
of the awards was based on the achievement of management objectives, which are
performance-oriented goals that directly support the Company's overall business
objectives, which included developing long-term business growth strategies,
undertaking a comprehensive review of the Company's organizational structure and
compensation programs, implementing specific operational policies and plans and
developing industry business relationships. The 1996 management objectives were
approved by the Compensation Committee at the May 1996 meeting of the
Compensation Committee. Revised 1996 management objectives for Messrs. Whitmire,
Krips and Peabody were approved by the Compensation Committee at the July 1996
meeting due to implementation of the long-term business strategy of the Company.
Certain of the management objectives are non-quantifiable, and thus the
evaluation of the completion of these objectives is subjective in nature. The
accomplishment of such management objectives, as well as the accomplishment of a
significant number of additional other objectives, was evaluated by the Chief
Executive Officer. The results of this evaluation were reflected in a
recommended award for each key employee, including officers.
Under this incentive program for 1996, annual bonus targets as a percentage
of salary ranged from 40% to 45% for each of the executive officers named in the
Summary Compensation Table, excluding the Chief Executive Officer. See "Chief
Executive Officer Compensation" below. The executive officers received a bonus
on the basis of target percentage award levels established at the time of
hiring, which may be increased in connection with promotions and increased job
responsibilities. Based on the Consultant Study provided to the Compensation
Committee, these target awards were generally competitive with the market median
rates described in the Consultant Study. In certain cases, an award to a key
employee, including an officer, was adjusted upward or downward by senior
management, generally no more than 20% in either direction, to allow senior
management discretion in rewarding performance. These adjustments were subject
to approval by the Chief Executive Officer, and with respect to adjustments to
awards for officers, approval by the Compensation Committee. The Chief Executive
Officer of the Company reviewed all of the calculated awards for key salaried
employees, including officers, adjusted such awards as he deemed appropriate and
reviewed with the Compensation Committee at the January 1997 meeting a list of
recommended awards for all officers of the Company. Although the awards to
executive officers were discretionary in 1996, such awards were above target
because the Company exceeded its financial target objectives in 1996.
LONG-TERM INCENTIVES
Another important consideration in the compensation philosophy of the
Company is to align the interests of the directors, key executive officers and
employees with the long-term interests of the stockholders of the Company. The
1994 Incentive Plan provides authority for the Committees to use a range of
long-term incentive awards in various forms as part of the Company's overall
compensation program. In connection with this philosophy, the Company
historically has attempted to periodically award its employees with stock
options whose value depends upon an increase in the value of the Common Stock of
the Company. The use of stock options is an integral part of the entire
compensation package of the employees of the Company, which also serves as a
pay-for-performance plan. Through providing the executives an opportunity for
stock ownership, stock options reward executives, on the basis of the Company's
future performance reflected in increased stock price, for long-term service to
the Company and for enhancing shareholder value. See "Election of
Directors -- Director Compensation."
On October 24, 1996, the Committees granted a total of 1,027,300 stock
options pursuant to the 1994 Incentive Plan, which plan was previously approved
by the stockholders. Options were received by all U.S.-based employees,
including the named executive officers as described in the Summary Compensation
Table and the Option/SAR Grants in 1996 Table. The option exercise price is
equal to the fair market value of the stock on October 24, 1996, the date of the
grants. The 1996 option grants vest at a rate of 25% per year beginning one year
after the grant date.
The Committees' overall stock option grant guidelines for key management
were generally to position grants above the market median (50th percentile) of
the competitors, in accordance with the Company's salary and bonus objectives. A
history of stock options granted to officers from 1985 to such October 1996
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<PAGE> 21
meeting was provided. The 1996 stock option grants to officers were made on the
same basis as approved in 1995, at equivalent levels as the prior year's awards.
The number of shares subject to option grants varied based on job grade
classification. The 1996 stock option grants were at the market 65th percentile.
The Committees periodically grant stock options to provide continuing incentives
for individuals to enhance the value of the Company and to remain with the
Company and thereby receive value from such compensation. Accordingly, the
long-term stock options are granted to vest over time without regard to the
number of options held currently by each executive officer on the date of grant.
By working to increase the Company's stock value, one of the Company's
performance goals is met, and the executives and employees are likewise
compensated through increased option value.
OTHER COMPENSATION PROGRAMS AND POLICIES
Another aspect of the Company's compensation package is to encourage
employees to save for the future through the Savings Plan. The Savings Plan
permits most regular salaried employees of the Company to contribute a
percentage of their annual base salary to the Savings Plan on a before-tax
basis. A participant's contributions to the Savings Plan are matched by the
Company. Generally, the Company's basic matching contribution is an amount equal
to 100% of the first 8% of the participant's annual base salary contributed to
the Savings Plan, which 8% is referred to as the participant's basic
contribution. To encourage alignment of the employees' and stockholders'
long-term financial interests, all of the Company's contributions to the Savings
Plan are invested in the Company's Common Stock, and participants may elect to
invest their contributions in six investment funds, including the one invested
in the Company's Common Stock. The Code places certain maximum limitations on
the amount of contributions which otherwise could be contributed to the Savings
Plan. Highly compensated participants limited by such provisions, which include
all of the executive officers, may contribute to the Supplemental Savings Plan
and have their contributions matched by the Company in cash in accordance with
the terms of the Supplemental Savings Plan. The Supplemental Savings Plan is
unfunded, and benefits are paid from the general assets of the Company. Company
contributions to the Supplemental Savings Plan in 1996 were $176,130.92, and
1996 contributions of $176,130.92 were made by the participants. See the Summary
Compensation Table for information with respect to each named executive officer.
The Company has certain broad-based employee benefit plans in which all
employees, including the executives, participate, such as life and health
insurance plans, the relocation program and the Company's Matching Gifts
Program, under which program the Company currently will match a maximum of
$10,000 of gifts to eligible institutions per participant per year. Also, the
executives of the Company are provided director and officer insurance coverage.
The incremental cost to the Company of the executives' benefits provided under
these plans is not material to the Company. For employee participants (which
include all of the executive officers) whose benefits under the Savings Plan or
Pension Plan are reduced or restricted due to tax law limits, the Company has
applicable excess supplemental benefit plans. Benefits under these plans are not
directly or indirectly tied to Company performance.
Section 162(m) of the Code limits the tax deduction that the Company may
take with respect to the compensation of certain executive officers, unless the
compensation is "performance based" as defined in the Code. The Company's 1996
executive compensation, other than with respect to the Chief Executive Officer,
was within the provisions for the $1 million deductibility cap set forth in
Section 162(m) of the Code. Stock options granted under the 1992 Stock Option
Plan and the 1994 Incentive Plan are intended to qualify for exemption from the
cap. To the extent a committee has discretion in its decision making that is not
permissible under the Code, certain awards such as annual incentive bonuses will
not meet the requirement of deductibility under the Code. The Committees intend
to continue to monitor developments under the tax law and consider actions that
may be taken in the future that would enable any compensation in excess of $1
million paid to its executives who are "covered persons" under the provisions of
Section 162(m), which generally includes the Chief Executive Officer and the
four other most highly compensated executive officers of the Company who are
officers on the last day of the tax year, to be deductible. However, awards that
are not intended to qualify under Section 162(m) will be paid without regard to
the limitation on deductibility thereunder.
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<PAGE> 22
1997 COMPENSATION PROGRAM
In connection with a comprehensive review by management during 1996 of the
Company's compensation program for all employees, the Compensation Committee
approved a new compensation program for 1997, which places more emphasis on
variable performance-based pay that is tied directly to the results of the
Company. The new program continues to strengthen the alignment between
compensation and stockholder wealth creation.
The new program is composed of four elements: a base salary, an annual
incentive, long-term incentives in the form of stock options, and a
comprehensive benefits program. The goal of the new program for all employees,
including executive officers, is to establish base salaries at the market median
and bonus opportunities at the 65th percentile. All employees will now
participate in the Company's annual incentive compensation plan, which will be
based entirely on the Company meeting its financial and strategic objectives as
approved by the Compensation Committee. Individual personal objectives for
executive officers and other key management personnel have been eliminated.
Specific award opportunities will vary depending on the Company's performance
level and the individual's salary grade. In addition, each employee's award,
including for executive officers, can be adjusted up or down by as much as 25%
depending on individual performance to allow management discretion in rewarding
performance.
CHIEF EXECUTIVE OFFICER COMPENSATION
In accordance with the discussion above of the Company's philosophy for
executive compensation, a significant portion of the compensation for the Chief
Executive Officer is based upon the Company's performance.
On January 9, 1996, after an extensive search for a qualified individual to
assume the significant responsibilities of Chief Executive Officer, Mr. Whitmire
assumed those responsibilities. Based on compensation data for comparable
companies historically provided to the Company and the Compensation Committee,
as well as the Consultant Study, Mr. Whitmire was provided an annual base salary
of $600,000 for 1996 and an annual cash bonus target award under the Company's
incentive compensation program of 65% of his base salary. On January 9, 1996 and
October 24, 1996, Mr. Whitmire was granted options to purchase 225,000 and
120,000 shares of Common Stock at $19.3125 and $21.4375 per share, respectively,
under the 1994 Incentive Plan. During February 1996, the Company purchased Mr.
Whitmire's home in Bartlesville, Oklahoma, at its appraised value of $388,000
and paid him a $170,000 special relocation payment to reimburse him for the loss
on the sale of his residence in order for him to move to Houston, Texas, to
commence employment with the Company. Pursuant to the Company's relocation
program, Mr. Whitmire was reimbursed for all of his moving expenses. To ensure
that Mr. Whitmire receives compensation for any loss of total pension benefit as
a result of his early retirement from Phillips, the Compensation Committee at
its January 1997 meeting approved an amendment to the Company's Supplemental
Retirement Plan II to allow Mr. Whitmire to participate in the plan to provide
this special supplemental benefit. Mr. Whitmire also was entitled to a payment
of employer matching contributions at the end of 1996 determined as if Mr.
Whitmire had been a participant in the Company's Supplemental Savings Plan
throughout 1996. See "Summary Compensation Table." On January 31, 1996, Mr.
Whitmire, through his personal rollover contribution to the Company's Savings
Plan, acquired 27,302 shares of Common Stock in the Savings Plan at an average
price per share of $18.25.
Mr. Whitmire's discretionary annual incentive bonus for 1996 was $565,500,
which approximated 49.1% of his combined bonus and salary compensation for 1996.
His annual incentive compensation was based on the achievement of financial and
personal objectives by the Company and management, respectively, as described
above. The Compensation Committee established the management objectives,
including for Mr. Whitmire, in May 1996, which were revised in July 1996 due to
the implementation of the long-term business strategy of the Company. In 1996,
Mr. Whitmire's bonus was based on financial measures directly related to net
income, cash flow and reserve additions, revisions or acquisitions. The
remaining portion of the incentive target award was based on management
objectives, which objectives were substantially met by Mr. Whitmire and
management in 1996. These management objectives included the development and
implementation of a multi-faceted long-term growth plan for the Company, the
restructuring of the organization of the Company
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<PAGE> 23
in order to implement the growth plan and a comprehensive review and redesign of
the Company's compensation program to support the growth plan. The Compensation
Committee evaluated the attainment of Mr. Whitmire's and management's
objectives, as well as the accomplishment of a significant number of other
objectives and approved Mr. Whitmire's 1996 discretionary bonus. His 1996 award
was above target because the Company exceeded its financial target objectives in
1996. Also, Mr. Whitmire participated in the Supplemental Savings Plan as
reflected in the Summary Compensation Table. Mr. Whitmire's compensation in
excess of $1 million for 1996 did not qualify for deductibility under the
provisions of Section 162(m) of the Code. Since the Compensation Committee
applied discretion to its decision making for 1996 awards that is not
permissible under the Code, its annual incentive bonus to Mr. Whitmire did not
and was not intended to meet the requirements for deductibility under the Code.
The Compensation Committee believes the payment of the annual incentive bonus
was in the best interests of the Company. Although the excess amount was not
deductible, it was not material.
The report of the Committees shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act or under the Exchange Act, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
Organization and Compensation Committee:
Edward A. Gilhuly
Michael W. Michelson
Richard R. Shinn
Section 16 Committee:
Glenn A. Cox
Richard R. Shinn
February 28, 1997
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Two of the current members of the Compensation Committee, Mr. Michelson and
Mr. Gilhuly, are affiliates of KKR and the KKR Partnerships. The KKR
Partnerships collectively own approximately 25.7% of the Company's outstanding
Common Stock. In connection with the 1985 Stock Acquisition, the Company agreed
to pay each of KKR and Allied a fee for financial advisory services of $250,000
per year, increasing at a compounded rate of 10% per annum. The Company is
obligated to continue to pay this annual advisory service fee to KKR until KKR
or its affiliates own less than 20% of the number of shares of Common Stock
outstanding. During 1996, KKR was paid $680,857 for such financial advisory
services pursuant to this Consulting Agreement. See "Voting Securities and
Certain Beneficial Owners."
STOCKHOLDER PROPOSALS
To be considered for inclusion in the Company's Proxy Statement relating to
the 1998 Annual Meeting of Stockholders, a stockholder proposal must be received
in proper form at the Company's principal executive office no later than
November 24, 1997, and must otherwise comply with the requirements of Rule 14a-8
under the Exchange Act. See "Election of Directors" and the Company's Bylaws for
notice procedures to recommend a person for nomination as a director and to
propose business to be considered by the stockholders at a meeting, including
one that is not the subject of a proposal timely submitted for inclusion in the
Company's proxy statement.
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<PAGE> 24
ANNUAL REPORT AND INFORMATION FOR STOCKHOLDERS
The annual report to stockholders, including consolidated financial
statements, accompanies this Proxy Statement but does not constitute a part of
the proxy soliciting materials. THE COMPANY WILL FURNISH WITHOUT CHARGE AN
ADDITIONAL COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1996, INCLUDING FINANCIAL STATEMENTS BUT WITHOUT EXHIBITS, TO EACH PERSON
WHOSE VOTE IS SOLICITED BY THIS PROXY STATEMENT, UPON WRITTEN REQUEST TO JOHN M.
ZIMMERMAN, VICE PRESIDENT -- INVESTOR RELATIONS, UNION TEXAS PETROLEUM HOLDINGS,
INC., 1330 POST OAK BLVD., HOUSTON, TEXAS 77056. Upon the payment of the
Company's reasonable expense of furnishing the exhibit requested, the Company,
upon request, will furnish any exhibit to the Form 10-K to any person whose vote
is solicited by this Proxy Statement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and reports of
changes in ownership (Forms 3, 4 and 5) of Common Stock and other equity
securities of the Company with the SEC and the New York Stock Exchange.
Officers, directors and greater-than-10% beneficial holders are required by SEC
regulation to furnish the Company with copies of all such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company and, if applicable, written
representations from certain reporting persons that no reports on Form 5 were
required, the Company believes that during the fiscal year ended December 31,
1996, all Section 16(a) filing requirements applicable to its officers,
directors and greater-than-10% beneficial owners were complied with except that
an inadvertent late report was filed on Form 4 for Harry L. Wheat, a former
officer of the Company, with respect to one transaction that occurred after his
retirement when he was no longer an officer of the Company.
By Order of the Board of Directors
/s/ AMY J. WATKINS
AMY J. WATKINS
Secretary
Houston, Texas
March 24, 1997
21
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[UNION TEXAS PETROLEUM UNION TEXAS PETROLEUM HOLDINGS, INC.
HOLDINGS, INC. LOGO]
[printed on recycled paper]
<PAGE> 26
P UNION TEXAS PETROLEUM HOLDINGS, INC.
R PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR ANNUAL MEETING MAY 9, 1997
O
The undersigned hereby constitutes and appoints
X John L. Whitmire, Larry D. Kalmbach and Amy J. Watkins, and each
of them, his true and lawful agents and proxies with full power
Y of substitution in each, to represent the undersigned at the
Annual Meeting of Stockholders of UNION TEXAS PETROLEUM HOLDINGS,
INC. to be held at the office of the Company, 1330 Post Oak
Blvd., Houston, Texas on Friday, May 9, 1997, and at any
adjournments thereof, on all matters coming before said meeting.
Election of Directors. Nominees:
Glenn A. Cox, Edward A. Gilhuly, James H.
Greene, Jr., Henry R. Kravis, Michael W. Michelson, Stanley P.
Porter, George R. Roberts, Richard R. Shinn, Sellers Stough,
John L. Whitmire, James D. Woods.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY
MARKING THE APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT
MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD
OF DIRECTORS' RECOMMENDATIONS. THE PROXY COMMITTEE CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
THIS CARD ALSO REPRESENTS VOTING INSTRUCTIONS FOR
SHARES HELD FOR THE BENEFIT OF COMPANY EMPLOYEES IN THE UNION
TEXAS PETROLEUM SAVINGS PLAN FOR SALARIED EMPLOYEES.
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 27
[ X ] PLEASE MARK YOUR |
VOTES AS IN THIS | 2855
EXAMPLE. -------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS AND
FOR PROPOSAL 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. Election of Directors. FOR WITHHELD
(see reverse) [ ] [ ]
For, except vote withheld from
the following nominee(s):
___________________________________
2. Approval of independent FOR AGAINST ABSTAIN
accountants. [ ] [ ] [ ]
Please mark this box if you will [ ]
personally be attending the meeting
Note: Please sign exactly as your name
appears on this card. Joint owners
should each sign personally. Corporation
proxies should be signed by an
authorized officer. Executors,
administrators, trustees, etc. should so
indicate when signing.
________________________________________
________________________________________
SIGNATURE(S) DATE
- - --------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
UNION TEXAS PETROLEUM HOLDINGS, INC.
March 24, 1997
To our Stockholders:
Our 1997 Annual Meeting of Stockholders is scheduled to be held at 10:00 a.m.
on May 9, 1997 at the Company's offices in Houston. In addition to voting on
the matters contained in the enclosed Notice and Proxy Statement, I will report
on the Company's progress throughout 1996 and on our growth strategy to enhance
stockholder value as we go forward in 1997 and beyond.
To ensure your vote is counted, please promptly return your completed proxy
card. On behalf of the Board of Directors and all of the employees of Union
Texas, we thank you for taking the time to vote your shares and hope you will
be able to attend the meeting.
Sincerely,
JOHN WHITMIRE
John Whitmire
Chairman of the Board and
Chief Executive Officer
