Schedule 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
PHILLIPS PETROLEUM COMPANY
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
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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:
-------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
1) Amount Previously Paid:
-----------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------
3) Filing Party:
-----------------------------
4) Date Filed:
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DEFINITIVE COPY
PHILLIPS PETROLEUM COMPANY
NOTICE OF
1995 ANNUAL MEETING
MAY 8, 1995
and PROXY STATEMENT
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PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004
OFFICE OF THE CHAIRMAN
March 31, 1995
Dear Stockholder:
You are cordially invited to the Annual Meeting of Phillips Petroleum Company
to be held in the Adams Building, 4th Street and Keeler Avenue, Bartlesville,
Oklahoma, on Monday, May 8, 1995, commencing at 10 a.m. local time. Your
attendance will provide you with an opportunity to hear management's report
on the operations and meet the directors and representatives of the Company.
The Secretary's formal notice of the meeting and the Proxy Statement
accompany this letter and describe the matters on which action will be taken.
In addition to the election of 14 directors, you are asked to vote on three
other proposals. Proposal 1 is by the Company to approve the independent
auditors. Proposal 2 is sponsored by six stockholders and asks the Company to
endorse the CERES Principles. Proposal 3 is sponsored by one stockholder and
asks the Company to adopt a policy on the use of preferred stock. Our Board
of Directors unanimously recommends that you vote For Proposal 1 and Against
Proposal 2 and Proposal 3.
It is important that your views be represented at the meeting whether or not
you are able to attend. Accordingly, we respectfully request that you sign,
date and promptly return your proxy in the enclosed postage-paid envelope.
On behalf of the directors and employees of Phillips Petroleum Company, we
express our appreciation to you, the owners of this Company, for your
continued support and interest.
Sincerely,
/s/ W. W. Allen
------------------------------------
W. W. Allen
Chairman and Chief Executive Officer
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PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004
NOTICE OF ANNUAL MEETING to be held May 8, 1995
To the Stockholders:
The Annual Meeting of Stockholders will be held at the Adams Building, 4th
Street and Keeler Avenue, Bartlesville, Oklahoma, on Monday, May 8, 1995, at
10 a.m. local time, for the purposes of considering and voting on the
following matters as described in the attached Proxy Statement:
Election of 14 directors (pages 7 through 9);
Proposal of the Company:
-----------------------
Proposal 1. To approve the designation of Ernst & Young LLP as
independent auditors for 1995 (page 20);
Proposals of Stockholders:
-------------------------
Proposal 2. To endorse the CERES Principles (pages 20
through 21);
Proposal 3. To adopt a policy on the use of preferred stock (pages
21 through 23); and
Any other matters that may properly come before the meeting (page 23).
Only stockholders of record at the close of business March 17, 1995, will be
entitled to vote at this meeting.
A copy of the Company's Annual Report containing financial data and a summary
of operations for 1994 is being mailed to the Company's stockholders with
this Proxy Statement.
By Order of the Board of Directors,
/s/ Dale J. Billam
------------------
Dale J. Billam
Secretary
Dated March 31, 1995
IMPORTANT:
Please sign, date and promptly mail the enclosed proxy in the accompanying
postage-paid envelope. If you wish to vote in accordance with the Company's
recommendations, it is not necessary to specify your choice but your proxy
must be signed and returned. In any event, your prompt response is requested
and your cooperation will be appreciated.
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PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004
March 31, 1995
PROXY STATEMENT
SOLICITATION
Your proxy is solicited by the Board of Directors and all costs of
solicitation will be borne by the Company. Your proxy will be voted as you
direct and may be revoked by you at any time before it is voted by filing
with the Secretary an instrument revoking it, by executing a later-dated
proxy or by voting in person by ballot at the meeting. This Proxy Statement
and Proxy Card are first being mailed on or about March 31, 1995, to
stockholders of record as of March 17, 1995.
Georgeson & Co. Inc. has been engaged by the Company to solicit proxies for
this Annual Meeting from brokers, banks and other institutional holders, and
individual holders of record. The fee for this service, payable one-half at
the commencement of solicitation and the balance at its completion, is
$16,000, plus the reimbursement of certain out-of-pocket costs. In addition
to solicitation by mail, officers, directors and employees of the Company may
solicit proxies by telephone, facsimile or personal contact.
CONFIDENTIAL VOTING
It is the policy of the Company that all proxies, ballots, and voting
tabulations that identify stockholders be kept confidential, except where
disclosure may be required by applicable law, where stockholders write
comments on their proxy cards, and where disclosure is expressly requested by
a stockholder, and in limited circumstances such as a proxy contest or other
solicitation of proxies based on an opposition proxy statement or any matter
requiring for stockholder approval the vote of more than a majority of the
shares present at any meeting. The Company has engaged Chemical Bank as
tabulators of all proxies and ballots, and has appointed two persons who are
employees of Chemical Bank to be Inspectors of Election.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The Company's only class of voting securities is its $1.25 par value common
stock. There were 261,663,753 shares outstanding at the close of business
February 28, 1995. The record date for stockholders entitled to vote at this
meeting is March 17, 1995. Each share is entitled to one vote.
The number of shares of the Company's common stock beneficially owned as of
February 28, 1995, by any person or group known to own five percent or more,
and by each of the directors and nominees, and by all directors and officers
of the Company as a group, is shown in the tables "Security Ownership of
Certain Beneficial Owners," and "Security Ownership of Management,"
respectively, on pages 9 through 11 after the information on nominees for
directors.
VOTE REQUIRED FOR ELECTION OF DIRECTORS AND
ADOPTION OF COMPANY AND STOCKHOLDER PROPOSALS
Under the Company's Bylaws, the holders of a majority of the issued and
outstanding shares of the common stock, present in person or represented by
proxy at the Annual Meeting, will constitute the quorum for all purposes
unless otherwise provided by law. Where a quorum is present, the affirmative
vote of a majority of the stock represented at the meeting is required for
the election of the directors, and the adoption of Proposals 1, 2 and 3. For
purposes of determining whether the directors have been elected or a proposal
has received a majority vote, abstentions are the equivalent of a negative
vote.
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NOMINEES FOR ELECTION AS DIRECTORS
The number of directors to be elected is 14. The designated proxy holders of
the Company intend, unless otherwise instructed, to vote all proxies for the
election of the following 14 nominees, to hold office for the ensuing year or
until their successors are elected. The term of each present director will
expire concurrently with the election of directors at the 1995 Annual
Meeting. If any nominee is unable or unwilling to serve, the Company, through
the designated proxy holders, reserves discretionary authority to vote for a
substitute. The Company has no reason to believe that any nominee will be
unable or unwilling to serve if elected. The following provides information
about each nominee as of February 28, 1995, including data on the nominees'
business backgrounds for the past five years, and the names of public
companies and other selected entities for which they also serve as directors.
Photo of W. W. Allen, 58, is Chairman of the Board of Directors
Mr. Allen and Chief Executive Officer of the Company, a position he
appears in assumed in May 1994. He previously was President and
this space Chief Operating Officer, beginning in December 1991; Senior
Vice President responsible for worldwide exploration and
production beginning in July 1989; and Vice President of
International Exploration and Production beginning January
1988. He is a director of the Federal Reserve Bank of Kansas
City. Mr. Allen became a director in December 1989.
Photo of Norman R. Augustine, 59, is Chairman of the Board of
Mr. Augustine Directors and Chief Executive Officer of Martin Marietta
appears in Corporation, a position he has held since April 1988. He
this space is a director of The Procter & Gamble Company. Mr. Augustine
became a director in January 1989.
Photo of George B. Beitzel, 66, is a retired Senior Vice President
Mr. Beitzel and Director of International Business Machines
appears in Corporation. He is a director of Bankers Trust New York
this space Corporation and its subsidiary, Bankers Trust Company;
Computer Task Group; FlightSafety International, Inc.;
Phillips Gas Company, a subsidiary of the Company with a
series of preferred stock registered under the Securities
Exchange Act of 1934 and listed on the New York Stock
Exchange; Roadway Services, Inc.; Rohm and Haas Company; TIG
Holdings; and Xillix Technologies Corp. Mr. Beitzel became a
director in July 1980.
Photo of David L. Boren, 53, is President of the University of
Mr. Boren Oklahoma, a position he assumed in November 1994. He
appears in previously served as a United States Senator from the
this space State of Oklahoma from November 1979 until November 1994 and
is a former Governor of Oklahoma. He is a director of AMR
Corporation and Texas Instruments Corporation. Mr. Boren
became a director in December 1994.
Photo of C. L. Bowerman, 55, is an Executive Vice President
Mr. Bowerman responsible for planning and corporate relations and
appears in services, a position he assumed in January 1995. He
this space previously was Executive Vice President responsible for
corporate strategic planning, corporate information
technology and research and development, beginning in April
1992; Executive Vice President responsible for corporate
engineering, corporate strategic planning and research and
development beginning December 1991; and Senior Vice
President responsible for refining, marketing, supply and
transportation beginning in October 1988. Mr. Bowerman became
a director in December 1989.
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Photo of Robert E. Chappell, Jr., 58, is self employed as an
Mr. Chappell investment and management consultant. He previously was
appears in the Senior Executive Vice President and Chief Investment
this space Officer of Metropolitan Life Insurance Company, a position he
held from October 1989 through December 1992. He previously
served Metropolitan Life Insurance Company as Executive Vice
President from October 1986 to October 1989. He is also a
director of First Colony Corporation and Igloo Products
Corporation. Mr. Chappell became a director in December 1990.
Photo of Lawrence S. Eagleburger, 64, is Senior Foreign Policy
Mr. Eagleburger Advisor for Baker, Donelson, Bearman & Caldwell, a
appears in Washington, D.C. law firm, a position he assumed in
this space January 1993. He previously served as Secretary of State from
December 1992 through January 1993, Acting Secretary of State
from August 1992 to December 1992, and Deputy Secretary of
State from February 1989 to August 1992. He is a director of
Dresser Industries; the Institute for Defense Analyses;
Jefferson Bankshares; Stimpsonite Corporation; and Universal
Corporation. Mr. Eagleburger became a director in February
1993.
Photo of James B. Edwards, 67, is President of the Medical
Mr. Edwards University of South Carolina, a position he has held
appears in since November 1982. He is a director of Brendle's, Inc.;
this space Chemical Waste Management, Inc.; Encyclopaedia Britannica,
Inc.; Imo Industries Inc.; National Data Corporation; SCANA
Corporation; and Wachovia Bank of South Carolina N.A. He is a
former U.S. Secretary of Energy and Governor of South
Carolina. Mr. Edwards became a director in January 1983.
Photo of Larry D. Horner, 60, is Chairman of Pacific USA Holdings
Mr. Horner Corporation, a position he assumed in August 1994. He
appears in previously was a Managing Director of Arnhold and
this space S. Bleichroeder, Inc., from April 1991 through July 1994. He
previously was a partner in KPMG Peat Marwick, and is a
former Chairman and Chief Executive of that firm from October
1984 to December 1990. He is a director of American General
Corporation; Atlantis Plastics, Inc.; Charterhouse Group
International Limited and the First Eagle Fund International.
Mr. Horner became a director in May 1991.
Photo of J. J. Mulva, 48, is President and Chief Operating Officer
Mr. Mulva of the Company, a position he assumed in May 1994.
appears in Previously he was an Executive Vice President of the
this space Company and its Chief Financial Officer from January 1994
through April 1994; Senior Vice President and Chief Financial
Officer beginning in May 1993; Vice President and Chief
Financial Officer beginning in March 1993; Vice President,
Treasurer and Chief Financial Officer beginning in March
1990; and Vice President and Treasurer beginning in September
1988. He is Chairman of the Board of Directors of Phillips
Gas Company. Mr. Mulva became a director in January 1994.
Photo of Randall L. Tobias, 52, is Chairman and Chief Executive
Mr. Tobias Officer of Eli Lilly and Company, a position he assumed
appears in in July 1993. He previously was Vice Chairman of American
this space Telephone and Telegraph Company from September 1986 to June
1993. He is a director of Kimberly-Clark Corporation and
Knight-Ridder, Inc. Mr. Tobias became a director in July
1992.
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Photo of Victoria J. Tschinkel, 47, is a Senior Consultant to
Mrs. Tschinkel Landers & Parsons, a Tallahassee, Florida law firm, a
appears in position she assumed in 1987. She previously served as
this space Secretary of the Florida Department of Environmental
Regulation from 1981 to 1987. Mrs. Tschinkel became a
director in July 1993.
Photo of Kathryn C. Turner, 47, is Chairperson and Chief Executive
Ms. Turner Officer of Standard Technology, Inc., an engineering and
appears in manufacturing firm she founded in 1985. She is a director
this space of Carpenter Technology Corporation. Ms. Turner became a
director in January 1995.
Photo of J. L. Whitmire, 54, is an Executive Vice President of the
Mr. Whitmire Company responsible for worldwide exploration and
appears in production, a position he assumed in January 1994.
this space Previously he was Senior Vice President for worldwide
exploration and production beginning in December 1991; and
Vice President of North America Exploration and Production
beginning January 1988. Mr. Whitmire became a director in
January 1994.
Mr. E. Douglas Kenna, a current director, is retiring as director, having
reached mandatory retirement age. In July 1994, Mr. D. J. Tippeconnic, a
director and Executive Vice President, resigned from the Board and the
Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Name and Address of Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
-------------- ------------------------- -------------------- ----------
Common Bankers Trust Company Direct (1) Indirect 22.65%
P. O. Box 1855 ----------- --------
Church Street Station 59,199,802 54,974
New York, New York, 10008
(1) 53,543,859 were held by the Bank as Trustee under the Company's Thrift
and Long-Term Stock Savings Plans with shared voting power; 2,005,860
were held in trust accounts for which the Bank possessed sole voting and
investment power; 36,547 were held in trust accounts for which the Bank
possessed voting and investment power shared with others; 3,613,536 were
held in trust accounts for which the Bank possessed sole investment power
but no voting power; 54,974 were held in trust accounts for which the
Bank possessed sole voting power but no investment power; and none were
owned outright. The Bank has disclaimed beneficial ownership of the
shares it holds as record owner for the Thrift and Long-Term Stock
Savings Plans.
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SECURITY OWNERSHIP OF MANAGEMENT
Phillips Petroleum Company
Securities
--------------------------------
Amount and Nature of
Beneficial Ownership
Title Name of --------------------
of Class Beneficial Owner Direct(1) Indirect Percent of Class
-------- ----------------------- --------- ---------- -----------------
Directors and Nominees(2)
-------------------------
Common W. W. Allen 165,726 - less than 1%
Common Norman R. Augustine 6,200 - less than 1%
Common George B. Beitzel 66,379 59,254,776 (3) less than 1% (3)
Common David L. Boren 1,000 - less than 1%
Common C. L. Bowerman 141,942 654 less than 1%
Common Robert E. Chappell, Jr. 4,500 - less than 1%
Common Lawrence S. Eagleburger 2,163 - less than 1%
Common James B. Edwards 9,138 - less than 1%
Common Larry D. Horner 3,500 - less than 1%
Common E. Douglas Kenna 12,599 - less than 1%
Common J. J. Mulva 142,272 - less than 1%
Common Randall L. Tobias 4,000 - less than 1%
Common Victoria J. Tschinkel 2,052 - less than 1%
Common Kathryn C. Turner 1,000 - less than 1%
Common J. L. Whitmire 111,208 - less than 1%
Executive Officers
------------------
Common R. G. Ceconi 58,958 - less than 1%
Common K. L. Hedrick 56,678 - less than 1%
Common J. L. Howe 89,221 - less than 1%
Common J. C. Mihm 114,448 633 less than 1%
Common T. C. Morris 86,572 - less than 1%
Common M. J. Panatier 32,855 - less than 1%
Common W. G. Paul 89,185 3,111 less than 1%
Common B. J. Price 39,783 - less than 1%
--------- ----------
All directors, nominees and
executive officers
as a group (23 in group) 1,241,379 59,259,174 less than 1%
direct, 22.65%
indirect (3)
(1) Direct ownership includes shares which may be acquired under options
within 60 days of the record date.
(2) The shares stated as being beneficially owned by each nominee do not
include shares beneficially owned by the other companies on whose boards
of directors the nominees, directors or officers serve. (The list of
nominees for directors on pages 7 through 9 contains the names of the
other companies for which the nominees serve as directors.) Each nominee
disclaims beneficial ownership of all such shares.
(3) The shares shown as indirectly owned by Mr. Beitzel include shares
directly and indirectly owned by Bankers Trust Company on whose Board
Mr. Beitzel serves and whose ownership is set forth in the table at the
bottom of page 9. Mr. Beitzel disclaims beneficial ownership of all such
shares.
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SECURITY OWNERSHIP OF MANAGEMENT
Phillips Gas Company
Securities (1)
--------------------------------
Amount and Nature
of Beneficial
Ownership (1)
Name of -------------------- Percent
Title of Class Beneficial Owner Direct Indirect of Class
------------------ ------------------ -------- --------- ------------
Directors and
Nominees
------------------
Series A Preferred W. W. Allen - 500 (2) less than 1%
Series A Preferred George B. Beitzel 1,000 - less than 1%
Series A Preferred J. J. Mulva 475 1,070 (2) less than 1%
Series A Preferred J. L. Whitmire 1,400 - less than 1%
Executive Officers
------------------
Series A Preferred R. G. Ceconi - 1,000 (2) less than 1%
Series A Preferred K. L. Hedrick 1,000 - less than 1%
Series A Preferred J. C. Mihm - 19 less than 1%
Series A Preferred M. J. Panatier 1,600 - less than 1%
Series A Preferred W. G. Paul 1,500 - less than 1%
Series A Preferred B. J. Price 200 - less than 1%
-------- ---------
All directors, nominees and executive
officers as a group (10 in group) 7,175 2,589 less than 1%
(1) Table shows only those directors, nominees and executive officers who
own shares.
(2) Messrs. Allen, Ceconi, Mihm and Mulva have disclaimed beneficial
ownership of all such shares.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Members of the Compensation Committee are Norman R. Augustine, George B.
Beitzel, Larry D. Horner, Randall L. Tobias and Victoria J. Tschinkel. The
Company had no interlocking relationship during the last fiscal year.
GENERAL INFORMATION
RELATING TO THE BOARD OF DIRECTORS
The Board of Directors
The business and affairs of the Company are managed under the direction of
the Board of Directors. To assist it in carrying out its duties, the Board
has delegated certain authority to five committees. The Board of Directors
held eight meetings in 1994. Attendance by the current directors at meetings
of the Board and of the Committees on which they served averaged over
96 percent in calendar year 1994.
Committees of the Board
The Audit Committee, the Compensation Committee, the Committee on Directors'
Affairs, the Executive Committee and the Public Policy Committee are the
standing committees of the Board of Directors. Membership is as follows:
Compen- Directors' Public
Audit sation Affairs Executive Policy
-------------------------------------------------------------
Chappell* Horner* Beitzel* Allen* Eagleburger*
Augustine Augustine Edwards Augustine Boren
Boren Beitzel Kenna Horner Chappell
Eagleburger Tobias Kenna Edwards
Horner Tschinkel Mulva Kenna
Tobias Tschinkel
Turner Turner
---------------
* Chairman
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The Audit Committee recommends to the Board the independent auditors to be
engaged by the Company, reviews the scope of their engagement, including the
remuneration to be paid, and reviews on a continuing basis the independence
of the auditors. The Committee reviews with the independent auditors, the
Controller, the General Auditor, the General Counsel, the Chief Financial
Officer and other appropriate Company personnel: (1) the Company's general
policies and procedures with respect to audits and accounting and financial
controls; (2) the general accounting and reporting principles and practices
applied in preparing the Company's financial statements and conducting
financial audits; (3) the interim and year-end financial statements and any
certification, report or opinion which the independent auditors propose to
render in connection with such statements; (4) the extent to which the
Company has implemented changes suggested by the internal audit staff, the
independent auditors or the Committee; and (5) the adequacy of the Company's
accounting practices and internal control structure. The Committee may direct
the General Counsel, the independent auditors and the internal audit staff to
inquire into and report to it on any matter having to do with the Company's
business affairs. The Committee also monitors compliance with the Company's
Code of Business Ethics, Conduct and Responsibility and oversees the
activities of the Corporate Compliance and Ethics Committee. The Audit
Committee held five meetings in 1994.
The Compensation Committee recommends for Board approval the salaries for the
Chairman of the Board of Directors and Chief Executive Officer and the
President, and approves salaries for other officers who are members of the
Board of Directors and for employees who earn $200,000 or above. The
Committee makes recommendations to the Board with respect to proposals for
the application of new benefits, incentive plans or programs to officers who
are also directors and the application of amendments to existing plans or
programs which would significantly increase such officers' compensation. The
Compensation Committee held six meetings in 1994.
The Committee on Directors' Affairs, formerly known as the Nominating
Committee, recommends to the Board qualified candidates for election as
directors and nominates candidates to the Board committees. The Committee
welcomes suggestions from stockholders about qualified candidates. A
stockholder wishing to submit a recommendation to the Committee may do so by
writing Dale J. Billam, Secretary, Phillips Petroleum Company, Bartlesville,
Oklahoma 74004. The Nominating Committee held six meetings in 1994.
The Executive Committee, when the Board is not in session, may exercise all
power and authority of the Board in the management and business of the
Company, subject to the limitations imposed by the Bylaws. The Committee has
the authority to review and approve proposed corporate action when the Board
is not in session and may advise the Board of any recommendations of the
Committee regarding any proposed corporate action presented to the Board. The
Executive Committee held four meetings in 1994.
The Public Policy Committee advises management and the Board of Directors (i)
in response to current and emerging public policy issues, and (ii) in the
development and review of policies and budgets in respect of contributions,
including, but not limited to, contributions to organizations whose primary
purpose is charitable, civic, cultural or educational. In order to carry out
these duties, the Committee (a) identifies, evaluates and monitors the
social, political, environmental, occupational, safety and health trends,
issues and concerns, domestic and foreign, which affect or could affect the
Company's business activities and performance; (b) reviews information from
management and approves recommendations to assist in the formulation and
adoption of policies, programs and practices concerning the matters set forth
in (a) above, including, but not limited to ecological and environmental
protection, employee safety, ethical business conduct, consumer affairs,
alcohol and drug abuse, equal opportunity matters and government relations;
and (c) monitors and evaluates on an on-going basis the Company's compliance
with such policies, programs and practices. The Committee also has the
authority to authorize the use of Company funds for political contributions
on behalf of the Company, if and to the extent permitted by law. The Public
Policy Committee held six meetings in 1994.
COMPENSATION OF DIRECTORS AND NOMINEES
Compensation of non-employee directors consists of $10,000 and 1,000 shares
of Phillips common stock per year, plus $2,000 per year for each Board
committee membership, $950 for each Board meeting attended, and $700 for the
committee chairman or $500 for a committee member for each committee meeting
attended. Non-employee directors may elect to defer all or part of their cash
compensation. The future payment of this deferred compensation has been pre-
funded in a special trust designated for this purpose.
These directors also participate in the Non-Employee Director Retirement
Plan. This plan provides for monthly payments to each non-employee director
who retires from Board service. Each monthly payment is equal to one-twelfth
of the annual cash retainer paid for Board service (currently $10,000) plus
the average, calculated on a formula which includes daily and monthly
computations, of the fair market value of the 1,000 shares of stock during
the twelve months immediately prior to the non-employee director's
retirement. These payments continue for the number of years equal to each
director's years of Board service. If a retired non-employee director should
die prior to the completion of the payment period, the director's surviving
spouse will receive the remainder of the payments unless such spouse dies
prior to the end of the payment period. Plan payments have been pre-funded by
the Company in a special trust designated for this purpose. Prior to
retirement the Company also provides $200,000 of life insurance for each non-
employee director.
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EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth compensation information
for services performed in 1994, 1993 and 1992 for those persons who were at
December 31, 1994, the Chief Executive Officer, the four most highly
compensated officers, and the retired Chief Executive Officer of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation
---------------------------------
Other Annual
Name and Salary Bonus Compensation
Principal Position Year ($) ($) ($)
------------------ ---- -------- ------- ------------
W. W. Allen 1994 681,333 899,766 0
Chairman of the 1993 448,250 275,235 0
Board & CEO 1992 392,000 180,000 0
(Effective 5/1/94)
C. L. Bowerman 1994 337,000 260,354 0
Executive Vice 1993 325,250 155,876 0
President 1992 307,000 98,180 0
J. J. Mulva 1994 415,750 511,710 0
President & 1993 289,417 126,226 0
COO 1992 258,250 90,740 0
W. G. Paul 1994 402,000 250,002 0
Sr. Vice President 1993 388,000 152,736 0
& General Counsel 1992 369,000 127,730 0
J. L. Whitmire 1994 374,917 285,830 0
Executive Vice 1993 292,500 137,256 0
President 1992 263,000 92,470 0
C. J. Silas 1994 336,667 404,842 0
Chairman of the 1993 935,000 612,514 0
Board & CEO 1992 865,000 437,488 0
(Retired 5/1/94)
SUMMARY COMPENSATION TABLE (Cont.)
Long-Term Compensation
--------------------------------------
Awards Payouts
------------------------- -----------
Restricted Securities Long-Term All Other
Stock Underlying Incentive Compen-
Name and Award(s) Options/SARs Payout sation
Principal Position Year (1)($) (#) ($) (2) ($)
------------------ ---- ---------- ------------ ----------- ----------
W. W. Allen 1994 0 59,706 - (3) 4,770
Chairman of the 1993 0 54,154 136,898 (4) 5,499
Board & CEO 1992 0 0 119,430 (5) 8,820
(Effective 5/1/94)
C. L. Bowerman 1994 0 27,069 - (3) 4,770
Executive Vice 1993 0 31,467 114,489 (4) 5,499
President 1992 0 0 82,380 (5) 8,820
J. J. Mulva 1994 0 34,300 - (3) 4,770
President & 1993 0 25,504 111,134 (4) 5,499
COO 1992 0 0 48,120 (5) 8,820
W. G. Paul 1994 0 30,343 - (3) 4,770
Sr. Vice President 1993 0 35,229 159,307 (4) 5,475
& General Counsel 1992 0 0 137,970 (5) 8,677
J. L. Whitmire 1994 0 29,335 - (3) 4,770
Executive Vice 1993 0 25,504 68,648 (4) 5,499
President 1992 0 0 58,290 (5) 8,820
C. J. Silas 1994 0 116,589 - (3) 1,905
Chairman of the 1993 0 127,044 538,038 (4) 5,499
Board & CEO 1992 0 0 453,720 (5) 8,343
(Retired 5/1/94)
(1) The Company has not made any outright grants of restricted stock to any
executive during any of the periods covered by the table. The Company
settled awards under its 1985 and 1987 annual incentive plans and under
all long-term incentive plans since 1986 by distributing to award
recipients shares of restricted stock which are not transferable prior
to death, disability or retirement at age 62 for corporate officers,
unless restrictions are earlier lapsed by the Committee. The aggregate
number of such restricted shares held at December 30, 1994, and the
market value of such shares on that date (calculated according to SEC
regulation without regard to the restrictions and the resulting
inability of the named executives to realize such values at such time)
were: Mr. Allen, 18,132 shares, $597,223; Mr. Bowerman, 47,385 shares,
$1,560,743; Mr. Mulva, 28,043 shares, $923,666; Mr. Paul, 0 shares, $0;
Mr. Whitmire, 28,019 shares, $922,876; Mr. Silas, 0 shares, $0.
(2) Includes Company contributions to the Thrift Plan for the benefit of
participants and the value of the shares allocated to Long-Term Stock
Savings Plan participants as of the respective valuation dates.
(3) No decision has been made on awards for performance under the Strategic
Incentive Plan Performance Period from 1991-1994.
(4) Value of the restricted stock on the date of the award for performance
under the Strategic Incentive Plan Performance Period from 1990-1993.
(5) Value of the restricted stock on the date of the award for performance
under the Strategic Incentive Plan Performance Period from 1989-1992.
13
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Stock options granted during 1994 to the Chief Executive Officer, the four
most highly compensated officers and the retired Chief Executive Officer of
the Company are reflected in the following Option/SAR Grants in Last Fiscal
Year table.
Individual Grants
-----------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options/SARs Exercise
Options/SARs Granted to or Base
Granted Employees in Price Expiration
Name (#) Fiscal Year ($/Sh) Date
------------------ ------------ ------------ -------- ----------
W. W. Allen 51,945 3.40% 30.32 01/09/04
7,761 .51% 34.82 09/12/04
C. L. Bowerman 27,069 1.77% 30.32 01/09/04
J. J. Mulva 23,439 1.53% 30.32 01/09/04
3,847 .25% 29.32 02/14/04
7,014 .46% 34.82 09/12/04
W. G. Paul 30,343 1.99% 30.32 01/09/04
J. L. Whitmire 25,488 1.67% 30.32 01/09/04
3,847 .25% 29.32 02/14/04
C. J. Silas 116,589 (2) 7.63% 30.32 01/09/04
------------------ ------------ ------------ -------- ----------
Total Stockholders(3) N/A N/A N/A N/A
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR (Cont.)
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option Term (1)
---------------------------------------------
Name 0% ($) 5% ($) 10% ($)
------------------ ------------ ------------- --------------
W. W. Allen 0 990,591 2,509,982
0 169,966 430,658
C. L. Bowerman 0 516,206 1,307,974
J. J. Mulva 0 446,982 1,132,572
0 70,939 179,770
0 153,607 389,207
W. G. Paul 0 578,641 1,466,174
J. L. Whitmire 0 486,056 1,231,580
0 70,939 179,770
C. J. Silas 0 2,223,352 5,633,580
------------------ ------------ ------------- --------------
Total Stockholders(3) 0 4,802,676,000 12,168,519,300
(1) "Potential realizable value" is disclosed in response to SEC rules which
require such disclosure for illustration only. The values disclosed are
not intended to be, and should not be interpreted by stockholders as
representations or projections of the future value of the Company's
stock or of the stock price.
(2) Of the 116,589 options granted 77,726 options were cancelled at
retirement for a net of 38,863 stock options outstanding from the
original grant. The "potential realizable value" for the net stock
options is $741,117 and $1,877,860 for the 5 percent and 10 percent
assumed annual rates of price appreciation.
(3) To lend perspective to the illustrative "potential realizable value," if
the Company's stock price increased 5 percent or 10 percent per year for
10 years from January 1, 1994, (disregarding dividends and assuming for
purpose of the calculation a constant number of shares outstanding),
the total increase in the value of all shares outstanding at January 1,
1994, is shown above as "potential realizable value" for Total
Stockholders.
TEN-YEAR OPTION/SAR REPRICING
There have been no options or stock appreciation right repricings during the
last 10 years for the Chief Executive Officer, for any of the four most
highly compensated officers, or for the retired Chief Executive Officer of
the Company as reflected in the following Ten-Year Option/SAR Repricing
table.
Number of Market Length of
Securities Price Exercise Original
Underlying of Stock Price Option
Options/ at Time At Time Term
SARs of of New Remaining
Repriced Repricing Repricing Exercise at Date of
or Amended or Amend- or Amend- Price Repricing of
Name Date (#) ment ($) ment ($) ($) Amendment
----------------- ---- ---------- --------- --------- -------- ------------
W. W. Allen - 0 - - - -
C. L. Bowerman - 0 - - - -
J. J. Mulva - 0 - - - -
W. G. Paul - 0 - - - -
J. L. Whitmire - 0 - - - -
C. J. Silas - 0 - - - -
14
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE
The following table shows the number of shares acquired and the net value
realized from exercising stock options during 1994 and the number and value
of exercisable and unexercisable stock options granted under the 1986 Stock
Plan, the 1990 Stock Plan and the Omnibus Securities Plan at fiscal year-end
1994 for the Chief Executive Officer, the four most highly compensated
executive officers and the retired Chief Executive Officer of the Company.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Number of Year-End Year-End($)(2)
Shares Net Value
Acquired Realized Exercisable/ Exercisable/
Name on Exercise ($) (1) Unexercisable Unexercisable
----------------- ----------- --------- ------------- --------------
67,015 811,779
W. W. Allen 18,546 344,913 103,770 481,571
42,088 406,220
C. L. Bowerman 8,700 158,775 53,748 279,796
67,197 983,690
J. J. Mulva 0 0 55,667 242,679
42,124 369,218
W. G. Paul 1,086 16,828 60,555 315,941
36,634 398,299
J. L. Whitmire 8,338 176,365 50,746 248,375
205,415 2,377,370
C. J. Silas 4,075 30,298 145,228 935,115
(1) Net value realized is the market price on the date of exercise less the
option price times the number of shares exercised under the option.
(2) Based on $32.9375, the fair market value of the Company's common stock
on December 30, 1994.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table shows Long-Term Incentive Plan awards established under
the Omnibus Securities Plan during 1994 for the Chief Executive Officer, the
four most highly compensated executive officers and the retired Chief
Executive Officer of the Company.
Estimated Future Payouts Under
Performance Non-Stock Price--Based Plans
or Other ------------------------------
Period Number of Shares (1)
Until
Number of Maturation Threshold Target Maximum
Name Shares (#) or Payout (#) (2) (#) (#)
----------------- ---------- ----------- --------- ------ --------
W. W. Allen (3) 10,596 12/31/96 5,298 10,596 21,192
C. L. Bowerman 4,810 12/31/96 2,405 4,810 9,620
J. J. Mulva (3) 5,900 12/31/96 2,950 5,900 11,800
W. G. Paul 5,196 12/31/96 2,598 5,196 10,392
J. L. Whitmire (3) 5,241 12/31/96 2,620 5,241 10,482
C. J. Silas 20,717(4) 12/31/96 10,358(4) 20,717(4) 41,434(4)
(1) At the end of the three-year performance period, from January 1, 1994,
through December 31, 1996, the Compensation Committee will evaluate the
Company's performance to determine the extent to which target awards
have been earned. The Company's performance will be measured by total
stockholder return compared to the total stockholder return of the peer
group of eight integrated oil companies used in the Performance Graph.
(2) The Company's total stockholder return must be above the bottom quartile
when compared with the peer group (threshold performance) before any
award can be approved. If the threshold performance is achieved, the
Committee expects to approve awards at the threshold level which is
fifty percent of the target number of shares established for the
performance period.The actual awards earned can range from 0 percent to
200 percent of the target awards.
(3) In addition, target awards for the Performance Period established in
1993 were increased to reflect promotions as follows Mr. Allen, 960
shares; Mr. Mulva, 1,207 shares and Mr. Whitmire, 576 shares.
(4) The number of shares for C. J. Silas will be prorated to 2,301 shares
and 1,150 shares, 2,301 shares and 4,602 shares for threshold, target and
maximum number of shares, respectively, based on the four months he was
an employee during the performance period.
15
<PAGE>
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee is composed of the directors named below, all of whom are
independent directors who are not employees and who qualify as disinterested
persons for purposes of Rule 16b-3 adopted under the Securities Exchange
Act of 1934.
The executive compensation programs are designed to motivate all executives
to work as a team to maximize long-term shareholder value and achieve
industry safety leadership.
Executive compensation decisions made by the Committee are based on a
combination of quantitative and qualitative measures. During 1994, the
quantitative measures employed included: relative total return to
shareholders; improved safety performance through reduced rates of recordable
injuries and chargeable vehicle accidents and through the implementation of
improved safety systems; relative return on equity; relative return on
assets; performance against pre-established financial measures; targets for
finding and development costs and for reserve replacement; as well as
internal performance objectives. The Committee also uses qualitative measures
of performance such as experience, ability to develop and implement strategic
plans, leadership in the industry and community, and social responsibility.
The Committee recognizes that the Company's businesses are extremely capital
intensive, requiring large investments, in most cases over a number of years,
before tangible financial returns are achieved. In addition, in the short-
term, the Company's prospects and performance as measured by its share price
can be significantly affected by commodity price movements and geopolitical
factors over which the Company and its management have no control. Therefore,
the Committee evaluates the quantitative and qualitative measures, but may
use discretion in recognizing performance achievements and value enhancement.
Section 162(m) of the Internal Revenue Code requires establishment of
performance-based standards for the deduction of certain compensation to any
individual in excess of $1 million per year. The stock options granted by
the Committee under prior shareholder approved plans are exempt from this
provision. No officer of the Company is expected to receive compensation in
1995 which will result in non-deductibility of such compensation expense to
the Company. The Committee has elected to defer a decision to qualify other
elements of compensation under Section 162(m) of the Internal Revenue Code.
By design, the executive compensation program is variable, based on
performance and results in an opportunity for earnings through performance
over a longer term. The Company's objective in so doing is to provide a
greater percentage of the total compensation of its executives through
variable or "at-risk" compensation arrangements under the Annual Incentive
Compensation Plan ("AICP"), stock options and through awards under the Long-
Term Incentive Plan.
Executive Compensation Actions for 1994
Salaries
--------
In its February 1994 meeting, the Committee recommended to the Board of
Directors salary increases to be effective May 1, 1994, for Mr. Allen upon
his election to the offices of Chairman of the Board and Chief Executive
Officer and for Mr. Mulva upon his election to the offices of President and
Chief Operating Officer. The recommendations, which were unanimously adopted
by the non-employee members of the Board of Directors, were based on, without
assigning relative weight to any of the factors: (i) a comparison of
Mr. Allen's and Mr. Mulva's salaries to those of chief executive officers and
presidents, respectively, of other companies in the petroleum industry,
including those in the peer group by which the Company evaluates its
stockholder return performance, (ii) Mr. Allen's and Mr. Mulva's leadership
in directing key strategic corporate decisions, (iii) their key leadership
role in implementing cost containment strategies, and (iv) their industry and
national public service. Also at the February meeting, Mr. Mulva's and
Mr. Whitmire's salaries were adjusted in recognition of their election to the
Board.
The Committee reviewed and approved salaries for all employees with annual
salaries of $200,000 or above except for the Chairman of the Board and the
President in which cases the Committee recommends their salaries to the Board
of Directors for consideration. With the exception of the Chairman of the
Board and the President, executive salaries were increased in October 1994 as
part of a Company-wide merit salary program affecting salaried employees. In
determining executive salaries, without assigning relative weight to any
factor, the committee considers the responsibilities of the executive's
position, the relative success with which the executive employee carries out
those responsibilities and their salary within the range for their job grade
classification.
Annual Incentive Compensation Program
-------------------------------------
The Committee administers the AICP, which provides an opportunity for the
award of annual bonuses. Under the AICP, a threshold of Company financial
performance must be met before awards are approved. For 1994, this threshold
was generation of not less than $900 million in cash from operating
activities. The AICP also employs annual objectives, which the Committee
establishes each year. For 1994, the Committee set three Company-wide
objectives: (i) total stockholder return for 1994 greater than the median
stockholder return of the oil industry peer group used by the Company to
measure its stockholder return performance as listed in the Performance
Graph; (ii) generation of $1.5 billion cash from operating activities plus
asset sales; and (iii) meeting pre-established safety targets for recordable
injury rate and chargeable accidents involving Company vehicles.
The Committee establishes targets each year for individual AICP awards on the
basis of a percentage of salary which varies according to the employee's job
grade classification under the Company's job evaluation system. The target
awards are established using internally generated data and data obtained from
independent third party consultants, and are intended to be at the mean of
peer companies if performance objectives are met. For 1994, the target
percentages varied from 12 percent of
16
<PAGE>
salary for the beginning level of AICP eligibility to 65 percent of salary
for the Chairman of the Board of Directors. The target percentages are
prorated in recognition of promotions during the year. The Committee is
authorized under the terms of the AICP to approve individual awards from zero
to two hundred percent of target for the award year.
Mr. Allen's and Mr. Mulva's AICP awards are based on overall corporate
performance. Awards to all other AICP participants reflect the performance of
business units or staff groups with which they are related, as well as
corporate performance. In February 1995, the Committee approved cash
incentive compensation awards from 101.5 percent to 185 percent, based on a
review of the Company's 1994 Corporate and Business Unit performance. In
determining the amount of the incentive compensation award paid to Mr. Allen
and the other named executive officers, the Compensation Committee considered
that the cash generated from operating activities exceeded the threshold. The
objective for cash from operating activities plus asset sales exceeded the
target by $65 million. The Company's total return to stockholders, which
assumes reinvested dividends, was 17 percent, which placed the Company first
compared to the eight peer companies; and rates for recordable injury rates
and chargeable vehicle accidents matched record lows, making 1994 the
Company's all-around safest year. For Mr. Allen and the other named executive
officers, the awards are set forth in the Summary Compensation Table.
Stock Options
-------------
It is the Committee's practice to consider the grant of stock options in
January of each year. All grants to date have been made at the fair market
value of the Company's stock on the date of the grant. The number of shares
subject to options at the date of each grant is set using internally
generated information and information from independent third party
consultants to achieve option grants which approximate those granted by peer
companies to persons in corresponding positions. The number of shares subject
to option grants varies based on job grade classification and salary. The
grants in January 1994 ranged from the number of shares equal in market value
at the grant date to 75 percent of annual salary for the lowest level of
eligibility to the number of shares equal in market value at the grant date
to 350 percent of annual salary for the Chairman and Chief Executive Officer.
It is also the Committee's practice to consider supplemental stock option
grants in recognition of promotions during the year to reflect the promoted
executive's new job grade classification and salary. Additional stock option
grants were made in recognition of promotions during 1994 for Messrs. Allen,
Mulva and Whitmire. For Mr. Allen and the other named executive officers the
stock option grants are set out in the Options/SAR Grants in Last Fiscal Year
table.
Long-Term Incentive Programs
----------------------------
The Committee is currently administering two different long-term incentive
programs under the former 1990 Stock Plan and the Omnibus Securities Plan,
both of which were approved by shareholders. It has been the Committee's
practice each year to establish a three-year or four-year performance period,
at the end of which performance for the period is measured against pre-
determined objectives and awards, if any, are made.
In April 1994 the Committee approved awards under the Strategic Incentive
Plan Performance Period V ("SIP V"). SIP V covered the period from January 1,
1990 through December 31, 1993. A target award for each individual had been
established at the outset of the performance period, based on a percentage of
salary varying according to job grade classification. Supplemental target
awards were approved for individuals who were promoted during the performance
period to positions with higher job grade classifications. For SIP V, target
awards were based upon 22 percent of salary for the lowest level of
eligibility to 65 percent of salary for the Chairman and Chief Executive
Officer.
The Committee approved awards for SIP V at 10 percent above the target award
level. The awards for SIP V were based on the Company ranking fourth of ten
in the peer group for Total Shareholder Return, second of ten for Return on
Equity, and seventh of ten for Return on Assets. These rankings were made for
purposes of SIP V on the Company's position within the range of returns for
the peer group and not on the market capitalization weighted basis required
in the performance graph presented in this proxy statement. Also, the peer
group for awards under the Strategic Incentive Plan included one additional
company not in the peer group used in the performance graph in this proxy
statement for evaluation of the Company's shareholder return performance.
This additional company ceased to be an integrated oil and gas company and
was removed from the peer group for purposes of the Proxy Statement
Performance Graph and for measurement of future performance under the Long
Term Incentive Plan.
The Committee also employed internal performance measures with pre-determined
objectives for SIP V. Those objectives met included completion of a foreign
chemicals and plastics processing facility, replacement of more than 100
percent of hydrocarbon reserves produced during the four-year period, and
restoration of high density polyethylene manufacturing capacity at the
Company's Houston Chemical Complex. An additional objective, which was met,
was maintenance of finding costs for hydrocarbon reserves in the lowest
quartile of a peer group (which includes three additional companies, as well
as those companies in the shareholder return peer group). In addition, the
Committee evaluated performance against certain internal performance measures
which it does not disclose in this report because of its view that the
standards and the Company's performance involve confidential commercial or
business information, which if disclosed would have an adverse effect on the
Company.
The value of the awards, which were settled in restricted stock for Mr. Allen
and the other named executive officers, for SIP V are set forth on the line
for 1993 in the Summary Compensation Table.
Under the Strategic Incentive Plan portion of the Company's former 1990 Stock
Plan there is one remaining performance period January 1, 1991, through
December 31, 1994, with respect to which the Committee will make a decision
about awards. The 1990 Stock Plan has been discontinued and no further
performance periods will be established under it.
17
<PAGE>
Upon completion of the remaining Strategic Incentive Plan performance period,
the only continuing form of long-term incentive program will be the Long-Term
Incentive Plan under the Company's Omnibus Securities Plan. The Committee
established the second performance period of the plan, which extends from
January 1, 1994, through December 31, 1996. Target awards for Mr. Allen and
the other named executive officers were established as presented in the Long-
Term Incentive Plan Awards in Last Fiscal Year table and were based on a
percentage of salary varying according to job grade classification and the
price of the Company's stock at the beginning of the performance period.
Supplemental target awards, which are included in the target awards listed in
the table, were approved in recognition of promotions during the year. Actual
awards, if any, will be determined by the Committee at the end of the
performance period based on the single measurement of the Company's relative
total shareholder return compared with the peer group by which the Company
evaluates its stockholder return performance. Before awards may be granted
the Company's total shareholder return must be above the bottom quartile when
compared with the industry peer group.
THE COMPENSATION COMMITTEE
Larry D. Horner, Chairman
Norman R. Augustine
George B. Beitzel
Randall L. Tobias
Victoria J. Tschinkel
PERFORMANCE GRAPH
The following graph shows the Company's total return to stockholders compared
to the S&P 500 Index and a peer group of eight integrated oil companies over
the five-year period from December 31, 1989, through December 31, 1994.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN*
Among Phillips Petroleum, S&P 500 Index, and Peer Group Index**
* Total return assumes dividend reinvestment
** Amoco, Chevron, Exxon, Mobil, Texaco, Amerada Hess, ARCO, Unocal
[Proxy Graph appears in this space]
Assumes $100 invested on 12/31/89 in Phillips Common Stock, S&P 500 Index and
Peer Group Index
A table of the data points used in the graph:
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(1) PHILLIPS PETROLEUM $107 103 113 135 158
(2) S&P 500 INDEX 97 126 135 149 150
(3) PEER GROUP INDEX 106 116 122 138 145
18
<PAGE>
The Retirement Income Plan, in which all active eligible employees (including
executive officers) participate, does not require participant contributions.
Benefits are computed in accordance with several formulas. Officers,
including executive officers, generally receive benefits under a final
average earnings formula. Benefits are based on length of service, a
participant's annual salary and awards paid under the Annual Incentive
Compensation Plan. Normal retirement age is 65. A participant may retire as
early as age 55 and receive a reduced benefit. Benefits for a retiring
employee are paid in the form of a straight-life annuity or one of several
other forms of equivalent actuarial value. One executive officer of the
Company has elected to be covered by a supplemental plan which provides for
retirement after age 62 but before age 65. It supplements retirement by
calculating benefits as if the retiring officer had continued to be employed
until age 65. All other executive officers have indicated to the Company an
intention to retire at age 62.
The following table shows the maximum estimated straight-life annual benefits
payable at normal retirement age to employees in the higher salary
classifications, prior to reductions required by the plan for Social Security
benefits.
PENSION PLAN TABLE
Estimated Annual Retirement Benefits
Under Final Average Earnings Formula (1) (2)
Annual Average of
Highest 3 Consecutive
Calendar Years' Salary Years of Credited Service at Normal Retirement
and AICP Awards in 10 Years ------------------------------------------------
Preceding Retirement(3) 10 15 20 25 30
--------------------------- -------- -------- -------- -------- --------
$ 450,000 72,000 108,000 144,000 180,000 216,000
650,000 104,000 156,000 208,000 260,000 312,000
850,000 136,000 204,000 272,000 340,000 408,000
1,150,000 184,000 276,000 368,000 460,000 552,000
1,450,000 232,000 348,000 464,000 580,000 696,000
1,750,000 280,000 420,000 560,000 700,000 840,000
1,950,000 312,000 468,000 624,000 780,000 936,000
PENSION PLAN TABLE (Cont.)
Estimated Annual Retirement Benefits
Under Final Average Earnings Formula (1) (2)
Annual Average of
Highest 3 Consecutive Years of Credited Service
Calendar Years' Salary at Normal Retirement
and AICP Awards in 10 Years ------------------------------------
Preceding Retirement(3) 35 40 45
--------------------------- ---------- ---------- ----------
$ 450,000 252,000 288,000 324,000
650,000 364,000 416,000 468,000
850,000 476,000 544,000 612,000
1,150,000 644,000 736,000 828,000
1,450,000 812,000 928,000 1,044,000
1,750,000 980,000 1,120,000 1,260,000
1,950,000 1,092,000 1,248,000 1,404,000
(1) As required by the Internal Revenue Code of 1986, as amended, the
retirement plan may not provide annual benefits exceeding a maximum
amount, or include in benefit computations, compensation in excess of
the amount specified in the Internal Revenue Code. Also, participation
in the Company's AICP deferral program and voluntary salary reduction
program may cause a reduction in retirement plan benefits. Additional
amounts, if required to provide the total benefits indicated in the
table, would be made by supplemental Company payments. The Company also
maintains, as a recruiting tool, a supplemental plan under which
officers and other executives who are hired during mid-career may
receive retirement income in excess of that which their shorter Credited
Service would provide under the retirement plan. However, total benefits
under this supplemental plan and the retirement plan will not exceed
benefits obtainable under the retirement plan by a full career employee
at similar salary levels. These supplemental benefits have been
partially pre-funded by the Company in a special trust designated for
this purpose.
(2) With respect to the executive officers named in the Summary Compensation
Table, their years of credited service as of February 28, 1995, for
retirement purposes are: W. W. Allen, 35 years; C. L. Bowerman,
33 years; J. J. Mulva, 23 years; W. G. Paul, 15 years; J. L. Whitmire,
26 years; and C. J. Silas, 42 years. See the Summary Compensation Table
for their current covered compensation.
(3) AICP Awards are shown under the heading "Bonus" in the Summary
Compensation Table.
TERMINATION OF EMPLOYMENT
and
CHANGE-IN-CONTROL ARRANGEMENTS
The Work Force Stabilization Plan authorized on April 26, 1988, provides that
all employees of the Company, including executive officers, who are laid off
(as defined in the plan) within two years following a change of control of
the Company will be entitled to severance benefits equal to four weeks' pay
for each year of service, subject to a maximum of 104 weeks. "Pay" is
determined by adding the employee's current base salary, regularly scheduled
overtime pay and most recent Annual Incentive Compensation Plan award (or
target award, if greater).
Company-sponsored medical, dental and life insurance programs would be
continued for affected employees. The period of time which severance benefits
cover would be added to service for purposes of retirement plan calculations,
and all affected employees would be immediately vested. In addition, affected
employees would be entitled to require the Company to purchase their
principal residences under a formula-pricing arrangement intended to protect
them from loss of value, and would be entitled to reimbursement of legal
expenses incurred in connection with any claim for benefits under the plan.
A change of control would take place if there is either (i) an acquisition
(other than directly from the Company) of 20 percent or more of the
beneficial interest in the Company's voting stock by a party other than the
Company, a subsidiary or a Company-sponsored benefit plan, or (ii) a change
in the Board of Directors as a result of which the current directors
(together with the successors which they nominate or approve for nomination)
cease to be a majority of the Board.
19
<PAGE>
PROPOSAL 1 - BY THE COMPANY
The Board of Directors unanimously recommends a vote FOR adoption of the
following resolution, which will be presented at the meeting:
------------------------------------------------
RESOLVED, that the Board of Directors' designation of Ernst & Young LLP to
serve as the independent auditors to audit the books, records and accounts of
the Company for the 1995 fiscal year be and hereby is approved.
------------------------------------------------
Upon the recommendation of the Audit Committee, the Board of Directors has
designated Ernst & Young LLP, Certified Public Accountants, for the purpose
stated above and, in accordance with the Bylaws of the Company, has directed
that a vote of stockholders be taken to determine their approval or
disapproval.
As provided in the Company's Bylaws, in the event of stockholder disapproval,
the Board must then determine whether to replace the independent auditors
before the end of the current year and shall designate other independent
auditors for the following year.
Ernst & Young LLP, which has served as the Company's independent auditors
since 1949, is familiar with the Company's operations, accounting policies
and procedures and is, in the Company's opinion, well-qualified to act in
this capacity. Representatives of Ernst & Young LLP will be present at the
meeting to make any statement they desire and to answer questions directed to
them.
PROPOSAL 2 - BY STOCKHOLDERS
The Franciscan Health System, One MacIntyre Drive, Aston, Pennsylvania 19014-
1196, which states it is the owner of 2,900 shares, has given notice through
Ruth Goodwin, OSF, Senior Vice President, Mission & Ministry, of its
intention to present the following resolution at the meeting which is co-
sponsored by the General Board of Church and Society of the United Methodist
Church, 100 Maryland Avenue, N.E., Washington, D.C. 20002, which states it is
the owner of 3,200 shares.
ENDORSEMENT OF THE CERES PRINCIPLES FOR PUBLIC ENVIRONMENTAL ACCOUNTABILITY
WHEREAS WE BELIEVE:
The responsible implementation of a sound, credible environmental policy
increases long-term shareholder value by raising efficiency, decreasing
clean-up costs, reducing litigation, and enhancing public image and product
attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than following standards created by industry
alone. For maximum credibility and usefulness, such standards should reflect
what investors and other stakeholders want to know about the environmental
records of their companies;
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. These help
investors and the public to understand environmental progress and problems;
Uniform standards for environmental reports permits comparisons of
performance over time. It also allows companies to attract new capital from
investors seeking investments which are environmentally responsible and
responsive and which minimize risk of environmental liability.
WHEREAS:
The Coalition for Environmentally Responsible Economies (CERES) -- which
comprises large institutional investors (including shareholders of this
Company) with $160 billion in stockholdings, public interest representatives,
and environmental experts -- consulted with corporations and produced
comprehensive public standards for both environmental performance and
reporting. Over 80 companies, including Sun [Oil], General Motors,
H. B. Fuller, Polaroid, and Arizona Public Service Company have endorsed the
CERES Principles to demonstrate their commitment to public environmental
accountability. Fortune-500 endorsers speak enthusiastically about the
benefits that flow from working with CERES: increasing public credibility;
adding `value' to the company's environmental initiatives; and advancing
the company's own environmental plans and agenda.
In endorsing the CERES Principles, a company commits to work
toward:
1. Protection of the biosphere
2. Sustainable use of natural resources
3. Waste reduction and disposal
4. Energy conservation
5. Risk reduction
6. Safe products and services
7. Environmental restoration
8. Informing the public
9. Management commitment
10. Audits and reports
[Full text of the CERES Principles and accompanying CERES Report Form
obtainable from CERES, 711 Atlantic Avenue, Boston MA 02110, tel: 617/451-
0927].
The CERES Principles were also proposed by the Women's Division, The General
Board of Global Ministries, The United Methodist Church, 15th Floor, 475
Riverside Drive, New York, New York 10115; The Sisters of Charity, BVM, BVM
Center, 1100 Carmel Drive, Dubuque, Iowa 52001; Mercy Consolidated Assets
Management Program, 20 Washington Square North, New York, New York 10011; and
the Rabbinical Pension Board, 192 Lexington Avenue, New York, New York 10016-
6823; each of whom has advised this Company that they were the owner of at
least $1,000 worth of the Company's common stock, held for at least one year.
------------------------------------------------
RESOLVED: Shareholders request the Company to endorse the CERES Principles
as a part of its commitment to be publicly accountable for its environmental
impact.
------------------------------------------------
SUPPORTING STATEMENT
Concerned investors are asking the Company to be publicly accountable for its
environmental impact, including collaborating with this corporate-
environmental-investor-community coalition to develop: standards for
environmental
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performance and disclosure; methods for measuring progress toward these
goals; and a format for public reporting of progress. We believe this is
comparable to the European Community regulation for voluntary participation
in verified and publicly-reported eco-management and auditing.
We invite our Company to endorse the CERES Principles by (1) stating its
endorsement in a letter signed by a senior officer; (2) committing to
implement the Principles; and (3) annually publishing an environmental report
in the format of the CERES Report. This will complement -- not supplant --
internal corporate environmental policies and procedures.
Without such public scrutiny, corporate environmental policies and reports
lack the critical component of adherence to standards upheld by management
and stakeholders alike. Shareholders are asked to vote FOR this resolution to
encourage our Company to demonstrate environmental leadership and
accountability.
STATEMENT IN OPPOSITION
The Company recommends a vote AGAINST adoption of this proposal by
stockholders.
This is the third time that the co-sponsor and associated groups have
proposed the CERES Principles (or its predecessor, the Valdez Principles) for
consideration by stockholders. On each of the two previous occasions, the
stockholders have overwhelmingly rejected the proposal. The Company again
recommends a vote against this proposal.
Proponents of the proposal call for the Company to demonstrate its
environmental commitment and responsibility according to a format to be
negotiated with them as representatives of all stockholders. The Company,
however, believes that it is, and should remain, responsible to all
stockholders and not a self-appointed group. Further, the Company has
demonstrated its genuine commitment to sound environmental policies through
(1) responsible operations throughout the world, and (2) publishing and
distributing, in 1993 and 1994, a comprehensive report of its actual
environmental performance. The Company believes that every aspect of the
CERES Principles is included both in the Company's policies and its
performance.
As stated in previous years, the Company supports public environmental
reporting. We were a founding member of the Public Environmental Reporting
Initiative (PERI). The PERI reporting guidelines were developed as a
voluntary effort by a number of companies following discussions with
environmental and investor groups, some of which are CERES participants. A
copy of the Company's 1994 report, which includes quantitative information
related to our actual environmental, safety and health performance, is
available to all stockholders and the public at large. The proponents of
CERES would have you believe that each company who agrees to adopt the CERES
Principles would produce a report that would be comparable; however, there is
nothing that would prevent the proponents from changing the requirements, as
they have done in the past.
In 1990, the Company adopted a set of environmental goals called the
Principles of Performance, which complement its health, environmental and
safety policies and provide for the diversity of our business. In addition to
the Company's own standards, the Principles of Performance reflect various
governmental agency regulations and recommended management practices from
several major industrial organizations, including The Chemical Manufacturers
Association's Responsible Care(r) Initiative, the American Petroleum
Institute's STEP(r)(Strategies for Today's Environmental Partnership) program,
The National Petroleum Refiners' Association BEST(r) (Building Environmental
Stewardship Tools) program, and the International Chamber of Commerce's
Charter For Sustainable Development. Not only do these programs represent
policy commitments by the Company, but most include specific performance
reporting.
The Company believes strongly in the importance of performance and
accountability in environmental matters. Clearly, the Board and Company
management also recognize its importance to the value of the Company and to
all its stockholders. A committee of the Board, the Public Policy committee,
composed entirely of outside directors, has direct oversight of the Company's
environmental policies, practices and performance. The Company's Management
Committee, composed of Senior Management executives, is the primary body
within the management of the Company responsible for health, safety and
environmental policy. The Company's corporate-level staff, led by the Vice
President Health, Environment and Safety, is responsible for formulating and
recommending policy and implementing plans, as well as providing expert
assistance to the operating units. Further, it is the policy and philosophy
of the Company that all employees, as a part of their work assignments, have
the responsibility to protect the environment.
Finally, the Company believes that in publishing its environmental policies,
plans and results annually, the Company is being responsible and accountable
to its stockholders and the public.
Accordingly, the Board of Directors unanimously recommends a vote AGAINST
this proposal.
PROPOSAL 3 - BY STOCKHOLDER
The College Retirement Equities Fund ("CREF"), 730 Third Avenue, New York, NY
10017-3206 which states it is the owner of 1,952,117 shares, has given notice
through Peter C. Clapman, Senior Vice President and Chief Counsel,
Investments of CREF, of its intention to present the following resolution at
the meeting:
CREF SHAREHOLDER RESOLUTION
WHEREAS, the Company's Board of Directors has authority under the Company's
charter to issue one or more classes of so-called "blank check" preferred
stock, having such voting and other rights as the Board, in its sole
discretion, may determine:
WHEREAS, the Board may be able to deter unsolicited acquisition offers by
placing blank check preferred in friendly hands without seeking shareholder
approval;
WHEREAS, Delaware's anti-takeover statute enhances the Board's ability to
deter unsolicited takeover bids by placing a block of blank check preferred
in friendly hands;
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WHEREAS, such use of blank check preferred by the Board could deprive
shareholders of the opportunity to consider valuable offers for their stock;
-----------------------------------------------
RESOLVED that the shareholders request that the Board: Adopt a policy of
seeking shareholder approval prior to placing preferred stock with any person
or group except for the purpose of raising capital in the ordinary course of
business or making acquisitions and without a view to effecting a change in
voting power.
-----------------------------------------------
SUPPORTING STATEMENT
I. The Board can limit shifts in control of the Company by placing a block
of preferred stock in friendly hands without shareholder approval.
Blank check preferred can be issued by the Board for capital raising,
acquisitions or as an anti-takeover device, without shareholder approval. The
Board can use blank check preferred as an anti-takeover device to deter
unsolicited tender offers favorable to shareholders. For example, the Board
could issue blank check preferred to dilute the stock ownership of, or create
voting impediments for, an unsolicited acquiror. Since such uses of blank
check preferred could potentially diminish the value of the shareholders'
investment and decrease the market price of the Company's shares, shareholder
approval should be obtained before the Board uses blank check preferred as an
anti-takeover device.
II. Delaware's anti-takeover statute enhances the Board's ability to deter
takeovers by undertaking blocking transactions.
Delaware's anti-takeover statute enhances the Board's ability to deter a
takeover by placing blank check preferred in friendly hands. The statute
provides generally that unless an unsolicited acquiror obtains 85 percent of
the Company's voting stock in the transaction by which it obtains 15 percent,
it is barred for three years from consummating a business combination with
the Company. The Board can thus effectively deter unsolicited bids by placing
a significant block of blank check preferred in friendly hands, making it
much harder (if not impossible) for an unsolicited bidder to attain the 85
percent ownership it needs to be exempted from the Delaware statute.
III. Blank check preferred should not be used by the Board to disadvantage
shareholders without their consent.
The Board's discretionary authority to issue blank check preferred should
only be exercised for corporate purposes demonstrably in the best interests
of shareholders. Good corporate governance requires that holders of a
majority of voting stock approve the use of blank check preferred as a
deterrent to unsolicited tender offers -- a use that is not necessarily in
the best interests of shareholders.
STATEMENT IN OPPOSITION
The Company recommends a vote AGAINST adoption of this proposal by
stockholders.
The stockholders of the Company, at their 1985 Annual Meeting, authorized the
creation of a class of preferred stock and conferred upon the Board of
Directors the ability to designate the terms of the preferred stock at the
time of issue. The CREF proposal seeks to cause that action by our
stockholders to be overturned. The Board of Directors believes that
stockholders' interests will be best served by a rejection of the CREF
proposal.
The ability to issue preferred stock with terms designated at the time of
issue enables the Company to respond promptly and effectively to financing,
acquisition and other capital opportunities. A Company that lacks the ability
to act quickly in response to capital market developments can be placed at a
disadvantage and find itself foreclosed from opportunities to enhance the
value of its stockholders' investment.
The Company's Board of Directors has demonstrated through its effective
performance, both under the pressure of real unsolicited offers and in the
continuing course of effectively leading the Company to solid financial
performance, that it is able and entitled to maintain its ability to
determine the basis and terms of issue for the Company's preferred stock.
The proponent appears to suggest that preferred stock that may have terms
designated at the time of issue has a particular application as a deterrent
to unsolicited tender offers. The Company's Board of Directors, having dealt
with two consecutive unsolicited takeover proposals in 1984-85, is well aware
of the issues that such proposals present. The Board believes that it
demonstrated in those situations its commitment to and ability to serve
effectively the interests of the Company's stockholders. The Board was able
at that time to use the Company's preferred stock, designating particular
terms at the time of issue, to deliver extra value to stockholders through a
recapitalization. If a similar situation were to arise now, and if a hostile
would-be acquiror were to have the right to vote a significant number of
shares on the question of whether to issue the preferred shares because of a
policy such as that suggested by the proponent, the hostile would-be acquiror
could deny to other holders the right to the value enhancement provided
by the preferred stock.
The Board acknowledges the sincerity of the proponent's concern with the
practice of entrenchment through placement of blocks of voting stock in
friendly hands, and is aware of reported instances of such actions. But no
amount of well-meaning concern can justify a vague "policy" that would, if
the Board gave it binding effect, require the Company to solicit a
stockholder vote in order to fund its participation in a joint venture with
preferred stock or create legal uncertainties in a simple financing because
the Company has not previously issued preferred stock as a financing vehicle.
Such a result would, in the Board's opinion, punish, and not protect,
stockholders.
Further, the Board believes that any concern over entrenchment through
placement of preferred stock is unwarranted as to the Company. The current
Board of Directors, and the Board nominated for election, have a substantial
majority of independent directors. Under Delaware law, directors have a
fiduciary responsibility to act in the best interests of the Company and its
stockholders in all circumstances, including the issue or placement of
preferred stock. The use of preferred stock in the context of an unsolicited
takeover proposal is
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subject to scrutiny under an enhanced standard of care applied by
the Delaware courts to review directors' actions in such circumstances.
The Board believes that its ability to issue and designate the terms of
preferred stock, even in the context of an unsolicited takeover proposal, is
an important tool to enhance the value of the stockholders' investment. This
ability enables the Board, while meeting its fiduciary responsibilities, to
act in the best interests of stockholders with the flexibility and power to
take advantage of business opportunities as they arise.
Accordingly, the Board of Directors unanimously recommends a vote AGAINST
this proposal.
OTHER MATTERS
The Company knows of no matters to be presented at the meeting other than
those included in the Notice preceding this Proxy Statement. If other matters
should come before the meeting which require a stockholder vote, it is
intended that the proxy holders will use their own discretion in voting on
such other matters.
Information included in this Proxy Statement is as of the date of
preparation, approximately February 28, 1995, unless otherwise stated.
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1996 Annual Meeting
must be received at the Company's executive offices in Bartlesville,
Oklahoma, no later than November 30, 1995, for inclusion in the Company's
Proxy Statement and form of proxy relating to that meeting.
By Order of the Board of Directors,
/s/ Dale J. Billam
-------------------
Dale J. Billam
Secretary
Bartlesville, Oklahoma 74004
March 31, 1995
Stockholders are encouraged to keep their account address up to date and
promptly deposit their dividend checks to avoid surrender of these funds and
related stock to their respective states under unclaimed property laws.
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APPENDIX - FORM OF PROXY
DEFINITIVE COPY
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PHILLIPS PETROLEUM COMPANY
Annual Meeting May 8, 1995
The undersigned hereby appoints W. ALLEN, R. TOBIAS and V. TSCHINKEL as
proxy holders with power of substitution, or, if all do not act on a
matter, those who do act, to vote all stock which the undersigned could
vote at the Company's annual stockholders' meeting to be held at the Adams
Building, 4th Street and Keeler Avenue, Bartlesville, Oklahoma, on May 8,
1995, at 10 a.m., and at any adjournment thereof, in the manner stated
herein as to the following matters and in their discretion on any other
matters that come before the meeting, all as described in the Notice and
Proxy Statement.
This Proxy is Continued on the Reverse Side
Please Sign on the Reverse Side and Return Promptly
<PAGE>
This Proxy will be voted or not voted as you direct below. In the absence
of such direction, it will be voted FOR Directors, and FOR Proposal 1 and
AGAINST Proposal 2 and Proposal 3.
---
| X | Please mark your
--- votes as this
Company recommends a vote FOR: ELECTION OF DIRECTORS: Nominees: W. Allen,
N. Augustine, G. Beitzel, D. Boren, C. Bowerman, R. Chappell, Jr.,
L. Eagleburger, J. Edwards, L. Horner, J. Mulva, R. Tobias, V. Tschinkel,
K. Turner, and J. Whitmire.
VOTE FOR __ VOTE WITHHELD __
all nominees |__| from all nominees |__|
listed above* listed above
*To withhold authority to vote for any nominee write the nominee's name on
the space below.
----------------------------------------
Company recommends a vote FOR: FOR AGAINST ABSTAIN
Proposal 1 to approve the __ __ __
designation of the independent |__| |__| |__|
auditors, Ernst & Young LLP.
Company recommends a vote AGAINST: __ __ __
Proposal 2 to endorse the |__| |__| |__|
CERES Principles.
Company recommends a vote AGAINST: __ __ __
Proposal 3 to adopt a policy on |__| |__| |__|
the use of preferred stock.
__
I PLAN TO ATTEND THE |__|
ANNUAL MEETING
Please mark, date, sign and return this proxy card promptly. To vote in
accordance with the Company's recommendations no boxes need be checked.
Dated:______________________, 1995
__________________________________
__________________________________
Signature(s) of Stockholder(s)
Your signature(s) on this proxy form should be exactly the same as the
name(s) imprinted hereon. Persons signing as executors, administrators,
trustees, or in similar capacities, should so indicate.
<PAGE>
