<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY PROXY STATEMENT
[X] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO SEC. 240.14A-11(C) OR SEC. 240.14A-12
------------------------
BURLINGTON RESOURCES INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BURLINGTON RESOURCES INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(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
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
PER UNIT PRICE OR
OTHER
UNDERLYING VALUE OF
TITLE OF EACH CLASS OF AGGREGATE NUMBER OF TRANSACTION COMPUTED PROPOSED MAXIMUM
SECURITIES TO WHICH SECURITIES TO WHICH PURSUANT TO EXCHANGE AGGREGATE VALUE OF
TRANSACTION APPLIES: TRANSACTION APPLIES: ACT RULE 0-11: TRANSACTION:
- ---------------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
</TABLE>
[ ] 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.
Amount previously paid:
Filing party:
Form, schedule or
registration statement no.:
Date filed:
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<PAGE> 2
[LOGO]
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held March 17, 1994
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Burlington Resources Inc. will be
held on Thursday, March 17, 1994, at 9:00 a.m. in the 6th floor meeting room,
First Interstate Center, 999 Third Avenue, Seattle, Washington, for the
following purposes:
1. To elect seven directors, each to hold office for a term of one year.
2. To consider and act on the proposed Burlington Resources Inc. 1993
Stock Incentive Plan.
3. To consider and vote on a stockholder proposal.
4. To transact any other business which may be properly brought before the
meeting.
Only stockholders of record at the close of business on January 24, 1994
are entitled to notice of, and to vote at, the meeting and any adjournment
thereof.
By Order of the Board of Directors
LESLIE S. LELAND
Corporate Secretary
February 17, 1994
<PAGE> 3
BURLINGTON RESOURCES INC.
999 THIRD AVENUE
SEATTLE, WASHINGTON 98104-4097
Mailing Date:
February 17, 1994
PROXY STATEMENT
The enclosed proxy is solicited by the management of Burlington Resources
Inc. (the "Company") for use at the Annual Meeting of Stockholders on March 17,
1994. Shares of Common Stock, par value $.01 per share ("Common Stock"), of the
Company represented by a properly executed proxy in the accompanying form will
be voted at the meeting. The proxy may be revoked at any time before its
exercise by sending written notice of revocation to Ms. Leslie S. Leland,
Corporate Secretary, Burlington Resources Inc., 999 Third Avenue, Seattle,
Washington 98104-4097, or by signing and delivering a proxy which is dated
later, or, if the stockholder attends the meeting in person, by giving notice of
revocation to the Inspectors of Election at the meeting.
January 24, 1994 was the record date for the determination of stockholders
entitled to notice of, and to vote at, the meeting. On that date there were
outstanding and entitled to vote 129,700,564 shares of Common Stock, which is
the Company's only class of voting securities. Each stockholder is entitled to
one vote for each share of Common Stock held of record. A plurality of the
shares of Common Stock present in person or represented by proxy at the meeting
is required for the election of Directors. An affirmative vote of a majority of
the shares of Common Stock present in person or represented by proxy and
entitled to vote at the meeting is required for approval of all other items
being submitted to the stockholders for their consideration. Abstentions are
counted in the number of shares present in person or represented by proxy and
entitled to vote for purposes of determining whether a proposal has been
approved, whereas broker nonvotes are not counted for those purposes.
INFORMATION ABOUT THE BOARD OF DIRECTORS
The Board of Directors of the Company held nine meetings during 1993. There
are two standing committees of the Board of Directors: an Audit Committee and a
Compensation and Nominating Committee. The Audit Committee held two meetings
during 1993. This Committee recommends the employment of the Company's
independent auditors and reviews with management and the independent auditors
the Company's financial statements, basic accounting and financial policies and
practices, audit scope and competency of control personnel. The Compensation and
Nominating Committee met four times during 1993. This Committee reviews and
recommends to the Board of Directors the compensation and promotion of senior
officers, the size and composition of the Board of Directors and nominees for
Directors, and any proposed employee benefit plans. This Committee also grants
stock options and other forms of long-term incentive compensation. During 1993,
no Directors attended fewer than 75% of the meetings of the Board of Directors.
The Compensation and Nominating Committee will consider proposals for
nominees for Directors from stockholders which are made in writing to Ms. Leslie
S. Leland, Corporate Secretary, Burlington Resources Inc., 999 Third Avenue,
Seattle, Washington 98104-4097.
<PAGE> 4
STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN OTHER HOLDERS
The following table sets forth information about the only known beneficial
owners of more than 5% of the Company's Common Stock. This information is based
solely on Schedules 13G filed by such beneficial owners with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT
BENEFICIAL OWNER SHARES OF CLASS
----------------------------------------------------- ---------- --------
<S> <C> <C>
FMR Corp. and Edward C. Johnson 3d................... 12,989,812(1) 10.02%
82 Devonshire Street
Boston, Massachusetts 02109
Wellington Management Company........................ 8,078,450(2) 6.23%
75 State Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
NOTES
(1) In its Schedule 13G, FMR Corp. states that it has voting power as to 739,910
shares and dispositive power with respect to 12,989,812 shares. Mr. Johnson
states that he has voting power with respect to no shares and dispositive
power with respect to 12,989,812 shares. FMR and Mr. Johnson state that
their Schedule 13G includes 8,796,200 shares of Common Stock attributable to
the Magellan Fund.
(2) Wellington Management Company has advised the Company that its Schedule 13G
includes 8,041,900 shares of Common Stock owned by The Windsor Fund, for
which Wellington is the investment advisor.
The following table sets forth the number of shares of Common Stock
beneficially owned as of January 24, 1994 by each Director (including all
nominees for Director), the executive officers of the Company named in the
Summary Compensation Table below, and by all Directors and executive officers as
a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES RIGHT TO ACQUIRE
BENEFICIALLY OWNED WITHIN 60 DAYS
AS OF JANUARY 24, OF JANUARY 24, PERCENT
NAME 1994(1) 1994(2) OF CLASS
----------------------------------- ------------------ ----------------- --------
<S> <C> <C> <C>
DIRECTORS
J. V. Byrne........................ 5,403 4,553 *
J. C. Cushman, III................. 71,156(3) 4,553 *
S. P. Gilbert...................... 12,053 4,553 *
J. F. McDonald..................... 7,653 4,553 *
T. H. O'Leary...................... 584,168(4) 469,773 *
D. M. Roberts...................... 5,500 3,000 *
W. Scott, Jr. ..................... 6,296(5) 4,553 *
W. E. Wall......................... 5,185 2,185 *
NAMED EXECUTIVE OFFICERS
J. E. Hagale....................... 72,762(4) 69,262 *
G. E. Howison...................... 182,202(4) 166,811 *
L. E. Parker....................... 115,813(4) 110,712 *
B. S. Shackouls(6)................. 534 0 *
J. W. Becker(7).................... 151,386(4) 132,929 *
ALL DIRECTORS AND EXECUTIVE
OFFICERS
AS A GROUP (17 PERSONS).......... 1,366,629 1,108,812 1.05%
</TABLE>
- ---------------
NOTES
* Indicates that the percentage of shares beneficially owned does not exceed
1% of the class.
(1) For purposes of this table, shares are considered to be "beneficially" owned
if the person directly or indirectly has sole or shared voting and
investment power with respect to such shares. In addition, a
2
<PAGE> 5
person is deemed to beneficially own shares if that person has the right to
acquire such shares within 60 days of January 24, 1994; as a result, the
number of shares shown in this column also includes the number of shares
shown in the column "Right to Acquire Within 60 Days of January 24, 1994."
The numbers shown also include shares owned through the Company's Retirement
Savings Plan as of December 31, 1993.
(2) Shares subject to options which are exercisable within 60 days of January
24, 1994.
(3) Excludes 348 shares of Common Stock held in trust for the benefit of one of
Mr. Cushman's children, of which Mr. Cushman disclaims beneficial ownership.
(4) For Messrs. O'Leary, Hagale, Howison, Parker and Becker includes 50,000,
3,500, 7,500, 2,500 and 11,500 shares of Common Stock, respectively, subject
to restrictions.
(5) Excludes 1,150,300 shares of Common Stock owned by a subsidiary of Peter
Kiewit Sons', Inc., of which Mr. Scott is Chairman and President. Mr. Scott
disclaims beneficial ownership of these shares.
(6) Mr. Shackouls commenced employment with Meridian Oil Inc. ("Meridian") in
June 1993.
(7) Mr. Becker ceased to be an executive officer of the Company in December
1993.
3
<PAGE> 6
ELECTION OF DIRECTORS
In accordance with the By-Laws of the Company, the Board of Directors has
fixed the number of Directors constituting the Board of Directors at seven as of
the date of the Annual Meeting. It is proposed to elect seven Directors, each to
hold office for a term of one year and until his successor shall have been
elected and qualified. Unless otherwise instructed by the stockholder, the
persons named in the enclosed form of proxy will vote the shares represented by
such proxy for the election of the seven nominees named in this Proxy Statement,
subject to the condition that if any of the named nominees should be unable to
serve, discretionary authority is reserved to vote for a substitute. No
circumstances are presently known which would render any nominee named herein
unable or unwilling to serve. Holders of the Common Stock may not cumulate their
votes in the election of Directors.
Each of the following nominees is a Director of the Company at the present
time:
JOHN V. BYRNE--President, Oregon State University, Corvallis, Oregon.
Age--65. Chairman--Audit Committee. Since November 1984, Dr. Byrne's principal
occupation has been as shown above. Dr. Byrne has been a Director of the Company
since 1988.
S. PARKER GILBERT--Retired. Age--60. Member--Compensation and Nominating
Committee. Mr. Gilbert has been retired since January 1991. From January 1984
until December 1990, Mr. Gilbert was Chairman and Managing Director of Morgan
Stanley Group Inc. Mr. Gilbert has been a Director of the Company since 1990.
Mr. Gilbert is also a director of ITT Corporation, Morgan Stanley Group Inc.,
Rayonier Forest Resources Company and Taubman Centers, Inc. Morgan Stanley & Co.
Incorporated, a subsidiary of Morgan Stanley Group Inc., acts as a commercial
paper dealer for, and provides investment banking and financial advisory
services to, the Company and its subsidiaries.
JAMES F. MCDONALD--President and Chief Executive Officer,
Scientific-Atlanta, Inc., Norcross, Georgia--Telecommunications. Age--53.
Member--Audit Committee. Since July 1993, Mr. McDonald's principal occupation
has been as shown above. From July 1991 until July 1993, Mr. McDonald was a
partner with J.H. Whitney & Co. From January 1991 until July 1991, Mr. McDonald
was Vice Chairman of the Board of Prime Computer Inc. From January 1990 until
January 1991, Mr. McDonald was Vice Chairman of the Board and Chief Executive
Officer of Prime Computer, Inc. From September 1989 until January 1990, Mr.
McDonald was President and Chief Executive Officer of Prime Computer, Inc. From
October 1988 until August 1989, Mr. McDonald was Chairman of the Board,
President and Chief Executive Officer of Gould/ Computer Systems Inc. and
Gould/IGD Inc. Mr. McDonald has been a Director of the Company since 1988. Mr.
McDonald is also a director of Scientific-Atlanta, Inc.
THOMAS H. O'LEARY--Chairman of the Board, President and Chief Executive
Officer, Burlington Resources Inc., Seattle, Washington. Age--59. Since February
1993, Mr. O'Leary's principal occupation has been as shown above. From July 1992
to February 1993, Mr. O'Leary was Chairman of the Board and Chief Executive
Officer of Burlington Resources Inc. From October 1990 until July 1992, Mr.
O'Leary was Chairman of the Board, President and Chief Executive Officer of
Burlington Resources Inc. From January 1989 until October 1990, Mr. O'Leary was
President and Chief Executive Officer of Burlington Resources Inc. Mr. O'Leary
has been a Director of the Company since 1988. Mr. O'Leary is also a director of
B.F. Goodrich and The Kroger Company.
DONALD M. ROBERTS--Vice Chairman and Treasurer, United States Trust Company
of New York and its parent, U.S. Trust Corporation, New York, New York. Age--58.
Member--Audit Committee. Since February 1990, Mr. Roberts' principal occupation
has been as shown above. From January 1989 until February 1990, Mr. Roberts was
Executive Vice President and Treasurer of United States Trust Company of New
York and its parent, U.S. Trust Corporation. Mr. Roberts was elected as a
Director of the Company in 1993. Mr. Roberts is also a trustee of United States
Trust Company of New York and a director of U.S. Trust Corporation and York
International Corporation.
WALTER SCOTT, JR.--Chairman and President, Peter Kiewit Sons', Inc., Omaha,
Nebraska -- Construction, Mining and Telecommunications. Age--62.
Chairman--Compensation and Nominating Committee. For more than five years Mr.
Scott's principal occupation has been as shown above.
4
<PAGE> 7
Mr. Scott has been a Director of the Company since 1988. Mr. Scott is also a
director of Berkshire Hathaway Inc., California Energy Company, Inc., C-TEC
Corporation, ConAgra, Inc., FirsTier Financial, Inc., MFS Communications
Company, Inc. and Valmont Industries, Inc.
WILLIAM E. WALL--Of Counsel, Siderius Lonergan, Seattle, Washington--Law.
Age--65. Member--Compensation and Nominating Committee. Since March 1988, Mr.
Wall's principal occupation has been as shown above. Mr. Wall has been a
Director of the Company since 1992.
Directors who are not officers or employees of the Company received an
annual retainer of $50,000 in 1993 and will receive an annual retainer of
$55,000 beginning in 1994. Directors who are also officers or employees of the
Company do not receive any compensation for duties performed as Directors.
Directors who are not officers or employees of the Company may defer all or part
of their compensation.
The Company's 1992 Stock Option Plan for Non-Employee Directors provides
for the annual grant of a nonqualified option for 1,000 shares of Common Stock
immediately following the Annual Meeting of Stockholders to Directors who are
not salaried officers of the Company. In addition, an option for 3,000 shares is
granted upon a Director's initial election or appointment to the Board of
Directors. The exercise price per share with respect to each option is 100% of
the fair market value (as defined in the plan) of the Common Stock on the date
the option is granted. During 1993, an initial option for 3,000 shares of Common
Stock was granted to Mr. Roberts and an annual option for 1,000 shares of Common
Stock was granted to Dr. Byrne and to Messrs. Cushman, Gilbert, McDonald, Scott
and Wall pursuant to this plan.
The Company has established a Charitable Award Program for Directors who
have served on the Board of Directors for at least two years. Upon the death of
a Director, the Company will donate $1 million to one or more educational
institutions or private foundations nominated by the Director.
5
<PAGE> 8
REPORT ON EXECUTIVE COMPENSATION
BY THE COMPENSATION AND NOMINATING COMMITTEE
The Compensation and Nominating Committee of the Board of Directors (the
"Committee") is composed entirely of Directors who are not employees of the
Company. The Committee is responsible for establishing and administering the
Company's executive compensation program.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The philosophy underlying the development and administration of the
Company's annual and long-term compensation plans is the alignment of the
interests of executive management with those of the shareholders. Key elements
of this philosophy are:
- Establishing compensation plans which strengthen the Company's ability to
attract and retain officers and key employees and to deliver pay
commensurate with the Company's performance, as measured by strategic,
operating and financial objectives.
- Providing significant equity-based incentives for executives to ensure
that they are motivated over the long term to respond to the Company's
business challenges and opportunities as owners rather than just as
employees.
- Rewarding executives for superior performance and when shareholders
receive an above-average return on their investment over the long term.
One of the Committee's objectives is to position executive base salaries at
the median when compared to the Company's competitors. The competitor group
consists of approximately 40 oil and gas companies, including the peer companies
that are used in the Comparison of Cumulative Total Shareholder Return. The
performance of the companies in the competitor group is not considered in
establishing executive base salaries.
The Incentive Compensation Plan, or annual bonus plan, is the vehicle by
which executives can earn additional compensation, with maximum awards for
executive officers generally of up to 100% of salary, depending on individual
and Company performance relative to certain annual objectives. In determining
the size of the annual bonus, no single performance factor or formula is used
because the Committee believes that the rigid application of quantitative
performance measures would eliminate the consideration of important qualitative
factors critical to long-term strategic performance. The Company's objectives
that the Committee considers, which are not specifically weighted, are a
combination of strategic, operating and financial objectives, including oil and
gas production levels, reserve additions and reserve finding costs, earnings per
share, operating income and operating cash flow. These performance measures are
considered to be critical to the Company's fundamental goal -- building
shareholder value.
The Company's long-term incentive program consists of the proposed 1993
Stock Incentive Plan (the "Stock Incentive Plan") and the 1992 Performance Share
Unit Plan (the "PSU Plan"). Stock options granted under the Stock Incentive Plan
have a term of ten years and awards under the PSU Plan vest over a four-year
performance period. Stock purchase rights granted under the Stock Incentive Plan
give an executive the opportunity to purchase with his or her annual bonus the
Company's Common Stock at a discount of up to 25% of fair market value with the
stipulation that the stock cannot be sold for at least three years or until the
executive achieves certain Stock Ownership Targets, as described below.
Management is motivated to enhance shareholder value because benefits under
these plans accrue when strategic, operating and financial goals are achieved
and the Company's Common Stock appreciates.
The Omnibus Budget Reconciliation Act of 1993 places a limit on the amount
of certain types of compensation for each of the executive officers which may be
tax deductible by the Company beginning in 1994. The Internal Revenue Service
recently issued proposed regulations on the deductibility limit for public
comment. The Company is in the process of evaluating these proposed
modifications and assessing how the Company's compensation programs may be
affected if the regulations are ultimately adopted. The Company will continue to
monitor these proposed regulations and consider modifications to its
compensation programs once final regulations are adopted. The Company's policy
is, primarily, to design and administer compensation
6
<PAGE> 9
plans which support the achievement of long-term strategic objectives and
enhance shareholder value and, to the extent possible, to maximize the
proportion of compensation expense that is tax-deductible by the Company.
COMPANY PERFORMANCE AND COMPENSATION
During 1993, the Company met or substantially exceeded its strategic,
operating and financial goals of production levels, reserve additions and
reserve finding costs, earnings per share, and operating cash flow. Operating
income was slightly below the target for the year because of a decline in crude
oil prices. Considering these accomplishments, which were not specifically
weighted, the Committee awarded the Company's CEO, T.H. O'Leary, an annual
incentive award of $750,000, the maximum award available to him under the
Incentive Compensation Plan. In addition, the Committee awarded the other
executive officers the maximum awards available under the Incentive Compensation
Plan. The Committee increased Mr. O'Leary's base salary to approximately the
median when compared to the competitor group of energy companies. The other
executive officers received salary increases which positioned them below the
median for the competitor group of energy companies because the officers
generally are new to their current positions.
In evaluating performance for purposes of the PSU Plan, the Committee
determined that the Company had attained the strategic, operating and financial
objectives mentioned above, which were not specifically weighted, for the plan
period from July 1, 1992 to December 31, 1993, and that the Company's total
shareholder return ranked in the middle of the peer group used in the Comparison
of Cumulative Total Shareholder Return. Accordingly, the Committee approved the
vesting of 75 percent of the PSUs eligible for vesting, or 15,525 PSUs for Mr.
O'Leary and 20,925 PSUs for the other executive officers. In addition, the
Committee granted PSUs to certain executive officers who either joined the
Company or received promotions in 1993. The Committee's objective was to target
this PSU grant so that the level of all long-term incentive compensation for
these executives was at the seventy-fifth percentile when compared to the
competitor group of companies. The Committee also reviewed, but did not consider
in its compensation decisions, the Company's total shareholder return versus the
Dow Jones Secondary Oil Index, a published index of oil and gas companies in
which the Company is included.
As an incentive for future performance and consistent with the objective of
targeting long-term incentive compensation at the seventy-fifth percentile when
compared to the competitor group of companies, the Committee granted Mr. O'Leary
and the other executive officers 34,500 and 46,500 stock options, respectively.
These awards provide incentive for Mr. O'Leary and the executive officers to
continue to build shareholder value over the long term. In making these awards,
the Committee did not consider currently outstanding grants of stock options.
STOCK OWNERSHIP GUIDELINES
To facilitate ownership of the Company's Common Stock, the Committee
approved Stock Ownership Guidelines for the executives in conjunction with the
approval of the Stock Incentive Plan. The ownership guidelines, set at four
times base salary for the CEO and three times base salary for the other
executive officers, are to be attained within five years, and support the
Company's philosophy of aligning the interests of executives with those of the
shareholders.
COMPENSATION AND NOMINATING COMMITTEE
Walter Scott, Jr., Chairman
S. Parker Gilbert
William E. Wall
7
<PAGE> 10
Comparison of Cumulative Total Shareholder Return(1)
<TABLE>
<CAPTION>
DOW JONES
Measurement Period BURLINGTON SECONDARY OIL
(Fiscal Year Covered) RESOURCES(2) PEER GROUP(3) S&P 500(4) INDEX (U.S.)
<S> <C> <C> <C> <C>
1988 100 100 100 100
1989 151 162 132 136
1990 120 136 127 113
1991 113 104 166 111
1992 153 107 179 112
1993 164 141 197 124
</TABLE>
- ------------------
NOTES
(1) Assumes that the value of the investment in the Company's Common Stock and
in each index was $100 on January 1, 1989 and that all dividends were
reinvested.
(2) The Company's Common Stock return assumes that the .24 share of El Paso
Natural Gas Company ("EPNG") common stock distributed to the Company's
stockholders on June 30, 1992 was sold and the proceeds were reinvested in
the Company's Common Stock.
(3) This peer group is comprised of Anadarko Petroleum Corp., Apache Corp.,
Louisiana Land & Exploration Company, and Oryx Energy Company. This peer
group of independent exploration and production competitors is used for the
Company's performance comparison in the PSU Plan. This index is weighted to
reflect the relative market capitalization of the peer group companies as of
December 31, 1988.
(4) Provided as a matter of information only.
8
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended December 31,
1993, 1992 and 1991 with respect to the Company's Chief Executive Officer, each
of the four other most highly compensated executive officers of the Company and
its subsidiaries during 1993 whose salary and bonus exceeded $100,000 and other
individuals who would have been among the most highly compensated executive
officers of the Company and its subsidiaries during 1993 but for the fact that
the individuals were no longer serving as executive officers on December 31,
1993 ("named executive officers"). Annual compensation includes amounts deferred
at the officer's election.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ---------------------------- ---------------
NAME AND ------------------------------------- SECURITIES
PRINCIPAL OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION STOCK AWARDS(2) OPTIONS(3) LTIP PAYOUTS(4) COMPENSATION(5)
- ----------------- ---- --------- -------- --------------- --------------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas H. O'Leary 1993 $750,000 $750,000 $ 80,179(6) -- 34,500 -- $ 120,315
Chairman of the 1992 $675,000 $675,000 $ 96,482(6) -- 34,500 $ 4,839,000 $ 183,956
Board, 1991 $585,000 $585,000 -- $ 1,850,000 213,132 -- --
President and
Chief Executive
Officer
Burlington
Resources Inc.
George E. Howison 1993 $385,000 $450,000 $ 108,548 -- 22,500 -- $ 109,416
President and 1992 $230,000 $250,000 -- -- 8,600 $ 774,240 $ 52,841
Chief Executive 1991 $185,000 $210,000 -- $ 277,500 62,164 -- --
Officer
Meridian Oil
Inc.;
Senior Vice
President and
Chief Financial
Officer
Burlington
Resources Inc.
Bobby S. 1993 $204,169 $205,000 -- -- 12,000 -- $ 374,747
Shackouls(7)
Executive Vice
President and
Chief Operating
Officer
Meridian Oil
Inc.
L. Edward Parker 1993 $201,156 $205,000 -- -- 6,000 -- $ 32,877
Executive Vice 1992 $169,841 $125,300 -- -- 4,600 $ 38,207
President, 1991 $160,758 $118,300 -- $ 86,875 37,891 --
Marketing
Meridian Oil
Inc.
John E. Hagale 1993 $199,723 $215,000 $ 43,600 -- 6,000 -- $ 44,674
Executive Vice 1992 $162,500 $130,000 -- -- 4,600 -- $ 31,398
President and 1991 $142,500 $115,000 -- $ 129,500 37,891 --
Chief Financial
Officer
Meridian Oil
Inc.
James W. Becker 1993 $250,000 $300,000 -- -- -- -- $ 44,111
Formerly Senior 1992 $225,000 $250,000 -- -- 8,600 $ 1,209,750 $ 68,650
Vice President, 1991 $190,000 $215,000 -- $ 277,500 62,164 -- --
Law Burlington
Resources Inc.
</TABLE>
- ---------------
NOTES
(1) Bonus payments are reported for the year in which the related services were
performed.
(2) Restricted Common Stock is valued at the closing price of the Common Stock
on the New York Stock Exchange, Inc. on the date of grant. On December 31,
1993, Messrs. O'Leary, Howison, Shackouls, Parker, Hagale and Becker held
50,000, 7,500, 0, 2,500, 3,500 and 11,500 shares, respectively, of
restricted Common Stock having a market value, based on the closing price of
the Common Stock on such date, of $2,118,750, $317,813, 0, $105,938,
$148,313 and $487,313, respectively. Dividends are paid on restricted Common
Stock at the same rate as paid to all stockholders.
(3) The number and exercise price of options granted in 1991 were adjusted in
connection with the spin-off distribution of EPNG common stock on June 30,
1992.
(4) Long-term incentive plan ("LTIP") payouts pursuant to the Company's 1988
Performance Share Unit Plan for the four-year performance period which ended
in 1992.
(5) Includes matching contributions made by the Company during 1993 in the
Company's Retirement Savings (401(k)) Plan and Supplemental Benefits Plan
for Messrs. O'Leary, Howison, Shackouls, Parker, Hagale and Becker of
$120,000, $64,350, $24,522, $32,492, $24,133 and $44,000, respectively.
Includes matching contributions made by the Company during 1992 in the
Company's Retirement Savings Plan and Supplemental Benefits Plan for Messrs.
O'Leary, Howison, Parker, Hagale and Becker of $135,225, $41,400, $33,075,
$24,450 and $55,200, respectively. Includes interest credited toward
deferred compensation at above market rates for Messrs. O'Leary, Howison,
Shackouls, Parker, Hagale and Becker of $315, $66, $225, $385, $41 and $111,
respectively, in 1993 and $80, $15, 0, $138, $11 and $31 in 1992. In
addition, includes a payment made by the Company in 1992 in connection with
the modification of stock appreciation rights outstanding under the
Company's 1988 Stock Option Incentive Plan (the "Option Plan") to Messrs.
O'Leary, Howison, Parker, Hagale and Becker of $48,651, $11,426, $4,994,
$6,937 and $13,419, respectively. Upon commencement of Mr. Shackouls'
employment with Meridian in June 1993, the Company credited his deferred
compensation account under the Supplemental Benefits Plan with $350,000 to
compensate Mr. Shackouls for long term incentive compensation from his
former employer which Mr. Shackouls forfeited by joining Meridian. During
1993, Messrs. Howison and Hagale received additional compensation of $45,000
and $20,500, respectively, in connection with their relocation to Houston.
(6) Includes $37,977 and $48,756 attributed for personal use of Company
airplanes in 1993 and 1992, respectively.
(7) Mr. Shackouls commenced employment with Meridian in June 1993.
9
<PAGE> 12
OPTIONS GRANTED IN 1993
The following information is furnished for the year ended December 31, 1993
with respect to the named executive officers for stock options which were
granted in December 1993 and are conditioned on approval by the Company's
stockholders at this Annual Meeting of the Burlington Resources Inc. 1993 Stock
Incentive Plan (the "Stock Incentive Plan").
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS OPTIONS
GRANTED GRANTED EXERCISE GRANT DATE
IN TO EMPLOYEES PRICE EXPIRATION PRESENT
NAME 1993(1) IN 1993 PER SHARE DATE(1) VALUE(2)
- --------------------------------------- --------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
T. H. O'Leary.......................... 2,200(3) .55% $ 44.00 12/7/2003 $ 31,416
32,300(4) 8.03% $ 44.00 12/8/2003 $461,244
G. E. Howison.......................... 2,200(3) .55% $ 44.00 12/7/2003 $ 31,416
20,300(4) 5.04% $ 44.00 12/8/2003 $289,884
B. S. Shackouls........................ 2,200(3) .55% $ 44.00 12/7/2003 $ 31,416
9,800(4) 2.44% $ 44.00 12/8/2003 $139,944
L. E. Parker........................... 2,200(3) .55% $ 44.00 12/7/2003 $ 31,416
3,800(4) .94% $ 44.00 12/8/2003 $ 54,264
J. E. Hagale........................... 2,200(3) .55% $ 44.00 12/7/2003 $ 31,416
3,800(4) .94% $ 44.00 12/8/2003 $ 54,264
J. W. Becker........................... 0
</TABLE>
- ---------------
NOTES
(1) Under the terms of the Stock Incentive Plan, options are granted at fair
market value and generally may not be exercised until the employee has
completed one year of continuous employment with the Company or its
subsidiaries from the grant date. Options have a term of ten years and
generally terminate one year following an optionee's death or three years
after termination of employment, disability, retirement, termination in
certain events following a "Change in Control" of the Company, as defined in
the Option Plan (a "Change in Control"), or other termination except that
the Compensation and Nominating Committee may terminate options earlier
following such other termination of employment of the named executive
officers.
(2) The value has been calculated using a variation of the Black-Scholes stock
option valuation methodology. The applied model used the grant date of
December 8, 1993, and option price of $44.00. In addition, it assumed a
stock price volatility of 27.12%, a risk-free rate of return of 4.71% and a
dividend yield of $.55. Options have an exercise period of ten years, but
the estimated average time held before exercise is five years. The value was
also adjusted to account for the one-year waiting period before vesting and
the three-year post-retirement exercise period.
(3) Incentive stock options, which become exercisable on December 8, 1994.
(4) Nonqualified stock options, which become exercisable on December 8, 1994.
10
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN 1993 AND YEAR-END VALUE TABLE
The following information is furnished for the year ended December 31, 1993
with respect to the named executive officers for stock option exercises which
occurred during 1993. The number of, and exercise price for, all outstanding
options granted prior to June 30, 1992 shown on the following table have been
adjusted to reflect the distribution of EPNG common stock to the Company's
stockholders on June 30, 1992.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SECURITIES AT DECEMBER 31, 1993 AT DECEMBER 31, 1993(2)
UNDERLYING VALUE ----------------------------- ----------------------------
NAME OPTIONS EXERCISED REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ----------------- ----------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. H. O'Leary..... 220,605 $ 6,081,831 469,773 93,703 $6,572,209 $ 624,361
G. E. Howison..... 7,694 $ 205,910 166,811 40,261 $2,641,588 $ 187,309
B. S. Shackouls... -- -- 0 12,000 -- --
L. E. Parker...... -- -- 110,712 15,473 $1,678,995 $ 99,903
J. E. Hagale...... 10,000 $ 224,015 69,262 15,473 $ 892,349 $ 99,903
J. W. Becker...... 62,820 $ 1,644,547 132,929 17,761 $1,905,215 $ 187,309
</TABLE>
- ---------------
NOTES
(1) This amount is the aggregate of the market value of the Common Stock at the
time each stock option was exercised minus the exercise price for that
option.
(2) This amount is the aggregate of the number of options multiplied by the
difference between the closing price of the Common Stock on the New York
Stock Exchange, Inc. on December 31, 1993 minus the exercise price for that
option.
LONG-TERM INCENTIVE PLAN AWARDS IN 1993
The following information is furnished for the year ended December 31, 1993
with respect to the named executive officers with respect to grants under the
Company's 1992 Performance Share Unit Plan (the "PSU Plan") during 1993.
<TABLE>
<CAPTION>
NUMBER OF UNITS PERFORMANCE PERIOD MAXIMUM
NAME GRANTED IN 1993 UNTIL PAYOUT FUTURE PAYOUT(1)
- -------------------------------------------- --------------- ------------------ ----------------
<S> <C> <C> <C>
T. H. O'Leary............................... 0
G. E. Howison............................... 55,600 12/31/96 55,600
B. S. Shackouls............................. 48,000 12/31/96 48,000
L. E. Parker................................ 5,600 12/31/96 5,600
J. E. Hagale................................ 5,600 12/31/96 5,600
J. W. Becker................................ 0
</TABLE>
- ---------------
NOTES
(1) Maximum future payout is stated as the number of vested PSUs at the end of
the performance period. At the end of the performance period, participants
receive a cash payment equal to the number of vested PSUs multiplied by the
average closing price of the Common Stock for the 20 business days
immediately preceding the end of the performance period. Under the terms of
the PSU Plan, a portion of the granted PSUs may vest each year beginning in
1993 and any remaining unvested PSUs may vest at the end of the performance
period on December 31, 1996. PSUs vest to the extent that the Compensation
and Nominating Committee determines that the Company has achieved
performance goals established by that Committee, including financial,
operating and strategic goals and total shareholder return. Under the terms
of the PSU Plan, the Compensation and Nominating Committee does not
establish thresholds or targets with respect to the vesting of PSUs at the
time of the initial grant. In the event of a Change in Control of the
Company, a portion of the total PSUs originally granted fully vests. If a
participant is terminated other than for cause, death or disability, or
voluntarily terminates employment for good reason
11
<PAGE> 14
within two years after a Change in Control but subsequent to the year in
which the Change in Control occurs, an additional portion of the PSUs
originally granted will vest. A Change in Control of the Company would
affect the method of calculating the market price of the Company's Common
Stock for purposes of paying PSUs.
PENSION PLAN
Benefit accruals under the pension plan of the Company and its subsidiaries
(the "Pension Plan") are based on the gross amount of earnings, including
incentive bonuses, but excluding all commissions and other extra or added
compensation or benefits of any kind or nature. Estimated annual benefit levels
under the Pension Plan, based on earnings and years of credited service at age
65, are as follows:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE AT AGE 65
PENSION -----------------------------------------------
EARNINGS(1) 15 20 25 30
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 400,000.................. $ 94,560 $126,080 $157,600 $189,120
$ 600,000.................. $142,560 $190,080 $237,600 $285,120
$ 800,000.................. $190,560 $254,080 $317,600 $381,120
$1,000,000.................. $238,560 $318,080 $397,600 $477,120
$1,200,000.................. $286,560 $382,080 $477,600 $573,120
$1,400,000.................. $334,560 $446,080 $557,600 $669,120
$1,600,000.................. $382,560 $510,080 $637,600 $765,120
$1,800,000.................. $430,560 $574,080 $717,600 $861,120
</TABLE>
- ---------------
NOTES
(1) Average pension earnings for a given year include salary and bonus payments
for the year in which the related services were performed (as reported in
the Summary Compensation Table).
The Pension Plan formula for retirement at age 65 is 1.1% of the highest
five-year average earnings, plus .5% of the highest five-year average earnings
in excess of one-third of the FICA taxable wage base in effect during the year
of termination, times the number of years of credited service up to a maximum of
30 years. An early retirement supplement equal to 1% of the highest five-year
average earnings up to one-third of the FICA taxable wage base in effect in the
year of termination, times the number of years of credited service up to a
maximum of 30 years, is payable until age 62. Both the basic benefit and the
supplement are reduced by 2% for each year the employee's actual retirement date
precedes the date the employee would have attained age 65, or the date the
employee could have retired after attaining age 60 with 30 years of credited
service, if earlier. Years of credited service under the Pension Plan at age 65
for Messrs. O'Leary, Howison, Shackouls, Parker, Hagale and Becker would be 16,
26, 22, 40, 35 and 35, respectively.
EMPLOYMENT AGREEMENTS AND SEVERANCE PLANS
The Company has an agreement with Mr. O'Leary which provides for his
employment as Chief Executive Officer of the Company through December 31, 1994
at a minimum annual salary of $525,000. The Company also has employment
agreements with Messrs. Howison and Shackouls which provide for their employment
as President and Chief Executive Officer and Executive Vice President and Chief
Operating Officer, respectively, of Meridian Oil Inc. through April 30, 1998 at
minimum annual salaries of $450,000 and $350,000, respectively. These agreements
provide that upon termination of employment within two years after a Change in
Control of the Company, Messrs. O'Leary, Howison and Shackouls will be entitled
to the greater of the benefits under the employment agreement or the Key
Executive Severance Protection Plan (the
12
<PAGE> 15
"Severance Protection Plan"). Pursuant to these agreements, Mr. Howison is
entitled to additional years of credited service under the Supplemental Benefits
Plan except under certain conditions and Mr. Shackouls is entitled to additional
years of credited service under the Supplemental Benefits Plan if he remains
employed by the Company until age 55.
The Severance Protection Plan provides severance benefits following a
Change in Control for officers of the Company and its subsidiaries in an amount
equal to three times annual salary, including maximum bonus amounts. The
Severance Protection Plan also provides for the continuation of life and health
insurance for a period of up to 18 months subsequent to a participant's
termination of employment following a Change in Control as well as a
supplemental pension payable under the Supplemental Benefits Plan calculated by
adding three years of additional credited pension service and certain other
benefits. Benefits are payable under the Severance Protection Plan for any
termination of employment within two years of the date of a Change in Control,
except where termination is by reason of death, disability, for cause, or
instituted by the employee for other than good reason. The Severance Protection
Plan also provides that the Company will pay legal fees and expenses incurred by
a participant to enforce rights or benefits under this plan.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes an
excise tax on payments to terminated employees following a Change in Control if
the payments meet certain requirements and exceed certain limits set forth in
the Code. If payments under the Severance Protection Plan (the "Severance
Payments") are subject to this excise tax, the Company will pay an additional
amount to the participant (the "Gross-Up Payment") such that the participant
retains, after payment of the excise tax on the Severance Payments and the
Gross-Up Payment and any income tax on the Gross-Up Payment, an amount equal to
the Severance Payments.
The Company also has a Severance Plan and a Key Executive Retention Plan
which provide benefits for any termination of employment, except where
termination is for cause or instituted by the employee for other than good
reason. The Severance Plan provides a severance benefit to employees of the
Company in Seattle, Washington, excluding Mr. O'Leary and employees of the
Company's subsidiaries, based on annual compensation and years of service of up
to a maximum of 30 months of compensation, which includes salary and maximum
bonus. The Key Executive Retention Plan provides for a cash payment upon
termination, including among other things the participant's prorated bonus under
the Incentive Compensation Plan, the value of certain PSUs and restricted stock,
and certain other severance benefits. The Key Executive Retention Plan also
provides that a participant will receive at termination additional pension
benefits based on projected compensation, and for the continuation of health
insurance for a period of up to 18 months subsequent to a participant's
termination of employment.
PROPOSAL TO APPROVE THE BURLINGTON RESOURCES INC.
1993 STOCK INCENTIVE PLAN
On December 8, 1993, the Compensation and Nominating Committee of the Board
of Directors and the Board of Directors approved the Company's 1993 Stock
Incentive Plan (the "Stock Incentive Plan") and approved its submission to the
stockholders for their approval. The purpose of the Stock Incentive Plan is to
promote the interests of the Company and its stockholders by strengthening the
Company's ability to attract and retain officers and key employees for the
Company and its subsidiaries by furnishing suitable recognition of their ability
and industry which contributed materially to the success of the Company and to
align the interests and efforts of the Company's officers and key employees to
the long term interests of the Company's stockholders. The Stock Incentive Plan
succeeds the Company's 1988 Stock Option Plan, which expired by its terms in May
1993. The 1988 Stock Option Plan remains in effect for options granted prior to
May 1993. The Stock Incentive Plan provides for the grant of stock options,
stock appreciation rights ("SARs") and/or limited stock appreciation rights
("LSARs"), restricted shares of the Company's Common Stock ("Restricted Stock"),
and stock purchase rights ("Stock Purchase Rights"). Grants made prior to the
Annual Meeting of Stockholders are subject to the approval of the Stock
Incentive Plan by the stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
13
<PAGE> 16
The following is a summary of the Stock Incentive Plan and is qualified in
its entirety by the full text thereof which is attached to this Proxy Statement
as EXHIBIT A.
ADMINISTRATION OF THE STOCK INCENTIVE PLAN
The Stock Incentive Plan will be administered by the Board of Directors or,
in the event the Board of Directors appoints and/or authorizes a committee to
administer the Stock Incentive Plan, by such committee (the "Plan
Administrator"). The Board of Directors has appointed the Compensation and
Nominating Committee as the Plan Administrator.
The Plan Administrator has the discretion to decide when and to whom to
grant stock options, SARs and/or LSARs, Restricted Stock and Stock Purchase
Rights and to establish the terms and conditions relating to such awards. The
Plan Administrator has full authority to construe and interpret the Stock
Incentive Plan, to establish, amend and rescind rules and regulations relating
to the Stock Incentive Plan, to grant options, SARs and/or LSARs, Restricted
Stock and Stock Purchase Rights, to administer the Stock Incentive Plan and to
take all such steps and make all such determinations in connection with the
Stock Incentive Plan and the awards granted thereunder as it may deem necessary
or advisable, which determination is final and binding upon participants in the
Stock Incentive Plan. No member of the Plan Administrator is eligible to receive
awards or grants under the Stock Incentive Plan.
ELIGIBILITY
To be eligible for selection by the Plan Administrator to receive a grant
under the Stock Incentive Plan, an individual must be an officer, including all
of the Company's executive officers, or key employee of the Company or its
subsidiaries as of the date of such grant and a person who, in the judgment of
the Plan Administrator, holds a position of responsibility and is able to
contribute substantially to the Company's continued success.
SHARES AVAILABLE FOR THE PLAN
Subject to certain adjustments, the maximum number of shares for which
options, SARs and/or LSARs, Restricted Stock and Stock Purchase Rights may at
any time be granted under the Stock Incentive Plan is 10,000,000 shares of
Common Stock. Of this total, the number of shares for which Restricted Stock may
be granted under the Stock Incentive Plan may not exceed 1,000,000 shares of
Common Stock and the number of shares which may be issued upon exercise of Stock
Purchase Rights granted under the Stock Incentive Plan may not exceed 2,000,000
shares of Common Stock. The Stock Incentive Plan provides that an employee may
not receive options or SARs/LSARs for more than 500,000 shares of Common Stock
in any one year. The closing price for the Company's Common Stock on NYSE on
January 24, 1994 was $45.50.
In the event of a recapitalization, stock split, stock dividend, exchange
of shares, merger, reorganization, change in corporate structure or shares of
the Company or similar event, the Board of Directors, upon the recommendation of
the Plan Administrator, may make appropriate adjustments in the number of shares
authorized for the Plan and, with respect to outstanding grants, may make
appropriate adjustments in the number of shares and the option price or stock
purchase price.
STOCK OPTIONS
Grant of Options. Options may be granted to eligible employees in such
number and at such times during the term of the Stock Incentive Plan as the Plan
Administrator determines, taking into account the duties of the respective
employees, their present and potential contributions to the success of the
Company, and such other factors as the Plan Administrator deems relevant. An
option granted under the Stock Incentive Plan may be either an Incentive Stock
Option (an "ISO"), which is intended to meet the requirements defined in Section
422 of the Interna1 Revenue Code of 1986, as amended (the "Code"), or a
Nonqualified Stock Option (an "NSO").
14
<PAGE> 17
Terms and Conditions of Options. The price per share of Common Stock at
which each option is exercisable (the "option price") is determined by the Plan
Administrator at the time of grant, but may not be less than 100% of the fair
market value of the Common Stock on the date the option is granted. Options are
exercisable at such time and under such conditions as are set forth in the
option grant, but in no event may any ISO be exercisable subsequent to the day
before the tenth anniversary of the date on which the option is granted, nor
will any other option be exercisable later than the tenth anniversary of the
date of its grant. In general, an optionee may not exercise an option until he
or she has completed one year of continuous employment with the Company or one
of its subsidiaries from and including the date on which the option is granted,
or such longer period as the Plan Administrator may determine in a particular
case.
STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS
The Plan Administrator may grant SARs and LSARs to eligible employees in
connection with any option granted under the Stock Incentive Plan, either at the
time of the grant of such option or at any time thereafter during the term of
the option. Such SARs cover the same shares covered by the related option and
are subject to the same terms and conditions as the related options and such
further terms and conditions as are determined by the Plan Administrator. An
LSAR is similar to a SAR but becomes exercisable only upon the occurrence of
certain circumstances following a Change of Control (as defined in the Stock
Incentive Plan). A SAR or LSAR entitles the holder of the related option to
surrender to the Company the unexercised, related option, or any portion
thereof, and to receive from the Company in exchange therefor an amount equal to
the excess of the Fair Market Value (as defined in the Stock Incentive Plan) of
a share of Common Stock on the date of exercise over the option price times the
number of shares covered by the option, or portion thereof, which is
surrendered.
RESTRICTED STOCK
Restricted Stock may be granted to eligible employees in such number and at
such times as the Plan Administrator determines, taking into account the duties
of the respective participants, their present and potential contributions to the
success of the Company, and such other factors as the Plan Administrator deems
relevant. Employees who receive Restricted Stock have all the rights of
stockholders with respect to such shares, including the right to vote the shares
and receive all dividends or other distributions made or paid with respect to
such shares. During a period of years following the date of grant, as determined
by the Plan Administrator, which in no event will be less than one year, the
Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated
or otherwise encumbered or disposed of by the recipient, except in the event of
death or permanent disability. Restricted Stock is forfeited if the employee
terminates employment with the Company for any reason before the expiration of
the restriction period or if the employee attempts to sell, exchange, transfer,
pledge or otherwise dispose of such Restricted Stock; provided, however, that
the Plan Administrator may waive or modify such restrictions. In addition, all
restrictions on Restricted Stock lapse upon the employee's death or permanent
disability or any termination of employment determined by the Plan Administrator
to end such restrictions. All such restrictions terminate immediately upon a
change of control (as defined in the Stock Incentive Plan).
STOCK PURCHASE RIGHTS
The Plan Administrator may grant to eligible employees Stock Purchase
Rights that entitle the employee to purchase shares of Common Stock. The
purchase price for such shares is determined by the Plan Administrator, but may
not be less than 75% of the fair market value of Common Stock on the date that
the price is set. Shares of Common Stock received upon exercise of the Stock
Purchase Rights will be subject to a restriction period of at least three years
together with such other restrictions as the Plan Administrator provides, unless
the purchase price for the Stock Purchase Rights is at least equal to the fair
market value of Common Stock on such date. During the restriction period, such
shares of Common Stock may not be sold, exchanged, transferred, pledged or
otherwise disposed of. These restrictions lapse upon the employee's death,
disability or termination of employment. Stock Purchase Rights may be exercised
only during a limited period of time following the grant of such rights. The
Plan Administrator may grant Stock Purchase Rights at such
15
<PAGE> 18
time or times as awards in cash are made under the Company's Incentive
Compensation Plan or become payable under the PSU Plan. The maximum number of
shares of Common Stock for which Stock Purchase Rights may be granted is the
amount of such cash award divided by the purchase price set by the Plan
Administrator.
TERM OF THE STOCK INCENTIVE PLAN
The Stock Incentive Plan was effective as of December 8, 1993, which was
the date of its adoption by the Board of Directors. The Stock Incentive Plan
will be void, however, unless it is approved by the Company's stockholders at
this Annual Meeting of Stockholders or any continuation thereof. Subject to
receiving stockholder approval, grants under the Stock Incentive Plan may be
made from time to time until December 8, 2003 (the tenth anniversary of the
adoption of the Stock Incentive Plan by the Board of Directors). Grants made
under the Stock Incentive Plan may extend beyond that date and the terms and
conditions of the Stock Incentive Plan will continue to apply to such grants and
to shares of Common Stock acquired upon exercise thereof.
AMENDMENT OF THE STOCK INCENTIVE PLAN
Except as described in the next paragraph, the Plan Administrator may from
time to time amend the Stock Incentive Plan as it deems proper and in the best
interests of the Company without further approval of the stockholders.
The Board of Directors and the Plan Administrator may not amend certain
features of the Stock Incentive Plan without the approval of the Company's
stockholders to the extent such approval is required for compliance with Section
422 of the Code with respect to ISOs, Section 162(m) of the Code with respect to
NSOs or Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), with respect to awards made to
individuals subject to Section 16 of the Exchange Act. Such amendments would
include (a) materially increasing the maximum number of shares of Common Stock
that may be issued under the Stock Incentive Plan, (b) materially modifying the
requirements as to eligibility for participation in the Stock Incentive Plan, or
(c) otherwise materially increasing the benefits accruing to participants under
the Stock Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK INCENTIVE PLAN
The following discussion summarizes the material federal income tax
consequences of participation in the Stock Incentive Plan. This discussion is
general in nature and does not address issues related to the tax circumstances
of any particular employee. The discussion is based on federal income tax laws
in effect on the date hereof and is, therefore, subject to possible future
changes in law. This discussion does not address state, local or foreign
consequences.
ISOs. An optionee will not recognize any income upon either grant or
exercise of an ISO, although the exercise may subject the optionee to
alternative minimum tax liability in the year of exercise because the excess of
the fair market value of the shares at the time of exercise over the purchase
price of the shares is included in income for purposes of the alternative
minimum tax. The treatment of any gain realized upon sale or other disposition
of the Company Common Stock received upon exercise of an ISO will depend on the
holding period. If the optionee does not dispose of the stock received within
either one year after exercise of the ISO or two years after grant, any gain
realized upon disposition will be characterized as long-term capital gain. If
the optionee disposes of his or her shares within either one year after exercise
of the ISO or two years after grant, such disposition will be a disqualifying
disposition. In the case of a disqualifying disposition, the portion of the gain
realized on disposition equal to the excess of the fair market value of the
shares at the time the ISO was exercised over the option price will be ordinary
income taxable as compensation in the year of disposition. The balance, if any,
of the gain will be capital gain.
If the optionee sells the shares in a disqualifying disposition at a price
that is below the fair market value of the shares at the time the ISO was
exercised, the optionee's ordinary income will be limited to the excess of the
amount realized upon the disposition over the adjusted basis in the shares.
16
<PAGE> 19
In the event of a disqualifying disposition in which ordinary income is
realized by the optionee, the Company will only withhold income taxes from the
optionee's compensation with respect to that ordinary income element if the
optionee elects to have withholding imposed.
The Company is entitled to a deduction with respect to an ISO only in the
taxable year of the Company in which a disqualifying disposition occurs. In that
event, the deduction would be equal to the ordinary income, if any, recognized
by the optionee upon disposition of the shares, provided that the deduction is
not otherwise disallowed under the Code.
Nonqualified Stock Options. An optionee will not recognize any income upon
either grant or vesting of a Nonqualified Stock Option. Upon exercise of any
part of a Nonqualified Stock Option, the optionee will recognize ordinary income
in an amount equal to the difference between the option exercise price and the
then fair market value of the shares acquired. The Company must withhold taxes
from the optionee's compensation with respect to the ordinary income recognized
by the optionee upon exercise.
In general, upon a subsequent disposition of the shares, the optionee's
basis for determining taxable gain or loss would be the amount paid for such
shares plus the amount that was includable in the optionee's income at the time
of exercise. Any gain recognized on such disposition would generally be taxed as
long-term or short-term capital gain depending on the length of time the
optionee is deemed to have held these shares and the holding period in effect at
the time. The Company will be entitled to a deduction for federal income tax
purposes upon exercise of a Nonqualified Stock Option in an amount equal to the
ordinary income recognized by the optionee, provided that the deduction is not
otherwise disallowed under the Code.
The treatment of SARs and LSARs is essentially the same as the treatment of
the related options granted under the Stock Incentive Plan.
Restricted Stock. The recipient of Restricted Stock will not be subject to
tax upon its grant, unless the recipient makes an election under Section 83(b)
of the Code. Assuming no election under Section 83(b) is made, the holder will
be subject to tax at ordinary income tax rates at the time of the expiration or
earlier termination of the Restriction Period in an amount equal to the fair
market value of the Restricted Stock at the time that the Restriction Period
lapses or terminates. Any further gain would be capital gain. If a holder makes
an election under Section 83(b) of the Code, the holder will be subject to tax
at ordinary income rates based on the fair market value of the Restricted Stock
at the date of grant. Any further gain would be capital gain. The Company must
withhold taxes and will be entitled to a deduction with respect to the amount of
ordinary income recognized by the employee, unless otherwise disallowed under
the Code.
Stock Purchase Rights. A holder of a Stock Purchase Right will not be
subject to tax upon grant of such rights. In general, the holder will be subject
to tax at ordinary income tax rates upon exercise of the rights in an amount
equal to the excess of the fair market value of the stock over the purchase
price for the stock even though there may be restrictions on immediate sale of
the stock.
Tax Effect of Change in Control Provisions. Because an LSAR is exercisable
only upon a Change in Control, exercise by the holder could result in the
imposition of an additional 20% excise tax on, and denial of a deduction to the
Company for, all or a portion of the total payments made to the employee upon
the Change in Control. Similarly, if vesting is accelerated in the case of any
other items under the Stock Incentive Plan, the 20% excise tax and denial of
deductibility could be imposed.
The applicability and amount of the excise tax will depend on the amount of
the payments subject to the Change in Control provisions, including the amount
of payments received under the Severance Protection Plan, and the other
circumstances of the employee.
Cap on Company Deductions for Certain Compensation. Under the recently
enacted Omnibus Reconciliation Act of 1993 (the "Act"), certain compensation
payments in excess of $1 million are subject to a cap on deductibility for the
Company. The limitation on deductibility applies with respect to that portion of
a compensation payment for a taxable year in excess of $1 million to either the
chief executive officer of the corporation or any one of the other four highest
paid executives. Certain performance-based compensation is not subject to the
cap on deductibility. Stock options and SARs can qualify for this
performance-based
17
<PAGE> 20
exception, but only if they are granted at fair market value, the total number
of shares that can be granted to an executive for any period is stated, and
shareholder and Board approval is obtained. The ISO, Nonqualified Stock Option,
and SAR portions of the Stock Incentive Plan have been drafted to comply with
these performance-based criteria.
Restricted Stock and Stock Purchase Rights do not satisfy the definition of
performance-based compensation unless the granting or vesting of the Restricted
Stock and Stock Purchase Rights are based upon the attainment of specified
performance goals.
The following table shows grants made during 1993 for the individuals and
groups set forth below under the Stock Incentive Plan and are subject to
stockholder approval of the Stock Incentive Plan at this Annual Meeting.
STOCK INCENTIVE PLAN AWARDS DURING 1993
<TABLE>
<CAPTION>
STOCK OPTION AWARDS
----------------------
NUMBER OF SECURITIES
UNDERLYING OPTIONS
NAME AND POSITION GRANTED IN 1993
- ---------------------------------------------------------------- ----------------------
<S> <C>
Thomas H. O'Leary 34,500
Chairman of the Board, President and Chief Executive Officer
Burlington Resources Inc.
George E. Howison 22,500
President and Chief Executive Officer
Meridian Oil Inc.;
Senior Vice President and Chief Financial Officer,
Burlington Resources Inc.
Bobby S. Shackouls 12,000
Executive Vice President and Chief Operating Officer
Meridian Oil Inc.
L. Edward Parker 6,000
Executive Vice President, Marketing
Meridian Oil Inc.
John E. Hagale 6,000
Executive Vice President and Chief Financial Officer
Meridian Oil Inc.
Executive Officer Group 102,200
Non-Executive Officer 0
Director Group
Non-Executive Officer 300,200
Employee Group
</TABLE>
STOCKHOLDER PROPOSAL
Mr. William F. Jebb and Ms. Wynona B. Jebb, 2545 Ramsgate Terrace, Colorado
Springs, Colorado 80919, have stated that they intend to present the following
resolution at the Annual Meeting. In accordance with applicable proxy
regulations, the proposed resolution and supporting statement, for which the
Board of Directors and the Company accept no responsibility, are set forth
below.
PROPOSED RESOLUTION AND STATEMENT OF SECURITY HOLDER IN SUPPORT OF PROPOSED
RESOLUTION
I am very concerned with the total compensation of our top executives and
the lack of stockholder input to the process. Accordingly, I believe the
following should be placed before the stockholders.
Where as the excessive compensation paid to top executives reflect poorly
on the corporation and ultimately reduce the stockholder equity. It is
recommended to the Board of Directors that the total compensation be limited to
twenty (20) times the average pay of non exempted employees or ten (10) times
the average pay of exempted employees whichever is less.
This proposal shall be voted on at the next stockholders meeting.
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<PAGE> 21
BOARD OF DIRECTORS STATEMENT RECOMMENDING A VOTE AGAINST THIS RESOLUTION
The Board of Directors believes that adoption of this proposal would not be
in the best interests of the Company. The Company's executive compensation
program is reviewed and approved by the Compensation and Nominating Committee,
which consists entirely of outside Directors. The Committee's philosophy and
objectives with respect to executive compensation are described in the
Committee's Report on Executive Compensation, which begins on page 6 of this
Proxy Statement. Key elements of this philosophy are to pay base salaries which
are approximately at the median when compared to the Company's competitors and
to establish incentive compensation plans which deliver pay commensurate with
the Company's performance and to reward executives when the Company's
shareholders receive an above-average return on their investment over the long
term. As a result, total compensation of the Company's executive officers is
highly dependent on the Company's performance and the performance of the
Company's Common Stock.
The Compensation and Nominating Committee believes that overall
compensation of the Company's executive officers is competitive in the energy
industry and a cap on executive compensation could prevent or restrict the
Company from attracting and retaining the best people to manage the Company,
particularly since other companies with which the Company competes for
executives are not subject to such a pay cap.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS
RESOLUTION.
AUDITORS
The Board of Directors has appointed Coopers & Lybrand as independent
public accountants for the year ending December 31, 1994.
Representatives of Coopers & Lybrand will be present at the Annual Meeting
of Stockholders with the opportunity to make a statement and to respond to
appropriate questions.
EXPENSES OF SOLICITATION
The expenses of preparing and mailing this Proxy Statement and the
accompanying form of proxy and the cost of solicitation of proxies on behalf of
the management will be borne by the Company. In addition, D. F. King & Co. has
been retained to aid in the solicitation at an estimated fee of $10,000. Proxies
may be solicited by personal interview, mail and telephone. Brokerage houses,
other custodians and nominees will be asked whether other persons are beneficial
owners of the shares which they hold of record and, if so, they will be supplied
with additional copies of the proxy materials for distribution to such
beneficial owners. The Company will reimburse parties holding stock in their
names or in the names of their nominees for their reasonable expenses in sending
proxy material to their principals.
OTHER MATTERS
The management knows of no other matters which are likely to be brought
before the meeting. However, if any other matters, not now known or determined,
come before the meeting, the persons named in the enclosed form of proxy or
their substitutes will vote such proxy in accordance with their judgment in such
matters.
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<PAGE> 22
ANNUAL REPORT
A copy of the Company's 1993 Annual Report to Stockholders is being mailed
with this Proxy Statement to each stockholder of record. Stockholders not
receiving a copy of such Annual Report may obtain one by writing or calling Ms.
Leslie S. Leland, Corporate Secretary, Burlington Resources Inc., 999 Third
Avenue, Seattle, Washington 98104-4097, telephone (206) 467-3838.
SUBMISSION OF STOCKHOLDER PROPOSALS
FOR THE 1995 ANNUAL MEETING
Stockholder proposals for inclusion in the Proxy Statement to be issued in
connection with the 1995 Annual Meeting of Stockholders must be mailed to
Corporate Secretary, Burlington Resources Inc., 5051 Westheimer, Suite 1400,
Houston, Texas 77056, and must be received by the Corporate Secretary on or
before October 20, 1994.
By Order of the Board of Directors
LESLIE S. LELAND
Corporate Secretary
20
<PAGE> 23
EXHIBIT A
1993 BURLINGTON RESOURCES INC.
STOCK INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the 1993 Burlington Resources Inc. Stock Incentive Plan (the
"Plan") is to promote the interests of Burlington Resources Inc. (the "Company")
and its stockholders by strengthening the Company's ability to attract and
retain officers and key employees in the employ of the Company and its
subsidiaries by furnishing suitable recognition of their ability and industry
which contributed materially to the success of the Company and to align the
interests and efforts of the Company's officers and key employees to the long
term interests of the Company's stockholders. The Plan provides for the grant of
stock options, stock appreciation rights, limited stock appreciation rights,
restricted stock and stock purchase rights in accordance with the terms and
conditions set forth below.
SECTION 2. DEFINITIONS
Unless otherwise required by the context, the following terms when used in
the Plan shall have the meanings set forth in this Section 2:
2.1 BENEFICIARY
The person or persons designated by the Participant pursuant to Section
6.4(f) to whom payments are to be paid pursuant to the terms of the Plan in the
event of the Participant's death.
2.2 BOARD OF DIRECTORS
The Board of Directors of the Company.
2.3 BONUS
The annual incentive award paid by the Company or any Subsidiary under its
Incentive Compensation Plan or any successor or similar plans during any
calendar year to any employee thereof, including officers and directors of the
Company who are full-time, salaried employees, in recognition of performance of
services to the Company or its Subsidiaries.
2.4 CAUSE
The Company may terminate the Participant's employment for Cause. A
termination for Cause is a termination evidenced by a resolution adopted in good
faith by two-thirds ( 2/3) of the Board of Directors that the Participant (a)
willfully and continually failed to substantially perform the Participant's
duties with the Company (other than a failure resulting from the Participant's
incapacity due to physical or mental illness), which failure continued for a
period of at least thirty (30) days after a written notice of demand for
substantial performance was delivered to the Participant specifying the manner
in which the Participant failed to substantially perform or (b) willfully
engaged in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise; provided, however, that no termination of the
Participant's employment shall be for Cause as set forth in clause (b) above
until (i) there shall have been delivered to the Participant a copy of a written
notice setting forth that the Participant was guilty of the conduct set forth in
clause (b) above and specifying the particulars thereof in detail and (ii) the
Participant shall have been provided an opportunity to be heard by the Board of
Directors (with the assistance of the Participant's counsel if the Participant
so desires). No act, or failure to act, on the Participant's part shall be
considered "willful" unless the Participant has acted, or failed to act, with an
absence of good faith and without a reasonable belief that the Participant's
action or failure to act was in the best interest of the Company.
Notwithstanding
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anything contained in the Plan to the contrary, no failure to perform by the
Participant after notice of termination is given by the Participant shall
constitute Cause.
2.5 CHANGE IN CONTROL
As used in the Plan, a Change in Control shall be deemed to occur (a) if
any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing
twenty percent (20%) or more of the combined voting power of the Company's
then-outstanding securities, (b) upon the first purchase of the Common Stock
pursuant to a tender or exchange offer (other than a tender or exchange offer
made by the Company), (c) upon the approval by the Company's stockholders of a
merger or consolidation, a sale or disposition of all or substantially all the
Company's assets or a plan of liquidation or dissolution of the Company, or (d)
if, during any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board of Directors cease for any reason
to constitute at least a majority thereof, unless the election or nomination for
the election by the Company's stockholders of each new director was approved by
a vote of at least two-thirds ( 2/3) of the directors then still in office who
were directors at the beginning of the period.
2.6 CODE
The Internal Revenue Code of 1986, as amended and in effect from time to
time, and the temporary or final regulations of the Secretary of the U.S.
Treasury adopted pursuant thereto.
2.7 COMMON STOCK
The Common Stock of the Company, $.01 par value per share, or such other
class of shares or other securities as may be applicable pursuant to the
provisions of Section 5.
2.8 EXCHANGE ACT
The Securities Exchange Act of 1934, as amended.
2.9 FAIR MARKET VALUE
As applied to a specific date, the mean between the highest and lowest
quoted selling prices at which Common Stock was sold on such date as reported in
the NYSE-Composite Transactions by The Wall Street Journal on such date or, if
no Common Stock was traded on such date, on the next preceding day on which
Common Stock was so traded. Notwithstanding the foregoing, upon the exercise,
(a) during the thirty (30) day period following a Change in Control,
of a stock appreciation right or of a limited stock appreciation right
granted in connection with a Nonqualified Option more than six (6) months
prior to a Change in Control or
(b) during the seven (7) month period following a Change in Control,
of a stock appreciation right or of a limited stock appreciation right
granted in connection with a Nonqualified Option to an Insider Participant
less than six (6) months prior to a Change in Control,
Fair Market Value on the date of exercise shall be deemed to be the greater of
(i) the highest price per share of Common Stock as reported in the
NYSE-Composite Transactions by The Wall Street Journal during the sixty (60) day
period ending on the day preceding the date of exercise of the stock
appreciation right or the limited stock appreciation right, as the case may be,
and (ii) if the Change in Control is one described in clause (b) or (c) of
Section 2.5, the highest price per share paid for Common Stock in connection
with such Change in Control.
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2.10 GOOD REASON
The occurrence of any of the following events or conditions:
(a) a change in the Participant's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Participant's reasonable judgment, represents a substantial reduction of
the status, title, position or responsibilities as in effect immediately
prior thereto; the assignment to the Participant of any duties or
responsibilities which, in the Participant's reasonable judgment, are
inconsistent with such status, title, position or responsibilities; or any
removal of the Participant from or failure to reappoint or reelect the
Participant to any of such positions, except in connection with the
termination of the Participant's employment for Cause, for Permanent
Disability or as a result of his or her death, or by the Participant other
than for Good Reason;
(b) a reduction in the Participant's annual base salary;
(c) the Company's requiring the Participant (without the consent of
the Participant) to be based at any place outside a thirty-five (35) mile
radius of his or her place of employment prior to a Change in Control,
except for reasonably required travel on the Company's business which is
not materially greater than such travel requirements prior to the Change in
Control;
(d) the failure by the Company to (i) continue in effect any material
compensation or benefit plan in which the Participant was participating at
the time of the Change in Control, including, but not limited to, the Plan,
the Burlington Resources Inc. Pension Plan, the Burlington Resources Inc.
Supplemental Benefits Plan, the Burlington Resources Inc. Incentive
Compensation Plan, the Burlington Resources Inc. Deferred Compensation
Plan, and the Burlington Resources Inc. Retirement Savings Plan, or (ii)
provide the Participant with compensation and benefits at least equal (in
terms of benefit levels and/or reward opportunities) to those provided for
under each employee benefit plan, program and practice as in effect
immediately prior to the Change in Control (or as in effect following the
Change in Control, if greater);
(e) any material breach by the Company of any provision of the Plan;
or
(f) any purported termination of the Participant's employment for
Cause by the Company which does not otherwise comply with the terms of the
Plan.
2.11 INCENTIVE STOCK OPTION
An option intended to meet the requirements of an Incentive Stock Option as
defined in Section 422 of the Code, as in effect at the time of grant of such
option, or any statutory provision that may hereafter replace such Section.
2.12 INSIDER PARTICIPANT
Any person who is selected by the Plan Administrator to receive options,
stock appreciation rights, limited stock appreciation rights, Restricted Stock
and/or Stock Purchase Rights hereunder and who is subject to the requirements of
Section 16 of the Exchange Act, and the rules and regulations issued thereunder.
2.13 MAXIMUM ANNUAL EMPLOYEE GRANT
The Maximum Annual Employee Grant set forth in Section 6.1.
2.14 NONQUALIFIED OPTION
An option not intended to meet the requirements of an Incentive Stock
Option.
2.15 OPTION PRICE
The price per share of Common Stock at which each option is exercisable.
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2.16 PARTICIPANT
An eligible employee to whom an option, stock appreciation right, limited
stock appreciation right, Restricted Stock or Stock Purchase Right is granted
under the Plan as set forth in Section 4.
2.17 PERFORMANCE SHARE UNIT
A Performance Share Unit awarded under the Performance Unit Plan, which has
become payable under the Performance Unit Plan.
2.18 PERFORMANCE UNIT PLAN
The Company's 1992 Performance Share Unit Plan or any successor or similar
plans.
2.19 PERMANENT DISABILITY
A Participant shall be deemed to have a Permanent Disability for purposes
of the Plan if the Chief Executive Officer of the Company shall find upon the
basis of medical evidence satisfactory to the Chief Executive Officer that the
Participant is totally disabled, whether due to a physical or mental condition,
so as to be prevented from engaging in further employment by the Company or any
Subsidiary, and that such disability will be permanent and continuous during the
remainder of the Participant's life; provided, however, that for officers and
directors of the Company who are subject to Section 16 of the Exchange Act, such
determination shall be made by the Plan Administrator.
2.20 PLAN ADMINISTRATOR
The Board of Directors or the committee appointed and/or authorized
pursuant to Section 3 to administer the Plan.
2.21 PURCHASE DATE
For any Stock Purchase Right, a date within thirty (30) days after the date
any Bonus is paid or any Performance Share Unit becomes payable, which date
shall be the only date on which such Stock Purchase Right may be exercised.
2.22 RESTRICTED STOCK
Common Stock granted under the Plan that is subject to the requirements of
Section 9 and such other restrictions as the Plan Administrator deems
appropriate.
2.23 RULE 16B-3
Rule 16b-3 of the General Rules and Regulations under the Exchange Act.
2.24 STOCK PURCHASE PRICE
The price per share of Common Stock acquired upon exercise of a Stock
Purchase Right as determined by the Plan Administrator, which price shall not be
less than seventy-five percent (75%) of the Fair Market Value of a share of
Common Stock on the Purchase Date.
2.25 STOCK PURCHASE RIGHT
A right to purchase Common Stock granted under the Plan.
2.26 SUBSIDIARY
An entity that is designated by the Plan Administrator as a subsidiary for
purposes of the Plan and that is a corporation (or other form of business
association that is treated as a corporation for tax purposes) of which
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shares (or other ownership interests) having more than fifty percent (50%) of
the voting power are owned or controlled, directly or indirectly, by the Company
so as to qualify as a "subsidiary corporation" (within the meaning of Section
424(f) of the Code).
SECTION 3. ADMINISTRATION
3.1 The Plan shall be administered by the Board of Directors or, in the
event the Board of Directors shall appoint and/or authorize a committee or
committees to administer the Plan, by such committee or committees. The
administrator of the Plan shall hereinafter be referred to as the "Plan
Administrator."
In the event a member of the Board of Directors (or the committee) may be
eligible, subject to the restrictions set forth in Section 4, to participate in
or receive or hold options, stock appreciation rights, limited stock
appreciation rights, Restricted Stock and/or Stock Purchase Rights under the
Plan, no member of the Board of Directors or the committee shall vote with
respect to the granting of options, stock appreciation rights, limited stock
appreciation rights, Restricted Stock and/or Stock Purchase Rights hereunder to
himself or herself, as the case may be, and, if state corporate law does not
permit a committee to grant options, stock appreciation rights, limited stock
appreciation rights, Restricted Stock and Stock Purchase Rights to directors,
then any option, stock appreciation right, limited stock appreciation right,
Restricted Stock or Stock Purchase Right granted under the Plan to a director
for his or her services as such shall be approved by the full Board of
Directors.
The members of any committee serving as Plan Administrator shall be
appointed by the Board of Directors for such term as the Board of Directors may
determine. The Board of Directors may from time to time remove members from, or
add members to, the committee. Vacancies on the committee, however caused, may
be filled by the Board of Directors.
With respect to grants made under the Plan to officers and directors of the
Company who are subject to Section 16 of the Exchange Act, the Plan
Administrator shall be constituted at all times so as to meet the requirements
of Rule 16b-3 so long as any of the Company's equity securities are registered
pursuant to Section 12(b) or 12(g) of the Exchange Act.
3.2 Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have full authority to construe and interpret the
Plan, to establish, amend and rescind rules and regulations relating to the
Plan, to select persons eligible to participate in the Plan, to grant options,
stock appreciation rights, limited stock appreciation rights, Restricted Stock
and Stock Purchase Rights thereunder, to administer the Plan, to make
recommendations to the Board of Directors, to take all such steps and make all
such determinations in connection with the Plan and the options, stock
appreciation rights, limited stock appreciation rights, Restricted Stock and
Stock Purchase Rights granted thereunder as it may deem necessary or advisable,
which determination shall be final and binding upon all Participants, so long as
such interpretation and construction with respect to Incentive Stock Options
correspond to the requirements of Section 422 of the Code. The Plan
Administrator shall cause the Company at its expense to take any action related
to the Plan which may be required or necessary to comply with the provisions of
any federal or state law or any regulations issued thereunder.
3.3 Each member of any committee acting as Plan Administrator, while
serving as such, shall be considered to be acting in his or her capacity as a
director of the Company. Members of the Board of Directors and members of any
committee acting under the Plan shall be fully protected in relying in good
faith upon the advice of counsel and shall incur no liability except for gross
negligence or willful misconduct in the performance of their duties.
3.4 The fact that a member of the Board of Directors is, or shall
theretofore have been or thereafter may be, a person who has received or is
eligible to receive an option, stock appreciation right, limited stock
appreciation right, Restricted Stock and/or Stock Purchase Right shall not
disqualify him or her from taking part in and voting at any time as a member of
the Board of Directors in favor of or against any amendment or repeal of the
Plan.
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SECTION 4. ELIGIBILITY
To be eligible for selection by the Plan Administrator to receive a grant
of an option, stock appreciation right, limited stock appreciation right,
Restricted Stock or Stock Purchase Right under the Plan, an individual must be
an officer or a key employee of the Company, or of any Subsidiary, as of the
date on which the Plan Administrator grants to such individual such option,
stock appreciation right, limited stock appreciation right, Restricted Stock or
Stock Purchase Right and a person who, in the judgment of the Plan
Administrator, holds a position of responsibility and is able to contribute
substantially to the Company's continued success.
SECTION 5. SHARES AVAILABLE FOR THE PLAN
5.1 Subject to Section 5.3, the maximum number of shares for which
options, stock appreciation rights, limited stock appreciation rights,
Restricted Stock and Stock Purchase Rights may at any time be granted under the
Plan is ten million (10,000,000) shares of Common Stock, all such shares to be
held in the Company's treasury or out of the authorized but unissued shares of
the Company, or partly out of each, as shall be determined by the Board of
Directors. Upon (a) the expiration or termination in whole or in part of
unexercised options, stock appreciation rights, limited stock appreciation
rights and Stock Purchase Rights or the surrender of an option, or portion
thereof, upon exercise of a related stock appreciation right for cash or of a
limited stock appreciation right or (b) to the extent permissible under Rule
16b-3, the forfeiture of Restricted Stock, shares of Common Stock which were
subject thereto shall again be available for grants of options, stock
appreciation rights, limited stock appreciation rights, Restricted Stock and
Stock Purchase Rights under the Plan.
5.2 Notwithstanding the foregoing, and subject to Section 5.3, the number
of shares for which Restricted Stock may be granted pursuant to Section 9 of the
Plan may not exceed one million (1,000,000) shares of Common Stock and the
number of shares which may issued upon exercise of Stock Purchase Rights granted
under Section 10 of the Plan may not exceed two million (2,000,000) shares of
Common Stock.
5.3 In the event of a recapitalization, stock split, stock dividend,
exchange of shares, merger, reorganization, change in corporate structure or
shares of the Company or similar event, the Board of Directors, upon the
recommendation of the Plan Administrator, may make appropriate adjustments in
the number of shares authorized for the Plan, the Maximum Annual Employee Grant
and, with respect to outstanding options, stock appreciation rights, limited
stock appreciation rights, Restricted Stock and Stock Purchase Rights, the Plan
Administrator may make appropriate adjustments in the number of shares and the
Option Price or Stock Purchase Price.
SECTION 6. STOCK OPTIONS
6.1 Options may be granted to eligible employees in such number and at
such times during the term of the Plan as the Plan Administrator shall
determine, the Plan Administrator taking into account the duties of the
respective employees, their present and potential contributions to the success
of the Company, and such other factors as the Plan Administrator shall deem
relevant in accomplishing the purposes of the Plan; provided, that the maximum
number of shares with respect to which an option or options may be granted to
any eligible employee in any one year will not exceed five hundred thousand
(500,000) shares (the "Maximum Annual Employee Grant"). The granting of an
option shall take place when the Plan Administrator by resolution, written
consent or other appropriate action determines to grant such an option to a
particular Participant at a particular price. Each option shall be evidenced by
a written instrument delivered by or on behalf of the Company containing
provisions not inconsistent with the Plan.
6.2 An option granted under the Plan may be either an Incentive Stock
Option or a Nonqualified Option.
6.3 Each provision of the Plan and each Incentive Stock Option granted
thereunder shall be construed so that each such option shall qualify as an
Incentive Stock Option, and any provision thereof that cannot be so construed
shall be disregarded, unless the Participant agrees otherwise. The total number
of shares which
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may be purchased upon the exercise of Incentive Stock Options granted under the
Plan shall not exceed the total specified in Section 5.1. Incentive Stock
Options, in addition to complying with the other provisions of the Plan relating
to options generally, shall be subject to the following conditions:
(a) A Participant must not, immediately before an Incentive Stock
Option is granted, own stock representing more than ten percent (10%) of
the voting power or value of all classes of stock of the Company or a
Subsidiary. This requirement is waived if (i) the Option Price of the
Incentive Stock Option to be granted is at least one hundred ten percent
(110%) of the Fair Market Value of the stock subject to the option,
determined at the time the option is granted, and (ii) the option is not
exercisable more than five (5) years from the date the option is granted.
(b) To the extent that the aggregate Fair Market Value (determined at
the time of the grant of the option) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by the
Participant during any calendar year exceeds One Hundred Thousand Dollars
($100,000), such options shall be treated as Nonqualified Options.
(c) Any other terms and conditions which the Plan Administrator
determines, upon advice of counsel, must be imposed for the option to be an
Incentive Stock Option.
6.4 Except as otherwise provided in Section 6.3, all Incentive Stock
Options and Nonqualified Options under the Plan shall be granted subject to the
following terms and conditions:
(a) OPTION PRICE
The Option Price shall be determined by the Plan Administrator at the time
of grant, but shall not be less than one hundred percent (100%) of the Fair
Market Value of the Common Stock on the date the option is granted.
(b) DURATION OF OPTIONS
Options shall be exercisable at such time and under such conditions as set
forth in the option grant, but in no event shall any Incentive Stock Option be
exercisable subsequent to the day before the tenth anniversary of the date on
which the option is granted, nor shall any other option be exercisable later
than the tenth anniversary of the date of its grant.
(c) EXERCISE OF OPTIONS
Subject to Section 6.4(j), an optionee may not exercise an option until he
or she has completed one (1) year of continuous employment with the Company or
one of its Subsidiaries from and including the date on which the option is
granted, or such longer period as the Plan Administrator may determine in a
particular case. This requirement is waived in the event of death or Permanent
Disability of an optionee before such period of continuous employment is
completed. Thereafter, shares of Common Stock covered by an option may be
purchased at one time or in such installments during the option period as may be
provided in the option grant. Any shares not purchased on the applicable
installment date may be purchased at one time or in such installments over the
balance of the option period as may be provided in the option grant. To the
extent that the right to purchase shares has accrued thereunder, options may be
exercised from time to time by written notice to the Company setting the number
of shares with respect to which the option is being exercised.
(d) PAYMENT
The purchase price of shares purchased under options shall be paid in full
to the Company upon the exercise of the option by delivery of consideration
equal to the product of the Option Price and the number of shares purchased.
Such consideration may be either (i) in cash or (ii) at the discretion of the
Plan Administrator, in Common Stock already owned by the Participant for at
least six (6) months, or any combination of cash and Common Stock. The Fair
Market Value of such Common Stock as delivered shall be valued as of the day
prior to delivery. The Plan Administrator can determine at the time the option
is granted that additional forms of payment will be permitted. To the extent
permitted by the Plan Administrator and applicable laws and regulations
(including, but not limited to, federal tax and securities laws and regulations
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and state corporate law), an option may also be exercised by delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan proceeds to
pay the purchase price of shares purchased under the option. If specifically
authorized in the option grant, shares of Common Stock with a Fair Market Value
equal to all or a portion of the purchase price of shares purchased under
options may be withheld from the shares issuable to the Participant upon the
exercise of the option. The Fair Market Value of such Common Stock as is
withheld shall be valued as of the day prior to exercise of the option. In the
event an option grant to an Insider Participant provides that the purchase price
of shares purchased under options may be paid in whole or in part by having
shares with a Fair Market Value equal to all or a portion of the purchase price
withheld from the shares issuable to the optionee upon the exercise of the
option, the following restrictions shall apply. To the extent required for
compliance with Rule 16b-3, the withholding of shares issuable upon the exercise
of an option to pay the purchase price of shares acquired upon exercise of an
option by an Insider Participant must be approved by the Plan Administrator and
must be made (x) pursuant to an irrevocable election made six (6) months in
advance of the transaction, (y) during the period beginning on the third
business day following the date of release for publication of the quarterly or
annual summary statements of sales and earnings of the Company and ending on the
twelfth business day following such date, or (z) otherwise in accordance with
Rule 16b-3 and interpretations thereunder.
(e) RESTRICTIONS
The Plan Administrator shall determine and reflect in the option grant,
with respect to each option, the nature and extent of the restrictions, if any,
to be imposed on the shares of Common Stock which may be purchased thereunder,
including, but not limited to, restrictions on the transferability of such
shares acquired through the exercise of such options for such periods as the
Plan Administrator may determine and, further, that in the event a Participant's
employment by the Company or a Subsidiary terminates during the period in which
such shares are nontransferable, the Participant shall be required to sell such
shares back to the Company at such prices as the Plan Administrator may specify
in the option.
(f) NONTRANSFERABILITY OF OPTIONS
During a Participant's lifetime, an option may be exercisable only by the
Participant and options granted under the Plan and the rights and privileges
conferred thereby shall not be subject to execution, attachment or similar
process and may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution. Notwithstanding the foregoing, to
the extent permitted by applicable law and Rule 16b-3, the Plan Administrator
may permit a recipient of a Nonqualified Option to (i) designate in writing
during the Participant's lifetime a Beneficiary to receive and exercise the
Participant's Nonqualified Options in the event of such Participant's death (as
provided in Section 6.4(i)) or (ii) transfer a Nonqualified Option. Any other
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
option under the Plan or of any right or privilege conferred thereby, contrary
to the provisions of the Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby, shall be null and void.
(g) PURCHASE FOR INVESTMENT
The Plan Administrator shall have the right to require that each
Participant or other person who shall exercise an option under the Plan, and
each person into whose name shares of Common Stock shall be issued pursuant to
the exercise of an option, represent and agree that any and all shares of Common
Stock purchased pursuant to such option are being purchased for investment only
and not with a view to the distribution or resale thereof and that such shares
will not be sold except in accordance with such restrictions or limitations as
may be set forth in the option. This Section 6.4(g) shall be inoperative during
any period of time when the Company has obtained all necessary or advisable
approvals from governmental agencies and has completed all necessary or
advisable registrations or other qualifications of shares of Common Stock as to
which options may from time to time be granted as contemplated in Section 11.
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(h) TERMINATION OF EMPLOYMENT
Upon the termination of a Participant's employment for any reason other
than death, the Participant's option shall be exercisable only to the extent
that it was then exercisable and, unless the term of the option expires sooner,
such option shall expire according to the following schedule; provided, however,
that the Plan Administrator may at any time determine in a particular case that
specific limitations and restrictions under the Plan shall not apply:
(i) Retirement
The option shall expire, unless exercised, thirty-six (36) months after the
Participant's retirement from the Company or any Subsidiary.
(ii) Disability
The option shall expire, unless exercised, thirty-six (36) months
after the Participant's Permanent Disability.
(iii) Termination With Approval
The option shall expire, unless exercised, thirty-six (36) months
after a Participant resigns or is terminated as an employee of the Company
or any Subsidiary, unless the Chief Executive Officer of the Company shall
have determined in a specific case that the option should terminate when
the Participant's employment status ceases; provided, however, that for
officers and directors who are subject to Section 16 of the Exchange Act,
such determination shall be made by the Plan Administrator.
(iv) Termination Following a Change in Control
The option shall expire, unless exercised, within thirty-six (36)
months of a Participant's termination of employment (other than a
termination by the Company for Cause or a voluntary termination by the
Participant other than for Good Reason) following a Change in Control,
provided that said termination of employment occurs within two (2) years
following a Change in Control.
(v) All Other Terminations
Except as provided in subparagraphs (iii) and (iv) above, the option
shall expire upon termination of employment.
Leaves of absence for such period and purposes conforming to the personnel
policy of the Company or of its Subsidiaries, as applicable, shall not be deemed
terminations or interruptions of employment.
(i) DEATH OF PARTICIPANT
Upon the death of a Participant, whether during the Participant's period of
employment or during the thirty-six (36) month period referred to in Section
6.4(h)(i), (ii) and (iii), the option shall expire, unless the term of the
option expires sooner, twelve (12) months after the date of the Participant's
death, unless the option is exercised within such twelve (12) month period by
the Participant's Beneficiary, legal representatives, estate or the person or
persons to whom the Participant's option rights shall have passed by will or the
laws of descent and distribution; provided, however, that the Plan Administrator
may determine in a particular case that specific limitations and restrictions
under the Plan shall not apply. Notwithstanding other Plan provisions pertaining
to the times at which options may be exercised, no option shall continue to be
exercisable, pursuant to Section 6.4(h) or this Section 6.4(i), at a time that
would violate the maximum duration of Section 6.4(b).
(j) CHANGE IN CONTROL
Notwithstanding other Plan provisions pertaining to the times at which
options may be exercised, all outstanding options, to the extent not then
currently exercisable, shall become exercisable in full upon the occurrence of a
Change in Control; provided, that the Plan Administrator may determine that such
acceleration will not occur if it would render unavailable "pooling of interest"
accounting treatment for any reorganization, merger or consolidation of the
Company. In no event, however, shall any intended Incentive
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Stock Option first become exercisable, pursuant to Section 6.4(c) or this
Section 6.4(j), without the consent of the Participant, if the result would be
to cause such option, when granted, not to be treated as an Incentive Stock
Option (whether by reason of the possible future violation of the annual
limitation of Section 6.3(b) or otherwise).
(k) RIGHTS AS STOCKHOLDER
A Participant shall have none of the rights of a stockholder until the
shares of Common Stock are issued to the Participant.
SECTION 7. STOCK APPRECIATION RIGHTS
7.1 The Plan Administrator may grant stock appreciation rights to eligible
employees in connection with any option granted under the Plan, either at the
time of the grant of such option or at any time thereafter during the term of
the option. Such stock appreciation rights shall cover the same shares covered
by the options (or such lesser number of shares of Common Stock as the Plan
Administrator may determine) and shall, except as provided in Section 7.3, be
subject to the same terms and conditions as the related options and such further
terms and conditions not inconsistent with the Plan as shall from time to time
be determined by the Plan Administrator.
7.2 Each stock appreciation right shall entitle the holder of the related
option to surrender to the Company unexercised the related option, or any
portion thereof, and to receive from the Company in exchange therefor an amount
equal to the excess of the Fair Market Value of one (1) share of Common Stock on
the date the right is exercised over the Option Price per share times the number
of shares covered by the option, or portion thereof, which is surrendered.
Payment shall be made in shares of Common Stock valued at Fair Market Value as
of the date the right is exercised, or in cash, or partly in shares and partly
in cash, at the discretion of the Plan Administrator; provided, however, that
payment shall be made solely in cash with respect to a stock appreciation right
which is exercised within seven (7) months following a Change in Control.
Notwithstanding the foregoing and to the extent required for compliance with
Rule 16b-3, a payment, in whole or in part, of cash upon exercise of a stock
appreciation right held by an Insider Participant may be made only if the Plan
Administrator approves such election to receive cash and the right is exercised
(a) during the period beginning on the third business day following the date of
release for publication of the quarterly or annual summary statements of sales
and earnings of the Company and ending on the twelfth business day following
such date or (b) otherwise in accordance with the provisions of Rule 16b-3 and
interpretations thereunder. Stock appreciation rights may be exercised from time
to time upon actual receipt by the Company of written notice stating the number
of shares of Common Stock with respect to which the stock appreciation right is
being exercised. The value of any fractional shares shall be paid in cash.
7.3 Stock appreciation rights are subject to the following restrictions:
(a) Each stock appreciation right shall be exercisable at such time
or times that the option to which it relates shall be exercisable or at
such other times as the Plan Administrator may determine; provided,
however, that stock appreciation rights granted to Insider Participants
shall not be exercisable until the Participant shall have completed a six
(6) month period of continuous employment with the Company or any
Subsidiary immediately following the date on which the stock appreciation
right is granted. In the event of death or Permanent Disability of a
Participant during employment but before the Participant has completed such
period of continuous employment, such stock appreciation right shall be
exercisable only within the period specified in the related option. In the
event of a Change in Control, the requirement that a Participant shall have
completed a six (6) month period of continuous employment is waived with
respect to a Participant who is employed by the Company at the time of the
Change in Control but who, within the six (6) month period, voluntarily
terminates employment for Good Reason or is terminated by the Company other
than for Cause; provided, that the Plan Administrator may determine that
such waiver will not occur if it would render unavailable "pooling of
interest" accounting treatment for any reorganization, merger or
consolidation of the Company. Notwithstanding the
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foregoing, a stock appreciation right may not be exercised for cash by an
Insider Participant under any circumstances until the expiration of the six
(6) month period following the date of grant.
(b) Except in the event of a Change in Control, the Plan
Administrator in its sole discretion may approve or deny in whole or in
part a request to exercise a stock appreciation right. Denial or approval
of such request shall not require a subsequent request to be similarly
treated by the Plan Administrator.
(c) The right of a Participant to exercise a stock appreciation right
shall be canceled if and to the extent the related option is exercised. To
the extent that a stock appreciation right is exercised, the related option
shall be deemed to have been surrendered, unexercised and canceled.
(d) A holder of stock appreciation rights shall have none of the
rights of a stockholder until shares of Common Stock, if any, are issued to
such holder pursuant to such holder's exercise of such rights.
(e) The acquisition of Common Stock pursuant to the exercise of a
stock appreciation right shall be subject to the same terms and conditions
as would apply to the acquisition of Common Stock acquired upon acquisition
of the related option, as set forth in Section 6.4.
SECTION 8. LIMITED STOCK APPRECIATION RIGHTS
8.1 The Plan Administrator may grant limited stock appreciation rights to
eligible employees in connection with any options granted under the Plan, either
at the time of the grant of such option or at any time thereafter during the
term of the option. Such limited stock appreciation rights shall cover the same
shares covered by the options (or such lesser number of shares of Common Stock
as the Plan Administrator may determine) and shall, except as provided in
Section 8.3, be subject to the same terms and conditions as the related options
and such further terms and conditions not inconsistent with the Plan as shall
from time to time be determined by the Plan Administrator.
8.2 Each limited stock appreciation right shall entitle the holder of the
related option to surrender to the Company the unexercised portion of the
related option and to receive from the Company in exchange therefor an amount in
cash equal to the excess of the Fair Market Value of one (1) share of Common
Stock on the date the right is exercised over the Option Price per share times
the number of shares covered by the option, or portion thereof, which is
surrendered.
8.3 Limited stock appreciation rights are subject to the following
restrictions:
(a) Each limited stock appreciation right shall be exercisable in full
for a period of seven (7) months following the date of a Change in Control
regardless of whether the holder is employed by the Company or any of its
Subsidiaries on the date the right is exercised; provided, however, that
limited stock appreciation rights may not be exercised under any
circumstances by Insider Participants until the expiration of the six (6)
month period following the date of grant. Limited stock appreciation rights
shall be exercisable only to the same extent and subject to the same
conditions as the options related thereto are exercisable, as provided in
Section 6.4(j).
(b) The right of a Participant to exercise a limited stock
appreciation right shall be canceled if and to the extent the related
option is exercised. To the extent that a limited stock appreciation right
is exercised, the related option shall be deemed to have been surrendered,
unexercised and canceled.
(c) Limited stock appreciation rights shall not be exercisable if the
event constituting the Change in Control is an event in which the
consideration to be paid to the Company's stockholders consists solely of
equity securities registered under Section 12 of the Exchange Act.
SECTION 9. RESTRICTED STOCK
9.1 Restricted Stock may be granted to eligible employees in such number
and at such times during the term of the Plan as the Plan Administrator shall
determine, the Plan Administrator taking into account the duties of the
respective Participants, their present and potential contributions to the
success of the Company,
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and such other factors as the Plan Administrator shall deem relevant in
accomplishing the purposes of the Plan. The granting of Restricted Stock shall
take place when the Plan Administrator by resolution, written consent or other
appropriate action determines to grant such Restricted Stock to a particular
Participant. Each grant shall be evidenced by a written instrument delivered by
or on behalf of the Company containing provisions not inconsistent with the
Plan. The Participant receiving a grant of Restricted Stock shall be recorded as
a stockholder of the Company and, subject to the provisions hereof, shall have
all the rights of a stockholder with respect to such shares, including the right
to vote the shares and receive all dividends or other distributions made or paid
with respect to such shares; provided, however, that the shares themselves, and
any new, additional or different shares or securities which the Participant may
be entitled to receive with respect to such shares by virtue of a stock split or
stock dividend or any other change in the corporate or capital structure of the
Company, shall be subject to the restrictions hereinafter described.
9.2 A grant of Restricted Stock shall entitle a Participant to receive, on
the date or dates designated by the Plan Administrator, upon payment to the
Company of consideration determined by the Plan Administrator, which
consideration shall be at least equal to the par value of the Common Stock, in a
manner determined by the Plan Administrator, the number of shares of Common
Stock selected by the Plan Administrator. The Plan Administrator may require,
under such terms and conditions as it deems appropriate or desirable, that the
certificates for Restricted Stock delivered under the Plan may be held in
custody by a bank or other institution, or that the Company may itself hold such
shares in custody until the Restriction Period (as defined in Section 9.3)
expires or until restrictions thereon otherwise lapse, and may require, as a
condition of any receipt of Restricted Stock, that the Participant shall have
delivered a stock power endorsed in blank relating to the shares of Restricted
Stock.
9.3 During a period of years following the date of grant, as determined by
the Plan Administrator, which shall in no event be less than one (1) year (the
"Restriction Period"), the Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by the
recipient, except in the event of death or Permanent Disability, the Plan
Administrator's waiver or modification of such restrictions in the agreement
evidencing the grant of Restricted Stock or by resolution of the Plan
Administrator adopted at any time.
9.4 Except as provided in Section 9.5 or 9.6, if a Participant terminates
employment with the Company for any reason before the expiration of the
Restriction Period, all shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant to the Company. In addition, in the event
of any attempt by the Participant to sell, exchange, transfer, pledge or
otherwise dispose of shares of Restricted Stock in violation of the terms of the
Plan, such shares shall be forfeited to the Company.
9.5 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall lapse upon the
Participant's death or Permanent Disability or any termination of employment
determined by the Plan Administrator to end the Restriction Period.
9.6 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall terminate immediately upon
a Change in Control.
9.7 When the restrictions imposed by Section 9.3 expire or otherwise lapse
with respect to one (1) or more shares of Restricted Stock, the Company shall
deliver to the Participant (or the Participant's legal representative,
Beneficiary or heir) one (1) share of Common Stock for each share of Restricted
Stock. At that time, the written instrument referred to in Section 9.1, as it
relates to such shares, shall be terminated.
9.8 Subject to Section 9.2, each Participant entitled to receive
Restricted Stock under the Plan shall be issued a certificate for such shares.
Such certificate shall be registered in the name of the Participant.
SECTION 10. STOCK PURCHASE RIGHTS
10.1 The Plan Administrator may grant to any Participant Stock Purchase
Rights that entitle a Participant to purchase, on the Purchase Date, up to the
maximum number of shares of Common Stock authorized by Section 10.2 at the Stock
Purchase Price; provided, however, that the Plan Administrator may
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provide that a Participant automatically and without any act on the
Participant's part will be deemed to have exercised the Participant's Stock
Purchase Right on the Purchase Date.
10.2 The maximum number of shares of Common Stock subject to a Stock
Purchase Right granted to any Participant in any Plan Year shall equal the
number of shares that can be purchased on the Purchase Date at the Stock
Purchase Price with the Participant's Bonus and/or the amount payable in respect
of the Participant's Performance Share Units. A Stock Purchase Right granted to
any Participant may cover a number of shares that is less than the maximum
number permitted by this Section 10.2.
10.3 All Stock Purchase Rights shall be granted in writing and shall
express an offer by the Company to sell a number of shares of Common Stock, not
to exceed the maximum number provided in Section 10.2, on the Purchase Date at
the Stock Purchase Price.
10.4 With respect to each Stock Purchase Right, the Plan Administrator
shall determine and reflect in the grant of the Stock Purchase Right the nature
and extent of the restrictions, if any, to be imposed in connection with the
purchase of shares of Common Stock thereunder, including but not limited to,
restrictions on the transferability of shares acquired through the exercise of
such Stock Purchase Rights. Unless the written grant of a Stock Purchase Right
provides otherwise, shares acquired upon exercise of a Stock Purchase Right for
a Stock Purchase Price of less than one hundred percent (100%) of the Fair
Market Value of Common Stock on the Purchase Date shall be issued as "SPR
Restricted Stock" that shall be subject to a minimum Restriction Period of three
years and such other conditions as the Plan Administrator may provide in the
grant of such Stock Purchase Rights and shall otherwise be subject to the terms
and conditions of Section 9. Notwithstanding the foregoing, the Restriction
Period for any Participant shall be deemed to end and all restrictions on shares
of SPR Restricted Stock shall lapse upon (i) a Participant's retirement, (ii) a
determination by the Plan Administrator that the Participant has incurred a
severe and unexpected financial hardship, (iii) a Change of Control or (iv) a
Participant's termination of employment with the Company or a subsidiary.
10.5 Common Stock shall be purchased by the exercise of Stock Purchase
Rights granted hereunder. Stock Purchase Rights granted to any Participant shall
be exercisable only on the Purchase Date for such Stock Purchase Right.
10.6 A Stock Purchase Right may be exercised in whole or in part. To the
extent a Participant does not purchase the maximum number of shares covered by a
Stock Purchase Right on the Purchase Date, the Stock Purchase Right shall
terminate.
10.7 A Participant shall exercise a Stock Purchase Right by providing
written notice to the Company on or before the Purchase Date on a form provided
by the Company for such purpose. Notice to the Company of the exercise of a
Stock Purchase Right shall be irrevocable and shall specify the number of
shares, subject to the maximum specified in the grant of the Stock Purchase
Right, to be purchased by the Participant on the Purchase Date. The Company
shall treat such notice by a Participant as a binding commitment to deliver to
the Company as soon as practicable following the Purchase Date the Stock
Purchase Price for the number of shares specified in the notice. The Stock
Purchase Price shall be paid in full to the Company solely in cash.
10.8 Except as provided in this Section 10.8, as soon as administratively
feasible after the Purchase Date, certificates representing the shares of Common
Stock purchased by the Participant shall be issued in the Participant's name and
sent to the Participant unless such shares are issued as SPR Restricted Stock.
10.9 Except as provided in Section 10.10, a Participant shall be
ineligible to exercise a Stock Purchase Right unless the Participant is an
employee of the Company or a Subsidiary on the Purchase Date for such Stock
Purchase Right.
10.10 A Participant (or the Participant's legal representative in the case
of his or her death) who has received a Bonus or who holds a Performance Share
Unit but who retires, dies, or suffers a Permanent Disability after December
31st of the year for which the Bonus was granted or after the Performance Share
Unit became payable but before the Purchase Date, shall be entitled to exercise
his or her Stock Purchase Rights in respect of such Bonus or Performance Share
Unit on the Purchase Date.
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SECTION 11. REGULATORY APPROVALS AND LISTING
11.1 The Company shall not be required to issue any certificate for shares
of Common Stock upon the exercise of an option, stock appreciation right or
Stock Purchase Right granted under the Plan prior to:
(a) the obtaining of any approval or ruling from the Securities and
Exchange Commission, the Internal Revenue Service or any other governmental
agency which the Company, in its sole discretion, shall determine to be
necessary or advisable;
(b) the listing of such shares on any stock exchange on which the
Common Stock may then be listed; or
(c) the completion of any registration or other qualification of such
shares under any federal or state laws, rulings or regulations of any
governmental body which the Company, in its sole discretion, shall
determine to be necessary or advisable.
11.2 All certificates for shares delivered pursuant to Section 9.8 in
respect of Restricted Stock awards or pursuant to Section 10.8 in respect of the
exercise of Stock Purchase Rights shall be subject to such stop-transfer orders
and other restrictions as the Plan Administrator may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which Common Stock is then listed and any
applicable federal or state securities laws, and the Plan Administrator may
cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions. The foregoing provisions of this
Section 11.2 shall not be effective if and to the extent that the shares of
Common Stock delivered under the Plan are covered by an effective and current
registration statement under the Securities Act of 1933, as amended, or if and
so long as the Plan Administrator determines that application of such provisions
is no longer required or desirable. In making such determination, the Plan
Administrator may rely upon an opinion of counsel for the Company.
SECTION 12. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall be dated as of December 8, 1993 and shall be effective upon
adoption by the Board of Directors, but the Plan shall be void unless it is
approved by the Company's stockholders within the earlier of the date of the
Company's next annual meeting of stockholders and twelve (12) months after the
date the Plan is adopted by the Board of Directors. Subject to the foregoing
condition, options, stock appreciation rights, limited stock appreciation
rights, Restricted Stock and Stock Purchase Rights may be granted pursuant to
the Plan from time to time within the period commencing upon adoption of the
Plan by the Board of Directors and ending ten (10) years after the earlier of
such adoption and the approval of the Plan by the stockholders. Options, stock
appreciation rights, limited stock appreciation rights, Restricted Stock and
Stock Purchase Rights theretofore granted may extend beyond that date, and the
terms and conditions of the Plan shall continue to apply thereto and to shares
of Common Stock acquired thereunder. To the extent required for compliance with
Rule 16b-3, shares of Common Stock underlying options, stock appreciation rights
or Stock Purchase Rights and shares of Restricted Stock granted subject to
subsequent stockholder approval of the Plan to Insider Participants may not be
sold until a date at least six (6) months after the date such stockholder
approval is obtained, and stock appreciation rights that are granted subject to
stockholder approval of the Plan to Insider Participants may not be exercised
for cash until a date at least six (6) months after the date such stockholder
approval is obtained.
SECTION 13. GENERAL PROVISIONS
13.1 Nothing contained in the Plan, or in any option, stock appreciation
right, limited stock appreciation right, Restricted Stock or Stock Purchase
Right granted pursuant to the Plan, shall confer upon any employee any right
with respect to continuance of employment by the Company or a Subsidiary, or
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of such employee at any time with or without assigning any reason
therefor.
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13.2 Grants, vesting or payment of options, stock appreciation rights,
limited stock appreciation rights, Restricted Stock or Stock Purchase Rights
shall not be considered as part of a Participant's salary or used for the
calculation of any other pay, allowance, pension or other benefit unless
otherwise permitted by other benefit plans provided by the Company or a
Subsidiary, or required by law or by contractual obligations of the Company or a
Subsidiary.
13.3 The right of a Participant or Beneficiary to the payment of any
compensation under the Plan may not be assigned, transferred, pledged or
encumbered, nor shall such right or other interests be subject to attachment,
garnishment, execution or other legal process.
13.4 Leaves of absence for such periods and purposes conforming to the
personnel policy of the Company or a Subsidiary, as applicable, shall not be
deemed terminations or interruptions of employment. The foregoing
notwithstanding, with respect to Incentive Stock Options, employment shall not
be deemed to continue beyond the first ninety (90) days of such leave unless the
Participant's reemployment rights are guaranteed by statute or contract.
13.5 Subject to Section 6.4(h) in the event a Participant is transferred
from the Company to a Subsidiary, or vice versa, or is promoted or given
different responsibilities, the options, stock appreciation rights, limited
stock appreciation rights, Restricted Stock and/or Stock Purchase Rights granted
to the Participant prior to such date shall not be affected.
13.6 The Plan shall be construed and governed in accordance with the laws
of the State of Washington, except that it shall be construed and governed in
accordance with applicable federal law in the event that such federal law
preempts state law.
13.7 Appropriate provision shall be made for all taxes required to be
withheld in connection with the exercise, grant or other taxable event with
respect to options, stock appreciation rights, limited stock appreciation
rights, Restricted Stock and Stock Purchase Rights under the applicable laws or
regulations of any governmental authority, whether federal, state or local and
whether domestic or foreign. Unless otherwise provided in the option grant, a
Participant is permitted to deliver shares of Common Stock (including shares
acquired pursuant to the exercise of an option or Stock Purchase Right other
than the option or Stock Purchase Right currently being exercised, to the extent
permitted by applicable regulations) for payment of withholding taxes on the
exercise of an option, stock appreciation right or Stock Purchase Right or upon
the vesting of the Restricted Stock. The Fair Market Value of such Common Stock
as delivered shall be valued as of the day prior to delivery. At the election of
the Plan Administrator or, subject to approval of the Plan Administrator at its
sole discretion, at the election of a Participant, shares of Common Stock may be
withheld from the shares issuable to the optionee upon exercise of an option,
stock appreciation right or Stock Purchase Right or upon the vesting of the
Restricted Stock to satisfy tax withholding obligations. The Fair Market Value
of such Common Stock as is withheld shall be valued as of the day prior to
exercise of the option, stock appreciation right or Stock Purchase Right or the
vesting of the Restricted Stock. The withholding of shares to pay tax
obligations in connection with the exercise of an option, stock appreciation
right or Stock Purchase Right or the vesting of the Restricted Stock by an
Insider Participant must be approved by the Plan Administrator and must occur
(i) pursuant to an irrevocable election made six (6) months in advance of the
transaction, (ii) during the period beginning on the third business day
following the date of release for publication of the quarterly or annual summary
statements of sales and earnings of the Company and ending on the twelfth
business day following such date, or (iii) otherwise in accordance with the
provisions of Rule 16b-3 and interpretations thereunder. In the event Rule 16b-3
is amended or interpreted to permit shares to be withheld to pay tax withholding
obligations outside of the periods described in clause (i) or (ii) of the
preceding sentence, or without Plan Administrator approval, the Plan
Administrator may determine that such provisions shall no longer apply to
Insider Participants.
Tax advice should be obtained by the Participant prior to the Participant's
(a) entering into any transaction under or with respect to the Plan, (b)
designating or choosing the time of distributions under the Plan, or (c)
disposing of any shares of Common Stock issued under the Plan.
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SECTION 14. AMENDMENT, TERMINATION OR DISCONTINUANCE OF THE PLAN
14.1 Subject to the Board of Directors and Section 14.2, the Plan
Administrator may from time to time make such amendments to the Plan as it may
deem proper and in the best interest of the Company without further approval of
the stockholders of the Company, including, but not limited to, any amendment
necessary to ensure that the Company may obtain any regulatory approval referred
to in Section 11; provided, however, that no change in any option, stock
appreciation right, limited stock appreciation right, Restricted Stock or Stock
Purchase Right therefore granted may be made without the consent of the
Participant which would impair the right of the Participant to acquire or retain
Common Stock or cash that the Participant may have acquired as a result of the
Plan.
14.2 To the extent required for compliance with applicable law or
regulation, including Rule 16b-3, the Plan Administrator and the Board of
Directors may not amend the Plan without the approval of the stockholders of the
Company, including any amendment which would (a) materially increase the number
of securities that may be issued under the Plan to Insider Participants; (b)
materially modify the requirements as to eligibility for participation in the
Plan to add a class of Insider Participants; or (c) otherwise materially
increase the benefits accruing under the Plan to Insider Participants; provided,
however, that any increase in the number of shares available under the Plan for
grant as Incentive Stock Options and any change in the designation of the group
of employees eligible to receive Incentive Stock Options under the Plan shall be
subject to stockholder approval in accordance with Section 422 of the Code.
14.3 The Board of Directors may at any time suspend the operation of or
terminate the Plan with respect to any shares of Common Stock or rights not at
the time subject to any option, stock appreciation right, limited stock
appreciation right, Stock Purchase Right or grant of Restricted Stock.
SECTION 15. SALES BY INSIDER PARTICIPANTS
Except in the case of sales by an executor or administrator of the estate
of a deceased Participant, if an Insider Participant disposes of shares of
Common Stock acquired by such Participant upon exercise of an option, stock
appreciation right, Stock Purchase Right or the grant of Restricted Stock within
six (6) months after the date the option, stock appreciation right, Restricted
Stock or Stock Purchase Right was granted, the grant of such option, stock
appreciation right, Restricted Stock or Stock Purchase Right will be deemed a
nonexempt matchable purchase for purposes of Section 16(b) as of the date of
grant.
SECTION 16. COMPLIANCE WITH RULE 16B-3
It is the intention of the Company that, so long as any of the Company's
equity securities are registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, the Plan shall comply in all respects with Rule 16b-3 and, if any
Plan provision is later found not to be in compliance with such Section, that
provision shall be deemed null and void, and in all events the Plan shall be
construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in the Plan to the contrary, the Board of Directors, in
its absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to Insider Participants without
so restricting, limiting or conditioning the Plan with respect to other
Participants.
A-16
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(LOGO)
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YOUR VOTE IS IMPORTANT NOTICE OF
YOUR MANAGEMENT WILL APPRECIATE THE ANNUAL MEETING
PROMPT RETURN OF YOUR SIGNED PROXY SO OF STOCKHOLDERS
THE SHARES YOU OWN WILL BE REPRESENTED AND
AT THE ANNUAL MEETING OF STOCKHOLDERS. PROXY STATEMENT
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TO BE HELD IN THE 6TH FLOOR MEETING
ROOM, FIRST INTERSTATE CENTER,
999 THIRD AVENUE,
SEATTLE, WASHINGTON
MARCH 17, 1994
9:00 A.M.
<PAGE> 40
PROXY SOLICITED BY THE BOARD OF DIRECTORS
BURLINGTON RESOURCES INC. ANNUAL MEETING OF STOCKHOLDERS
MARCH 17, 1994
The undersigned hereby appoints Thomas H. O'Leary and Gerald J. Schissler,
and each or any of them, with power of substitution, proxies for the undersigned
and authorizes them to represent and vote, as designated, all of the shares of
stock of the Company which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders to be held at the 6th floor meeting room, First
Interstate Center, 999 Third Avenue, Seattle, Washington on March 17, 1994 and
at any adjournment or postponement of such meeting for the following purposes
and with discretionary authority as to any other matters that may properly come
before the meeting, in accordance with and as described in the Notice of Annual
Meeting of Stockholders and Proxy Statement. If no direction is given, this
proxy will be voted FOR proposals 1 and 2 and AGAINST proposal 3.
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
The Board of Directors recommends a vote FOR proposals 1 and 2.
1. Election of Directors Nominees: J. V. Byrne, S. P. Gilbert, J. F. McDonald,
T. H. O'Leary, D. M. Roberts, W. Scott, Jr., W. E. Wall
/ / FOR / / WITHHELD
/ / FOR all nominees except as noted above
2. Adoption of Burlington Resources Inc. 1993 Stock Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
The Board of Directors recommends a vote AGAINST proposal 3.
3. Stockholder proposal relating to compensation.
/ / FOR / / AGAINST / / ABSTAIN
Mark here for address change and note at left / /
Mark here for comments / /
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Please sign exactly as your name Date
appears. If acting as attorney, Signature
executor, trustee or in other
representative capacity, sign name and
title.
Date
Signature
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