DEVON ENERGY CORPORATION
20 North Broadway, Suite 1500
Oklahoma City, OK 73102-8260
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of Devon Energy
Corporation, an Oklahoma Corporation ("Devon" or the "Company")
will be held in the Community Room (Mezzanine Floor), Bank of
Oklahoma, Robinson Avenue at Robert S. Kerr, Oklahoma City,
Oklahoma on May 21, 1997, at 11:00 a.m., local time, for the
following purposes:
1. To elect three directors for terms expiring in the year 2000;
2. To act upon a proposal to adopt the Devon Energy Corporation 1997
Stock Option Plan;
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 25,
1997, are entitled to notice of and to vote at the meeting. The
accompanying proxy statement contains information regarding the
matters to be considered at the meeting. For reasons outlined in
the attached proxy statement, the Board of Directors recommends a
vote "FOR" the matters being voted upon.
IMPORTANT
YOUR PROXY IS IMPORTANT TO ASSURE A QUORUM AT THE MEETING.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE BE SURE
THAT THE ENCLOSED PROXY IS PROPERLY COMPLETED, DATED, SIGNED AND
RETURNED WITHOUT DELAY. PLEASE USE THE ENCLOSED RETURN ENVELOPE.
IT REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
Marian J. Moon
Corporate Secretary
Oklahoma City, Oklahoma
April 3, 1997
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DEVON ENERGY CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1997
THE COMPANY
Devon is an independent energy company engaged primarily in
oil and gas exploration, development and production and in the
acquisition of producing properties. The Company owns interests
in approximately 2,200 oil and gas properties concentrated in
five core areas: the Permian Basin in southeastern New Mexico
and western Texas; the San Juan Basin in northwestern New Mexico;
the Rocky Mountain region in Wyoming; the Mid-continent region in
Oklahoma and the Texas Panhandle; and the Western Canada
Sedimentary Basin in Alberta, Canada. At December 31, 1996,
Devon's estimated proved reserves were 179.3 million barrels of
oil equivalent ("MMBoe"), which were balanced between oil and
natural gas liquids (45%) and natural gas (55%). The present
value of pre-tax future net revenues discounted at 10% per annum
assuming unescalated prices of such reserves was $1.6 billion.
Devon is one of the top 20 public independent oil and gas
companies in the United States, as measured by oil and gas
reserves.
Strategy
Devon's primary objectives are to build production, cash
flow and earnings per share by: (a) acquiring oil and gas
properties, (b) exploring for new oil and gas reserves and (c)
optimizing production from existing oil and gas properties.
During 1988, Devon expanded its capital base with its first
issuance of common stock to the public. This transaction began a
substantial expansion program which has continued through the
subsequent nine years. Devon has used a two-pronged growth
strategy of acquiring producing properties and engaging in
drilling activities.
In the last five years alone, Devon has consummated six
significant acquisitions and drilled 637 new wells, 614 of which
were producers. These activities have resulted in reserve
additions of 196.9 MMBoe. Capital costs incurred to complete
these activities totaled $743.2 million, for a five-year finding
and development cost of $3.77 per Boe. Reserve additions and
adjustments, minus production and property sales, resulted in an
annual average reserve replacement factor of 435%.
Devon's objective, however, is to increase value per share,
not simply to increase total assets. Reserves have grown from
3.12 Boe per fully-diluted share at year-end 1991 to 4.84 Boe
per fully-diluted share at year-end 1996. During this same five-
year period, net debt (long-term debt minus working capital) has
remained relatively low, never exceeding $1.17 per Boe, and was
zero at year-end 1996.
The oil and gas industry is characterized by volatile
product prices. Devon's management believes that by (a) keeping
debt levels low, (b) concentrating its properties in core areas
to achieve economies of scale, (c) acquiring and developing high
profit margin properties, (d) continually disposing of marginal
and non-strategic properties and (e) balancing reserves between
oil and gas, Devon's profitability will be maximized, even during
periods of low oil and/or gas prices. In addition, Devon remains
financially flexible to take advantage of opportunities for
mergers, acquisitions, exploration or other growth opportunities.
Recent Developments
During 1996 Devon completed two notable transactions which
had a significantly positive impact on the Company's size and
financial strength. These two transactions are discussed below.
Trust Convertible Preferred Offering. On July 3, 1996,
Devon Financing Trust, a Delaware business trust organized by
Devon, closed a $149.5 million private placement of 6-1/2% trust
convertible preferred securities (the "TCP Securities"). The net
proceeds of $144.7 million were used to repay substantially all
of Devon's then outstanding bank debt. This increased Devon's
unused borrowing capacity, which can be used for future
acquisitions and drilling projects.
The TCP Securities, which do not mature until June, 2026,
are convertible at the holders' option into Devon common stock at
a conversion price of $30.50 per common share. The securities
are redeemable at Devon's option beginning on June 18, 1999
Kerr-McGee Transaction. On December 31, 1996, Devon
acquired the North American onshore oil and gas exploration and
production properties and business of Kerr-McGee Corporation (the
"KMG-NAOS Properties") in exchange for 9,954,000 shares of Devon
common stock (the "Kerr-McGee Transaction"). The transaction
increased Devon's year-end 1996 reserves by 62 MMBoe, or
approximately 50%, and tripled the Company's net undeveloped
leasehold inventory to 490,000 net acres. The KMG-NAOS
Properties are concentrated in the Permian Basin, the Rocky
Mountains and the Mid-Continent regions of the United States -
areas in which Devon previously owned significant reserves - and
in the Western Canada Sedimentary Basin of Alberta, Canada, which
is a new producing province for Devon.
After consummation of the Kerr-McGee Transaction, Kerr-McGee
Corporation ("Kerr-McGee") owns 31% (26% on a fully-diluted
basis) of Devon's outstanding common stock. Because of Kerr-
McGee's relatively large ownership position, Devon and Kerr-McGee
entered into two agreements which define and limit their
respective rights and obligations. In addition, Devon's board of
directors amended Devon's share rights plan so that Devon's
existing anti-takeover defenses will remain in force for third
parties and/or certain further transactions with Kerr-McGee.
Each of these arrangements are defined in the Stock Rights and
Restrictions Agreement, the Registration Rights Agreement, the
First Amendment to the Rights Agreement and the Second Amendment
to the Rights Agreement.
Since September 29, 1988, Devon's common stock has been
traded on the American Stock Exchange (the "AMEX") under the
symbol "DVN." The Company's mailing address is 20 North
Broadway, Suite 1500, Oklahoma City, OK 73102-8260. Its
telephone number is 405/235-3611.
All references in this proxy statement to Devon or the
Company include its predecessors and subsidiary corporations.
GENERAL INFORMATION
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Devon to be
used at the annual meeting of stockholders (the "Meeting"). The
Meeting will be held on the 21st day of May, 1997, and any
adjournment thereof. At the Meeting the shareholders will (i)
elect three directors for terms expiring in the year 2000 and
(ii) consider and vote upon a proposal to adopt the Devon Energy
Corporation 1997 Stock Option Plan. The shareholders will also
consider and vote upon such other business as may properly come
before the Meeting or any adjournment thereof. This proxy
statement is first being sent to the shareholders on or about
April 3, 1997.
The Board of Directors has established March 25, 1997, as
the record date (the "Record Date") to determine stockholders
entitled to notice of and to vote at the Meeting. At the close
of business on the Record Date, 32,141,295 shares of $.10 par
value common stock of the Company ("Common Stock") were
outstanding. Each share is entitled to one vote. Devon's
officers and directors own a total of 1,105,460 shares, or 3.4%
of Devon Common Stock, and intend to vote all of such shares in
favor of the matters to be voted upon at the Meeting.
Each proxy which is properly signed, dated and returned to
the Company in time for the Meeting, and not revoked, will be
voted in accordance with instructions contained therein. If no
contrary instructions are given, proxies will be voted "FOR" the
three director nominees and "FOR" the adoption of the Devon
Energy Corporation 1997 Stock Option Plan. Proxies may be
revoked at any time prior to their being exercised by delivering
a written notice of revocation or a later dated proxy to the
Secretary of the Company. In addition, a stockholder present at
the Meeting may revoke his proxy and vote in person.
The office of the Company's Secretary appoints an inspector
of election to tabulate all votes and to certify the results of
all matters voted upon at the Meeting. Election of each director
at the Meeting will be by plurality vote. Approval of the
adoption of the Devon Energy Corporation 1997 Stock Option Plan
requires the affirmative vote of a majority of the Company's
outstanding Common Stock present, or represented by proxy, and
entitled to vote at the Meeting
Neither the corporate law of the state of Oklahoma, the
state in which Devon is incorporated, nor the Company's
Certificate of Incorporation or Bylaws have any provisions
regarding the treatment of abstentions and broker non-votes. It
is the Company's policy (i) to count abstentions or broker non-
votes for purposes of determining the presence of a quorum at the
Meeting; (ii) to treat abstentions as votes not cast but as
shares represented at the Meeting for determining results on
actions requiring a majority vote; and (iii) to consider neither
abstentions nor broker non-votes in determining results of
plurality votes. Thus, abstentions and broker non-votes have the
effect of a vote against the Devon Energy Corporation 1997 Stock
Option Plan, since approval of such plan requires the affirmative
vote of a majority of the Company's Common Stock present or
represented and entitled to vote at the Meeting.
The cost of solicitation of proxies will be borne by the
Company. Proxies may be solicited by mail or personally by
directors, officers or regular employees of the Company, none of
whom will receive additional compensation therefor. The Company
has also retained Morrow & Co., Inc. to assist in solicitation of
proxies for a fee of $3,500, plus reimbursement of certain
expenses. Those holding shares of the Company's Common Stock of
record for the benefit of others ("Nominee Holders") are being
asked to distribute proxy soliciting materials to, and request
voting instructions from, the beneficial owners of such shares.
The Company will reimburse Nominee Holders for their reasonable
out-of-pocket expenses.
PRINCIPAL SECURITY OWNERSHIP
The table below sets forth as of March 25, 1997, the names
and addresses of each person known by management to own
beneficially more than 5% of the Company's outstanding Common
Stock, the number of shares beneficially owned by each such
stockholder and the percentage of outstanding shares owned. The
table also sets forth the number and percentage of outstanding
shares of Common Stock beneficially owned by the Company's Chief
Executive Officer ("CEO"), each of the Company's directors, the
four most highly compensated executive officers other than the
CEO and by all officers and directors of the Company as a group.
Common Stock
Name and Address of Number of Percent of
Beneficial Owner Shares Class
Kerr McGee Corporation 9,954,000 (1) 30.97%
123 Robert S. Kerr Avenue
Oklahoma City, Oklahoma 73102
Merrill Lynch & Co., Inc. 3,840,065 (2) 11.37%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
J. Larry Nichols* 697,771 (3) 2.16%
Michael E. Gellert* 311,720 (4) 0.97%
Thomas F. Ferguson* 122,100 (5) 0.38%
H. R.Sanders, Jr.* 113,864 (6) 0.35%
John W. Nichols* 101,204 0.31%
Darryl G. Smette 91,800 (7) 0.28%
H. Allen Turner 90,685 (8) 0.28%
J. Michael Lacey 86,365 (9) 0.27%
David M. Gavrin* 73,251 (10) 0.23%
Lawrence H. Towell* 100 0.00%
Luke R. Corbett* 0 0.00%
Tom J. McDaniel* 0 0.00%
All directors and officers of Devon Energy
as a group (16 persons) 1,829,560 (11) 5.57%
<PAGE>
_____________________________________
* Director. The business address of each director is 20 North
Broadway, Suite 1500, Oklahoma City, Oklahoma 73102-8260.
(1) Kerr-McGee acquired these shares on December 31, 1996, in
connection with the Kerr-McGee Transaction. Kerr-McGee
reports shared voting and investment power with respect to
these shares.
(2) Merrill Lynch & Co., Inc. ("ML&Co."), Merrill Lynch Group,
Inc. ("ML Group"), Princeton Services, Inc. ("PSI"), Merrill
Lynch Asset Management, L.P. ("MLAM") and Merrill Lynch
Growth Fund for Investment and Retirement (the "Fund"), have
reported beneficial ownership of these shares. ML&Co., ML
Group and PSI are parent holding companies. MLAM is an
investment advisor. The Fund is an investment company.
ML&Co., ML Group, PSI, MLAM and the Fund report shared
voting and investment power with respect to these shares.
ML&Co., ML Group and PSI disclaim beneficial ownership of
such shares. The number of shares reported includes
1,639,300 shares which MLAM has the right to acquire upon
the conversion of the TCP Securities.
(3) Includes 42,965 shares owned of record by Mr. Nichols as
Trustee of a family trust, 78,624 shares owned by Mr.
Nichols' wife, 12,570 shares owned by Mr. Nichols as trustee
of his children's trusts as to which he exercises sole
voting and investment power, 6,200 shares owned by Mr.
Nichols' son, 6,000 shares owned by Mr. Nichols' daughter
and 217,800 shares which are deemed beneficially owned
pursuant to stock options held by Mr. Nichols.
(4) Includes 309,149 shares owned by Windcrest Partners, a
limited partnership, in which Mr. Gellert shares investment
and voting power.
(5) These shares are owned by Englewood, N.V. The ultimate
parent of Englewood, N.V., Al-Futtooh Investments WLL, is
owned equally by Sheikh Nasser Al-Sabah, Sheikha Salwa Al-
Sabah and Sheikh Hamad Al-Sabah, who each share voting and
investment power. Thomas F. Ferguson is Managing Director of
Englewood N.V. and disclaims beneficial ownership of such
shares.
(6) Includes 111,000 shares which are deemed beneficially owned
pursuant to stock options held by Mr. Sanders.
(7) Includes 89,500 shares which are deemed beneficially owned
pursuant to stock options held by Mr. Smette.
(8) Includes 87,200 shares which are deemed beneficially owned
pursuant to stock options held by Mr. Turner.
(9) Includes 81,200 shares which are deemed beneficially owned
pursuant to stock options held by Mr. Lacey.
(10) Includes 2,141 shares owned by Mr. Gavrin as co-trustee of
the Mark Sandler 1987 Trust and 9,249 shares owned by Mr.
Gavrin's wife.
(11) Includes 724,100 shares which are deemed beneficially owned
pursuant to stock options held by officers.
ELECTION OF DIRECTORS
Pursuant to provisions of the Company's Certificate of
Incorporation and Bylaws, the Board of Directors has fixed the
number of directors at nine. The Company's Certificate of
Incorporation and Bylaws provide for three classes of directors,
serving staggered three-year terms, with each class to be as
nearly equal in number as possible. The Board of Directors has
nominated Thomas F. Ferguson, J. Larry Nichols and Lawrence H.
Towell for re-election as directors for terms expiring at the
annual meeting in the year 2000, and in each case until their
successors are elected and qualified. Proxies cannot be voted
for a greater number of persons than the number of nominees
named. The three nominees are presently directors of the Company
whose terms expire at the Meeting. Other directors who are
remaining on the Board will continue in office in accordance with
their previous elections until the expiration of their terms at
the 1998 or 1999 annual meeting, as the case may be.
The Board of Directors recommends a vote "FOR" each of the
nominees for election to the Board of Directors.
It is the intention of the persons named in the proxy to
vote proxies "FOR" the election of the three nominees. In the
event that any of the nominees should fail to stand for election,
the persons named in the proxy intend to vote for substitute
nominees designated by the Board of Directors, unless the Board
of Directors reduces the number of directors to be elected.
INFORMATION ABOUT NOMINEES AND DIRECTORS
Nominees for Re-election as Directors For Terms Expiring in the
year 2000
Thomas F. Ferguson, age 60, has been a director of Devon
since 1982, and is the chairman of the Audit Committee. He is
Managing Director of Englewood, N.V., a wholly-owned subsidiary
of Kuwaiti-based Al-Futtooh Investments WLL. His 20 year
association with the principals of Al-Futtooh has allowed him to
represent them on the board of directors of Devon and other
companies in which they invest. Those investments include
hotels, pharmaceutical companies, an investment banking company
and a venture capital fund. Mr. Ferguson is a Canadian qualified
Certified General Accountant and was formerly employed by the
Economist Intelligence Unit of London as a financial consultant.
J. Larry Nichols, age 54, co-founded Devon with his father.
He has been a Director since 1971, President since 1976 and Chief
Executive Officer since 1980. He serves as a director of the
Independent Petroleum Association of America (IPAA) and chairs
its Public Lands Committee. He is president of the Domestic
Petroleum Council and is also a director of the Independent
Petroleum Association of New Mexico, the Oklahoma Independent
Petroleum Association and the National Petroleum Council. He
also serves as a director of the National Association of
Manufacturers and of the Oklahoma Nature Conservancy. Mr.
Nichols holds a geology degree from Princeton University and a
law degree from the University of Michigan. He served as a law
clerk to Mr. Chief Justice Earl Warren and Mr. Justice Tom Clark
of the U.S. Supreme Court. Mr. Nichols is a member of the
Oklahoma Bar Association.
Lawrence H. Towell, age 53, was appointed to the Board of
Directors in December, 1996. Mr. Towell is the Vice President of
Acquisitions in the Exploration and Production Division of Kerr-
McGee Corporation, a position he has held since 1984. Prior to
his current position, he served Kerr-McGee in various positions
since 1975, including Vice President of Engineering and Vice
President of Natural Gas Sales. Prior to his employment with
Kerr-McGee, Mr. Towell was manager of HK Properties for Howell-
Kerr Enterprises in Oklahoma City. Prior to his employment at
Howell-Kerr, he worked for Shell Oil Co. for eight years serving
in various engineering capacities in various domestic locations.
Mr. Towell received his bachelor's degree in mechanical
engineering from Yale University. He is a member of the Society
of Petroleum Engineers, the Independent Petroleum Association of
America and the Yale University Science and Engineering
Association.
Directors Whose Terms Expire in 1998
David M. Gavrin, age 62, a director of Devon since 1979,
serves as the chairman of the Compensation and Stock Option
Committee. In addition to managing his personal investments, he
serves as a director of several other companies, including
Heidemij, N.V., a worldwide environmental services company; New
York Federal Savings Bank; and United American Energy Corp., an
independent power producer. In addition, Mr. Gavrin was
associated with Drexel Burnham Lambert Incorporated, a former
investment banking firm, for 14 years as First Vice President and
was a General Partner of Windcrest Partners, an investment
partnership, for 10 years.
Tom J. McDaniel, age 58, was appointed to the Board of
Directors in December, 1996. Mr. McDaniel has been Kerr-McGee
Corporation's Vice-Chairman of the Board of Directors since
February 1, 1997. He joined Kerr-McGee as Associate General
Counsel in 1984, became Senior Vice President in 1986 and served
as Senior Vice President and Corporate Secretary from 1989 to
1997. Prior to joining Kerr-McGee, Mr. McDaniel was engaged in
the private practice of law for 18 years. In 1981 he was
appointed Administrative Director of State Courts by the Oklahoma
Supreme Court. Mr. McDaniel serves on the board of directors of
the National Association of Manufacturers. A member of the
Oklahoma and American Bar Associations, Mr. McDaniel holds an
undergraduate degree in business from Northwestern Oklahoma State
University and a law degree from the University of Oklahoma.
John W. Nichols, age 82, is the co-founder of Devon and has
been Chairman of the Board of Directors since 1971. He is a
founding partner of Blackwood & Nichols Co., which developed the
conventional reserves in the Northeast Blanco Unit of the San
Juan Basin. Mr. Nichols is a non-practicing Certified Public
Accountant.
Directors Whose Terms Expire in 1999
Luke R. Corbett, age 49, was appointed to the Board of
Directors in December, 1996. Mr. Corbett is Kerr-McGee
Corporation's Chairman of the Board of Directors and Chief
Executive Officer, a position he has held since February 1, 1997.
He joined Kerr-McGee in 1985 as Vice President of Geophysics, was
named Senior Vice President of Exploration for the Exploration
and Production Division in 1987, Senior Vice President in 1991
and President and Chief Operating Officer in 1995. Prior to
joining Kerr-McGee, Mr. Corbett was employed by Amoco Production
Company as a geophysicist. He later joined Aminoil, Inc. where
he held the position of Vice President of Domestic Exploration.
Mr. Corbett is also a director of OGE Energy Corp. He is a
member of the American Association of Petroleum Geologists and
the Society of Exploration Geophysicists and is on the board of
the American Petroleum Institute. He is a member of the Domestic
Petroleum Council and a trustee for the American Geological
Institute Foundation and is chairman of the advisory board of the
Energy and Geoscience Institute at the University of Utah. Mr.
Corbett obtained his bachelor's degree in mathematics from the
University of Georgia.
Michael E. Gellert, age 65, has been a director of Devon
since 1971 and is a member of the Compensation and Stock Option
Committee. In addition to managing his personal investments and
serving as a director of Devon, Mr. Gellert serves on the board
of several other companies. These include Humana Inc., owners of
managed health care facilities; Premier Parks, Inc., an amusement
parks operator; Seacor Holdings, Inc., owners and operators of
marine equipment; and Regal Cinemas, Inc., owners and operators
of multiplex motion picture theaters. Mr. Gellert is also a
member of the Putnam Trust Company Advisory Board to The Bank of
New York. Mr. Gellert was associated with the Drexel Burnham
Lambert Group and its predecessors for 31 years, including 17
years as a director, and served in various executive capacities
for its wholly-owned subsidiary, Drexel Burnham Lambert
Incorporated.
H. R. Sanders, Jr., age 64, has been a Director and
Executive Vice President of Devon since 1981. Prior to joining
Devon, Mr. Sanders was associated with RepublicBank Dallas, N.A.
serving from 1970 to 1981 as its Senior Vice President with
direct responsibility for independent oil and gas producer and
mining loans. Mr. Sanders is a member of the IPAA, Texas
Independent Producers and Royalty Owners Association, Oklahoma
Independent Petroleum Association and a past director of Triton
Energy Corporation.
INFORMATION ABOUT EXECUTIVE OFFICERS
The positions held by the executive officers of the Company
are as follows.
J. Michael Lacey, age 51, joined Devon as Vice President -
Operations and Exploration in 1989. Prior to his employment with
Devon, Mr. Lacey served as General Manager in Tenneco Oil
Company's Mid-Continent and Rocky Mountain Divisions. He holds
both undergraduate and graduate degrees in Petroleum Engineering
from the Colorado School of Mines, is a Registered Professional
Engineer and a member of the Society of Petroleum Engineers and
the American Association of Petroleum Geologists.
Duke R. Ligon, age 55, joined Devon on February 17, 1997, as
its Vice President - General Counsel. In addition to his 12
years of energy law practice, most recently as a partner of a
large New York City law firm, he was an investment banker at
Bankers Trust Company of New York for 10 years. Mr. Ligon also
served for three years in various positions with the Federal
Energy Administration, U. S. Department of the Interior and
Department of Energy in Washington D. C. Mr. Ligon's primary
responsibilities at Devon include assisting in the Company's
acquisition efforts and representing the Company in various legal
matters, including litigation. Mr. Ligon holds an undergraduate
degree in business from Westminster College and a law degree from
the University of Texas School of Law.
Darryl G. Smette, age 49, Vice President - Marketing and
Administrative Planning since 1989, joined Devon in 1986 as
Manager of Gas Marketing. Mr. Smette's educational background
includes an undergraduate degree from Minot State College and a
masters degree from Wichita State University. His marketing
background includes 15 years with Energy Reserves Group, Inc./BHP
Petroleum (Americas), Inc., his last position being Director of
Marketing. He is also an oil and gas industry instructor
approved by the University of Texas' Department of Continuing
Education. Mr. Smette is a member of the Oklahoma Independent
Producers Association, the Natural Gas Association of Oklahoma,
the American Gas Association and serves on the Gas Demand
Committee and the Transportation Committee of the Natural Gas
Supply Association.
H. Allen Turner, age 44, has been responsible for Devon's
corporate finance and capital formation activities as Vice
President - Corporate Development since 1982. In 1981 he served
as Executive Vice President of Palo Pinto/Harken Drilling
Programs. For the six prior years he was associated with Merrill
Lynch with various responsibilities including Regional Tax
Investments Manager. He is a member of the Petroleum Investor
Relations Association, and serves on the Independent Petroleum
Association of America ("IPAA") Capital Markets Committee. He is
the current chairman of the IPAA Oil and Gas Investment
Symposium. Mr. Turner received his bachelor's degree from Duke
University.
William T. Vaughn, age 50, is Devon's Vice President -
Finance in charge of commercial banking functions, accounting,
tax and information services. Mr. Vaughn was elected in 1987 to
his present position. Prior to that he was Controller of Devon
from 1983 to 1987. Mr. Vaughn's prior experience includes
serving as Controller with Marion Corporation for two years and
employment with Arthur Young & Co. for seven years with various
duties, including audit manager. He is a Certified Public
Accountant and a member of the American Institute of Certified
Public Accountants and the Oklahoma Society of Certified Public
Accountants. He is a graduate of the University of Arkansas with
a Bachelor of Science degree.
Danny J. Heatly, age 41, has been Devon's Controller since
1989. Prior to joining Devon, Mr. Heatly was associated with
Peat Marwick Main & Co. in Oklahoma City for ten years with
various duties, including senior audit manager. He is a
Certified Public Accountant and a member of the American
Institute of Certified Public Accountants and the Oklahoma
Society of Certified Public Accountants. He graduated with a
Bachelor of Accountancy degree from the University of Oklahoma.
Gary L. McGee, age 47, was elected Treasurer in 1983, having
first served as Devon's Controller. Mr. McGee is a member of the
Executive Committees of both the Rocky Mountain Oil & Gas
Association and the Petroleum Association of Wyoming. Mr. McGee
is also a member of the Petroleum Accounting Society of Oklahoma
City and has been active in various accounting functions with
several companies in the industry. He served as Vice President
of Finance with KSA Industries, Inc., a private holding company
with various interests including oil and gas exploration. Mr.
McGee also held various accounting positions with Adams Resources
and Energy Co. and Mesa Petroleum Company. He received his
accounting degree from the University of Oklahoma.
Marian J. Moon, age 46, was elected Corporate Secretary in
1994. Ms. Moon has served Devon in various capacities since
1984, including her current position as Manager of Corporate
Finance. She has also served as Assistant Secretary with
responsibilities including compliance with SEC and stock exchange
regulations. Prior to joining Devon, Ms. Moon was employed for
eleven years by Amarex, Inc., an Oklahoma City based oil and
natural gas production and exploration firm, where she served
most recently as Treasurer. Ms. Moon is a member of the
Petroleum Investor Relations Association and the American Society
of Corporate Secretaries. She is a graduate of Valparaiso
University.
MEETINGS AND COMMITTEES OF THE BOARD
During 1996, the Board of Directors of the Company held four
regular meetings and one special meeting. All directors attended
(a) all of meetings of the Board of Directors and (b) all of the
meetings held by committees of the Board on which they served.
The Board of Directors has standing audit, compensation and stock
option, and dividend committees. It does not have a standing
nominating committee.
Mr. Ferguson is the sole member of the Company's Audit
Committee. The Audit Committee meets with the Company's
independent public accountants and reviews the consolidated
financial statements of the Company on a regular basis. The
functions of the Audit Committee consist of recommending
independent accountants to the Board of Directors; approving the
nature and scope of services performed by the independent
accountants and reviewing the range of fees for such services;
conferring with the independent accountants and reviewing the
results of their audit; reviewing the Company's accounting and
financial controls; and providing assistance to the Board of
Directors with respect to the corporate and reporting practices
of the Company. The Board of Directors, as recommended by the
Audit Committee, has selected KPMG Peat Marwick LLP to serve as
the Company's independent public accountants for the fiscal year
ending December 31, 1997. The Audit Committee met two times
during 1996.
The Compensation and Stock Option Committee, which consists
of Messrs. Gavrin (Chairman) and Gellert, determines the nature
and amount of compensation of all executive officers of the
Company who are also directors and the amount and terms of stock
options granted to all employees. In addition, this committee
provides guidance to and makes recommendations to management
regarding employee benefit programs. The Compensation and Stock
Option Committee held one meeting in 1996.
The Dividend Committee, which consists of Messrs. J. Larry
Nichols (Chairman) and H. R. Sanders, determines the timing and
extent to which dividends on Common Stock will be declared. The
Dividend Committee held four meetings in 1996.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information regarding annual
and long-term compensation during 1994, 1995 and 1996 for the
chief executive officer ("CEO") and the four most highly
compensated executive officers, other than the CEO, who were
serving as executive officers of the Company on December 31,
1996.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Compensation<F2>
---------------------------------- ----------------
Principal Awards of All Other
Name Position Year Salary Bonus Other<F1> Options/SAR's<F3> Compensation<F4>
- ---- -------- ----- ------ ----- ----- ----------------- ----------------
# Shares
---------
<S> <S> <C> <C> <C> <C> <C> <C>
J. L. Nichols President & CEO 1996 $325,000 $500,600 -- 40,000 $3,000
1995 $300,000 $200,600 -- 36,000 $3,000
1994 $275,000 $200,600 -- 72,000 $3,000
H.R. Sanders, Jr. Executive Vice 1996 $255,710<F5> $125,600 -- -- $3,000
President 1995 $240,710<F5> $175,600 -- 27,000 $3,000
1994 $230,710<F5> $118,988 -- 54,000 $3,000
J. M. Lacey Vice President 1996 $210,000 $90,600 -- 20,000 $3,000
1995 $200,000 $65,600 -- 18,000 $3,000
1994 $190,000 $67,618 -- 36,000 $3,000
D. G. Smette Vice President 1996 $168,000 $90,600 -- 20,000 $3,000
1995 $160,000 $65,600 -- 18,000 $3,000
1994 $155,500 $67,019 -- 36,000 $3,000
H. A. Turner Vice President 1996 $168,000 $90,600 -- 20,000 $3,000
1995 $160,000 $65,600 -- 18,000 $3,000
1994 $155,500 $67,019 -- 36,000 $3,000
<FN>
<F1> Excludes other compensation which, in aggregate, does not
exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported for the named executive officer.
<F2> No awards of restricted stock or payments under long-term
incentive plans were made by the Company to any of the named
executives in any period covered by the table.
<F3> Two option grants were made in 1994 as a result of a change
in the timing of the grant dates from mid-year to year-end.
One grant was made in 1995, and one was made in 1996. It is
anticipated that future consideration of option grants will
be made only once per year, at year-end.
<F4> These amounts represent Company matching contributions to the
Devon Energy Incentive Savings Plan.
<F5> Includes $10,710 of interest imputed at the fair market rate
of 9% on a non-interest bearing note payable to Devon in the
amount of $119,000, executed by Mr. Sanders and secured by a
first mortgage on his home.
</FN>
</TABLE>
Option Grants in 1996
The following table sets forth information concerning
options to purchase Common Stock granted in 1996 to the five
individuals named in the Summary Compensation Table. The
material terms of such options appear in the following table and
the footnotes thereto.
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------
Percent of Total Exercise
Options Options Granted to Price Per Expiration Grant Date
Name Granted Employees in 1996 Share<F1> Date Present Value<F2>
- ----- ------- ----------------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
J. Larry Nichols 40,000<F3> 16.1% $32.50 12/15/2006 $518,800
H. R. Sanders, Jr. -- -- n/a n/a --
J. Michael Lacey 20,000<F4> 8.0% $32.50 12/15/2006 $259,400
Darryl G. Smette 20,000<F4> 8.0% $32.50 12/15/2006 $259,400
H. Allen Turner 20,000<F4> 8.0% $32.50 12/15/2006 $259,400
<FN>
<F1> Exercise price is the fair market value on the date of
grant, determined by calculating the average of the high and
low prices of Common Stock, as reported by the American Stock
Exchange, for the date of grant.
<F2> The grant date present value is an estimation of the possible
future value of the option grant based upon one of the
methods prescribed by the Securities and Exchange Commission,
the Binomial Option Pricing Model. This model uses the past
performance of a stock to predict the future value of a stock
option. The following assumptions were used in the model:
volatility (a measure of the historic variability of a stock
price) - 33.9%; risk-free interest rate (the interest paid by
zero-coupon U.S. government issues with a remaining term
equal to the expected life of the options) - 6.3% per annum;
annual dividend yield - 0.6%; and expected life of the
options - five years from grant date. The option value
estimated using this model does not necessarily represent the
value to be realized by the named officers.
<F3> These options, which were granted December 16, 1996, were
immediately vested and exercisable.
<F4> These options, which were granted on December 16, 1996, were
immediately vested and exercisable. However, 80% of the
unexercised portion of such options are subject to forfeiture
upon the officer's voluntary termination or termination for
cause prior to December 16, 1997. This percentage decreases
20% in each subsequent year. After December 16, 2000, no
options are subject to forfeiture.
</FN>
</TABLE>
Aggregated Option Exercises in 1996 and Year-End Option Values
The following table sets forth information for the five
individuals named in the Summary Compensation Table concerning
their exercise in 1996 of options to purchase Common Stock and
the unexercised options to purchase Common Stock held by the
named individuals at December 31, 1996.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at 12/31/96 at 12/31/96 <F2>
-------------------------- --------------------------
Number of Shares
Acquired Upon Value
Name Exercise Realized<F1> Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Larry Nichols -- $ -- 207,600 14,400 $2,700,175 $109,575
H. R. Sanders, Jr. 20,000 $420,000 106,800 4,200 $1,323,713 $ 48,038
J. Michael Lacey 4,500 $75,656 73,600 34,400 $1,026,250 $281,000
Darryl G. Smette 4,000 $110,750 81,900 34,400 $1,223,663 $281,000
H. Allen Turner 12,500 $208,594 79,600 34,400 $1,152,250 $281,000
<FN>
<F1> The value realized equals the aggregate amount of the excess
of the fair market value (the average of the high and low
prices of the Common Stock as reported by the American Stock
Exchange on the exercise date) over the relevant exercise
price.
<F2> The value is based on the aggregate amount of the excess of
$34.75 (the closing price as reported by the American Stock
Exchange for December 31, 1996) over the relevant exercise
price for outstanding options that were exercisable and in-
the-money at year-end.
</FN>
</TABLE>
Compensation Pursuant to Plans
Long-term Incentive Plans. Devon has outstanding stock
options issued to certain of its executive officers and employees
under two stock option plans adopted in 1988 and 1993 (the "1988
Plan" and the "1993 Plan"). Options granted under the 1988 Plan
remain exercisable by the employees owning such options, but no
new options will be granted under the 1988 Plan. At December 31,
1996, 15 participants held options granted under the 1988 Plan.
Effective June 7, 1993, Devon adopted the 1993 Plan and
reserved one million shares of Common Stock for issuance
thereunder to key management and professional employees.
The exercise price of incentive stock options granted under
the 1993 Plan may not be less than the estimated fair market
value of the stock on the date of grant, plus 10% if the grantee
owns or controls more than 10% of the total voting stock of Devon
prior to the grant. The exercise price of non-qualified options
granted under the 1993 Plan may not be less than 75% of the fair
market value of the stock on the date of grant. (However, no
options have been granted under such plan for less than 100% of
the fair market value of the stock on the date of grant.)
Options granted are exercisable during a period established for
each grant, which period may not exceed 10 years from the date of
grant. Under the 1993 Plan, the grantee must pay the exercise
price in cash or in Common Stock, or a combination thereof, at
the time the option is exercised. The 1993 Plan expires on April
25, 2003. However, the 1993 Plan will be canceled and no
additional shares will be granted thereunder if the Devon Energy
Corporation 1997 Stock Option Plan is approved and adopted (See
"Proposal to Adopt the Devon Energy Corporation 1997 Stock Option
Plan"). As of December 31, 1996, 23 participants held options
granted under the 1993 Plan.
The Company has no other plans that provide compensation
intended to serve as incentive for performance to occur over a
period longer than one fiscal year.
Retirement Plan. Devon maintains a defined benefit
retirement plan (the "Basic Plan") which provides benefits based
upon past and future employment service with Devon. Each eligible
employee who retires is entitled to receive annual retirement
income, computed as a percentage of "final average compensation"
(which consists of the average of the highest three consecutive
years' salaries, wages, and bonuses out of last ten years), and
credited years of service up to 25 years. Contributions by
employees are neither required nor permitted under the Basic
Plan. Benefits are computed based on straight-life annuity
amounts and are reduced by Social Security payments. All of the
executive officers except John W. Nichols participate in the
Basic Plan.
The following table illustrates estimated annual benefits
payable upon retirement under the Basic Plan to employees in
specified compensation and years of service classifications,
assuming a normal retirement in 1996 at age 65.
Years of Service
-------------------------------------
Final Average Compensation 15 20 25
- -------------------------- --------- ------- --------
$50,000 $10,000 $16,400 $22,900
$100,000 $25,800 $38,800 $51,800
$150,000 $45,300 $64,800 $84,300
The maximum annual compensation that can be considered is
$150,000, subject to adjustments in accordance with regulations
of the Internal Revenue Service. Accordingly, only $150,000 of
compensation for each of the five individuals named in the
Summary Compensation Table is considered by the Basic Plan.
The following table sets forth the credited years of service
under Devon's Basic Plan for each of the five individuals named
in the Summary Compensation Table.
Credited
Years of Service
Name of Individual (Through December 31, 1996)
-------------------- ---------------------------
J. Larry Nichols 26 years
H. R. Sanders, Jr. 15 years
J. Michael Lacey 7 years
H. Allen Turner 15 years
Darryl G. Smette 10 years
Supplemental Retirement Plan. Effective July 1, 1995, Devon
established a non-qualified deferred compensation plan (the
"Supplemental Plan"), the purpose of which is to provide
supplemental retirement income to certain selected key management
and highly compensated employees because their annual
compensation is greater than the maximum annual compensation that
can be considered in computing their benefits under the Company's
Basic Plan. An employee must be selected by the Compensation and
Stock Option Committee in order to be eligible for participation
in the Supplemental Plan. All of the five individuals named in
the Summary Compensation Table and two additional executive
officers, Duke R Ligon and William T. Vaughn, have been selected
to participate in the Supplemental Plan. Each eligible
participant's supplemental retirement income will equal 65% of
his final average compensation, multiplied by a fraction, the
numerator of which is his credited years of service (not to
exceed 20) and the denominator of which is 20 (the denominator is
16 for H. R. Sanders, Jr.), less any offset amounts. Offset
amounts are (i) retirement benefits payable to the participant
under the Basic Plan, (ii) benefits due to the participant under
Social Security, and (iii) any benefits which are paid to the
participant under the Company's long-term disability plan. The
Supplemental Plan is currently unfunded.
Supplemental Retirement Income Agreement. Effective March
25, 1997, the Board established a nonqualified deferred
compensation plan for John W. Nichols. Upon his retirement as an
employee of Devon, in lieu of his current compensation as an
employee and Chairman of the Board, Mr. Nichols will receive the
compensation received by non-employee directors plus a pension of
$180,000 per year. Upon Mr. Nichols' death, $100,000 per year
will be paid as survivor's benefit to Mr. Nichols' wife for the
remainder of her life. Mr. Nichols does not participate in
either the Basic Plan or the Supplemental Plan.
Mr. Nichols has notified the Board of Directors that he
intends to retire as an employee of the Company on April 30,
1997, but will continue to serve as Chairman of the Board.
Severance Agreements
Pursuant to severance agreements, each of the five
individuals named in the Summary Compensation Table is entitled
to certain compensation ("Severance Payment") in the event that
his employment with the Company is terminated (a) within one year
of the acquisition by the Company of reserves or assets which
result in the reserves or assets of the Company increasing by at
least 20% or (b) within two years of a change in control of the
Company. "Change of control" is defined in the agreements as
being an event which results in an entity or group acquiring
either (i) 30% or more of the Company's outstanding voting
securities, or (ii) less than 30% of the outstanding voting
securities, but which a majority of the Board of Directors
determines has caused a change in control. In either case the
Severance Payment would be approximately equal to two times the
individual's annual compensation.
The Company also has severance agreements with Mr. William
T. Vaughn, Vice President - Finance and Duke R. Ligon, Vice
President - General Counsel, with terms identical to the above-
referenced severance agreements.
Employment Agreement
The Company has an Employment Agreement with Duke R. Ligon
dated February 7, 1997, which has an initial term of two years
and, unless sooner terminated, shall automatically renew for an
additional two year term. The Employment Agreement provides that
Mr. Ligon will be paid a base salary at the annual rate of
$200,000 and will be eligible to participate in other incentive
compensation and benefit arrangements provided to other employees
of the Company. The Employment Agreement also provides that Mr.
Ligon will be eligible to participate in the Company's 1993 Stock
Option Plan and shall be granted a nonqualified stock option to
purchase at least 30,000 shares of the Company's Common Stock at
a price not greater than fair market value on the date of grant.
Mr. Ligon was granted an option to purchase 30,000 shares on
February 10, 1997, at an exercise price of $32.81. One-third of
these options vest on each of the first, second and third
anniversaries of the grant date.
If the Company terminates Mr. Ligon's employment other than
for cause or by reason of his death or disability, or if Mr.
Ligon terminates for good reason within 24 months following a
change of control, the Company shall pay to Mr. Ligon a cash lump
sum payment equal to his earned but unpaid base salary plus his
base salary otherwise payable to him for the remainder of his
employment term.
Director Compensation
Non-management directors of Devon receive an annual retainer
of $20,000, payable quarterly, plus $1,000 for each Board meeting
attended. Also, directors serving as chairmen of the standing
committees of the Board of Directors receive an additional $2,000
per year. Committee members who attend the meetings of their
standing committee receive $1,000 per meeting. John W. Nichols,
Chairman of the Board, received $185,600 in 1996 as payment for
his services as an employee and as Chairman of the Board.
If the 1997 Stock Option Plan is approved and adopted at the
Meeting, nonemployee directors will be entitled to receive grants
of stock options in addition to their cash remuneration. (See
"Proposal to Adopt the Devon Energy Corporation 1997 Stock Option
Plan - Stock Option Awards to Non-Employee Directors.")
Compensation and Stock Option Committee Report on Executive
Compensation
The Compensation and Stock Option Committee of the Board of
Directors (the "Committee") establishes the general compensation
policies of the Company. The Committee meets in November or
December of each year to establish specific compensation levels
for the CEO, the Executive Vice President ("EVP") and the
Chairman of the Board and to review the executive officers'
compensation in general. (The compensation for executive
officers other than the CEO, EVP and Chairman of the Board is
determined by the CEO and EVP.)
The Committee's goal in setting executive compensation is to
motivate, reward and retain management talent who support the
Company's goals of increasing absolute and per share growth for
shareholders. This goal is carried out through awards of base
salary, annual cash bonuses and stock options.
The Committee generally believes that the total cash
compensation of its CEO, EVP and other executive officers should
be similar to the total cash compensation of similarly situated
executives of peer group public companies within the oil and gas
industry. Further, a significant portion of the complete
compensation package should be tied to the Company's success in
achieving long-term growth in per share earnings, cash flow,
reserves and stock price.
Base Salary. A competitive base salary is considered vital
to support the continuity of management and is consistent with
the long-term nature of the oil and gas business. The Committee
believes that the base salaries of the executive officers should
be similar to the base salaries of executive officers of similar
companies within the oil and gas industry. Therefore, no
performance criteria are applied to the base salary portion of
the total compensation. Performance of the Company versus its
peers is, however, given significant weight in the cash bonus and
stock option portions of compensation.
The CEO's base salary for 1996 was based upon information
available to the Committee at its December, 1995 meeting. At
that meeting the Committee established a peer group of 16
companies to which Devon should be compared. This peer group
included companies which are similar to Devon in total revenues,
balance sheet ratios, oil and gas reserves and overall oil and
gas operations. (The industry group index in the Performance
Graph included in this proxy statement includes, but is not
limited to, the companies used for this compensation analysis.
In its analysis, the Committee specifically focused on those
companies that are most similar to Devon in size, financial
structure and operations, believing that the most direct
comparisons would not necessarily include all of the more than
200 companies included in the industry group index used for the
Performance Graph.)
A review of the base salaries for the highest-paid executive
at each of these peer companies revealed that the 1995 base
salary of the CEO was at the low end of the range of all base
salaries in the group, and only 83% of the average base salary
for the group. As a result of this finding, the Committee
increased the CEO's base salary for 1996 by 8% to improve his
base salary in relationship to the peer group.
The Committee used similar criteria to evaluate the base
salary for Devon's EVP. However, the EVP's base salary was a
somewhat higher percentage than that of the CEO in relationship
to the peer group. While the EVP's base salary was at the low
end of the range of all base salaries for the second-highest paid
executives in the peer group, it was 97% of the average base
salary. As a result of this finding the Committee increased the
EVP's base salary by 6% to keep his base salary competitive with
the group.
The Committee advised the CEO and EVP that similar criteria
should be used to evaluate the base salaries of the other
executive officers of the Company.
Cash Bonuses. The Committee believes that the officers'
cash bonuses should be tied to Devon's success in meeting its
corporate goals and budgets and in achieving growth in comparison
to those of the Company's industry peers and to the individual
officers' contribution to such success. Cash bonuses for
calendar year 1996 were set at the November, 1996 Committee
meeting. In setting the cash bonus for the CEO for the calendar
year 1996, the Committee reviewed the performance of the peer
group of 17 oil and gas companies. (One company on the prior
year's list had merged with another company, and two other
companies similar to Devon were added.)
The Committee reviewed Devon's growth over the last three
years, compared with the peer group average on a number of
different measures, notably, change in earnings per share, cash
flow per share, reserves per share and stock price. Devon's
growth in reserves per share, earnings per share and stock price
exceeded that of the peer group average for the years reviewed.
The growth in cash flow per share and in the net value per share
was somewhat less than the peer group average. However, the
Committee particularly noted the unique value of the CEO's
efforts in connection with the Kerr-McGee Transaction,
consummated on December 31, 1996. As a result of this analysis,
the Committee awarded the CEO a cash bonus of $500,000. This
award resulted in his total compensation for 1996 being 130% of
the average total 1995 compensation for the highest-paid
executives of the companies in the peer group.
The Committee used the same criteria to evaluate the cash
bonus for the EVP. As a result of this analysis, the Committee
awarded him a cash bonus of $125,000. This award resulted in his
total compensation for 1996 being 87% of the average total 1995
compensation for the second highest-paid executives of companies
in the peer group.
The Committee advised the CEO and EVP that similar criteria
should be used in establishing cash bonuses for the other
executive officers.
Stock Options. The Committee desires to reward key
management and professional employees for long-term strategic
management practices and enhancement of shareholder value through
the award of stock options. Stock options are granted at an
option price equal to the fair market value of the Common Stock
on the grant date. The grant of these options and the optionees'
holdings of unexercised options and/or ownership of exercised
option shares is designed to closely align the interests of the
executive officers with those of the shareholders. The ultimate
value of the stock options will depend on the continued success
of the Company, thereby creating a continuing incentive for
executive officers to perform long after the initial grant.
Stock options were awarded to the CEO and other executive
officers in December, 1996. Due to the EVP's planned retirement
during 1997, no stock options were awarded to him in 1996.
The award of options is based generally upon the same
criteria as that used for the award of cash bonuses; that is,
more options are awarded if the Company performs well in
relationship to its peers, and less or none are awarded if the
Company does not perform well. In addition, the Committee wants
to encourage executives to maintain ownership of Company stock
and/or unexercised options. Although there are no specific
ownership criteria used in awarding options, long-term ownership
is viewed favorably. The Committee noted that Devon's officers
as a group still retain over 78% of all options (both vested and
unvested) granted to them.
The Committee generally seeks to award no more than 1% of
the outstanding shares in any one year, and further desires to
keep the total number of shares under option and available for
option to less than 10% of the total shares outstanding. As of
December 31, 1996, there were 1,202,000 shares under option and
88,700 shares available for option, which were 3.7% and 0.3%,
respectively, of the total shares outstanding.
Policy on Deductibility of Compensation. Section 162(m) of
the Internal Revenue Code limits the tax deduction to $1 million
for compensation paid to any one executive officer, unless
certain requirements are met. The Committee presently intends
that all compensation paid to executive officers will meet the
requirements for deductibility under Section 162(m). However,
the Committee may award compensation which is not deductible
under Section 162(m) if it believes that such awards would be in
the best interest of the Company or its shareholders.
Intention to Submit a Compensation Plan to the Shareholders.
The Board of Directors has approved a new stock option plan which
is being submitted to the shareholders for approval at the
Meeting. (See "Proposal to Adopt the Devon Energy Corporation
1997 Stock Option Plan.") The Committee has no present intention
of submitting any other compensation plans to the shareholders
for approval which would result in the issuance of more than 5%
of the Company's outstanding Common Stock.
We believe that the Company has an appropriate compensation
structure which properly rewards and motivates its executive
officers to build shareholder value.
As to Compensation to As to Compensation
the CEO and EVP to Executive Officers
other than the CEO and EVP
David M. Gavrin, Chairman J. Larry Nichols
Michael E. Gellert H. R. Sanders, Jr.
Compensation Committee Interlocks
The Compensation Committee is composed of two independent,
non-employee directors, Mr. Gavrin and Mr. Gellert. These
directors have no interlocking relationships as defined by the
Securities and Exchange Commission.
Performance Graph
The following performance graph compares the Company's
cumulative total stockholder return on its Common Stock for the
five-year period from December 31, 1991 to December 31, 1996,
with the cumulative total return of the Standard & Poor's 500
stock index and the Stock Index by Standard Industrial
Classification Code ("SIC Code") for Crude Petroleum and Natural
Gas. The SIC Code for Crude Petroleum and Natural Gas is 1311.
The identities of the 200+ companies included in the index will
be provided upon request.
CUMULATIVE TOTAL RETURN*
THE COMPANY, S&P 500, AND SIC CODE INDEX
FOR CRUDE PETROLEUM AND NATURAL GAS
FISCAL YEAR ENDING
------------------------------------------------
COMPANY 1991 1992 1993 1994 1995 1996
_____ ____ ____ ____ ____ ____
DEVON ENERGY CORP. 100 169.01 233.36 207.73 291.82 399.86
INDUSTRY INDEX 100 94.95 113.13 118.56 130.39 173.38
BROAD MARKET 100 107.64 118.50 120.06 165.18 203.11
Assumes $100 invested on December 31, 1991, in Devon Energy
Corporation Common Stock, S&P 500 Index and SIC Code Index for
Crude Petroleum and Natural Gas.
* Total return assumes reinvestment of dividends.
<PAGE>
PROPOSAL TO ADOPT THE DEVON ENERGY CORPORATION
1997 STOCK OPTION PLAN
General
In order to permit the Company to grant stock options to
certain employees and directors, it is proposed that the
shareholders approve the Devon Energy Corporation 1997 Stock
Option Plan (the "1997 Plan"). Upon approval of the 1997 Plan,
ungranted options under the 1993 Plan will be canceled.
On March 26, 1997, the Board of Directors, subject to
shareholder approval, adopted the 1997 Plan which will have the
effect of authorizing the Company through the Compensation and
Stock Option Committee of the Board of Directors (the
"Committee") to grant stock options to employees and directors of
the Company ("Participants"). The Board of Directors has
reserved 2,000,000 shares of Common Stock for grant to
Participants designated by the Committee under the 1997 Plan. A
description of the 1997 Plan appears below. A copy of the 1997
Plan is attached to this proxy statement as Exhibit "A," and the
description contained herein is qualified in its entirety by
reference to the complete text of the 1997 Plan.
Background
The purpose of the 1997 Plan is to create incentives that
are designed to motivate employees and directors of the Company
to put forth maximum efforts toward the success and growth of the
Company and to enable the Company to attract and retain
experienced individuals who by their position, ability and
diligence are able to make important contributions to the
Company's success. Toward these objectives, the 1997 Plan
provides for the granting of stock options.
Administration
The 1997 Plan will be administered by the Committee. Among
the powers granted to the Committee are the powers to interpret
the 1997 Plan, establish rules and regulations for its operation,
select employees of the Company and its subsidiaries to receive
awards and determine the timing, form, amount and other terms and
conditions pertaining to employee awards. The Committee may also
select nonemployee directors of the Company to receive awards and
determine the vesting schedule of such awards. However, such
awards may only be made at the times and up to the amounts
specified in the 1997 Plan. (See "- Stock Option Awards to
Nonemployee Directors" below.)
Eligibility for Participation
Any employee of the Company or its subsidiaries and any
nonemployee director of the Company is eligible to participate in
the 1997 Plan. The selection of Participants from among
employees and directors is within the discretion of the
Committee.
Types of Awards
The 1997 Plan provides for the granting of both stock
options intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code ("ISOs") and
nonqualified stock options that do not qualify as ISOs ("NQOs").
Awards of either ISOs or NQOs may be granted to employees.
Nonemployee directors may be granted only NQOs.
Other Components of the 1997 Plan
The 1997 Plan authorizes the Committee to grant awards
during the period beginning March 26, 1997, subject to
shareholder approval at the Meeting, and ending March 25, 2007.
Two million shares of Common Stock have been reserved for
issuance subject to awards under the 1997 Plan. Shares of Common
Stock reserved for option awards that terminate by expiration,
forfeiture, cancellation or otherwise without the issuance of
shares will again be available for grant under the 1997 Plan.
Stock Option Awards to Employees
Under the 1997 Plan, the Committee may grant awards to
employees in the form of options to purchase shares of Common
Stock. The Committee will, with regard to each option, determine
the terms and conditions of such option, the number of shares
subject to the option and the manner and time of the option's
exercise. The exercise price of an option may not be less than
the fair market value of the Common Stock on the date of grant.
The exercise price of an option may be paid by a Participant in
cash, shares of Common Stock or a combination thereof. Subject to
the adjustment provisions of the 1997 Plan, the aggregate number
of shares of Common Stock made subject to the award of options to
any Participant in any year may not exceed 50,000.
Stock Option Awards to Nonemployee Directors
The 1997 Plan provides for the grant of NQOs to nonemployee
directors. Such directors are eligible to receive stock option
grants of up to 3,000 shares immediately after each annual
meeting of shareholders at an exercise price equal to the fair
market value of the Common Stock on that date. Any unexercised
options will expire ten years after the date of grant. As an
initial grant, each nonemployee director will receive a stock
option grant of 3,000 shares immediately after the Meeting,
assuming the 1997 Plan is approved at the Meeting.
The Committee may elect to grant awards that are less than
the maximum share amount specified in the 1997 Plan and may
determine the vesting schedule for such grants. However, the
Committee will have no other discretion regarding awards to
nonemployee directors.
Adjustments
The total number of shares of the Common Stock which may be
purchased through options under the 1997 Plan and the number of
shares subject to outstanding options and the related option
process will be adjusted in the case of changes in capital
structure, resulting from any recapitalization, stock split,
stock dividend or similar transaction.
Change of Control
In the case of a "Corporate Event" as defined in the 1997
Plan, all NQOs and ISOs will become automatically fully vested
and immediately exercisable, with such acceleration to occur
without the requirement of any further act by the Company or the
Participant. For the definition of Corporate Event, see Article
IX of the 1997 Plan attached hereto as Exhibit "A." In the case
of either a "Change of Control Date" or an "Acquisition Date"
options may become automatically vested and fully exercisable,
provided the Committee makes such provision in the grant of the
award. See Sections 2.1 and 2.6 of Article II of the 1997 Plan
for definitions of Acquisition Date and Change of Control Date,
respectively.
Termination and Amendment
The 1997 Plan terminates as of midnight, March 25, 2007, but
prior thereto may be suspended or terminated by the Board of
Directors. In addition, the Board of Directors may, from time to
time, amend the 1997 Plan in any manner, but not without
shareholder approval of any amendment which would increase the
number of shares of Common Stock available under the 1997 Plan or
decrease the exercise price to less than the fair market value of
the Common Stock on the date of grant. Any other amendment to
the 1997 Plan would also require shareholder approval if, in the
opinion of counsel to the Company, such approval is required by
any federal or state law, rule or regulation.
Federal Tax Treatment
Under current federal tax law, the following are the federal
tax consequences generally arising with respect to awards under
the 1997 Plan. A Participant who is granted an ISO does not
realize regular taxable income at the time of the grant or at the
time of exercise, but only at the time of disposition of the
shares. The Participant does, however, realize alternative
minimum taxable income at the time of exercise equal to the
difference between the exercise price and the market value of the
shares on the date of exercise. The Company is not entitled to
any deduction at the time of grant or at the time of exercise.
However, if the Participant makes no disposition of the shares
acquired pursuant to an ISO before the later of two years from
the date of grant or one year from the date the option is
exercised, any gain or loss realized on a subsequent disposition
of the shares will be treated as a long-term capital gain or
loss. Under such circumstances, the Company will not be entitled
to any deduction for federal income tax purposes. If the
Participant makes a disposition prior to such times, the Company
is entitled to a deduction equal to the value of such shares.
The Participant who is granted a NQO does not have taxable
income at the time of grant, but does have taxable income at the
time of exercise equal to the difference between the exercise
price of the shares and the market value of the shares on the
date of exercise. The Company is entitled to a corresponding
deduction for the same amount.
Withholding Taxes
The Company will have the right to require a Participant to
remit to the Company, in cash, an amount sufficient to satisfy
federal, state and local withholding requirements, if any, prior
to the delivery of any certificate for shares of Common Stock
acquired pursuant to the exercise of the options.
Notwithstanding the foregoing, a Participant may tender to the
Company a number of shares of Common Stock or the Company may
withhold a number of shares of Common Stock the fair market value
of which will satisfy the federal and state tax requirements.
New Plan Benefits
Since the grant of options to directors on the Meeting Date
will be made at the current fair market value, there will be no
immediate benefits to such directors. The future benefits or
dollar amounts to be received by the directors, the executive
officer group or all officers and directors as a group under the
1997 Plan are not possible to determine, as such future value
will depend upon the success of such directors, officers and
other employees in causing the Company's value to increase.
The Board of Directors recommends a vote "FOR" the proposal
to approve the adoption of the Devon Energy Corporation 1997
Stock Option Plan.
CERTAIN TRANSACTIONS
In 1986, H. R. Sanders, Jr., Executive Vice President and a
director of Devon, executed a non-interest bearing note in favor
of Devon in the principal amount of $125,000, to evidence his
borrowings from Devon. This note, which was executed as part of
Mr. Sanders' employment agreement with Devon, was made on terms
favorable to him to induce him to move to Oklahoma City. The
employment agreement was entered into on February 8, 1981 and
expired December 31, 1987. The note, which is due on demand, is
secured by a first mortgage on Mr. Sanders' personal residence.
As of December 31, 1996, the outstanding balance of the note was
$119,000.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder desiring to present a proposal for action at
the 1998 Annual Meeting of Stockholders of the Company must
present the proposal to the Secretary of the Company not later
than December 1, 1997. Only those proposals that comply with the
requirements of Rule 14a-8 promulgated under the Securities
Exchange Act of 1934 will be included in the Company's proxy
statement for the 1998 Annual Meeting. No stockholder proposals
were received by the Company for inclusion in this proxy
statement.
OTHER MATTERS
The Board of Directors of the Company knows of no other
matter to come before the Meeting other than that set forth
herein and in the accompanying Notice of Annual Meeting of
Stockholders. However, if any other matters should properly come
before the Meeting, it is the intention of the persons named in
the accompanying proxy to vote such proxies as they deem
advisable in accordance with their best judgment.
Your cooperation in giving this matter your immediate
attention and in returning your proxy promptly will be
appreciated.
BY ORDER OF THE BOARD OF DIRECTORS
Marian J. Moon
Corporate Secretary
April 3, 1997
<PAGE>
EXHIBIT A
DEVON ENERGY CORPORATION
1997 STOCK OPTION PLAN
<PAGE>
DEVON ENERGY CORPORATION
1997 STOCK OPTION PLAN
Table of Contents
Page
ARTICLE I PURPOSE A-1
Section 1.1 Purpose A-1
Section 1.2 Establishment A-1
Section 1.3 Shares Subject to the Plan A-1
Section 1.4 Shareholder Approval A-1
ARTICLE II DEFINITIONS A-1
ARTICLE III ADMINISTRATION A-4
Section 3.1 Administration by Committee A-4
Section 3.2 Committee to Make Rules and
Interpret Plan A-5
ARTICLE IV GRANT OF AWARDS A-5
Section 4.1 Committee to Grant Awards A-5
ARTICLE V ELIGIBILITY A-5
ARTICLE VI STOCK OPTIONS A-6
Section 6.1 Grant of Options A-6
Section 6.2 Conditions of Options A-6
Section 6.3 Options Not Qualifying as
Incentive Stock Options A-7
ARTICLE VII STOCK ADJUSTMENTS A-8
ARTICLE VIII GENERAL A-8
Section 8.1 Amendment or Termination of Plan A-8
Section 8.2 Acceleration of Otherwise
Unexercisable Stock Options on Death,
Disability or Other Special Circumstances A-8
Section 8.3 Non-Transferability of Options A-9
Section 8.4 Withholding Taxes A-9
Section 8.5 Amendments to Awards A-9
Section 8.6 Securities Laws A-9
Section 8.7 Change of Control A-9
Section 8.8 No Right to Continued Employment A-9
Section 8.9 Reliance on Reports A-9
Section 8.10 Construction A-10
Section 8.11 Incentive Stock Options and
Nonqualified Stock Options Granted Separately A-10
Section 8.12 Governing Law A-10
ARTICLE IX ACCELERATION OF OPTIONS UPON CORPORATE EVENT A-10
<PAGE>
ARTICLE I
PURPOSE
Section 1.1 Purpose. This Stock Option Plan is
established by Devon Energy Corporation, an Oklahoma corporation
(the "Company") to create incentives which are designed to
motivate participants to put forth maximum effort toward the
success and growth of the Company and to enable the Company to
attract and retain experienced individuals who by their position,
ability and diligence are able to make important contributions to
the Company's success. Toward these objectives, the Plan
provides for the granting of Options to Participants on the terms
and subject to the conditions set forth in the Plan.
Section 1.2 Establishment. The Plan is effective as of
March 26, 1997, and for a period of 10 years from such date. The
Plan will terminate on March 25, 2007, however; it will continue
in effect until all matters relating to the payment of Awards and
administration of the Plan have been settled.
Section 1.3 Shares Subject to the Plan. Subject to
Articles IV, VII and VIII of this Plan, shares of stock covered
by Options shall consist of 2,000,000 shares of Common Stock.
Section 1.4 Shareholder Approval. The Plan shall be
approved by the holders of a majority of the outstanding shares
of Common Stock present, or represented, and entitled to vote at
a meeting called for such purposes, which approval must occur
within the period ending twelve months after the date the Plan is
adopted by the Board. Pending such approval by the shareholders,
Awards under the Plan may be granted to Participants, but no such
Awards may be exercised or paid prior to receipt of shareholder
approval. In the event shareholder approval is not obtained
within such twelve-month period, all such Awards shall be void.
ARTICLE II
DEFINITIONS
Section 2.1 "Acquisition Date" means the date on which
the Company completes the acquisition of oil and gas properties,
or assets, or a business entity owning such properties or assets
under an acquisition contract ("Acquisition Contract") which
results in a 20% or more increase in the total oil and gas
reserves or total assets of the Company.
(i) For purposes of determining if the 20%
increase in total oil and gas reserves has occurred, the acquisi
tion must result in a 20% or more increase in the total oil and
gas reserves of the Company when compared to the Company's
pre-acquisition reserves. The Company's pre-acquisition reserves
will be the estimated reserve volumes expressed in barrels of oil
equivalent contained in the most recent annual report, adjusted
to the Acquisition Date for subsequent production, drilling,
purchases and sales of reserves (other than the subject
acquisition). In each instance, 6 Mcf of natural gas will be
equal to one barrel of oil.
(ii) For purposes of determining if the 20% or
more increase in the total assets of the Company has occurred,
the gross purchase or acquisition price paid (including any debt
or other liabilities assumed) for the assets or the business
entity owning the assets (as determined pursuant to the final
Acquisition Contract) must equal 20% or more of the sum of (1)
Total Liabilities and Stockholders' Equity minus (2) the Total
Stockholders' Equity and Devon Financing Trust Convertible
Preferred Securities plus (3) the market value of the Company's
outstanding common and preferred stock and Devon Financing Trust
Convertible Preferred Securities (the "Market Capitalization").
For the purpose of this determination, the foregoing items
included in (1) and (2) above shall be based upon the Company's
consolidated financial statement as of the last day of the month
immediately preceding the month in which such purchase or
acquisition occurs; and, for the purpose of determining the
Market Capitalization, the Company's outstanding common and
preferred stock and Devon Financing Trust Convertible Preferred
Securities shall be valued at the weighted average closing price
of such securities for the ten trading days preceding the public
announcement of the execution of the definitive Acquisition
Contract.
Section 2.2 "Affiliated Entity" means any partnership or
limited liability company, a majority of the partnership or other
similar interest thereof is owned or controlled, directly or
indirectly, by the Company or one or more of its Subsidiaries or
Affiliated Entities or a combination thereof. For purposes
hereof, the Company, a Subsidiary or an Affiliate Entity shall be
deemed to have a majority ownership interest in a partnership or
limited liability company if the Company, such Subsidiary or
Affiliated Entity shall be allocated a majority of partnership or
limited liability company gains or losses or shall be or control
the managing director or a general partner of such partnership or
limited liability company.
Section 2.3 "Award" means, any Option granted under the
Plan to a Participant by the Committee pursuant to such terms,
conditions, restrictions, and/or limitations, if any, as the
Committee may establish by the Award Agreement or otherwise.
Section 2.4 "Award Agreement" means any written
instrument that establishes the terms, conditions, restrictions,
and/or limitations applicable to an Award in addition to those
established by this Plan and by the Committee's exercise of its
administrative powers.
Section 2.5 "Board" means the Board of Directors of the
Company.
Section 2.6 "Change of Control Date" means the date on
which one of the following events occurs:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30%
or more of either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company;
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii), and (iii) of subsection (c) below; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, appointment or nomination for election by the
Company's shareholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for purposes of this
definition, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, share exchange, merger or consolidation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the indi
viduals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Incumbent Board
providing for such Business Combination, or were elected,
appointed or nominated by the Incumbent Board; or
(d) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or, (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation with respect
to which following such sale or other disposition, (A) more than
50% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respec
tively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their owner
ship, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) less than 30% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly
or indirectly, by any Person (excluding any employee benefit plan
(or related trust) of the Company or such corporation), except to
the extent that such Person owned 30% or more of the Outstanding
Company Common Stock or Outstanding Company Voting Securities
prior to the sale or disposition, and (C) at least a majority of
the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Incumbent Board
providing for such sale or other disposition of assets of the
Company, or were elected, appointed or nominated by the Incumbent
Board.
Section 2.7 "Code" means the Internal Revenue Code of
1986, as amended. Reference in the Plan to any Section of the
Code shall be deemed to include any amendments or successor
provisions to such Section and any regulations under such
Section.
Section 2.8 "Committee" means the Compensation and Stock
Option Committee of the Board, or such other committee designated
by the Board, authorized to administer the Plan under Article III
hereof consisting of not less than two "Nonemployee Directors" as
that term is defined in Rule 16b-3 promulgated under the Exchange
Act.
Section 2.9 "Common Stock" means the common stock, par
value $.10 per share, of the Company, and after substitution,
such other stock as shall be substituted therefor as provided in
Article VII.
Section 2.10 "Date of Grant" means the date on which the
granting of an Award is authorized by the Committee or such later
date as may be specified by the Committee in such authorization.
Section 2.11 "Disability" shall have the meaning set forth
in Section 22(e)(3) of the Code.
Section 2.12 "Eligible Employee" means any employee of the
Company, a Subsidiary or an Affiliated Entity.
Section 2.13 "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
Section 2.14 "Fair Market Value" means (A) during such
time as the Common Stock is listed upon the American Stock
Exchange or other exchanges or the Nasdaq/National Market, the
closing price of the Common Stock on such stock exchange or
exchanges or the Nasdaq/National Market on the day for which such
value is to be determined, or if no sale of the Common Stock
shall have been made on any such stock exchange or the
Nasdaq/National Market that day, on the next preceding day on
which there was a sale of such Common Stock or (B) during any
such time as the Common Stock is not listed upon an established
stock exchange or the Nasdaq/National Market, the mean between
dealer "bid" and "ask" prices of the Common Stock in the over-the-
counter market on the day for which such value is to be
determined, as reported by the National Association of Securities
Dealers, Inc. or (C) during any such time as the Common Stock
cannot be valued pursuant to (A) or (B) above, the fair market
value shall be as determined by the Board considering all
relevant information including, by example and not by limitation,
the services of an independent appraiser.
Section 2.15 "Incentive Stock Option" means an Option
within the meaning of Section 422 of the Code.
Section 2.16 "Nonemployee Director" means any person who
is a member of the Board, and who is not an Eligible Employee.
Section 2.17 "Nonqualified Stock Option" means an Option
which is not an Incentive Stock Option.
Section 2.18 "Option" means an Award granted under Article
VI of the Plan and includes both Non-qualified Options and
Incentive Stock Options to purchase shares of Common Stock.
Section 2.19 "Participant" means a Nonemployee Director or
an Eligible Employee to whom an Award under the Plan has been
granted by the Committee.
Section 2.20 "Plan" means Devon Energy Corporation 1997
Stock Option Plan.
Section 2.21 "Subsidiary" shall have the same meaning set
forth in Section 424 of the Code.
ARTICLE III
ADMINISTRATION
Section 3.1 Administration by Committee. The Committee
shall administer the Plan. Unless otherwise provided in the by-
laws of the Company or the resolutions adopted from time to time
by the Board establishing the Committee, the Board may from time
to time remove members from, or add members to, the Committee.
Vacancies on the Committee, however caused, shall be filled by
the Board. However, at all times the Committee members shall
meet the definition of "Nonemployee Director" as defined in Rule
16b-3 promulgated under the Exchange Act. The Committee shall
hold meetings at such times and places as it may determine. A
majority of the Committee shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a
quorum is present or acts reduced to or approved in writing by a
majority of the members of the Committee shall be the valid acts
of the Committee.
Subject to the provisions of the Plan, the Committee shall
have exclusive power to:
(a) Select the Participants to be granted Awards.
(b) Determine the time or times when Awards will be
made.
(c) Determine the form of an Award, whether an
Incentive Stock Option or Nonqualified Stock Option, the number
of shares of Common Stock subject to the Award, all the terms,
conditions (including performance requirements), restrictions
and/or limitations, if any, of an Award, including the time and
conditions of exercise or vesting, and the terms of any Award
Agreement, which may include the waiver or amendment of prior
terms and conditions or acceleration or early vesting or payment
of an Award under certain circumstances determined by the
Committee.
(d) Determine whether Awards will be granted singly or
in combination.
(e) Accelerate the vesting, exercise or payment of an
Award or the performance period of an Award when such action or
actions would be in the best interest of the Company.
(f) Take any and all other action it deems necessary or
advisable for the proper operation or administration of the Plan.
Section 3.2 Committee to Make Rules and Interpret Plan.
The Committee in its sole discretion shall have the authority,
subject to the provisions and the general purpose and intent of
the Plan, to (i) modify the requirements of the Plan to conform
with the law or to meet special circumstances not anticipated or
covered by the Plan; (ii) suspend or discontinue the Plan; (iii)
establish, adopt, or revise rules and regulations; and (iv) make
all such determinations relating to the Plan as it may deem
necessary or advisable for the administration of the Plan. The
Committee's interpretation of the Plan or any Awards granted
pursuant thereto and all decisions and determinations by the
Committee with respect to the Plan shall be final, binding, and
conclusive on all parties.
ARTICLE IV
GRANT OF AWARDS
Section 4.1 Committee to Grant Awards. The Committee
may, from time to time, grant Awards to one or more Participants,
provided, however, that:
(a) Subject to Article VII, the aggregate number of
shares of Common Stock made subject to the Award (i) to any
Eligible Employee who is a Participant in any year may not exceed
50,000 and (ii) to any Nonemployee Director may not exceed 3,000
in any year. The grant of an Award to any Nonemployee Director
will only be made on the date of the Company's annual shareholder
meeting and immediately after the occurrence of such meeting.
(b) Any shares of Common Stock related to Awards which
terminate by expiration, forfeiture, cancellation or otherwise
without the issuance of shares of Common Stock shall be available
again for grant under the Plan.
(c) Common Stock delivered by the Company issued
pursuant to an Award under the Plan may be authorized and
unissued Common Stock or Common Stock held in the treasury of the
Company or may be purchased on the open market or by private
purchase.
(d) Separate certificates representing Common Stock to
be delivered to a Participant upon the exercise of any Option
will be issued to such Participant.
ARTICLE V
ELIGIBILITY
Subject to the provisions of the Plan, the Committee shall,
from time to time, select from the Nonemployee Directors and
Eligible Employees those to whom Awards shall be granted and
shall determine the type or types of Awards to be made and shall
establish in the related Award Agreements the terms, conditions,
restrictions and/or limitations, if any, applicable to the Awards
in addition to those set forth in the Plan and the administrative
rules and regulations issued by the Committee.
ARTICLE VI
STOCK OPTIONS
Section 6.1 Grant of Options. The Committee may, from
time to time, subject to the provisions of the Plan and such
other terms and conditions as it may determine, grant Options to
Participants. These Options may be Incentive Stock Options or
Nonqualified Stock Options, or a combination of both. Each grant
of an Option shall be evidenced by an Award Agreement executed by
the Company and the Participant, and shall contain such terms and
conditions and be in such form as the Committee may from time to
time approve, subject to the requirements of Section 6.2.
Section 6.2 Conditions of Options. Each Option so
granted shall be subject to the following conditions:
(a) Exercise Price. As limited by Section 6.2(e)
below, each Option shall state the exercise price which shall be
set by the Committee at the Date of Grant; provided, however, no
Option shall be granted at an exercise price which is less than
the Fair Market Value of the Common Stock on the Date of Grant.
(b) Form of Payment. The exercise price of an Option
may be paid (i) in cash or by check, bank draft or money order
payable to the order of the Company; (ii) by delivering shares of
Common Stock or other equity securities of the Company having a
Fair Market Value on the date of payment equal to the amount of
the exercise price; (iii) by directing the Company to withhold
from the shares of Common Stock to be delivered to the
Participant upon exercise of the Option, shares of Common Stock
with a Fair Market Value on the date of payment equal to the
amount of the exercise price; or (iv) a combination of the
foregoing. In addition to the foregoing, any Option granted
under the Plan may be exercised by a broker-dealer acting on
behalf of a Participant if (A) the broker-dealer has received
from the Participant or the Company a notice evidencing the
exercise of such Option and instructions signed by the
Participant requesting the Company to deliver the shares of
Common Stock subject to such Option to the broker-dealer on
behalf of the Participant and specifying the account into which
such shares should be deposited, (B) adequate provision has been
made with respect to the payment of any withholding taxes due
upon such exercise or, in the case of an Incentive Stock Option,
upon the premature disposition of such shares and (C) the broker-
dealer and the Participant have otherwise complied with Section
220.3(e)(4) of Regulation T, 12 CFR, Part 220 and any successor
rules and regulations applicable to such exercise.
(c) Exercise of Options. Options granted under the
Plan shall be exercisable, in whole or in such installments and
at such times, and shall expire at such time, as shall be
provided by the Committee in the Award Agreement. Exercise of an
Option shall be by written notice stating the election to
exercise in the form and manner determined by the Committee.
Every share of Common Stock acquired through the exercise of an
Option shall be deemed to be fully paid at the time of exercise
and payment of the exercise price.
(d) Other Terms and Conditions. Among other conditions
that may be imposed by the Committee, if deemed appropriate, are
those relating to (i) the period or periods and the conditions of
exercisability of any Option; (ii) the minimum periods during
which Participants must be employed by the Company, its
Subsidiaries or an Affiliated Entity, or must hold Options before
they may be exercised; (iii) the minimum periods during which
shares acquired upon exercise must be held before sale or
transfer shall be permitted; (iv) conditions under which such
Options or shares may be subject to forfeiture; (v) the frequency
of exercise or the minimum or maximum number of shares that may
be acquired at any one time and (vi) the achievement by the
Company of specified performance criteria.
(e) Special Restrictions Relating to Incentive Stock
Options. Options issued in the form of Incentive Stock Options
shall not be granted to Directors who are not also Eligible
Employees of the Company or a Subsidiary and shall, in addition
to being subject to all applicable terms, conditions,
restrictions and/or limitations established under the Plan or by
the Committee, comply with the requirements of Section 422 of the
Code (or any successor Section thereto), including, without
limitation, the requirement that the exercise price of an
Incentive Stock Option not be less than 100% of the Fair Market
Value of the Common Stock on the Date of Grant, the requirement
that each Incentive Stock Option, unless sooner exercised,
terminated or cancelled, expire no later than 10 years from its
Date of Grant, and the requirement that the aggregate Fair Market
Value (determined on the Date of Grant) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by a Participant during any calendar year (under this
Plan or any other plan of the Company, its parent or any
Subsidiary) not exceed $100,000. Incentive Stock Options which
are in excess of the applicable $100,000 limitation will be
automatically recharacterized as Nonqualified Stock Options as
provided under Section 6.3 of this Plan. No Incentive Stock
Options shall be granted to any Eligible Employee if, immediately
before the grant of an Incentive Stock Option, such Eligible
Employee owns more than 10% of the total combined voting power of
all classes of stock of the Company or its Subsidiaries (as
determined in accordance with the stock attribution rules
contained in Sections 422 and 424(d) of the Code). Provided, the
preceding sentence shall not apply if, at the time the Incentive
Stock Option is granted, the exercise price is at least 110% of
the Fair Market Value of the Common Stock subject to the
Incentive Stock Option, and such Incentive Stock Option by its
terms is exercisable no more than five years from the date such
Incentive Stock Option is granted.
(f) Application of Funds. The cash proceeds received
by the Company from the sale of Common Stock pursuant to Options
will be used for general corporate purposes. Shares received by
the Company in lieu of cash payment will be considered as
treasury stock and may be retired at the Company's discretion.
(g) Shareholder Rights. No Participant shall have a
right as a shareholder with respect to any share of Common Stock
subject to an Option prior to purchase of such shares of Common
Stock by exercise of the Option.
Section 6.3 Options Not Qualifying as Incentive Stock
Options. With respect to all or any portion of any Option
granted under this Plan not qualifying as an "incentive stock
option" under Section 422 of the Code, such Option shall be
considered as a Nonqualified Stock Option granted under this Plan
for all purposes. Further, this Plan and any Incentive Stock
Options granted hereunder shall be deemed to have incorporated by
reference all the provisions and requirements of Section 422 of
the Code (and the Treasury Regulations issued thereunder) which
are required to provide that all Incentive Stock Options granted
hereunder shall be "incentive stock options" described in Section
422 of the Code. Further, in the event that (a) the Committee
grants Incentive Stock Options under this Plan to a Participant,
and, (b) the applicable limitation contained in Section 6.2(e)
herein is exceeded, then, such Incentive Stock Options in excess
of such limitation shall be treated as Nonqualified Stock Options
under this Plan subject to the terms and provisions of the
applicable Award Agreement, except to the extent modified to
reflect recharacterization of the Incentive Stock Options as
Nonqualified Stock Options.
ARTICLE VII
STOCK ADJUSTMENTS
In the event that the shares of Common Stock, as presently
constituted, shall be changed into or exchanged for a different
number or kind of shares of stock or other securities of the
Company or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, stock split,
combination of shares or otherwise), or if the number of such
shares of Common Stock shall be increased through the payment of
a stock dividend, or a dividend on the shares of Common Stock or
rights or warrants to purchase securities of the Company shall be
made, then there shall be substituted for or added to each share
available under and subject to the Plan as provided in Section
1.3 hereof, and each share theretofore appropriated or thereafter
subject or which may become subject to Options under the Plan,
the number and kind of shares of stock or other securities into
which each outstanding share of Common Stock shall be so changed
or for which each such share shall be exchanged or to which each
such share shall be entitled, as the case may be, on a fair and
equivalent basis in accordance with the applicable provisions of
Section 424 of the Code; provided, however, with respect to
Options, in no such event will such adjustment result in a
modification of any Option as defined in Section 424(h) of the
Code. In the event there shall be any other change in the number
or kind of the outstanding shares of Common Stock, or any stock
or other securities into which the Common Stock shall have been
changed or for which it shall have been exchanged, then if the
Committee shall, in its sole discretion, determine that such
change equitably requires an adjustment in the shares available
under and subject to the Plan, or in any Award theretofore
granted or which may be granted under the Plan, such adjustments
shall be made in accordance with such determination, except that
no adjustment of the number of shares of Common Stock available
under the Plan or to which any Award relates that would otherwise
be required shall be made unless and until such adjustment either
by itself or with other adjustments not previously made would
require an increase or decrease of at least 1% in the number of
shares of Common Stock available under the Plan or to which any
Award relates immediately prior to the making of such adjustment
(the "Minimum Adjustment"). Any adjustment representing a change
of less than such minimum amount shall be carried forward and
made as soon as such adjustment together with other adjustments
required by this Article VII and not previously made would result
in a Minimum Adjustment. Notwithstanding the foregoing, any
adjustment required by this Article VII which otherwise would not
result in a Minimum Adjustment shall be made with respect to
shares of Common Stock relating to any Award immediately prior to
exercise, payment or settlement of such Award.
No fractional shares of Common Stock or units of other
securities shall be issued pursuant to any such adjustment, and
any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole
share.
ARTICLE VIII
GENERAL
Section 8.1 Amendment or Termination of Plan. The Board
may suspend or terminate the Plan at any time. In addition, the
Board may, from time to time, amend the Plan in any manner, but
may not without shareholder approval adopt any amendment which
would increase the aggregate number of shares of Common Stock
available under the Plan (except by operation of Article VII) or
decrease the exercise price to less than the Fair Market Value on
the Date of Grant, provided, that any amendment to the Plan shall
require approval of the shareholders if, in the opinion of
counsel to the Company, such approval is required by any Federal
or state law or any regulations or rules promulgated thereunder.
Section 8.2 Acceleration of Otherwise Unexercisable
Options on Death, Disability or Other Special Circumstances.
The Committee, in its sole discretion, may permit (i) a
Participant who terminates employment due to a Disability, (ii)
the personal representative of a deceased Participant, or (iii)
any other Participant who terminates employment upon the
occurrence of special circumstances (as determined by the
Committee) to purchase all or any part of the shares subject to
any unvested Option on the date of the Participant's Disability,
death, or as the Committee otherwise so determines.With respect
to Options which have already vested at the date of such
termination or the vesting of which is accelerated by the
Committee in accordance with the foregoing provision, the
Participant or the personal representative of a deceased
Participant shall automatically have the right to exercise such
vested Options within three months of such date of termination of
employment (or such longer period as shall be provided in the
Award Agreement) or one year in the case of a Participant
suffering a Disability or three years in the case of a deceased
Participant; provided, however, in no event shall the option be
exercisable beyond the original expiration date of the Option.
Section 8.3 Non-Transferability of Options. Except as
otherwise herein provided, any Option granted shall not be
transferable otherwise than by will or the laws of descent and
distribution, and the Option may be exercised, during the
lifetime of the Participant, only by him. More particularly (but
without limiting the generality of the foregoing), the Option
shall not be assigned, transferred (except as provided above),
pledged or hypothecated in any way whatsoever, shall not be
assignable by operation of law and shall not be subject to
execution, attachment, or similar process. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition
of the Option contrary to the provisions hereof shall be null and
void and without effect.
Section 8.4 Withholding Taxes. A Participant may pay the
amount of taxes required by law upon the exercise or payment of
an Award (i) in cash, (ii) by delivering to the Company shares of
Common Stock having a Fair Market Value on the date of payment
equal to the amount of such required withholding taxes, or (iii)
by directing the Company to withhold from the shares of Common
Stock to be delivered to the Participant upon exercise or payment
of the Award shares of Common Stock having a Fair Market Value on
the date of payment equal to the amount of such required
withholding taxes.
Section 8.5 Amendments to Awards. The Committee may at
any time amend the terms of any Award Agreement, whether or not
presently exercisable, earned, paid or vested, to accelerate
vesting of Awards.
Section 8.6 Securities Laws. The Company shall have no
obligation to issue or deliver certificates representing shares
of Common Stock subject to Awards prior to:
(a) the obtaining of any approval from, or satisfaction
of any waiting period or other condition imposed by, any
governmental agency which the Committee shall, in its sole
discretion, determine to be necessary or advisable; and
(b) the completion of any registration or other
qualification of such shares under any state or Federal law or
ruling of any governmental body which the Committee shall, in its
sole discretion, determine to be necessary or advisable.
Section 8.7 Change of Control. Awards granted under the
Plan to any Participant may, in the discretion of the Committee,
provide that such Awards shall be immediately vested, fully
earned and exercisable upon the Acquisition Date or the Change of
Control Date.
Section 8.8 No Right to Continued Employment.
Participation in the Plan shall not give any Nonemployee Director
any right to remain a Nonemployee Director of the Company or any
Eligible Employee any right to remain in the employ of the
Company, any Subsidiary or any Affiliated Entity. The adoption
of this Plan shall not be deemed to give any Director, Eligible
Employee or any other individual any right to be selected as a
Participant or to be granted an Award.
Section 8.9 Reliance on Reports. Each member of the
Committee and each member of the Board shall be fully justified
in relying or acting in good faith upon any report made by the
independent public accountants of the Company and its
Subsidiaries and upon any other information furnished in
connection with the Plan by any person or persons other than
himself. In no event shall any person who is or shall have been
a member of the Committee or of the Board be liable for any
determination made or other action taken or any omission to act
in reliance upon any such report or information or for any action
taken, including the furnishing of information, or failure to
act, if in good faith.
Section 8.10 Construction. Masculine pronouns and other
words of masculine gender shall refer to both men and women. The
titles and headings of the sections in the Plan are for the
convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall
control.
Section 8.11 Incentive Stock Options and Nonqualified
Stock Options Granted Separately. Since the Committee is
authorized to grant Nonqualified Stock Options and Incentive
Stock Options to Participants, the grants thereof and Award
Agreements relating thereto will be made separately and totally
independent of each other. Except as it relates to the total
number of shares of Stock which may be issued under the Plan, the
grant or exercise of a Nonqualified Stock Option shall in no
manner affect the grant and exercise of any Incentive Stock
Options. Similarly, the grant and exercise of an Incentive Stock
Option shall in no manner affect the grant and exercise of any
Nonqualified Stock Options.
Section 8.12 Governing Law. The Plan shall be governed by
and construed in accordance with the laws of the State of
Oklahoma except as superseded by applicable Federal law.
ARTICLE IX
ACCELERATION OF OPTIONS UPON CORPORATE EVENT
If the Company shall, pursuant to action by the Board, at
any time propose to dissolve or liquidate or merge into,
consolidate with, or sell or otherwise transfer all or
substantially all of its assets to another corporation and
provision is not made pursuant to the terms of such transaction
for the assumption by the surviving, resulting or acquiring
corporation of outstanding Options under the Plan, or for the
substitution of new options therefor, the Committee shall cause
written notice of the proposed transaction to be given to each
Participant no less than forty days prior to the anticipated
effective date of the proposed transaction, and his Option shall
become 100% vested and, prior to a date specified in such notice,
which shall be not more than ten days prior to the anticipated
effective date of the proposed transaction, each Participant
shall have the right to exercise his Option to purchase any or
all of the Common Stock then subject to such Option. Each
Participant, by so notifying the Company in writing, may, in
exercising his Option, condition such exercise upon, and provide
that such exercise shall become effective at the time of, but
immediately prior to, the consummation of the transaction, in
which event such Participant need not make payment for the Common
Stock to be purchased upon exercise of such Option until five
days after written notice by the Company to such Participant that
the transaction has been consummated. If the transaction is
consummated, each Option, to the extent not previously exercised
prior to the date specified in the foregoing notice, shall
terminate on the effective date of such consummation. If the
transaction is abandoned, (i) any Common Stock not purchased upon
exercise of such Option shall continue to be available for
purchase in accordance with the other provisions of the Plan and
(ii) to the extent that any Option not exercised prior to such
abandonment shall have vested solely by operation of this Article
IX, such vesting shall be deemed annulled, and the vesting
schedule set forth in the Participant's Option Agreement shall be
reinstituted, as of the date of such abandonment.
<PAGE>
DEVON ENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Devon Energy Corporation, an
Oklahoma corporation, hereby nominates and appoints John W.
Nichols, J. Larry Nichols and H. R. Sanders, Jr., or any one of
them, with full power of substitution, as true and lawful agents
and proxies to represent the undersigned and vote all shares of
stock of Devon Energy Corporation owned by the undersigned in all
matters coming before the Annual Meeting of Stockholders (or any
adjournment thereof) of Devon Energy Corporation to be held in
the Community Room (Mezzanine Floor), Bank of Oklahoma on
Wednesday, May 21, 1997, at 11:00 a.m., local time. The Board of
Directors recommends a vote "FOR" the matters set forth on the
reverse side.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
/ X /
Please mark
votes as in this
example.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
SPECIFIED BELOW BY THE STOCKHOLDER. TO THE EXTENT CONTRARY
SPECIFICATIONS ARE NOT GIVEN, THIS PROXY WILL BE VOTED "FOR" THE
NOMINEES LISTED IN ITEM 1 AND "FOR" ITEM 2.
1. ELECTION OF DIRECTORS 2. APPROVE THE PROPOSAL TO
ADOPT THE DEVON ENERGY
Nominees: Thomas F. Ferguson, CORPORATION 1997 STOCK OPTION
J. Larry Nichols and Lawrence PLAN
H Towell
FOR AGAINST ABSTAIN
FOR WITHHELD
(all nominees) (as to all / / / / / /
nominees)
/ / / /
WITHHELD
(as to nominees listed below) 3. OTHER MATTERS:
/ / In their discretion, to
vote with respect to any other
matters that may come before
_____________________________ the meeting or any adjournment
You may withhold your vote for thereof, including matters
a particular nominee by incident to its conduct.
marking this box and naming
the nominee for which your I RESERVE THE RIGHT TO REVOKE
vote is being withheld. THE PROXY AT ANY TIME BEFORE
THE EXERCISE THEREOF.
Please sign exactly as your
name appears at left,
indicating your official
position or representative
capacity, if applicable. If
shares are held jointly, each
owner should sign.
Signature:
_______________________ Date _______
Signature:
_______________________ Date _______
