<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
BENTON OIL & GAS COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
[LOGO]
, 1998
- ------------------
Dear Fellow Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders of
Benton Oil and Gas Company to be held on Tuesday, June 30, 1998, at the Four
Seasons Biltmore Hotel, 1260 Channel Drive, Santa Barbara, California at 10:00
a.m. For those stockholders wishing to stay at the Four Seasons Biltmore Hotel,
there are a limited number of rooms available the night of June 29, 1998, at
significantly reduced rates. Please mention that you are a Benton stockholder
when making your reservation.
The matters to be acted on at the meeting are set forth in the accompanying
Notice of Annual Meeting and Proxy Statement.
During this meeting, we will report on the operations of the Company during 1997
and its plans for 1998. Your board of directors, executive officers and
management look forward to personally greeting and answering the questions of
those stockholders able to attend.
It is important that your shares be represented at the meeting. Please sign,
date and mail the enclosed proxy in the envelope provided at your earliest
convenience. If you attend the meeting, you may, at your discretion, withdraw
the proxy and vote in person.
It is always a pleasure to meet with our stockholders, and we personally look
forward to seeing as many of you as possible at the Annual Meeting.
Sincerely,
A. E. BENTON
Chairman of the Board, Chief Executive
Officer and President
<PAGE> 3
BENTON OIL AND GAS COMPANY
1145 EUGENIA PLACE, SUITE 200
CARPINTERIA, CALIFORNIA 93013
(805) 566-5600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Benton Oil and Gas Company, a
Delaware corporation (the "Company"), will be held at the Four Seasons Biltmore
Hotel, 1260 Channel Drive, Santa Barbara, California on the 30th day of June,
1998 at 10:00 a.m., Pacific Daylight Time, for the following purposes:
1. To elect five (5) directors to the Board of Directors for terms of
one (1) year or until their successors are elected and qualified;
2. To approve and adopt a proposal to amend the Company's Certificate
of Incorporation to increase the number of authorized shares of the Company's
Common Stock from 40,000,000 to 80,000,000 shares;
3. To approve and adopt the Benton Oil and Gas Company 1998 Stock-Based
Incentive Plan;
4. To approve and ratify the appointment of Price Waterhouse LLP as
independent auditors for the fiscal year ending December 31, 1998; and
5. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only stockholders of record at the close of business on May 8, 1998 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. The stock transfer books will not be closed. A list of stockholders of
the Company as of May 8, 1998 will be available for inspection by stockholders
of the Company at the Four Seasons Biltmore Hotel, 1260 Channel Drive, Santa
Barbara, California during the ten (10) days immediately preceding the date of
the Annual Meeting.
By Order of the Board of Directors
TONI L. JACKSON
Secretary
________, 1998
IMPORTANT
PLEASE VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN
THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND
THE ANNUAL MEETING. IF YOU ATTEND THE ANNUAL MEETING AND SO DESIRE, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY
<PAGE> 4
BENTON OIL AND GAS COMPANY
1145 EUGENIA PLACE, SUITE 200
CARPINTERIA, CALIFORNIA 93013
(805) 566-5600
--------------------
PROXY STATEMENT
--------------------
The accompanying Proxy is solicited by the Board of Directors of Benton
Oil and Gas Company (the "Company") for use at the Annual Meeting of
Stockholders to be held on June 30, 1998, at 10:00 a.m., Pacific Daylight Time,
at the Four Seasons Biltmore Hotel, 1260 Channel Drive, Santa Barbara,
California, or at any adjournments thereof. When the Proxy is properly executed
and returned to the Company, the shares it represents will be voted at the
Annual Meeting in accordance with the directions noted thereon or, if no
direction is indicated, such shares will be voted in favor of the proposals set
forth in the Notice of Annual Meeting of Stockholders attached hereto. The
shares represented by any Proxy which directs abstention on any proposal will
not be voted on such proposal, but will be included in calculating the shares
represented by Proxy at the Annual Meeting. Broker non-votes on the proposals
are treated as shares as to which voting power has been withheld by the
beneficial holders of those shares, and as shares not entitled to vote on the
proposal as to which there is a broker non-vote. Any stockholder may revoke his
or her Proxy at any time before it is voted by delivering a later Proxy to the
Secretary of the Company at the Company's principal office. A stockholder may
also revoke his or her Proxy at any time before it is voted at the Annual
Meeting by delivering a later Proxy to the Secretary of the Company, or by
voting in person at the Annual Meeting. The cost of the solicitation of Proxies
will be borne by the Company.
Only stockholders of record at the close of business on May 8, 1998
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
The Company has outstanding only common stock, $.01 par value (the
"Common Stock"), of which __________ shares were issued and outstanding at the
close of business on May 8, 1998. Each outstanding share of Common Stock is
entitled to one vote.
This Proxy Statement, together with the Notice of Annual Meeting of
Stockholders, Proxy and the Annual Report of the Company for the fiscal year
ended December 31, 1997, was first mailed to stockholders on or about _________,
1998.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to (i) each
person known to the Company to be the beneficial owner of more than five percent
of the issued and outstanding shares of Common Stock of the Company as of May 8,
1998, (ii) the directors, (iii) certain of the executive officers, and (iv) all
officers and directors as a group. The Common Stock ownership information
includes current stockholdings, Common Stock subject to options under the
Company's stock option plans which are currently exercisable or exercisable
within 60 days and securities which are convertible into shares of Common Stock
within 60 days. No schedules 13D were filed with the Securities and Exchange
Commission reporting ownership of 5% or more as of December 31, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENTAGE OF SHARES
BENEFICIAL OWNER OWNED BENEFICIALLY OWNED (1)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
A.E. Benton 1,660,000 (2) _____%
Michael B. Wray 225,967 (3) *
James M. Whipkey 0 *
Joseph C. White 13,333 (4) *
E. Sven Hagen 100,000 (5) *
Bruce M. McIntyre 84,000 (6) *
Richard W. Fetzner 71,667 (7) *
Garrett A. Garrettson 32,500 (8) *
All directors and executive officers as a group 2,226,301 (9) _____%
(9 persons)
</TABLE>
*Less than 1%
(1) The percentage of Common Stock is based upon __________ shares of
Common Stock outstanding as of May 8, 1998.
(2) Includes 1,060,000 shares subject to options which are currently
exercisable or exercisable within 60 days after May 8, 1998, under the
Company's stock option plans.
(3) Includes 206,667 shares subject to options which are currently
exercisable or exercisable within 60 days after May 8, 1998, under the
Company's stock option plans.
(4) Includes 13,333 shares subject to options which are currently
exercisable or exercisable within 60 days after May 8, 1998, under the
Company's stock option plans.
(5) Includes 100,000 shares subject to options which are currently
exercisable or exercisable within 60 days after May 8, 1998, under the
Company's stock option plans.
(6) Includes 80,000 shares subject to options which are currently
exercisable or exercisable within 60 days after May 8, 1998, under the
Company's stock option plans.
(7) Includes 71,667 shares subject to options which are currently
exercisable or exercisable within 60 days after May 8, 1998, under the
Company's stock option plans.
(8) Includes 20,000 shares subject to options which are currently
exercisable or exercisable within 60 days after May 8, 1998, under the
Company's stock option plans.
(9) Includes 1,590,001 shares subject to options which are currently
exercisable or exercisable within 60 days after May 8, 1998, under the
Company's stock option plans.
2
<PAGE> 6
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, directors and greater than
ten-percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the last fiscal
year all filing requirements applicable to its officers, directors, and greater
than ten-percent beneficial owners were complied with except that one late
report was filed by Mr. Garrettson, covering one transaction.
PROPOSAL 1. - ELECTION OF DIRECTORS
GENERAL
The Bylaws of the Company provide for a Board of Directors composed of
five directors. Directors are elected at the annual stockholders' meeting and
hold office until the next annual stockholders' meeting or until their
successors are elected and qualified. The Company's five current directors are
A.E. Benton, Michael B. Wray, Bruce M. McIntyre, Richard W. Fetzner, and Garrett
A. Garrettson.
Except where authority to vote is withheld, the proxyholders will vote
the Proxies received by them FOR the nominees shown below for terms of one year
or until their successors are duly elected and qualified. Although the Board of
Directors has no reason to believe that any of the nominees will decline or be
unable to serve as a director, should that occur the Proxies will be voted by
the proxyholders for such other persons as may be designated by the present
Board of Directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.
INFORMATION REGARDING NOMINEES
The following information was supplied to the Company by the listed
nominees of the Company.
<TABLE>
<CAPTION>
FIRST YEAR ELECTED OR
NAME AGE PRINCIPAL OCCUPATION APPOINTED DIRECTOR
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A. E. Benton 55 Chairman of the Board, Chief Executive 1988
Officer and President of the Company
Michael B. Wray 62 Vice Chairman of the Company 1988
Bruce M. McIntyre 70 Private Investor; Oil and Gas Consultant 1988
Richard W. Fetzner 69 Associate Professor of California Lutheran 1990
University - Retired
Garrett A. Garrettson 54 Chief Executive Officer and President of 1996
Spectrian Corporation
</TABLE>
A. E. BENTON
A. E. Benton, founder of the Company, was elected President of the
Company in February 1998, and was first elected Chief Executive Officer and
Chairman of the Board of the Company in September 1988. He has served as
director of the Company since September 1988. From 1986 to October 1988, Mr.
Benton was employed as president and director of Benton Petroleum Company. From
1981 to 1986, Mr. Benton was employed by May Petroleum Inc., becoming its senior
vice president of exploration. From 1979 to 1981, Mr. Benton was employed by
TransOcean Oil Company and, upon TransOcean's acquisition by Mobil Oil
Corporation, he was employed by another subsidiary of Mobil Oil Corporation as
manager of geophysics. He was employed from 1968 to 1979 by Amoco Oil Company in
various positions, including director of applied geophysical research. Mr.
Benton has a B.S. degree in geophysics from California State University.
3
<PAGE> 7
MICHAEL B. WRAY
Michael B. Wray was first elected Vice Chairman of the Company in
February 1998. He served as President and Treasurer of the Company from January
1996 to February 1998. He served as Chief Financial Officer of the Company from
January 1996 to August 1997. He has served as director of the Company since
November 1988. From January 1994 through December 1995, Mr. Wray served as a
consultant to the Company. From January 1992 until July 1993, Mr. Wray served as
vice president-finance and administration of Del Mar Operating, Inc. From 1985
through 1991, Mr. Wray served as an independent financial consultant to oil and
gas exploration and production companies. From 1979 to 1985, Mr. Wray served as
a senior financial officer of Guardian Oil Company, Huffco Petroleum Corporation
and May Petroleum, Inc. Prior to that time, Mr. Wray worked for over 15 years in
New York as an investment banker, security analyst and officer in various
investment firms including Donaldson, Lufkin & Jenrette, Inc., Drexel & Co. and
L.F. Rothschild & Co. Mr. Wray began his career as an attorney with Morgan,
Lewis & Bockius in Philadelphia. Mr. Wray holds a B.A. degree from Amherst
College and a law degree from Columbia Law School.
BRUCE M. MCINTYRE
Bruce M. McIntyre has served as director of the Company since November
1988. Mr. McIntyre is a private investor and a consultant in the oil and gas
industry. He also serves in a management capacity with several small, private
companies in the energy field. He currently serves as a director of MSC Corp., a
private company which manages oil wells in Illinois. From 1981 to 1984, Mr.
McIntyre served as president of Rocky Mountain Exploration Company, ultimately
negotiating its merger into Carmel Energy, Inc., on whose board of directors he
served until March 1986. Prior to that time, Mr. McIntyre held various
management positions with C&K Petroleum, Inc. (now ENSTAR Petroleum, Inc.),
Jenney Oil Company and Sinclair Oil & Gas Company. Mr. McIntyre is a graduate of
Harvard College and the Harvard University Graduate School of Business
Administration.
RICHARD W. FETZNER
Richard W. Fetzner has served as director of the Company since May
1990. In September 1997, Dr. Fetzner retired as associate professor of business
administration at California Lutheran University in Thousand Oaks, California
where he had taught since 1989. From 1984 to 1989, Dr. Fetzner served in various
academic capacities at the University of Singapore and California Lutheran
University and was a consultant to the World Bank. From 1979 to 1984, Dr.
Fetzner served as group vice president of Sun Company, Inc. and president of Sun
Exploration and Production Company in Dallas, Texas. From 1958 to 1979, he
served in various management and professional positions with Sun Oil Company and
its subsidiaries including president of Sun International, Inc. and Sun Marine
Transport, Inc. Dr. Fetzner holds a B.A. from Augustana College, an M.S. in
geology from the University of Wisconsin, a Ph.D. in geology and economics from
the University of Wisconsin and an M.B.A. from Drexel University.
GARRETT A. GARRETTSON
Garrett A. Garrettson has served as director of the Company since his
appointment to fill a vacancy created by the Board in January 1996. In 1996, Mr.
Garrettson was elected chief executive officer and president of Spectrian
Corporation, a publicly held company which is a leading independent supplier of
high-power amplifiers to the wireless communications industry. In 1995, Mr.
Garrettson was elected as chairman, chief executive officer and president of
Contract Recording Technology, Inc. In addition, since 1993, he has served as
president and chief executive officer of Censtor Corporation. From 1989 to 1993,
Mr. Garrettson served as Vice President of Seagate Technology; and from 1986 to
1989, Mr. Garrettson served as vice president of Imprimis Technology, a
wholly-owned subsidiary of Control Data Corporation. Prior to that time, after
serving in the United States Navy and Naval Reserves, Mr. Garrettson held
various positions with Hewlett Packard Company, including laboratory director,
department manager, project manager, and research engineer. Mr. Garrettson
graduated from Stanford University with a B.S. and M.S. in engineering physics,
and a Ph.D. in mechanical engineering.
4
<PAGE> 8
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors, pursuant to its powers, has designated a
Compensation Committee and an Audit Committee. The Board of Directors has no
Nominating Committee or other committee which performs similar functions. The
Board of Directors held 6 regularly scheduled meetings, took 4 actions in
writing without a meeting and held 4 telephonic meetings during the year ended
December 31, 1997. Each member of the Board of Directors attended at least 75%
of the aggregate number of meetings held in 1997 of the Board of Directors and
the number of meetings held by all committees of the Board on which he served.
The Compensation Committee is responsible for making recommendations to
the Board of Directors regarding salaries, benefits and bonuses to be paid to
Company officers, employees and consultants. In addition, the Compensation
Committee has responsibility for the administration of the Company's stock
option plans. Messrs. McIntyre and Garrettson are presently members of this
committee. During the year ended December 31, 1997, the Compensation Committee
held 5 meetings, took 8 actions in writing without a meeting and held 2
telephonic meetings.
The primary functions of the Audit Committee include making
recommendations to the Board of Directors on the selection of the Company's
auditors, reviewing the arrangements and scope of the independent auditors'
examination, meeting with the independent auditors to review the adequacy of
internal controls, reviewing the scope of internal audit procedures and
performing any other duties or functions deemed appropriate by the Board of
Directors. Messrs. Garrettson and McIntyre are presently members of this
committee. The Audit Committee held 1 meeting during the year ended December 31,
1997.
MANAGEMENT
INFORMATION REGARDING EXECUTIVE OFFICERS
Information with respect to the executive officers and key employees of the
Company as of May 8, 1998 is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------- --- ------------------------------------------------------------
<S> <C> <C>
A.E. Benton (1) 55 President, Chairman of the Board and Chief Executive Officer
Michael B. Wray (1) 62 Vice Chairman of the Board
E. Sven Hagen 41 Senior Vice President - Exploration and Production
James M. Whipkey 40 Senior Vice President, Chief Financial Officer and Treasurer
Chris C. Hickok 40 Vice President - Controller, Chief Accounting Officer
Linda Blount-Strauss 57 Vice President - Corporate Communications/Investor Relations
Jennifer J. Young 51 Vice President - Human Resources
</TABLE>
(1) See "Information Regarding Nominees."
E. SVEN HAGEN was first appointed gulf coast geologist in March 1990, was
elected Vice President-Exploration and Development in July 1995 and was elected
Senior Vice President - Exploration and Production in October 1997. From March
1987 to February 1990, Mr. Hagen was employed by Shell Oil Company as an
exploration geologist responsible for the technical evaluation of the oil and
gas potential of West Africa salt basins including Angola, Congo, Gabon and
Namibia. From December 1985 to February 1987, Mr. Hagen was employed by Standard
Oil Production Company as an Exploration Geologist. Mr. Hagen holds a B.A.
degree in geology from the University of California at Santa Barbara and a Ph.D.
in geology from the University of Wyoming.
JAMES M. WHIPKEY was first elected Senior Vice President and Chief Financial
Officer of the Company in August 1997 and was elected Treasurer in March 1998.
From 1995 to 1997, Mr. Whipkey was employed by Lehman Brothers, Inc. as Senior
Equity Analyst in the Oil and Gas Sector. From 1993 to 1995, he was employed by
Kidder, Peabody & Co. as an investment banker. Mr. Whipkey was an energy
derivatives specialist at Phibro Energy, Inc. from 1989 to 1992, and a futures
broker and commercial lender at First Chicago from 1985 to 1989. He was employed
from 1980 to 1985 by Amoco Production Company as a petroleum engineer. Mr.
Whipkey has a B.S. degree in petroleum and natural gas engineering from the
Pennsylvania State University and an M.B.A. from the University of Chicago.
5
<PAGE> 9
CHRIS C. HICKOK was first appointed controller in November 1991 and was elected
Vice President-Controller and Chief Accounting Officer in January 1995. From
March 1979 to September 1991, Mr. Hickok was employed by Mission Resources, Inc.
and held various positions in the accounting and finance department including
financial analyst, assistant controller and controller. Mr. Hickok holds a B.S.
degree in business administration from California State University at Hayward
and is a Certified Management Accountant.
LINDA BLOUNT-STRAUSS was first appointed manager of investor relations in
January 1996 and was elected Vice President - Corporate Communications/Investor
Relations in October 1997. Ms. Blount-Strauss was employed by West One Bancorp
from June 1991 to January 1996 as Vice President - Corporate
Communications/Investor Relations. Ms. Blount-Strauss began her career at Lear
Siegler, Inc. as Manager of Investor Relations where she served for seventeen
years. She served as a member of the Board of Directors of the National Investor
Relations Institute for four years. Ms. Blount-Strauss holds a B.A. in Business
Administration from the University of Washington.
JENNIFER J. YOUNG was first appointed Manager of Human Resources in October 1996
and was elected Vice President - Human Resources in October 1997. From April
1995 to October 1996, Ms. Young was self-employed as a healthcare insurance
agent, human resources consultant, and mediator/arbitrator of business disputes.
From April 1988 to April 1995, Ms. Young was employed by West One Bancorp,
headquartered in Boise, Idaho, as Compensation and Benefits Manager. From March
1974 to April 1988, Ms. Young was employed by InterFirst Bank Dallas. From
November 1970 to March 1974, Ms. Young was employed by Mobil Oil Corporation in
Dallas, Texas as an employee relations assistant. Ms. Young graduated with
distinction from Purdue University with a B.A.
6
<PAGE> 10
EXECUTIVE COMPENSATION
REMUNERATION OF EXECUTIVE OFFICERS
The following table sets forth as to the Chief Executive Officer and
the four most highly compensated executive officers, whose annual salaries and
bonuses exceeded $100,000, information regarding all forms of compensation paid
or payable by the Company for services in all capacities for the years
indicated.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A. E. Benton, 1997 $485,000 $200,000 (2) 200,000 $1,935(3)
Chief Executive Officer (1) 1996 425,000 100,000 125,000 1,157
1995 279,000 50,000 125,000 460
Michael B. Wray 1997 400,000 50,000 (2) 30,000 $3,019(3)
President (4) 1996 380,000 50,000 200,000 2,821
Joseph C. White 1997 233,000 0 (2) 65,000 $5,418(3)
Vice President - Operations (5) 1996 135,000 10,000 10,000 4,884
1995 116,000 20,000 15,000 902
E. Sven Hagen 1997 170,000 50,000 (2) 50,000 $ 439(3)
Senior Vice President - 1996 115,000 15,000 15,000 373
Exploration and Production 1995 98,000 20,000 35,000 81
James M. Whipkey 1997 108,100 150,000 (2) 100,000 $ 16(3)
Senior Vice President -
Chief Financial Officer
and Treasurer (6)
</TABLE>
(1) Mr. Benton was elected President of the Company in February 1998.
(2) The aggregate amount of perquisite compensation to be reported herein
is less than the lesser of either $50,000 or 10% of the total of annual
salary and bonus reported for the named executive officer. No other
annual compensation was paid or payable to the named executive officers
in the years indicated.
(3) Represents premiums paid by the Company with respect to term life
insurance for the benefit of the named executive officer.
(4) Mr. Wray was elected President of the Company in January 1996. During
1995, Mr. Wray provided consulting services to the Company. See
"Certain Relationships and Related Transactions." Mr. Wray resigned as
President of the Company in February 1998.
(5) Mr. White tendered his resignation as Vice President - Operations of
the Company in April 1998.
(6) Mr. Whipkey was elected Senior Vice President and Chief Financial
Officer of the Company in August 1997. In connection with his
employment with the Company, Mr. Whipkey was reimbursed an aggregate of
$5,465 for relocation expenses (not reflected in table). Of the bonus
reported, $100,000 reflects the signing bonus paid to Mr. Whipkey upon
employment with the Company.
7
<PAGE> 11
The following table shows information concerning options to purchase
Common Stock granted to certain individuals during 1997.
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS/SARS
GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE ($) (1)
- ---------------- ------------ ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
A.E. Benton 200,000 23.3% $ 11.875 12/30/07 $1,686,540
Michael B. Wray 30,000 3.5% $ 11.875 12/30/07 $252,981
Joseph C. White 65,000 7.6% $15.3125 09/16/07 $718,380
E. Sven Hagen 50,000 5.8% $15.3125 09/16/07 $552,600
James M. Whipkey 100,000 11.6% $14.5625 08/04/07 $1,048,320
</TABLE>
(1) To calculate the present value of option/SAR grants, the Company has used
the Black-Scholes option pricing model. The actual value, if any, an executive
may realize will depend on the excess of the stock price over the exercise price
on the date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. The estimated value under that model for the stock option
granted on August 4, 1997 is based on the assumptions that include (i) a stock
price volatility of 54%, (ii) a risk-free rate of return based on a 10-year U.S.
Treasury rate at the time of grant of 6.36%, and (iii) an option exercise term
of ten years. The estimated values under that model for the stock options
granted on September 16, 1997 are based on the assumptions that include (i) a
stock price volatility of 54%, (ii) a risk-free rate of return based on a
10-year U.S. Treasury rate at the time of grant of 6.48%, and (iii) an option
exercise term of ten years. The estimated values under that model for the stock
options granted on December 30, 1997 are based on the assumptions that include
(i) a stock price volatility of 54%, (ii) a risk-free rate of return based on a
10-year U.S. Treasury rate at the time of grant of 5.75%, and (iii) an option
exercise term of ten years. No adjustments were made for the non-transferability
of the options or to reflect any risk of forfeiture prior to vesting. The
Securities and Exchange Commission requires disclosure of the potential
realizable value or present value of each grant. The Company's use of the
Black-Scholes model to indicate the present value of each grant is not an
endorsement of this valuation, which is based on certain assumptions, including
the assumption that the option will be held for the full ten-year term prior to
exercise.
The following table provides information regarding the exercise of stock options
during 1997 by certain individuals and the year-end value of unexercised options
for certain individuals.
<TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN 1997 AND YEAR-END OPTION/SAR VALUES
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
YEAR-END (#) OPTIONS/SARS ($)
----------------------------- ----------------------------
SHARES VALUE
NAME ACQUIRED ON REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ EXERCISE (#) ($) ----------- ------------- ----------- -------------
------------ --------
<S> <C> <C> <C> <C> <C> <C>
A.E. Benton 0 0 1,060,000 325,000 5,431,438 212,500
Michael B. Wray 0 0 156,667 163,333 651,900 31,875
Joseph C. White 0 0 53,333 76,667 222,500 0
E. Sven Hagen 0 0 93,333 71,667 343,612 1,650
James M. Whipkey 0 0 0 100,000 0 0
</TABLE>
8
<PAGE> 12
EMPLOYMENT AGREEMENTS
In June 1995, the Board of Directors approved employment agreements
with certain key employees of the Company (the "Employment Agreements"), which
contain severance provisions in the event of a change in control of the Company.
The Company has entered into similar agreements with other officers and key
employees.
Pursuant to each Employment Agreement, in the event of a proposed
change in control (as defined in the Employment Agreement), the employee has
agreed to remain with the Company until the earliest of (a) 180 days from the
occurrence of such proposed change in control, (b) termination of the employee's
employment by reason of death or disability (as defined in the Employment
Agreement), or (c) the date on which the employee first becomes entitled to
receive benefits under the Employment Agreement by reason of disability or
termination of his employment following a change in control. Except for this
agreement by the employee to so remain employed by the Company, the Company or
the employee may terminate the employee's employment prior to or after a change
in control either immediately or after certain notice periods, subject to the
Company's obligation to provide benefits specified in the Employment Agreement.
Each Employment Agreement is for a period of either two or three years.
In the event of a change in control, the term of the Employment Agreements will
continue in effect for an additional 24 months after such change in control,
subject to certain exceptions described therein. Following a change in control
of the Company and for a period of 24 months following such event, if the
employee is terminated without cause (as defined in the Employment Agreement) or
if employment is terminated by the employee for good reason (as defined in the
Employment Agreement), the employee is entitled to a cash severance payment
equal to three times his annual base salary at the rate in effect prior to
termination. The employee, and his dependents, will also be entitled to
participate in all life, accidental death, medical and dental insurance plans of
the Company in which the employee was entitled to participate at termination for
a period of up to two years (and up to seven years in certain circumstances).
However, such amounts will not be payable if termination is due to death, normal
retirement, permanent disability, or voluntary action of the employee other than
for good reason (as defined in the Employment Agreement), or by the Company for
cause (as defined in the Employment Agreement) or if such payment is not
deductible by the Company as a result of the operation of Section 280G of the
Internal Revenue Code.
Mr. Benton entered into an employment agreement for a term of three
years on June 26, 1995. Dr. Hagen entered into an employment agreement for a
term of three years on April 26, 1995. Pursuant to the employment agreements,
Mr. Benton's annual base salary was $300,000 and Dr. Hagen's annual base salary
was $100,000. On December 20, 1995, Dr. Hagen's annual base salary was increased
to $115,000. On January 3, 1996, Mr. Benton's annual base salary was increased
to $425,000. On December 16, 1996, Mr. Benton's annual base salary was increased
to $485,000 and Dr. Hagen's annual base salary was increased to $250,000. Mr.
Wray entered into an employment agreement for a term of three years on January
3, 1996. Pursuant to the agreement, Mr. Wray would serve as President with an
annual base salary of $380,000. In December 1996, Mr. Wray's annual base salary
was increased to $400,000. In February 1998, Mr. Wray resigned as President and
was elected Vice Chairman of the Company. Mr. White entered into an employment
agreement for a term of three years on May 16, 1997, at an annual base salary of
$185,000. Mr. White's annual base salary was increased to $290,000 with an
expatriate bonus of $60,000 on October 6, 1997 when he was given the additional
title of First Deputy General Director of Geoilbent, Ltd. and relocated to
Russia. Mr. White resigned his positions with the Company in April 1998. Mr.
Whipkey entered into an employment agreement for a term of three years on August
5, 1997, at an annual base salary of $250,000. Salaries are reviewed annually
and bonuses are within the discretion of the Board of Directors.
REMUNERATION OF DIRECTORS
Directors are elected at the annual stockholders' meeting and hold
office until the next annual stockholders' meeting and until their successors
are elected and qualified. Directors who are not Company officers are paid an
annual retainer of $20,000 and are paid a fee of $2,000 for each Board meeting
attended, $500 for each committee meeting attended and $250 for participation in
telephonic meetings. Directors are reimbursed for all travel and related
expenses.
Additionally, the Company's Director Stock Option Plan provides that
each person who is elected to serve as a non-employee director of the Company is
annually and automatically granted an option to purchase 10,000 shares of Common
Stock at an exercise price equal to the market price on the date of grant.
9
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation. This report shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that Benton Oil and
Gas Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
COMPENSATION PHILOSOPHY. The Company's executive compensation
philosophy has historically been and is currently focused on aligning the
interests of its management team with those of its stockholders. In order to
attract, maintain and reward its key management personnel, the Committee
believes that it is appropriate to grant to these employees and to newly hired
key personnel stock options as an integral part of their overall compensation.
The Committee has no established criteria, formula or guidelines for determining
the number of options to be granted. However, the Committee believes that
granting stock options has the inherent benefit of directly aligning
compensation to stock performance and thus to increase stockholder value. The
Compensation Committee does not consider the amount of options or stock held by
an executive officer or the Chief Executive Officer in determining the amount of
options to award. The base salary, bonus and number of stock options granted to
an individual is based upon the Committee's understanding of the performance of
each individual determined after consultation and recommendations from the Chief
Executive Officer and after a subjective performance review of each of the
executive officers. Certain of the executive officers have entered into
employment agreements with the Company which provided for an initial base salary
with an annual review of such employee's salary by the Company. Although no
relative weight is assigned to any particular factor in determining the elements
and size of an executive officer's compensation, the Committee in 1997
considered the expansion of the Company's international operations, and the
expanded role and responsibility of the executive officers in the Company's
international operations, as well as the base salary provisions set forth in
certain of the executive officers' employment agreements.
Generally, the Compensation Committee reviews published compensation
data and proxies from other public companies on an annual basis when making
compensation awards to the Company's executive officers. The Company has not
hired any independent consultants to review similar companies, but from its
general review of published compensation data and proxy statements from other
public companies, the Compensation Committee believes that the cash compensation
paid to its executives is comparable to what they could receive from other
exploration and production companies.
The Compensation Committee of the Board of Directors has not
formalized a policy with respect to qualifying compensation paid to executive
officers under Section 162(m) of the Internal Revenue Code, but intends to study
the Company's compensation plans to develop a formal policy, if necessary.
CHIEF EXECUTIVE OFFICER COMPENSATION. In determining the 1997 salary,
bonus and annual stock grants to Mr. Benton, Chief Executive Officer, the
Committee considered the Company's successes in expanding its operations
internationally and the significant contribution made thereto by Mr. Benton,
with no relative weight assigned to any particular factor of the Company's
operational performance. In addition, the Committee considered the base salary
provision set forth in the June 26, 1995 employment agreement between the
Company and Mr. Benton. Stock options for 200,000 shares were granted December
30, 1997 at an exercise price of $11.875 per share. Mr. Benton's base salary was
increased to $425,000 in January 1996 and to $485,000 in December 1996. On
December 30, 1997, the Committee approved a bonus of $200,000. The Committee has
no established measures of performance, guidelines or formula it uses when
determining the number of stock options granted to the Chief Executive Officer
and does not consider the number of options or stock held by the Chief Executive
Officer in determining the number of options to award.
GARRETT A. GARRETTSON BRUCE M. MCINTYRE
10
<PAGE> 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors
during 1997 were Messrs. Garrettson and McIntyre. Mr. Benton, Chief Executive
Officer of the Company, made recommendations to the Compensation Committee
regarding compensation levels of each of the other executive officers of the
Company.
CORPORATE PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent Benton Oil and Gas
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The graph below compares the yearly percentage change in the cumulative
stockholder return on the Company's Common Stock with the cumulative total
return of the Wilshire Domestic Oil Index and the S&P Composite - 500 Stock
Index over the five-year period ending on December 31, 1997. The stockholder
return shown on the graph below is not necessarily indicative of future
performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF BENTON COMMON STOCK,
THE WILSHIRE DOMESTIC OIL INDEX AND THE S&P 500 INDEX
[Chart to be inserted]
11
<PAGE> 15
The Wilshire Domestic Oil Index, as prepared by Wilshire Associates
Incorporated, is composed of companies that are classified as domestic oil
companies under Standard Industrial Classification codes (1300-1399, 2900-2949,
5170-5179 and 5980-5989). After an individual review of each company, Wilshire
Associates determines whether such company is primarily engaged in the domestic
oil industry and is appropriate for its index. A list of the companies
comprising the Wilshire Domestic Oil index will be provided, without charge,
upon request to Investor Relations, Benton Oil and Gas Company, 1145 Eugenia
Place, Suite 200, Carpinteria, California 93013, or can be obtained upon written
request to Wilshire Associates Incorporated, 1299 Ocean Avenue, Santa Monica,
California 90401.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 31, 1993, the Company guaranteed a loan made to Mr. A. E.
Benton, its Chief Executive Officer, for $300,000. In January 1994, the Company
loaned $800,000 to Mr. Benton with interest at prime plus 1.0%; in September
1994, Mr. Benton made a payment of $207,014 against this loan. In December 1995,
the Company purchased a home from Mr. Benton for $1.73 million, based on two
independent appraisals, and from the proceeds Mr. Benton repaid the balance owed
to the Company of $592,986 plus accrued interest and a $300,000 loan guaranteed
by the Company. The Company sold the home in 1996 for $1.5 million. During 1996,
the Company loaned $268,154 to Mr. Benton at an interest rate of 6% for personal
expenses. During 1997, the Company loaned Mr. Benton a total of $1,514,149 on
various dates at an interest rate of 6% to cover margin calls and for personal
expenses. During 1998, the Company loaned a total of $618,301 to Mr. Benton on
various dates at an interest rate of 6% to cover margin calls, pay personal
taxes and for personal expenses. At May 8, 1998, the balance owed to the Company
was $2,493,142.
In June 1996, the Company loaned $600,000 to Mr. Wray, a director of
the Company, with interest at 6% for the purchase of a home. At May 8, 1998, the
outstanding balance owed to the Company was $667,266. In September, 1997, the
Company loaned $500,000 to Mr. Whipkey, the Company's Senior Vice President and
Chief Financial Officer, with interest at 6% for the purchase of a home, and
such loan is secured by a mortgage on his house. At May 8, 1998, the outstanding
balance owed to the Company was $519,151.
The Company has made loans to several of its officers, directors and
employees, with interest varying from 6% to prime plus 1%. At May 8, 1998, an
aggregate of seven officers, directors and employees owed an aggregate balance
of $3,782,013.
PROPOSAL 2. - AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK
On March 17, 1998, the Company's Board of Directors authorized an
amendment to the Company's Certificate of Incorporation to increase the number
of authorized shares of Common Stock from 40,000,000 to 80,000,000. The
stockholders are being asked to approve and adopt this proposed amendment. As of
May 8, 1998, __________ shares of Common Stock were issued, _________ shares
outstanding, and __________ shares were reserved for issuance pursuant to stock
option plans and outstanding common stock purchase warrants, leaving only
____________ shares (including Treasury shares) available for issuance.
The Board believes that the proposed increase is desirable so that, as
the need may arise, the Company will have more flexibility to issue shares of
Common Stock, without the expense and delay of a special stockholders' meeting,
in connection with future opportunities for expanding the business through
acquisitions, equity financings, management incentive and employee benefit
plans, possible future stock splits or stock dividends, and for other general
corporate purposes.
The increase in authorized Common Stock will not have any immediate
effect on the rights of existing stockholders. The Company has no present plans
to issue any shares of additional Common Stock authorized by this proposal.
However, any such issuance of additional shares of Common Stock will decrease
the existing stockholders' percentage equity ownership and could have the effect
of diluting the earnings per share and book value per share of outstanding
shares of Common Stock. The Board will have the authority to issue authorized
Common Stock without obtaining future stockholder approval of such issuances,
except as may be required by applicable law or stock exchange regulations.
In addition, the Company could issue additional shares of authorized
and unissued Common Stock in one or more transactions which could dilute the
stock ownership or voting rights of a person seeking to obtain control of the
Company, which would make a change in control of the Company more difficult, and
therefore less likely.
12
<PAGE> 16
The approval of the adoption of the amendment to the Company's
Certificate of Incorporation requires the affirmative vote of a majority of the
shares of Common Stock issued and outstanding. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO INCREASE THE AUTHORIZED SHARES
OF THE COMPANY'S COMMON STOCK.
PROPOSAL 3. - APPROVAL OF 1998 STOCK-BASED INCENTIVE PLAN
The stockholders are asked to approve and adopt the Company's 1998
Stock-Based Incentive Plan (the "1998 Plan"). This plan provides to officers and
employees of the Company and its subsidiaries incentives directly linked to the
profitability of the Company's business and increases in stockholder value. The
1998 Plan is the Company's current stock-based incentive plan for management.
REASON FOR SEEKING STOCKHOLDER APPROVAL
The sole purpose for seeking stockholder approval of the 1998 Plan is
to secure certain tax deductions for the Company. Section 162(m) of the Internal
Revenue Code, as amended, (the "Code") imposes a limitation on the tax
deductibility by a corporation of compensation in excess of $1,000,000 paid to
any of the executive officers of a publicly traded company whose compensation is
required to be disclosed in the Summary Compensation Table of the company's
proxy statement. The limitation does not apply to performance-based compensation
if certain conditions are met. One of these conditions is stockholder approval.
The Board of Directors of the Company approved the 1998 Plan on March 17, 1998.
Section 162(m) requires that the Company submit the 1998 Plan for approval by
the public stockholders in order to qualify stock options and certain other
awards under the 1998 Plan as performance-based. The Company's Board of
Directors believes that it is important for the Company to take all steps
reasonably necessary to ensure that the Company be able to take all available
tax deductions with respect to compensation resulting from awards under the 1998
Plan.
As of May 8, 1998, approximately ___ shares of the Company's common
stock remained available for grants under the 1991-1992 Stock Option Plan. In
approving the 1998 Plan, the Board of Directors intends to terminate any future
grants under the 1991-1992 Stock Option Plan upon approval by the stockholders
of the 1998 Plan.
MATERIAL FEATURES OF THE 1998 PLAN
Certain key provisions of the 1998 Plan are summarized below. Because
this is the summary, it may not contain all the information that is important to
you. The 1998 Plan is attached hereto as Exhibit A. Copies of the 1998 Plan will
also be available at the annual meeting.
Authorized Shares. The 1998 Plan authorizes up to 1,400,000 shares of
the Company's common stock for grants of non-qualified and incentive stock
options, stock appreciation rights, restricted stock awards and bonus stock
awards. The number of shares authorized may be adjusted for stock dividends,
stock splits, reorganizations, recapitalizations and other similar transactions.
Shares subject to awards that are forfeited or terminated will be available
again for issuance pursuant to other awards. Shares used may be either unissued
shares or treasury shares or both.
Administration. The Compensation Committee of the Board of Directors
administers the 1998 Plan. The members of the Compensation Committee are
non-employee directors of the Company. With certain exceptions, the full Board
of Directors may also exercise authority granted to the Compensation Committee.
Eligible Employees. The Compensation Committee may grant awards under
the 1998 Plan to any employee of the Company or its subsidiaries or associated
companies who is responsible for, or contributes to, the growth and
profitability of the Company, a subsidiary or an associated company. As of May
8, 1998, no awards have been granted pursuant to the 1998 Plan. The total number
of shares for which awards may be made to any one participant during any
calendar year cannot exceed 500,000 shares, as adjusted for any changes in
capitalization, such as stock splits. Directors who are not officers of the
Company are not eligible to participate in the Plan. Pursuant to the 1991-1992
Stock Option Plan, a total of ____ options were granted to an aggregate of _____
employees during 1997. Information regarding such grants is set forth elsewhere
in this proxy statement.
13
<PAGE> 17
Stock Options. The Compensation Committee establishes the terms and
conditions of the stock options granted under the 1998 Plan, subject to certain
limitations set forth in the Plan. Under the 1998 Plan, the exercise price of
the stock option granted must be no less than the fair market value of the
Company's common stock on the date of grant. The 1998 Plan also provides that
the term of any stock option granted under the Plan may not exceed ten years
and, additionally, may not exceed twelve months following the termination of
employment unless the termination is the result of retirement, death or
disability.
Options granted under the 1998 Plan are not transferable except by will
or the laws of descent and distribution. Options may be exercised during the
participant's lifetime only by the participant or the participant's guardian or
legal representative.
Incentive stock options may be granted if they meet the requirements of
the Code. The Company has not granted, and has no plans to grant, incentive
stock options.
U.S. Tax Consequences of Stock Options. No taxable income is realized
by the participant upon the grant of a non-qualified stock option, and no tax
deduction is then available to the Company. Upon exercise of the option, the
excess of the fair market value of the shares on the date of exercise over the
option price will be taxable to the participant and deductible by the Company.
The tax basis of shares acquired will be the fair market value on the date of
exercise. Depending upon whether the shares are held for twelve months or less,
more than twelve months but less than or equal to eighteen months, or more than
eighteen months, various tax rates will apply to the individual upon the
eventual sale of the shares. The most favorable capital gains rates apply to
shares held for more than eighteen months.
No taxable income is realized by a participant, and no tax deduction is
available to the Company, upon either the grant or exercise of an incentive
stock option. If a participant holds the shares acquired upon the exercise of an
incentive stock option for more than one year after the stock option exercise
and more than two years after the date of the option grant (the "holding
period"), the difference between the option price and the amount realized upon
the sale of the shares will be treated as long-term capital gain or loss and no
deduction will be available to the Company. If the shares are transferred before
the expiration of the holding period, the participant will realize ordinary
income, and the Company will be entitled to a deduction on a portion of the
gain, if any, equal to the difference between the option price and the lesser of
the fair market value of the shares on the date of exercise or the amount
realized on the disposition. Any further gain or loss will be taxable as
long-term or short-term capital gain or loss depending upon the holding period
before disposition.
If the stockholders approve the 1998 Plan, the Company believes that
compensation received by participants on the exercise of non-qualified options,
or the disposition of shares acquired upon the exercise of any incentive stock
options, will be considered performance-based compensation and thus not subject
to the $1,000,000 limit on deductibility of compensation under Section 162(m) of
the Code.
Participants are responsible for the payment of all withholding taxes
due in connection with the exercise or disposition of a stock option or the
vesting of a restricted stock award. In the discretion of the Compensation
Committee, participants may direct the Company to withhold shares to be issued
on an option exercise or stock award to satisfy the withholding obligation.
Stock Appreciation Rights. The 1998 Plan authorizes the grant of stock
appreciation rights in tandem with stock options or, to employees in foreign
jurisdictions where the grant of a stock option is impossible or impracticable
because of securities or tax laws or other governmental regulations, without
relationship to a stock option. The Company has no stock appreciation rights
currently outstanding under the 1998 Plan or any other similar stock option
plan.
Restricted and Unrestricted Stock. The Compensation Committee may make
restricted or unrestricted stock awards. The Compensation Committee may set the
terms and conditions of restricted stock awards, including restrictions against
sale, transfer or other disposition, and may make the lapse of such restrictions
contingent upon the achievement of performance goals or upon continued
employment. The Compensation Committee may determine to withhold payment of
dividends pending satisfaction of specified terms and conditions. The
Compensation Committee may also determine that cash dividends be deferred and
reinvested in additional restricted stock and that dividends payable on common
stock be paid in restricted stock. The Company has never awarded restricted
stock under the 1998 Plan or any similar plan.
Change of Control. Upon a change in control (as defined in the 1998
Plan), any stock option or stock appreciation right that is not then exercisable
will become fully exercisable and the restrictions applicable to an award of
restricted stock will lapse immediately.
14
<PAGE> 18
Amendments. The Company's Board of Directors may amend or discontinue
the 1998 Plan at any time. However, the Board may not make any amendment without
the approval of the Company's stockholders to the extent any law or agreement
requires stockholder approval. In addition, no amendment or termination of the
Plan may, without the participant's consent, adversely effect any awards already
made to participants under the Plan unless the amendment is required to cause
the Plan to qualify for any exemption provided by Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended.
The approval of the adoption of the Company's 1998 Stock-Based
Incentive Plan requires the affirmative vote of a majority of the shares present
or represented, and entitled to vote. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF
THE COMPANY'S 1998 STOCK-BASED INCENTIVE PLAN.
PROPOSAL 4. - INDEPENDENT PUBLIC ACCOUNTANTS
The stockholders are asked to approve and ratify the Board of
Directors' appointment of Price Waterhouse LLP as the independent auditors of
the Company for the purpose of auditing and reporting upon the financial
condition of the Company for the fiscal year ending December 31, 1998.
Since the Company's inception, Deloitte & Touche LLP has been
performing services of an accounting and auditing nature for the Company. On
April 16, 1998, the Company informed Deloitte & Touche LLP that effective
immediately they had been dismissed as the Company's principal independent
accountants, in accordance with the recommendation of the Company's audit
committee, and approval by the Board of Directors of the Company. Concurrently,
the Board of Directors of the Company engaged the accounting firm of Price
Waterhouse LLP to act as independent accountants for the Company, effective
immediately.
The report of Deloitte & Touche LLP on the financial statements of the
Company for the past two years has contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles. Further, during the two most recent fiscal years and any
subsequent interim period, there have been no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
Deloitte's satisfaction, would have caused them to make reference to the subject
matter of such disagreement in connection with their report on the financial
statements for such years. Representatives of Deloitte & Touche LLP will not be
present at the annual meeting.
The Board of Directors has appointed Price Waterhouse LLP to act as the
independent accountants for the Company. An affirmative vote of the holders of a
majority of the shares present or represented, and entitled to vote, is required
for approval and ratification of such appointment. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL AND RATIFICATION
OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT AUDITORS OF THE
COMPANY. Representatives of Price Waterhouse LLP will be present at the annual
meeting. At that time, such representatives will have an opportunity to make a
statement, if they desire to do so, and will be able to respond to appropriate
questions. Proxies returned by stockholders will be voted FOR the approval of
Price Waterhouse LLP as independent auditors of the Company unless otherwise
directed in the Proxy.
In the event the stockholders fail to ratify the appointment, it will
be considered as a direction to the Board of Directors to select another
independent accounting firm. it is understood that even if the selection is
ratified, the Board of Directors, in its discretion, may direct the appointment
of a new independent accounting firm at any time during the year if the Board of
Directors feels that such a change would be in the best interests of the Company
and its stockholders.
FINANCIAL STATEMENTS
The financial statements of the Company are not included in this Proxy
Statement as they are not deemed material to the exercise of prudent judgment by
the stockholders with respect to any proposal to be submitted at this Annual
Meeting. The Annual Report of the Company for the year ended December 31, 1997,
including the audited financial statements contained therein, is enclosed with
this Proxy Statement, but such Annual Report is not deemed to be part of the
proxy soliciting material.
15
<PAGE> 19
STOCKHOLDERS' PROPOSALS
Stockholders' proposals intended for inclusion in the Proxy material
solicited by the Company for the 1999 Annual Meeting of Stockholders must be
received at the Company's executive offices not later than ____________, 1999.
The Company is not required to include in its Proxy Statement or form of proxy a
stockholder proposal which is received after the date or which otherwise fails
to meet requirements for stockholders' proposals established by regulations of
the Securities and Exchange Commission.
GENERAL
The Proxy is solicited by management and confers discretionary
authority to vote on other matters which may properly come before the meeting or
any adjournment thereof, but the Board of Directors does not know of any matter
to be brought before the Annual Meeting other than the matters referred to in
the Notice of Annual Meeting of Stockholders and matters incident thereto. The
persons named in the Proxy solicited by management will vote all properly
executed Proxies. If a stockholder specifies on such Proxy a choice with respect
to a proposal to be acted upon, the Proxy will be voted in accordance with such
specifications. Where no choice is specified, the Proxy will be voted FOR
Proposals One, Two, Three and Four. If any matter not set forth in the Notice of
Annual Meeting of Stockholders is properly brought before the Annual Meeting,
such persons will vote thereon in accordance with their best judgment. The
presence at the Annual Meeting in person or by Proxy of the holders of a
majority of the outstanding shares of Common Stock is necessary to constitute a
quorum as prescribed by the Bylaws of the Company.
The entire cost of soliciting proxies for the Annual Meeting will be
borne by the Company. Corporate Investor Communications, Inc. has been retained
by the Company to assist in the solicitation of proxies at a cost of $4,000 plus
reimbursement of reasonable out-of-pocket expenses. Proxies may also be
solicited by officers, directors and regular employees of the Company
personally, by mail, or by telephone or telegraph, and the Company may reimburse
brokers, custodian banks, nominees and other fiduciaries for their reasonable
out-of-pocket expenses in forwarding proxy material to their principals.
By Order of the Board of Directors
A. E. BENTON
Chairman of the Board, Chief Executive
Officer and President
, 1998
- -------------------
<PAGE> 20
EXHIBIT A
---------
BENTON OIL AND GAS COMPANY
1998 STOCK-BASED INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give the Company a competitive advantage
in attracting, retaining and motivating officers and employees and to provide
the Company and its Subsidiaries and Associated Companies with a stock plan
providing incentives directly linked to the profitability of the Company's
businesses and increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Associated Company" means any corporation (or partnership, joint
venture, or other enterprise), of which the Company owns or controls, directly
or indirectly, 10% or more, but less than 50% of the outstanding shares of stock
normally entitled to vote for the election of directors (or comparable equity
participation and voting power).
b. "Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock, unrestricted share of Common Stock, dividend equivalent, interest
equivalent or other award granted under this Plan.
c. "Board" means the Board of Directors of the Company.
d. "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 9(b) and (c), respectively.
e. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
f. "Commission" means the Securities and Exchange Commission or any
successor agency.
g. "Committee" means the Compensation Committee referred to in Section
2.
h. "Common Stock" means common stock, par value $0.01 per share, of the
Company.
i. "Company" means Benton Oil and Gas Company, a Delaware corporation.
j. "Covered Employee" means a participant designated prior to the grant
of shares of Restricted Stock by the Committee who is or may be a "covered
employee" within the meaning of Section 162(m)(3) of the Code in the year in
which Restricted Stock is expected to be taxable to such participant.
k. "Disability" means permanent and total disability as determined by
the Committee for purposes of the Plan.
<PAGE> 21
l. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
m. "Fair Market Value" means, as of any given date, the average of the
highest and lowest sales prices of the Common Stock reported as the New York
Stock Exchange-Composite Transactions for such day, or if the Common Stock was
not traded on the New York Stock Exchange on such day, then on the next
preceding day on which the Common Stock was traded, all as reported by The Wall
Street Journal under the heading New York Stock Exchange-Composite Transactions
or by such other source as the Committee may select.
n. "Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code.
o. "Non-Employee Director" means a member of the Board who qualifies as
a Non-Employee Director as defined in Rule 16b-3(b)(3), as promulgated by the
Commission under the Exchange Act, or any successor definition adopted by the
Commission.
p. "NonQualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
q. "Qualified Performance-Based Award" means an Award of Restricted
Stock designated as such by the Committee at the time of grant, based upon a
determination that (i) the recipient is or may be a "covered employee" within
the meaning of Section 162(m)(3) of the Code in the year in which the Company
would expect to be able to claim a tax deduction with respect to such Restricted
Stock and (ii) the Committee wishes such Award to qualify for the Section 162(m)
Exemption.
r. "Performance Goals" means the performance goals established by the
Committee in connection with the grant of Restricted Stock. In the case of
Qualified Performance-Based Awards, (i) such goals shall be based on the
attainment of specified levels of one or more of the following measures:
earnings per share, sales, net profit after tax, gross profit, operating profit,
cash generation, economic value added, production volume, return on equity,
change in working capital, return on capital, cash flow, reserve value or
shareholder return, and (ii) such Performance Goals shall be set by the
Committee within the time period prescribed by Section 162(m) of the Code and
related regulations.
s. "Plan" means the Benton Oil and Gas Company 1998 Stock-Based
Incentive Plan, as set forth herein and as hereinafter amended from time to
time.
t. "Restricted Stock" means an Award granted under Section 7.
u. "Retirement" means retirement from employment with the Company, a
Subsidiary or an Associated Company as determined by the Committee for purposes
of an Award under the Plan.
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<PAGE> 22
v. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
w. "Section 162(m) Exemption" means the exemption from the limitation
on deductibility imposed by Section 162(m) of the Code that is set forth in
Section 162(m)(4)(C) of the Code.
x. "Stock Appreciation Right" means an Award granted under Section 6.
y. "Stock Option" means an Award granted under Section 5.
z. "Subsidiary" means: (i) for the purpose of an Incentive Stock
Option, any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of the
Incentive Stock Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain; and (ii) for the purposes of a NonQualified Stock Option, a Stock
Appreciation Right or Restricted Stock Award, any corporation (or partnership,
joint venture, or other enterprise) of which the Company owns or controls,
directly or indirectly, 50% or more of the outstanding shares of stock normally
entitled to vote for the election of directors (or comparable equity
participation and voting power).
aa. "Termination of Employment" means the termination of the
participant's employment with the Company and any Subsidiary or Associated
Company. A participant employed by a Subsidiary or an Associated Company shall
also be deemed to incur a Termination of Employment if the Subsidiary or
Associated Company ceases to be such a Subsidiary or Associated Company, as the
case may be, and the participant does not immediately thereafter become an
employee of the Company or another Subsidiary or Associated Company. Temporary
absences from employment because of illness, vacation or leave of absence and
transfers among the Company and its Subsidiaries, or, if the Committee so
determines, among the group consisting of the Company, its Subsidiaries and
Associated Companies, shall not be considered Terminations of Employment.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the
Board of Directors of the Company, or such other committee of the Board as the
Board may from time to time designate (the "Committee"), which shall be composed
of not less than two Non-Employee Directors, each of whom shall be an "outside
director" for purposes of Section 162(m)(4) of the Code, and shall be appointed
by and serve at the pleasure of the Board.
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<PAGE> 23
The Committee shall have plenary authority to grant Awards pursuant to
the terms of the Plan or, in the Committee's discretion, in connection with
awards under other bonus plans or programs of the Company, to officers and
employees of the Company and its Subsidiaries and Associated Companies.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) To select the officers and employees to whom Awards may from time
to time be granted;
(b) To determine whether and to what extent Incentive Stock Options,
NonQualified Stock Options, Stock Appreciation Rights and Restricted Stock, or
any combination thereof, are to be granted hereunder;
(c) To determine the number of shares of Common Stock to be covered by
each Award granted hereunder;
(d) To determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price (subject to Section
5(a)) or base price, as applicable, any vesting condition, restriction or
limitation (which may be related to the performance of the participant, the
Company or any Subsidiary or Associated Company) and any vesting acceleration or
forfeiture waiver regarding any Award and the shares of Common Stock relating
thereto, based on such factors as the Committee shall determine;
(e) To modify, amend or adjust the terms and conditions of any Award,
at any time or from time to time, including but not limited to Performance
Goals; provided, however, that the Committee may not adjust upwards the amount
payable with respect to a Qualified Performance-Based Award or waive or alter
the Performance Goals associated therewith;
(f) To determine under what circumstances an Award may be settled in
cash or Common Stock under Sections 5(g) and 6(d)(ii);
(g) To determine under what circumstances dividends, dividend
equivalents or interest equivalents with respect to an Award shall be paid; and
(h) To certify, in writing, that any and all performance goals and
other material terms related to Qualified Performance-Based Awards have been
satisfied, as contemplated by Section 1.162-27(e)(5) of the Income Tax
Regulations (the "Regulations").
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any award certificate relating
thereto) and to otherwise supervise the administration of the Plan.
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<PAGE> 24
The Committee may act only by a majority of its members then in office,
except that the members thereof may delegate all or a portion of the
administration of the Plan to senior managers of the Company or its Subsidiaries
(provided that no such delegation may be made that would cause Awards or other
transactions under the Plan to cease to be exempt from Section 16(b) of the
Exchange Act or not to qualify for, or cease to qualify for, the Section 162(m)
Exemption).
Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to any Award shall
be made in the sole discretion of the Committee or such delegate at the time of
the grant of the Award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee or any
appropriate delegate pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and Plan participants.
Any authority granted to the Committee may also be exercised by the
full Board, except to the extent that the grant or exercise of such authority
would cause any Award or transaction to become subject to (or lose an exemption
under) the short-swing profit recovery provisions of Section 16 of the Exchange
Act or cause an award designated as a Qualified Performance-Based Award not to
qualify for, or to cease to qualify for, the Section 162(m) Exemption. To the
extent that any permitted action taken by the Board conflicts with action taken
by the Committee, the Board action shall control.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
The total number of shares of Common Stock reserved and available for
grant under the Plan shall not exceed 1,400,000. No participant may be granted
Awards covering in excess of 500,000 shares of Common Stock in any calendar
year. Shares subject to an Award under the Plan may be authorized and unissued
shares or may be treasury shares, or both.
If any shares of Restricted Stock are forfeited, or if any Stock Option
or Stock Appreciation Right terminates without being exercised, or if any Stock
Appreciation Right (whether granted alone or in conjunction with a Stock Option)
is exercised for cash, shares subject to such Awards shall again be available
for distribution in connection with Awards under the Plan.
In the event of any change in corporate capitalization, such as a stock
split or a corporate transaction, such as any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property (without regard
to the payment of any cash dividends by the Company in the ordinary course) of
the Company, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Company, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, in the maximum number of shares with respect to
which any participant may be granted Awards in any calendar year, in the number,
kind and option price or base price, as applicable, of shares
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<PAGE> 25
subject to outstanding Stock Options and Stock Appreciation Rights, in the
number and kind of shares subject to other outstanding Awards granted under the
Plan and/or such other equitable substitution or adjustments as it may determine
to be appropriate in its sole discretion; provided, however, that the number of
shares subject to any Award shall always be a whole number. Such adjusted option
price shall also be used to determine the amount payable by the Company upon the
exercise of any Stock Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY
Officers and employees of the Company, a Subsidiary or an Associated
Company who are responsible for or contribute to the growth and profitability of
the business of the Company, a Subsidiary or an Associated Company are eligible
to be granted Awards under the Plan.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options and
NonQualified Stock Options. Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, NonQualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided, however, that
grants hereunder are subject to the aggregate limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may be granted only
to employees of the Company and its subsidiaries (within the meaning of Section
424(f) of the Code). To the extent that any Stock Option is not designated as an
Incentive Stock Option or, even if so designated, does not qualify as an
Incentive Stock Option, it shall constitute a NonQualified Stock Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
NonQualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Common Stock to be
subject to such Stock Option to be granted to such individual and specifies the
terms and provisions of the Stock Option, or on such later date as is specified
by the Committee.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or, without
the consent of the optionee affected, to disqualify any Incentive Stock Option
under such Section 422.
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<PAGE> 26
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee and set
forth in the option agreement, and shall not be less than the Fair Market Value
of the Common Stock subject to the Stock Option on the date of grant. The option
price per share shall not be decreased thereafter except pursuant to Section 3
of this Plan.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than 10 years after the
date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee may
at any time accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise, or notice in accordance with
such other procedures as may be established from time to time, to the Company or
its designated agent specifying the number of shares of Common Stock subject to
the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase
price in cash or by certified or cashier's check or such other instrument as the
Company may accept. If approved by the Committee, payment, in full or in part,
may also be made in the form of unrestricted Common Stock already owned by the
optionee of the same class as the Common Stock subject to the Stock Option
(based on the Fair Market Value of the Common Stock on the date the Stock Option
is exercised); provided, however, that, in the case of an Incentive Stock
Option, the right to make a payment in the form of already owned shares of
Common Stock of the same class as the Common Stock subject to the Stock Option
may be authorized only at the time the Stock Option is granted and provided,
further, that, in the case of either an Incentive Stock Option or a NonQualified
Stock Option, such already owned shares have been held by the optionee for at
least six months at the time of exercise.
In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed exercise notice
to the Company, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds necessary to
pay the purchase price, and, if requested, by the amount of any federal, state,
local or foreign withholding taxes. To facilitate the foregoing, the Company may
enter into agreements for coordinated procedures with one or more brokerage
firms.
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<PAGE> 27
In addition, in the discretion of the Committee, payment for any shares
subject to a Stock Option may also be made by instructing the Company or its
designated agent to withhold a number of such shares having a Fair Market Value
on the date of exercise equal to the aggregate exercise price of such Stock
Option.
No shares of Common Stock shall be issued until full payment therefor
has been made. An optionee shall have all of the rights of a shareholder of the
Company holding the class or series of Common Stock that is subject to such
Stock Option (including, if applicable, the right to vote the shares and the
right to receive dividends), when the optionee has given written notice of
exercise, has paid in full for such shares and, if requested, has given the
representation described in Section 12(a).
(e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the optionee other than by will or by the laws of descent and
distribution, or, in the Committee's discretion, pursuant to a written
beneficiary designation. All Stock Options shall be exercisable, subject to the
terms of this Plan, only by the optionee or guardian or legal representative or
beneficiary of the optionee, it being understood that the terms "holder" and
"optionee" include any such guardian, legal representative or beneficiary.
(f) Termination of Employment. The Stock Option and its related Stock
Appreciation Right, if any, may be exercised in full or in part from time to
time within ten years from the date of the grant, or such shorter period as may
be specified by the Committee in the option agreement, provided that in any
event each shall lapse and cease to be exercisable upon, or within such period
following, Termination of Employment as shall have been determined by the
Committee and as specified in the Stock Option agreement or Stock Appreciation
Right award certificate; provided, however, that such period following
Termination of Employment shall not exceed twelve months unless employment shall
have terminated:
(i) as a result of Retirement or Disability, in which event
such period shall not exceed --
(A) in the case of a Stock Option, the original term
of the Stock Option; and
(B) in the case of a Stock Appreciation Right, one
year after such Retirement or Disability or after resignation
as an officer or employee of the Company, whichever shall last
occur; or
(ii) as a result of death, or death shall have occurred
following Termination of Employment and while the Stock Option or Stock
Appreciation Right was still exercisable, in which event such period
shall not exceed the original term of the Stock Option; and provided,
further, that such period following Termination of Employment shall in
no event exceed the original exercise period of the Stock Option or
related Stock Appreciation Right, if any.
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<PAGE> 28
SECTION 6. STOCK APPRECIATION RIGHT
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a NonQualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. In addition, Stock Appreciation Rights may be granted without
relationship to a Stock Option to employees residing in foreign jurisdictions,
where the grant of a Stock Option is impossible or impracticable because of
securities or tax laws or other governmental regulations.
(b) Freestanding Stock Appreciation Rights. A Stock Appreciation Right
granted without relationship to a Stock Option, pursuant to Section 6(a), shall
be exercisable as determined by the Committee, but in no event after ten years
from the date of grant. The base price of a Stock Appreciation Right granted
without relationship to a Stock Option shall be the Fair Market Value of a share
of Common Stock on the date of grant. A Stock Appreciation Right granted without
relationship to a Stock Option shall entitle the holder, upon receipt of such
right, to a cash payment determined by multiplying (i) the difference between
the base price of the Stock Appreciation Right and the Fair Market Value of a
share of Common Stock on the date of exercise of the Stock Appreciation Right,
by (ii) the number of shares of Common Stock as to which Stock Appreciation
Right shall have been exercised. A freestanding Stock Appreciation Right may be
exercised by giving written notice of exercise to the Company or its designated
agent specifying the number of shares of Common Stock as to which such Stock
Appreciation Right is being exercised.
(c) Tandem Stock Appreciation Rights. A Stock Appreciation Right
granted in conjunction with a Stock Option may be exercised by an optionee in
accordance with Section 6(d) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee shall be entitled to receive an
amount determined in the manner prescribed in Section 6(d). Stock Options which
have been so surrendered shall no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised. A Stock Appreciation
Right shall terminate and no longer be exercisable upon the termination or
exercise of the related Stock Option.
(d) Terms and Conditions. Stock Appreciation Rights granted in
conjunction with a Stock Option shall be subject to such terms and conditions as
shall be determined by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which
they relate are exercisable in accordance with the provisions of
Section 5 and this Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash, equal to the
excess of the Fair Market Value of one share of Common Stock over the
option price per share specified in the related Stock
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<PAGE> 29
Option multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right is
related shall be deemed to have been exercised for the purpose of the
limitation set forth in Section 3 on the number of shares of Common
Stock to be issued under the Plan, but only to the extent of the number
of shares covered by the Stock Appreciation Right at the time of
exercise based on the value of the Stock Appreciation Right at such
time.
SECTION 7. BONUS SHARES AND RESTRICTED STOCK
(a) Administration. Awards of shares of Common Stock or Restricted
Stock may be made either alone or in addition to other Awards granted under the
Plan. In addition, a participant may receive unrestricted shares of Common Stock
or Restricted Stock in lieu of certain cash payments awarded under other plans
or programs of the Company. The Committee shall determine the officers and
employees to whom and the time or times at which grants of unrestricted shares
of Common Stock and Restricted Stock will be awarded, the number of shares to be
awarded to any participant (subject to the aggregate limit on grants to
individual participants set forth in Section 3 in the case of Qualified
Performance-Based Awards), the conditions for vesting, the time or times within
which such Awards may be subject to forfeiture and any other terms and
conditions of the Awards, in addition to those contained in Section 7(c).
(b) Awards and Certificates. Awards of unrestricted shares of Common
Stock and Restricted Stock shall be evidenced in such manner as the Committee
may deem appropriate, including, book-entry registration or delivery of one or
more stock certificates to the participant, or, in the case of Restricted Stock,
a custodian or escrow agent. Any stock certificate issued in respect of
unrestricted shares or shares of Restricted Stock shall be registered in the
name of such participant. The Committee may require that the stock certificates
evidencing shares of Restricted Stock be held in custody or escrow by the
Company or its designated agent until the restrictions thereon shall have lapsed
and that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:
(i) The Committee may, prior to or at the time of grant,
designate an Award of Restricted Stock as a Qualified Performance-Based
Award, in which event it shall condition the grant or vesting, as
applicable, of such Restricted Stock upon the attainment of Performance
Goals. If the Committee does not designate an Award of Restricted Stock
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<PAGE> 30
as a Qualified Performance-Based Award, it may also condition the grant
or vesting thereof upon the attainment of Performance Goals. Regardless
of whether an Award of Restricted Stock is a Qualified
Performance-Based Award, the Committee may also condition the grant or
vesting thereof upon the continued service of the participant. The
conditions for grant or vesting and the other provisions of Restricted
Stock Awards (including without limitation any applicable Performance
Goals) need not be the same with respect to each recipient. The
Committee may at any time, in its sole discretion, accelerate or waive,
in whole or in part, any of the foregoing restrictions; provided,
however, that in the case of Restricted Stock that is a Qualified
Performance-Based Award, the applicable Performance Goals have been
satisfied.
(ii) Subject to the provisions of the Plan and the terms of
the Restricted Stock Award, during the period, if any, set by the
Committee, commencing with the date of such Award for which such
participant's continued service is required (the "Restriction Period"),
and until the later of (A) the expiration of the Restriction Period and
(B) the date the applicable Performance Goals (if any) are satisfied,
the participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares of Restricted Stock.
(iii) Except as provided in this paragraph (iii) and Sections
7(c)(i) and 7(c)(ii) and the terms of the Restricted Stock Award, the
participant shall have, with respect to the shares of Restricted Stock,
all of the rights of a stockholder of the Company holding the class or
series of Common Stock that is the subject of the Restricted Stock,
including, if applicable, the right to vote the shares and the right to
receive any cash dividends. If so determined by the Committee under the
applicable terms of the Restricted Stock Award and subject to Section
12(e) of the Plan, (A) cash dividends on the class or series of Common
Stock that is the subject of the Restricted Stock Award shall be
automatically deferred and reinvested in additional Restricted Stock,
held subject to the vesting of the underlying Restricted Stock, or held
subject to meeting Performance Goals applicable only to dividends, and
(B) dividends payable in Common Stock shall be paid in the form of
Restricted Stock of the same class as the Common Stock with which such
dividend was paid, held subject to the vesting of the underlying
Restricted Stock, or held subject to meeting Performance Goals
applicable only to dividends.
(iv) Except to the extent otherwise provided under the
applicable terms of the Restricted Stock Award and Sections 7(c)(i),
7(c)(ii), 7(c)(v) and 9(a)(ii), upon a participant's Termination of
Employment for any reason during the Restriction Period or before the
applicable Performance Goals are satisfied, all shares still subject to
restriction shall be forfeited by the participant.
(v) Except to the extent otherwise provided in Section
9(a)(ii), in the event of a participant's Termination of Employment by
reason of Retirement, the Committee shall have the discretion to waive,
in whole or in part, any or all remaining restrictions (other than, in
the case of Restricted Stock with respect to which a participant is a
Covered Employee, satisfaction of the applicable Performance Goals
unless the participant's
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<PAGE> 31
employment is terminated by reason of death or Disability) with respect
to any or all of such participant's shares of Restricted Stock.
(vi) If and when any applicable Performance Goals are
satisfied and the Restriction Period expires without a prior forfeiture
of the Restricted Stock, unlegended certificates for such shares shall
be delivered to the participant upon surrender of the legended
certificates, or the restrictions on such shares shall be removed from
the book-entry registration.
SECTION 8. DIVIDEND EQUIVALENTS AND INTEREST EQUIVALENTS
(a) The Committee may provide that a participant to whom a Stock Option
has been awarded, which is exercisable in whole or in part at a future time for
shares of Common Stock (such shares, the "Option Shares") shall be entitled to
receive an amount per Option Share, equal in value to the cash dividends, if
any, paid per share of Common Stock on issued and outstanding shares, as of the
dividend record dates occurring during the period between the date of the Award
and the time each such Option Share is delivered pursuant to the exercise of
such Stock Option. Such amounts (herein called "dividend equivalents") may, in
the discretion of the Committee, be:
(i) paid in cash or shares of Common Stock from time to time
prior to or at the time of the delivery of such shares of Common Stock
or upon expiration of the Stock Option if it shall not have been fully
exercised (except that payment of the dividend equivalents on an
Incentive Stock Option may not be made prior to exercise); or
(ii) converted into contingently credited shares of Common
Stock (with respect to which dividend equivalents shall accrue) in such
manner, at such value, and deliverable at such time or times, as may be
determined by the Committee.
Such shares of Common Stock (whether delivered or contingently credited) shall
be charged against the limitations set forth in Section 3.
(b) The Committee, in its discretion, may authorize payment of interest
equivalents on any portion of any Award payable at a future time in cash, an
interest equivalents on dividend equivalents which are payable in cash at a
future time.
SECTION 9. CHANGE IN CONTROL PROVISIONS
(a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights
outstanding as of the date such Change in Control is determined to have
occurred, and which are not then
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exercisable and vested, shall become fully exercisable and vested to
the full extent of the original grant.
(ii) The restrictions and deferral limitations applicable to
any Restricted Stock shall lapse, and such Restricted Stock shall
become free of all restrictions and become fully vested and
transferable to the full extent of the original grant.
(b) Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following events:
(i) The acquisition by any individual, entity or group (with
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 51% or more of either (A) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) 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, for purposes of this subsection
(i), the following acquisitions shall not constitute a Change of
Control: (1) any acquisition directly from the Company, (2) any
acquisition by the Company, (3) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (iii) of this Section 9; or
(ii) 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, or
nomination for election by the Company's stockholders, 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 this purpose, 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
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company or the
acquisition of assets or stock of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals 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 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities
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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 or all or substantially all of the
Company's assets either directly or 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,
(B) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, [20%] 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 (C) 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 Board,
providing for such Business Combination; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(c) Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the higher of (i) the highest reported sales price, regular
way, of a share of Common Stock in any transaction reported on the New York
Stock Exchange Composite Tape or other national exchange on which such shares
are listed or on NASDAQ during the 60-day period prior to and including the date
of a Change in Control or (ii) if the Change in Control is the result of a
tender or exchange offer or a Corporate Transaction, the highest price per share
of Common Stock paid in such tender or exchange offer or Corporate Transaction;
provided, however, that in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Common Stock on the
date such Incentive Stock Option or Stock Appreciation Right is exercised. To
the extent that the consideration paid in any such transaction described above
consists all or in part of securities or other noncash consideration, the value
of such securities or other noncash consideration shall be determined in the
sole discretion of the Board.
SECTION 10. AMENDMENT AND TERMINATION
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee under any Award theretofore granted without the optionee's or
recipient's consent, except such an amendment made to cause the Plan to qualify
for any exemption provided by Rule 16b-3. In addition, no such amendment shall
be made without the approval of the Company's stockholders to the extent such
approval is required by law or agreement.
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The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
cause a Qualified Performance-Based Award to cease to qualify for the Section
162(m) Exemption or impair the rights of any holder without the holder's consent
except such an amendment made to cause the Plan or Award to qualify for any
exemption provided by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and accounting rules
as well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 11. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Common Stock or make payments; provided, however, that
unless the Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 12. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or receiving
shares pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend,
or, in the case of book-entry registration any notation, which the Committee
deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or certificates made
pursuant thereto, the Company shall not be required to issue or deliver any
stock certificate or certificates for shares of Common Stock, or account for
such shares by book-entry registration, under the Plan prior to fulfillment of
all of the following conditions:
(1) Listing or approval for listing upon notice of issuance,
of such shares on the New York Stock Exchange, Inc., or such other
securities exchange as may at the time be the principal market for the
Common Stock;
(2) Any registration or other qualification of such shares of
the Company under any state, federal or foreign law or regulation, or
the maintaining in effect of any such registration or other
qualification which the Committee shall, in its absolute discretion
upon the advice of counsel, deem necessary or advisable; and
(3) Obtaining any other consent, approval, or permit from any
state or federal governmental agency or foreign governmental body which
the Committee shall, in its
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absolute discretion after receiving the advice of counsel, determine to
be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Company or any
Subsidiary or Associated Company from adopting other or additional compensation
arrangements for its employees.
(c) Adoption of the Plan shall not confer upon any employee any right
to continued employment, nor shall it interfere in any way with the right of the
Company or a Subsidiary or an Associated Company to terminate the employment of
any employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any Award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Company, withholding obligations may be settled with Common Stock, including
Common Stock that is part of the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditional
on such payment or arrangements, and the Company and its Subsidiaries or
Associated Companies shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the participant. The
Committee may establish such procedures as it deems appropriate, including
making irrevocable elections, for the settlement of withholding obligations with
Common Stock.
(e) Reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if sufficient shares of
Common Stock are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Awards).
(f) Upon approval by the Board, in lieu of receiving shares of
restricted stock or upon exercise of stock options, a participant may make an
irrevocable election in the year prior to the performance of services that
related to the expected receipt of restricted stock, and/or make an irrevocable
election to Company shares upon the exercise of stock options, to a deferred
compensation arrangement adopted by the Board.
(g) The Committee, in its sole discretion, may establish such
procedures as it deems appropriate for a participant to designate a beneficiary
to whom any amounts payable in the event of the participant's death are to be
paid or by whom any rights of the participant, after the participant's death,
may be exercised.
(h) In the case of a grant of an Award to any employee of a Subsidiary
or Affiliated Company, the Company may, if the Committee so directs, issue or
transfer the shares of Common Stock, if any, covered by the Award to the
Subsidiary or Affiliated Company, for such lawful consideration as the Committee
may specify, upon the condition or understanding that the Subsidiary or
Affiliated Company will transfer the shares of Common Stock to the employee in
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accordance with the terms of the Award specified by the Committee pursuant to
the provisions of the Plan.
(i) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws.
SECTION 13. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of _____________, 1998.
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