<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Cabot Oil & Gas Corporation
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[LOGO] CABOT OIL & GAS CORPORATION
March 29, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Cabot Oil & Gas Corporation to be held on Thursday, May 16, 1996 at 10:00
a.m., local time, at The Ritz-Carlton Hotel, 1919 Briar Oaks Lane, Houston,
Texas.
The attached Notice of Annual Meeting and Proxy Statement cover the
formal business of the meeting. To better acquaint you with the directors, the
Proxy Statement contains biographical information of each nominee and each
director continuing in office.
A report on the operations of the Company and its plans will be
presented at the meeting. In addition, directors and officers of the Company
will be present to respond to your questions.
Whether or not you plan to attend the Annual Meeting, it is important
that your shares be represented. Please complete, sign, date and return the
enclosed proxy card in the postage-paid envelope provided.
Sincerely,
/s/ CHARLES P. SIESS, JR.
CHARLES P. SIESS, JR.
Chairman of the Board,
Chief Executive Officer and
President
<PAGE> 3
CABOT OIL & GAS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 1996
The Annual Meeting of Stockholders of Cabot Oil & Gas Corporation (the
"Company"), a Delaware corporation, will be held in The Colonnade Salon, The
Ritz-Carlton, 1919 Briar Oaks Lane, Houston, Texas 77027, on Thursday, May 16,
1996 at 10:00 a.m., for the following purposes:
1. To elect two persons to the Board of Directors of the Company.
2 To approve an amendment to the Company's 1990 Nonemployee
Director Stock Option Plan.
3. To ratify the appointment of the firm of Coopers & Lybrand
L.L.P, independent certified public accountants, as auditors
of the Company for its 1996 fiscal year.
4. To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
Only holders of record of the Class A Common Stock and the 6%
Convertible Redeemable Preferred Stock at the close of business on March 18,
1996 are entitled to receive notice of and to vote at the Annual Meeting. The
transfer books of the Company will not be closed.
Stockholders who do not expect to be present at the Annual Meeting
are urged to complete, date, sign and return the accompanying proxy in the
enclosed, self-addressed envelope requiring no postage if mailed in the United
States. You may still vote in person if you decide to attend the Annual
Meeting.
It is important that your shares be voted at the Annual Meeting.
Please exercise your right to vote and return a completed form of proxy at your
earliest convenience.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ LISA A. MACHESNEY
LISA A. MACHESNEY
Corporate Secretary
Houston, Texas
March 29, 1996
<PAGE> 4
CABOT OIL & GAS CORPORATION
15375 Memorial Drive
Houston, Texas 77079
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 1996
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Cabot Oil & Gas Corporation (the "Company") of
proxies for use at its 1996 Annual Meeting of Stockholders, to be held at The
Ritz-Carlton, Houston, Texas, on Thursday, May 16, 1996, at 10:00 a.m., or any
adjournment or postponement thereof (the "Annual Meeting"), for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. You
may revoke your proxy at any time prior to its use by a written communication
to Ms. Lisa A. Machesney, Corporate Secretary of the Company, or by a duly
executed proxy bearing a later date.
Stockholders attending the Annual Meeting may vote their shares in
person even though they have already executed a proxy. Properly executed
proxies not revoked will be voted in accordance with the specifications thereon
at the Annual Meeting and at any adjournment thereof. Proxies on which no
voting instructions are indicated will be voted for the election of the
nominees for directors, for approval of the amendment to the 1990 Nonemployee
Director Stock Option Plan, for ratification of the appointment of Coopers &
Lybrand L.L.P., independent certified public accountants, as auditors of the
Company for its 1996 fiscal year and in the best judgment of the proxy holders
on any other matter that may properly come before the Annual Meeting.
Only holders of record of the Company's Class A Common Stock, par
value $.10 per share ("Common Stock"), and the Company's 6% Convertible
Redeemable Preferred Stock ("6% Preferred Stock") as of the close of business
on March 18, 1995, are entitled to vote at the Annual Meeting. As of that
date, the Company had outstanding and entitled to vote 22,796,607 shares of
Common Stock, and 1,134,000 shares of 6% Preferred Stock. Each share of Common
Stock is entitled to one vote per share and each share of the 6% Preferred
Stock is entitled to 1.739 votes per share. There is no provision for
cumulative voting. A quorum for the consideration of business at the Annual
Meeting consists of a majority of all outstanding shares of stock entitled to
vote at the Annual Meeting. The Proxy Statement and form of Proxy are being
first sent or given to security holders on March 29, 1996.
In accordance with Delaware law, a stockholder entitled to vote for
the election of directors can withhold authority to vote for all nominees for
director or can withhold authority to vote for certain nominees for director.
Abstentions from proposals are treated as votes against the particular
proposal. Broker non-votes on proposals are treated as shares as to which
voting power has been withheld by the beneficial holders of those shares and,
therefore, as shares not entitled to vote on the proposal.
PROPOSAL I.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of directors
serving staggered three-year terms. Samuel W. Bodman and William P. Vititoe
have been nominated for election at the Annual Meeting for terms of three
years, each to hold office until the expiration of his term in 1999 and until
his successor shall have been elected and shall have qualified. Each nominee
is currently a director of the Company.
<PAGE> 5
It is the intention of the persons named in the enclosed form of proxy
to vote such proxies for the election of Messrs. Bodman and Vititoe for terms
of three years. If any one of the nominees is not so available at the time of
the Annual Meeting to serve, proxies received will be voted for substitute
nominees to be designated by the Board of Directors or, in the event no such
designation is made by the Board, proxies will be voted for a lesser number of
nominees. In no event will the proxies be voted for more than the number of
nominees set forth below.
CERTAIN INFORMATION REGARDING NOMINEES AND DIRECTORS
Set forth below, as of March 1, 1996, for each director that will
continue to serve after the Annual Meeting and for each nominee for election as
a director of the Company, is information regarding his age, position(s) with
the Company, membership on committees of the Board of Directors, the period
during which he has served as a director and term of office, his business
experience during at least the past five years, and other directorships
currently held by him. Carl M. Mueller, a director of the Company since 1990,
is retiring from the Board at the Annual Meeting and is not standing for
reelection. Mr. Mueller is currently Chairman of the Compensation Committee
and a member of the Safety and Environmental Affairs Committee.
ROBERT F. BAILEY
Age: 63
Committee Membership: Audit, Safety and Environmental Affairs
Director Since: 1994
Term of Office Expires: 1998
Business Experience:
Trans Republic Energy, L.P.
President - 1992 to present
Alta Energy Corporation
President - prior to 1992
Other Directorships:
Washington Energy Company
Texas Commerce Bank - Midland
SAMUEL W. BODMAN
Age: 57
Committee Membership: Compensation, Nominations
Director Since: 1989
Term of Office Expires: 1996 (Nominee for Director)
Business Experience:
Cabot Corporation:
Chairman of the Board - October 1988 to present
President - February 1991 to February 1995
January 1987 to October 1988
Chief Executive Officer - February 1988 to present
Other Directorships:
Cabot Corporation
John Hancock Mutual Life Insurance Company
Westvaco Corporation
Security Capital Group Incorporated
-2-
<PAGE> 6
HENRY O. BOSWELL
Age: 66
Committee Membership: Audit, Compensation
Director Since: 1991
Term of Office Expires: 1997
Business Experience:
Retired October 1987
Amoco Production Company
President - 1983 to October 1987
Amoco Corporation
Director - 1983 to October 1987
Amoco Canada Petroleum Ltd.
Chairman of the Board - 1983 to October 1987
Other Directorships:
ServiceMaster Management Corporation
Rowan Companies, Inc.
JOHN G.L. CABOT
Age: 61
Committee Memberships: Nominations, Safety and Environmental Affairs
Director Since: 1989
Term of Office Expires: 1998
Business Experience:
Retired September 1995
Cabot Corporation:
Chief Financial Officer - October 1992 to September 1995
Vice Chairman of the Board - October 1988 to September 1995
Other Directorships:
Cabot Corporation
Eaton Vance Corp.
K.N. Energy, Inc. (Advisory Director)
WILLIAM R. ESLER
Age: 70
Committee Membership: Audit, Safety and Environmental Affairs
Director Since: 1992
Term of Office Expires: 1997
Business Experience:
Retired February 1991
Southwestern Public Service Company
Chairman of the Board and Chief Executive Officer - July 1989
to February 1991
President and Chief Executive Officer - January 1989 to July 1989
President and Chief Operating Officer - 1985 to July 1989
Director - 1985 to 1992
-3-
<PAGE> 7
WILLIAM H. KNOELL
Age: 71
Committee Membership: Audit, Safety and Environmental Affairs
Director Since: 1990
Term of Office Expires: 1998
Business Experience:
Retired September 1989
Cyclops Industries, Inc.
Chairman, President and Chief Executive Officer - 1987 to
September 1989
Director until April 1992
Other Directorships:
DQE Corporation
Duquesne Light Company
C. WAYNE NANCE
Age: 64
Committee Memberships: Compensation, Nominations
Director Since: 1992
Term of Office Expires: 1998
Business Experience:
C. Wayne Nance & Associates, Inc. (petroleum consulting and
investments)
President - July 1989 to present
The Mitchell Group
Senior Vice President - July 1989 to present
Other Directorships:
Matador Petroleum Corporation
CHARLES P. SIESS, JR.
Age: 69
Position: Chairman of the Board, Chief Executive Officer and President
Director Since: 1989
Term of Office Expires: 1997
Business Experience:
Cabot Oil & Gas Corporation
Chairman of the Board, Chief Executive Officer and President -
May 1995 to present and December 1989 to December 1992
Bridas S.A.P.I.C. Oil Exploration
Consultant and Acting General Manager - January 1993 to
January 1994
Other Directorships:
Cabot Corporation
CAMCO, Inc.
Rowan Companies, Inc.
-4-
<PAGE> 8
WILLIAM P. VITITOE
Age: 57
Committee Memberships: Compensation, Nominations
Term of Office Expires: 1996 (Nominee for Director)
Business Experience:
Washington Energy Company
Chairman of the Board, Chief Executive Officer and President -
January 1994 to present
ANR Pipeline Company
President and Chief Executive Officer - October 1990 to
December 1993
Other Directorships:
Washington Energy Company
Comerica Bank
Michigan Mutual/Amerisure
INFORMATION ON THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held seven meetings during the year ended
December 31, 1995. The Board of Directors has four standing committees: the
Audit Committee, the Compensation Committee, the Nominations Committee and the
Safety and Environmental Affairs Committee. Membership on each committee is
listed above. All standing committees are composed entirely of nonemployee
directors.
The Audit Committee annually recommends the independent public
accountants to be appointed by the Board of Directors as auditor of the Company
and its subsidiaries; the committee also reviews the arrangements for and the
results of the auditor's examination of the Company's books and records,
internal accounting control procedures, and the activities and recommendations
of the Company's internal auditors. It reports to the Board of Directors on
Audit Committee activities and makes such investigations as it deems
appropriate. The Audit Committee held four meetings during 1995.
The Compensation Committee determines the salaries, bonuses and other
remuneration of the Company's officers who are also directors, reviews and
approves the salaries, bonuses and other remuneration of all other executive
officers, and determines the aggregate amount of bonuses and other incentives
to be paid pursuant to the Company's incentive compensation program. It
administers the Company's Annual Target Cash Incentive Plan, 1994 Long-Term
Incentive Plan, Incentive Stock Option Plan and supplemental retirement plans,
including the adoption of the rules and regulations therefore and the
determination of awards. It also makes recommendations to the Board of
Directors with respect to the Company's compensation policy. The Compensation
Committee held nine meetings during 1995.
The Nominations Committee considers and proposes nominees for
membership on the Board of Directors, including nominations made by
stockholders, reviews the composition of the Board of Directors and makes
recommendations to the Board of Directors concerning corporate governance. Any
stockholder desiring to make a nomination to the Board of Directors should
submit such nomination for consideration by the Nominations Committee,
including such nominee's qualifications, to Ms. Lisa A. Machesney, Corporate
Secretary, Cabot Oil & Gas Corporation, 15375 Memorial Drive, Houston, Texas
77079. The Nominations Committee held two meetings during 1995.
The Safety and Environmental Affairs Committee reviews the Company's
safety and environmental management programs and major hazard analyses. It
also reviews the nature of and extent of Company spending from time to time for
safety and environmental compliance. It further consults with outside and
internal advisors of the Company regarding the management of the Company's
safety and environmental programs. The Safety and Environmental Affairs
Committee held two meetings during 1995.
All directors attended 75% or more of the meetings of the Board of
Directors and of the committees held while they were members during 1995.
-5-
<PAGE> 9
DIRECTOR'S COMPENSATION
Directors who are not employees of the Company were compensated during
1995 by the payment of a quarterly cash fee of $4,000, plus $1,000 for
attendance by them at each Board meeting and $500 for attendance at each
meeting of a committee of which they are a member. Committee chairmen
received an additional fee of $500 per quarter. Directors are further
compensated $500 for attendance at business meetings when so requested by the
Chairman of the Board of Directors.
Nonemployee directors also received nondiscretionary automatic grants
of nonqualified options to purchase 10,000 shares of the Common Stock at a
price equal to 100% of the fair market value on the date first elected to the
Board of Directors under either the 1990 Nonemployee Director Stock Option Plan
or the 1994 Nonemployee Director Stock Option Plan. In addition, under the
1994 Nonemployee Director Stock Option Plan, nonemployee directors also receive
a nondiscretionary automatic grant of a nonqualified option to purchase an
additional 5,000 shares of Common Stock upon reelection to a new term of
office. Directors who are employees of the Company receive no additional
compensation for their duties as directors. All directors were also reimbursed
for travel expenses incurred for attending all Board and committee meetings.
PROPOSAL II.
APPROVAL OF AMENDMENT TO THE
1990 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, a
Second Amendment (the "Amendment") to the 1990 Nonemployee Director Stock
Director Plan of the Company (the "1990 Director Plan"). A copy of the
Amendment is attached hereto as Exhibit A and is incorporated herein by
reference. The 1990 Director Plan was adopted in April 1990 and approved by the
Company's stockholders in February 1991. It was amended in July 1993 by the
Board of Directors in order to allow the Company to issue new stock in addition
to the use of treasury stock to fund option exercises under the 1990 Director
Plan. The 1990 Director Plan was intended as an incentive to retain and
attract persons of training, experience and ability to serve as independent
directors on the Board of Directors, to encourage the sense of proprietorship
in such directors and to stimulate the active interest of such directors in the
development and financial success of the Company. The 1990 Director Plan
provides for stock options with respect to a total of 60,000 shares of Common
Stock. As of December 31, 1995, options to purchase a total of 47,000 shares
were outstanding under the 1990 Director Plan, all of which were then
exercisable, and 3,000 shares had been issued to directors pursuant to the 1990
Director Plan. The 1990 Director Plan provided for automatic option grants of
10,000 shares on the date an individual first becomes a director of the
Company. Options under the 1990 Director Plan are exercisable with respect to
25% of the shares subject thereto on the date of grant, with the remaining 75%
vesting in equal increments on the second, third and fourth anniversaries of
the date of grant. The exercise price for all options is the fair market value
(as defined) of the Common Stock on the date of grant.
In December 1993, the Board of Directors adopted, and stockholders
approved in May 1994, the 1994 Nonemployee Director Stock Option Plan (the
"1994 Director Plan"). Due to the adoption of the 1994 Director Plan, no
further stock options are intended to be granted under the 1990 Director Plan.
The Amendment is intended to conform the provision of the 1990
Director Plan with the 1994 Director Plan with respect to the length of time a
nonemployee director has to exercise vested stock options following mandatory
retirement. Each option under the 1990 Director Plan expires ten years from
the date it becomes exercisable. Under the 1990 Director Plan as currently in
effect, an option will expire, if earlier, one year after the date the optionee
ceases to be a director by reason of death or disability or three months after
the date optionee ceases to be a director for any other reason. The Amendment
would allow a nonemployee director up to one year following mandatory
retirement to exercise vested stock options, in conformance with the 1994
Director Plan.
-6-
<PAGE> 10
Approval of the Amendment to the 1990 Director Plan will require the
affirmative vote of a majority of the votes of the shares of Common Stock and
the 6% Preferred Stock voting on the proposal. For this purpose, abstentions
will be counted as votes against and broker non-votes will not be treated as
voting on the proposal. The persons named on the accompanying proxy will vote
in accordance with the choice specified thereon, or, if no choice is properly
indicated, in favor of the approval of the Amendment.
PROPOSAL III.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation by the Audit Committee,
has approved and recommended the appointment of Coopers & Lybrand L.L.P.,
independent public accountants, as auditors to examine the Company's financial
statements for 1996. Neither such firm nor any of its associates has any
relationship with the Company except in their capacity as auditors. The
persons named in the accompanying proxy will vote in accordance with the choice
specified thereon, or, if no choice is properly indicated, in favor of the
designation of Coopers & Lybrand L.L.P. as auditors of the Company.
A representative of Coopers & Lybrand L.L.P. is expected to attend the
Annual Meeting and to be available to respond to appropriate questions raised
during the Annual Meeting. The representative will also have an opportunity to
make a statement during the meeting if the representative so desires.
-7-
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes annual and long-term compensation paid
to the Company's Chief Executive Officer, the Company's four most highly
compensated executive officers other than the Chief Executive Officer who were
serving as of December 31, 1995 and the Company's former Chief Executive
Officer for all services rendered to the Company and its subsidiaries during
each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
------------------------------------------------------------------
Awards
-------------------------------
Name and Year Salary Bonus Other Annual Restricted Stock Securities All Other
Principal Position ($) ($) (1) Compensation Awards ($) (3) Underlying Compensation
($) (2) Options (#) ($)(4)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C.P. Siess, Jr. 1995 230,978 0 21,030 133,750(5) 280,000 8,750
Chairman of the Board 1994 0 0 0 0 0 0
Board and CEO 1993 0 0 0 0 0 0
H.B. Whitehead 1995 165,000 0 11,704 41,625(7) 12,000 6,593
Vice President - 1994 161,833 0 1,288 0 9,000 8,273
Regional Manager 1993 144,500 45,000 44,310(6) 0 8,000 7,380
J.M. Trimble 1995 150,000 0 6,732 41,625(8) 7,500 6,000
Vice President - Business 1994 148,667 0 1,631 0 7,500 7,947
Development & Engineering 1993 142,000 50,000 1,740 0 7,500 7,280
G.F. Reiger 1995 135,000 0 696 41,625(9) 10,500 5,400
Vice President - 1994 72,916 0 868 0 4,000 2,917
Regional Manager 1993 0 0 0 0 0 0
J.L. Batt 1995 137,500 0 5,652 34,688(10) 6,000 6,150
Vice President - Land 1994 136,250 0 3,867 0 6,000 6,000
1993 128,917 30,000 1,620 0 5,000 8,994
J.H. Lollar (11) 1995 156,250 0 3,755 0 0 1,094,561(11)
Former Chairman of the 1994 370,883 0 14,766 0 30,000 9,240
Board and CEO 1993 350,000 120,000 5,764 0 28,000 8,994
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1/ No bonuses were paid to the Chief Executive Officer or the four most
highly compensated executives in 1994 or 1995. See "Compensation
Committee Report on Executive Compensation - Annual Incentive Bonus".
2/ Unless otherwise indicated, the amount in this column represents
premiums paid on and a tax gross-up for imputed income on executive
term life insurance and a tax gross-up on club dues. Premiums paid on
and a tax gross-up for imputed income on executive term life insurance
represents $17,732, $1,217, $1,088, $696, $3,825 and $0 for Messrs.
Siess, Whitehead, Trimble, Reiger, Batt and Lollar, respectively. The
tax gross-up on club dues represents $3,298, $10,487, $5,644, $0,
$1,827 and $3,755 for Messrs. Siess, Whitehead, Trimble, Reiger, Batt
and Lollar, respectively.
3/ Unless otherwise indicated, the amount in this column represents the
value of restricted stock grants made to the named executive on
November 14, 1995, based on a closing market price of $13.875 on
November 14, 1995, as reported on the New York Stock Exchange, Inc.
Composite Transactions Reporting System.
4/ Unless otherwise indicated, the amount in this column represents the
Company's contribution to the 401(k) Plan and associated non-qualified
agreement on behalf of the named executive.
-8-
<PAGE> 12
5/ This amount represents the value of a 10,000 share restricted stock
grant made to Mr. Siess on August 3, 1995, based on a closing market
price of $13.375 on August 3, 1995, as reported on the New York Stock
Exchange, Inc. Composite Transactions Reporting System, the
restrictions on which lapse in one installment on May 18, 1998. Mr.
Siess holds a total of 60,000 shares of restricted stock. The market
value (net of purchase price) of such shares at December 29, 1995 was
$477,500. Dividends are paid on the other 50,000 shares of restricted
stock held, which were purchased for $8 per share in 1990 in
connection with the Company's initial public offering.
6/ Represents $400 for premiums paid on and a tax gross-up for imputed
income on executive term life insurance and $43,910 tax gross-up for
relocation expenses.
7/ Mr. Whitehead holds 6,125 shares of restricted stock. The market
value (net of purchase price) of such shares at December 29, 1995 was
$64,578. Mr. Whitehead was granted 3,000 shares of restricted stock
on November 14, 1995, the restrictions on which lapse 33 1/3% on
November 14, 1996 and an additional 33 1/3% on each of the next two
anniversaries of such date. Dividends are paid on the other 3,125
shares of restricted stock held, which were purchased for $8 per share
in 1990 in connection with the Company's initial public offering.
8/ Mr. Trimble holds 15,500 shares of restricted stock. The market value
(net of purchase price) of such shares at December 29, 1995 was
$126,688. Mr. Trimble was granted 3,000 shares of restricted stock on
November 14, 1995, the restrictions on which lapse 33 1/3% on November
14, 1996 and an additional 33 1/3% on each of the next two
anniversaries of such date. Dividends are paid on the other 12,500
shares of restricted stock held, which were purchased for $8 per share
in 1990 in connection with the Company's initial public offering.
9/ Mr. Reiger holds 3,000 shares of restricted stock. The market value
of such shares at December 29, 1995 was $43,875. Mr. Reiger was
granted 3,000 shares of restricted stock on November 14, 1995, the
restrictions on which lapse 33 1/3% on November 14, 1996 and an
additional 33 1/3% on each of the next two anniversaries of such date.
No dividends are paid on the restricted stock held.
10/ Mr. Batt holds 2,500 shares of restricted stock. The market value of
such shares at December 29, 1995 was $36,563. Mr. Batt was granted
2,500 shares of restricted stock on November 14, 1995, the
restrictions on which lapse 33 1/3% on November 14, 1996 and an
additional 33 1/3% on each of the next two anniversaries of such date.
No dividends are paid on the restricted stock held.
11/ Mr. Lollar resigned from the Company effective May 18, 1995. See
"Severance Arrangements."
-9-
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
Set forth below is certain information relating to the Company's
grants of options during 1995 to the executive officers named in the preceding
Summary Compensation Table, including the relative size of each grant, and each
grant's exercise price and expiration date. Also included is information
relating to the potential realizable value of the options granted, based upon
assumed annualized stock value appreciation rates. Neither the option values
reflected in the table nor the assumptions utilized in arriving at the values
should be considered indicative of future stock performance.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed Annual Rates
Individual Grants of Stock Price Appreciation
for Option Term
- ---------------------------------------------------------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees in
Granted Fiscal Year Exercise
(#) (1) Price Expiration
Name ($/Sh) (2) Date (3) 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C.P. Siess, Jr. 30,000 (4) 5.5% $15.3125 May 18, 2000 $126,825 (6) $280,425 (8)
C.P. Siess, Jr. 250,000 (5) 45.8% $13.5625 August 9, 2000 $936,875 (7) $2,069,375 (9)
H.B. Whitehead 12,000 (4) 2.2% $15.3125 May 18, 2000 $50,730 (6) $112,170 (8)
J.M. Trimble 7,500 (4) 1.4% $15.3125 May 18, 2000 $31,706 (6) $70,106 (8)
G.F. Reiger 10,500 (4) 1.9% $15.3125 May 18, 2000 $44,389 (6) $98,149 (8)
J.L. Batt 6,000 (4) 1.1% $15.3125 May 18, 2000 $25,365 (6) $56,085 (8)
J.H. Lollar 0 0% - - 0 0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
1/ There were no adjustments or amendments during 1995 to the
exercise price of stock options previously awarded to any of the
named executive officers.
2/ Equal to the average of the high and low trading price per share
of the Company's Common Stock on the date of grant, as reported
on The New York Stock Exchange, Inc. Composite Transactions
Reporting System.
3/ The options permit the exercise price to be paid in cash or by
tendering shares of Common Stock. The options permit the
withholding of shares, at the discretion of the Compensation
Committee, to satisfy tax obligations.
4/ 33 1/3% of such options become exercisable on the first
anniversary of the date of grant (May 18, 1995) and the remainder
of such option becomes exercisable in 33 1/3% increments on each
of the next two anniversaries of such date.
5/ Consists of two options granted August 9, 1995. One, with
respect to 195,000 shares, is exercisable upon the date of grant.
The other option, with respect to 55,000 shares, is exercisable
on February 9, 1996.
-10-
<PAGE> 14
6/ The stock price required to produce this value is $19.54 and
would produce a corresponding $96,372,597 increase in total
stockholder value based upon 22,796,593 shares of Common Stock
outstanding on March 1, 1996.
7/ The stock price required to produce this value is $17.31 and
would produce a corresponding $85,430,232 increase in total
stockholder value based upon 22,796,593 shares of Common Stock
outstanding on March 1, 1996.
8/ The stock price required to produce this value is $24.66 and
would produce a corresponding $213,091,153 increase in total
stockholder value based upon 22,796,593 shares of Common Stock
outstanding on March 1, 1996.
9/ The stock price required to produce this value is $21.84 and would
produce a corresponding $188,698,799 increase in total
stockholder value based upon 22,796,593 shares of Common Stock
outstanding on March 1, 1996.
AGGREGATED FY-END OPTION VALUES
Set forth below is supplemental information relating to the number and
intrinsic value of stock options held at December 31, 1995 ("FY-End"), by the
executive officers named in the preceding Summary Compensation Table. Year-end
values are based on the Company's stock price at December 29, 1995, do not
reflect the actual amounts, if any, which may be realized upon the future
exercise of remaining stock options, and should not be considered indicative of
future stock performance. No options were exercised by the individuals named
in the Summary Compensation Table during 1995.
AGGREGATED FY-END OPTION VALUES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
- --------------------------------------------------------------------------------------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable(1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
C.P. Siess, Jr. 331,000 / 85,000 $207,188 / $58,438
H.B. Whitehead 30,520 / 23,880 $14,740 / $3,685
J.M. Trimble 32,420 / 17,980 $14,740 / $3,685
G.F. Reiger 1,334 / 13,166 0 / 0
J.L. Batt 21,520 / 13,630 $8,965 / $2,241
J.H. Lollar 118,000 / 0 0 / 0
- --------------------------------------------------------------------------------------------------
</TABLE>
1/ A stock option is considered to be "in-the-money" if the price of the
related stock is higher than the exercise price of the option. The
closing market price of the Common Stock was $14.625 per share as
reported on the New York Stock Exchange, Inc. Composite Transactions
Reporting System for December 29, 1995.
-11-
<PAGE> 15
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
Shown below is information with respect to long term incentive awards
made to the executive officers named in the Summary Compensation Table.
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Estimated Future Payouts Under Non-Stock
Price-Based Plans
----------------------------------------------------
Number of Shares, Performance or
Name Units or Other Rights Other Period until
(#) (1) Maturation or Threshold (#) Target (#) Maximum (#)
Payout (2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
C.P. Siess, Jr. 10,000 3 Years 2,500 10,000 15,000
H.B. Whitehead 4,000 3 Years 1,000 4,000 6,000
J.M. Trimble 2,500 3 Years 625 2,500 3,750
G.F. Reiger 3,500 3 Years 875 3,500 5,250
J.L. Batt 2,000 3 Years 500 2,000 3,000
J.H. Lollar 0 n/a n/a n/a n/a
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Performance shares were awarded under the 1994 Long-Term Incentive Plan.
Each performance share represents the right to receive, after the end of
the performance period, from 0% to 150% of a share of Common Stock, based
on the Company's performance. The performance criteria that determines the
number of shares of Common Stock of the Company issued per performance
share is the relative total shareholder return on the Company's Common
Stock as compared to the total shareholder return on the common equity of
each company in a specified comparator group of 12 companies. For this
purpose, total shareholder return is expressed as a percentage equal to
common stock price appreciation as averaged for the first and last month of
the performance period plus dividends (on a cumulative reinvested basis).
After the end of each performance period, the Company will issue shares in
respect to such performance share award for such period based on the
relative ranking of the Company versus the comparator group for total
shareholder return during the performance period, using a specified scale.
See "Compensation Committee Report on Executive Compensation - Long Term
Incentives".
(2) The performance period began to run on July 1, 1995 and is scheduled to end
on June 30, 1998. Unless otherwise determined by the Compensation
Committee, if a participant's employment terminates prior to the end of a
performance period, no shares of Common Stock shall be issued to such
participant. With respect to Mr. Siess, the Compensation Committee has
determined that should his service as a Company officer terminate prior to
the end of the performance period, any issuance of Common Stock shall be
prorated based on actual service completed during the performance period,
but such issuance shall only be made at the end of the performance period.
-12-
<PAGE> 16
PENSION PLAN TABLE
Company employees are covered by the Company's Pension Plan (the "Pension
Plan"), a noncontributory defined benefit pension plan that provides benefits
based generally upon the employee's compensation levels during the last years
of employment. In addition, the Company has entered into agreements to
supplement the benefits payable to certain officers to the extent benefits
under the Pension Plan are limited by provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), or the Employee Retirement Income Security
Act of 1974, as amended. The following table sets forth estimated annual
benefits payable for eligible employees (including executive officers) who
retire at age 65 under the Pension Plan (and, where applicable, such
supplemental agreements) for specified earnings and years of service
classification. Amounts shown are for employees (including all persons listed
in the Summary Compensation Table) who were not "grandfathered" under the
Pension Plan (based on years of service and age) as of September 30, 1988.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
REMUNERATION YEARS OF SERVICE
- -------------------------------------------------------------------------------------------
15 20 25 30 35
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
125,000 26,570 35,426 44,283 53,140 61,996
- -------------------------------------------------------------------------------------------
150,000 32,195 42,926 53,658 64,390 75,121
- -------------------------------------------------------------------------------------------
175,000 37,820 50,426 63,033 75,640 88,246
- -------------------------------------------------------------------------------------------
200,000 43,445 57,926 72,408 86,890 101,371
- -------------------------------------------------------------------------------------------
225,000 49,070 65,426 81,783 98,140 114,496
- -------------------------------------------------------------------------------------------
250,000 54,695 72,926 91,158 109,390 127,621
- -------------------------------------------------------------------------------------------
275,000 60,320 80,426 100,533 120,640 140,476
- -------------------------------------------------------------------------------------------
300,000 65,945 87,926 109,908 131,890 153,871
- -------------------------------------------------------------------------------------------
400,000 88,445 117,926 147,408 176,890 206,371
- -------------------------------------------------------------------------------------------
450,000 99,695 132,926 166,158 199,390 232,621
- -------------------------------------------------------------------------------------------
500,000 110,945 147,926 184,908 221,890 258,871
- -------------------------------------------------------------------------------------------
600,000 133,445 177,926 222,408 266,890 311,371
- -------------------------------------------------------------------------------------------
</TABLE>
Compensation under the Pension Plan generally consists of base salary
and any short-term incentive payments. The Pension Plan provides for full
vesting after five years of service. Benefits are payable for the life of the
employee on a single-life annuity basis and are not subject to any deductions
for Social Security or other offset amounts. Covered compensation under the
Pension Plan in 1995 for the executive officers named in the Summary
Compensation Table is the amounts under the "Salary" and "Bonus" columns set
forth in such table. The Company provides Mr. Siess supplemental pension
benefits by granting one month's additional service credit for each month of
actual service. For purposes of the Pension Plan, including Mr. Siess's
supplemental pension benefits, Messrs. Siess, Trimble, Whitehead, Reiger and
Batt had 7.0, 12.67, 15.25, 1.58 and 8.00 years of credited service,
respectively, as of December 31, 1995. Mr. Siess' benefits shall be offset by
the value of pension benefits paid upon his prior termination of service. The
Company provided Mr. Lollar supplemental pension benefits by granting one
month's additional service credit for each month of actual service. Mr.
Lollar's participation in the Company's Pension Plan terminated upon his
resignation from the Company. See "Severance Arrangements".
-13-
<PAGE> 17
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee of the Company's Board of Directors (the
"Committee") is comprised of five non-employee directors. The Committee has
responsibility for determining the salaries, incentive compensation and other
remuneration of the officers of the Company who are also directors and for
reviewing and approving the salaries, incentive compensation and other
remuneration of all other officers of the Company. The Committee also approves
the design of the Company's compensation and benefit plans.
The foundation of the executive compensation program is based on
principles designed to align compensation with business strategy, to create
value for the stockholders and to support a performance-based culture
throughout the Company. Consistent with these principles, the Committee's
compensation policy for executive officers, including the executive officers
named in the foregoing tables, is to:
o Tie total executive compensation to the performance of the Company,
providing both reward and penalty based on the Company's performance
compared to its peers and individual performance.
o Comprise a significant amount of the compensation as long-term,
at-risk pay to focus management on the long-term interests of the
stockholders.
o Tie the at-risk components of pay primarily to equity-based
opportunities to encourage a personal proprietary interest in the
Company and to align executives' interests with those of
stockholders. The Committee believes this promotes a continuing
focus on building stockholder value and profitability.
o Enhance the Company's ability to attract, retain and encourage the
development of exceptionally knowledgeable and experienced
executives upon whom, in large part, the successful operation and
management of the Company depends.
The Committee also believes that executive compensation should be
subject to objective scrutiny. Consequently, the Committee retains the
services of an independent consultant, who on a regular basis evaluates the
compensation programs and practices for the Company's executive officers
against a competitive industry peer group.
COMPONENTS OF COMPENSATION
The Committee relates total compensation levels for the Company's
senior executives to the compensation paid to executives of a peer group of
companies. This peer group consists of companies that are in the same industry
and are considered by the Committee to be direct competitors for investment
dollars in the energy sector of the market. The Committee reviews and approves
the selection of the peer companies used for compensation comparison purposes.
Currently, the peer group is made up of twelve companies: Anadarko Petroleum
Corporation, Apache Corporation, Barrett Resources, Burlington Resources, Inc.
(Meridian Oil), Devon Energy Corporation, Enron Oil & Gas Company, The
Louisiana Land & Exploration Company, Noble Affiliates, Inc., Oryx Energy
Company, Parker & Parsley Petroleum Company, Santa Fe Energy Resources, Inc.
and Seagull Energy Corporation.
The companies chosen for the peer comparator group used for
compensation purposes generally are not the same companies which comprise the
Dow Jones Secondary Oils Index, shown in the Performance Graph included in this
proxy statement. The Committee believes that the Company's most direct
competitors for executive talent are not necessarily all of the companies
included in the Dow Jones Secondary Oils Index used for comparing stockholder
returns.
-14-
<PAGE> 18
The key elements of the Company's executive compensation program are
base salary, annual incentive bonus and long-term incentives. These key
elements are addressed separately below. In determining each component of
compensation, the Compensation Committee considers competitive data from the
comparator group of companies for each component of pay and the overall value
of the total compensation package. The Committee believes that the total
compensation package should be competitive and targeted at the median level of
compensation for the comparator group but that superior performance should
reflect a corresponding increase in value for short and long term incentives.
BASE SALARIES
The Compensation Committee reviews each executive's base salary
annually. Base salaries are targeted at market levels and are adjusted by the
Committee to recognize varying levels of responsibility, prior experience,
breadth of knowledge, internal equity issues and external pay practices. Base
salaries in 1995 for the executive officers named in the Summary Compensation
Table as a group were at, or near, the 50th percentile of the predicted
competitive market base salary for similar positions in the peer comparator
group. Increases to base salaries are driven primarily by individual
performance.
Mr. Siess' base salary of $375,000 per year approximates the 50th
percentile of the competitive market for his position and reflects his depth of
experience as a chief executive.
ANNUAL INCENTIVE BONUS
The Annual Target Cash Incentive Plan promotes the Company's
pay-for-performance philosophy by providing executives with direct financial
incentives in the form of annual cash bonuses to achieve corporate business
goals and individual performance goals. Annual bonus opportunities allow the
Company to communicate specific goals that are of primary importance during the
coming year and motivate executives to achieve these goals.
A bonus pool is generated under the Annual Target Cash Incentive Plan
as administered in past years when the Company has met pre-determined
performance goals which measure the Company's success. These goals are
approved by the Board of Directors each year in conjunction with its approval
of the Company's operating and capital spending plans. Goals are set for
finding costs, reserve additions, produced volumes, operating cash flow,
economic value added and other discretionary objectives. A weighting factor is
established for such goals with equal weight given to financial performance
criteria (50%) and operating measurement criteria (50%). If a bonus pool is
generated based upon achievement of the established Company goals, executives
earn bonuses to the extent pre-established individual performance goals are
achieved. Individual incentive targets are set at market levels which are
considered by the Compensation Committee to be appropriate, based upon
corporate and individual performance.
In anticipation of a challenging business environment for the year,
the Committee did not establish a formal program identifying performance goals
or weighting factors for the Annual Target Cash Incentive Plan for 1995 and the
Committee did not authorize payment of any bonuses to executives for 1995
performance.
LONG TERM INCENTIVES
In past years, the Company has used two types of awards to provide
long term incentives to executives: stock options and performance shares. The
Committee places greater emphasis on stock options as long term incentive
awards for key executives, but also believes that performance shares should be
made to those individuals who have a direct impact on the Company's
profitability. In light of the fact that 1995 was a difficult year in a
challenging business environment, that no increases were made to base salaries
and that no bonus awards were given to officers, the Committee incorporated the
use of restricted stock awards, in lieu of any salary increase or cash bonus,
viewing the implementation of such awards as an appropriate measure to retain
and motivate key employees and to also conserve the Company's cash reserves.
-15-
<PAGE> 19
Stock options are granted at an option price not less than the fair
market value of the Common Stock on the date of grant. Accordingly, stock
options have value only if the stock price appreciates from the date the
options are granted. This design focuses executives on the creation of
stockholder value over the long term and encourages equity ownership in the
Company.
The size of stock option grants is based primarily on competitive
practice and is generally targeted to be at the 50th percentile of option
values granted by the comparator companies. The Committee does not typically
consider the amount of options previously granted and outstanding when
determining the size of option grants to executive officers. The Committee's
objective is to deliver a competitive award opportunity based on the dollar
value of the award granted. As a result, the number of shares underlying stock
option awards is dependent on the stock price on the date of grant.
Performance shares, a form of stock award, are granted to executives
under the 1994 Long-Term Incentive Plan. Each grant of performance shares has
a three-year performance period, which runs from July 1 of the initial year of
the performance period to June 30 of the third succeeding year.
Each performance share represents the right to receive, after the end
of the performance period, from 0% to 150% of a share of Common Stock, based on
the Company's performance. The performance criteria that determines the number
of shares of Common Stock of the Company issued per performance share is the
relative total shareholder return on the Company's Common Stock as compared to
the total shareholder return on the common equity of each company in the
comparator group. For this purpose, total shareholder return is expressed as a
percentage equal to common stock price appreciation as averaged for the first
and last month of the performance period plus dividends (on a cumulative
reinvested basis). The comparator group for the performance shares is the peer
group listed above. If any member of the comparator group ceases to have
publicly traded common stock, it will be removed from the comparator group for
purposes of computing shareholder return.
After the end of each performance period, the Company will issue
shares of Common Stock in respect of each performance share award for such
period based on the relative ranking of the Company versus the comparator group
for total shareholder return during the performance period using the following
scale:
<TABLE>
<CAPTION>
COMPANY PERCENT
RELATIVE PLACEMENT PERFORMANCE SHARES
------------------ ------------------
<S> <C>
1 (highest) ............................................ 150%
2 ..................................................... 140%
3 ..................................................... 130%
4 ..................................................... 120%
5 ..................................................... 110%
6 ..................................................... 100%
7 ..................................................... 75%
8 ..................................................... 50%
9 ..................................................... 25%
10 .................................................... 0%
11 .................................................... 0%
12 .................................................... 0%
13 (lowest)............................................. 0%
</TABLE>
-16-
<PAGE> 20
If a participant is not an employee on the last day of the relevant
performance period, no shares of Common Stock shall be issued in respect of the
participant's performance share award unless otherwise determined by the
Compensation Committee. Prior to the issuance of shares of Common Stock in
respect of a performance share award, the participant has no right to vote or
receive dividends on such shares. Each award of performance shares may not be
assigned or transferred except by will or the laws of descent and distribution.
In the event the Company ceases to have publicly traded common stock as a
result of a business combination or other extraordinary transaction, the
performance period for each outstanding performance share award shall be
terminated effective upon the date of such cessation.
The Company's stock options and performance share provisions are
intended to constitute "qualified performance based compensation" as defined
under Section 162(m) of the Code, with the effect that the deduction
disallowance of Section 162(m) of the Code should not be applicable to
compensation paid to covered employees under the stock options or the
performance share provisions. It is the Committee's intent that the majority
of long term incentive awards will qualify under Section 162(m) of the Internal
Revenue Code.
The Company's restricted stock awards to executives consist of grants
of Common Stock, the restrictions on which generally lapse in equal increments
of one third over the three year period from the date of the initial grant.
Prior to the lapse of such restrictions, the participant has no right to vote
or receive dividends on such shares. Each award of restricted stock may not be
assigned or transferred except by will or the laws of descent and distribution.
In the event of a Change in Control (as defined), any restriction periods shall
lapse and the stock certificates representing the shares of restricted stock
shall be issued to the participant. In the event of any merger, reorganization,
recapitalization, separation, liquidation, stock dividend, split-up, share
combination or other change in the corporate structure of the Company affecting
the shares of restricted stock, the number of shares of restricted stock shall
be equitably adjusted by the Compensation Committee to prevent dilution or
enlargement of rights. In determining the size of restricted stock awards,
the Committee used its discretion and was not bound by any pre-adopted formula.
In recognition of Mr. Siess' unusual situation in agreeing to emerge
from retirement to revitalize the Company and restore its competitive edge, the
Compensation Committee developed a compensation package weighted towards
long-term incentives designed to reward enhancement of the Company's profits
and to encourage the creation of shareholder value.
With Mr. Siess' election to the office of Chairman of the Board, Chief
Executive Officer and President, effective May 18, 1995, the Committee
authorized the following awards: options to purchase a total of 280,000 shares
of Common Stock, 30,000 shares with an exercise price of $15.3125 awarded in
May 1995 and 250,000 shares with an exercise price of $13.5625 awarded in
August 1995 (the respective fair market values on date of grant); a grant of
10,000 performance shares with a three year performance period commencing July
1, 1995; and a grant of 10,000 shares of restricted stock, the restrictions on
which will lapse in one installment effective May 18, 1998. The size of the
stock option awards given to Mr. Siess in 1995 was based upon competitive data
derived from the comparator group and the anticipation that Mr. Siess will not
receive further stock option awards during his tenure. In addition, options
previously granted to Mr. Siess in May 1990 and May 1992 that would otherwise
have terminated pursuant to their terms in December 1995 (three years after
retirement) continue to be exercisable as a result of Mr. Siess' resuming
employment. Mr. Siess' non-employee director options expired unexercised after
his resumption of employment.
CONCLUSION
The Committee believes these executive compensation policies and
programs serve the interests of stockholders and the Company effectively. The
various pay vehicles offered are appropriately balanced to provide increased
motivation for executives to contribute to the Company's overall future
successes, thereby enhancing the value of the Company for the stockholders'
benefit.
-17-
<PAGE> 21
We will continue to monitor the effectiveness of the Company's total
compensation program to meet the current needs of the Company.
Compensation Committee
Carl M. Mueller, Chairman
Samuel W. Bodman
Henry O. Boswell
C. Wayne Nance
William P. Vititoe
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of the Compensation Committee was, during 1995, an officer
or employee of the Company or any of its subsidiaries, or formerly an officer
of the Company or any of its subsidiaries. During 1995, the Company had no
Compensation Committee interlocks.
EMPLOYMENT AGREEMENTS
AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into Change in Control Agreements (the
"Agreements") with the current executive officers named in the Summary
Compensation Table other than Mr. Siess, and with four other officers of the
Company. The Agreements are intended to encourage such employees to remain in
the employ of and to carry out their duties with the Company. The term of the
Agreements is initially three years from November 3, 1995, subject to automatic
one-year extensions on the second and each subsequent anniversary thereof
unless prior to such anniversary the Company gives written notice that the term
shall not be so extended. The Agreements provide that in the event of a change
in control, such individuals will receive certain benefits in the event of a
termination of their employment within two years of such change in control. A
"change in control" is generally defined as occurring if (i) any "person"
becomes the "beneficial owner", directly or indirectly, of securities of the
Company representing 35% or more of the combined voting power of the Company's
then outstanding securities, (ii) during any 12-month period, individuals who
at the beginning of such period constitute the Board of Directors cease for any
reason to constitute a majority thereof unless the election, or the nomination
for election by the Company's stockholders, of each new director was approved
by the vote of at least a majority of the directors then still in office who
were directors at the beginning of the period or (iii) the Company sells or
otherwise disposes of, in one transaction or a series of transactions, in a
single 12-month period, assets or properties of the Company representing 50% or
more of the total proved reserves (on a volumetric basis) of the Company as of
the beginning of such 12-month period. Benefits are provided under the
Agreements unless such termination of employment is (i) for cause (as defined
in the Agreements), (ii) voluntary by the executive and does not constitute a
constructive termination without cause (as defined in the Agreements), or (iii)
because of the death or disability of the executive.
Generally, benefits payable under the terms of the Agreements include
(i) a lump-sum cash payment equal to three times the sum of (a) base salary in
effect immediately prior to the change in control or, if greater, immediately
prior to the executive's termination and (b) the greater of (1) 80% of the
executive's target bonus with respect to the fiscal year during which the
change in control occurred or, if greater, the fiscal year during which the
executive's termination occurred or (2) the executive's actual bonus paid in
the fiscal year immediately preceding
-18-
<PAGE> 22
the change in control, (ii) payment with respect to any performance shares
granted to the executive, such payment to be prorated based on actual service
completed at the time of the executive's termination, and valued according to
the percentage of goal attainment on the date of termination, (iii) immediate
vesting and exercisability of all of the executive's options to purchase
securities of the Company, (iv) immediate vesting and lapse of restrictions on
any restricted stock grants outstanding at the time of the executive's
termination, (v) subject to the payment of the applicable premiums, continued
medical, dental and life insurance coverage for three years following the date
of the executive's termination, (vi) effective crediting of an additional three
years of service in the Company's retirement plans in which the executive is
participating at the time of the change in control and (vii) outplacement
assistance in an amount not to exceed 15% of the executive's base salary in
effect on the date of a change in control (the "Termination Benefits"). In the
event the excise tax relating to Section 280G of the Code applies to payments
by the Company, the Company will make an additional payment to the executive in
an amount such that after payment of income taxes (but not the excise tax) on
such additional payment, the executive retains an amount equal to the excise
tax originally imposed. No payments have been made under the Agreements.
The Company has entered into both an employment agreement and a Change
in Control Agreement with Mr. Ray R. Seegmiller, Vice President, Chief
Financial Officer and Treasurer of the Company. The employment agreement
provides that if Mr. Seegmiller terminates his employment for good reason (as
defined in the agreement) or the Company terminates his employment for any
reason other than cause (as defined in the agreement) prior to August 1, 1996,
Mr. Seegmiller shall receive his base salary through July 31, 1997, as well as
continuation of all applicable benefit programs. If such termination occurs
after August 1, 1996, Mr. Seegmiller shall receive 12 months of base salary, as
well as continuation of all applicable benefit programs. Additionally, if such
termination occurs, Mr. Seegmiller's option to purchase 20,000 shares of Common
Stock will immediately vest and be exercisable and the restrictions on 5,000
shares of restricted stock will immediately lapse. Under the terms of Mr.
Seegmiller's Change in Control Agreement, in the event of a termination, Mr.
Seegmiller will be required to elect between receiving the Termination Benefits
or the amounts payable to Mr. Seegmiller under his employment agreement.
SEVERANCE ARRANGEMENTS
Effective May 18, 1995, John H. Lollar resigned as Chairman of the
Board, Chief Executive Officer, President and a director of the Company. In
connection with Mr. Lollar's resignation, Mr. Lollar received a lump sum
severance payment of $726,270 in June 1995. The Company also agreed to
reimburse Mr. Lollar for premiums for COBRA coverage under the Company's health
care insurance plan for up to 18 months (a total of approximately $5,500). The
Compensation Committee extended the period during which Mr. Lollar's stock
options (covering an aggregate of 118,000 shares) are exercisable until May 31,
1998, and provided for the vesting of the unvested portion of these options
(covering 61,200 of such shares). Pursuant to his existing supplemental
agreement in connection with the Pension Plan (see "Pension Plan Table"), Mr.
Lollar also received lump sum distributions totaling $339,884. In addition,
Mr. Lollar received $20,490 representing forfeitures from the Savings
Investment Plan and an associated non-qualified SERP agreement, and $1,667
representing Company contributions to the qualified plan in excess of the
limits of Section 415 of the Code.
-19-
<PAGE> 23
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The following graph compares the Common Stock ("COG") performance with
the performance of the Standard & Poor's 500 Stock Index and the Dow Jones
Secondary Oils Index for the period December 1990 through December 1995. The
graph assumes that the value of the investment in the Company's Common Stock
and in each index was $100 on December 31, 1990 and that all dividends were
reinvested.
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P500 100 126 132 141 139 187
- --------------------------------------------------------------------------------------------------------
COG 100 77 113 133 91 94
- --------------------------------------------------------------------------------------------------------
DJ Secondary Oils 100 95 93 101 95 108
- --------------------------------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE> 24
BENEFICIAL OWNERSHIP OF OVER FIVE PERCENT OF COMMON STOCK
The following table reports beneficial ownership of Common Stock by
holders of more than five percent of any class of the Company's voting
securities. Unless otherwise noted, all ownership information is based upon
filings made by such persons with the Securities and Exchange Commission (the
"Commission").
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER OF COMMON STOCK CLASS
OWNED
------------------- ---------------- ----------
<S> <C> <C>
Harvard Private Capital Realty, Inc. . . . . . . 1,648,664(1) 6.7% (1)
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
New South Capital Management, Inc. . . . . . . 1,517,795(2) 6.7%
1000 Ridgeway Loop Road, Suite 233
Memphis, TN 38120
State of Wisconsin Investment Board . . . . . . 1,191,200(3) 5.2%
Post Office Box 7842
Madison, WI 53707
The Prudential Insurance Company . . . . . . . . 1,624,500(4) 7.1%
of America
751 Broad Street
Newark, NJ 07102
Vanguard/Windsor Fund, Inc. . . . . . . . . . . 1,325,000(5) 5.8%
Post Office Box 2600
Valley Forge, PA 19482
Washington Energy Company . . . . . . . . . . . 4,105,174(6) 16.6% (6)
815 Mercer Street
Seattle, WA 98111
Wellington Management Company . . . . . . . . . 2,903,673(7) 12.7%
75 State Street
Boston, MA 02109
</TABLE>
- ---------------
(1) According to Amendment No. 1 to a Schedule 13G, dated February 13, 1996,
filed with the Commission by Harvard Private Capital Realty, Inc., the
shares consist of shares issuable upon the conversion of 692,439 shares of
$3.125 Convertible Preferred Stock (100% of the series) currently owned.
(2) According to a Schedule 13G, dated February 13, 1996, filed with the
Commission by New South Capital Management, Inc., it has shared voting
power over 85,000 of these shares and sole dispositive power over all of
these shares.
(3) According to a Schedule 13G, dated February, 1996, filed with the
Commission by the State of Wisconsin Investment Board, it has sole voting
power and sole dispositive power over these shares.
-21-
<PAGE> 25
(4) According to Amendment No. 2 to a Schedule 13G, dated February 8, 1996,
filed with the Commission by The Prudential Insurance Company of America,
it has shared voting power over 688,900 of these shares and shared
dispositive power over 693,100 of these shares.
(5) According to Amendment No. 4 to a Schedule 13G, dated February 2, 1996,
filed with the Commission by Vanguard/Windsor Fund, Inc., it has sole
voting power and shared dispositive power over these shares. Wellington
Management Company shares beneficial ownership over all of these shares
with, and is the investment advisor to, Vanguard/Windsor Fund, Inc. See
Note (7) below.
(6) Consists of 2,133,000 shares of Common Stock currently owned and 1,972,174
shares of Common Stock issuable upon conversion of 1,134,000 shares of 6%
Preferred Stock (100% of the series) currently owned. On May 2, 1994, the
Company and Washington Energy Company ("WECO") completed the transaction to
merge a subsidiary of the Company and Washington Energy Resources Company
("WERCO"), a subsidiary of WECO. The Company acquired the stock of WERCO
in a tax-free exchange for total consideration of approximately $168
million, subject to certain adjustments. The Company issued to WECO
2,133,000 shares of Common Stock and 1,134,000 shares of 6% Preferred Stock
in exchange for the capital stock of WERCO. The 6% Preferred Stock is
entitled to 1.739 votes for each share and votes together with the Common
Stock on all matters to be voted on by the holders of the Common Stock,
with certain exceptions when voting as a class is required. As a part of
the transaction, WECO was entitled to nominate two persons (Messrs. Bailey
and Vititoe) to serve on the Company's Board of Directors.
(7) According to Amendment No. 7 to a Schedule 13G, dated March 5, 1996, filed
with the Commission by Wellington Management Company, it has shared voting
power over 10,000 of these shares and shared dispositive power over all of
these shares. This amount includes the 1,325,000 shares beneficially owned
by the Vanguard/Windsor Fund, Inc. See Note (5) above.
BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table reports, as of March 1, 1996, beneficial ownership
of Common Stock by each current director of the Company, by each current
executive officer listed in the Summary Compensation Table and by all directors
and executive officers as a group. Unless otherwise indicated, the persons
below have sole voting and investment power with respect to the shares of
Common Stock shown as beneficially owned by them. All ownership information is
based upon filings made by such persons with the Commission.
<TABLE>
<CAPTION>
Number of Shares
of Common Percent
Name of Beneficial Owner Stock Owned of Class
------------------------------------------------ ---------------- --------
<S> <C> <C>
Robert F. Bailey . . . . . . . . . . . . . . . . 3,834 1/ *
Samuel W. Bodman . . . . . . . . . . . . . . . . 153,302 2/ *
Henry O. Boswell . . . . . . . . . . . . . . . . 15,667 3/ *
John G.L. Cabot . . . . . . . . . . . . . . . . 245,798 4/ 1.07
William R. Esler . . . . . . . . . . . . . . . . 12,667 5/ *
William H. Knoell . . . . . . . . . . . . . . . 11,000 6/ *
Carl M. Mueller . . . . . . . . . . . . . . . . 14,187 7/ *
C. Wayne Nance . . . . . . . . . . . . . . . . . 10,000 8/ *
William P. Vititoe. . . . . . . . . . . . . . . 3,334 9/ *
Charles P. Siess, Jr. . . . . . . . . . . . . . 446,615 10/ 1.96
J.L. Batt . . . . . . . . . . . . . . . . . . . 25,742 11/ 15/ *
Gerald F. Reiger . . . . . . . . . . . . . . . 4,831 12/ 15/ *
James M. Trimble . . . . . . . . . . . . . . . . 49,732 13/ 15/ *
H. Baird Whitehead . . . . . . . . . . . . . . . 38,033 14/ 15/ *
All directors and executive officers as a group
(17 individuals) . . . . . . . . . . . . . . 1,057,468 16/ 4.64
</TABLE>
---------------
* Represents less than 1% of the outstanding Common Stock.
-22-
<PAGE> 26
1/ Includes 3,334 shares purchasable upon the exercise of options within 60
days.
2/ Includes 950 shares for which Mr. Bodman is the indirect owner as Trustee
of the Elizabeth L. Bodman Trust, as to which Mr. Bodman disclaims
beneficial ownership, and 6,667 shares purchasable upon the exercise of
options within 60 days.
3/ Includes 11,667 shares purchasable upon the exercise of options within
sixty days.
4/ Includes 1,782 shares held by Mr. Cabot's spouse and 117,519 shares held by
various trusts in which Mr. Cabot serves as co-trustee, as to all of which
Mr. Cabot shares voting and investment power; Mr. Cabot disclaims
beneficial ownership of such shares. Also includes 6,667 shares
purchasable upon the exercise of options within 60 days.
5/ Includes 8,667 shares purchasable upon the exercise of options within sixty
days.
6/ Includes 10,000 shares purchasable upon the exercise of options within
sixty days.
7/ Includes 10,000 shares purchasable upon the exercise of options within
sixty days and 237 shares held by Mr. Mueller's spouse, as to which Mr.
Mueller disclaims beneficial ownership.
8/ Includes 10,000 shares purchasable upon the exercise of options within
sixty days.
9/ Includes 3,334 shares purchasable upon the exercise of options within sixty
days.
10/ Includes 386,000 shares purchasable upon the exercise of options within
sixty days. Also includes 10,000 shares of restricted stock, the
restrictions on which lapse May 18, 1998; Mr. Siess has no voting or
investment power with respect to these shares during the restriction
period.
11/ Includes 772 shares held in the Company's Savings Investment Plan as to
which Mr. Batt shares voting and investment power and 21,520 shares
purchasable upon the exercise of options within sixty days.
12/ Includes 498 shares held in the Company's Savings Investment Plan as to
which Mr. Reiger shares voting and investment power and 1,334 shares
purchasable upon the exercise of options within sixty days.
13/ Includes 1,812 shares held in the Company's Savings Investment Plan as to
which Mr. Trimble shares voting and investment power and 32,420 shares
purchasable upon the exercise of options within sixty days.
14/ Includes 1,309 shares held in the Company's Savings Investment Plan as to
which Mr. Whitehead shares voting and investment power and 30,520 shares
purchasable upon the exercise of options within sixty days.
15/ Includes 2,500, 3,000, 3,000, 3,000 shares of restricted stock granted to
Messrs. Batt, Reiger, Trimble and Whitehead, respectively, the
restrictions on which lapse 33 1/3% on November 14, 1996 and lapse on an
additional 33 1/3% on each of the next two one-year anniversaries of such
date. Messrs. Batt, Reiger, Trimble and Whitehead have no voting or
investment power with respect to these shares during the restriction
period.
16/ Includes 5,625 shares held in the Company's Savings Investment Plan as to
which the executive officers share voting and investment power and 551,931
shares purchasable by the executive officers and directors upon the
exercise of options within sixty days. Also includes 32,500 shares of
restricted stock granted to the executive officers, none of the
restrictions on which have lapsed. See also Notes 1-15 above.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the proxy statement
for the 1997 Annual Meeting of Stockholders of the Company, and otherwise
eligible, should be sent to Ms. Lisa A. Machesney, Secretary, Cabot Oil & Gas
Corporation, 15375 Memorial Drive, Houston, Texas 77079 and must be received by
December 8, 1996.
The Bylaws of the Company require timely advance written notice of
stockholder nominations of director candidates and of any other business to be
presented by a stockholder at an annual meeting of stockholders. To be timely,
the Bylaws require advance written notice be delivered to the Company's
Secretary at the principal executive offices of the Company not later than the
close of business on the 60th day, nor earlier than the close of business on
the 90th day, prior to the anniversary of the preceding year's annual meeting
(with certain exceptions if the date of the annual meeting is different by more
than specified amounts from the anniversary date). To be valid, a notice must
set forth certain information specified in the Bylaws.
-23-
<PAGE> 27
SOLICITATION OF PROXIES
The cost of soliciting proxies in the enclosed form will be borne by
the Company. In addition to solicitation by mail, officers, employees or
agents of the Company may solicit proxies personally, by telephone and by
telegraph. The Company may request banks and brokers or other similar agents
or fiduciaries to transmit the proxy material to the beneficial owners for
their voting instructions and will reimburse them for their expenses in so
doing. Morrow & Co., Inc. has been retained to assist the Company in the
solicitation of proxies at a fee to the Company estimated not to exceed $5,000.
MISCELLANEOUS
The Company's management does not know of any matters to be presented
at the Annual Meeting other than those set forth in the Notice of Annual
Meeting of Stockholders. However, if any other matters properly come before
the Annual Meeting, the persons named in the enclosed proxy intend to vote the
shares to which the proxy relates on such matters in accordance with their best
judgment unless otherwise specified in the proxy.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ LISA A. MACHESNEY
LISA A. MACHESNEY
Corporate Secretary
March 29, 1996
-24-
<PAGE> 28
EXHIBIT A
CABOT OIL & GAS CORPORATION
1990 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
SECOND AMENDMENT
Cabot Oil & Gas Corporation, a Delaware corporation (the "Company"), has
previously established the Cabot Oil & Gas Corporation 1990 Nonemployee
Director Stock Option Plan, which was approved by the Company's Board of
Directors on April 6, 1990 and approved by its stockholders on February 22,
1991 and which was amended by the Company's Board of Directors by the First
Amendment to the 1990 Nonemployee Director Stock Option Plan effective as of
July 1, 1993 (the "Plan"). Subject to stockholder approval, the Board of
Directors of the Company hereby amends Section 6 Option Period of the Plan
effective as of May 16, 1996, as follows:
(i) Section 6 of the Plan is deleted in its entirety and is
replaced by the following:
6. Option Period.
Each Option granted under this Plan shall terminate
and be of no force and effect with respect to any
shares of Class A Stock not previously purchased by
the Optionee upon the earliest to occur of the
following: (a) the expiration of ten (10) years from
the date the Option became exercisable; (b) one (1)
year after the Optionee ceases to be a Director of
the Company by reason of death, disability or
mandatory retirement of the Optionee or (c) three
months after the date on which the Optionee ceases to
be a Director of the Company for any reason other
than death, disability or mandatory retirement.
(ii) The Amendment made hereby shall be effective May 16, 1996.
CABOT OIL & GAS CORPORATION
<PAGE> 29
DETACH HERE
CABOT OIL & GAS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
P MAY 16, 1996
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
X The undersigned acknowledges receipt of the notice of Annual Meeting of
Y Stockholders and the Proxy Statement, each dated March 29, 1996, and
appoints Lisa A. Machesney and Scott C. Schroeder, or either of them,
proxies for the undersigned, with power of substitution, to vote all of the
undersigned's shares of common stock of Cabot Oil & Gas Corporation at the
Annual Meeting of Stockholders to be held at the Ritz-Carlton Hotel in
Houston, Texas at 10:00 a.m., local time, on May 16, 1996, and at any
adjournments or postponements thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1,
2 AND 3 AND WILL GRANT DISCRETIONARY AUTHORITY PURSUANT TO ITEM 4.
THIS PROXY WILL REVOKE ALL PRIOR PROXIES SIGNED BY YOU.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
<PAGE> 30
DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEMS 1, 2 AND 3.
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
1. ELECTION OF DIRECTORS (check one box only):
Nominees: Samuel W. Bodman and William P. Vititoe
FOR WITHHELD
[ ] [ ]
[ ]
---------------------------------------
For both nominees except as noted above
2. Adoption of an Amendment to FOR AGAINST ABSTAIN
the 1990 Nonemployee Director [ ] [ ] [ ]
Stock Option Plan
3. Ratification of the appointment [ ] [ ] [ ]
of Coopers & Lybrand L.L.P. as
the Company's independent
certified public accountants.
4. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournments or postponements thereof.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Please date this proxy and sign your name exactly as it appears hereon.
In the case of one or more joint owners, each joint owner should sign.
If signing as executor, trustee, guardian, attorney, or in any other
representative capacity, or as an officer of a corporation, please
indicate your full title as such.
