<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 sec. 240.14a-11(c) or sec. 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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:
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(4) Date Filed:
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<PAGE> 2
[LOGO]
CABOT OIL & GAS CORPORATION
March 25, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Cabot Oil & Gas Corporation to be held on Tuesday, May 6, 1997 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,
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 6, 1997
The Annual Meeting of Stockholders of Cabot Oil & Gas Corporation (the
"Company"), a Delaware corporation, will be held in The Plaza Room, at The
Ritz-Carlton, 1919 Briar Oaks Lane, Houston, Texas 77027, on Tuesday, May 6,
1997 at 10:00 a.m., for the following purposes:
1. To elect three persons to the Board of Directors of the
Company.
2 To ratify the appointment of the firm of Coopers & Lybrand
L.L.P., independent certified public accountants, as auditors
of the Company for its 1997 fiscal year.
3. 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 14,
1997 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,
LISA A. MACHESNEY
Corporate Secretary
Houston, Texas
March 25, 1997
<PAGE> 4
CABOT OIL & GAS CORPORATION
15375 Memorial Drive
Houston, Texas 77079
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1997
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 1997 Annual Meeting of Stockholders, to be held at The
Ritz-Carlton, Houston, Texas, on Tuesday, May 6, 1997, 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 ratification of the appointment of Coopers &
Lybrand L.L.P., independent certified public accountants, as auditors of the
Company for its 1997 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 14, 1997, are entitled to vote at the Annual Meeting. As of that
date, the Company had outstanding and entitled to vote 22,864,686 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 or about March 25, 1997.
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. Henry O. Boswell, William R. Esler and
Charles P. Siess, Jr. 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 2000 and until his successor shall have been elected and shall have
qualified. Each nominee is currently a director of the Company. Mr. Siess is
also the Chairman of the Board of Directors and the Chief Executive Officer and
President 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. Boswell, Esler and Siess 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, 1997, 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.
ROBERT F. BAILEY
Age: 64
Committee Membership: Audit, Safety and Environmental Affairs
Director Since: 1994
Term of Office Expires: 1998
Business Experience:
Trans Republic Energy, L.C.
President - 1992 to present
Alta Energy Corporation
President - prior to 1992
Other Directorships:
Texas Commerce Bank - Midland
SAMUEL W. BODMAN
Age: 58
Committee Membership: Nominations, Compensation (Chairman)
Director Since: 1989
Term of Office Expires: 1999
Business Experience:
Cabot Corporation:
Chairman of the Board - October 1988 to present
President - February 1991 to February 1995
and 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: 67
Committee Membership: Compensation, Audit (Chairman)
Director Since: 1991
Term of Office Expires: 1997 (Nominee for Director)
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: 62
Committee Memberships: Safety and Environmental Affairs, Nominations
(Chairman)
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.
WILLIAM R. ESLER
Age: 71
Committee Membership: Audit, Safety and Environmental Affairs
Director Since: 1992
Term of Office Expires: 1997 (Nominee for Director)
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: 72
Committee Membership: Audit, Safety and Environmental Affairs
(Chairman)
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: 65
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: 70
Position: Chairman of the Board, Chief Executive Officer and President
Director Since: 1989
Term of Office Expires: 1997 (Nominee for Director)
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: 58
Committee Memberships: Compensation, Nominations
Term of Office Expires: 1999
Business Experience:
Consultant to Puget Sound Energy, Inc. - February 1997 to present
Washington Energy Company
Chairman of the Board, Chief Executive Officer and President -
January 1994 to February 1997
ANR Pipeline Company
President and Chief Executive Officer - October 1990 to
December 1993
Other Directorships:
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, 1996. 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 internal audit activities and
recommendations. It reports to the Board of Directors on Audit Committee
activities and makes such investigations as it deems appropriate. The Audit
Committee held three meetings during 1996.
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 four meetings during 1996.
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 one meeting during 1996.
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 1996.
All directors attended 75% or more of the meetings of the Board of
Directors and of the committees held while they were members during 1996.
- 5 -
<PAGE> 9
DIRECTOR'S COMPENSATION
Directors who are not employees of the Company were compensated during
1996 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.
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 1997. 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.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes annual and long-term compensation paid
to the Company's Chief Executive Officer and the Company's four most highly
compensated executive officers other than the Chief Executive Officer who were
serving as of December 31, 1996 for all services rendered to the Company and
its subsidiaries during each of the last three fiscal years.
- 6 -
<PAGE> 10
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------ -------------------------
Awards
--------------------------
Name and Year Salary($) Bonus Other Annual Restricted Securities All Other
Principal Position ($)(1) Compensation Stock Underlying Compensation
($)(2) Awards($) Options(#) ($)(6)
(3)(4)(5)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C.P. Siess, Jr. 1996 375,000 300,000 24,892 168,750(7) 25,000 9,500
Chairman of the Board 1995 230,978 0 21,030 133,750(8) 280,000 8,750
CEO and President 1994 0 0 0 0 0 0
R.R. Seegmiller 1996 186,667 100,000 8,388 42,188(9) 20,000 7,467
Executive Vice President, 1995 84,328 0 6,244 108,500(10) 20,000 3,374
Chief Operating Officer 1994 0 0 0 0 0 0
and Treasurer
H.B. Whitehead 1996 170,834 95,000 5,822 40,500(11) 15,000 6,250
Vice President - 1995 165,000 0 11,704 41,625 12,000 6,593
Regional Manager 1994 161,833 0 1,288 0 9,000 8,273
J.M. Trimble 1996 158,750 80,000 7,450 30,375(12) 15,000 6,350
Vice President - Business 1995 150,000 0 6,732 41,625 7,500 6,000
Development & Engineering 1994 148,667 0 1,631 0 7,500 7,947
G.F. Reiger 1996 148,750 70,000 823 21,938(13) 12,000 5,950
Vice President - 1995 135,000 0 696 41,625 10,500 5,400
Regional Manager 1994 72,916 0 868 0 4,000 2,917
</TABLE>
1/ No bonuses were paid to the Chief Executive Officer or the four most highly
compensated executives in 1994 or 1995.
2/ 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. 1996 premiums paid on and a tax gross-up for imputed income on
executive term life insurance represents $15,646, $4,278, $991, $897 and
$823 for Messrs. Siess, Seegmiller, Whitehead, Trimble and Reiger,
respectively. The tax gross-up on club dues represents $9,246, $4,110,
$4,831, $6,553 and $0 for Messrs. Siess, Seegmiller, Whitehead, Trimble and
Reiger, respectively.
3/ Unless otherwise indicated, the amount in this column for 1996 and 1995
represents the value of restricted stock grants made to the named executive
on February 20, 1997 and November 14, 1995, based on closing market prices
on such dates of $16.875 and $13.875, respectively, as reported on the New
York Stock Exchange, Inc. Composite Transactions Reporting System.
4/ Messrs. Siess, Seegmiller, Whitehead, Trimble and Reiger were granted
10,000, 2,500, 2,400, 1,800 and 1,300 shares of restricted stock,
respectively, on February 20, 1997, the restrictions on which lapse in full
in two years from the date of grant. These grants are reported with
respect to 1996.
5/ Messrs. Seegmiller, Whitehead, Trimble and Reiger were each 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. These grants are reported with
respect to 1995.
- 7 -
<PAGE> 11
6/ The amount in this column represents the Company's contributions to the
401(k) Plan and associated non-qualified agreement on behalf of the named
executive.
7/ Mr. Siess holds a total of 60,000 shares of restricted stock as of December
31, 1996, which excludes the 10,000 shares of restricted stock granted on
February 20, 1997. The market value (net of purchase price) of the 60,000
shares at December 31, 1996 was $627,500. Dividends are paid on 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.
8/ 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.
9/ Mr. Seegmiller holds a total of 7,000 shares of restricted stock as of
December 31, 1996, which excludes the 2,500 shares of restricted stock
granted on February 20, 1997. The market value of the 7,000 shares at
December 31, 1996 was $119,875. No dividends are paid on the restricted
stock held.
10/ This amount represents the value of a 5,000 share restricted stock grant
made to Mr. Seegmiller on August 3, 1995, based on a closing market price
of $13.375 on August 3, 1995, the restrictions on which lapse in one
installment on August 3, 1997, and the value of a 3,000 share restricted
stock grant made to Mr. Seegmiller on November 14, 1995, based on a closing
market price of $13.875 on November 14, 1995.
11/ Mr. Whitehead holds 5,125 shares of restricted stock as of December 31,
1996, which excludes the 2,400 shares of restricted stock granted on
February 20, 1997. The market value (net of purchase price) of the 5,125
shares at December 31, 1996 was $62,766. Dividends are paid on 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.
12/ Mr. Trimble holds 14,500 shares of restricted stock as of December 31,
1996, which excludes the 1,800 shares of restricted stock granted on
February 20, 1997. The market value (net of purchase price) of the 14,500
shares at December 31, 1996 was $148,313. Dividends are paid on 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.
13/ Mr. Reiger holds 2,000 shares of restricted stock as of December 31, 1996,
which excludes the 1,300 shares of restricted stock granted on February 20,
1997. The market value of the 2,000 shares at December 31, 1996 was
$34,250. No dividends are paid on the restricted stock held.
- 8 -
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
Set forth below is certain information relating to the Company's
grants of options during 1996 to the executive officers named in the preceding
Summary Compensation Table, including the relative size of each grant, and each
grant's exercise price and expiration date. Also included is information
relating to the potential realizable value of the options granted, based upon
assumed annualized stock value appreciation rates. Neither the option values
reflected in the table nor the assumptions utilized in arriving at the values
should be considered indicative of future stock performance.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed Annual Rates
of Stock Price Appreciation
for Option Term
- -------------------------------------------------------------------------------------------------------------------
Number of Percent of
Securities Total
Underlying Options
Options Granted to Exercise
Name Granted Employees Price
(#)(1)(2) in Fiscal ($/Sh)(3) Expiration 5% ($)(5) 10% ($)(6)
Year Date (4)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C.P. Siess, Jr. 25,000 8.3% $17.0625 May 16, 2001 $117,938 $260,438
R.R. Seegmiller 20,000 6.6% $17.0625 May 16, 2001 $94,350 $208,350
H.B. Whitehead 15,000 5.0% $17.0625 May 16, 2001 $70,763 $156,263
J.M. Trimble 15,000 5.0% $17.0625 May 16, 2001 $70,763 $156,263
G.F. Reiger 12,000 4.0% $17.0625 May 16, 2001 $56,610 $125,010
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1/ There were no adjustments or amendments during 1996 to the exercise price
of stock options previously awarded to any of the named executive officers.
2/ 33 1/3% of each option becomes exercisable on the first anniversary of the
date of grant (May 16, 1997) and the remainder of such option becomes
exercisable in 33 1/3% increments on each of the next two anniversaries of
such date.
3/ 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.
4/ 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.
5/ The stock price required to produce this value is $21.78 and would produce
a corresponding $107,829,284 increase in total stockholder value based upon
22,857,294 shares of Common Stock outstanding on March 1, 1997.
6/ The stock price required to produce this value is $27.48 and would produce
a corresponding $238,115,860 increase in total stockholder value based upon
22,857,294 shares of Common Stock outstanding on March 1, 1997.
- 9 -
<PAGE> 13
AGGREGATED FY-END OPTION VALUES
Set forth below is supplemental information relating to the number and
intrinsic value of stock options held at December 31, 1996 ("FY-End"), by the
executive officers named in the preceding Summary Compensation Table. Year-end
values are based on the Company's stock price at December 31, 1996, do not
reflect the actual amounts, if any, which may be realized upon the future
exercise of remaining stock options, and should not be considered indicative of
future stock performance. No options were exercised by the individuals named
in the Summary Compensation Table during 1996.
AGGREGATED FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
- --------------------------------------------------------------------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable(1)
- --------------------------------------------------------------------------------
<S> <C> <C>
C.P. Siess, Jr. 396,000 / 45,000 $1,008,751 / $37,813
R.R. Seegmiller 10,000 / 30,000 $37,450 / $38,700
H.B. Whitehead 41,800 / 27,600 $71,175 / $15,438
J.M. Trimble 41,500 / 23,900 $71,456 / $10,001
G.F. Reiger 6,166 / 20,334 $6,344 / $13,438
- --------------------------------------------------------------------------------
</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 $17.125 per share as reported on the
New York Stock Exchange, Inc. Composite Transactions Reporting System for
December 31, 1996.
- 10 -
<PAGE> 14
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
Shown below is information with respect to additional long term
incentive awards made in 1996 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. 0 n/a n/a n/a n/a
R.R. Seegmiller 6,500 3 Years 1,625 6,500 9,750
H.B. Whitehead 5,000 3 Years 1,250 5,000 7,500
J.M. Trimble 5,000 3 Years 1,250 5,000 7,500
G.F. Reiger 4,000 3 Years 1,000 4,000 6,000
- -----------------------------------------------------------------------------------------------------------
</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 criterion 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
with 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, 1996 and is scheduled to end
on June 30, 1999. 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.
- 11 -
<PAGE> 15
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 26,470 35,294 44,117 52,941 61,764
- --------------------------------------------------------------------------------
150,000 32,095 42,794 53,492 64,191 74,889
- --------------------------------------------------------------------------------
175,000 37,720 50,294 62,867 75,441 88,014
- --------------------------------------------------------------------------------
200,000 43,345 57,794 72,242 86,691 101,139
- --------------------------------------------------------------------------------
225,000 48,970 65,294 81,617 97,941 114,264
- --------------------------------------------------------------------------------
250,000 54,595 72,794 90,992 109,191 127,389
- --------------------------------------------------------------------------------
275,000 60,220 80,294 100,367 120,441 140,514
- --------------------------------------------------------------------------------
300,000 65,845 87,794 109,742 131,691 153,639
- --------------------------------------------------------------------------------
400,000 88,345 117,794 147,242 176,691 206,139
- --------------------------------------------------------------------------------
450,000 99,595 132,794 165,992 199,191 232,389
- --------------------------------------------------------------------------------
500,000 110,845 147,794 184,742 221,691 258,639
- --------------------------------------------------------------------------------
600,000 133,345 177,794 222,242 266,691 311,139
- --------------------------------------------------------------------------------
</TABLE>
Compensation under the Pension Plan generally consists of taxable income
and 401(k) deferred amounts. 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 1996 for the executive officers named in the Summary Compensation Table is
the amounts under the "Salary" and "Bonus" columns set forth in such table,
together with $16,500 for each of Messrs. Seegmiller, Whitehead, Trimble and
Reiger on account of the lapsing of restrictions on restricted stock awards. The
Company provides Mr. Siess and Mr. Seegmiller 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' and Mr. Seegmiller's
supplemental pension benefits, Messrs. Siess, Seegmiller, Whitehead, Trimble and
Reiger had 9.00, 3.00, 13.67, 16.25 and 2.58 years of credited service,
respectively, as of December 31, 1996. Mr. Siess' benefits shall be offset by
the value of pension benefits paid upon his prior termination of service.
- 12 -
<PAGE> 16
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee of the Company's Board of Directors (the
"Committee") is comprised of four 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 compensation to the performance of the Company, providing
both reward and penalty based on the Company's performance,
individual performance and Company performance compared to its
peers.
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 a significant portion of the at-risk components of pay 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 an 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.
- 13 -
<PAGE> 17
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
peer 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 peer 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 1996 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. Mr. Siess' base salary
for 1996 remained unchanged from 1995. (See Long Term Incentives below.)
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.
The current measurement criteria used in the Annual Target Cash
Incentive Plan are designed to recognize that certain factors which impact
performance are controllable, while others are not controllable, and to reward
executives for superior performance against those factors which are deemed
controllable. In establishing the measurement criteria for 1996, the Committee
decided that certain of the performance measures previously used by the
Company, such as operating cash flow, were not necessarily appropriate measures
of management performance because they could be significantly swayed by
commodity prices. As a result, the Committee decided to establish measurement
criteria which eliminate the volatility of commodity prices and any other
non-controllable items from the equation, while preserving some of the
previously used measures as threshold tests.
A bonus pool is generated under the Annual Target Cash Incentive Plan
based on achievement of all of the following threshold tests: (i) annual cash
flow for the Company must exceed two times debt service, with debt service
including interest, dividends and originally scheduled principal payments; (ii)
the Company must achieve 75% or greater performance against its target for
annual discretionary cash flow; and (iii) the Company must achieve a 75% or
greater replacement ratio for annual reserves. These goals are approved by the
Board of Directors each year in conjunction with its approval of the Company's
annual business plan.
If the threshold tests are met, a bonus pool is generated. The size
of the bonus pool is determined by measuring each business unit's performance
and the total Company performance against the budgeted discretionary cash flow
targets adjusted for non-controllable items and non-recurring items. The
Committee then has the discretion to adjust the final overall bonus pool for
any business unit and the final bonus payment for any participant to reflect
its assessment of the unit's and the participant's performance. If a bonus
pool is generated based upon achievement of the established Company goals,
executives earn bonuses to the extent of the performance of their primary
business unit, the Company's overall performance and achievement of individual
performance goals. Individual incentive targets are set at market levels which
are considered by the Compensation Committee to be appropriate.
- 14 -
<PAGE> 18
In 1996, the bonus plan funded, with overall Company performance at
102% of its budgeted discretionary cash flow targets adjusted for
non-controllable items and non-recurring items. Based upon this performance,
and the performance of each business unit, the formula in the bonus plan
produced bonuses ranging from 78% to 133% of pre-established bonus targets for
the executive officers of the Company, including the executives named in the
above tables. The Committee then applied its discretion to recognize that the
Company's 1996 financial statement performance surpassed all expectations, that
no cash bonuses had been paid to the Company's executive officers in the
preceding two years and that the competitive data showed the peer company
comparators paying far in excess of established bonus targets for 1996
performance. This resulted in the Committee's decision to award cash bonus
payments ranging from 128% to 170% of the pre-established bonus targets to the
executive officers of the Company, including the executive officers named in
the tables above. To encourage the retention of the executive officers and the
other participants in the annual incentive program, the Committee also approved
a restricted stock grant as part of the award for 1996 performance. The
restricted stock award consists of a grant of Common Stock, the restrictions on
which generally lapse in full in two years from the date of grant. The
restricted stock will be forfeited if, during the two year restrictive period,
the executive leaves the Company for any reason other than retirement,
termination without cause, death or disability. Mr. Siess received a cash
bonus of $300,000 and a restricted stock award of 10,000 shares of the
Company's Common Stock, subject to certain conditions. (For a discussion of
the restricted stock awards made in conjunction with the 1996 annual incentive
program, see Long Term Incentives below.)
LONG TERM INCENTIVES
In 1996, the Company used three types of awards to provide long term
incentives to executives: stock options, performance shares and restricted
stock. 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. The Company used restricted stock awards in association with
the Company's Annual Target Cash Incentive Plan for 1996 performance.
Stock options are granted under the 1994 Long-Term Incentive Plan 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 peer 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 criterion 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 previously under Components of Compensation. 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.
- 15 -
<PAGE> 19
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>
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.
Restricted stock awards are granted under the 1994 Long-Term Incentive
Plan. The Company's restricted stock awards to executives with respect to 1996
consist of grants of Common Stock, the restrictions on which generally lapse in
full in two years from the date of grant. The restricted stock will be
forfeited if, during the two year restrictive period, the executive leaves the
Company for any reason other than retirement, termination without cause, death
or disability. Prior to the lapse of such restrictions, the participant has no
right to vote or receive dividends on such shares. The restricted stock award
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), the
restrictive period shall lapse and a stock certificate representing the shares
of restricted stock shall be issued to the executive. 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 the restricted stock awards to the executives of the Company, the
Committee set the value of the awards at 50% of the formula calculated cash
bonus under the measurement criteria established for the 1996 annual incentive
program.
- 16 -
<PAGE> 20
In 1996 Mr. Siess was granted an option to purchase 25,000 shares of
Common Stock with an exercise price of $17.0625. These options were granted to
Mr. Siess in lieu of a salary adjustment and in recognition of his extended
tenure with the Company beyond that which was contemplated when he rejoined the
Company in May 1995. Mr. Siess was also granted a 10,000 share restricted
stock award in association with the Company's 1996 annual incentive program.
Mr. Siess did not receive a performance share award during 1996.
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.
We will continue to monitor the effectiveness of the Company's total
compensation program to meet the current needs of the Company.
Compensation Committee
Samuel W. Bodman, Chairman
Henry O. Boswell
C. Wayne Nance
William P. Vititoe
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of the Compensation Committee was, during 1996, 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 1996, the Company had no
Compensation Committee interlocks.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Mr. Samuel W. Bodman, a Director of the Company, filed one Form 4 after
the required due date, disclosing the distribution of 950 shares of Common
Stock from a trust of which he is a trustee to the beneficiaries in accordance
with the distribution provisions of the trust. Under Commission rules, Mr.
Bodman was deemed to be the indirect beneficial holder of such shares.
CERTAIN OTHER MATTERS
On February 10, 1997, Washington Energy Company and Puget Sound Power
& Light Company merged to form Puget Sound Energy, Inc. ("Puget"). As a
result of the merger, Puget is the holder of 2,133,000 shares of Common Stock
and 1,134,000 shares of the Company's 6% Convertible Redeemable Preferred Stock
(convertible into 1,972,174 shares of Common Stock), all of which were
previously held by Washington Energy Company. Mr. William P. Vititoe, a member
of the Company's Board of Directors, is a consultant to Puget and was formerly
an officer and director of Washington Energy Company.
- 17 -
<PAGE> 21
The Company sells approximately 20% of its natural gas production in
the Western Region to a cogeneration plant located in Bellingham, Washington
and owned by Encogen Northwest, L.P. ("Encogen") under a gas sales contract
containing a fixed price that escalates annually, a firm delivery arrangement
and a term continuing through June 30, 2008. Encogen sells all the electrical
power generated in the plant to Puget under an Agreement for Firm Power
Purchase ("Power Agreement"). The Company is aware that a dispute has arisen
between Puget and Encogen over the appropriate interpretation of certain
provisions of the Power Agreement, which dispute is currently being litigated.
Puget has requested the court, among other matters, to declare that Encogen is
in material breach of the Power Agreement. A finding by the court that Encogen
is in material breach of the Power Agreement could lead to termination of the
Power Agreement. Any restructuring or termination of the Power Agreement may
have a negative impact on the Company's gas sales arrangement with Encogen.
Encogen has requested that the Company consider restructuring its gas sales
arrangement with Encogen. To date the Company has been unwilling to
restructure its gas sales agreement without being fully compensated for the
agreement's value.
EMPLOYMENT AGREEMENTS
AND CHANGE IN CONTROL ARRANGEMENTS
In 1995 the Company 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 three 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 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
- 18 -
<PAGE> 22
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, Executive Vice President,
Chief Operating 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.
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-US Index for the period December 1991 through December 1996.
The graph assumes that the value of the investment in the Company's Common
Stock and in each index was $100 on December 31, 1991 and that all dividends
were reinvested.
[GRAPH]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
S&P500 100 105 112 110 148 178
- --------------------------------------------------------------------------------
COG 100 146 172 118 119 140
- --------------------------------------------------------------------------------
DJ Secondary Oils-US 100 98 106 100 113 137
- --------------------------------------------------------------------------------
</TABLE>
- 19 -
<PAGE> 23
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
NewSouth Capital Management, Inc. . . . . . . . 1,963,165(2) 8.6%
1000 Ridgeway Loop Road, Suite 233
Memphis, TN 38120
Puget Sound Energy, Inc. . . . . . . . . . . . . 4,105,174(3) 16.6%(3)
411 108th Avenue, N.E.
Bellevue, WA 98009-5515
The Prudential Insurance Company . . . . . . . . 1,619,700(4) 7.1%
of America
751 Broad Street
Newark, NJ 07102
Vanguard/Windsor Fund, Inc. . . . . . . . . . . 2,255,200(5) 9.9%
Post Office Box 2600
Valley Forge, PA 19482
Wellington Management Company, LLP . . . . . . . 2,656,073(6) 11.7%
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 Amendment No. 2 to a Schedule 13G, dated February 12, 1997,
filed with the Commission by NewSouth Capital Management, Inc., it has
shared voting power over 116,000 of these shares and sole dispositive power
over all of these shares.
(3) 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 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.
- 20 -
<PAGE> 24
As a part of the transaction, WECO was initially entitled to nominate two
persons (Messrs. Bailey and Vititoe) to serve on the Company's Board of
Directors. On February 10, 1997 WECO merged with Puget Sound Power & Light
Company to form Puget Sound Energy, Inc.
(4) According to Amendment No. 4 to a Schedule 13G, dated January 27, 1997,
filed with the Commission by The Prudential Insurance Company of America,
it has shared voting power over 643,600 of these shares and shared
dispositive power over 654,300 of these shares.
(5) According to Amendment No. 5 to a Schedule 13G, dated February 7, 1997,
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 (6) below.
(6) According to Amendment No. 7 to a Schedule 13G, dated January 24, 1997,
filed with the Commission by Wellington Management Company, LLP, it has no
voting power over all of these shares and shared dispositive power over all
of these shares. This amount includes the 2,255,200 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, 1997, 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> <C>
Robert F. Bailey . . . . . . . . . . . . . . . . 8,834 1/ *
Samuel W. Bodman . . . . . . . . . . . . . . . . 155,685 2/ *
Henry O. Boswell . . . . . . . . . . . . . . . . 17,334 3/ *
John G.L. Cabot . . . . . . . . . . . . . . . . 247,571 4/ 1.1%
William R. Esler . . . . . . . . . . . . . . . . 14,334 5/ *
William H. Knoell . . . . . . . . . . . . . . . 12,667 6/ *
C. Wayne Nance . . . . . . . . . . . . . . . . . 11,667 7/ *
William P. Vititoe. . . . . . . . . . . . . . . 6,667 8/ *
Charles P. Siess, Jr. . . . . . . . . . . . . . 466,615 9/ 15/ 2.0%
Ray R. Seegmiller . . . . . . . . . . . . . . . 21,500 10/ 14/ 15/ *
H. Baird Whitehead . . . . . . . . . . . . . . . 51,713 11/ 14/ 15/ *
James M. Trimble . . . . . . . . . . . . . . . . 60,612 12/ 14/ 15/ *
Gerald F. Reiger . . . . . . . . . . . . . . . 11,409 13/ 14/ 15/ *
All directors and executive officers as a group
(16 individuals) . . . . . . . . . . . . . . 1,127,005 16/ 4.9%
</TABLE>
- ----------------
* Represents less than 1% of the outstanding Common Stock.
1/ Includes 8,334 shares purchasable upon the exercise of options within 60
days.
2/ Includes 10,000 shares purchasable upon the exercise of options within 60
days.
3/ Includes 13,334 shares purchasable upon the exercise of options within 60
days.
- 21 -
<PAGE> 25
4/ Includes 1,782 shares held by Mr. Cabot's spouse and 114,292 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 11,667 shares
purchasable upon the exercise of options within 60 days.
5/ Includes 10,334 shares purchasable upon the exercise of options within 60
days.
6/ Includes 12,667 shares purchasable upon the exercise of options within 60
days.
7/ Includes 11,667 shares purchasable upon the exercise of options within 60
days.
8/ Includes 6,667 shares purchasable upon the exercise of options within 60
days.
9/ Includes 396,000 shares purchasable upon the exercise of options within 60
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.
10/ Includes 10,000 shares purchasable upon the exercise of options within 60
days. Also includes 5,000 shares of restricted stock, the restrictions on
which lapse August 3, 1997; Mr. Seegmiller has no voting or investment
power with respect to these shares during the restriction period.
11/ Includes 1,309 shares held in the Company's Savings Investment Plan as to
which Mr. Whitehead shares voting and investment power and 41,800 shares
purchasable upon the exercise of options within 60 days.
12/ Includes 1,812 shares held in the Company's Savings Investment Plan as to
which Mr. Trimble shares voting and investment power and 41,500 shares
purchasable upon the exercise of options within 60 days.
13/ Includes 943 shares held in the Company's Savings Investment Plan as to
which Mr. Reiger shares voting and investment power and 6,166 shares
purchasable upon the exercise of options within 60 days.
14/ Includes 3,000 shares of restricted stock granted to each of Messrs.
Seegmiller, Whitehead, Trimble and Reiger, 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.
Seegmiller, Whitehead, Trimble and Reiger have no voting or investment
power with respect to these shares during the restriction period.
15/ Includes 10,000, 2,500, 2,400, 1,800 and 1,300 shares of restricted stock
granted to Messrs. Siess, Seegmiller, Whitehead, Trimble and Reiger,
respectively, on February 20, 1997, the restrictions on which lapse on
February 20, 1999. Messrs. Siess, Seegmiller, Whitehead, Trimble and
Reiger have no voting or investment power with respect to these shares
during the restriction period.
16/ Includes 5,318 shares held in the Company's Savings Investment Plan as to
which the executive officers share voting and investment power and 619,619
shares purchasable by the executive officers and directors upon the
exercise of options within sixty days. Also includes 52,660 shares of
restricted stock granted to the executive officers, the restrictions on
5,453 shares of which have lapsed. See also Notes 1-15 above.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the proxy statement
for the 1998 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
November 28, 1997.
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.
- 22 -
<PAGE> 26
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.
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,
LISA A. MACHESNEY
Corporate Secretary
March 25, 1997
- 23 -
<PAGE> 27
DETACH HERE
CABOT OIL & GAS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
P MAY 6, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
The undersigned acknowledges receipt of the notice of Annual Meeting
O of Stockholders and the Proxy Statement, each dated March 25, 1997, and
appoints Lisa A. Machesney and Scott C. Schroeder, or either of them,
X proxies for the undersigned, with power of substitution, to vote all of
the undersigned's shares of common stock of Cabot Oil & Gas Corporation
Y 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 6, 1997, 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 AND 2 AND WILL GRANT DISCRETIONARY AUTHORITY PURSUANT TO
ITEM 3.
THIS PROXY WILL REVOKE ALL PRIOR PROXIES SIGNED BY YOU.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
<PAGE> 28
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEMS 1 AND 2.
1. ELECTION OF DIRECTORS (check one box only):
NOMINEES: Charles P. Siess, Jr., Henry O. Boswell and William R. Esler
FOR WITHHELD [ ] ______________________________________
[ ] [ ] For all nominees except as noted above
2. Ratification of the appointment of Coopers & Lybrand L.L.P. as the
Company's independent certified public accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. 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.
MAKE 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 any other
representative capacity, or as an
officer of a corporation, please
indicate your full title as such.
Signature: __________________________________ Date: __________________________
Signature: __________________________________ Date: __________________________
