<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
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(Name of Registrant as Specified in its Charter)
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(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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(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
March 27, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Cabot Oil & Gas Corporation to be held on Tuesday, May 12, 1998 at 10:00 a.m.,
local time, at The Luxury Collection 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 future 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 and
Chief Executive Officer
<PAGE> 3
CABOT OIL & GAS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 1998
The Annual Meeting of Stockholders of Cabot Oil & Gas Corporation (the
"Company"), a Delaware corporation, will be held in The Colonnade Room at The
Luxury Collection Hotel, 1919 Briar Oaks Lane, Houston, Texas 77027, on Tuesday,
May 12, 1998 at 10:00 a.m., for the following purposes:
I. To elect four persons to the Board of Directors of the
Company.
II. To approve the amendment and restatement of the 1994 Long-Term
Incentive Plan and to approve performance criteria adopted
thereunder.
III. To approve the amendment and restatement of the 1994
Nonemployee Director Stock Option Plan.
IV. To ratify the appointment of the firm of Coopers & Lybrand
L.L.P., independent certified public accountants, as auditors
of the Company for its 1998 fiscal year.
V. 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, 1998 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 27, 1998
<PAGE> 4
CABOT OIL & GAS CORPORATION
15375 Memorial Drive
Houston, Texas 77079
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 1998
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 1998 Annual Meeting of Stockholders, to be held at The Luxury
Collection Hotel, Houston, Texas, on Tuesday, May 12, 1998, 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 the approval of the amendment and restatement of the 1994
Long-Term Incentive Plan, for the approval of the amendment and restatement of
the 1994 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 1998 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,
1998, are entitled to vote at the Annual Meeting. As of that date, the Company
had outstanding and entitled to vote 24,699,116 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 27, 1998.
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. Robert F. Bailey, John G.L. Cabot, William H. Knoell
and C. Wayne Nance 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
2001 and until his successor shall have been elected and shall have qualified.
Each nominee is currently a director of the Company. Mr. Ray R. Seegmiller was
elected to the Board of Directors in September 1997 by the Board of Directors.
In December 1997 the Board of Directors announced its intention to elect Mr.
Seegmiller as Chief Executive Officer and President of the
<PAGE> 5
Company effective with the Annual Meeting. Mr. Seegmiller will succeed Mr.
Charles P. Siess, Jr. who will remain non-executive Chairman of the Board.
It is the intention of the persons named in the enclosed form of proxy to
vote such proxies for the election of Messrs. Bailey, Cabot, Knoell and Nance
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, 1998, 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: 65
Committee Membership: Audit, Safety and Environmental Affairs
Director Since: 1994
Term of Office Expires: 1998 (Nominee for Director)
Business Experience:
Trans Republic Energy, L.C.
President - 1992 to present
Alta Energy Corporation
President - prior to 1992
Other Directorships:
Chase Bank Texas - Midland - Advisory Director
SAMUEL W. BODMAN
Age: 59
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
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<PAGE> 6
HENRY O. BOSWELL
Age: 68
Committee Membership: Compensation, Audit (Chairman)
Director Since: 1991
Term of Office Expires: 2000
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:
The ServiceMaster Co.
Rowan Companies, Inc.
JOHN G.L. CABOT
Age: 63
Committee Memberships: Safety and Environmental Affairs,
Nominations (Chairman)
Director Since: 1989
Term of Office Expires: 1998 (Nominee for Director)
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: 72
Committee Membership: Audit, Safety and Environmental Affairs
Director Since: 1992
Term of Office Expires: 2000
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
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<PAGE> 7
WILLIAM H. KNOELL
Age: 73
Committee Membership: Audit, Safety and Environmental
Affairs (Chairman)
Director Since: 1990
Term of Office Expires: 1998 (Nominee for Director)
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: 66
Committee Memberships: Compensation, Nominations
Director Since: 1992
Term of Office Expires: 1998 (Nominee for Director)
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
RAY R. SEEGMILLER
Age: 62
Director Since: 1997
Term of Office Expires: 1999
Business Experience:
Cabot Oil & Gas Corporation
President and Chief Operating Officer -
September 1997 to present
Executive Vice President and Chief Operating Officer -
March 1997 to September 1997
Vice President, Chief Financial Officer and Treasurer -
August 1995 to March 1997
RCS Enterprises, Inc.
President and Chief Executive Officer -
May 1993 to June 1995
Terry Petroleum Company
President and Chief Executive Officer -
May 1988 to April 1993
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<PAGE> 8
CHARLES P. SIESS, JR.
Age: 71
Position: Chairman of the Board and Chief Executive Officer
Director Since: 1989
Term of Office Expires: 2000
Business Experience:
Cabot Oil & Gas Corporation
Chairman of the Board and Chief Executive Officer -
September 1997 to present
Chairman of the Board, Chief Executive
Officer and President -
May 1995 to September 1997 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.
WILLIAM P. VITITOE
Age: 59
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 six meetings during the year ended December 31,
1997. 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 1997.
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 three meetings
during 1997.
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<PAGE> 9
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 1997.
The Safety and Environmental Affairs Committee reviews the Company's safety
and environmental management programs and evaluates 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 1997.
All directors attended 75% or more of the meetings of the Board of
Directors and of the committees held while they were members during 1997.
DIRECTOR'S COMPENSATION
Directors who are not employees of the Company were compensated during 1997
by the payment of a quarterly cash fee of $6,000, 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, during 1997
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 under the 1994 Nonemployee Director Stock
Option Plan. (See Proposal III below.) Directors who are employees of the
Company receive no additional compensation for their duties as directors. All
directors were reimbursed for travel expenses incurred for attending all Board
and committee meetings.
PROPOSAL II.
APPROVAL OF THE AMENDMENT AND RESTATEMENT
OF THE 1994 LONG-TERM INCENTIVE PLAN
In 1994 the Board of Directors adopted, and the stockholders approved, the
Company's 1994 Long-Term Incentive Plan. The Board of Directors has now adopted,
subject to stockholder approval, certain amendments to the 1994 Long-Term
Incentive Plan and a restatement of the plan, as so amended (such plan, as so
amended and restated, the "1994 Incentive Plan"). A copy of the 1994 Incentive
Plan is attached hereto as Exhibit A and is incorporated herein by reference.
The principal changes effected by the amendment and restatement of the 1994
Incentive Plan are (i) increasing the number of shares subject to the plan by
1,000,000 shares (from 1,500,000 shares to 2,500,000 shares); (ii) increasing
the limit on "stock awards" (as defined in the plan) from 600,000 shares (40% of
1,500,000) to 750,000 shares (30% of 2,500,000); (iii) increasing the annual
limit on awards to any individual from 15% of the shares initially available for
award under the plan to 500,000 shares; and (iv) conforming certain provisions
of the plan to reflect amendments to applicable regulations. In addition, the
Compensation Committee has adopted broadened performance share provisions under
the 1994 Incentive Plan.
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<PAGE> 10
Pursuant to the 1994 Incentive Plan, employees of the Company, including
officers and directors who are employees, will be eligible to receive awards
consisting of (i) stock options, (ii) stock appreciation rights, (iii)
restricted or nonrestricted stock awards ("stock awards"), (iv) cash awards or
(v) any combination of the foregoing. The 1994 Incentive Plan is intended as an
incentive to retain key executives and other selected employees of the Company
and to reward them for making contributions to the success of the Company.
An aggregate of 1,500,000 shares of Common Stock were initially reserved
for issuance pursuant to the 1994 Incentive Plan. As of December 31, 1997, under
the 1994 Incentive Plan options to purchase a total of 839,938 shares were
outstanding, 67,211 shares had been issued upon exercise of options, 378,771
shares had been granted as restricted stock awards and 80,250 shares had been
reserved for performance shares granted in 1995 and 1996, leaving only 133,830
shares available for future grants. In order to continue the effectiveness of
the 1994 Incentive Plan, the Board of Directors has adopted the amended and
restated 1994 Incentive Plan, which will provide for the issuance of up to an
additional 1,000,000 shares of Common Stock
The 1994 Incentive Plan is administered by the Compensation Committee of
the Board of Directors. Subject to the provisions of the 1994 Incentive Plan,
the Compensation Committee is authorized to determine the type or types of
awards made to each participant and the terms, conditions and limitations
applicable to each award. In addition, the Compensation Committee has the power
to interpret the 1994 Incentive Plan, to adopt such rules and regulations as it
may deem necessary or appropriate in keeping with the objectives of the 1994
Incentive Plan, to extend the exercisability of awards, to accelerate the
vesting or exercisability of awards, to eliminate or make less restrictive any
restrictions on awards, to waive any restrictions or other provisions of awards
under the 1994 Incentive Plan or to otherwise amend or modify awards. The
Compensation Committee may also provide for loans from the Company to permit the
exercise or purchase of awards and may provide for procedures to permit the
exercise or purchase of awards by use of the proceeds to be received from the
sale of Common Stock issuable pursuant to an award.
Options are rights to purchase a specified number of shares of Common Stock
at a price fixed at the time the option is granted. Options granted pursuant to
the 1994 Incentive Plan will become exercisable on such date or dates as may be
established by the Compensation Committee and may either be incentive stock
options within the meaning of Section 422 of the Internal Revenue Code or
non-qualified stock options. The exercise price of options granted under the
Incentive Plan will be an amount not less than the fair market value of the
Common Stock at the time of grant (or, if greater, the par value thereof). The
1994 Incentive Plan provides that stock options will never be repriced or
reissued at a different exercise price in exchange for existing options. The
exercise price must be paid in full in cash at the time an option is exercised
or, if permitted by the Compensation Committee, by means of tendering Common
Stock or surrendering another award. For purposes of satisfying the requirements
of Section 162(m) of the Internal Revenue Code, in any calendar year no
participant may be granted stock options to purchase or stock appreciation
rights for more than 500,000 shares.
Stock appreciation rights are rights to receive, without payment to the
Company, cash or shares of Common Stock with a value determined by reference to
the difference between the exercise or "strike" price of the stock appreciation
right and the fair market value or other specified valuation of the Common Stock
at the time of exercise. A stock award is an award of shares of Common Stock or
units denominated in shares of Common Stock that may be subject to conditions
established by the Compensation Committee and may include a restriction against
transfer as well as a repurchase option exercisable by the Company upon the
occurrence of conditions fixed by the Compensation Committee. During any period
of restriction, the employee may have the right to vote and receive dividends on
the shares covered by the restricted stock awards. A cash award may be
denominated in cash with the amount of payment subject to future service and
other restrictions and conditions as may be established by the Compensation
Committee, including continuous service with the Company, achievement of
specific business objectives, increases in specified indices, attaining
specified growth rates and other comparable measures of performance.
Unless otherwise determined by the Compensation Committee, awards under the
1994 Incentive Plan that constitute derivative securities are not transferable
except by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order. The 1994 Incentive Plan allows for the
satisfaction of a
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<PAGE> 11
participant's tax withholding in respect of an award by the withholding of
shares of Common Stock issuable pursuant to the award or the delivery by the
participant of previously owned shares of Common Stock, in either case valued at
the fair market value thereof. On March 17, 1998, the closing price of the
Common Stock on the New York Stock Exchange was $20.00 per share.
The amount and type of awards to be granted in the future to the named
officers, to all executive officers as a group and to all other employees are
not currently determinable. The 1994 Incentive Plan does not permit the grant of
awards to directors who are not employees.
In 1994, the Compensation Committee adopted performance share provisions
under the 1994 Incentive Plan pursuant to which the Compensation Committee may
grant awards of performance shares (a form of stock award under the 1994
Incentive Plan) under the specified terms and conditions described below. In
connection with the amendment and restatement of the 1994 Incentive Plan, the
Compensation Committee has adopted broadened performance share provisions.
Grants of performance shares may be made to members of the executive
management group of the Company selected by the Compensation Committee.
Currently, there are approximately ten individuals who would qualify for
performance share awards. No participant may be granted more than 25,000
performance shares for any one-year period. Unless otherwise determined by the
Compensation Committee, each award of performance shares may not be assigned or
transferred except by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order.
Performance awards granted in the future under the broadened performance
share provisions may, in addition to the performance shares under the provisions
adopted in 1994, be based on one or more performance goals, and a performance
goal may be based on one or more business criteria applicable to the grantee,
the Company as a whole or one or more of the Company's business units and may
include any of the following: increased revenue; net income; earnings before
interest, taxes, depreciation and amortization; other earnings measures;
economic value added; cash flow measures; stock price; market share; return on
equity or capital; return on revenue measures; costs; oil and gas volumes;
petroleum reserve measures; and safety and environmental performance measures.
The Committee will determine the employees to receive such awards and the terms,
conditions and limitations applicable to each such award, which conditions may,
but need not, include continuous service with the Company, achievement of
specific business objectives, attainment of specified growth rates, increases in
specified indices or other comparable measures of performance.
Each grant of performance shares under the provisions approved in 1994 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 of these
performance shares 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
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 consists of Anadarko Petroleum
Corporation, Apache Corporation, Burlington Resources, Inc. (which counts as two
companies to reflect its acquisition of The Louisiana Land and Exploration
Company), Devon Energy Corporation, Enron Oil & Gas Company, Noble Affiliates,
Inc., Oryx Energy Company, Pioneer Natural Resources (previously Parker &
Parsley Petroleum Company), Barrett Resources Corporation (previously Plains
Petroleum Company), Santa Fe Energy Resources, Inc. and Seagull Energy
Corporation. If any member of the comparator group ceases to have publicly
traded common stock, it will be removed from the comparator group.
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<PAGE> 12
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 under
the provisions approved in 1994 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 RELATIVE PERCENT PERFORMANCE
PLACEMENT 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 under the 1994 provisions unless otherwise
determined by the Compensation Committee. Prior to the issuance of shares of
Common Stock in respect of such a performance share award, the participant will
have no right to vote or receive dividends on such shares. 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 under the 1994 provisions shall be
terminated effective upon the date of such cessation.
The performance period for the performance share awards granted in 1994
expired June 30, 1997 with no shares of Common Stock being issued. The
performance period for the performance share awards granted in 1995 and 1996
will expire on June 30, 1998 and June 30, 1999, respectively.
The performance share provisions are intended to constitute "qualified
performance based compensation" as defined under Section 162(m) of the Internal
Revenue Code, with the effect that the deduction disallowance of Section 162(m)
should not be applicable to compensation paid to covered employees under the
performance share provisions.
In the event of a stock split, stock dividend, combination or
reclassification or certain other corporate transactions, the Compensation
Committee is authorized to make appropriate adjustments to the exercise price
and number of shares subject to awards granted under the 1994 Incentive Plan.
The Board of Directors has the right to amend, modify, suspend or terminate
the 1994 Incentive Plan, except that (a) without the consent of the affected
participant, no amendment or alteration shall be made that would impair the
rights of a participant under any award theretofore granted and (b) no amendment
or alteration shall be effective prior to approval by the Company's stockholders
to the extent such approval is then required by applicable legal requirements.
Certain Federal Income Tax Consequences. The following discussion of tax
considerations relating to options describes only certain U.S. federal income
tax matters. The discussion is general in nature and does not take in to account
a number of considerations which may apply in light of the particular
circumstances of an optionee.
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<PAGE> 13
Some of the options issuable under the 1994 Incentive Plan may constitute
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code, while other options granted under the 1994 Incentive Plan will be
non-qualified stock options. The Internal Revenue Code provides for tax
treatment of stock options qualifying as incentive stock options that may be
more favorable to employees than the tax treatment accorded non-qualified stock
options. Generally, upon the exercise of an incentive stock option, the optionee
will recognize no income for U.S. federal income tax purposes. The difference
between the exercise price of the incentive stock option and the fair market
value of the stock at the time of exercise is an item of tax preference that may
require payment of an alternative minimum tax. On the sale of shares acquired by
exercise of an incentive stock option (assuming that the sale does not occur
within two years of the date of grant of the option or within one year from the
date of exercise), any gain will be taxed to the optionee as long-term or
mid-term capital gain. In contrast, upon the exercise of a non-qualified option,
the optionee recognizes taxable income (subject to withholding) in an amount
equal to the difference between the then fair market value of the shares on the
date of exercise and the exercise price. Upon any sale of such shares by the
optionee, any difference between the sale price and the fair market value of the
shares on the date of exercise of the non-qualified option will be treated
generally as capital gain or loss. No deduction is available to the employer
corporation upon the grant or exercise of an incentive stock option (although a
deduction may be available if the employee sells the shares so purchased before
the applicable holding period expires), whereas upon exercise of a non-qualified
stock option, the employer corporation is entitled to a deduction in an amount
equal to the income recognized by the employee. Except with respect to death, an
optionee has three months after termination of employment in which to exercise
an incentive stock option and retain favorable tax treatment at exercise. An
option exercised more than three months after an optionee's termination of
employment other than upon death cannot qualify for the tax treatment accorded
incentive stock options. Such option would be treated as a non-qualified stock
option instead. Based on the provisions of the 1994 Incentive Plan, the Company
expects that the 1994 Incentive Plan will comply with the requirements of
Section 162(m) of the Internal Revenue Code, provided that the grant is made by
a qualified compensation committee.
Approval of the amendment and restatement of the 1994 Incentive Plan and
the performance share provisions adopted thereunder will require the affirmative
vote of a majority of the shares of Common 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 1994
Incentive Plan and the performance share provisions.
PROPOSAL III.
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE
1994 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
In 1994 the Board of Directors adopted, and the stockholders approved, the
Company's 1994 Nonemployee Director Stock Option Plan. The Board of Directors
has now adopted, subject to stockholder approval, certain amendments to the 1994
Nonemployee Director Stock Option Plan and a restatement of the plan, as so
amended (such plan, as so amended and restated, the "1994 Nonemployee Director
Plan"). A copy of the 1994 Nonemployee Director Plan is attached hereto as
Exhibit B and is incorporated herein by reference.
The principal changes effected by the amendment and restatement of the 1994
Nonemployee Director Plan are (i) increasing the number of shares subject to the
plan by 200,000 (from 100,000 to 300,000); (ii) changing the timing of the
periodic grant of 5,000 shares per director from the director's reelection (once
every three years) to each annual meeting of stockholders; and (iii) conforming
certain provisions of the plan to reflect amendments to applicable regulations.
The 1994 Nonemployee Director Plan is intended as an incentive to attract
and retain as independent directors of the Company persons of training,
experience and ability, to encourage the sense of proprietorship of such persons
and to stimulate their active interest in the development and financial success
of the Company.
- 10 -
<PAGE> 14
Under the 1994 Nonemployee Director Plan, each director of the Company who
is not an employee of the Company is automatically granted an option to purchase
10,000 shares of Common Stock on the date such person first becomes a
nonemployee director. Thereafter, each nonemployee director will be
automatically granted an option to purchase an additional 5,000 shares of Common
Stock at each annual meeting of stockholders (other than when the director's
status as director terminates at such meeting). Each option permits the optionee
to purchase shares of Common Stock at an exercise price per share equal to 100%
of the fair market value of a share of Common Stock on the date the option is
granted. The exercise price of the options is payable in cash or in shares of
Common Stock or any combination thereof. An optionee may also exercise an option
using the proceeds to be received from the sale of Common Stock issuable
pursuant to the option.
The 1994 Nonemployee Director Plan originally provided for the granting of
options to purchase an aggregate of not more than 100,000 shares of Common
Stock. As of December 31, 1997, 90,000 shares had been issued under the 1994
Nonemployee Director Plan, leaving only 10,000 shares available for future
grants. Under the plan as in effect prior to the amendment and restatement,
options to purchase an aggregate of 20,000 shares of Common Stock would be
granted at the 1998 Annual Meeting. In order to continue the effectiveness of
the plan, the Board of Directors has adopted the amended and restated 1994
Nonemployee Director plan, which will provide for the granting of options to
purchase an aggregate of not more than 300,000 shares of Common Stock. On March
17, 1998, the closing price of the Common Stock on the New York Stock Exchange
was $20.00 per share.
Approval of the amendment and restatement of the 1994 Nonemployee Director
Plan will result in each nonemployee director receiving an option to purchase
5,000 shares as of the date of the 1998 Annual Meeting.
Options granted under the 1994 Nonemployee Director Plan will be
exercisable, on a cumulative basis, with respect to 33 1/3% of the total number
of shares of Common Stock subject to the option as of the first, second and
third anniversaries of the date of the grant of such option. In the event of a
"change in control" of the Company (as defined in the 1994 Nonemployee Director
Plan), any unvested portion of the options will immediately become exercisable
in full. Options granted under the 1994 Nonemployee Director Plan will terminate
upon the earliest of: (a) five years from the date of the grant of the option;
(b) one 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 optionee ceases to be a director of the Company for any reason
other than death, disability or mandatory retirement. In the event of cessation
of services of a director because of death, disability or mandatory retirement,
any unmatured installments of the option shall be accelerated, effective as of
the date of cessation of service.
In the event of a stock split, stock dividend, combination or
reclassification or certain other corporate transactions, the Board of Directors
is authorized to make appropriate adjustments to the exercise price and number
of shares subject to options under the 1994 Nonemployee Director Plan.
The Board of Directors has the right to amend, alter or discontinue the
1994 Nonemployee Director Plan, except that (a) without the consent of the
affected optionee, no amendment or alteration shall be made that would impair
the rights of an optionee under any option theretofore granted and (b) no
amendment or alteration shall be effective prior to approval by the Company's
stockholders to the extent such approval is then required.
Options under the 1994 Nonemployee Director Plan are intended to be
non-qualified options for federal income tax purposes. See "Proposal II -
Approval of the Amendment and Restatement of the 1994 Long-Term Incentive Plan -
Certain Federal Income Tax Consequences" for a description of the federal income
tax consequences of non-qualified options.
Approval of the amendment and restatement of the 1994 Nonemployee Director
Plan will require the affirmative vote of a majority of the shares of Common
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 1994 Nonemployee Director Plan.
- 11 -
<PAGE> 15
PROPOSAL IV.
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 1998. 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, 1997 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
----------------------------
Restricted
Other Annual Stock Securities All Other
Name and Bonus Compensation Awards ($) Underlying Compensation
Principal Position Year Salary ($) ($) (1) ($) (2) (3)(4)(5)(6) Options (#) ($) (7)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C.P. Siess, Jr 1997 418,750 450,000 73,523 425,000(8) 20,000 9,500
Chairman of the Board 1996 375,000 300,000 24,892 168,750 25,000 9,500
and CEO 1995 230,978 0 21,030 133,750(9) 280,000 8,750
R.R. Seegmiller 1997 319,111 200,000 13,950 187,000(10) 10,000 9,029
President and 1996 186,667 100,000 8,388 42,188 20,000 7,467
Chief Operating Officer 1995 84,328 0 6,244 108,500(11) 20,000 3,374
J.M. Trimble 1997 182,083 125,000 9,230 102,000(12) 5,000 9,017
Senior Vice President - 1996 158,750 80,000 7,450 30,375 15,000 6,350
Exploration & Production 1995 150,000 0 6,732 41,625 7,500 6,000
H.B. Whitehead 1997 183,750 120,000 7,294 102,000(13) 5,000 8,142
Vice President - 1996 170,834 95,000 5,822 40,500 15,000 6,250
Regional Manager 1995 165,000 0 11,704 41,625 12,000 6,593
G.F. Reiger 1997 163,750 90,000 1,946 102,000(14) 5,000 8,950
Vice President - 1996 148,750 70,000 823 21,938 12,000 5,950
Regional Manager 1995 135,000 0 696 41,625 10,500 5,400
</TABLE>
- 12 -
<PAGE> 16
1/ No bonuses were paid to the Chief Executive Officer or the four most highly
compensated executives in 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. 1997 premiums paid on and a tax gross-up for imputed income on
executive term life insurance represents $67,232, $10,091 , $2,229, $2,151
and $1,946 for Messrs. Siess, Seegmiller, Trimble, Whitehead and Reiger,
respectively. The tax gross-up on club dues represents $6,291, $3,859,
$7,001, $5,143 and $0 for Messrs. Siess, Seegmiller, Trimble, Whitehead and
Reiger, respectively.
3/ Unless otherwise indicated, the amount in this column for 1997, 1996 and
1995 represents the value of restricted stock grants made to the named
executive on May 5, 1997, February 20, 1997 and November 14, 1995, based on
closing market prices on such dates of $17.00, $16.875 and $13.875,
respectively, as reported on the New York Stock Exchange, Inc. Composite
Transactions Reporting System.
4/ Messrs. Siess, Seegmiller, Trimble, Whitehead and Reiger were granted
25,000, 11,000, 6,000, 6,000 and 6,000 shares of restricted stock,
respectively, on May 5, 1997, the restrictions on which lapse in full in
three years from the date of grant. These grants are reported with respect
to 1997.
5/ Messrs. Siess, Seegmiller, Trimble, Whitehead and Reiger were granted
10,000, 2,500, 1,800, 2,400 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.
6/ Messrs. Seegmiller, Trimble, Whitehead 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/ 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.
8/ Mr. Siess holds a total of 45,000 shares of restricted stock as of December
31, 1997. The market value of the 45,000 shares at December 31, 1997 was
$874,688. No dividends are paid on the restricted stock held.
9/ 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.
10/ Mr. Seegmiller holds a total of 14,500 shares of restricted stock as of
December 31, 1997. The market value of the 14,500 shares at December 31,
1997 was $281,844. No dividends are paid on the restricted stock held.
11/ 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 lapsed 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.
12/ Mr. Trimble holds 8,800 shares of restricted stock as of December 31, 1997.
The market value of the 8,800 shares at December 31, 1997 was $171,050. No
dividends are paid on restricted stock held.
13/ Mr. Whitehead holds 9,400 shares of restricted stock as of December 31,
1997. The market value of the 9,400 shares at December 31, 1997 was
$182,713. No dividends are paid on the restricted stock held.
14/ Mr. Reiger holds 8,300 shares of restricted stock as of December 31, 1997.
The market value of the 8,300 shares at December 31, 1997 was $161,331. No
dividends are paid on the restricted stock held.
- 13 -
<PAGE> 17
OPTION GRANTS IN LAST FISCAL YEAR
Set forth below is certain information relating to the Company's grants of
options during 1997 to the executive officers named in the preceding Summary
Compensation Table, including the relative size of each grant, and each grant's
exercise price and expiration date. Also included is information relating to the
potential realizable value of the options granted, based upon assumed annualized
stock value appreciation rates. Neither the option values reflected in the table
nor the assumptions utilized in arriving at the values should be considered
indicative of future stock performance.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
- --------------------------------------------------------------------------------- --------------------------------
Percent of
Number of Total
Securities Options
Underlying Granted to
Options Employees Exercise
Granted in Fiscal Price Expiration
Name (#) (1) (2) Year ($/Sh) (3) Date (4) 5% ($)(5) 10% ($)(6)
- --------------- ----------- ---------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
C.P. Siess, Jr. 20,000 27.6% $16.9375 May 5, 2002 $93,590 $206,810
R.R. Seegmiller 10,000 13.8% $16.9375 May 5, 2002 $46,795 $103,405
J.M. Trimble 5,000 6.9% $16.9375 May 5, 2002 $23,398 $ 51,703
H.B. Whitehead 5,000 6.9% $16.9375 May 5, 2002 $23,398 $ 51,703
G.F. Reiger 5,000 6.9% $16.9375 May 5, 2002 $23,398 $ 51,703
</TABLE>
1/ There were no adjustments or amendments during 1997 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 5, 1998) 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 $21.62 and would produce
a corresponding $115,568,482 increase in total stockholder value based upon
24,680,936 shares of Common Stock outstanding on March 1, 1998.
6/ The stock price required to produce this value is $27.28 and would produce
a corresponding $255,262,580 increase in total stockholder value based upon
24,680,936 shares of Common Stock outstanding on March 1, 1998.
- 14 -
<PAGE> 18
AGGREGATED FY-END OPTION VALUES
Set forth below is supplemental information relating to the number and
intrinsic value of stock options held at December 31, 1997 ("FY-End"), by the
executive officers named in the preceding Summary Compensation Table. Year-end
values are based on the Company's stock price at December 31, 1997, do not
reflect the actual amounts, if any, which may be realized upon the future
exercise of remaining stock options, and should not be considered indicative of
future stock performance. No options were exercised by the individuals named in
the Summary Compensation Table during 1997.
AGGREGATED FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
--------------------- ---------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable (1)
- --------------- ---------------- ---------------------
<S> <C> <C>
C.P. Siess, Jr. 414,334 / 46,666 $1,983,203 / $130,832
R.R. Seegmiller 26,667 / 23,333 $ 136,984 / $ 56,666
J.M. Trimble 52,900 / 17,500 $ 165,101 / $ 46,563
H.B. Whitehead 55,400 / 19,000 $ 167,538 / $ 52,750
G.F. Reiger 15,000 / 16,500 $ 38,375 / $ 45,938
</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 $19.4375 per share as reported on the
New York Stock Exchange, Inc. Composite Transactions Reporting System for
December 31, 1997.
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
There were no additional long-term incentive awards made in 1997 to the
executive officers named in the Summary Compensation Table.
PENSION PLAN TABLE
Company employees are covered by the Company's Pension Plan (the "Pension
Plan"), a noncontributory defined benefit 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.
- 15 -
<PAGE> 19
PENSION PLAN TABLE
<TABLE>
<CAPTION>
REMUNERATION YEARS OF SERVICE
- ------------ ------------------------------------------------------------------------
5 10 15 20 25 30 35
- ------------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
125,000 8,789 17,578 26,367 35,156 43,945 52,734 61,522
150,000 10,664 21,328 31,992 42,656 53,320 63,984 74,647
175,000 12,539 25,078 37,617 50,156 62,695 75,234 87,772
200,000 14,414 28,828 43,242 57,656 72,070 86,484 100,897
225,000 16,289 32,578 48,867 65,156 81,445 97,734 114,022
250,000 18,164 36,328 54,492 72,656 90,820 108,984 127,147
275,000 20,039 40,078 60,117 80,156 100,195 120,234 140,272
300,000 21,914 43,828 65,742 87,656 109,570 131,484 153,397
350,000 25,664 51,328 76,992 102,656 128,320 153,984 179,647
400,000 29,414 58,828 88,242 117,656 147,070 176,484 205,897
500,000 36,914 73,828 110,742 147,656 184,570 221,484 258,397
600,000 44,414 88,828 133,242 177,656 222,070 266,484 310,897
700,000 51,914 103,828 155,742 207,656 259,570 311,484 363,397
800,000 59,414 118,828 178,242 237,656 297,070 356,484 415,897
</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
1997 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 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, Trimble, Whitehead and
Reiger had 11.00, 5.00, 14.67, 17.25 and 3.58 years of credited service,
respectively, as of December 31, 1997. Upon retirement, Mr. Siess' benefits
shall be adjusted to reflect his prior termination of service.
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.
- 16 -
<PAGE> 20
The objectives of the executive compensation program are to align
compensation with business strategy, to create value for the stockholders, to
attract, retain, motivate and reward highly qualified executives and to support
a performance-based culture throughout the Company.
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 eleven companies: Anadarko Petroleum
Corporation, Apache Corporation, Barrett Resources Corporation, Burlington
Resources, Inc., Devon Energy Corporation, Enron Oil & Gas Company, Noble
Affiliates, Inc., Oryx Energy Company, Pioneer Natural Resources, Santa Fe
Energy Resources, Inc. and Seagull Energy Corporation (the "Peer Group").
The companies chosen for the Peer Group 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.
The components of the Company's executive compensation program are base
salary, annual incentive bonus and long-term incentives. These components are
described below. In determining each component of compensation, the Compensation
Committee considers competitive data from the Peer Group 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 Group and that superior performance should reflect a
corresponding increase in value for annual 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
1997 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 Group. Increases to base salaries
are driven primarily by individual performance.
Mr. Siess' base salary of $450,000 per year approximates the 50th
percentile of the competitive market for his position and reflects his depth of
experience, his breadth of knowledge and his willingness to stay on with the
Company. Mr. Siess received a salary increase from $375,000 to $450,000 per year
during 1997. This is the first salary increase Mr. Siess has received since
resuming service with the Company in May 1995.
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 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.
- 17 -
<PAGE> 21
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.
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 and dividend 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 thresholds 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, such as commodity prices, interest rates
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.
In 1997, the bonus plan funded, and overall Company performance exceeded
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
124% to 130% 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 1997 was the second year in a row of
record performance by the Company and that the Company has had eight consecutive
profitable quarters as of December 31, 1997. This resulted in the Committee's
decision to award cash bonus payments ranging from 151% to 180% of the
pre-established bonus targets to the executive officers of the Company,
including the executive officers named in the tables above. Mr. Siess received a
cash bonus of $450,000. This represents 167% of Mr. Siess' target and recognizes
Mr. Siess' fulfillment of the Company's 1997 goals to increase production rates,
reduce costs and reduce debt.
LONG TERM INCENTIVES
In 1997, the Company used two types of awards to provide long-term
incentives to executives: stock options and restricted stock. The Committee
placed greater emphasis on restricted stock as a long term retention incentive
due to the highly competitive market for energy industry executives. The Company
did not grant performance shares during 1997.
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.
Restricted stock awards are also granted under the 1994 Long-Term Incentive
Plan. The Company's restricted stock awards to executives with respect to 1997
consist of grants of Common Stock, the restrictions on which generally lapse in
full in three years from the date of grant. The restricted stock will be
forfeited if, during the three year restrictive period, the executive leaves the
Company for any reason other than retirement, termination without cause, death
or disability. In each of these events, the Committee has the discretion to
accelerate the lapse of restrictions on all or some of the shares. 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
- 18 -
<PAGE> 22
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.
The size of stock option and restricted stock grants is based primarily on
competitive practice and is generally targeted to be at the 50th percentile of
values granted by the Peer Group. During 1997 the value of the stock option and
restricted stock grant was targeted at slightly above the 50% percentile of the
competitive market in recognition of the following factors: the continued
significant increase in the competitive market values and as the financial
results in the energy industry continue to improve, greater pressure is put on
the Company to provide long term incentives designed to retain its executives.
The Committee does not typically consider the amount of options and restricted
stock previously granted and outstanding when determining the size of stock
option and restricted stock 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 and restricted stock awards is dependent on the stock price on the date
of grant.
In 1997 Mr. Siess was granted an option to purchase 20,000 shares of Common
Stock with an exercise price of $16.9375. Mr. Siess was also granted a 25,000
share restricted stock award. Factors considered by the Committee in making the
1997 grant included the sound financial and strategic position of the Company,
the growth in the Company's production rates and the recognition that Mr. Siess
has extended his tenure with the Company beyond that which was contemplated when
he rejoined the Company in May 1995.
The Company's stock options 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 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. To date the Company has experienced no loss of tax deduction as a result
of 162(m).
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
- 19 -
<PAGE> 23
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of the Compensation Committee was, during 1997, 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 1997, the Company had no
Compensation Committee interlocks.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Mr. John G.L. Cabot, a Director of the Company, filed one Form 4 after the
required due date, disclosing the distribution of 15,000 shares of Common Stock
from a grantor retained annuity trust of which Mr. Cabot is the trustee and
contingent beneficiary, to Mr. Cabot in accordance with the distribution
provisions of the trust.
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.
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
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 five 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
- 20 -
<PAGE> 24
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 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, President and Chief Operating
Officer 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), Mr. Seegmiller shall receive 12 months of base salary, as well
as continuation of all applicable benefit programs. 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.
- 21 -
<PAGE> 25
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 1992 through February 1998. The graph
assumes that the value of the investment in the Company's Common Stock and in
each index was $100 on December 31, 1992 and that all dividends were reinvested.
[GRAPH]
<TABLE>
<CAPTION>
Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Feb-98
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500 100 107.1 105.4 141.4 170.0 222.7 240.8
COG 100 119.1 82.4 84.0 99.3 113.6 123.0
DJ Secondary Oils-US 100 108.3 102.3 115.6 139.8 146.3 144.8
</TABLE>
- 22 -
<PAGE> 26
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>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF OF COMMON STOCK OF
BENEFICIAL OWNER OWNED CLASS
------------------- ---------------- --------
<S> <C> <C>
NewSouth Capital Management, Inc. ................. 1,940,465 (1) 7.9%
1000 Ridgeway Loop Road, Suite 233
Memphis, TN 38120
Puget Sound Energy, Inc............................ 4,105,174 (2) 15.4% (2)
411 108th Avenue, N.E.
Bellevue, WA 98009-5515
The Prudential Insurance Company................... 1,572,300 (3) 6.4%
of America
751 Broad Street
Newark, NJ 07102
Vanguard/Windsor Fund, Inc......................... 2,255,200 (4) 9.1%
Post Office Box 2600
Valley Forge, PA 19482
Wellington Management Company, LLP................. 2,337,173 (5) 9.5% (5)
75 State Street
Boston, MA 02109
</TABLE>
- -------------
(1) According to Amendment No. 3 to a Schedule 13G, dated February 12, 1998,
filed with the Commission by NewSouth Capital Management, Inc., it has
shared voting power over 117,500 of these shares and sole dispositive power
over all of these shares.
(2) 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. On February 10, 1997 WECO
merged with Puget Sound Power & Light Company to form Puget Sound Energy,
Inc.
(3) According to Amendment No. 5 to a Schedule 13G, dated February 10, 1998,
filed with the Commission by The Prudential Insurance Company of America,
it has shared voting and dispositive power over 563,400 of these shares.
(4) According to Amendment No. 6 to a Schedule 13G, dated February 9, 1998,
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 (5) below.
(5) According to Amendment No. 8 to a Schedule 13G, dated January 13, 1998,
filed with the Commission by Wellington Management Company, LLP, it has
shared voting power over 400 of these shares, no voting power over the
remainder 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 (4) above.
- 23 -
<PAGE> 27
BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table reports, as of March 1, 1998, 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 Class
- -------------------------------------------- ------------------------- -------
<S> <C> <C>
Robert F. Bailey............................ 13,834 1/ *
Samuel W. Bodman............................ 157,352 2/ *
Henry O. Boswell............................ 19,000 3/ *
John G.L. Cabot............................. 184,093 4/ 1.0%
William R. Esler............................ 16,000 5/ *
William H. Knoell........................... 14,334 6/ *
C. Wayne Nance.............................. 13,334 7/ *
William P. Vititoe.......................... 14,282 8/ *
Charles P. Siess, Jr........................ 509,949 9/ 15/ 16/ 2.0%
Ray R. Seegmiller........................... 49,167 10/ 14/ 15/ 16/ *
H. Baird Whitehead.......................... 71,313 11/ 14/ 15/ 16/ *
James M. Trimble............................ 78,012 12/ 14/ 15/ 16/ *
Gerald F. Reiger ........................... 25,300 13/ 14/ 15/ 16/ *
All directors and executive officers as a
group (16 individuals)..................... 1,227,335 17/ 5.0%
</TABLE>
- -------------------
* Represents less than 1% of the outstanding Common Stock.
1/ Includes 13,334 shares purchasable upon the exercise of options within
60 days.
2/ Includes 11,667 shares purchasable upon the exercise of options within
60 days.
3/ Includes 15,000 shares purchasable upon the exercise of options within
60 days.
4/ Includes 1,782 shares held by Mr. Cabot's spouse and 55,737 shares held by
various trusts of 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 13,334 shares
purchasable upon the exercise of options within 60 days.
5/ Includes 12,000 shares purchasable upon the exercise of options within
60 days.
6/ Includes 13,334 shares purchasable upon the exercise of options within
60 days.
7/ Includes 13,334 shares purchasable upon the exercise of options within
60 days.
8/ Includes 11,667 shares purchasable upon the exercise of options within
60 days.
9/ Includes 414,334 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 26,667 shares purchasable upon the exercise of options within
60 days.
- 24 -
<PAGE> 28
11/ Includes 1,309 shares held in the Company's Savings Investment Plan as to
which Mr. Whitehead shares voting and investment power and 55,400 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 52,900 shares
purchasable upon the exercise of options within 60 days.
13/ Includes 15,000 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 the shares as to which the restrictions have not
lapsed.
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 25,000, 11,000, 6,000, 6,000, 6,000 shares of restricted stock
granted to Messrs. Siess, Seegmiller, Whitehead, Trimble and Reiger,
respectively on May 5, 1997, the restrictions on which lapse May 5, 2000.
Messrs. Siess, Seegmiller, Whitehead, Trimble and Reiger have no voting or
investment power with respect to these shares during the restrictive
period.
17/ Includes 4,375 shares held in the Company's Savings Investment Plan as to
which the executive officers share voting and investment power and 706,922
shares purchasable by the executive officers and directors upon the
exercise of options within sixty days. Also includes 119,060 shares of
restricted stock granted to the executive officers, the restrictions on
15,097 shares of which have lapsed. See also Notes 1-16 above.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the proxy statement for
the 1999 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 26,
1998.
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.
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. Corporate
Investor Communications, Inc. has been retained to assist the Company in the
solicitation of proxies at a fee estimated not to exceed $6,500, exclusive of
expenses.
- 25 -
<PAGE> 29
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 27, 1998
- 26 -
<PAGE> 30
EXHIBIT A
AMENDED AND RESTATED
1994 LONG-TERM INCENTIVE PLAN
OF
CABOT OIL & GAS CORPORATION
1. Objectives. The Cabot Oil & Gas Corporation 1994 Long-Term Incentive
Plan (the "Plan") is designed to retain key executives and other selected
employees and reward them for making major contributions to the success of Cabot
Oil & Gas Corporation, a Delaware corporation (the "Company"), and its
Subsidiaries (as hereinafter defined). These objectives are to be accomplished
by making awards under the Plan and thereby providing Participants (as
hereinafter defined) with a proprietary interest in the growth and performance
of the Company and its Subsidiaries.
2. Definitions. As used herein, the terms set forth below shall have the
following respective meanings:
"Award" means the grant of any form of stock option, stock appreciation
right, stock award or cash award, whether granted singly, in combination or in
tandem, to a Participant pursuant to any applicable terms, conditions and
limitations as the Committee may establish in order to fulfill the objectives of
the Plan.
"Award Agreement" means a written agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
an Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means such committee of the Board as is designated by the Board
to administer the Plan.
"Common Stock" means the Class A Common Stock, par value $.10 per share, of
the Company.
"Director" means an individual serving as a member of the Board.
"Fair Market Value" means, as of a particular date, (i) if the shares of
Common Stock are listed on a national securities exchange, the average between
the highest and lowest sales price per share of Common Stock on the consolidated
transaction reporting system for the principal such national securities exchange
on that date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported, (ii) if
the shares of Common Stock are not so listed but are quoted in the NASDAQ
National Market System, the average between the highest and lowest sales price
per share of Common Stock on the NASDAQ National Market System on that date, or,
if there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported or (iii) if the Common Stock
is not so listed or quoted, the average between the closing bid and asked price
on that date, or, if there are no quotations available for such date, on the
last preceding date on which such quotations shall be available, as reported by
NASDAQ, or, if not reported by NASDAQ, by the National Quotation Bureau, Inc.
"Participant" means an employee of the Company or any of its Subsidiaries
to whom an Award has been made under this Plan.
<PAGE> 31
"Subsidiary" means any corporation of which the Company directly or
indirectly owns shares representing more than 50% of the voting power of all
classes or series of capital stock of such corporation which have the right to
vote generally on matters submitted to a vote of the stockholders of such
corporation.
3. Eligibility. Employees of the Company and its Subsidiaries are eligible
for an Award under this Plan.
4. Common Stock Available for Awards. There shall be available for Awards
granted wholly or partly in Common Stock (including rights or options which may
be exercised for or settled in Common Stock) during the term of this Plan an
aggregate of 2,500,000 shares of Common Stock of which no more than 750,000
shares will be used for Stock Awards. The Board of Directors and the appropriate
officers of the Company shall from time to time take whatever actions are
necessary to file required documents with governmental authorities and stock
exchanges and transaction reporting systems to make shares of Common Stock
available for issuance pursuant to Awards. Common Stock related to Awards that
are forfeited or terminated, expire unexercised, are settled in cash in lieu of
Stock or in a manner such that all or some of the shares covered by an Award are
not issued to a Participant, or are exchanged for Awards that do not involve
Common Stock, shall immediately become available for Awards hereunder. The
Committee may from time to time adopt and observe such procedures concerning the
counting of shares against the Plan maximum as it may deem appropriate.
5. Administration. This Plan shall be administered by the Committee, which
shall have full and exclusive power to interpret this Plan and to adopt such
rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Award, accelerate the vesting or exercisability of an
Award, eliminate or make less restrictive any restrictions contained in an
Award, waive any restriction or other provision of this Plan or an Award or
otherwise amend or modify an Award in any manner that is either (i) not adverse
to the Participant holding such Award or (ii) consented to by such Participant.
The Committee may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or in any Award in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect. Any decision of
the Committee in the interpretation and administration of this Plan shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned. No member of the Committee or officer of the
Company to whom it has delegated authority in accordance with the provisions of
Paragraph 6 of this Plan shall be liable for anything done or omitted to be done
by him or her, by any member of the Committee or by any officer of the Company
in connection with the performance of any duties under this Plan, except for his
or her own willful misconduct or as expressly provided by statute. The Committee
shall establish the vesting schedule, if any, for each award. It is the intent
of this Plan that any stock option grants will never be repriced or reissued.
6. Delegation of Authority. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties under
this Plan pursuant to such conditions or limitations as the Committee may
establish.
7. Awards. The Committee shall determine the type or types of Awards to be
made to each Participant under this Plan. Each Award made hereunder shall be
embodied in an Award Agreement, which shall contain such terms, conditions,
performance requirements and limitations as shall be determined by the Committee
in its sole discretion and shall be signed by the Participant and by the Chief
Executive Officer, the Chief Operating Officer, or any Vice President of the
Company for and on behalf of the Company. Awards may consist of those listed in
this Paragraph 7 and may be granted singly, in combination or in tandem. Awards
may also be made in combination or in tandem with, in replacement of, or as
alternatives to, grants or rights under this Plan or any other employee plan of
the Company or any of its Subsidiaries, including the plan of any acquired
entity. An Award may provide for the granting or issuance of additional,
replacement or alternative Awards upon the occurrence of specified events,
including the exercise of the original Award. Notwithstanding anything herein to
the contrary, no Participant may be granted, during any calendar year, Awards
consisting of stock options or stock appreciation rights on more than 500,000
shares of Common Stock.
A-2
<PAGE> 32
(a) Stock Option. An Award may consist of a right to purchase a specified
number of shares of Common Stock at a specified price that is not less than the
greater of (i) the Fair Market Value of the Common Stock on the date of grant
and (ii) the par value of the Common Stock on the date of grant. A stock option
may be in the form of an incentive stock option ("ISO") which, in addition to
being subject to applicable terms, conditions and limitations established by the
Committee, complies with Section 422 of the Code.
(b) Stock Appreciation Right. An Award may consist of a right to receive a
payment, in cash or Common Stock, equal to the excess of the Fair Market Value
or other specified valuation of a specified number of shares of Common Stock on
the date the stock appreciation right ("SAR") is exercised over a specified
strike price as set forth in the applicable Award Agreement.
(c) Stock Award. An Award may consist of Common Stock or may be denominated
in units of Common Stock. All or part of any stock award may be subject to
conditions established by the Committee, and set forth in the Award Agreement,
which may include, but are not limited to, continuous service with the Company
and its Subsidiaries, achievement of specific business objectives, increases in
specified indices, attaining specified growth rates and other comparable
measurements of performance. Such Awards may be based on Fair Market Value or
other specified valuations. The certificates evidencing shares of Common Stock
issued in connection with a stock award shall contain appropriate legends and
restrictions describing the terms and conditions of the restrictions applicable
thereto.
(d) Cash Award. An Award may be denominated in cash with the amount of the
eventual payment subject to future service and such other restrictions and
conditions as may be established by the Committee, and set forth in the Award
Agreement, including, but not limited to, continuous service with the Company
and its Subsidiaries, achievement of specific business objectives, increases in
specified indices, attaining specified growth rates and other comparable
measurements of performance.
8. Payment of Awards.
(a) General. Payment of Awards may be made in the form of cash or Common
Stock or combinations thereof and may include such restrictions as the Committee
shall determine, including in the case of Common Stock, restrictions on transfer
and forfeiture provisions. As used herein, "Restricted Stock" means Common Stock
that is restricted or subject to forfeiture provisions.
(b) Deferral. With the approval of the Committee, payments may be deferred,
either in the form of installments or a future lump sum payment. The Committee
may permit selected Participants to elect to defer payments of some or all types
of Awards in accordance with procedures established by the Committee. Any
deferred payment, whether elected by the Participant or specified by the Award
Agreement or by the Committee, may be forfeited if and to the extent that the
Award Agreement so provides.
(c) Dividends and Interest. Dividends or dividend equivalent rights may be
extended to and made part of any Award denominated in Common Stock or units of
Common Stock, subject to such terms, conditions and restrictions as the
Committee may establish. The Committee may also establish rules and procedures
for the crediting of interest on deferred cash payments and dividend equivalents
for deferred payment denominated in Common Stock or units of Common Stock.
(d) Substitution of Awards. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another Award
or Awards of the same or different type.
A-3
<PAGE> 33
9. Stock Option Exercise. The price at which shares of Common Stock may be
purchased under a stock option shall be paid in full at the time of exercise in
cash or, if permitted by the Committee, by means of tendering Common Stock or
surrendering another Award, including Restricted Stock, valued at Fair Market
Value on the date of exercise, or any combination thereof. The Committee shall
determine acceptable methods for tendering Common Stock or other Awards to
exercise a stock option as it deems appropriate. If permitted by the Committee,
payment may be made by successive exercises by the Participant. The Committee
may provide for loans from the Company to permit the exercise or purchase of
Awards and may provide for procedures to permit the exercise or purchase of
Awards by use of the proceeds to be received from the sale of Common Stock
issuable pursuant to an Award. Unless otherwise provided in the applicable Award
Agreement, in the event shares of Restricted Stock are tendered as consideration
for the exercise of a stock option, a number of the shares issued upon the
exercise of the stock option, equal to the number of shares of Restricted Stock
used as consideration therefor, shall be subject to the same restrictions as the
Restricted Stock so submitted as well as any additional restrictions that may be
imposed by the Committee.
10. Tax Withholding. The Company shall have the right to deduct applicable
taxes from any Award payment and withhold, at the time of delivery or vesting of
cash or shares of Common Stock under this Plan, an appropriate amount of cash or
number of shares of Common Stock or a combination thereof for payment of taxes
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes. The
Committee may also permit withholding to be satisfied by the transfer to the
Company of shares of Common Stock theretofore owned by the holder of the Award
with respect to which withholding is required. If shares of Common Stock are
used to satisfy tax withholding, such shares shall be valued based on the Fair
Market Value when the tax withholding is required to be made.
11. Amendment, Modification, Suspension or Termination. The Board may
amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law except that (i) no amendment or alteration that would impair the rights
of any Participant under any Award previously granted to such Participant shall
be made without such Participant's consent and (ii) no amendment or alteration
shall be effective prior to approval by the Company's stockholders to the extent
such approval is then required by applicable legal requirements.
12. Termination of Employment. Upon the termination of employment by a
Participant, any unexercised, deferred or unpaid Awards shall be treated as
provided in the specific Award Agreement evidencing the Award. In the event of
such a termination, the Committee may, in its discretion, provide for the
extension of the exercisability of an Award, accelerate the vesting or
exercisability of an Award, eliminate or make less restrictive any restrictions
contained in an Award, waive any restriction or other provision of this Plan or
an Award or otherwise amend or modify the Award in any manner that is either (i)
not adverse to such Participant or (ii) consented to by such Participant.
13. Assignability. Unless otherwise determined by the Committee and
provided in the Award Agreement, no Award or any other benefit under this Plan
constituting a derivative security within the meaning of Rule 16a-1(c) under the
Exchange Act shall be assignable or otherwise transferable except by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. The Committee may prescribe and include
in applicable Award Agreements other restrictions on transfer. Any attempted
assignment of an Award or any other benefit under this Plan in violation of this
Paragraph 13 shall be null and void.
A-4
<PAGE> 34
14. Adjustments.
(a) The existence of outstanding Awards shall not affect in any manner the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to the
Common Stock) or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding shares
of Common Stock or declaration of a dividend payable in shares of Common Stock
or capital reorganization or reclassification or other transaction involving an
increase or reduction in the number of outstanding shares of Common Stock, the
Committee may adjust proportionally (i) the number of shares of Common Stock
reserved under this Plan and covered by outstanding Awards denominated in Common
Stock or units of Common Stock; (ii) the exercise or other price in respect of
such Awards; and (iii) the appropriate Fair Market Value and other price
determinations for such Awards. In the event of any consolidation or merger of
the Company with another corporation or entity or the adoption by the Company of
a plan of exchange affecting the Common Stock or any distribution to holders of
Common Stock of securities or property (other than normal cash dividends or
dividends payable in Common Stock), the Committee shall make such adjustments or
other provisions as it may deem equitable, including adjustments to avoid
fractional shares, to give proper effect to such event. In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Committee shall be authorized to issue or
assume stock options, regardless of whether in a transaction to which Section
424(a) of the Code applies, by means of substitution of new options for
previously issued options or an assumption of previously issued options, or to
make provision for the acceleration of the exercisability of, or lapse of
restrictions with respect to, Awards and the termination of unexercised options
in connection with such transaction.
15. Restrictions. No Common Stock or other form of payment shall be issued
with respect to any Award unless the Company shall be satisfied based on the
advice of its counsel that such issuance will be in compliance with applicable
federal and state securities laws. Certificates evidencing shares of Common
Stock delivered under this Plan may be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any securities exchange or transaction reporting system upon which the Common
Stock is then listed and any applicable federal and state securities law. The
Committee may cause a legend or legends to be placed upon any such certificates
to make appropriate reference to such restrictions.
16. Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock
or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Participants who are entitled to cash, Common
Stock or rights thereto under this Plan, any such accounts shall be used merely
as a bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation, nor
shall the Company nor the Board nor the Committee be deemed to be a trustee of
any cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to a
grant of cash, Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and any
Award Agreement, and no such liability or obligation of the Company shall be
deemed to be secured by any pledge or other encumbrance on any property of the
Company. Neither the Company nor the Board nor the Committee shall be required
to give any security or bond for the performance of any obligation that may be
created by this Plan.
17. Governing Law. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities laws of the United States, shall be governed by and
construed in accordance with the laws of the State of Delaware.
A-5
<PAGE> 35
18. Effective Date of Plan. This amended and restated Plan shall be
effective as of the date (the "Effective Date") it is approved by the Board of
Directors of the Company. Notwithstanding the foregoing, the adoption of this
Plan is expressly conditioned upon the approval by the holders of a majority of
shares of Common Stock present, or represented, and entitled to vote at a
meeting of the Company's stockholders held on or before December 31, 1998. If
the stockholders of the Company should fail to approve this amended and restated
Plan prior to such date, this amended and restated Plan shall revert to the
provisions of the prior Plan and all grants of Awards hereunder in excess of the
Plan limitations shall be null and void.
A-6
<PAGE> 36
EXHIBIT B
AMENDED AND RESTATED
1994 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
OF
CABOT OIL & GAS CORPORATION
1. Purpose of the Plan. This Nonemployee Director Stock Option Plan (the
"Plan") is intended as an incentive to retain and attract persons of training,
experience and ability to serve as independent directors on the Board of
Directors of Cabot Oil & Corporation, a Delaware corporation (the "Company"), to
encourage the sense of proprietorship of such persons and to stimulate the
active interest of such persons in the development and financial success of the
Company. It is further intended that the options granted pursuant to this Plan
(the "Options") will be nonqualified options within the meaning of Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. Stockholder Approval. All Options granted pursuant to this Plan are
subject to, and may not be exercised before, the approval of this Plan by the
affirmative vote of the holders of a majority of the outstanding shares of the
Class A Common Stock, par value $.10 per share (the "Common Stock"), of the
Company that are present, or represented, and entitled to vote at a meeting of
the Company's stockholders.
3. Designation of Participants; Automatic Grant of Options. Each director
of the Company who is not an employee of the Company or any Subsidiary (as
hereinafter defined) of the Company (any such director being hereinafter
referred to as a "Nonemployee Director") shall be granted Options as described
hereunder. Each individual who becomes a Nonemployee Director after the
Effective Date shall automatically be granted Options to purchase 10,000 shares
of Common Stock (subject to adjustment as provided in Paragraph 10) on the date
such person first becomes a Nonemployee Director. Furthermore, at each annual
meeting of stockholders (other than when the director's status as such
terminates at such meeting), each Nonemployee Director shall automatically be
granted Options to purchase an additional 5,000 shares of Common Stock (subject
to adjustment as provided in Paragraph 10) on such date. Notwithstanding the
foregoing, in the case of any grant of Options made on a date subsequent to the
Effective Date, such grant shall only be made if the number of shares subject to
future grant under this Plan is sufficient to make all automatic grants required
to be made pursuant to this Plan on such date of grant. As used herein, the term
"Subsidiary" of the Company shall mean any corporation of which the Company
directly or indirectly owns shares representing more than 50% of the voting
power of all classes or series of capital stock of such corporation which have
the right to vote generally on matters submitted to a vote of the stockholders
of such corporation.
4. Option Agreement. Each Option granted hereunder shall be embodied in a
written option agreement ("Option Agreement"), which shall be subject to the
terms and conditions set forth herein and shall be signed by the Optionee and by
the Chief Executive Officer, the Chief Operating Officer, or any Vice President
of the Company for and on behalf of the Company.
5. Common Stock Reserved for the Plan. Subject to adjustment as provided in
Paragraph 10 hereof, a total of 300,000 shares of Common Stock shall be reserved
for issuance upon the exercise of Options granted pursuant to this Plan. The
shares subject to the Plan shall consist of unissued shares or previously issued
shares reacquired and held by the Company, or any parent or subsidiary of the
Company, in its treasury. The Board of Directors and the appropriate officers of
the Company shall from time to time take whatever actions are necessary to
execute, acknowledge, file and deliver any documents required to be filed with
or delivered to any governmental authority or any stock exchange or transaction
reporting system on which shares of Common Stock are listed or quoted in order
to make shares of Common Stock available for issuance to an Optionee (as
hereinafter defined)
<PAGE> 37
pursuant to this Plan. Common Stock subject to Options that are forfeited or
terminated or expire unexercised in such a manner that all or some of the shares
subject thereto are not issued to an Optionee shall immediately become available
for the granting of Options. As used herein, the term "Optionee" shall mean any
Nonemployee Director to whom Options are granted hereunder.
6. Option Price.
(a) The purchase price of each share of Common Stock that is subject to an
Option granted pursuant to this Plan shall be 100% of the Fair Market Value of
such share of Common Stock on the date the Option is granted.
(b) The Fair Market Value of a share of Common Stock on a particular date
shall be deemed to be (i) if the shares of Common Stock are listed on a national
securities exchange, the average of the highest and lowest sales price per share
of Common Stock on the principal such national securities exchange on that date,
or, if there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (ii) if the shares of
Common Stock are not so listed but are quoted in the NASDAQ National Market
System, the average of the highest and lowest sales price per share of Common
Stock on the NASDAQ National Market System on that date, or, if there shall have
been no such sale so reported on that date, on the last preceding date on which
such a sale was so reported or (iii) if the Common Stock is not so listed or
quoted, the average of the closing bid and asked price on that date, or, if
there are no quotations available for such date, on the last preceding date on
which such quotations shall be available, as reported by NASDAQ, or, if not
reported by NASDAQ, by the National Quotation Bureau, Inc.
7. Option Period. Each Option granted pursuant to this Plan shall terminate
and be of no force and effect with respect to any shares of Common Stock not
purchased by the Optionee upon the earliest to occur of the following: (a) the
expiration of five years following the date upon which the Option is granted;
(b) the expiration of one year following the date upon which the Optionee ceases
to be a Nonemployee Director by reason of death, disability or mandatory
retirement; or (c) the expiration of three months following the date on which
the Optionee ceases to be a Nonemployee Director for any reason other than
death, disability or mandatory retirement.
8. Exercise of Options.
(a) Options granted pursuant to this Plan shall be exercisable, on a
cumulative basis, as follows: (i) with respect to 33 1/3% of the total number of
shares of Common Stock initially subject to any Option, such Option shall be
exercisable on the first anniversary of the date of grant; and (ii) with respect
to the remaining shares of Common Stock subject to any Option, such Option shall
be exercisable with respect to an additional 33 1/3% of the total number of
shares initially subject thereto as of the second and third anniversaries of the
date of the grant.
(b) An Option may be exercised solely by the Optionee during his lifetime
or after his death by the person or persons entitled thereto under his will or
the laws of descent and distribution.
(c) In the event that an Optionee ceases to serve as a Nonemployee Director
for any reason other than death, disability or mandatory retirement, an Option
granted to such Optionee may be exercised only to the extent such Option was
exercisable at the time he ceased to serve in such capacity.
(d) In the event that an Optionee ceases to serve as a Nonemployee Director
by reason of death, disability or mandatory retirement, at a time when an Option
granted hereunder is still in force and unexpired under the terms of Paragraph 7
hereof, each such unmatured Option shall be accelerated. Such acceleration shall
be effective as of the date of death, disability or retirement, as appropriate,
and each Option so accelerated shall be exercisable in full for so long as it is
still in force and unexpired under the terms of Paragraph 7 hereof.
B-2
<PAGE> 38
(e) The purchase price of the shares as to which an Option is exercised
shall be paid in full at the time of the exercise. Such purchase price shall be
payable in cash or by means of tendering theretofore owned Common Stock which
has been held by the Optionee for more than six months, valued at Fair Market
Value on the date of exercise, or any combination thereof. An Optionee may also
exercise an Option by use of the proceeds to be received from the sale of Common
Stock issuable pursuant to the Option. No holder of an Option shall be, or have
any of the rights or privileges of, a stockholder of the Company in respect of
any shares subject to any Option unless and until certificates evidencing such
shares shall have been issued by the Company to such holder.
9. Assignability. No Option shall be assignable or otherwise transferable
except by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. Any attempted
assignment of an Option in violation of this Paragraph 9 shall be null and void.
10. Adjustments.
(a) The existence of outstanding Options shall not affect in any manner the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalization, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to the
Common Stock) or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding shares
of Common Stock or declaration of a dividend payable in shares of Common Stock
or capital reorganization or reclassification or other transaction involving an
increase or reduction in the number of outstanding shares of Common Stock, the
Board of Directors may adjust proportionally (i) the number of shares of Common
Stock reserved under these Options; and (ii) the exercise price of such Options.
In the event of any consolidation or merger of the Company with another
corporation or entity or the adoption by the Company of a plan of exchange
affecting the Common Stock or any distribution to holders of Common Stock of
securities or property (other than normal cash dividends or dividends payable in
Common Stock), the Board of Directors shall make such adjustments or other
provisions as it may deem equitable, including adjustments to avoid fractional
shares, to give proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Board of Directors shall be authorized to issue or assume stock
options, regardless of whether in a transaction to which Section 424(a) of the
Code applies, by means of substitution of new options for previously issued
options or an assumption of previously issued options, or to make provision for
the acceleration of the exercisability of, or lapse of restrictions with respect
to, the termination of unexercised options in connection with such transaction.
(c) An Option shall become fully exercisable upon a Change in Control (as
hereinafter defined) of the Company. For purposes of this Plan, a "Change of
Control" shall be conclusively deemed to have occurred if (and only if) any of
the following events shall have occurred: (a) there shall have occurred an event
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A (or in response to any similar item on any similar schedule or form)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether or not the Company is then subject to such reporting requirement;
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) shall have become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding voting securities without prior approval of at least two-thirds of
the members of the Board of Directors in office immediately prior to such
person's attaining such percentage interest; (c) the Company is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors in office
immediately prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter or (d) during any period of
B-3
<PAGE> 39
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any new director
whose election or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
11. Purchase for Investment. Unless the Options and shares of Common Stock
covered by this Plan have been registered under the Securities Act of 1933, as
amended, each person exercising an Option under this Plan may be required by the
Company to give a representation in writing in form and substance satisfactory
to the Company to the effect that he is acquiring such shares for his own
account for investment and not with a view to, or for sale in connection with,
the distribution of such shares or any part thereof.
12. Taxes. The Company may make such provisions as it may deem appropriate
for the withholding of any taxes that it determines is required in connection
with any Options granted to any Optionee hereunder.
13. Amendments or Termination. The Board of Directors of the Company may
amend, alter or discontinue this Plan, except that (a) no amendment or
alteration that would impair the rights of any Optionee under any Option that he
has been granted shall be made without his consent and (b) no amendment or
alteration shall be effective prior to approval by the Company's stockholders to
the extent such approval is then required.
14. Government Regulations. This Plan, and the granting and exercise of
Options hereunder, and the obligation of the Company to sell and deliver shares
of Common Stock under such Options, shall be subject to all applicable laws,
rules and regulations, and to such approvals on the part of any governmental
agencies or national securities exchanges or transaction reporting systems as
may be required.
15. Governing Law. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities laws of the United States, shall be governed by and
construed in accordance with the laws of the State of Delaware.
16. Effective Date of Plan. This amended and restated Plan shall be
effective as of the date (the "Effective Date") it is approved by the Board of
Directors of the Company. Notwithstanding the foregoing, the adoption of this
amended and restated Plan is expressly conditioned upon the approval by the
holders of a majority of shares of Common Stock present, or represented, and
entitled to vote at a meeting of the Company's stockholders held on or before
December 31, 1998. If the stockholders of the Company should fail so to approve
this amended and restated Plan prior to such date, this amended and restated
Plan shall revert to the provisions of the prior plan and all grants of options
hereunder in excess of The Plan's limitations shall be null and void.
17. Miscellaneous. The granting of any Option shall not impose upon the
Company, the Board of Directors of the Company or any other directors of the
Company any obligation to nominate any Optionee for election as a director and
the right of the stockholders of the Company to remove any person as a director
of the Company shall not be diminished or affected by reason of the fact that an
Option has been granted to such person.
B-4
<PAGE> 40
DETACH HERE
PROXY
CABOT OIL & GAS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned acknowledges receipt of the notice of Annual Meeting
of Stockholders and the Proxy Statement, each dated March 27, 1998, 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 and Gas Corporation at the
Annual Meeting of Stockholders to be held at The Luxury Collection Hotel, in
Houston, Texas, at 10:00 a.m., local time, on May 12, 1998, 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 I, II, III AND IV AND WILL GRANT DISCRETIONARY AUTHORITY PURSUANT TO ITEM
V.
THIS PROXY WILL REVOKE ALL PRIOR PROXIES SIGNED BY YOU.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
<PAGE> 41
DETACH HERE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEMS, I, II, III AND IV.
I. ELECTION OF DIRECTORS (check one box only)
Nominees Robert F. Bailey, John G.L. Cabot, William H. Knoell and C. Wayne Nance
FOR [ ] WITHHELD [ ]
[ ]__________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
II. To approve the amendment and
restatement of the 1994 Long-Term
Incentive Plan and to approve
performance criteria adopted thereunder. [ ] [ ] [ ]
III. To approve the amendment and
restatement of the 1994 Nonemployee
Director Stock Option Plan. [ ] [ ] [ ]
IV. Ratification of the appointment of Coopers
& Lybrand L.L.P. as the Company's
independent certified public accountants. [ ] [ ] [ ]
V. 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.
Signature:___________ Date:_________ Signature:_________________ Date:_______
