SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and
Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ST. MARY LAND & EXPLORATION COMPANY
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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)(4) 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:
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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.
<PAGE>
[ ] 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 Number:
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3) Filing party:
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4) Date filed:
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<PAGE>
April 14, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held in the Forum Room of Norwest Bank, 1740 Broadway, Denver,
Colorado on Wednesday, May 21, 1997 at 3:00 p.m. Mountain Daylight Time.
The matters to be acted upon at the meeting will include the election of
nine Directors and the approval of a Stock Option Plan and a companion Incentive
Stock Option Plan. In addition, reports of the Company's operations and other
matters of interest will be made at the meeting. Shareholders will have an
opportunity to ask questions of general interest.
Please complete and sign the enclosed proxy card and return it promptly in
the accompanying envelope. This will ensure that your shares are represented at
the meeting even if you can not attend. Returning your proxy card to us will not
prevent you from voting in person at the meeting if you are present and wish to
do so.
Thank you for your cooperation in returning your proxy card as promptly as
possible. We hope to see many of you at our meeting in Denver.
Very truly yours,
Thomas E. Congdon
Chairman
<PAGE>
ST. MARY LAND & EXPLORATION COMPANY
1776 Lincoln Street, Suite 1100
Denver, Colorado 80203
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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May 21, 1997
TO ALL SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of St.
Mary Land & Exploration Company will be held in the Forum Room of Norwest Bank,
1740 Broadway, Denver, Colorado on Wednesday, May 21, 1997 at 3:00 p.m. Mountain
Daylight Time. The meeting shall have the following purposes:
1. To elect nine Directors to serve during the ensuing year and until
their successors are elected and qualified;
2. To approve a Stock Option Plan to replace the Company's Stock
Appreciation Rights Plan, and to approve a companion Incentive Stock
Option Plan;
3. To transact any other business which may properly come before the
meeting at the time and place scheduled or, should the meeting be
adjourned, at such time and place as it may be resumed.
Only Stockholders of record at the close of business on April 4, 1997 will
be entitled to vote at this meeting.
Please execute and return the accompanying proxy in the enclosed envelope
as soon as possible. Any Stockholder who signs and returns the accompanying
proxy shall have the power to revoke it at any time before it is exercised.
By Order of the Board of Directors
JOHN P. CONGDON
Secretary
Denver, Colorado
April 14, 1997
<PAGE>
ST. MARY LAND & EXPLORATION COMPANY
1776 Lincoln Street, Suite 1100, Denver, Colorado 80203
(303) 861-8140
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1997
------------------------
The accompanying proxy is solicited by the Board of Directors of St. Mary
Land & Exploration Company (the "Company") for use at the annual meeting of
stockholders (the "Annual Meeting") to be held in the Forum Room of Norwest
Bank, 1740 Broadway, Denver, Colorado on Wednesday, May 21, 1997, at 3:00 p.m.
local time, and at any and all adjournments thereof, for the purposes set forth
in the Notice of Annual Meeting of Stockholders. The Company anticipates that
this Proxy Statement and the accompanying form of proxy will be first sent or
given to stockholders on or about April 14, 1997.
Any stockholder giving such a proxy has the right, at any time before it is
voted, to revoke the proxy by giving written notice to the Secretary of the
Company, by executing a new proxy bearing a later date, or by voting in person
at the Annual Meeting. A proxy, when executed and not revoked, will be voted in
accordance therewith. If no instructions are given, proxies will be voted FOR
management's slate of directors and FOR approval of the Stock Option Plan and
the companion Incentive Stock Option Plan.
All expenses in connection with the solicitation of proxies will be borne
by the Company. The solicitation will be made by mail. The Company will also
supply brokers or persons holding stock in the names of brokers or their
nominees with such number of proxies, proxy material and annual reports as they
may require for mailing to beneficial owners and will reimburse them for their
reasonable expenses incurred in connection therewith. Certain directors,
officers and employees of the Company not specifically employed for that purpose
may, without additional compensation, solicit proxies by mail, telephone,
facsimile transmission, telegraph or personal interview.
UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF
ITS ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES
THERETO, FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 TO EACH RECORD OR
BENEFICIAL OWNER OF ITS COMMON STOCK ON THE RECORD DATE. THERE WILL BE A
REASONABLE CHARGE FOR COPIES OF THE EXHIBITS TO THE REPORT, LIMITED TO THE
COMPANY'S REASONABLE EXPENSES IN FURNISHING THE EXHIBIT. SUCH REQUESTS SHOULD BE
DIRECTED TO THE COMPANY AT 1776 LINCOLN STREET, SUITE 1100, DENVER, COLORADO
80203, ATTENTION: ADELE LINNEMAN.
VOTING SECURITIES
The close of business on Friday, April 4, 1997 has been fixed by the Board
of Directors of the Company as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. On that
date, the Company had outstanding 10,942,759 shares of common stock, all of
which are entitled to vote on the matters to come before the Annual Meeting.
<PAGE>
Each outstanding share of common stock entitles the holder to one vote. The
presence in person or by proxy of one-third of the outstanding shares of common
stock is necessary to constitute a quorum at the meeting, but if a quorum should
not be present, the meeting may be adjourned from time to time until a quorum is
obtained. If a quorum is present, the affirmative vote of a majority of shares
represented in person or by proxy will be required to approve the matters upon
which the stockholders are to vote. Accordingly, any shares present but not
voted shall have the same effect as shares voted against approval.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows beneficial ownership of shares of the Company's
outstanding common stock as of the record date (i) by all persons, insofar as is
known to the Company, owning more than 5% of such stock and (ii) by each
director, each of the executive officers, and all directors and executive
officers as a group.
Name and Position Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership Owned
------------------- -------------------- -----
Stockholders Owning More Than 5%
Greenhouse Associates (1) 644,731 5.9
Heartland Advisors, Inc. (2) 558,900 5.1
Directors and Executive Officers
Larry W. Bickle 3,600 *
Director
David C. Dudley (3)(4) 85,623 .8
Director
Richard C. Kraus 1,600 *
Director
R. James Nicholson (4)(5) 13,121 .1
Director
Arend J. Sandbulte (4) 9,528 *
Director
John M. Seidl 4,300 *
Director
Thomas E. Congdon (6)(7) 92,386 .8
Chairman and Director
Mark A. Hellerstein (8) 44,048 .4
President, Chief Executive
Officer and Director
Ronald D. Boone (8) 43,985 .4
Executive Vice President and
Chief Operating Officer
Ralph H. Smith (9) 4,942 *
Senior Vice President -
Mid-Continent
David L. Henry - -
Vice President and Chief
Financial Officer
John P. Congdon (10)(11) 503,643 4.6
Vice President, General
Counsel and Secretary
All Executive Officers and Directors 806,776 7.4
as a Group (12 persons) (12)
_____________
* Ownership is less than 0.1 percent.
(1) The address of Greenhouse Associates is Dudley & Company, 444 Madison
Avenue, 34th Floor, New York, New York 10022. Greenhouse Associates is
a Dudley family general partnership, the partners of which include
David C. Dudley.
(2) The address of Heartland Advisors, Inc. is 790 North Milwaukee Street,
Milwaukee, Wisconsin 53202.
(3) Includes 64,473 shares which represents 10% of the total number of
shares of Common Stock owned by Greenhouse Associates, in which Mr.
Dudley is a 10% general partner.
(4) Includes 2,345 shares underlying presently exercisable stock options.
(5) Held by the defined benefit plan of a corporate affiliate as to which
Mr. Nicholson has voting and investment power.
(6) Includes 18,205 shares held of record by the spouse of Thomas E.
Congdon as to which he may be deemed to be the beneficial owner.
(7) Includes 23,454 shares underlying presently exercisable stock options.
(8) Includes 41,379 shares underlying presently exercisable stock options.
2
<PAGE>
(9) Includes 1,942 shares held of record by the spouse of Ralph H. Smith
as to which he may be deemed to be the beneficial owner.
(10) Includes 487,833 shares held by two trusts as to which Mr. Congdon is
trustee with voting and investment power.
(11) Includes 10,695 shares underlying presently exercisable stock options.
(12) Includes 123,942 shares underlying presently exercisable stock
options.
BOARD OF DIRECTORS AND COMMITTEES
All directors of the Company are elected annually. At this meeting, nine
directors are to be elected to serve for one year or until their successors are
elected and qualified. The Company's nominees for these directorships are
identified below, all of whom are currently serving in that capacity.
The proxies will be voted for such persons as the Company shall determine
unless a contrary specification is made in the proxy. All nominees have
indicated their willingness to serve as directors of the Company. However, if
any nominee is unable or should decline to serve as a director, it is the
intention of the persons named in the proxy to vote for such other person as
they in their discretion shall determine.
The Board of Directors, acting as a Nominating Committee of the Whole,
selects director nominees and will consider suggestions by stockholders for
names of possible future nominees delivered in writing to the Secretary of the
Company on or before November 1 in any year. The Board performed its Nominating
Committee functions during the course of regular meetings of the full Board of
Directors in late 1996 and early 1997. The Board has a Compensation Committee
whose primary function is to oversee the administration of the Company's
employee benefit plans and to establish the Company's compensation policies. The
Compensation Committee recommends to the Board the compensation arrangements for
senior management and directors, adoption of compensation plans in which
officers and directors are eligible to participate, and the granting of stock
options or other benefits under compensation plans. See "Report of Compensation
Committee" contained herein. This committee, comprised of Richard C. Kraus,
Chairman, R. James Nicholson and Arend J. Sandbulte, met twice during 1996. All
members of the committee attended each meeting. The Board also has an Audit
Committee to assist the Board in fulfilling its responsibilities for financial
reporting by the Company. The Audit Committee recommends the engagement and
discharge of independent auditors, directs and supervises special investigations
when necessary, reviews with independent auditors the audit plan and the results
of the audit, reviews the independence of the independent auditors, considers
the range of audit fees, and reviews the scope and results of the Company's
procedures for internal auditing and the adequacy of its system of internal
accounting controls. Members of the audit committee are John M. Seidl, Chairman,
Larry W. Bickle and Richard C. Kraus. The audit committee met twice during 1996
to review the audit plan and the results of the audit and to plan and recommend
auditors for the next audit. All members of the audit committee attended each
meeting.
During 1996, the full Board of Directors met six times. No director
attended less than 75% of the total of Board and committee meetings held during
the Director's tenure on the Board and its committees.
3
<PAGE>
Nominees
The following information regarding the nominees is provided in conjunction
with their nomination for re-election.
<TABLE>
<CAPTION>
Age at Director
Directors/Occupation and Background April 14, 1997 Since
----------------------------------- -------------- -----
<S> <C> <C>
Thomas E. Congdon. Mr. Congdon has served the Company 70 1966
as an officer and director since 1966, including service as
its President and Chief Executive Officer for more than 25
years. Mr. Congdon is also a director, officer or general
partner of a number of family corporations and partnerships
which produce scientific and statistical software, iron ore
and agricultural products, manage marketable securities and
own and operate developed real estate. From 1980 to 1991, he
was Chairman of the Board of Directors of CoCa Mines Inc.,
which was an affiliate of the Company during that time. From
1974 to 1994, he was a director of Colorado National
Bankshares Inc., a bank holding company.
Mark A. Hellerstein. Mr. Hellerstein joined the 44 1992
Company in September 1991 and served as Executive Vice
President and Chief Financial Officer until May 1992, at
which time he was elected President and a director of the
Company. Mr. Hellerstein was elected Chief Executive Officer
of the Company in May 1995. He also has served as Chairman
of the Board of Summo Minerals since 1995. From 1987 through
August 1991 (excluding October 1989 to May 1990), he served
as Vice President-Finance, Chief Financial Officer and
Secretary for CoCa Mines Inc.
Ronald D. Boone. Mr. Boone has served the Company as 49 1996
Executive Vice President since 1990, as Chief Operating
Officer since 1992 and as a director of the Company since
1996. From 1981 to 1990, he was employed in various
capacities by Anderman/Smith Operating Company, an affiliate
of the Company during that period, most recently as Vice
President-Production and Engineering.
Larry W. Bickle. Mr. Bickle has served as a director 51 1995
of the Company since 1995. He currently is Chairman and
Chief Executive Officer of TPC Corporation, a public gas
storage and transportation company he co-founded in 1984.
4
<PAGE>
David C. Dudley. Mr. Dudley has served as a director of 46 1986
the Company since 1986. Since 1983, he has served as
Operating Manager of Dudley & Associates, LLC, Denver,
Colorado, a closely-held oil and gas exploration and
production firm. Since 1985, he has served as general
partner of the New York investment advisory firm Dudley &
Company. In addition, since 1980 Mr. Dudley has served as a
general partner of Greenhouse Associates, a closely-held
investment partnership.
Richard C. Kraus. Mr. Kraus has served as a director of 50 1994
the Company since 1994. Since 1981, he has been employed by
Echo Bay Mines Ltd., a public company engaged primarily in
mining operations, and currently serves as its President and
Chief Executive Officer. In addition, he has been an Echo
Bay director since 1992.
R. James Nicholson. Mr. Nicholson has served as a 59 1987
director of the Company since 1987. Since 1978, he has
served as President of Nicholson Enterprises, Inc., a land
development company. Mr. Nicholson has also served as
President of Renaissance Homes, a residential home building
company, since 1988. Since 1974, he has served as a director
of Lerch, Bates & Associates, Inc., a consulting engineering
firm. He was elected Chairman of the Republican National
Committee in January 1997.
Arend J. Sandbulte. Mr. Sandbulte has served as a 63 1989
director of the Company since 1989. From 1964 to 1996, he
was employed by Minnesota Power & Light Company, a
publicly-held energy utility, most recently as its Chairman
of the Board, President and Chief Executive Officer, and
continues as a director of this utility, a position to which
he was first elected in 1983.
John M. Seidl. Mr. Seidl has served as a director of 58 1994
the Company since 1994. He currently serves as President,
Chief Executive Officer and director of CellNet Data
Systems. From 1989 to 1993, he served as an officer and
director of MAXXAM Inc. and Kaiser Aluminum Corporation and
The Pacific Lumber Company, subsidiaries of MAXXAM Inc., a
public company.
</TABLE>
There are no family relationships (first cousin or closer) among the
directors. There are no arrangements or understandings between any director and
any other person pursuant to which that director was or is to be elected.
5
<PAGE>
Director Compensation
Each non-employee director receives 600 shares of the Company's stock per
year for serving as a director and is paid $750 for each meeting attended.
Non-employee directors named to the various committees are paid $600/meeting
attended. Directors are reimbursed for expenses incurred in attending Board and
committee meetings. Members of the Board of Directors also participate in the
Company's Stock Option Plan as described below under Executive Compensation.
EXECUTIVE OFFICERS OF THE COMPANY
The following background information is provided on the Company's executive
officers.
<TABLE>
<CAPTION>
Age at Officer
Name/Position and Background April 14, 1997 Since
- ---------------------------- -------------- -----
<S> <C> <C>
Thomas E. Congdon. Chairman. See "Board of Directors 70 1966
and Committees."
Mark A. Hellerstein. President and Chief Executive 44 1991
Officer. See "Board of Directors and Committees."
Ronald D. Boone. Executive Vice President and Chief 49 1990
Operating Officer. See "Board of Directors and Committees."
Ralph H. Smith. Senior Vice President - Mid-Continent. 54 1995
Mr. Smith has served the Company as Senior Vice President -
Mid-Continent since 1995. From 1982 to 1994, he was
Executive Vice President of Anderman/Smith Operating
Company, an affiliate of the Company during that period. In
addition, he has been a director and President of R.H. Smith
International Corporation since 1989.
David L. Henry. Vice President - Finance and Chief 40 1996
Financial Officer. Mr. Henry joined the Company in 1996 as
Vice President - Finance and Chief Financial Officer. From
1983 to 1996, he was employed in corporate finance
investment banking positions with Boettcher & Company, Inc.,
CharterWest Capital Co. and most recently as
Director-Corporate Finance for Hanifen, Imhoff Inc.
John P. Congdon. Vice President, General Counsel and 56 1986
Secretary. Mr. Congdon has served the Company as Vice
President, General Counsel and Secretary since 1986.
</TABLE>
The executive officers of the Company serve at the pleasure of the Board of
Directors and do not have fixed terms. Executive officers generally are elected
at the regular meeting of the Board immediately following the annual stockholder
meeting. Any officer or agent elected or appointed by the Board of Directors may
be removed by the Board whenever in its judgment the best interests of the
Company will be served thereby without prejudice, however, to contractual
rights, if any, of the person so removed.
6
<PAGE>
There are no family relationships (first cousin or closer) among the
executive officers. There are no arrangements or understandings between any
officer and any other person pursuant to which that officer was elected.
EXECUTIVE COMPENSATION
In addition to salaries, the Company has granted stock options and stock
appreciation rights ("SARs") to certain executive management personnel. These
individuals also participate with other members of management in a net profits
interest bonus plan. All employees are eligible to participate in the Company's
cash bonus plan. These plans are described on pages 9-11 of this proxy.
The following table sets forth the annual and long term compensation
received during each of the Company's last three years by the Chief Executive
Officer of the Company and by the four other highest compensated executive
officers of the Company during 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long Term Compensation
--------------------------
Awards
Annual Compensation --------------------------
----------------------- Restricted All Other
Name and Stock Options/ Compensation
Principal Position Year Salary($) Bonus Awards($) SARs (#) ($) (1)
- ------------------ ---- --------- ----- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Hellerstein 1996 219,167 63,563 - 56,239 (4) 9,500
President and Chief 1995 205,000 32,631 - 7,547 9,240
Executive Officer 1994 183,333 17,767 - 8,602 9,240
Ronald D. Boone 1996 173,333 54,279 - 48,622 (4) 9,500
Executive Vice President 1995 163,333 24,325 - 6,038 9,240
and Chief Operating Officer 1994 153,750 14,183 - 6,882 9,225
Ralph H. Smith (2) 1996 169,333 8,350 - 15,425 (4) 1,740
Senior Vice President- 1995 41,750 350 - - -
Mid-Continent
David L. Henry (3) 1996 85,295 350 - 14,573 (4) -
Vice President-Finance and
Chief Financial Officer
John P. Congdon 1996 108,667 27,140 - 32,550 (4) 6,520
Vice President, General 1995 104,533 13,850 - 3,898 6,160
Counsel and Secretary 1994 97,967 9,607 - 4,099 5,878
</TABLE>
- --------------
(1) Amounts consist of the Company's contribution to the 401(k) Savings
Plan.
(2) Ralph H. Smith became an executive officer October 1, 1995,
compensated at an annual salary of $167,000.
(3) David L. Henry became an executive officer April 29, 1996, compensated
at an annual salary of $125,000.
(4) Includes SARs granted January 1, 1996, options granted effective
November 21, 1996, pursuant to the new Stock Option Plan to cap
appreciation for all SARs at $20.50 per SAR, and options granted on
December 31, 1996 pursuant to the Company's Stock Option Plan. See
breakdown on following table.
7
<PAGE>
Stock options and SARs granted to the Company's five
highest compensated executive officers during 1996 are set forth in the
following two tables.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
Individual Grants
- -------------------------------------------------------------------------------------- Potential Realizable Value
at Assumed Annual Rates of
Percentage of Stock Price Appreciation
Total SARs/ for
Options Granted Option Term
Number of SARs/ to Employees Base Price Expiration ----------------------------
NAME Options Granted in 1996 Per Share Date 5% 10%
---- --------------- ------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Mark A. Hellerstein 7,679 (1) 14.0% $14.00 12/31/00 $ 37,090 $ 57,285
43,987 (2) 20.9% $20.50 12/31/01-05 360,714 847,162
4,573 (3) 12.4% $24.88 12/31/06 71,539 181,294
------
56,239
======
Ronald D. Boone 6,071 (1) 11.0% $14.00 12/31/00 29,323 45,290
38,933 (2) 18.5% $20.50 12/31/01-05 310,677 726,784
3,618 (3) 9.8% $24.88 12/31/06 56,599 143,433
------
48,622
======
Ralph H. Smith 5,964 (1) 10.8% $14.00 12/31/00 28,806 44,491
5,964 (2) 2.8% $20.50 12/31/01-05 67,406 166,025
3,497 (3) 9.5% $24.88 12/31/06 54,706 138,636
------
15,425
======
David L. Henry 6,000 (1) 10.9% $14.00 12/31/00 28,980 44,760
6,000 (2) 2.9% $20.50 12/31/01-05 67,813 167,028
2,573 (3) 7.0% $24.88 12/31/06 40,251 102,005
------
14,573
======
John P. Congdon 3,821 (1) 6.9% $14.00 12/31/00 18,455 28,505
26,478 (2) 12.6% $20.50 12/31/01-05 206,685 482,032
2,251 (3) 6.1% $24.88 12/31/06 35,214 89,239
------
32,550
======
</TABLE>
- ------------
(1) SARs granted January 1, 1996. Appreciation for such SARs was capped at
$20.50 per SAR in connection with the grant of stock options effective
November 21, 1996.
(2) Stock options granted effective November 21, 1996 to cap appreciation
for all previously granted SARs at $20.50 per SAR, pursuant to the
Company's Stock Option Plan as described on page 16 of this proxy
statement, which plan is being submitted to a vote of the shareholders
at the May 21, 1997 meeting. These options were intended to allow the
grantees to realize the same appreciation as would otherwise have been
realized under the SAR Plan.
(3) Stock options granted effective December 31, 1996 pursuant to the
Company's Stock Option Plan as described on page 16 of this proxy
statement, which plan is being submitted to a vote of the shareholders
at the May 21, 1997 meeting.
8
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN 1996 AND DECEMBER 31, 1996 OPTION/SAR VALUE
------------------------------------------------------------------------------
Number of Value of Unexercised
Unexercised Options/SARs In-the-Money
Held at Options/SARs at
Shares December 31, 1996 December 31, 1996 (1)
Acquired Value ---------------------------- -----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Hellerstein (2) - - 41,379 34,488 $879,243 $392,905
Ronald D. Boone (3) - - 41,379 28,479 879,243 330,472
Ralph H. Smith - - - 9,461 - 65,816
David L. Henry - - - 8,573 - 66,210
John P. Congdon - - 10,695 18,034 220,477 209,202
</TABLE>
- --------------
(1) On December 31, 1996, the last reported sales price of the Common
Stock as quoted on the Nasdaq National Market System was $24.875.
(2) On September 1, 1991, the Company granted Mr. Hellerstein an option to
purchase 27,307 shares of the Company's Common Stock at an exercise
price of $3.30 per share. The option expires ten years from the date
of grant.
(3) On November 1, 1990, the Company granted Mr. Boone an option to
purchase 27,307 shares of the Company's Common Stock at an exercise
price of $3.30 per share. The option expires ten years from the date
of grant.
Incentive Compensation Plans
Effective January 1992, the Company adopted the Cash Bonus Plan, the Net
Profits Interest Bonus Plan, and the Stock Appreciation Rights Plan (SAR Plan).
On November 21, 1996 the Company adopted the Stock Option Plan described
beginning on page 16 as a substitute for the SAR Plan, subject to all SARs
previously granted and further subject to the approval of the shareholders as
set forth herein.
Cash Bonus Plan. In January of each year the Board of Directors of the
Company determines whether the Company's performance during the prior year
warrants payment of a cash bonus to employees. If so, the Board designates key
employees to participate in the Cash Bonus Plan and the aggregate amount of
bonuses to be paid to those designated persons, which amount is to be not less
than ten nor more than fifty percent of their aggregate base salaries. The Cash
Bonus Plan participants share in such aggregate amount pro rata to the
performance adjusted base salary of each participant. The performance adjusted
base salary is between zero and one hundred percent of the employee's base
salary for the prior calendar year as determined by his or her supervisor. The
performance adjusted base salary of the Chief Executive Officer of the Company
is determined by the Board of Directors. No participant may receive a pro rata
portion of the aggregate bonus amount in excess of fifty percent of his or her
salary for the prior year and a participant must be employed by St. Mary at the
time the cash bonuses are awarded. The Board of Directors has the unilateral
right to terminate or modify the Cash Bonus Plan.
Net Profits Interest Bonus Plan. Each year the Board of Directors of the
Company designates key employees to participate in the Net Profits Interest
Bonus Plan for the following calendar year. The participants receive a bonus
based on the aggregate net profits earned by the Company's interests in oil and
gas wells completed or acquired during the following year. The total amount of
the bonus pool to be distributed to all participants for such year is ten
percent of net profits after the Company has recovered one hundred percent of
all costs incurred by it with respect to those wells. The bonus pool increases
to twenty percent of aggregate net profits after the Company has recovered two
hundred percent of costs.
9
<PAGE>
Participants in the Net Profits Interest Bonus Plan for a year share in the
net profits bonus pool for the year in proportion to their relative weighted
base salaries during that year. For this purpose, the salaries of the President
and the Executive Vice Presidents of the Company are weighted at one hundred
percent of their base salaries and the salaries of all other participants are
weighted at two-thirds thereof or less.
In the event that the Company engages in a particularly large oil and gas
project during a calendar year, which is defined as a project having a cost of
more than 75 percent of the average annual aggregate costs expended by the
Company for other oil and gas projects during such year and during the preceding
two calendar years, such large project is accounted for as a separate pool and
the ten and twenty percent net profits interests are proportionately reduced to
the extent that this large project exceeds that 75 percent comparison. Moreover,
the costs of the Company to be recovered in determining the net profits of a
large project include interest. Oil and gas projects with aggregate costs
incurred over more than one year are also accounted for as a separate pool if
such costs exceed 10 percent of the Company's average annual expenditures for
acquisition, exploration and development during the initial year and the
preceding two calendar years, exclusive of this project and other similar large
projects.
Mining projects are accounted for as a separate pool. Employees whose
activities primarily relate to oil and gas projects participate in a small share
of a mining project net profits interests and vice versa.
Following the termination of a participant under the Net Profits Interest
Bonus Plan, the Company has the right to purchase his rights in exchange for the
value thereof, determined by the use of assumptions selected by the Board of
Directors as fair and reasonable. The Board of Directors has the right at any
time to terminate or modify prospectively the Net Profits Interest Bonus Plan.
Stock Appreciation Rights Plan. Effective January 1, 1992, the Company
adopted a SAR Plan. Participation in the plan was limited to the directors and
the most senior employees of the Company. The SAR Plan was designed to provide a
participant with the opportunity five years after he was allocated a stock
appreciation right to receive with respect to such right a cash amount equal to
100% of his base salary for the year of grant if the per share value of the
Common Stock during such five-year period increased at an average rate of 25%
per annum. This plan was replaced by a Stock Option Plan on November 21, 1996,
subject to all SARs then granted and further subject to the approval of the
shareholders as set forth herein. As part of this new option plan, the SARs
previously granted were capped at $20.50, the market price on that date, and an
equal number of stock options were granted to replace them with an exercise
price of $20.50 which allows the holders to realize the same appreciation as
would otherwise have been realized under the SAR Plan.
Stock Option Plan. Effective November 21, 1996, and subject to approval by
the shareholders as set forth herein, the Company adopted a Stock Option Plan.
It is currently expected that those persons who will be designated to receive
options under the Plan will be directors and the most senior employees of the
Company. Options are granted at the discretion of the Board. Options are
exercisable five years after grant and expire unless exercised within ten years
of grant.
The Board of Directors of the Company each year determines the participants
in the plans. The right of a participant to an allocated stock option vests 25%
immediately and the balance ratably over a three-year period following the award
of the right so that if such participant terminates his employment prior to
three years after an award, the award will be proportionately reduced. However,
by Board resolution, the options of a participant employed by the Company for no
less than 12 years who retires after reaching age 60 and who does not
subsequently become a full-time employee of a competitor prior to reaching age
65 shall not be subject to any reduction. Non-employee directors currently
receive each year non-tax qualified options for 1,000 shares which vest over a
three-year period in the same manner as for employee participants, except that
the rights of a director who retires after five years of service shall become
fully vested upon retirement. The Board of Directors retains the right to
terminate or modify prospectively the Stock Option Plan at any time.
10
<PAGE>
In addition, the Board of Directors adopted on March 27, 1997 an Incentive
Stock Option Plan ("ISO Plan"), subject to approval by the shareholders as set
forth herein, which is intended to be a companion option plan with the Stock
Option Plan. It is currently intended that the ISO Plan will be an alternative
to the above-described Stock Option Plan for those employees designated by the
Board of Directors to be granted stock options, with such employees electing at
the time of grant whether the options to be granted shall be non-tax qualified
options granted under the above-described Stock Option Plan or incentive stock
options granted under the ISO Plan.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
administers the Company's executive compensation programs. After consideration
of the Committee's recommendations, the full Board of Directors reviews and
approves the salaries of all elected officers, including those of the executive
officers named in the Summary Compensation Table on page 7. The Committee is
responsible for all other elements of executive compensation, including annual
incentive awards, stock options, and the Net Profits Interest Bonus. The
Committee is also responsible for approving the salaries of all employees and
the amount and distribution of payments made under the Cash Bonus Plan. In
addition, the Committee reviews the performance of the Company's pension and
401(k) plans with the trustees of the plans.
The goals of the Company's integrated executive compensation programs
include the following:
1. Attract and retain talented management personnel.
2. Encourage management to obtain superior returns for the Company's
stockholders.
3. Promote preservation of the Company's capital base.
Salaries
In order to emphasize performance-based incentive compensation, base
salaries are targeted to be slightly below the median salary for the industry.
The Committee, with the assistance of management, determines the salary ranges
for various positions based on survey data from the Company's industry peer
group. The Committee then reviews management's recommendations for executive
salaries and the performance summaries on which they are based. Final salary
recommendations are made by the Committee to the full Board based on experience,
sustained performance, and comparison to peers inside and outside the Company.
Incentive Compensation
The Company also has established three compensation plans which have the
potential to increase annual compensation if the economic performance of the
Company and its employees so warrants. These plans, which are described in
detail in the "Incentive Compensation Plan" section of the Proxy Statement, have
certain specific objectives.
1. The Net Profits Interest Plan is designed to reward the personal
contributions made by various management personnel to the Company's financial
success. Plan participants share in the net profits in proportion to their
relative weighted salaries during the year. Recognizing that the primary
incentive for profitable acquisitions and operations needs to be provided to the
most senior of the executive officers, the salaries of the president and the
executive vice president are weighted at 100% and the salaries of all other
participants are weighted at two-thirds of actual base salary or less.
11
<PAGE>
2. The Stock Option Plan is intended to reward executive management of the
Company for long-term increases in the value of the Company's stock. The Stock
Option Plan focuses on appreciation of the market price of the Company's stock
over a five year period. As presently implemented by the Board (and in
conjunction with the SARs as to the options granted on November 21, 1996), if
the average stock appreciation during this period is 25% per year, then the
persons granted stock options at the beginning of the period will, at the end of
five years, have the opportunity to receive an amount equal to 100% of their
base salary at the time the stock option was granted. The options may be
exercised at any time during a five year period beginning five years after the
grant. This Stock Option Plan, which is designed to encourage management's
concern for long-term appreciation of the stockholders' interest, is being
submitted for approval of the shareholders as set forth herein. In addition, the
Board of Directors approved on March 27, 1997 an Incentive Stock Option Plan
("ISO Plan"), subject to approval by the shareholders as set forth herin, which
is intended to be a companion option plan with the Stock Option Plan. It is
currently intended that the ISO Plan will be an alternative to the
above-described Stock Option Plan for those employees designated by the Board of
Directors to be granted stock options, with such employees electing at the time
of grant whether the options to be granted shall be non-tax qualified options
granted under the above-described Stock Option Plan or incentive stock options
granted under the ISO Plan.
3. The Company also has established a Cash Bonus Plan. Each year the Board
of Directors evaluates the overall performance of the Company for the year and
determines the cash bonus to be paid to employees designated with the assistance
of management. The proportional participation of each designee is a function of
his or her performance during the year. As the minimum cash bonus distribution
would equal ten percent of the salaries of designated participants, employees
are motivated to achieve individual excellence even if the business climate
affecting the oil and gas industry is poor.
Conclusion
The Company's executive compensation is linked to individual and corporate
performance and stock price appreciation. Base salaries are set below the median
for the industry so that incentivized compensation can have its intended effect.
The Compensation Committee plans both to continue the policy of linking
executive compensation to individual and corporate performance and returns to
shareholders and to provide a cash bonus incentive to key employees which will
provide performance motivation independent of the ups and downs of the oil and
gas industry's business cycle.
Richard C. Kraus, Chairman
R. James Nicholson
Arend J. Sandbulte
April 4, 1997
RETIREMENT PLANS
Pension Plan
The Company's Pension Plan is a qualified, non-contributory defined benefit
plan which is available to substantially all employees. This Plan was amended in
1994 to conform with the changes required by the Tax Reform Act of 1986 and to
reduce the plan formula. The Company also has a supplemental pension plan for
executive officers to provide for benefits in excess of Internal Revenue Code
limits.
12
<PAGE>
The following table shows the estimated maximum annual benefits payable
upon retirement at age 65 as a straight life annuity to participants in the
Pension Plans for the indicated levels of average annual compensation and years
of service.
Estimated Annual Pension Estimated Annual Pension
Benefits for Executives Benefits for Executives
Hired before 1995 with Hired after 1995 with
greater than greater than
Remuneration 15 years of service 25 years of service
------------ ------------------- -------------------
$100,000 $ 67,454 $ 35,000
125,000 86,704 43,750
150,000 105,954 52,500
175,000 125,204 61,250
200,000 144,454 70,000
250,000 182,954 87,500
The qualified plan provides a benefit after 25 years of service equal to
35% of final average compensation, subject to Internal Revenue Code limits.
Final average compensation is the average of the highest 3 consecutive years of
the 10 years preceding termination of employment. For each named executive
officer, the level of compensation used to determine benefits payable under the
qualified pension plan is such officer's average of the base salaries (excluding
bonus) shown in the Summary Compensation Table.
The supplemental plan provides executives hired prior to 1995, after
completing 15 years of service and reaching age 65, a benefit equal to 40% of
final average compensation plus 37% of final average compensation integrated
with the social security wage base without regard to compensation limitations
provided under the qualified plan less the benefit provided by the qualified
plan. For executives hired after 1994, the supplemental benefit is calculated
using the formula for the qualified plan without the limitation imposed by
Section 415 of the Internal Revenue Code, less the benefit provided by the
qualified plan.
As of December 31, 1996, the named executive officers have the following
years of credited service:
Mark A. Hellerstein 5
Ronald D. Boone 6
Ralph H. Smith 1
David L. Henry 0
John P. Congdon 10
401(k) Plan
The Company's 401(k) Profit Sharing Plan is a defined contribution pension
plan qualified under the Employee Retirement Income Security Act of 1974. The
401(k) Plan allows eligible employees to contribute up to nine percent of their
income on a pre-tax and/or after tax basis through contributions to the Plan.
The Company matches each employee's contributions up to six percent of the
employee's pre-tax income. The Company also may contribute additional funds to
the 401(k) Plan each year in its discretion. Company contributions vest over an
employee's first five years of employment.
13
<PAGE>
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative total
stockholder return on its Common Stock for the period December 16, 1992 (the
date the Common Stock began trading on the Nasdaq National Market System) to
December 31, 1996 with the cumulative total return of the Standard Industrial
Classification Code ("SIC Code") for Crude Petroleum and Natural Gas. The SIC
Code for Crude Petroleum and Natural Gas is 1311. The identities of the
companies included in the index will be provided upon request.
[GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG ST. MARY LAND & EXPLORATION COMPANY,
THE S&P 500 INDEX AND THE SIC CODE INDEX
<TABLE>
<CAPTION>
12/16/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ST. MARY LAND & EXPLORATION COMPANY 100.00 104.55 112.63 123.30 131.87 236.60
SIC CODE INDEX 100.00 100.00 119.15 124.87 137.33 182.60
S&P 500 100.00 100.00 110.08 111.54 153.45 188.69
</TABLE>
- --------------
Assumes $100 invested on December 16, 1992 in St. Mary Land & Exploration
Company, S&P 500 Index and SIC Code Index for Crude Petroleum and Natural
Gas.
*Total return assumes reinvestment of dividends.
EMPLOYMENT AGREEMENT
On September 1, 1991, the Company entered into an employment agreement with
Mr. Hellerstein. His current salary is $227,500 per year. Compensation is
reviewed annually. Mr. Hellerstein participates in the Company's benefit plans
and is entitled to bonuses and incentive compensation as determined by the Board
of Directors and the Chairman of the Company. The agreement is terminable at any
time upon 30 days' notice by either party. Upon termination of the agreement by
the Company for any reason whatsoever (other than death, disability or
misconduct by Mr. Hellerstein), the Company is obligated to continue to pay his
compensation, including insurance benefits, for a period of one year.
The Company also entered into an employment agreement with Mr. Smith
effective October 1, 1995. His current salary is $174,000 per year. Mr. Smith
participates in the Company's benefit plans and is entitled to bonuses and
incentive compensation as determined by the Board of Directors. The agreement
allows Mr. Smith to elect to participate on an annual basis as a working
interest owner in all oil and gas interests acquired by the Company and managed
through the Company's Mid-Continent (Tulsa) office during each year, which
election is in lieu of participation in the Company's Net Profits Interest Bonus
Plan. In addition, the Company administers Mr. Smith's interests at no charge.
This agreement is terminable at any time and without further obligation upon six
months notice by either party.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description of transactions entered into between the
Company and certain of its officers and directors during the last three years.
Other transactions between the Company and its wholly-owned subsidiary St. Mary
Operating Company (formerly Anderman/Smith Operating Company ("Anderman/Smith"))
and some of its key personnel are described in Footnote 10 to the financial
statements contained in the Form 10-K filed by the Company for 1996. Certain of
these transactions will continue in effect and may result in conflicts of
interest between the Company and such individuals. Although these persons may
owe fiduciary duties to the Company and its stockholders, there can be no
assurance that conflicts of interest will always be resolved in favor of the
Company.
R. James Nicholson has served as a director of the Company since 1987. He
is also active in the real estate business. See "Nominees for Election as
Director." Mr. Nicholson owns a 17% interest in a 40-acre parcel subject to a
preferential distribution right in favor of Parish Corporation (a wholly-owned
subsidiary) in the amount of $1,265,000.
Ralph H. Smith was hired as Senior Vice President - Mid-Continent on
October 1, 1995. During the previous 14 years he was a shareholder of
Anderman/Smith and the principal manager of its activities in the Anadarko
Basin. Along with the Company, he acquired a working interest in all of the oil
and gas rights acquired through Anderman/Smith. The Board of Directors has
approved the cost-bearing working interest participation by Mr. Smith, at his
annual election as to participation and amount, of between 2.5% and 10% of all
working interests acquired by the Company each year which are managed from the
Mid-Continent (Tulsa) office. Mr. Smith elected to participate at 5% for 1996
and 7.5% for 1997.
As a result of their prior employment by Anderman/Smith, Ronald D. Boone
and three other Vice Presidents own working interests and royalty interests in
many of the Company's properties, earned as part of two Anderman/Smith employee
benefit programs and from other Anderman/Smith entities in which they
participated. They have no royalty participation in any new Company properties.
Mr. Boone also owns 50% of Princeton Resources Ltd. and 33% interest in
Baron Oil Corporation, entities which manage oil and gas working and royalty
interests which he acquired as a result of his Anderman/Smith employment. While
these corporations are managed by another former Anderman/Smith employee, Mr.
Boone participates in their investment decisions. The Board of Directors has
approved Mr. Boone's involvement in Princeton Resources and Baron Oil.
From time to time, David C. Dudley, a director of the Company, offers the
Company the right to participate in lease acquisition, exploration and
development prospects in which Mr. Dudley's firm has an interest. The Company
currently is not participating in any such prospect.
During 1993 and 1994 the Company and others, having reserved to themselves
the maximum working interest desired by each of them, sought to obtain the
participation of outside parties in the drilling on an exploratory well on the
Patterson Prospect in Louisiana. During 1994, in an effort to obtain the
required amount of outside participation, the Board of Directors approved
participation by any officer, employee or director who wished to acquire a
portion of the available working interest on a promoted basis. Thomas E.
Congdon, Dudley & Associates, LLC and Ronald D. Boone (through Princeton
Resources Ltd.) all participated. A dry well was drilled in early 1995. The
Company and its partners believe that the area remains prospective and will
participate in a 20 square mile 3-D seismic survey in early 1997 to further
delineate this prospect.
15
<PAGE>
The Company's By-Laws provide that no director may pursue a business or
investment opportunity for himself if he has obtained knowledge of such
opportunity through his affiliation with the Company, provided that the Company
is interested in pursuing such opportunity and is financially or otherwise able
to pursue the opportunity. Moreover, no officer or employee of the Company may
pursue for his own account an oil and gas opportunity unless (a) with respect to
an officer of the Company, the interest has been approved by the Board of
Directors and (b) with respect to a non-officer of the Company, such interest of
the employee has been approved by a senior officer of the Company with full
knowledge of such opportunity. These restrictions do not apply to the
acquisition of less than one percent of the publicly traded stock of another
company as long as the Company is not at such time engaged in any present or
pending transaction with the other company.
OTHER MATTERS TO BE VOTED UPON
Stock Option Plan
Effective November 21, 1996, the Board of Directors adopted a Stock Option
Plan (the "Stock Option Plan") which is intended to replace the Company's SAR
Plan adopted in 1992. The purpose of the Stock Option Plan is to enhance
shareholder value by attracting, retaining and motivating key employees,
consultants and members of the Board of Directors of the Company and of any
subsidiary of the Company by providing them with a means to acquire a
proprietary interest in the Company's success. All current and former employees,
consultants and members of the Board of Directors of the Company, and of any
subsidiary of the Company are eligible to participate in the Stock Option Plan.
As of December 31, 1996, 27 persons had been designated by the Board of
Directors to participate in the Stock Option Plan.
The total number of shares of Common Stock of the Company which may be
granted under the Stock Option Plan is 700,000. However, to the extent that
options are granted under any incentive stock option plan adopted by the
Company, the shares of Common Stock that may be granted under the Stock Option
Plan are reduced. At the discretion of the Board of Directors the Stock Option
Plan may be administered by a Committee of two or more non-employee Directors
appointed by the Board. Optionees under the Stock Option Plan shall be selected
at the discretion of the Board or such Committee from among those eligible
participants who, in the opinion of the Board or such Committee, are or were in
a position to contribute materially to the Company's continued growth and
development and to its long-term success. Subject to the provisions of the Stock
Option Plan, the Board or such Committee shall have complete discretion in
determining the terms and conditions and number of Options granted under the
Stock Option Plan.
Options granted under the Stock Option Plan are to be exercisable at the
market price of the Company's Common Stock on the date of grant, are to have a
term not to exceed ten years and may not be exercised prior to five years
following the date of grant. Options under the Stock Option Plan will fully vest
(i) just prior to the completion of any acquisition of the Company or (ii) upon
termination of the optionee's employment with the Company due to death,
disability or normal retirement. Unexercised options will terminate (i) upon
completion of any acquisition of the Company or (ii) upon termination of the
optionee's employment with the Company for cause. Nothing contained in the Stock
Option Plan shall be construed to give any employee or consultant any right to
continued employment or association with the Company.
Each option under the Stock Option Plan shall be evidenced by a written
option agreement that specifies the exercise price, the duration of the option,
the number of shares of stock to which the option applies, and such vesting or
exercisability restrictions and other terms and conditions which the Board or
Committee may impose.
The principal federal income tax consequences of the grant and exercise of
options under the Stock Option Plan are, in general, as follows:
16
<PAGE>
1. Options granted under the Stock Option Plan are not intended to qualify
as "incentive stock options" under the Internal Revenue Code.
2. Upon the grant of an option under the Stock Option Plan, the optionee
will have no taxable income and the Company will have no tax deduction.
3. Upon exercise of an option under the Stock Option Plan, the optionee
will realize ordinary taxable income in an amount equal to the excess of the
fair market value of the underlying shares of Common Stock at the time the
option is exercised over the exercise price of the option for such shares.
4. The amount of income recognized by the optionee will be deductible by
the Company as compensation in the year in which ordinary income is recognized
by the optionee by reason of exercise of options under the Stock Option Plan.
5. An optionee's basis for the shares of Common Stock acquired pursuant to
the exercise of options under the Stock Option Plan will be the option exercise
price plus any amount recognized as ordinary income by reason of the exercise of
the options.
6. Upon the sale of the Common Stock acquired pursuant to the exercise of
options under the Stock Option Plan, capital gain or loss will be realized by
the optionee in the amount by which the sales price is greater or less than the
basis of such stock. Such gain or loss will be long-term or short-term depending
on whether the shares were held for more than one year after the option was
exercised.
7. Exercise of an option by exchanging previously acquired shares of the
Company's Common Stock will not result in taxable gain or loss on the exchanged
shares, but the optionee's tax basis for an equal number of acquired shares will
be the same as the optionee's tax basis for the exchanged shares. The remaining
acquired shares will have an original tax basis equal to the sum of the amount
paid in cash, if any, plus any amount which the optionee is required to
recognize as income as a result of the exercise of the option.
Effective November 21, 1996, the Board of Directors authorized the grant of
256,598 options under the Stock Option Plan which are exercisable at $20.50 per
share, the fair market value of the underlying Common Stock on the date of
grant, in connection with the termination of future awards or appreciation under
the Company's SAR plan. The various vesting and exercisability provisions of
such options correspond to such provisions of the SARs applicable to the
respective optionees. Further, the options expire in various increments during
the period from December 31, 2001 through December 31, 2005 in a manner
corresponding to the SARs applicable to the respective optionees.
Effective December 31, 1996, the Board of Directors authorized the grant of
42,880 options under the Stock Option Plan which are exercisable, to the extent
vested, beginning five years after the date of grant at $24.875 per share, the
fair market value of the underlying Common Stock on the date of grant, which
vest twenty-five percent on the date of grant and an additional twenty-five
percent upon the completion of each of the following three years of employment
with the Company, and which expire December 31, 2006.
17
<PAGE>
The following table sets forth certain information with respect to the
benefits received pursuant to the options granted effective November 21, 1996
and December 31, 1996:
NEW PLAN BENEFITS
Number of
Name and Position Dollar Value Options
----------------- ------------ -------
Mark A. Hellerstein (1) 48,560
President and Chief
Executive Officer
Ronald D. Boone (1) 42,551
Executive Vice President
and Chief Operating
Officer
Ralph H. Smith (1) 9,461
Senior Vice President-
Mid-Continent
David. L. Henry (1) 8,573
Vice President-Finance and
Chief Financial Officer
John P. Congdon (1) 28,729
Vice President, General
Counsel and Secretary
Executive Group (1) 182,564
Non-Executive Director
Group (1) 33,445
Non-Executive Officer
Employee Group (1) 59,213
- ------------
(1) Options have an exercise price equal to the fair market value of the
Company's Common Stock on the grant date of the options. The actual
value an optionee may realize will depend on the excess of the stock
price over the exercise price on the date vested options are
exercised.
18
<PAGE>
The following table sets forth certain additional information regarding the
options granted:
<TABLE>
<CAPTION>
Aggregate Consideration
Number of Shares Number of Shares Market Value of Received or to
of $.01 Par Value of $.01 Par Value Common Stock be Received by
Common Stock Common Stock Underlying the Company for
Name and Position Covered by Options Covered by Options Options(1) Granting Option
- ----------------- ------------------ ------------------ ----------- ---------------
(Effective Nov. 21, 1996) (Effective Dec. 31, 1996)
<S> <C> <C> <C> <C>
Thomas E. Congdon 43,082 (2) 1,608 $1,122,836 -0-
Chairman
Mark A. Hellerstein 43,987 (2) 4,573 1,220,070 -0-
President & Chief
Executive Officer
Ronald D. Boone 38,933 (2) 3,618 1,069,094 -0-
Executive Vice President &
Chief Operating Officer
Ralph H. Smith 5,964 3,497 237,708 -0-
Senior Vice President-
Mid-Continent
David L. Henry 6,000 2,573 215,397 -0-
Vice President-Finance &
Chief Financial Officer
John P. Congdon 26,478 (2) 2,251 721,816 -0-
Vice President, General
Counsel & Secretary
Executive Group 164,444 18,120 4,586,921 -0-
Non-Executive Director 27,445 6,000 840,306 -0-
Group
Mike Barber 4,107 2,395 (2) 163,363 -0-
Vice President
Richard C. Norris 24,739 (2) 2,127 675,008 -0-
Vice President & Treasurer
Julian Pope 4,107 2,395 (2) 163,363 -0-
Vice President
Kevin Willson 4,107 2,395 (2) 163,363 -0-
Vice President
Non-Executive Officer 3,393 9,448 322,630 -0-
Employee Group (3)
</TABLE>
- --------------
(1) The market value per share as of March 21, 1997, the latest
practicable date prior to the filing of this Proxy Statement with the
Securities and Exchange Commission, was $25.125. Options have an
exercise price equal to the fair market value of the Company's Common
Stock on the grant date of the options. The actual value an optionee
may realize will depend on the excess of the stock price over the
exercise price on the date vested options are exercised.
(2) Received five percent or more of the options granted.
(3) Excludes Messrs. Barber, Norris, Pope and Willson.
19
<PAGE>
Since the Board of Directors believes that the Plan will attract, retain
and motivate key employees, consultants and members of the Board of Directors of
the Company and of any subsidiary of the Company by providing them with a means
to acquire a proprietary interest in the Company's success, the Board of
Directors recommends that the Shareholders vote FOR the approval of the Plan.
Incentive Stock Option Plan
On March 27, 1997, the Board of Directors adopted an Incentive Stock Option
Plan (the "ISO Plan") which is intended to be a companion option plan with the
Stock Option Plan adopted effective November 21, 1996. It is currently intended
that the ISO Plan will be an alternative to the above-described Stock Option
Plan for those employees designated by the Board of Directors to be granted
stock options, with such employees electing at the time of grant whether the
options to be granted shall be options granted under the above-described Stock
Option Plan or incentive stock options granted under the ISO Plan. The purpose
of the ISO Plan is to enhance shareholder value by attracting, retaining and
motivating key employees of the Company and of any subsidiary of the Company by
providing them with a means to acquire a proprietary interest in the Company's
success. All employees of the Company or any subsidiary corporation are eligible
to participate in the ISO Plan. It is currently anticipated that approximately
15 employees will be designated in 1997 as prospective participants in the ISO
Plan.
The total number of shares of Common Stock of the Company which may be
granted under the ISO Plan is 700,000. However, to the extent that options are
granted under the Stock Option Plan adopted November 21, 1996 by the Company,
the shares of common stock that may be granted under the ISO Plan are reduced.
At the discretion of the Board of Directors the ISO Plan may be administered by
a Committee of two or more non-employee Directors appointed by the Board.
Optionees under the ISO Plan shall be selected at the discretion of the Board or
such Committee from among those eligible participants who, in the opinion of the
Board or such Committee, are in a position to contribute materially to the
Company's continued growth and development and to its long-term success. Subject
to the provisions of the ISO Plan, the Board or such Committee shall have
complete discretion in determining the terms and conditions and number of
options granted under the ISO Plan.
It is intended that options granted under the ISO Plan will constitute
"incentive stock options" under the Internal Revenue Code and thus the ISO Plan
provides that options granted thereunder are to be (i) exercisable at the market
price of Company's Common Stock on the date the options are granted, (ii)
nontransferable by the optionee, and (iii) terminated if not exercised within 3
months of an optionee's termination of employment with the Company (unless
termination of employment is a result of the optionee's death or disability, in
which event the option will terminate if not exercised within one year of the
optionee's termination of employment with the Company). Further, options granted
under the ISO Plan will have a term of no more that ten years (five years in the
case of ten percent or more shareholders). Options under the ISO Plan will fully
vest (i) just prior to the completion of any acquisition of the Company or (ii)
upon termination of the optionee's employment with the Company due to death,
disability or normal retirement. Unexercised options will terminate (i) upon
completion of any acquisition of the Company or (ii) upon termination of the
optionee's employment with the Company for cause. Nothing contained in the ISO
Plan shall be construed to give any employee any right to continued employment
with the Company.
Unless earlier terminated by the Board of Directors, the ISO Plan shall
terminate on the date ten years subsequent to the date of the adoption of the
ISO Plan by the Board, after which date no options may be granted under the ISO
Plan. The Board of Directors may at any time terminate the ISO Plan and from
time to time may amend or modify the ISO Plan, provided, however that no such
action of the Board, without approval of the shareholders, may: (i) increase the
total amount of Common Stock which may be purchased through options granted
under the ISO Plan; or (ii) change the class of employees eligible to receive
options under the ISO Plan.
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Each option under the ISO Plan shall be evidenced by a written option
agreement that specifies the exercise price, the duration of the option, the
number of shares of stock to which the option applies, and such vesting or
exercisability restrictions and other terms and conditions which the Board or
Committee may impose.
The principal federal income tax consequences of the grant and exercise of
options under the ISO Plan are, in general, as follows:
1. Options granted under the ISO Plan are intended to qualify as "incentive
stock options" under the Internal Revenue Code.
2. Upon the grant of an option under the ISO Plan, the optionee will have
no taxable income and the Company will have no tax deduction.
3. The tax consequences upon exercise of the option and later disposition
of the shares of Common Stock acquired thereby depend upon whether the optionee
satisfies the holding period rule whereby the optionee must hold the shares for
more than one year after exercise and two years after the date of grant of the
option.
4. If the optionee satisfies the holding period rule, the optionee will not
realize income upon exercise of the option (although the excess of the fair
market value of the shares on the date of exercise over the option price must be
included as an adjustment in computing alternative minimum taxable income) and
the Company will not be allowed an income tax deduction at any time. The
difference between the option price and the amount realized upon disposition of
the shares by the optionee will constitute a long-term capital gain or loss, as
the case may be.
5. If the optionee fails to observe the holding period rule, the portion of
any gain realized upon such disqualifying disposition of the shares which does
not exceed the excess of the fair market value at the date of exercise over the
option price will be treated as ordinary income to the optionee; the balance of
any gain or any loss will be treated as capital gain or loss (long-term or
short-term depending on whether the shares were held for more than one year
after the option was exercised); and the Company will be entitled to a deduction
equal to the amount of ordinary income upon which the optionee is taxed.
6. Exercise of an incentive stock option by exchanging previously acquired
shares of the Company's Common Stock (other than shares acquired under a
previously exercised incentive stock option with respect to which the holding
period has not been met, the exchange of which would be a disposition with the
result described in the immediately preceding paragraph) will not result in
taxable income to the optionee. Under proposed IRS regulations, the optionee's
basis in shares received equivalent in number to the shares surrendered will be
the same as the basis in the surrendered shares and the basis in the additional
shares obtained by the exercise of the option will be zero. The optionee's
holding period for the shares having the transferred basis will include the
holding period for the shares surrendered; the holding period for the additional
shares obtained by the exercise of the option will commence at the date of
exercise.
No options have been granted under the ISO Plan.
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Since the Board of Directors believes that the ISO Plan will attract,
retain and motivate key employees of the Company and of any subsidiary of the
Company by providing them with a means to acquire a proprietary interest in the
Company's success, the Board of Directors recommends that the Shareholders vote
FOR the approval of the ISO Plan.
Other than the election of Directors and the approval of the Stock Option
Plan and the Companion Incentive Stock Option Plan, the Company is aware of no
matters to be submitted to a vote of the stockholders at the Annual Meeting.
COMPLIANCE WITH SECTION 16(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Based solely on a review of reports filed with the Company, all directors
and executive officers timely filed all reports regarding transactions in the
Company's securities required to be filed during 1996 by Section 16(a) under the
Securities Exchange Act of 1934.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors selected Coopers & Lybrand L.L.P. as the independent
accountants to audit the books, records and accounts of the Company for its 1996
fiscal year. On April 3, 1997, after obtaining the approval of the Audit
Committee and the full Board of Directors, the Company dismissed Coopers &
Lybrand L.L.P. as its independent accountants and thereafter engaged Arthur
Andersen LLP as the independent accountants for 1997.
The reports of Coopers & Lybrand L.L.P. on the Company's financial
statements for the past two years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles. Further, during the two most recent fiscal years and
interim period subsequent to December 31, 1996, there have been no disagreements
with Coopers & Lybrand L.L.P. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure or any
reportable events. The decision to change independent accountants was based on
the Company's effort to obtain what it believes to be more cost-effective
accounting and auditing services.
To the knowledge of management, neither of these accounting firms nor any
of their members has any direct or material indirect financial interests in the
Company nor any connection with the Company in any capacity other than as
independent accountants.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company on or before November 1,
1997 in order to be eligible for inclusion in the Company's proxy statement and
form of proxy. To be so included, a proposal must also comply with all
applicable provisions of Rule 14a-8 under the Securities Exchange Act of 1934.
OTHER MATTERS
Management does not know of any other matters to be brought before the
Annual Meeting. If any other matters not mentioned in this proxy statement are
properly brought before the meeting, the individuals named in the enclosed proxy
intend to vote such proxy in accordance with their best judgment on such
matters.
By Order of the Board of Directors
JOHN P. CONGDON
Secretary
April 14, 1997
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Appendix A
ST. MARY LAND & EXPLORATION COMPANY
STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Establishment. St. Mary Land & Exploration Company, a Delaware
corporation (the "Company"), hereby establishes a stock option plan for key
employees, consultants and members of the Board of Directors of the Company or
of a subsidiary of the Company, providing material services to the Company,
which shall be known as the ST. MARY LAND & EXPLORATION COMPANY STOCK OPTION
PLAN (the "Plan"). The Company shall enter into Option agreements with Optionees
pursuant to the Plan.
1.2 Purpose. The purpose of the Plan is to enhance shareholder value by
attracting, retaining and motivating key employees, consultants and members of
the Board of Directors of the Company and of a subsidiary of the Company by
providing them with a means to acquire a proprietary interest in the Company's
success.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
All current and former employees, consultants and members of the Board of
Directors of the Company (the "Board"), and of any subsidiary of the Company,
are eligible to participate in the Plan and receive Options under the Plan.
Optionees under the Plan shall be selected by the Board, in its sole discretion,
from among those current and former employees, consultants and members of the
Board of the Company, and of any subsidiary of the Company, who, in the opinion
of the Board, are or were in a position to contribute materially to the
Company's continued growth and development and to its long-term success.
ARTICLE III
ADMINISTRATION
Administration. The Board shall be responsible for administering the Plan.
(a) The Board is authorized to interpret the Plan; to prescribe,
amend, and rescind rules and regulations relating to the Plan; to provide
for conditions and assurances deemed necessary or advisable to protect the
interests of the Company with respect to the Plan; and to make all other
determinations necessary or advisable for the administration of the Plan.
Determinations, interpretations, or other actions made or taken by the
Board with respect to the Plan and Options granted under the Plan shall be
final and binding and conclusive for all purposes and upon all persons.
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(b) At the discretion of the Board the Plan may be administered by a
Committee of two or more non-employee Directors appointed by the Board (the
"Committee"). The members of the Committee may be Directors who are
eligible to receive Options under the Plan, but Options may be granted to
such persons only by action of the full Board and not by action of the
Committee. The Committee shall have full power and authority, subject to
the limitations of the Plan and any limitations imposed by the Board, to
construe, interpret and administer the Plan and to make determinations
which shall be final, conclusive and binding upon all persons, including
any persons having any interests in any Options which may be granted under
the Plan, and, by resolution or resolutions to provide for the creation and
issuance of any Option, to fix the terms upon which and the time or times
at or within which, and the price or prices at which any shares may be
purchased from the Company upon the exercise of an Option. Such terms, time
or times and price or prices shall, in every case, be set forth or
incorporated by reference in the instrument or instruments evidencing an
Option, and shall be consistent with the provisions of the Plan.
(c) Where a Committee has been created by the Board pursuant to this
Article III, references in the Plan to actions to be taken by the Board
shall be deemed to refer to the Committee as well, except where limited by
the Plan or by the Board.
(d) No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option granted under it.
ARTICLE IV
STOCK SUBJECT TO THE PLAN
4.1 Number. The total number of shares of common stock of the Company (the
"Stock") hereby made available and reserved for issuance under the Plan upon
exercise of Options shall be 700,000 shares. Notwithstanding anything to the
contrary contained in the foregoing, to the extent that options are issued under
any Incentive Stock Option Plan adopted by the Company, the shares of common
stock reserved for issuance pursuant to Options granted under this Plan shall be
reduced. The aggregate number of shares of Stock available under the Plan shall
be subject to adjustment as provided in Section 4.3.
4.2 Unused Stock. If an Option shall expire or terminate for any reason
without having been exercised in full, or if an "immaculate cashless exercise"
(as described in Section 5.4) results in the issuance of a reduced number of
shares in satisfaction of an option grant, the unpurchased shares of Stock
subject thereto shall (unless the Plan shall have terminated) become available
for other Options under the Plan.
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4.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock of the Company by reason of a stock dividend or
split, recapitalization, reclassification, or other similar capital change, the
aggregate number of shares of Stock set forth in Section 4.1 shall be
appropriately adjusted by the Board, whose determination shall be conclusive. In
any such case, the number and kind of shares of Stock that are subject to any
Option and the Option price per share shall be proportionately and appropriately
adjusted without any change in the aggregate Option price to be paid therefor
upon exercise of the Option.
ARTICLE V
TERMS OF STOCK OPTIONS
5.1 Grant of Options. Subject to Section 4.1, Options may be granted to
current and former employees, consultants and members of the Board of the
Company and of any subsidiary of the Company at any time and from time to time
as determined by the Board. The Board shall have complete discretion in
determining the terms and conditions and number of Options granted to each
Optionee. In making such determinations, the Board may take into account the
nature of services rendered by such current and former employees, consultants
and members of the Board, their present and potential contributions to the
Company and such other factors as the Board in its discretion shall deem
relevant.
5.2 Option Agreement; Terms and Conditions to Apply Unless Otherwise
Specified. As determined by the Board on the date of grant, each Option shall be
evidenced by an option agreement (the "Option Agreement") that specifies: the
Option price; the duration of the Option; the number of shares of Stock to which
the Option applies; such vesting or exercisability restrictions which the Board
may impose; and any other terms or conditions which the Board may impose. All
such terms and conditions shall be determined by the Board at the time of grant
of the Option.
(a) If not otherwise specified by the Board, the following terms and
conditions shall apply to Options granted under the Plan:
(i) Term. The duration of the Option shall be for ten years from
the date of grant.
(ii) Exercise of Option. Unless an Option is terminated as
provided hereunder, an Optionee may exercise an Option pursuant to a
vesting schedule as determined by the Board. The Option may however
not be exercised prior to five years following the date of its grant.
(iii) Termination. Each Option granted pursuant to the Plan shall
expire upon the earliest to occur of:
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(A) The date set forth in such Option, not to exceed ten
years from the date of grant;
(B) The completion of the merger or sale of substantially
all of the Stock or assets of the Company with or to another
company in a transaction in which the Company is not the
survivor, except for the merger of the Company into a
wholly-owned subsidiary (and the Company shall not be considered
the surviving corporation for purposes hereof if the Company is
the survivor of a reverse triangular merger), provided that the
Company shall have given the Optionee at least thirty days' prior
written notice of its intent to enter into such merger or sale;
or
(C) The termination of the employment of an Optionee for
cause by the Company.
(iv) Acceleration. The Option shall become fully exercisable
irrespective of its other provisions (i) immediately prior to the
completion of the merger or sale of substantially all of the stock or
assets of the Company in a transaction in which the Company is not the
survivor, except for the merger of the Company into a wholly-owned
subsidiary (and the Company shall not be considered the surviving
corporation for purposes hereof if the Company is the survivor of a
reverse triangular merger); or (ii) upon termination of the Optionee's
employment with the Company or a subsidiary thereof because of death,
disability or normal retirement.
(v) Transferability. In addition to the Optionee, the Option may
be exercised, to the extent exercisable by the Optionee, by the person
or persons to whom the Optionee's rights under the Option pass by will
or the laws of descent and distribution, by the spouse or the
descendants of the Optionee or by trusts for such persons, to whom or
which the Optionee may have transferred the Option, or by legal
representative of any of the foregoing. Any such transfer shall be
made only in compliance with the Securities Act of 1933, as amended,
and the requirements therefor as set forth by the Company.
(b) The Board shall be free to specify terms and conditions other than
and in addition to those set forth above, in its discretion.
(c) All Option Agreements shall incorporate the provisions of the Plan
by reference.
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5.3 Option Price. No Option granted pursuant to the Plan shall have an
Option price that is less than the fair market value of Stock on the date the
Option is granted, as determined by the Board. The Option exercise price shall
be subject to adjustment as provided in Section 4.3 above.
5.4 Payment. Payment for all shares of Stock shall be made at the time that
an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash, or
(ii) if acceptable to the Board, in Stock, by the surrender of Option rights
hereunder valued at the difference between the Option exercise price plus income
taxes to be withheld, if any, and the fair market value of the common stock
(referred to as "immaculate cashless exercise"), or in some other form.
ARTICLE VI
WRITTEN NOTICE, ISSUANCE OF STOCK
CERTIFICATES, SHAREHOLDER PRIVILEGES
6.1 Written Notice. An Optionee wishing to exercise an Option shall give
written notice to the Company, in the form and manner prescribed by the Board.
Full payment for the shares of Stock acquired pursuant to the Option must
accompany the written notice.
6.2 Issuance of Stock Certificates. As soon as practicable after the
receipt of written notice and payment, the Company shall deliver to the Optionee
a certificate or certificates for the requisite number of shares of Stock.
6.3 Privileges of a Shareholder. An Optionee or any other person entitled
to exercise an Option under the Option Agreement shall not have shareholder
privileges with respect to any Stock covered by the Option until the date of
issuance of a stock certificate for such Stock.
ARTICLE VII
RIGHTS OF OPTIONEES
Nothing in the Plan shall interfere with or limit in any way the right of
the Company or a subsidiary corporation to terminate any employee's or
consultant's employment at any time, nor confer upon any employee or consultant
any right to continue in the employ of the Company or a subsidiary corporation.
ARTICLE VIII
AMENDMENT, MODIFICATION, AND
TERMINATION OF THE PLAN
The Board may at any time terminate and from time to time may amend or
modify the Plan.
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No amendment, modification, or termination of the Plan shall in any manner
adversely affect any outstanding Option under the Plan without the consent of
the Optionee holding the Option.
ARTICLE IX
ACQUISITION, MERGER OR LIQUIDATION
9.1 Acquisition.
(a) In the event that an acquisition occurs with respect to the
Company, the Company shall have the option, but not the obligation, to
cancel Options outstanding as of the effective date of such acquisition,
whether or not such Options are then exercisable, in return for payment to
the Optionees of an amount equal to a reasonable estimate of an amount
(hereinafter the "Spread"), determined by the Board, equal to the
difference between the net amount per share payable in the acquisition or
as a result of the acquisition, less the exercise price of the Option. In
estimating the Spread, appropriate adjustments to give effect to the
existence of the Options shall be made, such as deeming the Options to have
been exercised, with the Company receiving the exercise price payable
thereunder, and treating the Stock receivable upon exercise of the Options
as being outstanding in determining the net amount per share.
(b) For purposes of this section, an "acquisition" shall mean any
transaction in which substantially all of the Company's assets are acquired
or in which a controlling amount of the Company's outstanding shares are
acquired, in each case by a single person or entity or an affiliated group
of persons and entities. For purposes of this section, a controlling amount
shall mean more than fifty percent of the issued and outstanding shares of
Stock of the Company. The Company shall have the above option to cancel
Options regardless of how the acquisition is effectuated, whether by direct
purchase, through a merger or similar corporate transaction, or otherwise.
In cases where the acquisition consists of the acquisition of assets of the
Company, the net amount per share shall be calculated on the basis of the
net amount receivable with respect to shares upon a distribution and
liquidation by the Company after giving effect to expenses and charges,
including but not limited to taxes, payable by the Company before the
liquidation can be completed.
(c) Where the Company does not exercise its option under this
Section 9.1 the remaining provisions of this Article IX shall apply, to the
extent applicable.
9.2 Merger or Consolidation. If the Company shall be the surviving
corporation in any merger or consolidation, any Option granted hereunder shall
pertain to and apply to the securities to which a holder of the number of shares
of Stock subject to the Option would have been entitled in such merger or
consolidation, provided that the Company shall not be considered the surviving
corporation for purposes hereof if the Company is the survivor of a reverse
triangular merger.
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9.3 Other Transactions. A dissolution or a liquidation of the Company or a
merger and consolidation in which the Company is not the surviving corporation
(the Company shall not be considered the surviving corporation for purposes
hereof if the Company is the survivor of a reverse triangular merger) shall
cause every Option outstanding hereunder to terminate as of the effective date
of such dissolution, liquidation, merger or consolidation. However, the Optionee
either (i) shall be offered a firm commitment whereby the resulting or surviving
corporation in a merger or consolidation will tender to the Optionee an option
(the "Substitute Option") to purchase its shares on terms and conditions both as
to number of shares and otherwise, which will substantially preserve to the
Optionee the rights and benefits of the Option outstanding hereunder granted by
the Company, or (ii) shall have the right immediately prior to such dissolution,
liquidation, merger, or consolidation to exercise any unexercised Options
whether or not then vested, subject to the other provisions of the Plan. The
Board shall have absolute and uncontrolled discretion to determine whether the
Optionee has been offered a firm commitment and whether the tendered Substitute
Option will substantially preserve to the Optionee the rights and benefits of
the Option outstanding hereunder.
ARTICLE X
SECURITIES REGISTRATION
10.1 Securities Registration. In the event that the Company shall deem it
necessary or desirable to register under the Securities Act of 1933, as amended,
or any other applicable statute, any Options or any Stock with respect to which
an Option may be or shall have been granted or exercised, or to qualify any such
Options or Stock under the Securities Act of 1933, as amended, or any other
statute, then the Optionee shall cooperate with the Company and take such action
as is necessary to permit registration or qualification of such Options or
Stock.
10.2 Representations. Unless the Company has determined that the following
representation is unnecessary, each person exercising an Option under the Plan
may be required by the Company, as a condition to the issuance of the shares of
Stock pursuant to exercise of the Option, to make a representation in writing
(i) 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 any part
thereof within the meaning of the Securities Act of 1933, and (ii) that before
any transfer in connection with the resale of such shares, he will obtain the
written opinion of counsel for the Company, or other counsel acceptable to the
Company, that such shares may be transferred without registration thereof. The
Company may also require that the certificates representing such shares contain
legends reflecting the foregoing. To the extent permitted by law, including the
Securities Act of 1933, nothing herein shall restrict the right of a person
exercising an Option to sell the shares received in an open market transaction.
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ARTICLE XI
TAX WITHHOLDING
Whenever shares of Stock are to be issued in satisfaction of Options
exercised under the Plan, the Company shall have the power to require the
recipient of the Stock to remit to the Company an amount sufficient to satisfy
federal, state, and local withholding tax requirements, if any.
ARTICLE XII
INDEMNIFICATION
To the extent permitted by law, each person who is or shall have been a
member of the Board or the Committee shall be indemnified and held harmless by
the Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be a party or in which he
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by him in settlement thereof, with
the Company's approval, or paid by him in satisfaction of judgment in any such
action, suit, or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's certificate of
incorporation or bylaws, as a matter of law, or otherwise, or any power that the
Company or a Subsidiary Corporation may have to indemnify them or hold them
harmless.
ARTICLE XIII
REQUIREMENTS OF LAW
13.1 Requirements of Law. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
13.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Colorado.
ARTICLE XIV
EFFECTIVE DATE OF PLAN
The Plan shall be effective on November 21, 1996.
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ARTICLE XV
NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the holder
thereof to exercise such Option.
THIS STOCK OPTION PLAN was adopted by the Board of Directors of St. Mary
Land & Exploration Company on November 21, 1996, to be effective upon adoption.
ST. MARY LAND & EXPLORATION COMPANY
By: /s/ John P. Congdon
----------------------------------
Title: Vice President and General Counsel
----------------------------------
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Appendix B
ST. MARY LAND & EXPLORATION COMPANY
INCENTIVE STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Establishment. St. Mary Land & Exploration Company, a Delaware
corporation (the "Company"), hereby establishes a stock option plan for key
employees providing material services to the Company or a subsidiary of the
Company as described herein, which shall be known as the "ST. MARY LAND &
EXPLORATION COMPANY INCENTIVE STOCK OPTION PLAN" (the "Plan"). It is intended
that the options issued to employees pursuant to the Plan constitute incentive
stock options within the meaning of Section 422 of the Internal Revenue Code.
The Company shall enter into stock option agreements with recipients of options
pursuant to the Plan.
1.2 Purpose. The purpose of the Plan is to enhance shareholder value by
attracting, retaining and motivating key employees of the Company and of a
subsidiary of the Company by providing them with a means to acquire a
proprietary interest in the Company's success.
ARTICLE II
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below, unless the context clearly requires
otherwise, and when such meaning is intended, the term shall be capitalized.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee provided for by Article IV
hereof, which may be created at the discretion of the Board.
(d) "Company" means St. Mary Land & Exploration Company, a Delaware
corporation.
(e) "Date of Exercise" means the date the Company receives notice, by
an Optionee, of the exercise of an Option pursuant to Section 8.1 of the
Plan. Such notice shall indicate the number of shares of Stock the Optionee
intends to acquire pursuant to exercise of the Option.
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(f) "Employee" means any person, including an officer or director of
the Company or a Subsidiary Corporation, who is employed by the Company or
a Subsidiary Corporation.
(g) "Fair Market Value" means the fair market value of Stock upon
which an option is granted under the Plan, determined as follows:
(i) If the Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange, the Fair
Market Value shall be the last reported sale price of the Stock on the
composite tape of such exchange on the date of issuance of this
option, or if such day is not a normal trading day, the last trading
day prior to the date of issuance of this option, and if no such sale
is made on such day, the Fair Market Value shall be the average
closing bid and asked prices for such day on the composite tape of
such exchange; or
(ii) If the Stock is not so listed or admitted to unlisted
trading privileges, the Fair Market Value shall be the mean of the
last reported bid and asked prices reported by the National
Association of Securities Dealers Quotation System (or, if not so
quoted on NASDAQ, by the National Quotation Bureau, Inc.) on the last
trading day prior to the date of issuance of the option.
(h) "Incentive Stock Option" means an Option granted under the Plan
which is intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Code.
(i) "Option" means the right, granted under the Plan, to purchase
Stock of the Company at the option price for a specified period of time.
(j) "Optionee" means an Employee holding an Option under the Plan.
(k) "Parent Corporation" shall have the meaning set forth in
Section 424(e) of the Code with the Company being treated as the employer
corporation for purposes of this definition.
(l) "Subsidiary Corporation" shall have the meaning set forth in
Section 424(f) of the Code with the Company being treated as the employer
corporation for purposes of this definition.
(m) "Significant Shareholder" means an individual who, within the
meaning of Section 422(b)(6) of the Code, owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of
the Company or of any Parent Corporation or Subsidiary Corporation of the
Company. In determining whether an individual is a Significant Shareholder,
an individual shall be treated as owning stock owned by certain relatives
of the individual and certain stock owned by corporations in which the
individual is a shareholder, partnerships in which the individual is a
partner, and estates or trusts of which the individual is a beneficiary,
all as provided in Section 424(d) of the Code.
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(n) "Stock" means the $.01 par value common stock of the Company.
2.2 Gender and Number. Except when otherwise indicated by the context, any
masculine terminology when used in the Plan also shall include the feminine
gender, and the definition of any term herein in the singular also shall include
the plural.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
All Employees are eligible to participate in the Plan and receive Incentive
Stock Options under the Plan. Optionees in the Plan shall be selected by the
Board, in its sole discretion, from among those Employees who, in the opinion of
the Board, are in a position to contribute materially to the Company's continued
growth and development and to its long-term financial success.
ARTICLE IV
ADMINISTRATION
The Board shall be responsible for administering the Plan.
(a) The Board is authorized to interpret the Plan; to prescribe,
amend, and rescind rules and regulations relating to the Plan; to provide
for conditions and assurances deemed necessary or advisable to protect the
interests of the Company; and to make all other determinations necessary or
advisable for the administration of the Plan. Determinations,
interpretations, or other actions made or taken by the Board with respect
to the Plan and Options granted under the Plan shall be final and binding
and conclusive for all purposes and upon all persons.
(b) At the discretion of the Board the Plan may be administered by a
Committee of two or more non-employee Directors appointed by the Board (the
"Committee"). The Committee shall have full power and authority, subject to
the limitations of the Plan and any limitations imposed by the Board, to
construe, interpret and administer the Plan and to make determinations
which shall be final, conclusive and binding upon all persons, including
any persons having any interests in any Options which may be granted under
the Plan, and, by resolution or resolutions to provide for the creation and
issuance of any Option, to fix the terms upon which, the time or times at
or within which, and the price or prices at which any shares of Stock may
be purchased from the Company upon the exercise of an Option. Such terms,
time or times and price or prices shall, in every case, be set forth or
incorporated by reference in the instrument or instruments evidencing an
Option, and shall be consistent with the provisions of the Plan.
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(c) Where a Committee has been created by the Board pursuant to this
Article IV, references in the Plan to actions to be taken by the Board
shall be deemed to refer to the Committee as well, except where limited by
the Plan or by the Board.
(d) No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option granted under it.
ARTICLE V
STOCK SUBJECT TO THE PLAN
5.1 Number. The total number of shares of Stock hereby made available and
reserved for issuance under the Plan upon exercise of Options shall be 700,000
shares. Notwithstanding anything to the contrary contained in the foregoing, to
the extent that options are issued under any other current Stock Option Plan
adopted by the Company, the shares of Stock reserved for issuance pursuant to
Options granted under the Plan shall be reduced. The aggregate number of shares
of Stock available under the Plan shall be subject to adjustment as provided in
Section 5.3.
5.2 Unused Stock. If an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares of Stock subject
thereto shall (unless the Plan shall have terminated) become available for other
Options under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, or other similar capital change, the
aggregate number of shares of Stock set forth in Section 5.1 shall be
appropriately adjusted by the Board, whose determination shall be conclusive. In
any such case, the number and kind of shares of Stock that are subject to any
Option and the Option price per share shall be proportionately and appropriately
adjusted without any change in the aggregate Option price to be paid therefor
upon exercise of the Option.
ARTICLE VI
DURATION OF THE PLAN
Subject to approval of shareholders, the Plan shall be in effect for ten
years from the date of its adoption by the Board. Any Options outstanding at the
end of such period shall remain in effect in accordance with their terms. The
Plan shall terminate before the end of such period if all Stock subject to it
has been purchased pursuant to the exercise of Options granted under the Plan.
ARTICLE VII
TERMS OF STOCK OPTIONS
7.1 Grant of Options. Subject to Section 5.1, Options may be granted to
Employees at any time and from time to time as determined by the Board. The
Board shall have complete discretion in determining the terms and conditions and
number of Options granted to each Optionee. In making such determinations, the
Board may take into account the nature of services rendered by such Employees,
their present and potential contributions to the Company and its Subsidiary
Corporations, and such other factors as the Board in its discretion shall deem
relevant.
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(a) The total Fair Market Value (determined at the date of grant) of
shares of Stock with respect to which incentive stock options granted are
exercisable for the first time by the Optionee during any calendar year
under all plans of the Company under which incentive stock options may be
granted (and all such plans of any Parent Corporations and any Subsidiary
Corporations of the Company) shall not exceed $100,000. Hereinafter, this
requirement is sometimes referred to as the "$100,000 Limitation".
(b) The Board is expressly given the authority to issue amended or
replacement Options with respect to shares of Stock subject to an Option
previously granted hereunder. An amended Option amends the terms of an
Option previously granted and thereby supersedes the previous Option. A
replacement Option is similar to a new Option granted hereunder except that
it provides that it shall be forfeited to the extent that a previously
granted Option is exercised, or except that its issuance is conditioned
upon the termination of a previously granted Option.
7.2 No Tandem Options. Where an Option granted under the Plan is intended
to be an Incentive Stock Option, the Option shall not contain terms pursuant to
which the exercise of the Option would affect the Optionee's right to exercise
another Option, or vice versa, such that the Option intended to be an Incentive
Stock Option would be deemed a tandem stock option within the meaning of the
regulations under Section 422 of the Code.
7.3 Option Agreement; Terms and Conditions to Apply Unless Otherwise
Specified. As determined by the Board on the date of grant, each Option shall be
evidenced by an Option agreement (the "Option Agreement") that includes the
non-transferability provisions required by Section 10.2 hereof and that
specifies: the Option price; the duration of the Option; the number of shares of
Stock to which the Option applies; such vesting or exercisability restrictions
which the Board may impose; a provision implementing the $100,000 Limitation;
and any other terms or conditions which the Board may impose. All such terms and
conditions shall be determined by the Board at the time of grant of the Option.
(a) If not otherwise specified by the Board, the following terms and
conditions shall apply to Options granted under the Plan:
(i) Term. The duration of the Option shall be for ten years from
the date of grant.
(ii) Exercise of Option. Unless an Option is terminated as
provided hereunder, an Optionee may exercise an Option pursuant to a
vesting schedule as determined by the Board.
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(iii) Termination. Each Option granted pursuant to the Plan shall
expire upon the earliest to occur of:
(A) The date set forth in such Option, not to exceed ten
years from the date of grant (five years in the case of a
Significant Shareholder);
(B) The completion of the merger or sale of substantially
all of the Stock or assets of the Company with or to another
company in a transaction in which the Company is not the
survivor, except for the merger of the Company into a
wholly-owned subsidiary and, provided that the Company shall have
given the Optionee at least thirty days' prior written notice of
its intent to enter into such merger or sale (and the Company
shall not be considered the surviving corporation for purposes
hereof if the Company is the survivor of a reverse triangular
merger);
(C) Ninety days following the termination of the employment
of an Optionee, except for termination for cause by the Company
or termination because of the Optionee's death or disability (in
which event of termination of employment due to the Optionee's
death or disibility, the Option shall expire one year following
the termination of employment of an Optionee); or
(D) Immediately upon the termination of the employment of an
Optionee for cause by the Company.
(iv) Nontransferability. All Options granted under the Plan shall
be nontransferable by the Optionee, other than by will or the laws of
descent and distribution, and shall be exercisable during the
Optionee's lifetime only by the Optionee.
(b) The Board shall be free to specify terms and conditions other than
and in addition to those set forth above, in its discretion.
(c) All Option Agreements shall incorporate the provisions of the Plan
by reference.
7.4 Option Price. No Option granted pursuant to the Plan shall have an
Option price that is less than the Fair Market Value of Stock on the date the
Option is granted. Incentive Stock Options granted to Significant Shareholders
shall have an Option price of not less than 110% of the Fair Market Value of
Stock on the date of grant. The Option exercise price shall be subject to
adjustment as provided in Section 5.3 above.
7.5 Payment. Payment for all shares of Stock shall be made at the time that
an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash, or
(ii) if acceptable to the Board, in Stock or in some other form; provided,
however, in the case of an Incentive Stock Option, that such other form of
payment does not prevent the Option from qualifying for treatment as an
"incentive stock option" within the meaning of the Code.
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ARTICLE VIII
WRITTEN NOTICE, ISSUANCE OF STOCK
CERTIFICATES, SHAREHOLDER PRIVILEGES
8.1 Written Notice. An Optionee wishing to exercise an Option shall give
written notice to the Company, in the form and manner prescribed by the Board.
Full payment for the shares of Stock to be acquired pursuant to the exercise of
the Option must accompany the written notice.
8.2 Issuance of Stock Certificates. As soon as practicable after the
receipt of written notice and payment, the Company shall deliver to the Optionee
a certificate or certificates for the requisite number of shares of Stock.
8.3 Privileges of a Shareholder. An Optionee or any other person entitled
to exercise an Option under the Option Agreement shall not have shareholder
privileges with respect to any Stock covered by the Option until the date of
issuance of a stock certificate for such Stock.
ARTICLE IX
TERMINATION OF EMPLOYMENT OR SERVICES
9.1 Death or Disability. Subject to any prior partial exercise of the
Option, if an Optionee's employment terminates by reason of Optionee's death or
permanent and total disability, the Option may be exercised up to one hundred
percent of the shares originally subject to the Option at any time prior to the
expiration date of the Option or within 12 months after the date of such death
or disability, whichever period is the shorter, by the person or persons
entitled to do so under the Optionee's will or, if the Optionee shall fail to
make a testamentary disposition of an Option or shall die intestate, the
Optionee's legal representative or representatives.
9.2 Termination other than for Cause or Due to Death. In the event of an
Optionee's termination of employment other than by reason of death or permanent
and total disability, the Optionee may exercise such portion of his Option as
was vested and exercisable by him at the date of such termination (the
"Termination Date") at any time within ninety days of the Termination Date. In
any event, the Option cannot be exercised after the expiration of the term of
the Option. Options not exercised within the applicable period specified above
shall terminate.
(a) In the case of an Employee, a change of duties or position within the
Company or an assignment of employment in a Subsidiary Corporation or Parent
Corporation of the Company, if any, or from such a Corporation to the Company,
shall not be considered a termination of employment for purposes of the Plan.
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(b) The Option Agreements may contain such provisions as the Board shall
approve with reference to the effect of approved leaves of absence upon
termination of employment.
9.3 Termination for Cause. In the event of an Optionee's termination of
employment, which termination is by the Company or a Subsidiary Corporation for
cause, any Option or Options held by him under the Plan, to the extent not
exercised before such termination, shall terminate upon notice of termination
for cause.
ARTICLE X
RIGHTS OF OPTIONEES
10.1 Service. Nothing in the Plan shall interfere with or limit in any way
the right of the Company or a Subsidiary Corporation to terminate any Employee's
employment at any time, nor confer upon any Employee any right to continue in
the employ of the Company or a Subsidiary Corporation.
10.2 Non-transferability. All Options granted under the Plan shall be
nontransferable by the Optionee, other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee.
ARTICLE XI
OPTIONEE-EMPLOYEE'S TRANSFER
OR LEAVE OF ABSENCE
For purposes of the Plan:
(a) A transfer of an Optionee who is an Employee from the Company to a
Subsidiary Corporation or Parent Corporation, or from one such Corporation
to another, or
(b) A leave of absence for such an Optionee (i) which is duly
authorized in writing by the Company or a Subsidiary Corporation, and
(ii) if the Optionee holds an Incentive Stock Option, which qualifies under
the applicable regulations under the Code which apply in the case of
incentive stock options,
shall not be deemed a termination of employment. However, under no circumstances
may an Optionee exercise an Option during any leave of absence, unless
authorized by the Board.
ARTICLE XII
AMENDMENT, MODIFICATION, AND
TERMINATION OF THE PLAN
(a) The Board may at any time terminate and from time to time may
amend or modify the Plan, provided, however, that no such action of the
Board, without approval of the shareholders, may:
(i) increase the total amount of Stock which may be purchased
through Options granted under the Plan, except as provided in
Article V;
(ii) change the class of Employees eligible to receive Options;
(b) No amendment, modification, or termination of the Plan shall in
any manner adversely affect any outstanding Option under the Plan without
the consent of the Optionee holding the Option.
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ARTICLE XIII
ACQUISITION, MERGER OR LIQUIDATION
13.1 Acquisition.
(a) In the event that an acquisition occurs with respect to the
Company, the Company shall have the option, but not the obligation, to
cancel Options outstanding as of the effective date of such acquisition,
whether or not such Options are then exercisable, in return for payment to
the Optionees of an amount equal to a reasonable estimate of an amount
(hereinafter the "Spread"), determined by the Board, equal to the
difference between the net amount per share payable in the acquisition or
as a result of the acquisition, less the exercise price of the Option. In
estimating the Spread, appropriate adjustments to give effect to the
existence of the Options shall be made, such as deeming the Options to have
been exercised, with the Company receiving the exercise price payable
thereunder, and treating the shares receivable upon exercise of the Options
as being outstanding in determining the net amount per share.
(b) For purposes of this section, an "acquisition" shall mean any
transaction in which substantially all of the Company's assets are acquired
or in which a controlling amount of the Company's outstanding shares are
acquired, in each case by a single person or entity or an affiliated group
of persons and entities. For purposes of this section, a controlling amount
shall mean more than 50% of the issued and outstanding shares of Stock of
the Company. The Company shall have the above option to cancel Options
regardless of how the acquisition is effectuated, whether by direct
purchase, through a merger or similar corporate transaction, or otherwise.
In cases where the acquisition consists of the acquisition of assets of the
Company, the net amount per share shall be calculated on the basis of the
net amount receivable with respect to shares upon a distribution and
liquidation by the Company after giving effect to expenses and charges,
including but not limited to taxes, payable by the Company before the
liquidation can be completed.
(c) Where the Company does not exercise its option under this
Section 13.1 the remaining provisions of this Article XIII shall apply, to
the extent applicable.
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13.2 Merger or Consolidation. If the Company shall be the surviving
corporation in any merger or consolidation, any Option granted hereunder shall
pertain to and apply to the securities to which a holder of the number of shares
of Stock subject to the Option would have been entitled in such merger or
consolidation, provided that the Company shall not be considered the surviving
corporation for purposes hereof if the Company is the survivor of a reverse
triangular merger.
13.3 Other Transactions. A dissolution or a liquidation of the Company or a
merger and consolidation in which the Company is not the surviving corporation
(the Company shall not be considered the surviving corporation for purposes
hereof if the Company is the survivor of a reverse triangular merger) shall
cause every Option outstanding hereunder to terminate as of the effective date
of such dissolution, liquidation, merger or consolidation. However, the Optionee
either (i) shall be offered a firm commitment whereby the resulting or surviving
corporation in a merger or consolidation will tender to the Optionee an option
(the "Substitute Option") to purchase its shares on terms and conditions both as
to number of shares and otherwise, which will substantially preserve to the
Optionee the rights and benefits of the Option outstanding hereunder granted by
the Company, or (ii) shall have the right immediately prior to such dissolution,
liquidation, merger, or consolidation to exercise any unexercised Options
whether or not then vested, subject to the provisions of the Plan. The Board
shall have absolute and uncontrolled discretion to determine whether the
Optionee has been offered a firm commitment and whether the tendered Substitute
Option will substantially preserve to the Optionee the rights and benefits of
the Option outstanding hereunder. In any event, any Substitute Option for an
Incentive Stock Option shall comply with the requirements of Code
Section 424(a).
ARTICLE XIV
SECURITIES REGISTRATION
14.1 Securities Registration. In the event that the Company shall deem it
necessary or desirable to register under the Securities Act of 1933, as amended,
or any other applicable statute, any Options or any Stock with respect to which
an Option may be or shall have been granted or exercised, or to qualify any such
Options or Stock under the Securities Act of 1933, as amended, or any other
statute, then the Optionee shall cooperate with the Company and take such action
as is necessary to permit registration or qualification of such Options or
Stock.
14.2 Representations. Unless the Company has determined that the following
representation is unnecessary, each person exercising an Option under the Plan
may be required by the Company, as a condition to the issuance of the shares
pursuant to exercise of the Option, to make a representation in writing (i) 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 any part thereof
within the meaning of the Securities Act of 1933, (ii) that before any transfer
in connection with the resale of such shares, he will obtain the written opinion
of counsel for the Company, or other counsel acceptable to the Company, that
such shares may be transferred without registration thereof. The Company may
also require that the certificates representing such shares contain legends
reflecting the foregoing. To the extent permitted by law, including the
Securities Act of 1933, nothing herein shall restrict the right of a person
exercising an Option to sell the shares received in an open market transaction.
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ARTICLE XV
TAX WITHHOLDING
Whenever shares of Stock are to be issued in satisfaction of Options
exercised under the Plan, the Company shall have the power to require the
recipient of the Stock to remit to the Company an amount sufficient to satisfy
federal, state, and local withholding tax requirements, if any.
ARTICLE XVI
INDEMNIFICATION
To the extent permitted by law, each person who is or shall have been a
member of the Board or the Committee shall be indemnified and held harmless by
the Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be a party or in which he
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by him in settlement thereof, with
the Company's approval, or paid by him in satisfaction of judgment in any such
action, suit, or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's certificate of
incorporation or bylaws, as a matter of law, or otherwise, or any power that the
Company or any Subsidiary Corporation may have to indemnify them or hold them
harmless.
ARTICLE XVII
REQUIREMENTS OF LAW
17.1 Requirements of Law. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
17.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Colorado.
ARTICLE XVIII
EFFECTIVE DATE OF PLAN
The Plan shall be effective on March 27, 1997.
ARTICLE XIX
COMPLIANCE WITH CODE
Incentive Stock Options granted hereunder are intended to qualify as
"incentive stock options" under Code Section 422. If any provision of the Plan
is susceptible to more than one interpretation, such interpretation shall be
given thereto as is consistent with Incentive Stock Options granted under the
Plan being treated as incentive stock options under the Code.
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ARTICLE XX
NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the holder
thereof to exercise such Option.
ARTICLE XXI
SHAREHOLDER APPROVAL
The Plan shall be submitted for approval and ratification by a vote of the
holders of a majority of the shares of Stock of the Company no later than 12
months after the date the Plan is adopted; provided, however, that failure to
timely obtain such shareholder approval shall result in all Options granted
hereunder being deemed to be Non-qualified Options and shall not affect the
validity of any Option issued under the Plan.
THIS INCENTIVE STOCK OPTION PLAN was adopted by the Board of Directors of
St. Mary Land & Exploration Company on March 27, 1997, to be effective upon
adoption.
ST. MARY LAND & EXPLORATION COMPANY
By: /s/ John P. Congdon
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Title: Vice President and General Counsel
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