<PAGE> 1
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
| | Preliminary Information Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
|X| Definitive Information Statement
-------------------------------
TATHAM OFFSHORE, INC.
(Name of Registrant as Specified in its Charter)
-------------------------------
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
1) Title of each class of securities to which transaction applies:
-------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
-------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------
5) Total fee paid:
-------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identity the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------
3) Filing Party:
------------------------------------------
4) Date Filed:
------------------------------------------
<PAGE> 2
[Tatham Offshore, Inc. Logo]
TATHAM OFFSHORE, INC.
May 1, 1997
Dear Stockholder,
The Board of Directors of Tatham Offshore, Inc. (the "Company") has
approved the issuance (the "Issuance") of 7,500 shares of the Company's 9%
Senior Convertible Preferred Stock with a liquidation preference of $1,000 per
share and those rights set forth in a certain agreement dated as of March 27,
1996 between Leviathan Gas Pipeline Partners, L.P. (the "Partnership") and the
Company in exchange for the Company's release from its demand charge
obligations to the Partnership under certain transportation agreements with
respect to the Company's Seattle Slew and Genuine Risk Properties.
The Board of Directors of the Company has also proposed the adoption
of an amendment to the Company's Non-Employee Director Stock Option Plan (the
"Plan") in order to adjust the exercise price of stock options currently
outstanding pursuant to Section 6 of the Plan as well as to make certain
technical amendments to the Plan, such amendment to be reflected in the form
of an amended and restated Plan (the "Amended Plan"). The Issuance and the
Amended Plan are discussed further in the attached Information Statement.
The authorization of the Issuance and the adoption of the Amended
Plan have been approved by holders of a majority of the outstanding shares of
common stock of the Company. A total of 5 shareholders holding an aggregate
approximate 63% of the Company's outstanding shares of Common Stock have
consented in writing to the authorization of the Issuance. A total of 7
stockholders holding an aggregate 50.1% of the Company's outstanding shares of
Common Stock have consented in writing to the Amended Plan. Such actions are
to be effective May 21, 1997. Therefore, the Issuance and the Amended Plan will
be adopted by written consents without the need for any action to be taken by
you.
WE ARE NOT ASKING YOU TO DELIVER A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY. THE ATTACHED INFORMATION STATEMENT IS BEING SENT TO YOU FOR
INFORMATION PURPOSES ONLY.
Very truly yours,
Thomas P. Tatham
Chairman of the Board
Tatham Offshore, Inc.
<PAGE> 3
TATHAM OFFSHORE, INC.
-------------------------------------------
INFORMATION STATEMENT
This Information Statement is being furnished by Tatham Offshore, Inc.
(the "Company") to the holders of the Company's common stock, par value $.01 per
share (the "Common Stock") in connection with the authorization of an issuance
of 7,500 shares of 9% Senior Convertible Preferred Stock (the "Issuance") with a
liquidation preference of $1,000 per share and those rights set forth in a
certain agreement dated as of March 27, 1996 between Leviathan Gas Pipeline
Partners, L.P. (the "Partnership"), an affiliate of the Company, and the Company
and the adoption of amendments to the Company's Non-Employee Director Stock
Option Plan (the "Amended Plan"). The purpose of the Issuance is to obtain the
Company's release from demand charge obligations to the Partnership under
certain transportation agreements with respect to the Company's Seattle Slew and
Genuine Risk Properties. The Amended Plan provides for the adjustment of the
exercise price of stock options currently outstanding pursuant to Section 6 of
the Plan as well as to certain other technical amendments to the Plan.
The Issuance and the Amended Plan have been approved by holders of a
majority of the outstanding shares of common stock of the Company. A total of
5 stockholders holding an aggregate approximate 63% the Company's outstanding
shares of Common Stock have consented in writing to the authorization of the
Issuance. A total of 7 stockholders holding an aggregate 50.1% of the
Company's outstanding shares of Common Stock have consented in writing to the
Amended Plan. Such actions are to be effective May 21, 1997. The Issuance and
the Amended Plan will be adopted by written consents without the need for any
action to be taken by you. THEREFORE, WE ARE NOT ASKING YOU TO DELIVER A PROXY
AND THE ATTACHED INFORMATION STATEMENT IS BEING SENT TO YOU FOR INFORMATION
PURPOSES ONLY.
--------------------------
THIS STATEMENT IS ONLY FOR INFORMATION PURPOSES.
--------------------------
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
--------------------------
The date of this Information Statement is May 1, 1997
All Stockholders of record at the close of business on April 25, 1997
will receive this Information Statement.
<PAGE> 4
THE COMPANY
Tatham Offshore, Inc., a Delaware corporation (the "Company"), is an
independent energy company engaged in the development and production of, and
the exploration for, oil and gas reserves located offshore the United States
in the Gulf of Mexico primarily in the Flextrend (water depths of 600 to 1,500
feet) and Deepwater (water depths greater than 1,500 feet) areas.
The Company's principal executive offices are located at 7400 Texas
Commerce Tower, 600 Travis Street, Houston, Texas 77002. The Company's
telephone number at such address is (713) 224-7400.
SUMMARY OF ISSUANCE
OF NEW CLASS OF PREFERRED STOCK
AUTHORIZATION OF THE ISSUANCE
The purpose of the Issuance is to obtain the Company's release from
demand charge obligations to Leviathan Gas Pipeline Partners, L.P. (the
"Partnership") by the prepayment of charges under certain transportation
agreements with respect to the Company's Seattle Slew and Genuine Risk
Properties. The Board approved the Issuance by action at its meeting held on
March 28, 1996. Stockholders holding in aggregate a majority interest of the
Company's outstanding shares of common stock, par value $.01 per share (the
"Common Stock"), consented in writing to the authorization of the Issuance. The
Partnership is an affiliate of the Company. See "Voting Securities and
Principal Stockholders."
TERMS OF THE ISSUANCE
Effective February 1, 1996, the Company entered into an agreement
with the Partnership to prepay its remaining demand charge obligations under
the transportation agreements covering its Ewing Bank and Ship Shoal
properties. Under the agreement, the Company's demand charge obligations
relative to the Ewing Bank Gathering System and the pipeline facilities
constructed by the Partnership for its Ship Shoal property have been prepaid
in full. In exchange, the Company has agreed to issue the Partnership 7,500
shares of a new class of Company preferred stock (the "Preferred Stock"). Each
share of the Preferred Stock has a liquidation preference of $1,000 per share,
is senior in liquidation preference to all other classes of Company stock and
has a 9% cumulative dividend, payable quarterly. The Partnership has made an
irrevocable offer to the Company to sell all or any portion of the Preferred
Stock to the Company or its designee at a price equal to $1,000 per share,
plus interest thereon at 9% per annum less the sum of all dividends paid
thereon. In the event the Company does not purchase the Preferred Stock on or
before September 30, 1998, then for a period of 90 days thereafter it shall be
convertible into the Company's Class A 12% Convertible Exchangeable Preferred
Stock (the "Convertible Exchangeable Preferred Stock"). The conversion ratio
shall be equal to (i) the liquidation preference amount plus accumulated but
unpaid dividends divided by (ii) the arithmetic average of closing prices for
the 20 trading days following October 1, 1998 of the Convertible Exchangeable
Preferred Stock. The Convertible Exchangeable Preferred Stock is convertible
into Company common stock based on a fraction, the numerator of which is the
liquidation preference value of the Convertible Exchangeable Preferred Stock
plus all accrued but unpaid dividends and the denominator of which is based on
the lowest average of consecutive five day closing prices for the Company's
common stock between December 26, 1995 and July 1, 1996 (the "Trading
Reference Price").
The agreement also provides that the sum of $7.5 million was added to
the payout amount (the "Payout Amount") under a purchase and sale agreement
between the Company and the Partnership by which a subsidiary of the
Partnership acquired the Company's working interest in three offshore oil and
properties (the "Assigned Properties"), subject to certain reversionary
interests. By adding $7.5 million to the Payout Amount, the Partnership will
be entitled to an additional $7.5 million plus interest at the rate of 15% per
annum from revenue attributable to the Assigned Properties prior to
reconveying any interest in the Assigned Properties to the Company. The
Company waived its remaining option to prepay the then existing Payout
2
<PAGE> 5
Amount and receive a reassignment of its working interests. The Company and
the Partnership have also agreed that in the event the Company furnishes the
Partnership with a financing commitment from a lender with a credit rating of
BBB- or better covering 100% of the then outstanding Payout Amount, then the
interest rate utilized to compute the Payout Amount shall be adjusted from and
after the date of such commitment to the interest rate specified in such
commitment. The Company has also agreed to grant the Partnership the right to
utilize the Ship Shoal Block 331 platform and related facilities at a rental
rate of $1.00 per annum for such period as the platform is owned by the
Company and located on the Ship Shoal Block 331, provided such use, at the
time proposed, does not interfere with lease operations or other activities of
the Company. In addition, the Company has granted the Partnership a right of
first refusal relative to a sale of the platform.
GENERAL EFFECT OF ISSUANCE UPON EXISTING SHAREHOLDERS
The issuance of Preferred Stock to the Partnership may result in a
decrease in the proportionate ownership interest of the current holders of
Common Stock. The Preferred Stock is convertible into Company's Convertible
Exchangeable Preferred Stock in certain circumstances. The Convertible
Exchangeable Preferred Stock may be converted into Common Stock or exchanged
for exchange warrants which may be exercised to purchase Common Stock. If the
Partnership elects to convert the Preferred Stock into Convertible Exchangeable
Preferred Stock on September 30, 1998 based on a market value of the
Convertible Exchangeable Preferred Stock of $2.50 per share (the closing market
price on July 11, 1996 of the Convertible Exchangeable Preferred Stock), the
Company would issue 3,675,000 shares of Convertible Exchangeable Preferred
Stock to the Partnership. If the Partnership were to then immediately convert
the 3,675,000 shares of such stock to Common Stock, the Company would issue
8,441,807 shares of Common Stock to the Partnership. In addition, as discussed
above, the Preferred Stock is senior in liquidation preference to all other
classes of the Company's stock.
INTERESTS OF CERTAIN PERSONS IN PREFERRED STOCK ISSUANCE
As discussed in "Voting Securities and Principal Stockholders" below,
the Partnership is an affiliate of the Company through the ownership by
DeepTech International Inc. ("DeepTech") of Common Stock of the Company. As of
May 31, 1996, approximately 39% of the outstanding Common Stock of the Company
was owned by DeepTech. DeepTech also indirectly owns an 85% interest in
Leviathan Gas Pipeline Company ("Leviathan"), which owns a 27.3% effective
interest in the Partnership (23.2% effective interest net to DeepTech),
represented by a 1% general partner interest, a 25.6% limited partner interest
evidenced by 3,145,947 common units in the Partnership and a 1.0101%
nonmanaging interest in certain limited liability company subsidiaries of the
Partnership.
As also indicated in "Voting Securities and Principal Stockholders"
below, certain executive officers and directors of the Company beneficially own
DeepTech common stock and Partnership preference units. Those officers and
directors owning common stock of DeepTech hold an indirect interest in the
Partnership as a result of DeepTech's effective 23.2% interest in the
Partnership noted above. Those officers and directors owning preference units
of the Partnership hold a direct interest in the Partnership. As discussed
above, the Issuance of Preferred Stock relates to an agreement between the
Company and the Partnership, by which the Preferred Stock is partial
consideration to the Partnership for the prepayment of certain demand charge
obligations by the Company. However, the officers and directors of the Company
will not receive any extra or special benefit related to the Issuance of
Preferred Stock to the Partnership not shared on a pro rata basis by the other
holders of the same classes of securities of DeepTech and the Partnership.
SUMMARY OF AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The principal amendment reflected in the Tatham Offshore, Inc.
Amended and Restated Non-Employee Director Stock Option Plan (the "Amended
Plan") is the adjustment of the exercise price of Stock Options (hereinafter
defined) outstanding as of February 13, 1996, to $0.8125. The following
summary description of the Amended Plan is qualified in its entirety by
reference to the Amended Plan attached hereto as Exhibit A.
ADOPTION
The purpose of the Amended Plan is to allow the Company to attract
the best available individuals to serve as outside directors of the Company.
The Company also plans to issue stock under the Plan to non-employee directors
of the Company who have elected to receive stock instead of cash director
compensation for the Company's fiscal year ending June 30, 1996.
The Board approved adoption of the Plan by action at its meeting held
on August 23, 1995. Stockholders holding in aggregate a majority in interest
of the Company's outstanding shares of Common Stock, consented in writing to
the adoption of the Plan. An Information Statement dated October 24, 1995
which included information on adoption of the Plan was distributed to the
Company's stockholders of record as of October 22, 1995. Stockholders holding
in aggregate a majority interest of the Company's Common Stock have consented
in writing to the amendment of the Plan and its restatement as amended.
SUMMARY OF THE PLAN
All non-employee directors of the Company are eligible to participate
in the Amended Plan. The Amended Plan provides for both automatic one time
grants of Stock Options to the Company's non-employee directors and for the
issuance and exercise of Stock Options in lieu of standard cash director
compensation upon the election of non-employee directors. All Stock Options
granted under the Amended Plan are intended to be non-statutory stock options
and will not qualify for any special tax benefits to the Optionees.
Except with respect to outstanding Stock Options, and unless sooner
terminated by action of the Company's Board of Directors (the "Board"), or the
committee (the "Committee") thereof charged with administration of the Amended
Plan, the Amended Plan will terminate on December 31, 2005. The maximum number
of shares of Common Stock with respect to which Stock Options may be granted
under the Amended Plan is 1,000,000, subject to adjustments for stock splits,
stock dividends and certain other changes in capitalization.
Under the Amended Plan, grants of stock options (each, a "Stock
Option") to purchase 30,000 shares of the Company's Common Stock will be
automatically made to all non-employee directors of the Company provided that
such non-employee directors have not already received stock options to
purchase 30,000 shares of the Company's Common Stock in connection with their
service as a director of the Company. In addition,
3
<PAGE> 6
after the effective date of the Amended Plan, any newly elected non-employee
director will automatically receive Stock Options to purchase 30,000 shares of
the Company's Common Stock. The exercise price for the Stock Options to
purchase 30,000 shares of the Company's Common Stock will be 100% of the Fair
Market Value of the Company's Common Stock on the later to occur of (i) the
effectiveness of the Amended Plan, or (ii) the election of Participant as a
Director of the Company. Notwithstanding the foregoing, upon the effectiveness
of the Amended Plan reflected in the form of Amended Plan attached hereto, the
exercise price of the Stock Options granted pursuant to Section 6 of the
Amended Plan and outstanding on February 13, 1996, whether or not vested at
such time, shall be $0.8125, subject to further adjustment pursuant to the
terms of the Amended Plan. The Stock Options issued pursuant to these
provisions will be immediately exercisable and, unless terminated sooner in
accordance with the Amended Plan, shall expire on a date which is ten (10)
years after the date of grant of the option.
Under the Amended Plan, each non-employee director may elect to
receive Stock Options in lieu of all or a portion of his or her director
compensation, including the annual director base compensation of $30,000 and
$2,000 meeting fees attributable to the Company's fiscal year ended June 30,
1996. The Stock Options issued in lieu of cash director compensation will be
issued on a monthly basis for purchase of the number of shares of Common Stock
of the Company equal to (A) 200% of the director compensation for such month
subject to deferral pursuant to such director's election divided by (B) the
lesser of (w) $3.50 or (x) the average NASDAQ closing price for the Company's
Common Stock for such month. The exercise price of the Stock Options shall be
a price per share the lesser of (w) $3.50 or (x) the average NASDAQ closing
price for the Company's Common Stock in the applicable month for which the
Stock Options are issued. Such Stock Options will be automatically exercised
in full on July 1, 1996, the exercise price being satisfied in full by the
cancellation of the deferred director compensation, each dollar of which will
count $2.00 toward the exercise price of the Stock Option.
The Board may terminate or suspend the Plan (or any portion thereof)
at any time with respect to any shares for which Stock Options have not
previously been granted and remain outstanding. The Board has the right to
alter or amend the Amended Plan or any part thereof from time to time;
provided, however, that no change in any Stock Option theretofore granted may
be made which would materially adversely affect the rights and obligations of
the holder of any such Stock Option without the written consent of such Plan
participant.
Although the Amended Plan is a formula plan under Rule 16b-3 under
the Exchange Act, it provides that the Board may appoint a committee comprised
of not less than two of the then members of the Board who qualify to
administer the Amended Plan as disinterested persons within the meaning of
Rule 16b-3. The Committee is authorized to construe and interpret the Amended
Plan and may, from time to time, promulgate, amend, and rescind rules and
regulations relating to the implementation, administration and maintenance of
the Plan, provided that such rules and regulations are consistent with the
terms of the Amended Plan. Members of the Committee may be contacted at the
Company's address set forth above. Requests for additional information about
the Committee members should be directed to the Secretary of the Company at
the address and telephone number listed on the first page of this Memorandum.
The Amended Plan provides that neither the members of the Committee nor the
other members of the Board of Directors of the Company shall be liable for any
act, omission, interpretation, construction or determination made in good
faith in connection with the Amended Plan or any resulting agreement and that
such persons shall be indemnified and reimbursed for claims to the full extent
permitted by law.
ELIGIBILITY
Under the Amended Plan, each member of the Board of Directors of the
Company who is neither an officer nor employee of the Company or any affiliate
of the Company and who is not elected solely by holders of any preferred stock
of the Company is eligible to participate in the Amended Plan (individually, a
"Participant"). Currently, five persons are eligible to participate in the
Amended Plan.
4
<PAGE> 7
SHARES SUBJECT TO THE AMENDED PLAN
Until termination of the Amended Plan, the Company shall at all times
reserve and keep available a sufficient number of shares of Common Stock to
meet the requirements of the Amended Plan. Upon termination of the Amended
Plan, the shares of Common Stock reserved for issuance pursuant to the Amended
Plan that remain unissued and that are not subject to outstanding Stock
Options shall cease to be subject to the Amended Plan. If any Stock Option
expires or otherwise becomes unexercisable without its having been exercised
in full, the shares of Common Stock formerly subject to such Stock Option will
once again be available for future Stock Options granted under the Amended
Plan.
TERMS OF STOCK OPTIONS
Each Stock Option will be evidenced by a Stock Option Agreement,
which shall contain terms and conditions consistent with the terms of the
Amended Plan; provided that (i) no Stock Option shall be exercisable more than
10 years from the date of grant thereof. Other than the terms dictated by the
Amended Plan, the terms and conditions of the respective Stock Option
Agreements need not be identical.
VESTING OF STOCK OPTIONS
Unless otherwise provided by the terms of the Amended Plan or the
Stock Option Agreements, all Stock Options are immediately exercisable upon
issuance.
NON-TRANSFERABILITY OF STOCK OPTIONS
Stock Options granted pursuant to the Amended Plan and the rights
granted thereunder will generally not be transferable other than by will or
the laws of descent and distribution.
EXERCISE OF STOCK OPTIONS
Unless otherwise provided in the relevant Stock Option Agreement, a
Stock Option may be exercised by giving written notice of exercise to the
Committee, or the Committee's designee, specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the exercise
price by any method that is approved by the Committee, including without
limitation payment in cash, by certified check, bank draft or money order
payable to the order of the Company or, if permitted by the terms of the
relevant Stock Option Agreement and applicable law, by delivery of, alone or
in connection with a partial cash or instrument payment, shares of Common
Stock already owned by the Participant for at least six months. The Committee
may, in the relevant Stock Option Agreement, also permit Participants (either
on a selective or group basis) to simultaneously exercise Stock Options and
sell the shares of Common Stock thereby acquired, pursuant to a brokerage
"cashless exercise" arrangement, selected by and approved of in all respects
in advance by the Committee, and use the proceeds from such sale as payment of
the exercise price of such Stock Options.
A Participant may exercise the Stock Option with respect to all or
part of the shares as to which the Stock Option is exercisable. Any
unexercised portion may be accumulated and exercised at a later date prior to
the expiration of the Stock Option. All Stock Options granted under the
Amended Plan will expire on the date set forth in the Stock Option Agreement
covering such Stock Option; provided, however, that the exercise period for
each Stock Option may not be more than 10 years from the date of grant. The
proceeds received by the Company upon exercise of any Stock Option may be used
by the Company for general corporate purposes.
5
<PAGE> 8
RESALE RESTRICTIONS ON STOCK PURCHASED WITH STOCK OPTIONS
The Common Stock is traded on the NASDAQ National Market System.
Under current law, Participants in the Amended Plan are considered to be
"affiliates" of the Company and are subject to the applicable provisions of
Rule 144 promulgated under the Securities Act, including the volume
limitations imposed by Rule 144(e) in connection with their sales. In
addition, in connection with such sales, Participant Holders must pay the
applicable brokerage commissions and transfer taxes.
CHANGE IN CAPITALIZATION
In the event of any change in capitalization affecting the Common
Stock of the Company, including, without limitation, a stock dividend or other
distribution, stock split, reverse stock split, recapitalization,
consolidation, subdivision, split-up, split-off, spin-off, combination or
exchange of shares or other form of reorganization, or any other change
affecting the Common Stock, the Board shall authorize and make such
proportionate adjustments, if any, as the Board deems appropriate to reflect
such change, including, without limitation, with respect to the aggregate
number of shares of the Common Stock for which Stock Options in respect
thereof may be granted under the Amended Plan, the maximum number of shares of
the Common Stock which may be sold or awarded to any Participant, the number
of shares of the Common Stock covered by each outstanding Stock Option, and
the exercise price or other price per share of Common Stock in respect of
outstanding Stock Options.
TERMINATION OF SERVICE AS DIRECTOR
Stock Option Agreements and consultant agreements of Participants may
establish terms and conditions under which a Stock Option may be exercised or
settled after a Participant's termination of service as a director of the
Company. If a Participant's service as a director is terminated for any
reason, and the circumstance are not covered in either the relevant Stock
Option Agreement or another agreement, the Participant's rights, if any, to
exercise any then exercisable Stock Options will terminate 180 days after the
date of such termination and thereafter the Participant shall forfeit any
rights or interests in or with respect to such Stock Options. If any
Participant dies while entitled to exercise a Stock Option, such Participant's
estate, designated beneficiary or other legal representative, as the case may
be, will generally have the right, (subject to the applicable provisions of
the Amended Plan, any rules or procedures thereunder, and the relevant Stock
Option Agreement), to exercise any then exercisable Stock Options at any time
within 180 days from the date of such Participant's death.
MERGER; LIQUIDATION
The Amended Plan provides that upon certain reorganizations of the
Company in which the Company is not the surviving entity, or the Company is
the surviving entity and the stockholders of the Company are required to
exchange their shares for property and/or securities, the Company will give
the Participants at least 30 days prior written notice of such proposed
reorganization, and any outstanding Stock Options shall be exercisable in full
prior to such reorganization. The exercise of the Stock Options will be
effective immediately prior to such reorganization. Any Stock Options not
exercised prior to such a reorganization will expire. A sale of all or
substantially all of the assets of the Company for consideration consisting
primarily of securities shall be considered a reorganization for purposes of
these Amended Plan provisions.
In the event of a proposed dissolution or liquidation of the Company,
Participants will be given at least 30 days prior written notice and will
continue to have the right to exercise their Stock Options during such notice
period, unless such options terminate earlier pursuant to their terms. The
Company may provide that Stock Options exercised after the receipt of such
notice effective only immediately prior to the consummation of such
dissolution. The Board may establish a date after such notice period for the
termination of all unexercised Stock Options.
6
<PAGE> 9
FEDERAL INCOME TAX CONSEQUENCES RELATED TO STOCK OPTIONS
THE FOLLOWING DISCUSSION OF THE FEDERAL INCOME TAX CONSEQUENCES OF
PARTICIPATION IN THE AMENDED PLAN FOR A TYPICAL PARTICIPANT IS ONLY A SUMMARY,
DOES NOT PURPORT TO BE COMPLETE AND DOES NOT COVER, AMONG OTHER THINGS, STATE
AND LOCAL TAX TREATMENT OF PARTICIPATION IN THE AMENDED PLAN. FURTHERMORE,
DIFFERENCES IN INDIVIDUAL PARTICIPANTS' FINANCIAL SITUATIONS MAY CAUSE
FEDERAL, STATE AND LOCAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE
AMENDED PLAN TO VARY.
A Participant will recognize compensation income upon the receipt of
a Stock Option granted under the Amended Plan equal to the fair market value
thereof if the Option has a readily ascertainable value at the time of the
grant. In the opinion of the Company, an Option granted pursuant to the
Amended Plan will not have a readily ascertainable value at the time of grant.
Accordingly, a Participant will not recognize any income upon the grant of a
Stock Option. Upon exercise of a Stock Option, if the shares received are not
subject to a substantial risk of forfeiture or are transferable, the amount by
which the fair market value of the shares at the time of exercise exceeds the
exercise price must be treated as ordinary income received by the Participant.
However, if the Participant is subject to certain restrictions with respect to
the shares received upon the exercise of the Option, then the taxable income
realized by the Participant will be deferred and will be measured based on the
fair market value of the shares at the time the restrictions lapse. The
restrictions imposed on officers, directors, and 10% stockholders by Section
16(b) of the Exchange Act is such a transfer restriction during the period
prescribed thereby. A Participant may elect, pursuant to Section 83(b) of the
Code, to be taxed in the taxable year in which an Option was exercised on the
difference between the fair market value of the Stock on the date of exercise
and the exercise price. The date as of which Common Stock is to be valued
pursuant to the foregoing rules is referred to herein as the "Valuation Date."
The Company will be entitled to deduct the amount that the
Participant is required to treat as ordinary income in the Company's taxable
year that ends with or within the taxable year in which the Participant
recognizes such income, to the extent that such amount constitutes an ordinary
and necessary business expense and the Company satisfies all reporting
requirements with respect to such amount.
Upon a taxable disposition of shares of Common Stock acquired through
the exercise of a Stock Option, the difference between the amount realized on
the disposition and the basis of the stock will generally be treated as
long-term or short-term capital gain, depending upon the holding period of the
shares. To qualify for long-term capital gain or loss treatment, shares of
Common Stock must have been held for more than 12 months as a capital asset.
If, upon disposition, the Participant receives an amount that is less than the
fair market value of the shares on the Valuation Date, the loss will generally
be treated as a long or short-term capital loss, depending upon the holding
period of the shares.
DIRECTOR FEE STOCK OPTIONS
To the extent that a Participant is receiving Stock Options in lieu
of all or a portion of his or her director compensation, it is likely that
such Participant will be considered to have constructively received income in
the amount of any fees deferred at such time as the Stock Options are
exercised pursuant to the terms of the Amended Plan.
OTHER LEGAL MATTERS
Subject to the issuance of regulations or other authority to the
contrary, the Company believes the Amended Plan is not subject to any
provisions of ERISA. The Amended Plan is not a "qualified" plan as defined in
Section 401(a) of the Code. The information contained in this section, "Tax
Effects of Participation in the Plan," is based on existing law as of the date
of adoption of the Amended Plan, which is subject to change.
7
<PAGE> 10
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
As of May 31, 1996, there were 25,245,182 outstanding shares of
Common Stock. Each share is entitled to one vote on all matters submitted to
vote of the Stockholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of May 31, 1996, approximately 39% of the outstanding Common Stock
of the Company was owned by DeepTech International Inc. ("DeepTech"). DeepTech
indirectly owns an 85% interest in Leviathan Gas Pipeline Company ("Leviathan"),
which owns a 27.3% effective interest in the Partnership (23.2% effective
interest net to DeepTech), represented by a 1% general partner interest, a 25.6%
limited partner interest evidenced by 3,145,947 common units in the Partnership
and a 1.0101% nonmanaging interest in certain limited liability company
subsidiaries of the Partnership.
The following table sets forth, as of May 31, 1996, the beneficial
ownership of the outstanding Common Stock by (i) each person who is known to
the Company to beneficially own more than 5% of the outstanding Common Stock of
the Company, (ii) each director of the Company and (iii) all executive officers
and directors of the Company as a group. The following table also sets forth,
as of May 31, 1996, the beneficial ownership of the common stock of DeepTech
and Partnership preference units by (i) each director of the Company and
(ii) all executive officers and directors of the Company as a group. Those
officers and directors of the Company owning common stock of DeepTech hold an
indirect interest in the Partnership as a result of DeepTech's effective 23.2%
interest in the Partnership noted above. Those officers and directors owning
preference units of the Partnership hold a direct interest in the Partnership.
<TABLE>
<CAPTION>
SHARES OF CLASS BENEFICIALLY OWNED(1)
----------------------------------
TATHAM OFFSHORE DEEPTECH PARTNERSHIP(2)
COMMON STOCK(2) COMMON STOCK PREFERENCE UNITS
------------ ------------ --------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
- ---------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Tatham . . . . . . . . 2,284,511(3) 9.0% 7,497,136(4) 42.7% 51,000 *
7400 Texas Commerce Tower
Houston, Texas 77002
Donald S. Taylor . . . . . . . . 1,725,871 6.8% 1,274,027(5) 7.6% -- --
3803 Pleasant Valley Drive
Missouri City, Texas 77459
Harry J. Briscoe . . . . . . . . 1,048,227 4.2% 1,197,524(5) 7.1% 2,300 *
2703 Rocky Woods
Kingwood, Texas 77339
Robert H. Williams . . . . . . . 1,026,771 4.1% 1,161,524(5) 6.9% 2,000 *
14511 Westway Lane
Houston, Texas 77077
Diana J. Walters . . . . . . . . 25,000 * 5,000 * -- --
7400 Texas Commerce Tower
Houston, Texas 77002
Kenneth E. Beeney . . . . . . . . 85,000 * 21,863 * 200 *
7400 Texas Commerce Tower
Houston, Texas 77002
James G. Niven . . . . . . . . . 76,762(6) * -- -- -- --
230 Park Avenue South
New York, New York 10003
Humbert B. Powell, III . . . . . 76,762(6) * 11,988 * -- --
712 Fifth Avenue, 11th Floor
New York, New York 10019
Phil G. Clarke . . . . . . . . . 56,762(7) * 158,000(8) * -- --
3141 Hood Street, Suite 350
Dallas, Texas 77219
Clyde E. Nath . . . . . . . . . . 84,564(9) * 30,000(10) * 500 *
164 Charter Oaks Drive
Conroe, Texas 77302
Roger Vincent . . . . . . . . . . 1,000 * 86,134(12) * 1,000 *
230 Park Avenue
New York, New York 10169
Edward Gibbon, Jr. . . . . . . . -- - -- -- 100 *
7400 Texas Commerce Tower
Houston, Texas 77002
Dennis A. Kunetka . . . . . . . . 12,500 * 5,000 * 500 *
7400 Texas Commerce Tower
Houston, Texas 77002
Jeffry K. Lucas . . . . . . . . . 100,000 * 21,863 * 250 *
7400 Texas Commerce Tower
Houston, Texas 77002
Antoine Gautreaux, Jr. . . . . . 25,000(12) * -- -- -- --
7400 Texas Commerce Tower
Houston, Texas 77002
John Pike . . . . . . . . . . . . 204,739(13) * 15,000(14) * -- --
7400 Texas Commerce Tower
Houston, Texas 77002
DeepTech International Inc. . . . 16,000,000(15) 51.2% -- -- --(16) --
7400 Texas Commerce Tower
Houston, Texas 77002
Executive officers and directors
as a group (16 persons) . . . 6,833,469(17) 26.5% 9,906,887(18) 55.3% 57,850 *
</TABLE>
___________________________
* Less than 1%.
(1) Shares of common stock that are not outstanding but they may be
acquired by a person upon exercise of options or warrants within
60 days are deemed outstanding for the purpose of computing
8
<PAGE> 11
the percentage of outstanding shares beneficially owned by such
person. However, such shares are not deemed to be outstanding
for the purpose of computing the percentage of outstanding
shares beneficially owned by any other person.
(2) Excludes each named person's indirect ownership interest, if any,
in the 16,000,000 shares (51.2% of the outstanding shares) of the
Company beneficially owned by DeepTech. Excludes each named
person's indirect ownership, if any, in the 1% general partner
interest and the 3,145,947 common units in the Partnership and
the 1.0101% nonmanaging interest in certain limited liability
company subsidiaries of the Partnership owned by Leviathan which
is indirectly 85% owned by DeepTech.
(3) Includes options to purchase 246,911 shares of Tatham Offshore
Common Stock.
(4) Includes options to purchase 783,333 shares of DeepTech common
stock. Excludes options to purchase 1,333,333 shares of DeepTech
common stock which are not exercisable within the next 60 days
pending shareholder approval.
(5) Includes 789,086 shares held of record by Dover Energy. Each of
Messrs. Taylor and Briscoe and Dr. Williams is a director and
officer of Dover Energy and disclaims beneficial ownership of
526,057 shares held by Dover Energy. Also includes options to
purchase 50,000 shares of DeepTech common stock.
(6) Includes options to purchase 76,762 shares of Tatham Offshore
Common Stock.
(7) Includes options to purchase 56,762 shares of Tatham Offshore
Common Stock.
(8) Includes options to purchase 150,000 shares of DeepTech common
stock.
(9) Includes options to purchase 84,564 shares of Tatham Offshore
Common Stock.
(10) Includes options to purchase 30,000 shares of DeepTech common
stock.
(11) Includes options to purchase 33,482 shares of DeepTech common
stock and 52,652 shares of DeepTech common stock held
beneficially.
(12) Includes options to purchase 25,000 shares of Tatham Offshore
Common Stock.
(13) Includes options to purchase 15,505 shares of Tatham Offshore
Common Stock.
(14) Includes options to purchase 2,500 shares of DeepTech common
stock.
(15) Includes 6,000,000 shares of Common Stock which DeepTech has the
right to acquire in connection with certain conversion rights
relating to Tatham Offshore's $60,000,000 Subordinated Notes
payable to DeepTech.
(16) Excludes DeepTech's effective 23.2% interest in the Partnership.
(17) Includes options to purchase 582,266 shares of Tatham Offshore
Common Stock.
(18) Includes options to purchase 1,149,315 shares of DeepTech common
stock.
9
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The executive officers of the Company are compensated by DeepTech and
do not receive compensation from the Company for their services as such except
for amounts that may be paid to such officers under the Bonus Plan or the
Equity Incentive Plan (each as defined and as discussed below). See "--Bonus
Plan" and "--Equity Incentive Plan" below. DeepTech has entered into
management agreements with each of its subsidiaries, including the Company,
pursuant to which each affiliate is charged an annual management fee in
exchange for operational, financial, accounting and administrative services.
The management fee is intended to reimburse DeepTech for the estimated costs of
the services provided to each affiliate. The Company was charged an annual
management fee equal to 40% of DeepTech's unreimbursed overhead through October
31, 1995. Effective November 1, 1995, DeepTech redetermined the level of
services provided to each of its subsidiaries and amended the management
agreement with the Company to provide for an annual management fee of 27.4% of
DeepTech's overhead expenses. During the years ended June 30, 1996 and 1995,
the Company was charged $4,436,000 and $4,967,000, respectively, under its
management agreement. The management agreement was amended effective July 1,
1996 to provide for an annual management fee equal to 24% of DeepTech's
overhead expenses. During the six months ended December 31, 1996, DeepTech
charged the Company $1.6 million under its management agreement.
The following table sets forth the compensation paid by DeepTech to
the Company's chief executive officers and each of the Company's five other
most highly compensated executive officers for the fiscal year ended June 30,
1996 (collectively, the "Named Officers"). The compensation set forth in the
table represents amounts paid to the Named Officers in respect to their
services rendered in all capacities to DeepTech and its subsidiaries for the
fiscal years ended June 30, 1994, 1995 and 1996. Therefore, the amounts shown
do not reflect amounts earned solely as compensation for services to the
Company. During the fiscal year ended June 30, 1996, each of Messrs. Tatham,
Weir and Kunetka spent less than a majority of his time performing services for
the Company. During the same period, Messrs. Gautreax and Pike and Ms. Walters
spent a majority of their time performing services for the Company, and Mr.
Taylor spent a majority of his time performing services for the Company prior
to his resignation effective October 31, 1995. As noted below, in addition to
serving as executive officers of the Company each of Messrs. Tatham, Kunetka,
and Weir and Ms. Walters also served as officers of DeepTech and/or one or more
of its affiliates.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION BY DEEPTECH LONG TERM
------------------------------- COMPENSATION
NAME\PRINCIPAL OTHER ANNUAL AWARDS ALL OTHER
POSITION WITH THE FISCAL SALARY(2) BONUS(2) COMPENSATION(1) OPTIONS COMPENSATION
COMPANY YEAR ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Tatham(3)...... 1996 $2,731,750(4) $600,000(4) $39,178(5) 300,000(6)(9) --
Chief Executive Officer 1995 $600,000 $600,000(7) $107,714(8) 100,000(9) --
1994 $600,000 -- -- -- --
Antoine Gautreaux, Jr.(10). 1996 $162,500 -- -- 75,000(9) --
Chief Operating Officer 1995 $31,248 -- -- 25,000(11) --
1994 -- -- -- -- --
Dennis A. Kunetka(12)...... 1996 $126,000 -- -- 30,000(9) --
Senior Vice President- 1995 $126,375 $15,000(13) -- -- --
Corporate Finance & 1994 $120,000 -- -- 60,000(14) --
Investor Relations
John D. Pike(10)............. 1996 $227,195(15) -- -- 50,000(9) --
Vice President - 1995 $80,000 $50,000(13) -- -- --
Chief Geologist 1994 $71,252 $15,000(13) -- 25,000(14) --
Diana J. Walters(16)......... 1996 $128,000 -- -- 75,000(9) --
Chief Financial Officer 1995 $104,065 $25,000(13) -- -- --
1994 $95,514 -- -- 30,000(14) --
</TABLE>
10
<PAGE> 13
<TABLE>
ANNUAL COMPENSATION BY DEEPTECH LONG TERM
------------------------------- COMPENSATION
NAME\PRINCIPAL OTHER ANNUAL AWARDS ALL OTHER
POSITION WITH THE FISCAL SALARY(2) BONUS(2) COMPENSATION(1) OPTIONS COMPENSATION
COMPANY YEAR ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Donald S. Taylor(17)......... 1996 $124,288(18) -- -- -- $35,000(19)
1995 $179,162 -- -- 50,000(9) --
1994 $150,000 -- -- -- --
Donald V. Weir(20)........... 1996 $200,000 -- $19,241(21) 125,000(9) --
1995 $179,162 -- $86,899(22) 50,000(9) --
1994 $132,507 -- -- 75,000(14) --
</TABLE>
- -------------------------------
(1) Other Annual Compensation excludes the aggregate value of perquisites
when such value is less than the lesser of $50,000 or 10% of total
annual Salary and Bonus for each Named Officer.
(2) Includes the aggregate market value of Common Stock and DeepTech
common stock issued as a result of the exercise of options granted
pursuant to the Deferred Compensation Arrangement (as defined herein)
for salary and bonuses. The aggregate market value is calculated
based on the last reported sales prices of the Common Stock and/or the
DeepTech common stock on the dates of exercise of the options. See
"Officer and Employee Deferred Compensation Arrangement."
(3) Mr. Tatham also serves as Chairman of the Board and Chief Executive
Officer of DeepTech and Chairman of the Board of Leviathan Gas
Pipeline Company ("Leviathan"). During the fiscal year ended June 30,
1996, Mr. Tatham spent less than a majority of his time performing
services for the Company.
(4) Mr. Tatham's salary and bonus for the fiscal year ended June 30, 1996
was settled through the issuance of options pursuant to the Deferred
Compensation Arrangement. Under the Deferred Compensation
Arrangement, for each $1 of salary deferred, Mr. Tatham was entitled
to apply $3 to the exercise price of options to acquire Common Stock
or DeepTech common stock under the Company's Equity Incentive Plan or
DeepTech's equity incentive plan, respectively. Through June 30,
1996, Mr. Tatham had exercised options to acquire 600,125 shares of
DeepTech common stock in full settlement of his salary for the fiscal
year ended June 30, 1996. In addition, Mr. Tatham was awarded a bonus
during the fiscal year ended June 30, 1996 unrelated to the Company's
operations. This bonus was settled pursuant to the Deferred
Compensation Arrangement in September 1995 when Mr. Tatham exercised
options to purchase 150,000 shares of DeepTech common stock. The
aggregate market value of the 750,125 shares of DeepTech common stock
issued, calculated based on the last reported sales price on the dates
of exercise, was $3,331,750.
(5) Represents dues for club memberships.
(6) Excludes options to acquire 1,666,666 shares of DeepTech common stock
that were granted by DeepTech to Mr. Tatham during the fiscal year
ended June 30, 1996 related to matters other than for executive
compensation and unrelated to the operations of the Company.
(7) Mr. Tatham's bonus was earned during the fiscal year ended June 30,
1995, but was deferred under the Deferred Compensation Arrangement
with DeepTech. In August 1995, Mr. Tatham exercised options to
purchase 150,000 shares of DeepTech common stock in settlement of this
bonus obligation. The market value of the 150,000 shares of DeepTech
common stock issued, calculated based on the last reported sales price
on the date of exercise, was $600,000.
(8) Includes $85,400 to pay the initial membership fee at two country
clubs.
(9) Options to acquire DeepTech common stock granted pursuant to
DeepTech's equity incentive plan.
(10) Each of these executive officers spent the majority of his time
performing services for the Company during the fiscal year ended June
30, 1996.
(11) Represents options issued to purchase shares of Common Stock pursuant
to the Company's Equity Incentive Plan.
(12) Mr. Kunetka also serves as Senior Vice President - Corporate Finance
and Investor Relations for DeepTech and Leviathan. During the fiscal
year ended June 30, 1996, Mr. Kunetka spent less than a majority of
his time performing services for the Company.
(13) Represents bonuses paid pursuant to the Bonus Plan. See "--Bonus
Plan."
(14) Options granted pursuant to DeepTech's equity incentive plan which
were canceled during the fiscal year ended June 30, 1996 in connection
with the grant of options pursuant to DeepTech's equity incentive plan
in 1996.
(15) Mr. Pike's salary during the fiscal year ended June 30, 1996 was
settled through the issuance of options pursuant to the Deferred
Compensation Arrangement. Under the Deferred Compensation
Arrangement, for each $1 of salary deferred, Mr. Pike was entitled to
apply $3 to the exercise price of options to acquire Common Stock or
$1.50 to the exercise price of options to acquire DeepTech common
stock under the Company's Equity Incentive Plan or DeepTech's equity
incentive plan, respectively. Mr. Pike elected to exercise options to
acquire 124,234 shares of Common Stock and 15,006 shares of DeepTech
common stock in full settlement of his salary during the fiscal year
ended June 30, 1996.
11
<PAGE> 14
(16) During the fiscal year ended June 30, 1996, Ms. Walters spent the
majority of her time performing services for the Company. Ms. Walters
resigned as Chief Financial Officer of the Company effective November
30, 1996. Ms. Walters also served as Assistant Secretary for
DeepTech prior to her resignation.
(17) Mr. Taylor served as Chief Executive Officer of the Company prior to
his resignation effective October 31, 1995. Mr. Taylor spent the
majority of his time performing services for the Company.
(18) A portion of Mr. Taylor's salary during the portion of the fiscal year
ended June 30, 1996 in which he served as an executive officer of the
Company was paid through the issuance of options pursuant to the
Deferred Compensation Arrangement. Under the Deferred Compensation
Arrangement, for each $1 of salary deferred, Mr. Taylor was entitled
to apply $3 to the exercise price of options to acquire Common Stock
or $1.50 to the exercise price of options to acquire DeepTech common
stock under the Company's Equity Incentive Plan or DeepTech's equity
incentive plan, respectively. Mr. Taylor elected to exercise options
to acquire 27,471 shares of Common Stock and 18,750 shares of DeepTech
common stock in full settlement of this portion of his salary during
the fiscal year ended June 30, 1996. The aggregate market value of
these shares, calculated on the respective last reported sales prices
on the date of exercise, was $107,622.
(19) Amounts paid for consulting services rendered to one of the
subsidiaries of the Company.
(20) Mr. Weir served as Chief Financial Officer of the Company until
September 1995. Mr. Weir also serves as Chief Financial Officer of
DeepTech and Secretary of Leviathan. Mr. Weir spent less than a
majority of his time performing services for the Company during the
fiscal year ended June 30, 1996.
(21) Includes $7,125 related to the use of an automobile provided by
DeepTech and $12,116 of dues for club memberships.
(22) Includes $8,136 related to the use of an automobile provided by
DeepTech and $74,025 to pay the initial membership fees at two country
clubs.
OPTION GRANTS
The following table sets forth certain information with respect to
option grants made to the Named Officers to acquire shares of DeepTech common
stock pursuant to DeepTech's equity incentive plan and otherwise during the
fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
NUMBER OF SHARES OPTIONS EXERCISE
OF DEEPTECH GRANTED TO OR BASE POTENTIAL REALIZABLE VALUE AT
COMMON STOCK EMPLOYEES PRICE ASSUMED ANNUAL RATES OF STOCK
UNDERLYING IN FISCAL ($/SH) EXPIRATION PRICE APPRECIATION FOR OPTION
NAME OPTIONS GRANTED YEAR DATE TERM
5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Tatham 300,000(1) 11.4% $5.00 09/07/05 $849,182 $2,103,107
1,666,666(2) N/A (2) $4.50 07/15/97 $1,267,562 $1,702,641
850,000(3) 32.4% $4.00 07/15/96 N/A N/A
50,125(3) 1.9% $3.99 07/17/96 N/A N/A
Antoine Gautreaux, Jr. 75,000(4) 2.9% $4.00 11/13/05 $292,579 $616,675
3,516(3) * $4.00 07/15/96 N/A N/A
1,175(3) * $3.99 07/15/96 N/A N/A
Dennis Kunetka 30,000(4) 1.1% $4.00 11/13/05 $117,032 $246,670
1,689(3) * $4.00 07/15/96 N/A N/A
564(3) * $3.99 07/15/96 N/A N/A
John Pike 50,000(4) 1.9% $4.00 11/13/05 $195,053 $411,117
27,500(3) 1.0% $4.00 07/15/96 N/A N/A
2,506(3) * $3.99 07/15/96 N/A N/A
</TABLE>
12
<PAGE> 15
<TABLE>
PERCENT OF
TOTAL
NUMBER OF SHARES OPTIONS EXERCISE
OF DEEPTECH GRANTED TO OR BASE POTENTIAL REALIZABLE VALUE AT
COMMON STOCK EMPLOYEES PRICE ASSUMED ANNUAL RATES OF STOCK
UNDERLYING IN FISCAL ($/SH) EXPIRATION PRICE APPRECIATION FOR OPTION
NAME OPTIONS GRANTED YEAR DATE TERM
5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Diana Walters 75,000(4) 2.9% $4.00 11/13/05 $292,579 $616,675
2,250(3) * $4.00 07/15/96 N/A N/A
752(3) * $3.99 07/15/96 N/A N/A
Donald S. Taylor 18,750(3) * $4.00 07/15/96 N/A N/A
6,265(3) * $3.99 07/15/96 N/A N/A
Donald V. Weir 125,000(4) 4.8% $4.00 11/13/05 $487,632 $1,027,791
9,375(3) * $4.00 07/15/96 N/A N/A
3,133(3) * $3.99 07/15/96 N/A N/A
</TABLE>
- ------------------------------
*Less than 1%
(1) These options are immediately exercisable.
(2) These are common stock purchase warrants which are not related to Mr.
Tatham's employment. DeepTech issued 1,333,333 of the warrants to Mr.
Tatham subject to stockholder approval in connection with the
refinancing of certain indebtedness of DeepTech payable to Mr. Tatham.
They are immediately exercisable upon stockholder approval. The
remaining 333,333 warrants were originally issued by DeepTech to a
third party and are immediately exercisable. The third party
subsequently transferred these warrants to Mr. Tatham as partial
consideration for the guarantee of Company indebtedness by Mr. Tatham.
(3) These options were issued pursuant to the Deferred Compensation
Arrangement. See"--Officer and Employee Deferred Compensation
Arrangements."
(4) These options vest 25% annually beginning November 14, 1996.
The following table sets forth certain information with respect to
option grants made to the Named Officers under the Plan to acquire shares of
Tatham Offshore Common Stock during the fiscal year ended June 30, 1996. Each
of the options listed below were issued pursuant to the Deferred Compensation
Arrangement. See "--Officer and Employee Deferred Compensation Arrangements."
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
OF TATHAM TOTAL EXERCISE POTENTIAL REALIABLE VALUE AT
OFFSHORE COMMON OPTIONS OR BASE ASSUMED ANNUAL RATES OF
STOCK UNDERLYING GRANTED IN PRICE EXPIRATION STOCK APPRECIATION FOR
NAME OPTIONS GRANTED FISCAL ($/SH) DATE OPTION TERM
5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Tatham 58,139 1.8% $3.44 07/15/96 N/A N/A
57,142 1.8% $3.50 07/15/96 N/A N/A
66,225 2.1% $3.02 07/15/96 N/A N/A
109,889 3.5% $1.82 07/15/96 N/A N/A
163,933 5.2% $1.22 07/15/96 N/A N/A
155,278 4.9% $1.29 07/15/96 N/A N/A
218,458 6.9% $ .92 07/15/96 N/A N/A
219,778 6.9% $ .91 07/15/96 N/A N/A
246,911 7.8% $ .81 07/15/96 N/A N/A
238,093 7.5% $ .84 07/15/96 N/A N/A
155,061 4.9% $1.29 07/15/96 N/A N/A
156,096 4.9% $1.28 07/15/96 N/A N/A
</TABLE>
13
<PAGE> 16
<TABLE>
NUMBER OF SHARES PERCENT OF
OF TATHAM TOTAL EXERCISE POTENTIAL REALIABLE VALUE AT
OFFSHORE COMMON OPTIONS OR BASE ASSUMED ANNUAL RATES OF
STOCK UNDERLYING GRANTED IN PRICE EXPIRATION STOCK APPRECIATION FOR
NAME OPTIONS GRANTED FISCAL ($/SH) DATE OPTION TERM
5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Antoine Gautreaux, Jr. 1,817 * $3.44 07/15/96 N/A N/A
1,786 * $3.50 07/15/96 N/A N/A
2,070 * $3.02 07/15/96 N/A N/A
3,435 * $1.82 07/15/96 N/A N/A
Dennis Kunetka 872 * $3.44 07/15/96 N/A N/A
857 * $3.50 07/15/96 N/A N/A
993 * $3.02 07/15/96 N/A N/A
1,648 * $1.82 07/15/96 N/A N/A
John Pike 5,813 * $3.44 07/15/96 N/A N/A
5,714 * $3.50 07/15/96 N/A N/A
6,622 * $3.02 07/15/96 N/A N/A
10,988 * $1.82 07/15/96 N/A N/A
16,392 * $1.22 07/15/96 N/A N/A
15,526 * $1.29 07/15/96 N/A N/A
21,844 * $ .92 07/15/96 N/A N/A
21,976 * $ .91 07/15/96 N/A N/A
24,689 * $ .81 07/15/96 N/A N/A
23,807 * $ .84 07/15/96 N/A N/A
15,505 * $1.29 07/15/96 N/A N/A
15,608 * $1.28 07/15/96 N/A N/A
Diana Walters 1,163 * $3.44 07/15/96 N/A N/A
1,143 * $3.50 07/15/96 N/A N/A
1,325 * $3.02 07/15/96 N/A N/A
2,198 * $1.82 07/15/96 N/A N/A
Donald S. Taylor 14,534 * $3.44 07/15/96 N/A N/A
14,285 * $3.50 07/15/96 N/A N/A
16,556 * $3.02 07/15/96 N/A N/A
27,471 * $1.82 07/15/96 N/A N/A
Donald V. Weir 4,845 * $3.44 07/15/96 N/A N/A
4,762 * $3.50 07/15/96 N/A N/A
5,519 * $3.02 07/15/96 N/A N/A
9,158 * $1.82 07/15/96 N/A N/A
</TABLE>
* Less than 1%
OPTION EXERCISES AND YEAR-END VALUE TABLES
The following table sets forth certain information regarding the
outstanding options and warrants to purchase DeepTech common stock held by the
Named Officers at June 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED REALIZED AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME ON EXERCISE (#)(1) ($)(2) EXERCISABLE/UNEXERCISABLE(3) EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
Thomas P. Tatham 900,125 $2,731,750 2,066,666 / $833,333 / --
Antoine Gautreaux, Jr. -- -- -- / 75,000 -- / $75,000
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED REALIZED AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME ON EXERCISE (#)(1) ($)(2) EXERCISABLE/UNEXERCISABLE(3) EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
Dennis Kunetka -- -- -- / 30,000 -- / $30,000
John Pike 15,006 $31,902 -- / 50,000 -- / $50,000
Diana Walters -- -- -- / 75,000 -- / $75,000
Donald S. Taylor 18,750 $25,002 50,000 / -- -- / --
Donald V. Weir -- -- 50,000 / 125,000 -- / $125,000
</TABLE>
__________________________
(1) Consists of shares acquired as a result of the exercise of options issued
pursuant to the Deferred Compensation Arrangement. See "Summary
Compensation Table" and "Deferred Compensation Arrangement."
(2) Consists of the spread between the salary and/or bonus being settled and
the last reported sale price of DeepTech common stock times the number of
shares acquired on the dates of exercise. Accordingly, the Named Officers
would have realized these amounts had they sold such shares on the dates of
exercise.
(3) All unexercisable options in this column relate to options which were
issued pursuant to DeepTech's equity incentive plan and which vest 25%
annually beginning November 14, 1996.
The following table sets forth certain information regarding the
outstanding options and warrants to purchase Tatham Offshore Common Stock held
by the Named Officers at June 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED REALIZED AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME ON EXERCISE (#)(1) ($)(2) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
Antoine Gautreaux, Jr. -- -- 25,000 (3)/ -- -- / --
John Pike 124,234 $115,293 -- / -- -- / --
Donald Taylor 27,471 $15,956 -- / -- -- / --
</TABLE>
__________________________
(1) Consists of shares acquired as a result of the exercise of options pursuant
to DeepTech's Deferred Compensation Arrangement. See "Summary Compensation
Table" and "Deferred Compensation Arrangement."
(2) Consists of the spread between the salary being settled and the last
reported sale price of Tatham Offshore Common Stock times the number of
shares acquired on the date of exercise. Accordingly, the Named Officers
would have realized these amounts had they sold such shares on the dates of
exercise.
(3) Options granted pursuant to Tatham Offshore's Equity Incentive Plan which
are 100% vested.
BONUS PLAN
During the fiscal year ended June 30, 1990, the Company established a
bonus plan for the directors, employees and consultants of DeepTech who perform
services for the Company (the "Bonus Plan"). Following the end of each fiscal
year through June 30, 1994, the Bonus Plan Compensation Committee determined
the amount of the bonus payable to each participant in the Bonus Plan out of a
bonus pool determined by aggregating (i) the annual net billion cubic feet of
proved developed gas reserve additions multiplied by $10,000, (ii) the annual
net barrels of proved developed oil reserve additions multiplied by $0.10 and
(iii) 2 1/2% of the Company's actual working interest share of the annual gross
revenues attributable to its oil and gas
15
<PAGE> 18
properties. No awards were made for the fiscal year ended June 30, 1995.
During the fiscal year ended June 30, 1996, the Bonus Plan was discontinued.
EQUITY INCENTIVE PLAN
General. In 1995, the Company adopted the Tatham Offshore Inc. Equity
Incentive Plan (the "Equity Incentive Plan"). The Equity Incentive Plan was
effected to provide the Company with the ability of making a variety of awards
pursuant to the Equity Incentive Plan including stock options, restricted
stock, and stock value equivalent awards. The Company issued stock options
under the Equity Incentive Plan to certain employees of DeepTech performing
services for the Company who agreed to defer certain cash salary and bonus
otherwise due during the Company's fiscal year ending June 30, 1996.
Summary of Equity Incentive Plan. Under the Equity Incentive Plan,
the Company may grant to employees, consultants or agents of the Company or any
of its parents or subsidiaries one or more options (each, a "Stock Option") to
purchase shares of Common Stock as hereinafter set forth. Stock Options
granted under the Equity Incentive Plan may be either incentive stock options
("Incentive Stock Options") within the meaning of Section 422(b) of the Code,
or options that do not qualify as Incentive Stock Options ("Non-Qualified Stock
Options"). Pursuant to the Equity Incentive Plan, the Company may grant awards
of Common Stock subject to restrictions on sale or other disposition of such
shares ("Restricted Stock Grant"), and such other requirements including the
requirement that such shares be forfeited upon termination of employment for
certain reasons within a specified period of time. Pursuant to the Equity
Incentive Plan, the Company may also grant rights to receive an amount equal to
the fair market value of shares of Common Stock or rights to receive an amount
equal to any appreciation or increase in the fair market value of Common Stock
over a specified period of time ("Stock Value Equivalent Awards"). Stock
Options, Restricted Stock Grants and Stock Value Equivalent Awards are referred
to collectively herein as "Awards."
Except with respect to outstanding Awards, and unless sooner
terminated by action of the Company's Board of Directors or the committee
thereof charged with administration of the Equity Incentive Plan, the Equity
Incentive Plan will terminate on December 31, 2005. The maximum number of
shares of Common Stock with respect to which Awards may be granted under the
Equity Incentive Plan is 4,000,000, subject to adjustments for stock splits,
stock dividends and certain other changes in capitalization.
The Board of Directors may terminate or suspend the Equity Incentive
Plan (or any portion thereof) at any time with respect to any shares for which
Awards have not previously been granted and remain outstanding. The Board of
Directors has the right to alter or amend the Equity Incentive Plan or any part
thereof from time to time; provided, however, that no change in any Award
theretofore granted may be made which would materially adversely affect the
rights and obligations of the holder of any such Award without the written
consent of such Equity Incentive Plan participant; and provided, further, that
the Board of Directors may not, without stockholder approval as required under
the Equity Incentive Plan, (i) materially increase the number of shares of
Common Stock which may be issued under the Equity Incentive Plan (other than in
connection with adjustments permitted by the Equity Incentive Plan), (ii)
materially modify the requirements as to eligibility for participation in the
Equity Incentive Plan, (iii) materially increase the benefits accruing to
participants under the Equity Incentive Plan, or (iv) extend the termination
date of the Equity Incentive Plan. In addition, no amendment, suspension or
termination can be adopted which would disqualify the Equity Incentive Plan
from (i) the exemption provided by Rule 16b-3, promulgated under the Exchange
Act, or any successor rule or regulation to such Rule 16b-3, as such rule is
applicable from time to time, or (ii) the benefits provided under Section 422
of the Code, or any successor thereto.
The Equity Incentive Plan is not subject to any provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), nor the
qualification requirements of Section 401 of the Code.
The Plan is to be administered by the Equity Incentive Plan
Compensation Committee (the "Committee"). Each member of the Equity Incentive
Plan Compensation Committee is a disinterested person within the meaning of
Rule 16b-3 of the Exchange Act and qualifies as an "outside director", as such
term is used for the purposes of Section 162(m) of the Code and any rules and
regulations promulgated thereunder.
16
<PAGE> 19
Subject to the provisions of the Equity Incentive Plan, the Committee
has sole authority to select the individuals who are to be granted Awards from
among those persons who are eligible and to determine the restrictions, terms
and conditions of each Award granted under the Equity Incentive Plan (subject
to the terms of the Equity Incentive Plan). The Committee is authorized to
interpret the Equity Incentive Plan and may, from time to time, adopt, amend,
or rescind rules and regulations relating to the implementation, administration
and maintenance of the Equity Incentive Plan.
A total of 25,000 Stock Options issued pursuant to the Equity
Incentive Plan are currently outstanding.
OFFICER AND EMPLOYEE DEFERRED COMPENSATION ARRANGEMENTS
Effective July 1, 1995, DeepTech established three deferred
compensation arrangements (the "Deferred Compensation Arrangement"): (i) a
mandatory arrangement for Mr. Thomas P. Tatham, (ii) a mandatory arrangement
for certain senior executives of DeepTech and (iii) an optional arrangement for
all other employees of DeepTech. Pursuant to the terms of each arrangement,
participants deferred all or a portion of their cash salary until no later than
July 1, 1996. During each month in the deferral period, each participant was
entitled to receive options to purchase a number of common shares of either
DeepTech or the Company equal to a percentage (ranging from 100% to 300% times
their cash salary) divided by the lesser of the closing price on June 30, 1995
(DeepTech - $4.00 and the Company - $3.50) or the average closing price for the
applicable month. Options were exercisable only by cancellation of the
participant's cash salary. Each participant earned credits equal to a
multiple, based on the option elected, of their deferred cash salary. Any
participant except Mr. Tatham could have received all or a portion of their
salary in cash if they did not elect to exercise any options. To the extent
that the Company issued its Common Stock pursuant to the exercise of options
granted under the Equity Incentive Plan related to these arrangements, it
received an offsetting credit against its management fees payable to DeepTech.
In November 1995, DeepTech terminated the Deferred Compensation Arrangement for
all but three employees of DeepTech. During the fiscal year ended June 30,
1996, a total of 3,178,938 stock options were issued under the Equity Incentive
Plan to certain employees of DeepTech who performed services for the Company
and who had agreed to defer certain cash salary and bonus otherwise due during
the year. In November 1995 and June 1996, the Company issued 120,948 shares
and 124,234 shares, respectively, of Common Stock in connection with the
mandatory arrangement for certain senior executives of DeepTech and received a
$360,000 credit against its management fees payable to DeepTech. The remaining
2,933,756 stock options were canceled by July 15, 1996. Mr. Tatham's options
were immediately exercisable. The options of the senior executives continuing
in the arrangement were exercisable upon the earlier of (i) issuance or (ii)
January 1, 1996. The options issued to the remaining participants were
exercisable upon the termination of the plan in November 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At June 30, 1995, the Bonus Plan Compensation Committee was comprised
of (i) Mr. Taylor, a Director of Tatham Offshore and, at June 30, 1995, an
Executive Vice President and a Director of DeepTech and the Chief Executive
Officer of Tatham Offshore, (ii) Mr. Weir, the Chief Financial Officer and a
Director of DeepTech and (iii) Mr. Sims, Senior Vice President and a Director
of DeepTech. The Bonus Plan Compensation Committee made no awards for the
fiscal year ended June 30, 1995 and the Bonus Plan was discontinued during the
year ended June 30, 1996. See "Bonus Plan."
The Incentive Plan Compensation Committee is responsible for
administering the Equity Incentive Plan. The Incentive Plan Compensation
Committee is comprised of Messrs. Clarke, Nath and Vincent. During the year
ended June 30, 1996, the Board of Directors of the Company took action with
respect to the issuance of options pursuant to the Equity Incentive Plan
related to the Deferred Compensation Arrangement.
In February 1995, DeepTech entered into an agreement with Mr. Clarke
regarding his service as an Advisory Director and Chairman of the Engineering
and Technical Review Committee for DeepTech and a Director of Tatham Offshore.
The agreement provides that Mr. Clarke is to receive $30,000 base compensation
per year and $1,000 per meeting attended as an Advisory Director or as Chairman
of the Engineering and Technical Review Committee of DeepTech in addition to
$30,000 base compensation per year and $2,000 per
17
<PAGE> 20
meeting attended as a Director of Tatham Offshore. The agreement also provides
for consulting services to be provided by Mr. Clarke at the request of DeepTech
or Tatham Offshore at the rate of $250 per hour with a minimum $40,000 paid
during twelve month period following the date Mr. Clarke agreed to become a
director. The agreement also provided that for a period of one year following
the commencement of service, Mr. Clarke had the right to elect to receive (i)
options to purchase 30,000 shares of Tatham Offshore Common Stock, (ii) options
to purchase 150,000 shares of DeepTech common stock or (iii) options to purchase
common stock of both companies on a prorated basis. During the year ended June
30, 1996, Mr. Clarke elected to receive options to purchase 150,000 shares of
DeepTech common stock. The options are exercisable at $4.00 per share during
Mr. Clarke's term as a director and for a period of twelve months thereafter.
In February 1995, DeepTech entered into an agreement with Mr. Nath
regarding his service as a Director of Tatham Offshore and as a special advisor
to the Board of Directors of DeepTech. The agreement provides that Mr. Nath
will receive $30,000 base compensation per year and $2,000 per meeting attended
as a Director of Tatham Offshore. The agreement also provides that to the
extent Mr. Nath performs consulting services upon the request of Tatham
Offshore and/or DeepTech or affiliates thereof beyond the scope of services
usually performed by a director, that he will be compensated at a rate of $250
per hour. In addition, the agreement provided that for a period of one year
following the commencement of service, Mr. Nath had the right to elect to
receive (i) options to purchase 30,000 shares of Tatham Offshore Common Stock
and (ii) options to purchase 30,000 shares of DeepTech common stock. During
the year ended June 30, 1996, Mr. Nath was issued options to purchase 30,000
shares of Common Stock at $.8125 per share pursuant to the Tatham Offshore
Non-Employee Director Stock Option Plan (the "Director Plan") discussed below.
In addition, Mr. Nath was issued options to purchase 30,000 shares of DeepTech
common stock exercisable at $4.00 per share during Mr. Nath's term as a
director and for a period of twelve months thereafter.
18
<PAGE> 21
EXHIBIT A
TATHAM OFFSHORE, INC.
AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. This non-qualified stock option plan to be known as the
Tatham Offshore, Inc. Amended and Restated Non-Employee Director Stock Option
Plan (hereinafter, this "Plan") is intended to promote the interests of Tatham
Offshore, Inc. (hereinafter, the "Company") by providing an inducement to
obtain and retain the services of qualified persons who are neither employees
nor officers of the Company to serve as members of its Board of Directors. The
Plan also contains provisions for the granting of options in certain cases of
deferred compensation by the Directors. The options granted pursuant hereto
are intended by the Company and the optionees to be nonstatutory stock options
and will not qualify for any special tax benefits to the optionees. The Plan
is intended to qualify under Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") in order to be exempt
from the requirements of Section 16(b) of the Exchange Act.
2. DEFINITIONS. For purposes of the Plan, the following terms shall
have the meanings set forth below:
"Annual Retainer" means the annual dollar amount, designated
from time to time by the Board, payable monthly in arrears to each Participant
for services as a Director of the Company. The initial Annual Retainer is
$30,000.
"Board" means the Board of Directors of the Company, as
constituted from time to time.
"Code" means the Internal Revenue Code of 1986, as in effect and
as amended from time to time, or any successor statute thereto, together with
any rules, regulations and interpretations promulgated thereunder or with
respect thereto.
"Committee" means the Board or a committee appointed by the
Board from time to time to exercise the power set forth in Sections 5.1 and
5.2 herein.
"Common Stock" means the Common Stock, par value $.01 per share,
of the Company or any security of the Company issued by the Company in
substitution or exchange therefor.
"Director Fee Stock Option" means an option granted under
Section 7 of the Plan.
"Company" means Tatham Offshore, Inc., a Delaware corporation,
or any successor company.
"Director Fee" means the sum of the Annual Retainer and the
Meeting Fees.
"Exchange Act" means the Securities Exchange Act of 1934, as in
effect and as amended from time to time, or any successor statute thereto,
together with any rules, regulations and interpretations promulgated
thereunder or with respect thereto.
"Fair Market Value" means on, or with respect to, any given
date, the closing price of the Common Stock on such date (or, if the Common
Stock was not traded on such date, then the next preceding day on which the
Common Stock was traded) as reported on the NASDAQ composite tape or, if the
Common Stock is not traded on such exchange, as reported on any other national
securities exchange on which the Common Stock may be traded.
A-1
<PAGE> 22
"Meeting Fee" means the fee payable to each Participant for
attending each meeting of the Board, or committee thereof on which the
Participant then serves, designated from time to time by the Board. The
initial Meeting Fee is $2,000 and may be changed by resolution of the Board
from time to time in its discretion.
"Participant" means a member of the Board who is neither an
officer or employee of the Company or any affiliate of the Company and who is
not elected solely by holders of any preferred stock of the Company.
"Plan" means this Tatham Offshore, Inc. Amended and Restated
Non-Employee Director Stock Option Plan, as set forth herein and as in effect
and as amended from time to time (together with any rules and regulations
promulgated by the Committee with respect thereto).
"Stock Option" means an option granted under either Section 6 or
7 of the Plan.
"Stock Option Agreement" means the agreement executed by a
Participant pursuant to Section 11 of the Plan in connection with the granting
of a Stock Option pursuant to Section 6 of the Plan.
3. TERM OF PLAN. This Plan shall become effective as of the
Effective Date and shall continue in effect through December 31, 2005 unless
earlier terminated.
4. AVAILABLE SHARES. The total number of shares of Common Stock of
the Company for which Stock Options may be granted under this Plan shall not
exceed 1,000,000 shares, subject to adjustment in accordance with Section 10
of the Plan. Shares subject to the Plan may be either authorized but unissued
shares or shares that were once issued and subsequently reacquired by the
Company. If any options granted under this Plan are surrendered before
exercise or lapse without exercise, in whole or in part, the shares reserved
therefor shall continue to be available under this Plan. No fractional shares
of Common Stock shall be issued under the Plan, unless the Committee
determines otherwise. For the purpose of computing the maximum number of
shares of Common Stock available for Stock Options under the Plan, there shall
be counted against the limitations set forth above the maximum number of
shares of Common Stock potentially subject to issuance upon exercise of Stock
Options granted under the Plan determined as of the date on which such Stock
Options are granted. If any Stock Options expire unexercised or are otherwise
forfeited, surrendered, canceled, or terminated, the shares of Common Stock
which were theretofore subject (or potentially subject) to such Stock Options
shall again be available under the Plan to the extent of such expiration,
forfeiture, surrender, cancellation or termination.
5. ADMINISTRATION.
5.1 THE COMMITTEE. The Plan shall be administered by the
Committee. The Board may appoint members of the Committee from time to time.
The Committee shall be comprised of not less than two of the then members of
the Board who qualify to administer the Plan as disinterested persons within
the meaning of Rule 16b-3 under the Exchange Act. Consistent with the Bylaws
of the Company, members of the Committee shall serve at the pleasure of the
Board and the Board, subject to the immediately preceding sentence, may at any
time and from time to time remove members from, or add members to, the
Committee.
5.2 PLAN ADMINISTRATION AND PLAN RULES. The Committee is
authorized to construe and interpret the Plan and to promulgate, amend and
rescind rules and regulations relating to the implementation, administration
and maintenance of the Plan. Subject to the terms and conditions of the Plan,
the Committee shall make all determinations necessary or advisable for the
implementation, administration and maintenance of the Plan, in each case
consistent with the terms of the Plan,
A-2
<PAGE> 23
including, without limitation, (a) granting Stock Options pursuant to the
terms of the Plan in such consistent form as the Committee shall determine,
(b) imposing such restrictions, terms and conditions upon such Stock Options
as the Committee shall deem appropriate, and (c) correcting any technical
defect or technical omission or reconciling any technical inconsistency, in
the Plan and/or any Stock Option Agreement. The Committee may designate
persons other than members of the Committee to carry out the day-to-day
administration of the Plan under such conditions and limitations as it may
prescribe. Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration,
implementation or maintenance of the Plan shall be final, conclusive and
binding upon all Participants and any person(s) claiming under or through any
Participants.
5.3 LIABILITY LIMITATION. Neither the Board nor the Committee,
nor any member of either, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with the Plan (or any Stock Option Agreement), and the members of the Board
and the Committee shall be entitled to indemnification and reimbursement by
the Company in respect of any claim, loss, damage or expense (including,
without limitation, attorneys' fees) arising or resulting therefrom to the
fullest extent permitted by law and/or under any directors and officers
liability insurance coverage which may be in effect from time to time.
6. AUTOMATIC STOCK OPTION GRANT
6.1. STOCK OPTION GRANT Upon the effectiveness of the Plan,
Stock Options to purchase 30,000 shares of the Common Stock of the Company
shall automatically be granted to each Participant who has not already
otherwise received stock options to purchase 30,000 shares of Common Stock of
the Company in connection with such Participant's agreement to serve as a
Director of the Company. Stock Options to purchase 30,000 shares of Common
Stock of the Company shall automatically be granted to each individual who
becomes a Participant after the effectiveness of the Plan upon the election of
such individual as Director of the Company. In the event that there are not
sufficient shares available under the Plan to allow for the grant to a
Participant of a Stock Option provided for above, such Participant shall be
granted a Stock Option to purchase the remaining shares that are reserved
under the Plan. If two or more Participants are entitled to grants of Stock
Options hereunder under such circumstances, then such Participants shall
receive grants of Stock Options to purchase shares of Common Stock equal to
their pro rata share of the total number of shares of Common Stock remaining
and available under the Plan. The Stock Options may be granted under the Plan
in such form as the Committee may from time to time approve with such terms
and conditions, not inconsistent with the express terms and provisions of the
Plan, as the Committee shall set forth in the relevant Stock Option Agreement.
6.2. EXERCISE PRICE. The exercise price per share of Common
Stock subject to a Stock Option granted pursuant to Section 6 of this Plan
shall be 100% of Fair Market Value of such shares upon the later to occur of
(i) the effectiveness of the Plan, and (ii) the date of election as Director
of the Participant. The exercise price will be subject to adjustment in
accordance with the provisions of Section 10 of this Plan. Notwithstanding the
foregoing, the exercise price per share of Common Stock subject to a Stock
Option granted pursuant to Section 6 of this Plan and outstanding on February
13, 1996, whether or not vested at such time, shall be $0.8125, subject to
further adjustment as necessary pursuant to Section 10 of this Plan.
6.3. TERM. Unless sooner terminated in accordance with the
provisions of this Plan or pursuant to the terms of the applicable Stock Option
Agreement, a Stock Option granted hereunder shall expire on a date which is ten
(10) years after the date of grant of the option.
A-3
<PAGE> 24
6.4. EXERCISE. Subject to the terms and conditions of this Plan
and the Stock Option Agreements, a Stock Option granted hereunder shall, to
the extent then exercisable, be exercisable in whole or in part by giving
written notice to the Company by mail or in person addressed to the Secretary
of the Company, at its principal executive offices, stating the number of
shares with respect to which the option is being exercised. Such notice shall
be accompanied by payment in full of the exercise price by any method that is
approved by the Committee and that will cause the shares to be issued to be
fully paid and non-assessable, including without limitation payment in cash,
by certified check, bank draft or money order payable to the order of the
Company or, if permitted by the terms of the relevant Stock Option Agreement
and applicable law, by delivery of, alone or in connection with a partial cash
or instrument payment, shares of Common Stock already owned by the Participant
for at least six months. The Committee may, in the relevant Stock Option
Agreement, also permit Participants (either on a selective or group basis) to
simultaneously exercise Stock Options and sell the shares of Common Stock
thereby acquired, pursuant to a brokerage "cashless exercise" arrangement,
selected by and approved of in all respects in advance by the Committee, and
use the proceeds from such sale as payment of the exercise price of such Stock
Options. Payment instruments shall be received by the Company subject to
collection. The proceeds received by the Company upon exercise of any Stock
Option may be used by the Company for general corporate purposes.
7. DIRECTOR FEE STOCK OPTIONS.
7.1. DIRECTOR FEE. Each Participant shall be paid the
Annual Retainer, payable monthly in arrears. Each Participant shall also be
paid the Meeting Fee for each meeting of the Board attended by such Participant.
7.2. DIRECTOR FEE STOCK OPTION. Each Participant shall be
given the option to defer all or a portion of cash Director's Fees that accrue
during the period beginning on July 1, 1995 and ending 12 months thereafter
(the "Deferral Period"). The election to defer Director's Fees shall be
irrevocable and may not be amended thereafter for the entire term of the
Deferral Period. During the Deferral Period, the Participant will receive no
cash Director's Fees for the portion of cash Director's Fees deferred, but
shall receive Director Fee Stock Options in accordance with the provisions of
Section 7.3.
7.3. DETERMINATION OF NUMBER OF DIRECTOR FEE STOCK OPTIONS.
As soon as practicable following the end of each calendar month, for each of
the Participants who have elected to defer all or a portion of their
Director's Fees, the Committee shall determine the number of shares covered by
the Director Fee Stock Options in accordance with the following formula:
The result of:
i) 200% of the deferred portion of such
Participant's Director's Fees for that month; divided by
ii) the lesser of (x) $3.50 or (y) the average
NASDAQ closing price for the Company's common stock for such
month.
7.4 EXERCISE PRICE OF DIRECTOR FEE STOCK OPTIONS. The
exercise price under the Director Fee Stock Options shall be a price per share
equal to the lesser of (i) $3.50 or (ii) the average NASDAQ closing price for
the Company's common stock in the applicable month for which the Director Fee
Stock Options are issued.
7.5 EXERCISE OF DIRECTOR FEE STOCK OPTIONS. At the end of the
Deferral Period, the Director Fee Stock Options issued to a Participant shall
be deemed to be automatically exercised. The exercise price shall be satisfied
through the application of deferred Director's Fees. Each dollar
A-4
<PAGE> 25
of deferred cash Director's Fees applied to exercise the Director Fee Stock
Options will count $2.00 toward the exercise price of the Director Fee Stock
Options.
8. VESTING AND NON-TRANSFERABILITY OF STOCK OPTIONS.
(a) VESTING. Except as otherwise provided herein or in the
Stock Option Agreement, Stock Options shall become immediately exercisable
upon their issuance.
(b) LEGEND ON CERTIFICATES. Stock certificates issued
pursuant to the exercise of Stock Options may bear the following legends,
among other required legends, as determined by the Committee:
"The shares represented by this certificate have been taken without a
view to the distribution thereof within the meaning of the Securities
Act of 1933, as amended, and may not be sold, pledged, transferred or
otherwise disposed of except in accordance with such act and the
rules and regulations thereunder and in accordance with applicable
state securities laws. The Company will not transfer such shares
except upon receipt of evidence satisfactory to the Company that the
registration provisions of such act have been complied with or that
such registration is not required and that such transfer will not
violate any applicable state securities laws.
The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including, without limitation, forfeiture events) contained in the
Tatham Offshore, Inc. Amended and Restated Non-Employee Director
Stock Option Plan (the "Plan") and a Stock Option Agreement entered
into between the registered owner hereof and copies of the Plan and
Stock Option Agreement are on file in the office of the Secretary of
the Company. The Company will furnish to the recordholder of the
certificate, without charge, upon written request at its principal
place of business a copy of such Plan and Stock Option Agreement."
(c) NON-TRANSFERABILITY OF STOCK OPTIONS. No Stock Option
under the Plan or any Stock Option Agreement, and no rights or interests
herein or therein, shall or may be assigned, transferred, sold, exchanged,
pledged, disposed of or otherwise hypothecated or encumbered by a Participant
or any beneficiary hereof or thereof, except by testamentary disposition or
the laws of descent and distribution. No such interest shall be subject to
seizure for the payment of the Participant's (or any beneficiary's) debts,
judgments, alimony, or separate maintenance or be transferable by operation of
law in the event of the Participant's (or any beneficiary's) bankruptcy or
insolvency. During the lifetime of a Participant Stock Options are exercisable
only by the Participant.
9. TERMINATION OF BOARD MEMBERSHIP. Except as otherwise provided
herein or in the applicable Stock Option Agreement, if a Participant's
membership on the Board is terminated for any reason, such Participant's
rights, if any, to exercise any then exercisable Stock Options shall terminate
180 days after the date of such termination and thereafter the Participant
shall forfeit any rights or interests in or with respect to any such Stock
Options. If any Participant dies while entitled to exercise a Stock Option, if
any, such Participant's estate, designated beneficiary or other legal
representative, as the case may be, shall have the right, subject to the
applicable provisions of the Plan (and any rules or procedures thereunder), to
exercise such then exercisable Stock Options, if any, at any time within 180
days from the date of such Participant's death.
A-5
<PAGE> 26
10. CHANGES IN CAPITALIZATION AND OTHER MATTERS.
10.1. NO CORPORATE ACTION RESTRICTION. The existence of the
Plan, any Stock Option Agreement and/or the Stock Options granted hereunder
shall not limit, affect or restrict in any way the right or power of the Board
or the shareholders of the Company to make or authorize (a) any adjustment,
recapitalization, reorganization or other change in the Company's or any
affiliate's capital structure or its business, (b) any merger, consolidation
or change in the ownership of the Company or any affiliate, (c) any issue of
bonds, debentures, capital, preferred or prior preference stock ahead of or
affecting the Company's or any affiliate's capital stock or the rights
thereof, (d) any dissolution or liquidation of the Company or any affiliate,
(e) any sale or transfer of all or any part of the Company's or any
affiliate's assets or business, or (f) any other corporate act or proceeding
by the Company or any affiliate. No Participant, beneficiary or any other
person shall have any claim against any member of the Board or the Committee,
the Company or any affiliate as a result of any such action.
10.2. RECAPITALIZATION ADJUSTMENTS. In the event of any
change in capitalization affecting the Common Stock of the Company, including,
without limitation, a stock dividend or other distribution, stock split,
reverse stock split, recapitalization, consolidation, subdivision, split-up,
spin-off, split-off, combination or exchange of shares or other form of
reorganization, or any other change affecting the Common Stock, the Board
shall authorize and make such adjustments, if any, as are appropriate to
reflect such change, including, without limitation, with respect to the
aggregate number of shares of the Common Stock for which Stock Options in
respect thereof may be granted under the Plan, the maximum number of shares of
the Common Stock which may be sold to any Participant, the number of shares of
the Common Stock covered by each outstanding Stock Option, and the exercise
price per share of Common Stock in respect of outstanding Stock Options.
10.3. REORGANIZATIONS. The foregoing provisions of Section
10 notwithstanding, the following provisions of Section 10 shall control, where
applicable:
10.3.1 If the Company shall at any time participate
in a reorganization of a type described in Section 424(a) of the Code
and in which (A) the Company is not the surviving entity, or (B) the
Company is the surviving entity and the shareholders of Common Stock
are required to exchange their shares for property and/or securities,
the Company shall give the Participants written notice of any such
proposed reorganization on or before thirty (30) days before such
reorganization, and any outstanding Stock Options shall be
exercisable after receipt of such notice and prior to such
reorganization in full for all of the shares of Common Stock covered
by the Stock Options; provided, however, either the Participant or
the Company may make the exercise of outstanding Stock Options after
Participant's receipt of such notice effective only immediately prior
to the consummation of such reorganization. To the extent not
exercised prior to such reorganization, the Stock Options shall
expire on the occurrence of such reorganization. A sale of all or
substantially all the assets of the Company for a consideration
(apart from the assumption of obligations) consisting primarily of
securities shall be deemed a reorganization for the foregoing
purposes.
10.3.2 In the event of the proposed dissolution or
liquidation of the Company, the Stock Options granted hereunder shall
terminate as of a date to be fixed by the Board, provided that not
less than thirty (30) days' prior written notice of the date so fixed
shall be given to the Participants, and the Participants shall have
the right, during the period of thirty (30) days preceding such
termination, to exercise their Stock Options in full for all of the
shares of Common Stock covered by the Stock Options; provided,
however, either the Participant or the Company may make the exercise
of the outstanding Stock Options after Participant's receipt of such
notice effective only immediately prior to the consummation of such
dissolution. Notwithstanding the foregoing, the provisions of this
Section shall be subject
A-6
<PAGE> 27
to Section 10.3.1 if the optionee received notice under Section
10.3.1 at a time earlier than the notice provided for herein.
11. STOCK OPTION AGREEMENTS. Each Participant receiving a "Stock
Option" under Paragraph 6 of the Plan shall enter into a Stock Option
Agreement with the Company in a form not inconsistent with the Plan or any
determinations made by the Committee. Each such Participant shall agree to the
restrictions, terms and conditions of the Stock Option set forth therein.
12. MISCELLANEOUS.
12.1. TAX WITHHOLDING. With respect to the exercise of any
Stock Option the Company shall have the right to withhold or cause to be
withheld by any lawful means any federal, state, local or other taxes,
assessments or amounts of any kind which the Committee, in its sole
discretion, deems necessary to be withheld to comply with the Code and/or any
other applicable law, rule or regulation. If the Committee, in its sole
discretion, permits shares of Common Stock to be used to satisfy any such
withholding, such Common Stock shall be valued based on the Fair Market Value
of such stock as of the date the withholding is required to be made, such date
to be determined by the Committee. The Committee may establish rules limiting
the use of Common Stock to meet withholding requirements by Participants who
are subject to Section 16 of the Exchange Act.
12.2. UNFUNDED PLAN. The Plan shall be unfunded and the
Company shall not be required to segregate any assets in connection with any
Stock Options under the Plan. Any liability of the Company to any person with
respect to any Stock Option under the Plan or any Stock Option Agreement shall
be based solely upon the contractual obligations that may be created as a
result of the Plan or any such award or agreement. No such obligation of the
Company shall be deemed to be secured by any pledge of, encumbrance on, or
other interest in, any property or asset of the Company or any affiliate.
Nothing contained in the Plan or any Stock Option Agreement shall be construed
as creating in respect of any Participant (or beneficiary thereof or any other
person) any equity or other interest of any kind in any assets of the Company
or any affiliate or creating a trust of any kind or a fiduciary relationship
of any kind between the Company, any affiliate and/or any such Participant,
any beneficiary thereof or any other person.
12.3. LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE. No
shares of the Common Stock shall be issued under the Plan unless legal counsel
for the Company shall be satisfied that such issuance will be in compliance
with all applicable federal and state securities laws and regulations and any
other applicable laws or regulations. The Committee may require, as a
condition of any payment or share issuance, that certain agreements,
undertakings, representations, certificates, and/or information, as the
Committee may deem necessary or advisable, be executed or provided to the
Company to assure compliance with all such applicable laws or regulations.
Certificates for shares of the Common Stock delivered under the Plan may be
subject to such stock-transfer orders and such other restrictions as the
Committee may deem advisable under the rules, regulations, or other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Common Stock is then listed, and any applicable federal or
state securities law. The Committee may cause a legend or legends to be put on
any such share certificates to make appropriate reference to such
restrictions. In addition, if, at any time specified herein (or in any Stock
Option Agreement) for (a) the making of any determination or (b) the issuance
or other distribution of Common Stock to or through a Participant with respect
to any Stock Option, any law, rule, regulation or other requirement of any
governmental authority or agency shall require either the Company, any
affiliate or any Participant (or any estate, designated beneficiary or other
legal representative thereof) to take any action in connection with any such
determination, any such shares to be issued or distributed, or the making of
any such determination, as the case may be, shall be deferred until such
required action is taken.
A-7
<PAGE> 28
12.4. GOVERNING LAW. The Plan and all actions taken
thereunder shall be governed by and construed in accordance with the laws of
the State of Delaware, without regard to principles of conflict of laws
thereunder. Any titles and headings herein are for reference purposes only,
and shall in no way limit, define or otherwise affect the meaning,
construction or interpretation of any provisions of the Plan.
12.5. EFFECTIVE DATE; AMENDMENT OF PLAN. The Plan shall be
effective as of the date of approval of a majority of the Company's
outstanding stock entitled to vote on such matter. The Plan shall not be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder.
A-8
