<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
HUGOTON ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
HUGOTON ENERGY CORPORATION
301 NORTH MAIN STREET
SUITE 1900
WICHITA, KANSAS 67202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, MAY 15, 1997
To our Stockholders:
The Annual Meeting of Stockholders of Hugoton Energy Corporation (the
"Company"), a Kansas corporation, will be held at the NationsBank Financial
Center Auditorium, lower level, 100 N. Broadway, Wichita, Kansas 67202 on
Thursday, May 15, 1997, at 2:00 p.m., local time, for the following purposes:
(1) To elect two Class II directors to the Board of Directors;
(2) To approve the Hugoton Energy Corporation Amended and Restated
1995 Stock Option Plan;
(3) To approve a Nonstatutory Stock Option Agreement between the
Company and Jay W. Decker dated September 8, 1996;
(4) To ratify the appointment of Ernst & Young LLP as the
independent accountants of the Company for the fiscal year
ending December 31, 1997; and
(5) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 4, 1997
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof, notwithstanding the transfer of any stock on the books of
the Company after such record date.
You are requested to forward your proxy in order that you will be
represented at the Annual Meeting, whether or not you expect to attend in
person. Any stockholder giving the proxy enclosed with the proxy statement has
the power to revoke such proxy at any time prior to the exercise thereof by
filing with the Company a written revocation at or prior to the Annual Meeting,
by executing a proxy bearing a later date or by attending the Annual Meeting
and voting in person the shares of stock that such stockholder is entitled to
vote.
A Proxy Statement, proxy card and a copy of the Annual Report on the
Company's operations during the fiscal year ended December 31, 1996, accompany
this Notice of Annual Meeting of Stockholders.
By Order of the Board of Directors
/s/ FLOYD C. WILSON
FLOYD C. WILSON
Chairman of the Board of Directors,
President and Chief Executive Officer
April 30, 1997
<PAGE> 3
HUGOTON ENERGY CORPORATION
301 NORTH MAIN
SUITE 1900
WICHITA, KANSAS 67202
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1997
INTRODUCTION
This Proxy Statement is being furnished to stockholders of Hugoton
Energy Corporation, a Kansas corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company (the
"Board") to be voted at the Annual Meeting of Stockholders of the Company to
held at the NationsBank Financial Center Auditorium, lower level, 100 N.
Broadway, Wichita, Kansas 67202 on Thursday, May 15, 1997, at 2:00 p.m., local
time (the "Annual Meeting"), or at any adjournment thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders.
The approximate date on which this Proxy Statement and the enclosed
form of proxy will be first sent or given to stockholders is April 30, 1997.
The principal executive offices of the Company are located at 301 North Main,
Suite 1900, Wichita, Kansas 67202.
RIGHT TO REVOKE PROXY
Any proxy executed and returned by a stockholder may be revoked at any
time by filing with the Secretary of the Company a written notice of revocation
prior to the vote to be taken at the Annual Meeting, by executing a proxy
bearing a later date which is presented at the Annual Meeting or by attending
the Annual Meeting and voting in person the shares of stock that such
stockholder is entitled to vote. In the absence of such revocation, shares
represented by proxy will be voted at the Annual Meeting. It is the intention
of the persons named in the accompanying proxy to vote such proxies for each of
the nominees for director and for the other matters as noted thereon unless the
authority to vote is withheld.
BY WHOM AND THE MANNER IN WHICH PROXY IS BEING SOLICITED
In addition to solicitation by mail, the directors, officers and
employees of the Company, who will receive no compensation in excess of their
regular salaries, may solicit proxies from stockholders by personal interview,
telephone, telegram or otherwise. The Company will bear the costs of the
solicitation. Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries who hold of record voting securities of
the Company for forwarding of solicitation materials to the beneficial owners
thereof. The Company will, upon request, reimburse such brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them in connection therewith.
SHARES OUTSTANDING, VOTING RIGHTS AND VOTING PROCEDURES
Only stockholders of record at the close of business on April 4, 1997
are entitled to notice of, and to vote at, the Annual Meeting and any
adjournments thereof. The only voting stock of the Company outstanding is its
common stock, no par value (the "Common Stock"), of which 19,763,911 shares
were outstanding of record as of the close of business on April 4, 1997. Each
share of Common Stock is entitled to one vote. An automated system administered
by the Company's transfer agent shall be used to tabulate the votes.
1
<PAGE> 4
The presence, in person or by proxy, of the holders of record of a
majority of the outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting, but if a quorum should not be present, the meeting may be adjourned
from time to time until a quorum is obtained. For each matter to be voted on by
the stockholders, abstentions are counted in determining whether a quorum is
present but are not treated as either a vote for or against a proposal. Unvoted
positions in a brokerage account ("broker non-vote") are considered as not
voted for purposes of calculating the fulfillment of the quorum requirements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 17, 1997 by (i)
each person who is known by the Company to be the beneficial owner (as
determined in accordance with Rule 13d-3 under the Securities and Exchange Act
of 1934, as amended) of more than 5% of the outstanding Common Stock; (ii) each
director or nominee for director, (iii) each of the officers named in the
Summary Compensation Table; and (iv) all executive officers and directors of
the Company as a group.
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address Beneficially Owned Beneficially
of Beneficial Owner at April 17, 1997 Owned
------------------- ----------------- -----
<S> <C> <C>
Floyd C. Wilson 4,282,541(1) 21.5%
301 North Main, Suite 1900
Wichita, Kansas 67202
Comdisco, Inc. 3,859,820(2) 19.5%
6111 No. River Road
Rosemont, IL 60018
First Reserve Corporation 4,268,441(3) 21.6%
475 Steamboat Road
Greenwich, CT 06830
Cramer Rosenthal McGlynn, Inc. 1,423,934(4) 7.2%
707 Westchester Avenue
White Plains, NY 10604
Alan J. Andreini 65,000(5) *
Stephen Berger 21,000(6) *
David S. Elkouri 51,000(7) *
Jonathan S. Linker 28,500(8) *
William E. Macaulay 5,000(3)(9) *
John T. McNabb, II 71,000(10) *
W. Mark Womble 62,131(11) *
Jay W. Decker 318,230(12) 1.6%
Randall K. Click 19,125(13) *
Dallas W. Dobbs 23,822(14) *
Directors and executive officers as a group (14 persons) 13,233,234(15) 65.2%
</TABLE>
* Represents less than 1%
2
<PAGE> 5
(1) Does not include 135,750 shares currently owned by Mr. Wilson but
which are subject to an agreement with the Company pursuant to which
Mr. Wilson is required to contribute to the Company the number of
shares necessary to satisfy the exercise of certain of the options
previously granted by the Company in exchange for receipt of the
exercise price therefor. See "Stock Option Plans" and "Additional
Option Agreements". Includes 100,000 shares held by Mr. Wilson's wife
and 100,000 shares held by a family limited partnership, of which Mr.
Wilson and his wife are general partners and his children are limited
partners. Also includes 204,626 shares held by The Wilson Foundation,
5,991 shares allocated to Mr. Wilson pursuant to the Company's 401(k)
Profit Sharing Plan (based on a plan statement dated as of 9/30/96),
and 150,000 shares issuable pursuant to presently exercisable options
granted to Mr. Wilson pursuant to stock option agreements with the
Company. See "Stock Option Plans -- 1995 Stock Option Plan".
(2) As an executive officer of Comdisco, Inc., Mr. Andreini shares voting
and investment power of the shares owned by Comdisco, Inc. Mr.
Andreini disclaims beneficial ownership of the Company Common Stock
owned by Comdisco, Inc.
(3) First Reserve Corporation owns no shares of the Company's Common Stock
directly but, as the managing general partner of the entities named
below, it shares voting and investment power over such shares with
such entities. First Reserve Corporation is the managing general
partner of First Reserve Secured Energy Assets Fund, Limited
Partnership ("FRSEA"), First Reserve Fund V, Limited Partnership
("Fund V"), American Gas & Oil Investors, Limited Partnership ("AmGO")
and AmGO II, Limited Partnership ("AmGO II"). The address of each of
such entities is the address of First Reserve Corporation. Through
their ownership of shares of First Reserve Corporation, Mr. Macaulay
and Mr. John A. Hill may be deemed to share beneficial ownership of
the shares shown as owned by First Reserve Corporation. Messrs.
Macaulay and Hill disclaim beneficial ownership of such shares. The
following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 17,
1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
BENEFICIALLY OWNED BENEFICIALLY
NAME AT APRIL 17, 1997 OWNED
---- ----------------- -----
<S> <C> <C>
Fund V ................... 2,138,802 10.8%
FRSEA .................... 1,727,896 8.7%
AmGO ..................... 387,437 2.0%
AmGO II .................. 14,306 0.1%
</TABLE>
(4) As disclosed on the latest Schedule 13G, dated as of May 1, 1996,
filed with the Securities and Exchange Commission.
(5) Includes 15,000 shares issuable upon exercise of options granted to
Mr. Andreini pursuant to stock option agreements with the Company. See
"Nonemployee Directors' Stock Option Plan".
(6) Represents 21,000 shares issuable upon exercise of options granted to
Mr. Berger pursuant to stock option agreements with the Company. See
"Nonemployee Directors' Stock Option Plan".
(7) Includes 46,000 shares issuable upon exercise of options granted to
Mr. Elkouri pursuant to stock option agreements with the Company. See
"Nonemployee Directors' Stock Option Plan" and "Additional Option
Agreements". Includes 4,000 shares owned by The David S. and Debbi C.
Elkouri Foundation and 1,000 shares owned by The David S. Elkouri
Rollover IRA.
3
<PAGE> 6
(8) Includes 5,000 shares issuable upon exercise of options granted to Mr.
Linker pursuant to stock option agreements with the Company. See
"Nonemployee Directors' Stock Option Plan".
(9) Represents 5,000 shares issuable upon exercise of options granted to
Mr. Macaulay pursuant to stock option agreements with the Company. See
"Nonemployee Directors' Stock Option Plan".
(10) Represents 71,000 shares issuable upon exercise of options granted to
Mr. McNabb pursuant to stock option agreements with the Company. See
"Nonemployee Directors' Stock Option Plan" and "Additional Option
Agreements".
(11) Includes 57,500 shares issuable upon exercise of options granted to
Mr. Womble pursuant to stock option agreements with the Company. See
"Stock Option Plans --1993 Stock Option Plan and 1995 Stock Option
Plan". Includes 3,251 shares acquired pursuant to the Company's
401(k) Profit Sharing Plan (based on a plan statement dated as of
9/30/96).
(12) Includes 93,750 shares issuable upon exercise of options granted to
Mr. Decker pursuant to stock option agreements with the Company,
31,250 shares of which are pursuant to a stock option agreement which
has not yet been approved by the stockholders of the Company. See
"Additional Option Agreements".
(13) Represents 17,500 shares issuable upon exercise of options granted to
Mr. Click pursuant to stock option agreements with the Company. See
"Stock Option Plans -- 1993 Stock Option Plan and 1995 Stock Option
Plan". Includes 1,625 shares acquired pursuant to the Company's
401(k) Profit Sharing Plan (based on a plan statement dated as of
9/30/96).
(14) Represents 20,625 shares issuable upon exercise of options granted to
Mr. Dobbs pursuant to stock option agreements with the Company. See
"Stock Option Plans -- 1993 Stock Option Plan and 1995 Stock Option
Plan". Includes 3,097 shares acquired pursuant to the Company's
401(k) Profit Sharing Plan (based on a plan statement dated as of
9/30/96).
(15) Includes 567,625 shares issuable upon exercise of options under the
1993 Option Plan, the 1995 Option Plan and the Additional Option
Agreements, including 135,750 of the shares referenced in (1) above.
Includes 88,000 shares issuable upon exercise of options under the
Amended and Restated 1993 Nonemployee Directors' Stock Option Plan.
Also includes shares held by Comdisco, Inc. and partnerships for whom
First Reserve Corporation is the managing general partner.
4
<PAGE> 7
BOARD OF DIRECTORS
The Board is divided into three classes with terms of office of the
classes ending in successive years after the annual meetings of stockholders in
such years. Set forth below is certain information regarding the directors of
the Company.
<TABLE>
<CAPTION>
YEAR FIRST
SERVED AS
DIRECTOR OF BUSINESS EXPERIENCE
NAME THE COMPANY AGE DURING PAST FIVE YEARS
---- ----------- --- ----------------------
CLASS I DIRECTORS
(TERMS EXPIRING IN 1998)
<S> <C> <C> <C>
Alan J. Andreini (1) 1995 50 Executive Vice President of Comdisco, Inc., a corporation
which provides high technology asset management and continuity
services, since 1994. From 1980 until 1994, he was a Senior
Vice President of Comdisco, Inc. Mr. Andreini is also a
director of Comdisco, Inc.
David S. Elkouri (1) 1993 43 Member in the law firm of Hinkle, Eberhart & Elkouri, L.L.C.,
Wichita, Kansas, since 1986.
John T. McNabb, II (1) 1993 52 Chief Executive Officer and director of Growth Capital
Partners, Inc., a merchant banking firm, since April 1992.
Prior to such time, he was a Managing Director and a board
member of BT Southwest, Inc., a wholly-owned subsidiary of
Bankers Trust New York Corporation, a merchant banking firm,
beginning in July 1990, Mr. McNabb is also a director of
Vintage Petroleum, Inc.
CLASS II DIRECTORS
(TERMS EXPIRING 1997)
Stephen Berger (2) 1993 57 General partner of Odyssey Partners, L.P., an investment
partnership, since July 1993. From July 1990 to July 1993, he
was employed by GE Capital Corporation, a corporate finance
corporation, most recently as Executive Vice President. Mr.
Berger is also a director of Forstmann & Company, Inc.,
Scotsman Holdings, Inc. and The Scotsman Group, Inc.
Jonathan S. Linker (2) 1996 48 He has served as Managing Director of First Reserve
Corporation, an investment firm, since November 1996.
President of IDC Energy, an oil and gas production and
investment company, since January 1987. He is also Vice
President of Sunset Production Corporation, an oil and gas
company, since January 1992.
William E. Macaulay 1995 51 President and Chief Executive Officer of First Reserve
Corporation, an investment firm, since 1983. Mr. Macaulay is
also a director of Maverick Tube Corporation, Weatherford
Enterra, Inc., National-Oilwell, Inc. and TransMontaigne Oil
Company.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
YEAR FIRST
SERVED AS
DIRECTOR OF BUSINESS EXPERIENCE
NAME THE COMPANY AGE DURING PAST FIVE YEARS
---- ----------- --- ----------------------
CLASS III DIRECTORS
(TERMS EXPIRING 1999)
<S> <C> <C> <C>
Floyd C. Wilson 1987 50 Chairman of the Board, President and Chief Executive Officer
of the Company since its inception in 1987. He started in the
energy business in Houston in 1970 as a completion engineer.
He moved to Wichita in 1976 to start an oil and gas operating
company, one of several successful energy ventures which
preceded the 1987 formation of the Company. Mr. Wilson is a
member of the Board of Directors of the Kansas Independent Oil
and Gas Association.
W. Mark Womble 1995 46 Chief Financial Officer and Vice President of the Company
since October 1, 1993 and a director since 1995. Executive
Vice President of the Company since May 18, 1995. Prior to
joining the Company, Mr. Womble worked as a Financial
Consultant in the Dallas office of Merrill Lynch & Co. from
October 1991 to October 1993. Prior to October 1991, Mr.
Womble was employed by a large independent oil and gas company
for ten years, the last three years of which he served as Vice
President and Treasurer.
Jay W. Decker 1995 45 Executive Vice President of the Company since September 8,
1995. Prior to joining the Company, he served as President and
Chief Executive Officer of Consolidated Oil & Gas, Inc., from
1991 until it was merged into the Company in September 1995.
Mr. Decker is also a director of FX Energy, Inc. and Patina
Oil & Gas Corporation.
</TABLE>
- ---------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
BOARD MEETINGS AND COMMITTEES
The directors hold regular quarterly meetings, in addition to the
meeting held on the date of the Annual Meeting of Stockholders, attend special
meetings, as required, and spend such time on the affairs of the Company as
their duties require. During the fiscal year ended December 31, 1996, the Board
held six (6) meetings. All directors of the Company attended every meeting of
the Board and the committees on which they served for the fiscal year ended
December 31, 1996.
The Board has an Audit Committee consisting of Mr. Berger and Mr.
Linker. The Audit Committee held one (1) meeting during fiscal year ended
December 31, 1996. The Audit Committee's functions include recommending the
appointment of the Company's independent auditors and reviewing with management
and the independent auditors the Company's financial statements, basic
accounting and financial policies and practices, and the Company's internal
audit functions.
The Board also has a Compensation Committee consisting of Mr.
Andreini, Mr. Elkouri and Mr. McNabb. The Compensation Committee held two (2)
meetings during fiscal year ended December 31, 1996. The
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<PAGE> 9
Compensation Committee reviews and recommends to the Board the compensation and
promotion of officers of the Company, the terms of any proposed employee
benefit arrangements and the making of awards under such arrangements.
The Company has no nominating committee or any committee performing
similar functions.
PROPOSAL I - ELECTION OF DIRECTORS
Two directors are to be elected at the Annual Meeting. Jonathan S.
Linker and William E. Macaulay have been designated by the Board as the
nominees for election as Class II directors, for a term expiring at the annual
meeting of stockholders in 2000 and until their successors have been duly
elected and qualified. Mr. Linker and Mr. Macaulay are serving as Class II
directors as of the date hereof.
A director shall be elected by a plurality of the votes of the
stockholders present in person or represented by proxy at the Annual Meeting
and entitled to vote on the election of directors. Accordingly, abstentions and
"broker non- votes" would not have the same legal effect as a vote against a
particular director. Stockholders may not cumulate their votes in the election
of directors.
Unless otherwise instructed, properly executed proxies which are
returned in a timely manner will be voted for election of Mr. Linker and Mr.
Macaulay as Class II directors. Each of the nominees has indicated a
willingness to serve as a director, but if any of them should decline or be
unable to serve as a director, the person named in the proxy will vote for the
election of another person recommended by the Board.
The Board of Directors recommends you vote FOR the election of
Jonathan S. Linker and William E. Macaulay as Class II directors to the Board
of Directors.
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive
officers of the Company.
<TABLE>
<CAPTION>
YEAR FIRST
SERVED AS
OFFICER
OF THE BUSINESS EXPERIENCE
NAME COMPANY AGE DURING PAST FIVE YEARS
---- ------- --- ----------------------
<S> <C> <C> <C>
Floyd C. Wilson 1987 50 Chairman of the Board, President and Chief Executive Officer
of the Company since its inception in 1987. He started in the
energy business in Houston in 1970 as a completion engineer.
He moved to Wichita in 1976 to start an oil and gas operating
company, one of several successful energy ventures which
preceded the 1987 formation of the Company. Mr. Wilson is a
past member of the Board of Directors of the Kansas
Independent Oil and Gas Association.
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
YEAR FIRST
SERVED AS
OFFICER
OF THE BUSINESS EXPERIENCE
NAME COMPANY AGE DURING PAST FIVE YEARS
---- ------- --- ----------------------
<S> <C> <C> <C>
W. Mark Womble 1993 46 Chief Financial Officer and Vice President of the Company
since October 1, 1993 and a director since 1995. Executive
Vice President of the Company since May 18, 1995. Mr. Womble
worked as a Financial Consultant in the Dallas office of
Merrill Lynch & Co., a stock brokerage firm, from October 1991
to October 1993. Prior to October 1991, Mr. Womble was
employed by a large independent oil and gas company for ten
years, the last three years of which he served as Vice
President and Treasurer.
Jay W. Decker 1995 45 Executive Vice President of the Company since September 1995.
Prior to joining the Company, he served as President and Chief
Executive Officer of Consolidated Oil & Gas, Inc. from 1991
until it was merged into the Company in September 1995.
Randall K. Click 1996 44 Vice President of Land of the Company since August 1996 and
was Manager of Land from June 1994 to August 1996. Prior to
joining the Company, he was acting Director of Acquisitions
and Divestitures for Atlantic Richfield Company from September
1993 until June 1994 and served as Senior Landman from April
1991 until September 1993.
Dallas W. Dobbs 1993 39 Vice President of Marketing of the Company since May 1996.
Controller of the Company from June 1993 to May 1996 and
Manager of Information Systems from October 1991 to June 1993.
Jimmy W. Gowens 1993 48 Vice President of Exploration of the Company since August
1993, and from April 1987 to August 1993 was Manager of
Exploration of the Company.
Earl W. Ringeisen 1993 62 Vice President of Operations of the Company since August 1993
and from April 1987 to August 1993 was Production
Superintendent and Completion Engineer of the Company.
Shane M. Bayless 1996 30 Controller of the Company since May 1996 and Manager of
Accounting from August 1993 to May 1996. Prior to joining the
Company, he was a Senior Auditor with Ernst & Young LLP from
January 1990 to August 1993.
</TABLE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth compensation information with respect
to Floyd C. Wilson (President and Chief Executive Officer of the Company), W.
Mark Womble (Executive Vice President and Chief Financial Officer of the
Company), Jay W. Decker (Executive Vice President of the Company), Dallas W.
Dobbs (Vice President of Marketing of the Company) and Randall K. Click (Vice
President of Land of the Company) (collectively, the "Named Executive
Officers"), who were serving as the chief executive officer and the other four
most highly compensated executive officers of the Company at December 31, 1996.
8
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Compensation
------------
Number of
Annual Compensation Securities
Name and Principal ---------------------- Underlying All Other
Position Year Salary Bonus Options Compensation(1)
--------- ---- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Floyd C. Wilson. . . . . . . . . . . . . 1996 $325,000 $113,542 #250,000 $9,500
Chairman of the Board, President 1995 $275,000 $ 13,542 #250,000 $9,240
and Chief Executive Officer 1994 $250,000 $ 10,417 -- $9,240
W. Mark Womble . . . . . . . . . . . . . 1996 $150,000 $56,250 #105,000 $9,500
Chief Financial Officer and Executive 1995 $127,500 $63,750 # 80,000 $7,800
Vice President 1994 $100,000 $ 4,167 # 30,000 $8,750
Jay W. Decker . . . . . . . . . . . . . 1996 $160,000 $11,250 #250,000 $9,500
Executive Vice President 1995 $ 39,395 -- #125,000 --
Randall K. Click . . . . . . . . . . . . 1996 $87,500 $37,146 #32,500 $8,750
Vice President of Land 1995 $79,167 $18,646 #30,000 $7,917
1994 $40,096 $ 1,562 #10,000 --
Dallas W. Dobbs . . . . . . . . . . . . 1996 $90,000 $18,750 #30,000 $9,000
Vice President of Marketing 1995 $80,000 $13,333 #30,000 $8,000
1994 $70,000 $ 2,917 #15,000 $5,863
</TABLE>
- -------------------------------
(1) 401(k) Company matching contributions
The Company entered into an employment agreement with Mr. Wilson
("Wilson Agreement") in September of 1995 and such agreement expires in August
2000. Pursuant to the provisions of the Wilson Agreement, the Company will pay
Mr. Wilson an annual salary of $325,000, and he is also entitled to receive a
bonus and other benefits each year in amounts as determined by the Board.
Pursuant to the provisions of the Wilson Agreement, Mr. Wilson received an
option to purchase 150,000 shares of Company Common Stock on September 7, 1995.
The Wilson Agreement also contains certain non- compete and non-disclosure
provisions. If the Company terminates Mr. Wilson for Cause, he will be paid his
salary through the month of his termination. If the Company terminates Mr.
Wilson without Cause, Mr. Wilson is entitled to receive an amount equal to
three (3) times his annual compensation unless such termination occurs within
the first two (2) years of the employment period, wherein Mr. Wilson is
entitled to five (5) times his annual compensation.
The Company also entered into an employment agreement with Mr. Decker
("Decker Agreement") in September 1995 which expires in September 1998. Under
such agreement, the Company will pay Mr. Decker an annual salary of not less
than $160,000, and he is also entitled to receive a bonus and other benefits
each year in amounts as determined by the Board. Pursuant to the provisions of
the Decker Agreement, Mr. Decker received an option to purchase 125,000 shares
of Company stock on September 8, 1995 and an option to purchase 125,000 shares
of Company stock on September 8, 1996. Approval of the option granted to Mr.
Decker on September 8, 1996 is Proposal IV to be considered at the Annual
Meeting. If the Company terminates Mr. Decker for Cause, he will be paid his
salary through the month of his termination. If the Company terminates Mr.
Decker without Cause, Mr. Decker is entitled to the amount of his entire salary
for the remaining term of his employment under the Decker Agreement. The Decker
Agreement also contains certain non-compete and non-disclosure provisions.
The Company entered into an employment agreement with Mr. Womble (the
"Womble Agreement") in December 1996 which expires in September 1999. Under
such agreement, the Company will pay Mr. Womble an annual salary of $150,000,
and he is also entitled to receive a bonus and other benefits each year in
amounts as determined by the Company. If the Company terminates Mr. Womble with
Cause, the Company shall pay Mr. Womble the amount of his compensation
previously earned but not yet paid. If the Company terminates
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<PAGE> 12
Mr. Womble without Cause or if Mr. Womble terminates his employment for Good
Reason if a Change of Control has occurred, the Company shall pay him an amount
equal to three times his base compensation which shall not be less than
$175,000 plus the amount which the Company contributed to his 401(k) account
during the last year. The Womble Agreement also contains certain non-compete
and non-disclosure provisions.
For purposes of the Wilson Agreement, the Decker Agreement and the
Womble Agreement, "Cause" is defined as (i) the inability of the employee,
through sickness or other incapacity, to perform his duties under the
employment agreement for a period of six months; (ii) dishonesty, theft, or
conviction of a crime involving moral turpitude, in each case only if it could
reasonably affect his ability to perform assigned duties for the Company or
cause a material adverse effect on the Company; (iii) commission of a material
act of fraud against the Company or its subsidiaries; or (iv) failure of the
employee to observe or perform his material duties and obligations as an
employee of the Company or a material breach by the employee of his employment
agreement, which failure to perform or breach shall continue for more than
thirty days after written notice from the Company. For purposes of the Womble
Agreement: (a) a "Change of Control" shall occur if: (i) 50% or more of the
outstanding Common Stock has been acquired by any person or persons, provided
such person is not a current stockholder of the Company currently holding 10%
or more of the outstanding Common Stock; (ii) a merger or equivalent
combination occurs involving the Company after which 50% or more of the voting
stock of the surviving corporation is held by persons other than those persons
who were stockholders holding 10% or more of the outstanding Common Stock
immediately prior to the date of such merger or equivalent combination; or
(iii) there has been a merger or equivalent combination or stock sale involving
the Company and after such transaction 50% or more of the members of the Board
elected by stockholders are persons who were not directors immediately prior to
such transaction; and (b) "Good Reason" means (i) a change in Mr. Womble's
duties or in the title or offices held by him or any occurrence which causes
him to have his principal place of employment somewhere other than Wichita,
Kansas; (ii) a reduction in his compensation or the failure by the Company to
continue to provide prompt payment or reimbursement of all reasonable business
expenses; (iii) a failure of the Company to waive restrictions that might exist
on the exercise of any Company stock options held by Mr. Womble as of date of a
Change of Control; or (iv) failure of the Company to obtain the assumption of
his employment agreement by any successor to the Company.
OPTION GRANTS TABLE
The following is information with respect to grants of stock options
in fiscal year ended December 31, 1996 to the Named Executive Officers
reflected in the Summary Compensation Table. No stock appreciation rights were
granted to the Named Executive Officers in fiscal year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL EXERCISE OF ASSUMED ANNUAL RATE
SECURITIES OPTIONS OF BASE OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM (4)
OPTIONS EMPLOYEES IN ----- EXPIRATION ---------------------
NAME (# OF SHARES) FISCAL 1996 ($/SH) DATE 5% 10%
---- ------------ ----------- ------ ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Floyd C. Wilson. . . . . . . -- -- -- -- -- --
W. Mark Womble . . . . . . . 15,000 4.42 $7.69 (1) $ 28,535 $ 62,784
25,000 7.37 $8.50 (2) $ 52,568 $115,662
Jay W. Decker. . . . . . . . 125,000 36.87 $8.34 (3) $257,891 $567,425
Randall K. Click . . . . . . 7,500 2.21 $7.69 (1) $ 14,267 $ 31,392
Dallas W. Dobbs. . . . . . . 7,500 2.21 $7.69 (1) $ 14,267 $ 31,392
- ---------------------
</TABLE>
10
<PAGE> 13
(1) Subject to continued employment, 25% of the shares are vested and
exercisable on September 20, 1996, 25% are vested and exercisable on
September 20, 1997, 25% are vested and exercisable on September 20,
1998, and 25% are vested and exercisable on September 20, 1999.
Options expire thirty-six months after the date they become vested.
(2) Subject to continued employment, 25% of the shares are vested and
exercisable on October 24, 1996, 25% are vested and exercisable on
October 24, 1997, 25% are vested and exercisable on October 24, 1998,
and 25% are vested and exercisable on October 24, 1999. Options expire
thirty-six months after the date they become vested.
(3) Subject to continued employment, 25% of the shares are vested and
exercisable on September 8, 1996, 25% are vested and exercisable on
September 8, 1997, 25% are vested and exercisable on September 8,
1998, and 25% are vested and exercisable on September 8, 1999. Options
expire thirty-six months after the date they become vested. The grant
of this option is subject to the approval of the stockholders of the
Company. See "Proposal III - Approval of Nonstatutory Stock Option
Agreement Between the Company and Jay W. Decker".
(4) The dollar amounts under these columns represent the potential
realizable value of each grant of options assuming that the market
price of the Company's Common Stock appreciates in value from the date
of grant at the 5% and 10% annual rates of return prescribed by the
Securities and Exchange Commission. These calculations are not
intended to forecast possible future appreciation, if any, of the
price of the Company's Common Stock. Regardless of the theoretical
value of an option, its ultimate value will depend on the market value
of the Common Stock at a future date, and that value will depend on a
variety of factors, including the overall condition of the stock
market and the Company's results of operation and financial condition.
There can be no assurance that the values reflected in this table will
be achieved.
OPTION EXERCISE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
No stock options or stock appreciation rights were exercised by the
Named Executive Officers reflected in the Summary Compensation Table in fiscal
year ended December 31, 1996. The following table sets forth certain
information concerning unexercised options held as of December 31, 1996 by the
Named Executive Officers reflected in the Summary Compensation Table.
<TABLE>
<CAPTION>
Value of Unexercised
Number of In-the-Money
Unexercised Options Options
Shares at December 31, 1996 at December 31, 1996(1)
Acquired on Value --------------------------- --------------------------
Name Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Floyd C. Wilson . . . . . . . 0 $ 0 125,000 125,000 $183,590 $183,590
W. Mark Womble . . . . . . . 0 $ 0 42,500 62,500 $ 62,412 $100,987
Jay W. Decker . . . . . . . . 0 $ 0 93,750 156,250 $172,969 $284,531
Randall K. Click. . . . . . . 0 $ 0 14,375 18,125 $ 24,566 $ 33,697
Dallas W. Dobbs . . . . . . . 0 $ 0 13,125 16,875 $ 20,972 $ 30,103
- -------------------
</TABLE>
(1) Value based on the closing price listed on NASDAQ on 12/31/96
11
<PAGE> 14
COMPARISON OF 35 MONTH CUMULATIVE TOTAL RETURN*
The following chart compares the Company's 35 month cumulative total
return since January 1, 1994 with the Standard and Poor's Smallcap 600 Index,
and the Standard and Poor's Oil & Gas (Exploration and Production) Index. The
stock performance chart shown below is not necessarily indicative of future
price performance.
[GRAPH]
* $100 invested on 01/27/94 in stock or on 12/31/93 in index -
including reinvestment of dividends. Fiscal year ending December 31.
<TABLE>
<CAPTION>
1/94 12/94 12/95 12/96
<S> <C> <C> <C> <C>
Hugoton Energy Corporation 100 73 73 84
S&P Smallcap 600 100 95 124 150
S&P Oil & Gas (Exploration & Production) 100 79 93 124
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors' Compensation Committee establishes and reviews
the general levels and policies of compensation for the Company. The Committee
meets at least annually to review and to set specific compensation levels for
the executive officers. These levels include the amounts paid to executive
officers in the form of base salaries and annual cash bonuses along with the
issuance of incentive and nonstatutory stock options.
The Compensation Committee seeks to set overall compensation amounts
at levels sufficient to attract and retain key executives and to provide
incentives to produce superior results for stockholders of the Company. These
levels are set after considering the total cash compensation of executives
employed by selected peer group public
12
<PAGE> 15
companies within the oil and gas industry. The Compensation Committee
determines the total compensation to be paid to Floyd C. Wilson, W. Mark Womble
and Jay W. Decker.
Base salaries are set at levels determined by various compensation
surveys as adjusted by the experience and capability of each individual
officer. The 1996 annual salary of Floyd C. Wilson, the Chief Executive Officer
of the Company, in the amount of $325,000, was paid pursuant to an employment
agreement with the Company which expires in August 2000. The 1996 annual salary
of W. Mark Womble, Chief Financial Officer and Executive Vice President of the
Company, in the amount of $150,000 was paid pursuant to an employment agreement
with the Company which expires in September 1999. The annual salary of Jay W.
Decker, an Executive Vice President of the Company, in the amount of $160,000
was paid pursuant to an employment agreement with the Company which expires in
September 1998. Cash bonuses for the Chief Executive Officer as well as the
other officers of the Company are determined by considering the Company's
success in achieving certain operating and financial goals and each officer's
contribution to the overall effort by considering the performance of the area
managed, the quality of the work performed by the department and the
executive's ability to accomplish various assigned tasks.
Incentive stock options are granted by the Compensation Committee to
certain selected recipients pursuant to the Company's 1993 Stock Option Plan
("1993 Plan"), which was adopted in July 1993 and the Company's 1995 Stock
Option Plan (the "1995 Plan"), which was adopted in January 1995 and approved
by the stockholders in May 1995. Under the 1993 Plan, the Company reserved
600,000 shares for issuance. As of April 17, 1997, there were 648 shares
available for future grants under the 1993 Plan. Under the 1995 Plan, the
Company reserved 500,000 shares for issuance. As of April 17, 1997, there were
12,250 shares available for future grants under the 1995 Plan. The purpose of
the 1993 Plan and the 1995 Plan is to provide a means whereby certain officers
and employees may develop a sense of proprietary and personal involvement in
the development and financial success of the Company and to encourage them to
remain with and devote their best efforts to the business of the Company and
its stockholders.
COMPENSATION COMMITTEE
Alan J. Andreini
David S. Elkouri
John T. McNabb, II
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. David S. Elkouri, a member in the law firm of Hinkle, Eberhart &
Elkouri, L.L.C. which firm renders legal services to the Company and Mr. John
T. McNabb, II, a principal in Growth Capital Partners, Inc., which renders
financial consulting services to the Company are directors of the Company and
members of the Company's Compensation Committee. See "Additional Option
Agreements-McNabb, Elkouri and Decker Stock Option Agreements" and "Certain
Relationships and Related Transactions" for information regarding transactions
with such persons.
COMPENSATION OF DIRECTORS
ANNUAL COMPENSATION OF NONEMPLOYEE DIRECTORS
Since January 1, 1996, nonemployee directors of the Company each
receive an annual fee of $10,000, to be paid in quarterly installments, and are
reimbursed for their expenses incurred in attending meetings of the Board.
Under the Hugoton Energy Corporation Amended and Restated 1993
Nonemployee Directors' Stock Option Plan ("Amended Directors' Stock Option
Plan"), approved by the stockholders in May 1996, each nonemployee director is
offered an option for 5,000 shares of Common Stock on each January 1. The
exercise price of such
13
<PAGE> 16
options shall be equal to the fair market value of the Common Stock on the date
of the grant. See "Stock Option Plans -- Nonemployee Directors' Stock Option
Plan"
STOCK OPTION PLANS
1993 STOCK OPTION PLAN
In July 1993, the Company adopted the 1993 Stock Option Plan (the
"1993 Plan") to grant options to key employees. Under the Plan, the Company has
reserved 600,000 shares for issuance. The purchase price of the Company's
Common Stock issued under each option is equal to the fair market value of the
Company's Common Stock on the date such option was granted, except with respect
to certain options which were granted to key employees in November 1993
("Special Options"). The purchase price of the Company's Common Stock issued
under each Special Option is $.10 per share. Mr. Wilson entered into an
agreement with the Company whereby, upon any exercise of an outstanding option
with a $.10 exercise price, he will deliver to the Company the number of shares
to which the optionee is entitled pursuant to such exercise and the Company
will pay to him the exercise price paid for such shares by the optionee. This
agreement does not pertain to any future options granted under the 1993 Plan.
Options with respect to 150,000 shares were granted to key employees during
1996 under the 1993 Plan. As of April 17, 1997, there were 648 shares available
for future grant under the 1993 Plan.
1995 STOCK OPTION PLAN
In January 1995, the Company adopted the 1995 Stock Option Plan (the
"1995 Plan") to grant options to key employees, and such plan was approved by
the stockholders in May 1995. Under the 1995 Plan, the Company has reserved
500,000 shares for issuance. The purchase price of the Company's Common Stock
issued under each option is equal to the fair market value of the Company's
Common Stock on the date such option was granted. Options with respect to
64,000 shares were granted to key employee during 1996 under the 1995 Plan. As
of April 17, 1997, there were 12,250 shares available for future grant under
the 1995 Plan.
PROPOSAL II - APPROVAL OF HUGOTON ENERGY CORPORATION AMENDED AND RESTATED 1995
STOCK OPTION PLAN
The Board voted to amend and restate the 1995 Plan at its meeting on
April 17, 1997, subject to the approval of the stockholders of the Company. A
summary of the essential features of the Hugoton Energy Corporation Amended and
Restated 1995 Stock Option Plan ("Amended 1995 Plan") is provided below, but is
qualified in its entirety by reference to the full text of such plan which was
filed with this proxy statement with the Securities and Exchange Commission.
Such text is not included in the printed version of this Proxy Statement.
The essential features of the Amended 1995 Plan are identical to the
features of the 1995 Plan except that options to purchase 1,000,000 shares of
Common Stock may be issued under the Amended 1995 Plan, rather than 500,000
shares as provided in the original 1995 Plan.
The Amended 1995 Plan is administered by the Compensation Committee of
the Board. The Compensation Committee has the authority to select the employees
of the Company who will receive options and to establish the number of shares
which may be issued under each option; provided, however, that the maximum
number of shares that may be subject to options granted under the Amended 1995
Plan to an individual optionee during any calendar year may not exceed 250,000
(subject to adjustment in the event of a recapitalization, subdivision,
consolidation, payment of a stock dividend or other corporate action affecting
the number of shares outstanding).
The Amended 1995 Plan provides for two types of options: (a) incentive
stock options and (b) nonqualified stock options. The terms and conditions of
the option agreements to be executed pursuant to the Amended 1995 Plan shall
contain such terms and conditions as may be approved by the Compensation
Committee and such option agreements need not be identical. Such option
agreements may provide for the surrender of the right to purchase shares under
the option in return for a payment in cash or shares of stock of the Company or
a combination of cash
14
<PAGE> 17
and shares of stock of the Company equal in value to the excess of the fair
market value of the shares with respect to which the right to purchase is
surrendered over the option price therefor ("SAR"). Each option and all rights
granted under the Amended 1995 Plan shall not be transferable other than by
will or the laws of descent and distribution or pursuant to a qualified
domestic relations order, and shall be exercisable during the optionee's
lifetime only by the optionee or the optionee's guardian or legal
representative.
Options under the Amended 1995 Plan may only be granted to individuals
who are employees of the Company or any parent or subsidiary of the Company at
the time the option is granted; however, members of the Compensation Committee
are not eligible to be granted options. As of February 28, 1997, there were
approximately 116 employees of the Company.
The aggregate number of shares which may be issued under options
granted under the Amended 1995 Plan shall not exceed 1,000,000 shares of stock
of the Company (subject to adjustment in the event of a recapitalization,
subdivision, consolidation, payment of a stock dividend or other corporate
action affecting the number of shares outstanding). Such shares may consist of
authorized but unissued shares of stock of the Company or previously issued
shares of the Company reacquired by the Company. If any options or SARs granted
under the Amended 1995 Plan are forfeited, or if options or SARs terminate for
any other reason prior to exercise, then the underlying shares of Common Stock
again become available for awards.
The purchase price of stock of the Company issued under each option
shall be equal to the fair market value of the stock of the Company subject to
the option on the date the option is granted; however, this limitation shall
not apply to incentive stock options for which a greater purchase price is
required pursuant to the provisions of the Amended 1995 Plan. Except with
respect to options then outstanding, if not sooner terminated under the
provisions of the Amended 1995 Plan, such Amended 1995 Plan shall terminate
upon and no further options shall be granted after January 30, 2005.
The shares with respect to which options may be granted are shares of
the Company's Common Stock as presently constituted. The Amended 1995 Plan
provides that if the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of stock covered by an option theretofore granted shall be
adjusted so that such option shall thereafter cover the number and class of
shares of stock and securities to which the optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the optionee had been the holder of record of the number of
shares of Stock then covered by such option.
The Amended 1995 Plan provides that, upon a Corporate Change, the
Compensation Committee may accelerate the vesting of options, cancel options
and make payments in respect thereof in cash, adjust the outstanding options as
appropriate to reflect such Corporate Change, or provide that each option shall
thereafter be exercisable for the number and class of securities or property
that the optionee would have been entitled to had the option already been
exercised. The Amended 1995 Plan provides that a Corporate Change occurs (a)
if the Company is to be dissolved and liquidated, (b) if the Company is not the
surviving entity in any merger, consolidation or other reorganization, (c) if
the Company sells, leases or exchanges all or substantially all of its assets,
(d) if any person, entity or group acquires or gains ownership or control of
more than 50% of the outstanding shares of the Company's voting stock, or (e)
if after a contested election of directors, the persons who were directors
before such election cease to constitute a majority of the Board.
The Board may terminate the Amended 1995 Plan with respect to any
shares for which options have not theretofore been granted. The Board may amend
the Amended 1995 Plan; however, the Board may not make amendments which would
materially increase the benefits accruing to participants under the Amended
1995 Plan, increase the aggregate number of shares which may be issued pursuant
to the provisions of the Amended 1995 Plan, change the class of individuals
eligible to receive options under the Amended 1995 Plan or extend the term of
the Amended 1995 Plan, without the approval of the stockholders of the Company.
15
<PAGE> 18
No Federal income tax is imposed upon an optionee upon the grant of
the option under the Amended 1995 Plan and the Company is not entitled to a tax
deduction by reason of such grant. Upon the exercise of such an option, the
optionee will be treated as receiving compensation taxable as ordinary income
in the year of exercise in an amount equal to the excess of the fair market
value of the shares on the date of exercise over the option price paid for such
shares. Upon the exercise of such an option, the Company may claim a deduction
for compensation paid at the same time and in the same amount as compensation
income is recognized to the optionee assuming any Federal income tax
withholding requirements are satisfied. Upon a subsequent disposition of the
shares received upon exercise of such stock option, any appreciation after the
date of exercise should qualify as capital gain. If the shares received upon
the exercise of an option are transferred to an optionee subject to certain
restrictions, then the taxable income realized by him, unless he elects
otherwise, and the Company's tax deduction (assuming any Federal income tax
withholding requirements are satisfied) should be deferred and should be
measured at the fair market value of the shares at the time the restrictions
lapse. The restrictions imposed on officers, directors and 10% shareholders by
Section 16(b) of the Securities Exchange Act of 1934, as amended, is such a
restriction during the period prescribed thereby if other shares have been
purchased by such an individual within six months of the exercise of a
nonqualified stock option.
The following resolution will be presented for a vote of the
stockholders at the Annual Meeting:
"RESOLVED that the adoption by the Board of Directors of the Hugoton
Energy Corporation Amended and Restated 1995 Stock Option Plan
effective April 17, 1997 is hereby approved, ratified and confirmed."
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
HUGOTON ENERGY CORPORATION AMENDED AND RESTATED 1995 STOCK OPTION PLAN.
As of April 18, 1997, the closing sales price of the Company's
Common Stock on NASDAQ was $10.125. Upon approval by the stockholders, the
Company intends to file a registration statement under the Securities Act of
1933, as amended, with respect to the 500,000 additional shares of the Company's
Common Stock underlying the options which may be granted under the Amended
1995 Plan.
The Amended 1995 Plan shall be approved by the affirmative vote of the
holders of a majority of the Common Stock present or represented by proxy and
entitled to vote at the Annual Meeting. Accordingly, an abstention would have
the same legal effect as a vote against approval of the Amended 1995 Plan.
NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
In May 1996, the stockholders approved the Hugoton Energy Corporation
1993 Nonemployee Directors' Stock Option Plan ("Nonemployee Directors' Stock
Option Plan"). Under the Nonemployee Directors' Stock Option Plan, the Company
has reserved 150,000 shares for issuance. The purchase price of the Company's
Common Stock issued under each option is equal to the fair market value of the
Company's Common Stock on the date such option was granted. Options with
respect to 40,000 shares were granted to nonemployee directors during 1996
under the Nonemployee Directors' Plan. As of April 17, 1997, there were 62,000
shares available for future grant under such Plan.
ADDITIONAL OPTION AGREEMENTS
MCNABB, ELKOURI AND DECKER STOCK OPTION AGREEMENTS
During 1993, the Company entered into agreements with Messrs. McNabb
and Elkouri pursuant to which the Company has issued options exercisable for
50,000 and 25,000 respectively, of the Company's Common Stock (subject to
certain adjustments) at an exercise price of $10.00 per share. Such options
were not issued under the 1993 Plan, 1995 Plan or the Nonemployee Directors'
Stock Option Plan. Mr. Wilson entered into an agreement with the Company,
whereby, upon the exercise of any of such options, he will deliver to the
Company the number of
16
<PAGE> 19
shares to which the optionee is entitled pursuant to such exercise, and the
Company will forward to him the exercise price paid for such shares by the
optionee.
In September 1995, the Company entered into a Nonstatutory Stock
Option Agreement with Jay W. Decker, pursuant to which the Company issued an
option exercisable for 125,000 shares of the Company's Common Stock at an
exercise price of $8.25 per share. Such agreement was approved by the
stockholders in May 1996. Such option was not issued under the 1993 Plan, 1995
Plan or the Nonemployee Directors' Stock Option Plan.
PROPOSAL III - APPROVAL OF NONSTATUTORY STOCK OPTION AGREEMENT BETWEEN THE
COMPANY AND JAY W. DECKER
DECKER STOCK OPTION AGREEMENT
Pursuant to the provisions of Mr. Decker's employment agreement, on
September 8, 1996, the Company entered into a Nonstatutory Stock Option
Agreement with Jay W. Decker ("Decker Stock Option Agreement") pursuant to
which the Company issued, subject to stockholder approval, an option
exercisable for 125,000 shares of the Company's Common Stock (subject to
certain adjustments) at an exercise price of $8.34 per share. See "Executive
Compensation and Other Matters." A summary of the essential features of the
Decker Stock Option Agreement is provided below, but is qualified in its
entirety by reference to the full text of such agreement which was filed with
this Proxy Statement with the Securities and Exchange Commission. Such text is
not included in the printed version of this Proxy Statement.
Such option was not issued under any of the Company's stock option
plans. Such option is exercisable as follows: 25% become vested September 8,
1996, 25% vest twelve months after such date, 25% vest twenty-four months after
such date, and 25% vest thirty-six months after such date. The options must be
exercised within thirty-six months after the date they become vested or they
will expire worthless.
Options granted under the Decker Stock Option Agreement are not
transferable by him except by will or by the laws of descent and distribution,
and are exercisable during the lifetime of Mr. Decker only while he remains an
employee of the Company and will terminate and cease to be exercisable upon Mr.
Decker's termination of employment with the Company, except in the case of
certain events including disability.
The shares underlying the option granted to Mr. Decker under the
Decker Stock Option Agreement are shares of the Company's Common Stock as
presently constituted. Under the terms of the Decker Stock Option Agreement, if
the Company recapitalizes, reclassifies its capital stock, or otherwise changes
its capital structure (a "recapitalization"), the number and class of shares of
Common Stock covered by the option granted under such agreement, shall be
adjusted so that such option shall thereafter cover the number and class of
shares of stock and securities to which Mr. Decker would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, Mr. Decker had been the holder of record of the number of
shares of the Company's Common Stock then covered by such option.
No Federal income tax is imposed upon Mr. Decker upon the grant of the
option under the Decker Stock Option Agreement and the Company is not entitled
to a tax deduction by reason of such grant. Upon the exercise of Mr. Decker's
option, he will be treated as receiving compensation taxable as ordinary income
in the year of exercise in an amount equal to the excess of the fair market
value of the shares on the date of exercise over the option price paid for such
shares. Upon the exercise of his option, the Company may claim a deduction for
compensation paid at the same time and in the same amount as compensation
income is recognized to Mr. Decker assuming any Federal income tax withholding
requirements are satisfied. Upon a subsequent disposition of the shares
received upon exercise of his stock option, any appreciation after the date of
exercise should qualify as capital gain. If the shares received upon the
exercise of an option are transferred to Mr. Decker subject to certain
restrictions, then the taxable income realized by him, unless he elects
otherwise, and the Company's tax deduction (assuming any Federal income tax
withholding requirements are satisfied) should be deferred and should be
measured at the fair
17
<PAGE> 20
market value of the shares at the time the restrictions lapse. The restrictions
imposed on officers, directors and 10% shareholders by Section 16(b) of the
Securities Exchange Act of 1934, as amended, is such a restriction during the
period prescribed thereby if other shares have been purchased by such an
individual within six months of the exercise of a nonqualified stock option.
The following resolution will be presented for a vote of the
stockholders at the Annual Meeting:
"RESOLVED that the Nonstatutory Stock Option Agreement between the
Company and Jay W. Decker pursuant to which Mr. Decker was issued an
option exercisable for 125,000 shares of the Company's Common Stock at
an exercise price of $8.34 per share is hereby approved, ratified and
confirmed."
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
NONSTATUTORY STOCK OPTION AGREEMENT DATED SEPTEMBER 8, 1996, BETWEEN HUGOTON
ENERGY CORPORATION AND JAY W. DECKER
As of April 18, 1997, the closing sales price of the Company's Common
Stock on NASDAQ was $10.125. Upon approval by the stockholders of the Company,
the Company intends to file a registration statement under the Securities Act
with respect to the 125,000 shares of Company Common Stock underlying the
options which may be granted under the Decker Stock Option Agreement.
The Nonstatutory Stock Option Agreement between the Company and Mr.
Decker shall be approved by the affirmative vote of the holders of a majority
of the Common Stock present or represented by proxy and entitled to vote at the
Annual Meeting. Accordingly, an abstention would have the same legal effect as
a vote against approval of the Decker Stock Option Agreement.
SECTION 16 REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than
10% of a registered class of the Company's equity securities, to file reports
of ownership and changes in ownership with the Securities Exchange Commission.
Officers, directors and greater than 10% beneficial owners of Common Stock are
required by regulations of the Commission to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it
and written representations that no other reports were required, during or for
the year ended December 31, 1996, all persons subject to these reporting
requirements filed the required reports on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDER AGREEMENT
As a condition to the September 7, 1995 merger between Consolidated
Oil & Gas, Inc. and the Company (the "Merger"), FRSEA, Fund V, AmGO, AmGO II,
AmGO III, Comdisco and Jay W. Decker (such parties are hereinafter referred to
collectively as "the COG Holders"), Odyssey Partners, L.P. ("Odyssey Partners")
and Floyd C. Wilson entered into a certain Agreement of Shareholders. Such
Agreement of Shareholders provides that the parties agree, so long as they own
their shares or until the Agreement of Shareholders is terminated, to use their
best efforts (including voting the shares owned by them and their affiliates,
calling special meetings of the stockholders of the Company and executing and
delivering written consents) to elect nine members of the Board, consisting of
the following:
(a) One Class II member designated by FRSEA;
(b) One Class II member designated by Fund V;
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<PAGE> 21
(c) One Class III member designated by First Reserve Corporation
(provided that such member shall be Jay W. Decker so long as
he is an executive officer of the Company);
(d) One Class I member designated by Comdisco;
(e) Two Class III members designated by Floyd C. Wilson;
(f) One Class II member designated by Odyssey Partners; and
(g) Two members designated by a vote of a majority of the
stockholders of the Company (both of which shall be members of
Class I) and the parties to the Agreement of Shareholders
agreed that such initial directors shall be John T. McNabb, II
and David S. Elkouri, both of whom were directors of the
Company prior to the Merger and previously elected by the
stockholders of the Company.
The Agreement of Shareholders further provides that the party
designating a director may remove such director and designate his or her
successor. If the director designated by a party resigns, dies, becomes
incapacitated or is otherwise unable to serve, the party designating such
director may designate his or her successor. All parties shall vote all shares
held by them in favor of the election or removal of the persons so designated.
Action taken by any of the parties in designating or removing directors shall
be in writing executed by the party entitled to take such action and promptly
delivered by to the other parties and to the Company.
Each party's right to designate a director shall terminate if such
party's ownership of the Company's Common Stock is below 5% of the outstanding
Company Common Stock, except for First Reserve Corporation (whose stock
ownership for the purpose of such provision shall be the aggregate ownership of
their managed funds). If Mr. Wilson is not the Chief Executive Officer of the
Company and his ownership is less than 10% and more than 5% of the outstanding
Company Common Stock, Mr. Wilson's right to designate directors shall be
reduced from two to one.
If a party to the Agreement of Shareholders is no longer eligible to
designate a director, or, in the case of John T. McNabb, II or David S.
Elkouri, if either is unable to serve, then the Board shall (i) shrink the size
of the Board, (ii) leave the vacated seat empty or (iii) appoint a replacement
to serve until the next election of directors by stockholders and through its
normal nominating procedure, select a nominee to fill the open seat for
election by stockholders of the Company at the next annual meeting.
The Agreement of Shareholders shall terminate and be of no force and
effect at the close of business on September 7, 2005; provided that such
agreement may also be terminated earlier by the vote of the holders of 100% of
the shares of Company Common Stock subject thereto.
On April 17, 1997, Odyssey Partners sold all of its shares of Company
Common Stock. Therefore, pursuant to the provisions of the Agreement of
Shareholders, Odyssey Partners' right to designate a director terminated.
Pursuant to the provisions of the Agreement of Shareholders, the Board has
chosen to shrink the size of the Board to eight members.
REGISTRATION RIGHTS AGREEMENT
On September 7, 1995, the Company, Odyssey Partners, CRM Partners
L.P., CRM Retirement Partners L.P., CRM Hugoton Partners L.P., A.C. Israel
Enterprises, Inc., American Gas & Oil Investors, Limited Partnership, AmGO II,
Limited Partnership, AmGO III, Limited Partnership, First Reserve Secured
Energy Assets Fund, Limited Partnership, First Reserve Fund V, Limited
Partnership, Comdisco, Inc. and Floyd C. Wilson entered into a Registration
Rights Agreement. Under such agreement, if the Company files a registration
statement, the Company must, with certain exceptions and limitations, offer the
other parties to the Registration Rights Agreement ("holders") the opportunity
to include their shares in such registration statement. Each of (i) the First
Reserve Group,
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<PAGE> 22
(ii) Comdisco, (iii) Odyssey Partners and (iv) Floyd C. Wilson, if he is no
longer the Chief Executive Officer of the Company, is also granted a separate
right to require the Company to use its best efforts to cause the registration
and sale in an underwritten public offering of all or a portion of such
holder's shares. The Company will bear the expenses of the above registration,
other than transfer taxes, fees and expenses of counsel to any holder and fees
and commissions of brokers, dealers and underwriters. The Company also agreed
to indemnify the holders against certain liabilities and expenses arising out
of such registration.
WILSON WORKING INTERESTS
Since the formation of the Company and up to the Company's initial
public offering, which was completed on February 1, 1994, Mr. Wilson had
personally participated in most of the Company's drilling prospects, usually
acquiring a 25% working interest in each prospect. Since the date of the
initial public offering, Mr. Wilson's participation in drilling prospects has
been limited to those prospects located in a field where he previously held an
interest. Mr. Wilson has paid his pro rata share of all expenses associated
with his interest in each such prospect.
MCNABB AND ELKOURI BUSINESS RELATIONSHIPS
The Company retains Growth Capital Partners, Inc. to provide financial
consulting services. Mr. McNabb, is an officer, director and stockholder of
Growth Capital Partners, Inc. During 1996, the Company paid Growth Capital
Partners, Inc. $52,391 for financial consulting services.
The law firm of Hinkle, Eberhart & Elkouri, L.L.C., of which Mr. David
S. Elkouri, a director of the Company, is a member, renders legal services to
the Company. During 1996, the Company paid Hinkle, Eberhart & Elkouri, L.L.C.
$134,432 for legal services rendered to the Company.
LOAN TO MANAGEMENT
On May 5, 1994, Jimmy W. Gowens, Vice President of Exploration of the
Company, executed a Promissory Note in favor of the Company for up to the
principal amount of $100,000. Such Promissory Note provides for interest to
accrue at the rate of 8% per year on any amounts advanced and that all
principal and interest was due and payable on May 5, 1995. Under the terms of
such Promissory Note, if Mr. Gowens exercises certain options to purchase stock
of the Company, the net proceeds from the sale of any such stock shall be
immediately remitted to the Company to the extent necessary to pay any
outstanding principal and interest under such Promissory Note. The due date of
such Promissory Note has been extended until May 5, 1998. Mr. Gowens borrowed
$50,000 from the Company on May 5, 1994, $20,000 on December 14, 1994 and
$10,000 on October 5, 1995. As of April 17, 1997, all amounts borrowed by Mr.
Gowens under such Promissory Note and the interest accrued on such amounts are
outstanding.
LEASE AGREEMENTS
During 1996, the Company has entered into several Lease Agreements
with Sky King, L.L.C. for the lease of Sky King, L.L.C.'s airplane. Sky King,
L.L.C. is a Kansas limited liability company and its members are Floyd C.
Wilson, the Company's Chief Executive Officer, President and Chairman of the
Board, and Mr. Wilson's wife, Carol E. Wilson. The total amount paid to Sky
King, L.L.C. pursuant to such Lease Agreements during fiscal year ended
December 31, 1996 was $192,947. The lease rate paid from the Company to Sky
King, L.L.C. under such Lease Agreements was at or below the prevailing market
lease rate for similar airplanes in Wichita, Kansas.
Any transactions between the Company and its officers, directors,
principal stockholders, affiliates or advisors, including any loans or
participations in any of the Company's drilling prospects, are on terms no less
favorable to the Company than those reasonably obtainable from third parties
and have been approved or ratified by a majority of the Company's independent
directors.
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<PAGE> 23
PROPOSAL IV - RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP acted as the Company's independent auditors for the
year ended December 31, 1996 and has been selected by the Board, upon
recommendation of its Audit Committee, to continue to act as the Company's
independent auditors in 1997. This selection is being presented to the
Stockholders for ratification, although the Board may terminate the appointment
of Ernst & Young LLP as the Company's independent auditors without the approval
of the stockholders of the Company whenever the Board deems such termination
necessary or appropriate. In the event the appointment is not ratified, the
Board will consider the appointment of other independent auditors. The Company
has been advised that representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting of Stockholders; such representatives will have
an opportunity to make a statement, if they desire to do so, and will be
available to respond to appropriate questions.
The following resolution will be presented for a vote of the
stockholders at the Annual Meeting:
"RESOLVED that the appointment of Ernst & Young LLP as the Company's
independent auditors be ratified and confirmed."
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
Ratification of the appointment of Ernst & Young LLP shall be
effective upon receiving the affirmative vote of the holders of a majority of
the Common Stock present or represented by proxy and entitled to vote at the
Annual Meeting. Accordingly, an abstention would have the same legal effect as
a vote against this proposal.
STOCKHOLDERS PROPOSALS
Any proposals by stockholders intended to be presented at the 1998
Annual Meeting of Stockholders must be received by the Company no later than
December 17, 1997, to be considered by the Board for inclusion in the Company's
1998 Proxy Statement and form of proxy relating to that meeting. Stockholder
proposals should be submitted to the Secretary at the offices of the Company in
Wichita, Kansas.
OTHER MATTERS
Management knows of no other business which will be presented to the
meeting. If other matters properly come before the meeting, the persons named
as proxies will vote on them in accordance with their best judgment.
By Order of the Board of Directors,
/s/ FLOYD C. WILSON
FLOYD C. WILSON
Chairman of the Board of Directors,
President and Chief Executive Officer
April 30, 1997
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<PAGE> 24
APPENDIX A
FORM OF PROXY
HUGOTON ENERGY CORPORATION
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING ON MAY 15, 1997
The undersigned hereby appoints Floyd C. Wilson and W. Mark Womble, and
each of them, as proxies, each with full power of substitution, and hereby
authorizes them to represent and to vote as designated herein all the shares of
Common Stock of Hugoton Energy Corporation represented hereby and held of record
by the undersigned on April 4, 1997, at the Annual Meeting of Stockholders to be
held at the NationsBank Financial Center Auditorium, lower level, 100 N.
Broadway, Wichita, Kansas 67202 on Thursday, May 15, 1997, at 2:00 p.m., local
time, or at any adjournments thereof, upon all subjects that may properly come
before the meeting, including the matters described in the proxy statement
furnished herewith. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" ELECTION OF THE NOMINEES LISTED IN PROPOSAL
1,"FOR" APPROVAL OF THE HUGOTON ENERGY CORPORATION AMENDED AND RESTATED 1995
STOCK OPTION PLAN IN PROPOSAL 2, "FOR" APPROVAL OF THE JAY W. DECKER
NONSTATUTORY STOCK OPTION AGREEMENT IN PROPOSAL 3, "FOR" RATIFICATION OF
INDEPENDENT AUDITORS IN PROPOSAL 4, AND IN ACCORDANCE WITH THE DETERMINATION OF
THE NAMED PROXIES AS TO OTHER MATTERS.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE ON THE REVERSE
AND PROMPTLY RETURN.
- --------------------------------------------------------------------------------
Directors recommend a vote "FOR" the following:
<TABLE>
FOR WITHHELD Director Nominee(s) in Class II are: FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C>
Jonathan S. Linker
1. Election of William E. Macaulay 2. FOR approval of the Hugoton
Directors Energy Corporation Amended
and Restated 1995 Stock
Option Plan.
FOR all nominees listed except vote withheld for 3. FOR approval of the Jay W.
the following nominee(s): Decker Nonstatutory Stock
Option Agreement.
- -----------------------------------------
4. FOR ratification of Ernst &
Young LLP as Independent Auditors.
5. In their discretion, the proxies are authorized to vote upon
such other matters as may properly come before the meeting.
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
</TABLE>
SIGNATURE(S): DATE:
--------------------------------------- -----------------------
Note: If signing for a corporation or partnership or as agent, attorney or
fiduciary, indicate the capacity in which you are signing. If you do attend the
meeting and decide to vote by ballot, such vote will supersede this proxy.
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS CARD. Joint owners should
each sign individually. Corporate proxies should be signed in full corporate
name by an authorized officer. Fiduciaries should give full titles.
<PAGE> 25
APPENDIX B
HUGOTON ENERGY CORPORATION
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
On January 31, 1995, the HUGOTON ENERGY CORPORATION 1995 STOCK OPTION
PLAN (the "ORIGINAL PLAN") was adopted. Effective April 17, 1997, the Original
Plan is amended and restated in its entirety.
I. PURPOSE OF PLAN
The HUGOTON ENERGY CORPORATION 1995 STOCK OPTION PLAN (the "PLAN") is
intended to provide a means whereby certain employees of HUGOTON ENERGY
CORPORATION, a Kansas corporation (the "COMPANY"), and its subsidiaries may
develop a sense of proprietorship and personal involvement in the development
and financial success of the Company, and to encourage them to remain with and
devote their best efforts to the business of the Company, thereby advancing the
interests of the Company and its stockholders. Accordingly, the Company may
grant to certain employees ("OPTIONEES") the option ("OPTION") to purchase
shares of the common stock of the Company ("STOCK"), as hereinafter set forth.
Options granted under the Plan may be either incentive stock options, within
the meaning of section 422(b) of the Internal Revenue Code, as amended (the
"CODE"), ("INCENTIVE STOCK OPTIONS") or options which do not constitute
Incentive Stock Options.
II. ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"COMMITTEE") of the Board of Directors of the Company (the "BOARD"), and the
Committee shall be (a) comprised solely of two or more outside directors
(within the meaning of section 162(m) of the Code and applicable interpretive
authority thereunder), and (b) constituted so as to permit the Plan to comply
with Rule 16b-3, as currently in effect or as hereinafter modified or amended
("RULE 16B-3"), promulgated under the Securities Exchange Act of 1934, as
amended (the "1934 ACT"). The Committee shall have sole authority to select
the Optionees from among those individuals eligible hereunder and to establish
the number of shares which may be issued under each Option; provided, however,
that, notwithstanding any provision in the Plan to the contrary, the maximum
number of shares that may be subject to Options granted under the Plan to an
individual Optionee during any calendar year may not exceed 250,000 (subject to
adjustment in the same manner as provided in Paragraph VIII hereof with respect
to shares of Stock subject to Options then outstanding). The limitation set
forth in the preceding sentence shall be applied in a manner which will permit
compensation generated under the Plan to constitute "performance-based"
compensation for purposes of section 162(m) of the Code, including, without
limitation, counting against such maximum number of shares, to the extent
required under section 162(m) of the Code and applicable interpretive authority
thereunder, any shares subject to Options that are cancelled or repriced. In
selecting the Optionees from among individuals eligible hereunder and in
establishing the number of shares that may be issued under each Option, the
Committee may take into account the nature of the services rendered by such
individuals, their present and potential contributions to the Company's success
and such other factors as the Committee in its discretion shall deem relevant.
The Committee is authorized to interpret the Plan and may from time to time
adopt such rules and regulations, consistent with the provisions of the Plan,
as it may deem advisable to carry out the Plan. All decisions made by the
Committee in selecting the Optionees, in establishing the number of shares
which may be issued under each Option and in construing the provisions of the
Plan shall be final.
II. OPTION AGREEMENTS
(a) Each Option shall be evidenced by a written agreement between the
Company and the Optionee ("OPTION AGREEMENT") which shall contain such terms
and conditions as may be approved by the Committee. The terms and conditions
of the respective Option Agreements need not be identical. Specifically, an
Option Agreement may provide for the surrender
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of the right to purchase shares under the Option in return for a payment in
cash or shares of Stock or a combination of cash and shares of Stock equal in
value to the excess of the fair market value of the shares with respect to
which the right to purchase is surrendered over the option price therefor
("STOCK APPRECIATION RIGHTS"), on such terms and conditions as the Committee in
its sole discretion may prescribe; provided, that with respect to Stock
Appreciation Rights granted to employees who are subject to Section 16 of the
1934 Act, except as provided in Subparagraph VII(c) hereof, the Committee shall
retain final authority (i) to determine whether an Optionee shall be permitted,
or (ii) to approve an election by an Optionee, to receive cash in full or
partial settlement of Stock Appreciation Rights. Moreover, an Option Agreement
may provide for the payment of the option price, in whole or in part, by the
delivery of a number of shares of Stock (plus cash if necessary) having a fair
market value equal to such option price.
(b) For all purposes under the Plan, the fair market value of a share
of Stock on a particular date shall be equal to the mean of the reported high
and low sales price of the Stock (i) reported by the National Market System or
NASDAQ on that date or (ii) if the Stock is listed on a national stock
exchange, reported on the stock exchange composite tape on that date; or, in
either case, if no prices are reported on that date, on the last preceding date
on which such prices of the Stock are so reported. If the Stock is traded over
the counter at the time a determination of its fair market value is required to
made hereunder, its fair market value shall be deemed to be equal to the
average between the reported high and low or closing bid and asked prices of
Stock on the most recent date on which Stock was publicly traded. In the event
Stock is not publicly traded at the time a determination of its value is
required to be made hereunder, the determination of its fair market value shall
be made by the Committee in such manner as it deems appropriate.
(c) Each Option and all rights granted thereunder shall not be
transferable other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder, and shall be exercisable during the Optionee's lifetime
only by the Optionee or the Optionee's guardian or legal representative.
IV. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are employees
(including officers and directors who are also employees) of the Company or any
parent or subsidiary corporation (as defined in section 424 of the Code) of the
Company at the time the Option is granted; provided, however, that members of
the Committee shall not be eligible to be granted Options. Options may be
granted to the same individual on more than one occasion. No Incentive Stock
Option shall be granted to an individual if, at the time the Option is granted,
such individual owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or its parent or subsidiary
corporation, within the meaning of section 422(b) of the Code, unless (i) at
the time such Option is granted the option price is 110% of the fair market
value of the Stock subject to the Option and (ii) such Option by its terms is
not exercisable after the expiration of five years from the date of grant. To
the extent that the aggregate fair market value (determined at the time the
respective Incentive Stock Option is granted) of stock with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any calendar year under all incentive stock option plans of the Company
and its parent and subsidiary corporations exceeds $100,000, such excess
Incentive Stock Options shall be treated as Options which do not constitute
Incentive Stock Options. The Committee shall determine, in accordance with
applicable provisions of the Code, Treasury Regulations and other
administrative pronouncements, which of an Optionee's Incentive Stock Options
will not constitute Incentive Stock Options because of such limitation and
shall notify the Optionee of such determination as soon as practicable after
such determination.
V. SHARES SUBJECT TO PLAN
The aggregate number of shares which may be issued under Options
granted under the Plan shall not exceed 1,000,000 shares of Stock. Such shares
may consist of authorized but unissued shares of Stock or previously issued
shares of Stock reacquired by the Company. Any of such shares which remain
unissued and which are not subject to outstanding Options at the termination of
the Plan shall cease to be subject to the Plan, but, until termination of the
Plan, the Company shall at all times make available a sufficient number of
shares to meet the requirements of the Plan. Should any Option hereunder
expire or terminate
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<PAGE> 27
prior to its exercise in full, the shares theretofore subject to such Option
may again be subject to an Option granted under the Plan to the extent
permitted under Rule 16b-3. The aggregate number of shares which may be issued
under the Plan shall be subject to adjustment in the same manner as provided in
Paragraph VIII hereof with respect to shares of Stock subject to Options then
outstanding. Exercise of an Option in any manner, including an exercise
involving a Stock Appreciation Right, shall result in a decrease in the number
of shares of Stock which may thereafter be available, both for purposes of the
Plan and for sale to any one individual, by the number of shares as to which
the Option is exercised. Separate stock certificates shall be issued by the
Company for those shares acquired pursuant to the exercise of any Option which
does not constitute an Incentive Stock Option.
VI. OPTION PRICE
The purchase price of Stock issued under each Option shall be equal to
the fair market value of Stock subject to the Option on the date the Option is
granted; provided, however, that this limitation shall not apply to Incentive
Stock Options for which a greater purchase price is required pursuant to
Paragraph IV hereof.
VII. TERM OF PLAN
The Plan shall be effective upon the date of its adoption by the
Board, provided the Plan is approved by the stockholders of the Company within
twelve months thereafter. Notwithstanding any provision in this Plan or in any
Option Agreement, no Option shall be exercisable prior to such stockholder
approval. Except with respect to Options then outstanding, if not sooner
terminated under the provisions of Paragraph IX, the Plan shall terminate upon
and no further Options shall be granted after March 31, 2007.
VIII. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Plan and the Options granted hereunder
shall not affect in any way the right or power of the Board or the stockholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of debt or
equity securities, the dissolution or liquidation of the Company or any sale,
lease, exchange or other disposition of all or any part of its assets or
business or any other corporate act or proceeding.
(b) The shares with respect to which Options may be granted are
shares of Stock as presently constituted, but if, and whenever, prior to the
expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Stock or the payment of a stock
dividend on Stock without receipt of consideration by the Company, the number
of shares of Stock with respect to which such Option may thereafter be
exercised (i) in the event of an increase in the number of outstanding shares
shall be proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the Optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the Optionee had been the holder of record of the number of
shares of Stock then covered by such Option. If (i) the Company shall not be
the surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges
substantially all of its assets to any other person or entity (other than a
wholly- owned subsidiary of the Company), (iii) the Company is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the 1934 Act acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company's voting stock (based upon voting power), or
(v) as a result of or in connection with a contested election of directors, the
persons who were directors
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of the Company before such election shall cease to constitute a majority of the
Board (each such event is referred to herein as a "Corporate Change"), no later
than (a) ten days after the approval by the stockholders of the Company of such
merger, consolidation, reorganization, sale, lease or exchange of assets or
dissolution or such election of directors or (b) thirty days after a change of
control of the type described in Clause (iv), the Committee, acting in its sole
discretion without the consent or approval of any Optionee, shall act to effect
one or more of the following alternatives, which may vary among individual
Optionees and which may vary among Options held by any individual Optionee:
(1) accelerate the time at which Options then outstanding may be exercised so
that such Options may be exercised in full for a limited period of time on or
before a specified date (before or after such Corporate Change) fixed by the
Committee, after which specified date all unexercised Options and all rights of
Optionees thereunder shall terminate, (2) require that mandatory surrender to
the Company by selected Optionees of some or all of the outstanding Options
held by such Optionees (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date, before or after
such Corporate Change, specified by the Committee, in which event the Committee
shall thereupon cancel such Options and the Company shall pay to each Optionee
an amount of cash per share equal to the excess, if any, of the amount
calculated in Subparagraph (d) below (the "Change of Control Value") of the
shares subject to such Option over the exercise price(s) under such Options for
such shares, (3) make such adjustments to Options then outstanding as the
Committee deems appropriate to reflect such Corporate Change (provided,
however, that the Committee may determine in its sole discretion that no
adjustment is necessary to Options then outstanding) or (4) provide that the
number and class of shares of Stock covered by an Option theretofore granted
shall be adjusted so that such Option shall thereafter cover the number and
class of shares of stock or other securities or property (including, without
limitation, cash) to which the Optionee would have been entitled pursuant to
the terms of the agreement of merger, consolidation or sale of assets and
dissolution if, immediately prior to such merger, consolidation or sale of
assets and dissolution the Optionee had been the holder of record of the number
of shares of Stock then covered by such Option.
(d) For the purposes of clause (2) in Subparagraph (c) above, the
"CHANGE OF CONTROL VALUE" shall equal the amount determined in clause (i), (ii)
or (iii), whichever is applicable, as follows: (i) the per share price offered
to stockholders of the Company in any such merger, consolidation,
reorganization, sale of assets or dissolution transaction, (ii) the price per
share offered to stockholders of the Company in any tender offer or exchange
offer whereby a Corporate Change takes place, or (iii) if such Corporate Change
occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which such Options being surrendered are
exercisable, as determined by the Committee as of the date determined by the
Committee to be the date of cancellation and surrender of such Options. In the
event that the consideration offered to stockholders of the Company in any
transaction described in this Subparagraph (d) or Subparagraph (c) above
consists of anything other than cash, the Committee shall determine the fair
cash equivalent of the portion of the consideration offered which is other than
cash.
(e) Any adjustment provided for in Subparagraph (b) or (c) above
shall be subject to any required stockholder action.
(f) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason therefor shall be made with respect to, the
number of shares of Stock subject to Options theretofore granted or the
purchase price per share.
IX. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Options have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part thereof from
time to time; provided, that no change in any Option theretofore granted may be
made which would impair the rights of the Optionee without the consent of such
Optionee (unless such change is required in order to cause the benefits under
the Plan to qualify as performance-based compensation within the meaning of
section 162(m) of the Code and applicable interpretive authority thereunder);
and provided, further, that (i) the Board may not make any alteration or
amendment which would decrease any authority granted to the Committee hereunder
in contravention of Rule 16b-3 and (ii) the Board may not make any alteration
or amendment which would materially increase the benefits accruing to
participants under the Plan, increase the aggregate number
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of shares which may be issued pursuant to the provisions of the Plan, change
the class of individuals eligible to receive Options under the Plan or extend
the term of the Plan, without the approval of the stockholders of the Company.
X. SECURITIES LAWS
(a) The Company shall not be obligated to issue any Stock pursuant
to any Option granted under the Plan at any time when the offering of the
shares covered by such Option have not been registered under the Securities Act
of 1933 and such other state and federal laws, rules or regulations as the
Company or the Committee deems applicable and, in the opinion of legal counsel
for the Company, there is no exemption from the registration requirements of
such laws, rules or regulations available for the offering and sale of such
shares.
(b) It is intended that the Plan and any grant of an Option made to
a person subject to Section 16 of the 1934 Act meet all of the requirements of
Rule 16b-3. If any provision of the Plan or any such Option would disqualify
the Plan or such Option under, or would otherwise not comply with, Rule 16b-3,
such provision or Option shall be construed or deemed amended to conform to
Rule 16b-3.
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APPENDIX C
JAY W. DECKER
NONSTATUTORY STOCK OPTION AGREEMENT
This Nonstatutory Stock Option Agreement (the "AGREEMENT") is made and
entered into on this 8th day of September, 1996, by and between HUGOTON ENERGY
CORPORATION, a Kansas corporation (THE "COMPANY"), and JAY W. DECKER
("EMPLOYEE").
In consideration of the mutual agreements and other matters set forth
herein, the Company and Employee hereby agree as follows:
1. GRANT OR OPTION. The Company hereby irrevocably grants to
Employee the right and option ("OPTION") to purchase all or any part of an
aggregate of 125,000 shares of common stock of the Company ("STOCK"), on the
terms and conditions set forth herein. Exercise of this Option is subject to,
and contingent upon, approval of this Agreement by the stockholders of the
Company on or before twelve (12) months after the date this Agreement is
approved by the Board of Directors of the Company (the "BOARD"). This Option
shall not be treated as an incentive stock option within the meaning of section
422(b) of the Internal Revenue Code of 1986, as amended (the "CODE").
2. PURCHASE PRICE. The purchase price of Stock purchased
pursuant to the exercise of this Option shall be $8.34 per share, which has
been determined to be the fair market value of the Stock at the date of grant
of this Option.
3. VESTING AND EXERCISE OF OPTION. The Option granted hereunder
shall vest as follows:
(a) the option to purchase 25% of the shares covered herein shall
vest immediately;
(b) the option to purchase 25% of the shares covered herein shall
vest twelve (12) months after the date of this Agreement;
(c) the option to purchase 25% of the shares covered herein shall
vest twenty-four (24) months after the date of this Agreement;
and
(d) the option to purchase 25% of the shares covered herein shall
vest thirty-six (36) months after the date of this Agreement.
Subject to the earlier expiration of this Option as herein provided,
this Option may be exercised by written notice to the Company at its principal
executive office addressed to the attention of its Chief Executive Officer.
The options granted hereunder must be exercised within thirty-six (36) months
after the date they become vested or they will expire worthless.
This Option is not transferable by Employee otherwise than by will or
the laws of descent and distribution, and may be exercised only by Employee
during Employee's lifetime. This option may be exercised only while Employee
remains an employee of the Company and will terminate and cease to be
exercisable upon Employee's termination of employment with the Company, except
that:
(a) If Employee's employment with the Company terminates by
reason of disability (within the meaning of section 22(c)(3) of the
Code), this Option may be exercised in full (whether or not the option
is fully vested) by Employee (or Employee's estate or the person who
acquires this Option by will or the laws of descent and distribution
or otherwise by reason of the death of Employee) at any time during
the period of one (1) year following such termination.
(b) If Employee dies while in the employ of the Company,
Employee's estate, or the person who acquires this Option by will or
the laws of descent and distribution or otherwise by reason of the
death of Employee, may exercise
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this Option in full (whether or not the option is fully vested) at any
time during the period of one (1) year following the date of
Employee's death.
(c) If Employee's employment with the Company terminates for
any reason other than as described in (a) or (b) above, unless
Employee voluntarily terminates without the written consent of the
Company or is terminated for cause, this Option may be exercised by
Employee at any time during the period of three (3) months following
such termination, or by Employee's estate (or the person who acquires
this Option by will or the laws of descent and distribution or
otherwise by reason of the death of Employee) during a period of one
(1) year following Employee's death if Employee dies during such
three-month period, but in each case only to the extent the Option was
vested and only as to the number of shares Employee was entitled to
purchase hereunder as of the date Employee's employment so terminates.
For purposes of this Agreement, "CAUSE" shall mean the inability of
Employee, through sickness or other incapacity, to perform his duties
under his employment agreement for a period of six (6) months,
dishonesty, theft, conviction of a crime involving moral turpitude or
commission of a material act of fraud against the Company or its
subsidiaries, failure of Employee to observe or perform his material
duties and obligations as an employee of the Company or a material
breach of his employment agreement.
The purchase price of shares as to which this Option is exercised
shall be paid in full at the time of exercise (a) in cash (including check,
bank draft or money order payable to the order of the Company), or (b) by
delivering to the Company shares of Stock having a fair market value equal to
the purchase price, or (c) a combination of cash and Stock. No fraction of a
share of Stock shall be issued by the Company upon exercise of an Option or
accepted by the Company in payment of the exercise price thereof, rather,
Employee shall provide a cash payment for such amount as is necessary to effect
the issuance and acceptance of only whole shares of Stock. Unless and until a
certificate or certificates representing such shares shall have been issued by
the Company to Employee, Employee (or the person permitted to exercise this
Option in the event of Employee's death) shall not be or have any of the rights
or privileges of a stockholder of the Company with respect to shares acquirable
upon an exercise of this Option.
4. RECAPITALIZATION.
(a) The shares with respect to which this Option is granted are
shares of Stock as presently constituted but if, and whenever, prior to the
expiration of this Option, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which this Option may thereafter be exercised (a) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced
and (b) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced and the purchase price per share shall be
proportionately increased. If the Company recapitalizes or otherwise changes
its capital structure, thereafter upon any exercise hereunder, Employee shall
be entitled to purchase, in lieu of the number of shares of Stock as to which
this Option shall be exercisable, the number and class of shares of stock and
securities to which he would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, he had been
the holder of record of the number of shares of Stock as to which this Option
is then exercisable.
The existence of the Options granted hereunder shall not affect in any
way the right or power of the Board or the stockholders of the Company to make
or authorize any adjustment, recapitalization, reorganization or other change
in the Company's capital structure or its business, any merger or consolidation
of the Company, any issue of debt or equity securities, the dissolution or
liquidation of the Company or any sale, lease, exchange or other disposition of
all or any part of its assets or business or any other corporate act or
proceeding.
(b) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by this Option shall be adjusted so that such
Option shall thereafter cover the number and class of shares of stock and
securities to which Employee would have been entitled pursuant to the terms of
the recapitalization if, immediately prior to the recapitalization, Employee
had been the holder of record of the number of shares of Stock then covered by
this Option. If (i) the Company shall not be the surviving entity in any
merger, consolidation or other reorganization (or survives only as a subsidiary
of an entity other than a previously wholly-owned
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subsidiary of the Company), (ii) the Company sells, leases or exchanges
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company's voting stock
(based upon voting power), or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board (each
such event is referred to herein as a "Corporate Change"), no later than (a)
ten (10) days after the approval by the stockholders of the Company of such
merger, consolidation, reorganization, sale, lease or exchange of assets or
dissolution or such election of directors or (b) thirty (30) days after a
change of control of the type described in clause (iv) the Board, acting in its
sole discretion without the consent or approval of Employee, shall act to
effect one or more of the following alternatives, which may vary: (1)
accelerate the time at which this Option may be exercised so that this Option
may be exercised in full for a limited period of time on or before a specified
date (before or after such Corporate Change) fixed by the Board, after which
specified date all unexercised portions of this Option and all rights of
Employee thereunder shall terminate, (2) require that mandatory surrender to
the Company by Employee of this Option (irrespective of whether this Option is
then exercisable) as of a date, before or after such Corporate Change,
specified by the Board, in which event the Board shall thereupon cancel this
Option and the Company shall pay to Employee an amount of cash per share equal
to the excess, if any, of the amount calculated in subparagraph (d) below (the
"Change of Control Value") of the shares subject to this Option over the
exercise price(s) under this Option for such shares, (3) make such adjustments
to this Option as the Board deems appropriate to reflect such Corporate Change
(provided, however, that the Board may determine in its sole discretion that no
adjustment is necessary to this Option) or (4) provide that the number and
class of shares of Stock covered by this Option shall be adjusted so that this
Option shall thereafter cover the number and class of shares of stock or other
securities or property (including, without limitation, cash) to which Employee
would have been entitled pursuant to the terms of the agreement of merger,
consolidation or sale of assets and dissolution if, immediately prior to such
merger, consolidation or sale of assets and dissolution Employee had been the
holder of record of the number of shares of Stock then covered by this Option.
(c) For the purposes of clause (2) in subparagraph (b) above, the
"Change of Control Value" shall equal the amount determined in clause (i), (ii)
or (iii), whichever is applicable, as follows: (i) the per share price offered
to stockholders of the Company in any such merger, consolidation,
reorganization, sale of assets or dissolution transaction, (ii) the price per
share offered to stockholders of the Company in any tender offer or exchange
offer whereby a Corporate Change takes place, or (iii) if such Corporate Change
occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which this Option, if being surrendered are
exercisable, as determined by the Board as of the date determined by the Board
to be the date of cancellation and surrender of this Option. In the event that
the consideration offered to stockholders of the Company in any transaction
described in this subparagraph (c) or subparagraph (b) above consists of
anything other than cash, the Board shall determine the fair cash equivalent of
the portion of the consideration offered which is other than cash.
(d) Any adjustment provided for in subparagraph (a) or (b) above
shall be subject to any required stockholder action.
(e) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason therefor shall be made with respect to, the
number of shares of Stock subject to this Option or the purchase price per
share.
5. WITHHOLDING OF TAX. To the extent that the exercise of this
Option or the disposition of shares of Stock acquired by exercise of this
Option results in compensation income to Employee for federal or state income
tax purposes, Employee shall deliver to the Company at the time of such
exercise or disposition such amount of money or shares of Stock as the Company
may require to meet its obligation under applicable tax laws or regulations,
and, if Employee fails to do so, the Company is authorized to withhold from any
cash or Stock remuneration then or thereafter payable to Employee any tax
required to be withheld by reason of such resulting compensation income. Upon
an exercise of this Option, the Company is further authorized in its discretion
to satisfy any such withholding requirement out of any cash or shares of Stock
distributable to Employee upon such exercise.
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6. STATUS OF STOCK. Following approval of this Agreement by the
stockholders of the Company, the Company intends to register for issuance under
the Securities Act of 1933, as amended (the "Act") the shares of Stock
acquirable upon exercise of this Option, and to keep such registration
effective throughout the period this Option is exercisable. In the absence of
such effective registration or an available exemption from registration under
the Act, issuance of shares of Stock acquirable upon exercise of this Option
will be delayed until registration of such shares is effective or an exemption
from registration under the Act is available. In the event exemption from
registration under the Act is available upon an exercise of this Option,
Employee (or the person permitted to exercise this Option in the event of
Employee's death or incapacity), if requested by the Company to do so, will
execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with applicable
securities laws.
Employee agrees that the shares of Stock which Employee may acquire by
exercising this Option will not be sold or otherwise disposed of in any manner
which would constitute a violation of any applicable securities laws, whether
federal or state. Employee also agrees (i) that the certificates representing
the shares of Stock purchased under this Option may bear such legend or legends
as the Company deems appropriate in order to assure compliance with applicable
securities laws, and (ii) that the Company may refuse to register the transfer
of the shares of Stock purchased under this Option on the stock transfer
records of the Company if such proposed transfer would in the opinion of
counsel satisfactory to the Company constitute a violation of any applicable
securities laws and (iii) that the Company may give related instructions to its
transfer agent, if any, to stop registration of the transfer of the shares of
Stock purchased under this Option.
7. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement,
Employee shall be considered to be in the employment of the Company as long as
Employee remains an employee of either the Company, a parent or subsidiary
corporation (as defined in section 424 of the Code) of the Company, or a
corporation or a parent or subsidiary of such corporation assuming or
substituting a new option for this Option. Any question as to whether and when
there has been a termination of such employment, and the cause of such
termination, shall be determined by the Board and its determination shall be
final.
8. PLAN. This Agreement is intended to constitute an employee
benefit plan within the meaning of Rule 405 of the Act.
9. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
10. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Kansas.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed, by its officer thereunto duly authorized, and Employee has executed
this Agreement, all as of the day and year first above written.
HUGOTON ENERGY CORPORATION
By:
-------------------------------------
Name: W. Mark Womble
-----------------------------------
Title: Executive Vice President and CFO
----------------------------------
----------------------------------------
JAY W. DECKER
"EMPLOYEE"
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