<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:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SONAT INC.
(Name of Registrant as Specified in Its Charter)
SONAT INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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/ / 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 registrations statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
Federal Securities Law Reports
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- ---------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
SONAT INC.
P. O. BOX 2563, BIRMINGHAM, ALABAMA 35202 TELEPHONE: (205) 325-3800
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 1994
To Our Stockholders:
The Annual Meeting of Stockholders of Sonat Inc., a Delaware corporation,
will be held at the AmSouth Upper Lobby Auditorium, AmSouth/Harbert Plaza,
Birmingham, Alabama at 9:00 a.m., local time, on Thursday, April 28, 1994, for
the following purposes:
1. To elect three Directors as members of the Board of Directors of the
Company, to serve until the 1997 Annual Meeting of Stockholders and
until their respective successors have been duly elected and qualified.
2. To elect an Auditor of the Company for the ensuing year. The Board of
Directors of the Company has recommended Ernst & Young, the present
Auditor, for election as Auditor (Proposal No. 1).
3. To approve the Company's Performance Award Plan (Proposal No. 2).
4. To approve each of the following five proposals to amend the Company's
Restated Certificate of Incorporation ("Charter"):
(a) to increase the number of authorized shares of Common Stock from
200,000,000 shares to 400,000,000 shares (Proposal No. 3);
(b) to delete a Charter provision which provides in certain cases for
minimum price protection or, alternatively, higher stockholder
voting requirements, in connection with certain business
combinations (Proposal No. 4);
(c) to provide that, subject to certain conditions, the Board of
Directors shall call a special meeting of the stockholders at the
request of a person that has owned at least 3% of the Company's
voting stock for at least six months (Proposal No. 5);
(d) to reduce the vote required for stockholders to amend, repeal or
adopt By-Laws from 67% of the outstanding shares to 60% (Proposal
No. 6); and
(e) to reduce the vote required for stockholders to amend, repeal or
adopt any provision inconsistent with certain "anti-takeover"
provisions of the Charter from 67% of the outstanding shares to
60% (Proposal No. 7).
5. To transact such other business as may properly be brought before the
meeting.
Only holders of Common Stock of record at the close of business on March
11, 1994, will be entitled to vote at the meeting.
The meeting may be adjourned from time to time without other notice than by
announcement at the meeting, or any adjournment thereof, and any and all
business for which the meeting is hereby noticed may be transacted at any such
adjournment.
By order of the Board of Directors,
BEVERLEY T. KRANNICH
Secretary
Birmingham, Alabama
March 16, 1994
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YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED RETURN ENVELOPE.
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<PAGE> 3
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS APRIL 28, 1994
This Proxy Statement is furnished in connection with the solicitation of
proxies by Sonat Inc. on behalf of the Board of Directors of the Company, to be
voted at the Annual Meeting of Stockholders, called to be held on Thursday,
April 28, 1994 at 9:00 a.m. at the AmSouth Upper Lobby Auditorium,
AmSouth/Harbert Plaza, Birmingham, Alabama. Mailing of the Proxy Statement and
the accompanying proxy card to the stockholders is expected to commence on or
about March 18, 1994.
VOTING SECURITIES
As of January 31, 1994, the Company had outstanding 87,172,087 shares of
Common Stock, par value $1.00 per share, which are its only voting securities.
Holders of Common Stock are entitled to one vote for each share held. The Board
of Directors has fixed March 11, 1994, as the record date for the determination
of stockholders entitled to notice of, and to vote at, the Annual Meeting.
All references in this Proxy Statement to shares of the Company's Common
Stock reflect the two-for-one split of the Common Stock which became effective
on September 14, 1993.
THE PROXY
If a proxy is executed properly by a stockholder and is not revoked, it
will be voted at the Annual Meeting in the manner specified on the proxy, or if
no manner is specified, it will be voted "FOR" the election of the three
nominees for Director and "FOR" Proposal No. 1, 2, 3, 4, 5, 6 and 7. The
submission of an executed proxy will not affect a stockholder's right to attend,
and to vote in person at, the Annual Meeting. A stockholder who executes a proxy
may revoke it at any time before it is voted by filing a written revocation with
the Secretary of the Company, executing a proxy bearing a later date or
attending and voting in person at the Annual Meeting.
THE BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED RETURN ENVELOPE.
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for the
classification of the Board of Directors into three classes (Class I, Class II
and Class III). Three Class II Directors are to be elected at the Annual Meeting
of Stockholders to serve for a three-year term and until the election and
qualification of their respective successors in office.
The three nominees for election as Class II Directors are Jerome J.
Richardson, James B. Williams and Joe B. Wyatt. Each of the nominees has been
previously elected as a Director by the stockholders. In the event that any of
the nominees becomes unavailable for any reason, which is not anticipated, the
Board of Directors in its discretion may, unless it has taken appropriate action
to provide for a lesser number of Directors, designate a substitute nominee, in
which event, pursuant to the accompanying proxy, votes will be cast for such
substitute nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" JEROME J. RICHARDSON, JAMES
B. WILLIAMS AND JOE B. WYATT AS CLASS II DIRECTORS.
<PAGE> 4
NOMINEES FOR DIRECTOR -- CLASS II -- TERMS TO EXPIRE 1997
<TABLE>
<S> <C>
- ----------------------- JEROME J. RICHARDSON, age 57, is Chairman of the Board and Chief
Executive Officer of Flagstar Companies, Inc. and Flagstar
Corporation (a wholly-owned subsidiary of Flagstar Companies, Inc.),
the principal business of which is food services. He has served as a
Director of the Company since 1991. Mr. Richardson is also a
Director of NCAA Foundation and Isotechnologies, Inc., a trustee of
[Picture] Saint Mary's College and Wofford College, and a Member of the Board
of Visitors of Duke University Medical Center. During the past five
years, Mr. Richardson has served as an executive officer of Flagstar
Companies, Inc. and Flagstar Corporation.
- -----------------------
</TABLE>
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<TABLE>
<S> <C>
- ----------------------- JAMES B. WILLIAMS, age 60, is Chairman of the Board and Chief
Executive Officer of SunTrust Banks, Inc. He has served as a
Director of the Company since 1987. Mr. Williams is also a Director
of The Coca-Cola Company, Federal Reserve Bank of Atlanta, Genuine
Parts Company, Georgia-Pacific Corporation, Rollins, Inc. and RPC
Energy Services, Inc. During the past five years, Mr. Williams has
[Picture] served as an executive officer of SunTrust Banks, Inc. and certain
of its subsidiaries.
- -----------------------
</TABLE>
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<TABLE>
<S> <C>
- ----------------------- JOE B. WYATT, age 58, is Chancellor, Chief Executive Officer and
Trustee of Vanderbilt University, a position he has held during the
past five years. He has served as a Director of the Company since
1984. Chancellor Wyatt is also a Director of Advanced Network &
Services, Inc., Ingram Industries, Inc., Reynolds Metals Company and
University Research Association, and a Trustee of EDUCOM, Inc.
[Picture]
- -----------------------
</TABLE>
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2
<PAGE> 5
CONTINUING DIRECTORS -- CLASS I -- TERMS EXPIRING 1996
<TABLE>
<S> <C>
- ----------------------- WILLIAM O. BOURKE, age 66, is Chairman of the Executive Committee of
the Board of Directors and a Director of Reynolds Metals Company, an
aluminum and consumer products company. He has served as a Director
of the Company since 1990. Mr. Bourke is also a Director of Merrill
Lynch & Co., Inc. and Premark International Inc. During the past
five years prior to his retirement in April 1992, Mr. Bourke served
[Picture] as an executive officer of Reynolds Metals Company.
- -----------------------
</TABLE>
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<TABLE>
<S> <C>
- ----------------------- ROBERTO C. GOIZUETA, age 62, is Chairman of the Board and Chief
Executive Officer of The Coca-Cola Company, the principal business
of which is the manufacture of soft drinks. He has served as a
Director of the Company since 1981. Mr. Goizueta is also a Director
of Eastman Kodak Company, Ford Motor Company, SunTrust Banks, Inc.,
Trust Company of Georgia and Trust Company Bank of Georgia, and a
[Picture] member of the Board of Trustees of Emory University. During the past
five years, Mr. Goizueta has served as an executive officer of The
Coca-Cola Company.
- -----------------------
</TABLE>
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<TABLE>
<S> <C>
- ----------------------- RONALD L. KUEHN, JR., age 58, is Chairman of the Board, President
and Chief Executive Officer of the Company. He has served as a
Director of the Company since 1981. Mr. Kuehn is also a Director of
AmSouth Bancorporation, Praxair, Inc., Protective Life Corporation,
Sonat Offshore Drilling Inc. and Union Carbide Corporation, and a
member of the Board of Trustees of Birmingham-Southern College and
[Picture] Tuskegee University. During the past five years, Mr. Kuehn has
served as an executive officer of the Company.
- -----------------------
</TABLE>
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3
<PAGE> 6
<TABLE>
<S> <C>
- ----------------------- ROBERT J. LANIGAN, age 65, is Chairman Emeritus of the Board of
Directors of Owens-Illinois, Inc., the principal business of which
is the manufacture and sale of packaging products. He has served as
a Director of the Company since 1983. Mr. Lanigan is also a Director
of Chrysler Corporation, Sonat Offshore Drilling Inc. and The Dun &
Bradstreet Corporation. During the past five years prior to his
[Picture] appointment to his current position, Mr. Lanigan served as an
executive officer of Owens-Illinois, Inc.
- -----------------------
</TABLE>
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<TABLE>
<S> <C>
- ----------------------- CHARLES MARSHALL, age 64, is the former Vice Chairman of the Board
of American Telephone and Telegraph Company. He has served as a
Director of the Company since 1982. Mr. Marshall is also a Director
of Ceridian Corporation, GATX Corporation, Grumman Corporation,
Hartmarx Corporation, Sundstrand Corporation and Zenith Electronics
Corporation. During the past five years prior to his retirement in
[Picture] June 1989, Mr. Marshall served as an executive officer of American
Telephone and Telegraph Company.
- -----------------------
</TABLE>
CONTINUING DIRECTORS -- CLASS III -- TERMS EXPIRING 1995
<TABLE>
<S> <C>
- ----------------------- JOHN J. CREEDON, age 69, is the former President and Chief Executive
Officer of Metropolitan Life Insurance Company. He has served as a
Director of the Company since 1987. Mr. Creedon is also a Director
of Melville Corporation, Metropolitan Life Insurance Company, NYNEX
Corporation, Praxair, Inc., Rockwell International Corporation and
Union Carbide Corporation. During the past five years, Mr. Creedon
[Picture] served as Chief Executive Officer and as Chairman of the Executive
Committee of the Board of Directors of Metropolitan Life Insurance
Company.
- -----------------------
</TABLE>
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4
<PAGE> 7
<TABLE>
<S> <C>
- ----------------------- BENJAMIN F. PAYTON, age 61, is President of Tuskegee University, a
position he has held during the past five years. He has served as a
Director of the Company since 1992. Dr. Payton is also a Director of
AmSouth Bancorporation, ITT Corporation, Liberty Corporation,
Morrison's, Inc., Praxair, Inc. and The Sheraton Corporation.
[Picture]
- -----------------------
</TABLE>
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<TABLE>
<S> <C>
- ----------------------- JOHN J. PHELAN, JR., age 62, is the former Chairman of the Board and
Chief Executive Officer of the New York Stock Exchange. He has
served as a Director of the Company since 1990. Mr. Phelan is also a
Director of Avon Products, Inc., Eastman Kodak Company, Merrill
Lynch & Co., Inc. and Metropolitan Life Insurance Company. During
the past five years prior to his retirement in December 1990, Mr.
[Picture] Phelan served as Chairman of the Board and Chief Executive Officer
of the New York Stock Exchange.
- -----------------------
</TABLE>
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<TABLE>
<S> <C>
- ----------------------- L. EDWIN SMART, age 70, serves as counsel to the law firm of Hughes
Hubbard & Reed. He has served as a Director of the Company (or its
predecessor, Southern Natural Gas Company, now a wholly-owned
subsidiary of the Company) since 1967. Mr. Smart is also a Director
of The Continental Corporation, Flagstar Companies, Inc. and
Flagstar Corporation. Prior to his retirement in April 1987, Mr.
[Picture] Smart served as an executive officer of Flagstar Corporation (and
its predecessor, Transworld Corporation), Trans World Airlines, Inc.
and Hilton International Co.
- -----------------------
</TABLE>
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Henry R. Linden, who is currently a Class II Director, will retire from the
Board of Directors on April 28, 1994, in accordance with the Board's retirement
policy.
BOARD MEETINGS AND COMMITTEES
During 1993 the Board of Directors held eleven regular and special
meetings. The Board has standing Audit, Employee Benefits, Executive
Compensation, Finance, Nominating and Board Structure, Public Affairs, and
Strategic Planning Committees which assist the Board in the discharge of its
responsibilities. Each Director attended at least 75% of the meetings of the
Board and the Committees on which he served, except Dr. Payton.
Audit Committee. The Audit Committee reviews and reports to the Board the
scope and results of audits by the Auditor and the Company's internal auditing
staff, and reviews with the Auditor the
5
<PAGE> 8
adequacy of the Company's system of internal controls. It reviews transactions
between the Company and its Directors and officers and Company policies with
respect thereto, and compliance with the Company's business ethics and conflict
of interest policies. The Committee also recommends a firm of certified public
accountants to serve as Auditor of the Company (subject to nomination by the
Board and election by the stockholders), authorizes all audit and other
professional services rendered by the Auditor and periodically reviews the
independence of the Auditor.
Membership on the Audit Committee is restricted to those Directors who are
not active or retired officers or employees of the Company. The Company's policy
on Audit Committee membership complies with the Audit Committee Policy Statement
adopted by the New York Stock Exchange. The current members of the Committee are
Mr. Creedon, Chairman, and Messrs. Goizueta, Linden, Phelan and Wyatt. The
Committee met three times during 1993.
Employee Benefits Committee. The Employee Benefits Committee periodically
reviews the status of the Company's employee benefit programs and the
performance of the managers of the funded programs. To assist in its review, the
Committee meets periodically with the chairmen of the administrative and benefit
asset committees of each of the funded plans. The current members of the
Committee are Dr. Linden, Chairman, and Messrs. Marshall, Payton, Williams and
Wyatt. The Committee met four times during 1993.
Executive Compensation Committee. The Executive Compensation Committee
reviews and approves the compensation of the officers of the Company and makes
awards under the Executive Award Plan and the Performance Award and Cash Bonus
Plan. The current members of the Committee are Mr. Goizueta, Chairman, and
Messrs. Lanigan, Linden, Smart and Wyatt. The Committee met seven times during
1993.
Finance Committee. The Finance Committee approves long-term financial
policies and annual financial plans, significant capital expenditures, insurance
programs and investment policies of the Company. It also makes recommendations
to the Board concerning dividend policy, the issuance and terms of debt and
equity securities and the establishment of bank lines of credit. The current
members of the Committee are Mr. Williams, Chairman, and Messrs. Creedon,
Lanigan, Richardson and Smart. The Committee met three times during 1993.
Nominating and Board Structure Committee. The Nominating and Board
Structure Committee makes recommendations to the Board with respect to the size
and composition of the Board and Board retirement and tenure policies. It also
reviews the qualifications of potential candidates for the Board of Directors,
evaluates the performance of incumbent Directors and recommends to the Board
nominees to be elected at the Annual Meeting of Stockholders. The current
members of the Committee are Mr. Marshall, Chairman, and Messrs. Bourke, Payton,
Phelan, Richardson and Williams. The Committee met three times during 1993.
The Nominating and Board Structure Committee will consider nominees for
Director recommended by stockholders. Such recommendations should be submitted
in writing, accompanied by a resume of the nominee's qualifications and business
experience and a signed statement of the proposed candidate consenting to be
named as a candidate and, if nominated and elected, to serve as a Director, and
addressed to the offices of the Company to the attention of Beverley T.
Krannich, Secretary.
Public Affairs Committee. The Public Affairs Committee reviews the
Company's policies and practices which address issues of social and public
concern, such as government affairs, the environment, energy conservation and
charitable contributions. It also reviews stockholder relations and, in
coordination with the Nominating and Board Structure Committee, considers
stockholder proposals and matters of corporate governance. The current members
of the Committee are Mr. Smart, Chairman, and Messrs. Bourke, Creedon, Marshall
and Phelan. The Committee met three times during 1993.
Strategic Planning Committee. The Strategic Planning Committee assists in
the formulation of the business strategies of the Company and its subsidiaries.
The current members of the Committee are
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<PAGE> 9
Mr. Lanigan, Chairman, and Messrs. Bourke, Creedon, Goizueta, Linden, Marshall,
Payton, Phelan, Richardson, Smart, Williams and Wyatt. The Committee met three
times during 1993.
COMPENSATION OF OUTSIDE DIRECTORS
FEES AND RETAINERS. Each non-employee Director of the Company receives a
quarterly retainer of $7,500 ($8,750 for Committee Chairmen) and a fee of $1,000
for each Board meeting and each Board Committee meeting attended, plus incurred
expenses where appropriate.
Pursuant to the Director's Fees Deferral Plan, a Director may elect to
defer receipt of some or all of his fees and retainer. All amounts deferred are
credited to the Director's account under the Plan, and interest is credited to
the account quarterly. The Director may choose to have the balance in his
account distributed to him in a lump sum or in annual installments, commencing
upon termination of service as a Director or, at his election, attainment of a
specified age.
RETIREMENT PLAN FOR DIRECTORS. Directors of the Company who during some
portion of their service as Directors were not officers of the Company or its
subsidiaries are participants in the Retirement Plan for Directors. An eligible
Director who ceases being a Director after reaching age 70, completing five
years of service as a non-employee Director or as a result of death or permanent
disability, will receive a retirement benefit from the Plan. The Director may
choose to have such benefit paid either in a series of quarterly payments equal
to the retainer (as of the date of the Director's retirement) for the period the
Director served as a non-employee Director of the Company (or its predecessor,
Southern Natural Gas Company) or in a cash lump-sum payment that equals the
present value of such series of payments.
RESTRICTED STOCK PLAN FOR DIRECTORS. Each non-employee Director of the
Company is a participant in the Restricted Stock Plan for Directors. Each such
Director was granted 2,000 shares of restricted stock in 1993, except that each
Director who is scheduled to retire from the Board under the Board's retirement
policy prior to April 1, 1998 (the Plan's termination date) was granted 400
shares of restricted stock for each remaining year of service as a Director. The
Plan provides that 400 shares granted to each Director will vest on April 1 of
each of the years 1994 through 1998.
Each person who first becomes a non-employee Director after April 22, 1993
(the effective date of the Plan, as amended and restated) will be granted 33.33
shares of restricted stock for each calendar month or fraction thereof from the
Director's election as a non-employee Director to the following March 31
(rounded to the nearest whole share), plus 400 shares for each subsequent Plan
Year (April 1 -- March 31) until the earlier of April 1, 1998 or the Director's
scheduled retirement date. The product of 33.33 shares times the number of full
and partial calendar months from the Director's election as a non-employee
Director to the following March 31 (rounded to the nearest whole share) will
vest on the April 1 following such election, and 400 shares will vest on each
April 1 thereafter through April 1, 1998.
All shares of restricted stock will vest immediately upon the Director's
death or disability. At the time his restricted stock vests, the Director will
receive a cash tax-offset "supplemental payment" in an amount equal to the
amount necessary to pay the federal income tax payable with respect to both the
vesting of restricted stock and receipt of the supplemental payment, assuming
the Director is taxed at the maximum effective federal income tax rate. If a
Director leaves the Board of Directors before all of his shares of restricted
stock have vested, the unvested shares will be forfeited.
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<PAGE> 10
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the amount and nature of beneficial ownership of
shares of the Common Stock of the Company beneficially owned by the Directors
and certain executive officers of the Company, and by all present Directors and
executive officers of the Company as a group, as of January 31, 1994.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)
----------------------------------------------------------- ------------------------
<S> <C>
Thomas W. Barker, Jr. ..................................... 39,079(2)
William O. Bourke.......................................... 5,000(3)
John J. Creedon............................................ 13,700(4)
Roberto C. Goizueta........................................ 3,600
John D. Johns.............................................. 2,817
Ronald L. Kuehn, Jr. ...................................... 593,588(2 and 5)
Robert J. Lanigan.......................................... 6,040(6)
Henry R. Linden............................................ 6,568(7)
Charles Marshall........................................... 7,600
James E. Moylan, Jr. ...................................... 42,121(2)
William C. O'Malley........................................ 155,157(2)
Benjamin F. Payton......................................... 2,373
John J. Phelan, Jr. ....................................... 2,660
Jerome J. Richardson....................................... 4,280
Donald G. Russell.......................................... 137,872(2)
L. Edwin Smart............................................. 3,600
William A. Smith........................................... 187,056(2)
James B. Williams.......................................... 15,200
Joe B. Wyatt............................................... 3,200
All Present Directors and Executive Officers as a Group
(18 persons)............................................. 1,124,609(8)
</TABLE>
NOTE 1: Each Director and executive officer has sole voting power and sole
investment power with respect to all shares beneficially owned by him, unless
otherwise indicated. As of January 31, 1994, each such individual beneficially
owned less than 0.70% of the outstanding shares of Common Stock of the Company,
and all present Directors and executive officers of the Company as a group,
consisting of 18 persons, beneficially owned 1.29% of the outstanding shares of
the Company's Common Stock.
The number of shares shown includes 2,000 shares of restricted stock for
each of Messrs. Bourke, Goizueta, Lanigan, Marshall, Payton, Phelan, Richardson,
Williams and Wyatt, 1,600 shares of restricted stock for Mr. Creedon, 1,200
shares of restricted stock for Mr. Smart, and 400 shares of restricted stock for
Dr. Linden, granted under the Company's Restricted Stock Plan for Directors,
which shares had not vested as of January 31, 1994. Such persons have the power
to vote and receive dividends on such shares, but do not have the power to
dispose of, or to direct the disposition of, such shares until such shares are
vested pursuant to the terms of such plan.
NOTE 2: The number of shares shown for Messrs. Barker, Kuehn, Moylan,
O'Malley, Russell and Smith includes 3,568 shares, 73,400 shares, 4,368 shares,
26,534 shares, 18,534 shares and 12,534 shares, respectively, of restricted
stock granted under the Company's Executive Award Plan, which shares had not
vested as of January 31, 1994. Such persons have the right to vote and receive
dividends on such shares, but do not have the power to dispose of, or to direct
the disposition of, such shares until such shares are vested pursuant to the
terms of such plan. The number of shares shown for Messrs. Barker, Kuehn,
Moylan, O'Malley, Russell and Smith also includes (a) 7,334 shares, 41,078
shares, 8,106 shares, 20,605 shares, 7,969 shares and 13,818 shares,
respectively, held by the Trustee under the Company's Savings Plan (or, with
respect to Mr. O'Malley, the Sonat Offshore Drilling Savings Plan) as of January
31, 1994; and (b) 27,000 shares, 456,266 shares, 27,000 shares, 102,666 shares,
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<PAGE> 11
107,332 shares and 152,332 shares, respectively, covered by options under the
Company's Executive Award Plan which were exercisable, but had not been
exercised, as of January 31, 1994.
NOTE 3: Mr. Bourke filed a late report to the Securities and Exchange
Commission with respect to one transaction in the Company's Common Stock.
NOTE 4: The number of shares shown for Mr. Creedon includes 3,200 shares
held in trusts for two of his children, of which shares he disclaims any
beneficial ownership.
NOTE 5: The number of shares shown for Mr. Kuehn includes 6,000 shares
owned by his wife and 1,500 shares held in trust for one of his children, of
which shares he disclaims any beneficial ownership.
NOTE 6: Mr. Lanigan filed a late report to the Securities and Exchange
Commission with respect to four transactions in the Company's Common Stock.
NOTE 7: The number of shares shown for Dr. Linden includes 6,168 shares
owned jointly with his wife.
NOTE 8: The number of shares shown includes 115,804 shares of restricted
stock granted under the Company's Executive Award Plan, which shares had not
vested as of January 31, 1994; 86,065 shares held by the Trustee under the
Company's Savings Plan as of January 31, 1994; 808,262 shares covered by options
under the Company's Executive Award Plan which were exercisable, but had not
been exercised, as of January 31, 1994; and 21,200 shares of restricted stock
granted under the Company's Restricted Stock Plan for Directors, which shares
had not vested as of January 31, 1994.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
James B. Williams, a Director of the Company, is Chairman and Chief
Executive Officer of SunTrust Banks, Inc. Trust Company Bank, a subsidiary of
SunTrust Banks, Inc. ("Trust Company"), has extended a line of credit to the
Company permitting the short-term borrowing of $25,000,000. During 1993, there
were periodic borrowings and repayments under this line of credit and, at
December 31, 1993, there was no principal amount outstanding thereunder. In
addition, the Company and one of its wholly-owned subsidiaries were permitted to
borrow an aggregate of $40,120,000 pursuant to long-term loan agreements, and
were indebted to Trust Company in the principal amount thereunder of an
aggregate of $11,120,000 at December 31, 1993. A subsidiary of Trust Company
also serves as investment manager for trusts that fund the Company's retirement,
disability and retiree medical benefits programs.
L. Edwin Smart, a Director of the Company, serves as counsel to the law
firm of Hughes Hubbard & Reed. Hughes Hubbard & Reed provides legal services to
the Company and certain of its subsidiaries.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee of the Board of Directors of the
Company, which is composed solely of non-employee Directors, administers the
Company's executive compensation program. The Committee's primary responsibility
is to ensure that the executive compensation program furthers the interests of
the Company and its stockholders.
The Company's executive compensation program has three principal
objectives: (1) to attract and retain a highly qualified and motivated
management team; (2) to appropriately reward individual executives for their
contributions to the attainment of the Company's key strategic goals; and (3) to
link the interests of executives and stockholders through stock-based plans and
performance measures.
The Committee meets with outside consultants at least annually to evaluate
the Company's performance against the performance of a peer group of companies
and to review and compare the level of compensation paid or awarded to key
executives to the compensation practices of the peer group. The
9
<PAGE> 12
peer group used for determining compensation for corporate executives consists
of 19 publicly held companies in the Company's key business segments and
investments -- natural gas transmission and sales, domestic oil and gas
exploration and production, and offshore drilling (the "Corporate Peer Group").
The aggregate asset mix of the companies included in the Corporate Peer Group
approximates the Company's asset mix. The Committee also reviews and may give
greater weight to compensation survey data specific to a particular business
segment when considering the compensation of executive officers whose job is
related primarily to a single business segment. In comparing the level of the
Company's compensation to that of a peer group, the Committee takes into account
the relative size of companies as measured by revenues. The Standard & Poor's
Natural Gas Distribution/Pipeline Group described in the five-year total
stockholder return comparison on page 18 of this Proxy Statement is not used to
determine the compensation of executives, because that group's aggregate asset
mix does not include an appropriate weighting for exploration and production and
offshore drilling.
The key components of the Company's executive compensation program are base
salary, annual cash bonus incentives, and long-term stock incentives. The
Committee's policies with respect to each component of the program, including
the bases for the compensation of Mr. Kuehn, Chairman of the Board, President
and Chief Executive Officer of the Company, are described below. The Committee
consults with Mr. Kuehn in reviewing the individual performance and compensation
of key executives of the Company (other than Mr. Kuehn). The Committee reviews
Mr. Kuehn's performance and compensation in executive session at least annually.
BASE SALARIES. Base salaries are initially established by an evaluation of
the executive's position, responsibilities and experience and a review of salary
surveys. Each year the Committee reviews the base salaries of key executive
officers of the Company and its subsidiaries and determines whether salaries
should be adjusted, based primarily on the executive's individual performance
and experience and salary survey information. In general, the Committee's
objective is to maintain executive salaries at the median of the salaries for
comparable executives in the Corporate Peer Group or other relevant peer group.
Executive salaries for 1993 were at the median level overall, although some
executives were below and some above the median. Taking into consideration Mr.
Kuehn's individual performance and experience and the salary survey data, Mr.
Kuehn's base salary was increased 7%, effective April 1, 1993. Mr. Kuehn has
been in his current position for approximately 9 1/2 years and his salary for
1993 was slightly above the size-adjusted median for the Corporate Peer Group.
ANNUAL CASH BONUS INCENTIVES. Annual cash bonus incentive opportunities
are awarded each year. The amount of an executive's bonus opportunity (which is
expressed as a percentage of base salary) is dependent primarily upon such
individual's position and responsibilities and bonus opportunities provided to
comparable positions within the Corporate Peer Group or other relevant peer
group. At the beginning of each year, the Committee reviews and approves annual
performance goals. Shortly after the end of the year, the Committee determines
the appropriate bonus payout levels based on the degree to which these goals
have been achieved. The annual incentive program is designed to pay total annual
cash compensation in the upper quartile of the relevant peer group when the
Company meets substantially all of the goals established for an executive's
bonus opportunity. Similarly, when the goals are not achieved, the program is
intended to result in total annual cash compensation below the median of the
relevant peer group.
The payout of an executive's 1993 bonus opportunity was based on the level
of achievement of certain financial goals, corporate and subsidiary goals, and
individual goals, as described below. The goals for each executive's bonus
opportunity were weighted as follows: financial goals -- 40% for Mr. Kuehn and
30% for the other named executive officers; company and subsidiary goals -- 45%
for Mr. Kuehn and 55% for the other named executive officers; and individual
goals -- 15% for all executives.
The financial goals included in the 1993 bonus opportunities were the
Company's 1993 earnings per share ("EPS") as compared to the Company's budgeted
EPS, and the Company's five-year average cash flow return on assets as compared
to that of the Corporate Peer Group. In general, these goals were
10
<PAGE> 13
weighted equally. Payout of the EPS goal was based on minimum, target and
maximum levels of achievement. The payout of the cash flow return on assets goal
was based on the Company's absolute ranking within the Corporate Peer Group and
its performance against the mean of the Corporate Peer Group.
The company and subsidiary goals included in the 1993 bonus opportunities
included operating, marketing and strategic goals relating to each major
business segment, and annual corporate goals relating to safety and the
environment, human resources and customer-focus programs, and corporate
citizenship. Subsidiary goals also included financial goals with respect to
earnings and cash flow. When appropriate, an executive's goals focused on the
company for which he was primarily employed. Achievement of many of the goals
was determined by quantitative or objective measures, while other goals were
subjective in nature.
Each executive's 1993 bonus opportunity included individual goals. Mr.
Kuehn's individual performance is based primarily on the Company's achievement
of its financial and business goals. The Committee also has discretion to make
additional cash bonus awards to recognize exceptional individual performance.
In January 1994, the Committee reviewed in detail the extent to which the
1993 performance goals had been achieved. The Company's EPS was significantly
above the budgeted EPS, and cash flow return on assets was in the upper quartile
of the Corporate Peer Group and significantly above the mean for the Corporate
Peer Group. The payout percentage for these financial goals was 120% of the
bonus opportunity for the EPS goal and 91% of the bonus opportunity for the cash
flow return on assets goal. The Company and its subsidiaries also substantially
achieved the key company and subsidiary goals, including oil and gas production
and reserve replacement goals, pipeline restructuring goals, oil and gas
marketing goals, safety and environmental goals, and subsidiary earnings goals.
In June 1993, the Company also completed a very successful sale of approximately
60% of the common stock of Sonat Offshore Drilling Inc. ("Sonat Offshore"), the
Company's offshore drilling subsidiary. The payout percentages for Company and
subsidiary goals ranged from 75% to 100% of the bonus opportunity for these
goals.
Mr. Kuehn's total bonus payout percentage for 1993 was 105% of his bonus
opportunity.
In connection with the sale of Sonat Offshore's common stock, William C.
O'Malley, Chairman and Chief Executive Officer of Sonat Offshore, resigned as an
officer and Director of the Company. In June 1993, the Committee awarded Mr.
O'Malley a cash bonus equal to and in lieu of the full amount of his 1993 bonus
opportunity, in recognition of his significant contribution to the completion of
the sale.
LONG-TERM STOCK INCENTIVES. The long-term stock incentives component of
the Company's executive compensation program is designed to align executive and
stockholder interests by rewarding executives for the attainment of stock price
appreciation and total stockholder returns.
As a general rule, the Committee administers the long-term stock incentive
program through annual grants of stock options and restricted stock to certain
executive officers of the Company and its major operating subsidiaries. Awards
under the annual grant program were made in December 1993. In addition, the
Committee may make special awards to individual executives during the year on a
discretionary basis.
In 1993, the number of stock options and restricted shares granted to each
executive officer as part of the annual grant program was determined primarily
by individual position and responsibilities, compensation survey data of the
Company's Corporate Peer Group, and the Company's three-year total stockholder
return (considering stock price appreciation and reinvestment of dividends) as
compared to the total stockholder return of the Corporate Peer Group. The amount
of an executive's annual long-term incentive grant was expressed as a percentage
of base salary. The percentage used for each executive was tied to the Company's
total stockholder return as compared to that of the Corporate Peer Group. In
1993, the Company's three-year total stockholder return ranked in the upper
quartile of the Corporate Peer Group, and the December 1993 long-term incentive
grants were designed to result in long-term
11
<PAGE> 14
compensation at that level. The Committee may adjust the grants to take into
account individual performance and the number of options and restricted shares
previously granted to the executive.
In December 1993, Mr. Kuehn was awarded stock options and restricted stock
as a part of the annual program. As discussed above, the amount of this award
was intended to reward and compensate Mr. Kuehn for the excellent performance of
the Company's stock as compared to the Corporate Peer Group and to result in
long-term compensation in the upper quartile of the Corporate Peer Group.
In connection with the sale of Sonat Offshore's common stock in June 1993,
the Committee amended the stock options and restricted stock previously awarded
to Mr. O'Malley to provide that service by Mr. O'Malley with Sonat Offshore
following the sale will count as service for purposes of satisfying the vesting
requirements for the options and restricted shares. In addition, Mr. O'Malley
may exercise any of his vested options during the remainder of the original
option terms. Mr. O'Malley is no longer eligible for stock awards under the
Company's Executive Award Plan.
STOCK OWNERSHIP GUIDELINES. In 1992 the Committee established guidelines
designed to encourage key executives of the Company and its subsidiaries to
attain specified levels of stock ownership over a five-year period. Stock
ownership goals are based on the value of the Company's stock, and are expressed
as a multiple of the executive's base salary. The Committee periodically reviews
the guidelines and the executives' progress toward attaining the stock ownership
goals.
POLICY WITH RESPECT TO SECTION 162(m). Section 162(m) of the Internal
Revenue Code, which was enacted in August 1993, limits the tax deduction that
the Company or its subsidiaries can take with respect to the compensation of
certain executive officers, unless the compensation is "performance based." The
Committee expects that all income recognized by executive officers upon the
exercise of stock options granted under the Executive Award Plan will qualify as
performance based compensation. The portion of the Company's annual cash bonus
program that is based on objective financial measures, and the restricted stock
grant program, have been modified in an effort to qualify compensation
thereunder as performance based.
The Committee currently intends to continue to make cash bonus payments
that are based on the achievement of subjective, non-quantifiable goals, and
that may therefore not qualify as performance based compensation. The Committee
believes that these Company, subsidiary and individual goals, while not properly
measurable by the kind of quantifiable targets that are required to qualify
compensation as performance based, are important to the long-term financial
success of the Company and to its stockholders.
CONCLUSION. The Committee believes that the executive compensation
philosophy that it has adopted effectively serves the interests of the
stockholders and the Company. It is the Committee's intention that the pay
delivered to executives be commensurate with Company performance.
Roberto C. Goizueta Robert J. Lanigan Henry R. Linden
L. Edwin Smart Joe B. Wyatt
12
<PAGE> 15
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ending December 31, 1991,
1992 and 1993, the cash compensation paid by the Company, and a summary of
certain other compensation paid or accrued for such years, to certain of the
Company's executive officers (as determined pursuant to the rules of the
Securities and Exchange Commission) (the "named executive officers") for service
in all capacities with the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------------- -----------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND COMPENSATION STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS (1) AWARDS (2) OPTIONS/SARS (3)
- ------------------------ ----- --------- --------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald L. Kuehn, Jr., 1993 $ 590,000 $ 504,600 $300,362 $ 420,000 (4) 110,000 $113,528
Director, Chairman of 1992 $ 560,000 $ 455,000 $ 0 $1,071,100(5 & 6) 91,600 $117,801
the Board, President and 1991 $ 560,000 $ 340,000 $ 0 $ 205,538 (7) 112,000 $124,052
Chief Executive Officer
Thomas W. Barker, Jr., 1993 $ 152,675 $ 64,000 $ 58,578 $ 51,000 (4) 13,500 $ 20,353
Vice President -- 1992 $ 145,700 $ 58,700 $ 13,164 $ 29,575 (6) 9,000 $ 18,625
Finance and Treasurer 1991 $ 145,700 $ 45,900 $ 9,519 $ 22,838 (7) 12,000 $ 18,805
John D. Johns, 1993 $ 173,665 $ 91,000 $236,832 $ 0 0 $ 7,601
Vice President and 1992 $ 205,000 $ 95,000 $ 0 $ 229,750 (5 & 6) 15,000 $ 14,955
General Counsel(8) 1991 $ 202,500 $ 90,100 $ 3,656 $ 45,675 (7) 24,600 $ 14,890
James E. Moylan, Jr., 1993 $ 151,875 $ 65,500 $410,888 $ 75,000 (4) 21,000 $ 18,467
Vice President 1992 $ 142,500 $ 59,700 $ 563 $ 29,575 (6) 9,000 $ 16,589
and Controller 1991 $ 142,500 $ 46,500 $ 7,499 $ 22,838 (7) 12,000 $ 16,662
William C. O'Malley, 1993 $ 134,250 $ 216,500 $236,810 $ 0 0 $ 11,411
Director and Executive 1992 $ 315,000 $ 185,000 $ 0 $ 480,625 (5 & 6) 32,000 $ 47,456
Vice President(9) 1991 $ 315,000 $ 173,000 $ 0 $ 75,038 (7) 41,000 $ 48,815
Donald G. Russell, 1993 $ 362,500 $ 250,000 $649,292 $ 300,000 (4) 65,000 $102,687
Executive Vice President 1992 $ 340,000 $ 218,000 $ 705 $ 147,875 (6) 40,000 $ 70,240
1991 $ 340,000 $ 161,100 $ 0 $ 75,038 (7) 41,000 $ 73,920
William A. Smith, 1993 $ 313,500 $ 200,000 $530,865 $ 180,000 (4) 45,000 $ 41,440
Executive Vice President 1992 $ 300,000 $ 180,000 $ 1,339 $ 105,625 (6) 32,000 $ 38,271
1991 $ 293,917 $ 160,500 $ 0 $ 75,038 (7) 41,000 $ 38,122
</TABLE>
NOTE 1: With respect to 1993, represents the amount of tax-offset
"supplemental payments" paid upon the exercise of stock options (or tandem stock
appreciation rights) granted under the Company's Executive Award Plan.
NOTE 2: The amount shown represents the dollar value of restricted stock
awards made during the year, calculated by multiplying the closing price of
unrestricted shares of the Company's Common Stock on the date of grant by the
number of shares awarded. Dividends are paid on all shares of restricted stock.
All shares of restricted stock that have not previously vested are
generally forfeited upon termination of employment, unless such termination
occurs either after age 65, by reason of death or disability, or for the
convenience of the Company (as determined by the Executive Compensation
Committee). All shares of restricted stock that have not previously vested will
immediately vest upon a "Change of Control" of the Company, as described under
"Compensation Upon Change of Control" below.
The number of shares of restricted stock held by the named executive
officers as of December 31, 1993, and the value of such shares (calculated by
multiplying the closing price of unrestricted shares of the Company's Common
Stock on December 31, 1993 by the number of shares held on such date) is as
follows: Mr. Kuehn, 73,400 shares, $2,119,425; Mr. Barker, 3,568 shares,
$103,026; Mr. Johns, 0 shares, $0; Mr. Moylan, 4,368 shares, $126,126; Mr.
O'Malley, 26,534 shares, $766,169; Mr. Russell, 18,534 shares, $535,169; and Mr.
Smith, 12,534 shares, $361,919.
13
<PAGE> 16
NOTE 3: With respect to 1993, represents the following amounts for each of
Messrs. Kuehn, Barker, Johns, Moylan, O'Malley, Russell and Smith, respectively:
(1) Company matching contributions to the trust established under the Company's
Savings Plan -- $6,377, $12,944, $7,387, $12,865, $6,377, $6,377 and $6,377; (2)
Company contributions to the Savings Plan accounts under the Company's
Supplemental Benefit Plan -- $43,773, $0, $0, $0, $5,034, $24,436 and $20,271;
and (3) with respect to premiums paid by the Company under the Company's
"split-dollar" Executive Life Insurance Program, the sum of (a) the value of the
premium payment used to purchase term life insurance plus (b) the value of the
benefit to the executive officer of the remainder of the premium
payment -- $63,378, $7,409, $214, $5,602, $0, $71,874 and $14,792.
NOTE 4: Includes the value of 14,000 shares, 1,700 shares, 2,500 shares,
10,000 shares and 6,000 shares of restricted stock granted on December 2, 1993
to Messrs. Kuehn, Barker, Moylan, Russell and Smith, respectively. Such shares
generally vest 10 years from the date of grant, unless the average closing price
of the Company's Common Stock achieves certain specified levels, in which case
vesting of such shares is accelerated.
NOTE 5: Includes the value of 40,000 shares, 10,000 shares and 20,000
shares of restricted stock granted on May 28, 1992 to Messrs. Kuehn, Johns and
O'Malley, respectively. Such shares were granted to such executive officers in
recognition of their performance with respect to the sale of an oilfield
services subsidiary. Such shares generally vest 10 years from the date of grant.
The shares granted to Mr. Johns were forfeited upon his resignation on October
8, 1993.
NOTE 6: Includes the value of 15,200 shares, 1,400 shares, 2,000 shares,
1,400 shares, 5,000 shares, 7,000 shares and 5,000 shares of restricted stock
granted on December 3, 1992 to Messrs. Kuehn, Barker, Johns, Moylan, O'Malley,
Russell and Smith, respectively. Such shares generally vest 10 years from the
date of grant, unless the average closing price of the Company's Common Stock
achieves certain specified levels, in which case vesting of such shares is
accelerated. The shares granted to Mr. Johns were forfeited upon his resignation
on October 8, 1993.
NOTE 7: Represents the value of 12,600 shares, 1,400 shares, 2,800 shares,
1,400 shares, 4,600 shares, 4,600 shares and 4,600 shares of restricted stock
granted on December 6, 1991 to Messrs. Kuehn, Barker, Johns, Moylan, O'Malley,
Russell and Smith, respectively. Such shares generally vest in equal
installments on each of the first three anniversaries of the date of grant. The
1,868 shares granted to Mr. Johns that had not previously vested were forfeited
upon his resignation on October 8, 1993.
NOTE 8: Mr. Johns resigned from all of his positions with the Company and
its subsidiaries on October 8, 1993.
NOTE 9: On June 4, 1993, Sonat Offshore Drilling Inc. ("Sonat Offshore")
completed an initial public offering (the "Offshore IPO") of its common stock.
As a result of the Offshore IPO, Sonat Offshore is no longer a wholly-owned
subsidiary of the Company. On the effective date of the Offshore IPO, Mr.
O'Malley resigned from all of his positions with the Company.
14
<PAGE> 17
OPTION GRANT TABLE
The following table contains certain information with respect to stock
options granted in 1993 under the Company's Executive Award Plan to the named
executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
INDIVIDUAL GRANTS STOCK PRICE APPRECIATION FOR
------------------------------------------------------ OPTION TERM (10 YEARS)
NUMBER OF % OF TOTAL -------------------------------
SECURITIES OPTIONS/SARS 5% (RESULTING 10% (RESULTING
UNDERLYING GRANTED TO EXERCISE COMPANY STOCK COMPANY STOCK
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION PRICE OF PRICE OF
NAME GRANTED (1) IN 1993 ($/SHARE) (2) DATE (3) $48.87) (4) $77.81) (4)
- ----------------------- ------------ ------------ -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders....... -- -- -- -- $ 1,644,665,497 $ 4,167,008,872
Ronald L. Kuehn, Jr.... 110,000 11.1% $30.00 12/1/03 $ 2,075,700 $ 5,259,100
Thomas W. Barker, Jr... 13,500 1.4% $30.00 12/1/03 $ 254,745 $ 645,435
John D. Johns.......... 0 0% -- -- $ 0 $ 0
James E. Moylan, Jr.... 21,000 2.1% $30.00 12/1/03 $ 396,270 $ 1,004,010
William C. O'Malley.... 0 0% -- -- $ 0 $ 0
Donald G. Russell...... 65,000 6.6% $30.00 12/1/03 $ 1,226,550 $ 3,107,650
William A. Smith....... 45,000 4.5% $30.00 12/1/03 $ 849,150 $ 2,151,450
Named Executive Officers' Potential Realizable Value
as a % of All Stockholders' Potential Realizable Value 0.29% 0.29%
</TABLE>
NOTE 1: All stock options shown were granted on December 2, 1993. The
stock options become exercisable in equal installments on each of the first five
anniversaries of the date of grant, provided that the entire option grant will
become immediately exercisable if, during any 10 business day period ending
prior to December 2, 1998, the average of the closing prices of the Company's
Common Stock during such period is at least $45.00. Any stock options that have
not previously become exercisable are generally forfeited upon termination of
employment, unless such termination occurs by reason of death or disability or
for the convenience of the Company (as determined by the Executive Compensation
Committee). Any options held by then-current employees will become immediately
exercisable and will remain exercisable for three years after the employee's
termination of employment (but not beyond December 1, 2003) in the event of a
"Change of Control" of the Company, as described under "Compensation Upon Change
of Control" below.
NOTE 2: The exercise price equals the closing price of the Company's
Common Stock on the date of grant.
NOTE 3: The stock options are subject to termination prior to their
expiration date in the event of termination of employment.
NOTE 4: The Resulting Company Stock Price shown in the table equals the
price the Company's Common Stock would attain at the end of the stock options'
10-year term if the price of the Company's Common Stock appreciated from the
date of stock option grant at a rate of 5% or 10% per year (as the case may be).
The potential realizable values shown represent the difference between the
$48.87 or $77.81 Resulting Company Stock Price (as the case may be) and the
$30.00 exercise price, multiplied by (a) for all stockholders, the number of
outstanding shares of the Company's Common Stock as of December 31, 1993, and
(b) for each named executive officer, the number of options granted.
15
<PAGE> 18
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The following table shows certain information with respect to the named
executive officers concerning the exercise of stock options (or stock
appreciation rights ("SARs") granted in tandem therewith) during 1993 and
unexercised stock options (and tandem SARs) held as of December 31, 1993.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
- ----------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED,
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES AT FISCAL YEAR END (1) AT FISCAL YEAR END (2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald L. Kuehn, Jr. .... 37,000 $436,000 456,266 147,334 $ 5,308,517 $ 469,008
Thomas W. Barker, Jr. ... 13,000 $139,406 27,000 17,500 $ 195,750 $ 50,250
John D. Johns............ 54,700 $715,625 0 0 $ 0 $ 0
James E. Moylan, Jr. .... 44,000 $596,437 27,000 25,000 $ 201,500 $ 50,250
William C. O'Malley...... 30,000 $343,750 102,666 13,668 $ 888,452 $ 171,704
Donald G. Russell........ 80,000 $942,500 107,332 78,668 $ 778,359 $ 171,704
William A. Smith......... 47,000 $770,594 152,332 58,668 $ 1,541,109 $ 171,704
</TABLE>
NOTE 1: Certain stock options granted before December 6, 1991, were
granted with tandem SARs. Each stock option granted before December 6, 1991 was
granted with a tax-offset "supplemental payment" payable upon the exercise of
the stock option (or tandem SAR). The amount of the supplemental payment is the
amount necessary to pay the federal income tax payable with respect to both (i)
exercise of the stock option (or tandem SAR) and (ii) receipt of the
supplemental payment, based on the assumption that the participant is taxed at
the maximum effective federal income tax rate applicable to such income.
NOTE 2: The value of each unexercised in-the-money stock option (or tandem
SAR) is equal to the difference between $28.875 (the closing price of the
Company's Common Stock on December 31, 1993) and the exercise price of the stock
option. Such value does not include the value of any tax-offset supplemental
payments.
DEFINED BENEFIT PLANS
Employees and officers of the Company and participating subsidiaries are
participants in the Company's Retirement Plan. In general, annual retirement
benefits are based on average covered compensation for the highest five
consecutive years of the final ten years of employment. Covered compensation
under the Retirement Plan currently includes salaries and amounts paid under the
Performance Award and Cash Bonus Plan (reported in the Summary Compensation
Table) and certain personal benefits; covered compensation does not include
amounts relating to the grant or vesting of restricted stock, the exercise of
stock options and SARs, and receipt of supplemental payments under the Executive
Award Plan, or to employer contributions under the Savings Plan or the
Supplemental Benefit Plan.
The maximum annual retirement benefit is 65% of the participant's average
covered compensation minus 50% of his primary social security benefit.
Participants accrue benefits under the following formula: (a) 2.4% of average
covered compensation minus 2.0% of primary social security benefits for each
year of service prior to January 1, 1992; plus (b) 2.0% of average covered
compensation minus 1.667% of primary social security benefits for each year of
service after January 1, 1992; plus (c) when the total of (a) plus (b) above
equals 60% of average covered compensation minus 50% of primary social security
benefits, 1% of average covered compensation for each year of service after
January 1, 1992, not included in the calculation in (b) above, up to five such
additional years of service. The eligible survivors of a deceased Retirement
Plan participant are entitled to a survivors benefit, which usually equals 75%
of the participant's retirement benefit. Retirement Plan benefits are generally
paid as life annuities.
16
<PAGE> 19
The Supplemental Benefit Plan provides its eligible participants and their
eligible survivors with retirement and survivors benefits which would have been
payable under the Retirement Plan but for the fact that benefits payable under
funded pension plans are limited by federal tax laws. As a general rule, during
1993 the federal tax laws limited annual benefits under the Retirement Plan to
$115,641 (subject to reduction in certain circumstances), and required the
Retirement Plan to disregard any portion of the participant's 1993 compensation
in excess of $235,840. A participant may choose to have benefits under the Plan
paid either as a life annuity or in a cash lump sum upon termination of
employment.
The following table sets forth information with respect to certain named
executive officers concerning the benefits payable under the Retirement Plan and
Supplemental Benefit Plan.
DEFINED BENEFIT PLAN TABLE
<TABLE>
<CAPTION>
CURRENT ESTIMATED ANNUAL
YEARS OF 1993 COVERED RETIREMENT
NAME SERVICE (1) COMPENSATION (2) BENEFIT AT AGE 65 (3)
- ---------------------------------------------- ----------- ---------------- ---------------------
<S> <C> <C> <C>
Ronald L. Kuehn, Jr. ......................... 23.4 $1,048,500 $ 671,040
Thomas W. Barker, Jr. ........................ 24.3 $ 215,565 $ 140,117
James E. Moylan, Jr. ......................... 17.5 $ 214,235 $ 139,253
Donald G. Russell............................. 5.9 $ 582,269 $ 112,960
William A. Smith.............................. 23.7 $ 498,815 $ 324,230
</TABLE>
NOTE 1: The number of years of credited service under the Retirement Plan
as of December 31, 1993.
NOTE 2: The amount of covered compensation under the Retirement Plan
during 1993.
NOTE 3: The estimated annual retirement benefit payable as a single life
annuity at age 65 to the named executive officer (based on the assumptions that
such officer retires at age 65 and has average covered compensation at his
retirement date equal to his 1993 covered compensation, and calculated prior to
the offset for primary social security benefits).
Prior to his resignation on June 4, 1993, from all of his positions with
the Company, Mr. O'Malley accrued an annual benefit under the Retirement Plan
and the Supplemental Benefit Plan of $142,207 (expressed as a single life
annuity payable at age 65). Prior to his resignation on October 8, 1993, from
all of his positions with the Company, Mr. Johns accrued an annual benefit under
such Plans of $28,054 (expressed as a single life annuity payable at age 65).
17
<PAGE> 20
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the five-year period ending December 31, 1993, with
the cumulative total return of two indices during such period.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN
SONAT INC.; STANDARD & POOR'S 500 STOCK INDEX;
STANDARD & POOR'S NATURAL GAS DISTRIBUTION/PIPELINE GROUP(1)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P NATURAL
(FISCAL YEAR COVERED) SONAT INC. S&P 500 GAS
<S> <C> <C> <C>
12/31/88 100.00 100.00 100.00
12/31/89 177.04 131.59 155.23
12/31/90 177.20 127.49 135.90
12/31/91 131.29 166.17 118.33
12/31/92 201.62 178.81 130.69
12/31/93 250.18 196.75 155.06
</TABLE>
The total returns set forth above assume that $100 was invested in the
Company's Common Stock and each of the indices set forth above on December 31,
1988, and that all dividends were reinvested.
NOTE 1: The Standard & Poor's Natural Gas Distribution/Pipeline Group
consists of the following companies: Arkla, Inc., The Coastal Corporation,
Columbia Gas System, Inc., Consolidated Natural Gas Company, Enron Corp.,
Ensearch Corporation, NICOR Inc., ONEOK Inc., Pacific Enterprises, Panhandle
Eastern Corporation, Peoples Energy Corporation, Sonat Inc. and Transco Energy
Company.
COMPENSATION UPON CHANGE OF CONTROL
Certain of the Company's benefit plans provide for the acceleration of
certain benefits in the event of a "Change of Control" of the Company. Under
such plans, a Change of Control will be deemed to have occurred if (1) any
person or group acquires (or obtains the right to acquire) beneficial ownership
of 35% or more of the Company's voting securities, (2) there is a change in the
composition of a majority of the Company's Board of Directors within any period
of three consecutive years which change was not approved by a majority of the
Board of Directors as constituted immediately prior to the commencement of such
three-year period, or (3) at any meeting of stockholders of the Company called
for the purpose of electing Directors, the entire slate nominated by the Board
of Directors fails to be elected.
Any outside Director who is eligible for a retirement benefit under the
Retirement Plan for Directors will receive such benefit (regardless of whether
he has met the other eligibility requirements of the Plan) in the event he
ceases to be a Director following a Change of Control. A Director who
participates in the
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<PAGE> 21
Director's Fees Deferral Plan may, prior to the year the fees are earned, elect
to have the balance of his account distributed to him in a lump sum in the event
his service as a Director is terminated within one year following a Change of
Control, regardless of any other elections he may have made with respect to the
timing and manner of payment of amounts in his account. Also, all shares of
restricted stock granted under the Restricted Stock Plan for Directors will vest
immediately upon a Change of Control.
Upon the occurrence of a Change of Control, all outstanding shares of
restricted stock under the Executive Award Plan will immediately vest, and all
outstanding options (and tandem SARs) under the Executive Award Plan held by
then-current employees will become immediately exercisable and will remain
exercisable for three years following the employee's termination of employment
(but not beyond their expiration date). If an SAR is exercised within 60 days of
the occurrence of a Change of Control, the holder will receive, in addition to
the amount otherwise due on exercise, a payment equal to the excess over the
amount otherwise due of the highest price per share of Common Stock paid during
the 60-day period prior to exercise of the SAR, plus a supplemental payment on
such excess. Also, upon the occurrence of a Change of Control, the participant
will receive 100% of his bonus opportunities under the Performance Award Plan
(if approved by the stockholders) and the Cash Bonus Plan. Any officer of the
Company or certain of its subsidiaries who at the time of a Change of Control is
not vested under the Retirement Plan will be provided with a vested benefit
under the Supplemental Benefit Plan equal to the benefit that would have been
payable under the Retirement Plan if his actual years of service had been
sufficient for vesting. Following a Change of Control, a participant's Savings
Plan account under the Supplemental Benefit Plan will be distributed within 30
days of his termination of employment.
EXECUTIVE SEVERANCE AGREEMENTS
The Company has Executive Severance Agreements with Messrs. Kuehn, Russell
and Smith. These agreements provide that if the executive officer's employment
is terminated within three years after a Change of Control (as defined above),
either (a) by the Company for reasons other than dishonesty, conviction of a
felony or willful unauthorized disclosure of confidential information or other
than as a consequence of death, disability or retirement at age 65 or (b) by the
executive officer for reasons relating to a diminution of responsibilities or
compensation, or relocation requiring a change in residence or a significant
increase in travel, or a good faith determination by the executive officer that
he can no longer effectively discharge his duties, he will receive: (1) a lump
sum payment equal to three times his highest earnings (defined to include those
items described as covered compensation under the Retirement Plan) during any
12-month period during the three years preceding the termination (such lump sum
payment to be reduced pro rata to the extent there are less than 36 months until
the officer reaches age 65); (2) life, medical, and accident and disability
insurance as provided in the Company's insurance programs or, in certain
circumstances, substantially equivalent insurance to be provided by the Company
for a period of 36 months after termination of employment (or until age 65,
whichever is sooner); and (3) for an executive officer who has reached age 50
and is not otherwise entitled to an early retirement benefit under the terms of
a qualified retirement plan of the Company or its subsidiaries, an annual
benefit equal to the amount such officer would have received had he been
entitled to an early retirement benefit (reduced by any benefits payable to him
under such retirement plan and the Supplemental Benefit Plan), and a 75%
survivors benefit with respect to such early retirement benefit. Assuming that
the executive officers terminated employment on January 31, 1994, in a manner
entitling them to benefits under the Executive Severance Agreements, the
respective executive officers would receive the following lump sum cash payments
pursuant to item (1) above and the following annual retirement benefits pursuant
to item (3) above: Mr. Kuehn, $3,304,300 in cash and $0 in retirement benefits;
Mr. Russell, $1,850,306 in cash and $13,543 in retirement benefits; and Mr.
Smith, $1,560,945 in cash and $0 in retirement benefits.
The Executive Severance Agreements provide that the executive officer may
not voluntarily leave the employ of the Company if a third party attempts to
effect a Change of Control until such third party abandons such attempt or a
Change of Control has occurred. The executive officer is also required to be
available for three years after his termination of employment for consultation
with senior officers of the
19
<PAGE> 22
Company. The Agreements renew automatically for one-year terms unless terminated
at the end of any term by the Board of Directors. The Agreements shall also
terminate if the Executive Compensation Committee determines that the executive
officer is no longer a key employee, unless a Change of Control is threatened at
the time or has occurred within the past three years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
L. Edwin Smart, a member of the Executive Compensation Committee of the
Board of Directors, serves as counsel to the law firm of Hughes Hubbard & Reed.
Hughes Hubbard & Reed provides legal services to the Company and certain of its
subsidiaries.
ELECTION OF AUDITOR (PROPOSAL NO. 1)
Ernst & Young has been nominated for election as Auditor of the Company.
The Restated Certificate of Incorporation provides that no other person shall be
eligible for election as Auditor unless notice of intention to nominate such
person has been given to the Company not less than ten days before the Annual
Meeting.
A representative of Ernst & Young will be present at the Annual Meeting
with the opportunity to make a statement if such representative desires to do so
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ERNST &
YOUNG AS AUDITOR (PROPOSAL NO. 1).
APPROVAL OF PERFORMANCE AWARD PLAN
(PROPOSAL NO. 2)
Since 1981 the Company has had a bonus plan pursuant to which annual cash
bonuses were paid to officers and other employees based on the performance of
the individual, the Company and its subsidiaries. The performance criteria used
have included both objective and subjective measures. In 1993 the Internal
Revenue Code was amended by the addition of Section 162(m), which limits the tax
deduction available with respect to compensation paid to certain executive
officers, unless the compensation qualifies as "performance based" (as defined
for purposes of Section 162(m)). Among the requirements for "performance based"
compensation are that the compensation be paid based solely on the attainment of
objective performance measures established by a committee of outside directors,
and that the plan providing for such compensation be approved by stockholders.
The Board of Directors believes that in light of Section 162(m) it is
desirable to restructure the Company's bonus program to create a separate plan
providing for objective performance goals, and to submit that plan for
stockholder approval. This would enable the portion of an executive's annual
bonus based on objective performance criteria to qualify as "performance based"
for purposes of Section 162(m), and thereby continue to be deductible without
regard to the deduction limit otherwise imposed by Section 162(m). Accordingly,
on January 27, 1994 the Board of Directors took action to adopt, subject to
stockholder approval at the 1994 Annual Meeting of Stockholders, the Company's
Performance Award Plan (the "Plan").
The Board believes that it is important to have a plan which permits the
payment of bonuses based on subjective performance criteria and on a
discretionary basis, even though amounts paid under such a plan may not qualify
as "performance based" compensation under Section 162(m). Therefore, on January
27, 1994, the Board adopted the Company's Cash Bonus Plan, which permits awards
based on any performance criteria established by the Executive Compensation
Committee, as well as bonuses paid on a discretionary basis. The Cash Bonus Plan
is not being submitted for stockholder approval.
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<PAGE> 23
PRINCIPAL PROVISIONS OF THE PLAN
The following summary of the Plan is qualified by reference to the full
text of the Plan, which is attached as Exhibit A to this Proxy Statement.
The purpose of the Plan is to provide officers of the Company with
additional incentives through the payment of bonuses based on the performance of
the Company relating to specified objective financial and business criteria,
thereby increasing the personal stake of such officers in the continued success
and growth of the Company.
ADMINISTRATION. The Plan is administered by the Executive Compensation
Committee or other designated committee of the Board of Directors consisting
solely of two or more Directors, each of whom qualifies as an "outside director"
for purposes of Section 162(m). The Committee has authority to interpret the
Plan, to adopt rules and regulations for carrying out the Plan, and to take any
other action necessary or advisable for the administration of the Plan.
ELIGIBILITY. All officers of the Company and its "Subsidiaries" at the
level of Vice President and above are eligible to participate in the Plan. (For
purposes of the Plan, the term "Subsidiaries" means subsidiaries, partnerships
and joint ventures in which the Company and its subsidiaries have at least a 50%
ownership interest.) Directors who are not officers of the Company or its
Subsidiaries are not eligible. As of January 31, 1994, approximately 37
employees were eligible to participate in the Plan.
TERMS AND CONDITIONS OF AWARDS. The Committee determines which of the
eligible employees will be granted an award under the Plan for any given year.
At or before the start of each calendar year, the Committee establishes written
Performance Objectives based on one or more of the criteria set forth in the
Plan for each eligible employee chosen to receive an award for that year. At the
same time, the Committee also establishes a Bonus Opportunity for each employee,
which is the amount of the bonus the employee will earn if the Performance
Objectives are fully satisfied. The Committee may specify a minimum acceptable
level of achievement of each Performance Objective below which no bonus is
payable with respect to that Objective, and additional levels above the minimum
(which may also be above the targeted Performance Objective), with a formula to
determine the percentage of the Bonus Opportunity to be earned at each level of
achievement above the minimum. Performance at a level above the targeted
Performance Objective may entitle the employee to earn a bonus in excess of 100%
of the Bonus Opportunity. However, the maximum payout to any individual under
the Plan in any year cannot exceed $1.5 million.
Performance Objectives may be based on one or more of the following
criteria: Company earnings per share; Company or Subsidiary earnings before
interest and taxes or earnings before interest, taxes and corporate charges;
Company or Subsidiary net income; Company or Subsidiary revenues, pipeline
throughput, oil and gas production volumes, or oil and gas marketing volumes;
Company or Subsidiary unit revenues minus unit variable costs; Company or
Subsidiary return on capital, return on equity, return on assets, or return on
invested capital; Company or Subsidiary cash flow return on assets or cash flows
from operating activities; Company or Subsidiary capital expenditures; Company
or Subsidiary operations and maintenance expense or general and administrative
expense; Company or Subsidiary oil and gas unit operating income or oil and gas
unit lifting costs; Company or Subsidiary reserve replacement, reserve
replacement costs and reserve acquisition costs; and Company or Subsidiary
debt-equity ratios and key profitability ratios.
At the end of the year, the Committee determines the extent to which the
Performance Objectives have been attained and the extent to which the Bonus
Opportunity has been earned under the formula previously established by the
Committee. The Committee has discretion to reduce the amount of the bonus
payable to any employee from the amount of the Bonus Opportunity "earned" under
the formula. The Committee may exercise its discretion to reduce the award for
any reason, including its judgment that a Performance Objective has become an
inappropriate measure of achievement, a change in the employment status,
position or duties of the employee, unsatisfactory performance of the employee,
or the employee's service for less than the entire year.
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<PAGE> 24
Awards under the Plan are paid in cash in a lump sum promptly after the
Committee has determined the amount of bonus to be paid, unless the Committee
determines, either at the time of grant or the time of distribution, to
distribute all or a portion of the award in installments or as deferred
compensation. The Plan also authorizes the Committee, in its discretion, to
adopt a program under which employees may elect to defer all or a portion of
their award.
CHANGE OF CONTROL. In the event of a change of control (as defined in the
Plan), all participants are deemed to have fully earned the Bonus Opportunities
contained in their outstanding awards, and the amount of such Bonus
Opportunities is payable promptly (no later than 30 days) after the change of
control, in a cash lump sum. Following a change of control, the Committee will
have no power to decrease the amount of the Bonus Opportunity payable under an
award.
Under the Plan, a change of control is deemed to have occurred if (i) any
person or group acquires (or obtains the right to acquire) beneficial ownership
of 35% or more of the Company's voting securities, (ii) there is a change in the
composition of a majority of the Company's Board of Directors within any period
of three consecutive years which change was not approved by a majority of the
Board as constituted immediately prior to the commencement of such three-year
period, or (iii) at any meeting of stockholders of the Company called for the
purpose of electing Directors the entire slate nominated by the Board of
Directors fails to be elected.
AMENDMENT AND TERMINATION. The Board of Directors may amend the Plan from
time to time without stockholder approval except as required to satisfy Section
162(m). Awards may be granted under the Plan for calendar years 1994 through
1998, unless the Plan is terminated earlier by the Board of Directors. However,
the Plan will remain in effect until payment has been competed with respect to
all awards granted under the Plan prior to its termination.
BENEFITS UNDER THE PLAN
It is not possible to specify the amount of benefits to be paid to
particular individuals under the Plan, since the amount of each employee's Bonus
Opportunity will be set each year by the Committee in its discretion, subject to
the Plan's limitation that the bonus paid to any employee under the Plan for any
year may not exceed $1.5 million.
In January 1994, the Committee granted awards under the Plan with respect
to 1994 to each eligible employee under the Plan. Such awards are subject to
stockholder approval of the Plan. The following
22
<PAGE> 25
table sets forth the maximum bonus payable under the Plan for such awards for
the persons indicated below.
NEW PLAN BENEFITS
PERFORMANCE AWARD PLAN OF SONAT INC.
<TABLE>
<CAPTION>
1994 MAXIMUM
NAME AND POSITION BONUS
------------------------------------------------------------------- ---------------
<S> <C>
Ronald L. Kuehn, Jr. .............................................. $ 331,200
Chairman of the Board, President and Chief Executive Officer
Thomas W. Barker, Jr. ............................................. $ 20,460
Vice President -- Finance and Treasurer
John D. Johns...................................................... $ 0
Former Vice President and General Counsel
James E. Moylan, Jr. .............................................. $ 28,132
Vice President and Controller
William C. O'Malley................................................ $ 0
Former Executive Vice President
Donald G. Russell.................................................. $ 85,470
Executive Vice President
William A. Smith................................................... $ 68,211
Executive Vice President
Current Executive Officer Group.................................... $ 552,217
(6 persons)
Non-Executive Director Group....................................... $ 0
(12 persons)
Non-Executive Officer Employee..................................... $ 541,874
Group (31 persons)
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PERFORMANCE
AWARD PLAN (PROPOSAL NO. 2).
APPROVAL OF PROPOSED AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
(PROPOSAL NO. 3)
The Board of Directors of the Company believes that it would be in the best
interest of the Company and its stockholders to amend the first paragraph of
Article FOURTH of the Restated Certificate of Incorporation (the "Charter") to
increase the number of shares of Common Stock which the Company is authorized to
issue from 200,000,000 shares to 400,000,000 shares. Accordingly, at a meeting
held on December 3, 1993, the Board of Directors unanimously adopted resolutions
declaring such an amendment to be advisable and voted to recommend that the
Company's stockholders consider and approve the amendment ("Proposal No. 3") at
the Annual Meeting.
Under the present Charter, the total number of shares of all classes of
capital stock which the Company has authority to issue is 210,000,000 shares, of
which 10,000,000 shares are Serial Preference Stock, par value $1.00 per share,
and 200,000,000 shares are Common Stock, par value $1.00 per share.
On January 31, 1994, no shares of Serial Preference Stock were outstanding
and 87,172,087 shares of Common Stock were outstanding. As of such date,
5,503,448 shares of Common Stock were reserved for issuance under certain
benefit plans and 92,675,535 shares of Common Stock were reserved for issuance
in connection with the exercise of rights to purchase the Company's Common Stock
(the
23
<PAGE> 26
"Rights") upon the terms and subject to the conditions set forth in the Rights
Agreement dated as of January 23, 1986, as amended, between the Company and
Chemical Bank, as Rights Agent (the "Rights Agreement"). Accordingly, as of
January 31, 1994, an aggregate of 185,351,070 shares of Common Stock were
outstanding or reserved for issuance, and there remained an aggregate of
14,648,930 shares of Common Stock available for issuance. The number of
available shares, however, may be effectively reduced in half after giving
effect to the requirement of the Rights Agreement that, under certain
circumstances, upon issuance of any shares of Common Stock the Company must
issue one Right for each share issued and must reserve for issuance one
additional share of Common Stock in connection with the exercise of each Right.
The additional shares for which authorization is sought would be part of the
existing class of Common Stock and, if and when issued, would have the same
rights and privileges as the shares of Common Stock presently outstanding.
As with the presently authorized Serial Preference Stock and Common Stock,
the additional authorized Common Stock will not be subject to preemptive rights.
If Proposal No. 3 is adopted, the first paragraph of Article FOURTH will be
amended to delete the language in brackets and to add the language in italics,
as follows:
"FOURTH: The total number of shares which the Corporation shall have
authority to issue is [two hundred ten million (210,000,000)] four hundred
ten million (410,000,000), of which ten million (10,000,000) are to be
Serial Preference Stock of the par value of One Dollar ($1.00) per share
and [two hundred million (200,000,000)] four hundred million (400,000,000)
are to be Common Stock of the par value of One Dollar ($1.00) per share."
PURPOSES AND EFFECTS OF THE AMENDMENT
Although the Company has no agreements, commitments or plans at this time
with respect to the additional shares of Common Stock (other than under the
terms of the Rights Agreement), the Board of Directors believes that it is
desirable to have a sufficient number of additional shares of Common Stock
available for possible future financing and acquisition transactions, stock
dividends or splits, stock issuances pursuant to employee benefit plans and
other proper corporate purposes. Having such additional shares available for
issuance in the future would give the Company greater flexibility and allow
shares of Common Stock to be issued without the expense and delay of a special
stockholders' meeting. The additional shares of Common Stock would be available
for issuance without further action by the stockholders of the Company, unless
such action is required by applicable law or under the rules of any stock
exchange on which the Company's securities may be listed.
While the Company has no knowledge of any pending efforts to obtain control
of the Company, shares of authorized but unissued Common Stock could be issued
in one or more transactions which could make a takeover of the Company more
difficult or costly and, therefore, less likely. Any such additional issuance of
Common Stock could have the effect of diluting earnings and book value per share
of outstanding shares of Common Stock, and issuance of additional shares could
be used to dilute the stock ownership of any person or persons seeking to obtain
control of the Company. The Board does not currently intend to authorize the
issuance of any additional shares of Common Stock which are the subject of this
amendment proposal. As noted above, however, 92,675,535 shares have been
reserved for issuance in connection with the Rights Agreement.
OTHER INFORMATION
The Charter provides that Serial Preference Stock of the Company may be
issued in one or more series and expressly vests in the Board of Directors the
authority to determine the designations, preferences and certain rights of each
such series. Although the Board presently has no intention of doing so, such
shares could be issued with voting rights to a holder that would vote against a
merger, sale of assets or other extraordinary corporate transaction.
24
<PAGE> 27
The Company's Charter has provisions which may affect any possible takeover
attempt by making a change of control of the Company more difficult or costly.
For a description of these provisions and of proposed amendments thereto, see
"Proposed Amendments to the Restated Certificate of Incorporation (Proposal No.
4, 5, 6 and 7)" below. For a description of the Rights and the Rights Agreement,
see "Proposed Amendments to the Restated Certificate of Incorporation (Proposal
No. 4, 5, 6 and 7) -- Description of Proposal No. 4" below. For a description of
certain provisions of the Company's By-Laws which regulate the manner and timing
of stockholder proposals and stockholder nominations for the Board of Directors,
see "Proposals of Stockholders" below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE PROPOSAL
TO AMEND THE FIRST PARAGRAPH OF ARTICLE FOURTH OF THE CHARTER (PROPOSAL NO. 3).
PROPOSED AMENDMENTS TO THE RESTATED CERTIFICATE OF
INCORPORATION (PROPOSAL NO. 4, 5, 6 AND 7)
The Board of Directors of the Company believes that it would be in the best
interests of the Company and its stockholders to amend the Company's Charter to:
-- delete a Charter provision which provides in certain cases for
minimum price protection or, alternatively, higher stockholder
voting requirements, in connection with certain business
combinations (Proposal No. 4);
-- provide that, subject to the conditions described below, the Board
of Directors shall call a special meeting of stockholders at the
request of a person that has owned at least 3% of the Company's
voting stock for at least six months (Proposal No. 5);
-- reduce the vote required for stockholders to amend, repeal or adopt
By-Laws from 67% of the outstanding shares to 60% (Proposal No. 6);
and
-- reduce the vote required for stockholders to amend, repeal or adopt
any provision inconsistent with certain "anti-takeover" provisions
of the Charter from 67% of the outstanding shares to 60% (Proposal
No. 7).
INTRODUCTION
In 1983 the stockholders of the Company approved amendments to the
Company's Charter (the "1983 Amendments") which may affect any possible takeover
attempt by making a change of control of the Company more difficult. In general,
the purpose of the 1983 Amendments is to deter or delay a potential holder of a
controlling interest in the Company's voting stock from exercising its voting
power in a manner believed by the Board to be detrimental to the interests of
the remaining stockholders.
Pursuant to the 1983 Amendments, the Board of Directors is divided into
three classes, with one class of Directors being elected each year. The Board of
Directors has sole authority to increase or decrease its size and to fill all
vacancies (provided that the Board may have no less than five nor more than
fifteen members). Directors may not be removed without cause. Only the Board of
Directors is authorized to call special meetings of stockholders, and corporate
action may not be taken by written consent of stockholders in lieu of a meeting.
The amendment, repeal or adoption by stockholders of the Company's By-Laws, as
well as the amendment, repeal or adoption of any Charter provision inconsistent
with the foregoing provisions of the Charter, requires the affirmative vote of
the holders of not less than 67% of the voting power of the Company.
The 1983 Amendments also revised the Charter to provide that approval of
certain mergers, consolidations, or other business combinations between the
Company and a holder of at least 10% of the voting power of the Company (a
"related person") must be approved by a "super-majority" vote of the
stockholders (80% of the Company's voting power and 67% of the Company's voting
power held by stockholders other than the related person) unless either (1)
certain Board approvals are obtained or (2) the related person paid all
stockholders a price per share that equalled or exceeded the highest price
25
<PAGE> 28
the related person paid in connection with the business combination. The same
vote is required to amend or repeal the foregoing Charter provision.
In each of the last five years, the Company's proxy statement for its
Annual Meeting of Stockholders has included a stockholder proposal which has
sought the repeal of the 1983 Amendments. The Board of Directors has opposed
each of these stockholder proposals as not being in the best interest of the
Company's stockholders, and the proposal has been rejected by the stockholders
at each Annual Meeting at which it has been presented. In recent years,
representatives of the Company have discussed the 1983 Amendments with many of
the Company's stockholders, including stockholders with significant investments
in the Company's stock. As a result of these discussions, the Board has
conducted a careful review of the 1983 Amendments and of possible changes to the
Amendments.
The Board of Directors believes that the 1983 Amendments have served their
purpose, but believes that the revisions to the 1983 Amendments set forth in
this Proxy Statement are appropriate and advisable. The Board believes that such
revisions will respond to stockholder concerns with respect to certain
provisions of the 1983 Amendments, while preserving the principal protections
established for the Company's stockholders by the 1983 Amendments. The Board of
Directors has therefore determined that the proposed Charter amendments set
forth in Proposal No. 4, 5, 6 and 7 are in the best interest of the Company and
its stockholders, and recommends a vote "FOR" each of Proposal No. 4, 5, 6 and
7.
DESCRIPTION OF PROPOSAL NO. 4
THE TEXT OF CURRENT ARTICLE SEVENTH OF THE CHARTER IS ATTACHED TO THIS
PROXY STATEMENT AS EXHIBIT B. THE FOLLOWING DESCRIPTION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO EXHIBIT B.
Proposal No. 4 would delete current Article SEVENTH (sometimes referred to
as a "fair price" provision) from the Company's Charter. In general, Article
SEVENTH requires that certain mergers, consolidations, or certain other business
combinations initiated by a related person be approved by the holders of not
less than 80% of the outstanding shares of the Company's capital stock, and by
the holders of not less than 67% of the outstanding shares of capital stock not
held by the related person, unless (a) the acquisition of the capital stock that
caused such related person to become a related person was approved in advance by
at least a majority of the Continuing Directors (as defined in Article SEVENTH),
(b) the business combination was approved by a majority of the Continuing
Directors, or (c) the consideration per share of Common Stock in the business
combination equalled or exceeded the highest price paid by the related person in
acquiring any shares of Common Stock in or subsequent to the transaction in
which it became a related person.
Article SEVENTH was intended to respond to situations in which a
publicly-owned corporation was taken over by a swift purchase of control through
a tender offer, followed by a merger or other transaction between the acquired
corporation and the purchaser, which is not then dealing at arm's length because
of its control and which may then give consideration for the acquired
corporation's shares in the second step that is of substantially less value than
the consideration given in the first step. While such a "two-tier" takeover may
benefit all of the stockholders of the acquired company, it may also be
detrimental to some or all of them, because the terms of an ensuing merger or
other transaction with the purchaser may be less favorable to the remaining
stockholders than is warranted, and the suddenness and relatively short duration
of the offer may leave insufficient time for them to evaluate the merits of the
offer in comparison with other possible alternatives. The coercive nature of a
"two-tier" offer -- a stockholder who fails to tender into the offer runs the
risk that, if the offer succeeds, the stockholder will receive lesser
consideration in the second step than if he had tendered -- may also result in
transactions that do not produce the highest value for stockholders.
The Board of Directors believes that the protections currently provided by
the Rights Agreement, and by Section 203 of the Delaware General Corporation Law
("Section 203"), make the provisions of Article SEVENTH unnecessary at this
time. Accordingly, the Board of Directors recommends that the current provisions
in Article SEVENTH be deleted from the Charter.
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<PAGE> 29
Section 203, which was enacted after the adoption of Article SEVENTH of the
Company's Charter, generally protects the stockholders against the same types of
activities that the Board considered when it recommended the adoption of Article
SEVENTH, although there are material differences between Section 203 and Article
SEVENTH. Section 203 provides, generally, that subject to certain exceptions
specified therein, a corporation may not engage in any business combination with
any "interested stockholder" for a three-year period following the date that
such stockholder becomes an interested stockholder unless either (1) prior to
such date, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (2) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares) or
(3) on or subsequent to such date, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of at least
66 2/3% of the outstanding voting stock of the corporation which is not owned by
the interested stockholder. In general, an interested stockholder includes (1)
any person that is the owner of 15% or more of the outstanding voting stock of
the corporation, or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation, at any
time within three years immediately prior to the relevant date and (2) the
affiliates and associates of any such person. Section 203 provides that a
corporation may elect to opt out of the restrictions imposed thereunder;
however, the Company has not opted out of these provisions.
On February 3, 1986, the Company issued the Rights as a dividend to the
holders of its Common Stock. The Rights are not exercisable (or transferable
apart from the Common Stock) until the earlier of (i) ten days following the
public announcement that a person or group has acquired 20% or more of the
outstanding Common Stock (an "Acquiring Person") or (ii) ten days following the
commencement of or announcement of an intention to make a tender or exchange
offer upon consummation of which a person or group would own 30% or more of the
outstanding Common Stock.
After the Rights become exercisable, each Right entitles the holder to buy
one share of Common Stock at a price of $50, subject to adjustment (the
"Purchase Price"). In addition, if certain types of mergers or other business
combinations involving the Company occur after the Rights become exercisable,
the Rights will be modified so as to entitle the holder thereof, upon payment of
the then current Purchase Price, to purchase common stock of the acquiring
company which at the time of such transaction would have a value equal to twice
such Purchase Price. Alternatively, if an Acquiring Person acquires the Company
by means of a reverse merger in which the Company and its Common Stock survive,
or engages in certain self-dealing transactions with the Company, or if a person
or group acquires 30% or more of the outstanding Common Stock (except pursuant
to a cash tender offer for all outstanding shares by a bidder owning less than
20% of the outstanding shares that results in the bidder owning at least 85% of
the outstanding shares), each Right not owned by the Acquiring Person would
become exercisable for the number of shares of Common Stock that at that time
have a value of twice the then current Purchase Price. (The Board may reduce the
30% threshold in the preceding sentence to 15%.) The Rights are redeemable, at
the option of the Company, at $.025 per Right at any time prior to the
acquisition by a person or group of ownership of 20% or more of the outstanding
Common Stock (or 15% or more, if the Board has reduced the 30% threshold
described above). The Rights will expire on February 3, 1996, unless previously
redeemed as described above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE PROPOSAL
TO DELETE CURRENT ARTICLE SEVENTH FROM THE CHARTER (PROPOSAL NO. 4).
DESCRIPTION OF PROPOSAL NO. 5
THE TEXT OF SECTION (6) OF ARTICLE FIFTH OF THE CHARTER, AS CURRENTLY IN
EFFECT AND AS PROPOSED TO BE AMENDED, IS ATTACHED TO THIS PROXY STATEMENT AS
EXHIBIT C. THE FOLLOWING DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO EXHIBIT C.
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<PAGE> 30
Currently, Section (6) of Article FIFTH of the Charter ("Section (6)")
provides that, subject to any special rights to call such meetings that may be
granted to the holders of any series of preferred stock, special meetings of
stockholders may be called only by a majority of the Board of Directors.
Proposal No. 5 would amend Section (6) to add a requirement that, subject to
certain conditions, at the request of a "Qualified Holder" the Board of
Directors will call a special meeting of stockholders of the Company. A
"Qualified Holder" would mean a person who, together with all "affiliates" of
such person (as such term is defined in Rule 405 under the Securities Act of
1933 as in effect on January 1, 1994), has owned, for at least six months before
the Company receives the request, at least 3% of the outstanding shares of
capital stock of the Company entitled to vote for the election of directors. For
these purposes, shares shall be considered as "owned" by a person only if such
person has the sole power to both vote and dispose of, or to direct the voting
or disposition of, such shares. A Qualified Holder will not include a group of
persons acting in concert or pursuant to contractual arrangement.
Proposal No. 5 provides that if a request to call a special meeting is
received from a Qualified Holder, the Board of Directors will select a date for
the special meeting not less than 60 nor more than 90 days after receipt of the
request by the Secretary of the Company. However, the Board will not be required
to call a special meeting if the request was received during the 150-day period
immediately preceding the anniversary of the previous year's annual meeting of
stockholders. The Board also will not be required to call a special meeting at
the request of any Qualified Holder that has, within the twelve months preceding
the date the request is received, delivered to the Company a request pursuant to
which a special meeting has been called.
Proposal No. 5 provides that a request to call a special meeting must set
forth (1) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting; (2) the
name and address of the stockholder who intends to propose such business; (3) a
representation that the stockholder is a Qualified Holder, agrees to furnish
such supporting documentation as the Company may request, is entitled to vote at
such meeting and intends to appear in person or by proxy at such meeting to
propose such business; and (4) any material interest of the stockholder in such
business. In addition, only business properly brought before a special meeting
will be able to be transacted at such meeting. Business will be deemed properly
brought only if it is (1) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (2) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors or (3) brought before the meeting by a Qualified Holder entitled to
vote at such meeting if written notice of such stockholder's intent to bring
such business before such meeting is contained in the request to call a special
meeting.
Proposal No. 5 also provides that if the stockholder intends to present a
proposal at the special meeting and to have the proposal included in the
Company's proxy materials for the meeting, the request must include such
proposal and any supporting statement, and the Company will include the proposal
and supporting statement in its proxy materials if the Qualified Holder complies
with the requirements of Rule 14a-8 (or any successor rule) under the Securities
Exchange Act of 1934 and if the Board of Directors does not determine that such
proposal and supporting statement may be omitted from the Company's proxy
materials pursuant to paragraph (c) of such Rule.
The current provisions of Section (6) would preclude a stockholder from
forcing stockholder consideration of a proposal over the opposition of the Board
of Directors by calling a special meeting of stockholders prior to such time as
the Board believes such consideration to be appropriate. The Board believes that
a stockholder that meets the requirements of a Qualified Holder should generally
be allowed to request that a special meeting be held, provided the Qualified
Holder has furnished the Company with the information described above and the
other requirements of Proposal No. 5 are met. Adoption of Proposal No. 5 would
permit a Qualified Holder to cause the Board of Directors to call a special
meeting of stockholders, regardless of whether the Board of Directors believed
that a special meeting was necessary or appropriate at that time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE PROPOSAL
TO AMEND SECTION (6) OF ARTICLE FIFTH OF THE CHARTER (PROPOSAL NO. 5).
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<PAGE> 31
DESCRIPTION OF PROPOSAL NO. 6
THE TEXT OF SECTION (10) OF ARTICLE FIFTH OF THE CHARTER, AS CURRENTLY IN
EFFECT AND AS PROPOSED TO BE AMENDED, IS ATTACHED TO THIS PROXY STATEMENT AS
EXHIBIT D. THE FOLLOWING DESCRIPTION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO EXHIBIT D.
Proposal No. 6 would amend Section (10) of Article FIFTH of the Company's
Charter to reduce the vote required for stockholders to amend, repeal or adopt
By-laws from 67% of the outstanding shares to 60%. The Board believes that it is
appropriate to reduce the vote necessary for the stockholders to change the
Company's By-Laws. Adoption of Proposal No. 6 would facilitate such changes by
the stockholders, regardless of whether the change was proposed by the Board of
Directors or any stockholder of the Company or whether the Board of Directors
believed the change to be in the best interest of the Company's stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE PROPOSAL
TO AMEND SECTION (10) OF ARTICLE FIFTH OF THE CHARTER (PROPOSAL NO. 6).
DESCRIPTION OF PROPOSAL NO. 7
THE TEXT OF THE FINAL PARAGRAPH OF ARTICLE FIFTH OF THE COMPANY'S CHARTER,
AS CURRENTLY IN EFFECT AND AS PROPOSED TO BE AMENDED, IS ATTACHED TO THIS PROXY
STATEMENT AS EXHIBIT E. THE FOLLOWING DESCRIPTION IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO EXHIBIT E.
Proposal No. 7 would amend the final paragraph of Article FIFTH of the
Company's Charter to reduce the vote required for stockholders to amend, repeal
or adopt any provision inconsistent with Sections (1), (2), (3), (6), (7), (8),
(9) or (10) of Article FIFTH of the Charter (which Sections include the Charter
provisions adopted by the 1983 Amendments, other than the "fair price" provision
described at "Description of Proposal No. 4" above) from 67% of the outstanding
shares to 60%.
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, in order for the Charter to be amended, the Board of Directors
must adopt resolutions that set forth the proposed amendment, declare its
advisability, and put the proposed amendment to a vote of the stockholders.
Therefore, action by the Board of Directors approving any Charter amendment must
precede any stockholder vote on such an amendment. If, in the future, the Board
of Directors takes such action with respect to Sections (1), (2), (3), (6), (7),
(8), (9) or (10) of Article FIFTH of the Charter, the adoption of Proposal No. 7
would reduce the vote necessary for adoption of the proposed amendment of such
Sections.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE PROPOSAL
TO AMEND THE LAST PARAGRAPH OF ARTICLE FIFTH OF THE CHARTER (PROPOSAL NO. 7).
OTHER INFORMATION
Each of Proposal No. 4, 5, 6 and 7 is an independent proposal which, if
approved by the stockholders, will be adopted regardless of whether the
remaining Proposals are so approved. If the proposed amendments are adopted, the
Board will amend the By-Laws to conform them to the adopted Charter amendments.
Approval of Proposal No. 4, 5, 6 and 7 by the stockholders would not
eliminate all "anti-takeover" provisions with respect to the Company. In
particular, the Rights would still be outstanding, and the Charter would retain
the current provisions establishing a classified Board strucuture, permitting
only the Board to increase or decrease the size of the Board and fill vacancies,
and prohibiting removal of Directors without cause and corporate action by
written consent of stockholders in lieu of a meeting. For a description of
certain provisions of the Company's By-Laws which regulate the manner and timing
of stockholder proposals and stockholder nominations for the Board of Directors,
see "Proposals of Stockholders" below.
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<PAGE> 32
The Company has no current plans to propose any other amendments to its
Charter or to take any other action having a similar effect if any of the
Proposals is not approved. Except as described herein, if all of the Proposals
are approved, the Board does not presently contemplate recommending the adoption
of any further amendments to the Charter or By-Laws of the Company which would
affect the ability of third parties to take over or change control of the
Company. However, the financial markets and the environment for corporate
takeovers are volatile, and the Board may at any time adopt measures designed to
protect against hostile takeovers or other actions that the Board may believe to
be contrary to the best interests of the Company and its stockholders. Such
measures may include actions that do not require the consent of the stockholders
(such as amendment of the Rights Agreement or the issuance of new rights with
respect to the Company's Common Stock).
OTHER MATTERS
PROPOSALS OF STOCKHOLDERS
Stockholder Proposals in the Company's Proxy Statement. In order for
proposals by stockholders to be considered for inclusion in the proxy statement
and form of proxy relating to the 1995 Annual Meeting of Stockholders, such
proposals must be received at the principal executive offices of the Company,
AmSouth-Sonat Tower, Birmingham, Alabama 35203, by no later than November 18,
1994.
Stockholder Proposals to be Presented at Meetings. A stockholder who
desires to propose any business at a meeting of stockholders must give the
Company written notice within ten days following public disclosure by the
Company of the meeting date (by notice to the New York Stock Exchange or
otherwise) or, if the meeting is adjourned and the Company is required by
Delaware law to give notice of the adjourned meeting date, within five days
after the earlier of the date public disclosure is made by the Company of the
adjourned meeting date (by notice to such exchange or otherwise) or the date
notice of the adjourned meeting is given to stockholders. The stockholder's
notice must set forth (a) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting; (b) the name and address of the stockholder who intends to propose such
business; (c) a representation that the stockholder is a holder of record of
stock of the Company entitled to vote at such meeting (or if the record date for
such meeting is subsequent to the date required for such stockholder notice, a
representation that the stockholder is a holder of record at the time of such
notice and intends to be a holder of record on the record date for such meeting)
and intends to appear in person or by proxy at such meeting to propose such
business; and (d) any material interest of the stockholder in such business.
Stockholder Nominations for Directors. A stockholder who desires to
nominate Directors at a meeting of stockholders must give the Company written
notice within the time period described in the preceding paragraph. The
stockholder's notice must set forth (a) the name and address of the stockholder
who intends to make the nomination and of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting (or if the record date for such meeting
is subsequent to the date required for such stockholder notice, a representation
that the stockholder is a holder of record at the time of such notice and
intends to be a holder of record on the record date for such meeting) and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the consent of each nominee
to serve as a Director of the Company if so elected.
30
<PAGE> 33
The Chairman of the meeting may refuse to transact any business or to
acknowledge the nomination of any person if a stockholder has failed to comply
with the foregoing procedures.
A copy of the Company's By-Laws may be obtained from the Company upon
written request to the Company at its principal place of business.
INSTITUTIONAL OWNERSHIP OF COMMON STOCK
The table below sets forth, as of January 31, 1994, certain information
with respect to each person or entity known by the Company to be the beneficial
owner of more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE OF NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER CLASS BENEFICIALLY OWNED OF CLASS
------------------------------------ ------------- ------------------ --------
<S> <C> <C> <C>
FMR Corp. Common Stock 5,019,174 5.8%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
In a report on Schedule 13G filed with the Securities and Exchange
Commission with respect to the ownership of the Company's Common Stock as of
December 31, 1993, FMR Corp. and certain of its affiliates stated that such
stock was acquired in the ordinary course of business and was not acquired for
the purpose of changing or influencing the control of the Company and was not
acquired in connection with or as a participant in any transaction having such a
purpose or effect.
VOTING AT THE ANNUAL MEETING
The presence, in person or by proxy, of the holders of a majority of the
Company's Common Stock is necessary to constitute a quorum at the Annual Meeting
or any adjournment thereof.
The vote required for the election of Directors and the approval of the
other matters scheduled for a vote at the Annual Meeting is controlled by the
provisions of the Company's Charter and By-Laws and the Delaware General
Corporation Law. Directors are elected by a plurality vote. Approval of Proposal
No. 1 would require a plurality vote. Approval of Proposal No. 2 would require
the affirmative vote of a majority of the shares of Common Stock represented in
person or by proxy at the Annual Meeting and voting either for or against, or
abstaining from voting on, such proposal. Approval of Proposal No. 3 would
require the affirmative vote of a majority of the shares of Common Stock
outstanding and entitled to vote at the Annual Meeting. Approval of Proposal No.
4 would require the affirmative vote of 80% of the shares of Common Stock
outstanding and entitled to vote at the Annual Meeting. Approval of Proposal No.
5, 6 and 7 would each require the affirmative vote of 67% of the shares of
Common Stock outstanding and entitled to vote at the Annual Meeting. Abstentions
and broker "non-votes" (shares not voted on a matter because a nominee holding
shares for a beneficial owner neither receives voting instructions from such
beneficial owner nor has discretionary voting power with respect thereto) shall
not have an effect on the vote for the election of Directors and on Proposal No.
1, and shall have the effect of a vote against Proposal No. 2, 3, 4, 5, 6 and 7.
The vote will be tabulated by an independent tabulator and the results of such
vote will be certified by independent inspectors of election.
SOLICITATION OF PROXIES
The Company will bear the costs of solicitation of proxies. Officers and
regular employees of the Company may solicit proxies by mail, telephone,
telegraph and personal interview. In addition, the Company has retained D. F.
King & Co., Inc. to assist in the solicitation of proxies, and anticipates that
the fees that it will incur for this service, excluding out-of-pocket expenses,
will not exceed $50,000. Arrangements will be made with brokerage houses and
with other custodians, nominees and fiduciaries to forward proxy soliciting
material to beneficial owners. The Company will reimburse persons holding stock
for others in their names or in those of their nominees for their reasonable
out-of-pocket expenses in sending proxy material to their principals and
obtaining their proxies.
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------------------------
The information provided under the headings "Report of the Executive
Compensation Committee" and "Performance Graph" above shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to Regulations 14A or 14C, other than as provided in Item
402 of Regulation S-K, or to the liabilities of Section 18 of the Securities
Exchange Act of 1934 and, unless specific reference is made therein to such
headings, shall not be incorporated by reference into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
The Company is not aware that any matters other than those mentioned above
will be presented for action at the 1994 Annual Meeting, but if any other
matters do properly come before the meeting, the persons named as proxies will
vote upon such matters in accordance with their best judgment.
Please complete, sign, date and return the enclosed proxy card promptly.
SONAT INC.
Beverley T. Krannich
Secretary
Birmingham, Alabama
March 16, 1994
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<PAGE> 35
EXHIBIT A
PERFORMANCE AWARD PLAN OF SONAT INC.
I. GENERAL
1.1 PURPOSE OF THE PLAN. The Performance Award Plan (the "Plan") of Sonat
Inc. (the "Company") is intended to advance the best interests of the Company
and its subsidiaries by providing officers with additional incentives through
the payment of bonuses based on the performance of the Company relating to
specified objective financial and business criteria, thereby increasing the
personal stake of such officers in the continued success and growth of the
Company and encouraging them to remain in the employ of the Company. Awards
under the Plan are intended to qualify as "performance-based compensation" for
purposes of Section 162(m) of the Internal Revenue Code ("Section 162(m)").
1.2 ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Executive Compensation Committee or other designated Committee (the "Committee")
of the Board of Directors of the Company (the "Board of Directors") which shall
consist solely of two or more Directors, each of whom qualifies as an "outside
director" for purposes of Section 162(m). The Committee shall have authority,
subject to the provisions of the Plan, in its discretion, to grant awards
("Awards") under the Plan, to interpret conclusively the provisions of the Plan,
to adopt such rules and regulations for carrying out the Plan as it may deem
advisable, to decide conclusively all questions of fact arising in the
application of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. All decisions and acts of the
Committee shall be final and binding upon all affected Plan participants. No
member of the Committee shall be liable for any action taken, or determination
made, in good faith.
1.3 ELIGIBLE PARTICIPANTS. All officers of the Company and its
Subsidiaries at the level of Vice President and above shall be eligible to
participate in the Plan. For purposes of the Plan the term "Subsidiaries" shall
mean subsidiaries, partnerships and joint ventures in which the Company and its
subsidiaries have at least a 50% ownership interest. Directors who are not
officers of the Company or its Subsidiaries shall not be eligible to participate
in the Plan.
1.4 AWARDS UNDER THE PLAN. The Committee shall designate the eligible
employees, if any, to be granted Awards under the Plan. All Awards granted under
the Plan shall be on the terms and subject to the conditions hereinafter
provided.
1.5 OTHER COMPENSATION PROGRAMS. The existence and terms of the Plan shall
not limit the authority of the Board of Directors in compensating employees of
the Company and its Subsidiaries in such other forms and amounts, including
compensation pursuant to any other plans as may be currently in effect or
adopted in the future, as it may determine from time to time.
II. TERMS AND CONDITIONS OF AWARDS
2.1 ESTABLISHMENT OF PERFORMANCE OBJECTIVES AND BONUS OPPORTUNITY. Prior
to the commencement of each Performance Year (or such later time as may be
permitted for performance-based compensation under Section 162(m)), the
Committee shall establish written Performance Objectives and a Bonus Opportunity
for each eligible employee chosen to receive an Award for such Performance Year.
The Performance Objectives shall be based on one or more of the following
criteria: Company earnings per share; Company or Subsidiary earnings before
interest and taxes or earnings before interest, taxes and corporate charges;
Company or Subsidiary net income; Company or Subsidiary revenues, pipeline
throughput, oil and gas production volumes, or oil and gas marketing volumes;
Company or Subsidiary unit revenues minus unit variable costs; Company or
Subsidiary return on capital, return on equity, return on assets, or return on
invested capital; Company or Subsidiary cash flow return on assets or cash flows
from operating activities; Company or Subsidiary capital expenditures; Company
or Subsidiary operations and maintenance expense or general and administrative
expense; Company or
A-1
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Subsidiary oil and gas unit operating income or oil and gas unit lifting costs;
Company or Subsidiary reserve replacement, reserve replacement costs and reserve
acquisition costs; and Company or Subsidiary debt-equity ratios and key
profitability ratios. At the time of setting the Performance Objectives, the
Committee shall specify the formula to be used in calculating each of the
criteria on which an Award is based and their relative weights. The Bonus
Opportunity shall be expressed as an amount of cash. The Committee may also
specify a minimum acceptable level of achievement of the relevant Performance
Objectives, as well as one or more additional levels of achievement, and a
formula to determine the percentage of the Bonus Opportunity deemed to have been
earned by the employee upon attainment of each such level of achievement, which
percentage may exceed 100%. The Performance Objectives and Bonus Opportunity
relating to any particular Award need not be the same as those relating to any
other Award, whether made at the same or a different time.
2.2 PERFORMANCE YEAR. The Performance Year with respect to an Award shall
be the calendar year within which the Performance Objectives relating to that
Award are to be achieved.
2.3 EARNING OF AWARD. Promptly after the date on which the necessary
information for a particular Performance Year becomes available, the Committee
shall determine, and certify in writing, the extent to which the Bonus
Opportunity for such Performance Year has been earned, through the achievement
of the relevant Performance Objectives, by each employee who was granted an
Award for such Performance Year. Notwithstanding the terms of any Award, the
maximum payout under this Plan to any individual for any Performance Year shall
not exceed $1.5 million.
2.4 DISCRETIONARY DOWNWARD ADJUSTMENTS. Notwithstanding the terms of any
Award, the Committee, in its sole and absolute discretion, may reduce the amount
of the Award payable to any employee for any reason, including the Committee's
judgment that the Performance Objectives have become an inappropriate measure of
achievement, a change in the employment status, position or duties of the
employee, unsatisfactory performance of the employee, or the employee's service
for less than the entire Performance Year.
2.5 DISTRIBUTIONS. Promptly after the Committee has determined the extent
to which an Award has been earned, such Award shall be distributed in cash in a
lump sum, unless the Committee determines, either at the time of grant or the
time of distribution, to distribute all or a portion of such Award in
installments or as deferred compensation. The Committee, in its discretion, may
adopt a program to permit employees to defer all or a portion of their Award.
2.6 CHANGE OF CONTROL. Notwithstanding any other provision of this Plan or
contained in any Award granted hereunder (including any provision for deferred
payment thereof), upon the occurrence of a Change of Control (as defined in
Section 3.6), a participant shall be deemed to have fully earned the Bonus
Opportunities contained in his outstanding Awards, and the amount of such Bonus
Opportunities shall be paid promptly (and no later than 30 days after the Change
of Control) in a cash lump sum. Notwithstanding the provisions of Section 2.4,
following a Change of Control the Committee shall not adjust the Bonus
Opportunity specified in an Award from that in effect immediately prior to the
Change of Control in a manner adverse to the participant.
III. ADDITIONAL PROVISIONS
3.1 AMENDMENTS. The Board of Directors may, in its sole discretion, amend
the Plan from time to time. Any such amendment may be made without stockholder
approval unless required to satisfy Section 162(m).
3.2 WITHHOLDING. Payments under the Plan shall be net of an amount
sufficient to satisfy any federal, state or local withholding tax liability.
3.3 NON-ASSIGNABILITY; DEATH OF PARTICIPANT. No Award under the Plan shall
be assignable or transferable by the holder thereof except by will or by the
laws of descent and distribution. In the event of
A-2
<PAGE> 37
the death of a participant, any payments due to such participant shall be paid
to his beneficiary designated in writing to the Committee, or, if none has been
designated, to his estate.
3.4 NON-UNIFORM DETERMINATIONS. Determinations by the Committee under the
Plan (including, without limitation, determinations of the persons to receive
Awards; the terms and provisions of such Awards; the relevant Performance
Objectives; the amount of Bonus Opportunity; and the amount of any downward
adjustment) need not be uniform and may be made by it selectively among persons
who receive, or are eligible to receive, Awards under the Plan, whether or not
such persons are similarly situated.
3.5 NO GUARANTEE OF EMPLOYMENT. The grant of an Award under the Plan shall
not constitute an assurance of continued employment for any period.
3.6 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if:
(i) any "person" (as defined in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as in effect on March 1, 1985) is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Securities Exchange Act of 1934 as in effect on March 1, 1985) of
securities of the Company representing 35% or more of the voting power of
the outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board of Directors,
(ii) there shall occur a change in the composition of a majority of
the Board of Directors within any period of three consecutive years which
change shall not have been approved by a majority of the Board of Directors
as constituted immediately prior to the commencement of such period, or
(iii) at any meeting of the stockholders of the Company called for the
purpose of electing directors, all persons nominated by the Board of
Directors for election as directors shall fail to be elected.
3.7 UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended to
constitute an "unfunded" plan. With respect to any amounts payable to a
participant pursuant to an Award, nothing contained in the Plan (or in any
documents related thereto), nor the creation or adoption of the Plan, the grant
of any Award, or the taking of any other action pursuant to the Plan, shall give
any such participant any rights that are greater than those of a general
creditor of the Company. The Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan, which
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan.
3.8 EFFECTIVE DATE AND DURATION OF PLAN. The Plan shall become effective
on January 27, 1994 subject to the approval thereof by stockholders of the
Company at the 1994 annual meeting. Awards may be granted under the Plan for
calendar years 1994 through 1998, unless the Plan is terminated earlier by the
Board of Directors, in its sole discretion. The Plan shall remain in effect for
purposes of administering the payment of Awards granted under the Plan until
such payments have been completed.
A-3
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EXHIBIT B
PROPOSAL NO. 4
TEXT OF CURRENT ARTICLE SEVENTH
If Proposal No. 4 is adopted, current Article SEVENTH of the Charter,
bracketed below, will be deleted, and current Article EIGHTH will be renumbered
as Article SEVENTH:
[SEVENTH: Any other provision of this Certificate of Incorporation to the
contrary notwithstanding, the affirmative vote of the holders of not less than
80 percent of the outstanding shares of capital stock of the Corporation
entitled to vote generally (the "Voting Stock") and the affirmative vote of the
holders of not less than 67 percent of the Voting Stock held by stockholders
other than a Related Person (as hereinafter defined) shall be required for the
approval or authorization of any Business Combination (as hereinafter defined)
or of any series of related transactions which, if taken together, would
constitute a Business Combination of the Corporation with any Related Person;
provided, however, that the 80 percent and 67 percent voting requirements shall
not be applicable if:
1. A majority of Continuing Directors (as hereinafter defined) of the
Corporation (a) have expressly approved in advance the acquisition of Voting
Stock of the Corporation that caused the Related Person to become a Related
Person, or (b) have approved the Business Combination; or
2. The Business Combination is a merger or consolidation and the cash or
fair market value of the property, securities or other consideration to be
received per share by holders of Common Stock of the Corporation in the Business
Combination is not less than the highest per share price (with appropriate
adjustments for recapitalizations and for stock splits, stock dividends and like
distributions), in each case determined in good faith by a majority of
Continuing Directors, paid by the Related Person in acquiring any of its
holdings of the Corporation's Common Stock either in or subsequent to the
transaction or series of transactions in which the Related Person became a
Related Person.
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
For purposes of this Article SEVENTH:
(a) The term "Business Combination" shall mean (i) any merger or
consolidation of the Corporation or a Subsidiary (as hereinafter defined) with
or into a Related Person, (ii) any sale, lease, exchange, transfer or other
disposition, including without limitation a pledge, mortgage or any other
security device, of all or any Substantial Part (as hereinafter defined) of the
assets either of the Corporation (including without limitation any voting
securities of a Subsidiary) or of a Subsidiary, or both, to a Related Person,
(iii) any merger or consolidation of a Related Person with or into the
Corporation or a Subsidiary of the Corporation, (iv) any sale, lease, exchange,
transfer or other disposition of all or any Substantial Part of the assets of a
Related Person to the Corporation or a Subsidiary of the Corporation, (v) the
issuance of any securities of the Corporation or a Subsidiary of the Corporation
to a Related Person, (vi) any reclassification of securities (including a
reverse stock split) or any other recapitalization that would have the effect of
increasing the voting power of a Related Person and (vii) any agreement,
contract or other arrangement providing for any of the transactions described in
this definition of Business Combination.
(b) The term "Related Person" shall mean and include any individual,
corporation, partnership or other person or entity which, together with its
"Affiliates" and "Associates" (as defined on March 1, 1983 in Rule 12b-2 under
the Securities Exchange Act of 1934), "beneficially owns" (as defined on March
1, 1983 in Rule 13d-3 under the Securities Exchange Act of 1934) in the
aggregate 10 percent or more of the outstanding Voting Stock of the Corporation,
any Affiliate or Associate of any such individual, corporation, partnership or
other person or entity, and any assignee of any of the foregoing.
B-1
<PAGE> 39
(c) Notwithstanding the definition of "beneficially owned" in subparagraph
(b) of this Article SEVENTH, any Voting Stock of the Corporation that any
Related Person has the right to acquire pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise, shall be
deemed beneficially owned by the Related Person.
(d) The term "Substantial Part" shall mean more than 20 percent of the fair
market value of the total assets of the corporation in question, as determined
in good faith by a majority of Continuing Directors, as of the end of its most
recent fiscal year ending prior to the time the determination is being made.
(e) For the purposes of subparagraph (a) of this Article SEVENTH, the term
"Subsidiary" means any corporation of which a majority of any class of equity
security is owned directly or indirectly by the Corporation and whose assets
constitute a Substantial Part of the assets of the Corporation, as determined in
good faith by a majority of Continuing Directors.
(f) For the purposes of the first paragraph of this Article SEVENTH, in any
Business Combination of a Subsidiary of the Corporation with a Related Person,
the voting provisions contained therein shall be deemed to be required for the
Corporation to cause the Subsidiary to approve or authorize such Business
Combination.
(g) For the purposes of subparagraph (2) of this Article SEVENTH, the term
"other consideration to be received" shall include, without limitation, Common
Stock of the Corporation retained by its existing public stockholders in the
event of a Business Combination in which the Corporation is the surviving
corporation.
(h) The term "Continuing Director" shall mean a Director who was a member
of the Board of Directors of the Corporation immediately prior to the time that
the Related Person involved in a Business Combination became a Related Person.]
B-2
<PAGE> 40
EXHIBIT C
PROPOSAL NO. 5
AMENDMENT OF SECTION (6) OF ARTICLE FIFTH
If Proposal No. 5 is adopted, the language in Section (6) of Article FIFTH
below in italics will be added:
(6) Except as otherwise provided in Article FOURTH of this certificate with
respect to the holders of any one or more series of Serial Preference Stock,
special meetings of the stockholders for any purpose or purposes shall be called
solely by resolution of the Board of Directors, acting by not less than a
majority of the entire Board, and, except as set forth in this Section (6), the
power of stockholders to call a special meeting is specifically denied.
Notwithstanding the foregoing, and subject to the conditions set forth in this
Section (6), the Board of Directors shall call a special meeting of stockholders
upon the receipt by the Secretary of the Corporation of a Request (as
hereinafter defined) of a Qualified Holder (as hereinafter defined). The place
and notice of any special meeting shall be as set forth below and in the
By-Laws. Only business properly brought before a special meeting shall be
transacted at such meeting. Business shall be deemed properly brought only if it
is (i) specified in the notice of meeting (or any supplement thereto) given by
or at the direction of the Board of Directors, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or (iii)
brought before the meeting by a Qualified Holder entitled to vote at such
meeting if written notice of such Qualified Holder's intent to bring such
business before such meeting was contained in the Request. The Chairman of the
meeting may refuse to transact any business at any special meeting made without
compliance with the foregoing procedure.
If the Secretary of the Corporation receives a Request from a Qualified
Holder, the Board of Directors shall select a date for the special meeting not
less than 60 nor more than 90 days after the date the Request is received;
provided, however, that (a) the Board shall not be required to call a special
meeting at the request of any Qualified Holder that has, within the twelve
months preceding the date the Request is received, delivered to the Corporation
a Request pursuant to which a special meeting has been called, and (b) the Board
shall not be required to call a special meeting pursuant to a Request received
during the 150-day period preceding the anniversary of the most recent annual
meeting of stockholders.
For the purposes of this Section (6):
(a) The term "Qualified Holder" shall mean any individual, corporation,
partnership or other person or entity (collectively, a "Person") which, together
with all of its "affiliates" (as such term is defined on December 3, 1993 in
Rule 405 under the Securities Act of 1933), has had continuous Ownership (as
hereinafter defined) of at least 3 percent of the outstanding shares of capital
stock of the Corporation entitled to vote for the election of directors ("Voting
Stock") throughout the six-month period prior to the date the Corporation
receives the Request from such Person. A "Qualified Holder" shall not include a
group of Persons acting in concert or pursuant to a contractual arrangement.
(b) The term "Ownership" of Voting Stock shall mean the sole possession of
both the power to vote (or direct the voting of) and the power to dispose of (or
direct the disposition of) such Voting Stock.
(c) The term "Request" shall mean a writing received by the Secretary of
the Corporation at the principal executive offices of the Corporation, which
requests the Board of Directors to call a special meeting of the stockholders
and which sets forth: (1) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting; (2) the name and address of the Qualified Holder who intends to propose
such business; (3) a representation that the stockholder is a Qualified Holder
of Voting Stock, agrees to furnish such supporting documentation with respect to
such stockholder's status as a Qualified Holder as the Corporation may request,
is entitled to
C-1
<PAGE> 41
vote at such meeting and intends to appear in person or by proxy at such meeting
to propose such business; and (4) any material interest of the stockholder in
such business. If the Qualified Holder intends to present a proposal at the
special meeting and to have such proposal included in the Corporation's proxy
materials for such meeting and the Request includes the proposal and any
supporting statement with respect thereto, the Corporation's proxy materials for
the meeting shall include such proposal and supporting statement, provided (A)
the Qualified Holder complies with the requirements of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (or any successor rule), and (B) the
Board of Directors does not determine that such proposal and supporting
statement may be omitted from the Corporation's proxy materials pursuant to
paragraph (c) of such Rule 14a-8.
C-2
<PAGE> 42
EXHIBIT D
PROPOSAL NO. 6
If Proposal No. 6 is adopted, the language in Section (10) of Article FIFTH
below in brackets will be deleted and the language in italics will be added:
(10) The stockholders of the Corporation may exercise their power to alter,
amend, change, repeal or adopt By-Laws of the Corporation only by the
affirmative vote of the holders of not less than [67 percent] 60 percent of the
outstanding shares of capital stock of the Corporation entitled to vote for the
election of directors, provided that notice of such proposed alteration,
amendment, repeal or adoption is included in the notice of meeting called for
the taking of such action.
D-1
<PAGE> 43
EXHIBIT E
PROPOSAL NO. 7
If Proposal No. 7 is adopted, the language in the last paragraph of Article
FIFTH below in brackets will be deleted and the language in italics will be
added:
Notwithstanding any other provisions of this Certificate of Incorporation
or the By-Laws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
By-Laws of the Corporation), the affirmative vote of the holders of [67 percent]
60 percent of the outstanding shares of capital stock of the Corporation
entitled to vote for the election of directors shall be required to amend,
repeal or adopt any provision inconsistent with Sections (1), (2), (3), (6),
(7), (8), (9) and (10) of this Article FIFTH.
E-1
<PAGE> 44
PROXY SONAT INC.
AMSOUTH--SONAT TOWER
BIRMINGHAM, ALABAMA 35203
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Ronald L. Kuehn, Jr., Donald G. Russell and
William A. Smith, and each of them, proxies, with full powers of substitution,
to represent the undersigned at the Annual Meeting of Stockholders of Sonat
Inc. to be held on April 28, 1994 and at any adjournment thereof, and to vote
all shares of stock which the undersigned would be entitled to vote if
personally present as follows:
THE BOARD RECOMMENDS A VOTE "FOR ALL NOMINEES", AND "FOR" PROPOSAL NO. 1, 2, 3,
4, 5, 6 AND 7.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees [ ] WITHHOLD AUTHORITY [ ]
(see reverse side) (except those whose names are inserted to vote for
on the line below) all nominees
</TABLE>
<TABLE>
<S> <C> <C> <C>
2. ELECTION of Ernst & Young as Auditor (Proposal No. 1). FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVAL of Performance Award Plan (Proposal No. 2). FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. APPROVAL of Charter amendment to increase the number of
authorized shares of Common Stock (Proposal No. 3). FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. APPROVAL of Charter amendment deleting provision regarding minimum
price protection in certain business combinations (Proposal No. 4). FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
(CONTINUED, AND TO BE SIGNED AND DATED, ON THE REVERSE SIDE)
<TABLE>
<S> <C> <C> <C>
6. APPROVAL of Charter amendment requiring Board to call special
stockholder meetings upon request of certain 3% stockholders,
subject to restrictions (Proposal No. 5). FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. APPROVAL of Charter amendment to reduce stockholder vote needed to
change By Laws from 67% to 60% (Proposal No. 6). FOR [ ] AGAINST [ ] ABSTAIN [ ]
8. APPROVAL of Charter amendment to reduce stockholder vote needed to
approve certain Charter changes from 67% to 60% (Proposal No. 7). FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
9. In their discretion upon such other matters as may properly come before the
meeting; all as set forth in the Proxy Statement for the meeting, the
receipt of which is hereby acknowledged.
Nominees for the Board of Directors: Jerome J. Richardson, James B. Williams
and Joe B. Wyatt.
This Proxy will be voted as specified above. If no vote is specified, this
Proxy will be voted "FOR all nominees" in Item 1 and "FOR" Proposal No. 1,
2, 3, 4, 5, 6 and 7.
DATED: , 1994
---------------
SIGNATURE
-----------------
SIGNATURE
-----------------
Sign here as name(s) appear hereon.
(If shares are held by joint tenants, both should sign. If signing as Attorney,
Executor, Administrator, Trustee or Guardian, please give your title as such.
If the signer is a corporation, please sign the full corporate name by duly
authorized officer.)
PLEASE SIGN, DATE AND MAIL PROXY PROMPTLY
<PAGE> 45
ACCT. NO.
--------------------
SHARES
----------------------
NAME
-------------------------
AMSOUTH BANK N.A., TRUSTEE
SONAT SAVINGS PLAN
RE: SONAT INC.
ANNUAL MEETING APRIL 28, 1994
Receipt of proxy soliciting material for the above meeting is acknowledged.
As to stock in Sonat Inc. owned by me but held by your nominee for my account,
you are instructed to sign and forward a proxy in the form being solicited by
the Board of Directors and to direct a vote as follows:
THE BOARD RECOMMENDS A VOTE "FOR ALL NOMINEES", AND "FOR" PROPOSAL NO. 1, 2, 3,
4, 5, 6 AND 7.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS (see reverse side). FOR all nominees [ ] WITHHOLD AUTHORITY [ ]
(except those whose names are inserted on the line below) to vote for all nominees
</TABLE>
<TABLE>
<S> <C> <C> <C>
2. ELECTION of Ernst & Young as Auditor (Proposal No. 1). FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVAL of Performance Award Plan (Proposal No. 2). FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
ITEMS CONTINUED ON THE REVERSE SIDE OF PROXY--PLEASE SIGN ON
THE REVERSE SIDE
<TABLE>
<S> <C> <C> <C>
4. APPROVAL of Charter amendment to increase the number of authorized
shares of Common Stock (Proposal No. 3). FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. APPROVAL of Charter amendment deleting provision regarding minimum
price protection in certain business combinations (Proposal No. 4). FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. APPROVAL of Charter amendment requiring Board to call special
stockholder meetings upon request of certain 3% stockholders, subject
to restrictions (Proposal No. 5). FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. APPROVAL of Charter amendment to reduce stockholder vote needed to
change By Laws from 67% to 60% (Proposal No. 6). FOR [ ] AGAINST [ ] ABSTAIN [ ]
8. APPROVAL of Charter amendment to reduce stockholder vote needed to
approve certain Charter changes from 67% to 60% (Proposal No. 7). FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
9. In their discretion upon such other matters as may properly come before the
meeting; all as set forth in the Proxy Statement for the meeting.
Nominees for the Board of Directors: Jerome J. Richardson, James B. Williams
and Joe B. Wyatt
THE UNDERSIGNED'S VOTE IS TO BE CAST AS SPECIFIED ABOVE. IF NO VOTE IS
SPECIFIED, IT WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1 AND "FOR" PROPOSAL NO.
1, 2, 3, 4, 5, 6 AND 7.
Dated , 1994
----------------
Signature
---------------------------------
Sign here as name appears hereon.
PLEASE SIGN, DATE AND MAIL PROXY PROMPTLY IN THE ENVELOPE PROVIDED
<PAGE> 46
ACCT. NO.
----------------------
SHARES
----------------------
NAME
----------------------
AMSOUTH BANK N.A., TRUSTEE
SONAT OFFSHORE DRILLING SAVINGS PLAN
RE: SONAT INC.
ANNUAL MEETING APRIL 28, 1994
Receipt of proxy soliciting material for the above meeting is acknowledged.
As to stock in Sonat Inc. owned by me but held by your nominee for my account,
you are instructed to sign and forward a proxy in the form being solicited by
the Board of Directors and to direct a vote as follows:
THE BOARD RECOMMENDS A VOTE "FOR ALL NOMINEES", AND "FOR" PROPOSAL NO. 1, 2, 3,
4, 5, 6 AND 7.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS (see reverse side). FOR all nominees [ ] WITHHOLD AUTHORITY [ ]
(except those whose names are inserted on the line below) to vote for all nominees
</TABLE>
<TABLE>
<S> <C> <C> <C>
2. ELECTION of Ernst & Young as Auditor (Proposal No. 1). FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVAL of Performance Award Plan (Proposal No. 2). FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
ITEMS CONTINUED ON THE REVERSE SIDE OF PROXY PLEASE SIGN ON
THE REVERSE SIDE
<TABLE>
<S> <C> <C> <C>
4. APPROVAL of Charter amendment to increase the number of authorized shares
of Common Stock (Proposal No. 3). FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. APPROVAL of Charter amendment deleting provision regarding minimum price
protection in certain business combinations (Proposal No. 4). FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. APPROVAL of Charter provision to require Board to call special stockholder
meetings upon request of certain 3% stockholders, subject to restrictions
(Proposal No. 5). FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. APPROVAL of Charter provision to reduce stockholder vote needed to change
By-Laws from 67% to 60% (Proposal No. 6). FOR [ ] AGAINST [ ] ABSTAIN [ ]
8. APPROVAL of Charter provision to reduce stockholder vote needed to approve
certain Charter changes from 67% to 60% (Proposal No. 7). FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
9. In their discretion upon such other matters as may properly come before the
meeting; all as set forth in the Proxy Statement for the meeting.
Nominees for the Board of Directors: Jerome J. Richardson, James B. Williams
and Joe B. Wyatt
THE UNDERSIGNED'S VOTE IS TO BE CAST AS SPECIFIED ABOVE. IF NO VOTE IS
SPECIFIED, IT WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1 AND "FOR" ITEMS 2, 3,
4, 5, 6, 7 AND 8.
Dated , 1994
---------------
Signature
---------------------------------
Sign here as name appears hereon.
PLEASE SIGN, DATE AND MAIL PROXY PROMPTLY IN THE ENVELOPE PROVIDED
<PAGE> 47
SONAT INC.
AMSOUTH--SONAT TOWER
BIRMINGHAM, ALABAMA 35203
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Ronald L. Kuehn, Jr., Donald G. Russell and
William A. Smith, and each of them, proxies, with full powers of substitution,
and hereby authorizes each of them to represent the undersigned at the Annual
Meeting of Stockholders of Sonat Inc. to be held on April 28, 1994 and at any
adjournment thereof, and to vote all shares of stock which the undersigned
would be entitled to vote if personally present as directed on the reverse side
hereof with respect to the items set forth in the Proxy Statement and upon any
other matter which may properly come before the meeting or any adjournment
thereof.
Nominees for the Board of Directors: Jerome J. Richardson, James B. Williams
and Joe B. Wyatt.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE> 48
[ X ]
PLEASE MARK
YOUR VOTES
AS THIS
- ---------------------
COMMON
- ---------------------
D.R.S
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4, 5, 6, 7, AND 8.
WITHHELD
Item 1--ELECTION of Directors FOR FOR ALL
(see reverse side). [ ] [ ]
WITHHELD FOR: (Write that nominee's name in the space provided below).
Item 2--ELECTION of FOR AGAINST ABSTAIN
Ernst Young as Auditor [ ] [ ] [ ]
(Proposal No. 1).
Item 3--APPROVAL of
Performance Award Plan [ ] [ ] [ ]
(Proposal No. 2).
Item 4--APPROVAL of
Charter amendment
to increase the number of
authorized shares of
Common Stock (Proposal No. 3). [ ] [ ] [ ]
Item 5--APPROVAL of Charter
amendment deleting provision
regarding minimum price
protection in certain business
combinations (Proposal No. 4). [ ] [ ] [ ]
Item 6--APPROVAL of Charter
amendment requiring Board to
call special stockholder
meetings upon request of
certain 3% stockholders,
subject to restrictions
(Proposal No. 5). [ ] [ ] [ ]
Item 7--APPROVAL of Charter
amendment to reduce
stockholder vote needed to
change By-Laws from 67%
to 60% (Proposal No. 6). [ ] [ ] [ ]
Item 8--APPROVAL of Charter
amendment to reduce stockholder
vote needed to approve certain
Charter changes from 67% to 60%
(Proposal No. 7). [ ] [ ] [ ]
Signature(s) Date
----------------------------------------- -------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
