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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
FORCENERGY INC
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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FORCENERGY INC
FORCENERGY CENTER
2730 SW 3RD AVENUE, SUITE 800
MIAMI, FLORIDA 33129-2237
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, MAY 15, 1997
To the Stockholders of Forcenergy Inc:
The 1997 Annual Meeting of Stockholders of Forcenergy Inc (the "Company")
will be held at the Sheraton Biscayne Bay Hotel at 495 Brickell Avenue, Miami,
Florida at 3:30 P.M., Eastern Daylight Time, on Thursday, May 15, 1997 for the
following purposes:
1. To elect five members of the Board of Directors to serve
until the 1998 annual meeting of stockholders and until their
successors are duly elected and have qualified.
2. To consider and act upon a proposal to adopt the 1997 Stock
Price Performance Incentive Plan for Employees of Forcenergy Inc.
3. To consider and act upon a proposal to consolidate all of the
Company's Stock Option Plans into the Plan adopted in 1995 (the
"1995 Plan"), to amend the 1995 Plan, and to increase the number of
shares covered by the 1995 Plan.
4. To ratify the Board of Director's appointment of Coopers &
Lybrand L.L.P. as the independent accountants of the Company for the
year ending December 31, 1997.
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on April 7, 1997 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you are
planning to attend the meeting, you are urged to complete, date and sign the
enclosed proxy card and return it promptly. The giving of such proxy does not
preclude you from voting in person if you attend the meeting.
By Order of the Board of Directors
By: /s/ Stig Wennerstrom
------------------------
Stig Wennerstrom
President
Miami, Florida
April 21, 1997
YOUR VOTE IS IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. NO
ADDITIONAL POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE> 3
April 21, 1997
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1997
___________
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Forcenergy Inc (the
"Company") for use at the 1997 Annual Meeting of Stockholders of the Company to
be held on Thursday, May 15, 1997, and at any adjournment thereof (the "Annual
Meeting"). This Proxy Statement and the enclosed form of proxy will first be
sent to stockholders on or about April 22, 1997.
The cost of soliciting proxies will be borne by the Company.
Solicitations of proxies are being made by the Company through the mail and may
also be made in person or by telephone. Employees and Directors of the Company
may be utilized in connection with such solicitation and will not receive any
compensation therefor. The Company will also request brokers and nominees to
forward soliciting materials to the beneficial owners of the Common Stock held
of record by such persons and will reimburse them for their reasonable
forwarding expenses.
PROXIES
The shares represented by any proxy in the enclosed form, if such proxy is
properly executed and is received by the Company prior to or at the Annual
Meeting, will be voted in accordance with the directions made thereon. Proxies
on which no direction has been made by the stockholder will be voted (i) FOR
the election to the Board of Directors of the nominees named herein, (ii) FOR
the proposed adoption of the 1997 Stock Price Performance Incentive Plan for
Employees of the Company, (iii) FOR the proposal to consolidate the Company's
Stock Option Plans into the Plan adopted in 1995 (the "1995 Plan"), to amend
the 1995 Plan and increase the number of shares covered by the 1995 Plan, and
(iv) FOR the ratification of the appointment of Coopers & Lybrand L.L.P. as
independent accountants of the Company for the year ending December 31, 1997.
Any stockholder giving a proxy has the power to revoke it at any time before it
is voted, either in person at the Annual Meeting or by written notice to the
President of the Company or by delivery of a later-dated proxy.
VOTING SECURITIES
Stockholders of record at the close of business on April 7, 1997 are
entitled to notice of and to vote at the Annual Meeting. As of April 7, 1997,
the issued and outstanding voting securities of the Company consisted of
22,667,749 shares of common stock, par value $0.01 per share (the "Common
Stock"), each of which is entitled to one vote.
QUORUM AND VOTING
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum. No matters are expected
to come before the Annual Meeting other than those referred to in this Proxy
Statement. If any other matter should properly come before the Annual Meeting,
the persons named in the accompanying proxy intend to vote such proxies in
accordance with their best business judgment.
Shares of Common Stock represented by a properly dated, signed and
returned proxy will be counted as present at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting
a vote or abstaining. Directors will be elected by a plurality of the votes
cast at the Annual Meeting. All matters other than election of Directors
scheduled to come before the Annual Meeting require the approval of a
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majority of the votes cast at the Annual Meeting. Therefore, abstentions and
broker non-votes will have no effect on the outcome of the vote on any of the
proposals presented.
BOARD OF DIRECTORS
The Certificate of Incorporation of the Company provides for all Directors
to be elected at the Annual Meeting and to serve until the next annual meeting
of stockholders. Members of the Board of Directors are elected each year for
annual terms at the Company's annual meeting and serve until their successors
are duly elected and qualified or their earlier resignation or removal.
Messrs. Eric Forss, Robert Issal, Stig Wennerstrom, Bruce L. Burnham and
William F. Wallace are currently Directors of the Company. Messrs. Arnold L.
Chavkin, Kevin S. Penn and Jeffrey A. Weber, formerly nominated to the Board
pursuant to a voting agreement among the Company, Forcenergy AB and holders of
the Company's 7% Exchangeable Subordinated Notes ("ESNs"), resigned in March
1997 following the retirement of the ESNs and termination of the voting
agreement in November 1996. Therefore, five Directors will be elected at the
Annual Meeting. Proxies cannot be voted for a greater number of persons than
the number of nominees named. The election of Directors requires the favorable
vote of the holders of a plurality of the shares of Common Stock present and
voting, in person or by proxy, at the Annual Meeting. Stockholders may not
cumulate their votes in the election of Directors. Unless authority to vote
for the election of Directors is withheld as to any or all nominees, all shares
represented by proxies will be voted for the election of the nominees listed.
If authority to vote for the election of Directors is withheld as to any but
not all of the nominees listed, all shares represented by such proxies will be
voted for the election of the nominees as to whom authority is not withheld.
If a nominee becomes unavailable for any reason before the election, the shares
represented by proxies will be voted for such person, if any, as may be
nominated by the Board of Directors. However, the Board of Directors has no
reason to believe that any nominee will be unavailable. The Board of Directors
may increase the size of the Board at any time during the year. Any vacancy
occurring between annual meetings may be filled by the Board of Directors at
any time during the year. A director elected to fill a vacancy shall hold
office until the next annual meeting of stockholders.
NOMINEES FOR ELECTION
The following table sets forth certain information with respect to each
nominee for election as a Director. The information as to age, principal
occupation and directorships held has been furnished by each such nominee.
<TABLE>
<CAPTION>
NAME (AGE) PRINCIPAL OCCUPATION DIRECTOR SINCE
- ----------------------- ------------------------------------- --------------
<S> <C> <C>
Stig Wennerstrom (54) President and CEO of Company 1993
Bruce L. Burnham (63) President, The Burnham Group 1996
Director & President of Forcenergy AB
Eric Forss (31) Chairman and President of Rejmyre 1994
Robert Issal (51) Belysning AB 1993
William F. Wallace (57) Advisory Member of The Beacon Group 1996
</TABLE>
Stig Wennerstrom has been President and Chief Executive Officer and a
Director of the Company since its inception in September 1993. From 1982
until the formation of the Company, Mr. Wennerstrom was the President and Chief
Executive Officer of the Company's predecessors.
Bruce L. Burnham has served as President of The Burnham Group, a
privately-held consulting and marketing firm formed by Mr. Burnham shortly
after retiring from Dayton's Department Stores in 1984. From 1981 to 1984, Mr.
Burnham served as Chairman and Chief Executive Officer of Dayton's Department
Stores in Minneapolis, Minnesota. From 1979 to 1980, Mr. Burnham was President
and Chief Executive Officer of Bonwit Teller in New York City. From 1978 to
1979, Mr. Burnham was President and Chief Operating Officer of Jordan Marsh.
He serves on the Board of Directors of Paxson Communications Corporation,
Financial Benefit Group, Inc. and J.B. Rudolph, Inc.
Eric Forss has been a Director of the Company since June 1994. Mr. Forss
has been President of Forcenergy AB, a Swedish public corporation ("FAB") and a
major stockholder of the Company ""since May 1991. Prior to
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serving as President of FAB, Mr. Forss was Vice President of FAB from May 1990
through April 1991. Mr. Forss has served on the Board of Directors of FAB
since May 1994.
Robert Issal has served as Chairman of the Board of Directors of the
Company since May 1994 and has been a Director since the Company's inception in
September 1993. Mr. Issal has also served as Chairman of FAB since May 1994
and served as Vice Chairman of FAB from April 1992 to April 1994. Mr. Issal
served as President and Chief Executive Officer of Forsheda AB, a Swedish
public company, from 1988 through 1991. From 1991 through 1994, Mr. Issal was
the Chairman and President of Abstracta Group. Since 1994, Mr. Issal has
served as Chairman and President of Rejmyre Belysning AB Sweden, a Swedish
lighting manufacturer.
William F. Wallace currently is an advisory member of The Beacon Group, a
private investment and advisory partnership. Prior to joining The Beacon Group
in early 1996, Mr. Wallace was Vice Chairman of Barrett Resources/Plains
Petroleum Company and President and Chief Operating Officer of Plains Petroleum
Company from 1994 to March 1996. Prior to joining Plains Petroleum Company in
1994, Mr. Wallace spent a combined total of 22 years with Texaco, Inc., the
last five of which he served as Regional Vice President.
COMMITTEES
The Company's Board of Directors has established Executive, Audit and
Compensation Committees. The Executive Committee consists of Messrs.
Wennerstrom, Forss and Issal. The Audit Committee consists of Messrs. Issal,
Burnham and Wallace, all of whom are currently non-employee Directors of the
Company. The Compensation Committee consists of Messrs. Issal and Burnham,
both of whom are non-employee Directors of the Company.
The Audit Committee in performing its functions meets with
representatives of the Company's independent accountants and with
representatives of senior management. The Audit Committee reviews the general
scope of audit coverages, the fees charged by the independent accountants,
matters relating to the Company's internal control systems, and other matters
related to the audit and financial functions. In addition to formal Audit
Committee meetings, detailed financial reviews are presented to the full board
at each quarterly board meeting.
The Compensation Committee administers the Company's stock option plans,
and in this capacity approves all option grants or awards to Company
employees, including executive officers, under such plans. In addition, the
Compensation Committee determines the compensation of the Company's Chief
Executive Officer and its other executive officers, and establishes policies
dealing with various compensation and employee benefit matters for the Company.
MEETINGS
During the year ended December 31, 1996, the Board of Directors held four
meetings, the Audit Committee held one meeting, the Compensation Committee
held five meetings and the Executive Committee held no meetings. During the
year ended December 31, 1996, Mr. Chavkin was the only Director who attended
less than 75% of the aggregate number of meetings of the Board of Directors and
the committees on which such Directors served. Mr. Chavkin attended two of the
four board meetings.
COMPENSATION ARRANGEMENTS FOR MEMBERS OF THE BOARD OF DIRECTORS
The Company increased the fees it pays Directors in November 1996 to make
total director compensation competitive with levels offered by comparable
companies. The previous fees per Director were $5,000 per year and $1,250 per
meeting attended, limited to $10,000 per year; the new fees per Director are
$10,000 per year and $3,000 per meeting attended, limited to $25,000 per year.
These fees are not paid to Directors that are employees of the Company. The
Company also compensates Directors through stock option grants. These grants
have been made under the Company's 1995 Non-Employee Director Stock Option Plan
(the "Directors' Plan") and these option grants will continue on an annual
basis following the consolidation of the Director's Plan into the Forcenergy
Inc 1995 Stock Option Plan. See "- Proposal to Consolidate and Amend the
Company's Stock Option Plans."
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Each Director currently receives options to buy 5,000 shares of Common
Stock upon his or her initial appointment to the Board, vesting annually over
three years subject to such Director's continued service on the Board. Each
Director also receives an additional grant of options to buy 1,000 shares of
Common Stock at each annual meeting at which such Director is re-elected to the
Board; these options vest in six months. In addition, Directors have received
grants of additional options on a discretionary basis and may receive
additional discretionary grants in the future. All of these options have been
granted with an exercise price equivalent to the fair market value of Common
Stock on the date of grant and expire 10 years after grant.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are Stig Wennerstrom, President and
Chief Executive Officer and those officers listed below. Biographical
information on Mr. Wennerstrom is included under the caption "Nominees for
Election".
Gary Carlson is Vice President - Exploration and Production (Alaska
Division) of the Company and has responsibility for all Alaskan operations.
Prior to joining the Company in March 1997, Mr. Carlson held various positions
during a tenure of 29 years with Unocal Corporation, most recently serving as
Unocal's General Manager for Health, Environmental and Safety Support from 1995
until joining the Company. Mr. Carlson also served as President and Managing
Director of Unocal Indonesia from 1992 to 1995 and as Managing Director for
Unocal Netherlands N.V. from 1989 to 1992.
Thomas F. Getten is Vice President, General Counsel and Secretary of the
Company. Prior to joining the Company in January 1997, Mr. Getten was in
private law practice in New Orleans, Louisiana. From May 1974 until December
1995, Mr. Getten was a partner and stockholder with Liskow & Lewis, and from
January 1996 until December 1996, Mr. Getten was a partner with Nesser, King &
LeBlanc.
E. Joseph Grady is Vice President, Treasurer and Chief Financial Officer
of the Company. From 1980 until joining the Company in October 1995, Mr. Grady
held various financial management positions within Southdown, Inc. and its
subsidiaries, including Pelto Oil Company from 1980 through 1989, serving as
Vice President-Finance in 1988 and 1989. Most recently Mr. Grady was Director
of Finance for Southdown Environmental Systems, Inc. from January 1991 until
joining the Company.
Gary W. Loveless is Vice President - Exploration and Production (Onshore
Division) of the Company. Mr. Loveless joined the Company in January 1997 upon
its acquisition of Great Western Resources Inc., where he served as President
and Chief Executive Officer. Prior to joining Great Western in 1986, Mr.
Loveless was founder and Chairman of L&B Oil Company, Inc.
Percy A. Payne is Vice President - Exploration and Production (Gulf of
Mexico Division) of the Company and has responsibility for all Gulf of Mexico
and Gulf Coast operations. Prior to joining the Company in August 1996, Mr.
Payne served as President of Payne Energy Associates, Inc., a privately held
consulting group formed by Mr. Payne in September 1994 serving the
international oil industry. Prior to establishing his consulting business, Mr.
Payne held various positions during a tenure of 27 years within Shell Oil
Company USA, most recently serving as Vice President of Pecten International,
Shell Oil Company USA's international subsidiary. Mr. Payne also served as
General Manager of Operations for the lower 48 states (less California) and
Alaska for Shell Western E&P from April 1986 to September 1991.
J. Russell Porter is Vice President - Corporate Development of the
Company. Mr. Porter joined the Company as Vice President - Financial Planning
and Analysis in April 1994 and served in that capacity until being appointed to
his current position in October 1995. From January 1992 until joining the
Company, Mr. Porter held the position of Vice President in the Natural
Resources Group of Internationale Nederlanden (U.S.) Capital Corporation in New
York. From July 1990 to December 1991, Mr. Porter was an Associate in the
Energy Group of Manufacturers Hanover and Chemical Bank.
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EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. The Compensation
Committee believes that its policies are reflected in the Company's executive
compensation program which aims to: (i) motivate executives toward effective
long-term management of Company operations; (ii) reward effective, efficient
ongoing management of Company operations; and (iii) provide the ability to
attract and retain executives through competitive salary levels and benefit
programs.
Executive Compensation. The Company's executive compensation program
includes, separately or through any combination, base salary, annual incentives
and various stock and stock option programs.
Base Salary and Annual Incentives. The Company's policy, as implemented
by the Compensation Committee, is to structure executive compensation to
reflect performance and to be competitive in the market. The Compensation
Committee considers the executive's individual performance and overall Company
performance, along with other relevant factors, in setting compensation,
including discretionary annual bonuses. In recognition of their contributions
to the Company's growth in reserves, earnings, revenue, cash flow and market
capitalization value in 1996, Messrs. Porter and Grady were granted
performance-related bonuses in February 1997 of $125,000 and $75,000,
respectively. The Compensation Committee considers the scope of each
executive's responsibilities in selecting the performance measures to apply to
that executive's compensation, and does not apply any specific weight to any
particular measure of performance.
Stock Options. The Company believes that stock options are important in
motivating executives to increase long-term shareholder value because options
focus executive attention on stock price as a measure of performance, thereby
aligning the executive's financial interests with those of the Company's
stockholders. Accordingly, prior to the Company's Initial Public Offering in
1995, the Company adopted, with stockholder approval, the Forcenergy Gas
Exploration, Inc. 1995 Stock Option Plan (see "1995 Stock Option Plan") to
supplement a similar Plan adopted in 1993. The Compensation Committee
administers the 1995 Stock Option Plan and grants options to executives and
employees based on the performance of the employee and the Company and other
relevant factors. Since the options vest over a number of years, they enhance
the Company's ability to retain option holders and motivate them to take a
long-term view of the Company's interests in their decisions. As an additional
measure to enhance the Company-wide focus on increasing value for stockholders,
the Company is seeking stockholder approval for, the 1997 Stock Price
Performance Incentive Plan for Employees of Forcenergy Inc (the "$60 a Share
Plan"), under which all employees, including the executive officers, will
participate. See "- Proposal to Adopt the 1997 Stock Price Performance
Incentive Plan for Employees of the Company."
Messrs. Wennerstrom, Grady, Payne and Porter were granted options, at
various times during 1996, under the 1995 Stock Option Plan to purchase shares
of Common Stock, based primarily on the efforts and performance of those
officers in accomplishing Company growth.
Chief Executive Officer Compensation. Mr. Wennerstrom entered into an
employment agreement with the Company as President and Chief Executive Officer
for an initial term of three years effective September 14, 1993 (See
"Employment Agreement of Chief Executive Officer)". This employment agreement
was amended in May 1995 in connection with the Initial Public Offering and in
recognition of the Company's rapid growth and financial performance. In
addition to the stock option grants and other elements of compensation required
by his employment agreement, the Compensation Committee awarded Mr. Wennerstrom
a $350,000 performance-related bonus in February 1997. This bonus recognized
Mr. Wennerstrom's performance in increasing the Company's reserves, earnings,
revenues, cash flow and market capitalization in 1996.
COMPENSATION COMMITTEE
Robert Issal
Chairman
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SUMMARY COMPENSATION TABLE
The following table sets forth information concerning cash and non-cash
compensation paid or accrued for services in all capacities for the Company
during the three years ended December 31, 1996 for each of the six most highly
compensated executive officers of the Company ("Named Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1) LONG TERM ALL OTHER
NAME, POSITION & AGE YEAR SALARY BONUS COMPENSATION COMPENSATION
- ----------------------------- ---- -------- -------- ------------ ------------
SECURITIES UNDERLYING
STOCK OPTIONS
(NUMBER OF SHARES)
------------------
<S> <C> <C> <C> <C> <C>
Stig Wennerstrom (54) 1996 $533,333 $500,000 334,839 $91,344(2)
President and Chief Executive 1995 600,000 - 492,943 73,683(2)
Officer 1994 350,000 250,000 - 73,393(2)
John A. Brush (42) 1996 138,200 - - 1,484(3)
Vice President-Land and 1995 130,800 - 123,337 1,080(3)
Marketing, General Counsel, 1994 111,667 - - 1,665(3)
Secretary (4)
E. Joseph Grady (44) 1996 203,333 75,000 120,000 1,979(3)
Vice President, Treasurer and 1995 34,846 - 75,000 -
Chief Financial Officer (5)
Harry F. Hufft (46) 1996 186,633 - - 1,696(3)
Vice President-Exploration 1995 175,000 51,250 25,000 2,310(3)
and Production (6) 1994 175,000 42,500 - 2,185(3)
Percy A. Payne (55) 1996 89,231 - 125,000 250(3)
Vice President-Exploration
and Production (7)
J. Russell Porter (35) 1996 225,300 125,000 75,000 1,692(3)
Vice President-Corporate 1995 194,800 50,000 75,000 2,310(3)
Development (8) 1994 130,385 50,000 98,337 -
</TABLE>
(1) Amounts exclude perquisites and other personal benefits because such
compensation did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus reported for each executive officer, except for
Mr. Wennerstrom where such amounts have been reflected in All Other
Compensation.
(2) Includes $71,373 in annual premiums paid by the Company for life
insurance policies on the life of, and payable to a beneficiary selected
by, Mr. Wennerstrom for the years 1994 through 1996. Also includes
employer matching contributions of $2,375, $2,310 and $2,020 under the
Company's 401(k) Plan for 1996, 1995 and 1994, respectively and $17,596
for other non-cash benefits received in 1996.
(3) Employer matching contributions under the Company's 401(k) Plan.
(4) Mr. Brush resigned from the Company on January 4, 1997.
(5) Mr. Grady joined the Company in his current position in October 1995.
(6) Mr. Hufft resigned from the Company effective August 19, 1996.
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(7) Mr. Payne joined the Company in his current position in August 1996.
(8) Mr. Porter joined the Company in April 1994 as Vice President - Financial
Planning and Analysis and was promoted to his current position in November
1995.
EMPLOYMENT AGREEMENT OF CERTAIN EXECUTIVE OFFICERS
Chief Executive Officer. In connection with the formation of the Company,
Mr. Wennerstrom and the Company entered into an employment agreement effective
as of September 14, 1993, and amended as of May 18, 1995 (the "Employment
Agreement") pursuant to which Mr. Wennerstrom serves as President and Chief
Executive Officer of the Company.
Mr. Wennerstrom received a salary in 1996 of $533,333 and will receive
$566,667 in 1997 and $600,000 in 1998, which amount will then be subject to
annual cost of living increases thereafter. In addition, Mr. Wennerstrom
received in 1996, and is entitled to receive for years thereafter, a yearly
bonus of $150,000, payable with his salary, provided that the Company may
require him to return this bonus, or a portion thereof, for any year in which
the Company fails to attain pre-determined cash flow targets. In recognition
of individual and Company performance in 1996, Mr. Wennerstrom received an
additional $350,000 bonus in February 1997 (See "Executive Compensation-Chief
Executive Officer Compensation"). The Employment Agreement also provides that
the Company will maintain certain life insurance policies on the life of Mr.
Wennerstrom, payable to a beneficiary selected by Mr. Wennerstrom. The initial
term of the Employment Agreement extends to December 31, 1998 and thereafter
is automatically extended for "rolling" three-year periods that can be
terminated upon 36 months' prior notice; provided that after January 1, 2002
the term can be ended upon 12 months' prior notice.
The Employment Agreement is subject to early termination by the Company
for cause or upon the death or incapacity of Mr. Wennerstrom. The Employment
Agreement is subject to early termination by Mr. Wennerstrom for cause. If the
Employment Agreement is terminated without cause by the Company or with cause
(including certain changes in control of the Company) by Mr. Wennerstrom, the
Company is obligated to pay Mr. Wennerstrom a termination fee of three times
the amount of Mr. Wennerstrom's annual includible compensation.
Other. The Company entered into an Employment Agreement with J. Russell
Porter on July 1, 1996. This Agreement provides for: (i) an initial term of
one year, subject to renewal; (ii) a base salary of $250,000 a year, subject to
annual increases upon any renewals, and a discretionary bonus; (iii) salary
continuance payments for up to twelve months upon termination without cause
(which will cease upon attaining alternative employment) or upon a change in
control of the Company; and (iv) confidentiality and non-compete provisions
that are effective for a limited time following any termination of employment.
The Company entered into an Employment Agreement with E. Joseph Grady on
September 1, 1996. This Agreement provides for: (i) an initial term of
twenty-six months, subject to renewal; (ii) a base salary of $240,000 a year,
subject to annual increases upon any renewals, and a discretionary bonus; (iii)
salary continuance payments for the greater of the remaining term of the
Agreement or twelve months' from the date of termination without cause (which
will cease upon attaining alternative employment) or upon a change in control
of the Company; and (iv) confidentiality and non-compete provisions that are
effective for a limited time following any termination of employment.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company is subject to U.S. tax legislation enacted in 1993 that could
limit the deductibility of certain compensation payments to its executive
officers. The Company believes that any compensation realized in connection
with the exercise of stock options granted by the Company will continue to be
deductible as performance-based compensation. The Compensation Committee will
continue to evaluate the impact of this legislation.
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PROPOSAL TO ADOPT THE 1997 STOCK PRICE PERFORMANCE INCENTIVE PLAN FOR EMPLOYEES
OF THE COMPANY
Effective January 1, 1997, the Company has adopted, subject to the
approval of its stockholders at the Annual Meeting, the 1997 Stock Price
Performance Incentive Plan for Employees of Forcenergy Inc (the "$60 a Share
Plan" or "Plan"). All of the Company's employees are eligible to receive awards
of the Company's Common Stock under the Plan without being required to pay any
purchase price if (1) the closing price of the Company's Common Stock reaches
$60 a share before January 1, 2000, and (2) the employee remains employed by
the Company through the date that the shares are actually distributed under the
Plan. If the Common Stock reaches $60 per share on any date (the "$60 Price
Date") on or before December 31, 1999, then all employees would receive Common
Stock worth 500% of their annual base compensation, distributed in equal
installments on the first, second and third anniversaries of the $60 Price
Date, if they are still employed by the Company. For purposes of determining
the value of Common Stock to be distributed, the Common Stock will be valued at
its closing price on the $60 Price Date. The number of shares of Common Stock
issuable will not be affected by subsequent fluctuations in the stock price,
and will not be at all dependent upon the market price of Common Stock on the
dates that Common Stock is distributed to employees under the Plan.
The annual base pay which forms the basis for awards under the $60 a Share
Plan consists of base annual compensation paid in periodic installments, and
excludes any overtime or other elements of compensation. Each employee's base
annual pay as of January 1, 1997 will be used to calculate the value of the
stock the employee may receive under the Plan. The base annual pay for
employees first hired after January 1, 1997 will be their initial pay rate.
The Plan also provides for reduced compensation if the Common Stock does
not reach $60 a share during the plan period but does reach $50 a share (but
not $60) prior to December 31, 1999 (with December 31, 1999 representing the
"$50 Price Date"). In such case, all employees would receive Common Stock
worth 250% of their annual base compensation, distributed in equal installments
on December 31, 2000, 2001 and 2002. For purposes of determining the value of
the Common Stock to be distributed, the Common Stock will be valued at $50 a
share on the distribution dates.
Employees shall not have any rights to receive shares of Common Stock
under the $60 a Share Plan until the requirements of the Plan are met. If
employment terminates for any reason before the $60 Price Date or the $50 Price
Date, then the terminated employee shall receive no shares under the Plan. If
employment terminates after the $50 or $60 Price Date, then employees will only
receive the shares of Common Stock that are actually distributed before
employment terminates; provided, however, that in this case, if employment
terminates because of death or disability or if the Company has a Change in
Control (as defined in the Plan), then the shares distributable to such
employee under the Plan after such termination would be accelerated and issued
upon such termination. Since employees have no vested rights under the Plan,
the interest of participants in the Plan will not be transferable, except that
employees could designate that shares, when and if issued under the Plan, be
delivered for the benefit of their immediate families.
The Compensation Committee of the Company's Board of Directors will
administer the Plan. The Compensation Committee shall have discretion to
reduce the number of shares otherwise distributable under the Plan to employees
hired after January 1, 1997. This reduction would reflect the price of the
Common Stock at the time employment commenced and the period of time that the
employee worked until the $50 Price Date or $60 Price Date, as applicable. The
Compensation Committee shall also have the sole and exclusive right to
interpret and administer the Plan, including determining the employees eligible
to receive awards under the Plan, calculating the employees' annual base pay
and the number of shares of Common Stock issuable and reducing the number of
shares issuable to particular employees. The Compensation Committee may also
amend the Plan prior to the $50 Price Date or $60 Price Date in its sole
discretion, and may amend the Plan after the $50 Price Date or $60 Price Date
with the consent of any employees that are adversely affected by a proposed
change.
The Plan is intended to qualify under Section 162 (m) of the Internal
Revenue Code of 1986, as amended ("Code"), so that the Company may deduct the
value of the shares issuable under the Plan regardless of the amount thereof.
Therefore, changes to the Plan will require stockholder approval if they are
"material" for purposes of Section 162(m) of the Code. "Material" changes
would include an increase in the aggregate number of shares issuable under the
Plan or to a particular employee or a change in the eligibility criteria for
participation in the Plan.
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<PAGE> 11
The $60 a Share Plan does not provide for a maximum limitation on the
number of shares of Common Stock that may be awarded thereunder or to any
particular employee. However, based on the Company's payroll as of January 1,
1997, there would be an aggregate of approximately 499,000 shares of Common
Stock issuable under the Plan to existing employees if the $50 price target is
met, and approximately 832,000 shares issuable if the $60 price target is met
(based on a $60 a share value). The Plan also provides for awards of Common
Stock to employees joining the Company after January 1, 1997. The maximum value
of shares issuable to any one such employee is $3,500,000 (58,333 shares at the
$60 value); there is no limitation on the aggregate number of employees that
the Company may hire and thereby make eligible to participate in the Plan.
The foregoing description of the Company's proposed $60 a Share Plan is
intended only as a summary of its material terms. Shareholders who would like
more information are urged to review the plan, which is available from the
Company without charge by contacting Investor Relations by telephone at (305)
856-8500 or by mail addressed to the Company.
The Board of Directors recommends that stockholders vote "FOR" the $60 a
Share Plan.
1993 STOCK OPTION PLAN
In September 1993, the Company adopted the Forcenergy Gas Exploration,
Inc. 1993 Stock Option Plan for Officers and Key Employees (the "1993 Option
Plan" or "1993 Plan"). The 1993 Option Plan is intended, among other things,
to provide officers and key employees with incentives to further the growth,
development and financial success of the Company. The 1993 Option Plan
authorized the issuance of options to purchase up to 983,370 shares of Common
Stock, 551,879 of which were outstanding at December 31, 1996, subject to
various vesting requirements, at exercise prices ranging from $12.02 to $14.51
per share. Options to purchase up to 333,154 shares of Common Stock remained
available for grant under the 1993 Plan at December 31, 1996. Options granted
under the 1993 Option Plan include both incentive stock options within the
meaning of Section 422(b) of the Code and options that do not constitute
incentive stock options ("non-qualified stock options"). The exercise price of
each option cannot be initially granted at or repriced to a level less than the
fair market value of a share of the Common Stock on the date of grant or
repricing. The 1993 Option Plan provides for adjustment of the number of
shares and the exercise price (or type of shares in certain circumstances) upon
the occurrence of extraordinary transactions, mergers, consolidations,
dividends or distributions of Common Stock or rights thereto and certain other
dilutive and anti-dilutive events.
The 1993 Option Plan is administered by the Compensation Committee, each
member of which is a "disinterested person" as defined in Rule 16b-3 pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee administers and interprets the 1993 Option Plan in accordance with
its provisions and has the power to designate which employees receive options,
and the number, terms and conditions of such options.
1995 STOCK OPTION PLAN
In May 1995, the Company adopted the Forcenergy Gas Exploration, Inc. 1995
Stock Option Plan (the "1995 Option Plan" or "1995 Plan"). The 1995 Option
Plan is intended to provide officers and key employees with an opportunity to
acquire a proprietary interest in the Company and additional incentive and
reward opportunities based on the profitable growth of the Company and to aid
the Company in attracting and retaining outstanding personnel. The 1995 Option
Plan provides for the granting of options (either incentive stock options
within the meaning of Section 422(b) of the Code or non-qualified stock
options), restricted stock awards, stock appreciation rights, performance
awards, and phantom stock awards, or any combination thereof. The 1995 Option
Plan covers an aggregate of 1,016,630 shares of Common Stock (subject to
certain adjustments in the event of stock dividends, stock splits and certain
other events), all of which were outstanding at December 31, 1996, subject to
vesting requirements, at exercise prices ranging from $10.00 to $14.51 per
share. Additionally, option grants on another 942,409 shares were issued
during 1996 to new and existing employees at exercise prices ranging from
$10.50 to $32.00 per share. These grants were awarded on a contingent basis
pending stockholder approval of the proposal to amend the 1995 Option Plan
contained herein (See "- Proposal to Consolidate and Amend the Company's Stock
Option Plans"). See "Stock Option Grants in 1996" for a listing of options
granted to the Named Executive Officers during 1996. Under the Amended
Plan (as defined below), no more than 1,000,000 shares of Common Stock, subject
to adjustments, may be granted
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<PAGE> 12
under the 1995 Option Plan to any one employee in any one calendar year. The
limitation set forth in the preceding sentence will be applied in a manner which
permits compensation generated in connection with the exercise of options, stock
appreciation rights and, if determined by the Committee, restricted stock awards
to constitute "performance-based" compensation for purposes of Section 162(m) of
the Code.
The 1995 Option Plan is administered by the Compensation Committee. The
Compensation Committee has the power to determine which employees will receive
an award, the time or times when such awards will be made, the type of the
award and the number of shares of Common Stock to be issued under the award or
the value of the award. Only persons who at the time of the grant are
employees of the Company or of any subsidiary of the Company are eligible to
receive grants under the 1995 Option Plan.
NON-EMPLOYEE DIRECTOR PLAN
In May 1995, the Company adopted the 1995 Non-Employee Director Stock
Option Plan for the benefit of non-employee Directors. See "Board of Directors
- - Compensation Arrangements for Members of the Board of Directors".
PROPOSAL TO CONSOLIDATE AND AMEND THE COMPANY'S STOCK OPTION PLANS
The Company proposes to expand and streamline the Directors' Plan, 1993
Option Plan and 1995 Option Plan (collectively, the "Current Option Plans") and
their administration by increasing the number of shares covered by the Current
Option Plans, by consolidating the 1993 Plan and the Director's Plan into the
1995 Plan, and by adopting certain amendments to the 1995 Plan to permit
participants in the Directors' Plan to receive options under the 1995 Plan (the
1995 Plan, as amended, is called the "Amended Plan"). The Amended Plan will
expand the Current Option Plans to allow for the grant of options to purchase
an aggregate of up to 4,000,000 shares of Common Stock, as compared to the
2,150,000 shares covered by the Current Option Plans. As a result of the
consolidation of the Current Option Plans, the 1993 Plan and Directors' Plan
would be closed to further option grants. All future awards would be granted
under and governed by the terms and conditions of the Amended Plan. All
previous awards would be governed by the terms and conditions of the relevant
plan and option agreement previously entered into. Except as otherwise noted
in the following description of the Amended Plan, the terms and conditions of
the Amended Plan are substantially the same as those of the Current Option
Plans (when considered together as if they were one plan).
If the Amended Plan is not approved by the stockholders of the Company at
the Annual Meeting, then no further awards will be granted under the 1993 Plan,
the 1995 Plan or the Amended Plan, and all options awarded under the Current
Option Plans from and after January 16, 1997 will be null and void.
Description of Amended Plan
The Amended Plan will be administered by the Compensation Committee, which
will be composed of at least two Directors who are "outside directors" within
the meaning of Section 162(m) of the Code and "Non-employee directors" within
the meaning of Rule 16b-3 of the "Exchange Act". The 1993 Plan and 1995 Plan
were administered by the Compensation Committee, and the Directors' Plan by the
full Board of Directors.
The Amended Plan will permit awards covering up to an aggregate of
4,000,000 shares of Common Stock. As of April 7, 1997, 4,000,000 shares of
Common Stock had an aggregate market value of approximately $117 million. The
Current Option Plans together permit awards covering up to an aggregate of
2,150,000 shares of Common Stock. As of April 7, 1997, 2,150,000 shares of
Common Stock have an aggregate market value of approximately $63 million. The
number of, and in some cases, types of, shares covered by the Amended Plan are
subject to adjustments in the event of stock dividends, stock splits and
certain other events.
All employees and non-employee directors of the Company, presently
approximately 210 people, will be eligible to participate in the Amended Plan.
The Committee will have the power to determine which employees receive awards
under the Amended Plan and the terms of each award.
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<PAGE> 13
The Amended Plan provides for the grant of stock options which are either
incentive stock options or non-qualified stock options. The Committee will
determine the employees that receive options and the terms of each option,
including the exercise price and vesting schedule. The Amended Plan does not
limit the Committee's discretion to set the exercise price of options. The
Current Option Plans require that the exercise price of options shall not be
less than fair market value on the date of grant. No more than 1,000,000
shares of Common Stock, subject to adjustments, may be subject to awards to any
one employee in any one calendar year under the Amended Plan. This limitation
will be applied so that compensation realized from certain awards under the
Amended Plan will qualify as "performance based" compensation for purposes of
Section 162(m) of the Code.
The Amended Plan will no longer provide for automatic, formula based
option grants to non-employee Directors, however, the Compensation Committee
may grant discretionary options to non-employee directors, and it is
anticipated that such options may be granted upon initial appointment to the
Board and at annual or more frequent intervals, in the Committee's discretion.
Incentive stock options granted under the Amended Plan cannot be exercisable at
less than the fair market value of Common Stock on the date of grant (subject
to adjustments), nor for more than 10 years after grant; provided that options
granted to a holder of securities representing more than 10% of the total
combined voting power of all classes of the Company's stock or of its
subsidiary cannot be exercisable at less than 110% of the fair market value of
Common Stock at the date of grant (subject to adjustments) or for longer than 5
years from grant. The Compensation Committee can determine how the exercise
price of options will be paid.
The Amended Plan provides that the Compensation Committee may award
incentives other than options to acquire Common Stock, including Restricted
Stock Awards, Stock Appreciation Rights, Performance Awards and Phantom Stock
Awards. The 1995 Plan currently provides for awards of these types, although
none have been awarded to date. The 1993 Plan and the Directors' Plan provide
only for awards of options to acquire Common Stock.
A restricted stock award would entitle an employee to buy Common Stock for
nominal or no purchase price. The shares would, however, remain in the
Company's custody and could not be transferred in any way until the expiration
of the restrictions that the Compensation Committee establishes when awarding
the restricted shares. These restrictions could range from continued employment
for a given period of time to the achievement of certain financial or other
goals by the Company or the employee. The employee could be able to vote the
restricted shares, but any dividends or distributions on the shares would be
retained until the restrictions lapse.
A stock appreciation right will permit the holder of the right to receive
an amount of cash, Common Stock, or a combination thereof, equal to the number
of stock appreciation rights exercised by the holder, multiplied by the excess
of the fair market value of Common Stock on the exercise date over the stock
appreciation right's exercise price. A stock appreciation right may be
exercised in whole or in such installments and at such times as determined by
the Compensation Committee.
Performance and phantom stock awards can be paid in cash or Common Stock
or any combination of both. The Compensation Committee will determine the
maximum value of each performance award and the performance criteria that must
be achieved to receive that value. Phantom stock awards are rights to receive
cash, Common Stock or any combination of both, measured by the appreciation in
the value of the Common Stock over a given period. Phantom stock awards will
vest over the period of time the Committee determines, or upon the occurrence
of specified events, and will not generally require the employee to pay any
money or satisfy any performance criteria. Restricted and phantom stock awards
will generally be forfeited or expire upon any termination of employment, or
the occurrence or non-occurrence of the relevant event the Compensation
Committee specifies at the time of grant. The Compensation Committee will
consider many factors in granting these awards, including the employee's
responsibilities, performance, potential, and any other considerations it deems
relevant. The Company may make payment for a performance or phantom stock award
in one lump sum or in installments, and any payment made in Common Stock will
be based on the fair market value thereof at the time it is issued.
The Compensation Committee will have the authority, in its discretion, to
amend the Amended Plan, unless approval of the Company's stockholders is
required for the Amended Plan to meet the stockholder approval requirements of
Sections 422 and 162(m) of the Code. Therefore, the Company's stockholders
would need to approve any amendment that is "material" for purposes of Section
162(m) or required by Section 422, including any amendment
-12-
<PAGE> 14
(a) increasing the number of shares available in the aggregate for awards, (b)
increasing the number of shares that may be granted to an employee, or (c)
changing eligibility requirements for participation in the Amended Plan.
The limitations on the Compensation Committee's ability to amend the
Amended Plan described in the preceding paragraph are not markedly different
from those in the Current Option Plans. The 1995 Plan and 1993 Plan may be
amended by the Committee, and the Director Plan may be amended by the Company's
Board of Directors. The Current Option Plans expressly state the material
amendments which require the approval of the Company's stockholders. For
example, the 1995 Plan requires the approval of the Company's stockholders for
any amendment that would increase the number of shares under the plan, change
the 1995 Plan's option pricing mechanism, change the class of employees
eligible to receive plan awards, materially increase plan benefits, extend the
period during which awards may be granted under the plan, modify eligibility
requirements for participation in the plan or decrease the authority that may
be exercised by the committee administering the plan.
There are 1,568,509 options outstanding under the Current Option Plans, at
exercise prices ranging from $10.00 to $14.51. Subject to the approval of
stockholders at the Annual Meeting, options for an additional 1,110,572 shares
have been granted under the Amended Plan through April 7, 1997, at exercise
prices ranging from $10.50 to $36.25. See Stock Option Grants in 1996. No
grants of Restricted Stock Awards, Stock Appreciation Rights, Performance
Awards or Phantom Stock Awards have been made under the Current Option Plans or
Amended Plan.
The foregoing descriptions of the Company's stock option and incentive
plans and the proposed amendment to the 1995 Plan are intended only as
summaries of their material terms. Shareholders who would like more
information are urged to review the plans and proposed amendment, which are
available from the Company without charge by contacting Investor Relations by
telephone at (305) 856-8500 or by mail addressed to the Company.
The Board of Directors recommends that stockholders vote "FOR" the Amended
Plan.
Certain Federal Income Tax Information Regarding Option Awards
The Federal income tax consequences to an employee who receives incentive
stock options generally will, under current law, be as follows:
An employee will not realize any income upon the grant or exercise of an
incentive stock option. If the employee disposes of the shares of Common Stock
acquired upon the exercise of an incentive stock option more than two years
after the date the option is granted and more than one year after the Common
Stock is transferred to him or her upon exercise of the option, the employee
will realize long-term capital gain in an amount equal to the excess, if any,
of his or her selling price for the shares over the option exercise price. In
such case, the Company will not be entitled to any tax deduction resulting from
the issuance or sale of the shares. If the employee disposes of the shares of
Common Stock acquired upon the exercise of an incentive stock option prior to
the expiration of two years from the date the option is granted, or one year
from the date the Common Stock is transferred to him or her upon exercise of
the option, any gain realized will be taxable at such time as follows (a) as
ordinary income to the extent of the difference between the option exercise
price and the lesser of the fair market value of the shares on the date the
option was exercised or the amount realized from such disposition, and (b) as
capital gain to the extent of any excess, which gain will be treated as
short-term or long-term capital gain depending upon the holding period of the
Common Stock. In such case, the Company may claim an income tax deduction (as
compensation) for the amount taxable to the employee as ordinary income.
In general, the difference between the fair market value of the Common
Stock at the time the incentive stock option is exercised and the option
exercise price will constitute an item of adjustment, for purposes of
determining alternative minimum taxable income, and under certain circumstances
may be subject, in the year in which the option is exercised, to the
alternative minimum tax.
If an employee uses shares of Common Stock which he or she owns to pay, in
whole or in part, the exercise price for shares acquired pursuant to an
incentive stock option, (a) the holding period for the newly issued shares of
Common Stock equal in value to the old shares which were surrendered upon the
exercise shall include the period
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<PAGE> 15
during which the old shares were held, (b) the employee's basis in such newly
issued shares will be the same as his or her basis in the old shares
surrendered, and (c) no gain or loss will be recognized by the employee on the
old shares surrendered. However, if any employee uses shares previously
acquired pursuant to the exercise of an incentive stock option to pay all or
part of the exercise price under an incentive stock option, such tender will
constitute a disposition of such previously acquired shares for purposes of the
one-year (or two-year) holding period requirement applicable to such incentive
stock option, and such tender may be treated as a taxable exchange.
The Federal income tax consequences to an individual who receives
non-qualified stock options generally will, under current law, be as follows:
An individual will not realize any income at the time the option is
granted. Generally, an individual will realize ordinary income, at the time
the option is exercised, in a total amount equal to the excess of the then fair
market value of the Common Stock acquired over the exercise price. However, if
a director, officer or principal stockholder (i.e., an owner of more than 10
percent of the outstanding shares of Common Stock) receives shares pursuant to
the exercise of a non-qualified stock option, he or she is generally not
required to recognize any income until the date on which such shares can be
sold at a profit without liability under Section 16(b) of the Exchange Act. At
such time, the director, officer or principal stockholder will realize income
equal to the amount by which the then fair market value of the shares acquired
pursuant to the exercise of such option exceeds the price paid for such shares.
Alternatively, a director, officer or principal stockholder who would not
otherwise be taxed at the time that the shares are transferred may file a
written election within 30 days with the Internal Revenue Service, to be taxed
as of the date of transfer on the difference between the then fair market value
of the shares and the price paid for such shares.
All income realized upon the exercise of a non-qualified stock option will
be taxed as ordinary income. Subject to the limitations of Section 162(m), the
Company will be entitled to a tax deduction (as compensation) for the amount
taxable to an individual (including a Director, officer and principal
stockholder) upon the exercise of a non-qualified stock option, as described
above, in the same year as those amounts are taxable to the employee.
Shares of Common Stock issued pursuant to the exercise of a non-qualified
stock option generally will constitute a capital asset in the hands of an
individual (including a director, officer or principal stockholder) and will be
eligible for capital gain or loss treatment upon any subsequent disposition.
The holding period of an individual (including a director, officer or principal
stockholder) will commence upon the date he or she recognizes income with
respect to the issuance of such shares, as described above. The individual's
basis in the shares will be equal to the greater of their fair market value as
of that date or the amount paid for such shares. If, however, an individual
uses shares of Common Stock which he or she owns to pay, in whole or in part,
the exercise price for shares acquired pursuant to the exercise of a
non-qualified stock option, (a) the holding period for the newly issued shares
of Common Stock equal in value to the old shares which were surrendered upon
the exercise shall include the period during which the old shares were held,
(b) the individual's basis in such newly issued shares will be the same as his
or her basis in the surrendered shares, (c) no gain or loss will be realized by
the individual on the old shares surrendered, and (d) the individual will
realize ordinary income in an amount equal to the fair market value of the
additional number of shares received over and above the number of old shares
surrendered.
Section 162(m) of the Code provides that the deduction by a publicly-held
corporation for compensation paid in a taxable year to the chief executive
officer and the four other most highly compensated executive officers of the
corporation is limited to $1 million per year per officer. For purposes of
Section 162(m), compensation which is performance-based is not counted as
subject to the deductibility limitation. Income pursuant to an option or stock
appreciation right granted under the Amended Plan will be exempt from the
limitations of Section 162(m) of the Code if the committee granting such option
or stock appreciation right consists solely of two or more "outside directors"
as defined in Section 162(m) of the Code and if the exercise price under such
option or stock appreciation right is at least equal to the fair market value
of the shares subject to the option or stock appreciation right on the date of
grant. However, Section 162(m) of the Code could limit the Company's deduction
with respect to compensation income generated in connection with the exercise
of an option or stock appreciation right granted by such a committee if the
exercise price is less than the fair market value of the shares on the date of
grant. No restricted stock award, performance award or phantom stock award
under the Amended Plan will qualify as performance-based compensation
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<PAGE> 16
and, therefore, the Company's compensation expense deductions relating to such
awards will be subject to the Code Section 162(m) deduction limitation.
The foregoing summary with respect to Federal income taxation does not
purport to be complete, and reference is made to the applicable provisions of
the Code for a complete description of the matters summarized.
401(K) PLAN
The Company has adopted a 401(k) Profit Sharing Plan (the "401(k) Plan")
for its employees. Under the 401(k) Plan, eligible employees are permitted to
defer receipt of up to 15% of their cash compensation (subject to certain
limitations imposed under the Code). The 401(k) Plan provides that a
discretionary match of employee deferrals may be made by the Company in cash.
Pursuant to the 401(k) Plan, the Company has currently elected to match $.50
for each $1.00 contributed by the employee through salary deferral, said
deferral not to exceed 5% of an employee's salary, subject to limitations
imposed by the Internal Revenue Service. The amounts held under the 401(k)
Plan are invested among various investment funds maintained under the 401(k)
Plan in accordance with the directions of each participant. Salary deferral
contributions under the 401(k) Plan are 100% vested. Matching contributions
vest immediately upon a participants attainment of a minimum of one year of
service with the Company. Participants or their beneficiaries are entitled to
payment of vested benefits upon termination of employment.
EMPLOYEE STOCK PURCHASE PLAN
The Company has adopted the Forcenergy Gas Exploration, Inc. Employee
Stock Purchase Plan (the "Stock Purchase Plan"), which permits all Company
employees (other than the Chief Executive Officer) who work full time (or part
time for at least 20 hours per week and more than five months per year) to
acquire Common Stock at a discount from its fair market value through payroll
deductions. Up to 100,000 shares of Common Stock have been authorized for
purchase under the Stock Purchase Plan.
For each six-month period beginning on January 1 or July 1 during the term
of the Stock Purchase Plan, unless the Board determines otherwise, the Company
will offer to each eligible employee the opportunity to purchase Common Stock.
Employees may elect to participate prior to the start of a period and may elect
to have from two to ten percent of their compensation withheld. The Stock
Purchase Plan allows withdrawals, termination and changes in the level of
participation. The purchase price will be 85% of the lesser of the fair market
value of Common Stock on (i) the first day of the period or (ii) the last day
of the period. No employee may purchase Common Stock under the Stock Purchase
Plan valued at more than $25,000 (or such other maximum as may be prescribed
from time to time under the Code) for each calendar year in accordance with the
provisions of the Code.
Employees have purchased 25,674 shares under the Stock Purchase Plan as of
December 31, 1996.
STOCK OPTION GRANTS IN 1996
OPTION GRANTS TO NAMED OFFICERS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM (1)
OPTIONS FISCAL PRICE PER EXPIRATION ---------------
GRANTED YEAR SHARE DATE 5% 10%
------- ---- ----- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Stig Wennerstrom 224,329(2) 20.95 $10.500 2006 $1,481,333 $3,753,988
110,000(4) 10.27 26.875 2006 1,859,170 4,711,501
E. Joseph Grady 25,000(3) 2.33 14.125 2006 222,078 562,790
75,000(3) 7.00 20.875 2006 984,613 2,495,203
20,000(4) 1.87 26.875 2006 338,031 856,637
Percy A. Payne 125,000(3) 11.67 20.375 2006 1,601,716 4,059,063
10,000(4) 0.93 26.875 2006 169,015 428,318
J. Russell Porter 50,000(3) 4.67 14.125 2006 444,157 1,125,581
25,000(4) 2.33 26.875 2006 422,539 1,070,796
</TABLE>
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<PAGE> 17
________
(1) Potential realizable value was reported net of the option exercise price,
but before taxes, associated with the exercise. These amounts represent
the theoretical realizable value, on the option expiration date, assuming
that the stock price appreciates annually at the rates shown from the date
of grant through expiration. Actual values realized, if any, on stock
option exercises are dependent on the future performance of the Common
Stock and the officer's continued employment throughout the vesting
period. Accordingly, the amounts reflected in this table may not
necessarily be achieved. All options granted to the Named Officers in
1996 reflected the market price of the common stock on the date of grant.
(2) Mr. Wennerstrom was granted options to purchase 224,329 shares of Common
Stock on January 16, 1996 under the 1995 Option Plan, all of which vested
on January 15, 1997.
(3) All options granted to each Named Officer were granted at various times
during the year under the 1995 Option Plan and vest 33.33% on each of the
third through fifth anniversaries of the date of grant.
(4) Options were granted to the Named Officer on November 1, 1996 under the
1995 Plan and such options vest one year from the date of grant.
Mr. Harry Hufft, a Named Officer prior to his resignation from the Company in
August 1996, exercised options on 98,337 shares in November 1996, and sold the
shares. The value realized by Mr. Hufft upon exercise was approximately $1.2
million. Those were the only options exercised by a Named Officer in 1996.
UNEXERCISED OPTIONS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF OPTIONS IN-THE-MONEY OPTIONS (1)
---------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stig Wennerstrom 796,222 435,422 $19,735,158 $9,257,072
John A. Brush (2) 65,558 57,779 1,425,231 1,366,358
E. Joseph Grady -- 195,000 -- 3,862,560
Percy A. Payne -- 135,000 -- 2,078,190
J. Russell Porter 56,217 192,120 1,262,971 4,304,256
</TABLE>
(1) Value based on the last trade on the NASDAQ National Market on December 31,
1996 ($36.25 per share), less the applicable exercise price of the outstanding
options.
(2) Mr. Brush resigned from the Company on January 4, 1997.
-16-
<PAGE> 18
STOCK PERFORMANCE GRAPH
The following graph compares total return of the Company's Common Stock
against the S&P 500 Index and a peer group index consisting of public
independent oil and gas companies.* The graph assumes that $100 was invested
on August 2, 1995 (the date of the closing of the Initial Public Offering) in
the Company's Common Stock, the S&P 500 Index and the peer group and that
dividends thereon were reinvested quarterly.
[GRAPH]
*The peer group consists of Flores & Rucks Inc., Hugoton Energy Inc., Louis
Dreyfus Natural Gas Company, Inc., Newfield Exploration Company, PetroCorp,
Inc. and Stone Energy Corp.
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<PAGE> 19
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table is furnished as of February 15, 1997 to indicate
beneficial ownership of shares of the Common Stock by persons owning more than
5% of the Common Stock and all Executive Officers and Directors individually
and the Executive Officers and Directors as a group. The information in the
following table is provided by such persons.
<TABLE>
<CAPTION>
COMMON VESTED PERCENT
STOCK(1) OPTIONS(2) TOTAL OF CLASS
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Forcenergy AB(3) 8,740,486 - 8,740,486 38.71%
FMR Corp. 3,052,900 - 3,052,900 13.52%
Chase Equity Associates(4) 504,130 99,421 603,551 2.66%
AC Israel Enterprises, Inc.(5) 68,913 9,342 78,255 *
Stig Wennerstrom(3) (6) 229,000 870,997 1,099,997 4.69%
Thomas F. Getten(3) 300 - 300 *
E. Joseph Grady(3) 609 - 609 *
Gary E. Loveless(3) 21,700 - 21,700 *
Percy A. Payne(3) - - -
J. Russell Porter(3)(7) 3,732 56,217 59,949 *
Bruce L. Burnham(3) 15,000 - 15,000 *
Arnold Chavkin(4) 504,130 99,421 603,551 2.66%
Eric Forss(3) 8,740,486 6,000 8,746,486 38.73%
Robert Issal(3) - 6,000 6,000 *
Kevin S. Penn(5) 68,913 15,342 84,255 *
William F. Wallace(3) 2,000 - 2,000 *
Jeffrey A. Weber(3) - 5,000 5,000 *
Directors and Officers, total
as a group 9,585,870 1,058,977 10,644,847 45.04%
</TABLE>
* Less than 1%
(1) Except as otherwise noted, each stockholder has sole voting and investment
power with respect to the shares beneficially owned.
(2) Represent shares of Common Stock issuable pursuant to stock option grants
that are vested or that will be vested within 60 days of the effective date of
this schedule.
(3) The address of Forcenergy AB and Messrs. Forss and Issal is Birger
Jarlsgatan, 73-75, Box 19040, S-10432 Stockholm, Sweden. The address of Messrs.
Wennerstrom, Brush, Getten, Grady, Loveless, Payne and Porter is 2730 SW 3rd
Avenue, Suite 800, Miami, Florida 33129. The address of Mr. Wallace is 30036
Snowbird Lane, Evergreen, Colorado 80439. The address of Mr. Burnham is 10
Haig Point Circle, Hilton Head, SC 29938. The address of Mr. Weber is 10 East
53rd Street, 32nd Floor, New York, New York 10022.
(4) Chase Equity Associates is a limited partnership, the general partner
of which is Chase Capital Partners, an affiliate of Chase Manhattan Bank. The
shares owned by Chase Equity Associates are included because of Mr. Chavkin's
position as General Partner of Chase Capital Partners. The address of Mr.
Chavkin and Chase Capital Partners is 380 Madison Avenue, 12th Floor New York,
New York 10017. Mr. Chavkin disclaims beneficial ownership of these shares
within the meaning of Rule 13d-3 under the Exchange Act.
(5) Of the shares indicated as owned by A.C. Israel Enterprises, Inc. and Mr.
Penn, 9,342 are issuable upon exercise of options and are included because of
Mr. Penn's affiliation with A.C. Israel Capital Co., Inc. a subsidiary of A.C.
Israel Enterprises, Inc. The address of A.C. Israel Capital Co., Inc. and Mr.
Penn is 65 East 55th Street,
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<PAGE> 20
32nd Floor, New York, New York 10022. The address of A.C. Israel Enterprises,
Inc. is 707 Westchester Avenue, White Plains, New York 10604.
(6) Of the shares listed as beneficially owned by Mr. Wennerstrom, 2,000 shares
are owned by each of his children, Linda Wennerstrom and Henrik Wennerstrom,
for which Mr. Wennerstrom disclaims beneficial ownership.
(7) Of the shares beneficially owned by Mr. Porter, 1,000 shares are owned by
his wife, Deborah A. Porter.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its principal offices in Miami, Florida from an
affiliate of the Forss family, who collectively own a majority voting interest
in FAB. The terms of the lease include current monthly payments of $23,612,
subject to a yearly escalation not to exceed 6%, and a term of five years,
expiring in November 1998. The Company made payments under such lease of
$280,000 in 1996. The Company believes that the lease terms are comparable to
those terms which could be obtained from an unaffiliated third party.
In May 1994, the Company issued 2,355,892 shares of Common Stock to FAB in
a private placement resulting in net proceeds of $31.8 million to the Company.
Also in May 1994, in connection with the sale of shares of Common Stock to FAB,
the Company received certain consents and waivers related to such sale from the
former holders of the ESNs (the "Note Holders") in exchange for granting the
Note Holders two-year options to purchase an aggregate of 317,629 shares of
Common Stock at an exercise price of $18.81 per share. In connection with
certain consents and waivers obtained from the Note Holders in connection with
the Initial Public Offering, the exercise price for such options was reduced to
$15.76 per share and the term of the options was extended to September 15,
2000.
In connection with Mr. Wennerstrom's currently outstanding stock options,
the Company has granted certain piggy back registration rights and a put option
on the value of all such options and the Common Stock acquired through the
exercise of such options, including the 1995 option grants.
The Company has a consulting arrangement with Wictor Forss, the former
Chairman of the Board of the Company and of FAB, whereby Mr. Forss receives
$10,000 per month in exchange for consulting services. The arrangement may be
terminated by either party upon 60 days notice. The Company believes that Mr.
Forss' prior years of service to the Company as a Director enable him to
provide business and financial advice to the Company at a reasonable cost. The
Company does not believe that it could obtain such services from any other
source.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's Directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission and the NASDAQ National Market. Specific
due dates for these reports have been established and the Company is required
to disclose in this proxy statement any failure to file by these dates. Mr.
Chavkin filed a late Form 4 for shares sold by Chase Equity Associates for
which he disclaims beneficial ownership. He also filed a late Form 5 for 1996
for options granted in 1996 pursuant to the Directors' Plan. Messrs. Burnham
and Wallace filed late Form 3s upon being elected to the Board of Directors in
May 1996. Messrs. Carlson, Getten and Payne filed late Form 3s subsequent to
joining the Company. All other required filings were satisfied on a timely
basis. In making these disclosures, the Company has relied solely on written
statements of its Directors, executive officers and stockholders and copies of
the reports that they have filed with the SEC. In 1997, the Company initiated
procedures to assist officers and Directors in meeting the filing requirements
of Section 16(a).
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The stockholders will be asked to ratify the appointment of Coopers &
Lybrand L.L.P. as independent accountants of the Company for the year ending
December 31, 1997. Such ratification will require the favorable vote
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<PAGE> 21
of the holders of a majority of the shares of Common Stock present and voting,
in person or by proxy, at the Annual Meeting. The Board of Directors
recommends that stockholders vote "FOR" ratification of the appointment.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting, will have the opportunity to make a statement, if they desire to do
so, and will be available to respond to appropriate questions.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
In order for stockholder proposals to be included in the Company's proxy
statement and proxy relating to the Company's 1998 Annual Meeting of
Stockholders, such proposals must be received by the Company at its principal
executive offices not later than December 31, 1997.
By Order of the Board of Directors
By: /s/ Stig Wennerstrom
------------------------
Stig Wennerstrom
President
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<PAGE> 22
APPENDIX A
1997 $60 A SHARE STOCK PERFORMANCE PLAN
FOR EMPLOYEES OF
FORCENERGY INC
1. PURPOSE. The purpose of this Stock Performance Plan is to advance the
interests of the Corporation by encouraging and enabling the acquisition of
a larger personal proprietary interest in the Corporation by Employees of the
Corporation, and by providing such Employees with incentives to put forth
maximum efforts for the success of the Corporation's business. It is anticipated
that the opportunity to acquire a proprietary interest in the Corporation will
strengthen the desire of such Employees to remain with the Corporation and work
on its behalf and will also enable the Corporation to attract additional
desirable personnel.
2. DEFINITIONS. When used in this Plan, unless the context otherwise
requires:
(a) "Base Pay" shall mean with respect to each Employee, the annual
base compensation payable by the Company to such Employee as of January 1, 1997,
and with respect to each New Employee, the annual base compensation payable by
the Company to such New Employee as of his or her initial date of hire by the
Company. In each case, Base Pay shall include the base annual compensation
payable in periodic installments (whether on a monthly or biweekly or other
basis, in accordance with the Company's applicable payroll practices) and shall
include bonus or other compensation only if it is payable with salary or base
pay in such regular periodic installments (and whether or not any such bonus or
other compensation is subject to forfeiture or return to the Company in any
circumstances), but base pay shall exclude annual, special or other bonus
compensation (other than that payable with salary as aforesaid), benefits,
overtime, expense reimbursements, or other amounts.
(b) "Board of Directors" shall mean the Board of Directors of the
Corporation as constituted at any time.
<PAGE> 23
(c) "Change in Control" shall mean the occurrence of any of the
following events: (i) the Corporation shall conduct a merger, consolidation or
similar reorganization and the Corporation (or a wholly owned subsidiary of the
Corporation) shall not be the surviving entity in such transaction (or the
Corporation shall survive only as a wholly-owned subsidiary of an entity other
than a previously wholly-owned subsidiary of the Corporation), unless the
Corporation's stockholders retain effective voting control of the surviving
entity and adequate provision is made for the assumption of this Plan by the
surviving entity, (ii) the Corporation sells, leases or exchanges all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Corporation), (iii) the Corporation is to be
dissolved and liquidated, (iv) any person or entity, including a "group" as
contemplated by Section 13(d)(3) of the Exchange Act (but excluding Forcenergy,
AB, Swedish corporation and presently a substantial stockholder of the
Corporation), acquires or gains ownership or control (including, without
limitation, power to vote) of more than twenty percent (20%) of the outstanding
shares of the Corporation's voting stock (based upon voting power), (v)
Forcenergy, AB shall, without prior approval by a resolution of the Board of
Directors, acquire voting securities of the Corporation so that its total voting
power in the Corporation shall increase by five percent (5%) or more, or (vi) as
a result of or in connection with a contested election of directors, the persons
who were directors of the Corporation before such election shall cease to
constitute a majority of the Board of Directors.
(d) "Closing Price" shall mean the closing price of one Share on the
principal exchange or market on which the Shares are traded.
(e) "Code" shall mean the Internal Revenue Code of 1986 as amended.
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<PAGE> 24
(f) "Committee" shall mean the Compensation Committee of the Board of
Directors, subject to the provisions of Section 3 hereof.
(g) "Corporation" or "Company" shall mean Forcenergy Inc, a Delaware
corporation.
(h) "Effective Date" shall mean January 1, 1997.
(i) "Employee" shall mean an employee of the Corporation. For all
purposes of this Plan other than the provisions of Section 5(a)(i) and (ii)
regarding the number of Performance Shares issuable to New Employees hereunder,
references to "Employees" in this Plan shall include New Employees.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "New Employees" shall mean an Employee whose first date of
employment by the Corporation is after the Effective Date of this Plan.
(l) "Plan" shall mean this 1997 Stock Performance Plan for Employees of
Forcenergy Inc, as it may be amended from time to time.
(m) "Share" shall mean a share of common stock, par value $.01 per
share, of the Corporation.
(n) "Performance Share" shall mean a Share issuable pursuant to the
Plan.
(o) "Subsidiary" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the Corporation
if each of the corporations (other than the last corporation in the unbroken
chain) owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain.
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<PAGE> 25
(p) "Target Date" shall have the meaning set forth in Section 5 (a)(i)
and (ii) hereof.
3. COMMITTEE. The Plan shall be administered by a Committee which shall
consist of at least two directors of the Corporation, each of whom shall be an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder and a "Non-Employee Director" within the
meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act. The
members of the Committee shall be selected by the Board of Directors. The
Committee can consist of the Compensation Committee of the Board of Directors as
comprised on the Effective Date. If a member of the Committee, for any reason,
shall cease to serve, the vacancy may be filled by the Board of Directors. Any
member of the Committee may be removed at any time, with or without cause, by
the Board of Directors. At all meetings of the Committee, a majority of the
members of the Committee at the time of such meeting shall be necessary to
constitute a quorum. Any act of a majority of the quorum present at a meeting
shall be the act of the Committee.
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<PAGE> 26
4. PARTICIPANTS. All Employees shall be eligible to receive Performance
Shares in accordance with the provisions of the Plan. Each Employee who becomes
entitled to receive Performance Shares shall be notified thereof in a letter
which shall incorporate the terms and provisions of the Plan.
5. TERMS AND CONDITIONS OF ISSUANCE OF SHARES.
(a) (i) If the Closing Price of a Share equals or exceeds $60 on any
date before January 1, 2000 (such date on which the Closing Price equals or
exceeds $60 being referred to herein as the "Target Date"), Employees shall be
entitled to receive Performance Shares as hereinafter provided. Each person who
is an Employee on the Effective Date and who is still an Employee on the Target
Date shall be entitled to receive Performance Shares having a "Value" (as
defined below) equal to 5 times the Employee's Base Pay. Each New Employee who
is still an Employee on the Target Date shall be entitled to receive Shares
having a Value equal to 5 times the New Employee's Base Pay provided, however,
that the Committee may provide for a pro rata portion and/or other reduction in
the number of Performance Shares otherwise issuable to the New Employee and
provided, further, that in no event shall the Value of the Performance Shares
issuable to such a New Employee exceed $3,500,000 (the "New Employee Maximum
Amount"). For purposes of all calculations pursuant to the formula under this
subparagraph (i), the "Value" of each Performance Share shall mean the Closing
Price of a Share on the Target Date.
(ii) If the Closing Price does not equal or exceed $60 on any date
prior to January 1, 2000, but does equal or exceed $50 on any date prior to
January 1, 2000, each Employee shall be entitled to receive Performance Shares
based on a Target Date of December 31, 1999. In such circumstances, each person
who was an Employee on the Effective Date and who is still an Employee on
December 31, 1999 shall be entitled to receive Performance Shares having a Value
(as defined below) equal to 2.5 times the Employee's Base Pay. Effective Date.
Each New Employee who is still an Employee on the Target Date shall be entitled
to receive Performance Shares having a Value equal to 2.5 times the
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<PAGE> 27
New Employee's Base Pay provided, however, that the Committee may provide for a
pro rata portion and/or other reduction in the number of Performance Shares
otherwise issuable to the New Employee and provided, further, that in no event
shall the Value of the Performance Shares issuable to such a New Employee exceed
the New Employee Maximum Amount. For purposes of all calculations pursuant to
the formula under this subparagraph (ii), the Value of each Performance Share
shall mean $50 per Share regardless of the actual Closing Price of a Share on
December 31, 1999. New Employees hired after the Closing Price has reached $50
can receive Performance Shares only under (a)(i), above, and not under this
Section (a)(ii).
(iii) Prior to the issuance of any Performance Shares, the
Committee shall certify in writing, to the extent required under Section 162(m)
of the Code and the regulations promulgated thereunder, that the $60 or $50
Closing Price target described in subparagraph (i) or (ii) above, respectively,
has been attained. If neither of the targets described in subparagraphs (i) and
(ii) above is attained, no Performance Shares shall be issued.
(b) The Employees shall not be required to pay any purchase price or
other consideration to the Company upon the issuance of Performance Shares under
the Plan. The par value of the Performance Shares ($.01 per share) shall be
deemed paid by the Employee to the Company in consideration of the Employee's
services to the Company prior to the Target Date, and the balance of the value
of the Performance Shares shall be deemed compensation for the Employee's
services to the Company after the Target Date and through the date the
Performance Shares are issued to the Employee.
(c) All Performance Shares shall be subject to the following
conditions:
(i) Any certificate representing Performance Shares shall bear a
legend making appropriate reference to any restrictions imposed under applicable
securities laws.
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<PAGE> 28
(ii) The Corporation has the right to obtain agreements from
certain of its stockholders agreeing not to dispose of Shares if such a
disposition would interfere with a bona fide underwritten public offering of the
Corporation's securities (a "Public Offering"). Therefore, each Employee
receiving Performance Shares hereby, at the request of the representative of the
underwriters conducting a Public Offering (the "Representative"), agrees that
the Employee will not, without the consent of the Representative, dispose of the
Performance Shares for a period not in excess of 90 days from the effective date
of the underwritten offering; provided, that such holdback agreement shall be no
more burdensome to the Employee than the similar agreements executed by the
other principal stockholders of the Corporation in connection with such Public
Offering. This provision is intended to be self-operative, so that it shall be
binding upon each Employee that receives or becomes entitled to receive
Performance Shares pursuant to this Plan; however, each Employee shall also be
bound to sign an agreement with the Representative containing these provisions
upon the Corporation's request. Each of the Employees shall, by acceptance of
Performance Shares, be deemed to have granted to the Company and its executive
officers an irrevocable power of attorney to execute, in the name and on behalf
of the Employees, any documents that are necessary or appropriate to effectuate
this provision of the Plan, including but not limited to a "holdback" or similar
agreement in favor of the Representative.
(d) One-third of the Performance Shares which each Employee may become
entitled to receive shall be issued on each of the first, second and third
anniversaries of the Target Date, provided that the Employee is still an
employee of the Corporation or a Subsidiary on each respective anniversary date.
At the time an Employee voluntarily or involuntarily terminates his employment
with the Corporation and all Subsidiaries, all rights to receive Performance
Shares which were not previously issued hereunder shall be forfeited and shall
terminate. No Employee shall have any vested or similar right to receive
Performance Shares unless and until such Performance Shares are issuable to him
or her in accordance with the provisions of this Plan. In the event of (a) the
death or permanent and total
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<PAGE> 29
disability of the Employee after the Target Date or (b) a Change in Control
after the Target Date, all Performance Shares not previously issued to the
Employee shall be issued to the Employee or the representative of his estate.
(e) The number of Performance Shares to be issued to an Employee shall
be the number determined pursuant to the applicable formula under subparagraph
(a)(i) or (ii) above, regardless of the Closing Price of a Share on the date on
which the Shares are issued, and shall be adjusted only as provided in Section
9. Notwithstanding the foregoing, no fractional Shares shall be issued pursuant
to the Plan and the number of Performance Shares issued to any Employee shall be
adjusted to the nearest whole number of Shares.
(f) No Employee shall have any rights or privileges of a stockholder of
the Corporation in respect of any Performance Shares (including but not limited
to the rights to vote or receive dividends) unless and until certificates
representing such Performance Shares shall have been issued by the Corporation
to such Employee.
6. TRANSFERABILITY OF RIGHTS. Rights to receive Performance Shares
shall not be transferable by any Employee otherwise than by will or the laws of
descent and distribution or as provided in this Section 6. Notwithstanding the
preceding, the Committee may, in its discretion, authorize a transfer of rights
to receive Performance Shares by an Employee to (i) the spouse, children or
grandchildren of the Employee ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members or (iii) a
corporation or partnership in which such Immediate Family Members are the only
shareholders or partners; provided, however, that (A) there may be no
consideration for any such transfer and (B) subsequent transfers of transferred
rights to receive Performance Shares shall be prohibited except by will or the
laws of descent and distribution. A transfer pursuant to this Section 6 may be
made before the Target Date. Following any transfer of rights to receive
Performance Shares, such rights shall continue to be subject to the same terms
and conditions of the Plan, including,
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<PAGE> 30
without limitation, attainment of one of the targets described in Sections
5(a)(i) and (ii) and satisfaction by the Employee of the requirements for
vesting under Section 5(d).
7. NO RIGHT OF EMPLOYMENT. Nothing in the Plan shall be construed to
confer upon any Employee the right to be continued in the employ of the
Corporation or any Subsidiary or derogate from any right of the Corporation and
any Subsidiary to retire, request the resignation of or discharge such Employee
(without or with pay), at any time, with or without cause.
8. TAX WITHHOLDING. The Corporation shall deduct and withhold such
amounts under any federal, state or local tax rules or regulations as it deems
appropriate with respect to the issuance of Shares from any cash or other
payments to be made to the Employee. In any event, the Employee shall make
available to the Corporation, promptly when required, sufficient funds to meet
the requirements of such withholding, and the Committee shall be entitled to
take and authorize such steps as it may deem advisable in order to have such
funds available to the Corporation when required.
9. ADJUSTMENT PROVISION. If, prior to a Target Date or the issuance of
all Performance Shares hereunder, there shall be declared and paid a stock
dividend upon the Shares or if the Shares shall be split up, converted,
exchanged, reclassified, or in any way substituted for, or the Corporation shall
merge, sell, or transfer its assets, or if any other similar event shall occur
that affects the Shares (an "Adjustment Event"), then (a) if the Adjustment
Event occurs before the Target Date, the $60 and $50 Closing Price targets shall
be proportionately adjusted, and (b) if the Adjustment Event occurs after a
Target Date and before the Performance Shares are issued, each Employee shall
receive, subject to the same vesting and forfeiture conditions as determined
pursuant to the provisions of Section 5(d), the same securities or other
property as are received by the holders of the Corporation's Shares pursuant to
such stock dividend, split-up, conversion, exchange, reclassification,
substitution, merger, asset sale or other similar event.
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<PAGE> 31
10. ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES ACT. The
Corporation may postpone the issuance and delivery of Performance Shares until
(a) the admission of such Shares to listing on any stock exchange on which
Shares of the Corporation of the same class are then listed and (b) the
completion of such registration or other qualification of such Shares under any
state or federal law, rule or regulation as the Corporation shall determine to
be necessary or advisable. As a condition precedent to the issuance of
Performance Shares pursuant to the Plan, the Corporation may require the
recipient thereof to execute any documents and perform any acts as may, in the
opinion of counsel for the Corporation, be appropriate to permit the Corporation
to issue the Shares in compliance with the provisions of applicable law and
regulations.
11. ADMINISTRATION AND AMENDMENT OF THE PLAN. Except as hereinafter
provided, the Committee may amend any provisions of the Plan prior to a Target
Date and, with the consent of any adversely affected Employee after a Target
Date, may withdraw or amend any provisions of the Plan, including but not
limited to the provisions relating to the terms and conditions of the issuance
of Performance Shares not previously issued. The Committee may also, in its sole
discretion, reduce the number of Performance Shares to which particular
Employees may become entitled. The Committee shall also have discretion to
reduce the number of Performance Shares issuable to an Employee to reflect a
temporary break in the Employee's service with the Company. Notwithstanding the
foregoing provisions of this Section 11, an amendment by the Committee shall be
subject to the approval of the stockholders of the Corporation if such approval
is required in order for the Plan to meet the stockholder approval requirements
of Section 162(m) of the Code and the regulations promulgated thereunder.
A determination of the Committee as to any questions which may arise
with respect to the interpretation of the provisions of the Plan shall be final.
The Committee may authorize and establish such rules, regulations and
revisions thereof not inconsistent with the
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<PAGE> 32
provisions of the Plan, as it may determine to be advisable to make the Plan
effective or provide for its administration, and may take such other action with
regard to the Plan as it shall deem desirable to effectuate its purpose.
12. GOVERNING LAW. Except as required by Delaware corporate law, the
Plan shall be governed by and construed in accordance with the laws of the State
of Florida, without giving effect to principles of conflicts of laws.
13. EFFECTIVE DATE OF THE PLAN. The Plan has been adopted by the
Committee and ratified by the Board of Directors and shall be effective as of
January 1, 1997 (the "Effective Date"), subject to approval of the Plan by the
stockholders of the Corporation, by a majority of the votes cast on the issue of
Plan approval. If the Plan is not approved by the stockholders of the
Corporation as aforesaid, the Plan shall be void and of no force or effect.
Notwithstanding any other provision of the Plan to the contrary, no Performance
Shares shall be issued prior to the date of stockholder approval of the Plan.
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<PAGE> 33
APPENDIX B
AMENDMENT TO THE
FORCENERGY INC
1995 STOCK OPTION PLAN
WHEREAS, Forcenergy Inc (formerly known as Forcenergy Gas Exploration,
Inc.) (the "Company") has adopted the Forcenergy Gas Exploration, Inc. 1995
Stock Option Plan (the "Plan"); and
WHEREAS, Paragraph XIII of the Plan permits the Board of Directors of
the Company to amend the Plan; and
WHEREAS, the Board of Directors of the Company now desires to amend the
Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. The name of the Plan shall be the "Forcenergy Inc 1995 Stock
Incentive Plan" and all references to "Forcenergy Gas Exploration, Inc." are
hereby amended to refer to "Forcenergy Inc".
2. Paragraph II (f) is hereby amended to read in its entirety as
follows:
"(f ) 'Committee' means the Compensation Committee of the
Board which shall consist of at least two directors of the Company,
each of whom shall be an 'outside director' within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder
and a 'Non-Employee Director' within the meaning of Rule 16b-3."
<PAGE> 34
3. Paragraph II (k) is hereby amended as follows:
(k) "Fair Market Value" means, as of any particular date, the
last reported (closing) sales price of the Stock on that date on the NASDAQ
National Market System or, if different, the principal market or exchange on
which the Stock is traded and reported, or, in any such case, if no prices are
reported on such day, on the last preceding day on which prices are so reported.
In the event that the Stock is not publicly traded when a determination of its
Fair Market Value is required, this determination shall be made by the Committee
in such manner as it deems appropriate.
4. Paragraph V(a) is hereby amended as follows: (i) by deleting the
number "1,016,630" and by inserting the number "4,000,000" in its stead, and
(ii) by deleting the number "500,000" and by inserting the number "1,000,000" in
its stead.
5. Paragraph VI is hereby amended to read in its entirety as follows:
"VI. ELIGIBILITY
(a) Awards may be granted only to persons who, at the time of
grant, are key employees, except as provided in Paragraph VI(b) below.
An Award may be granted on more than one occasion to the same person,
and, subject to the limitations set forth in the Plan, such Award may
include an Incentive Stock Option or an Option which is not an
Incentive Stock Option, a Stock Appreciation Right, a Restricted Stock
Award, a Performance Award, a Phantom Stock Award or any combination
thereof.
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<PAGE> 35
(b) Notwithstanding any other provision of the Plan to the
contrary, the Committee may from time to time grant Awards (other than
Incentive Stock Options) to Directors who are not employees
('Non-Employee Directors'). Any Non-Employee Director who is granted an
Award under this Paragraph VI(b) shall be considered a Holder for
purposes of the Plan."
1. The third sentence of Paragraph VII(d) is hereby deleted.
2. Paragraph VII(e) is hereby amended by inserting, in the beginning of
clause (i), the words "in the case of an Incentive Stock Option,".
3. The last two sentences of Paragraph VIII(a) are hereby deleted.
4. The next to last sentence of Paragraph XII(c) is hereby deleted.
5. Paragraph XII(f) of the Plan is hereby deleted and Paragraph XII(g)
is hereby redesignated as Paragraph XII(f).
6. Paragraph XIII is hereby amended to read in its entirety as
follows:
"XIII. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Awards have not theretofore been
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<PAGE> 36
granted. The Board shall have the right to alter or amend the Plan or
any part thereof from to time; provided that no change in any Award
theretofore granted may be made which would impair the rights of the
Holder without the Holder's consent. Notwithstanding the foregoing, an
amendment by the Board shall be subject to approval of the stockholders
of the Company if such approval is required in order for the Plan to
meet the stockholder approval requirements of Section 422 or 162(m) of
the Code and the regulations promulgated thereunder."
1. Paragraph XIV(e) is hereby amended to read in its entirety as
follows:
"(e) Restrictions on Transfer. An Award shall not be
transferable otherwise than by will or the laws of descent and
distribution or pursuant to a 'qualified domestic relations order' as
defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, and the rules thereunder, or as
provided in this Paragraph XIV(e). Notwithstanding the preceding, the
Committee may, in its discretion, authorize a transfer of any Award
other than an Incentive Stock Option by the initial Holder to (i) the
spouse, children or grandchildren of the initial Holder ('Immediate
Family Members'), (ii) a trust or trusts for the exclusive benefit of
such Immediate Family Members or (iii) a corporation or partnership in
which such Immediate Family Members are the only shareholders or
partners; provided, however, that (A) there may be no consideration for
any such transfer and (B) subsequent transfers of such Awards shall be
prohibited
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<PAGE> 37
except by will or the laws of descent and distribution. Following any
transfer of such an Award, such Award shall continue to be subject to
the same terms and conditions of the Award and of the Plan. An
Incentive Stock Option shall not be transferable otherwise than by will
or the laws of descent and distribution and shall be exercisable during
the Holder's lifetime only by such Holder or the Holder's guardian or
legal representative."
2. Paragraphs XIV(f) and XIV(g) are hereby deleted and Paragraph
XIV(h) is hereby redesignated as Paragraph XIV(f).
3. A new Appendix A is hereby added to the Plan, to read in its
entirety as follows:
"Appendix A
Special Provisions Relating to the Merger
into the Plan of the Forcenergy Gas
Exploration, Inc. 1993 Stock Option Plan for
Officers and Key Employees and the Forcenergy
Gas Exploration, Inc. 1995 Nonemployee
Director Stock Option Plan.
1. Effective as of November 1, 1996 (the 'Merger Date'), the
Forcenergy Gas Exploration, Inc. 1993 Stock Option Plan for Officers
and Key Employees (the '1993 Plan') and the Forcenergy Gas Exploration,
Inc. 1995 Nonemployee Director Stock Option Plan (the '1995 Director
Plan') are each merged into, and maintained as a part of, the Plan as
provided in this Appendix A.
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<PAGE> 38
2. No Options shall be granted on or after the Merger Date
under the 1993 Plan or the 1995 Director Plan.
3. All options granted prior to the Merger Date under the 1993
Plan and the 1995 Director Plan shall continue to be subject to the
terms and conditions of such options and of the 1993 Plan and the 1995
Director Plan, as applicable, as in effect prior to the Merger Date and
the merger shall not provide any additional benefits or any decrease in
the benefits to the holders of such options.
4. Defined terms as used in this Appendix A shall have the
same meaning as under the Forcenergy Inc 1995 Stock Incentive Plan
(formerly known as the Forcenergy Gas Exploration, Inc. 1995 Stock
Option Plan)."
1. The provisions of this Amendment shall be effective as of November
1, 1996 for the purpose of granting Awards pursuant to this Amendment on and
after that date; provided, however, that if this Amendment is not approved by
the stockholders of the Company at the 1997 annual meeting, then this Amendment
and any Awards granted pursuant to this Amendment shall be void and of no force
or effect.
2. Except to the extent hereinabove set forth, the Plan shall remain in
full force and effect.
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<PAGE> 39
IN WITNESS WHEREOF, the Board of Directors of the Company has caused
this Amendment to be executed by a duly authorized officer of the Company on the
______ day of __________, 1997.
FORCENERGY INC
By:
-----------------------------------
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<PAGE> 40
APPENDIX C
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
OF FORCENERGY INC
Annual Meeting - May 15, 1997
The undersigned hereby appoints Stig Wennerstrom, E. Joseph Grady, and Thomas
F. Getten each of them, each with full power of substitution, the proxies of
the undersigned to attend the Annual Meeting of Stockholders of FORCENERGY INC
(the "Corporation") to be held at 3:30 P.M., Eastern Daylight Time, on May 15,
1997 at the Sheraton Biscayne Bay Hotel, 495 Brickell Avenue, Miami, Florida,
Brasilia Room, and any adjournments thereof, and to vote at said meeting and any
adjournments thereof all shares of stock of the Corporation standing in the name
of the undersigned, as instructed on the reverse side, and in their judgment on
any other business which may properly come before said meeting.
(To Be Continued and Signed On The Other Side)
A /x/ Please mark your
votes as in this
example
<TABLE>
<CAPTION>
FOR all nominees WITHHOLD
listed at right AUTHORITY FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION / / / / Nominees: Stig Wennerstrom 2. Proposal to adopt the 1997 / / / / / /
OF Bruce L. Burnham Stock Price Performance
DIRECTORS Eric Forss Incentive Plan for Employees
Robert Issal of Forcenergy Inc.
William F. Wallace
3. Proposal to consolidate all / / / / / /
of the Company's Stock
Option Plans into the Plan
* (INSTRUCTIONS: To withhold authority adopted in 1995 (the "1995
to vote for any individual nominee write Plan"), to amend the 1995
that nominee name in the space provided Plan, and to increase the
below) number of shares covered
by the 1995 Plan.
- ----------------------------------------- 4. Proposal to approve the / / / / / /
election of Coopers &
Lybrand L.L.P. as
independent accountants for
the year ending December 31,
1997.
This proxy will be voted as directed, but if no
direction is specified, it will be voted FOR
Proposals 1, 2, 3 and 4.
SIGNATURE _______________________ DATE: ________________________ SIGNATURE ______________________________ DATE: _________________
IF HELD JOINTLY
NOTE: Stockholder(s) should sign above exactly as name(s) appears hereon. But minor discrepancies in such signatures shall not
invalidate their proxy. If more than one Stockholder, all should sign.
</TABLE>
