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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CABOT OIL & GAS CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
[CABOT OIL & GAS CORPORATION LOGO]
March 29, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Cabot Oil & Gas Corporation to be held on Thursday, May 3, 2001 at 10:00 a.m.,
local time, at our corporate headquarters, Cabot Oil & Gas Corporation, First
Floor, 1200 Enclave Parkway, Houston, Texas.
The attached Notice of Annual Meeting and Proxy Statement cover the formal
business of the meeting. To better acquaint you with the directors, the Proxy
Statement contains biographical information of each nominee and each director
continuing in office.
A report on the operations of the Company and its future plans will be
presented at the meeting. In addition, directors and officers of the Company
will be present to respond to your questions.
Whether or not you plan to attend the Annual Meeting, it is important that
your shares be represented. Please complete, sign, date and return the enclosed
proxy card in the postage-paid envelope provided, or if your proxy card or
voting instructions form so indicates, vote electronically via the Internet or
telephone.
Sincerely,
/S/ RAY R. SEEGMILLER
RAY R. SEEGMILLER
Chairman of the Board
CABOT OIL & GAS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2001
The Annual Meeting of Stockholders of Cabot Oil & Gas Corporation (the
"Company"), a Delaware corporation, will be held at the Company's corporate
headquarters, 1200 Enclave Parkway, Houston, Texas 77077, on Thursday, May 3,
2001, at 10:00 a.m., for the following purposes:
I. To elect three persons to the Board of Directors of the Company.
II. To approve the second amendment and restatement of the 1994 Long-Term
Incentive Plan.
III. To approve the second amendment and restatement of the 1994 Non-
employee Director Stock Option Plan.
IV. To ratify the appointment of the firm of PricewaterhouseCoopers LLP,
independent certified public accountants, as auditors of the Company
for its 2001 fiscal year.
V. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only holders of record of the Class A Common Stock at the close of business
on March 9, 2001 are entitled to receive notice of and to vote at the Annual
Meeting. The transfer books of the Company will not be closed.
It is important that your shares be represented and voted at the Annual
Meeting. Stockholders are urged to vote their shares by one of the following
methods whether or not they plan to attend the Annual Meeting:
. vote over the Internet or by telephone using the instructions on the
proxy card, if this option is available to you (please refer to your
proxy card to determine if this option is available to you); or
. complete, sign, date and return the accompanying proxy card in the
enclosed, self-addressed envelope (the self-addressed envelope
requires no postage if mailed in the United States).
You may still vote in person if you do attend the Annual Meeting.
Please exercise your right to vote at your earliest convenient time.
BY ORDER OF THE BOARD OF DIRECTORS,
/S/ LISA A. MACHESNEY
LISA A. MACHESNEY
Corporate Secretary
Houston, Texas
March 29, 2001
CABOT OIL & GAS CORPORATION
1200 Enclave Parkway
Houston, Texas 77077
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held May 3, 2001
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GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Cabot Oil & Gas Corporation (the "Company") of proxies
for use at its 2001 Annual Meeting of Stockholders, to be held at the Company's
corporate headquarters, 1200 Enclave Parkway, Houston, Texas, on Thursday, May
3, 2001, at 10:00 a.m., or any adjournment or postponement thereof (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. You may revoke your proxy at any time prior to its use
by a written communication to Ms. Lisa A. Machesney, Corporate Secretary of the
Company, or by a duly executed proxy bearing a later date.
Stockholders attending the Annual Meeting may vote their shares in person
even though they have already executed a proxy. Properly executed proxies not
revoked will be voted in accordance with the specifications thereon at the
Annual Meeting and at any adjournment thereof. Proxies on which no voting
instructions are indicated will be voted for Proposals I-IV and in the best
judgment of the proxy holders on any other matters that may properly come before
the meeting.
Only holders of record of the Company's Class A Common Stock, par value
$.10 per share ("Common Stock"), as of the close of business on March 9, 2001,
are entitled to vote at the Annual Meeting. As of that date, the Company had
outstanding and entitled to vote 29,348,053 shares of Common Stock. Each share
of Common Stock is entitled to one vote per share. There is no provision for
cumulative voting. A quorum for the consideration of business at the Annual
Meeting consists of a majority of all outstanding shares of stock entitled to
vote at the Annual Meeting. The Proxy Statement and form of Proxy are being
first sent or given to security holders on or about March 22, 2001.
In accordance with Delaware law, a stockholder entitled to vote for the
election of directors can withhold authority to vote for all nominees for
director or can withhold authority to vote for certain nominees for director.
Abstentions from proposals are treated as votes against the particular proposal.
Broker non-votes on proposals are treated as shares as to which voting power has
been withheld by the beneficial holders of those shares and, therefore, as
shares not entitled to vote on the proposal.
PROPOSAL I.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of directors serving
staggered three-year terms. Robert F. Bailey, John G.L. Cabot and C. Wayne
Nance have been nominated for election at the Annual Meeting for terms of three
years, each to hold office until the expiration of his term in 2004 and until
his successor shall have been elected and shall have qualified. Each nominee is
currently a director of the Company.
It is the intention of the persons named in the enclosed form of proxy to
vote such proxies for the election of Messrs. Bailey, Cabot and Nance for terms
of three years. If any one of the nominees is not available at the time of the
Annual Meeting to serve, proxies received will be voted for substitute nominees
to be designated by the Board of Directors or, in the event no such designation
is made by the Board, proxies will be voted for a lesser number of nominees. In
no event will the proxies be voted for more than the number of nominees set
forth below.
The Board of Directors recommends a vote FOR the election of Messrs.
Bailey, Cabot and Nance to the Board of Directors.
Certain Information Regarding Nominees and Directors
Set forth below, as of March 1, 2001, for each director and for each
nominee for election as a director of the Company, is information regarding age,
position(s) with the Company, membership on committees of the Board of
Directors, the period served as a director and term of office, business
experience during at least the past five years, and other directorships
currently held. It is expected that Messrs. Esler, Siess and Boswell will
retire from the Board at the Board of Directors meeting immediately following
the 2001, 2002 and 2003 Annual Meetings of Stockholders, respectively, in
accordance with the Board's mandatory retirement policy.
Robert F. Bailey
Age: 68
Committee Membership: Audit, Safety and
[Photo 2A] Environmental Affairs
Director Since: 1994
Term of Office Expires: 2001 (Nominee for
Director)
Business Experience:
TransRepublic Resources, Inc.
President and Chief Executive Officer - 1992
to present
Alta Energy Corporation
President and Chief Executive Officer - prior
to 1992
Other Directorships:
Chase Bank Texas - Midland - Advisory Director
Henry O. Boswell
Age: 71
[Photo 2B] Committee Membership: Audit (Chairman)
Compensation, Compensation Subcommittee,
Executive
Director Since: 1991
Term of Office Expires: 2003
Business Experience:
Retired October 1987
Amoco Production Company
President - 1983 to October 1987
Amoco Corporation
Director - 1983 to October 1987
Amoco Canada Petroleum Ltd.
Chairman of the Board - 1983 to October 1987
Other Directorships:
Rowan Companies, Inc.
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John G.L. Cabot
Age: 66
[Photo 3A] Committee Memberships: Safety and Environmental
Affairs (Chairman), Nominations
Director Since: 1989
Term of Office Expires: 2001 (Nominee for
Director)
Business Experience:
Retired September 1995
Cabot Corporation
Chief Financial Officer - October 1992 to
September 1995
Vice Chairman of the Board - October 1988 to
September 1995
Other Directorships:
Cabot Corporation
Eaton Vance Corp.
William R. Esler
[Photo 3B] Age: 75
Committee Membership: Audit, Safety and
Environmental Affairs
Director Since: 1992
Term of Office Expires: 2003
Business Experience:
Retired February 1991
Southwestern Public Service Company
Chairman of the Board and Chief Executive
Officer - July 1989 to February 1991
President and Chief Executive Officer -
January 1989 to July 1989
President and Chief Operating Officer - 1985
to July 1989
Director - 1985 to 1992
C. Wayne Nance
Age: 69
[Photo 4A] Committee Memberships: Compensation (Chairman),
Compensation Subcommittee (Chairman),
Nominations, Executive
Director Since: 1992
Term of Office Expires: 2001 (Nominee for
Director)
Business Experience:
C. Wayne Nance & Associates, Inc. (petroleum
consulting and investments)
President - July 1989 to present
The Mitchell Group
Senior Vice President - July 1989 to present
Other Directorships:
Matador Petroleum Corporation
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P. Dexter Peacock
Age: 59
Committee Memberships: Audit, Safety and
Environmental Affairs, Executive
[Photo 4B] Director Since: 1998
Term of Office Expires: 2003
Business Experience:
Andrews & Kurth L.L.P.
Of Counsel - January 1998 to present
Partner - 1991 to 1997
Managing Partner - 1986 to 1991
Other Directorships:
Chase Bank of Texas - Houston Regional Board
Ray R. Seegmiller
Age: 65
Position: Chairman, President and Chief Executive
Officer
Director Since: 1997
Committee Memberships: Executive
Term of Office Expires: 2002
[Photo 4C] Business Experience:
Cabot Oil & Gas Corporation
Chairman, President and Chief Executive
Officer - May 1999 to present
President and Chief Executive Officer - May
1998 to May 1999
President and Chief Operating Officer -
September 1997 to May 1998
Executive Vice President and Chief Operating
Officer - March 1997 to September 1997
Vice President, Chief Financial Officer and
Treasurer - August 1995 to March 1997
RCS Enterprises, Inc.
President and Chief Executive Officer - May
1993 to June 1995
Terry Petroleum Company
President and Chief Executive Officer - May
1988 to April 1993
Other Directorships:
Domestic Petroleum Counsel - Vice Chairman
Independent Petroleum Association of America
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Charles P. Siess, Jr.
Age: 74
Director Since: 1989
Committee Memberships: Nominations (Chairman),
[Photo 5A] Safety and Environmental Affairs, Executive
Term of Office Expires: 2003
Business Experience:
Retired May 1999
Cabot Oil & Gas Corporation
Chairman of the Board - May 1998 to May 1999
Chairman of the Board and Chief Executive
Officer - September 1997 to May 1998
Chairman of the Board, Chief Executive Officer
and President - May 1995 to September 1997 and
December 1989 to December 1992
Bridas S.A.P.I.C. Oil Exploration
Consultant and Acting General Manager -
January 1993 to January 1994
Other Directorships:
Rowan Companies, Inc.
Arthur L. Smith
Age: 48
Director Since: 1999
Committee Memberships: Audit, Compensation
[Photo 5B] Term Office Expires: 2002
Business Experience:
John S. Herold, Inc. (petroleum research and
consulting)
Chairman and Chief Executive Officer - May
1999 to present
Torch Energy Advisors (energy financial and
operational outsourcing)
Chairman and Chief Executive Officer - June
1998 to November 1998
John S. Herold, Inc.
Chairman and Chief Executive Officer -
December 1984 to May 1998
Other Directorships:
Plains All American, Inc.
John S. Herold, Inc.
Evergreen Resources Inc.
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William P. Vititoe
Age: 62
Director Since: 1994
Committee Memberships: Compensation, Compensation
[Photo 6A] Subcommittee, Nominations
Term of Office Expires: 2002
Business Experience:
Retired May 1998
Consultant to Puget Sound Energy, Inc. -
February 1997 to May 1998
Washington Energy Company
Chairman of the Board, Chief Executive Officer
and President - January 1994 to February 1997
ANR Pipeline Company
President and Chief Executive Officer -
October 1990 to December 1993
Other Directorships:
Aegis Software
Comerica Inc.
Amerisure Inc.
Midwest Independent System Operator, Inc.
Information on the Board of Directors and its Committees
The Board of Directors held seven meetings during the year ended December
31, 2000. All directors attended 75% or more of the meetings of the Board of
Directors and of the committees held while they were members during 2000. Any
stockholder desiring to make a nomination to the Board of Directors should
submit such nomination for consideration by the Nominations Committee, including
such nominee's qualifications, to Ms. Lisa A. Machesney, Corporate Secretary,
Cabot Oil & Gas Corporation, 1200 Enclave Parkway, Houston, Texas 77077.
The Board of Directors has six standing committees: the Audit Committee,
the Compensation Committee, the Compensation Subcommittee, the Nominations
Committee, the Safety and Environmental Affairs Committee and the Executive
Committee. Membership on each committee is listed above and below. All standing
committees, with the exception of the Executive Committee, are composed entirely
of non-employee directors.
Number of
Meetings in
Committee Members 2000 Responsibilities
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Audit Committee Henry O. Boswell * 3 Annually recommends the independent public accountants to be appointed by
Robert F. Bailey the Board of Directors as auditor of the Company and its subsidiaries; the
William R. Esler committee also reviews the arrangements for and the results of the auditor's
P. Dexter Peacock examination of the Company's books and records, internal accounting control
Arthur L. Smith procedures, and the internal audit activities and recommendations. It
reports to the Board of Directors on Audit Committee activities and makes
such investigations as it deems appropriate.
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Compensation Committee C. Wayne Nance * 3 Determines the salaries, bonuses and other remuneration of the Company's
Henry O. Boswell officers who are also directors, reviews and approves the salaries, bonuses
Arthur L. Smith and other remuneration of all other executive officers, and determines the
William P.Vitioe aggregate amount of bonuses and other incentives to be paid pursuant to the
Company's incentive compensation program. It administers the Company's
Annual Target Cash Incentive Plan, and supplemental retirement plans,
including the adoption of the rules and regulations therefore and the
determination of awards. It also makes recommendations to the Board of
Directors with respect to the Company's compensation policy.
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Compensation C. Wayne Nance * 1 Created to ensure each member is an "outside director" as defined for
Subcommittee Henry O. Boswell purposes of Section 162(m) of the Internal Revenue Code. It administers the
William P. Vititoe Company's Amended and Restated 1994 Long-Term Incentive Plan and Incentive
Stock Option Plan, including the adoption of the rules and regulations
therefore and the determination of awards
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Nominations Committee Charles P. Siess, Jr. * 1 Considers and proposes nominees for membership on the Board of Directors,
John G.L. Cabot including nominations made by stockholders, reviews the composition of the
C. Wayne Nance Board of Directors and makes recommendations to the Board of Directors
William P. Vititoe concerning corporate governance.
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Safety & Environmental John G.L. Cabot * 2 Reviews the Company's safety and environmental management programs and
Affairs Committee Robert F. Bailey evaluates major hazard analyses. From time to time, it also reviews the
William R. Esler nature of and extent of Company spending for safety and environmental
P. Dexter Peacock compliance. It further consults with outside and internal advisors of the
Charles P. Seiss Company regarding the management of the Company's safety and environmental
programs.
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Executive Committee P. Dexter Peacock 0 Created on February 22, 2001 to exercise all power and authority of the
Henry O. Boswell Board of Directors, except as limited by the Company's by-laws or applicable
C. Wayne Nance law.
Ray R. Seegmiller
Charles P. Siess, Jr.
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* Committee Chairman
Director Compensation
Directors who are not employees of the Company were compensated during
2000 by the payment of a quarterly cash fee of $6,000, plus $1,000 for
attendance by them at each Board meeting and $1,000 for attendance at each
meeting of a committee of which they are a member, with the exception of the
Compensation Subcommittee. Members of the Compensation Subcommittee receive no
additional fees for their services on this committee. Committee chairmen
received an additional fee of $500 per quarter. Directors are further
compensated $500 for attendance at business meetings when so requested by the
Chairman of the Board of Directors.
Non-employee directors also received nondiscretionary automatic grants
of non-qualified options to purchase 10,000 shares of the Common Stock at a
price equal to 100% of the fair market value on the date first elected to the
Board of Directors under either the 1990 Non-employee Director Stock Option Plan
or the Amended and Restated 1994 Non-employee Director Stock Option Plan. In
addition, non-employee directors receive a nondiscretionary automatic grant of a
non-qualified option to
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purchase an additional 5,000 shares of Common Stock at each annual meeting of
stockholders under the Amended and Restated 1994 Non-employee Director Stock
Option Plan. Directors who are employees of the Company receive no additional
compensation for their duties as directors. All directors were reimbursed for
travel expenses incurred for attending all Board and committee meetings.
PROPOSAL II.
APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT
OF THE 1994 LONG-TERM INCENTIVE PLAN
In 1994 the Board of Directors adopted, and the stockholders approved, the
Company's 1994 Long-Term Incentive Plan, and in 1998 the Board of Directors
adopted, and the stockholders approved, an amendment and restatement of the
plan. The Board of Directors has now adopted, subject to stockholder approval,
further amendments to the 1994 Long-Term Incentive Plan and a second restatement
of the plan, as so amended (such plan, as so amended and restated, the "1994
Incentive Plan"). A copy of the 1994 Incentive Plan is attached hereto as
Exhibit A and is incorporated herein by reference.
The principal changes effected by the amendment and second restatement of
the 1994 Incentive Plan are (i) increasing the number of shares subject to the
plan by 1,200,000 shares (from 2,500,000 shares to 3,700,000 shares); (ii)
changing the limit on "stock awards" (as defined in the plan) from 750,000
shares (30% of 2,500,000) to 30% of the shares authorized under the plan; and
(iii) broadening the performance share provisions previously approved by
stockholders, making them a formal part of the 1994 Incentive Plan as
"performance awards" and allowing performance awards to be paid in cash.
Pursuant to the 1994 Incentive Plan, employees of the Company, including
officers and directors who are employees, will be eligible to receive awards
consisting of (i) stock options, (ii) stock appreciation rights, (iii)
restricted or nonrestricted stock awards ("stock awards"), (iv) awards paid,
vested or otherwise deliverable on account of pre-established objective
performance goals ("performance awards"), (v) cash awards or (vi) any
combination of the foregoing. The 1994 Incentive Plan is intended as an
incentive to retain key executives and other selected employees of the Company
and to reward them for making contributions to the success of the Company.
An aggregate of 2,500,000 shares of Common Stock were reserved for issuance
pursuant to the 1994 Incentive Plan as amended and restated in 1998. As of
December 31, 2000, under the 1994 Incentive Plan options to purchase a total of
857,448 shares were outstanding, 792,573 shares had been issued upon exercise of
options, 488,720 shares had been granted as restricted stock awards and 35,382
shares had issued for performance shares, leaving only 325,877 shares available
for future grants. In order to continue the effectiveness of the 1994 Incentive
Plan, the Board of Directors has adopted the second amended and restated 1994
Incentive Plan, which will provide for the issuance of up to an additional
1,200,000 shares of Common Stock.
The 1994 Incentive Plan is administered by the Compensation Subcommittee of
the Board of Directors. Subject to the provisions of the 1994 Incentive Plan,
the Compensation Subcommittee is authorized to determine the type or types of
awards made to each participant and the terms, conditions and limitations
applicable to each award. In addition, the Compensation Subcommittee has the
power to interpret the 1994 Incentive Plan, to adopt such rules and regulations
as it may deem necessary or appropriate in keeping with the objectives of the
1994 Incentive Plan, to extend the exercisability of awards, to accelerate the
vesting or exercisability of awards, to eliminate or make less restrictive any
restrictions on awards, to waive any restrictions or other provisions of awards
under the 1994 Incentive Plan or to otherwise amend or modify awards. The 1994
Incentive Plan specifically prohibits the repricing of stock options and the
substitution of outstanding stock options for new options with a lower exercise
price. The Compensation Subcommittee may also provide for loans from the Company
to permit the exercise or purchase of awards and may provide for procedures to
permit the exercise or purchase of awards by use of the proceeds to be received
from the sale of Common Stock issuable pursuant to an award.
Options are rights to purchase a specified number of shares of Common Stock
at a price fixed at the time the option is granted. Options granted pursuant to
the 1994 Incentive Plan will become exercisable on such date or dates as may be
established by the Compensation Subcommittee and may either be incentive stock
options within the meaning of Section 422 of the Internal Revenue Code or non-
qualified stock options. The exercise price of options granted under the
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1994 Incentive Plan will be an amount not less than the fair market value of the
Common Stock at the time of grant (or, if greater, the par value thereof). The
exercise price must be paid in full in cash at the time an option is exercised
or, if permitted by the Compensation Subcommittee, by means of tendering Common
Stock or surrendering another award.
Stock appreciation rights are rights to receive, without payment to the
Company, cash or shares of Common Stock with a value determined by reference to
the difference between the exercise or "strike" price of the stock appreciation
right and the fair market value or other specified valuation of the Common Stock
at the time of exercise. A stock award is an award of shares of Common Stock or
units denominated in shares of Common Stock that may be subject to conditions
established by the Compensation Subcommittee and may include a restriction
against transfer as well as repurchase provisions. During any period of
restriction, the employee may have the right to vote and receive dividends on
the shares covered by the restricted stock awards.
A cash award may be denominated in cash with the amount of payment subject
to future service and other restrictions and conditions as may be established by
the Compensation Subcommittee, including continuous service with the Company,
achievement of specific business objectives, increases in specified indices,
attaining specified growth rates and other comparable measures of performance.
In 1994, the Compensation Committee adopted performance share provisions
under the 1994 Incentive Plan pursuant to which the Compensation Committee has
granted awards of performance shares (as a form of stock award under the 1994
Incentive Plan) under specified terms and conditions. In connection with the
amendment and restatement of the 1994 Incentive Plan effected in 1998, the
Compensation Committee adopted broadened performance share provisions. As part
of the second amendment and restatement currently proposed, the performance
award provisions are being revised, broadened and added as an explicit part of
the 1994 Incentive Plan.
Grants of performance shares previously could be made only to members of
the executive management group of the Company selected by the Compensation
Committee, while performance awards under the second amended and restated 1994
Incentive Plan can be made to any eligible participant under the plan.
Previously, there was a limit that no participant could be granted more than
25,000 performance shares for any one-year period; this limitation is removed
and replaced by the general plan limits described below.
Performance awards under the second amended and restated plan are awards
paid in cash or shares of Common Stock that are paid, vested or otherwise
deliverable on account of one or more objective performance goals. The
performance goals may be based on one or more business criteria applicable to
the participant, the Company as a whole or one or more of the Company's business
units and may include one or more of the following: increased revenue, net
income, stock price, market share, earnings per share, other earnings measures,
return on equity, return on assets, decrease in costs, shareholder value, EBIT,
EBITDA, funds from operations, cash flow, cash from operations, net cash flow,
net cash flow before financing activities, other cash flow measures, total
shareholder return, return on capital, return on invested capital, operating
income, after-tax operating income, reserve additions, proceeds from
dispositions, production volumes, reserve replacement measures, finding and
development costs, total market value, petroleum reserve measures and safety and
environmental performance measures. The Committee will determine the employees
to receive such awards and the terms, conditions and limitations applicable to
each such award, which conditions may, but need not, include continuous service
with the Company, achievement of specific business objectives, attainment of
specified growth rates, increases in specified indices or other comparable
measures of performance.
The performance award provisions are intended to constitute "qualified
performance based compensation" as defined under Section 162(m) of the Internal
Revenue Code, with the effect that the deduction disallowance of Section 162(m)
should not be applicable to compensation paid to covered employees under the
performance share provisions.
For purposes of satisfying the requirements of Section 162(m) of the
Internal Revenue Code, no participant may be granted stock options to purchase
or stock appreciation rights for more than 500,000 shares in any calendar year,
and no participant may be granted in respect of any calendar year cash awards
with a value on date of grant of more than $2,000,000. In addition, no
participant may be granted stock awards covering more than 100,000 shares in any
calendar year.
Unless otherwise determined by the Compensation Subcommittee, awards under
the 1994 Incentive Plan that constitute derivative securities are not
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order. The 1994 Incentive Plan allows
for the satisfaction of a participant's tax withholding in
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respect of an award by the withholding of shares of Common Stock issuable
pursuant to the award or the delivery by the participant of previously owned
shares of Common Stock, in either case valued at the fair market value thereof.
On March 9, 2001, the closing price of the Common Stock on the New York Stock
Exchange was $31.53 per share.
The amount and type of awards to be granted in the future to the named
officers, to all executive officers as a group and to all other employees are
not currently determinable. The 1994 Incentive Plan does not permit the grant of
awards to directors who are not employees.
In the event of a stock split, stock dividend, combination or
reclassification or certain other corporate transactions, the Compensation
Committee is authorized to make appropriate adjustments to the exercise price
and number of shares subject to awards granted under the 1994 Incentive Plan.
The Board of Directors has the right to amend, modify, suspend or terminate
the 1994 Incentive Plan, except that (a) without the consent of the affected
participant, no amendment or alteration shall be made that would impair the
rights of a participant under any award theretofore granted and (b) no amendment
or alteration shall be effective prior to approval by the Company's stockholders
to the extent such approval is then required by applicable legal requirements.
Certain Federal Income Tax Consequences. The following discussion of tax
considerations relating to options describes only certain U.S. federal income
tax matters. The discussion is general in nature and does not take in to account
a number of considerations which may apply in light of the particular
circumstances of an optionee.
Some of the options issuable under the 1994 Incentive Plan may constitute
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code, while other options granted under the 1994 Incentive Plan will be
non-qualified stock options. The Internal Revenue Code provides for tax
treatment of stock options qualifying as incentive stock options that may be
more favorable to employees than the tax treatment accorded non-qualified stock
options. Generally, upon the exercise of an incentive stock option, the optionee
will recognize no income for U.S. federal income tax purposes. The difference
between the exercise price of the incentive stock option and the fair market
value of the stock at the time of exercise is an item of tax preference that may
require payment of an alternative minimum tax. On the sale of shares acquired by
exercise of an incentive stock option (assuming that the sale does not occur
within two years of the date of grant of the option or within one year from the
date of exercise), any gain will be taxed to the optionee as long-term capital
gain. In contrast, upon the exercise of a non-qualified option, the optionee
recognizes taxable income (subject to withholding) in an amount equal to the
difference between the then fair market value of the shares on the date of
exercise and the exercise price. Upon any sale of such shares by the optionee,
any difference between the sale price and the fair market value of the shares on
the date of exercise of the non-qualified option will be treated generally as
capital gain or loss. No deduction is available to the employer corporation upon
the grant or exercise of an incentive stock option (although a deduction may be
available if the employee sells the shares so purchased before the applicable
holding period expires), whereas upon exercise of a non-qualified stock option,
the employer corporation is entitled to a deduction in an amount equal to the
income recognized by the employee. Except with respect to death, an optionee has
three months after termination of employment in which to exercise an incentive
stock option and retain favorable tax treatment at exercise. An option exercised
more than three months after an optionee's termination of employment other than
upon death or disability cannot qualify for the tax treatment accorded incentive
stock options. Such option would be treated as a non-qualified stock option
instead. Based on the provisions of the 1994 Incentive Plan, the Company expects
that the 1994 Incentive Plan will comply with the requirements of Section 162(m)
of the Internal Revenue Code, provided that the grant is made by a qualified
compensation committee.
Approval of the amendment and restatement of the 1994 Incentive Plan will
require the affirmative vote of a majority of the shares of Common Stock voting
on the proposal. For this purpose, abstentions will be counted as votes against
and broker non-votes will not be treated as voting on the proposal. The persons
named on the accompanying proxy will vote in accordance with the choice
specified thereon, or, if no choice is properly indicated, in favor of the
approval of the amendment and restatement of the 1994 Incentive Plan.
The Board of Directors recommends a vote FOR approval of the Second Amended
and Restated 1994 Long-Term Incentive Plan.
-10-
PROPOSAL III.
APPROVAL OF THE SECOND AMENDMENT AND RESTATEMENT OF THE
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
In 1994 the Board of Directors adopted, and the stockholders approved, the
Company's 1994 Non-employee Director Stock Option Plan, and in 1998 the Board of
Directors adopted, and the stockholders approved, an amendment and restatement
of the plan. The Board of Directors has now adopted, subject to stockholder
approval, further amendments to the 1994 Non-employee Director Stock Option Plan
and a second restatement of the plan, as so amended (such plan, as so amended
and restated, the "1994 Non-employee Director Plan"). A copy of the 1994 Non-
employee Director Plan is attached hereto as Exhibit B and is incorporated
herein by reference.
The principal change effected by the amendment and second restatement of
the 1994 Non-employee Director Plan is to increase the number of shares subject
to the plan by 200,000 (from 300,000 to 500,000).
The 1994 Non-employee Director Plan is intended as an incentive to attract
and retain as independent directors of the Company persons of training,
experience and ability, to encourage the sense of proprietorship of such persons
and to stimulate their active interest in the development and financial success
of the Company.
Under the 1994 Non-employee Director Plan, each director of the Company who
is not an employee of the Company is automatically granted an option to purchase
10,000 shares of Common Stock on the date such person first becomes a non-
employee director. Thereafter, each non-employee director is automatically
granted an option to purchase an additional 5,000 shares of Common Stock at each
annual meeting of stockholders (other than when the director's status as
director terminates at such meeting). Each option permits the optionee to
purchase shares of Common Stock at an exercise price per share equal to 100% of
the fair market value of a share of Common Stock on the date the option is
granted. The exercise price of the options is payable in cash or in shares of
Common Stock or any combination thereof. An optionee may also exercise an option
using the proceeds to be received from the sale of Common Stock issuable
pursuant to the option.
The 1994 Non-employee Director Plan as amended and restated in 1998
provided for the granting of options to purchase an aggregate of not more than
300,000 shares of Common Stock. As of December 31, 2000, options to purchase a
total of 170,000 shares were outstanding, 20,000 shares had been issued upon
exercise of options, leaving only 110,000 shares available for future grants. In
order to continue the effectiveness of the plan, the Board of Directors has
adopted the second amended and restated 1994 Non-employee Director Plan, which
will provide for the granting of options to purchase an aggregate of not more
than 500,000 shares of Common Stock. On March 9, 2001, the closing price of the
Common Stock on the New York Stock Exchange was $31.53 per share.
Options granted under the 1994 Non-employee Director Plan will be
exercisable, on a cumulative basis, with respect to 33 1/3% of the total number
of shares of Common Stock subject to the option as of the first, second and
third anniversaries of the date of the grant of such option. In the event of a
"change in control" of the Company (as defined in the 1994 Non-employee Director
Plan), any unvested portion of the options will immediately become exercisable
in full. Options granted under the 1994 Non-employee Director Plan will
terminate upon the earliest of: (a) five years from the date of the grant of the
option; (b) one year after the optionee ceases to be a director of the Company
by reason of death, disability or mandatory retirement of the optionee; or (c)
three months after the optionee ceases to be a director of the Company for any
reason other than death, disability or mandatory retirement. In the event of
cessation of services of a director because of death, disability or mandatory
retirement, any unmatured installments of the option shall be accelerated,
effective as of the date of cessation of service.
In the event of a stock split, stock dividend, combination or
reclassification or certain other corporate transactions, the Board of Directors
is authorized to make appropriate adjustments to the exercise price and number
of shares subject to options under the 1994 Non-employee Director Plan.
The Board of Directors has the right to amend, alter or discontinue the
1994 Non-employee Director Plan, except that (a) without the consent of the
affected optionee, no amendment or alteration shall be made that would impair
the rights of an optionee under any option theretofore granted and (b) no
amendment or alteration shall be effective prior to approval by the Company's
stockholders to the extent such approval is then required.
-11-
Options under the 1994 Non-employee Director Plan are intended to be non-
qualified options for federal income tax purposes. See "Proposal II - Approval
of the Second Amendment and Restatement of the 1994 Long-Term Incentive Plan -
Certain Federal Income Tax Consequences" for a description of the federal income
tax consequences of non-qualified options.
Approval of the amendment and restatement of the 1994 Non-employee Director
Plan will require the affirmative vote of a majority of the shares of Common
Stock voting on the proposal. For this purpose, abstentions will be counted as
votes against and broker non-votes will not be treated as voting on the
proposal. The persons named on the accompanying proxy will vote in accordance
with the choice specified thereon, or, if no choice is properly indicated, in
favor of the approval of the 1994 Non-employee Director Plan.
The Board of Directors recommends a vote FOR approval of the Second Amended
and Restated 1994 Non-employee Director Stock Option Plan.
PROPOSAL IV.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation by the Audit Committee, has
approved and recommended the appointment of PricewaterhouseCoopers LLP,
independent public accountants, as auditors to examine the Company's financial
statements for 2001. Neither such firm nor any of its associates has any
relationship with the Company except in their capacity as auditors. The persons
named in the accompanying proxy will vote in accordance with the choice
specified thereon, or, if no choice is properly indicated, in favor of the
designation of PricewaterhouseCoopers LLP as auditors of the Company.
A representative of PricewaterhouseCoopers LLP is expected to attend the
Annual Meeting and to be available to respond to appropriate questions raised
during the Annual Meeting. The representative will also have an opportunity to
make a statement during the meeting if the representative so desires.
See Audit Committee Report on page 20 for further information.
The Board of Directors recommends a vote FOR ratification of the
appointment of the firm of PricewaterhouseCoopers LLP, independent certified
public accounts, as auditors of the Company for its 2001 fiscal year.
-12-
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes annual and long-term compensation paid to
the Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers who were serving as of December 31, 2000 for all
services rendered to the Company and its subsidiaries during each of the last
three fiscal years.
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------------------------------------------------------
Awards Payouts
----------------------------------------
Name and Year Salary Bonus Other Annual Restricted Securities LTIP All Other
Principal Position ($) ($) Compensation Stock Underlying Payouts Compensation
($) (4) Awards ($) Options (#) ($) (15) ($) (17)
(8) (9) (16)
- -----------------------------------------------------------------------------------------------------------------------------------
Ray R. Seegmiller 2000 395,412 218,000 34,596 596,250 (10) 50,000 0 10,500
Chairman, President and 1999 375,000 200,000 18,806 0 70,000 101,999 10,000
Chief Executive Officer 1998 339,042 99,000 20,246 0 62,000 0 10,000
H. Baird Whitehead (1) 2000 226,667 80,000 19,837 149,063 (11) 14,000 0 10,500
Senior Vice President 1999 215,000 83,700 6,283 0 16,000 78,461 9,976
1998 198,333 34,400 9,696 0 10,000 44,813 10,000
Michael B. Walen 2000 175,750 62,000 6,012 129,188 (12) 11,000 0 9,430
Vice President - 1999 160,000 60,000 3,811 0 15,000 0 7,360
Regional Manager 1998 150,417 24,000 13,490 (6) 0 10,000 0 8,097
Robert R. McBride, Jr. (2) 2000 184,083 45,000 1,044 79,500 (13) 11,000 0 0
Vice President - 1999 60,000 40,300 (3) 19,771 (7) 144,375 (13) 0 0 0
Regional Manager 1998 0 0 0 0 0 0 0
Jeffrey W. Hutton 2000 160,833 51,000 3,532 114,281 (14) 9,000 0 8,501
Vice President - 1999 155,000 51,700 2,828 0 15,000 62,769 7,156
Marketing 1998 149,792 23,900 2,846 0 10,000 22,406 8,792
- ------------------------------------------------------------------------------------------------------------------------------------
1/ Mr. Whitehead resigned from the Company January 19, 2001.
- -
2/ Mr. McBride resigned from the Company January 31, 2001.
- -
3/ Includes $25,000 bonus paid upon commencement of employment with the Company
- -
in September 1999.
4/ The amount in this column for 2000 represents premiums paid on and a tax
- -
gross-up for imputed income on executive term life insurance and a tax
gross-up on club dues. The 2000 premiums paid on and a tax gross-up for
imputed income on executive term life insurance represents $30,289, $3,067,
$2,237, $1,044 and $1,321 for Messrs. Seegmiller, Whitehead, Walen, McBride
and Hutton, respectively. The 2000 tax gross-up on club dues represents
$4,307, $2,412, $3,775, $0 and $2,211 for Messrs. Seegmiller, Whitehead,
Walen, McBride and Hutton, respectively.
5/ Also includes $14,358 tax gross-up for imputed income on relocation
- -
expenses.
6/ Includes a $9,874 tax gross up for imputed income on relocation expenses.
- -
-13-
7/ Includes $15,000 relocation allowance (the equivalent of one-month's salary)
- -
and $4,543 tax gross-up for imputed income on relocation expenses.
8/ The amount in this column for 2000 represents the value of restricted stock
- -
grants made to the named executive on May 9, 2000 based on closing market
prices on such date of $19.875 as reported on the New York Stock Exchange,
Inc. Composite Transactions Reporting System.
9/ Messrs. Seegmiller, Whitehead, Walen, McBride and Hutton were granted
- -
30,000, 7,500, 6,500, 4,000 and 5,750 shares of restricted stock,
respectively, on May 9, 2000. The restrictions on these shares lapse in full
in three years from the date of grant provided the officer is still employed
with the Company.
10/ Mr. Seegmiller holds a total of 30,000 shares of restricted stock as of
- --
December 29, 2000. The market value of the 30,000 shares at December 29,
2000 was $935,625. No dividends are paid on the restricted stock held.
11/ Mr. Whitehead held a total of 7,500 shares of restricted stock as of
- --
December 29, 2000. The market value of the 7,500 shares at December 29, 2000
was $233,906. No dividends are paid on the restricted stock held. Upon Mr.
Whitehead's resignation from the Company January 19, 2001, all shares of
restricted stock were forfeited.
12/ Mr. Walen holds a total of 6,500 shares of restricted stock as of December
- --
29, 2000. The market value of the 6,500 shares at December 29, 2000 was
$202,719. No dividends are paid on the restricted stock held.
13/ Mr. McBride held a total of 11,500 shares of restricted stock as of
- --
December 29, 2000. 7,500 shares were granted September 1, 1999 as part of
his employment package. The market value of the 11,500 shares at December
29, 2000 was $358,656. No dividends are paid on the restricted stock held.
Upon Mr. McBride's resignation from the Company January 31, 2001, all shares
of restricted stock were forfeited.
14/ Mr. Hutton holds a total of 5,750 shares of restricted stock as of December
- --
29, 2000. The market value of the 5,750 shares at December 29, 2000 was
$179,328. No dividends are paid on the restricted stock held.
15/ The amount in this column next to the year 1999 represents the value of a
- --
performance share payout of 5,395, 4,150 and 3,320 shares of Common Stock to
Messrs. Seegmiller, Whitehead and Hutton respectively, for the performance
period July 1, 1996 through June 30, 1999, based upon the average of the
high and low trading prices on the date the shares were issued of $18.90625,
as reported on the New York Stock Exchange, Inc. Composite Transactions
Reporting System.
16/ The amount in this column next to the year 1998 represents the value of a
- --
performance share payout of 3,000 and 1,500 shares of Common Stock to
Messrs. Whitehead and Hutton, respectively, for the performance period July
1, 1995 through June 30, 1998, based upon the average of the high and low
trading prices on the date the shares were issued of $14.9375, as reported
on the New York Stock Exchange, Inc. Composite Transactions Reporting
System.
17/ The amount in this column represents the Company's contributions to the
- --
401(k) Plan and the associated non-qualified agreement or the associated
non-qualified Deferred Compensation Plan on behalf of the named executive.
Option Grants in Last Fiscal Year
Set forth below is certain information relating to the Company's grant of
options during 2000 to the executive officers named in the preceding Summary
Compensation Table, including the relative size of each grant, and each grant's
exercise price and expiration date. Also included is information relating to the
potential realizable value of the options granted, based upon assumed annualized
stock value appreciation rates. Neither the option values reflected in the table
nor the assumptions utilized in arriving at the values should be considered
indicative of future stock performance.
-14-
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------------
Individual Grants Potential Realizable
Value at Assumed Annual Rates
of Stock Price Appreciation
for Option Term
- ------------------------------------------------------------------------------------------------------------------------
Number of
Securities Percent of
Underlying Total
Options Options Exercise
Granted Granted to Price Expiration
Name (#)/(3)//(4)/ Employees in ($/Sh) /(5)/ Date /(6)/ 5% ($) /(7)/ 10% ($) /(8)/
Fiscal Year
- -------------------------------------------------------------------------------------------------------------------
R.R. Seegmiller 50,000 19.7% $19.375 May 9, 2005 $ 267,650 $ 591,450
H.B. Whitehead/(1)/ 14,000 5.5% $19.375 May 9, 2005 $ 74,942 $ 165,606
M.B. Walen 11,000 4.3% $19.375 May 9, 2005 $ 58,883 $ 130,119
R.R. McBride/(2)/ 11,000 4.3% $19.375 May 9, 2005 $ 58,883 $ 130,119
J.W. Hutton 9,000 3.5% $19.375 May 9, 2005 $ 48,177 $ 106,461
- ------------------------------------------------------------------------------------------------------------------
1/ Upon Mr. Whitehead's resignation January 19, 2001, the option grant reported
- -
in this table was forfeited.
2/ Upon Mr. McBride's resignation January 31, 2001, the option grant reported
- -
in this table was forfeited.
3/ There were no adjustments or amendments during 2000 to the exercise price of
- -
stock options previously awarded to any of the named executive officers.
4/ For each of the named executive officers, 33 1/3% of each option becomes
- -
exercisable on the first anniversary of the date of grant (May 9, 2001) and
the remainder of such option becomes exercisable in 33 1/3% increments on
each of the next two anniversaries of such date.
5/ Equal to the average of the high and low trading price per share of the
- -
Company's Common Stock on the date of grant, as reported on The New York
Stock Exchange, Inc. Composite Transactions Reporting System.
6/ The options permit the exercise price to be paid in cash or by tendering
- -
shares of Common Stock. The options permit the withholding of shares to
satisfy tax obligations.
7/ The stock price required to produce this value is $24.728 and would produce
- -
a corresponding $156,737,708 increase in total stockholder value based upon
29,280,349 shares of Common Stock outstanding on February 1, 2001.
8/ The stock price required to produce this value is $31.204 and would produce
- -
a corresponding $346,357,248 increase in total stockholder value based upon
29,280,349 shares of Common Stock outstanding on February 1, 2001.
Aggregated FY-End Option Values
Set forth below is supplemental information relating to options exercised
during 2000 and the number and intrinsic value of stock options held at December
29, 2000 ("FY-End"), by the executive officers named in the preceding Summary
Compensation Table. Year-end values are based on the Company's stock price at
December 29, 2000, do not reflect the actual amounts, if any, which may be
realized upon the future exercise of remaining stock options, and should not be
considered indicative of future stock performance.
-15-
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
- -------------------------------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
- -------------------------------------------------------------------------------------------------------------------------
Exercisable/ Exercisable/
Name Shares Acquired Value Realized Unexercisable Unexercisable (2)
on Exercise (#) ($) (1)
- -------------------------------------------------------------------------------------------------------------------------
R.R. Seegmiller 20,000 $ 99,375 94,667/117,333 $1,103,632/1,411,182
H.B. Whitehead 26,667 $144,294 45,401/27,999 $ 654,542/340,884
M.B. Walen 22,500 $149,719 4,167/24,333 $ 38,617/296,289
R.R. McBride n/a n/a 0/11,000 0/$129,938
J.W. Hutton 28,000 $189,831 11,667/22,333 $ 126,461/272,664
- -------------------------------------------------------------------------------------------------------------------------
1/ Value realized equals the Common Stock market price received by the
Executive Officer on the date of exercise (via a cashless exercise and sale
of the Common Stock) less the exercise price, times the number of shares
exercised.
2/ A stock option is considered to be "in-the-money" if the price of the
related stock is higher than the exercise price of the option. The closing
market price of the Common Stock was $31.1875 per share as reported on the
New York Stock Exchange, Inc. Composite Transactions Reporting System for
December 29, 2000.
Long-Term Incentive Plan - Awards in Last Fiscal Year
There were no additional long-term incentive awards made in 2000 to the
executive officers named in the Summary Compensation Table.
Pension Plan Table
Company employees are covered by the Company's Pension Plan (the "Pension
Plan"), a noncontributory defined benefit plan that provides benefits based
generally upon the employee's compensation levels during the last years of
employment. In addition, the Company has entered into agreements to supplement
the benefits payable to certain officers to the extent benefits under the
Pension Plan are limited by provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), or the Employee Retirement Income Security Act of 1974, as
amended. The following table sets forth estimated annual benefits payable for
eligible employees (including executive officers) who retire at age 65 under the
Pension Plan (and, where applicable, such supplemental agreements) for specified
earnings and years of service classification. Amounts shown are for employees
(including all persons listed in the Summary Compensation Table) who were not
"grandfathered" under the Pension Plan (based on years of service and age) as of
September 30, 1988.
-16-
PENSION PLAN TABLE
- ---------------------------------------------------------------------------------------------------------------------------
Remuneration Years of Service
- ---------------------------------------------------------------------------------------------------------------------------
5 10 15 20 25 30 35
- ---------------------------------------------------------------------------------------------------------------------------
125,000 8,673 17,346 26,019 34,692 43,365 52,038 60,711
- ---------------------------------------------------------------------------------------------------------------------------
150,000 10,548 21,096 31,644 42,192 52,740 63,288 73,836
- ---------------------------------------------------------------------------------------------------------------------------
175,000 12,423 24,846 37,269 49,692 62,115 74,538 86,961
- ---------------------------------------------------------------------------------------------------------------------------
200,000 14,298 28,596 42,894 57,192 71,490 85,788 100,086
- ---------------------------------------------------------------------------------------------------------------------------
225,000 16,173 32,346 48,519 64,692 80,865 97,038 113,211
- ---------------------------------------------------------------------------------------------------------------------------
250,000 18,048 36,096 54,144 72,192 90,240 108,288 126,336
- ---------------------------------------------------------------------------------------------------------------------------
300,000 21,798 43,596 65,394 87,192 108,990 130,788 152,586
- ---------------------------------------------------------------------------------------------------------------------------
400,000 29,298 58,596 87,894 117,192 146,490 175,788 205,086
- ---------------------------------------------------------------------------------------------------------------------------
450,000 33,048 66,096 99,144 132,192 165,240 198,288 231,336
- ---------------------------------------------------------------------------------------------------------------------------
500,000 36,798 73,596 110,394 147,192 183,990 220,788 257,586
- ---------------------------------------------------------------------------------------------------------------------------
600,000 44,298 88,596 132,894 177,192 221,490 265,788 310,086
- ---------------------------------------------------------------------------------------------------------------------------
700,000 51,798 103,596 155,394 207,192 258,990 310,788 362,586
- ---------------------------------------------------------------------------------------------------------------------------
750,000 55,548 111,096 166,644 222,192 277,740 333,288 388,836
- ---------------------------------------------------------------------------------------------------------------------------
Compensation under the Pension Plan generally consists of taxable
income and 401(k) deferred amounts. The Pension Plan provides for full vesting
after five years of service. Benefits are payable for the life of the employee
on a single-life annuity basis and are not subject to any deductions for Social
Security or other offset amounts. Covered compensation under the Pension Plan
in 2000 for the executive officers named in the Summary Compensation Table is
the amounts under the "Salary" and "Bonus" columns set forth in such table. The
Company provides Mr. Seegmiller supplemental pension benefits by granting one
month's additional service credit for each month of actual service. For
purposes of the Pension Plan, including Mr. Seegmiller's supplemental pension
benefits, Messrs. Seegmiller, Whitehead, Walen, McBride and Hutton had 11.00,
20.25, 13.67, 1.33 and 15.75 years of credited service, respectively, as of
December 31, 2000.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Introduction
- ------------
The Compensation Committee and the Compensation Subcommittee of the Board
of Directors administer the Company's compensation programs. The Compensation
Committee (the "Committee") is comprised of four non-employee directors: Mr.
Nance, Chairman, and Messrs. Boswell, Smith and Vititoe. The Committee has
responsibility for determining the salaries, annual incentive compensation and
other remuneration of the officers of the Company who are also directors; and
for reviewing and approving the salaries, annual incentive compensation and
other remuneration of all other officers of the Company. The Committee also
approves the design of the Company's compensation and benefit plans. The
Compensation Subcommittee (the "Subcommittee") is comprised of three non-
employee directors: Mr. Nance, Chairman, and Messrs. Boswell and Vititoe. It
was established on December 8, 1999 to administer the Company's long-term
incentive plans for officers and employees.
-17-
The objectives of the executive compensation program are to align
compensation with business strategy, to create value for the stockholders, to
attract, retain, motivate and reward highly qualified executives and to support
a performance-based culture throughout the Company.
The Committee also believes that executive compensation should be subject
to objective scrutiny. Consequently, the Committee retains the services of an
independent consultant, who on a regular basis evaluates the compensation
programs and practices for the Company's executive officers against an industry
peer group.
Components of Compensation
- --------------------------
The Committee relates total compensation levels for the Company's senior
executives to the compensation paid to executives of a peer group of companies.
This peer group consists of companies that are in the same industry and are
considered by the Committee to be competitors for investment dollars in the
energy sector of the market. The Committee reviews and approves the selection
of the peer companies used for compensation comparison purposes. The companies
chosen for the peer group generally are not the same companies which comprise
the Dow Jones Secondary Oils Index, shown in the Performance Graph included in
this proxy statement. The Committee believes that the Company's competitors for
executive talent are not necessarily all of the companies included in the Dow
Jones Secondary Oils Index used for comparing stockholder returns. Competition
for talent is not limited to the size of the organization. Therefore, the
Committee takes into account larger and smaller market capitalization firms in
its selection of the peer group.
The components of the Company's executive compensation program are base
salary, annual incentive bonus and long-term incentives. These components are
described below. In determining each component of compensation, the Committee
and the Subcommittee consider competitive data from the peer group and the
overall value of the total compensation package. The Committee and the
Subcommittee believe that the total compensation package should be competitive
and targeted at the median level of compensation for the peer group and that
superior performance should produce a corresponding increase in value for annual
and long-term incentives.
Base Salaries
- -------------
The Committee reviews each executive's base salary annually. Base salaries
are targeted at market levels and are adjusted by the Committee to recognize
varying levels of responsibility, prior experience, breadth of knowledge,
internal equity issues and external pay practices. Base salaries in 2000 for
the executive officers named in the Summary Compensation Table as a group
approximate the 50/th/ percentile of the predicted competitive market base
salary for similar positions in the peer group. Mr. Seegmiller's base salary of
$375,000 was increased to $410,000 in 2000, the first increase since 1998. This
salary approximates the 50/th/ percentile of the competitive market for his
position and reflects his depth of experience as a Chief Executive.
Annual Incentive Bonus
- ----------------------
The Annual Target Cash Incentive Plan promotes the Company's pay-for-
performance philosophy by providing executives with incentives in the form of
annual bonuses to achieve corporate business and individual performance goals.
Annual bonus opportunities allow the Company to communicate specific goals that
are of primary importance during the coming year and motivate executives to
achieve these goals. The current measurement criteria used in the Annual Target
Cash Incentive Plan are designed to recognize that certain factors which impact
performance are controllable, while others are not controllable, and to reward
executives for superior performance against those factors which are deemed
controllable.
The bonus pool that can be generated under the Annual Target Cash Incentive
Plan is subject to a three-part threshold. For each of the three threshold
tests that are met, one-third of the bonus potential becomes available. The
three threshold tests are: (i) annual cash flow for the Company must equal or
exceed two times debt service, with debt service including interest and dividend
payments, but excluding originally scheduled principal payments unless the
Company's total borrowing capacity is diminished at the time of the principal
repayment; (ii) the Company must achieve 75% or greater performance against its
target for annual discretionary cash flow; and (iii) the Company must achieve an
85% or greater replacement ratio for annual reserves. These thresholds are
approved annually by the Committee in conjunction with its approval of each
bonus plan participant's incentive target percentage.
-18-
If one or more of the three threshold tests is met, the bonus pool is
determined by measuring each business unit's performance and the total Company
performance against the budgeted discretionary cash flow targets adjusted for
non-controllable items, such as commodity prices, interest rates and non-
recurring items. The Committee then has the discretion to adjust, on a
subjective basis, the final overall bonus pool for any business unit and the
final bonus payment for any participant to reflect its assessment of the unit's
and the participant's performance. If a bonus pool is generated based upon
achievement of the established Company goals, executives earn bonuses to the
extent of the performance of their primary business unit and the Company's
overall performance. Individual incentive target percentage opportunity is set
at the median of market levels, which is considered by the Compensation
Committee to be appropriate.
In 2000, all of the three threshold tests were met. The Company's
performance against the three funding tests ranked at or near the Company's best
performance since these three thresholds were adopted in 1996. However, after
reviewing the calculated plan payout, the Committee determined that, primarily
as a result of production delays, the payout did not properly take into account
a number of significant strategic accomplishments attained during the year.
During 2000, the Company reported record financial results in both absolute and
per share terms, replaced 165% of its production through drilling and
acquisitions, with year-end proved reserves increasing to 1,019 Bcfe, had an
exploration drilling program success rate of 59% and an overall drilling success
rate of 86%, with finding costs of less than $1.00 per Mcfe, and improved its
capital structure by retiring a series of preferred stock and reducing long-term
debt by $24 million. As a result of these accomplishments, as well as individual
achievements, and in recognition of the tight labor market in the energy sector,
the Committee utilized its discretion in setting the bonus awards for 2000 at
levels substantially above those that the plan would calculate, as the plan does
not give effect to these accomplishments. Financial results, production levels,
finding costs, reserve replacement and individual performance and contribution
were all factors considered in determining the size of individual awards. This
subjective evaluation resulted in cash bonus awards ranging from 73% to 88% of
the pre-established bonus targets to the executive officers of the Company,
including the executive officers named in the tables above. Mr. Seegmiller
received a cash bonus of $218,000. This represents 88% of Mr. Seegmiller's
target and recognizes the same factors in the Company's 2000 performance that
were applied to the entire group of executive officers.
For 2001 the Committee has modified the way a bonus pool is determined.
Instead of one measure, budgeted discretionary cash flow adjusted for non-
controllable items, the Committee will also measure reserve replacement,
including the quality of the reserve additions, the associated finding costs and
other factors. In this way, both short-term production goals and longer-term
value creation will be measured.
Long Term Incentives
- --------------------
In 2000, the Subcommittee used a combination of stock options and
restricted stock to provide long-term incentives to the Company's executives.
The Subcommittee's objective was to deliver one half of the long-term incentive
value via stock options and one-half in the form of restricted stock. In an
effort to retain key employees during the current tight labor market, where
competition for energy sector executive talent is a significant issue, the
Subcommittee reduced the number of the stock options granted and substituted
restricted stock.
Stock options are granted under the Amended and Restated 1994 Long-Term
Incentive Plan at an option price not less than the fair market value of the
Common Stock on the date of grant. Accordingly, stock options have value only
if the stock price appreciates after the date the options are granted. This
design focuses executives on the creation of stockholder value over the long-
term and encourages equity ownership in the Company.
The size of a stock option grant is based primarily on competitive practice
and is generally targeted to be at the 50th percentile of values granted by the
peer group. The Subcommittee does not typically consider the amount of options
previously granted and outstanding when determining the size of stock option
grants to executive officers. The Subcommittee's objective is to deliver a
competitive award opportunity based on the dollar value of the award granted.
As a result, the number of shares underlying stock option awards is dependent on
the stock price on the date of grant.
Restricted stock awards are granted under the Amended and Restated 1994
Long-Term Incentive Plan. The Company's restricted stock awards to executives
in 2000 consisted of grants of Common Stock, the restrictions on which generally
lapse in full three years from the date of the grant. The restricted stock will
be forfeited if, during the three-year restrictive period, the executive leaves
the Company for any reason other than retirement, termination without cause,
death or disability. Prior to the lapse of such restrictions, the participant
has no right to vote or receive dividends on such shares. The restricted stock
award may not be assigned or transferred except by will or the laws of descent
and distribution. In the
-19-
event of a Change of Control (as defined), the restrictive period shall lapse
and a stock certificate representing the shares of restricted stock shall be
issued to the executive. In the event of any merger, reorganization,
recapitalization, separation, liquidation, stock dividend, split-up, share
combination or other change in the corporate structure of the Company affecting
the shares of restricted stock, the number of shares of restricted stock shall
be equitably adjusted by the Subcommittee to prevent dilution or enlargement of
rights.
In 2000 Mr. Seegmiller was granted an option to purchase 50,000 shares of
Common Stock with an exercise price of $19.375 and a restricted stock award of
30,000 shares in accordance with the competitive market data.
The Company's stock options are intended to constitute "qualified
performance based compensation" as defined under Section 162(m) of the Code,
with the effect that the deduction disallowance of Section 162(m) of the Code
should not be applicable to compensation paid to covered employees under the
stock option provisions. It is the Committee's and the Subcommittee's intent
that the majority of long-term incentive awards will qualify under Section
162(m) of the Internal Revenue Code. To date the Company has experienced no
loss of tax deduction as a result of 162(m).
Conclusion
- ----------
The Committee and the Subcommittee believe these executive compensation
policies and programs serve the interests of stockholders and the Company
effectively. The various pay vehicles offered are appropriately balanced to
provide increased motivation for executives to contribute to the Company's
overall future success, thereby enhancing the value of the Company for the
stockholders' benefit. We will continue to monitor the effectiveness of the
Company's total compensation program to meet the current needs of the Company.
Compensation Committee Compensation Subcommittee
C. Wayne Nance, Chairman C. Wayne Nance, Chairman
Henry O. Boswell Henry O. Boswell
Arthur L. Smith William P. Vititoe
William P. Vititoe
AUDIT COMMITTEE REPORT
The Audit Committee is composed of five non-employee directors. The Board
of Directors has made a determination that the members of the Audit Committee
satisfy the requirements of the New York Stock Exchange as to independence,
financial literacy and experience. The responsibilities of the Audit Committee
are set forth in the Charter of the Audit Committee, which was adopted by the
Board of Directors of the Company on May 9, 2000. A copy of the charter is
attached hereto as Exhibit C. The Audit Committee, among other matters, is
responsible for annually recommending the independent accountants to be
appointed by the Board of Directors as the auditors of the Company and its
subsidiaries, and reviewing the arrangements for and the results of the
auditors' examination of the Company's books and records, auditors'
compensation, internal accounting control procedures, and activities and
recommendations of the Company's internal auditors. It also reviews the
Company's accounting policies, control systems and compliance activities. The
Audit Committee also reviews the Charter of the Audit Committee. This is a
report on the Audit Committee's activities relating to the calendar year 2000.
Review of Audited Financial Statements with Management
- ------------------------------------------------------
The Audit Committee reviewed and discussed the audited financial statements
with the management of the Company.
Review of Financial Statements and Other Matters with Independent Accountants
- -----------------------------------------------------------------------------
The Audit Committee discussed with the independent auditors the matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU Section 380). The Audit Committee has received and reviewed the
written disclosures and the letter from PricewaterhouseCoopers, LLP ("PWC"), the
Company's independent accountants, required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," and has
-20-
discussed with PWC the independent accountant's independence. These discussions
included a review of all audit and non-audit services (including internal audit
and tax services) provided by PWC to the Company.
Recommendation that Financial Statements be Included in Annual Report
- ---------------------------------------------------------------------
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year 2000 for
filing with the Securities and Exchange Commission.
Audit Fees
- ----------
The Company was billed an aggregate of $271,000 in professional fees and
out-of-pocket costs by its auditors, PWC, to audit the Company's financial
statements for the year ended December 31, 2000 and to review financial
statements included in the Company's Forms 10-Q.
Financial Information Systems Design and Implementation Fees
- ------------------------------------------------------------
PWC performed no financial information systems design and implementation
services during 2000.
All Other Fees
- --------------
PWC also provided other services to the Company, including internal audit
and tax services in the year 2000. Total fees and out-of-pocket costs billed by
PWC for these other services rendered in 2000 were $319,000. The Audit
Committee and Board of Directors are aware that PWC provides these services to
the Company and considered whether the provision of these services is compatible
with maintaining PWC's independence.
Audit Committee
Henry O. Boswell (Chairman)
Robert F. Bailey
William R. Esler
P. Dexter Peacock
Arthur L. Smith
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of the Compensation Committee was, during 2000, an officer or
employee of the Company or any of its subsidiaries, or formerly an officer of
the Company or any of its subsidiaries. During 2000, the Company had no
Compensation Committee interlocks.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Mr. C. Wayne Nance, a director of the Company, failed to timely file a Form
4 disclosing one stock option exercise transaction that took place on May 2,
2000. A corrective report has been filed.
EMPLOYMENT AGREEMENTS
AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into Change in Control Agreements (the
"Agreements") with the current executive officers named in the Summary
Compensation Table, and with seven other officers of the Company. The
Agreements are
-21-
intended to encourage such employees to remain in the employ of and to carry out
their duties with the Company. The term of the Agreements was initially three
years from November 3, 1995, subject to automatic one-year extensions on the
second and each subsequent anniversary thereof unless prior to such anniversary
the Company gives written notice that the term shall not be so extended. The
Agreements provide that in the event of a change in control, such individuals
will receive certain benefits in the event of a termination of their employment
within two years of such change in control. A "change in control" is generally
defined as occurring if (i) any "person" becomes the "beneficial owner,"
directly or indirectly, of securities of the Company representing 35% or more of
the combined voting power of the Company's then outstanding securities, (ii)
during any 12-month period, individuals who at the beginning of such period
constitute the Board of Directors cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by the vote of at least a
majority of the directors then still in office who were directors at the
beginning of the period or (iii) the Company sells or otherwise disposes of, in
one transaction or a series of transactions, in a single 12-month period, assets
or properties of the Company representing 50% or more of the total proved
reserves (on a volumetric basis) of the Company as of the beginning of such 12-
month period. Benefits are provided under the Agreements unless such termination
of employment is (i) for cause (as defined in the Agreements), (ii) voluntary by
the executive and does not constitute a constructive termination without cause
(as defined in the Agreements), or (iii) because of the death or disability of
the executive.
Generally, benefits payable under the terms of the Agreements include (i) a
lump-sum cash payment equal to three times the sum of (a) base salary in effect
immediately prior to the change in control or, if greater, immediately prior to
the executive's termination and (b) the greater of (1) 80% of the executive's
target bonus with respect to the fiscal year during which the change in control
occurred or, if greater, the fiscal year during which the executive's
termination occurred or (2) the executive's actual bonus paid in the fiscal year
immediately preceding the change in control, (ii) payment with respect to any
performance shares granted to the executive, such payment to be prorated based
on actual service completed at the time of the executive's termination, and
valued according to the percentage of goal attainment on the date of
termination, (iii) immediate vesting and exercisability of all of the
executive's options to purchase securities of the Company, (iv) immediate
vesting and lapse of restrictions on any restricted stock grants outstanding at
the time of the executive's termination, (v) subject to the payment of the
applicable premiums, continued medical, dental and life insurance coverage for
three years following the date of the executive's termination, (vi) effective
crediting of an additional three years of service in the Company's retirement
plans in which the executive is participating at the time of the change in
control and (vii) outplacement assistance in an amount not to exceed 15% of the
executive's base salary in effect on the date of a change in control (the
"Termination Benefits"). In the event the excise tax relating to Section 280G
of the Code applies to payments by the Company, the Company will make an
additional payment to the executive in an amount such that after payment of
income taxes (but not the excise tax) on such additional payment, the executive
retains an amount equal to the excise tax originally imposed. No payments have
been made under the Agreements.
The Company has entered into both an employment agreement and a Change in
Control Agreement with Mr. Ray R. Seegmiller, Chairman, President and Chief
Executive Officer of the Company. The employment agreement provides that if Mr.
Seegmiller terminates his employment for good reason (as defined in the
agreement) or the Company terminates his employment for any reason other than
cause (as defined in the agreement), Mr. Seegmiller shall receive 12 months of
base salary, as well as continuation of all applicable benefit programs. Under
the terms of Mr. Seegmiller's Change in Control Agreement, in the event of a
termination, Mr. Seegmiller will be required to elect between receiving the
Termination Benefits or the amounts payable to Mr. Seegmiller under his
employment agreement.
-22-
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The following graph compares the Common Stock ("COG") performance with the
performance of the Standard & Poor's 500 Stock Index and the Dow Jones Secondary
Oils-US Index for the period December 1995 through December 2000. The graph
assumes that the value of the investment in the Company's Common Stock and in
each index was $100 on December 31, 1995 and that all dividends were reinvested.
[GRAPH APPEARS HERE]
Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00
- ----------------------------------------------------------------------------------------------------------------
S&P 500 100.0 120.3 157.6 199.6 238.5 214.4
- ----------------------------------------------------------------------------------------------------------------
COG 100.0 118.0 134.7 105.8 114.1 217.5
- ----------------------------------------------------------------------------------------------------------------
DJ Secondary Oils-US 100.0 124.3 122.0 81.8 93.3 147.5
- ----------------------------------------------------------------------------------------------------------------
-23-
BENEFICIAL OWNERSHIP OF OVER FIVE PERCENT OF COMMON STOCK
The following table reports beneficial ownership of Common Stock by holders
of more than five percent of any class of the Company's voting securities.
Unless otherwise noted, all ownership information is based upon filings made by
such persons with the Commission.
Name and Address of Number of Shares Percent of
Beneficial Owner of Common Stock Class
Owned
------------------------------------------ -------------------- ------------------
Luther King Capital Management Corporation
301 Commerce Street, Suite 1600
Fort Worth, TX 76102 1,508,600/(1)/ 5.2%
Neuberger Berman Inc.
Neuberger Berman, LLC.
605 Third Ave.
New York, NY 10158-3698 1,958,981/(2)/ 6.75%
NewSouth Capital Management, Inc.
1000 Ridgeway Loop Rd., Suite 233
Memphis, TN 38120 2,520,401/(3)/ 8.7%
State Street Research & Management Company
One Financial Center, 30/th/ Floor
Boston, MA 02111-2690 1,702,100/(4)/ 5.87%
Wellington Management Company, LLP
75 State Street
Boston, MA 02109 3,568,300/(5)/ 12.26%
_______________
(1) According to a Schedule 13G, dated February 9, 2001, filed with the
Commission by Luther King Capital Management Corporation, it has sole
voting and sole dispositive power over all of these shares.
(2) According to a Schedule 13G, dated February 1, 2001, filed with the
Commission by Neuberger Berman Inc. and Neuberger Berman, LLC., they have
sole voting power over 1,029,081 of these shares, shared voting power over
692,300 of these shares and shared dispositive power over all of these
shares.
(3) According to Amendment No. 6 to a Schedule 13G, dated February 8, 2001,
filed with the Commission by NewSouth Capital Management, Inc., it has sole
voting power over 2,500,401 of these shares, shared voting power over
20,000 of these shares and sole dispositive power over all of these shares.
(4) According to a Schedule 13G, dated February 12, 2001, filed with the
Commission by State Street Research & Management Company, it has sole
voting power over 1,597, 600 of these shares, no voting power over the
remainder of these shares and sole dispositive power over all of these
shares.
(5) According to Amendment No. 13 to a Schedule 13G, dated February 14, 200l,
filed with the Commission by Wellington Management Company, LLP, it has
shared voting power over 2,332,200 of these shares, no voting power over
the remainder of these shares and shared dispositive power over all of
these shares.
-24-
BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table reports, as of February 1, 2001, beneficial ownership
of Common Stock by each current director of the Company, by each executive
officer listed in the Summary Compensation Table and by all directors and
executive officers as a group. Unless otherwise indicated, the persons below
have sole voting and investment power with respect to the shares of Common Stock
shown as beneficially owned by them.
Number of Shares
of Common Percent
Name of Beneficial Owner Stock Owned Class
------------------------------------------------- ----------------------- ------------
Robert F. Bailey................................. 5,501 1/ *
Henry O. Boswell................................. 24,001 2/ *
John G.L. Cabot.................................. 94,796 3/ *
William R. Esler................................. 21,001 4/ *
C. Wayne Nance................................... 15,001 5/ *
P. Dexter Peacock................................ 9,334 6/ *
Charles P. Siess, Jr............................. 115,093 7/ *
Arthur L. Smith.................................. 3,334 *
William P. Vititoe............................... 7,616 8/ *
Ray R. Seegmiller................................ 144,532 9/13/ *
H. Baird Whitehead............................... 22,598 10/ *
Michael B. Walen................................. 13,879 11/13 *
Robert R. McBride, Jr............................ 0 *
Jeffrey W. Hutton................................ 9,809 12/13/ *
-- --
All directors and executive officers as a group
(16 individuals)............................... 492,995 14/ 1.7%
--
________________
* Represents less than 1% of the outstanding Common Stock.
1/ Includes 5,001 shares purchasable upon the exercise of options within 60
- - days.
2/ Includes 20,001 shares purchasable upon the exercise of options within 60
- - days.
3/ Includes 1,782 shares held by Mr. Cabot's spouse and 13,184 shares held by
- - various trusts of which Mr. Cabot serves as co-trustee, as to all of which
Mr. Cabot shares voting and/or investment power; Mr. Cabot disclaims
beneficial ownership of such shares. Also includes 5,001 shares purchasable
upon the exercise of options within 60 days.
4/ Includes 17,001 shares purchasable upon the exercise of options within 60
- - days.
5/ Includes 15,001 shares purchasable upon the exercise of options within 60
- - days.
6/ Includes 8,334 shares purchasable upon the exercise of options within 60
- - days.
7/ Includes 89,334 shares purchasable upon the exercise of options within 60
- - days.
8/ Includes 5,001 shares purchasable upon the exercise of options within 60
- - days.
9/ Includes 67,334 shares purchasable upon the exercise of options within 60
- - days.
10/ Includes 1,309 shares held in the Company's Savings Investment Plan as to
- -- which Mr. Whitehead shares voting and investment power and 5,334 shares
purchasable upon the exercise of options within 60 days.
11/ Includes 4,167 shares purchasable upon the exercise of options within 60
- -- days.
-25-
12/ Includes 532 shares held in the Company's Savings Investment Plan as to
which Mr. Hutton shares voting and investment power.
13/ Includes 30,000, 6,500 and 5,750 shares of restricted stock granted to
- -- Messrs. Seegmiller, Walen and Hutton, respectively on May 9, 2000, the
restrictions on which lapse May 9, 2003. Messrs. Seegmiller, Walen and
Hutton have no voting or investment power with respect to these shares
during the restrictive period.
14 Includes 1,841 shares held in the Company's Savings Investment Plan as to
- -- which the executive officers share voting and investment power and 268,842
shares purchasable by the executive officers and directors upon the
exercise of options within 60 days. Also includes 47,250 shares of
restricted stock granted to the executive officers. See also Notes 1-13
above.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended for inclusion in the proxy statement for
the 2002 Annual Meeting of Stockholders of the Company, and otherwise eligible,
should be sent to Ms. Lisa A. Machesney, Secretary, Cabot Oil & Gas Corporation,
1200 Enclave Parkway, Houston, Texas 77077 and must be received by November 26,
2001.
The Bylaws of the Company require timely advance written notice of
stockholder nominations of director candidates and of any other business to be
presented by a stockholder at an annual meeting of stockholders. To be timely,
the Bylaws require advance written notice be delivered to the Company's
Secretary at the principal executive offices of the Company not later than the
close of business on the 60th day, nor earlier than the close of business on the
90th day, prior to the anniversary of the preceding year's annual meeting (with
certain exceptions if the date of the annual meeting is different by more than
specified amounts from the anniversary date). The deadline for submission for
the 2002 Annual Meeting of Stockholders is currently March 4, 2002. To be valid,
a notice must set forth certain information specified in the Bylaws.
SOLICITATION OF PROXIES
The cost of soliciting proxies in the enclosed form will be borne by the
Company. In addition to solicitation by mail, officers, employees or agents of
the Company may solicit proxies personally, by telephone and by telegraph. The
Company may request banks and brokers or other similar agents or fiduciaries to
transmit the proxy material to the beneficial owners for their voting
instructions and will reimburse them for their expenses in so doing. Corporate
Investor Communications, Inc. has been retained to assist the Company in the
solicitation of proxies at a fee estimated not to exceed $12,000, plus expenses.
MISCELLANEOUS
The Company's management does not know of any matters to be presented at
the Annual Meeting other than those set forth in the Notice of Annual Meeting of
Stockholders. However, if any other matters properly come before the Annual
Meeting, the persons named in the enclosed proxy intend to vote the shares to
which the proxy relates on such matters in accordance with their best judgment
unless otherwise specified in the proxy.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Lisa A. Machesney
LISA A. MACHESNEY
Corporate Secretary
March 29, 2001
-26-
EXHIBIT A
CABOT OIL & GAS CORPORATION
SECOND AMENDED AND RESTATED 1994 LONG-TERM INCENTIVE PLAN
1. Objectives. The Cabot Oil & Gas Corporation Second Amended and
Restated 1994 Long-Term Incentive Plan (the "Plan") is designed to attract and
retain key executives and other selected employees and reward them for making
major contributions to the success of Cabot Oil & Gas Corporation, a Delaware
corporation (the "Company"), and its Subsidiaries (as hereinafter defined).
These objectives are to be accomplished by making awards under the Plan and
thereby providing Participants (as hereinafter defined) with a proprietary
interest in the growth and performance of the Company and its Subsidiaries.
2. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
"Award" means the grant of any form of Stock Option, Stock
Appreciation Right, Stock Award, Performance Award or Cash Award, whether
granted singly, in combination or in tandem, to a Participant pursuant to any
applicable terms, conditions and limitations as the Committee may establish in
order to fulfill the objectives of the Plan.
"Award Agreement" means a written agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
an Award.
"Board" means the Board of Directors of the Company.
"Cash Award" means an Award denominated in cash.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means such committee of the Board as is designated by the
Board to administer the Plan.
"Common Stock" means the Class A Common Stock, par value $.10 per
share, of the Company.
"Company" means Cabot Oil & Gas Corporation.
"Employee" means any person who is receiving remuneration for personal
services (or could be receiving remuneration except for an authorized leave of
absence) as an employee of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" means, as of a particular date, (i) if the shares
of Common Stock are listed on a national securities exchange, the average
between the highest and lowest sales price per share of Common Stock on the
consolidated transaction reporting system for the principal such national
securities exchange on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was so
reported, or, at the discretion of the Committee, the price prevailing on the
exchange at the time of the relevant event on such date; (ii) if the shares of
Common Stock are not so listed but are quoted in the NASDAQ National Market
System, the average between the highest and lowest sales price per share of
Common Stock on the NASDAQ National Market System on that date, or, if there
shall have been no such sale so reported on that date, on the last preceding
date on which such a sale was so reported or, at the discretion of the
Committee, the price prevailing on the NASDAQ National Market at the time of the
relevant event on such date or (iii) if the Common Stock is not so listed or
quoted, the average between the closing bid and asked price on that date, or, if
there are no quotations available for such date, on the last preceding date on
which such quotations shall be available, as reported by NASDAQ, or, if not
reported by NASDAQ, by the National Quotation Bureau, Inc.
A-1
"Incentive Stock Option" or "ISO" means a Stock Option that complies
with Section 422 of the Code.
"Participant" means an employee of the Company or any of its
Subsidiaries to whom an Award has been made under this Plan.
"Performance Award" means an Award paid, vested or otherwise
deliverable on account of one or more pre-established objective Performance
Goals established by the Committee.
"Performance Goal" means a standard established by the Committee to
determine in whole or in part whether a Performance Award shall be earned.
"Restricted Stock" means Common Stock that is restricted or subject to
forfeiture provisions.
"Stock Award" means an Award consisting of Common Stock or denominated
in units of Common Stock.
"Stock Appreciation Right" or "SAR" means the right to receive a
payment, in cash or Common Stock, equal to the excess of the Fair Market Value
or other specified valuation of a number of shares of Common Stock on the date
the stock appreciation right is exercised over a specific strike price.
"Stock Based Awards Limitations" means the limitations applied to any
awards granted hereunder as described in Section 7(f)(i) and (ii) of the Plan.
"Stock Option" means a right to purchase a specified number of shares
of Common Stock at a specified price that is not less than the greater of (i)
the Fair Market Value of the Common Stock on the date of grant and (ii) the par
value of the Common Stock on the date of grant.
"Subsidiary" means any corporation of which the Company directly or
indirectly owns shares representing more than 50% of the voting power of all
classes or series of capital stock of such corporation which have the right to
vote generally on matters submitted to a vote of the stockholders of such
corporation.
3. Eligibility. Employees and individuals who have agreed to
become Employees of the Company and its Subsidiaries are eligible for an Award
under this Plan.
4. Common Stock Available for Awards. There shall be available for
Awards granted wholly or partly in Common Stock (including rights or options
which may be exercised for or settled in Common Stock) during the term of this
Plan an aggregate of 3,700,000 shares of Common Stock of which no more than 30%
of such shares will be used for Stock Awards. The Board and the appropriate
officers of the Company shall from time to time take whatever actions are
necessary to file required documents with governmental authorities and stock
exchanges and transaction reporting systems to make shares of Common Stock
available for issuance pursuant to Awards. Common Stock related to Awards that
are forfeited or terminated, expire unexercised, are settled in cash in lieu of
Stock or in a manner such that all or some of the shares covered by an Award are
not issued to a Participant, or are exchanged for Awards that do not involve
Common Stock, shall immediately become available for Awards hereunder. The
Committee may from time to time adopt and observe such procedures concerning the
counting of shares against the Plan maximum as it may deem appropriate.
5. Administration. This Plan shall be administered by the Committee,
which shall have full and exclusive power to interpret this Plan and to adopt
such rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Award, accelerate the vesting or exercisability of an
Award, eliminate or make less restrictive any restrictions contained in an
Award, waive any restriction or other provision of this Plan or an Award or
otherwise amend or modify an Award in any manner that is either (i) not adverse
to the Participant holding such Award or (ii) consented to by such Participant.
The Committee may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or in any Award in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect. Any decision of
the Committee in the interpretation and administration of this Plan shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned. No member of the Committee or officer of the
Company to whom it has delegated authority in accordance with the provisions of
Paragraph 6 of this Plan shall be liable for anything done or
A-2
omitted to be done by him or her, by any member of the Committee or by any
officer of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided
by statute. The Committee shall establish the vesting schedule, if any, for each
Award. It is the intent of this Plan that any Stock Option grants will never be
repriced or substituted for new Stock Option grants with a lower exercise price.
6. Delegation of Authority. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties under
this Plan pursuant to such conditions or limitations as the Committee may
establish.
7. Awards. The Committee shall determine the type or types of Awards
to be made to each Participant under this Plan. Each Award made hereunder shall
be embodied in an Award Agreement, which shall contain such terms, conditions,
performance requirements and limitations as shall be determined by the Committee
in its sole discretion and shall be signed by the Participant and by the Chief
Executive Officer, the Chief Operating Officer, or any Vice President of the
Company for and on behalf of the Company. Awards may consist of those listed in
this Paragraph 7 and may be granted singly, in combination or in tandem
(a) Stock Option. An Award may consist of a right to purchase a
specified number of shares of Common Stock at a specified price that is not less
than the greater of (i) the Fair Market Value of the Common Stock on the date of
grant and (ii) the par value of the Common Stock on the date of grant. A Stock
Option may be in the form of an Incentive Stock Option which, in addition to
being subject to applicable terms, conditions and limitations established by the
Committee, complies with Section 422 of the Code.
(b) Stock Appreciation Right. An Award may consist of a right to
receive a payment, in cash or Common Stock, equal to the excess of the Fair
Market Value or other specified valuation of a specified number of shares of
Common Stock on the date the Stock Appreciation Right is exercised over a
specified strike price as set forth in the applicable Award Agreement.
(c) Stock Award. An Award may consist of Common Stock or may be
denominated in units of Common Stock. All or part of any Stock Award may be
subject to conditions established by the Committee, and set forth in the Award
Agreement, which may include, but are not limited to, continuous service with
the Company and its Subsidiaries, achievement of specific business objectives,
increases in specified indices, attaining specified growth rates and other
comparable measurements of performance. Such Awards may be based on Fair Market
Value or other specified valuations. The certificates evidencing shares of
Common Stock issued in connection with a Stock Award shall contain appropriate
legends and restrictions describing the terms and conditions of the restrictions
applicable thereto.
(d) Cash Award. An Award may be denominated in cash with the amount
of the eventual payment subject to future service and such other restrictions
and conditions as may be established by the Committee, and set forth in the
Award Agreement, including, but not limited to, continuous service with the
Company and its Subsidiaries, achievement of specific business objectives,
increases in specified indices, attaining specified growth rates and other
comparable measurements of performance.
(e) Performance Award. Without limiting the type or number of Awards
that may be made under the other provisions of this Plan, an Award may be in the
form of a Performance Award. A Performance Award shall be paid, vested or
otherwise deliverable solely on account of the attainment of one or more pre-
established, objective Performance Goals established by the Committee prior to
the earlier to occur of (i) 90 days after the commencement of the period of
service to which the Performance Goal relates and (ii) the lapse of 25% of the
period of service (as scheduled in good faith at the time the goal is
established), and in any event while the outcome is substantially uncertain. A
Performance Goal is objective if a third party having knowledge of the relevant
facts could determine whether the goal is met. Such a Performance Goal may be
based on one or more business criteria that apply to the Employee, one or more
business units of the Company, or the Company as a whole, and may include one or
more of the following: increased revenue, net income, stock price, market share,
earnings per share, other earnings measures, return on equity, return on assets,
decrease in costs, shareholder value, EBIT, EBITDA, funds from operations, cash
flow, cash from operations, net cash flow, net cash flow before financing
activities, other cash flow measures, total shareholder return, return on
capital, return on invested capital, operating income, after-tax operating
income, reserve additions, proceeds from dispositions, production volumes,
reserve replacement measures, finding and development costs, total market value,
petroleum reserve measures and safety and environmental performance measures.
Unless otherwise stated, such a Performance Goal need not be based upon an
increase or positive result under a particular business criterion and could
include, for example, maintaining the status quo or limiting economic losses
(measured, in each
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case, by reference to specific business criteria). In interpreting Plan
provisions applicable to Performance Goals and Performance Awards, it is the
intent of the Plan to conform with the standards of Section 162(m) of the Code
and Treasury Regulation (S) 1.162-27(e)(2)(i), and the Committee in establishing
such goals and interpreting the Plan shall be guided by such provisions. Prior
to the payment of any compensation based on the achievement of Performance
Goals, the Committee must certify in writing that applicable Performance Goals
and any of the material terms thereof were, in fact, satisfied. Subject to the
foregoing provisions, the terms, conditions and limitations applicable to any
Performance Awards made pursuant to this Plan shall be determined by the
Committee.
(f) Notwithstanding anything to the contrary contained in this Plan,
the following limitations shall apply to any Awards made hereunder:
(i) no Participant may be granted, during any calendar year, Awards
consisting of Stock Options or Stock Appreciation Rights that are exercisable
for more than 500,000 shares of Common Stock;
(ii) no Participant may be granted, during any calendar year, Stock
Awards covering or relating to more than 100,000 shares of Common Stock; and
(iii) no Participant may be granted Awards consisting of cash or in
any other form permitted under this Plan (other than Awards consisting of Stock
Options or Stock Appreciation Rights or Stock Awards) in respect of any calendar
year having a value determined on the date of grant in excess of $2,000,000.
8. Payment of Awards.
(a) General. Payment of Awards may be made in the form of cash or
Common Stock or combinations thereof and may include such restrictions as the
Committee shall determine, including in the case of Common Stock, restrictions
on transfer and forfeiture provisions. As used herein, "Restricted Stock" means
Common Stock that is restricted or subject to forfeiture provisions.
(b) Deferral. With the approval of the Committee, payments may be
deferred, either in the form of installments or a future lump sum payment. The
Committee may permit selected Participants to elect to defer payments of some or
all types of Awards in accordance with procedures established by the Committee.
Any deferred payment, whether elected by the Participant or specified by the
Award Agreement or by the Committee, may be forfeited if and to the extent that
the Award Agreement so provides.
(c) Dividends and Interest. Dividends or dividend equivalent rights
may be extended to and made part of any Award denominated in Common Stock or
units of Common Stock, subject to such terms, conditions and restrictions as the
Committee may establish. The Committee may also establish rules and procedures
for the crediting of interest on deferred cash payments and dividend equivalents
for deferred payment denominated in Common Stock or units of Common Stock.
9. Stock Option Exercise. The price at which shares of Common
Stock may be purchased under a Stock Option shall be paid in full at the time of
exercise in cash or, if permitted by the Committee, by means of tendering Common
Stock or surrendering another Award, including Restricted Stock, valued at Fair
Market Value on the date of exercise, or any combination thereof. The Committee
shall determine acceptable methods for tendering Common Stock or other Awards to
exercise a Stock Option as it deems appropriate. If permitted by the Committee,
payment may be made by successive exercises by the Participant. The Committee
may provide for loans from the Company to permit the exercise or purchase of
Awards and may provide for procedures to permit the exercise or purchase of
Awards by use of the proceeds to be received from the sale of Common Stock
issuable pursuant to an Award. Unless otherwise provided in the applicable Award
Agreement, in the event shares of Restricted Stock are tendered as consideration
for the exercise of a Stock Option, a number of the shares issued upon the
exercise of the Stock Option, equal to the number of shares of Restricted Stock
used as consideration therefor, shall be subject to the same restrictions as the
Restricted Stock so submitted as well as any additional restrictions that may be
imposed by the Committee.
10. Tax Withholding. The Company shall have the right to deduct
applicable taxes from any Award payment and withhold, at the time of delivery or
vesting of cash or shares of Common Stock under this Plan, an appropriate amount
of cash or number of shares of Common Stock or a combination thereof for payment
of taxes required by law or to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for withholding of such taxes.
The Committee may also permit withholding to be satisfied by the transfer to the
Company of shares of Common
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Stock theretofore owned by the holder of the Award with respect to which
withholding is required. If shares of Common Stock are used to satisfy tax
withholding, such shares shall be valued based on the Fair Market Value when the
tax withholding is required to be made.
11. Amendment, Modification, Suspension or Termination. The Board may
amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law except that (i) no amendment or alteration that would impair the rights
of any Participant under any Award previously granted to such Participant shall
be made without such Participant's consent and (ii) no amendment or alteration
shall be effective prior to approval by the Company's stockholders to the extent
such approval is then required by applicable legal requirements.
12. Termination of Employment. Upon the termination of employment by
a Participant, any unexercised, deferred or unpaid Awards shall be treated as
provided in the specific Award Agreement evidencing the Award. In the event of
such a termination, the Committee may, in its discretion, provide for the
extension of the exercisability of an Award, accelerate the vesting or
exercisability of an Award, eliminate or make less restrictive any restrictions
contained in an Award, waive any restriction or other provision of this Plan or
an Award or otherwise amend or modify the Award in any manner that is either (i)
not adverse to such Participant or (ii) consented to by such Participant.
13. Assignability. Unless otherwise determined by the Committee and
provided in the Award Agreement, no Award or any other benefit under this Plan
constituting a derivative security within the meaning of Rule 16a-1(c) under the
Exchange Act shall be assignable or otherwise transferable except 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, or the rules thereunder. The Committee may prescribe and include
in applicable Award Agreements other restrictions on transfer. Any attempted
assignment of an Award or any other benefit under this Plan in violation of this
Paragraph 13 shall be null and void.
14. Adjustments.
(a) The existence of outstanding Awards shall not affect in any manner
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to the
Common Stock) or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of Common
Stock or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of Common
Stock, the Committee may adjust proportionally (i) the number of shares of
Common Stock reserved under this Plan and covered by outstanding Awards
denominated in Common Stock or units of Common Stock; (ii) the exercise or other
price in respect of such Awards; (iii) the appropriate Fair Market Value and
other price determinations for such Awards; and (iv) the Stock Based Awards
Limitations, as provided in Section 7(f) to reflect such transaction. In the
event of any consolidation or merger of the Company with another corporation or
entity or the adoption by the Company of a plan of exchange affecting the Common
Stock or any distribution to holders of Common Stock of securities or property
(other than normal cash dividends or dividends payable in Common Stock), the
Committee shall make such adjustments or other provisions as it may deem
equitable, including adjustments to avoid fractional shares, to give proper
effect to such event. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation, the
Committee shall be authorized to issue or assume stock options, regardless of
whether in a transaction to which Section 424(a) of the Code applies, by means
of substitution of new options for previously issued options or an assumption of
previously issued options, or to make provision for the acceleration of the
exercisability of, or lapse of restrictions with respect to, Awards and the
termination of unexercised options in connection with such transaction.
15. Restrictions. No Common Stock or other form of payment shall be
issued with respect to any Award unless the Company shall be satisfied based on
the advice of its counsel that such issuance will be in compliance with
applicable federal and state securities laws. Certificates evidencing shares of
Common Stock delivered under this Plan may be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under the
rules,
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regulations and other requirements of the Securities and Exchange Commission,
any securities exchange or transaction reporting system upon which the Common
Stock is then listed and any applicable federal and state securities law. The
Committee may cause a legend or legends to be placed upon any such certificates
to make appropriate reference to such restrictions.
16. Unfunded Plan. Insofar as it provides for Awards of cash, Common
Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping
accounts may be established with respect to Participants who are entitled to
cash, Common Stock or rights thereto under this Plan, any such accounts shall be
used merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets that may at any time be represented by cash, Common Stock
or rights thereto, nor shall this Plan be construed as providing for such
segregation, nor shall the Company nor the Board nor the Committee be deemed to
be a trustee of any cash, Common Stock or rights thereto to be granted under
this Plan. Any liability or obligation of the Company to any Participant with
respect to a grant of cash, Common Stock or rights thereto under this Plan shall
be based solely upon any contractual obligations that may be created by this
Plan and any Award Agreement, and no such liability or obligation of the Company
shall be deemed to be secured by any pledge or other encumbrance on any property
of the Company. Neither the Company nor the Board nor the Committee shall be
required to give any security or bond for the performance of any obligation that
may be created by this Plan.
17. Governing Law. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Delaware.
18. Effective Date of Plan. This amended and restated Plan shall be
effective as of the date (the "Effective Date") it is approved by the Board of
Directors of the Company. Notwithstanding the foregoing, the adoption of this
Plan is expressly conditioned upon the approval by the holders of a majority of
shares of Common Stock present, or represented, and entitled to vote at a
meeting of the Company's stockholders held on or before December 31, 2001. If
the stockholders of the Company should fail so to approve the provisions of this
Plan, the Plan shall revert to the provisions as in effect under the Amended and
Restated 1994 Long-Term Incentive Plan of Cabot Oil & Gas Corporation.
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EXHIBIT B
CABOT OIL & GAS CORPORATION
SECOND AMENDED AND RESTATED1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose of the Plan. This Non-employee Director Stock Option
Plan (the "Plan") is intended as an incentive to retain and attract persons of
training, experience and ability to serve as independent directors on the Board
of Directors of Cabot Oil & Corporation, a Delaware corporation (the "Company"),
to encourage the sense of proprietorship of such persons and to stimulate the
active interest of such persons in the development and financial success of the
Company. It is further intended that the options granted pursuant to this Plan
(the "Options") will be non-qualified options within the meaning of Section 83
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Stockholder Approval. All Options granted pursuant to this Plan
are subject to, and may not be exercised before, the approval of this Plan by
the affirmative vote of the holders of a majority of the outstanding shares of
the Class A Common Stock, par value $.10 per share (the "Common Stock"), of the
Company that are present, or represented, and entitled to vote at a meeting of
the Company's stockholders.
3. Designation of Participants; Automatic Grant of Options. Each
director of the Company who is not an employee of the Company or any Subsidiary
(as hereinafter defined) of the Company (any such director being hereinafter
referred to as a "Non-employee Director") shall be granted Options as described
hereunder. Each individual who becomes a Non-employee Director after the
Effective Date shall automatically be granted Options to purchase 10,000 shares
of Common Stock (subject to adjustment as provided in Paragraph 10) on the date
such person first becomes a Non-employee Director. Furthermore, at each annual
meeting of stockholders (other than when the director's status as such
terminates at such meeting), each Non-employee Director shall automatically be
granted Options to purchase an additional 5,000 shares of Common Stock (subject
to adjustment as provided in Paragraph 10) on such date. Notwithstanding the
foregoing, in the case of any grant of Options made on a date subsequent to the
Effective Date, such grant shall only be made if the number of shares subject to
future grant under this Plan is sufficient to make all automatic grants required
to be made pursuant to this Plan on such date of grant. As used herein, the term
"Subsidiary" of the Company shall mean any corporation of which the Company
directly or indirectly owns shares representing more than 50% of the voting
power of all classes or series of capital stock of such corporation which have
the right to vote generally on matters submitted to a vote of the stockholders
of such corporation.
4. Option Agreement. Each Option granted hereunder shall be
embodied in a written option agreement ("Option Agreement"), which shall be
subject to the terms and conditions set forth herein and shall be signed by the
Optionee and by the Chief Executive Officer, the Chief Operating Officer, or any
Vice President of the Company for and on behalf of the Company.
5. Common Stock Reserved for the Plan. Subject to adjustment as
provided in Paragraph 10 hereof, a total of 500,000 shares of Common Stock shall
be reserved for issuance upon the exercise of Options granted pursuant to this
Plan. The shares subject to the Plan shall consist of unissued shares or
previously issued shares reacquired and held by the Company, or any parent or
subsidiary of the Company, in its treasury. The Board of Directors and the
appropriate officers of the Company shall from time to time take whatever
actions are necessary to execute, acknowledge, file and deliver any documents
required to be filed with or delivered to any governmental authority or any
stock exchange or transaction reporting system on which shares of Common Stock
are listed or quoted in order to make shares of Common Stock available for
issuance to an Optionee (as hereinafter defined) pursuant to this Plan. Common
Stock subject to Options that are forfeited or terminated or expire unexercised
in such a manner that all or some of the shares subject thereto are not issued
to an Optionee shall immediately become available for the granting of Options.
As used herein, the term "Optionee" shall mean any Non-employee Director to whom
Options are granted hereunder.
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6. Option Price.
(a) The purchase price of each share of Common Stock that is subject
to an Option granted pursuant to this Plan shall be 100% of the Fair Market
Value of such share of Common Stock on the date the Option is granted.
(b) The Fair Market Value of a share of Common Stock on a particular
date shall be deemed to be (i) if the shares of Common Stock are listed on a
national securities exchange, the average between the highest and lowest sales
price per share of Common Stock on the consolidated transaction system reporting
system for such national securities exchange on that date, or, if there shall
have been no such sale so reported on that date, on the last preceding date on
which such a sale was so reported, or, at the discretion of the Board of
Directors, the price prevailing on the exchange at the time of the relevant
event on such date; (ii) if the shares of Common Stock are not so listed but are
quoted in the NASDAQ National Market System, the average between the highest and
lowest sales price per share of Common Stock on the NASDAQ National Market
System on that date, or, if there shall have been no such sale so reported on
that date, on the last preceding date on which such a sale was so reported or,
at the discretion of the Board of Directors, the price prevailing on the NASDAQ
National Market at the time of the relevant event on such date or (iii) if the
Common Stock is not so listed or quoted, the average between the closing bid and
asked price on that date, or, if there are no quotations available for such
date, on the last preceding date on which such quotations shall be available, as
reported by NASDAQ, or, if not reported by NASDAQ, by the National Quotation
Bureau, Inc.
7. Option Period. Each Option granted pursuant to this Plan shall
terminate and be of no force and effect with respect to any shares of Common
Stock not purchased by the Optionee upon the earliest to occur of the following:
(a) the expiration of five years following the date upon which the Option is
granted; (b) the expiration of one year following the date upon which the
Optionee ceases to be a Non-employee Director by reason of death, disability or
mandatory retirement; or (c) the expiration of three months following the date
on which the Optionee ceases to be a Non-employee Director for any reason other
than death, disability or mandatory retirement.
8. Exercise of Options.
(a) Options granted pursuant to this Plan shall be exercisable, on a
cumulative basis, as follows: (i) with respect to 33 1/3% of the total number of
shares of Common Stock initially subject to any Option, such Option shall be
exercisable on the first anniversary of the date of grant; and (ii) with respect
to the remaining shares of Common Stock subject to any Option, such Option shall
be exercisable with respect to an additional 33 1/3% of the total number of
shares initially subject thereto as of the second and third anniversaries of the
date of the grant.
(b) An Option may be exercised solely by the Optionee during his
lifetime or after his death by the person or persons entitled thereto under his
will or the laws of descent and distribution.
(c) In the event that an Optionee ceases to serve as a Non-employee
Director for any reason other than death, disability or mandatory retirement, an
Option granted to such Optionee may be exercised only to the extent such Option
was exercisable at the time he ceased to serve in such capacity.
(d) In the event that an Optionee ceases to serve as a Non-employee
Director by reason of death, disability or mandatory retirement, at a time when
an Option granted hereunder is still in force and unexpired under the terms of
Paragraph 7 hereof, each such unmatured Option shall be accelerated. Such
acceleration shall be effective as of the date of death, disability or
retirement, as appropriate, and each Option so accelerated shall be exercisable
in full for so long as it is still in force and unexpired under the terms of
Paragraph 7 hereof.
(e) The purchase price of the shares as to which an Option is
exercised shall be paid in full at the time of the exercise. Such purchase price
shall be payable in cash or by means of tendering theretofore owned Common Stock
which has been held by the Optionee for more than six months, valued at Fair
Market Value on the date of exercise, or any combination thereof. An Optionee
may also exercise an Option by use of the proceeds to be received from the sale
of Common Stock issuable pursuant to the Option. No holder of an Option shall
be, or have any of the rights or privileges of, a stockholder of the Company in
respect of any shares subject to any Option unless and until certificates
evidencing such shares shall have been issued by the Company to such holder.
9. Assignability. Unless otherwise determined by the Board of
Directors and provided in the Option Agreement, no Option shall be assignable or
otherwise transferable except by will or the laws of descent and distribution or
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pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act, or the rules thereunder. Any
attempted assignment of an Option in violation of this Paragraph 9 shall be null
and void.
10. Adjustments.
(a) The existence of outstanding Options shall not affect in any
manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the capital stock of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock (whether or not such issue is prior to, on a parity with
or junior to the Common Stock) or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding of any kind, whether or not of a character
similar to that of the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding
shares of Common Stock or declaration of a dividend payable in shares of Common
Stock or capital reorganization or reclassification or other transaction
involving an increase or reduction in the number of outstanding shares of Common
Stock, the Board of Directors may adjust proportionally (i) the number of shares
of Common Stock reserved under these Options; and (ii) the exercise price of
such Options. In the event of any consolidation or merger of the Company with
another corporation or entity or the adoption by the Company of a plan of
exchange affecting the Common Stock or any distribution to holders of Common
Stock of securities or property (other than normal cash dividends or dividends
payable in Common Stock), the Board of Directors shall make such adjustments or
other provisions as it may deem equitable, including adjustments to avoid
fractional shares, to give proper effect to such event. In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board of Directors shall be authorized to
issue or assume stock options, regardless of whether in a transaction to which
Section 424(a) of the Code applies, by means of substitution of new options for
previously issued options or an assumption of previously issued options, or to
make provision for the acceleration of the exercisability of, or lapse of
restrictions with respect to, the termination of unexercised options in
connection with such transaction.
(c) An Option shall become fully exercisable upon a Change in Control
(as hereinafter defined) of the Company. For purposes of this Plan, a "Change of
Control" shall be conclusively deemed to have occurred if (and only if) any of
the following events shall have occurred: (a) there shall have occurred an event
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A (or in response to any similar item on any similar schedule or form)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether or not the Company is then subject to such reporting requirement;
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) shall have become the "beneficial owner" (as defined in Rule l3d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding voting securities without prior approval of at least two-thirds of
the members of the Board of Directors in office immediately prior to such
person's attaining such percentage interest; (c) the Company is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors in office
immediately prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter or (d) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at least a
majority of the Board of Directors.
11. Taxes. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes that it determines is required in
connection with any Options granted to any Optionee hereunder.
12. Amendments or Termination. The Board of Directors of the Company
may amend, alter or discontinue this Plan, except that (a) no amendment or
alteration that would impair the rights of any Optionee under any Option that he
has been granted shall be made without his consent and (b) no amendment or
alteration shall be effective prior to approval by the Company's stockholders to
the extent such approval is then required.
13. Government Regulations. This Plan, and the granting and exercise
of Options hereunder, and the obligation of the Company to sell and deliver
shares of Common Stock under such Options, shall be subject to all applicable
laws, rules and regulations, and to such approvals on the part of any
governmental agencies or national securities exchanges or transaction reporting
systems as may be required.
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14. Governing Law. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Delaware.
15. Effective Date of Plan. This amended and restated Plan shall be
effective as of the date (the "Effective Date") it is approved by the Board of
Directors of the Company. Notwithstanding the foregoing, the adoption of this
amended and restated Plan is expressly conditioned upon the approval by the
holders of a majority of shares of Common Stock present, or represented, and
entitled to vote at a meeting of the Company's stockholders held on or before
December 31, 2001. If the stockholders of the Company should fail so to approve
this amended and restated Plan prior to such date, this amended and restated
Plan shall revert to the provisions of the prior plan and all grants of options
hereunder in excess of the Plan's limitations shall be null and void.
16. Miscellaneous. The granting of any Option shall not impose upon
the Company, the Board of Directors of the Company or any other directors of the
Company any obligation to nominate any Optionee for election as a director and
the right of the stockholders of the Company to remove any person as a director
of the Company shall not be diminished or affected by reason of the fact that an
Option has been granted to such person.
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EXHIBIT C
CABOT OIL & GAS CORPORATION
CHARTER OF THE
AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
(Adapted May 9, 2000)
The Board of Directors of Cabot Oil & Gas Corporation (hereafter "Company")
has heretofore constituted and established an Audit Committee of the Board of
Directors with authority, responsibility and specific duties as described in the
Statement of Responsibilities and Authorities of the Audit Committee, adapted by
the Board of Directors on May 5, 1990. This charter replaces and supersedes in
its entirety the Statement of Responsibilities and Authorities of the Audit
Committee.
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
compliance by the Company with legal and regulatory requirements and (3) the
independence and performance of the Company's internal and external auditor. The
independent auditors are ultimately accountable to the Audit Committee and the
Board of Directors.
The members of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange. The members of the Audit
Committee shall be appointed by the Board on the recommendation of the Chairman
of the Board.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel
or independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles
and practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
3. Recommend to the Board of Directors whether the Company's annual
audited financial statements and accompanying notes should be included
in the Company's Annual Report on Form 10-K.
4. Review with management and the independent auditor any matters
provided in Statement on Auditing Standards No. 71 (significant events
during auditor's quarterly review, such as a material change in
accounting principles, a significant subsequent event or significant
accounting adjustments) arising in connection with the Company's
quarterly financial statements.
5. Meet periodically (generally semi-annually) with management to review
the Company's report on accounting reserves and estimates, and any
other reports on reserves, estimates or exposures, and any steps
management is taking in respect of these items.
6. Review material changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor,
internal auditor or management .
7. Review any analysis prepared by management and the independent auditor
for the Committee of significant financial reporting issues and
judgments made in connection with the preparation of the Company's
financial statements.
C-1
8. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the
Board.
9. Approve the fees to be paid to the independent auditor and the
internal auditor.
10. Review the independence of the independent auditors, giving
consideration to the range of audit and non-audit services performed
by them. In this connection, the Committee is responsible for ensuring
the independent auditor furnishes at least annually a formal written
statement delineating all relationships with the Company consistent
with Independence Standards Board Standard No. 1. To evaluate the
independence of the independent auditor, the Committee shall review
the statement; conduct an active discussion with the independent
auditor with respect to any disclosed relationships or services that
may affect the objectivity and independence of the auditor; take any
other appropriate action in response to the independent auditors'
statement or other communications to satisfy itself of the
independence of the independent auditor; and, if so determined by the
Audit Committee, recommend that the Board take appropriate action to
satisfy itself of the independence of the auditor.
11. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommend that
the Board replace the independent auditor.
12. Review the appointment and replacement of the persons or firm
conducting the internal audit function.
13. Review the significant reports to management prepared by the internal
auditor and management's responses.
14. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
15. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 (relating to independent auditor
discovery of information that an illegal act may have occurred) has
not been implicated.
16. Obtain and review the annual report from management and any other
items provided by management, the Company's internal auditor or
independent auditor with respect to compliance with the Company's Code
of Business Conduct.
17. Discuss with the independent auditor certain matters required to be
communicated by the independent auditor pursuant to Statement on
Auditing Standards No. 61 (significant events during auditor's annual
audit, such as significant accounting policies, management judgements
and accounting estimates, significant audit adjustments, disagreements
with management, including accounting principles, scope of audit and
disclosures).
18. Review with the independent auditor and the internal auditor any
problems or difficulties either may have encountered and any
management letter provided by either auditor and the Company's
response to that letter. Such review should include:
a. Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access
to required information.
b. Any changes required in the planned scope of the internal or
external audit.
c. The internal and external auditor responsibilities, budget and
staffing.
19. Prepare the report of the Committee required by the rules of the
Securities and Exchange Commission to be included in the Company's
annual proxy statement.
20. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Conduct.
C-2
21. Review with the Company's legal counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from
regulators or governmental agencies.
22. Meet at least annually with the senior financial officer, the internal
auditor and the independent auditor in separate executive sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. It is also
not the duty of the Audit Committee to conduct investigations, to resolve any
disagreements between management and the independent auditor or to assure
compliance with laws and regulations and the Company's Code of Conduct.
C-3
[Cabot Oil & Gas Corporation Logo]
DETACH HERE
PROXY
CABOT OIL & GAS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 3, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned acknowledges receipt of the notice of Annual Meeting of
Stockholders and the Proxy Statement, each dated March 29, 2001, and appoints
Lisa A. Machesney and Scott C. Schroeder, or either of them, proxies for the
undersigned, with power of substitution, to vote all of the undersigned's shares
of common stock of Cabot Oil & Gas Corporation at the Annual Meeting of
Stockholders to be held at Cabot Oil & Gas Corporation's corporate headquarters,
First Floor, in Houston, Texas, at 10:00 a.m., local time, on May 3, 2001, and
at any adjournments or postponements thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS I, II,
III, AND IV AND WILL GRANT DISCRETIONARY AUTHORITY PURSUANT TO ITEM V.
THIS PROXY WILL REVOKE ALL PRIOR PROXIES SIGNED BY YOU.
- ---------------- --------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ---------------- --------------
CABOT OIL & GAS
CORPORATION
c/o EquiServe
P.O. Box 9398
Boston, MA 02205-9398
- ------------------------ ----------------------
Vote by Telephone Vote by Internet
- ------------------------ ----------------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
- ----------------------------------------- -------------------------------------------------------
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement/Prospectus and Proxy Card. Statement/Prospectus and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/cog
3. Enter your 14-digit Voter Control Number 3. Enter your 14-digit Voter Control Number
located on your Proxy Card above your name. located on your Proxy Card above your name.
4. Follow the recorded instructions. 4. Follow the instructions provided.
- ------------------------------------------- -------------------------------------------------------
Your vote is important! Your vote is important!
Call 1-877-PRX-VOTE anytime! Go to http://www.epoxyvote.com/cog anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet
DETACH HERE
[X] Please mark
X votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITEMS I, II, III, AND IV.
1. ELECTION OF DIRECTORS (check one box only) FOR AGAINST ABSTAIN
Nominees: (01) Robert F. Bailey, (02) John G.L. 2. To approve the second amendment [_] [_] [_]
Cabot, and (03) C. Wayne Nance and restatement of the 1994
Long-Term Incentive Plan.
FOR WITHHELD
[_] [_] 3. To approve the second amendment [_] [_] [_]
and restatement of the 1994
Non-employee Director Stock
Option Plan.
4. Ratification of the appointment [_] [_] [_]
of PricewaterhouseCoopers LLP,
independent certified public
[_] ________________________________________ accountants, as auditors of the
For all nominees except as noted above Company for it's 2001 fiscal year.
In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting or
any adjournments or postponements thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
Please date this proxy and sign your name exactly as it
appears hereon. In the case of one or more joint owner each
joint owner should sign. If signing as executor, trustee,
guardian, attorney, or in any other representative
capacity, or as an officer of a corporation, please indicate
your full title as such.
Signature:_____________________________ Date:___________________ Signature: ________________________________ Date:_____________