SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (A) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ] Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11 (c) or sec. 240.14a-12
STONE ENERGY CORPORATION
(Name of Registrant as Specified in its
Charter) (Name of Person (s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table shown below per Exchange Act Rules
14a-6 (i) (1) and 0-11.
Title of each class of securities to which transaction applies: Aggregate number
of securities to which transaction applies:
Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount of which the filing fee is
calculated and state how it was determined): Proposed maximum aggregate value of
transaction:
Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11 (a) (2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
(1)Amount Previously Paid:
(2)Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4)Date Filed:
LOGO
STONE ENERGY CORPORATION
Lafayette, Louisiana
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Thursday, May 18, 2000
To the Stockholders:
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of Stone
Energy Corporation (the "Company") will be held on Thursday, May 18, 2000 at
10:00 a.m., local time, in the Orleans Room, being Room 1130, of the
Pan-American Life Conference Center, 601 Poydras Street, New Orleans, Louisiana,
for the following purposes:
(1) To elect four directors to serve until the 2003 Annual Meeting of
Stockholders;
(2) To approve the Company's 2000 Amended and Restated Stock Option Plan
authorizing the Compensation Committee to award stock options to purchase
up to 2,500,000 shares of Common Stock to employees, including officers,
of the Company. The 2000 Amended and Restated Stock Option Plan will
amend and restate the Company's two existing employee stock option plans,
the 1993 Stock Option Plan and the 1999 Stock Option Plan;
(3) To ratify the appointment of Arthur Andersen LLP as independent auditors
of the Company for the fiscal year ending December 31, 2000; and
(4) To transact such other business as may properly come before such meeting
or any adjournment(s) thereof.
The close of business on March 23, 2000, was fixed as the record date
for the determination of stockholders entitled to receive notice of and to vote
at the Annual Meeting or any adjournment(s) thereof.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A SELF-ADDRESSED, POSTPAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors
/s/ Andrew L. Gates, III
-------------------------
Andrew L. Gates, III
Secretary
March 27, 2000
LOGO
STONE ENERGY CORPORATION
625 E. Kaliste Saloom Road
Lafayette, Louisiana 70508
(337) 237-0410
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of
Directors of the Company for use at the Annual Meeting to be held on Thursday,
May 18, 2000 at 10:00 a.m., local time, in the Orleans Room, being Room 1130, of
the Pan-American Life Conference Center, 601 Poydras Street, New Orleans,
Louisiana, or at any adjournment(s) thereof. The solicitation of proxies by the
Board of Directors of the Company (the "Board of Directors") will be conducted
primarily by mail. In addition, officers, directors and employees of the Company
may solicit proxies personally or by telephone, telegram or other forms of wire
or facsimile communication. The Company will reimburse brokers, custodians,
nominees and fiduciaries for reasonable expenses incurred by them in forwarding
proxy material to beneficial owners of common stock of the Company ("Common
Stock"). The costs of the solicitation will be borne by the Company. This proxy
statement and the form of proxy were first mailed to shareholders of the Company
on or about March 31, 2000.
The enclosed proxy, even though executed and returned, may be revoked
at any time prior to the voting of the proxy (a) by execution and submission of
a revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by the proxies will be voted at the Annual Meeting.
At the close of business on March 23, 2000, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were 18,372,458 shares of Common Stock outstanding, each share of
which is entitled to one vote. Common Stock is the only class of outstanding
securities of the Company entitled to notice of and to vote at the Annual
Meeting.
The Company's annual report to stockholders for the year ended December
31, 1999, including Form 10-K as filed with the Securities and Exchange
Commission, is being mailed herewith to all stockholders entitled to vote at the
Annual Meeting. The annual report does not constitute a part of the proxy
soliciting material.
ITEM 1.
ELECTION OF DIRECTORS
Four directors are to be elected at the Annual Meeting. The Company's
Bylaws provide for a classified Board of Directors. Thus, the Board of Directors
is divided into Classes I, II and III, the terms of office of which are
currently scheduled to expire on the dates of the Company's Annual Meetings of
Stockholders in 2000, 2001 and 2002, respectively. D. Peter Canty, Raymond B.
Gary, David R. Voelker and Peter K. Barker have been nominated to serve in Class
I and, if elected, will serve until the Company's 2003 Annual Meeting of
Stockholders and until their respective successors have been elected and
qualified. Each of the nominees for director, with the exception of Peter K.
Barker, currently serves as a director of the Company. The remaining six
directors named below will not be required to stand for election at the Annual
Meeting because their present terms expire in either 2001 or 2002. On February
16, 2000, Mr. Richard A. Pattarozzi was named by the Board of Directors as a
Class II Director to fill the vacancy created upon the resignation of Michael L.
Finch. A plurality of the votes cast in person or by proxy by the holders of
Common Stock is required to elect a director. Accordingly, abstentions and
"broker non-votes" will have no effect on the outcome of the election of
directors assuming a quorum is present or represented by proxy at the Annual
Meeting. A broker non-vote occurs if a broker or other nominee does not have
discretionary authority and has not received instructions with respect to a
particular item. Stockholders may not cumulate their votes in the election of
directors.
Unless otherwise instructed or unless authority to vote is withheld,
the enclosed proxy will be voted for the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE FOUR NOMINATED DIRECTORS.
The following table sets forth information regarding the names, ages as
of March 15, 2000 and principal occupations of the nominees and directors, other
directorships in certain companies held by them and the length of continuous
service as a director of the Company.
Principal Occupation and Director
Directorships Since Age
-------------------------- ------ -----
CLASS I NOMINEES
D. Peter Canty............ President and Chief Operating Officer 1993 53
of the Company
Raymond B. Gary........... Advisory Director, Morgan Stanley & 1993 71
Co. Inc.
David R. Voelker.......... Private investments 1993 46
Peter K. Barker........... Advisory Director, Goldman Sachs & Co., Director
Ameron International and Department 56, Inc. - 51
CLASS II DIRECTORS
B. J. Duplantis........... Managing Partner of the law firm of 1993 60
Gordon, Arata, McCollam, Duplantis
& Eagan
John P. Laborde........... Director, Tidewater Inc., Stewart 1993 76
Enterprises, Inc., Stolt Comex
Seaway, S.A., and Council member,
American Bureau of Shipping
Richard A. Pattarozzi Former Vice President of Shell Offshore Inc. 2000 56
CLASS III DIRECTORS
Robert A. Bernhard........ Co-Chairman of Munn, Bernhard & 1993 71
Associates, Inc., an investment advisory
firm, and a member of McFarland, Dewey and Co. LLC,
an investment banking firm
Joe R. Klutts............. Vice Chairman of the Board of the 1993 65
Company
James H. Stone............ Chairman of the Board and Chief 1993 74
Executive Officer of the Company;
Director, Newpark Resources, Inc.
The Company was formed in March 1993 to become a holding company for
The Stone Petroleum Corporation ("TSPC") and its subsidiaries. In 1997, TSPC was
dissolved after a majority of its assets were transferred to Stone Energy
Corporation. Each of the nominees and directors has been engaged in the
principal occupation set forth opposite his name for at least the past five
years except as described below.
David R. Voelker served as a Director of TSPC from 1991 to 1997.
Peter K. Barker served as a General Partner for the investment banking
firm of Goldman, Sachs & Co. from 1978 through his retirement in 1998. Since his
retirement, he has served as an Advisory Director of Goldman, Sachs & Co.
Richard A. Pattarozzi served as the General Manager of Shell Offshore's
Deepwater Exploration and Production Division from October 1991 through December
1996 and subsequently served as Vice President of Shell Offshore Inc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of March 15, 2000 (unless otherwise indicated) by
(i) each person known by the Company to own beneficially five percent or more of
its outstanding Common Stock, (ii) the Company's Chief Executive Officer and
each of the Company's other four most highly compensated executive officers,
(iii) each of the Company's directors and (iv) all executive officers and
directors of the Company as a group. Unless otherwise indicated, each of the
persons below has sole voting and investment power with respect to the shares
beneficially owned by such person.
Beneficial Ownership(2)
-----------------------------
Name of Beneficial Owner Shares Percent
- -------------------------- --------- -----------
James H. Stone (1).......................... 1,450,482(3) 7.9
Joe R. Klutts............................... 436,470 2.4
D. Peter Canty.............................. 397,570(4) 2.2
James H. Prince............................. 294,522(5) 1.6
Phillip T. Lalande.......................... 46,800 *
Andrew L. Gates, III........................ 30,100 *
David R. Voelker............................ 606,372(6) 3.3
John P. Laborde............................. 32,000 *
Robert A. Bernhard.......................... 173,000(7) 1.0
Raymond B. Gary............................. 69,259(8) *
B. J. Duplantis............................. 31,000 *
Richard A. Pattarozzi....................... - *
Executive Officers and Directors as a group
(consisting of 15 persons).................. 3,632,975 19.8
- ----------
* Less than 1%.
(1) The address of Mr. Stone is 909 Poydras, Suite 2650, New Orleans,
Louisiana, 70112.
(2) Under the regulations of the Securities and Exchange Commission, shares
are deemed to be "beneficially owned" by a person if he directly or
indirectly has or shares the power to vote or dispose of such shares,
whether or not he has any pecuniary interest in such shares, or if he
has the right to acquire the power to vote or dispose of such shares
within 60 days, including any right to acquire such power through the
exercise of any option, warrant or right. The shares beneficially owned
by (i) Mr. Stone include 24,000 shares, (ii) Mr. Lalande include 46,700
shares, (iii) Messrs. Canty and Klutts each include 40,000 shares,
(iv) Mr. Gates include 30,000 shares, (v) Messrs. Voelker and Duplantis
each include 20,000 shares, (vi) Mr. Prince include 36,000 shares,
(vii) Messrs. Laborde, Gary and Bernhard each include 15,000 shares and
(viii) the executive officers and directors as a group include 366,900
shares that may be acquired by such persons within 60 days through the
exercise of stock options.
(3) Includes shares owned by two partnerships known as James H. Stone
Interests and James H. Stone Interests II, of which Mr. Stone disclaims
any pecuniary interest with respect to 59,226 and 16,234 shares,
respectively. Also includes 7,620 shares held by Mr. Stone as custodian
for the benefit of his two minor children, to which Mr. Stone disclaims
any pecuniary interest. Also includes shares owned by a limited
liability company in which Mr. Stone has a 4% interest.
(4) Includes 200 shares owned by Mr. Canty's wife.
(5) Includes 500 shares held by Prince Foundation, Inc., a non-profit
corporation, of which Mr. Prince is the President and a Director.
(6) Includes 72,440 shares owned by two trusts for the benefit of Mr.
Stone's minor children, of which Mr. Voelker is a trustee, 346,570
shares owned by Frantzen/Voelker Investments, L.L.C., in which
Mr. Voelker owns a 20% interest and 120,000 shares owned by
Frantzen/Voelker Projects, L.L.C., in which Mr. Voelker owns a 20%
interest. Mr. Voelker disclaims any pecuniary interest with respect to
the shares owned by the trusts for the benefit of Mr. Stone's children.
Also includes 1,720 shares held by Mr. Voelker as custodian for the
benefit of his three minor children, to which Mr. Voelker disclaims any
pecuniary interest.
(7) Includes 30,000 shares held by the Bernhard Trust "B" of which
Mr. Bernhard is the trustee and a potential beneficiary, and 12,000
shares held by Mr. Bernhard's wife.
(8) Includes 20,000 shares owned by Mr. Gary's wife.
DIRECTORS' MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings and took action by written
consent on one occasion during 1999. Each director attended at least 75% of the
aggregate total meetings of the Board of Directors and any committee on which he
served. The Company has the following standing committees:
AUDIT COMMITTEE. The Audit Committee, which currently consists of
Messrs. Bernhard, Duplantis, Gary, Laborde and Voelker, met two times during
1999. Its principal functions are to recommend to the Board of Directors each
year the engagement of a firm of independent auditors, to review the Company's
accounting and internal control systems and principal accounting policies and to
oversee the entire audit function, both independent and internal.
COMPENSATION COMMITTEE. The Compensation Committee, which currently
consists of Messrs. Bernhard, Duplantis, Gary, Laborde and Voelker, met four
times during 1999 and took action by written consent on two occasions. Its
principal function is to review and approve the compensation of the officers and
other employees of the Company. In addition, the Compensation Committee
administers the Company's Stock Option and Incentive Compensation Plans and has
the sole authority to make grants pursuant to these plans. Members of the
Compensation Committee are not eligible to participate in any of the plans that
they administer.
EXECUTIVE COMMITTEE. The Executive Committee, which currently consists
of Messrs. Canty, Duplantis, Klutts and Stone, met one time during 1999. Its
principal function is to aid and assist the Company's management in the
day-to-day operation of the Company.
INVESTMENT COMMITTEE. The Investment Committee, which consists of
Messrs. Bernhard, Canty and Stone, did not meet during 1999. Its principal
functions are to determine the investment objectives for the Company's cash
assets and select and supervise one or more investment managers.
PRICING COMMITTEE. The Pricing Committee, which consists of Messrs.
Stone, Canty, Bernhard and Gary, met one time during 1999. Its principal
function is to determine the price at which the Company's securities are
initially sold.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and the New York
Stock Exchange. Officers, directors and greater than 10% shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of copies of such forms received by it, the
Company believes that, during the period from January 1, 1999 to February 15,
2000, its officers, directors, and greater than 10% beneficial owners complied
with all applicable filing requirements, except that David R. Voelker was late
in filing one monthly report relating to one transaction.
EXECUTIVE COMPENSATION
The following table sets forth annual and long-term compensation for
services in all capacities to the Company and its subsidiaries for the fiscal
years ended December 31, 1999, 1998 and 1997 of those persons who were, at
December 31, 1999, the Chief Executive Officer and the other four most highly
compensated executive officers of the Company (collectively, the "named
executive officers").
Summary Compensation Table
Long-Term
Compensation
Awards
------------------------
Number of Securities All Other
Name and Principal Position Year Salary Bonus(1) Other Underlying Options Compensation(2)
--------------------------- ---- ------ -------- ----- ------------------ ---------------
James H. Stone..................... 1999 $175,000 $140,000 $ -- -- $23,186(3)
Chairman of the Board and 1998 175,000 74,400 -- -- 23,366(3)
Chief Executive Officer 1997 167,500 108,875 -- -- 28,207(3)
D. Peter Canty..................... 1999 $165,000 $132,000 $ -- -- $8,536(4)(5)
President and Chief 1998 165,000 70,100 -- -- 8,554(4)(5)
Operating Officer 1997 157,500 102,375 -- -- 8,439(4)(5)
James H. Prince.................... 1999 $120,000 $87,666 $ -- -- $6,953(6)
Chief Financial Officer and 1998 95,000 35,100 -- -- 6,915(6)
Vice President 1997 95,000 61,700 -- 10,000 6,916(6)
Andrew L. Gates, III............... 1999 $150,000 $52,500 $ -- -- $9,372(7)
Vice President and General 1998 120,000 51,000 -- -- 9,410(7)
Counsel 1997 120,000 66,000 -- 10,000 9,179(7)
Phillip T. Lalande................. 1999 $120,000 $96,000 $2,324(8) -- $371,615(9)(10)
Vice President-Engineering 1998 120,000 51,000 4,879(8) -- 11,793(9)
1997 105,000 68,300 10,516(8) 15,000 11,523(9)
(1) The amounts reflected in the table for 1999, 1998 and 1997 represent
bonuses paid in February 2000, February 1999 and February 1998, respectively,
which related to performance in 1999, 1998 and 1997, respectively.
(2) Except as indicated in the following notes, amounts in all other
compensation reflect amounts contributed or accrued by the Company on behalf of
the named executive officers under the Company's 401(k) profit sharing plan and
the economic benefit attributable to group life insurance coverage.
(3) Includes premiums of $11,410 during 1999 and 1998 and $16,410 in 1997
paid by the Company for a life insurance policy as to which the Company is not a
beneficiary.
(4) Includes $2,300 of premiums paid by the Company for a life insurance
policy as to which the Company is not a beneficiary.
(5) A predecessor of TSPC entered into deferred compensation agreements
with several of its employees, including Mr. Canty, prior to 1982. TSPC has
purchased split-dollar life insurance policies to fund these agreements. A
substantial portion of the face value of each of the policies is payable to the
beneficiaries of the employees. See "--Deferred Compensation Agreements." Of the
amounts reflected in the table for each of 1999, 1998 and 1997, $364, $344
and $460, respectively, are attributable to the economic benefit pursuant to the
policy relating to Mr. Canty.
(6) A predecessor of TSPC entered into deferred compensation agreements
with several of its employees, including Mr. Prince, prior to 1982. TSPC has
purchased split-dollar life insurance policies to fund these agreements. A
substantial portion of the face value of each of the policies is payable to the
beneficiaries of the employees. See "--Deferred Compensation Agreements." Of the
amounts reflected in the table for each of 1999, 1998 and 1997, $595, $497 and
$718, respectively, are attributable to the economic benefit pursuant to the
policy relating to Mr. Prince.
(7) Includes $3,500 of premiums paid by the Company for a life insurance
policy as to which the Company is not the beneficiary.
(8) Reflects amounts paid by a trust formed by the Company for the benefit
of certain employees. Such trust holds net profits interests that burden
properties acquired by the Company prior to July 1993.
(9) Includes $6,240 of premiums paid by the Company for a life insurance
policy as to which the Company is not a beneficiary.
(10) Includes $359,503 representing income attributable to the exercise of
9,300 stock options that carried an exercise price of $12.38 per share.
STOCK OPTIONS GRANTED IN 1999
The named executive officers were not granted options to purchase
shares of common stock pursuant to any Stock Option Plan during 1999.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table contains certain information concerning the value
of unexercised options at December 31, 1999. During 1999, Phillip T. Lalande, a
named executive officer, exercised 9,300 stock options that carried an exercise
price of $12.38 per share (See Footnote 10 under the "Summary Compensation
Table"). No other named executive officer exercised any stock options during the
year.
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Options at December 31, 1999 at December 31, 1999(1)
-------------------------------------------- -------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------ ------------------- ---------------------- ------------------ ----------------------
James H. Stone.............. 49,000 16,000 $948,750 $245,000
D. Peter Canty.............. 40,000 10,000 810,938 153,125
James H. Prince............. 36,000 14,000 712,063 196,375
Phillip T. Lalande.......... 46,700 19,000 1,004,025 319,125
Andrew L. Gates, III........ 30,000 15,000 611,625 239,313
- ----------
(1) The value of each unexercised in-the-money stock option is equal to the
difference between the closing price of the Common Stock on the New York Stock
Exchange on December 31, 1999 of $35.63 and the per share exercise price of the
stock option.
DEFERRED COMPENSATION AGREEMENTS
Prior to 1982, a predecessor of the Company entered into deferred
compensation and disability agreements (the "Deferred Compensation Agreements")
with several of its employees, including D. Peter Canty and James H. Prince.
Benefits under the Deferred Compensation Agreements have become fully vested.
Benefits are payable in a fixed monthly amount at age 65 (or actual retirement,
if later) until the later of the expiration of 180 months or the death of the
employee. The Deferred Compensation Agreements also provide for monthly payments
upon total disability, and certain benefits upon partial disability, until the
employee reaches age 65. Mr. Canty and Mr. Prince are entitled to receive annual
benefits at age 65 (or actual retirement, if later) of $28,500 and $23,880,
respectively, under their Deferred Compensation Agreements.
The Company has purchased split-dollar life insurance policies to fund
its obligations under the Deferred Compensation Agreements. These policies are
designed to have a cash surrender value, when the employee reaches age 65, which
is sufficient to fund the Company's obligations. The Company owns the right to
the cash surrender value of the policies. A substantial portion of each of the
policies is payable to the beneficiaries of each employee with the remainder
payable to the Company. Premiums paid by the Company pursuant to the policies
relating to Mr. Canty and Mr. Prince are included under "All Other Compensation"
in the Summary Compensation Table.
COMPENSATION OF DIRECTORS
Pursuant to the Company's 1993 Nonemployee Directors' Stock Option Plan
(the "Directors' Plan"), directors of the Company who are not officers or
employees of the Company or any of its subsidiaries ("Nonemployee Directors")
will receive, upon the date of their initial election to the Board of Directors
of the Company, a nonqualified stock option to purchase 1,000 shares of Common
Stock. Effective as of February 16, 2000, Mr. Pattarozzi was granted an option
to purchase 1,000 shares of Common Stock at an exercise price of $37.69 per
share. Further, as of the date of each annual meeting of the stockholders of the
Company, each Nonemployee Director, who has already received his initial option
grant as described in the preceding sentence, will receive a nonqualified stock
option to purchase 5,000 shares of Common Stock. Each option will have an
exercise price equal to the fair market value of the Common Stock on the date of
grant. The exercise price may be paid in cash, in shares of Common Stock (valued
at fair market value at the date of exercise) or by a combination of such means
of payment. Generally, the fair market value of a share of Common Stock on a
particular date is equal to the average of the high and low sales prices of the
Common Stock on the New York Stock Exchange on such date. Effective as of the
date of the Company's 1999 Annual Meeting of Stockholders, each of Messrs. Gary,
Voelker, Duplantis, Laborde and Bernhard were granted an option to purchase
5,000 shares of Common Stock at an exercise price of $37.00 per share pursuant
to the Directors' Plan.
Except upon the occurrence of a "Change of Control" (as defined in the
Directors' Plan), all options granted under the Directors' Plan have a maximum
term of five years and will vest in three equal annual installments beginning on
the first anniversary of the date of grant. Upon the occurrence of a Change of
Control, each option will be exercisable in full.
Nonemployee Directors are paid $1,500 each quarter, plus $1,000 per
meeting, for attending the four regularly scheduled meetings of the Board of
Directors. Each Nonemployee Director is also reimbursed for expenses incurred in
attending meetings of the Board of Directors and committees thereof.
TRANSACTIONS WITH MANAGEMENT AND CERTAIN STOCKHOLDERS
Set forth below is a description of certain transactions entered into
between the Company and certain of its officers, directors and stockholders.
James H. Stone and Joe R. Klutts collectively own 9% of the working
interests in the Weeks Island Field. These interests were acquired at the same
time as the Company's predecessor acquired its interests in the Weeks Island
Field. In their capacity as working interest owners, they are required to pay
their proportional share of all costs and are entitled to receive their
proportional share of revenues.
Prior to the Company's Initial Public Offering in 1993, The Stone
Petroleum Corporation formed partnerships to acquire and manage oil and gas
properties. James H. Stone and Joe R. Klutts both participated in these
partnerships. On December 31, 1999, the partnerships were dissolved and the
working interests were transferred to Stone Energy Corporation. All participants
in the partnerships, including Messrs. Stone and Klutts, received overriding
royalty interests in the related properties in exchange for their partnership
interests.
Certain officers of the Company were granted net profits interests in
certain of the oil and gas properties that the Company acquired prior to 1993.
The recipients of net profits interests are not required to pay capital costs
incurred on the properties burdened by such interests.
As a result of these transactions, a conflict of interest may exist
between the Company and such employees and officers with respect to the drilling
of additional wells or other development operations.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's principal duty is to review and approve
the compensation of the officers and other employees of the Company. In
addition, the Compensation Committee administers the Company's Stock Option and
Incentive Compensation Plans and has the sole authority to make grants pursuant
to these plans. Members of the Compensation Committee are not eligible to
participate in any of the plans they administer.
EXECUTIVE COMPENSATION. The Committee believes that the compensation of
executive officers should not only be adequate to attract, motivate and retain
competent executive personnel, but that it should also serve to align the
interests of the executive officers with those of the stockholders. To achieve
these ends, in addition to a competitive yet modest base salary, the Company has
adopted both short-term and long-term incentive compensation plans that are
dependent upon the Company's performance. The Compensation Committee does not
currently intend to award levels of compensation that would result in a
limitation on the deductibility of a portion of such compensation for federal
income tax purposes pursuant to Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"); however, the Compensation Committee may authorize
compensation that results in such limitations in the future if it determines
that such compensation is in the best interest of the Company.
BASE SALARY. While the Committee believes it is crucial to provide
salaries within a competitive market range in order to attract and retain
personnel who are highly talented, the Committee has established a philosophy of
generally providing more conservative base salaries and more aggressive
incentive compensation opportunities than the market in order to strongly
emphasize pay-for-performance. The specific competitive markets considered
depend on the nature and level of the positions in question and the labor
markets from which qualified individuals would be recruited. The Committee
intends to review the executive group's salaries on a biannual basis and adjust
them if they deviate substantially from the average for other companies,
including the Peer Group, and salary levels implied by other market data.
INCENTIVE COMPENSATION. The Company's Annual Incentive Compensation
Plan was terminated in 1996 and, in lieu thereof, the Committee adopted a
discretionary bonus program. Under this program, bonuses are primarily tied to
several performance criteria, including the annual return on the Company's
Common Stock (including dividends and price appreciation), how such return
compares to the average annual return on the common stock of the Peer Group, and
the annual increases in earnings and cash flow per share and in the net asset
value of the Company. The Peer Group consists of the companies named under the
heading "Stockholder Return Performance Presentation." A portion of the bonuses
is determined by the sole discretion of the Committee. To the extent that
performance criteria are met, an incentive pool is generated. The amount of the
incentive pool, however, may not exceed the aggregate base salary of all
eligible employees for the relevant plan year, and no individual award to an
eligible employee may exceed such employee's base salary for the relevant plan
year.
The Committee is responsible for determining the participants,
performance criteria to be used, award levels and allocation of generated
incentives. Any allocated incentives are awarded to individuals, including
executive officers, based upon a combination of group and individual performance
factors. It is the overall objective of the Company that the Incentive Plan not
reward employees until the Company's stockholders have been appropriately
rewarded for investing in the Company. The Committee is not required to grant
awards for all amounts available under the Incentive Plan. For the 1999
performance year, a total of $4.0 million was available for awards and $3.6
million was paid. Awards granted to the named executive officers for the 1999
performance year are presented under "Bonus" in the Summary Compensation Table.
STOCK OPTION PLANS. Stock option grants are designed to align the
long-term interests of the Company's employees with those of its stockholders by
directly linking compensation to stockholder return, as well as by enabling
employees to develop and maintain a significant, long-term equity ownership
position in the Company. The Company's 1993 Stock Option Plan authorizes the
Compensation Committee to award stock options to purchase up to 1,170,000 shares
of Common Stock to employees of the Company. Since 1993, the Company has granted
essentially all of the stock options available under this plan. After reviewing
the stock option plans of its Peer Group, the Company's Board of Directors
determined that the Company's plan had significantly fewer grantable options as
a percentage of outstanding stock than the Peer Group taken as a whole. As a
result, the Board of Directors approved the 1999 Stock Option Plan authorizing
the Compensation Committee to award stock options to purchase up to 300,000
shares of Common Stock to employees other than officers of the Company. The
Committee grants non-statutory options at an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant. Options
generally have ten-year terms, with exercise restrictions that lapse over a
five-year period.
On December 16, 1999, the Company's Compensation Committee granted
184,250 stock options under the 1999 Stock Option Plan to all employees other
than officers at an exercise price of $35.53 per share, the fair market value of
the Company's common stock on the date of grant.
401(K) PLAN. Under the Company's 401(k) profit sharing plan, eligible
employees are permitted to defer receipt of up to 15% of their compensation
(subject to certain limitations imposed under the Code). The plan provides that
a discretionary match of employee deferrals may be made by the Company in cash
or shares of Common Stock. During 1999, the Company's discretionary match of
employee deferrals totaled approximately $0.3 million. The amounts held under
the plan are to be invested among various investment funds maintained under the
plan in accordance with the directions of each participant.
Salary deferral contributions are 100% vested. Matching contributions
are vested over a period of five years at the rate of 20% per year. If a
participant terminates employment with the Company after attaining age 65 or by
reason of death or disability, however, the participant will be fully vested in
his or her share of Company matching contributions. Participants or their
beneficiaries are entitled to payment of vested benefits upon termination of
employment. In addition, hardship distributions to participants from the plan
are available under certain conditions. The amount of benefits ultimately
payable to a participant under the plan depends on the level of the
participant's elective deferrals under the plan, the amount of Company matching
contributions made to the plan and the performance of the investment funds
maintained under the plan in which contributions are invested.
CHIEF EXECUTIVE OFFICER COMPENSATION. As described above, the Company's
executive compensation philosophy, including the compensation of the Company's
Chief Executive Officer, James H. Stone, is a competitive, but conservative,
base salary and incentive compensation based upon the Company's performance.
BASE SALARY. Mr. Stone's annual base salary for 1999 was $175,000,
representing no change from 1998.
INCENTIVE COMPENSATION. Mr. Stone was awarded a $140,000 bonus for the
1999 performance year. This award was based upon the criteria set forth above
under "Executive Compensation-- Incentive Compensation."
STOCK OPTION PLAN. Mr. Stone was not granted options to purchase shares
of Common Stock pursuant to any Stock Option Plan in 1999.
Compensation Committee
Robert A. Bernhard
B. J. Duplantis
Raymond B. Gary
John P. Laborde
David R. Voelker
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
As required by applicable rules of the Securities and Exchange
Commission, the performance graph shown below was prepared based upon the
following assumptions:
1. $100 was invested in the Company's Common Stock, the S&P
500 and the Peer Group (as defined below) on July 8, 1993 at the initial public
offering price of the Company's Common Stock of $12 per share and the closing
price of the stocks comprising the S&P 500 and the Peer Group, respectively, on
such date. The Company's Common Stock began trading on the New York Stock
Exchange on July 9, 1993.
2. Peer Group investment is weighted based upon the market
capitalization of each individual company within the Peer Group at the beginning
of the period.
3. Dividends are reinvested on the ex-dividend dates.
Measurement Period
(Fiscal Year Covered) SGY Peer Group S&P 500
--------------------- ----- ------------ ---------
12/31/93 112.50 91.25 103.97
12/31/94 160.42 86.58 102.37
12/31/95 128.12 109.45 137.29
12/31/96 248.96 168.36 165.11
12/31/97 279.17 156.56 216.31
12/31/98 239.58 97.11 274.00
12/31/99 296.87 115.40 327.50
The companies that comprise the Company's current Peer Group are as
follows: Barrett Resources Corporation, Basin Exploration Inc, Cabot Oil & Gas
Corporation, Chieftain International, Inc., Cross Timbers Oil Company, Devon
Energy Corporation, Forest Oil Corporation, Meridian Resource Corporation,
Newfield Exploration Company, Ocean Energy, Inc., Pogo Producing Company, Snyder
Oil Corporation, St. Mary Land and Exploration Company, Swift Energy Company,
The Houston Exploration Company, Tom Brown, Inc. and Vintage Petroleum,
Incorporated.
ITEM 2.
APPROVAL OF 2000 AMENDED AND RESTATED STOCK OPTION PLAN
GENERAL
At the Annual Meeting, the stockholders will be asked to approve the
adoption of the Stone Energy Corporation 2000 Amended and Restated Stock Option
Plan (the "2000 Plan"), a copy of the 2000 Plan is attached hereto as Appendix
A. The 2000 Plan is an amendment and restatement of both the 1993 Stock Option
Plan (the "1993 Plan") and of the 1999 Stock Option Plan (the "1999 Plan") and
will supercede and replace in its entirety each plan. The primary differences
between the 2000 Plan and its predecessors are (a) the number of shares of
Common Stock subject to the 2000 Plan will be 2,500,000, which number includes
the number of shares of Common Stock previously made subject to an option
granted under either the 1993 Plan or the 1999 Plan and (b) a limit of 100,000
shares will be imposed on the number of shares of Common Stock that may be
subject to options granted under the 2000 Plan to any one individual during a
calendar year.
The Board of Directors unanimously adopted the 2000 Plan on February
16, 2000, subject to stockholder approval at the Annual Meeting. If the 2000
Plan is not approved by the stockholders of the Company at the Annual Meeting,
then no options will be granted under the 2000 Plan and the 1993 Plan and the
1999 Plan shall continue in effect as if the 2000 Plan had not occurred.
The 2000 Plan is designed to provide a means whereby certain employees
of the Company and its subsidiaries may develop a sense of proprietorship and
personal involvement in the development and financial success of the Company,
and to encourage them to remain with and devote their best efforts to the
business of the Company, thereby advancing the interests of the Company and its
stockholders. Accordingly, the 2000 Plan provides for granting (a) "incentive"
stock options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (b) stock options that do not constitute incentive
stock options ("non-statutory" stock options).
The following description of certain features of the 2000 Plan is
qualified in its entirety by reference to the 2000 Plan. Approval of the 2000
Plan requires the affirmative vote of a majority of the shares present, or
represented, and entitled to vote at the Annual Meeting.
SUMMARY OF THE 2000 PLAN
NUMBER OF SHARES SUBJECT TO THE 2000 PLAN. The aggregate maximum number
of shares authorized to be issued under the 2000 Plan pursuant to grants of
stock options is 2,500,000 shares of Common Stock. The maximum number of shares
of Common Stock which may be the subject of stock options granted under the 2000
Plan to any one individual during any calendar year may not exceed 100,000
shares. In each case, these numbers may be adjusted upon a reorganization, stock
split, recapitalization, or other change in the Company's capital structure. As
of March 15, 2000, 123,550 shares have been issued under the 1993 Plan and no
shares have been issued under the 1999 Plan in connection with the exercise of
stock options, and 988,450 and 185,250 shares are subject to options currently
outstanding under the 1993 Plan and the 1999 Plan, respectively.
ADMINISTRATION. The 2000 Plan will be administered by a committee (the
"Committee") of, and appointed by, the Board of Directors, and such committee
will be comprised solely of two or more directors who are both (a) outside
directors (within the meaning of Section 162(m) of the Code), and non-employee
directors (within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")). No member of the Committee is eligible
to receive a stock option under the 2000 Plan. The Compensation Committee of the
Board of Directors will initially serve as the Committee.
The Committee will have full authority, subject to the terms of the
2000 Plan, to establish rules and regulations for the proper administration of
the 2000 Plan, to select the persons to whom stock options are granted, and to
set the date of grant and the other terms of the options. When granting options,
the Committee will consider such factors as an employee's duties and current and
potential contributions to the Company's success.
ELIGIBILITY. All of the employees of the Company and its subsidiaries
(including an employee who may also be an officer or director of any such
company) are eligible to participate in the 2000 Plan. The selection of
employees, from among those eligible, who will receive stock options is within
the discretion of the Committee.
TERM OF THE 2000 PLAN. The 1993 Plan and the 1999 Plan were originally
effective as of July 8, 1993 and December 16, 1999, respectively. The 2000 Plan
will be effective as of the date of the Annual Meeting if approved by the
Company's stockholders. No further options may be granted under the 2000 Plan
after May 18, 2010, and the 2000 Plan will terminate thereafter once all options
have been exercised or expired. The Board of Directors may, however, terminate
the 2000 Plan at any time without prejudice to the holders of any then
outstanding options.
STOCK OPTIONS
A. TERM OF OPTION. The term of each option will be as specified by the
Committee at the date of grant (but not more than 10 years in the case of
incentive stock options). The effect of an employee's termination of employment
by reason of death, retirement, disability or otherwise will be specified in the
option contract which evidences each option grant.
B. OPTION PRICE. The option price will be determined by the Committee
and will be no less than the fair market value of the shares on the date that
the option is granted.
C. SPECIAL RULES FOR CERTAIN STOCKHOLDERS. If an incentive stock option
is granted to an employee who then owns, directly or by attribution under the
Code, stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a subsidiary, the term of the option will not
exceed five years, and the option price will be at least 110% of the fair market
value of the shares on the date that the option is granted.
D. SIZE OF GRANT.The number of shares for which an option is granted to
an employee will be determined by the Committee.
E. STATUS OF OPTIONS. The status of each grant of options as an
incentive stock option or non-statutory stock option will be designated by the
Committee at the time of grant. If, however, the aggregate fair market value
(determined as of the date of grant) of shares with respect to which incentive
stock options become exercisable for the first time by an employee exceeds
$100,000 in any calendar year, the options with respect to the excess shares
will be non-statutory stock options.
F. PAYMENT. The option price upon exercise may, at the discretion of
the Committee, be paid by an employee in cash, other shares of Common Stock
owned by the employee, or by a combination of cash and Common Stock.
Additionally, stock appreciation rights may be granted to eligible employees, in
conjunction with incentive stock options or non-statutory stock options. Stock
appreciation rights give the holder, among other things, the right to a payment
in cash, Common Stock, or a combination thereof, in an amount equal to the
difference between the fair market value of the Common Stock at the date of
exercise and the option exercise price. The 2000 Plan also allows the Committee,
in its discretion, to establish procedures pursuant to which an optionee may
affect a cashless exercise of an option through a brokerage firm.
G. OPTION CONTRACT. All options will be evidenced by a written
contract containing provisions consistent with the 2000 Plan and such other
provisions as the Committee deems appropriate.
H. TRANSFERABILITY. No option is transferable other than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order, and only the employee or his guardian or legal
representative may exercise any option during the employee's lifetime.
CORPORATE CHANGE. The 2000 Plan provides that, upon a Corporate Change
(as hereinafter defined), the Committee may accelerate the vesting of options,
cancel options and make payments in respect thereof in cash, adjust the
outstanding options as appropriate to reflect such Corporate Change, or provide
that each option shall thereafter be exercisable for the number and class of
securities or property that the optionee would have been entitled to had the
option already been exercised. The 2000 Plan provides that a Corporate Change
occurs (a) if the Company is dissolved and liquidated, (b) if the Company is not
the surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity), (c) if the Company sells, leases or
exchanges all or substantially all of its assets, (d) if any person, entity or
group acquires or gains ownership or control of more than 50% of the outstanding
shares of the Company's voting stock or (e) if after a contested election of
directors, the persons who were directors before such election cease to
constitute a majority of the Board of Directors.
AMENDMENTS. The Board of Directors may from time to time amend the 2000
Plan; however, no amendment which modifies the class of eligible employees or
increases the number of shares of Common Stock authorized or available under the
2000 Plan may be adopted without the prior approval of the stockholders of the
Company.
FEDERAL INCOME TAX ASPECTS OF THE 2000 PLAN
NON-STATUTORY STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. As a general
rule, no federal income tax is imposed on the optionee upon the grant of a
non-statutory stock option such as those under the 2000 Plan (whether or not
including a stock appreciation right) and the Company is not entitled to a tax
deduction by reason of such a grant. Generally, upon the exercise of a
non-statutory stock option, the optionee will be treated as receiving
compensation taxable as ordinary income in the year of exercise in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the option price paid for such shares. In the case of the exercise
of a stock appreciation right, the optionee will be treated as receiving
compensation taxable as ordinary income in the year of exercise in an amount
equal to the cash received plus the fair market value of the shares distributed
to the optionee. Upon the exercise of a non-statutory stock option or a stock
appreciation right, and subject to the application of Section 162(m) of the Code
as discussed below, the Company may claim a deduction for compensation paid at
the same time and in the same amount as compensation income is recognized to the
optionee assuming any federal income tax withholding requirements are satisfied.
Upon a subsequent disposition of the shares received upon exercise of a
non-statutory stock option or a stock appreciation right, any appreciation after
the date of exercise should qualify as capital gain. If the shares received upon
the exercise of an option or a stock appreciation right are transferred to the
optionee subject to certain restrictions, then the taxable income realized by
the optionee, unless the optionee elects otherwise, and the Company's tax
deduction (assuming any federal income tax withholding requirements are
satisfied) should be deferred and should be measured at the fair market value of
the shares at the time the restrictions lapse. The restrictions imposed on
officers, directors and 10% shareholders by Section 16(b) of the Exchange Act is
such a restriction during the period prescribed thereby if other shares have
been purchased by such an individual within six months of the exercise of a
non-statutory stock option or stock appreciation right.
INCENTIVE STOCK OPTIONS. The incentive stock options under the 2000
Plan are intended to constitute "incentive stock options" within the meaning of
Section 422 of the Code. Incentive stock options are subject to special federal
income tax treatment. No federal income tax is imposed on the optionee upon the
grant or the exercise of an incentive stock option if the optionee does not
dispose of shares acquired pursuant to the exercise within the two-year period
beginning on the date the option was granted or within the one-year period
beginning on the date the option was exercised (collectively, the "holding
period"). In such event, the Company would not be entitled to any deduction for
federal income tax purposes in connection with the grant or exercise of the
option or the disposition of the shares so acquired. With respect to an
incentive stock option, the difference between the fair market value of the
stock on the date of exercise and the exercise price must be included in the
optionee's alternative minimum taxable income. However, if the optionee
exercises an incentive stock option and disposes of the shares received in the
same year and the amount realized is less than the fair market value of the
shares on the date of exercise, the amount included in alternative minimum
taxable income will not exceed the amount realized over the adjusted basis of
the shares.
Upon disposition of the shares received upon exercise of an incentive
stock option after the holding period, any appreciation of the shares above the
exercise price should constitute capital gain. If an optionee disposes of shares
acquired pursuant to his or her exercise of an incentive stock option prior to
the end of the holding period, the optionee will be treated as having received,
at the time of disposition, compensation taxable as ordinary income. In such
event, and subject to the application of Section 162(m) of the Code as discussed
below, the Company may claim a deduction for compensation paid at the same time
and in the same amount as compensation is treated as received by the optionee.
The amount treated as compensation is the excess of the fair market value of the
shares at the time of exercise (or in the case of a sale in which a loss would
be recognized, the amount realized on the sale if less) over the exercise price;
any amount realized in excess of the fair market value of the shares at the time
of exercise would be treated as short-term or long-term capital gain, depending
on the holding period of the shares.
SECTION 162(M) OF THE CODE. Section 162(m) of the Code precludes a
public corporation from taking a deduction for compensation in excess of $1
million paid to its chief executive officer or any of its four other
highest-paid officers. However, compensation that qualifies under Section 162(m)
of the Code as "performance-based" is specifically exempt from the deduction
limit. Based on Section 162(m) of the Code and the regulations issued
thereunder, the Company believes that the income generated in connection with
the exercise of stock options granted under the 2000 Plan should qualify as
performance-based compensation and, accordingly, the Company's deduction for
such compensation should not be limited by Section 162(m) of the Code.
The 2000 Plan is not qualified under section 401(a) of the Code.
The comments set forth in the above paragraphs are only a summary of
certain of the Federal income tax consequences relating to the 2000 Plan. No
consideration has been given to the effects of state, local, or other tax laws
on the 2000 Plan or option recipients.
INAPPLICABILITY OF ERISA. Based upon current law and published
interpretations, the Company does not believe the 2000 Plan is subject to any of
the provisions of the Employee Retirement Income Security Act of 1974.
Under Delaware law, an abstention would have the same effect as a vote
against this proposal, but a broker non-vote would not be counted for purposes
of determining whether a majority had been achieved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2000 PLAN AS
DESCRIBED ABOVE AND AS SET FORTH IN APPENDIX A.
ITEM 3.
APPOINTMENT OF AUDITORS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors appointed Arthur Andersen LLP, independent public accountants, to
audit the consolidated financial statements of the Company for the year ending
December 31, 2000. The Company is advised that no member of Arthur Andersen LLP
has any direct or material indirect financial interest in the Company or, during
the past three years, has had any connection with the Company in the capacity of
promoter, underwriter, voting trustee, director, officer or employee.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Under Delaware
law, an abstention would have the same effect as a vote against this proposal,
but a broker non-vote would not be counted for purposes of determining whether a
majority had been achieved.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THIS APPOINTMENT.
In the event the appointment is not ratified, the Board of Directors
will consider the appointment of other independent auditors. A representative of
Arthur Andersen LLP is expected to be present at the Annual Meeting, and will be
offered the opportunity to make a statement if such representative desires to do
so and will be available to respond to appropriate questions.
ITEM 4.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to
be presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) thereof, it is
intended that the enclosed proxy will be voted in accordance with the judgment
of the persons voting the proxy.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for inclusion in the
proxy material and for presentation at the Company's 2001 Annual Meeting of
Shareholders must forward such proposal to the Secretary of the Company at the
address indicated on the second page of this proxy statement, so that the
Secretary receives it no later than November 30, 2000.
By Order of the Board of Directors
/s/ Andrew L. Gates, III
-------------------------
Andrew L. Gates, III
Secretary
March 27, 2000
Appendix A
STONE ENERGY CORPORATION
2000 AMENDED AND RESTATED STOCK OPTION PLAN
I. Purpose of the Plan
The STONE ENERGY CORPORATION 2000 AMENDED AND RESTATED STOCK OPTION
PLAN (the "Plan") is intended to provide a means whereby certain employees of
STONE ENERGY CORPORATION, a Delaware corporation (the "Company"), and its
subsidiaries may develop a sense of proprietorship and personal involvement in
the development and financial success of the Company, and to encourage them to
remain with and devote their best efforts to the business of the Company,
thereby advancing the interests of the Company and its stockholders.
Accordingly, the Company may grant to certain employees ("Optionees") the option
("Option") to purchase shares of the common stock of the Company ("Stock"), as
hereinafter set forth. Options granted under the Plan may be either incentive
stock options, within the meaning of section 422(b) of the Internal Revenue Code
of 1986, as amended ("Incentive Stock Options" under the "Code"), or options
which do not constitute Incentive Stock Options.
The Plan as set forth herein constitutes an amendment and restatement
of both (1) the Stone Energy Corporation 1999 Stock Option Plan (the "1999
Plan") and (2) the Stone Energy Corporation 1993 Stock Option Plan (the "1993
Plan"), each as previously adopted by the Company, and shall supersede and
replace in its entirety each previously adopted plan. This amendment and
restatement shall be effective as of May 18, 2000, provided this amendment and
restatement is adopted by the Board of Directors of the Company prior to such
date and approved by the stockholders of the Company at a duly called meeting of
the stockholders (or any adjournment thereof) held on May 18, 2000 (or, if
applicable, on the date of such adjournment). If this amendment and restatement
is not so approved by the stockholders, then any options granted under this
amendment on or after May 18, 2000, shall be considered null and void and of no
effect whatsoever, the 1999 Plan and the 1993 Plan shall continue in effect as
if this amendment and restatement had not occurred, and any options previously
granted under either the 1999 Plan or the 1993 Plan shall continue in effect
under the terms of the grant; provided, further, that thereafter options may
continue to be granted pursuant to the terms of the 1999 Plan and the 1993 Plan,
as in effect prior to this amendment and as may be otherwise amended hereafter.
II. Administration
The Plan shall be administered by a committee (the "Committee") of, and
appointed by, the Board of Directors of the Company (the "Board"), and the
Committee shall be comprised solely of two or more directors who are both (a)
outside directors (within the meaning of section 162(m) of the Code and
applicable interpretive authority thereunder), and (b) nonemployee directors
(within the meaning of Rule 16b-3, as currently in effect or as hereinafter
modified or amended ("Rule 16b-3"), promulgated under the Securities Exchange
Act of 1934, as amended (the "1934 Act")). The Committee shall have sole
authority to select the Optionees from among those individuals eligible
hereunder and to establish the number of shares which may be issued under each
Option; provided, however, that, notwithstanding any provision in the Plan to
the contrary, the maximum number of shares that may be subject to Options
granted under the Plan to an individual Optionee during any calendar year may
not exceed 100,000 (subject to adjustment in the same manner as provided in
Paragraph VIII hereof with respect to shares of Stock subject to Options then
outstanding). The limitation set forth in the preceding sentence shall be
applied in a manner which will permit compensation generated under the Plan to
constitute "performance-based" compensation for purposes of section 162(m) of
the Code, including, without limitation, counting against such maximum number of
shares, to the extent required under section 162(m) of the Code and applicable
interpretive authority thereunder, any shares subject to Options that are
canceled or repriced. In selecting the Optionees from among individuals eligible
hereunder and in establishing the number of shares that may be issued under each
Option, the Committee may take into account the nature of the services rendered
by such individuals, their present and potential contributions to the Company's
success and such other factors as the Committee in its discretion shall deem
relevant. The Committee is authorized to interpret the Plan and may from time to
time adopt such rules and regulations, consistent with the provisions of the
Plan, as it may deem advisable to carry out the Plan. All decisions made by the
Committee in selecting the Optionees, in establishing the number of shares which
may be issued under each Option and in construing the provisions of the Plan
shall be final.
III. Option Agreements
(a) Each Option shall be evidenced by a written agreement between the
Company and the Optionee ("Option Agreement") which shall contain such terms and
conditions as may be approved by the Committee. The terms and conditions of the
respective Option Agreements need not be identical. Specifically, an Option
Agreement may provide for the surrender of the right to purchase shares under
the Option in return for a payment in cash or shares of Stock or a combination
of cash and shares of Stock equal in value to the excess of the fair market
value of the shares with respect to which the right to purchase is surrendered
over the option price therefore ("Stock Appreciation Rights"), on such terms and
conditions as the Committee in its sole discretion may prescribe; provided,
that, except as provided in Subparagraph VIII(c) hereof, the Committee shall
retain final authority (i) to determine whether an Optionee shall be permitted,
or (ii) to approve an election by an Optionee, to receive cash in full or
partial settlement of Stock Appreciation Rights. Moreover, an Option Agreement
may provide for the payment of the option price, in whole or in part, by the
delivery of a number of shares of Stock (plus cash if necessary) having a fair
market value equal to such option price. Further, an Option Agreement may
provide for a "cashless exercise" of the Option pursuant to procedures
established by the Committee (as the same may be amended from time to time).
(b) For all purposes under the Plan, the fair market value of a share
of Stock on a particular date shall be equal to the mean of the high and low
sales prices of the Stock (i) reported by the National Market System of NASDAQ
on that date or (ii) if the Stock is listed on a national stock exchange,
reported on the stock exchange composite tape on that date; or, in either case,
if no prices are reported on that date, on the last preceding date on which such
prices of the Stock are so reported. If the Stock is traded over the counter at
the time a determination of its fair market value is required to be made
hereunder, its fair market value shall be deemed to be equal to the average
between the reported high and low or closing bid and asked prices of Stock on
the most recent date on which Stock was publicly traded. In the event Stock is
not publicly traded at the time a determination of its value is required to be
made hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
(c) Each Option and all rights granted thereunder shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and shall be exercisable during the Optionee's lifetime only by the
Optionee or the Optionee's guardian or legal representative.
IV. Eligibility of Optionee
Options may be granted only to individuals who are employees (including
officers and directors who are also employees) of the Company or any parent or
subsidiary corporation (as defined in section 424 of the Code) of the Company at
the time the Option is granted; provided, however, that members of the Committee
shall not be eligible to be granted Options. Options may be granted to the same
individual on more than one occasion. No Incentive Stock Option shall be granted
to an individual if, at the time the Option is granted, such individual owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of its parent or subsidiary corporation, within the
meaning of section 422(b)(6) of the Code, unless (i) at the time such Option is
granted the option price is at least 110% of the fair market value of the Stock
subject to the Option and (ii) such Option by its terms is not exercisable after
the expiration of five years from the date of grant. To the extent that the
aggregate fair market value (determined at the time the respective Incentive
Stock Option is granted) of stock with respect to which Incentive Stock Options
are exercisable for the first time by an individual during any calendar year
under all incentive stock option plans of the Company and its parent and
subsidiary corporations exceeds $100,000, such excess Incentive Stock Options
shall be treated as Options which do not constitute Incentive Stock Options. The
Committee shall determine, in accordance with applicable provisions of the Code,
Treasury Regulations and other administrative pronouncements, which of an
Optionee's Incentive Stock Options will not constitute Incentive Stock Options
because of such limitation and shall notify the Optionee of such determination
as soon as practicable after such determination.
V. Shares Subject to the Plan
The aggregate number of shares which may be issued under Options
granted under the Plan shall not exceed 2,500,000 shares of Stock. For these
purposes, the aggregate numbers of shares previously made subject to an Option
under either the 1999 Plan or the 1993 Plan shall count against the aggregate
number of shares which may be issued under Options granted under the Plan.
Shares which may be issued under Options granted under the Plan may consist of
authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Options at the termination of the Plan shall
cease to be subject to the Plan, but, until termination of the Plan, the Company
shall at all times make available a sufficient number of shares to meet the
requirements of the Plan. Should any Option hereunder expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan to the extent permitted under
Rule 16b-3. The aggregate number of shares which may be issued under the Plan
shall be subject to adjustment in the same manner as provided in Paragraph VIII
hereof with respect to shares of Stock subject to Options then outstanding.
Exercise of an Option in any manner, including an exercise involving a Stock
Appreciation Right, shall result in a decrease in the number of shares of Stock
which may thereafter be available, both for purposes of the Plan and for sale to
any one individual, by the number of shares as to which the Option is exercised.
Separate stock certificates shall be issued by the Company for those shares
acquired pursuant to the exercise of an Incentive Stock Option and for those
shares acquired pursuant to the exercise of any Option which does not constitute
an Incentive Stock Option.
VI. Option Price
The purchase price of Stock issued under each Option shall be
determined by the Committee, but such purchase price shall not be less than the
fair market value of Stock subject to the Option on the date the Option is
granted.
VII. Term of Plan
The 1999 Plan and the 1993 Plan were effective on the dates provided
therein. The Plan as amended and restated shall be effective as provided in
Paragraph I. Except with respect to Options then outstanding, if not sooner
terminated under the provisions of Paragraph IX, the Plan shall terminate upon
and no further Options shall be granted after the expiration of ten years from
such effective date provided in Paragraph I.
VIII. Recapitalization or Reorganization
(a) The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
(b) The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the Optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the Optionee had been the holder of record of the number of
shares of Stock then covered by such Option. If (i) the Company shall not be the
surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity), (ii) the Company sells, leases or
exchanges all or substantially all of its assets to any other person or entity,
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the 1934 Act,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company's voting stock
(based upon voting power), or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board (each
such event is referred to herein as a "Corporate Change"), no later than (a) ten
days after the approval by the stockholders of the Company of such merger,
consolidation, reorganization, sale, lease or exchange of assets or dissolution
or such election of directors or (b) thirty days after a change of control of
the type described in Clause (iv), the Committee, acting in its sole discretion
without the consent or approval of any Optionee, shall act to effect one or more
of the following alternatives, which may vary among individual Optionees and
which may vary among Options held by any individual Optionee: (1) accelerate the
time at which Options then outstanding may be exercised so that such Options may
be exercised in full for a limited period of time on or before a specified date
(before or after such Corporate Change) fixed by the Committee, after which
specified date all unexercised Options and all rights of Optionees thereunder
shall terminate, (2) require the mandatory surrender to the Company by selected
Optionees of some or all of the outstanding Options held by such Optionees
(irrespective of whether such Options are then exercisable under the provisions
of the Plan) as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such Options
and the Company shall pay to each Optionee an amount of cash per share equal to
the excess, if any, of the amount calculated in Subparagraph (d) below (the
"Change of Control Value") of the shares subject to such Option over the
exercise price(s) under such Options for such shares, (3) make such adjustments
to Options then outstanding as the Committee deems appropriate to reflect such
Corporate Change (provided, however, that the Committee may determine in its
sole discretion that no adjustment is necessary to Options then outstanding) or
(4) provide that the number and class of shares of Stock covered by an Option
theretofore granted shall be adjusted so that such Option shall thereafter cover
the number and class of shares of stock or other securities or property
(including, without limitation, cash) to which the Optionee would have been
entitled pursuant to the terms of the agreement of merger, consolidation or sale
of assets and dissolution if, immediately prior to such merger, consolidation or
sale of assets and dissolution, the Optionee had been the holder of record of
the number of shares of Stock then covered by such Option.
(d) For the purposes of clause (2) in Subparagraph (c) above, the
"Change of Control Value" shall equal the amount determined in clause (i), (ii)
or (iii), whichever is applicable, as follows: (i) the per share price offered
to stockholders of the Company in any such merger, consolidation,
reorganization, sale of assets or dissolution transaction, (ii) the price per
share offered to stockholders of the Company in any tender offer or exchange
offer whereby a Corporate Change takes place, or (iii) if such Corporate Change
occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which such Options being surrendered are
exercisable, as determined by the Committee as of the date determined by the
Committee to be the date of cancellation and surrender of such Options. In the
event that the consideration offered to stockholders of the Company in any
transaction described in this Subparagraph (d) or Subparagraph (c) above
consists of anything other than cash, the Committee shall determine the fair
cash equivalent of the portion of the consideration offered which is other than
cash.
(e) Any adjustment provided for in Subparagraphs (b) or (c) above shall be
subject to any required stockholder action.
(f) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefore, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
IX. Amendment or Termination of the Plan
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Options have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part thereof from
time to time; provided, that no change in any Option theretofore granted may be
made which would impair the rights of the Optionee without the consent of such
Optionee; and provided, further, that the Board may not, without the approval of
the stockholders of the Company, make any alteration or amendment which would
(a) increase the aggregate number of shares which may be issued pursuant to the
provisions of the Plan or (b) change the class of individuals eligible to
receive Options under the Plan.
X. Securities Laws
(a) The Company shall not be obligated to issue any Stock pursuant to any
Option granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of 1933
and such other state and federal laws, rules or regulations as the Company or
the Committee deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
rules or regulations available for the offering and sale of such shares.
(b) It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of the 1934 Act meet all of the requirements of
Rule 16b-3. If any provision of the Plan or any such Option would disqualify the
Plan or such Option under, or would otherwise not comply with, Rule 16b-3, such
provision or Option shall be construed or deemed amended to conform to Rule
16b-3.