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
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 under Rule 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.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
LOGO
STONE ENERGY CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Thursday, May 17, 2001
To the Stockholders of Stone Energy Corporation:
The 2001 Annual Meeting of Stockholders (the "Annual Meeting") of Stone
Energy Corporation (the "Company") will be held on Thursday, May 17, 2001 at
10:00 a.m., local time, in the Gravier Room of Le Pavillon Hotel, Baronne and
Poydras Streets, New Orleans, Louisiana, for the following purposes:
(1) To elect four directors to serve until the 2004 Annual Meeting of
Stockholders;
(2) To approve the Stone Energy Corporation 2001 Amended and Restated
Stock Option Plan;
(3) To ratify the appointment of Arthur Andersen LLP, the Company's
independent auditors during 2000, as independent auditors of the
Company for the fiscal year ending December 31, 2001; 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 29, 2001, 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. Your attention is
directed to the attached Proxy Statement. 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 29, 2001
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 17, 2001 at 10:00 a.m., local time, in the Gravier Room of Le Pavillon
Hotel, Baronne and Poydras Streets, 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. These officers, directors and employees will not receive any
extra compensation for these services. 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 stockholders of
the Company on or about April 6, 2001.
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 29, 2001, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were 25,981,827 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, 2000, 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.
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, 2001 (unless otherwise indicated) by
(i) each person known by the Company to own beneficially more than five percent
of its outstanding Common Stock, (ii) the Company's Chief Executive Officer
during 2000 and each of the Company's other four most highly compensated
executive officers who were serving as executive officers at the end of 2000,
(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)
------------------------
PERCENT OF
OUTSTANDING
NAME OF BENEFICIAL OWNER SHARES COMMON STOCK
------------------------ ------ ------------
James H. Stone (1).................... 1,483,068(3) 5.7
D. Peter Canty........................ 398,570(4) 1.5
James H. Prince....................... 299,022(5) 1.2
Phillip T. Lalande.................... 49,800 *
Andrew L. Gates, III.................. 39,100 *
Joe R. Klutts......................... 415,870 1.6
David R. Voelker...................... 540,915(6) 2.1
John P. Laborde....................... 31,636 *
Robert A. Bernhard..................... 176,333(7) *
Raymond B. Gary........................ 72,592(8) *
B. J. Duplantis........................ 29,333 *
Richard A. Pattarozzi................... 334 *
Peter K. Barker......................... 1,000 *
Michael S. Smith........................ 1,070,799(9) 4.1
Executive Officers and Directors as a group
(consisting of 17 persons).............. 4,686,472 18.0
- ------------
* Less than 1%.
(1) Mr. Stone's address 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 16,000 shares, (ii) Mr. Canty include 45,000 shares, (iii) Mr.
Prince include 43,000 shares, (iv) Mr. Lalande include 49,700 shares, (v)
Mr. Gates include 39,000 shares, (vi) Mr. Duplantis include 18,333 shares,
(vii) Messrs. Laborde, Voelker, Gary and Bernhard each include 13,333
shares, (viii) Mr. Pattarozzi include 334 shares, (ix) Mr. Smith include
54,420 shares and (x) the executive officers and directors as a group
include 396,719 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. Thomas Stone as custodian for the benefit
of Mr. Stone's two minor children, to which Mr. Stone disclaims any
pecuniary interest. Also includes 26,131 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
children, of which Mr. Voelker is a trustee, 294,970 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.
(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.
(9) Includes 120,531 shares held by Mr. Smith's wife, 1,588 shares held by Mr.
Smith's daughters and 38,150 shares held by trusts for Mr. Smith's
children, of which Mr. Smith is trustee.
ELECTION OF DIRECTORS
Currently, 11 directors serve on the Company's Board 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 2003,
2001 and 2002, respectively. B.J. Duplantis, John P. Laborde, Richard A.
Pattarozzi and Michael S. Smith have been nominated to serve in Class II and, if
elected, will serve until the Company's 2004 Annual Meeting of Stockholders and
until their respective successors have been elected and qualified. Each of the
four nominees for director currently serves as a director of the Company. The
remaining seven directors named below will not be required to stand for election
at the Annual Meeting because their present terms expire in either 2002 or 2003.
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 Class II 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, 2001 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 Director
and Directorships Since Age
-------------------- -------- ---
Class I Directors
D. Peter Canty.......... President and Chief Executive 1993 54
Officer of the Company
Raymond B. Gary......... Advisory Director, Morgan 1993 72
Stanley & Co. Inc.
David R. Voelker........ Owner, Frantzen-Voelker 1993 47
Investments
Peter K. Barker......... Advisory Director, Goldman 2000 52
Sachs & Co., Director, Ameron
International and Department 56, Inc.
Class II Nominees
B. J. Duplantis......... Senior Partner of the law firm 1993 61
of Gordon, Arata, McCollam,
Duplantis & Eagan
John P. Laborde......... Retired Chairman Emeritus, 1993 77
Tidewater Inc., Director,
Stewart Enterprises, Inc. & Stolt
Offshore, S.A., Chairman, Laborde
Marine Lifts, Inc., Laborde
Products, Inc., Lab More Properties
and Lab-Rex, L.L.C.
Richard A. Pattarozzi... Former Vice President of 2000 57
Shell Offshore Inc.
Michael S. Smith........ Former President and Chief 2001 45
Executive Officer of Basin
Exploration, Inc.
Class III Directors
Robert A. Bernhard...... Co-Chairman of Munn, Bernhard & 1993 72
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 1993 66
the Company
James H. Stone.......... Chairman of the Board of the 1993 75
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.
D. Peter Canty was appointed Chief Executive Officer of the Company on
January 1, 2001 upon the resignation of that position by James H. Stone. Prior
to January 1, 2001, Mr. Canty has served as President of the Company since March
1994.
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.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings and took action by written
consent on one occasion during 2000. Each director attended all of the meetings
of the Board of Directors with the exception of Mr. Bernhard who missed one
meeting and Mr. Duplantis who missed three meetings that occurred during the
week of October 20-28, 2000. Each director attended all of the meetings of the
committee on which he currently serves with the exception of Mr. Pattarozzi who
missed one Compensation Committee meeting and one Strategy Committee meeting.
The Company has the following standing committees:
AUDIT COMMITTEE. The Audit Committee, which currently consists of Messrs.
Barker, Bernhard, Duplantis, Gary and Laborde, met two times during 2000. 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, to recommend to
the Company's Board of Directors, based on its discussions with the Company's
management and independent auditors, the inclusion of the audited financial
statements in the Company's Annual Report on Form 10-K and to oversee the entire
audit function, both independent and internal.
The Company believes that each of the members of the Audit Committee is
independent as defined by the listing standards of the New York Stock Exchange.
During 1999, the Company's Board of Directors adopted and approved a formal
written charter for the Company's Audit Committee. During 2001, the Audit
Committee Charter was revised. A copy of the charter, as revised, is attached
hereto as Appendix B.
COMPENSATION COMMITTEE. The Compensation Committee, which currently
consists of Messrs. Gary, Duplantis, Klutts, Pattarozzi, and Voelker, met five
times during 2000. 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 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, did not meet during 2000 but took
action by written consent on four occasions. 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 currently consists of
Messrs. Bernhard, Barker, Canty and Stone, did not meet during 2000. 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 currently consists of
Messrs. Stone, Canty, Bernhard and Gary, did not meet during 2000. Its principal
function is to determine the price at which the Company's securities are
initially sold.
STRATEGY COMMITTEE. The Strategy Committee, which currently consists of
Messrs. Canty, Barker, Duplantis and Pattarozzi met twice during 2000. Its
principal function is to assist the Company's Directors in reviewing and
pursuing strategic alternatives.
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 the date of the Company's 2000 Annual Meeting of
Stockholders, Mr. Barker was granted an option to purchase 1,000 shares of
Common Stock at an exercise price of $58.16 per share. Effective as of February
1, 2001, Mr. Smith was granted an option to purchase 1,000 shares of Common
Stock at an exercise price of $54.20 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 2000
Annual Meeting of Stockholders, each of Messrs. Gary, Voelker, Duplantis,
Laborde, Klutts, Pattarozzi and Bernhard was granted an option to purchase 5,000
shares of Common Stock at an exercise price of $58.16 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.
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, 2000 to February 15,
2001, its officers, directors, and greater than 10% beneficial owners complied
with all applicable filing requirements, except that Richard A. Pattarozzi was
late in filing one monthly report relating to one transaction.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
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, 2000, 1999 and 1998 of those persons who were, at
December 31, 2000, the Chief Executive Officer and the other four most highly
compensated executive officers of the Company (collectively, the "named
executive officers"). Effective January 1, 2001, James H. Stone resigned his
position as Chief Executive Officer of the Company. He retained the office of
Chairman of the Board and D. Peter Canty assumed the role of Chief Executive
Officer of the Company.
LONG-TERM
COMPENSATION
------------
NUMBER OF
SECURITIES
UNDERLYING ALL OTHER
ANNUAL COMPENSATION OPTIONS COMPENSATION (2)
----------------------------- ------------ ----------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OTHER
- --------------------------- ---- ------ --------- -----
James H. Stone................. 2000 $190,625 $152,500 $ -- 50,000 $1,143,134(3)(4)
Chairman of the Board and 1999 175,000 140,000 -- -- 23,186(4)
Chief Executive Officer 1998 175,000 74,400 -- -- 23,366(4)
D. Peter Canty................. 2000 $185,000 $138,750 $ -- 50,000 $8,376(5)(6)
President and Chief 1999 165,000 132,000 -- -- 8,536(5)(6)
Operating Officer 1998 165,000 70,100 -- -- 8,554(5)(6)
James H. Prince................ 2000 $129,375 $97,031 $ -- 20,000 $6,652(7)
Chief Financial Officer and 1999 109,583 87,666 -- -- 6,953(7)
Vice President 1998 95,000 35,100 -- -- 6,915(7)
Andrew L. Gates, III........... 2000 $150,000 $112,500 $ -- 25,000 $9,172(8)
Vice President and General 1999 132,500 52,500 -- -- 9,372(8)
Counsel 1998 120,000 51,000 -- -- 9,410(8)
Phillip T. Lalande............. 2000 $138,750 $104,063 $17,735(9) 20,000 $395,512(10)(11)
Vice President-Engineering 1999 120,000 96,000 2,324(9) -- 371,615(10)(11)
1998 120,000 51,000 4,879(9) -- 11,793(10)
(1) The amounts reflected in the table for 2000, 1999 and 1998 represent
bonuses paid in March 2001, February 2000 and February 1999, respectively,
which related to performance in 2000, 1999 and 1998, 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 $1,122,758 representing income attributable to the exercise of
25,000 stock options that carried an exercise price of $12.38 per share and
16,000 stock options that carried an exercise price of $20.31.
(4) Includes annual premiums of $11,410 paid by the Company for a life
insurance policy as to which the Company is not a beneficiary.
(5) Includes annual premiums of $2,300 paid by the Company for a life insurance
policy as to which the Company is not a beneficiary.
(6) 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 2000, 1999
and 1998, $422, $364 and $344, respectively, are attributable to the
economic benefit pursuant to the policy relating to Mr. Canty.
(7) 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 2000, 1999
and 1998, $781, $595 and $497, respectively, are attributable to the
economic benefit pursuant to the policy relating to Mr. Prince.
(8) Includes $3,500 of premiums paid by the Company for a life insurance policy
as to which the Company is not the beneficiary.
(9) 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.
(10) Includes $6,240 of premiums paid by the Company for a life insurance policy
as to which the Company is not a beneficiary.
(11) Other compensation for 2000 includes income of $383,600 attributable to the
exercise of 10,000 stock options that carried an exercise price of $12.38
per share and for 1999 includes income of $359,503 attributable to the
exercise of 9,300 stock options that carried an exercise price of $12.38
per share.
STOCK OPTIONS GRANTED IN 2000
During 2000, the named executive officers were granted 165,000 options to
purchase shares of common stock at an exercise price of $58.16 per share
pursuant to the Company's 2000 Amended and Restated Stock Option Plan as
follows:
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION FAIR VALUE AT DATE
NAME GRANTED 2000 ($/SHARE) DATE OF GRANT (1)
------------------------ ------------- ----------------- ----------- ------------ --------------------
James H. Stone........ 50,000 14% $58.16 5/18/2010 $1,591,500
D. Peter Canty........ 50,000 14% 58.16 5/18/2010 1,591,500
James H. Prince....... 20,000 6% 58.16 5/18/2010 636,600
Andrew L. Gates, III.. 25,000 7% 58.16 5/18/2010 795,750
Phillip T. Lalande.... 20,000 6% 58.16 5/18/2010 636,600
(1) The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions: (a) dividend yield of 0%, (b) expected volatility of 45.4%,
(c) risk-free interest rate of 6.8% and (d) expected life of six years.
FISCAL YEAR-END OPTION VALUES AND STOCK OPTION EXERCISES
The following tables contain information concerning the number and value of
exercisable and unexercisable options at December 31, 2000, as well as options
exercised during 2000 by the named executive officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 2000 AT DECEMBER 31, 2000 (1)
------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------------- ----------- ------------- ----------- -------------
James H. Stone............ 16,000 58,000 $707,800 $673,588
D. Peter Canty............ 45,000 55,000 2,189,125 540,875
James H. Prince........... 43,000 27,000 2,067,775 414,788
Phillip T. Lalande........ 49,700 26,000 2,470,473 359,175
Andrew L. Gates, III...... 39,000 31,000 1,909,888 402,519
- ----------
(1) The value of each unexercised in-the-money stock option is equal to the
difference between the closing price of the Company's Common Stock on the
New York Stock Exchange on December 31, 2000 of $64.55 and the per share
exercise price of the stock option.
OPTIONS EXERCISED DURING 2000
- --------------------------------------------------------------------
NAME OPTIONS EXERCISED VALUE REALIZED
- ------------------------ ------------------- -----------------
James H. Stone......... 41,000 $1,122,758
D. Peter Canty......... - -
James H. Prince........ - -
Phillip T. Lalande..... 10,000 383,600
Andrew L. Gates, III... - -
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) for a continuous period of 180 months. 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 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 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. The Peer Group consists of the
companies named below under the heading "Stockholder Return Performance
Presentation".
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, the quarterly return on the Company's common stock as compared to
the quarterly 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. 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 2000 performance year, a total of
$4.8 million was available for awards and $4.0 million was paid. Awards granted
to the named executive officers for the 2000 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 2000 Amended and Restated Stock Option Plan authorizes
the Compensation Committee to award stock options to purchase up to 2,500,000
shares of Common Stock to employees 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 February 1, 2001, the stockholders of Stone Energy Corporation and Basin
Exploration, Inc. voted in favor of the merger of the two companies in a
tax-free, stock-for-stock transaction. In connection with the approval of the
merger, stockholders of Stone Energy also approved a proposal to increase the
authorized shares of Stone common stock from 25 million to 100 million shares.
Under the merger agreement, Basin stockholders received 0.3974 of a share of
Stone common stock for each share of Basin common stock they owned. As such,
Stone issued approximately 7.4 million shares of common stock which, based upon
Stone's closing price of $53.70 on February 1, 2001, resulted in total equity
value related to the transaction of approximately $400 million.
As a result of the impact of the Basin merger on the number of employees of
the Company and 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 Company's Board of Directors
unanimously adopted the 2001 Amended and Restated Stock Option Plan on February
1, 2001. The plan is subject to stockholder approval at the Annual Meeting.
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 2000, the Company's discretionary match of
employee deferrals totaled approximately $0.4 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 during 2000, 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 2000 was increased to
$190,625.
INCENTIVE COMPENSATION. Mr. Stone was awarded a $152,500 bonus for the 2000
performance year. This award was based upon the criteria set forth above under
"Executive Compensation-- Incentive Compensation."
STOCK OPTION PLAN. During 2000, Mr. Stone was granted 50,000 options to
purchase shares of Common Stock at an exercise price of $58.16 per share
pursuant to the 2000 Amended and Restated Stock Option Plan.
Compensation Committee
Raymond B. Gary
B. J. Duplantis
Joe R. Klutts
Richard A. Pattarozzi
David R. Voelker
TRANSACTIONS WITH MANAGEMENT AND CERTAIN DIRECTORS
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, two of the Company's directors,
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.
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 officers and directors with respect to the drilling of
additional wells or other development operations.
Joe R. Klutts received $41,000 in consulting fees after retiring, February
1, 2000, as an employee of the Company.
In June 2000, the Company purchased property that adjoins the Lafayette
office building from StoneWall Associates for an independently appraised value
of approximately $540,000. Two of the Company's board members, James H. Stone
and Joe R. Klutts, are partners of StoneWall Associates.
The law firm of Gordon, Arata, McCollam, Duplantis and Eagan, of which B.J.
Duplantis, a Stone director and member of the Company's Audit Committee, is a
Senior Partner, provided legal services for the Company during 2000. The value
of these services totaled approximately $9,000.
Laborde Marine Lifts, Inc., a company in which John P. Laborde, a Stone
director and member of the Company's Audit Committee, is Chairman of, provided
services to the Company during 2000. The value of these services was
approximately $75,000.
AUDIT COMMITTEE REPORT
The Audit Committee's 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, to recommend to the Company's Board of Directors, based on its
discussions with the Company's management and independent auditors, the
inclusion of the audited financial statements in the Company's Annual Report on
Form 10-K and to oversee the entire audit function, both independent and
internal.
The Company believes that each of the members of the Audit Committee is
independent as defined by the listing standards of the New York Stock Exchange.
During 1999, the Company's Board of Directors adopted and approved a formal
written charter for the Company's Audit Committee. During 2001, the Audit
Committee Charter was revised. A copy of the charter, as revised, is attached
hereto as Appendix B.
In connection with the Company's consolidated financial statements for the
year ended December 31, 2000, the Audit Committee has:
o reviewed and discussed the audited financial statements with
management;
o discussed with the Company's independent auditors, Arthur Andersen
LLP, the matters required to be discussed by Statements on Auditing
Standards 61; and
o received the written disclosures and the letter from Arthur Andersen
LLP as required by Independence Standards Board Standard No. 1 and
discussed with the auditors their independence.
Based on the review and discussions with the Company's management and
independent auditors, as set forth above, the Audit Committee recommended to the
Company's Board of Directors that the audited financial statements be included
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2000, as filed with the SEC.
Audit Committee
Peter K. Barker
Robert A. Bernhard
B.J. Duplantis
Raymond B. Gary
John P. Laborde
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 December 29, 1995 at
$15.38 per share for the Company's Common Stock and at the closing
price of the stocks comprising the S&P 500 and the Peer Group,
respectively, on such date.
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 Peer S&P
(Fiscal Year Covered) SGY Group 500
--------------------------- --------- --------- ---------
12/31/96 194.31 161.67 120.26
12/31/97 217.89 147.48 157.56
12/31/98 186.99 87.26 199.57
12/31/99 231.71 109.87 238.54
12/31/00 419.84 228.68 214.38
The companies that comprise the Company's current Peer Group are as
follows: Barrett Resources Corporation, 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, St. Mary Land and Exploration
Company, Swift Energy Company, The Houston Exploration Company, Tom Brown, Inc.
and Vintage Petroleum, Inc.
APPROVAL OF 2001 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 2001 Amended and Restated Stock Option
Plan (the "2001 Plan"), a copy of which is attached hereto as Appendix A. The
2001 Plan is an amendment and restatement of both the Stone Energy Corporation
2000 Amended and Restated Stock Option Plan (the "2000 Plan") and of the Stone
Energy Corporation 1993 Nonemployee Directors' Stock Option Plan (the "1993
Plan") and will supersede and replace each plan in its entirety. The primary
differences between the 2001 Plan and its predecessors are: (a) the number of
shares of Common Stock subject to the 2001 Plan will be 3,225,000, which number
includes the number of shares of Common Stock previously made subject to an
option granted under either the 2000 Plan or the 1993 Plan, (b) the Chief
Executive Officer of the Company may grant options to employees (with the
maximum number of shares that may be subject to such options granted to an
individual employee during any calendar year not to exceed 10,000 (subject to
adjustment for certain changes in the Common Stock)), and (c) except for
adjustments for certain changes in the Common Stock, the Administrator (defined
below) may not, without the approval of the stockholders of the Company, amend
any outstanding option contract to lower the option price (or cancel and replace
any outstanding option contract with option contracts having a lower option
price).
The Board of Directors unanimously adopted the 2001 Plan on February 1,
2001, subject to stockholder approval at the Annual Meeting. If the 2001 Plan is
not approved by the stockholders of the Company at the Annual Meeting, then no
options will be granted under the 2001 Plan and the 2000 Plan and the 1993 Plan
shall continue in effect as if the adoption of the 2001 Plan had not occurred.
The 2001 Plan is designed to promote the interests of the Company and its
stockholders by providing a means whereby certain employees of the Company and
its subsidiaries and the nonemployee directors of the Company 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. Accordingly, the 2001
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 2001 Plan is qualified
in its entirety by reference to the 2001 Plan. Approval of the 2001 Plan
requires the affirmative vote of a majority of the shares present, or
represented, 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.
NUMBER OF SHARES SUBJECT TO THE 2001 PLAN
The aggregate maximum number of shares authorized to be issued under the
2001 Plan pursuant to grants of stock options is 3,225,000 shares of Common
Stock (which number includes the number of shares of Common Stock previously
made subject to a stock option granted under either the 2000 Plan or the 1993
Plan). The maximum number of shares of Common Stock that may be the subject of
stock options granted under the 2001 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, 2001, 279,600 shares have
been issued under the 2000 Plan and 96,667 shares have been issued under the
1993 Plan in connection with the exercise of stock options, and 1,576,600 and
121,333 shares are subject to options currently outstanding under the 2000 Plan
and the 1993 Plan, respectively.
ADMINISTRATION
The 2001 Plan will be administered by an Administrator, which means (i) in
the context of options granted to, or the administration (or interpretation of
any provision) of the 2001 Plan as it relates to, any person who is subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Committee (as defined below), or (ii) in the context of options
granted to, or the administration (or interpretation of any provision) of the
2001 Plan as it relates to, any person who is not subject to Section 16 of the
Exchange Act, the Chief Executive Officer of the Company (or, if the Chief
Executive Officer is not a member of the Board of Directors, the Committee),
unless the 2001 Plan specifies that the Committee will take specific action (in
which case such action may only be taken by the Committee) or the Committee
specifies that it will serve as Administrator. The term "Committee" means a
committee of, and appointed by, the Board of Directors that 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 (b) nonemployee directors (within
the meaning of Rule 16b-3 under the Exchange Act). The Compensation Committee of
the Board of Directors will initially serve as the Committee.
The Administrator will have full authority, subject to the terms of the
2001 Plan, to interpret the 2001 Plan and establish rules and regulations for
the proper administration of the 2001 Plan. All decisions made by the
Administrator in construing the provisions of the 2001 Plan will be final;
provided, however, that in the event of a conflict in any such decision as
between the Committee and the Chief Executive Officer of the Company, each
acting in capacity as Administrator of the 2001 Plan, the determination by the
Committee will be conclusive.
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 2001 Plan. The selection of employees, from among
those eligible, who will receive stock options is within the discretion of the
Administrator. In addition, individuals who are nonemployee directors of the
Company are eligible to receive automatic grants of stock options under the 2001
Plan as described below.
TERM OF THE 2001 PLAN
The 2000 Plan and the 1993 Plan were originally effective as of May 18,
2000 and July 8, 1993 respectively. The 2001 Plan will be effective as of the
date of the Annual Meeting if approved by the Company's stockholders at such
meeting. No further options may be granted under the 2001 Plan after May 16,
2011, and the 2001 Plan will terminate thereafter once all options have been
exercised or expired. The Board of Directors may, however, terminate the 2001
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
Administrator at the date of grant (but not more than 10 years in the case of
incentive stock options). The effect of an optionee's termination of employment
by reason of death, retirement, disability or otherwise will be specified in the
option contract that evidences each option grant.
b. OPTION PRICE. The option price will be determined by the Administrator
and will be no less than the fair market value of the shares on the date that
the option is granted; provided, however, that the option price for options
granted to nonemployee directors will be the fair market value of the shares on
the date that the option is granted. Except for adjustments for certain changes
in the Common Stock, the Administrator may not, without the approval of the
stockholders of the Company, amend any outstanding option contract that
evidences an option grant to lower the option price (or cancel and replace any
outstanding option contract with an option contract having a lower option
price).
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, then 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 Administrator. However, the maximum number of
shares that may be subject to options granted to an employee during any calendar
year may not exceed 100,000 (subject to adjustment for certain changes in the
Common Stock). Further, the maximum number of shares that may be subject to
options granted to an employee during any calendar year by the Chief Executive
Officer of the Company may not exceed 10,000 (subject to adjustment for certain
changes in the Common Stock). Nonemployee directors will receive automatic stock
option grants under the 2001 Plan (without the exercise of the discretion of the
Administrator or any other person or persons), and the size of such grants are
determined as follows: (i) each nonemployee director who is elected to the Board
of Directors for the first time after the effective date of the 2001 Plan will
receive, on the date of his or her election, an option exercisable for 1,000
shares of Common Stock (subject to adjustment for certain changes in the Common
Stock) and (ii) as of the date of each annual meeting of the stockholders of the
Company in each year that the 2001 Plan is in effect, each nonemployee director
who is then in office and who is not entitled to a grant as described in clause
(i), will receive an option exercisable for 5,000 shares of Common Stock
(subject to adjustment for certain changes in the Common Stock).
e. STATUS OF OPTIONS. The status of each option granted to an employee as
either an incentive stock option or a non-statutory stock option will be
designated by the Administrator 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. All options granted to
nonemployee directors will be non-statutory stock options.
f. PAYMENT. The option price upon exercise may, at the discretion of the
Administrator, be paid by an optionee in cash, other shares of Common Stock
owned by the optionee, 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 2001 Plan also allows the
Administrator, 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 2001 Plan and such other provisions as
the Administrator deems appropriate.
h. TRANSFERABILITY. No option is transferable other than by will or the
laws of descent and distribution or, in the case of an option that is not an
incentive stock option, pursuant to a qualified domestic relations order, and
only the optionee or his guardian or legal representative may exercise any
option during the optionee's lifetime.
i. SPECIAL RULES FOR OPTIONS GRANTED TO NONEMPLOYEE DIRECTORS.
Notwithstanding the provisions of the 2001 Plan described in paragraphs a.
through h. above to the contrary, non-statutory stock options granted to
nonemployee directors will (i) have a terms of five years from the date of
grant, (ii) subject to clauses (iii) and (iv)(A) below, vest and become
exercisable with respect to one-third of the shares covered thereby following
each anniversary of the date of grant, (iii) vest and become exercisable in full
upon a Corporate Change (as defined below, or to the extent defined in an option
contract that evidences an option grant to a nonemployee director, as defined in
such option contract) or termination of a nonemployee director's membership on
the Board of Directors by reason of death or disability, and (iv) be exercisable
only while the nonemployee director is a member of the Board of Directors and
terminate and cease to be exercisable upon the nonemployee director's
termination of membership on the Board of Directors, except that, subject to the
limitation in clause (i) above: (A) if the nonemployee director dies or
terminates membership on the Board of Directors due to disability, the option
will be exercisable in full for a period of one year thereafter by the
nonemployee director (or his estate or the person who acquires the option due to
the nonemployee director's death) or (B) if the nonemployee director's
membership on the Board of Directors terminates for any other reason, the option
is exercisable for one year following such termination or by the nonemployee
director's estate (or the person who acquires the option due to the nonemployee
director's death) for one-year following the nonemployee director's death if he
or she dies within such initial one-year period, but in each case only as to the
number of shares exercisable as of the date the nonemployee director's
membership on the Board of Directors terminates.
CORPORATE CHANGE AND OTHER ADJUSTMENTS
The 2001 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, or adjust the outstanding options
as appropriate to reflect such Corporate Change (including, without limitation,
adjusting an option to provide that the number and class of shares of Common
Stock covered by such option will be adjusted so that the option will thereafter
cover securities of the surviving or acquiring corporation or other property
(including cash) as determined by the Committee). The 2001 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.
The maximum number of shares that may be issued under the 2001 Plan and the
maximum number of shares that may be issued to any one individual, as well as
the number and price of shares of Common Stock or other consideration subject to
an option, will be appropriately adjusted by the Committee in the event of
changes in the outstanding Common Stock by reason of recapitalizations,
reorganizations, mergers, consolidations, combinations, split-ups, split-offs,
spin-offs, exchanges or other relevant changes in capitalization or
distributions to the holders of Common Stock occurring after an option is
granted.
AMENDMENTS
The Board of Directors may from time to time amend the 2001 Plan; however,
no amendment may be adopted without the prior approval of the stockholders of
the Company if such amendment (a) materially increases the benefits accruing to
nonemployee directors participating under the 2001 Plan, (b) increases the
number of shares of Common Stock that may be issued under the 2001 Plan, (c)
modifies the class of eligible optionees, or (d) amends or deletes the provision
of the 2001 Plan that prevents the Administrator from amending any outstanding
option contract to lower the option price (or cancel and replace any outstanding
option contract with an option contract having a lower option price).
FEDERAL INCOME TAX ASPECTS OF THE 2001 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 2001 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 reporting 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 reporting 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 2001 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 2001 Plan by the Committee 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. On the
other hand, the income generated in connection with the exercise of stock
options granted under the 2001 Plan by the Chief Executive Officer of the
Company will not qualify as performance-based compensation and, accordingly, the
Company's deduction for such compensation may be limited by Section 162(m) of
the Code.
The 2001 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 2001 Plan. No
consideration has been given to the effects of state, local, or other tax laws
on the 2001 Plan or on option recipients.
INAPPLICABILITY OF ERISA
Based upon current law and published interpretations, the Company does not
believe the 2001 Plan is subject to any of the provisions of the Employee
Retirement Income Security Act of 1974.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2001 PLAN AS
DESCRIBED ABOVE AND AS SET FORTH IN APPENDIX A.
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, 2001. 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.
During 2000, the Company's independent accounting firm, Arthur Andersen
LLP, billed the Company the following aggregate fees for the following services
rendered:
Audit Fees $117,500
Financial Information System Design and Implementation Fees -
All Other Fees 99,680
The Company's Audit Committee does not believe that these services have
impacted Arthur Andersen's independence.
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. In the event the appointment is not ratified, the
Board of Directors will consider the appointment of other independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF
THIS APPOINTMENT.
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.
OTHER MATTERS FOR 2001 ANNUAL MEETING
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 FOR 2002 ANNUAL MEETING
Any stockholder who wishes to submit a proposal for inclusion in the proxy
material and for presentation at the Company's 2002 Annual Meeting of
Stockholders must forward such proposal to the Secretary of the Company at the
address indicated at the beginning of this proxy statement, so that the
Secretary receives it no later than November 30, 2001.
By Order of the Board of Directors
/s/ Andrew L. Gates, III
------------------------------
Andrew L. Gates, III
Secretary
March 29, 2001
APPENDIX A
STONE ENERGY CORPORATION
2001 AMENDED AND RESTATED STOCK OPTION PLAN
I. PURPOSE OF THE PLAN
The STONE ENERGY CORPORATION 2001 AMENDED AND RESTATED STOCK OPTION PLAN
(the "Plan") is intended to promote the interests of STONE ENERGY CORPORATION, a
Delaware corporation (the "Company"), and its stockholders by providing a means
whereby certain employees of the Company and its subsidiaries and the
nonemployee directors of the Company 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. Accordingly, the Company may grant to certain employees of the
Company and its subsidiaries ("Employees") the option ("Option") to purchase
shares of the common stock of the Company ("Stock"), as hereinafter set forth.
Further, the Company shall grant Options to directors of the Company who are not
employees of the Company or any of its subsidiaries ("Nonemployee Directors").
The Plan as set forth herein constitutes an amendment and restatement of
both (i) the Stone Energy Corporation 2000 Amended and Restated Stock Option
Plan (the "2000 Plan") and (ii) the Stone Energy Corporation 1993 Nonemployee
Directors' 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 17,
2001, provided this amendment and restatement is adopted by the Board of
Directors of the Company (the "Board") 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 17, 2001 (or, if applicable, on the date of
such adjournment). If this amendment and restatement is not so approved by the
stockholders, then this amendment and restatement shall be void ab initio, and
the 2000 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 2000 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 2000 Plan and the 1993 Plan, as in effect
prior to this amendment and as may be otherwise amended hereafter.
II. ADMINISTRATION
(a) The Plan shall be administered by the Administrator, which shall mean
(i) in the context of Options granted to, or the administration (or
interpretation of any provision) of the Plan as it relates to, any person who is
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"1934 Act") (including any successor section to the same or similar effect,
"Section 16"), the Committee (as defined below), or (ii) in the context of
Options granted to, or the administration (or interpretation of any provision)
of the Plan as it relates to, any person who is not subject to Section 16, the
Chief Executive Officer of the Company (or, if the Chief Executive Officer is
not a member of the Board, the Committee), unless the Plan specifies that the
Committee shall take specific action (in which case such action may only be
taken by the Committee) or the Committee (as to any Option described in this
clause (ii) or the administration or interpretation of any specific provision of
the Plan) specifies that it shall serve as Administrator. The term "Committee"
shall mean a committee of, and appointed by, the Board that shall be comprised
solely of two or more directors who are both (A) outside directors (within the
meaning of section 162(m) of the Internal Revenue Code of 1986, as amended (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 1934 Act).
The Administrator 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
Administrator in construing the provisions of the Plan shall be final; provided,
however, that in the event of any conflict in any such determination as between
the Committee and the Chief Executive Officer of the Company, each acting in
capacity as Administrator of the Plan, the determination of the Committee shall
be conclusive.
(b) With respect to Options granted pursuant to Subparagraph V (a) hereof,
the Administrator shall have sole authority to select the Employees from among
those individuals eligible under Subparagraph IV (a) hereof and to establish the
number of shares which may be issued under each Option granted to such
Employees; 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 Employee during any calendar year may
not exceed 100,000 (subject to adjustment in the same manner as provided in
Paragraph IX 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 that 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 granted to
Employees that are canceled or repriced. Further, the maximum number of shares
that may be subject to Options granted by the Chief Executive Officer of the
Company under the Plan to an individual Employee during any calendar year may
not exceed 10,000 (subject to adjustment in the same manner as provided in
Paragraph IX hereof with respect to shares of Stock subject to Options then
outstanding). In selecting the Employees from among individuals eligible under
Subparagraph IV (a) hereof and in establishing the number of shares that may be
issued under each Option granted to such Employees, the Administrator 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 Administrator in its discretion shall deem relevant. All
decisions made by the Administrator in selecting the Employees and in
establishing the number of shares which may be issued under each Option granted
under Subparagraph V (a) hereof shall be final.
III. OPTION AGREEMENTS
(a) Each Option granted to an Employee or Nonemployee Director
(collectively, "Optionees") 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 Administrator, but which are not
inconsistent with the terms of the Plan. The terms and conditions of the
respective Option Agreements need not be identical. Specifically, an Option
Agreement for an Employee 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 therefor ("Stock Appreciation Rights"), on
such terms and conditions as the Administrator in its sole discretion may
prescribe; provided, that, except as provided in Subparagraph IX(c) hereof, the
Administrator 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 Administrator (as the same may be amended from
time to time).
(b) Notwithstanding the provisions in Subparagraph (a) above, the
Administrator may not, without approval of the stockholders of the Company,
amend any outstanding Option Agreement to lower the option price (or cancel and
replace any outstanding Option Agreements with Option Agreements having a lower
option price).
(c) 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 such other reporting service
approved by the Administrator); 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 Administrator in such manner as it
deems appropriate.
(d) Each Option and all rights granted thereunder shall not be transferable
other than by will or the laws of descent and distribution or, in the case of an
Option that is not intended to constitute an Incentive Stock Option (as such
term is defined in Subparagraph V (a) below), 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 such Optionee or such
Optionee's guardian or legal representative.
(e) Notwithstanding the provisions in Subparagraph (a) above, each Option
granted to a Nonemployee Director shall (i) have a term of five years from the
date of grant, (ii) subject to clauses (iv) and (v)(A) below, vest and become
exercisable with respect to (A) one-third of the shares covered thereby on the
first anniversary of the date of grant, (B) an additional one-third of the
shares covered thereby on the second anniversary of the date of grant, and (C)
an additional one-third of the shares covered thereby on the third anniversary
of the date of grant, (iii) not constitute an Incentive Stock Option, (iv)
become vested and exercisable in full upon a Corporate Change (as defined in
Subparagraph IX(c) hereof or, to the extent the Option Agreement with such
Nonemployee Director defines Corporate Change, Corporate Change as defined in
such Option Agreement) or termination of the Nonemployee Director's membership
on the Board by reason of death or disability, (v) be exercisable only while the
Nonemployee Director remains a member of the Board and terminate and cease to be
exercisable upon the Nonemployee Director's termination of membership on the
Board, except that, subject to the limitation in clause (i) above: (A) if the
Nonemployee Director dies while a member of the Board or terminates his
membership on the Board due to disability, the Option may be exercisable in full
for a period of one year thereafter by the Nonemployee Director (the Nonemployee
Director's estate or the person who acquires the Option by will or the laws of
descent or otherwise by reason of death of the Nonemployee Director) or (B) if
the Nonemployee Director's membership on the Board terminates for any reason
other than as described in clause (v)(A), the Option may be exercisable by the
Nonemployee Director for one year following such termination or by the
Nonemployee Director's estate (or the person who acquires the Option by will or
the laws of descent or otherwise by reason of the death of the Nonemployee
Director) for one-year following the Nonemployee Director's death if the
Nonemployee Director dies within such initial one-year period, but in each case
only as to the number of shares exercisable as of the date the Nonemployee
Director's membership on the Board terminates.
IV. ELIGIBILITY OF OPTIONEE
(a) Options granted at the discretion of the Administrator pursuant to
Subparagraph V (a) hereof 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.
(b) Options granted automatically under the Plan pursuant to Subparagraph V
(b) hereof may be granted only to individuals who are Nonemployee Directors at
the time the Option is granted.
V. STOCK OPTION AWARDS
(a) Pursuant to the Administrator's discretion, an individual eligible
under Subparagraph IV (a) hereof may be granted one or more Options. Options may
be granted to the same individual on more than one occasion. Options granted
under this Subparagraph V (a) may be either incentive stock options, within the
meaning of section 422(b) of the Code ("Incentive Stock Options"), or options
that do not constitute Incentive Stock Options. 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 that do not
constitute Incentive Stock Options. The Administrator shall determine, in
accordance with applicable provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of an individual's Incentive Stock
Options will not constitute Incentive Stock Options because of such limitation
and shall notify the individual of such determination as soon as practicable
after such determination. Nonemployee Directors shall not be eligible to receive
Options pursuant to this Subparagraph V (a).
(b) Each Nonemployee Director who is elected to the Board for the first
time after the effective date provided in Paragraph I hereof shall receive, as
of the date of his or her election and without the exercise of the discretion of
the Committee or any person or persons, an Option exercisable for 1,000 shares
of Stock (subject to adjustment in the same manner as provided in Paragraph IX
hereof with respect to shares of Stock subject to Options then outstanding). As
of the date of the annual meeting of the stockholders of the Company in each
year that the Plan is in effect as provided in Paragraph VIII hereof, each
Nonemployee Director then in office who is not then entitled to receive an
Option pursuant to the preceding sentence of this Subparagraph V (b) shall
receive, without the exercise of the discretion of the Committee or any person
or persons, an Option exercisable for 5,000 shares of Stock (subject to
adjustment in the same manner as provided in Paragraph IX hereof with respect to
shares of Stock subject to Options then outstanding). If, as of any date that
the Plan is in effect, there are not sufficient shares of Stock available under
the Plan to allow for the grant to each Nonemployee Director of an Option for
the number of shares provided herein, each Nonemployee Director shall receive an
Option for his or her pro-rata share of the total number of shares of Stock then
available under the Plan. The purchase price of Stock issued under each Option
granted under this Subparagraph V (b) shall be the price set forth in Paragraph
VII hereof and shall be subject to adjustment as provided in Paragraph IX
hereof. Employees shall not be eligible to receive Options pursuant to this
Subparagraph V (b).
VI. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 3,225,000 shares of Stock (which number includes
the number of shares of Stock previously made subject to an Option granted under
either the 2000 Plan or the 1993 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
that remain unissued and that 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. The aggregate number of shares that may be issued under the Plan
shall be subject to adjustment in the same manner as provided in Paragraph IX
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 that does not constitute
an Incentive Stock Option.
VII. OPTION PRICE
The purchase price of Stock issued under each Option shall be determined by
the Administrator, 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;
provided, however, that the purchase price of Stock issued under each Option
granted to a Nonemployee Director pursuant to Subparagraph V (b) hereof shall be
the fair market value of Stock subject to such Option on the date such Option is
granted.
VIII. TERM OF PLAN
The 2000 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 hereof. Except with respect to Options then outstanding, if not
sooner terminated under the provisions of Paragraph X hereof, the Plan shall
terminate upon and no further Options shall be granted after the expiration of
ten years from the effective date provided in Paragraph I hereof.
IX. 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 (e) below (the
"Change of Control Value") of the shares subject to such Option over the
exercise price(s) under such Options for such shares, or (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), including, without limitation, adjusting an Option to provide that
the number and class of shares of Stock covered by such Option shall be adjusted
so that such Option shall thereafter cover securities of the surviving or
acquiring corporation or other property (including, without limitation, cash) as
determined by the Committee in its sole discretion.
(d) In the event of changes in the outstanding Common Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
split-ups, split-offs, spin-offs, exchanges or other relevant changes in
capitalization or distributions to the holders of Common Stock occurring after
the date of the grant of any Option and not otherwise provided for by this
Paragraph IX, such Option and any related Option Agreement shall be subject to
adjustment by the Committee at its discretion as to the number and price of
shares of Common Stock or other consideration subject to such Option. In the
event of any such change in the outstanding Common Stock or distribution to the
holders of Common Stock, the aggregate number of shares available under the Plan
and the maximum number of shares that may be subject to Options granted to any
one individual shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
(e) 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 (e) or Subparagraphs (c) or (d) 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.
(f) Any adjustment provided for in Subparagraphs (b), (c) or (d) above
shall be subject to any required stockholder action.
(g) Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
X. 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
individual; 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) materially increase the benefits accruing to Nonemployee Directors
participating under the Plan, (b) increase the aggregate number of shares which
may be issued pursuant to the provisions of the Plan, (c) change the class of
individuals eligible to receive Options under the Plan, or (d) amend or delete
Subparagraph III(b) hereof.
XI. 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 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.
APPENDIX B
STONE ENERGY CORPORATION
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the Board of Directors of Stone Energy
Corporation ("Corporation") to be known as the Audit Committee. The Audit
Committee shall be composed of directors who are independent of the management
of the Corporation and are free of any relationship that, in the opinion of the
Board of Directors, would interfere with their exercise of independent judgment
as a committee member.
The members of the Audit Committee shall be elected by the Board of
Directors at the annual organizational meeting of the Board of Directors or
until their successors shall be duly elected and qualified. Unless a Chair is
elected by the full Board of Directors, the members of the Audit Committee may
designate a Chair by majority vote of the full Audit committee membership.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the corporate directors
in fulfilling their responsibility to the shareholders, potential shareholders
and investment community relating to corporate accounting, reporting practices
of the Corporation and the quality and integrity of the financial reports of the
Corporation. In so doing, it is the responsibility of the Audit Committee to
maintain free and open means of communication between the directors, the
independent accountants and the financial management of the Corporation.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the directors and shareholders that the
corporate accounting and reporting practices of the Corporation are in
accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
o Review the committee's charter annually and update, if necessary.
o Provide an open avenue of communication between the independent
accountants and the Board of Directors.
o Recommend to the Board of Directors the independent accountants to be
nominated, which firm is ultimately accountable to the Board of
Directors and the Audit Committee, approve the compensation of the
independent accountants and, together with the Board of Directors,
review and approve the discharge of the independent accountants.
o Receive periodic reports from the independent accountants regarding
their independence, discuss such reports with them and, if so
determined by the Audit Committee, recommend that the Board take
appropriate action to satisfy itself of the independence of such
accountants.
o Meet with the independent accountants and financial management of the
Corporation to review the scope of the proposed audit for the current
year and at the conclusion thereof review such audit, including any
comments or recommendations of the independent accountants.
o Review with the independent accountants and the Corporation's
financial and accounting personnel, the adequacy and effectiveness of
the accounting and financial controls of the Corporation and elicit
any recommendations for the improvement of such internal control
procedures or particular areas where new or more detailed controls or
procedures are desirable. Particular emphasis should be given to the
adequacy of such internal controls to expose any payments,
transactions, or procedures that might be deemed illegal or otherwise
improper. Further, the committee periodically should review corporate
policy statements to determine their adherence to the code of conduct.
o Review the financial statements contained in the annual report to
shareholders with management and the independent accountants to
determine that the independent accountants are satisfied with the
disclosure and content of the financial statements to be presented to
the shareholders. Any changes in accounting principles should be
reviewed.
o Review filings with the SEC and other published documents containing
the Corporation's financial statements and consider whether the
information contained in these documents is consistent with the
information contained in the financial statements.
o The independent accountants and the members of the Audit Committee
will meet two times each year without members of management present.
Among the items to be discussed in these meetings are the independent
accountants' evaluation of the Corporation's financial, accounting and
auditing personnel, and the cooperation that the independent
accountants received during the course of the audit.
o Review accounting and financial human resources succession planning
within the company.
o Submit the minutes of all meetings of the Audit Committee to, or
discuss the matters discussed at each committee meeting with, the
Board of Directors.
o Investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel for this purpose
if, in its judgment, that is appropriate.