SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
LOUIS DREYFUS NATURAL GAS CORP.
(Name of Registrant as Specified in its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:______________________.
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):___________________.
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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: __________________.
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3) Filing Party: __________________________.
4) Date Filed: ___________________________.
LOUIS DREYFUS NATURAL GAS CORP.
14000 Quail Springs Parkway
Suite 600
Oklahoma City, Oklahoma 73134
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1997
TO THE SHAREHOLDERS OF LOUIS DREYFUS NATURAL GAS CORP.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Louis Dreyfus Natural Gas Corp., an Oklahoma corporation (the "Company"), will
be held on Tuesday, May 20, 1997 at 9:00 a.m. at the Company's principal
executive offices, 14000 Quail Springs Parkway, Suite 600, Oklahoma City,
Oklahoma, for the following purposes:
1. To elect eight directors for the ensuing year and until their
successors are duly elected and qualified.
2. To approve the amendment and restatement of the Company's Stock
Option Plan.
3. To ratify the selection of Ernst & Young LLP as independent
auditors of the Company for the year ending December 31, 1997.
4. To transact such other business as may come before the meeting or
any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The meeting may be adjourned from time to
time and, at any reconvened meeting, action with respect to the matters
specified in this Notice may be taken without further notice to the
shareholders, unless required by applicable law or the Bylaws of the Company.
Only shareholders of record at the close of business on April 7, 1997
are entitled to notice of, and to vote at, the meeting. A list of such
shareholders will be available at the meeting and at the Company's principal
executive offices, 14000 Quail Springs Parkway, Suite 600, Oklahoma City,
Oklahoma 73134 for ten days before the meeting. All shareholders are cordially
invited to attend the meeting in person. Whether or not you expect to attend
the meeting, please complete, date, sign and return the enclosed proxy as
promptly as possible in order to ensure your representation at the meeting. A
return envelope (which is postage prepaid if mailed in the United States) is
enclosed for that purpose. Even if you have given your proxy, you may still vote
in person if you attend the meeting. Please note, however, that if your shares
are held of record by a broker, bank or other nominee and you wish to vote at
the meeting, you must bring to the meeting a proxy issued in your name by the
record holder.
BY ORDER OF THE BOARD OF DIRECTORS
Kevin R. White, Secretary
Oklahoma City, Oklahoma
April 15, 1997
LOUIS DREYFUS NATURAL GAS CORP.
14000 Quail Springs Parkway
Suite 600
Oklahoma City, Oklahoma 73134
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 20, 1997
The following information is furnished in connection with the Annual
Meeting of Shareholders (the "Annual Meeting") of Louis Dreyfus Natural Gas
Corp., an Oklahoma corporation (the "Company"), to be held on Tuesday, May 20,
1997 at 9:00 a.m. at the Company's principal executive offices, 14000 Quail
Springs Parkway, Suite 600, Oklahoma City, Oklahoma. This Proxy Statement will
be mailed on or about April 15, 1997 to holders of record of Common Stock as of
the record date.
The record date and time for determining shareholders entitled to vote at
the Annual Meeting have been fixed at the close of business on April 7, 1997. On
that date, the Company had outstanding 27,801,500 shares of Common Stock. Each
outstanding share of Common Stock is entitled to one vote.
The enclosed proxy for the Annual Meeting is being solicited by the
Company's Board of Directors. The Company will bear the entire cost of such
solicitation of proxies, including preparation, assembly, printing and mailing
of this proxy statement, the proxy and any additional information furnished to
shareholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
Common Stock beneficially owned by others to forward to such beneficial owners.
The Company may reimburse persons representing beneficial owners of Common Stock
for their costs of forwarding solicitation materials to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
telegram or personal solicitation by directors, officers or other regular
employees of the Company. No additional compensation will be paid to directors,
officers or other regular employees for such services.
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive offices, 14000
Quail Springs Parkway, Suite 600, Oklahoma City, Oklahoma 73134, a written
notice of revocation or a duly executed proxy bearing a later date, or it may be
revoked by attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not, by itself, revoke a proxy.
Shares represented by valid proxies will be voted, unless otherwise
directed in the proxy, FOR the election of the director nominees, FOR the
approval of the amendment and restatement of the Company's Stock Option Plan and
FOR the ratification of the selection of Ernst & Young LLP
as independent auditors of the Company for the year ending December 31, 1997.
As to any other business which may properly come before the Annual Meeting,
shares represented by proxies will be voted in accordance with the
recommendations of the Board of Directors, although the Company does not
presently know of any other such business.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors has established the size of the Board as eight and
has nominated the current eight members of the Board for re-election. Each
director to be elected will hold office until the next annual meeting of
shareholders and until his successor is duly elected and qualified, or until
such director's earlier death, resignation or removal.
Each nominee named below is currently a director of the Company and has
agreed to serve if elected. Management has no reason to believe that any
nominee will be unable to serve. Should any of the nominees named below cease
to be a nominee at or prior to the Annual Meeting, the shares represented by the
enclosed proxy will be voted in favor of the remainder of the nominees named
below and for such substitute nominees, if any, as may be designated by the
Board of Directors and nominated by either of the proxies named in the enclosed
proxy.
Nominees
The nominees for the position of director of the Company are as follows.
Name Age Principal Occupation
---- --- --------------------
Richard E. Bross 48 Executive Vice President of the Company
Daniel R. Finn, Jr. 53 Chief Executive Officer of Duke/Louis
Dreyfus LLC
John J. Hogan, Jr. 52 Of Counsel to the law firm of Dewey
Ballantine
Gerard Louis-Dreyfus 64 President and Chief Executive Officer of S.A.
Louis Dreyfus et Cie
Mark E. Monroe 42 President and Chief Executive Officer of the
Company
James R. Paul 62 Retired, Former President and Chief
Executive Officer of The Coastal Corporation
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Name Age Principal Occupation
---- --- --------------------
Simon B. Rich, Jr. 52 Managing Director and Chief Operating
Officer of Duke/Louis Dreyfus LLC
James T. Rodgers, III 62 Retired, Former President and Chief
Operating Officer of Anadarko Petroleum
Corporation
The following is a brief description of the business background of each of
the nominees:
Richard E. Bross is Executive Vice President of the Company and was first
elected as a director of the Company in September 1993. Mr. Bross joined the
Company in 1991 and served as its President until September 1993. Prior to
joining the Company, Mr. Bross served in various capacities at Argent Energy,
Inc. (previously named Woods Petroleum Corporation) from 1977 until 1991,
culminating with his appointment as Executive Vice President and Chief Operating
Officer in September 1990. Mr. Bross joined Argent Energy, Inc. in 1977 after
working for Gulf Oil Corporation for seven years in various engineering
functions. Mr. Bross holds a B.S. degree in Mechanical Engineering from the
University of Missouri and an M.B.A. from Oklahoma City University.
Daniel R. Finn, Jr. has been a director of the Company since 1990. Mr. Finn
is Chief Executive Officer of Duke/Louis Dreyfus LLC, a company 50% owned by
S.A. Louis Dreyfus et Cie engaged in natural gas, petroleum product and electric
power trading and marketing. Mr. Finn has been employed by S.A. Louis Dreyfus et
Cie or its subsidiaries since 1972, serving in various capacities, including
Vice President of worldwide wheat merchandising, Senior Vice President of
worldwide grain merchandising and President and Chairman of the Board of
Directors of Louis Dreyfus Energy Corp. In addition, Mr. Finn is Executive Vice
President and a director of Louis Dreyfus Holding Company Inc., also a
subsidiary of S.A. Louis Dreyfus et Cie. Mr. Finn holds a B.A. in Economics from
Fairfield University and an M.B.A. in Finance from Northwestern University.
John J. Hogan, Jr. was first elected to the Board of Directors of the
Company in September 1993. Mr. Hogan has been with the law firm of Dewey
Ballantine, New York since 1969. He also serves as a director of several other
industrial corporations and is a former executive officer and/or director of
various subsidiaries of S.A. Louis Dreyfus et Cie. Mr. Hogan holds a B.A. in
Economics from Fordham University and J.D. and M.B.A. degrees from Columbia
University.
Gerard Louis-Dreyfus has been a director of the Company since September
1993. Mr. Louis-Dreyfus is the President and Chief Executive Officer of S.A.
Louis Dreyfus et Cie, the parent company of the Louis Dreyfus worldwide
organization of companies. S.A. Louis Dreyfus et Cie is privately owned by
family members and has been in business for over 140 years. The principal
activities of the Louis Dreyfus group include the international merchandising
and exporting of various commodities, ownership and management of ocean vessels,
real estate ownership,
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development and management, manufacturing, and natural gas, petroleum product
and electric power marketing. Mr. Louis-Dreyfus is the great-grandson of the
founder. Mr. Louis-Dreyfus is a graduate of Duke University and Duke University
School of Law. Upon graduation he joined the firm of Dewey Ballantine, New York,
until 1965 when he joined S.A. Louis Dreyfus et Cie.
Mark E. Monroe is President and Chief Executive Officer of the Company and
has been a director of the Company since 1986. Mr. Monroe joined the Company in
1980, which was then known as Bogert Oil Company and which was later acquired by
S.A. Louis Dreyfus et Cie, and served as Vice President and Chief Financial
Officer of the Company until April 1991. From April 1991 until September 1993,
Mr. Monroe served as a Vice President of Louis Dreyfus Energy Corp., an indirect
subsidiary of S.A. Louis Dreyfus et Cie, engaged in oil and natural gas trading
and marketing. Mr. Monroe rejoined the Company in September 1993 and served as
Chief Operating Officer until his election to his present position in August
1996. Mr. Monroe holds a B.B.A. degree from the University of Texas and is a
Certified Public Accountant.
James R. Paul was first elected to the Board of Directors of the Company in
February 1994. Mr. Paul retired in January 1994 from The Coastal Corporation
after twenty years of service in various executive capacities, including
President and Chief Executive Officer from 1989, and a director from 1981, until
his retirement. Mr. Paul holds a B.S. in Business Administration from Wichita
State University.
Simon B. Rich, Jr. has been a director of the Company since 1990 and has
served as Chairman of the Board of Directors since August 1996. Mr. Rich is
Managing Director and Chief Operating Officer of Duke/Louis Dreyfus LLC. From
September 1993 until August 1996, Mr. Rich served as President and Chief
Executive Officer of the Company. From 1990 to 1993, Mr. Rich served as
Executive Vice President of Louis Dreyfus Energy Corp. From 1986 to 1990, Mr.
Rich served as Executive Vice President-Development and Strategic Planning of
S.A. Louis Dreyfus et Cie. Mr. Rich holds a B.A. in Economics from Duke
University.
James T. Rodgers, III was first elected to the Board of Directors of the
Company in February 1994. Mr. Rodgers retired in 1992 from Anadarko Petroleum
Corporation after sixteen years of service in various executive capacities,
including President and Chief Operating Officer from 1986, and a director from
1979, until his retirement. Mr. Rodgers holds an M.S. from the University of
Texas and a B.S. from Louisiana State University both in Petroleum Engineering.
Mr. Rodgers also serves on the Board of Directors of Barrett Resources Corp., a
publicly-held independent oil and gas company.
The Board of Directors recommends that the shareholders vote "For" the
named nominees.
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Board Committees and Meetings
The Board of Directors has an Executive Committee, a Compensation Committee
and an Audit Committee.
The Executive Committee may exercise all of the powers of the Board of
Directors, except to the extent limited by resolution of the Board of Directors,
the Company's Bylaws and by applicable law. The Executive Committee, which
during 1996 consisted of Messrs. Louis-Dreyfus, Rich, Monroe and Finn, did not
hold any meetings but acted by unanimous consent without a meeting once during
1996.
The Compensation Committee establishes general compensation policies,
reviews and makes specific recommendations to the Board of Directors concerning
salaries and incentive compensation for executive officers of the Company and,
until December 1996, administered the Company's Stock Option Plan. The Stock
Option Plan has been administered by the full Board of Directors since December
1996. The Compensation Committee, which during 1996 consisted of Messrs. Finn
and Hogan, did not hold any meetings but acted by unanimous consent without a
meeting twice during 1996.
The Audit Committee is responsible to the Board of Directors for
establishing and reviewing internal and external audits of the Company and
meeting with representatives of the Company's independent auditors to receive
the results of their audits. The Audit Committee, which during 1996 consisted
of Messrs. Paul and Rodgers, met three times during 1996.
The Board of Directors does not have a nominating committee. The entire
Board performs this function and evaluates and recommends nominees for election
to the Board of Directors. Although there is no formal procedure for
shareholders to recommend nominees for the Board of Directors, the Board will
consider such recommendations if submitted in writing addressed to the Secretary
of the Company.
During the year ended December 31, 1996, the Board of Directors held four
meetings and acted by unanimous consent without a meeting seven times. During
1996, all incumbent directors of the Company attended at least 75% of the
aggregate of all meetings of the Board of Directors and committees on which they
served, except Mr. Louis-Dreyfus who attended 50% of all such meetings.
Compensation of Directors
Each director, other than the Chairman and Gerard Louis-Dreyfus, receives
an annual retainer of $20,000 and a fee of $1,000 for each meeting of the Board
of Directors or committee thereof attended and is reimbursed for certain
expenses in connection with attendance at such meetings. The Chairman of the
Board of Directors receives an annual retainer of $56,250, but does not receive
additional fees for meetings attended. Under the Company's Stock Option Plan
approved by the shareholders, each incumbent director who was not an employee of
the Company received on the date of the Company's 1995 Annual Meeting of
Shareholders an option grant to purchase 6,000
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shares of Common Stock of the Company and, while serving as a director, received
or will receive additional option grants to purchase 2,000 shares of Common
Stock as of the date of each subsequent annual meeting of shareholders. Any new
non-employee director will receive under the Company's Stock Option Plan an
initial option grant to purchase 6,000 shares of Common Stock upon election to
the Board of Directors and, while serving as a director, will receive additional
option grants to purchase 2,000 shares of Common Stock as of the date of each
subsequent annual meeting of shareholders.
PROPOSAL TWO
AMENDMENT AND RESTATEMENT OF STOCK OPTION PLAN
The Company's Stock Option Plan (the "Plan") is intended to promote and
advance the interests of the Company and its shareholders by providing a means
for the Company to offer appropriate equity incentive and compensation
opportunities to its directors, officers and key employees and to encourage
stock ownership by such persons in order to increase the proprietary interests
of such persons in the growth and financial success of the Company.
Established by the Company in October 1993, the Plan initially authorized
the issuance of up to 1,000,000 shares of Common Stock pursuant to options under
the Plan and had a ten-year term expiring in October 2003. However, in order to
ensure that the Company continues to have appropriate equity incentive and
compensation opportunities for its directors, officers and key employees, the
Board of Directors has approved the amendment and restatement of the Plan among
other things to increase the number of shares authorized for issuance under the
Plan from the initial 1,000,000 shares to 2,000,000 shares and to extend the
term of the Plan to February 2007. The amendments to the Plan were adopted
subject to shareholder approval, and the Board of Directors has directed that
the amended and restated Plan be submitted to the shareholders of the Company
for their approval at the Annual Meeting.
Summary of Amendments to the Plan
In addition to the increase in the number of shares authorized for issuance
under the Plan and extension of the term of the Plan, the Board of Directors has
approved other amendments to the Plan that are intended principally to
facilitate administration of the Plan and compliance with applicable federal
securities laws. The principal amendments to the Plan approved by the Board of
Directors are as follows:
* Increase in the number of shares authorized for issuance upon exercise
of options granted under the Plan from 1,000,000 shares to 2,000,000
shares.
* Extension of the term of the Plan from October 21, 2003 to February 6,
2007.
* Modification of selected provisions of the Plan in order to facilitate
compliance with and to take advantage of increased flexibility afforded
by recent amendments to Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"),
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relating to transactions between issuers and their executive officers
and directors that involve equity securities of the issuer. Such
modifications include (i) transferability of nonqualified stock options
by gift or other means pursuant to which no consideration is given for
the transfer provided the Board of Directors first consents to the
transfer, (ii) elimination of certain restrictions on the exercise of
options within six months of the date of grant of the option, (iii)
elimination of the requirement of prior Board approval under certain
circumstances in connection with the surrender of portions of options or
tender of shares already owned by an optionee in payment of the option
exercise price or tax withholding obligations, and (iv) elimination of
requirements for shareholder approval in connection with certain
amendments to the Plan, except as may otherwise be required by
applicable law or the rules of any securities exchange on which the
Company's Common Stock is admitted to listed trading. Shareholder
approval will continue to be required in connection with any increase in
the number of shares of Common Stock available for issuance pursuant to
options granted under the Plan or any material modification to the
requirements for eligibility to participate in the Plan. See " --
Modification and Termination of the Plan" on page 10 below.
* Removal of restrictions formerly prohibiting grants to any one
individual under the Plan of options to purchase in excess of 200,000
shares of Common Stock.
Description of the Plan as Amended and Restated
The foregoing amendments to the Plan as well as the other principal
features of the Plan as amended and restated are described below.
Administration. The Plan is administered by the Board of Directors of the
Company or, if the Board so authorizes, by a committee of the Board of Directors
consisting of not less than two members of the Board of Directors. Prior to
December 1996, the Plan was administered by the Compensation Committee of the
Board of Directors. However, as a result of amendments to Rule 16b-3 under the
Exchange Act affecting the administration of stock option and other equity
incentive plans generally, the Board of Directors of the Company has
administered the Plan since December 1996. The selection of participants and
the terms and conditions of options granted under the Plan are determined by the
Board of Directors, subject to applicable limitations under the Plan. The
Company may grant pursuant to the Plan both incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code and options which are not
qualified as incentive stock options.
Shares Subject to the Plan. The maximum number of shares of Common Stock
in respect of which options may be granted under the Plan will be increased by
the proposed amendment and restatement of the Plan from 1,000,000 shares to
2,000,000 shares. These shares consist of authorized but unissued shares or
treasury shares that may be held by the Company. This number is subject to
appropriate equitable adjustment in the event of a reorganization, stock split,
stock dividend, reclassification or other change affecting the Company's Common
Stock.
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Eligibility. All executive officers of the Company and other key employees
who hold positions of significant responsibility or whose performance or
potential contribution, in the judgment of the Board of Directors, will benefit
the future success of the Company are eligible to receive grants under the Plan.
In addition, each director of the Company who is not an employee of the Company
is eligible to receive certain non-discretionary option grants pursuant to
provisions of the Plan described below. At March 31, 1997, options had been
granted to 53 persons under the Plan.
Grant of Options. The number of shares to be covered by each option
granted to an executive officer or other key employee is determined by the Board
of Directors. Under the Plan as amended and restated, there will be no limit on
the number of shares that may be subject to options granted to any one executive
officer or other key employee. The exercise price for options granted under the
Plan is not less than 100% of the fair market value of the shares of Common
Stock on the date an option is granted. Options granted under the Plan to
officers and key employees become exercisable at such time as the Board of
Directors may determine in connection with the grant of each option. In
addition, the Board of Directors may at any time accelerate the date that any
option granted to an officer or key employee becomes exercisable.
Prior to the proposed amendment and restatement of the Plan, the Plan
provided that no option could become exercisable within six months of the date
of grant. This restriction was intended as a safeguard to ensure compliance
with applicable restrictions of Rule 16b-3 under the Exchange Act in effect at
the time the Plan was adopted requiring that at least six months elapse between
the grant of an option and the ultimate sale or other disposition of the
securities underlying the option. This six-month holding period requirement is
no longer in effect as a result of recent amendments to Rule 16b-3, and the
Board of Directors deems it desirable that the corresponding restrictions of the
Plan designed to require a six-month holding period be removed.
Effect of Termination of Employment or Death. If an optionee's employment
with the Company is terminated for any reason other than death or termination
for cause, an option will be exercisable for a period of three months after the
date of termination of employment as to all then vested portions of the option.
In addition, the Board of Directors may, in its sole discretion, approve
acceleration of the vesting of any unvested portion of the option. If an
optionee's employment with the Company is terminated for cause (as defined in
the Plan), the option shall terminate as of the date of such termination of
employment and the optionee shall have no further rights to exercise any portion
of the option. If an optionee dies while employed by the Company, any unvested
portion of the option as of the date of death shall be vested as of the date of
death and the option shall be exercisable in full by the legal representatives
of the optionee for a period of 12 months following the date of death. In any
event, options terminate and are no longer exercisable after 10 years from the
date of the grant.
Continued Service as a Director. In the event any optionee who is an
employee and also a director of the Company ceases to be employed by the Company
but continues to serve as a director of the Company, the Board of Directors may
determine that all or a portion of such optionee's options shall not expire
three months following the date of employment as described above, but
8
instead shall continue in effect until the earlier of the date the optionee
ceases to be a director of the Company or the date the option otherwise expires
according to its stated date of expiration. Termination of any such option in
connection with the optionee's termination of service as a director will be on
terms similar to those described above in connection with termination of
employment.
Grants to Non-Employee Directors. In order to retain, motivate and reward
non-employee directors of the Company, the Plan extends participation to non-
employee directors on the terms and conditions described below.
Each existing non-employee director of the Company received an initial
option grant to purchase 6,000 shares of Common Stock of the Company in 1995
and, while continuing to serve as a director, receives additional option grants
to purchase 2,000 shares of Common Stock immediately following each annual
meeting of shareholders. Any new non-employee director will also receive an
initial option grant of 6,000 shares of Common Stock immediately following his
or her election to the Board of Directors and, while continuing to serve as a
director, will be granted additional options to purchase 2,000 shares of Common
Stock immediately following each annual meeting of shareholders after the
initial grant.
The option price for options granted to non-employee directors is equal to
100% of the fair market value per share of Common Stock on the date the option
is granted. Options granted to non-employee directors are immediately vested
and fully exercisable on the date of grant, and remain exercisable for a period
of 10 years from the date of grant, subject to earlier termination in the event
of termination of service as a director.
Other than as described above, all options granted to non-employee
directors are subject to the same terms and conditions as options granted to
employees under the Plan.
Limited Transferability. Options granted under the Plan generally are not
assignable or transferable by optionees other than by will or the laws of
descent and distribution and are otherwise exercisable only by optionees.
However, under the Plan as amended and restated, optionees will be permitted,
with the prior consent of the Board of Directors, to transfer nonqualified stock
options under the Plan by gift or other means pursuant to which no consideration
is given for the transfer. Any options so transferred will remain subject to all
of the restrictions and limitations of the Plan. Due to the limited scope of
permitted transfers, it is anticipated that optionees who may elect to utilize
such transferability feature will do so primarily for estate planning or other
family oriented purposes and that any transferees will be family members of the
optionee. Such transferability was formerly prohibited by Rule 16b-3 under the
Exchange Act, but is now permitted as a result of the recent amendments to such
rule.
Exercise of Options. The exercise price of options may be paid in cash, by
tender of shares of Common Stock of the Company (valued at fair market value at
the date of exercise), by surrender of a portion of the option, or by a
combination of such means of payment. The prior consent of the Board of
Directors will continue to be required in connection with the payment of the
exercise price of options by tender of shares or surrender of a portion of the
option, except that pursuant to the
9
proposed amendments to the Plan the consent of the Board of Directors will not
be required if the exercise price is paid by surrender of shares that have been
owned by the optionee for more than six months prior to the date of exercise of
the option or by a combination of cash and shares that have been owned for more
than six months.
Effect of Certain Corporate Transactions. In the event of any
reorganization, merger, consolidation or sale of substantially all of the assets
of the Company while options remain outstanding under the Plan, the Plan
provides for substitute options with an appropriate number of shares or other
securities of the reorganized, merged, consolidated or acquiring corporation
which were distributed to the shareholders of the Company. In addition, unless
the Board of Directors expressly determines otherwise, in the event of a Change
in Control (as defined in the Plan) of the Company, all outstanding options will
become immediately and fully exercisable and optionees will be entitled to
surrender, within 60 days following the Change in Control, unexercised options
or portions of options in return for cash payment equal to the difference
between the aggregate exercise price of the surrendered options and the fair
market value of the shares of Common Stock underlying the surrendered options.
Modification and Termination of the Plan. The Plan as amended and restated
will terminate on February 6, 2007, except with respect to awards then
outstanding. Under the Plan as amended and restated, the Board of Directors may
from time to time amend, alter, suspend, or discontinue the Plan or alter or
amend any and all options granted thereunder without the further approval of the
shareholders of the Company, except to the extent such approval may be required
by applicable laws or by the rules of the New York Stock Exchange or other
securities exchange upon which the Company shares are admitted to listed
trading.
Prior to the proposed amendment and restatement of the Plan, the Plan
provided that shareholder approval would be required in connection with
amendments to the Plan that (i) materially increased the benefits accruing to
participants under the Plan, (ii) materially increased the number of securities
issuable under the Plan, or (iii) materially modified the requirements as to
eligibility under the Plan. These requirements were responsive to the then
applicable requirements of Rule 16b-3 in connection with shareholder approval of
amendments to covered plans. As a result of the recent amendments to Rule 16b-
3, these requirements have been eliminated from Rule 16b-3 and the Board of
Directors deems it desirable that these requirements also be eliminated from the
Plan. Under the Internal Revenue Code, shareholder approval will continue to be
required in connection with any amendment to the Plan that modifies the number
of shares available for issuance or the criteria for eligibility in regard to
grants of incentive stock options. The rules of the New York Stock Exchange do
not address shareholder approval of amendments to option plans, but the staff of
the New York Stock Exchange has indicated that increasing the number of newly
issued shares available for issuance or materially modifying eligibility
requirements may require shareholder approval under the rules of the Exchange.
Accordingly, amendments to the Plan relating to the number of shares covered by
the Plan and requirements for eligibility under the Plan generally will continue
to be subject to shareholder approval. The Board of Directors believes that
elimination of other restrictions on amendment of the Plan without shareholder
approval will enhance the Board's
10
ability to administer the Plan and to foster its intended goals without
incurring the uncertainties and expense associated with seeking shareholder
approval.
Satisfaction of Tax Withholding Obligations. The Company may require as a
condition to the issuance of any shares of Common Stock upon exercise of an
option that the optionee remit an amount sufficient to satisfy applicable tax
withholding requirements. Optionees are permitted to satisfy such withholding
obligations in cash, by tendering shares of Common Stock of the Company owned by
the optionee (valued at fair market value at the date of exercise of the
option), by surrender of a portion of the option or by a combination of such
means. Under the amended and restated Plan, the prior consent of the Board of
Directors will not be required in connection with the tender of shares or the
surrender of a portion of the option in satisfaction of tax withholding
obligations.
Federal Income Tax Consequences. An optionee receiving an option
qualifying as an "incentive stock option" under Section 422 of the Internal
Revenue Code will not recognize taxable income upon the grant or exercise of the
option. Upon disposition of the shares acquired, the optionee will recognize a
capital gain or loss based on the difference between the amount realized and the
option price, assuming certain holding period requirements are satisfied and the
shares are held as a capital asset. However, the alternative minimum tax may be
applicable. The Company will not receive any tax deduction in connection with
the grant or exercise of an incentive stock option or, assuming the holding
period requirements are satisfied, sale of the shares by an optionee.
An optionee receiving a nonqualified stock option will not recognize
taxable income on the grant of an option, but will be deemed to have received
ordinary income on the exercise of an option equal in amount to the difference
between the fair market value of the shares acquired as of the date of exercise
and the option price. The Company will be entitled to a tax deduction at the
same time in the same amount. An optionee's tax basis in the shares acquired
will be equal to the fair market value of the shares as of the date of exercise
for purposes of measuring any gain or loss on subsequent disposition of the
shares.
Summary of Award Activity Pursuant to the Plan
The following table indicates as of April 1, 1997 the number of shares
authorized for issuance under the Plan (including the proposed increase in the
authorized number of shares), the aggregate number of shares subject to
outstanding awards (net of cancellations), the number of shares issued pursuant
to prior awards, and the number of shares available for future awards (including
the proposed increase in the authorized number of shares):
Available for
Issued Future Awards
Subject to Outstanding Pursuant (including
Authorized (including Awards (net of to Prior proposed
proposed increase) cancellations)(1) Awards increase)
------------------ ----------------- ------ ---------
2,000,000 992,500 1,500 1,006,000
_________________
(1) Includes options to purchase 952,500 shares of Common Stock granted to
executive officers and key employees of the Company at exercise prices
ranging from $12.63 to $19.88 per share. The exercise prices of
11
such options are 100% of the market value of the Common Stock on the date
of grant. The expiration dates of such options range from November 10,
2003 to September 27, 2006. Of such options, 272,500 were granted to key
employees of the Company other than executive officers and 680,000 were
granted to current or former executive officers of the Company as follows:
Mark E. Monroe - President and Chief Executive Officer -160,000; Simon B.
Rich, Jr., - Chairman of the Board of Directors and former President and
Chief Executive Officer - 160,000; Richard E. Bross - Executive Vice
President - 95,000; Peter B. Fritzinger - Chief Financial Officer and
Treasurer - 60,000; Ronnie K. Irani - Executive Vice President -
Engineering and Exploration -95,000; Kevin R. White - Executive Vice
President - Corporate Development and Strategic Planning - 60,000; and
Jeffrey A. Bonney - Vice President and Chief Accounting Officer - 50,000.
Also includes options to purchase 40,000 shares granted to non-employee
directors pursuant to the non-discretionary grant provisions of the Plan at
exercise prices ranging from $13.44 to $14.13 per share.
Based on the closing price of the Common Stock as reported by the New York
Stock Exchange on April 1, 1997 of $14.625 per share, the market value of the
total number of shares of Common Stock previously issued pursuant to exercise of
options under the Plan was $21,938 and the market value of shares underlying
outstanding options under the Plan was $14,515,313.
Provided that the shareholders approve the proposed amendment and
restatement of the Plan, the increased number of shares will be available for
awards to all eligible participants in the Plan. Except as described above in
connection with the non-discretionary awards to non-employee directors, the
Committee has not at this time considered or approved any future awards under
the Plan, and, as a result, the identity of future award recipients and the size
and terms of future awards are not known at this time.
Consequences of Non-Approval
If the proposed amendment and restatement of the Plan is not approved by
the shareholders, the Plan will continue in its form prior to the proposed
amendment and restatement. However, if the amendment and restatement of the Plan
is not approved, any future grants under the Plan would be limited in view of
the relatively low number of shares that would be available for issuance in
connection with future awards (6,000 shares at April 1, 1997).
The Board of Directors recommends that the shareholders vote "FOR" the
proposed amendment and restatement of the Stock Option Plan.
PROPOSAL THREE
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1997 and has further
directed that management submit the selection of the independent auditors for
ratification by the shareholders at the Annual Meeting. Ernst & Young LLP has
audited the Company's consolidated financial statements since 1992.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have
12
an opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Shareholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. If the shareholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Board determines
that such a change would be in the best interests of the Company and its
shareholders.
The Board of Directors recommends that the shareholders vote "FOR"
ratification of the selection of Ernst & Young LLP as independent auditors of
the Company for the year ending December 31, 1997.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Officers
The executive officers of the Company are as follows:
Name Age Position
---- --- --------
Mark E. Monroe 42 President and Chief Executive Officer
Jeffrey A. Bonney 40 Vice President and Chief Accounting
Officer
Richard E. Bross 48 Executive Vice President
Peter B. Fritzinger 38 Chief Financial Officer and Treasurer
Ronnie K. Irani 40 Executive Vice President - Engineering
and Exploration
Kevin R. White 39 Executive Vice President - Corporate
Development and Strategic Planning
and Secretary
The executive officers of the Company are elected by the Board of
Directors and serve at its discretion. The following is a brief description of
the business background of each of the executive officers who are not also
directors of the Company. For descriptions of the business background of Mark
E. Monroe and Richard E. Bross, each a director of the Company, see "Election of
Directors - Nominees."
13
Jeffrey A. Bonney is Vice President and Chief Accounting Officer of
the Company. Mr. Bonney joined the Company in November 1993. From April 1990
to November 1993, Mr. Bonney was the Vice President and Controller of Hadson
Energy Resources Corporation, an international oil and gas concern. Prior
thereto, Mr. Bonney held various management positions with other independent oil
and gas companies. He began his career as an auditor with Deloitte, Haskins &
Sells in 1978. Mr. Bonney is a Certified Public Accountant and holds a B.S. in
Accounting from Oklahoma Christian University.
Peter B. Fritzinger is Chief Financial Officer and Treasurer of the
Company. Prior to his election to this position in September 1993, Mr.
Fritzinger served as Vice President - Finance and as Treasurer of Louis Dreyfus
Energy Corp., an indirect subsidiary of S.A. Louis Dreyfus et Cie, engaged in
oil and natural gas trading and marketing, beginning in April 1991. From 1980 to
1991, Mr. Fritzinger held various positions with Morgan Guaranty Trust Company
of New York. Mr. Fritzinger holds a B.A. in Math and Psychology from Amherst
College.
Ronnie K. Irani is Executive Vice President - Engineering and
Exploration of the Company. He joined the Company in March 1991 from Argent
Energy, Inc. (previously named Woods Petroleum Corporation) where he had worked
for the previous 12 years. At Argent Energy, Inc., Mr. Irani held the title of
Manager of Reservoir Engineering. Mr. Irani holds a B.S. in Chemistry from
Bombay University, India, a B.S. and M.S. in Petroleum Engineering from the
University of Oklahoma and an M.B.A. from Oklahoma City University.
Kevin R. White is Executive Vice President - Corporate Development and
Strategic Planning and Secretary of the Company. Mr. White joined the Company in
1983, which was then known as Bogert Oil Company, and served in various
management capacities prior to appointment to his present position. From 1981
until 1982, Mr. White was employed as an auditor with Arthur Andersen & Co. and
Ernst & Young. Mr. White is a Certified Public Accountant and holds B.S. and
M.S. degrees in Accounting from Oklahoma State University.
14
Executive Compensation
The following table sets forth information with respect to
compensation received by each person who served as the chief executive officer
of the Company during 1996 and the four other mostly highly compensated
executive officers of the Company. Such individuals are hereinafter referred to
as the "named executive officers."
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------- -------------------------
Restricted Securities All
Stock Underlying Other
Name and Principal Position Year Salary Bonus Awards(1) Options(#) Compensation(2)
--------------------------- ---- ------ ----- --------- ---------- ---------------
Mark E. Monroe 1996 $250,000 $260,000 - 20,000 $11,869
President and Chief 1995 250,000 250,000 - 40,000 11,784
Executive Officer(3) 1994 250,000 150,000 $275,000 - 4,500
Simon B. Rich, Jr. 1996 $250,000 $200,000 - 20,000 $25,381
Former President and 1995 325,000 275,000 - 40,000 11,784
Chief Executive Officer(4) 1994 325,000 225,000 $343,750 - 4,500
Richard E. Bross 1996 $178,000 $ 85,000 - 20,000 $11,869
Executive Vice President 1995 178,000 60,000 - 10,000 11,784
1994 178,000 75,000 $206,250 - 4,500
Peter B. Fritzinger 1996 $165,000 $ 85,000 - 20,000 $11,869
Chief Financial Officer 1995 165,000 75,000 - 15,000 11,088
and Treasurer 1994 165,000 60,000 $ 68,750 - 4,500
Ronnie K. Irani 1996 $164,600 $140,000 - 20,000 $11,869
Executive Vice President - 1995 134,800 120,000 - 25,000 11,579
Engineering and 1994 134,800 70,000 $206,250 - 4,500
Exploration
Kevin R. White 1996 $130,000 $ 85,000 - 20,000 $11,869
Executive Vice President - 1995 130,000 75,000 - 15,000 11,661
Corporate Development 1994 128,000 60,000 $ 68,750 - 4,500
and Strategic Planning
- ------------------
(1) Consists of awards expressed in units that are equivalent to one share of
Common Stock of the Company for each unit. The unit awards were granted
pursuant to the Louis Dreyfus Deferred Compensation Stock Equivalent Plan
(the "SEP") sponsored by an affiliate of S.A. Louis Dreyfus et Cie. The
total number of units awarded to each of the named executive officers was
as follows: Mark E. Monroe - 20,000 units; Simon B. Rich, Jr. - 25,000
units; Richard E. Bross - 15,000 units; Peter B. Fritzinger - 5,000 units;
Ronnie K. Irani -15,000 units; and Kevin R. White - 5,000 units. The
dollar value of the unit awards as indicated in the preceding table is
based on the closing sale price of the Common Stock of the Company of
$13.75 per share on August 31, 1994 (the date of grant of the awards).
Vested units awarded pursuant to the SEP are payable solely in cash after
termination of employment with the Louis Dreyfus group of companies,
subject to forfeiture for termination due to cause and to forfeiture for
competitive post-termination activities. The amount payable in respect of
each unit is equal to the average prices (as defined in the SEP) of one
share of Common
15
Stock on the New York Stock Exchange over all trading days in December of
the year of, or preceding, termination. The dollar value of the vested and
unvested units for each of the named executive officers as of December 31,
1996 calculated pursuant to the SEP based on the average prices of the
Common Stock over all trading days in December 1996 was as follows: Mark
E. Monroe - $339,000; Simon B. Rich, Jr. - $423,750; Richard E. Bross -
$254,250; Peter B. Fritzinger - $84,750; Ronnie K. Irani - $254,250; and
Kevin R. White -$84,750. The awards were vested immediately upon grant as
to 10% of the units and vest in additional increments on December 31 of
each year at the rate of 10%, 20%, 30% and 30% per year. The awards are
70% vested as of December 31, 1996 and, subject to continued service, will
be fully vested by December 31, 1997. In the event a cash dividend is paid
to shareholders generally, each unit will have allocated to it a dividend
equivalent, which will be payable, with interest, at the same time and
subject to the same conditions as the underlying units.
(2) All Other Compensation consists of (i) employer contributions to the
Company's 401(k) plan on behalf of each of the named executive officers to
match pre-tax elective deferral contributions (included under Salary) made
by each of the named executive officers to such plan and (ii) certain
employer discretionary profit sharing contributions allowed by such plan.
All Other Compensation for Mr. Rich also includes $14,062 received by Mr.
Rich consisting of the pro-rated portion of Mr. Rich's annual retainer for
service as Chairman of the Board of Directors of the Company commencing in
August 1996. See "Election of Directors -- Compensation of Directors."
(3) Mr. Monroe served as Chief Operating Officer of the Company prior to
assuming his present position in August 1996.
(4) Mr. Rich left his position as President and Chief Executive Officer of the
Company in August 1996 in order to perform other duties within the Louis
Dreyfus group of companies. Although no longer an executive officer of the
Company, Mr. Rich serves as Chairman of the Board of Directors.
The following table contains information concerning the grant of stock
options during the year ended December 31, 1996 under the Company's Stock Option
Plan to the named executive officers.
Option Grants in Last Fiscal Year
Individual Grants
--------------------------------------------------------
% of Total
Options
Granted to
Employees Exercise or
Options in Fiscal Base Price Expiration Grant Date
Name Granted (#)(1) Year ($/Sh)(2) Date Present Value(3)
---- -------------- ----------- ----------- ---------- ----------------
Mark E. Monroe 20,000 9.4% $14.4375 9/27/06 $177,080
Simon B. Rich, Jr. 20,000 9.4% $14.4375 9/27/06 $177,080
Richard E. Bross 20,000 9.4% $14.4375 9/27/06 $177,080
Peter B. Fritzinger 20,000 9.4% $14.4375 9/27/06 $177,080
Ronnie K. Irani 20,000 9.4% $14.4375 9/27/06 $177,080
Kevin R. White 20,000 9.4% $14.4375 9/27/06 $177,080
- ------------------
(1) All options granted to the named executive officers during 1996 were
granted under the Company's Stock Option Plan. The exercise price of such
options is equal to 100% of the price per share of the Common Stock on the
date of grant. The options become exercisable at the rate of 25% per year
commencing one year after
16
the date of grant so long as the optionee remains employed by the Company,
and will become immediately exercisable in the event of death of an
optionee or in the event of a Change in Control of the Company (as defined
in the Stock Option Plan) unless the Compensation Committee expressly
determines otherwise. The options expire if not exercised 10 years after
the date of grant.
(2) Exercise price of options must be paid in cash, by tender of shares of
Common Stock (valued at fair market value at the date of exercise), by
surrender of a portion of the option, or by a combination of such means of
payment.
(3) Grant Date Present Value is based on application of the Black-Scholes
option pricing model. The actual value, if any, realized will depend on
the excess of the stock price over the exercise price on the date the
option is exercised. There is no assurance that the value realized will be
at or near the value estimated by the Black-Scholes model. The estimated
values under that model are based on the following assumptions: (i)
annualized price volatility of the Company's Common Stock of 36% calculated
over the period commencing on November 12, 1993 and ending on the option
grant date (September 27, 1996); (ii) a risk-free rate of return equal to
the 10 year United States Treasury Bond rate at the option grant date
(September 27, 1996) of 6.68%; (iii) a dividend yield of 0%; and (iv)
exercise of all options at the expiration date of 10 years from date of
grant (September 27, 2006).
The following table provides information with respect to the named
executive officers concerning the exercise of options during the year ended
December 31, 1996 and unexercised options held as of December 31, 1996.
Option Exercises and Year-end Value Table
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Options at Options at
December 31, 1996 December 31, 1996(1)
----------------- -------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Mark E. Monroe - - 85,000 75,000 $34,375 $156,875
Simon B. Rich, Jr. - - 85,000 75,000 $34,375 $156,875
Richard E. Bross - - 51,250 43,750 $ 8,594 $ 79,531
Peter B. Fritzinger - - 22,500 37,500 $12,891 $ 92,422
Ronnie K. Irani - - 43,750 51,250 $21,484 $118,203
Kevin R. White - - 22,500 37,500 $12,891 $ 92,422
- ------------------
(1) Value of unexercised in-the-money options at December 31, 1996 is
calculated based on the market price per share of Common Stock of $17.125
per share on December 31, 1996 less the option exercise price.
17
Shareholder Return Performance
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder returns on the Company's Common Stock against the
cumulative total shareholder returns of the S&P 500 Index and the Dow Jones Oil
Secondary Index (the "Indices") for the period between November 11, 1993 (the
date of the initial public offering of the Company's Common Stock) and December
31, 1996. The line graph assumes a $100 investment in the Company's Common
Stock on November 11, 1993 and $100 of value in the Indices as of October 31,
1993, and that any dividends were reinvested. The graph is presented in
accordance with the requirements of the Securities and Exchange Commission.
COMPARISON OF 37 MONTH CUMULATIVE TOTAL RETURN
AMONG LOUIS DREYFUS NATURAL GAS CORP., THE S & P 500 INDEX
AND THE DOW JONES OIL, SECONDARY INDEX
Cumulative Total Return
---------------------------------------
11/93 12/93 12/94 12/95 12/96
LOUIS DREYFUS NATURAL GAS CORP. 100 89 71 84 95
S & P 500 100 100 102 140 172
DOW JONES OIL, SECONDARY 100 93 90 104 128
18
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors consists of Daniel R.
Finn, Jr. and John J. Hogan, Jr. Mr. Hogan is Of Counsel to the law firm of
Dewey Ballantine, New York, New York which provided legal services to the
Company during 1996 and continues to do so. Mr. Finn serves, and Mr. Hogan has
in the past served, as a director and/or executive officer of various
subsidiaries of S.A. Louis Dreyfus et Cie.
Compensation Committee Report on Executive Compensation
The Compensation Committee is primarily responsible for the development and
implementation of the Company's executive compensation programs. The Committee
makes recommendations to the Board of Directors of the Company with respect to
the various executive compensation plans which have been or may be adopted by
the Company, as well as the specific compensation levels of executive officers.
The Committee periodically reviews the Company's results of operations and
future plans in conjunction with meetings of the full Board of Directors. The
Committee seeks to ensure that the Company's executive officer compensation
programs support the objectives of the Company's long-term plan.
In general, in recommending levels of base salary, bonus and long-term
equity based compensation for the Company's executive officers, including the
Chief Executive Officer and the other named executive officers, the Committee
fosters the Company's long-range goals through the application of three key
criteria: first, through comparability to compensation levels of equivalent
officers in similarly situated companies in the oil and gas industry; second,
through review of the executive's individual contribution to such long-range
goals and to the Company as a whole; and third, through the executive's
contribution to the achievement of specific results, such as increases in
revenues, production, reserves, cash flow and net income. The Committee applies
the foregoing criteria subjectively, including the weight given the respective
criteria.
Salaries for the Company's executive officers are based primarily on the
level of salaries historically paid to the Company's executive officers by the
Company or other subsidiaries of S.A. Louis Dreyfus et Cie and are designed to
be comparable to the general level of salaries of executive officers in
similarly situated companies.
Discretionary annual bonuses are paid based on the Committee's subjective
evaluation of the performance of the Company and of each executive officer in
the context of the criteria described above. Total bonuses authorized by the
Committee for the named executive officers were $855,000 in 1996, an aggregate
amount that is identical to the bonuses awarded to the named executive officers
in 1995. The bonus for Mr. Monroe was $260,000 in 1996 compared to $250,000 in
1995, and was based on the Committee's subjective evaluation of his performance
during 1996 in his former capacity as Chief Operating Officer of the Company
until August 1996 and in his present capacity as President and Chief Executive
Officer of the Company subsequent to August 1996. The bonus for Mr. Rich, who
served as President and Chief Executive Officer of the Company until August 1996
was $200,000 in 1996 compared to $275,000 in 1995. Such reduction is
attributable
19
primarily to the fact that Mr. Rich served as an executive officer of the
Company for only a portion of 1996. The levels of the respective bonuses for
Mr. Monroe and Mr. Rich were based on the Committee's subjective evaluation of
their performance during 1996. The Committee applied the same criteria to its
evaluation of Mr. Monroe's and Mr. Rich's compensation as it did with respect to
all of the Company's executive officers. The Committee believes that the
salaries and cash bonuses paid during 1996 to executive officers, including the
individuals who served in the capacity of Chief Executive Officer during 1996,
are reasonable when compared to the Company's increases in revenues, production,
reserves, cash flow and net income in 1996 compared to 1995.
The Company's Stock Option Plan is designed to provide long-term equity
based compensation to executive officers and managers. During 1996 the
Committee approved the grant of options to purchase 20,000 shares of Common
Stock of the Company at an exercise price equal to the then current market price
of $14.4375 per share to each of the executive officers of the Company as
indicated under "Executive Compensation and Other Information -- Executive
Compensation." The number of options granted to the individuals who served in
the capacity of Chief Executive Officer during 1996 and each of the other named
executive officers was established based on the Committee's subjective judgment,
but reflects the Committee's favorable evaluation of the performance of the
Company and the named executive officers during 1996 and the Committee's desire
to provide competitive long-term equity incentive awards to these members of
senior management.
Members of the Compensation Committee:
Mr. Daniel R. Finn, Jr.
Mr. John J. Hogan, Jr.
20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 1, 1997 (except as otherwise
indicated) by (i) each director, (ii) each of the named executive officers,
(iii) all executive officers and directors of the Company as a group, and (iv)
all those known by the Company to be beneficial owners of more than five percent
of the Company's Common Stock.
Beneficial Ownership(1)
----------------------------------------
Number Percentage
Beneficial Owner of Shares of Total
---------------- ---------- -------------
S.A. Louis Dreyfus et Cie (2) 20,630,000 74.2%
Mutuelles AXA, AXA and The 2,645,100 9.5%
Equitable Companies Incor-
porated, as a group (3)
Mark E. Monroe (4) 100,000 *
Richard E. Bross (4) 53,250 *
Peter B. Fritzinger (4) 31,000 *
Ronnie K. Irani (4) 46,450 *
Kevin R. White (4) 27,500 *
Simon B. Rich, Jr. (4) 92,600 *
Daniel R. Finn, Jr. (5) 13,000 *
John J. Hogan, Jr. (5) (6) 12,000 *
Gerard Louis Dreyfus (5) 11,000 *
James R. Paul (5) 9,000 *
James T. Rodgers, III (5) 8,000 *
All executive officers and directors 415,050 1.5%
as a group (12 persons) (7)
- --------------------------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal shareholders and applicable Schedules 13D or 13G filed with the
Securities and Exchange Commission. Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, each of the shareholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned. The percentage of ownership for each person is calculated in
accordance with rules of the Securities
21
and Exchange Commission without regard to shares of Common Stock issuable
upon exercise of outstanding stock options, except that any shares a person
is deemed to own by having a right to acquire by exercise of an option are
considered outstanding solely for purposes of calculating such person's
percentage ownership.
(2) S.A. Louis Dreyfus et Cie, 87 Avenue de la Grande Armee, 75782 Paris,
France, shares voting and investment power over all of the shares indicated
as beneficially owned by it with its direct or indirect wholly owned
subsidiaries, Louis Dreyfus Holding Company Inc. and Louis Dreyfus
Commercial Activities, Inc., 10 Westport Road, Wilton, Connecticut 06897-
0810 and, as to 20,000,000 of such shares, shares voting and investment
power with Louis Dreyfus Natural Gas Holdings Corp., 3411 Silverside Road,
Suite 210E, Baynard Building, Wilmington, Delaware 19810-4808. S.A. Louis
Dreyfus et Cie has pledged 20,000,000 of the shares of Common Stock of the
Company owned by it to certain banks to secure loans made to S. A. Louis
Dreyfus et Cie in the ordinary course of its business. A default by S. A.
Louis Dreyfus et Cie under the terms of such arrangements could result in
the sale of all or a portion of the pledged shares and a change in control
of the Company.
(3) The named group consists of (i) a group collectively referred to as
Mutuelles AXA, consisting of Alpha Assurances I.A.R.D. Mutuelle and Alpha
Assurances Vie Mutuelle, 101-100 Terrasse Boieldieu, 92042 Paris La
Defense, France; AXA Assurances I.A.R.D. Mutuelle and AXA Assurances Vie
Mutuelle, 21 Rue de Chateaudun, 75009 Paris, France; and AXA Courtage
Assurance Mutuelle, 26 Rue le Grand, 75002 Paris, France; (ii) AXA, 23
Avenue Matignon, 75008 Paris, France; and (iii) The Equitable Companies
Incorporated, 787 Seventh Avenue, New York, New York, 10019 as a parent
holding company of Alliance Capital Management L.P. and The Equitable Life
Assurance Society of the United States. The group has sole investment
power for all of the shares indicated as beneficially owned and sole voting
power over 2,476,800 of such shares. Beneficial ownership information is
as of December 31, 1996.
(4) Includes shares which the named individuals have the right to acquire by
exercise of stock options granted under the Stock Option Plan, which are
currently exercisable as follows: Monroe - 85,000; Bross - 51,250;
Fritzinger - 22,500; Irani - 43,750; White - 22,500; and Rich - 85,000.
(5) Includes 8,000 shares which the named individual has the right to acquire
by exercise of currently exercisable stock options granted under the Stock
Option Plan.
(6) Includes 1,000 shares owned by Mr. Hogan's wife as custodian for two of
their children as to which Mr. Hogan disclaims beneficial ownership.
(7) Includes 361,250 shares which directors and executive officers as a group
have a right to acquire by exercise of options granted under the Stock
Option Plan which are currently exercisable.
CERTAIN TRANSACTIONS
Prior to the completion of the Company's initial public offering in
November 1993, the Company was a wholly-owned subsidiary of S.A. Louis Dreyfus
et Cie. For purposes of the following discussion of certain transactions
involving the Company, unless the context requires otherwise, references to the
"Company" refer to the Company and its subsidiaries and predecessors and
references to "S.A. Louis Dreyfus et Cie" refer to S.A. Louis Dreyfus et Cie and
its subsidiaries (other than the Company and its subsidiaries and predecessors).
Pursuant to a Services Agreement between the Company and S.A. Louis Dreyfus
et Cie entered into in 1993, the Company has agreed to reimburse S.A. Louis
Dreyfus et Cie for a portion
22
of the salaries of employees performing services requested by the Company based
on the amount of time expended ("Hourly Charges"), overhead costs equal to 40%
of Hourly Charges and all direct third party costs incurred by S.A. Louis
Dreyfus et Cie on behalf of the Company. During 1996, the Company paid to S.A.
Louis Dreyfus et Cie $907,000 under the Services Agreement primarily for
insurance services provided by S.A. Louis Dreyfus et Cie.
In 1993, the Company entered into a fixed-price sales contract with S.A.
Louis Dreyfus et Cie initially hedging 33 Bcf of the Company's natural gas
production over a five-year period beginning in 1996 at a weighted-average fixed
price of $2.49 per Mcf. In July 1995, the parties canceled 3 Bcf of fixed-price
sales under this contract and the Company received from S.A. Louis Dreyfus et
Cie $760,000 as consideration for the partial cancellation. The canceled portion
of this contract related to 1996 production and no settlements occurred pursuant
to this contract during 1996.
In 1994, the Company entered into a fixed-price sales contract with S.A.
Louis Dreyfus et Cie hedging 20 Bcf of the Company's natural gas production from
certain wells in the Company's Sonora field commencing in January 1996. This
natural gas swap provided for a weighted-average fixed price of approximately
$2.18 per Mcf. In January 1996, the parties canceled this contract and the
Company received from S.A. Louis Dreyfus et Cie $1.6 million upon cancellation.
In 1996, the Company entered into a fixed-price sales contract with
Duke/Louis Dreyfus LLC, a company 50% owned by S.A. Louis Dreyfus et Cie,
hedging 20 Bcf of the Company's natural gas production over a ten-year period
beginning in June 1997 at a weighted-average fixed price of $2.23 per Mcf.
During 1996, the Company used the commodity trading resources of S.A. Louis
Dreyfus et Cie when purchasing natural gas futures contracts on the New York
Mercantile Exchange. The Company funds S.A. Louis Dreyfus et Cie for margin
posted by it on behalf of the Company. The margin posted on the Company's
behalf under this arrangement at December 31, 1996 was $5.6 million, which
represented the largest amount posted at any time during 1996.
The terms of the transactions described above between the Company and S.A.
Louis Dreyfus et Cie and its subsidiaries were not established on an arms-length
basis and involved conflicts of interest. Nonetheless, the Company believes that
such transactions with S.A. Louis Dreyfus et Cie were on terms at least as
favorable to the Company as could have been obtained from unaffiliated third
parties. It is possible that S.A. Louis Dreyfus et Cie and the Company may
enter into material intercompany transactions from time to time in the future,
and the Company intends that the terms of any future transactions and agreements
between the Company and S.A. Louis Dreyfus et Cie will be at least as favorable
to the Company as could be obtained from unaffiliated third parties.
Gerard Louis-Dreyfus, Simon B. Rich, Jr. and Daniel R. Finn, Jr., all
directors of the Company, are also executive officers and/or directors of S.A.
Louis Dreyfus et Cie or various of its subsidiaries. John J. Hogan, Jr., also a
director of the Company, is a former executive officer and/or director of
various subsidiaries of S.A. Louis Dreyfus et Cie. See "Election of Directors."
23
VOTING
Directors will be elected by a plurality of the votes of the shares present
in person or represented by proxy at the Annual Meeting. The affirmative vote
of the holders of a majority of the shares of Common Stock which are represented
in person or by proxy at the Annual Meeting is required to approve the amendment
and restatement of the Stock Option Plan and to ratify the selection of Ernst &
Young LLP as independent auditors of the Company for the year ending December
31, 1997. All other matters properly brought before the Annual Meeting will be
decided by a majority of the votes cast on the matter, unless otherwise required
by law.
Shares represented by proxies which are marked "withhold authority" with
respect to the election of any one or more nominees for election as directors
and proxies which are marked "abstain" on the proposals to approve the amendment
and restatement of the Stock Option Plan or to ratify the selection of Ernst &
Young LLP as independent auditors will be counted for the purpose of determining
the number of shares represented by proxy at the meeting. As a result, proxies
marked "abstain" with regard to the approval of the amendment and restatement of
the Stock Option Plan or the ratification of the selection of Ernst & Young LLP
as independent auditors will have the same effect as if the shares represented
thereby were voted against the applicable proposal. However, because directors
are elected by a plurality rather than a majority of the shares present in
person or represented by proxy at the Annual Meeting, proxies marked "withhold
authority" with respect to any one or more nominee will not affect the outcome
of the nominee's election unless the nominee receives no affirmative votes or
unless other candidates are nominated for election as directors.
Shares represented by limited proxies will be treated as represented at the
meeting only as to such matter or matters for which authority is granted in the
limited proxy. Shares represented by proxies returned by brokers where the
brokers' discretionary authority is limited by stock exchange rules will be
treated as represented at the Annual Meeting only as to such matter or matters
voted on in the proxies.
PROPOSALS OF SHAREHOLDERS
The Board of Directors will consider proposals of shareholders intended to
be presented for action at the Annual Meeting of Shareholders. According to the
rules of the Securities and Exchange Commission, such proposals shall be
included in the Company's Proxy Statement if they are received in a timely
manner and if certain other requirements are met. For a shareholder proposal to
be included in the Company's Proxy Statement relating to the 1998 Annual Meeting
of Shareholders, a written proposal complying with the requirements established
by the Securities and Exchange Commission must be received at the Company's
principal executive offices, located at 14000 Quail Springs Parkway, Suite 600,
Oklahoma City, Oklahoma 73134, no later than December 16, 1997.
24
OTHER MATTERS
Management does not know of any matters to be presented for action at the
Annual Meeting other than those listed in the Notice of Meeting and referred to
herein. If any other matters properly come before the Annual Meeting, it is
intended that the proxy solicited hereby will be voted in accordance with the
recommendations of the Board of Directors.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the year ended December 31,
1996, including audited financial statements, is enclosed. No part of the
Annual Report to Shareholders is incorporated in this Proxy Statement or is
deemed to be a part of the material for the solicitation of proxies.
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1996 is available to
shareholders without charge upon written request to the Secretary of the
Company, 14000 Quail Springs Parkway, Suite 600, Oklahoma City, Oklahoma 73134.
25
APPENDIX TO PROXY STATEMENT OF LOUIS DREYFUS NATURAL GAS CORP.
CONTAINING SUPPLEMENTAL INFORMATION REQUIRED TO BE
PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION
The following is information required to be provided to the Securities and
Exchange Commission in connection with the Definitive Proxy Materials of Louis
Dreyfus Natural Gas Corp. (the "Company") in connection with the 1997 Annual
Meeting of Shareholders of the Company. This information is not deemed to be a
part of the Proxy Statement and will not be provided to shareholders in
connection with the Proxy Statement.
1. The Company anticipates that the definitive Proxy Materials will be mailed
to the shareholders on or about April 15, 1997.
2. The following information is provided pursuant to Instruction 5, Item 10 of
Schedule 14A: The shares of Common Stock issuable by the Company pursuant to
the Stock Option Plan are covered by the Company's Registration Statement on
Form S-8 (File No. 33-92724). In connection with the proposed increase in the
number of shares authorized for issuance pursuant to the amendment and
restatement of the Stock Option Plan discussed in the Proxy Statement, the
Company anticipates that an additional Registration Statement on Form S-8 will
be filed to register such increased number of shares.
3. The complete text of the Stock Option Plan is set forth below as required by
Instruction 3, Item 9 of Schedule 14A.
STOCK OPTION PLAN
OF
LOUIS DREYFUS NATURAL GAS CORP.
(as amended and restated effective February 6, 1997)
1. Purpose of the Plan
This Stock Option Plan, as amended and restated (the "Plan"), is intended
as an incentive to managerial and other key employees of Louis Dreyfus Natural
Gas Corp. (the "Company"), and its subsidiaries. Its purposes are to retain
employees with a high degree of training, experience, and ability, to attract
new employees whose services are considered unusually valuable, to encourage the
sense of proprietorship of such persons, and to stimulate the active interest of
such persons in the development and financial success of the Company. Options
granted under the Plan may be either "incentive stock options" as provided by
Section 422 of the Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time (the "Internal Revenue Code") or options which
do not qualify as incentive stock options. In addition, the Plan is intended to
secure, retain, motivate and reward Non-employee Directors (as defined in
Section 7 of the Plan) of the Company through the grant of stock options that do
not qualify as incentive stock options.
2. Administration of the Plan
(a) Administration. The Plan shall be administered by the Board of
--------------
Directors of the Company, or if the Board so authorizes, by a committee (the
"Committee") of the Board of Directors consisting of not less than two (2)
members of the Board of Directors. Unless the context otherwise requires,
references herein to the Committee shall be references to the Board of Directors
or the Committee. Members of the Committee shall serve at the pleasure of the
Board, and the Board may from time to time remove members from, or add members
to, the Committee. A majority of the members of the Committee shall constitute
a quorum for the transaction of business. Action approved in writing by a
majority of the members of the Committee then serving shall be fully effective
as if the action had been taken by unanimous vote at a meeting duly called and
held.
(b) Authority. The Committee is authorized to construe and interpret the
---------
Plan, to promulgate, amend and rescind rules and regulations relating to the
implementation of the Plan and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee may designate
persons other than members of the Committee to carry out its responsibilities
under such conditions and limitations as it may prescribe, except that the
Committee may not delegate its authority with regard to selection for
participation of, and the granting of options to, persons subject to Sections
16(a) and 16(b) of the Exchange Act. Any determination, decision or action of
the Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be final, conclusive and
binding upon all persons participating in the Plan and any person validly
claiming under or through persons participating in the Plan. The Company shall
effect the granting of options under the Plan in accordance with the
determinations made by the Committee, by execution of instruments in writing in
such form as approved by the Committee. Notwithstanding the foregoing, the
Committee shall have no discretionary authority with respect to the eligibility,
amount, price or timing of any stock option granted under the Plan to a Non-
employee Director of the Company pursuant to the provisions of Section 7 hereof.
3. Designation of Participants
Persons eligible for options under the Plan shall consist of managerial and
other key employees of the Company and/or its subsidiaries who hold positions of
significant responsibilities or whose performance or potential contribution, in
the sole judgment of the Committee, will benefit the future success of the
Company. In addition, all Non-employee Directors of the Company shall be
eligible for options under the Plan in accordance solely with the provisions of
Section 7 hereof.
4. Shares Subject to the Plan
Subject to adjustment as provided in Paragraph 8 hereof, there shall be
subject to the Plan 2,000,000 shares of common stock of the Company, par value
$.01 per share. The shares subject to the Plan shall consist of authorized but
unissued shares or treasury shares held by the Company. Any of such shares
which may remain unsold and which are not subject to outstanding options at the
termination of the Plan shall cease to be subject to the Plan, but until
termination of the Plan, the Company shall at all times make available a
sufficient number of shares to meet the requirements of the Plan. Should any
option expire or be cancelled prior to its exercise in full, or a portion of an
option is surrendered in payment for the exercise of an option or satisfaction
of any tax withholding obligations, the shares theretofore subject to such
options may again be subjected to an option under the Plan. Any shares not
subject to outstanding options at the expiration of the Plan or at any time
during the life of the Plan may be dedicated to other plans which the Company
may adopt and to the extent so dedicated, such shares shall not be subject to
this Plan.
5. Option Price
(a) Price. The purchase price for each share placed under option pursuant
-----
to the Plan shall be determined by the Committee, but shall in no event be less
than 100% of the Fair Market Value (as defined below) of such share on the date
the option is granted.
(b) Fair Market Value. "Fair Market Value" means the average of the high
-----------------
and low sales prices of the shares of Common Stock on any national securities
exchange on which the shares are listed on the day on which such value is to be
determined or, if no shares were traded on such day, on the next preceding day
on which shares were traded, as reported by such exchange, by National Quotation
Bureau, Inc. or other national quotation service. If the Common Stock is not
listed on a national securities exchange, Fair Market Value means the average of
the closing "bid" and "asked" prices of the shares of Common Stock in the over-
the-counter market on the date on which such value is to be determined or, if
such prices are not available, the last sales price on such day or, if no shares
were traded on such day, on the next preceding day on which the shares were
traded, as reported by the National Association of Securities Dealers Automatic
Quotation System (NASDAQ) or other national quotation service. If at any time
shares of Common Stock are not traded on an exchange or in the over-the-counter
market, Fair Market Value shall be the value determined
2
by the Committee, taking into consideration those factors affecting or
reflecting value which they deem appropriate. For purposes of determining the
purchase price of an incentive stock option, Fair Market Value shall in any
event be determined in accordance with Section 422 of the Code.
6. Terms and Exercise of Options
(a) General. The Committee, in granting options hereunder, shall have
-------
discretion to determine the times when, and the terms upon which, options shall
be exercisable, including such provisions as deemed advisable to permit
qualification as "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code, as the same may from time to time be amended for
options intended to qualify as such, and incentive stock options outstanding
under the Plan may be amended, if necessary, to permit such qualification. The
Committee shall designate at the time of granting of any option whether such
option or any portion thereof shall be an "incentive stock option." Each option
shall be evidenced by an agreement between the Company and the optionee
containing provisions consistent with this Plan and such other provisions as the
Committee may determine as provided herein. Unless otherwise determined by the
Committee at the time of grant, all options shall become exercisable at the rate
of 25% of the total shares subject to the option on each of the first four
anniversary dates of the date of grant. The Committee shall also be entitled to
accelerate the date any outstanding option becomes exercisable at any time.
(b) Term. In the event of the death of an optionee while in the employ of
----
the Company, any unvested portion of the option as of the date of death shall be
vested as of the date of death and the option shall be exercisable in full by
the heirs or other legal representatives of the optionee within twelve months
following the date of death. In the event of termination of employment for any
reason other than death or termination for cause (and except as otherwise
provided in subsection (e) below) such option shall be exercisable by the
employee or his legal representative within three months of the date of
termination as to all then vested portions. In addition, the Committee may in
its sole discretion, approve acceleration of the vesting of any unvested
portions of the option. If an optionee's employment with the Company is
terminated for cause, the option shall terminate as of the date of such
termination of employment and the optionee shall have no further rights to
exercise any portion of the option. "Termination for cause" means any discharge
for violation of the policies and procedures of the Company or for other job
performance or conduct which is detrimental to the best interests of the
Company, as determined by the Committee in its sole discretion. Notwithstanding
any of the foregoing, in no event may an option be exercised more than ten years
after the date of its grant.
(c) Method of Exercise. Options may be exercised, whether in whole or in
------------------
part, by written notification to the Company accompanied by cash or a certified
check for the aggregate purchase price of the number of shares being purchased,
or upon exercise of an option, the optionee shall be entitled (unless otherwise
provided in the agreement evidencing the option), without the requirement of
further approval or other action by the Committee, to pay for the shares (i) by
tendering stock of the Company that has been owned by the optionee for at least
six (6) months with such stock to be valued at the Fair Market Value (as
determined under Section 5) on the date immediately preceding the date of
exercise or (ii) with a combination of cash and stock that has been owned by the
optionee for at least six (6) months as provided above.
In addition, upon exercise of an option, the optionee may, with the prior
approval of the Committee, pay for the shares (a) by tendering stock of the
Company already owned by the optionee but that has not been held by the optionee
---
for at least six (6) months with such stock to be valued at the Fair Market
Value (as determined under Section 5) on the date immediately preceding the date
of exercise, (b) surrendering a portion of the option with such surrendered
option to be valued based on the difference between the Fair Market Value (as
determined under Section 5) of the shares surrendered on the date immediately
preceding the date of exercise and the aggregate option purchase price of the
shares surrendered ("Surrender Value"), or (c) with a combination of cash, stock
of the Company that has not been held by the optionee for at least six (6)
---
months or surrender of options.
3
Anything above to the contrary notwithstanding, optionees holding options
granted prior to February 6, 1997 that qualify for treatment as incentive stock
options pursuant to Section 422 of the Internal Revenue Code may pay for shares
being purchased upon exercise of any such incentive stock option by tendering
all or part of the purchase price in the form of stock of the Company already
owned by the optionee only with the prior approval of the Committee.
The Committee may also permit optionees, either on a selective or aggregate
basis, to simultaneously exercise options and sell the shares of common stock
thereby acquired, pursuant to a brokerage or similar arrangement, approved
in advanced by the Committee, and use the proceeds from such sale as payment of
the purchase price of the shares being acquired upon exercise of any option.
(d) Limitations Applicable To Incentive Options. To the extent the
-------------------------------------------
aggregate Fair Market Value of stock (determined as of the date of grant) with
respect to which incentive stock options are exercisable for the first time by
any individual during any calendar year (under all Company plans) exceeds
$100,000, such options shall be treated as options which are not incentive stock
options. Options intended to be incentive options shall have such additional
terms and provisions as required by the Internal Revenue Code.
(e) Continued Service as a Director. Any provisions of the Plan to the
-------------------------------
contrary notwithstanding, for purposes of Section 6(b) above, in the event an
optionee who is also a director of the Company ceases to be employed by the
Company but continues to serve as a director of the Company, the Committee, in
its sole discretion, may determine that all or a portion of such optionee's
options shall not expire three (3) months following the date of termination of
employment with the Company as is provided in Section 6(b) above, but instead
shall continue in full force and effect until the such optionee ceases to be a
director of the Company, but in no event beyond the stated expiration date of
the options as set forth in the applicable option agreement. Termination of any
such option in connection with the optionee's termination of service as a
director shall be in accordance with the provisions of Section 6(b) above;
provided, however, that (i) the terms "employ" and "employment" as used therein
- --------
shall be replaced with the terms "service" and "service on the Board of
Directors," respectively, and (ii) the phrase "termination for cause" shall mean
any removal from the Board of Directors for cause in accordance with applicable
law and the Certificate of Incorporation and By-Laws of the Company.
7. Non-employee Director Options
Notwithstanding anything elsewhere in the Plan to the contrary, each person
who is a member of the Board of Directors of the Company but who is not an
employee of the Company (a "Non-employee Director") shall be eligible for grants
of stock options under the Plan solely in accordance with the provisions of this
Section 7. The following provisions of this Section 7 shall apply to the
granting of stock options to Non-employee Directors:
(a) Grant of Options. Each individual who is a Non-employee Director on
----------------
the date of the 1995 annual meeting of the shareholders of the Company shall
receive an initial option grant to purchase 6,000 shares of the Common Stock of
the Company, par value $.01 per share, immediately following such meeting. Each
individual who becomes a Non-employee Director subsequent to the 1995 annual
meeting of the shareholders of the Company shall receive an initial option grant
to purchase 6,000 shares of the Common Stock immediately following the date of
his election to the Board of Directors. Each Non-employee Director shall
receive subsequent grants of stock options to purchase 2,000 shares of the
Common Stock immediately following each annual meeting of the shareholders of
the Company that follows the date of the initial grant of stock options to the
Non-employee Director hereunder. All stock options granted to the Non-employee
Directors shall constitute options that do not qualify as incentive stock
options under the Internal Revenue Code.
(b) Exercise Price. The purchase price for each share placed under an
--------------
option for a Non-employee Director shall be equal to 100% of the Fair Market
Value of such share on the date the option is granted.
4
(c) Vesting and Term. Each option granted to a Non-employee Director shall
----------------
be immediately vested and fully exercisable on the date of grant. The period
during which a Non-employee Director option may be exercised shall be ten (10)
years from the date of grant, subject to earlier termination in accordance with
the provisions of Section 6(b) hereof; provided, however that (i) the terms
-------- -------
"employ" and "employment" as used therein shall be replaced with the terms
"service" and "service on the Board of Directors," respectively, and (ii) the
phrase "termination for cause" shall mean any removal from the Board of
Directors for cause in accordance with applicable law and the Certificate of
Incorporation and By-Laws of the Company.
(d) Method of Exercise. Options granted to Non-employee Directors may be
------------------
exercised in the manner provided in Section 6(c) hereof.
(e) Other Provisions. All options granted to Non-employee Directors shall
----------------
be subject to the other provisions of general applicability to options granted
under the Plan, including without limitation, the provisions of Section 8
("Assignability") , Section 9 ("Changes in Capitalization") and Section 10
("Change in Control") hereof.
8. Assignability
During an optionee's lifetime, an option may be exercisable only by the
optionee and options granted under the Plan and the rights and privileges
conferred thereby shall not be subject to execution, attachment or similar
process and may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution. Notwithstanding the foregoing or
any other provisions of the Plan, to the extent permitted by applicable law, the
Committee may, in its sole discretion, permit recipients of options that do not
qualify as incentive stock options under Section 422 of the Internal Revenue
Code to transfer such non-incentive options by gift or other means pursuant to
which no consideration is given for such transfer. The Committee shall impose in
connection with any non-incentive options transferred pursuant to the foregoing
sentence such limitations and restrictions as it deems appropriate. Any other
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
option under the Plan or of any right or privilege conferred thereby, contrary
to the provisions of the Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred thereby, shall be null and void
ab initio.
9. Changes in Capitalization
(a) No Effect on Company Rights. Subject to the other provisions of this
---------------------------
Plan, the existence of the Plan and the options granted hereunder shall not
affect or restrict in any way the right or power of the Board or the
shareholders 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 bonds, debentures, preferred or prior preference stocks ahead of or affecting
the Company's capital stock or the rights thereof, any issue of shares of Common
Stock or shares of any other class of capital stock or warrants or rights to
acquire such shares, the dissolution or liquidation of the Company or any sale
or transfer of all or any part of its assets or business, or any other corporate
act or proceeding.
(b) Changes in Capitalization. In the event of any change in
-------------------------
capitalization affecting the common stock of the Company, such as a stock
dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, liquidation,
sale of assets or any other change affecting the common stock ("Change in
Capitalization"), such proportionate adjustments, shall be made with respect to
the aggregate number of shares of common stock for which options may be granted
under the Plan, the number of shares of common stock (or other securities)
covered by each outstanding option, and the price per share of outstanding
options to the end that the optionee shall be entitled to receive the same
number and kind of stock, securities, cash, property or other consideration as
if such option had been exercised immediately preceding such Change in
Capitalization.
5
(c) Other Distributions. The Committee may also make such adjustments in
-------------------
the number of shares covered by, and the price or other value of any outstanding
options in the event of a spin-off or other distribution (other than normal cash
dividends) of Company assets to shareholders.
10. Change in Control
(a) Effect on Options. In the event of a Change in Control (as defined
-----------------
below) of the Company, and except as the Committee may expressly determine
otherwise in connection with any Change in Control:
(i) all options outstanding on the date of such Change in Control shall
become immediately and fully exercisable, and
(ii) an optionee will be permitted to surrender for cancellation within
sixty (60) days after such Change in Control, any option or portion of such
option to the extent not yet exercised and the optionee will be entitled to
receive a cash payment in an amount equal to the excess, if any, of (A) the
Fair Market Value on the date preceding the date of surrender, of the
shares subject to the option or portion thereof surrendered, over (B) the
aggregate exercise price for the shares under the option or portion thereof
surrendered.
(b) Change in Control. A "Change in Control" of the Company shall mean the
-----------------
occurrence after the effective date of the Plan of:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Exchange Act) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of fifty percent (50%) or more of the combined voting power of the
Company's then outstanding Voting Securities;
(ii) The individuals who, as of the date of adoption of the Plan by
the Board, are members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least two-thirds of the members of the Board;
provided, however, that if the election, or nomination for election by the
Company's common stockholders, of any new director was approved by a vote
of at least two-thirds of the Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the Incumbent Board;
provided further, however, that no individual shall be considered a member
of the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened 'election contest' (as described
in Rule 14A-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy
Contest; or
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless
(1) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger, consolidation or
reorganization, at least sixty percent (60%) of the combined
voting power of the outstanding voting securities of the
corporation resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in substantially
the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization,
6
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at
least two-thirds of the members of the board of directors of
the Surviving Corporation, and
(3) no Person, other than (a) the Company, any Subsidiary,
any employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation, or any
Subsidiary, (b) S.A. Louis Dreyfus et Cie ("SALD") or a
corporation or other entity that is directly or indirectly more
than 50% owned by SALD, or (c) any Person who, immediately
prior to such merger, consolidation or reorganization had
Beneficial Ownership of fifty percent (50%) or more of the then
outstanding Voting Securities, has Beneficial Ownership of
fifty percent (50%) or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities;
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur:
(i) Solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by
the Company which, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the
Subject Person, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any additional Voting
Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in
Control shall occur or
(ii) By reason of any acquisition of Voting Securities by a
corporation or entity that is directly or indirectly more than 50% owned by
SALD.
11. Registration and Listing
The Company from time to time shall take such steps as may be necessary to
cause the issuance of shares upon the exercise of options granted under the Plan
to be registered under the Securities Act of 1933, as amended, and such other
federal or state securities laws as may be applicable. The Company shall also
from time to time take such steps as may be necessary to list the shares
issuable upon exercise of options granted under the Plan for trading on such
stock exchanges on which the Company's then outstanding shares are admitted to
listed trading.
12. Effective and Expiration Dates of Plan; Effect on Prior Plan
This Plan as initially adopted became effective as of October 21, 1993, the
date of its approval by the sole shareholder of the Company. The Plan as
initially adopted provided that no option shall be granted pursuant to the Plan
after October 21, 2003. The Plan, as amended and restated as of February 6,
1997, shall be submitted to the shareholders of the Company for their approval
at the 1997 Annual Meeting of Shareholders, or any adjournment thereof. If the
shareholders fail to approve the Plan as amended and restated effective February
6, 1997, the amendments adopted on such date shall be of no force or effect and
the Plan shall continue in its form immediately prior to the amendment and
restatement adopted as of February 6, 1997. If the shareholders approve the
amended and restated Plan, then the period during which options may be granted
under the Plan shall be extended to February 6, 2007.
7
13. Amendments or Termination
The Committee may at any time amend, alter or discontinue the Plan in such
manner as it may deem advisable. Any such amendment or alteration may be
effected without the approval of the shareholders of the Company, except to the
extent such approval may be required by applicable laws or by the rules of any
securities exchange upon which the Company's outstanding shares are admitted to
listed trading.
No amendment, alteration or discontinuation of the Plan shall adversely
affect any stock option grants made prior to the time of such amendment,
alteration or discontinuation, except with the consent of the holder of the
affected options.
14. Governmental Regulations
Notwithstanding any provision hereof, or any option granted hereunder, the
obligation of the Company to sell and deliver shares under any such option shall
be subject to all applicable laws, rules and regulations and to such approvals
by any governmental agencies or national securities exchange as may be required,
and the optionee shall agree that he will not exercise any option granted
hereunder, and that the Company will not be obligated to issue any shares under
any such option, if the exercise thereof or if the issuance of such shares shall
constitute a violation by the optionee or the Company of any applicable law or
regulation. The Company shall be entitled to require as a condition to the
issuance of any shares of Common Stock upon exercise of an option that the
optionee remit an amount sufficient, in the Company's opinion, to satisfy all
FICA, federal, state or other withholding tax requirements related thereto.
Unless otherwise provided in the Agreement evidencing the option, an optionee
shall be entitled, without the requirement of further approval or other action
by the Committee, to satisfy such obligation in whole or in part (i) by
tendering stock of the Company already owned by the optionee with such stock to
be valued at the Fair Market Value (as determined under Section 5) on the date
immediately preceding the date of exercise of the options, (ii) by surrendering
a portion of his or her option with such surrendered option to be valued at the
Surrender Value (as determined under Section 6(c)), or (iii) by a combination of
cash, stock of the Company and surrender of options.
Anything above to the contrary notwithstanding, optionees holding options
granted prior to February 6, 1997 that qualify for treatment as incentive stock
options pursuant to Section 422 of the Internal Revenue Code may satisfy tax
withholding obligations, if any, by surrender of stock of the Company owned by
the Optionee or surrender of a portion of the option only with the prior
approval of the Committee.
15. Governing Law
The Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the state of Oklahoma and applicable
federal law.
16. Severability
If any provision of this Plan is determined to be invalid or unenforceable
for any reason, the remaining provisions of the Plan shall remain in effect and
be interpreted to reasonably effect the intent of the Plan.
8
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
LOUIS DREYFUS NATURAL GAS CORP.
14000 Quail Springs Parkway
Suite 600
Oklahoma City, Oklahoma 73134
The undersigned hereby appoints Kevin R. White and David B. Oshel as
proxies (the "Proxies"), each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on the other
side, all of the shares of Common Stock of Louis Dreyfus Natural Gas Corp. held
of record by the undersigned on the record date at the Annual Meeting of
Shareholders to be held on May 20, 1997 or any reconvention thereof.
(Continued, and to be marked, dated, and signed, on the other side)
Please mark
your votes as
WITHHELD indicated in this
FOR FOR ALL example
Item 1 - ELECTION OF DIRECTORS [_] [_] [X]
Nominees:
Richard E. Bross Mark E. Monroe
Daniel R. Finn, Jr. James R. Paul
John J. Hogan, Jr. Simon B. Rich, Jr.
Gerard Louis-Dreyfus James T. Rodgers, III
WITHHELD FOR (Write nominee name(s) in the space provided): _____________________________________________
Item 2 - APPROVAL OF AMENDMENT AND FOR AGAINST ABSTAIN
RESTATEMENT OF STOCK OPTION PLAN
[_] [_] [_]
Item 3 - RATIFICATION OF SELECTION OF FOR AGAINST ABSTAIN
INDEPENDENT ACCOUNTANTS
[_] [_] [_]
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting. If any other business is presented at
the Annual Meeting, this Proxy shall be voted in accordance with the
recommendations of the Board. As to Items 1, 2 and 3, this Proxy will be voted
as directed, but if no directions are indicated, it will be voted for the
nominees listed in Item 1 and for Items 2 and 3.
Signature(s) ______________________________________ Date _____________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, administrator, trustee or guardian, please give full title
as such.