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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant to Rule 14a-12
Ocean Energy, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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[LOGO]
OCEAN ENERGY, INC.
HOUSTON, TEXAS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 9, 2001
Dear Shareholder:
You are cordially invited to attend the 2001 Annual Meeting of Shareholders
(the "Annual Meeting") of Ocean Energy, Inc., a Texas corporation (the
"Company"), which will be held on Wednesday, May 9, 2001 at 11:00 a.m., local
time, at The St. Regis Hotel, 1919 Briar Lane, Houston, Texas. The Annual
Meeting will be held for the following purposes:
1. To elect three directors to serve until the 2004 Annual Meeting of
Shareholders.
2. To approve the merger of the Company into a wholly-owned subsidiary
organized under the laws of Delaware to effect the change of the Company's
state of incorporation from Texas to Delaware. Upon consummation of the
merger, we will continue our operations as a Delaware corporation under the
name "Ocean Energy, Inc."
3. To approve our 2001 Long-Term Incentive Plan.
4. To approve our 2001 Employee Stock Purchase Plan.
5. To ratify the appointment of KPMG LLP as independent auditors of
the Company for the fiscal year ending December 31, 2001.
6. To transact such other business as may properly come before such
meeting or any adjournment(s) or postponement(s) thereof.
The close of business on March 28, 2001 has been fixed as the record date
for the determination of shareholders entitled to receive notice of and to vote
at the Annual Meeting or any adjournment(s) or postponement(s) thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE TO ENSURE THAT YOUR SHARES
WILL BE REPRESENTED. A SELF-ADDRESSED ENVELOPE HAS BEEN ENCLOSED FOR YOUR
CONVENIENCE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW ANY PREVIOUSLY GIVEN
PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
Robert K. Reeves
Secretary
April 3, 2001
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OCEAN ENERGY, INC.
1001 FANNIN, SUITE 1600
HOUSTON, TEXAS 77002
(713) 265-6000
------------------------
PROXY STATEMENT
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SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
(the "Board of Directors" or the "Board") of Ocean Energy, Inc., a Texas
corporation (the "Company"), for use at the 2001 Annual Meeting of Shareholders
(the "Annual Meeting") to be held on Wednesday, May 9, 2001 at 11:00 a.m., local
time, at The St. Regis Hotel, 1919 Briar Oaks Lane, Houston, Texas, or at any
adjournment(s) or postponement(s) thereof. The solicitation of proxies by the
Board of Directors will be conducted primarily by mail. Georgeson & Company Inc.
has been retained to assist the Company in the solicitation of proxies in
connection with the Annual Meeting for a fee of $10,000, plus out-of-pocket
expenses. In addition, officers, directors and employees of the Company may
solicit proxies personally or by telephone, telegram or other forms of wire or
facsimile communication. The Company will reimburse brokers, custodians,
nominees and fiduciaries for reasonable expenses incurred by them in forwarding
proxy material to beneficial owners of common stock (the "Common Stock") of the
Company. The costs of the solicitation will be borne by the Company. This proxy
statement and the form of proxy were first mailed to shareholders of the Company
on or about April 3, 2001.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy (a) by the execution and submission of
a revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by the proxies will be voted at the Annual Meeting.
At the close of business on March 28, 2001, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding shares of Common Stock and 50,000
shares of the Company's Series C Convertible Preferred Stock (the "Convertible
Preferred Stock"). Each shareholder is entitled to one vote for each share of
Common Stock, and 68.96 votes for each share of Convertible Preferred Stock.
Holders of Common Stock and Convertible Preferred Stock will vote together as a
single class on the matters to be voted on at the Annual Meeting. The Common
Stock and Convertible Preferred Stock are the only classes of outstanding
securities of the Company entitled to notice of and to vote at the Annual
Meeting.
The Company's annual report to shareholders for the year ended December 31,
2000, including financial statements, is being mailed with this proxy statement
to all shareholders entitled to vote at the Annual Meeting. The annual report
does not constitute a part of this proxy soliciting material.
TABLE OF CONTENTS
DESCRIPTION OF PROPOSAL PAGE
- ----------------------- ----
Item 1 -- Election of Directors............................. 2
Item 2 -- Approval of Reincorporation from Texas to 19
Delaware..................................................
Item 3 -- Approval of 2001 Long-Term Incentive Plan......... 24
Item 4 -- Approval of 2001 Employee Stock Purchase Plan..... 30
Item 5 -- Ratification of Appointment of Independent 34
Auditors..................................................
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ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Three directors are to be elected at the Annual Meeting. The Company's
Bylaws provide for a classified Board of Directors, divided into Classes I, II
and III, the terms of office of which are currently scheduled to expire,
respectively, on the dates of the Company's Annual Meetings of Shareholders in
2002, 2003 and 2001. The three nominees are to be elected to Class III for a
three-year term expiring at the Company's annual meeting of shareholders in
2004.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION OF EACH OF THE
DIRECTOR NOMINEES.
A plurality of the votes cast in person or by proxy by the holders of
Common Stock and Convertible Preferred Stock, voting together as a class, is
required to elect a director. Accordingly, under the Texas Business Corporation
Act ("TBCA") and the Company's Bylaws, abstentions and broker non-votes would
have no effect on the election of directors. Shareholders may not cumulate their
votes in the election of directors.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors.
The following table sets forth information regarding the names, ages and
principal occupations of the nominees and directors, directorships in other
companies held by them and the length of continuous service as a director of the
Company (or its predecessor):
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
CLASS III DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE
- ------------------- -------------------------------------- ---
John B. Brock................... Director, Southwest Bank of Texas, Southwest 68
Bancorporation
of Texas, Inc., St. Luke's Episcopal Health System and
St. Luke's Episcopal Hospital. Director of Ocean Energy
Inc., a
Delaware corporation ("Old OEI") and a predecessor
entity of
Old OEI, United Meridian Corporation ("UMC"), from 1989
until election as a director of the Company in March
1999.
Milton Carroll.................. Chairman of the Board and Chief Executive Officer, 50
Instrument Products, Inc.; Director, Health Care Service
Corporation, Reliant Energy, Inc. and TEPPCO Partners,
LP.
Director of the Company since 1997.
James T. Hackett................ Chairman of the Board, President and Chief Executive 47
Officer
of the Company. Director, Flour Corporation, Kaiser
Aluminum
Corp., New Jersey Resources Corporation and Temple-
Inland Inc. Director of the Company since 1998.
CONTINUING DIRECTORS
CLASS II DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE
- ------------------ -------------------------------------- ---
J. Evans Attwell................. Retired managing partner, Vinson & Elkins L.L.P. 70
Director,
American General Corporation. Director of the Company
since 1974.
Barry J. Galt.................... Director, StanCorp Financial Group, Inc., Trinity 67
Industries, Inc. and Friede Goldman Halter, Inc.
Director of the Company since 1983.
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CLASS II DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE
- ------------------ -------------------------------------- ---
Elvis L. Mason................... Principal, Elvis Mason & Associates, Inc. Consulting 67
and Advisory Services. Director of Old OEI and UMC,
from 1987 until election as a director of the Company
in March 1999.
David K. Newbigging.............. Chairman, Friends' Provident Life Office, Faupel 67
Trading Group plc and Thistle Hotels PLC; Director,
Merrill Lynch & Co., Inc. and PACCAR Inc. Director of
Old OEI and UMC, from 1987 until election as a director
of the Company in March 1999.
Dee S. Osborne................... President, Crest Investment Company (investments); 70
Director, EOTT Energy Corp. (the general partner of
EOTT Energy Partners, L.P.). Director of the Company
since 1983.
CLASS I DIRECTORS PRINCIPAL OCCUPATION AND DIRECTORSHIPS AGE
- ----------------- -------------------------------------- ---
Thomas D. Clark, Jr. ............ Ourso Distinguished Professor of Business and Dean of 60
College of Business Administration at Louisiana State
University. Director of Old OEI from 1997 until
election as a director of the Company in March 1999.
Peter J. Fluor................... President and Chief Executive Officer, Texas Crude 53
Energy, Inc. (independent oil and gas company);
Director, Fluor Corporation. Director of the Company
since 1980.
Robert L. Howard................. Retired Vice President of Domestic Operations, 64
Exploration and Production, Shell Oil Company.
Director, Southwestern Energy Company and McDermott
International Inc. Director of Old OEI and UMC, from
1996 until election as a director of the Company in
March 1999.
Charles F. Mitchell, M.D. ....... Otolaryngologist and facial plastic surgeon. Director 52
of Old OEI from 1995 until election as a director of
the Company in March 1999.
Each of the nominees and directors named above has been engaged in the
principal occupation set forth opposite his name for the past five years except
as follows:
Mr. Brock served as Chairman of the Board of Old OEI from March 1998 until
March 1999. He also served as Chairman of the Board of UMC from 1995 to March
1998 at which time UMC was merged into Old OEI. From 1989 to 1998, Mr. Brock
held a variety of positions with UMC, including as President and Chief Executive
Officer from 1992 to March 1998.
Mr. Hackett served as Chairman of the Board of the Company from January
1999 to March 1999 prior to the merger with Old OEI and was renamed Chairman of
the Board in January 2000. Prior to joining the Company, he served as Group
President of the Energy Services division of Duke Energy from June 1997 through
September 1998, following the merger of Duke Power Company and PanEnergy
Corporation. From January 1996 until the merger, Mr. Hackett served as
PanEnergy's Executive Vice President. Prior to his employment with PanEnergy,
Mr. Hackett was employed by NGC Corporation (now Dynegy, Inc.) from 1990 through
December 1995.
Mr. Galt served as Vice Chairman of the Company from January 1999 to March
1999 and as Chairman of the Board of the Company from 1983 to December 1998.
Mr. Mason served as Chairman of the Board of Directors of San Jacinto
Holdings, Inc. from 1991 to 1999 and served as Managing Partner of Mason Best
Company, L.P., a merchant banking firm, from 1984 to
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1998. He served as Chief Executive Officer of San Jacinto Holdings, Inc. from
1991 to March 1999 and Safeguard Business Systems Inc. from August 1997 to March
1999 and from 1992 to October 1996.
Mr. Newbigging has served as Chairman of Faupel Trading Group P.L.C. since
January 1994. He has also served as Chairman of Equitas Holdings Limited and
Equitas Reinsurance Limited from December 1995 to October 1998, and Equitas
Limited from March 1996 to October 1998. He was appointed Chairman of Thistle
Hotels PLC in March 1999.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned by each director, each nominee for director, the Chief
Executive Officer and each of the other four most highly compensated individuals
for 2000 who were serving as executive officers of the Company as of December
31, 2000 (the "Named Officers"), two additional highly compensated officers and
the directors and executive officers of the Company as a group, as of the date
of this Proxy Statement:
COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------------------
PERCENT
NUMBER OF SHARES (2) OF CLASS
-------------------- --------
J. Evans Attwell.................................... 88,000 *
John B. Brock....................................... 1,167,681(3) *
Milton Carroll...................................... 21,000 *
Thomas D. Clark, Jr. ............................... 42,172 *
Peter J. Fluor...................................... 75,998(4) *
Barry J. Galt....................................... 817,000 *
Robert L. Howard.................................... 48,800 *
Elvis L. Mason...................................... 67,547 *
Charles F. Mitchell, M.D. .......................... 48,700 *
David K. Newbigging................................. --(5) *
Dee S. Osborne...................................... 133,193 *
James T. Hackett.................................... 1,247,640(6) *
William L. Transier................................. 596,637(6)(7) *
Robert K. Reeves.................................... 638,462(6)(7) *
John D. Schiller, Jr. .............................. 339,289(6)(7) *
William S. Flores, Jr. ............................. 346,453(6)(7)(8) *
Scott A. Griffiths.................................. 178,697(6)(7)(8) *
Stephen A. Thorington............................... 91,033(6)(7) *
Directors and executive officers as a group: (17
persons).......................................... 5,426,152(9) %
- ---------------
* Less than 1%
(1) Unless otherwise indicated, beneficial owners have sole voting and
investment power with respect to the shares listed. Amounts shown are as of
March 15, 2001, except for amounts held by the trustees of the Company's
Thrift Plan and Employee Stock Ownership Plan, which are as of December 31,
1999.
(2) Includes shares that the above named persons have a right to purchase within
60 days pursuant to stock options granted under the Company's stock option
plans. Such shares are allocated as follows: Mr. Attwell -- 48,000; Mr.
Brock -- 871,125; Mr. Carroll -- 20,000; Mr. Clark -- 41,680; Mr. Fluor --
48,000; Mr. Galt -- 566,000; Mr. Howard -- 44,800; Mr. Mason -- 52,600; Dr.
Mitchell -- 46,360; Mr. Osborne -- 48,000; Mr. Hackett -- 777,411; Mr.
Transier -- 341,667; Mr. Reeves -- 502,037; Mr. Schiller -- 179,998; Mr.
Flores -- 321,088; Mr. Griffiths -- 152,370; and Mr. Thorington -- 58,333.
Prior to exercising these options, the directors and officers will have no
voting or investment power with respect to the underlying shares.
(3) Includes 5,000 shares owned by his wife as separate property with respect to
which Mr. Brock disclaims beneficial ownership because he has neither voting
nor dispositive power with respect to such shares.
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(4) Includes 4,000 shares held by certain trusts with respect to which Mr. Fluor
is the sole trustee but for which he disclaims any beneficial ownership.
(5) Mr. Newbigging has been the recipient of various stock options which have
been assigned to a trust of which members of his family are the
beneficiaries and of which Mr. Newbigging is not the trustee.
(6) Includes shares held by the trustee of the Company's Employee Stock
Ownership Plan for which the listed officers have sole voting power and no
investment power. Shares held are as follows: Mr. Hackett -- 49; Mr.
Transier -- 6,037; Mr. Reeves -- 2,124; Mr. Schiller -- 2,124; Mr.
Flores -- 2,124; Mr. Griffiths -- 5,507; and Mr. Thorington -- 5,880.
(7) Includes shares held by the trustees of the Company's Thrift Plan for which
the listed officers have sole voting power and no investment power. Shares
held are as follows: Mr. Transier -- 69,195; Mr. Reeves -- 2,090; Mr.
Schiller -- 2,295; Mr. Flores -- 1,922; Mr. Griffiths -- 2,270; and Mr.
Thorington -- 3,410.
(8) Messrs. Flores and Griffiths are not executive officers of the Company.
(9) Includes 93,204 shares held for directors and executive officers as a group
in the Company's Thrift Plan and Employee Stock Ownership Plan for which
such persons have sole voting power and no investment power. Also, includes
3,614,678 shares for directors and executive officers as a group that such
persons have the right to purchase within 60 days pursuant to options
granted under the Company's stock option plans. Prior to exercising these
options, said persons will have no voting or investment power with respect
to the underlying shares.
PRINCIPAL SHAREHOLDERS
To the Company's knowledge and based upon filings with the Securities and
Exchange Commission ("SEC"), the only person who may be deemed to own
beneficially more than 5% of the outstanding Common Stock (including any "group"
as that term is used in Section 13(d)(3) of the Exchange Act), as of the date of
this Proxy Statement, is named in the following table:
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- ------------------------------------ ---------------- ----------------
State Street Research & Management Co.................. 9,298,130 5.5%
One Financial Center, 30th Floor
Boston, MA 02111-2690
DIRECTORS' MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors held eight meetings during 2000. Each
director attended at least 75% of the aggregate total meetings of the Board of
Directors and the committees on which such director served during his tenure of
service.
Audit Committee. The Audit Committee currently consists of Messrs.
Osborne (Chairman), Attwell, Carroll, Howard and Newbigging. The
Committee's principal functions are to confirm the existence of effective
accounting and internal control systems and to oversee the entire audit
function, both independent and internal. During 2000, the Audit Committee
held six meetings. The report of the Audit Committee is set forth on page
6.
Organization and Compensation Committee. The Organization and
Compensation Committee currently consists of Messrs. Mason (Chairman),
Carroll, Clark and Mitchell. The Committee's principal functions are to
study, advise and consult with the Company's management respecting the
compensation of officers and other key employees of the Company. During
2000, the Organization and Compensation Committee held five meetings. The
report of the Organization and Compensation Committee is set forth on page
13.
Executive Committee. The Executive Committee currently consists of
Messrs. Fluor (Chairman), Attwell, Brock, Galt and Mason. The Committee's
principal function is to aid and assist the Company's
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management in the day-to-day operation of the Company. During 2000, the
Executive Committee held nine meetings.
Nominating Committee. The Nominating Committee currently consists of
Messrs. Clark (Chairman), Carroll, Fluor, Howard and Mitchell. The
Committee's principal function is to make proposals to the Board of
Directors for candidates to be nominated by the Board to fill vacancies or
for new directorship positions, if any, which may be created from time to
time. The Nominating Committee will consider suggestions from any source,
particularly shareholders, regarding possible candidates for director. With
respect to the procedures that must be followed in order for nominations
from shareholders to be considered, see "Shareholder Proposals and Director
Nominations." During 2000, the Nominating Committee held three meetings.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is governed by a restated charter adopted by the Board
of Directors on January 23, 2001. A copy of the charter is attached to this
Proxy Statement as Annex A. The Audit Committee's primary duties and
responsibilities are to:
- periodically assess the integrity of the Company's financial reporting
process and systems of internal control regarding accounting;
- periodically assess the independence and performance of the Company's
outside auditors; and
- provide an avenue of communication among the outside auditors, management
and the Board of Directors.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Audit Committee's responsibility is to monitor and oversee
these processes.
The Audit Committee held six meetings during fiscal 2000. During these
meetings, the Audit Committee reviewed and discussed the Company's financial
statements with management and KPMG LLP ("KPMG"), its independent certified
public accountants.
The Audit Committee reviewed and discussed the audited financial statements
of the Company for the fiscal year ended December 31, 2000 with the Company's
management and management represented to the Audit Committee that the Company's
financial statements were prepared in accordance with generally accepted
accounting principles. The Audit Committee discussed with KPMG matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees).
The Audit Committee received the written disclosures and the letter from
KPMG required by Independence Standards Board Standard No. 1 (Independence
Discussion with Audit Committees), and the Audit Committee discussed with KPMG
their independence from the Company. The Audit Committee considered the
non-audit services provided by KPMG and determined that the services provided
are compatible with maintaining KPMG's independence. The total fees paid to KPMG
for fiscal 2000 include audit fees of $472,750 and non-audit fees of $1,369,356.
Based on the Audit Committee's discussions with management and the
independent accountants and the Audit Committee's review of the representation
of management and the report of the independent accountants to the Audit
Committee, the Audit Committee recommended to the Board of Directors that the
Company's audited financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000 for filing with
the Securities and Exchange Commission.
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Each of the members of the Audit Committee listed below is independent as
defined under the listing standards of the New York Stock Exchange.
Audit Committee
Dee S. Osborne (Chairman)
J. Evans Attwell
Milton Carroll
Robert L. Howard
David K. Newbigging
COMPENSATION OF DIRECTORS
During 2000, each director of the Company who was not a full-time employee
was paid an annual director's fee of $35,000 plus $1,000 for each Board of
Directors and Committee meeting attended. Each nonemployee director who served
as a committee chairman received an additional $5,000 per year. In addition,
each director was reimbursed for reasonable travel expenses incurred in
connection with such director's attendance at Board of Directors and Committee
meetings.
Stock Options. The 1999 Long Term Incentive Plan (the "Plan") provides for
the grant of options to acquire Common Stock to each director who is not also an
employee of the Company (each a "Director"). On the date of any annual meeting
of shareholders prior to the termination of the Plan, each Director who is
continuing in office will automatically receive an option to purchase 6,000
shares of Common Stock at an exercise price equal to the fair market value of
the Common Stock on the date of grant with one-third vested at each of the next
three annual meeting dates. In addition, each Director who is elected or
appointed to the Board of Directors for the first time will receive on the date
of such director's election or appointment an option to purchase 10,000 shares
of Common Stock at an exercise price equal to the fair market value of the
Common Stock on the date of grant with 50% immediately vested and the remaining
50% vested on the next annual meeting of shareholders of the Company. All
outstanding options have terms of ten years.
Deferred Fee Plan. The Company has an Outside Directors Deferred Fee Plan
(the "Deferred Fee Plan"), a non-qualified deferred compensation plan, pursuant
to which all directors who are not employees of the Company ("Outside
Directors") may elect to defer all or a portion of their directors' fees.
Outside Directors are permitted to make elections regarding the method of income
crediting for these deferrals, which are credited based upon the performance of
various investment funds selected by the committee responsible for administering
the Deferred Fee Plan, including a fund investing in Common Stock (a "Stock
Fund"). However, an Outside Director may not make or revoke an election
designating a Stock Fund for the income crediting for his deferrals under the
Deferred Fee Plan within six months after making or revoking a previous election
designating a Stock Fund for such crediting. Distributions under the Deferred
Fee Plan can be made only in cash. As of March 1, 2001, all Outside Directors
except Messrs. Brock, Clark and Newbigging were participants in the Deferred Fee
Plan.
CERTAIN TRANSACTIONS
During 2000, as part of a previously announced stock repurchase program,
the Company purchased from Mr. Barry J. Galt, a director of the Company, and Mr.
James C. Flores, a former director of the Company, and an affiliated entity
150,000 shares and 600,000 shares of Common Stock, respectively, at then current
market prices. The Company purchased Mr. Galt's shares on June 20, 2000 for an
aggregate purchase price of $2,278,125 and purchased Mr. Flores' shares on May
17, 2000 for an aggregate purchase price of $9,262,500.
As previously disclosed, the Company paid James C. Flores, who served as a
director of the Company's during the Company's last fiscal year, $5.4 million in
cash and vested all of his outstanding and unvested stock options in connection
with his resignation as Chairman of the Board of the Company in December 1999.
This cash payment was made in January 2000. Mr. Flores resigned his position as
a director of the Company in January 2001.
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During 2000, the Company paid $341,454 to Sable Minerals, Inc. ("Sable"), a
corporation owned by Mr. Flores, pursuant to a non-cost bearing overriding
royalty interest held by Sable in the Company's Main Pass 69, South Pass 24 and
South Pass 27 fields.
During 2000, the Company retained the law firm of Vinson & Elkins L.L.P.,
of which Mr. Attwell, a director of the Company, is retired managing partner, to
perform various legal services for the Company. Vinson & Elkins L.L.P. has been
retained to perform similar services in 2001.
The following executive officers have outstanding loans from the Company.
These loans were made in 1998 in order to encourage stock ownership by the
management team and were designed to facilitate the immediate exercise of stock
options to purchase shares.
AMOUNT OUTSTANDING
(INCLUDING ACCRUED INTEREST)
NAME AS OF DECEMBER 31, 2000 MATURITY DATE INTEREST RATE
- ---- ---------------------------- ------------- -------------
William L. Transier........................... $368,062 12/17/2002 4.8%
John D. Schiller, Jr. ........................ $464,891 12/17/2002 4.8%
Since the inception of these loans, and in accordance with the terms of the
loans, no payments of principal or interest have been made. The loans to Mr.
Transier and Mr. Schiller were made on December 17, 1998 to allow for the
exercise of 60,982 and 77,025 stock options, respectively, pursuant to the
Company's Equity Ownership Program. Each of these loans is secured by the shares
of Common Stock acquired upon exercise of the stock options described above.
Portions of the loans are forgiven based on the Company's stock performance
against its peer group and the respective tenure of Mr. Transier and Mr.
Schiller with the Company. The maximum aggregate amount outstanding (including
accrued interest) during 2000 for Mr. Transier and Mr. Schiller was $404,134 and
$510,454, respectively.
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of the Common Stock to
file reports of ownership and changes in ownership concerning the Common Stock
with the SEC and to furnish the Company with copies of all Section 16(a) forms
they file. Based upon the Company's review of the Section 16(a) filings that
have been received by the Company, the Company believes that all filings
required to be made under Section 16(a) during 2000 were timely made.
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EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended December
31, 2000, 1999 and 1998, of the Named Officers and two additional highly
compensated officers:
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS
----------------------------- -------------------------------
SECURITIES
RESTRICTED STOCK UNDERLYING ALL OTHER
SALARY BONUS AWARD(S) OPTIONS/SARS COMPENSATION
NAME & PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#)(2) ($)(3)
- ------------------------- ---- --------- -------- ---------------- ------------ ------------
James T. Hackett........................... 2000 $606,148 $630,000 $1,404,688 150,000 $173,087
Chairman of the Board, 1999 $ 3,600(4) $475,000 $1,527,600 575,000 $ 57,815
President and Chief Executive Officer 1998 $ 875(4) $500,000 $ 677,922 391,996 $ 22,015
William L. Transier........................ 2000 $351,025 $350,000 $ 274,219 75,000 $ 92,528
Executive Vice President and 1999 $341,500 $350,000 $ -- 250,000 $ 36,246
Chief Financial Officer 1998 $290,500 $300,000 $ 554,186 130,982 $ 53,586
Robert K. Reeves(5)........................ 2000 $350,000 $315,000 $ 137,109 50,000 $ 34,485
Executive Vice President, 1999 $262,500 $300,000 $ -- 250,000 $ 15,611
General Counsel and Secretary 1998 $ -- $ -- $ -- -- $ --
John D. Schiller, Jr. ..................... 2000 $342,828 $350,000 $ 137,109 50,000 $100,631
Executive Vice President, Operations 1999 $287,500 $250,000 $ -- 200,000 $ 26,129
1998 $ 72,917 $ 70,614 $ -- 117,025 $ 63,970
William S. Flores, Jr.(5)(6)............... 2000 $251,025 $210,000 $ 54,844 45,000 $ 24,391
Senior Vice President, Drilling 1999 $187,500 $175,000 $ -- 120,000 $ 26,130
1998 $ -- $ -- $ -- -- $ --
Scott A. Griffiths(6)...................... 2000 $245,902 $185,000 $ 54,844 45,000 $ 24,604
Senior Vice President 1999 $225,000 $175,000 $ -- 120,000 $ 38,294
Exploration, International 1998 $186,123 $ 35,006 $ -- 20,000 $ 31,202
Stephen A. Thorington...................... 2000 $200,000 $160,000 $ 54,844 45,000 $ 20,085
Senior Vice President, Finance, 1999 $200,000 $160,000 $ -- 100,000 $ 32,619
Treasury and Corporate Development 1998 $175,000 $ 83,500 $ -- 11,000 $ 29,345
- ---------------
(1) The restricted stock included in the table represents the fair market value
of the entire restricted stock award on the date of grants. The Company
currently pays dividends on its Common Stock, but no dividends were paid
during 2000. The following restricted stock grants were made during 2000:
Mr. Hackett -- 125,000 shares; Mr. Transier -- 37,500 shares; Mr.
Schiller -- 18,750 shares; Mr. Reeves -- 18,750 shares; Mr. Flores -- 7,500
shares; Mr. Griffiths -- 7,500 shares; and Mr. Thorington -- 7,500 shares.
All restricted stock grants in 2000 were made on January 3, 2000, except
50,000 shares granted to Mr. Hackett on September 16, 2000. All restricted
stock grants have restrictions that lapse in equal annual increments during
the three year period following the grant date. Prior to the merger between
the Company and Old OEI, Mr. Hackett received 241,996 shares of restricted
stock with respect to which the restrictions were scheduled to lapse on
various dates through September 16, 2002. As a result of the merger between
the Company and Old OEI, all of the restrictions related to the restricted
stock held by Mr. Hackett and Mr. Transier lapsed in March 1999. The
following is the aggregate number of shares of unreleased restricted stock
and its value at December 31, 2000 for each of the listed officers: Mr.
Hackett -- 116,667 shares valued at $2,027,083; Mr. Transier -- 37,500
shares valued at $651,563; Mr. Reeves -- 18,750 shares valued at $325,781;
Mr. Schiller -- 18,750 shares valued at $325,781; Mr. Flores -- 7,500 shares
valued at $130,313; Mr. Griffiths -- 7,500 shares valued at $130,313; and
Mr. Thorington -- 7,500 shares valued at $130,313.
(2) No grants of stock appreciation rights have been made.
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(3) Amounts reported under "All Other Compensation," represent contributions by
the Company to defined contribution plans, parking or car allowances and
premiums paid on life insurance policies, and where applicable, include
amounts for personal use of aircraft chartered by the Company. In the case
of Mr. Hackett, includes annual premium payments paid by the Company for Mr.
Hackett's Flexible Premium Adjustable Life Insurance policy of $1,390 for
2000, 1999 and 1998. In the case of Messrs. Transier and Schiller, includes
for 2000 amounts forgiven pursuant to the terms of Equity Ownership Program
loans of $52,930 and $66,855, respectively.
(4) Under Mr. Hackett's employment agreement, Mr. Hackett received his annual
compensation of $500,000 for 1998 and 1999 in the form of stock options. In
connection with the merger between the Company and Old OEI, Mr. Hackett's
salary increased from $500,000 to $600,000. Mr. Hackett deferred this
increase under the Company's Supplemental Benefit Plan as phantom shares or
common stock equivalents. As a result, Mr. Hackett received only a nominal
amount of 1999 base salary in cash sufficient to cover costs associated with
the Company's benefit plans. During 1998, Mr. Hackett elected to waive
receipt of his 1998 and 1999 salary in exchange for an option to purchase
200,000 shares of Common Stock.
(5) Messrs. Reeves and Flores assumed their positions with the Company in March
1999 in connection with the merger between the Company and Old OEI.
(6) Messrs. Flores and Griffiths are not executive officers of the Company.
COMPENSATION ARRANGEMENTS
Employment Agreements.
Mr. Hackett entered into a three-year employment agreement with the Company
effective September 16, 1998. The term of Mr. Hackett's employment agreement is
extended automatically for an additional year on each anniversary of the
employment agreement, unless terminated prior to such renewal by either Mr.
Hackett or the Company. Consequently, the remaining term of Mr. Hackett's
employment agreement will always range from two to three years. However, if the
Company terminates Mr. Hackett's employment for cause (as defined in the
agreement), or because of Mr. Hackett's uncorrected material breach of the
employment agreement, the employment agreement will terminate. Similarly, if Mr.
Hackett voluntarily terminates his employment for reasons other than the
Company's uncorrected material breach of the employment agreement, his failure
to be re-elected to the positions specified in the employment agreement,
including as a director, the assignment of duties materially inconsistent with
his positions, or the relocation of the principal place of his employment by
more than 50 miles, the employment agreement will terminate. The employment
agreement provides for Mr. Hackett to serve as the Company's President and Chief
Executive Officer and as Chairman of the Company's Board of Directors. The
employment agreement also includes noncompetition provisions that apply while
Mr. Hackett is employed by the Company and for two years following a termination
of Mr. Hackett's employment by reason of his disability or a voluntary
termination by Mr. Hackett prior to September 16, 2000. During his term of
employment, Mr. Hackett will also receive various club memberships and certain
other personal and business-related benefits.
The foregoing description reflects an amendment to Mr. Hackett's employment
agreement effective January 1, 2000, that amended the provision pertaining to
Mr. Hackett's service as Chairman of the Company's Board of Directors and the
noncompetition provision, both of which had been amended previously in
connection with the merger between the Company and Old OEI.
Mr. Transier entered into a five-year employment agreement with the Company
effective June 22, 1999, which replaced an existing severance agreement. If the
Company terminates Mr. Transier's employment because of his misconduct or
disability (both as defined therein), the employment agreement will terminate.
Similarly, if Mr. Transier resigns for other than good reason (as defined
therein), the employment agreement will terminate. The employment agreement
provides for Mr. Transier to serve as Executive Vice President and Chief
Financial Officer of the Company. Mr. Transier's salary is subject to review and
possible increase by the Company's Board of Directors on an annual basis.
Further, during his term of employment, Mr. Transier will receive certain other
personal and business-related benefits.
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Mr. Reeves entered into a five-year employment agreement with the Company
effective June 22, 1999, which replaced an existing employment agreement. If the
Company terminates Mr. Reeves' employment because of his misconduct or
disability (both as defined therein), the employment agreement will terminate.
Similarly, if Mr. Reeves resigns for other than good reason (as defined
therein), the employment agreement will terminate. The employment agreement
provides for Mr. Reeves to serve as Executive Vice President, General Counsel
and Corporate Secretary of the Company. Mr. Reeves' salary is subject to review
and possible increase by the Company's Board of Directors on an annual basis.
Further, during his term of employment, Mr. Reeves will receive certain other
personal and business-related benefits.
Mr. Schiller entered into a five-year employment agreement with the Company
effective July 20, 2000, which replaced an existing severance agreement. If the
Company terminates Mr. Schiller's employment because of his misconduct or
disability (both as defined therein), the employment agreement will terminate.
Similarly, if Mr. Schiller resigns for other than good reason (as defined
therein), the employment agreement will terminate. The employment agreement
provides for Mr. Schiller to serve as Executive Vice President -- Operations of
the Company. Mr. Schiller's salary is subject to review and possible increase by
the Company's Board of Directors on an annual basis. Further, during his term of
employment, Mr. Schiller will receive certain other personal and
business-related benefits.
Mr. Flores entered into a five-year employment agreement with the Company
effective June 22, 1999, which replaced an existing employment agreement. If the
Company terminates Mr. Flores' employment because of his misconduct or
disability (both as defined therein), the employment agreement will terminate.
Similarly, if Mr. Flores resigns for other than good reason (as defined
therein), the employment agreement will terminate. The employment agreement
provides for Mr. Flores to serve as Senior Vice President, Drilling of the
Company. Mr. Flores' salary is subject to review and possible increase by the
Company's Board of Directors on an annual basis.
Executive Severance Agreement.
Messrs. Hackett and Griffiths have entered into agreements with the Company
(each a "Severance Agreement") that provide certain severance benefits in the
event their employment is subject to an involuntary termination (as defined
therein) within two years following a change of control (as defined therein) of
the Company. The merger between the Company and Old OEI in March 1999 (the "OEI
Merger") was deemed as a change of control within the meaning of the Severance
Agreements.
Mr. Hackett's Severance Agreement became effective as of August 25, 1998,
with an initial term of two years. This term may be extended for successive
two-year terms following the initial term; however, if a change of control
occurs during the term of Mr. Hackett's Severance Agreement, the Severance
Agreement cannot terminate until two years after the change of control.
Accordingly, as a result of the OEI Merger, Mr. Hackett's Severance Agreement
will pursuant to its terms expire on March 30, 2001. Notwithstanding the
foregoing, in the event that the Board of Directors of the Company fails to act
with respect to Mr. Hackett's Severance Agreement within sixty days of its
scheduled expiration, the Severance Agreement will by its terms automatically
renew for a term of two years.
Mr. Griffiths' Severance Agreement, which replaced an existing severance
agreement, became effective as of June 22, 1999, with an initial term of three
years. This term may be extended for successive three-year terms following the
initial term; however, if a change of control occurs during the term of Mr.
Griffiths' Severance Agreement, the Severance Agreement cannot terminate until
two years after the change of control.
The Severance Agreements generally provide for (a) the payment of 2.99
times the sum of annual salary and targeted incentive bonus or, where
applicable, two-year average bonus at the time of the change of control or the
involuntary termination, whichever is greater, and, where applicable, reduced by
the present value of any salary continuation, bonus or severance payments
payable under any other Company plan, policy or agreement, other than a plan
within the meaning of section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended, (b) where applicable, the payment of targeted incentive
bonus if the involuntary termination occurs after a bonus is earned but before
it is paid, (c) the continuation of health and insurance benefit coverage at
active employee cost for up to thirty-six months, and (d) outplacement services
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up to a maximum cost of $6,000. Additionally, the Severance Agreements provide
that if any payments to an executive by the Company would be subject to any
excise tax imposed by section 4999 of the Code, a "gross-up" payment will be
made to place such executive in the same net after-tax position as would have
been the case if no excise tax had been imposed.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following is information with respect to the unexercised options to
purchase Common Stock under the Company's stock option plans granted to the
Named Officers and two additional highly compensated officers and held by them
at December 31, 2000.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES DECEMBER 31, 2000(#) AT DECEMBER 31, 2000($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
James T. Hackett...... -- -- 577,412 539,584 $4,019,706 $4,726,959
William L. Transier... -- -- 283,333 241,667 $ 892,498 $2,417,189
Robert K. Reeves...... -- -- 541,036 216,667 $3,327,801 $2,165,627
John D. Schiller,
Jr. ................ -- -- 106,666 183,334 $ 892,494 $1,833,131
William S. Flores,
Jr. ................ -- -- 330,986 125,000 $2,795,183 $1,297,813
Scott A. Griffiths.... -- -- 112,858 125,000 $ 869,912 $1,297,813
Stephen A.
Thorington.......... -- -- 69,333 111,667 $ 390,164 $1,108,023
- ---------------
(1) Based on the closing price on the NYSE Composite Tape for Common Stock on
December 31, 2000 ($17.375 per share).
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following is information with respect to grants of options in fiscal
2000 pursuant to the Company's stock option plans to the Named Officers and two
additional highly compensated officers reflected in the Summary Compensation
Table on page 9. No stock appreciation rights were granted under those plans in
fiscal 2000.
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF PERCENT OF POTENTIAL REALIZABLE VALUE
SECURITIES TOTAL AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS/SARS OF STOCK PRICE APPRECIATION
OPTIONS/SARS GRANTED TO EXERCISE OR FOR OPTION TERM (2)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
(#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
------------ ------------ ----------- ---------- ----------- -------------
James T. Hackett....... 100,000 3.2% $ 7.3125 01/03/2010 $459,879 $1,165,424
50,000 1.6% $17.1250 09/16/2010 $538,491 $1,364,642
William L. Transier.... 75,000 2.4% $ 7.3125 01/03/2010 $344,909 $ 874,068
Robert K. Reeves....... 50,000 1.6% $ 7.3125 01/03/2010 $229,940 $ 582,712
John D. Schiller,
Jr. ................. 50,000 1.6% $ 7.3125 01/03/2010 $229,940 $ 582,712
William S. Flores,
Jr. ................. 45,000 1.5% $ 7.3125 01/03/2010 $206,946 $ 524,441
Scott A. Griffiths..... 45,000 1.5% $ 7.3125 01/03/2010 $206,946 $ 524,441
Stephen A.
Thorington........... 45,000 1.5% $ 7.3125 01/03/2010 $206,946 $ 524,441
- ---------------
(1) All options were granted on January 3, 2000 at an exercise price of $7.3125,
except 50,000 granted to Mr. Hackett on September 16, 2000 at an exercise
price of $17.125. All options vest in one-third increments on the first
three anniversaries of the grant date, except options relating to 50,000
shares granted to Mr. Hackett on September 16, 2000, which vest in
one-quarter increments on the first four anniversaries of the grant date.
The exercise price per share is equal to the closing price of Common Stock
on the NYSE Composite Tape on the date of grant.
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of options assuming that the market price of Common
Stock appreciates in value from the date of grant at the 5% and 10% annual
rates of return prescribed by the SEC. These calculations are not intended
to forecast possible future appreciation, if any, of the price of Common
Stock.
REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The primary goal of the Organization and Compensation Committee (the
"Committee") is to establish a compensation program that serves the long-term
interests of the Company and its shareholders. We intend to attract and retain
the highest caliber executive talent in the industry. The quality and caliber of
executive talent is fully expected to manifest itself in superior Company
performance within the industry. Generally, the strategy for managing executive
compensation will emphasize highly leveraged variable compensation, with a
strong link to Company performance. We intend to emphasize variable and equity
components of compensation that, upon attainment of expected performance, will
position total compensation at or near the 75th percentile of the competitive
market.
The Company's executive compensation program, as structured and implemented
by our Committee, consists of three main components: (1) base salary; (2)
potential for an annual bonus based on overall Company performance as well as
individual performance; and (3) the opportunity to earn long-term stock-based
incentives that are intended to encourage the achievement of superior results
over time and to align executive and shareholder interests. We engage the
outside compensation consulting firm of William M. Mercer, Incorporated
("Mercer") for advice in evaluating the executive compensation levels of the
Company's executive officers. Mercer's evaluation includes a peer group of
companies substantially similar to the Company's peer group named under the
heading "Shareholder Return Performance Presentation" and various energy and
general industry survey sources.
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Base Salary. The Company's objective in determining base salaries is to
position base salaries for executives between the 50th and 75th percentile of
the competitive market. Based upon Mercer's evaluation, we believe that the base
salary objectives have been met.
Adjustments to base salaries are made on an as needed basis depending on
the executive's performance over time and such factors as changes in job scope,
competitive market and the Company's size. No specific weight or emphasis is
placed on any one of these factors.
Annual Incentive Compensation. Annual incentive compensation is intended
to provide additional reward opportunities to our executives depending on
individual and Company performance. Annual incentives are determined at the end
of the fiscal year based on an evaluation of individual and Company performance.
Company performance is measured against the goals approved by the Board of
Directors at the beginning of the fiscal year for which the incentive
compensation is being paid. Generally, Company performance goals for any fiscal
year will include a combination of such factors as successful drilling results,
competitive finding and development costs, prudent control of production and
operating costs, growth in production and reserves, attainment of cash flow and
net income goals, implementation of corporate finance strategies, successful
mergers and acquisitions and common stock price performance.
Annual incentive payments could position the executive's total cash
compensation between the 75th to 90th percentile of the competitive market when
justified by superior Company performance. We utilize data obtained from Mercer
to determine the target annual incentive award levels. Annual incentive award
payments can increase to a maximum of two times the targeted percentage or
decrease to zero for any year, based upon the achievement of predetermined
Company and individual performance goals.
No specific weight or emphasis is placed on any one of these goals. After
the objective goals are measured independently and evaluated as a whole, we
evaluate the individual executive's performance and the Company's stock price
performance. The Company's stock price appreciated 124% from December 31, 1999
through December 31, 2000.
Long-Term Incentive Compensation. The Company delivers long-term incentive
compensation in the form of stock option grants and, on a limited basis to the
senior executives and other key employees, restricted stock awards. We believe
strongly that incentive compensation in the form of stock options and restricted
stock tends to align the interests of employees and shareholders by rewarding
performance that increases shareholder value. Option holders will only realize
value when the stock price increases over the exercise price established on the
date of grant, after vesting has occurred and upon exercise of the option.
Restricted stock recipients will only realize value if they remain employed by
Company until the end of the vesting period, during which time and, thereafter,
they have a significant incentive to influence stock price appreciation.
We determine the size of the grants by considering the value of the
long-term incentive grants to similarly situated executives of companies
included in the Company's peer group. The Company's long-term incentive grants
are intended to approximate the 75th percentile value of grants made by
companies in the Company's peer group. We base decisions concerning individual
option grants on the individual performance and the level of responsibility of
the executive. The Committee does not utilize the number of options, restricted
stock awards or shares held by any individual as a factor to limit long-term
incentive grants to that individual in subsequent years.
All outstanding options have terms of ten or eleven years, depending on the
plan from which they were granted. All options granted in 2000 have ten year
terms and vest in three equal annual installments beginning one year from the
grant date, with the exception of grants made to Mr. Hackett under the terms of
his Employment Agreement (which vest in four equal annual installments). All
options have been granted at 100% of the market value of the Common Stock on the
date of grant. The exercise price is payable in cash, shares of Common Stock, or
any combination thereof. All restricted stock awards made to executives during
2000 have restrictions that lapse in equal annual increments during the three
year period following the grant date.
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We periodically review the Company's executive compensation strategy to
ensure that the Company provides an appropriate mix of base salary and
short-term and long-term compensation opportunities that are competitive with
market alternatives.
Chief Executive Officer Compensation
As previously described, we consider several factors in developing an
executive compensation package. For the Chief Executive Officer, these factors
include competitive pay practices (consistent with the philosophy of market
competitiveness described above for other executives), experience, achievement
of strategic goals and financial success of the Company, and the Board's
subjective evaluation of leadership effectiveness. Specific actions taken by our
Committee regarding Mr. Hackett's compensation in 2000 are summarized below.
Base Salary. As with the Company's other executives, Mr. Hackett's 2000
base salary was based on a review of a variety of factors such as certain
individual performance criteria and such factors as changes in job scope,
competitive market and the Company's size. In December, 2000, we increased Mr.
Hackett's salary from $600,000 to $750,000 per year, which level is believed to
be at approximately the 50th percentile of chief executive officers in the
Company's peer group.
Annual Incentive Compensation. As a result of his leadership in the
attainment of the Company's 2000 goals and the stock price performance as
previously described, we awarded Mr. Hackett a 2000 bonus award of $630,000 in
cash. In addition, we also enhanced his retirement benefits under the Executive
Supplemental Retirement Plan.
Long-Term Incentive Compensation. Mr. Hackett received a restricted stock
grant covering 50,000 shares on January 3, 2000. This grant is scheduled to vest
in one-third increments on the first three anniversaries of the grant date. Also
on January 3, 2000, Mr. Hackett received a stock option grant covering 100,000
shares. These stock options have an exercise price of $7.3125, which was the
fair market value on the date of grant, and vest in one-third increments on the
first three anniversaries of the grant date.
In accordance with his Employment Agreement, Mr. Hackett received
restricted stock grants covering 25,000 shares on January 3, 2000 and 50,000
shares on September 16, 2000. These grants are scheduled to vest in one-third
increments during the three years following the grant date. Also in accordance
with his Employment Agreement, Mr. Hackett was granted a stock option covering
50,000 shares on September 16, 2000. These stock options have an exercise price
of $17.1250, which was the fair market value on the date of grant, and vest in
25% increments on the first four anniversaries of the grant date.
Section 162(m). Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), which was enacted in 1993, precludes a public corporation
from taking a deduction in 1994 or subsequent taxable years for compensation in
excess of $1 million paid to its chief executive officer or any of its four
other highest-paid officers. However, compensation that qualified under Section
162(m) of the Code as "performance-based" is specifically exempt from the
deduction limit. Our Committee has been advised that the Company's ability to
deduct compensation income generated in connection with the exercise of stock
options granted under the Company's stock option plans should not be limited by
Section 162(m) of the Code. We believe that it is not in the shareholders'
interests to modify the Company's annual incentive plan to enable the Company to
meet the requirements of the Code provisions which limit to $1 million the
deductibility of annual cash compensation paid to any executive officer named in
the Summary Compensation Table for corporate income tax purposes. We believe
that it is in the shareholders' interests for our Committee to retain discretion
in the awarding of cash bonuses to the officers to better ensure that the bonus
which is paid to each officer reflects the officer's contribution to the
achievement of the Company's goals. The Company has
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determined that the impact to the Company, if any, of being unable to deduct
that portion of the cash bonus paid to officers which, together with their
annual salary, exceeds $1 million will be minimal.
Organization and Compensation
Committee
Elvis L. Mason, Chairman
Milton Carroll
Thomas D. Clark, Jr.
Charles F. Mitchell, M.D.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The performance graph shown below was prepared by using data from the
Standard and Poor's Compustat Database for use in this Proxy Statement. As
required by applicable rules of the SEC, the graph was prepared based upon the
following assumptions:
1. $100 was invested in Common Stock, the Old Peer Group (as defined
below), the New Peer Group (as defined below) and the S&P 500 on December
31, 1995.
2. The Old Peer Group and New Peer Group investments are weighted
based on the market capitalization of each individual company within the
applicable peer group at the beginning of each year.
3. Dividends are reinvested on the ex-dividend dates.
The old industry peer group (the "Old Peer Group") is comprised of the
following: Anadarko Petroleum Corporation, Apache Corporation, Burlington
Resources Inc., Devon Energy Corporation, EOG Resources, Inc., Noble Affiliates,
Inc., Pioneer Natural Resources Company, Santa Fe Snyder Corporation, Unocal
Corporation, Union Pacific Resources Group Inc. and Vastar Resources, Inc.
The new industry peer group (the "New Peer Group") is comprised of the
following: Anadarko Petroleum Corporation, Apache Corporation, Burlington
Resources Inc., Devon Energy Corporation, EOG Resources, Inc., Kerr-McGee
Corporation, Noble Affiliates, Inc., Pioneer Natural Resources Company and
Unocal Corporation.
We believe the New Peer Group, which reflects the disappearance of Santa Fe
Snyder Corporation, Union Pacific Resources Group Inc. and Vastar Resources,
Inc. as a result of mergers and the addition of Kerr-McGee Corporation, more
accurately reflects our industry peers based on market capitalization and
business focus.
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OCEAN ENERGY, INC.
COMPARATIVE TOTAL RETURNS
DECEMBER 1995-DECEMBER 2000
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, OLD PEER GROUP, NEW PEER GROUP AND S&P 500 INDEX
[PERFORMANCE GRAPH]
- ----------------------------------------------------------------------------------------------------------------
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ----------------------------------------------------------------------------------------------------------------
The Company $100 $ 99 $ 93 $ 28 $ 35 $ 78
Old Peer Group $100 $128 $117 $ 87 $100 $179
New Peer Group $100 $129 $118 $ 89 $103 $169
S&P 500 $100 $123 $164 $211 $255 $232
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
The Company has an Executive Supplemental Retirement Plan (the "Retirement
Plan") in which Messrs. Hackett, Reeves, Schiller and Transier participate. The
Retirement Plan was established to provide supplemental retirement benefits for
those employees who are designated by the Compensation Committee as participants
and who complete the required period of employment with the Company. Benefits
under the Retirement Plan constitute unfunded, unsecured obligations of the
Company. The Retirement Plan provides a benefit for the surviving spouse of a
participant who dies before retirement with a vested benefit. Each participant
enters into a membership agreement ("Membership Agreement") that sets forth the
specific terms of his participation in the Retirement Plan as determined by the
Compensation Committee.
Subject to specified vesting requirements set forth in the participant's
Membership Agreement, a participant is entitled to receive commencing upon
termination of his or her employment by the Company or upon his or her normal
retirement date as specified in the Membership Agreement, whichever is later, a
pension equal to the applicable percentage of average monthly compensation and,
unless provided otherwise in the participant's Membership Agreement, reduced by
50% of his or her social security benefit. Further, unless otherwise provided in
the participant's Membership Agreement, the pension is payable during the joint
lives of
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the participant and his spouse, if any, and during the life of the survivor upon
the death of either the participant or his spouse, if any. Mr. Hackett is 70%
vested in his benefit under the Retirement Plan. Messrs. Reeves, Schiller and
Transier are 0% vested in their benefit under the Retirement Plan.
For Mr. Hackett, the applicable percentage is 50%, and the average monthly
compensation (including bonus) is determined based on the last thirty-six
consecutive months of employment with the Company. Based upon Mr. Hackett's
average monthly compensation (including deemed annual salary and bonuses for
years 1998, 1999 and 2000) of $121,894, the estimated vested accrued annual
benefit for Mr. Hackett is $504,115 payable during the joint lives of Mr.
Hackett and his spouse, with such payment continuing to the survivor for life
upon the death of either Mr. Hackett or his spouse.
For Messrs. Reeves, Schiller and Transier, the applicable percentage is
50%, and the average monthly compensation (including bonus) is determined based
on the last thirty-six consecutive months of employment with the Company.
However, for these participants, the pension is payable for a maximum of fifteen
years, to the participant or, upon the death of the participant, to the
participant's spouse, if any. Further, in the event of the participant's
disability, the benefit will commence upon the participant's normal retirement
date and be reduced by any benefits received under the Company's long-term
disability plan.
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APPROVAL OF REINCORPORATION FROM TEXAS TO DELAWARE
(ITEM 2 ON PROXY CARD)
GENERAL
The Board of Directors has approved and recommends that the shareholders
approve the proposed merger of the Company into a wholly owned subsidiary
incorporated under the laws of the State of Delaware for the purpose of changing
our state of incorporation from the State of Texas to the State of Delaware. We
believe that this reincorporation will result in the advantages described below.
Following the merger, we intend to retain our corporate name "Ocean Energy,
Inc." In this discussion, the term "merger subsidiary" or "surviving
corporation" refers to the new Delaware corporation which is the proposed
successor to the Company. Prior to the merger, the merger subsidiary will not
have any operating history, assets or liabilities.
The following discussion summarizes certain aspects of our proposed
reincorporation into the State of Delaware. This summary is not intended to be
complete and is subject to, and qualified in its entirety by, reference to the
following:
- the Certificate of Incorporation of the merger subsidiary attached as
Annex B to this Proxy Statement;
- the Bylaws of the merger subsidiary attached as Annex C to this Proxy
Statement;
- the Agreement and Plan of Merger attached as Annex D to this Proxy
Statement; and
- the "Comparison of Texas and Delaware Corporation Law" attached as Annex
E to this Proxy Statement.
Copies of our current Restated Articles of Incorporation and Bylaws are
available for inspection at our principal executive offices and copies will be
sent to shareholders, without charge, upon oral or written request directed to
our corporate secretary.
PRINCIPAL FEATURES OF THE REINCORPORATION
The reincorporation will be effected by the merger of the Company with and
into the merger subsidiary, which has been incorporated under the Delaware
General Corporation Law ("DGCL") solely for purposes of the merger. The merger
subsidiary will be the surviving corporation in the merger. The separate
existence of the Company will cease to exist as a result of the merger.
Upon completion of the merger, each outstanding share of Common Stock of
the Company will be converted into one share of common stock of the surviving
corporation and each outstanding share of Convertible Preferred Stock of the
Company will be converted into one share of preferred stock of the surviving
corporation, having equivalent rights, privileges, qualifications, limitations
and restrictions. As a result, the existing shareholders of the Company will
automatically become shareholders of the surviving corporation. Stock
certificates of the Company will be deemed to represent the same number of
merger subsidiary shares as were represented by such Company stock certificates
prior to the merger.
Our redomestication in Delaware will not result in any change to our
business operations or the location of our principal executive offices. The
financial condition and results of operations of the surviving corporation
immediately after the consummation of the merger will be identical to that of
the Company immediately prior to the consummation of the merger. In addition, at
the effective time of the merger, the board of directors of the surviving
corporation will consist of those persons who were directors of the Company
immediately prior to the merger, including those persons who are elected at the
Annual Meeting, and individuals serving as executive officers of the Company
immediately prior to the merger will continue to serve as executive officers of
the surviving corporation after the merger.
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CORPORATE NAME AND TRADING SYMBOL
Following the merger, we will retain our corporate name "Ocean Energy,
Inc." and do not anticipate changing our Common Stock trading symbol in
connection with the merger. Accordingly, our shares are expected to continue to
trade on the New York Stock Exchange under the symbol "OEI."
PRINCIPAL REASONS FOR THE REINCORPORATION
As the Company plans for the future, the Board of Directors believes that
it is essential to be able to draw upon well established principles of corporate
governance in making legal and business decisions. The predictability of
Delaware corporate law provides a reliable foundation on which our governance
decisions can be based. We believe that the shareholders will benefit from the
responsiveness of Delaware corporate law to their needs and to those of the
corporation they own.
For many years, the State of Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws which are updated and revised
to meet changing business needs. As a result, many corporations are initially
organized in Delaware or subsequently reincorporate in Delaware in a manner
similar to that proposed by us. The Company's predecessor, Old OEI, was
incorporated in Delaware prior to its merger with Seagull Energy, Inc. in March
1999. Because of Delaware's prominence as a state of incorporation for many
corporations, the Delaware courts have developed considerable expertise in
dealing with corporate issues and a substantial body of case law has developed
construing the DGCL and establishing public policies with respect to
corporations incorporated in Delaware. Consequently, the DGCL is comparatively
well known and understood. We believe that reincorporation in Delaware should
provide greater predictability with respect to our corporate affairs.
We believe that the proposed reincorporation under Delaware law will
enhance our ability to attract and retain qualified independent directors to
represent the Company. The law of Delaware offers greater certainty and
stability from the perspective of those who serve as corporate directors. To
date, we have not experienced difficulty in attracting or retaining directors.
However, as a result of the significant potential liability and comparatively
modest compensation associated with service as a director, we believe that the
better understood, and comparatively more stable, corporate environment afforded
by Delaware will enable us to improve our ability to continue to attract capable
and experienced individuals to our Board of Directors.
POSSIBLE DISADVANTAGES OF REINCORPORATION
There are a number of substantive differences between the DGCL and the TBCA
and some of those differences may, under certain circumstances, limit rights of
shareholders with respect to the management of the Company's affairs. For
example, unlike the TBCA, the DGCL does not require a corporation to permit
stockholders to call a special meeting of stockholders. Accordingly, we have not
made provision for stockholders calling special meetings in the certificate of
incorporation governing the merger subsidiary. Additionally, unlike the TBCA
which generally requires the affirmative vote of two-thirds of a corporation's
shareholders to approve charter amendments, mergers and other significant
corporate events, the DGCL generally requires the affirmative vote of a majority
of a corporation's stockholders. For information regarding these and other
material differences between the TBCA and the DGCL and the respective charter
and bylaws of the Company and the surviving corporation, please read Annex E
attached to this Proxy Statement. We believe that the advantages of the
reincorporation to the Company and its shareholders outweigh its possible
disadvantages.
SHAREHOLDERS ARE STRONGLY URGED TO READ THE SUMMARY OF CERTAIN SIGNIFICANT
DIFFERENCES IN THE PROVISIONS OF THE TBCA AND THE DGCL AFFECTING THE RIGHTS AND
INTERESTS OF SHAREHOLDERS SET FORTH IN ANNEX E ATTACHED TO THIS PROXY STATEMENT.
AMENDMENT, DEFERRAL OR TERMINATION OF THE AGREEMENT AND PLAN OF MERGER
If approved by the shareholders at the Annual Meeting, it is anticipated
that the reincorporation will become effective at the earliest practicable date.
However, the merger agreement provides that it may be
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amended, modified or supplemented before or after approval by the shareholders
of the Company, except that no such amendment, modification or supplement may be
made if it would have an adverse effect upon the rights of the Company's
shareholders unless it has been approved by the shareholders. The merger
agreement also provides that the Company may terminate and abandon the merger or
defer its consummation for a reasonable period, notwithstanding shareholder
approval, if in the opinion of the Board of Directors or, in the case of
deferral, of an authorized officer, such action would be in the best interests
of the Company and its shareholders.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
We believe that, for Federal income tax purposes, no gain or loss will be
recognized by the holders of Common Stock or Convertible Preferred Stock of the
Company as a result of the consummation of the reincorporation and no gain or
loss will be recognized by the Company or the surviving corporation. Each holder
of Common Stock or Convertible Preferred Stock of the Company will have the same
tax basis in the common stock or preferred stock of the surviving corporation
received pursuant to the reincorporation as such shareholder had in the Common
Stock or Convertible Preferred Stock of the Company held immediately prior to
the reincorporation, and the shareholder's holding period with respect to the
common stock or preferred stock of the surviving corporation will include the
period during which such shareholder held the corresponding Common Stock or
Convertible Preferred Stock of the Company, so long as such Common Stock or
Convertible Preferred Stock was held as a capital asset at the time of
consummation of the reincorporation.
ALTHOUGH IT IS NOT ANTICIPATED THAT STATE OR LOCAL INCOME TAX CONSEQUENCES
TO SHAREHOLDERS WILL VARY FROM THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED
ABOVE, SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE EFFECT OF
THE REINCORPORATION UNDER STATE, LOCAL OR FOREIGN INCOME TAX LAWS.
We also believe that the surviving corporation will succeed without
adjustment to the federal tax attributes of the Company.
EXCHANGE OF STOCK CERTIFICATES
The reincorporation will not affect the validity of the currently
outstanding stock certificates. Consequently, it will not be necessary for
shareholders of the Company to exchange their existing stock certificates for
stock certificates of the surviving corporation. Delivery of certificates
representing the Company's Common Stock or Convertible Preferred Stock will
constitute "good delivery" for transactions following the merger.
EFFECT ON OPTION AND OTHER EMPLOYEE BENEFIT PLANS
Our option plans will be continued by the surviving corporation and each
option with respect to Company shares issued pursuant to such plans will
automatically be converted into an option with respect to the same number of
shares of the surviving corporation, upon the same terms and subject to the same
conditions as set forth in the plans. Other employee benefit plans and
arrangements of the Company will be continued by the surviving corporation upon
the terms and subject to the conditions currently in effect. The reincorporation
merger will not result in the acceleration of benefits under any of the
Company's option or benefit plans.
EFFECT ON OUR SHAREHOLDER RIGHTS PLAN
Our existing shareholder rights plan will be assumed by the surviving
corporation upon consummation of the merger. Consequently, following the merger,
the preferred share purchase rights attached to each share of the Company's
Common Stock will remain outstanding and the rights attaching thereto will
remain in effect.
SECURITIES ACT CONSEQUENCES
The shares of the merger subsidiary to be issued in exchange of shares of
the Company are not being registered under the Securities Act of 1933, as
amended. In that respect, the merger subsidiary is relying on Rule 145(a)(2) of
the Securities and Exchange Commission under the Securities Act of 1933, as
amended,
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which provides that a merger which has as its sole purpose a change in the
domicile of the corporation does not involve the sale of securities for purposes
of that act. Following the merger, the surviving corporation will be a
publicly-held company, its common stock will be traded and it will file with the
Commission and provide to its stockholders the same type of information that the
Company has previously filed and provided. Shareholders whose stock in the
Company is freely tradeable before the merger will continue to have freely
tradeable shares of the surviving corporation. Shareholders holding restricted
securities of the Company will be subject to the same restrictions on transfer
as those to which their present shares of stock in the Company are subject. In
summary, the surviving corporation and its stockholders will be in the same
respective positions under the federal securities laws after the merger as were
the Company and its shareholders prior to the merger.
INCREASE IN AUTHORIZED CAPITALIZATION
The Board of Directors has determined that it is in the best interests of
the Company and its shareholders to increase the authorized capitalization of
the Company following the merger. Accordingly, the certificate of incorporation
of the merger subsidiary provides for an authorized capitalization of
520,000,000 shares of common stock, par value $.10 per share, and 10,000,000
shares of preferred stock, par value $1.00 per share. The Company's current
authorized capitalization consists of 230,000,000 shares of Common Stock and
10,000,000 shares of preferred stock, par value $1.00 per share.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to increase the number of authorized but unissued
shares of common stock in order to have additional shares available to meet the
surviving corporation's future business needs as they arise. As of March 28,
2001, shares of Common Stock were issued and outstanding. In addition,
the Company has reserved approximately shares of Common Stock for
issuance pursuant to the Company's equity compensation plans and upon conversion
of the Convertible Preferred Stock.
Among other things, the proposed increase in the surviving company's
authorized capitalization will make shares available for future activities that
are consistent with the surviving corporation's business strategy, including,
without limitation, the following:
- the acquisition of or investment in complementary businesses;
- the continued provision of equity incentives to employees, officers and
directors under the surviving corporation's equity compensation plans;
- the conversion of the surviving corporation's convertible securities;
- the effectuation of stock splits, dividends and distributions; and
- the completion of financings.
There are no immediate plans to issue any of the additional authorized
shares of common stock. However, depending on its need for additional equity and
its view of the capital markets, the surviving corporation may issue some
portion of the additional authorized shares of common stock. Furthermore, in
accordance with its business strategy, the surviving corporation may make future
acquisitions and may use its common stock in such acquisitions if appropriate
opportunities arise.
If the shareholders approve the merger, the Board of Directors may cause
the issuance of the additional shares of common stock without further vote of
the surviving corporation's stockholders, except as provided under the surviving
corporation's certificate of incorporation, the DGCL, the rules of any national
securities exchange on which the shares of common stock may at such time be
listed or any other applicable laws, rules or regulations. Subject to the
differences between the TBCA and the DGCL and the charter and bylaws of the
Company and the surviving corporation set forth on Annex E to this Proxy
Statement, the additional shares of common stock would be identical to the
shares of Common Stock now authorized. Holders of Common Stock do not have
preemptive or similar rights, which means that current holders of Common Stock
do not have a prior right to purchase any new issue of common stock by the
surviving corporation to maintain their
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respective percentage ownership thereof. The issuance of additional shares of
common stock by the surviving corporation would decrease the proportionate
ownership interest of the current holders of Common Stock and, depending upon
the price paid for such additional shares, could result in dilution to such
holders. The additional shares of common stock could be used for purposes that
might be deemed to be in defense of a potential takeover threat. Such shares
could be sold to purchasers who might side with the board of directors in
opposing a takeover bid that the board of directors determines not to be in the
best interests of the surviving corporation and its stockholders. The issuance
of new shares could discourage persons seeking to gain control of the surviving
corporation in other ways as well.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REINCORPORATION PROPOSAL.
The affirmative vote of at least two-thirds of the votes entitled to be
cast in person or by proxy by holders of outstanding shares of Common Stock and
Convertible Preferred Stock, voting together as a single class, is required to
approve the reincorporation proposal. Accordingly, under the TBCA and the
Company's Bylaws, abstentions and broker non-votes have the effect of a vote
against the proposal. A broker non-vote occurs if a broker or other nominee does
not have discretionary authority and has not received instructions with respect
to a particular item.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR this proposal.
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APPROVAL OF 2001 LONG-TERM INCENTIVE PLAN
(ITEM 3 ON PROXY CARD)
The Board of Directors has approved, subject to shareholder approval, the
Company's 2001 Long-Term Incentive Plan (the "2001 Plan"). The 2001 Plan is
necessary because only 717,125 shares remain available for issuance under the
Company's other shareholder-approved stock plan, the 1999 Long-Term Incentive
Plan (the "1999 Plan"), which the Board expects to be depleted prior to the 2002
annual meeting of shareholders. Once the 1999 Plan is depleted, the Company will
no longer have a vehicle for equity grants to the Company's officers and
directors.
The following summary is qualified in its entirety by reference to the text
of the 2001 Plan, which is attached to this Proxy Statement as Annex F.
GENERAL
The Board believes strongly in aligning executive and shareholder interests
through the use of long-term stock-based incentives because they tend to
encourage achievement of superior results over time. Accordingly, the Company's
executive compensation strategy depends on highly leveraged variable
compensation, with a strong link to Company performance. By providing officers
and directors with an opportunity to acquire a proprietary interest in the
Company and additional incentive and reward opportunities based on the
profitable growth of the Company, the 2001 Plan will enable the Board to
continue to give officers and directors a strong incentive to work for the
continued success of the Company. This should result in the retention of a
highly motivated executive team. In addition, given that long-term incentives
are such an integral component of executive compensation, the 2001 Plan will be
vital to the Company's ability to attract and retain outstanding personnel.
TYPES OF AWARDS
The 2001 Plan provides for the granting of options (either incentive stock
options within the meaning of Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"), or nonqualified stock options), restricted stock
awards, stock appreciation rights, performance awards, bonus shares, phantom
shares, cash awards, or any combination thereof (collectively, "Awards").
Options. The 2001 Plan provides for two types of options: incentive stock
options and nonqualified stock options (see "Federal Tax Consequences" below).
The Company's Organization and Compensation Committee (the "Committee") will
designate the employees to receive the options, the number of shares subject to
the options, and the terms and conditions of each option granted under the 2001
Plan. An incentive stock option may only be granted to an individual who is an
employee of the Company or any parent or subsidiary corporation (within the
meaning of Section 424 of the Code). Further, if the aggregate fair market value
(determined as of the date of grant) of shares with respect to which incentive
stock options become exercisable for the first time by an employee exceeds
$100,000 in any calendar year, the options with respect to the excess shares
will be nonqualified stock options. The term of any option granted under the
2001 Plan cannot exceed ten years from the date of the grant and any incentive
stock option granted to an employee who possesses more than 10% of the total
combined voting power of all classes of stock of the Company or of its
subsidiary within the meaning of Section 422(b)(6) of the Code must not be
exercisable after the expiration of five years from the date of grant. The
exercise price per share of Common Stock of options granted under the 2001 Plan
will be determined by the Committee; provided, however, that such exercise price
cannot be less than the fair market value of a share of Common Stock on a date
the option is granted (subject to adjustments). Further, the exercise price of
any incentive stock option granted to an employee who possesses more than 10% of
the total combined voting power of all classes of stock of the Company or of its
subsidiary within the meaning of Section 422(b)(6) of the Code must be at least
110% of the fair market value of the share at the time such option is granted.
The exercise price of options granted under the 2001 Plan will be paid in full
in a manner prescribed by the Committee.
Stock Appreciation Rights. A stock appreciation right permits the employee
to receive an amount (in cash, Common Stock, or a combination thereof) equal to
the number of stock appreciation rights exercised by
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the employee multiplied by the excess of the fair market value of Common Stock
on the exercise date over the stock appreciation rights' exercise price. Stock
appreciation rights may or may not be granted in connection with the grant of an
option. The term of any stock appreciation rights granted under the 2001 Plan
cannot exceed ten years from the date of the grant. The exercise price of stock
appreciation rights granted under the 2001 Plan will be determined by the
Committee; provided, however, that such exercise price cannot be less than the
fair market value of a share of Common Stock on a date the stock appreciation
right is granted (subject to adjustments). A stock appreciation right may be
exercised in whole or in such installments and at such times as determined by
the Committee.
Restricted Stock Awards. Pursuant to a restricted stock award, shares of
Common Stock will be granted to the employee at any time the award is made
without any cash payment to the Company, except to the extent otherwise provided
by the Committee or required by law; provided, however, that such shares will be
subject to certain restrictions on the disposition thereof and certain
obligations to forfeit such shares to the Company as may be determined in the
discretion of the Committee. The restrictions on disposition may lapse based
upon (a) the Company's attainment of specific performance targets established by
the Committee that are based on (1) the price of a share of Common Stock, (2)
net income, (3) cash flows, (4) reserve additions or revisions, (5)
acquisitions, (6) total capitalization, (7) total or comparative shareholder
return, (8) assets, (9) exploration successes, (10) production volumes, (11)
findings and developmental costs, (12) cost reductions and savings, (13)
reportable incidents in safety or environmental matters, (14) return on equity,
(15) profit margin or sales, or (16) earnings per share, (b) the number of years
the grantee remains an employee of the Company, or (c) a combination of both
factors. The performance targets may be made subject to adjustment for specified
unusual and nonrecurring events and may be absolute, relative to one or more
other companies, or relative to one or more indices. Restricted stock awards
will be evidenced in the manner determined by the Committee including, but not
limited to, book-entry registration or issuance of appropriately-legended stock
certificates. An employee may not sell, transfer, pledge, exchange, hypothecate,
or otherwise dispose of such shares until the expiration of the restriction
period.
Performance Awards. The 2001 Plan permits grants of performance awards,
which may be paid in cash, Common Stock or combination thereof as determined by
the Committee. The maximum value of performance awards granted under the 2001
Plan shall be established by the Committee at the time of the grant. An
employee's receipt of such amount will be contingent upon achievement of
performance targets during the performance period established by the Committee.
The performance targets may be absolute, relative to one or more other
companies, or relative to one or more indices. The performance targets may be
based upon the factors described above relating to restricted stock awards. The
performance targets may be made subject to adjustment for specified unusual and
nonrecurring events and may be absolute, relative to one or more other
companies, or relative to one or more indices. Following the end of the
performance period, the Committee will determine the amount payable to the
employee, not to exceed the maximum value of the incentive award, based on the
achievement of the performance targets for such performance period. Such payment
may be made in a lump sum or in installments as prescribed by the Committee. Any
payment made in shares of Common Stock will be based upon the fair market value
of the Common Stock on the payment date.
Bonus Shares. The 2001 Plan permits grants of bonus shares, which are
unrestricted shares of Common Stock delivered to the employee at the time the
Award is made without any cash payment to the Company, except to the extent
otherwise provided by the Committee or required by law.
Phantom Shares. The 2001 Plan permits grants of phantom shares, which are
rights to receive shares of Common Stock or amounts equal to the fair market
value of Common Stock or a combination thereof without any cash payment to the
Company, except to the extent otherwise provided by the Committee or required by
law. Such Awards are subject to the fulfillment of such conditions as may be
established by the Committee including, without limitation, the achievement of
performance targets based upon the factors described above relating to
restricted stock awards. The performance targets may be made subject to
adjustment for specified unusual and nonrecurring events and may be absolute,
relative to one or more other companies, or relative to one or more indices.
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Cash Awards. The 2001 Plan permits grants of cash awards, which are
specified cash payments that may or may not be granted in connection with
another Award. The amount and other terms and conditions, if any, of a cash
award will be established by the Committee.
As of March , 2001, the closing price of the Company's Common Stock as
quoted on the New York Stock Exchange was $ .
EFFECTIVE DATE
The 2001 Plan became effective on March 7, 2001, subject to shareholder
approval. The 2001 Plan will remain in effect until all Awards granted under the
2001 Plan have been satisfied or expired, unless earlier terminated; provided,
however, that no Awards may be granted under the 2001 Plan after the expiration
of ten years from the adoption date by the Board. The Board may, however,
terminate the 2001 Plan at any time without prejudice to the holders of any then
outstanding Awards.
ADMINISTRATION
The 2001 Plan will be administered by the Committee. The Committee has full
authority, subject to the terms of the 2001 Plan, to establish rules and
regulations for the proper administration of the 2001 Plan, to determine which
participants will receive an Award (other than nonqualified stock options
automatically granted to nonemployee directors of the Company ("nonemployee
directors") under the 2001 Plan), the time or times when such Award will be
made, the type of the Award and the number of shares of Common Stock to be
issued under the Award or the value or amount of the Award.
ELIGIBILITY
All employees of the Company and its affiliates (including an employee who
may also be a director of the Company) will be eligible to receive Awards under
the 2001 Plan. Further, nonemployee directors of the Company are eligible to
receive certain automatic grants of nonqualified stock options under the 2001
Plan. As of March 15, 2001, the Company and its subsidiaries had approximately
1,100 employees.
NUMBER OF SHARES SUBJECT TO THE 2001 PLAN
The aggregate number of shares that may be subject to Awards under the 2001
Plan is 4,000,000 shares of Common Stock. This limit may be adjusted by the
Committee in its sole discretion in the event of stock dividends, stock splits
and certain other events as specified in the 2001 Plan ("Adjustments"). During
the term of the 2001 Plan, no employee may be granted Awards denominated in
shares of Common Stock with respect to more than one-third of the shares of
Common Stock that may be subject to Awards under the 2001 Plan. The maximum
amount of compensation (including the fair market value of any shares of Common
Stock) that may be paid to any employee with respect to a single performance
award or cash award in any calendar year is $1.5 million. Further, the maximum
payment with respect to any cash award granted in tandem with, and expressed as
a percentage of, an Award denominated in shares of Common Stock that is intended
to qualify as "performance-based" compensation for purposes of Section 162(m) of
the Code in any calendar year is an amount (in cash and/or in shares of Common
Stock) equal to the fair market value of the number of shares of Common Stock
subject to such Award. The limitations set forth in the preceding sentences will
be applied in a manner which permits compensation generated in connection with
the exercise of options, stock appreciation rights, performance awards, and, if
determined by the Compensation Committee, restricted stock awards, phantom
shares and cash awards to constitute "performance-based" compensation for
purposes of Section 162(m) of the Code. Finally, restricted stock, performance
awards, phantom shares and bonus shares paid in shares of Common Stock may not,
in the aggregate, exceed 50% of all shares of Common Stock that may be subject
to Awards under the 2001 Plan. If an Award lapses or the rights of a participant
in an Award terminate, any shares of Common Stock subject to the Award will
again be available for grant under the 2001 Plan. Any shares of Common Stock
that remain unissued and are not subject to outstanding Awards at the
termination of the 2001 Plan will cease to be subject to the 2001 Plan.
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CHANGE IN CONTROL
The 2001 Plan provides that, upon a Change in Control (as defined therein),
all outstanding Awards granted automatically become fully vested, any
restrictions with respect to such Awards lapse and any performance goals with
respect to such Awards are deemed to have been met in full (at the maximum
performance level).
ACQUISITIONS
Options may be granted in substitution for options held by officers and
employees of other corporations who are about to, or who have, become employees
of the Company or an affiliate as a result of a merger, consolidation,
acquisition of assets, or similar transaction by the Company or an affiliate.
The terms, including the option price, of the substitute options so granted may
vary from the terms set forth in the 2001 Plan to such extent as the Committee
may deem appropriate to conform, in whole or in part, to the provisions of the
options in substitution for which they are granted.
AMENDMENTS
The Board may from time to time amend the 2001 Plan. However, without the
approval of the Company's shareholders, the Board may not adopt any amendment
that modifies the class of eligible participants, modifies the eligibility
requirements for Awards under the 2001 Plan, increases the number of shares of
Common Stock authorized or available under the 2001 Plan (subject to
adjustments), or amends or deletes the provision prohibiting the Committee from
amending an outstanding option to lower the exercise price and from canceling
and replacing an outstanding option with an option having a lower exercise price
without the approval of the Company's shareholders.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Options that constitute incentive stock options
within the meaning of Section 422(b) of the Code are subject to special federal
income tax treatment. An employee who has been granted an incentive stock option
will not realize taxable income at the time of the grant or exercise of such
option, and the Company will not be entitled to a deduction at either such time,
if the employee makes no disposition of shares acquired pursuant to such
incentive stock option (a) within two years after the option was granted or (b)
within one year after exercising such option (collectively, the "Holding
Periods"). However, the employee must include the difference between the
exercise price and the fair market value of the Common Stock on the date of
exercise in alternative minimum taxable income. If the employee exercises an
incentive stock option and disposes of the stock in the same year and the amount
realized is less than the fair market value on the exercise date, only the
difference between the amount realized and the adjusted basis of the stock will
be included in alternative minimum taxable income. Upon disposition of the
shares of Common Stock received upon exercise of an incentive stock option after
the Holding Periods, the difference between the amount realized and the exercise
price should constitute a long-term capital gain or loss. Under such
circumstances, however, the Company will not be entitled to any deduction for
federal income tax purposes.
If an employee disposes of shares acquired pursuant to the exercise of an
incentive stock option prior to the end of the Holding Periods, the disposition
would be treated as a disqualifying disposition. The employee will be treated as
having received, at the time of disposition, compensation taxable as ordinary
income equal to the excess of the fair market value of the shares at the time of
exercise (or in the case of a sale in which a loss would be recognized, the
amount realized on the sale, if less) over the exercise price and any amount
realized in excess of the fair market value of the shares at the time of
exercise would be treated as a short-term or long-term capital gain, depending
on the holding period of the shares of Common Stock. In the event of a
disqualifying disposition, and subject to the application of Section 162(m) of
the Code as discussed below, the Company may claim a deduction for compensation
paid at the same time and in the same amount as taxable compensation is treated
as received by the employee. However, the Company will not be entitled to any
deduction in connection with any loss to the employee or a portion of any gain
that is taxable to the employee as short-term or long-term capital gain.
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Nonqualified Stock Options. Nonqualified stock options (options that are
not incentive stock options within the meaning of Section 422(b) of the Code)
will not qualify for special federal income tax treatment. As a general rule, no
federal income tax is imposed on the optionee upon the grant of a nonqualified
stock option and the Company is not entitled to a tax deduction by reason of
such grant. Upon exercise of a nonqualified stock option, the optionee will
realize ordinary income in an amount equal to the excess, if any, of the fair
market value of the shares on the date of exercise over the option exercise
price, and, subject to the application of Section 162(m) of the Code as
discussed below, the Company will be entitled to a corresponding deduction
assuming any federal income tax reporting requirements are satisfied. Ordinary
income realized upon the exercise of a nonqualified stock option is not an
adjustment for alternative minimum tax purposes. In the case of an option holder
subject to Section 16(b) of the Exchange Act, subject to certain exceptions,
ordinary income will be recognized by the optionee (and, subject to the
application of Section 162(m) of the Code, and assuming any federal income tax
reporting requirements are satisfied, a deduction by the Company) upon the
exercise of the nonqualified stock option if the exercise occurs more than six
months after the date of grant of the nonqualified stock option. Upon a
subsequent disposition of shares received upon exercise of a nonqualified stock
option, the optionee will realize a short-term or long-term capital gain or loss
to the extent of any intervening appreciation or depreciation. However, the
Company will not be entitled to any further deduction at that time.
Section 162(m) of the Code. Section 162(m) of the Code precludes a public
corporation from taking a deduction for annual compensation in excess of $1
million paid to its chief executive officer or any of its four other
highest-paid officers. However, compensation that qualifies under Section 162(m)
of the Code as "performance-based" is specifically exempt from the deduction
limit. Based on Section 162(m) of the Code and the regulations thereunder, the
Company's ability to deduct compensation income generated in connection with the
exercise of stock options or stock appreciation rights granted under the 2001
Plan should not be limited by Section 162(m) of the Code. Further, the Company
believes that compensation income generated in connection with performance
awards granted under the 2001 Plan should not be limited by Section 162(m) of
the Code. The 2001 Plan has been designed to provide flexibility with respect to
whether restricted stock awards, phantom shares or certain cash awards will
qualify as performance-based compensation under Section 162(m) of the Code and,
therefore, be exempt from the deduction limit. If the forfeiture restrictions
relating to a such awards are based solely upon the satisfaction of one of the
performance goals set forth in the 2001 Plan, then the Company believes that the
compensation expense relating to such an award will be deductible by the Company
if the awards become vested. However, compensation expense deductions relating
to such awards will be subject to the Section 162(m) deduction limitation if
such awards become vested based upon any other criteria set forth in such award
(such as the occurrence of a Change in Control or vesting based upon continued
employment with the Company).
Withholding. The Company has the right to deduct from any or all awards
any taxes required by law to be withheld and to require any payments necessary
to enable it to satisfy its withholding obligations.
The 2001 Plan is not qualified under section 401(a) of the Code.
The comments set forth in the above paragraphs are only a summary of
certain of the Federal income tax consequences relating to the 2001 Plan. No
consideration has been given to the effects of state, local, or other tax laws
on the 2001 Plan or Award recipients.
INAPPLICABILITY OF ERISA
Based upon current law and published interpretations, the Company does not
believe the 2001 Plan is subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
INITIAL GRANTS
The awards to be received by participants under the 2001 Plan are not
currently determinable.
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THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE 2001 PLAN.
Approval of the 2001 Plan requires the affirmative vote of a majority of
the votes entitled to be cast by holders of shares of Common Stock and
Convertible Preferred Stock, voting together as a class, who are represented in
person or by proxy at the Annual Meeting. Under the TBCA and the Company's
Bylaws, an abstention or a broker non-vote would have the same legal effect as a
vote against this proposal. A broker non-vote occurs if a broker or other
nominee does not have discretionary authority and has not received instructions
with respect to a particular item.
Shareholder approval of the 2001 Plan is required for listing of the shares
for trading on the New York Stock Exchange and as a condition to the
effectiveness of the 2001 Stock Plan. Shareholder approval is also required so
that incentive stock options under the 2001 Plan will qualify under Section 422
of the Code and so that certain awards under the 2001 Plan will qualify as
performance-based compensation under Section 162(m) of the Code.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the 2001 Plan.
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APPROVAL OF 2001 EMPLOYEE STOCK PURCHASE PLAN
(ITEM 4 ON PROXY CARD)
GENERAL
The Board of Directors adopted the Ocean Energy, Inc. 2001 Employee Stock
Purchase Plan (the "Purchase Plan") on September 13, 2000, subject to approval
by the shareholders of the Company. The purpose of the Purchase Plan is to
provide an incentive to employees of the Company and certain of its subsidiaries
to acquire or increase their respective ownership interest in the Company
through the purchase of shares of Common Stock.
SUMMARY OF PURCHASE PLAN
The following general description of certain features of the Purchase Plan
is qualified in its entirety by reference to the Purchase Plan, which is
attached as Annex G.
Shares Available under the Purchase Plan; Adjustments. Subject to
adjustment as provided in the Purchase Plan, the number of shares of Common
Stock that may be purchased by participating employees under the Purchase Plan
will not in the aggregate exceed 1,500,000 shares, which may be originally
issued or reacquired shares, including shares bought on the market or otherwise
for purposes of the Purchase Plan. Such number of shares is subject to
adjustment in the event of a change in the Common Stock by reason of a stock
dividend or by reason of a subdivision, stock split, reverse stock split,
recapitalization, reorganization, combination, reclassification of shares or
other similar change. Upon any such event, the maximum number of shares that may
be subject to any option, and the number and purchase price of shares subject to
options outstanding under the Purchase Plan, will also be adjusted accordingly.
Eligibility. Subject to shareholder approval, options under the Purchase
Plan will be granted as of January 1, 2001, and, thereafter through December 31,
2010, on the first day of each successive July and January (each such date being
referred to herein as a "Date of Grant"). Each employee of the Company or any
present or future parent or subsidiary corporation of the Company that has been
designated as a "Participating Company" from time to time by the Plan
administrative committee as of a Date of Grant is eligible to participate in the
Purchase Plan as of such Date of Grant if such employee is regularly scheduled
to work more than 20 hours per week and more than five calendar months in any
calendar year. However, an eligible employee may not participate if such
employee would own (directly or indirectly) 5% or more of the total combined
voting power of all classes of stock of the Company or a subsidiary, taking into
account options to purchase stock and stock that may be purchased under the
Purchase Plan. At the present time, no employee of the Company or a
Participating Company would be prevented from participating by reason of this
limitation. Approximately 750 employees were eligible to participate in the
Purchase Plan as of January 1, 2001.
Participation. An eligible employee may elect to participate in the
Purchase Plan for any six-month period beginning on a Date of Grant (the "Option
Period") by designating an integral percentage of such employee's eligible
compensation to be deducted for each pay period and paid into the Purchase Plan
for such employee's account. The designated percentage may not be less than 1%
nor more than 15%. An eligible employee may participate in the Purchase Plan
only by means of payroll deduction. A participant who elects to participate in
the Purchase Plan and who takes no action to change or revoke such election
prior to any subsequent Date of Grant will be deemed to have made the same
election for such next following and/or subsequent Date(s) of Grant.
No employee will be granted an option under the Purchase Plan that permits
such employee's rights to purchase Common Stock to accrue at a rate that exceeds
$25,000 of fair market value of such stock (determined at the time such option
is granted) for the calendar year in which such option is outstanding. Unless an
employee's payroll deductions are withdrawn (as described below), the aggregate
payroll deductions credited to the employee's account will be used to purchase
whole shares of Common Stock at the end of the Option Period; provided, however,
that the maximum number of shares of Common Stock that may be purchased by a
participant during any Option Period may not exceed 3,200 (subject to adjustment
in the event
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of a change in the Common Stock). The per share purchase price of the Common
Stock will be 85% of the lesser of the fair market value of the Common Stock on
the Date of Grant or on the last day of the Option Period (the "Date of
Exercise"). For all purposes under the Purchase Plan, the fair market value of a
share of Common Stock on a particular date shall be equal to the closing price
of such stock on the New York Stock Exchange on that date (or, if no shares of
Common Stock have been traded on that date, on the next regular business date on
which shares of the Common Stock are so traded). Any payroll deductions
representing a fractional share of Common Stock will be applied to the next
Option Period as if the participant had contributed such amounts by payroll
deduction during such Option Period. If the total number of shares of Common
Stock for which options are exercised on any Date of Exercise exceeds the
maximum number of shares available under the Purchase Plan, the Company will
make a pro rata allocation of the shares of the Common Stock available and will
refund the balance of each participant's unused payroll deductions.
Payroll deductions will be included in the general funds of the Company,
free of any trust or other arrangement and may be used for any corporate
purpose. No interest will be paid or credited to any participant.
Changes in and Withdrawal of Payroll Deductions. A participant may reduce
the rate of his or her payroll deductions to a specific percentage (not less
than 1%) during an Option Period, but such reduction will be irrevocable for the
remainder of the Option Period. Further, a participant may withdraw in whole
from the Purchase Plan, but not in part, at any time prior to the Date of
Exercise relating to a particular Option Period by timely delivering to the
Company a notice of withdrawal in the manner specified by the Company. The
Company promptly will refund to the participant the amount of the participant's
payroll deductions under the Purchase Plan that have not been otherwise returned
or used upon exercise of options, and thereafter the participant's payroll
deduction authorization and interest in unexercised options under the Purchase
Plan will terminate.
Delivery of Shares. As soon as practicable after each Date of Exercise,
the Company will deliver to a custodian (currently Deutsche Bank Alex Brown) one
or more certificates representing (or shall otherwise cause to be credited to
the account of such custodian) the total number of whole shares of Common Stock
respecting options exercised on such Date of Exercise in the aggregate of all of
the participating employees under the Purchase Plan. Such custodian will keep
accurate records of the beneficial interests of each participant in such shares
by means of participant accounts under the Purchase Plan, and will provide each
participant with semi-annual or such other periodic statements with respect
thereto as the administrative committee under the Purchase Plan may specify.
Termination of Employment; Leaves of Absence. Except as described below,
if the employment of a participant terminates for any reason, then the
participant's participation in the Purchase Plan ceases and the Company will
refund the amount of such participant's payroll deductions under the Purchase
Plan that have not yet been otherwise returned or used upon exercise of options.
If the employment of a participant terminates after such participant has
attained age 65 or due to death or disability, the participant, or the
participant's personal representative, as applicable, may elect either to (i)
withdraw all of the accumulated unused payroll deductions credited to the
participant's account or (ii) exercise the participant's option for the purchase
of Common Stock as of the date the participant's employment terminated, which
will be the Date of Exercise for purposes of such exercise. If no such election
is timely received by the Company, the participant or personal representative
will automatically be deemed to have elected the first alternative.
During a paid leave of absence approved by the Company and meeting Internal
Revenue Service regulations, a participant's elected payroll deductions will
continue. A participant may not contribute to the Purchase Plan during an unpaid
leave of absence. If a participant takes an unpaid leave of absence that is
approved by the Company and meets Internal Revenue Service regulations, then
such participant's payroll deductions for such Option Period that were made
prior to such leave may remain in the Purchase Plan and be used to purchase
Common Stock on the Date of Exercise relating to such Option Period. If a
participant takes a leave of absence not described above, then the participant
will be considered to have withdrawn from the Purchase Plan.
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Restriction Upon Assignment of Option. An option granted under the
Purchase Plan may not be transferred other than by will or the laws of descent
and distribution. Subject to certain limited exceptions, each option is
exercisable, during the employee's lifetime, only by the employee to whom
granted.
Administration, Amendments and Termination. The Purchase Plan is to be
administered by the Organization & Compensation Committee of the Company's Board
of Directors and its delegates. In connection with its administration of the
Purchase Plan, the Organization and Compensation Committee is authorized to
interpret the Purchase Plan.
The Purchase Plan may be amended from time to time by the Board; provided,
however, that no change in any option theretofore granted may be made that would
impair the rights of a participant without the consent of such participant. The
Board may in its discretion terminate the Purchase Plan at any time with respect
to any Common Stock for which options have not theretofore been granted.
The benefits and amounts to be received by any participant under the
Purchase Plan are not currently determinable.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN OF THE U.S. FEDERAL INCOME TAX
CONSEQUENCES OF CERTAIN TRANSACTIONS UNDER THE PURCHASE PLAN BASED ON FEDERAL
INCOME TAX LAWS CURRENTLY IN EFFECT. THIS SUMMARY APPLIES TO THE PURCHASE PLAN
AS NORMALLY OPERATED AND IS NOT INTENDED TO PROVIDE OR SUPPLEMENT TAX ADVICE TO
ELIGIBLE EMPLOYEES. THE SUMMARY CONTAINS GENERAL STATEMENTS BASED ON CURRENT
U.S. FEDERAL INCOME TAX STATUTES, REGULATIONS AND CURRENTLY AVAILABLE
INTERPRETATIONS THEREOF. THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE AND DOES
NOT DESCRIBE STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OR THE EFFECT, IF ANY, OF
GIFT, ESTATE AND INHERITANCE TAXES. THE PURCHASE PLAN IS NOT QUALIFIED UNDER
SECTION 401(A) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
Tax Consequences to Participants. A participant's payroll deductions to
purchase Common Stock are made on an after-tax basis. There is no tax liability
to the participant when shares of Common Stock are purchased pursuant to the
Purchase Plan. However, the participant may incur tax liability upon disposition
(including by way of gift) of the shares acquired under the Purchase Plan. The
participant's U.S. federal income tax liability will depend on whether the
disposition is a qualifying disposition or a disqualifying disposition as
described below.
If a qualifying disposition of the shares is made by the participant (i.e.,
a disposition that occurs more than two years after the first day of the Option
Period in which the shares were purchased), or in the event of death (whenever
occurring) while owning the shares, the participant will recognize in the year
of disposition (or, if earlier, the year of the participant's death) ordinary
income in an amount equal to the lesser of (i) the excess of the fair market
value of the shares at the time of disposition (or death) over the amount paid
for the shares under the option or (ii) 15% of the fair market value of the
shares at the Date of Grant (the beginning of the Option Period). Upon the sale
of the shares, any amount realized in excess of the ordinary income recognized
by the participant will be taxed to the participant as a long-term capital gain.
If the shares are sold at less than the purchase price under the option, then
there will be no ordinary income. Instead, the participant will have a capital
loss equal to the difference between the sales price and the purchase price paid
under the option.
If a disqualifying disposition of the shares is made (i.e., a disposition
(other than by reason of death) within two years after the first day of the
Option Period in which the shares were purchased), the participant generally
will recognize ordinary income in the year of disposition in an amount equal to
any excess of the fair market value of the shares at the Date of Exercise over
the purchase price paid for the shares under the option (even if no gain is
realized on the sale or if a gratuitous transfer is made). Any further gain (or
loss) realized by the participant generally will be taxed as short-term or
long-term capital gain (or loss) depending on the holding period.
Tax Consequences to the Company or Participating Company. The Company, or
the Participating Company for which a participant performs services, will be
entitled to a deduction only if the participant
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makes a disqualifying disposition of any shares purchased under the Purchase
Plan. In such case, the Company or such Participating Company can deduct as a
compensation expense the amount that is ordinary income to the participant
provided that, among other things, (i) the amount meets the test of
reasonableness, is an ordinary and necessary business expense and is not an
"excess parachute payment" within the meaning of Section 280G of the Code, (ii)
any applicable reporting obligations are satisfied and (iii) the one million
dollar limitation of Section 162(m) of the Code is not exceeded.
INITIAL GRANTS
The awards to be received by participants under the Purchase Plan are not
currently determinable.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE PURCHASE PLAN.
Approval of the Purchase Plan requires the affirmative vote of a majority
of the votes entitled to be cast by holders of shares of Common Stock and
Convertible Preferred Stock, voting together as a class, who are represented in
person or by proxy at the Annual Meeting. Under the TBCA and the Company's
Bylaws, an abstention or a broker non-vote would have the same legal effect as a
vote against this proposal. A broker non-vote occurs if a broker or other
nominee does not have discretionary authority and has not received instructions
with respect to a particular item.
Shareholder approval of the Purchase Plan is required for listing of the
shares for trading on the New York Stock Exchange and as a condition to the
effectiveness of the Purchase Plan. Shareholder approval is also required so
that incentive stock options under the Purchase Plan will qualify under Section
422 of the Code and so that certain awards under the Purchase Plan will qualify
as performance-based compensation under Section 162(m) of the Code.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the Purchase Plan.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 5 ON PROXY CARD)
The Board of Directors has appointed the firm of KPMG LLP as independent
auditors of the Company for the fiscal year ending December 31, 2001, and
recommends ratification by the shareholders of such appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
Ratification of the appointment of independent auditors requires the
affirmative vote of a majority of the votes entitled to be cast by holders of
shares of Common Stock and Convertible Preferred Stock, voting together as a
class, who are represented in person or by proxy at the Annual Meeting. Under
the TBCA and the Company's Bylaws, an abstention or a broker non-vote would have
the same legal effect as a vote against this proposal. A broker non-vote occurs
if a broker or other nominee does not have discretionary authority and has not
received instructions with respect to a particular item.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the appointment of KPMG LLP as independent
auditors.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. The Board of Directors
may terminate the appointment of KPMG LLP as the Company's independent auditors
without the approval of the shareholders of the Company whenever the Board of
Directors deems such termination necessary or appropriate. A representative of
KPMG LLP is expected to attend the Annual Meeting and will have the opportunity
to make a statement, if such representative desires to do so, and will be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders may propose matters to be presented at shareholders' meetings
and may also nominate persons for election as directors. Formal procedures exist
for such proposals and nominations. The following discussion assumes that the
proposal relating to the Company's reincorporation from Texas to Delaware has
been approved by the shareholders of the Company.
Any stockholder desiring to present a proposal for inclusion in the
Company's proxy materials for the annual meeting of shareholders to be held in
2002 ("the 2002 Annual Meeting") must present the proposal to the Secretary of
the Company not later than December 28, 2001. Only those proposals that comply
with the requirements of Rule 14a-8 promulgated under the Securities Exchange
Act of 1934, as amended, will be included in the Company's proxy materials for
the 2002 Annual Meeting. Written notice of stockholder proposals submitted
outside the process of Rule 14a-8 for consideration at the 2002 Annual Meeting
(but not included in the Company's proxy materials) must be delivered in writing
to the Secretary of the Company between January 9, 2002 and February 8, 2002 in
order to be considered timely, subject to compliance with any other applicable
provisions of the Company's bylaws. The chairman of the meeting may determine
that any proposal for which the Company did not receive timely notice shall not
be considered at the meeting. If in the discretion of such chairman any such
proposal is to be considered at the meeting, the persons designated in the
Company's proxy materials shall be granted discretionary authority with respect
to the untimely stockholder proposal.
The Board of Directors will consider any nominee recommended by
shareholders for election at the 2002 Annual Meeting if that nomination is
delivered in writing to the Secretary of the Company between January 9, 2002 and
February 8, 2002, subject to compliance with any other provisions of the
Company's bylaws.
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OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) or postponement(s)
thereof, it is intended that the enclosed proxy will be voted in accordance with
the judgment of the persons named in the proxy.
By Order of the Board of Directors,
Robert K. Reeves
Secretary
April 3, 2001
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ANNEX A
OCEAN ENERGY, INC.
AUDIT COMMITTEE CHARTER
COMPOSITION:
Annually, the Board of Directors shall appoint an Audit Committee (the
"Committee") comprised of at least three non-employee members, one of whom shall
be designated by the Board to be Chairperson. The members of the Audit Committee
shall meet the independence and experience requirements of the New York Stock
Exchange. The members of the Audit Committee shall be appointed by the Board on
the recommendation of the Nominating Committee.
MEETINGS:
The Committee shall hold at least three regular meetings a year, and any
additional meetings that may be requested by a Committee member, the Board of
Directors, the Chief Executive Officer or the independent auditors. In addition
to Committee members, meetings shall normally be attended by the Chief Financial
Officer and the senior internal auditing executive of the Corporation. As
appropriate, representatives of the independent auditors will also attend. Other
officers and employees of the corporation may be asked to attend at the Audit
Committee's discretion. The Secretary or an Assistant Secretary of the
Corporation shall attend the regular meetings of the Committee to record the
minutes thereof. For a portion of each meeting, the voting members of the
Committee shall meet separately with the independent auditors and with the
Auditor. Non-members may be excused from any meeting, or portion of any meeting,
of the Committee upon the request of the Committee Chairperson.
RESPONSIBILITIES:
The purpose of the Audit Committee is to assist the Board of Directors in
fulfilling the Board's fiduciary responsibilities to the extent that such
responsibilities relate to (a) accounting policies, (b) internal controls, (c)
the quality and integrity of the financial reports of the Corporation and its
subsidiaries, and (d) the independence and performance of the Corporation's
independent auditors.
In carrying out its responsibilities, the Audit Committee shall:
1. Oversee the selection process for, and recommend to the Board of
Directors, the hiring, and if necessary the termination, of the
Corporation's independent auditors.
2. Discuss with management and review with the independent auditors,
prior to their audit, the scope of the independent auditor's examination,
and the compensation of the independent auditors. Review annually the
anticipated level of non-audit services to be provided by the independent
auditors and the estimated fees for the work to be performed. Consider the
possible effect, if any, of these services or any other relationships to
the Corporation on the independence of the independent auditors. Review
with the independent auditors the areas of emphasis of the audit process
and the results of any peer review of their auditing firm.
3. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could
significantly affect the Corporation's financial statements.
4. Review an analysis, prepared by management and the independent
auditor, of significant financial reporting issues and judgments made in
connection with the preparation of the Corporation's financial statements.
5. Review the Corporation's quarterly financial statements with
management and the independent auditor prior to the release of quarterly
earnings.
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6. Oversee the internal audit function of the Corporation including
(a) review and appointment of the senior internal auditing executive, (b)
the planned scope of the internal audit work, (c) findings of the internal
auditors and related management actions, (d) the adequacy of the staffing
of the internal audit function, (e) the adequacy and effectiveness of the
internal accounting controls of the Corporation and compliance with the
Foreign Corrupt Practices Act, and (f) the adequacy of the Corporation's
electronic data processing procedures and controls and related security
programs. Review the independent auditors' letter to management, and other
comments, if any, regarding the Corporation's system of internal accounting
controls and review any management response thereto.
7. Review changes in accounting principles and reporting standards
that have, or may in the future have, a significant impact on the financial
statements of the Corporation and its subsidiaries; and review with
management any circumstances in which management is seeking a second
opinion on a significant accounting issue from another independent public
accounting firm.
8. Meet periodically with management to review the Corporation's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
9. Obtain from the independent auditor assurance that Section 10A of
the Private Securities Litigation Reform Act of 1995 has not been
implicated.
10. Issue the report required by the rules of the Securities and
Exchange Commission to be included in the Corporation's annual proxy
statement.
11. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations and
with the Corporation's Business Conduct Policy.
12. Review such other matters as the Committee shall determine from
time to time, within the scope of its responsibilities, and make such
recommendations to the Board with respect thereto as the Committee deems
appropriate.
13. On at least an annual basis, review with the Corporation's General
Counsel, any legal matters that could have a significant impact on the
organization's financial statements, the Corporation's compliance with
applicable laws and regulations, and inquiries received from regulators or
governmental agencies.
14. Maintain minutes of meetings and periodically report to the Board
of Directors on significant results of the foregoing activities.
15. Consider the independent auditors' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in
its financial reporting.
While the Audit Committee has the oversight responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditor or
to assure compliance with laws and regulations and the Corporation's Business
Conduct Policy.
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ANNEX B
CERTIFICATE OF INCORPORATION
OCEAN ENERGY, INC. (DELAWARE)
ARTICLE I
NAME
The name of the corporation is Ocean Energy, Inc. (the "Corporation").
ARTICLE II
REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801. The name of the registered agent of the Corporation at such address is
The Corporation Trust Company.
ARTICLE III
PURPOSE
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful business, act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE IV
CAPITAL STOCK
The total number of shares of capital stock which the Corporation shall
have authority to issue is 530,000,000 shares, consisting of 10,000,000 shares
of Preferred Stock of the par value of $1.00 per share and 520,000,000 shares of
Common Stock of the par value of $.10 per share.
The following is a statement fixing certain of the designations and powers,
voting powers, preferences, and relative, participating, optional or other
rights of the Preferred Stock and the Common Stock of the Corporation, and the
qualifications, limitations or restrictions thereof, and the authority with
respect thereto expressly granted to the Board of Directors of the Corporation
to fix any such provisions not fixed by this Certificate of Incorporation:
A. PREFERRED STOCK
The Board of Directors is hereby expressly vested with the authority to
adopt a resolution or resolutions providing for the issuance of authorized but
unissued shares of Preferred Stock, which shares may be issued from time to time
in one or more series and in such amounts as may be determined by the Board of
Directors in such resolution or resolutions. The powers, voting powers,
designations, preferences, and relative, participating, optional or other
rights, if any, of each series of Preferred Stock and the qualifications,
limitations or restrictions, if any, of such powers, preferences and/or rights
(collectively the "Series Terms"), shall be such as are stated and expressed in
a resolution or resolutions providing for the creation or revision of such
Series Terms (a "Preferred Stock Series Resolution") adopted by the Board of
Directors (or a committee of the Board of Directors to which such responsibility
is specifically and lawfully delegated). The
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powers of the Board with respect to the Series Terms of a particular series
shall include, but not be limited to, determination of the following:
(i) The number of shares constituting that series and the distinctive
designation of that series, or any increase or decrease (but not below the
number of shares thereof then outstanding) in such number;
(ii) The dividend rate or method of determining dividends on the
shares of that series, any conditions upon which such dividends shall be
payable, and the date or dates or the method for determining the date or
dates upon which such dividends shall be payable, whether such dividends,
if any, shall be cumulative, and, if so, the date or dates from which
dividends payable on such shares shall accumulate, and the relative rights
of priority, if any, of payment of dividends on shares of that series;
(iii) The voting rights and powers, if any, of the holders of any
series of Preferred Stock generally or with respect to any particular
matter, which may be less than, equal to or greater than one vote per
share, and which may, without limiting the generality of any other series
of Preferred Stock or all series of Preferred Stock as a class, to elect
one or more directors of the Corporation generally or under such specific
circumstances and on such conditions, as shall be provided in the
resolution or resolutions of the Board of Directors (or such committee of
the Board of Directors, as the case may be) adopted pursuant hereto,
including, without limitation, in the event there shall have been a default
in the payment of dividends on or redemption of any one or more series of
Preferred Stock;
(iv) Whether that series shall have conversion or exchange privileges
with respect to shares of any other class or classes of stock or of any
other series of any class of stock, and, if so, the terms and conditions of
such conversion or exchange, including provision for adjustment of the
conversion or exchange rate upon occurrence of such events as the Board of
Directors shall determine;
(v) Whether the shares of that series shall be redeemable, and, if so,
the price or prices and the terms and conditions of such redemption,
including their relative rights of priority, if any, of redemption, the
date or dates upon or after which they shall be redeemable, provisions
regarding redemption notices, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at
different redemption dates;
(vi) Whether that series shall have a sinking fund for the redemption
or repurchase of shares of that series, and, if so, the terms, conditions
and amount of such sinking fund;
(vii) The rights, if any, of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution, or winding up of the
Corporation or in the event of any merger or consolidation of or sale of
assets by the Corporation, and the relative rights of priority, if any, of
payment of shares of that series;
(viii) The conditions or restrictions upon the creation of
indebtedness of the Corporation or upon the issuance of additional
Preferred Stock or other capital stock ranking on a parity therewith, or
prior thereto, with respect to dividends or distribution of assets upon
liquidation;
(ix) The conditions or restrictions with respect to the issuance of,
payment of dividends upon, or the making of other distributions to, or the
acquisition or redemption of, shares ranking junior to the Preferred Stock
or to any series thereof with respect to dividends or distribution of
assets upon liquidation; and
(x) Any other designations, powers, preferences, and relative,
participating, optional or other rights, including, without limitation, any
qualifications, limitations, or restrictions thereof.
Subject to the provisions of this Article IV, shares of one or more series
of Preferred Stock may be authorized or issued from time to time as shall be
determined by and for such consideration as shall be fixed by the Board of
Directors (or a designated committee thereof), in an aggregate amount not
exceeding the total number of shares of Preferred Stock authorized by this
Certificate of Incorporation. The number of authorized shares of Preferred Stock
may be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock,
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without a vote of the holders of the Preferred Stock, or of any series thereof,
unless a vote of any such holder is required pursuant to any Preferred Stock
Series Resolution. Except as required by law, holders of Preferred Stock shall
not be entitled to receive notice of any meeting of stockholders at which they
are not entitled to vote. Except in respect of series particulars fixed by the
Board of Directors as permitted hereby, all shares of Preferred Stock shall be
of equal rank and shall be identical. All shares of any one series of Preferred
Stock so designated by the Board of Directors shall be alike in every
particular, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall be cumulative.
B. COMMON STOCK
(i) Subject to the provisions of any Preferred Stock Series
Resolution, the Board of Directors may, in its discretion, out of funds
legally available for the payment of dividends and at such times and in
such manner as determined by the Board of Directors, declare and pay
dividends on the Common Stock of the Corporation.
(ii) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment or provision
for payment of the debts and other liabilities of the Corporation and
payment or setting aside for payment of any preferential amount due to the
holders of any other class or series of stock, the holders of the Common
Stock shall be entitled to receive ratably any or all assets remaining to
be paid or distributed.
(iii) Subject to any special voting rights set forth in any Preferred
Stock Series Resolution, the holders of the Common Stock of the Corporation
shall be entitled at all meetings of stockholders to one vote for each
share of such stock held by them. Except as may be provided in a Preferred
Stock Series Resolution, the Common Stock shall have the exclusive right to
vote for the election of directors and for all other purposes.
C. NO PREEMPTIVE RIGHTS
No holder of shares of stock of the Corporation shall have any preemptive
or other rights, except as such rights are expressly provided by contract, to
purchase or subscribe for or receive any shares of any class, or series thereof,
of stock of the Corporation, whether now or hereafter authorized, or any
warrants, options, bonds, debentures or other securities convertible into,
exchangeable for or carrying any right to purchase any shares of any class, or
series thereof, of stock; but such additional shares of stock and such warrants,
options, bonds, debentures or other securities convertible into, exchangeable
for or carrying any right to purchase any shares of any class, or series
thereof, of stock may be issued or disposed of by the Board of Directors to such
persons, and on such terms and for such lawful consideration, as in its
discretion it shall deem advisable or as to which the Corporation shall have by
binding contract agreed.
D. REGISTERED OWNER
The Corporation shall be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the Corporation shall have
notice thereof, except as expressly provided by applicable law.
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ARTICLE V
BOARD OF DIRECTORS
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
The number, classification, and terms of the Board of Directors of the
Corporation and the procedures to elect directors, to remove directors, and to
fill vacancies in the Board of Directors shall be as follows:
(i) Subject to the rights of holders of any series of Preferred Stock
to elect additional directors under specified circumstances, the number of
directors that shall constitute the whole Board of Directors shall from
time to time be fixed exclusively by the Board of Directors by a resolution
adopted by a majority of the whole Board of Directors serving at the time
of that vote. In no event shall the number of directors that constitute the
whole Board of Directors be fewer than three. No decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Directors of the Corporation need not be elected by written
ballot unless the Bylaws of the Corporation otherwise provide.
(ii) The Board of Directors of the Corporation shall be divided into
three classes designated Class I, Class II, and Class III, respectively,
all as nearly equal in number as possible. The initial term of office of
directors of Class I shall expire at the annual meeting of stockholders of
the Corporation in 2002, of Class II shall expire at the annual meeting of
stockholders of the Corporation in 2003, and of Class III shall expire at
the annual meeting of stockholders of the Corporation in 2004, or, in all
cases, as to each director until his successor is elected and qualified or
until his earlier death, resignation or removal. At each annual meeting of
stockholders beginning with the annual meeting of stockholders in 2002,
each director elected to succeed a director whose term is then expiring
shall hold his office until the third annual meeting of stockholders after
his election and until his successor is elected and qualified or until his
earlier death, resignation or removal. The directors chosen to succeed
those whose terms then expire shall be identified as being of the same
class as the directors they succeed.
(iii) Vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office, or other
cause and newly-created directorships resulting from any increase in the
authorized number of directors may only be filled by no less than a
majority vote of the remaining directors then in office, though less than a
quorum, or by the sole remaining director (but not by the stockholders
except as required by law), and each director so chosen shall receive the
classification of the vacant directorship to which he has been appointed
or, if it is a newly-created directorship, shall receive the classification
that at least a majority of the Board of Directors designates and shall
hold office until the first meeting of stockholders held after his election
for the purpose of electing directors of that classification and until his
successor is elected and qualified or until his earlier death, resignation,
or removal from office.
(iv) A director of any class of directors of the Corporation may be
removed before the expiration date of that director's term of office only
for cause, by an affirmative vote of the holders of at least two-thirds of
the votes of the outstanding shares of the class or classes or series of
stock then entitled to be voted at an election of directors of that class
or series, voting together as a single class.
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the right, voting
separately by series, to elect one or more directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of such
series of Preferred Stock, and any director so elected shall not be classified
as provided above unless expressly provided for by the Series Terms relating to
such Preferred Stock.
The provisions of this Article V may not be amended, altered, changed or
repealed, nor may any provision inconsistent with the foregoing provisions be
added to this Certificate of Incorporation, except upon the
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affirmative vote of the holders of at least two-thirds of the votes of the
outstanding shares of the class or classes or series of stock then entitled to
be voted thereon, voting together as a single class.
ARTICLE VI
STOCKHOLDER ACTION BY CONSENT
Any action required or permitted to be taken by the stockholders of the
Corporation must be taken at an annual or special meeting of such stockholders
and may not be taken by consent in lieu of a meeting of such stockholders. The
provisions of this Article VI may not be amended, altered, changed or repealed,
nor may any provision inconsistent with this Article VI be added to this
Certificate of Incorporation, except upon the affirmative vote of the holders of
at least two-thirds of the votes of the outstanding shares of the class or
classes or series of stock then entitled to be voted thereon, voting together as
a single class.
ARTICLE VII
LIMITED LIABILITY OF DIRECTORS
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty by such director
as a director, except for liability (a) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the General Corporation Law of the State of
Delaware, or (d) for any transaction from which the director derived an improper
personal benefit. Any amendment or repeal of this Article VII shall be
prospective only, and neither the amendment, modification nor repeal of this
Article VII shall eliminate or reduce the effect of this Article VII in respect
of any matter occurring, or any cause of action, suit or claim that, but for
this Article VII would accrue or arise, prior to such amendment, modification or
repeal. If the General Corporation Law of the State of Delaware hereafter is
amended to authorize corporate action further eliminating or limiting the
liability of directors, then the liability of a director of the Corporation, in
addition to the limitation on personal liability provided herein, shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended from time to time.
ARTICLE VIII
POWER TO AMEND BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Bylaws of the Corporation may be altered, amended or repealed and new Bylaws
may be adopted by the Board of Directors in accordance with the Bylaws or (ii)
the stockholders of the Corporation by an affirmative vote of the holders of at
least two-thirds of the votes of the outstanding shares of the class or classes
or series of stock then entitled to be voted thereon, voting together as a
single class. The provisions of this Article VIII may not be amended, altered,
changed or repealed, nor may any provision inconsistent with this Article VIII
be added to this Certificate of Incorporation, except upon the affirmative vote
of the holders of at least two-thirds of the votes of the outstanding shares of
the class or classes or series of stock then entitled to be voted thereon,
voting together as a single class.
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ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
Subject to the provisions of this Certificate of Incorporation and
applicable law, the Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and any other provisions authorized by the laws of
the State of Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed by law; and, all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Certificate of Incorporation in
its present form or as hereafter amended are granted subject to the right
reserved in this Article IX.
ARTICLE X
INCORPORATOR
The name and mailing address of the incorporator is Robert K. Reeves, c/o
Ocean Energy, Inc., 1001 Fannin, Suite 1600, Houston, Texas 77002.
IN WITNESS WHEREOF, I, the undersigned, being the incorporator hereinbefore
named, do hereby further certify that the facts hereinabove stated are truly set
forth and, accordingly, I have hereunto set my hand this day of ,
2001.
------------------------------------
Robert K. Reeves
Incorporator
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ANNEX C
BYLAWS
OCEAN ENERGY, INC. (DELAWARE)
DATE OF ADOPTION -- , 2001
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the Corporation
required by the state of incorporation of the Corporation to be maintained in
the state of incorporation of the Corporation shall be the registered office
named in the original charter documents of the Corporation, or such other office
as may be designated from time to time by the Board of Directors in the manner
provided by law.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places both within and without the state of incorporation of the
Corporation as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. Place of Meetings. All meetings of the stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the state of incorporation of the Corporation as shall be specified
or fixed in the notices or waivers of notice thereof.
SECTION 2. Quorum; Adjournment of Meetings. Unless otherwise required by
law, the rules or regulations of any stock exchange applicable to the
Corporation or any regulation applicable to the Corporation or its securities or
provided in the charter documents of the Corporation or these Bylaws, (i) the
holders of a majority of the voting power attributable to the stock issued and
outstanding and entitled to vote thereat, present in person or by remote
communication (if authorized by the Board of Directors), or represented by
proxy, shall constitute a quorum at any meeting of stockholders for the
transaction of business, (ii) in all matters other than election of directors,
the affirmative vote of the holders of a majority of the voting power
attributable to such stock so present or represented at any meeting of
stockholders at which a quorum is present shall constitute the act of the
stockholders, and (iii) where a separate vote by a class or classes is required,
a majority of the voting power attributable to the outstanding shares of such
class or classes, present in person or by remote communication (if authorized by
the Board of Directors), or represented by proxy shall constitute a quorum
entitled to take action with respect to that vote on that matter and the
affirmative vote of the majority of the voting power attributable to the shares
of such class or classes present in person or represented by proxy at the
meeting shall be the act of such class.
Directors shall be elected by a plurality of the votes cast at the meeting.
Notwithstanding the other provisions of the charter documents of the
Corporation or these Bylaws, the chairman of the meeting or the holders of a
majority of the voting power attributable to the issued and outstanding stock,
present in person or by remote communication, (if authorized by the Board of
Directors), or represented by proxy and entitled to vote, at any meeting of
stockholders, whether or not a quorum is present, shall have the power to
adjourn such meeting from time to time, without any notice other than
announcement at the meeting of the time and place of the holding of the
adjourned meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at such meeting. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally called.
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SECTION 3. Annual Meetings. An annual meeting of the stockholders, for the
election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place (within or without the state of incorporation of the
Corporation), or, if so determined by the Board of Directors in its sole
discretion, at no place (but rather by means of remote communication), on such
date, and at such time as the Board of Directors shall fix and set forth in the
notice of the meeting.
SECTION 4. Special Meetings. Unless otherwise provided in the charter
documents of the Corporation, special meetings of the stockholders for any
purpose or purposes may be called at any time by the Chairman of the Board, by
the President or by a majority of the Board of Directors, on such date, at such
time and at such place (within or without the state of incorporation of the
Corporation) or, if so determined by the Board of Directors in its sole
discretion, at no place (but rather by means of remote communication), as may be
stated in the notice of the meeting. Business transacted at a special meeting
shall be confined to the purpose(s) stated in the notice of such meeting.
SECTION 5. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors of the Corporation may fix a date as
the record date for any such determination of stockholders, which record date
shall not precede the date on which the resolutions fixing the record date are
adopted and which record date, in the case of a meeting of stockholders, shall
not be more than sixty (60) days nor less than ten (10) days before the date of
such meeting of stockholders, nor, in the case of any other action, more than
sixty (60) days prior to any such action.
If the Board of Directors does not fix a record date for any meeting of the
stockholders, the record date for determining stockholders entitled to notice of
or to vote at such meeting shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. If the Board of Directors does not fix the record date for determining
stockholders for any other purpose, the record date shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 6. Notice of Meetings. Notice of the place, if any, date, hour of
and the means of remote communications (if authorized by the Board of
Directors), by which stockholders and proxy holders may be deemed to be present
and vote at such meeting, and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given by or at the direction
of the Chairman of the Board, the President or the Secretary to each stockholder
entitled to vote thereat not less than ten (10) nor more than sixty (60) days
before the date of the meeting. If mailed, such notice is given when deposited
in the United States mail, postage prepaid, directed to the stockholder at such
stockholder's address as it appears on the records of the Corporation. Without
limiting the manner by which notice may otherwise be given effectively to
stockholders, any notice to stockholders may be given by electronic transmission
in the manner provided in Section 232 of the General Corporation Law of the
State of Delaware.
SECTION 7. Stockholder List. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in the name of such stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, for a
period of at least ten (10) days prior to the meeting, in the manner provided by
law. The stockholder list shall also be open to the examination of any
stockholder during the whole time of the meeting as provided by law. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by this Section 7 or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 8. Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for such stockholder
by proxy in the manner provided by law. Proxies for use
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at any meeting of stockholders shall be filed with the Secretary, or such other
officer as the Board of Directors may from time to time determine by resolution,
before or at the time of the meeting. All proxies shall be received and taken
charge of and all ballots shall be received and canvassed by the secretary of
the meeting, who shall decide all questions touching upon the qualification of
voters, the validity of the proxies, and the acceptance or rejection of votes,
unless an inspector or inspectors shall have been duly appointed as provided in
Section 9 of Article II hereof, in which event such inspector or inspectors
shall decide all such questions.
No proxy shall be valid after three (3) years from its date, unless the
proxy provides for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and only for so long as it is
coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by delivering a proxy in accordance with applicable law bearing a later
date to the Secretary, or such other officer as the Board of Directors may from
time to time determine by resolution.
Should a proxy designate two or more persons to act as proxies, unless such
instrument shall provide the contrary, a majority of such persons present at any
meeting at which their powers thereunder are to be exercised shall have and may
exercise all the powers of voting or giving consents thereby conferred, or if
only one be present, then such powers may be exercised by that one; or, if an
even number attend and a majority do not agree on any particular issue, each
person designated to act as proxy and so attending shall be entitled to exercise
such powers in respect of such portion of the shares as is equal to the
reciprocal of the fraction equal to the number of persons designated to act as
proxies and in attendance divided by the total number of shares represented by
such proxies.
SECTION 9. Voting; Elections; Inspectors. Unless otherwise required by law
or provided in the charter documents of the Corporation, each stockholder shall
on each matter submitted to a vote at a meeting of stockholders have one vote
for each of the shares of stock entitled to vote upon the matter in question
which is registered in his name on the record date for the meeting. Shares
registered in the name of another corporation, domestic or foreign, or other
legal entity may be voted by such officer, agent or proxy as the Bylaws (or
comparable instrument) of such corporation or other legal entity may prescribe,
or in the absence of such provisions, as the Board of Directors (or comparable
body) of such corporation or other legal entity may determine. Shares registered
in the name of a deceased person may be voted by the executor or administrator
of such person's estate, either in person or by proxy.
All voting, except as required by the charter documents of the Corporation
or where otherwise required by law, may be by a voice vote; provided,
however,upon request of the chairman of the meeting or upon demand therefor by
stockholders holding a majority of the issued and outstanding stock present in
person or by remote communication (if remote communication is authorized by the
Board of Directors), or by proxy at any meeting a stock vote shall be taken.
Every stock vote shall be taken by written ballots, each of which shall state
the name of the stockholder or proxy voting and such other information as may be
required under the procedure established for the meeting. All elections of
directors shall be by written ballots, unless otherwise provided in the charter
documents of the Corporation.
In advance of any meeting of stockholders, the Chairman of the Board, the
President or the Board of Directors shall appoint one or more inspectors, each
of whom shall subscribe an oath or affirmation to execute faithfully the duties
of inspector at such meeting with strict impartiality and according to the best
of such inspector's ability. Such inspector(s) shall ascertain the number of
shares outstanding and the voting power of each, determine the shares
represented at a meeting and the validity of proxies and ballots, count all
votes and ballots, determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors and
certify their determination of the number of shares represented at the meeting,
and their count of all votes and ballots. The inspectors shall take such further
action as may be required by law. The Chairman of the Board, the President or
the Board of Directors may appoint any person to serve as inspector, except no
candidate for the office of director shall be appointed as an inspector. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. In the event that no inspector so appointed or
designated is able to act at a meeting of stockholders, the chairman of the
meeting shall appoint one or more inspectors to act at the meeting.
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Unless otherwise provided in the charter documents of the Corporation,
cumulative voting for the election of directors shall be prohibited.
SECTION 10. Conduct of Meetings. The meetings of the stockholders shall be
presided over by the Chairman of the Board, or if the Chairman of the Board is
not present, by the President, or if neither the Chairman of the Board nor the
President is present, by a chairman elected at the meeting. The Secretary of the
Corporation, if present, shall act as secretary of such meetings, or if the
Secretary is not present, an Assistant Secretary shall so act; or if neither the
Secretary nor the Assistant Secretary is present, then a secretary shall be
appointed by the chairman of the meeting. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the Board of Directors, the person presiding over any meeting of
stockholders shall have the right and authority to convene and to adjourn the
meeting, to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the presiding officer of the meeting,
may include, without limitation, the following: (i) the establishment of an
agenda or order of business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iii)
limitations on attendance at or participation in the meeting to stockholders of
record of the Corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (iv) restrictions
on entry to the meeting after the time fixed for the commencement thereof; and
(v) limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the Board of Directors or the person
presiding over the meeting, meetings of stockholders shall not be required to be
held in accordance with the rules of parliamentary procedure.
SECTION 11. Treasury Stock. The Corporation shall not vote, directly or
indirectly, shares of its own stock owned by it, and such shares shall not be
counted for quorum purposes. No other corporation of which the Corporation owns
a majority of the shares entitled to vote in the election of directors of such
other corporation shall vote, directly or indirectly, shares of the
Corporation's stock owned by such other corporation, and such shares shall not
be counted for quorum purposes. Nothing in this Section 11 shall be construed as
limiting the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
SECTION 12. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual
meeting of stockholders only (a) pursuant to the Corporation's notice of
meeting (or any supplement thereto), (b) by or at the direction of the
Board of Directors or (c) by any stockholder of the Corporation who was a
stockholder of record of the Corporation at the time the notice provided
for in this Section 12 is delivered to the Secretary of the Corporation,
who is entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 12.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Section 12, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and any such
proposed business other than the nominations of persons for election to
the Board of Directors must constitute a proper matter for stockholder
action. To be timely, a stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the Corporation not
later than the close of business on the ninetieth day nor earlier than
the close of business on the one hundred twentieth day prior to the
first anniversary of the preceding year's annual meeting (provided,
however, that in the event that the date of the annual meeting is more
than thirty days before or more than seventy days after such anniversary
date, notice by the stockholder must be so delivered not earlier than
the close of business on the one hundred twentieth day prior to such
annual meeting
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and not later than the close of business on the later of the ninetieth
day prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made by
the Corporation). For purposes of the first annual meeting of
stockholders of the Corporation held after 2001, the first anniversary
of the 2001 annual meeting shall be deemed to be May 9, 2002. In no
event shall the public announcement of an adjournment or postponement of
an annual meeting commence a new time period (or extend any time period)
for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth: (a) as to each person whom the
stockholder proposes to nominate for election as a director (i) all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to and in
accordance with Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and (ii) such person's written
consent to being named in the proxy statement as a nominee and to
serving as a director if elected; (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of
the business desired to be brought before the meeting, the text of the
proposal or business (including the text of any resolutions proposed for
consideration and in the event that such business includes a proposal to
amend the Bylaws of the Corporation, the language of the proposed
amendment), the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c)
as to the stockholder giving the notice and the beneficial owner, if
any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books,
and of such beneficial owner, (ii) the class and number of shares of
capital stock of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner, (iii) a
representation that the stockholder is a holder of record of stock of
the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to propose such business or
nomination, and (iv) a representation whether the stockholder or the
beneficial owner, if any, intends or is part of a group which intends
(a) to deliver a proxy statement and/or form of proxy to holders of at
least the percentage of the Corporation's outstanding capital stock
required to approve or adopt the proposal or elect the nominee and/or
(b) otherwise to solicit proxies from stockholders in support of such
proposal or nomination. The foregoing notice requirements shall be
deemed satisfied by a stockholder if the stockholder has notified the
Corporation of his or her intention to present a proposal at an annual
meeting in compliance with Rule 14a-8 (or any successor thereof)
promulgated under the Exchange Act and such stockholder's proposal has
been included in a proxy statement that has been prepared by the
Corporation to solicit proxies for such annual meeting. The Corporation
may require any proposed nominee to furnish such other information as it
may reasonably require to determine the eligibility of such proposed
nominee to serve as a director of the Corporation.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Section 12 to the contrary, in the event that the number
of directors to be elected to the Board of Directors of the Corporation
at an annual meeting is increased and there is no public announcement by
the Corporation naming the nominees for the additional directorships at
least one hundred days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section
12 shall also be considered timely, but only with respect to nominees
for the additional directorships, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not
later than the close of business on the tenth day following the day on
which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made
at a special meeting of stockholders at which directors are to be elected
pursuant to the Corporation's notice of meeting (1) by or at the direction
of the Board of Directors or (2) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by any
stockholder of the Corporation who is a stockholder of record at the time
the notice provided for in this Section 12 is delivered to the Secretary of
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the Corporation, who is entitled to vote at the meeting and upon such
election and who complies with the notice procedures set forth in this
Section 12. In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board
of Directors, any such stockholder entitled to vote in such election of
directors may nominate a person or persons (as the case may be) for
election to such position(s) as specified in the Corporation's notice of
meeting, if the stockholder's notice required by paragraph (A)(2) of this
Section 12 shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the close of business on the
one hundred twentieth day prior to such special meeting and not later than
the close of business on the later of the ninetieth day prior to such
special meeting or the tenth day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
In no event shall the public announcement of an adjournment or postponement
of a special meeting commence a new time period (or extend any time period)
for the giving of a stockholder's notice as described above.
(C) General. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 12 shall be eligible to be
elected at an annual or special meeting of stockholders of the Corporation
to serve as directors and only such business shall be conducted at a
meeting of stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 12. Except as
otherwise provided by law, the chairman of the meeting shall have the power
and duty (a) to determine whether a nomination or any business proposed to
be brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 12 (including
whether the stockholder or beneficial owner, if any, on whose behalf the
nomination or proposal is made solicited (or is part of a group which
solicited) or did not so solicit, as the case may be, proxies in support of
such stockholder's nominee or proposal in compliance with such
stockholder's representation as required by clause (A)(2)(c)(iv) of this
Section 12) and (b) if any proposed nomination or business was not made or
proposed in compliance with this Section 12, to declare that such
nomination shall be disregarded or that such proposed business shall not be
transacted. Notwithstanding the foregoing provisions of this Section 12, if
the stockholder (or a qualified representative of the stockholder) does not
appear at the annual or special meeting of stockholders of the Corporation
to present a nomination or business, such nomination shall be disregarded
and such proposed business shall not be transacted, notwithstanding that
proxies in respect of such vote may have been received by the Corporation.
(2) For purposes of this Section 12, "public announcement" shall
include disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(3) Notwithstanding the foregoing provisions of this Section 12, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 12. Nothing in this Section 12
shall be deemed to affect any rights (a) of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act or (b) of the holders of any series of
Preferred Stock to elect directors pursuant to any express applicable
provisions of the certificate of incorporation.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. Power; Number; Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, and subject to the restrictions imposed by law or the charter
documents of the Corporation, the Board of Directors may exercise all the powers
of the Corporation.
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The number of directors that shall constitute the whole Board of Directors
shall be determined from time to time by the Board of Directors (provided that
no decrease in the number of directors which would have the effect of shortening
the term of an incumbent director may be made by the Board of Directors). If the
Board of Directors makes no such determination, the number of directors shall be
not less than eight and not more than eighteen.
Unless otherwise provided in the charter documents of the Corporation,
directors shall hold office for the term for which such director is elected, and
until such director's successor shall have been elected and qualified or until
his earlier death, resignation or removal. Directors need not be stockholders
nor residents of the state of incorporation of the Corporation.
SECTION 2. Quorum; Voting. Unless otherwise provided in the charter
documents of the Corporation, a majority of the total number of directors shall
constitute a quorum for the transaction of business of the Board of Directors
and the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
SECTION 3. Place of Meetings; Order of Business. The directors may hold
their meetings and may have an office and keep the books of the Corporation,
except as otherwise provided by law, in such place or places, within or without
the state of incorporation of the Corporation, as the Board of Directors may
from time to time determine. At all meetings of the Board of Directors business
shall be transacted in such order as shall from time to time be determined by
the Chairman of the Board, or in the Chairman of the Board's absence by the
President (should the President be a director), or by the Board of Directors.
SECTION 4. First Meeting. Each newly elected Board of Directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as the
annual meeting of the stockholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each year at which a
quorum shall be present, held next after the annual meeting of stockholders, the
Board of Directors shall elect the officers of the Corporation.
SECTION 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as shall be designated from time to time
by the Chairman of the Board or, in the absence of the Chairman of the Board, by
the President (should the President be a director), or by the Board of
Directors. Notice of such regular meetings shall not be required.
SECTION 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President (should the President
be a director) or, on the written request of any director, by the Secretary, in
each case on at least twenty-four (24) hours personal, written, telegraphic,
cable, wireless, electronic or other lawfully permissible notice to each
director. Such notice, or any waiver thereof pursuant to Article VII, Section 3
hereof, need not state the purpose or purposes of such meeting, except as may
otherwise be required by law or provided for in the charter documents of the
Corporation or these Bylaws. Meetings may be held at any time without notice if
all the directors are present or if those not present waive notice of the
meeting in writing or by electronic transmission.
SECTION 7. Compensation. Directors and members of standing committees may
receive such compensation as the Board of Directors from time to time shall
determine to be appropriate, and shall be reimbursed for all reasonable expenses
incurred in attending and returning from meetings of the Board of Directors.
SECTION 8. Action Without a Meeting; Telephone Conference Meetings. Unless
otherwise restricted by the charter documents of the Corporation, any action
required or permitted to be taken at any meeting of the Board of Directors, or
any committee designated by the Board of Directors, may be taken without a
meeting if all members of the Board of Directors or committee, as the case may
be, consent thereto in writing or by electronic transmission, and the writing or
writings or electronic transmission or transmissions are filed with the minutes
of proceedings of the Board of Directors or committee. Such filing shall be in
paper form if the minutes are maintained in paper form and shall be in
electronic form if the minutes are maintained in electronic form. Such consent
shall have the same force and effect as a unanimous vote at a meeting and may be
stated as such in any document or instrument filed with the Secretary of State
of the state of incorporation of the Corporation.
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Unless otherwise restricted by the charter documents of the Corporation,
subject to the requirement for notice of meetings, members of the Board of
Directors or members of any committee designated by the Board of Directors may
participate in a meeting of such Board of Directors or committee, as the case
may be, by means of a conference telephone connection or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in such a meeting shall constitute presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV
COMMITTEES
SECTION 1. Executive Committee. The Board of Directors may designate an
Executive Committee consisting of one or more of the directors of the
Corporation, one of whom shall be designated chairman of the Executive
Committee. During the intervals between the meetings of the Board of Directors,
the Executive Committee shall possess and may exercise such powers of the Board
of Directors as have been delegated to the Executive Committee, except as
provided in Section 8 of this Article IV.
SECTION 2. Audit Committee. The Board of Directors may designate an Audit
Committee consisting of one or more of the directors of the Corporation, one of
whom shall be designated chairman of the Audit Committee. The Audit Committee
shall have and may exercise such powers and authority as provided in the
resolution creating it and as determined from time to time by the Board of
Directors, except as provided in Section 8 of this Article IV.
SECTION 3. Organization and Compensation Committee. The Board of Directors
may designate an Organization and Compensation Committee consisting of one or
more of the directors of the Corporation, one of whom shall be designated
chairman of the Organization and Compensation Committee. During the intervals
between the meetings of the Board of Directors, the Organization and
Compensation Committee shall possess and may exercise such powers of the Board
of Directors as have been delegated to the Organization and Compensation
Committee, except as provided in Section 8 of this Article IV.
SECTION 4. Nominating Committee. The Board of Directors may designate a
Nominating Committee consisting of one or more of the directors of the
Corporation, one of whom shall be designated chairman of the Nominating
Committee. During the intervals between the meetings of the Board of Directors,
the Nominating Committee shall possess and may exercise such powers of the Board
of Directors as have been delegated to the Nominating Committee, except as
provided in Section 8 of this Article IV.
SECTION 5. Other Committees. The Board of Directors may designate such
other committees as it shall see fit consisting of one or more of the directors
of the Corporation, one of whom shall be designated chairman of each such
committee. Any such committee shall have and may exercise such powers and
authority as provided in the resolution creating it and as determined from time
to time by the Board of Directors, except as provided in Section 8 of this
Article IV.
SECTION 6. Procedure; Meetings; Quorum. Any committee designated pursuant
to this Article IV shall keep regular minutes of its actions and proceedings in
a book provided for that purpose if the minutes are maintained in paper form and
shall keep regular minutes in an electronic file if the minutes are maintained
in electronic form and report the same to the Board of Directors at its meeting
next succeeding such action, shall fix its own rules or procedures, and shall
meet at such times and at such place or places as may be provided by such rules,
or by such committee or the Board of Directors. Should a committee fail to fix
its own rules, the provisions of these Bylaws, pertaining to the calling of
meetings and conduct of business by the Board of Directors, shall apply as
nearly as practicable. At every meeting of any such committee, the presence of a
majority of all the members thereof shall constitute a quorum, except as
provided in Section 7 of this Article IV, and the affirmative vote of a majority
of the members present shall be necessary for the adoption by it of any
resolution.
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SECTION 7. Substitution and Removal of Members; Vacancies. The Board of
Directors may designate one or more directors as alternate members of any
committee who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint another member of
the Board of Directors who has been designated as an alternate member of that
committee to act at the meeting in the place of the absent or disqualified
member. The Board of Directors shall have the power at any time to remove any
member(s) of a committee and to appoint other directors in lieu of the person(s)
so removed and shall also have the power to fill vacancies in a committee.
SECTION 8. Limitation on Power and Authority of Committees. No committee
of the Board of Directors shall have the power or authority of the Board of
Directors in reference to (i) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the General Corporation
Law of the State of Delaware to be submitted to stockholders for approval or
(ii) adopting, amending or repealing any Bylaw.
ARTICLE V
OFFICERS
SECTION 1. Number, Titles and Term of Office. The officers of the
Corporation shall be such officers as the Board of Directors may from time to
time elect or appoint, including, but not limited to, a Chairman of the Board, a
Chief Executive Officer, a President, one or more Vice Presidents (any one or
more of whom may be designated Executive Vice President or Senior Vice
President), a Treasurer, a Secretary and one or more Assistant Treasurers and
one or more Assistant Secretaries. Each officer shall hold office until such
officer's successor shall be duly elected and shall qualify or until such
officer's death or until such officer shall resign or shall have been removed.
Any number of offices may be held by the same person, unless the charter
documents of the Corporation provide otherwise. Except for the Chairman of the
Board, no officer need be a director.
SECTION 2. Removal. Any officer elected or appointed by the Board of
Directors may be removed, either with or without cause, by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
shall not of itself create contract rights.
SECTION 3. Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
Section 4. Powers and Duties of the Chairman of the Board. The Chairman of
the Board shall preside at all meetings of the stockholders and of the Board of
Directors; and he shall have such other powers and duties as designated in these
Bylaws and as from time to time may be assigned to him by the Board of
Directors.
SECTION 5. Powers and Duties of the Chief Executive Officer. The President
shall be the Chief Executive Officer of the Corporation unless the Board of
Directors designates the Chairman of the Board (if any) or other officer as
Chief Executive Officer. Subject to the control of the Board of Directors, the
Chief Executive Officer shall have general executive charge, management and
control of the properties, business and operations of the Corporation with all
such powers as may be reasonably incident to such responsibilities; he or she
may agree upon and execute all leases, contracts, evidences of indebtedness and
other obligations in the name of the Corporation and may sign all certificates
for shares of capital stock of the Corporation; and he or she shall have such
other powers and duties as designated in accordance with these Bylaws and as
from time to time may be assigned to him by the Board of Directors.
SECTION 6. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and, unless the Board of Directors
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otherwise determines, he or she shall, in the absence of the Chairman of the
Board or if there be no Chairman of the Board, preside at all meetings of the
stockholders and (should he or she be a director) of the Board of Directors; and
the President shall have such other powers and duties as designated in
accordance with these Bylaws and as from time to time may be assigned to him by
the Board of Directors.
SECTION 7. Vice Presidents. The Vice President(s), if any, shall perform
such duties and have such powers as the Board of Directors may from time to time
prescribe. In addition, in the absence of the Chairman of the Board (if any) or
President, or in the event of their inability or refusal to act, (i) a Vice
President designated by the Board of Directors or (ii) in the absence of such
designation, the Vice President who is present and who is senior in terms of
length of service as a Vice President of the Corporation, shall perform the
duties of the Chairman of the Board (if any), or the President, as the case may
be, and when so acting shall have all the powers of and be subject to all the
restrictions upon the Chairman of the Board (if any), or the President; provided
that he shall not preside at meetings of the Board of Directors unless he is a
director.
SECTION 8. Treasurer. The Treasurer, if any, shall have responsibility for
the custody and control of all the funds and securities of the Corporation, and
he or she shall have such other powers and duties as designated in these Bylaws
and as from time to time may be assigned to him by the Board of Directors. He or
she shall perform all acts incident to the position of Treasurer subject to the
control of the Chief Executive Officer and the Board of Directors; and the
Treasurer shall, if required by the Board of Directors, give such bond for the
faithful discharge of his or her duties in such form as the Board of Directors
may require.
SECTION 9. Secretary. The Secretary shall keep the minutes of all meetings
of the Board of Directors, and the minutes of all meetings of the stockholders,
in books provided for that purpose; he or she shall attend to the giving and
serving of all notices; he or she may in the name of the Corporation affix the
seal (if any) of the Corporation to all contracts of the Corporation and attest
thereto; he or she may sign with the other appointed officers all certificates
for shares of capital stock of the Corporation; he or she shall have charge of
the certificate books, transfer books and stock ledgers, and such other books
and papers as the Board of Directors may direct; he or she shall have such other
powers and duties as designated in these Bylaws and as from time to time may be
assigned to him by the Chief Executive Officer or the Board of Directors; and he
or she shall in general perform all duties incident to the office of Secretary,
subject to the control of the Chief Executive Officer and the Board of
Directors.
SECTION 10. Assistant Treasurers. Each Assistant Treasurer, if any, shall
have the usual powers and duties pertaining to his or her office, together with
such other powers and duties as designated in these Bylaws and as from time to
time may be assigned to him or her by the Chief Executive Officer or the Board
of Directors or the Treasurer. The Assistant Treasurers shall exercise the
powers of the Treasurer during that officer's absence or inability or refusal to
act.
SECTION 11. Assistant Secretaries. Each Assistant Secretary, if any, shall
have the usual powers and duties pertaining to his or her office, together with
such other powers and duties as designated in these Bylaws and as from time to
time may be assigned to him or her by the Chief Executive Officer or the Board
of Directors or the Secretary. The Assistant Secretaries shall exercise the
powers of the Secretary during that officer's absence or inability or refusal to
act.
SECTION 12. Action with Respect to Securities of Other Entity. Unless
otherwise directed by the Board of Directors, each of the Chief Executive
Officer , any Vice President, the Treasurer (if any), the Secretary (if any), or
any of them, shall have power to vote and otherwise act on behalf of the
Corporation, in person or by proxy, at any meeting of security holders of or
with respect to any action of security holders of any other entity in which this
Corporation may hold securities and otherwise to exercise any and all rights and
powers which this Corporation may possess by reason of its ownership of
securities in such other entity.
SECTION 13. Delegation. For any reason that the Board of Directors may
deem sufficient, the Board of Directors may, except where otherwise provided by
statute, delegate the powers or duties of any officer to any other person, and
may authorize any officer to delegate specified duties of such officer to any
other person. Any such delegation or authorization by the Board of Directors
shall be effected from time to time by resolution of the Board of Directors.
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ARTICLE VI
INDEMNIFICATION
SECTION 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person for whom he or she is the legal representative, is or was a
director or an officer of the Corporation or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, employee or agent or trustee of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer or trustee or in any other capacity while serving as a
director, officer or trustee, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the General Corporation Law of
the State of Delaware, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights that such law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however,that,
except as provided in Section 3 of this Article VI with respect to proceedings
to enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation.
SECTION 2. Right to Advancement of Expenses. In addition to the right to
indemnification conferred in Section 1 of this Article VI, an indemnitee shall
also have the right to be paid by the Corporation the expenses (including
attorneys' fees) incurred in defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the General Corporation Law of the State of Delaware requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Section 2 or otherwise.
SECTION 3. Right of Indemnitee to Bring Suit. If a claim under Section 1
or 2 of this Article VI is not paid in full by the Corporation within sixty (60)
days after a written claim has been received by the Corporation, except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expense) it shall be a
defense that, and (ii) in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the General Corporation Law of the State of Delaware. Neither the failure of the
Corporation (including its directors who are not parties to such action, a
committee of such directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances because the
indemnitee has met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware, nor an actual determination by the
Corporation (including its directors who are not parties to such action, a
committee of such directors, independent legal counsel, or its stockholders)
that the indemnitee has not met such applicable standard of conduct, shall
create a presumption that the indemnitee has not met the applicable standard of
conduct or, in the case of such a suit brought by the indemnitee, be a
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defense to such suit. In any suit brought by the indemnitee to enforce a right
to indemnification or to an advancement of expenses hereunder, or brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden or proving that the indemnitee is not entitled to be
indemnified, or to the recovery of such advancement of expense, under this
Article VI or otherwise shall be on the Corporation.
SECTION 4. Non-Exclusivity of Rights. The rights to indemnification and to
the advancement of expenses conferred in this Article VI shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statue, the charter documents of the Corporation, Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
SECTION 5. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expenses,
liability or loss under the General Corporation Law of the State of Delaware.
SECTION 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article VI with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
SECTION 7. Nature of Rights. The rights conferred upon indemnitees in this
Article VI shall be contract rights and such rights shall continue as to an
indemnitee who has ceased to be a director, officer or trustee and shall inure
to the benefit of the indemnitee's heirs, executors and administrators. Any
amendment, alteration or repeal of this Article VI that adversely affects any
right of an indemnitee or its successors shall be prospective only and shall not
limit or eliminate any such right with respect to any proceeding involving any
occurrence or alleged occurrence of any action or omission to act that took
place prior to such amendment or repeal.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
that required by law and the charter documents of the Corporation, as shall be
approved by the Board of Directors. Every holder of stock represented by
certificates shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman of the Board (if any), the Chief Executive
Officer (if any), the President (if any) or a Vice President (if any) and the
Treasurer (if any) or an Assistant Treasurer (if any) or the Secretary (if any)
or an Assistant Secretary (if any) of the Corporation representing the number of
shares (and, if the stock of the Corporation shall be divided into classes or
series, certifying the class and series of such shares) owned by such
stockholder which are registered in certified form; provided, however, that any
of or all the signatures on the certificate may be facsimile. The stock record
books and the blank stock certificate books shall be kept by the Secretary, or
at the office of such transfer agent or transfer agents as the Board of
Directors may from time to time determine. In case any officer, transfer agent
or registrar who shall have signed or whose facsimile signature or signatures
shall have been placed upon any such certificate or certificates shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued by the Corporation, such certificate may nevertheless be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue. The stock certificates shall be
consecutively numbered and shall be entered in the books of the Corporation as
they are issued and shall exhibit the holder's name and number of shares.
SECTION 2. Transfer of Shares. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal representatives
upon surrender and cancellation of certificates for a like number of shares.
Upon surrender to
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58
the Corporation or a transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
SECTION 3. Ownership of Shares. The Corporation shall be entitled to treat
the holder of record of any share or shares of capital stock of the Corporation
as the holder in fact thereof and, accordingly, shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of the state of incorporation
of the Corporation.
SECTION 4. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Corporation.
SECTION 5. Lost or Destroyed Certificates. The Board of Directors may
determine the conditions upon which the Corporation may issue a new certificate
of stock in place of a certificate theretofore issued by it which is alleged to
have been lost, stolen or destroyed and may require the owner of such
certificate or such owner's legal representative to give bond, with surety
sufficient to indemnify the Corporation and each transfer agent and registrar
against any and all losses or claims which may arise by reason of the alleged
loss, theft or destruction of any such certificate or the issuance of such new
certificate in the place of the one so lost, stolen or destroyed.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall end on
the last day of December of each year.
SECTION 2. Corporate Seal. The corporate seal shall be circular in form
and shall have inscribed thereon the name of the Corporation and the state of
its incorporation, which seal shall be in the charge of the Secretary and shall
be affixed to certificates of stock, debentures, bonds, and other documents, in
accordance with the direction of the Board of Directors, and as may be required
by law; however, the Secretary may, if the Secretary deems it expedient, have a
facsimile of the corporate seal inscribed on any such certificates of stock,
debentures, bonds, contracts or other documents. Duplicates of the seal may be
kept for use by the Secretary or any Assistant Secretary.
SECTION 3. Notice and Waiver of Notice. Whenever any notice is required to
be given by law, the charter documents of the Corporation or under the
provisions of these Bylaws, said notice shall be deemed to be sufficient if
given (i) by electronic, telegraphic, cable or wireless transmission (including
by telecopy, facsimile transmission or electronic transmission in the manner
provided in Section 232 of the General Corporation Law of the State of Delaware)
or (ii) by deposit of the same in a post office box or by delivery to an
overnight courier service company in a sealed prepaid wrapper addressed to the
person entitled thereto at such person's post office address, as it appears on
the records of the Corporation, and such notice shall be deemed to have been
given on the day of such transmission or mailing or delivery to courier, as the
case may be.
Whenever notice is required to be given by law, the charter documents of
the Corporation or under any of the provisions of these Bylaws, a written waiver
thereof, signed by the person entitled to notice, or waiver by electronic
transmission by such person, whether given before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person, including
without limitation a director, at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or
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59
special meeting of the stockholders, directors or members of a committee of
directors need be specified in any waiver of notice unless so required by the
charter documents of the Corporation or these Bylaws.
SECTION 4. Facsimile Signatures. In addition to the provisions for the use
of facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors.
SECTION 5. Reliance upon Books, Reports and Records. A member of the Board
of Directors, or a member of any committee designated by the Board of Directors,
shall, in the performance of such person's duties, be fully protected in relying
in good faith upon the records of the Corporation and upon such information,
opinion, reports or statements presented to the Corporation by any of the
Corporation's officers or employees, or committees of the Board of Directors, or
by any other person as to matters the member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
SECTION 6. Application of Bylaws. In the event that any provision of these
Bylaws is or may be in conflict with any law of the United States, of the state
of incorporation of the Corporation or of any other governmental body or power
having jurisdiction over this Corporation, or over the subject matter to which
such provision of these Bylaws applies, or may apply, such provision of these
Bylaws shall be inoperative to the extent only that the operation thereof
unavoidably conflicts with such law and shall in all other respects be in full
force and effect.
ARTICLE IX
AMENDMENTS
SECTION 1. General. Subject to Section 2 of Article IX, the Board of
Directors shall have the power to adopt, amend and repeal from time to time
Bylaws of the Corporation, subject to the right of the stockholders entitled to
vote with respect thereto to amend or repeal such Bylaws as adopted or amended
by the Board of Directors.
SECTION 2. Supermajority Approval. Notwithstanding the provisions of
Section 1 of Article IX, the affirmative vote of the holders of at least
two-thirds of the outstanding shares of capital stock of the Corporation
entitled to vote thereon at a meeting called for that purpose shall be required
to alter, amend or repeal these Bylaws.
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ANNEX D
AGREEMENT AND PLAN OF MERGER OF
OCEAN ENERGY, INC. (TEXAS) AND
OCEAN ENERGY, INC. (DELAWARE)
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of
, 2001, is made and entered into by and between Ocean Energy, Inc.,
a Texas corporation ("OEI-Texas"), and Ocean Energy, Inc., a Delaware
corporation ("OEI-Delaware"), which corporations are sometimes referred to
herein as the "Constituent Corporations."
WITNESSETH
WHEREAS, OEI-Texas is a corporation organized and existing under the laws
of the State of Texas; and
WHEREAS, OEI-Delaware is a wholly-owned subsidiary corporation of
OEI-Texas; and
WHEREAS, the respective Boards of Directors of OEI-Texas and OEI-Delaware
have determined that it is desirable to merge OEI-Texas into OEI-Delaware (the
"Merger"); and
WHEREAS, the parties intend by this Agreement to effect a reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that
OEI-Texas shall be merged into OEI-Delaware upon the terms and conditions set
forth below.
ARTICLE I
MERGER
On the effective date of the Merger (the "Effective Date") as provided
herein, OEI-Texas shall be merged into OEI-Delaware, the separate existence of
OEI-Texas shall cease and OEI-Delaware (hereinafter sometimes referred to as the
"Surviving Corporation") shall continue to exist under the name of Ocean Energy,
Inc. by virtue of, and shall be governed by, the laws of the State of Delaware.
The address of the registered office of the Surviving Corporation in the State
of Delaware will be Corporation Trust Center, 1209 Orange Street, in the County
of New Castle, in the City of Wilmington, Delaware 19801.
ARTICLE II
CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
The name of the Surviving Corporation shall be "Ocean Energy, Inc." The
Certificate of Incorporation of the Surviving Corporation as in effect on the
date hereof shall be the Certificate of Incorporation of OEI-Delaware (the
"Delaware Charter") without change unless and until amended in accordance with
applicable law.
ARTICLE III
BYLAWS OF THE SURVIVING CORPORATION
The Bylaws of the Surviving Corporation as in effect on the date hereof
shall be the Bylaws of OEI-Delaware (the "Delaware Bylaws") without change
unless and until amended in accordance with applicable law.
D-1
61
ARTICLE IV
EFFECT OF MERGER ON STOCK OF CONSTITUENT CORPORATIONS
4.1. On the Effective Date, each outstanding share of common stock of
OEI-Texas, par value $.10 per share (the "Common Stock"), shall be converted
into one share of OEI-Delaware common stock, par value $.10 per share (the
"Delaware Common Stock"), and each outstanding share of Delaware Common Stock
held by OEI-Texas shall be retired and canceled. The shares of Delaware Common
Stock shall be identical to the shares of Common Stock in all other aspects.
4.2. On the Effective Date, each outstanding share of preferred stock of
OEI-Texas, par value $1.00 per share (the "Preferred Stock"), shall be converted
into one share of OEI-Delaware preferred stock, par value $1.00 per share (the
"Delaware Preferred Stock"), and each outstanding share of Delaware Preferred
Stock held by OEI-Texas shall be retired and canceled. The shares of Delaware
Preferred Stock shall have substantially equivalent rights, preferences and
limitations as the Preferred Stock.
4.3. On the Effective Date, each share of Common Stock held in the
Company's treasury shall be converted into one treasury share of OEI-Delaware
Common Stock.
4.4. All options and rights to acquire the Common Stock under all
outstanding options, warrants or rights outstanding on the Effective Date will
automatically be converted into equivalent options and other rights to purchase
the same number of shares of Delaware Common Stock.
4.5. After the Effective Date, certificates representing shares of the
Common Stock and Preferred Stock will represent shares of Delaware Common Stock
and Delaware Preferred Stock, respectively, and upon surrender of the same to
the transfer agent for OEI-Delaware, the holder thereof shall be entitled to
receive in exchange therefor a certificate or certificates representing the
number of shares of Delaware Common Stock or Delaware Preferred Stock, as the
case may be, into which such shares of Common Stock or Preferred Stock shall
have been converted pursuant to Article 4.1 and 4.2, respectively, of this
Agreement.
ARTICLE V
CORPORATE EXISTENCE, POWERS AND LIABILITIES
OF THE SURVIVING CORPORATION
5.1. On the Effective Date, the separate existence of OEI-Texas shall
cease. OEI-Texas shall be merged with and into OEI-Delaware, the Surviving
Corporation, in accordance with the provisions of this Agreement. Thereafter,
OEI-Delaware shall possess all the rights, privileges, powers and franchises of
a public as well as of a private nature, and shall be subject to all the
restrictions, disabilities and duties of each of the parties to this Agreement;
all singular rights, privileges, powers and franchises of OEI-Texas and
OEI-Delaware, and all property, real, personal and mixed and all debts due to
each of them on whatever account, shall be vested in OEI-Delaware; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectually the property of OEI-Delaware, the
Surviving Corporation, as they were of the respective constituent entities, and
the title to any real estate, whether by deed or otherwise, vested in OEI-Texas
and OEI-Delaware, or either of them, shall not revert or be in any way impaired
by reason of the Merger, but all rights of creditors and all liens upon the
property of the parties hereto, shall be preserved unimpaired, and all debts,
liabilities and duties of OEI-Texas, shall thenceforth attach to OEI-Delaware,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
5.2. OEI-Texas agrees that it will execute and deliver, or cause to be
executed and delivered, all such deeds and other instruments and will take or
cause to be taken such further or other action as the Surviving Corporation may
deem necessary in order to vest in and confirm to the Surviving Corporation
title to and possession of all the property, rights, privileges, immunities,
powers, purposes and franchises, and all and every other interest of OEI-Texas
and otherwise to carry out the intent and purposes of this Agreement.
D-2
62
ARTICLE VI
OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
6.1. Upon the Effective Date, the officers and directors of OEI-Texas shall
become the officers and directors of OEI-Delaware, and such persons shall hold
office in accordance with the charter documents of the Surviving Corporation
until their respective successors shall have been appointed or elected, and, in
case of directors, in the respective classes to which such directors are
assigned.
6.2. If upon the Effective Date, a vacancy shall exist in the Board of
Directors of the Surviving Corporation, such vacancy may be filled in the manner
provided by the charter documents of the Surviving Corporation.
ARTICLE VII
APPROVAL BY SHAREHOLDERS, EFFECTIVE DATE,
CONDUCT OF BUSINESS PRIOR TO EFFECTIVE DATE
7.1. Soon after the approval of this Agreement by the requisite number of
shareholders of OEI-Texas, the respective Boards of Directors of OEI-Texas and
OEI-Delaware will cause their duly authorized officers to make and execute
Articles of Merger and a Certificate of Ownership and Merger or other applicable
certificates or documentation effecting this Agreement and shall cause the same
to be filed with the Secretaries of State of the States of Texas and Delaware,
respectively, in accordance with the Texas Business Corporation Act (the "TBCA")
and the Delaware General Corporation Law (the "DGCL"). The Effective Date shall
be the date on which the Merger becomes effective under the TBCA or the date on
which the Merger becomes effective under the DGCL, whichever occurs later.
7.2. The Boards of Directors of OEI-Texas and OEI-Delaware may amend this
Agreement and the Delaware Charter at any time prior to the Effective Date,
provided that an amendment made subsequent to the approval of the Merger by the
shareholders of OEI-Texas may not (i) change the assessment or type of shares to
be received in exchange for or on conversion of the shares of the Common Stock
or Preferred Stock; or (ii) change any term of the terms and conditions of this
Agreement if such change would adversely affect the holders of the Common Stock
or Preferred Stock.
ARTICLE VIII
TERMINATION OF MERGER
This Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Date, whether before or after shareholder approval of this
Agreement, by the consent of the Board of Directors of OEI-Texas and
OEI-Delaware.
ARTICLE IX
MISCELLANEOUS
9.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, except to the extent the laws of
Delaware are required to be applied.
9.2. Agreement. An executed copy of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 1001 Fannin, Suite
1600, Houston, Texas 77002, and, upon request and without cost, a copy thereof
will be furnished to any shareholder.
9.3. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
D-3
63
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
OCEAN ENERGY, INC.,
a Texas corporation
By:
----------------------------------
Name:
Title:
OCEAN ENERGY, INC.,
a Delaware corporation
By:
----------------------------------
Name:
Title:
D-4
64
ANNEX E
COMPARISON OF RIGHTS OF STOCKHOLDERS
Following the merger, the shareholders of Ocean Energy, Inc., a Texas
corporation ("OEI-Texas"), will become stockholders of Ocean Energy, Inc., a
Delaware corporation ("OEI-Delaware"). The material differences between the
Texas and Delaware corporation laws (the "TBCA" and the "DGCL," respectively),
as well as material differences between the Articles of Incorporation and Bylaws
of OEI-Texas and the Certificate of Incorporation and Bylaws of OEI-Delaware,
are described below. The following description is a summary only and does not
purport to be a complete description of all differences.
OEI-TEXAS OEI-DELAWARE
- -------------------------------------------------------------------------------------------
AUTHORIZED CAPITALIZATION
- -------------------------------------------------------------------------------------------
230 million shares of common stock, 520 million shares of common stock,
including preferred share purchase rights including preferred share purchase rights
10 million shares of preferred stock 10 million shares of preferred stock
issuable in one or more series as issuable in one or more series as
designated by the board of directors, and designated by the board of directors, and
of which 500,000 shares are designated of which shares will be
"Series B Junior Participating Preferred designated "Series A Junior Participating
Stock," none of which are outstanding, and Preferred Stock," none of which will
50,000 shares are designated "Series C initially be outstanding, and 50,000
Convertible Preferred Stock," all of which shares will be designated "Series B
are outstanding Convertible Preferred Stock," all of which
will be outstanding. The Series A Junior
Participating Preferred Stock and the
Series B Convertible Preferred Stock will
be substantially identical to the Series B
Junior Participating Preferred Stock and
Series C Convertible Preferred Stock,
respectively, of OEI-Texas.
- -------------------------------------------------------------------------------------------
VOTE REQUIRED FOR MERGERS AND SIMILAR FUNDAMENTAL CORPORATE TRANSACTIONS
- -------------------------------------------------------------------------------------------
Consistent with the TBCA, the affirmative Consistent with the DGCL, affirmative vote
vote of the holders of at least two-thirds of the holders of a majority of the shares
of the shares entitled to vote, including entitled to vote, including if required by
if required by separate class, is required separate class, is required for a merger,
for a merger, consolidation, share consolidation or dissolution. The DGCL
exchange or dissolution. does not contain any share exchange
provision.
- -------------------------------------------------------------------------------------------
APPLICABLE STATE TAKEOVER LAWS
- -------------------------------------------------------------------------------------------
Article 13 of the TBCA: Section 203 of the DGCL:
Generally prohibits significant business Generally prohibits significant business
transactions, including mergers, with a transactions, including mergers, with a
holder of 20% or more of a public holder of 15% or more of a public
corporation's stock for a period of three corporation's stock for a period of three
years after such holder exceeds such years after such holder exceeds such
ownership level, unless: ownership level, unless:
- - the board approves either the - the board approves either the
transaction in question or the transaction in question or the acquisition
acquisition of shares by the affiliated of shares by the interested stockholder
shareholder prior to the affiliated prior to the time the stockholder
shareholder's share acquisition date; or becomes an interested stockholder based
on its direct or indirect ownership of
- - the transaction is approved by the 15% of the corporation's stock; or
holders of at least two-thirds of the
corporation's shares entitled to vote - when the interested stockholder exceeds
thereon, excluding the shares held the
E-1
65
OEI-TEXAS OEI-DELAWARE
- -------------------------------------------------------------------------------------------
by the shareholder in question, at a fifteen percent threshold, it acquires
meeting of shareholders not less than at least 85% of the outstanding shares
six months after the affiliated not held by certain affiliates, such as
shareholder's share acquisition date. pursuant to a tender offer; or
- the transaction is approved by the board
of directors and the holders of at least
two-thirds of the corporation's shares
entitled to vote thereon, excluding the
shares held by the interested
stockholder, at a meeting of
stockholders. Delaware law does not
require that this vote occur within six
month's of the interested stockholder's
share acquisition date.
- -------------------------------------------------------------------------------------------
VOTE REQUIRED FOR SALE OF ALL OR SUBSTANTIALLY ALL OF THE CORPORATE ASSETS
- -------------------------------------------------------------------------------------------
Consistent with the TBCA, requires the Consistent with the DGCL, requires
affirmative vote of the holders of at approval by the holders of a majority of
least two-thirds of the shares entitled to the corporation's outstanding stock.
vote, including by separate class if
required, if not in the "usual and regular The DGCL does not contain a statutory
course of business." definition of "all or substantially all."
Under the TBCA, a transaction is deemed to
be in the "usual and regular course of
business" if the corporation continues to
engage in one or more businesses after the
transaction or applies a portion of the
sale proceeds to the conduct of its
business.
- -------------------------------------------------------------------------------------------
APPRAISAL RIGHTS
- -------------------------------------------------------------------------------------------
Shareholders of a Texas corporation - Stockholders of a Delaware corporation
generally have dissenter's rights in generally have no appraisal rights in the
connection with significant business event of a merger or consolidation of a
transactions requiring shareholder corporation if the stock of the Delaware
approval, including mergers. However, a corporation is listed on a national
shareholder of a Texas corporation has no securities exchange or the Nasdaq
appraisal rights with respect to any plan National Market, or such stock is held
of merger pursuant to which there is a of record by more than 2,000
single surviving or new domestic or shareholders, or in the case of a merger
foreign corporation, or with respect to for which stockholder approval is not
any plan of exchange, if: required by statute,
- - the shares held by the shareholder are - in each case, unless they are required
part of a class of shares listed on a to accept for their stock anything other
national securities exchange, listed on than:
the Nasdaq National Market or held of
record by not less than 2,000 holders, - shares of stock of the surviving
corporation (or depositary receipts in
- - the shareholder is not required to respect thereof), or shares of stock or
accept for his shares any consideration depositary receipts of any other
that is different that the consideration corporation whose shares or depository
to be received by other holders of the receipts will satisfy the listing or
same class or series of shares held by ownership requirements described above,
such shareholder, and and
- - the shareholder is not required to - cash in lieu of fractional shares.
accept any consideration other than
shares of a corporation which satisfy
the requirements of the first
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66
OEI-TEXAS OEI-DELAWARE
- -------------------------------------------------------------------------------------------
bullet point above and cash in lieu of
fractional shares.
- -------------------------------------------------------------------------------------------
CHARTER AMENDMENT
- -------------------------------------------------------------------------------------------
In accordance with the TBCA, generally In accordance with the DGCL, generally
requires board approval and the requires board approval and the
affirmative vote of the holders of affirmative vote of the holders of a
two-thirds of the outstanding shares majority of the outstanding stock entitled
entitled to vote and, in some to vote and, in some circumstances, a
circumstances, a similar vote of each similar vote of each affected class of
affected class of shares. stock. OEI-Delaware's charter requires the
affirmative vote of the holders of
two-thirds of the outstanding shares
entitled to vote to amend the charter
provisions relating to the classified
board of directors, stockholder action by
consent and bylaw amendments.
- -------------------------------------------------------------------------------------------
AMENDMENTS TO BYLAWS
- -------------------------------------------------------------------------------------------
The TBCA provides that a corporation's The DGCL provides that stockholders have
board of directors and shareholders may the power to amend a corporation's bylaws,
amend the corporation's bylaws, unless unless a corporation confers this power to
otherwise provide in the corporation's its directors. OEI-Delaware's charter
articles of incorporation or bylaws. The documents provide that bylaw amendments
bylaws of OEI-Texas provide that bylaw may be made by the board of directors
amendments may be made by the board of without the consent or vote of the stock-
directors or by the shareholders with the holders or by the stockholders with the
affirmative vote of holders of a majority affirmative vote of holders of two-thirds
of the outstanding shares entitled to vote of the outstanding shares entitled to
thereon, except that amendments relating vote.
to the powers, number, term of office,
vacancy and removal of the members of the
board or the provisions authorizing
amendments to the bylaws require the vote
of the holders of at least two-thirds of
the shares entitled to vote thereon.
- -------------------------------------------------------------------------------------------
ACTION WITHOUT A MEETING
- -------------------------------------------------------------------------------------------
Under the TBCA and the OEI-Texas charter, As permitted by the DGCL, the certificate
any action required to be taken at an of incorporation of OEI-Delaware provides
annual or special meeting of shareholders that no action required to be taken or
may be taken without a meeting but only if which may be taken at any annual or
written consent thereto is signed by all special meeting of stockholders may be
the holders of shares entitled to vote taken without a meeting, and the power of
thereon. stockholders to consent in writing, with-
out a meeting, to the taking of any action
is specifically denied.
- -------------------------------------------------------------------------------------------
ABILITY TO CALL SPECIAL MEETINGS
- -------------------------------------------------------------------------------------------
Consistent with the TBCA, the bylaws of As permitted by the DGCL, OEI-Delaware's
OEI-Texas permit the holders of at least charter and bylaws do not authorize
ten percent of shares entitled to vote to stockholders to call special meetings.
call a special meeting of shareholders.
- -------------------------------------------------------------------------------------------
ADVANCE NOTICE PROVISIONS
- -------------------------------------------------------------------------------------------
In addition to other applicable The advance notice provisions contained in
requirements, the bylaws of OEI-Texas the bylaws of OEI-Delaware are similar to
provide that in order for a OEI-
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OEI-TEXAS OEI-DELAWARE
- -------------------------------------------------------------------------------------------
shareholder to present business for Texas except as described below. In order
consideration at an annual meeting or to be timely, a stockholder's notice must
nominate persons for election to the board be delivered to the Secretary not later
of directors, the shareholder must give than the close of business on the 90th day
timely notice in writing to the Secre- nor earlier than the close of business on
tary respecting such matters. In order to the 120th day prior to the anniversary
be timely in respect of an annual meeting date of the preceding year's annual
of shareholders, a shareholder's notice meeting; provided, however, that in the
must be delivered to or mailed and event that the date of the annual meeting
received by the corporation at its is more than 30 days before or more than
principal executive offices not less than 70 days after such anniversary date,
90 days prior to the anniversary date of notice by the stockholder must be
the preceding year's annual meeting. A delivered not earlier than the close of
shareholder's written notice relating to business on the 120th day prior to such
business to be considered at an annual annual meeting and not later than the
meeting must generally set forth a close of business on the later of the 90th
description of the proposal and the day prior to such annual meeting or the
reasons therefor, information relating to 10th day following the day on which public
the proposing shareholder (including announcement of the date of such meeting
ownership and any material interest of is first made by the corporation. In the
such shareholder in the proposal) and a event that the number of directors to be
representation that the shareholder elected to the corporation's board of
intends to appear in person or by proxy at directors at an annual meeting and there
the annual meeting. A shareholder's is no public announcement by the
written notice relating to director corporation naming the nominees for the
nominations must set forth all informa- additional directorships at least 120 days
tion relating to the director nominee that prior to the first anniversary of the
is required to be disclosed in preceding year's annual meeting, a
solicitations of proxies for election of stockholder's notice in respect of
directors or otherwise required pursuant nominees for the additional directorships
to Regulation 14A under the Securities and will be considered timely, if it is
Exchange Act of 1934, as amended, as well delivered to the Secretary not later than
as the director nominee's written consent the close of business on the 10th day
to be named in the proxy statement as a following the day on which public
nominee and to serve as director if announcement of the additional
elected. directorships is first made by the
corporation. The public announcement of an
adjournment or postponement of annual
meeting will not commence a new time
period (or extend any time period) for the
giving of any stockholder's notice. In
addition to the matters specified in the
bylaws of OEI-Texas, a stockholder's
written notice in respect of business to
be considered at an annual meeting must
set forth a representation as to whether
the stockholder intends or is part of a
group which intends to solicit proxies
from stockholders in support of a proposal
or director nomination.
- -------------------------------------------------------------------------------------------
CLASS VOTING
- -------------------------------------------------------------------------------------------
Under the TBCA, class voting is required Under the DGCL, class voting is not
in connection with certain amendments of a required in connection with such matters,
corporation's charter, a merger or except in the case of a charter amendment
consolidation requiring shareholder which increases or decreases the
approval (if the plan of merger or authorized shares or par value of the
consolidation contains any provision which share of a class or adversely affects a
if contained in a charter amendment would class of shares.
require class voting) and certain sales of
all or substantially all of the The Series B Convertible Preferred Stock
corporation's assets. will generally vote together with the
Common Stock, as a single class.
The Series C Convertible Preferred Stock
gener-
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OEI-TEXAS OEI-DELAWARE
- -------------------------------------------------------------------------------------------
ally votes together with the Common Stock,
as a single class.
- -------------------------------------------------------------------------------------------
CLASSIFIED BOARD; REMOVAL OF DIRECTORS
- -------------------------------------------------------------------------------------------
As permitted by the TBCA, the bylaws of As permitted by the DGCL, the certificate
OEI-Texas provide for a classified board of incorporation of OEI-Delaware provides
of directors and that directors may be for a classified board of directors and
removed only for cause by the vote of a does not provide for removal of a director
majority of the shares entitled to vote other than for cause and by an affirmative
thereon. vote of the holders of two-thirds of the
outstanding shares entitled to vote in the
election of directors.
- -------------------------------------------------------------------------------------------
INSPECTION OF BOOKS AND RECORDS
- -------------------------------------------------------------------------------------------
The TBCA provides that any person who has The DGCL provides that any stockholder may
been a stockholder for six months examine the list of stockholders of a
immediately preceding his demand, or is corporation and, upon written demand, may
the holder of at least 5% of all the inspect any other corporate books and
outstanding shares of the corporation may records for proper purposes.
inspect a corporation's books and records.
- -------------------------------------------------------------------------------------------
INDEMNIFICATION
- -------------------------------------------------------------------------------------------
As permitted by the TBCA, OEI-Texas has As permitted by the DGCL, OEI-Delaware has
agreed to limit the liability of its agreed to limit the liability of its
directors and indemnify its directors and directors and indemnify its directors and
officers, in each case, to the fullest officers, in each case, to the fullest
extent permitted by Texas law. extent permitted by Delaware law. The
differences between Texas and Delaware law
in respect of the limitations of director
liability and director and officer
indemnification are not material.
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ANNEX F
OCEAN ENERGY, INC.
2001 LONG-TERM INCENTIVE PLAN
SECTION 1. Purpose of the Plan.
The Ocean Energy, Inc. 2001 Long-Term Incentive Plan (the "Plan") is
intended to promote the interests of Ocean Energy, Inc., a Texas corporation
(the "Company"), by encouraging employees of the Company, its subsidiaries and
affiliated entities and Directors (as defined below) to acquire or increase
their equity interest in the Company and to provide a means whereby employees
may develop a sense of proprietorship and personal involvement in the
development and financial success of the Company, and to encourage them to
remain with and devote their best efforts to the business of the Company thereby
advancing the interests of the Company and its shareholders. The Plan is also
contemplated to enhance the ability of the Company, its subsidiaries and
affiliated entities to attract and retain the services of individuals who are
essential for the growth and profitability of the Company.
SECTION 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below:
"Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, as determined by the
Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Performance Award, Phantom Shares, Bonus Shares or Cash Award.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Bonus Shares" shall mean an award of Shares granted pursuant to
Section 6(e) of the Plan.
"Cash Award" shall mean an award payable in cash granted pursuant to
Section 6(g) of the Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations thereunder.
"Committee" shall mean the Organization and Compensation Committee of
the Board, which shall be comprised solely of two or more Directors who are
"outside directors" within the meaning of section 162(m) of the Code and
"Non-Employee Directors" within the meaning of Rule 16b-3.
"Director" shall mean a member of the Board who is not also an
Employee.
"Employee" shall mean any employee of the Company or an Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean, with respect to Shares, the closing
price of a Share quoted on the New York Stock Exchange Composite Tape, or
if the Shares are not listed on the New York Stock Exchange, on the
principal United States securities exchange registered under the Exchange
Act on which such stock is listed, or if the Shares are not listed on any
such stock exchange, the last sale price, or if none is reported, the
highest closing bid quotation on the National Association of Securities
Dealers, Inc., Automated Quotations System or any successor system then in
use on the Date of Grant, or if none are available on such day, on the next
preceding day on which the Shares were publicly traded. In the event the
Shares are not publicly traded at the time a determination of its fair
market value is
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required to be made hereunder, the determination of fair market value shall
be made in good faith by the Committee.
"Incentive Stock Option" or "ISO" shall mean an option granted under
Section 6(a) of the Plan that is intended to qualify as an "incentive stock
option" under Section 422 of the Code or any successor provision thereto.
"Non-Qualified Stock Option" or "NQO" shall mean an option granted
under Sections 6(a) or 6(h) of the Plan that is not intended to be an
Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" shall mean any individual granted an Award under the
Plan.
"Performance Award" shall mean any right granted under Section 6(d) of
the Plan.
"Person" shall mean individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or
political subdivision thereof or other entity.
"Phantom Shares" shall mean an Award of the right to receive Shares
issued at the end of a Restricted Period which is granted pursuant to
Section 6(f) of the Plan.
"Restricted Period" shall mean the period established by the Committee
with respect to an Award during which the Award either remains subject to
forfeiture or is not exercisable by the Participant.
"Restricted Stock" shall mean any Share, prior to the lapse of
restrictions thereon, granted under Section 6(c) of the Plan.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the
Exchange Act, or any successor rule or regulation thereto as in effect from
time to time.
"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.
"Shares" or "Common Shares" or "Common Stock" shall mean the common
stock of the Company, $0.10 par value, and such other securities or
property as may become the subject of Awards of the Plan.
"Spread" shall mean, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a Share on
the date such right is exercised over the exercise price of such Stock
Appreciation Right.
"Stock Appreciation Right" or "Right" shall mean any right to receive
the Spread of Shares granted under Section 6(b) of the Plan.
"Substitute Award" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by (i) a company
acquired by the Company or one or more of its Affiliates, or (ii) a company
with which the Company or one or more of its Affiliates combines. To the
extent reasonably practical, as determined by the Committee in its sole
discretion, Substitute Awards shall contain the same terms and conditions
as the award they replace.
SECTION 3. Administration.
The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum, and the acts of the members of the
Committee who are present at any meeting thereof at which a quorum is present,
or acts unanimously approved by the members of the Committee in writing, shall
be the acts of the Committee. Subject to the terms of the Plan and applicable
law, and in addition to other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be granted
to an eligible Participant; (iii) determine the number of Shares to be covered
by, or with respect to which payments, rights, or other matters are to be
calculated in connection with, Awards; (iv) determine the terms and conditions
of any Award, including such terms and conditions as shall be requisite in the
judgment of the Committee to
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71
cause designated Options to qualify as Incentive Stock Options; (v) determine
whether, to what extent, and under what circumstances Awards may be settled or
exercised in cash, Shares, other securities, other Awards or other property, or
canceled, forfeited, or suspended and the method or methods by which Awards may
be settled, exercised, canceled, forfeited, or suspended; (vi) determine
whether, to what extent, and under what circumstances cash, Shares, other
securities, other Awards, other property, and other amounts payable with respect
to an Award shall be deferred either automatically or at the election of the
holder thereof or of the Committee; (vii) interpret and administer the Plan and
any instrument or agreement relating to, or Award made under, the Plan; (viii)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award Agreement in the manner and to the
extent it shall deem expedient to carry it into effect. Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive, and binding upon all Persons, including the
Company, any Affiliate, any Participant, any holder or beneficiary of any Award,
any shareholder, any Employee and any Director.
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section 4(c)
and below, the number of Shares with respect to which Awards may be granted
under the Plan shall be 4,000,000. If any Shares covered by an Award granted
under the Plan, or to which such an Award relates, are forfeited, or if an Award
otherwise terminates or is canceled without the delivery of Shares or of other
consideration, then the Shares covered by such Award, or to which such Award
relates, or the number of Shares otherwise counted against the aggregate number
of Shares with respect to which Awards may be granted, to the extent of any such
forfeiture, termination or cancellation, shall again be, or shall become, Shares
with respect to which Awards may be granted.
(b) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares. Any of such Shares which remain unissued
and which are not subject to outstanding Awards 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.
(c) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee in its discretion to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or property) with respect
to which Awards may be granted, (ii) the number and type of Shares (or other
securities or property) subject to outstanding Awards, and (iii) the grant or
exercise price with respect to any Award or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award; provided, in
each case, that with respect to Awards of Incentive Stock Options and Awards
intended to qualify as performance based compensation under Section 162(m)(4)(C)
of the Code, no such adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422(b)(1) of the Code or would
cause such Award to fail to so qualify under Section 162(m) of the Code, as the
case may be, or any successor provisions thereto; and provided, further, that
the number of Shares subject to any Award denominated in Shares shall always be
a whole number.
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72
SECTION 5. Eligibility and Award Limits.
Other than Awards granted to Directors pursuant to Section 6(h) of the
Plan, any Employee shall be eligible to be designated a Participant. However, no
Employee may receive Share-denominated Awards during the term of the Plan that,
in the aggregate, are with respect to more than one-third of all Shares that may
be made subject to Awards under the Plan. The maximum amount of compensation
(including the Fair Market Value of any Shares) that may be paid to any
Participant with respect to any single Performance Award or Cash Award in any
calendar year shall be $1.5 million. With respect to any Award granted in tandem
with, and expressed as a percentage of, a Share-denominated Award that is
intended to qualify as "performance-based compensation," the maximum payment to
any Participant with respect to such Award in any calendar year shall be an
amount (in cash and/or in Shares) equal to the Fair Market Value of the number
of Shares subject to such Award. The limitations set forth in the preceding
sentences shall be applied in a manner which will permit compensation generated
under the Plan to constitute "performance-based" compensation for purposes of
section 162(m) of the Code, including, without limitation, counting against such
maximum number of Shares, to the extent required under Section 162(m) of the
Code and applicable interpretive authority thereunder, any Shares subject to
Options that are canceled or repriced. Further, Restricted Stock, Performance
Awards, Phantom Shares and Bonus Shares paid in Shares may not, in the
aggregate, exceed 50% of all Shares that may be the subject of Awards under the
Plan.
SECTION 6. Awards.
(a) Options. Subject to the provisions of the Plan, the Committee shall
have the authority to determine the Employees to whom Options shall be granted,
the number of Shares to be covered by each Option, the purchase price therefor
and the conditions and limitations applicable to the exercise of the Option,
including the following terms and conditions and such additional terms and
conditions, as the Committee shall determine, that are not inconsistent with the
provisions of the Plan.
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee at the time each Option is
granted, but shall not be less than the Fair Market Value of a Share on
such date, unless such Option is a Substitute Award.
(ii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part, and
the method or methods by which, and the form or forms (which may include,
without limitation, cash, already-owned Shares, outstanding Awards, Shares
that would otherwise be acquired upon exercise of the Option, a
"cashless-broker" exercise (through procedures approved by the Company),
other securities or other property, or any combination thereof, having a
Fair Market Value on the exercise date equal to the relevant exercise
price) in which payment of the exercise price with respect thereto may be
made or deemed to have been made.
(iii) Special Limitations on Incentive Stock Options. Incentive Stock
Options may be granted only to employees of the Company and its
subsidiaries, within the meaning of Section 424(f) of the Code. To the
extent that the aggregate Fair Market Value (determined at the time the
respective Incentive Stock Option is granted) of Shares with respect to
which Incentive Stock Options are exercisable for the first time by an
individual during any calendar year under all incentive stock option plans
of the Company and its parent and subsidiary corporations exceeds $100,000,
such Incentive Stock Options shall be treated as Options which do not
constitute Incentive Stock Options. The Committee shall determine, in
accordance with applicable provisions of the Code, Treasury regulations and
other administrative pronouncements, which of a Participant's Incentive
Stock Options will not constitute Incentive Stock Options because of such
limitation and shall notify the Participant of such determination as soon
as practicable after such determination. No Incentive Stock Option shall be
granted to an individual if, at the time the Option is granted, such
individual owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of its parent or subsidiary
corporation, within the meaning of Section 422(b)(6) of the Code, unless
(1) at the time such Option is granted the option price is at least 110% of
the Fair Market Value of the Shares subject to the Option and (2) such
Option by its terms is not exercisable after the expiration of five years
from the date of grant.
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73
(iv) Expiration. Except as provided in Section 6(a)(iii), each Option
shall expire ten (10) years from the date of grant thereof, and, unless
provided otherwise in the Award Agreement, shall be subject to earlier
termination as follows: Options, to the extent exercisable as of the date a
Participant ceases to be an Employee, must be exercised within three (3)
months of such date unless such event results from death, disability or
retirement, in which case all outstanding Options held by such Participant
may be exercised in full by the optionee, the optionee's legal
representative, heir or devisee, as the case may be, within two (2) years
from the date of the Participant's death, disability or retirement;
provided, however, that no such event shall extend the expiration date of
an Option beyond the 10th anniversary of its date of grant. Options that
are not exercisable on termination of employment shall be automatically
canceled on termination of employment. For purposes hereof, (x)
"disability" means the Participant is receiving benefits under a long-term
disability plan of the Company or, if the Company does not maintain such a
plan, a determination by the Committee, upon the basis of medical evidence
satisfactory to it, that the Participant is totally disabled, whether due
to a physical or mental condition, such that he is expected to be unable to
continue his employment for a continuous period of 12 or more months, and
(y) "retirement" means a termination of employment on or after the
Participant has reached age 65 or, with the consent of the Committee, on or
after reaching age 55.
(b) Stock Appreciation Rights. Subject to the provisions of the Plan, the
Committee shall have the authority to determine the Employees to whom Stock
Appreciation Rights shall be granted, the number of Shares to be covered by each
Stock Appreciation Right Award, the grant price thereof and the conditions and
limitations applicable to the exercise thereof. A Stock Appreciation Right may
be granted in tandem with another Award, in addition to another Award, or
freestanding and unrelated to another Award. A Stock Appreciation Right granted
in tandem with or in addition to another Award may be granted either at the same
time as such other Award or at a later time.
(i) Grant Price. The grant price of a Stock Appreciation Right shall
be determined by the Committee on the date of grant, but shall not be less
than the Fair Market Value of a Share on such date (or such greater
exercise price as may be required if such Stock Appreciation Right is
granted in connection with an Incentive Stock Option that must have an
exercise price equal to 110% of the Fair Market Value of a Share on the
date of grant pursuant to Section 6(a)(iii)), unless such Stock
Appreciation Right is a Substitute Award.
(ii) Other Terms and Conditions. Subject to the terms of the Plan and
any applicable Award Agreement, the Committee shall determine, at or after
the grant of a Stock Appreciation Right, the term, methods of exercise,
methods of settlement, and any other terms and conditions of any Stock
Appreciation Right. Any such determination by the Committee may be changed
by the Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted or exercised prior to such determination as
well as Stock Appreciation Rights granted or exercised thereafter. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it shall deem appropriate.
(iii) Expiration. Each Stock Appreciation Right shall expire ten (10)
years from the date of grant thereof, or, if granted in tandem with another
Award, upon the expiration of such tandem Award, if earlier, and, unless
provided otherwise in the Award Agreement, shall be subject to earlier
termination as follows: Stock Appreciation Rights, to the extent
exercisable as of the date a Participant ceases to be an Employee, must be
exercised within three (3) months of such date unless such event results
from death, disability or retirement, in which case all outstanding Stock
Appreciation Rights held by such Participant may be exercised in full by
the Participant, the Participant's legal representative, heir or devisee,
as the case may be, within two (2) years from the date of the Participant's
death, disability or retirement; provided, however, that no such event
shall extend the expiration date of a Stock Appreciation Right beyond the
10th anniversary of its date of grant. Stock Appreciation Rights that are
not exercisable on termination of employment shall be automatically
canceled on termination of employment. For purposes hereof, "disability"
and "retirement" shall have their respective meanings as set forth in
Section 6(a)(iv).
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74
(c) Restricted Stock. Subject to the provisions of the Plan, the Committee
shall have the authority to determine the Employees to whom Restricted Stock
shall be granted, the number of Shares of Restricted Stock to be granted to each
such Participant, the duration of the Restricted Period during which, and the
conditions, including performance goals, if any, under which, the Restricted
Stock may be forfeited to the Company, and the other terms and conditions of
such Awards.
(i) Dividends. Dividends paid on Restricted Stock may be paid
directly to the Participant, may be subject to risk of forfeiture and/or
transfer restrictions during any period established by the Committee or
sequestered and held in a bookkeeping cash account (with or without
interest) or reinvested on an immediate or deferred basis in additional
shares of Common Stock, which credit or shares may be subject to the same
restrictions as the underlying Award or such other restrictions, all as
determined by the Committee in its discretion.
(ii) Registration. Any Restricted Stock may be evidenced in such
manner as the Committee shall deem appropriate, including, without
limitation, book-entry registration or issuance of a stock certificate or
certificates. In the event any stock certificate is issued in respect of
Restricted Stock granted under the Plan, such certificate shall be
registered in the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to
such Restricted Stock.
(iii) Forfeiture and Restrictions Lapse. Except as otherwise
determined by the Committee or the terms of the Award that granted the
Restricted Stock, upon termination of a Participant's employment (as
determined under criteria established by the Committee) for any reason
during the applicable Restricted Period, all Restricted Stock shall be
forfeited by the Participant and re-acquired by the Company. The Committee
may, when it finds that a waiver would be in the best interests of the
Company and not cause such Award, if it is intended to qualify as
performance-based compensation under Section 162(m) of the Code, to fail to
so qualify under Section 162(m) of the Code, waive in whole or in part any
or all remaining restrictions with respect to such Participant's Restricted
Stock. Unrestricted Shares, evidenced in such manner as the Committee shall
deem appropriate, shall be issued to the holder of Restricted Stock
promptly after the applicable restrictions have lapsed or otherwise been
satisfied.
(iv) Transfer Restrictions. During the Restricted Period, Restricted
Stock will be subject to the limitations on transfer as provided in Section
6(i)(iii).
(d) Performance Awards. The Committee shall have the authority to
determine the Employees who shall receive a Performance Award, which shall be
denominated as a cash amount at the time of grant and confer on the Participant
the right to receive payment of such Award, in whole or in part, upon the
achievement of such performance goals during such performance periods as the
Committee shall establish with respect to the Award.
(i) Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award and the amount of
any payment or transfer to be made pursuant to any Performance Award.
(ii) Payment of Performance Awards. Performance Awards may be paid
(in cash and/or in Shares, in the sole discretion of the Committee) in a
lump sum or in installments following the close of the performance period,
in accordance with procedures established by the Committee with respect to
such Award.
(e) Bonus Shares. The Committee shall have the authority, in its
discretion, to grant Bonus Shares to eligible Employees. Each Bonus Share shall
constitute a transfer of an unrestricted Share to the Participant, without other
payment therefor, as additional compensation for the Participant's services to
the Company.
(f) Phantom Shares. The Committee shall have the authority to grant Awards
of Phantom Shares to eligible Employees upon such terms and conditions as the
Committee may determine.
(i) Terms and Conditions. Each Phantom Share Award shall constitute
an agreement by the Company to issue or transfer a specified number of
Shares or pay an amount of cash equal to the Fair
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Market Value of a specified number of Shares, or a combination thereof to
the Participant in the future, subject to the fulfillment during the
Restricted Period of such conditions, including performance goals, if any,
as the Committee may specify at the date of grant. During the Restricted
Period, the Participant shall not have any right to transfer any rights
under the subject Award, shall not have any rights of ownership in the
Phantom Shares and shall not have any right to vote such shares.
(ii) Dividends. Any Phantom Share award may provide that any or all
dividends or other distributions paid on Shares during the Restricted
Period be credited in a cash bookkeeping account (without interest) or that
equivalent additional Phantom Shares be awarded, which account or shares
may be subject to the same restrictions as the underlying Award or such
other restrictions as the Committee may determine.
(g) Cash Awards. The Committee shall have the authority to determine the
Employees to whom Cash Awards shall be granted, the amount, and the terms or
conditions, if any, as additional compensation for the Employee's services to
the Company or its Affiliates. A Cash Award may be granted (simultaneously or
subsequently) separately or in tandem with another Award and may entitle a
Participant to receive a specified amount of cash from the Company upon such
other Award becoming taxable to the Participant, which cash amount may be based
on a formula relating to the anticipated taxable income associated with such
other Award and the payment of the Cash Award.
(h) Granting of Options to Directors. Each individual who is elected or
appointed as a Director for the first time after the date the Plan is approved
by the shareholders of the Company shall receive, as of the date of his election
or appointment, and without the exercise of the discretion of any person or
persons, a Non-Qualified Stock Option (an "Initial Grant") exercisable for
10,000 Shares (subject to adjustment in the same manner as provided in Section 7
hereof with respect to Shares subject to Options then outstanding). As of the
date of the annual meeting of the shareholders of the Company ("Annual Meeting")
in each year after 2001 that the Plan is in effect, each Director who is in
office immediately after such meeting and who is not then entitled to receive an
Initial Grant pursuant to the preceding provisions of this Section 6(h) shall
receive, without the exercise of the discretion of any person or persons, a
Non-Qualified Stock Option exercisable for 6,000 Shares (an "Annual Grant")
(subject to adjustment in the same manner as provided in Section 7 hereof with
respect to shares of Stock subject to Options then outstanding).
(i) Other Terms and Conditions. The following provisions are
applicable to Options granted pursuant to this Section 6(h):
A. Subject to the following provisions, (1) an Initial Grant shall
become exercisable for 50% of the Shares covered thereby on the date of
grant, and for the remaining 50% thereof on the first Annual Meeting
following its date of grant and (2) an Annual Grant shall become
exercisable for one-third of the Shares covered thereby on the first
Annual Meeting following the date of grant, and thereafter, for an
additional one-third of the Shares covered thereby on each of the second
and third Annual Meetings following the date of grant.
B. The purchase price of a Share covered under an Option granted
under this Section 6(h) shall be the Fair Market Value of a Share on the
date of grant.
C. To the extent that the right to exercise an Option has accrued
and is in effect, the Option may be exercised in full at one time or in
part from time to time by giving written notice, signed by the optionee
exercising the Option, to the Company, stating the number of Shares with
respect to which the Option is being exercised, accompanied by payment
in full for such Shares, which payment may be in cash, already-owned
Shares, a "cashless-broker" exercise (through procedures approved by the
Company), or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price in which payment of
the exercise price with respect thereto may be made or deemed to have
been made; provided however, that (i) no Option shall be exercisable
after ten (10) years from the date on which it was granted, and (ii)
there shall be no such exercise at any one time for fewer than one
hundred (100) Shares or for all of the remaining
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Shares then purchasable by the optionee exercising the Option, if fewer
than one hundred (100) Shares.
D. Each Option shall expire ten (10) years from the date of grant
thereof, subject to earlier termination as follows: Options, to the
extent exercisable as of the date a Director optionee ceases to serve as
a director of the Company, must be exercised within three (3) months of
such date unless such event results from death, disability or
retirement, as determined by the Committee, in which case all
outstanding Options held by such Director may be exercised in full by
the optionee, the optionee's legal representative, heir or devisee, as
the case may be, within two (2) years from the date of death, disability
or retirement; provided, however, that no such event shall extend the
normal expiration date of such Options. Options not exercisable on
termination as provided above shall be automatically canceled on
termination.
E. Upon exercise of the Option, delivery of a certificate for fully
paid and nonassessable Shares shall be made at the corporate office of
the Company to the optionee exercising the Option either at such time
during ordinary business hours after fifteen (15) days but not more than
thirty (30) days from the date of receipt of the notice by the Company
as shall be designated in such notice, or at such time, place and manner
as may be agreed upon by the Company and the optionee exercising the
Option.
(ii) Number of Available Shares. In the event that the number of
Shares available for grants under the Plan is insufficient to make all
grants provided for in this Section 6(h) hereby made on the applicable
date, then all Directors who are entitled to a grant on such date shall
share ratably in the number of Shares then available for grant under the
Plan, and shall have no right to receive a grant with respect to the
deficiencies in the number of available Shares and the grants under this
Section 6(h) shall terminate.
(i) General.
(i) Awards May Be Granted Separately or Together. Awards to Employees
may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for any other Award granted
under the Plan or any award granted under any other plan of the Company or
any Affiliate. Awards granted in addition to or in tandem with other Awards
or awards granted under any other plan of the Company or any Affiliate may
be granted either at the same time as or at a different time from the grant
of such other Awards or awards.
(ii) Forms of Payment by Company Under Awards. Subject to the terms
of the Plan and of any applicable Award Agreement, payments or transfers to
be made by the Company or an Affiliate upon the grant, exercise or payment
of an Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Shares, other securities,
other Awards or other property, or any combination thereof, and may be made
in a single payment or transfer, in installments, or on a deferred basis,
in each case in accordance with rules and procedures established by the
Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments.
(iii) Limits on Transfer of Awards.
(A) Except as provided in (C) below, each Award, and each right
under any Award, shall be exercisable only by the Participant during the
Participant's lifetime, or, if permissible under applicable law, by the
Participant's guardian or legal representative or by a transferee
receiving such Award pursuant to a qualified domestic relations order (a
"QDRO") as determined by the Committee.
(B) Except as provided in (C) below, no Award and no right under
any such Award may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant otherwise than by
will or by the laws of descent and distribution (or, in the case of
Restricted Stock, to the Company) or, if permissible under applicable
law, pursuant to a QDRO and any such
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purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or any
Affiliate.
(C) Notwithstanding anything in the Plan to the contrary, except to
the extent specifically provided otherwise by the Committee in an Award
Agreement, Non-Qualified Stock Options may be transferred by the
optionee to one or more permitted transferees; provided that (i) there
may be no consideration given for such transfer, (ii) the optionee (or
such optionee's estate or representative) shall remain obligated to
satisfy all employment tax and other withholding tax obligations
associated with the exercise of the transferred Options, (iii) the
optionee shall notify the Company in writing that such transfer has
occurred, the identity and address of the permitted transferee and the
relationship of the permitted transferee to the optionee, and (iv) such
transfer shall be effected pursuant to transfer documents approved from
time to time by the Company. Any permitted transferee may not further
assign or transfer the transferred Option otherwise than by will or the
laws of descent and distribution. Following any permitted transfer, any
such Options shall continue to be subject to the same terms and
conditions as were applicable to the Option immediately prior to the
transfer, provided that the term "optionee" as used in the Plan shall be
deemed to refer also to each permitted transferee where required by the
context. A transferred Option may only be exercised by a transferee to
the same extent such Option could, at such time, be exercised by the
optionee "but for" such transfer. The term "permitted transferees" shall
mean one or more of the following: (i) any member of the optionee's
immediate family; (ii) a trust established for the exclusive benefit of
one or more members of such immediate family; (iii) a partnership in
which such immediate family members are the only partners; or (iv) any
other person approved from time to time by the Committee. The term
"immediate family" is defined for such purpose as spouses, children,
stepchildren and grandchildren, including relationships arising from
adoption.
(iv) Term of Awards. The term of each Award (other than pursuant to
Section 6(h)) shall be for such period as may be determined by the
Committee; provided, that in no event shall the term of any Award exceed a
period of ten (10) years from the date of its grant.
(v) Share Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan
pursuant to any Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may deem advisable
under the Plan or the rules, regulations, and other requirements of the
SEC, any stock exchange upon which such Shares or other securities are then
listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(vi) Consideration for Grants. Awards may be granted for no cash
consideration or for such consideration as the Committee determines
including, without limitation, such minimal cash consideration as may be
required by applicable law.
(vii) Delivery of Shares or other Securities and Payment by
Participant of Consideration. No Shares or other securities shall be
delivered pursuant to any Award until payment in full of any amount
required to be paid pursuant to the Plan or the applicable Award Agreement
is received by the Company, including without limitation, all applicable
withholding taxes. Such payment may be made by such method or methods and
in such form or forms as the Committee shall determine, including, without
limitation, cash, Shares, other securities, other Awards or other property,
withholding of Shares, cashless exercise with simultaneous sale, or any
combination thereof; provided that the combined value, as determined by the
Committee, of all cash and cash equivalents and the Fair Market Value of
any such Shares or other property so tendered to the Company, as of the
date of such tender, is at least equal to the full amount required to be
paid pursuant to the Plan or the applicable Award Agreement to the Company.
(viii) Performance Goals. Where necessary, the Committee shall
establish performance goals applicable to those Awards the payment of which
is intended by the Committee to qualify as "performance-based compensation"
as described in Section 162(m)(4)(C) of the Code. Until changed by the
Committee, the performance goals shall be based upon the attainment of such
target levels of Share price, net income, cash flows, reserve additions or
revisions, acquisitions, total capitalization, total
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or comparative shareholder return, assets, exploration successes,
production volumes, findings and development costs, costs reductions and
savings, reportable incidents in safety or environmental matters, return on
equity, profit margin or sales, and/or earnings per share as may be
specified by the Committee. The performance goals may be made subject to
adjustment for specified unusual and nonrecurring events and may be
absolute, relative to one or more other companies, or relative to one or
more indices. Which factor or factors to be used with respect to any grant,
and the weight to be accorded thereto if more than one factor is used,
shall be determined by the Committee at the time of grant.
SECTION 7. Amendment and Termination.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of any shareholder,
Participant, other holder or beneficiary of an Award, or other Person;
provided, however, notwithstanding any other provision of the Plan or any
Award Agreement, without the approval of the shareholders of the Company no
such amendment, alteration, suspension, discontinuation, or termination
shall be made that would (i) increase the total number of Shares available
for Awards under the Plan, except as provided in Section 4(c) of the Plan;
(ii) increase the class of eligible Participants; (iii) amend the
eligibility requirements for Awards under the Plan; or (iv) amend or delete
Section 7(b)(ii).
(b) Amendments to Awards. The Committee may waive any conditions or
rights under, amend any terms of, or alter any Award theretofore granted
(other than Initial Grants or Annual Grants under Section 6(h)); provided,
however, that (i) no change, other than pursuant to Section 7(c), in any
Award shall reduce the benefit to Participant without the consent of such
Participant and (ii) the Committee may not, without approval of the
shareholders of the Company, amend any outstanding Award Agreement to lower
the exercise price of any Option (or cancel and replace any outstanding
Option with an Option having a lower exercise price). Notwithstanding the
foregoing, with respect to any Award intended to qualify as
performance-based compensation under Section 162(m) of the Code, no
amendment shall be authorized to the extent such amendment would cause the
Award to fail to so qualify.
(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(c) of the Plan) affecting the
Company, any Affiliate, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
Notwithstanding the foregoing, with respect to any Award intended to
qualify as performance-based compensation under Section 162(m) of the Code,
no adjustment shall be authorized to the extent such adjustment would cause
the Award to fail to so qualify.
SECTION 8. Change in Control.
Notwithstanding any other provision of this Plan to the contrary, in the
event of a Change in Control of the Company, all outstanding Awards granted
prior to the date of the Change in Control automatically shall become fully
vested on such Change in Control, all restrictions, if any, with respect to such
Awards shall lapse, and all performance goals, if any, with respect to such
Awards shall be deemed to have been met in full (at the maximum performance
level). For purposes of this Plan, a "Change in Control" shall be deemed to
occur:
(i) if any person (as such term is used in sections 13(d) and 14(d)(2)
of the Exchange Act), other than the Company, any parent corporation or
subsidiary corporation of the Company or any employee benefit plan of the
Company or any such entity, is or becomes the "beneficial owner" (as
defined in
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Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of
the Company representing 25% or more of the combined voting power of the
Company's then outstanding securities,
(ii) upon the first purchase of the Company's common stock pursuant to
a tender or exchange offer (other than a tender or exchange offer made by
the Company),
(iii) on the date of consummation of a merger, consolidation,
recapitalization, reorganization, sale or disposition of all or a
substantial portion of the Company's assets, or the issuance of shares of
stock of the Company in connection with the acquisition of the stock or
assets of another entity; provided, however, that a Change in Control shall
not occur under this clause (iii) if consummation of the transaction would
result in at least two-thirds of the total voting power represented by the
voting securities of the Company (or, if not the Company, the entity that
succeeds to all or substantially all of the Company's business) outstanding
immediately after such transaction being beneficially owned (within the
meaning of Rule 13d-3 promulgated pursuant to the Exchange Act) by at least
two-thirds of the holders of outstanding voting securities of the Company
immediately prior to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction, or
(iv) if, during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board cease for any reason
to constitute at least a majority thereof, unless the election or
nomination for the election by the Company's shareholders of each new
director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period.
SECTION 9. Parachute Tax Gross-Up.
To the extent that the grant, payment, or acceleration of vesting or
payment, whether in cash or stock, of any Award made to a Participant under the
Plan is subject to an excise tax under Section 4999(a) of the Code, or any
similar or successor provision (a "Parachute Tax"), the Company shall pay such
Participant an additional amount of cash (the "Gross-up Amount") such that the
"net" after-tax benefit received by the Participant, after paying all applicable
Parachute Taxes with respect to such Awards (including those on the Gross-up
Amount) and any federal or state taxes on the Gross-up Amount, shall be equal to
the net after-tax benefit that such Participant would have received if such
Parachute Tax had not been applicable.
SECTION 10. General Provisions.
(a) No Rights to Awards. No Employee, Participant or other Person shall
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with respect
to each recipient.
(b) Withholding. The Company or any Affiliate is authorized to withhold
from any Award, from any payment due or transfer made under any Award or under
the Plan or from any compensation or other amount owing to a Participant the
amount (in cash, Shares, other securities, Shares that would otherwise be issued
pursuant to such Award, other Awards or other property) of any applicable taxes
payable in respect of an Award, its exercise, the lapse of restrictions thereon,
or any payment or transfer under an Award or under the Plan and to take such
other action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes. Any Participant who is subject to
Rule 16b-3 may direct the Company to withhold Shares or may tender Shares to the
Company to satisfy his tax withholding obligations.
(c) No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.
Nothing contained in the Plan shall confer on any Director any right with
respect to continuation of membership on the Board.
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(d) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Texas and applicable Federal law.
(e) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without , in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
(f) Other Laws. The Committee may refuse to issue or transfer any Shares
or other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.
(g) No Trust or Fund Created. Neither the Plan nor the Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any general unsecured creditor of the Company or any
Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
(j) No Restriction on Corporate Action. Nothing contained in the Plan
shall be construed to prevent the Company or any Affiliate from taking any
action that is deemed by the Company or such Affiliate to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan or any Award made under the Plan. No Employee, Participant, or other
Person shall have any claim against the Company or any Affiliate as a result of
any such action.
(k) Facsimile Signature. Any Award Agreement or related document may be
executed by facsimile signature. If any officer who shall have signed or whose
facsimile signature shall have been placed upon any such Award Agreement or
related document shall have ceased to be such officer before the related Award
is granted by the Company, such Award may nevertheless be issued by the Company
with the same effect as if such person were such officer at the date of grant.
SECTION 11. Effective Date of the Plan.
The Plan shall be effective as of the date of its approval by the Board,
provided the Plan is subsequently approved by the shareholders of the Company
within 12 months thereafter. Notwithstanding any provision in the Plan or in any
Award Agreement, no Option or Stock Appreciation Right shall be exercisable and
no Award shall vest or become satisfiable prior to such shareholder approval.
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SECTION 12. Term of the Plan.
No Award shall be granted under the Plan after the tenth anniversary of the
date the Plan was adopted by the Board or approved by the shareholders,
whichever is earlier. However, unless otherwise expressly provided in the Plan
or in an applicable Award Agreement, any Award theretofore granted may, and the
authority of the Board or the Committee to amend, alter, adjust, suspend,
discontinue, or terminate any such Award or to waive any conditions or rights
under any such Award shall, extend beyond such date.
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ANNEX G
OCEAN ENERGY, INC.
2001 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The OCEAN ENERGY, INC. 2001 EMPLOYEE STOCK PURCHASE PLAN (the
"Plan") is intended to provide an incentive for employees of OCEAN ENERGY, INC.
(the "Company") and certain of its subsidiaries to acquire or increase a
proprietary interest in the Company through the purchase of shares of the
Company's common stock. The Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall be construed in a manner
consistent with the requirements of that section of the Code.
2. Definitions. Where the following words and phrases are used in the
Plan, they shall have the respective meanings set forth below, unless the
context clearly indicates to the contrary:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Organization & Compensation Committee of the
Board.
(d) "Company" means Ocean Energy, Inc., a Texas corporation.
(e) "Date of Exercise" means the last day of each Option Period.
(f) "Date of Grant" means January 1, 2001, and, thereafter, the first
day of each successive July and January.
(g) "Eligible Compensation" means regular straight-time earnings or
base salary, determined before giving effect to any salary reduction
agreement pursuant to (i) a qualified cash or deferred arrangement (within
the meaning of Section 401(k) of the Code) or (ii) a cafeteria plan (within
the meaning of Section 125 of the Code). Eligible Compensation shall not
include management incentives, overtime, bonuses, commissions, severance
pay, incentive pay, shift premium differentials, extended work-week
premiums, pay in lieu of vacation, reimbursements, or any other special or
incentive payments excluded by the Committee in its discretion (applied in
a uniform basis).
(h) "Eligible Employee" means, with respect to each Date of Grant,
each employee of the Company or a Participating Company who, as of such
Date of Grant, is regularly scheduled to work more than 20 hours per week
and more than five months in any calendar year.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Option Period" means the six-month period beginning on each Date
of Grant.
(k) "Option Price" shall have the meaning assigned to such term in
paragraph 8(b).
(l) "Participating Company" means any present or future parent or
subsidiary corporation of the Company that participates in the Plan
pursuant to paragraph 4.
(m) "Plan" means this Ocean Energy, Inc. 2001 Employee Stock Purchase
Plan, as amended from time to time.
(n) "Stock" means the shares of the Company's common stock, par value
$.10 per share.
3. Administration of the Plan. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall interpret
the Plan and all options granted under the Plan, make such rules as it deems
necessary for the proper administration of the Plan, and make all other
determinations necessary or advisable for the administration of the Plan. In
addition, the Committee shall correct any defect or supply any omission or
reconcile any inconsistency in the Plan, or in any option granted under the
Plan, in the manner and to the extent that the Committee deems desirable to
carry the Plan or any option into effect.
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The Committee shall, in its sole discretion, make such decisions or
determinations and take such actions, and all such decisions, determinations and
actions taken or made by the Committee pursuant to this and the other paragraphs
of the Plan shall be conclusive on all parties. The Committee shall not be
liable for any decision, determination or action taken in good faith in
connection with the administration of the Plan. The Committee shall have the
authority to delegate routine day-to-day administration of the Plan (including
the selection of a custodian for the Plan) to such officers and employees of the
Company as the Committee deems appropriate.
4. Participating Companies. The Committee may designate any present or
future parent or subsidiary corporation of the Company that is eligible by law
to participate in the Plan as a Participating Company by written instrument
delivered to the designated Participating Company. Such written instrument shall
specify the effective date of such designation and shall become, as to such
designated Participating Company and persons in its employment, a part of the
Plan. The terms of the Plan may be modified as applied to the Participating
Company only to the extent permitted under Section 423 of the Code. Transfer of
employment among the Company and Participating Companies (and among any other
parent or subsidiary corporation of the Company) shall not be considered a
termination of employment hereunder. Any Participating Company may, by
appropriate action of its Board of Directors, terminate its participation in the
Plan. Moreover, the Committee may, in its discretion, terminate a Participating
Company's Plan participation at any time.
5. Eligibility. Subject to the provisions hereof, all Eligible Employees
as of a Date of Grant shall be eligible to participate in the Plan with respect
to options granted under the Plan as of such date.
6. Stock Subject to the Plan. Subject to the provisions of paragraph 13,
the aggregate number of shares which may be sold pursuant to options granted
under the Plan shall not exceed 1,500,000 shares of the authorized Stock, which
shares may be unissued shares or reacquired shares, including shares bought on
the market or otherwise for purposes of the Plan. Should any option granted
under the Plan expire or terminate prior to its exercise in full, the shares
theretofore subject to such option may again be subject to an option granted
under the Plan. Any shares that are not subject to outstanding options upon the
termination of the Plan shall cease to be subject to the Plan.
7. Grant of Options.
(a) In General. Commencing on January 1, 2001, and continuing while
the Plan remains in force, the Company shall, on each Date of Grant, grant
an option under the Plan to purchase shares of Stock to each Eligible
Employee as of such Date of Grant who elects to participate in the Plan;
provided, however, that no option shall be granted to an Eligible Employee
if such individual, immediately after the option is granted, owns stock
possessing five percent or more of the total combined voting power or value
of all classes of stock of the Company or of its parent or subsidiary
corporations (within the meaning of Sections 423(b)(3) and 424(d) of the
Code). Except as provided in paragraph 13, the term of each option shall be
for six months, which shall begin on a Date of Grant and end on the last
day of such six-month period. Subject to subparagraph 7(d), the number of
shares of Stock subject to an option for a participant shall be equal to
the quotient of (i) the aggregate payroll deductions withheld on behalf of
such participant during the Option Period in accordance with subparagraph
7(b), divided by (ii) the Option Price of the Stock applicable to the
option, rounded down to the nearest whole share; provided, however, that
the maximum number of shares of Stock that may be subject to any option for
a participant may not exceed 3,200 (subject to adjustment as provided in
paragraph 13).
(b) Election to Participate; Payroll Deduction Authorization. An
Eligible Employee may participate in the Plan only by means of payroll
deduction. Except as provided in subparagraph 7(f), each Eligible Employee
who elects to participate in the Plan shall deliver to the Company, within
the time period prescribed by the Committee, a written payroll deduction
authorization in a form prepared by the Company whereby he gives notice of
his election to participate in the Plan as of the next following Date of
Grant, and whereby he designates a stated percentage of his Eligible
Compensation to be deducted from his compensation for each pay period and
paid into the Plan for his account. The designated percentage shall be an
integral percentage of from 1% to 15%.
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(c) Changes in Payroll Authorization. The payroll deduction
authorization referred to in subparagraph 7(b) may be reduced at any time
during the Option Period by the employee giving written notice to the
Company that his payroll deductions with respect to such Option Period
shall thereafter be reduced to a specific percentage (not less than 1%) of
his Eligible Compensation. Any such reduction shall be irrevocable with
respect to the remainder of the Option Period.
(d) $25,000 Limitation. No employee shall be granted an option under
the Plan which permits his rights to purchase Stock under the Plan and
under all other employee stock purchase plans of the Company and its parent
and subsidiary corporations to accrue at a rate which exceeds $25,000 of
fair market value of Stock (determined at the time such option is granted)
for each calendar year in which such option is outstanding at any time
(within the meaning of Section 423(b)(8) of the Code). Any payroll
deductions in excess of the amount specified in the foregoing sentence
shall be returned to the participant as soon as administratively feasible
after the next following Date of Exercise.
(e) Leaves of Absence. During a paid leave of absence approved by the
Company and meeting the requirements of Treasury Regulation
sec.1.421-7(h)(2), a participant's elected payroll deductions shall
continue. A participant may not contribute to the Plan during an unpaid
leave of absence. If a participant takes an unpaid leave of absence that is
approved by the Company and meets the requirements of Treasury Regulation
sec.1.421-7(h)(2), then such participant's payroll deductions for such
Option Period that were made prior to such leave may remain in the Plan and
be used to purchase Stock under the Plan on the Date of Exercise relating
to such Option Period. If a participant takes a leave of absence that is
not described in the first or third sentence of this subparagraph 7(e),
then he shall be considered to have terminated his employment for purposes
of the Plan and withdrawn from the Plan pursuant to the provisions of
paragraph 9 hereof. Further, notwithstanding the preceding provisions of
this subparagraph 7(e), if a participant takes a leave of absence that is
described in the first or third sentence of this subparagraph 7(e) and such
leave of absence exceeds 90 days, then he shall be considered to have
withdrawn from the Plan pursuant to the provisions of paragraph 9 hereof
and terminated his employment for purposes of the Plan on the 91st day of
such leave of absence.
(f) Continuing Election. Subject to the limitation set forth in
subparagraph 7(d), a participant (i) who has elected to participate in the
Plan pursuant to subparagraph 7(b) as of a Date of Grant and (ii) who takes
no action to change or revoke such election as of the next following Date
of Grant and/or as of any subsequent Date of Grant prior to any such
respective Date of Grant shall be deemed to have made the same election,
including the same attendant payroll deduction authorization, for such next
following and/or subsequent Date(s) of Grant as was in effect immediately
prior to such respective Date of Grant. Payroll deductions that are limited
by subparagraph 7(d) shall recommence at the rate provided in such
participant's payroll deduction authorization at the beginning of the first
Option Period that is scheduled to end in the following calendar year,
unless the participant changes the amount of his payroll deduction
authorization pursuant to paragraph 7, withdraws from the Plan as provided
in paragraph 9, or is terminated from participation in the Plan as provided
in paragraph 10.
8. Exercise of Options.
(a) General Statement. Subject to the limitation set forth in
subparagraph 7(d), each participant in the Plan automatically and without
any act on his part shall be deemed to have exercised his option on each
Date of Exercise to the extent his unused payroll deductions under the Plan
are sufficient to purchase at the Option Price whole shares of Stock
subject to his option and to the extent the issuance of Stock to such
participant upon such exercise is lawful. Any amount relating to such
option that remains in his account representing a fractional share shall be
applied to the purchase of shares of Stock during the next Option Period as
if such participant had contributed such amount by payroll deduction to the
Plan during such period for the option that relates to such period. If the
total number of shares for which options are exercised on any date of
exercise exceeds the maximum number of shares remaining to be sold under
the Plan, the Company shall make a pro rata allocation of the shares of
stock available for delivery and distribution in as nearly a uniform manner
as shall be practicable and as it shall determine to
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be equitable, and the balance of the payroll deductions credited to the
account of each participant under the Plan shall be refunded to him
promptly.
(b) "Option Price" Defined. The term "Option Price" shall mean the
per share price of Stock to be paid by each participant on each exercise of
his option, which price shall be equal to 85% of the fair market value of
the Stock on the Date of Exercise or on the Date of Grant, whichever amount
is less. For all purposes under the Plan, the fair market value of a share
of Stock on a particular date shall be equal to the closing price of the
Stock on the New York Stock Exchange composite tape on that date, or if no
prices are reported on that date, on the last preceding date on which such
prices of the Stock are so reported. In the event Stock is not publicly
traded at the time a determination of its value is required to be made
hereunder, the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
(c) Delivery of Share Certificates. As soon as practicable after each
Date of Exercise, the Company shall deliver to a custodian selected by the
Committee (or its delegates) one or more certificates representing (or
shall otherwise cause to be credited to the account of such custodian) the
total number of whole shares of Stock respecting options exercised on such
Date of Exercise in the aggregate of all of the participating employees
hereunder. Such custodian shall keep accurate records of the beneficial
interests of each participating employee in such shares by means of
participant accounts under the Plan, and shall provide each participating
employee with semi-annual or such other periodic statements with respect
thereto as may be directed by the Committee. If the Company is required to
obtain from any U.S. commission or agency authority to issue any such
shares, the Company shall seek to obtain such authority. Inability of the
Company to obtain from any commission or agency (whether U.S. or foreign)
authority which counsel for the Company deems necessary for the lawful
issuance of any such shares shall relieve the Company from liability to any
participant in the Plan except to return to him the amount of his payroll
deductions under the Plan which would have otherwise been used upon
exercise of the relevant option.
9. Withdrawal from the Plan.
(a) General Statement. Any participant may withdraw in whole from the
Plan at any time prior to the Date of Exercise relating to a particular
Option Period. Partial withdrawals shall not be permitted. A participant
who wishes to withdraw from the Plan must timely deliver to the Company a
notice of withdrawal in a form prepared by the Company. The Company,
promptly following the time when the notice of withdrawal is delivered,
shall refund to the participant the amount of his payroll deductions under
the Plan which have not yet been otherwise returned to him or used upon
exercise of options; and thereupon, automatically and without any further
act on his part, his payroll deduction authorization and his interest in
unexercised options under the Plan shall terminate.
(b) Eligibility Following Withdrawal. A participant who withdraws
from the Plan shall be eligible to participate again in the Plan upon
expiration of the Option Period following the Option Period during which he
withdrew (provided that he is otherwise eligible to participate in the Plan
at such time).
10. Termination of Employment.
(a) General Statement. Except as provided in subparagraph 10(b), if
the employment of a participant terminates for any reason whatsoever, then
his participation in the Plan automatically and without any act on his part
shall terminate as of the date of the termination of his employment. The
Company shall promptly refund to him the amount of his payroll deductions
under the Plan which have not yet been otherwise returned to him or used
upon exercise of options, and thereupon his interest in unexercised options
under the Plan shall terminate.
(b) Termination by Retirement, Death or Disability. If the employment
of a participant terminates after such participant has attained age 65 or
due to such participant's death or permanent and total
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disability (within the meaning of Section 22(e)(3) of the Code), then such
participant, or such participant's personal representative, as applicable,
shall have the right to elect either to:
(1) withdraw all of such participant's accumulated unused payroll
deductions under the Plan; or
(2) exercise such participant's option as of his retirement date,
his date of death, or his date of termination due to permanent and total
disability, as applicable, for the purchase of the number of whole
shares of Stock which the accumulated payroll deductions at the date of
such participant's termination of employment will purchase at the Option
Price (subject to subparagraph 7(d)), and receive a payment from the
Company promptly after such exercise in the amount of such participant's
payroll deductions under the Plan which have not yet been otherwise
returned to him or used upon exercise of options. For purposes of this
subparagraph 10(b)(2), the date of the participant's termination of
employment will be deemed to be the Date of Exercise for the purpose of
computing the Option Price.
The participant or, if applicable, such personal representative, must make
such election by giving written notice to the Committee within 90 days of the
participant's date of retirement, date of death, or date of termination due to
permanent and total disability, as applicable. In the event that no such written
notice of election is timely received by the Committee, the participant or
personal representative will automatically be deemed to have elected as set
forth in clause (1) above.
11. Restriction Upon Assignment of Option. An option granted under the
Plan shall not be transferable otherwise than by will or the laws of descent and
distribution. Each option shall be exercisable, during his lifetime, only by the
employee to whom granted. The Company shall not recognize and shall be under no
duty to recognize any assignment or purported assignment by an employee of his
option or of any rights under his option or under the Plan.
12. No Rights of Shareholder Until Exercise of Option. With respect to
shares of Stock subject to an option, an optionee shall not be deemed to be a
shareholder, and he shall not have any of the rights or privileges of a
shareholder, until such option has been exercised and a certificate of shares
has been issued to him.
13. Changes in Stock; Adjustments. Whenever any change is made in the
Stock, by reason of a stock dividend or by reason of subdivision, stock split,
reverse stock split, recapitalization, reorganization, combination,
reclassification of shares or other similar change, appropriate action will be
taken by the Committee to adjust accordingly the number of shares subject to the
Plan, the maximum number of shares that may be subject to any option, and the
number and Option Price of shares subject to options outstanding under the Plan.
If the Company shall not be the surviving corporation in any merger or
consolidation (or survives only as a subsidiary of another entity), or if the
Company is to be dissolved or liquidated, then, unless a surviving corporation
assumes or substitutes new options (within the meaning of Section 424(a) of the
Code) for all options then outstanding, (i) the Date of Exercise for all options
then outstanding shall be accelerated to a date fixed by the Committee prior to
the effective date of such merger or consolidation or such dissolution or
liquidation, (ii) an employee (or his legal representative) may make a lump-sum
deposit prior to the Date of Exercise in lieu of the remaining payroll
deductions which otherwise would have been made, and (iii) upon such effective
date any unexercised options shall expire and the Company promptly shall refund
to each participant the amount of such participant's payroll deductions under
the Plan which have not yet been otherwise returned to him or used upon exercise
of options.
14. Use of Funds; No Interest Paid. All funds received or held by the
Company under the Plan shall be included in the general funds of the Company
free of any trust or other restriction, and may be used for any corporate
purpose. No interest shall be paid to any participant.
15. Term of the Plan. The Plan shall be effective January 1, 2001,
provided the Plan is approved by the shareholders of the Company within 12
months after the adoption by the Board. Notwithstanding any
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provision in the Plan, no option granted under the Plan shall be exercisable
prior to such shareholder approval, and, if the shareholders of the Company do
not approve the Plan by the Date of Exercise of the first option granted
hereunder, then the Plan shall automatically terminate, no options may be
exercised hereunder, and the Company promptly shall refund to each participant
the amount of such participant's payroll deductions under the Plan; and
thereupon, automatically and without any further act on his part, his payroll
deduction authorization and his interest in unexercised options under the Plan
shall terminate. Except with respect to options then outstanding, if not sooner
terminated under the provisions of paragraph 16, the Plan shall terminate upon
and no further payroll deductions shall be made and no further options shall be
granted after December 31, 2010.
16. Amendment or Termination of the Plan. The Board in its discretion may
terminate the Plan at any time with respect to any Stock for which options have
not theretofore been granted. The Board shall have the right to alter or amend
the Plan or any part thereof from time to time; provided, however, that no
change in any option theretofore granted may be made that would impair the
rights of the optionee without the consent of such optionee.
17. Securities Laws. The Company shall not be obligated to issue any Stock
pursuant to any option granted under the Plan at any time when the offer,
issuance or sale of shares covered by such option has not been registered under
the Securities Act of 1933, as amended, or does not comply with such other
state, federal or foreign laws, rules or regulations, or the requirements of any
stock exchange upon which the Stock may then be listed, as the Company or the
Committee deems applicable and, in the opinion of legal counsel for the Company,
there is no exemption from the requirements of such laws, rules, regulations or
requirements available for the offer, issuance and sale of such shares. Further,
all Stock acquired pursuant to the Plan shall be subject to the Company's
policies concerning compliance with securities laws and regulations, as such
policies may be amended from time to time. The terms and conditions of options
granted hereunder to, and the purchase of shares by, persons subject to Section
16 of the Exchange Act shall comply with any applicable provisions of Rule
16b-3. As to such persons, the Plan shall be deemed to contain, and such options
shall contain, and the shares issued upon exercise thereof shall be subject to,
such additional conditions and restrictions as may be required from time to time
by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
18. No Restriction on Corporate Action. Nothing contained in the Plan
shall be construed to prevent the Company or any subsidiary from taking any
corporate action that is deemed by the Company or such subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any option granted under the Plan. No employee,
beneficiary or other person shall have any claim against the Company or any
subsidiary as a result of any such action.
19. Miscellaneous Provisions.
(a) Parent and Subsidiary Corporations. For all purposes of the Plan,
a corporation shall be considered to be a parent or subsidiary corporation
of the Company only if such corporation is a parent or subsidiary
corporation of the Company within the meaning of Sections 424(e) and (f) of
the Code.
(b) Number and Gender. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the
plural shall be considered to include the singular. The masculine gender,
where appearing in the Plan, shall be deemed to include the feminine
gender.
(c) Headings. The headings and subheadings in the Plan are included
solely for convenience, and if there is any conflict between such headings
or subheadings and the text of the Plan, the text shall control.
(d) Not a Contract of Employment. The adoption and maintenance of the
Plan shall not be deemed to be a contract between the Company or any
Participating Company and any person or to be consideration for the
employment of any person. Participation in the Plan at any given time shall
not be deemed to create the right to participate in the Plan, or any other
arrangement permitting an employee of the Company or any Participating
Company to purchase Stock at a discount, in the future. The rights and
obligations under any participant's terms of employment with the Company or
any Participating
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Company shall not be affected by participation in the Plan. Nothing herein
contained shall be deemed to give any person the right to be retained in
the employ of the Company or any Participating Company or to restrict the
right of the Company or any Participating Company to discharge any person
at any time, nor shall the Plan be deemed to give the Company or any
Participating Company the right to require any person to remain in the
employ of the Company or such Participating Company or to restrict any
person's right to terminate his employment at any time. The Plan shall not
afford any participant any additional right to compensation as a result of
the termination of such participant's employment for any reason whatsoever.
(e) Compliance with Applicable Laws. The Company's obligation to
offer, issue, sell or deliver Stock under the Plan is at all times subject
to all approvals of and compliance with any governmental authorities
(whether domestic or foreign) required in connection with the
authorization, offer, issuance, sale or delivery of Stock as well as all
federal, state, local and foreign laws. Without limiting the scope of the
preceding sentence, and notwithstanding any other provision in the Plan,
the Company shall not be obligated to grant options or to offer, issue,
sell or deliver Stock under the Plan to any employee who is a citizen or
resident of a jurisdiction the laws of which, for reasons of its public
policy, prohibit the Company from taking any such action with respect to
such employee.
(f) Severability. If any provision of the Plan shall be held illegal
or invalid for any reason, said illegality or invalidity shall not affect
the remaining provisions hereof; instead, each provision shall be fully
severable and the Plan shall be construed and enforced as if said illegal
or invalid provision had never been included herein.
(g) Governing Law. All provisions of the Plan shall be construed in
accordance with the laws of Texas except to the extent preempted by federal
law.
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DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
1. Election of Three Directors to serve in Class FOR AGAINST ABSTAIN
III until the 2004 Annual Meeting of
Shareholders. 2. Proposal to approve the reincorporation merger [ ] [ ] [ ]
of the Company into a wholly-owned subsidiary
NOMINEES: (01) John B. Brock, (02) Milton Carroll, organized under the laws of Delaware.
(03) James T. Hackett.
3. Proposal to approve the Ocean Energy, Inc. [ ] [ ] [ ]
[ ] ______________________________________ 2001 Long-Term Incentive Plan.
For all nominees except as noted above
4. Proposal to approve the Ocean Energy, Inc. [ ] [ ] [ ]
MARK HERE IF YOU PLAN [ ] Employee Stock Purchase Plan.
TO ATTEND THE MEETING
5. Proposal to ratify the appointment by the [ ] [ ] [ ]
MARK HERE FOR ADDRESS [ ] Board of Directors of the firm of KPMG LLP
CHANGE AND NOTE BELOW as independent auditors of the Company for
the fiscal year ending December 31, 2001.
6. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting
or any adjournment(s) or postponement(s) thereof.
Please sign exactly as name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Signature: _____________________ Date: ______________ Signature: _____________________ Date: ______________